iSquare developer faces third lender lawsuit, second Ch. 11 filing on local CRE assets

A third lender has filed for foreclosure against the developer of the proposed iSquare Mall + Hotel project on International Drive for another local retail property, who in response opened a second Chapter 11 bankruptcy case to shield an affiliate's real estate. 

The latest commercial foreclosure lawsuit was filed on Dec. 8 by an affiliate of New York-based lender Arena Investors, LP in Orange County's Ninth Circuit Court against Abdul Mathin, CEO of local development company The BlackMINE Group, and his affiliate owner of the Avenue Shoppes retail center.

Located at 8204 Crystal Clear Lane, with primary frontage on S. Orange Blossom Trail on the northwest boundary of The Florida Mall, the two-story Avenue Shoppes features 48,000 square feet of gross leasable area. Mathin's affiliate Avenue Shoppes LLC paid $6 million for the property in June 2005. 

That business entity took out a $5.35 million mortgage from Arena Investors in mid-June 2017, a loan that Mathin himself guaranteed. 

Arena claims that Mathin's affiliate defaulted under the terms of the loan agreement by failing to provide financial reports and statements to the lender, and failing to pay monthly installments in September through November, or subsequent late fees and default interest, among other charges. 

As of early December, Mathin's affiliate and its guarantors have "failed and refused" to pay for the defaults, Arena's attorney wrote in the complaint.

Arena is calling for more than $5.596 million for the loan's principal, interest and related late fees. 

In response, Mathin filed to place Avenue Shoppes LLC into Chapter 11 bankruptcy, which has stalled activity in the case since mid-December. He also has pending lawsuits of his own against two tenants of the retail center for unpaid rent. 

"If the purpose is to keep the property, filing a Chapter 11 operating case gives an automatic stay to the foreclosure case, and a breather," said Jimmy D. Parrish, partner and bankruptcy specialist with BakerHostetler. 

"The price of starting a bankruptcy case is open and full disclosure required of the debtor. It also could open up that property to potential bidders," he added. 

Mathin did not respond to requests for comment on Thursday.

Main tenants in the Avenue Shoppes include Brazilian steakhouse Cafe Mineiro and Greenberg Dental. It was marketed as of early December by Mathin with just 3,000 to 6,000 square feet of space available. 

This new foreclosure suit and Chapter 11 filing by a Mathin affiliate follows two other lender lawsuits reported here on Dec. 5.

Those involve the loan default for a MetroWest office property with more than $4.268 million allegedly owed, as well as an International Drive retail center planned for the iSquare project, where a lender claims more than $14.54 million is owed, and has asked for a receiver to take over the property.

In the I-Drive property case, affiliate International Shoppes LLC was also placed in Chapter 11 bankruptcy in early December, with Mathin wanting to retain the property and restructure the secured claims.

Key to whether Chapter 11 reorganizing will prompt a property sale is the amount of debt, and determined real estate value.

On Wednesday, Mathin filed an amended motion in bankruptcy court claiming the International Shoppes retail center is worth approximately $6.682 million, based on the latest property tax assessment. 

Under the Bankruptcy Code, Delaware-based lender Elizon DB has a secured claim up to the property value determined. A judge must decide if Mathin's proposed $6.682 million is real market value. 

The same lender would have unsecured claims for the difference between that value and the total debt ($14.54 million). But unsecured creditors don't have a lien against property, and typically receive payments over time that may be pennies on the dollar, according to Kenneth Mather, attorney and bankruptcy specialist with Gunster law firm.

The automatic stay of a Chapter 11 filing doesn't protect guarantors, which Mathin serves as on some of the loans. So a lender can still try to go after guarantors to recover losses, but most lenders will pause the process when the main borrower is in bankruptcy, said Mather, due in part to the cost of multiple cases and low probability of success. 

As for the Bank of the Ozarks foreclosure suit involving the MetroWest office property, a Ninth Circuit Court judge on Tuesday set a trial period of late August for the case.

Mathin and his affiliate companies filed an affirmative defense on Dec. 15, claiming the lender can't foreclose on that property for a variety of reasons, including because it didn't meet various conditions that should precede an acceleration on the loan's default. 

Have a tip about Central Florida development? Contact me at bmoser@growthspotter.com, (407) 420-5685 or @bobmoser333. Follow GrowthSpotter on Facebook, Twitter and LinkedIn.

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