WeWork’s first investor Joel Schreiber faces a foreclosure on his Broadway Trade Center by its lender just as he reached a deal to buy another struggling office property in L.A.
The lender, a Starwood Capital affiliate, alleges that Schreiber and his partner Jack Jangana defaulted on $221 million in debt. And now the “borrower is financially incapable of curing said defaults,” according to a foreclosure lawsuit filed in Los Angeles in May.
As a result of these alleged defaults, the vacant building was recently transferred to a court-appointed receiver to oversee its operations.
Schreiber, who gained notoriety for his WeWork investment, bought the 10-story, 1.1 million-square-foot property at 801 South Broadway with partners for $123 million in 2014. The property scored a $164 million loan from Jamestown in 2016. Two years later, Starwood Property Trust provided a $213 million refinancing that was upped to $219 million in 2019.
But by June 2020, Schreiber and Jangana were in trouble. Their loan matured and they failed to make payments. Over the course of the next year, the borrower and lender agreed to three extensions through the end of 2021.
Meanwhile, reports indicated the building would be sold to an obscure startup and turned into a “Metaverse hub.” Other reports said the property was on the market for $425 million.
“If this thing takes off, anywhere near the sort of plan that they’ve outlined, it would be by far the biggest game changer for downtown,” Nick Griffin of the Downtown Center Business Improvement District, told the Commercial Observer at the time.
Starwood alleges in the lawsuit that the property owner failed to make multiple interest payments by the extended deadlines. It also failed to pay real estate property taxes in November 2021 and February as well as insurance premiums.
Starwood argues that a receiver should be appointed by the court. In addition to defaults, the “borrower has not been transparent about the property’s operations including the permitting process,” according to the lender’s lawyer. Another concern is that the property is 100 percent vacant and “susceptible to possible break-ins and vandalism.” The court approved an order to appoint a receiver on June 30.
Bisnow first reported the foreclosure.
Lawsuits have followed Schreiber throughout his real estate career. In the past decade, he has been sued by investors, brokers and more recently Goldman Sachs who allege he defaulted on a $20 million loan.
Even with the Broadway Trade Center, Schreiber has run into other obstacles besides Starwood. Another lender, Berry Enterprises, had sought to auction off an equity stake in the building multiple times since 2017. The most recent auction was called off, according to the auctioneer.
But the foreclosure suit comes at a bizarre time. Just this week Schreiber’s company, Waterbridge Capital, was revealed as the winning bidder of the Union Bank Plaza, a 40-story tower in Downtown L.A for $155 million. Waterbridge’s offer was a significant discount from the $250 million that its owner Newport Beach-based KBS Real Estate was seeking a year ago. The deal is expected to close Oct. 19. It’s not clear how Schreiber has the money to fund a $155 million purchase of an aging office building, but not enough money to fund loan payments at the Broadway Trade Center.
Schreiber, along with his company’s lawyers, did not return a request for comment. Starwood’s attorney also did not respond to a request for comment.
The post Starwood entity looks to foreclose on Broadway Trade Center appeared first on The Real Deal Los Angeles.
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