An investor in Century Plaza has come out of the woodwork, filing a lawsuit against DigitalBridge, a mezzanine lender on Michael Rosenfeld’s $2.5 billion project.
Urbanite Capital claims DigitalBridge did not disclose a restructuring agreement with the Reuben brothers, the development’s senior lender, according to a complaint filed last month in Los Angeles Superior Court.
Urbanite agreed to fund a capital commitment of $80.5 million for the project in 2018 — funding that was eventually folded into a $428 million mezzanine loan. DigitalBridge, then known as Colony Capital, was the general partner in the mezzanine loan partnership and ultimately made decisions on behalf of all investors, Urbanite said in its complaint.
But in 2020, DigitalBridge signed an agreement to allow the U.K.-based Reuben brothers to acquire “control” of the mezzanine loan — without Urbanite’s consent, the complaint alleges.
DigitalBridge “concealed these matters from [Urbanite], and decided not to seek [Urbanite’s] consent,” the complaint said, adding DigitalBridge knew Urbanite “would have contested these alterations.”
In separate court filings, DigitalBridge has said it willingly agreed to the 2020 deal, which handed out more cash to Michael Rosenfeld to finish construction of Century Plaza, located at 2025 Avenue of the Stars.
The Reubens agreed to hand out another $275 million mezzanine loan that would be more senior, meaning in the event of default, they would get paid before DigitalBridge. With the deal, they also agreed to take over as the administrative agent — essentially the entity that ensures the terms of the loan are met, according to sources familiar with the terms.
DigitalBridge agreed and ended up holding a $550 million mezzanine loan — classified as more junior than the Reubens’ debt.
“With essentially complete power over the Mezz Loan, Reubens acquired the senior loan to successfully effectuate a coup d’etat over the project’s mezzanine debt,” Urbanite writes in its complaint. Neither the Reubens, their investment vehicle nor Rosenfeld are named in the lawsuit.
DigitalBridge and the Reuben brothers had fought over the debt stack on Century Plaza for about a year, court filing show, as Rosenfeld defaulted on about $1 billion worth of loans tied to the project.
In April, the Reubens foreclosed on the project, paying $1 billion for the hotel and retail portion, plus some of the condo units. Rosenfeld still owns 197 condos and has come to a forbearance agreement with the Reubens over debt tied to those units.
In its complaint, Urbanite also points to the fact that DigitalBridge was looking to divest its real estate holdings, after CEO Marc Ganzi took over in 2019 and the firm was renamed.
“DigitalBridge’s transformational change of strategy … prioritized implementing the transition over maximizing the value of the investment in the project,” Urbanite’s complaint states.