David and Simon Reuben are exploring ways to finalize one of Los Angeles’s biggest real estate projects after taking control over major parts of the $2.5 billion plan through debt financing deals.
(Bloomberg) — David and Simon Reuben are exploring ways to finalize one of Los Angeles’s biggest real estate projects after taking control over major parts of the $2.5 billion plan through debt financing deals.
The British billionaire brothers are in talks over a revised repayment plan with the US property developer behind the Century Plaza site after it defaulted on loans during the pandemic, according to a statement from the Reubens’ namesake firm. The project, which includes a five-star hotel as well as retail stores and residential units, is almost complete.
Reuben Brothers is now “engaged in discussions on a forbearance agreement with the borrower, Next Century Partners, controlled by Michael Rosenfeld, to ensure the project will move forward,” the siblings’ firm said in the statement, without disclosing financial terms. “With the funding and development secured, Century Plaza can cement itself as a premier luxury residential complex in the center of Los Angeles.”
Representatives for Next Century Partners didn’t respond to requests for comment.
The situation underscores the risks many real estate firms worldwide face as higher interest rates to curb surging inflation lead to more defaults. Money managers have recently stepped up their bearish bets against office landlords: Warren Buffett has warned there will be problems for banks in the commercial property sector, while investor Kyle Bass went as far as saying skyscrapers will need to be demolished.
The Reubens control one of the world’s biggest portfolios of retail, office and residential properties. Sons of Iraqi Jews, they were born in India and moved to London as teenagers. They built a fortune trading metals and later invested in real estate, leisure and technology firms. David, 84, and Simon, 81, have a combined net worth of $13.6 billion, according to the Bloomberg Billionaires Index.
US court records show the siblings provided more than $1 billion in debt financing for the Los Angeles development, including borrowings the builder couldn’t repay. They extended a $275 million loan in 2020 as part of a flurry of US real estate deals after values plummeted during the pandemic and boosted their investment in the project the next year.
The brothers became owners for major parts of Century Plaza after fending off legal challenges from other lenders.
The Reubens reached a settlement in January with the US infrastructure-investment firm now known as DigitalBridge, which claimed in early 2022 that one of the brothers’ entities had prioritized the billionaires in how it handled debt arrangements for the project. Earlier this month, a New York court struck down a separate challenge from another lender that derived its funds from overseas investors, allowing the siblings to end their foreclosure process.
Reuben Brothers said it foreclosed on more than 100 luxury condominiums as well as about 96,300 square feet (8,950 square meters) of retail space, more than the total advertised in marketing documents for the project.
The 400-room luxury hotel at Century Plaza reopened in 2021 following renovations under the management of Accor SA’s Fairmont brand.
–With assistance from Laura Benitez and Natalie Wong.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.