Grant King tries to save his LA hotel empire — again

UPDATED: March, 2, 2023, 12:50 p.m.:

Grant King is used to financial fights. In 2012, he had $20 in his checking account, a set of golf clubs and a mountain of debt. His only option was to file for personal bankruptcy.

But insolvency was merely a hiccup. Before the bankruptcy had even wrapped, he co-founded his development firm, Relevant Group, envisioning a mini-empire of Hollywood hotels and luxury homes. He raised more than $850 million and built three hotels — the Dream, Tommie and Thompson — on Hollywood Boulevard between Selma and Wilcox Avenues.

Now, eleven years later, King is again staring down hardship. But this time, the stakes are much higher and he’s fighting battles on multiple fronts, some of which he’s already lost.

After opening the Tommie and Thompson hotels in 2021 following lengthy construction delays and cost overruns, King has lost both. On Feb. 28, the mezzanine lenders on the hotels acquired both through foreclosure.

He’s in court against his former top deputy. His co-founder has left the firm. And his CFO exited last year, saying Relevant was a “different company” from the one he joined in 2013. 

King responded to emails for this story and has previously spoken with The Real Deal about some of his disputes. Piecing his comments together with court filings and interviews with those who know him, a picture emerges of someone who, regardless of how many times he’s knocked down, refuses to stay on the mat.

Becoming Relevant

King’s life hasn’t left much of a paper trail. He has no public social media profiles, no high school or university references, no wedding announcements or divorce papers. 

His bio on Relevant’s website notes that he formerly worked at New American Financial, a mortgage firm. A search for Grant W. King and the word “mortgage” produced a 1997 advertisement in a Newport Beach newspaper, the Daily Pilot, referring readers to King, who was a branch manager for a lender in Corona del Mar. 

By the early 2000s, King had turned his sights on the Hollywood Hills. He met Jon Roger Davis, an actor-turned-developer, who was planning to build six luxury homes along Viewmont Drive, according to a 2003 report in the Los Angeles Times. 

King bought one of the lots for $1.5 million, scoring a $610,000 loan from MKA Capital, a now-defunct investment firm based out of Newport Beach, and an additional $1.1 million from RBC. He personally guaranteed both loans. Davis also lent King $3 million, court records show, bringing his total debt on the development to some $4.75 million. 

In 2006, King ventured out of state when he teamed up with Shawn Heyl to buy a 185-unit apartment complex in Phoenix for $22.6 million. King relied on MKA Capital again, scoring an $11.3 million loan for the development with a personal guarantee, according to court filings. 

He was making a name for himself, and got a new car to look the part — leasing a new silver Mercedes-Benz S550 for $2,293 a month, court records show.

In 2007, in his 40s, he founded Relevant Group with Richard Heyman, a developer who was previously with Merrill Lynch.

According to Heyman and King, they wanted to create “Los Angeles’ answer to New York City’s Meatpacking District” and bought 6417 Selma Avenue in Hollywood, which eventually became the Dream hotel.

“Fresh start”

In hindsight, most would agree that 2007 was not the best time to start a company. As the financial crisis decimated mortgage firms and residential developers across the country, King was not spared. 

“Like many people, I got caught in the global financial crisis of 2008, which felt like a once-in-a-lifetime event,” King said in an email. “I pivoted, which included restructuring my business strategy and finding a better source of capital.”

King’s financial woes extended to the personal. He turned to friends for help. Kevin Washington, one of the investors on the Viewmont Drive projects and the son of billionaire industrialist Dennis Washington, gave King a $1 million personal loan in March 2008, records show, but it didn’t solve all his troubles. 

By August, King defaulted on the $1.1 million loan on the Hollywood Hills lot. Wells Fargo, a trustee, foreclosed a month later. 

The defaults kept coming. In December 2010, a King- and Heyman-controlled entity defaulted on a loan connected to 6417 Selma, owing more than $3.7 million, prompting another foreclosure. In 2011, MKA Capital sued King and Heyman after they defaulted on the loan on the Phoenix apartment complex; the lender claimed they owed $30.1 million. 

King filed for Chapter 7 bankruptcy in September 2012. He barely had any assets left.

He reported $885 in monthly income, $4,770 in assets and nearly $35 million in liabilities. He had $2,200 worth of furniture, $1,000 worth of clothes and $500 worth of golf clubs, and a lender was suing him for owing more than $85,000 on the Benz. His Wells Fargo checking account had $20.34.

All of his business ventures were reported to be in the red.

Claims were flying in, according to King’s disclosures. The California tax agency said that he owed about $82,000 in personal income taxes. Chase, Citibank and American Express were seeking $38,000 in credit card debt, some of which dated back to 1999. The U.S. bankruptcy court declared the case a “no-asset” one on the grounds that King had nothing to sell to pay off creditors, filings show. 

All the king’s horses

Shortly after the bankruptcy wrapped up in 2013, King returned his focus to Hollywood. He and Heyman brought in a third partner as CFO, Andrew Shayne, “before they even owned anything,” Shayne said. 

The trio bought 6417 Selma Avenue back with an acquisition loan from East West Bank, according to records. 

The firm also tapped a relatively novel source of financing: the U.S. government’s EB-5 program, a cash-for-green-card initiative for foreign investors putting money into U.S. businesses.

EB-5 financing was attractive to developers because it can sit low in the capital stack and is significantly cheaper than a standard mezzanine loan. In the event of a default, EB-5 investors often get paid after senior and mezzanine lenders, though it varies by project. 

Since a big chunk of  EB-5 investors hail from China, King decided to move to Shanghai for a few years, trying to corral funding for the Selma project. Relevant often hosted events in Shanghai, featuring speeches from former L.A. mayors Antonio Villaraigosa and Eric Garcetti. 

