A mezzanine lender on Michael Rosenfeld’s $2.5 billion project, Century Plaza, is being sued by an investor who recently emerged from hiding.
According to a complaint lodged last month in Los Angeles Superior Court, Urbanite Capital contends that DigitalBridge failed to disclose a restructuring arrangement with the Reuben brothers, the development’s senior lender.
In 2018, Urbanite committed to make a $80.5 million capital commitment for the project; this money was then rolled into a $428 million mezzanine loan. According to Urbanite’s complaint, DigitalBridge, formerly known as Colony Capital, served as the mezzanine loan partnership’s general partner and ultimately made decisions on behalf of all investors.
However, according to the complaint, DigitalBridge entered into an agreement in 2020 to allow the U.K.-based Reuben brothers to gain “control” of the mezzanine loan without Urbanite’s approval.
According to the complaint, DigitalBridge “hid these matters from [Urbanite] and decided not to seek [Urbanite’s] consent,” knowing Urbanite “would have contested these alterations.”
In various court documents, DigitalBridge has claimed that it freely consented to the 2020 agreement, which gave Michael Rosenfeld more money to complete building Century Plaza, which is located at 2025 Avenue of the Stars.
The Reubens agreed to provide a second $275 million senior mezzanine loan, which means that in the event of default, they would receive payment before DigitalBridge. According to people acquainted with the details of the agreement, they also consented to assume the role of administrative agent, which entails acting as the organization responsible for making sure the loan’s conditions are followed.
As a result of their agreement, DigitalBridge acquired a $550 million mezzanine loan, which is seen as being more junior than the Reubens’ debt.
Reubens obtained the senior loan to effectively carry out a coup d’état over the project’s mezzanine debt since he had virtually all control over the Mezz Loan, according to Urbanite’s complaint. The lawsuit does not specifically name Rosenfeld, the Reubens, or their investment vehicle.
According to court documents, DigitalBridge and the Reuben brothers had been at odds over Century Plaza’s debt pile for almost a year while Rosenfeld was in default on loans totaling about $1 billion that were connected to the project.
The Reubens foreclosed on the project in April and paid $1 billion for the hotel, retail, and some residential apartments. Rosenfeld has reached a forbearance arrangement with the Reubens on the debt associated with the 197 condos that he still owns.
DigitalBridge considers selling its interests
In its case, Urbanite also makes note of the fact that, following the appointment of CEO Marc Ganzi in 2019 and the renaming of the company, DigitalBridge was considering selling its real estate interests.
According to Urbanite’s complaint, “DigitalBridge’s transformational change of strategy… prioritized implementation of the transition over maximizing the value of the investment in the project.”
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