Reuben brothers finally foreclose on Century Plaza

The Reuben brothers have foreclosed on Michael Rosenfeld’s $2.5 billion Century Plaza development, after more than a year of litigation concerning the debt on the project, The Real Deal has learned. 

David and Simon Reuben made a credit bid on the property at an auction held on Thursday morning, according to a source familiar with the matter. No other party showed up to the auction to make a bid on the development, the source added. 

The credit bid, when a lender bids an amount based on the debt the borrower owes, came out to a portion of the senior debt held by the Reubens. 

By the end of 2021, the Reubens held a $890 million senior loan on the property, plus a further $271 million mezzanine loan, meaning the property was bought at a fraction of the $2.5 billion development price tag. 

Rosenfeld, the developer of the project and head of Woodridge Capital Partners, did not respond to a request for comment.

The U.K.-based investor brothers got the green light to go ahead with the foreclosure from a California court last week, but a New York court continued an injunction preventing the foreclosure from taking place, siding with a group of EB-5 investors that has sought to block the sale while the court sorted out the property’s debt stack. 

Matthew Parrott, a Fried Frank attorney representing the Reuben brothers and their investment vehicle Motcomb Estates, appealed the continued injunction. The appellate division struck down the injunction this morning, allowing the foreclosure to proceed, according to court records.

Parrott, on behalf of the Reuben brothers, declined to comment.

The Reubens had hoped to close on the deal before the city of L.A.’s new transfer taxes went into effect, attorneys had argued in court proceedings. The duo now face a 5.5 percent tax on the sale, given that the city has not provided any tax exemption for foreclosures. Attorneys are still unclear whether the tax will apply to foreclosures.

With the foreclosure, the Reubens officially own their first piece of real estate in the city of Los Angeles — a 400-key hotel with 63 condos, attached to two condo towers.

The path to ownership was a difficult one. 

In March of last year, an entity controlled by DigitalBridge filed a lawsuit against Motcomb Estates, alleging it “violated its responsibilities” in servicing a $821 million mezzanine loan on the development, court records show. DigitalBridge claimed Motcomb did nothing after Rosenfeld defaulted on almost $1.8 billion in loans. 

Six months later, the Reubens were hit with a second suit — a group of EB-5 investors in the project claimed the brothers shuffled the debt stack to whittle away the claims of EB-5 investors. In the event of a default, the EB-5 investors claimed, they would never get repaid. 

DigitalBridge has settled its suit with the Reubens, though the EB-5 suit is still ongoing.

The group contributed a $450 million junior mezzanine loan, while DigitalBridge — formerly Colony Capital — provided a $120 million senior mezzanine loan. 

Even if the Reubens had placed a credit bid equal to its full senior loan, it would still not have been enough to pay back DigitalBridge and the EB-5 investors.