The Selma project relied on about 180 Chinese investors, meaning Relevant raised at least $90 million, given the minimum EB-5 investment of $500,000. The project opened as the Dream Hollywood hotel in 2017. All told, Relevant raised $350 million for the project, King and Heyman said in 2019. 

Relevant raised more than $250 million in “lower-cost Chinese capital” across all of its projects by 2018, according to the firm’s marketing materials. 

Street cred

With one hotel completed, Relevant decided to go for more, kicking off five more projects — the Tommie, the Thompson, which would be managed by Hyatt, plus three more in Downtown L.A. 

In late 2016, Relevant scored a nationally recognized partner: Colony NorthStar. The investment firm, founded by Tom Barrack and now known as DigitalBrdge, made a minority investment, which it did not disclose publicly, in Relevant thanks to Barrack’s cousin, Scott. 

King spent a year and a half wooing Scott, who had been working in China since 1998, the L.A. Business Journal reported at the time. He offered Scott a position as the China director for Relevant’s EB-5 entity, which Scott accepted. 

With Colony’s name attached to its developments, King recognized that Relevant could now tap institutional money. 

In 2018, the firm opened its first closed-end investment fund. Relevant and Colony NorthStar pitched a $125 million fund for five projects — a minimum investment of $5 million was required, according to marketing materials. The duo targeted a 20 percent return for investors. 

But Relevant was still relying on smaller commercial lenders for its projects. Between December 2018 and May 2019, it scored $111.5 million in construction loans from Calmwater Capital for the Thompson and Tommie hotels. 

“No experience”

Covid halted construction projects across the U.S., but Relevant’s problems predate the pandemic. Under a normal construction timeline, the hotels should have been finished by the end of 2019, according to Alan Reay, president of Atlas Hospitality, who tracks hotel development in the city.

Shayne said there were a number of reasons for the  delays, including workers getting sick, a slow general contractor and supply chain issues. Mechanic’s liens were also piling up. 

The firm faced environmental litigation brought by the labor union Unite Here — a lawsuit that “at times, stopped all construction at the Tommie,” a lawyer for Hyatt said at an arbitration hearing in 2022. 

But Relevant was also fighting with Hyatt. 

In April 2021, New York-based Machine Investment Group and Taconic Capital provided a $72 million mezzanine loan on both properties. The new funding helped finish construction, according to Shayne.

Relevant was also “upset” that the hotel operator had negotiated an agreement to allow employees to organize into a labor union, according to the union’s attorney.

Hyatt and Relevant terminated their management agreement and signed a franchise deal instead. The plan shifted to allow Relevant’s former COO Dan Daley to spin off his own firm, Ten Five Hospitality, which would operate the hotels and associated restaurants, retail and nightlife. Hyatt agreed, much to the chagrin of some of its employees. 

“Relevant Group had absolutely no experience managing a hotel of that quality and caliber,” Catie Cramer, a former development executive with Hyatt, said at the arbitration hearing. “I was very wary about our brand and our brand’s standards falling into the hands of somebody that I felt was unqualified.” 

Hanging on

King is the last partner standing at Relevant. And he’s fighting for his properties by delaying foreclosure proceedings, seeking equity partners for his Downtown L.A. projects and even going after his former colleague Daley.

Daley’s firm sued Relevant in January, accusing it of “an overt and planned effort to steal Ten Five’s business” and seeking to terminate an operating agreement that allowed Ten Five to manage Mother Wolf, an Italian restaurant at Relevant’s Citizen News property at 1545 Wilcox Avenue. 

The complaint claimed Relevant viewed Ten Five’s “success with great jealousy and decided that they no longer wanted to share fees and profits,” barring Ten Five from the premises.

Relevant is retaining management fees on the restaurant “to gain leverage” with its lender Machine Investment and “to find a quick solution to their own economic problems,” Ten Five added. The complaint also stated that Daley was promised an ownership stake in Relevant but was never presented with an agreement. Daley declined to comment. 

Relevant did not default on Machine’s mezzanine loan, but breached certain covenants. Essentially, because Relevant pushed the opening dates on both properties, Machine filed to foreclose. 

“We got these properties online just as the capital markets became incredibly challenging,” King said. “It’s a brutal cycle, and you can see major players making tough calls about their portfolios all over the country.”

The foreclosure was scheduled for the last week of February, but has been delayed as Relevant continues to try and work out a deal, according to sources familiar with the situation. 

But, “sadly, there were no more extensions granted and the foreclosure went forward,” King said in an email on the afternoon of Feb. 28, hours after the foreclosure occurred. Mezzanine lenders — a group composed of Machine Investment Group, Taconic Capital, and Miramar Capital — now own the property. 

“When a hotel is highly leveraged, at some point you’re going to run out of runway,” said Reay. 
The mezzanine lenders brought back Daley’s Ten Five Hospitality to operate the hotels, according to emails sent from Ten Five to hotel staff obtained by TRD.

Rising interest rates and loan delinquencies have prompted lenders to back away from new deals, making it difficult for Relevant to raise money. 

King is also seeking an equity partner in the Morrison Hotel in Downtown L.A. — a historic property that was rebranded after it appeared on the cover of the Doors’ 1970 album of the same name.

King still holds onto his dream of building a hotel empire across L.A. As in his days scoring million-dollar personal loans, he’s not afraid to ask for money.

Asked via text whether Relevant was looking to sell a 50 percent stake in the Morrison Hotel project, King replied: 

“Talking to several groups and hotel brands currently. Do you have any potential partners for us? 🤔🤔🤔”

At the time this story was written, Relevant Group still owned both the Tommie and Thompson hotels. The story has since been updated to reflect that mezzanine lenders on both properties have since acquired the hotels through foreclosure.