Posted Nov 25, 2019, 4:57 PM
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Ownership dispute sparks foreclosure threat at old Motorola campus
By Erin Edgemon – Staff Writer, Austin Business Journal
Quote:
A dispute between the owners of Austin Viie, part of the former Motorola campus in East Austin undergoing a massive redevelopment, led to the project’s major lender recently beginning foreclosure proceedings.
The feud centers on the financial underpinning for the major project, although it does not seem to have stopped construction.
Romspen Mortgage LP, the Canada-based lender, on Nov. 12 filed a notice of substitute trustee sale in Travis County for the Austin Viie campus.
But Richard Wheldon, managing partner of Romspen Mortgage, said he expects the issues that led to the foreclosure filing to be resolved soon: "In our opinion, this is something that is going to be built out."
"We have a long-term view on how good the project is, and once this is resolved — the partnership dispute — then it’s away to the races as far as we are concerned," Wheldon said.
The foreclosure notice stated the $125 million loan to 3443 Zen Garden LP — which owns Austin Viie — has matured and is delinquent. The notice calls for the campus to be sold on the west steps of the Travis County Courthouse on Dec. 3.
The partnership is made up of Adam Zarafshani of Austin and Dan White of Canada. Zarafshani said the loan isn't actually due for another year and a half.
Zarafshani is also the owner of Austin-based Panache Development and Construction Inc. and has spearheaded development of Austin Viie for about two years. He blames the dispute on White, who became a part owner of the campus in 2012.
“Mr. White has become insolvent, and he can’t meet his obligations here,” Zarafshani said. “That is the dispute. I refuse to carry him. He hasn’t been able to meet his financial obligations.”
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Construction work continues on the redevelopment of the 109-acre campus, despite Romspen placing a hold on the disbursement of the loan, Zarafshani said. He claims he’s been funding the construction out of his own pocket in the meantime. Austin Business Journal profiled Austin Viie earlier this month.
White responded to an email seeking comment on the allegations made by Zarafshani by saying his partner is a fraud, liar and a conman. "You cannot believe a word he says," he wrote.
White did not respond to an additional request for an interview and did not provide any evidence of his claims.
An Oct. 17 lawsuit that 3443 Zen Garden filed against Romspen gives some insight into the dispute between White and Zarafshani.
Zarafshani claims White spearheaded the lawsuit that alleges Romspen perpetrated a “loan to own” scheme against the owners of Austin Viie. The suit alleges Romspen delayed the release of funds on three separate loans on the property and “imposed itself” on the owners of the campus, “exercising excessive direct control” over the project in an effort to take ownership.
The suit alleges that Romspen ultimately refused to fully fund a third and final loan on the project, “formally declaring an event of default based on false and pre-textual grounds.” This third loan replaced the first two loans.
Romspen did this to cause the owners to lose their interest in the campus and "destroy the best hope of transforming” the property into a modern business park, the lawsuit alleges.
Austin attorney Eric Taube, who filed the lawsuit on behalf of 3443 Zen Garden, declined to comment on the suit and which party instigated it. Taube withdrew from the lawsuit in a motion filed Nov. 6 due to a conflict between White and Zarafshani, the motion states.
Zarafshani dropped the lawsuit in a notice filed Nov. 7 after learning that most of the claims listed in it were false, he said.
Moving forward
Zarafshani filled a conference room in Austin Viie's welcome center on Nov. 19 with more than a dozen subcontractors working on the project, from structural engineers and landscape architects to lighting and HVAC experts. During the meeting, Zarafshani reassured the subcontractors that work on Austin Viie would continue and the project wasn't in default.
A few of the subcontractors interviewed by this reporter said they are getting paid for their work on the project and they were confident that the partnership dispute would get resolved.
Lone Star Materials on Nov. 15 filed a mechanic's lien against 3443 Zen Garden for non-payment of $120,276.72 for delivered materials. Liens aren't too unusual on large construction projects and Zarafshani said the matter would be corrected shortly — he said the check is likely in the mail.
Formerly known as Eightfold, the rebranded Austin Viie campus is being marketed to technology companies looking for energy efficiencies and extra amenities for employees. Cushman & Wakefield is handling marketing and leasing.
Earlier this month, Zarafshani said multiple tech companies as well as a national coworking firm are in the running for space.
The first of eight former Motorola buildings being renovated is slated to be complete in the first half of 2020, he said.
More than 4.6 million square feet of office space is planned in multiple phases, including the future construction of large buildings along an expanded U.S. Highway 183. Additionally, a coworking space for artists, retail buildings, a medical clinic, an urban garden and other amenities are in the works.
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