The Reuben brothers have won a court case against a group of EB-5 lenders over the $2.5 billion Century Plaza project, ending nearly two years of legal battles.
A New York appellate court dismissed all claims brought by the lender group and ruled the Reubens’ investment vehicle, Motcomb Estates, did not conspire to reshuffle the debt stack to take over the Century City development, according to an order on Thursday.
Matthew Parrott at Fried Frank represented the Reubens in the case. An attorney for the EB-5 lenders, Jonathan Preziosi at Lewis Brisbois, did not respond to a request for comment.
The order “constitutes a complete vindication of Reuben brothers’ conduct as a lender in connection with the Century Plaza project and confirms that the false allegations of wrongdoing made by CMB were absolutely baseless,” a spokesperson for the U.K.-based brothers, David and Simon Reuben, said in a statement.
While the Reuben brothers’ Motcomb Estates foreclosed on a portion of the senior and mezzanine debt last year, taking control of the hotel, retail properties and some of the condo units, the court’s recent order also allows the Reuben brothers to foreclose on the remaining debt.
The property’s developer Michael Rosenfeld still owns almost 200 condo units at Century Plaza, located at 2025 Avenue of the Stars, which opened up sales late last year.
The Reubens and Rosenfeld came to a forbearance agreement to extend the maturity date on the loans tied to the remaining condos by an additional 12 months, according to court records.
Eric Orenstein, a Rosenberg & Estis attorney representing the Reubens, declined to comment on whether the Reubens planned to proceed with the second foreclosure, which would be a UCC foreclosure — a process that allows a mezzanine lender to foreclose without court proceedings.
The EB-5 lenders constitute a group of 900 foreign investors. Each contributed $500,000 to the loan pool in exchange for seeking a permanent visa in the U.S. through the federal EB-5 program, court documents stated.
The group alleged the Reubens reshuffled the debt stack to hold more than $1.2 billion in senior and mezzanine loans tied to the project. By doing so, junior lenders, including the EB-5 group, lost the right to reclaim loan payments, the group alleged.
The court ruled that the Reubens did nothing wrong in pursuing a foreclosure.
Under an agreement between the Reubens and the EB-5 lenders, the Reubens’ “conduct was contractually authorized upon an Event of Default, which undisputedly occurred,” the court’s appellate division wrote in its order.
Read more
Commercial
Los Angeles
These savvy investors are set to lose big in the Century Plaza foreclosure
Commercial
Los Angeles
Fight or flight: Inside the billion-dollar battle at Rosenfeld's Century Plaza