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The Reuben brothers have responded to the slew of allegations DigitalBridge has made against them, which claim the billionaire brothers deliberately failed to act after Michael Rosenfeld defaulted on more than $1.8 billion in loans connected to his Century Plaza project in Century City.
Their response: denial.
The brothers and their investment vehicle Motcomb Estates insisted that they didn’t act in bad faith when administering both senior and mezzanine loans on the development, according to a 43-page response filed with New York Supreme Court last week. The investors did not file any cross complaints.
DigitalBridge’s claims “are or will shortly become moot,” the Reubens said in the filing, as it has already pursued a foreclosure against Century Plaza, with an auction scheduled for Dec. 14.
But DigitalBridge, another mezzanine lender on the property, has argued it’s too little too late.
In March, the firm — formerly known as Colony Capital — sued the Reuben brothers, claiming they did nothing for several months after Michael Rosenfeld defaulted. By doing nothing, the brothers’ investment vehicle “violated its responsibilities” in servicing the mezzanine portion of the loan.
Though the Reubens are exuding some confidence that the foreclosure will resolve all claims, an attorney for the brothers, Matthew Parrott, conceded at a Sept. 30 hearing that “nobody can know” how the auction will play out.
“We won’t know if there are any losses actually suffered until, at a minimum, after the auction occurs,” Parrott said.
Until the UCC foreclosure auction happens, the case will still move forward, Judge Barry Ostrager said at the same hearing, where he denied the Reubens’ request to dismiss the claims.
“In the best of all worlds there will be a UCC foreclosure action which will moot the entire case,” the judge said.
The Reubens were hit with a second lawsuit over their actions involving Century Plaza last month. A group of EB-5 lenders sued the brothers for reshuffling the debt stack over four years.
From 2016 to 2020, the Reubens went from holding a small stake in the senior loan for the property to holding more than $1.2 billion worth of debt on the project and becoming the sole administrator of both the senior and mezzanine portions of the loan.
By doing so, the Reubens have “destroyed … any real prospect of repayment” to the EB-5 lenders.
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