Kingsbarn Realty Capital has sued its lender over a derailed $121.8 million acquisition of a Hollywood office property that’s leased to Kim Kardashian’s Skims clothing brand, The Real Deal has learned.
Las Vegas-based Kingsbarn, through an entity called KB Acquisitions, went into contract to buy 1601 Vine Street in December 2022, court documents show. The property is a 116,000-square-foot building that sits between Sunset and Hollywood Boulevard. Skims signed a lease for the entire office portion of the property — spanning floors two to eight — in July last year. City National Bank occupies the ground floor retail space.
In a complaint filed in a Los Angeles County court on Tuesday, Kingsbarn claimed its lender, Cleveland-based KeyBank, “pulled the rug out from underneath the transaction” by reducing the financing package at the last minute. KeyBank, which Kingsbarn described as its “long-term lender,” provided a $72 million senior loan and gave a “verbal indication” that it would also provide a $25 million preferred equity bridge loan.
According to the complaint, Kingsbarn and KeyBank have done a lot of business together over the past decade. Since 2015, the two have supposedly figured in 16 senior debt loan deals totaling $342.4 million. On preferred equity loans, the firms have closed seven deals totaling $77.8 million since 2019, according to the filing.
Kingsbarn claims that it went into escrow on the Hollywood deal under the assumption that KeyBank would do “what it had done many times in the past.”
This time it turned out differently.
On March 17 last year, the closing date for the deal, KeyBank supposedly told Kingsbarn that it was changing the terms of the financing package. On March 22, the end of the extension of the closing date, KeyBank “verbally floated” that it would reduce the senior loan from $71 million to $65 million and cut the preferred equity loan altogether.
According to the complaint, KeyBank eventually offered a promissory note for a $50 million loan and floated a preferred equity loan with “terms and conditions so onerous that (KeyBank) knew would not be acceptable.”
The deal fell apart, leaving Kingsbarn with $12.9 million in lost deposits and projected profits, according to the complaint. The firm claimed that finding alternative financing was difficult because the Measure ULA transfer tax was set to take effect a few days later on April 1.
The seller in the deal, J.H. Snyder, is not included in the lawsuit. In June last year, the firm sold a 51 percent stake in the asset to Oscar Properties. The deal pegged the value of 1601 Vine at $72.5 million.
The property previously housed WeWork’s only Hollywood location. WeWork, which exited bankruptcy in May, shut down the location in October 2022.
Kingsbarn is seeking at least $13 million in damages. Defendant KeyBank declined to comment.