EB-5 investors fail to post $100 million bond, Reuben’s investment vehicle included in ruling
By Dolores Quintana
A Los Angeles Superior Court judge has ruled that the brothers, David and Simon Reuben, can foreclose on the Century Plaza development at 2025 Avenue of the Stars as reported by The Real Deal.com. This judgment came down after EB–5 investors involved in the project did not post a promised $100 million bond according to sources and court documents. Motcomb Estates, Reuben’s investment vehicle, is included in the ruling.
This legal dispute started back in October 2022 when the Reubens brothers and Motcomb were accused by 900 international investors of “reshuffling the debt stack of the property” and removing the rights of junior lenders who are in line for loan payments. After L.A. County Superior Court judge Mark Epstein handed down an order that the EB-5 investors post a $100 million bond by March 30 at 11:59 p.m. on Monday, March 27. The penalty for not doing so was that a UCC foreclosure could advance.
According to the EB-5 investment group, they had not been made aware of the mezzanine loan agreement signed in 20202 by the developer of the project, Michael Rosenfeld, and the Reubens. The brothers countered that claim by producing proof that the EB-5 group was part of the email chain with the agreement attached. It was also revealed that the EB-5 investors had the proof themselves but did not introduce it to the court through the discovery process.
Matthew Parrott, a real estate attorney at Fried Frank who is representing the Reubens, said in an emailed statement quoted by The Real Deal said, “CMB’s false claim that it was misled by Reuben Brothers in connection with the Century Plaza loans blew up in its face,”
During the court hearing on the 27th, Judge Epstein admonished Matthew Taggart, an attorney for the EB-5 investors “You were told that that was the plan, it undercuts the very heart of the argument you were making to me. I am a little bit disturbed that we went all this way without anyone even mentioning the fact that aspects of the evil plan apparently were disclosed.”
The solution that Judge Epstein proposed was the $100 million bond which would have put off the foreclosure for a month, but the investors were unable to come up with the cash.
There is a second court case in New York between the EB-5 group and the Reubens. A lawyer for the EB-5 group, Jonathan Preziosi, as quoted by The Real Deal.com said on behalf of the EB-5 group that they “will not be able to post such a bond in so short a time period. It is simply not possible.”
