iSquare Mall + Hotel developer faces foreclosure suits, Chapter 11 & lack of private equity interest

The developer of the long-proposed $400 million iSquare Mall + Hotel project on International Drive is facing two foreclosure lawsuits from lenders, filed for Chapter 11 bankruptcy on Monday and has pre-construction contractors on the project claiming unpaid service fees. 

Now the lead advisor in sourcing private capital for the development told GrowthSpotter that iSquare has no private investors stepping up as of yet to supply much-needed equity, which instituional lenders are requiring before they'll fund the project.

Abdul Mathin, his iSquare land owner affiliate International Shoppes LLC and development company The BlackMINE Group have been served with two foreclosure lawsuits in the past four months. 

On Aug. 1, Bank of the Ozarks filed a commercial foreclosure suit against Mathin and five of his affiliate businesses, including the iSquare site owner, for default on a loan for an office property in MetroWest.

The borrower owed more than $4.268 million, which Mathin told GrowthSpotter he is in the process of refinancing. The bank's attorney responded on Nov. 17 saying no such negotiations are taking place.

On Nov. 29, Delaware-based lender Elizon DB filed suit claiming a $14.3 million mortgage on the property, and accused Mathin's affiliate of not making payments, failing to collect rent and failing to maintain the property. The lender is asking an Orange County judge to appoint a receiver to take over the property.

Mathin filed Monday to place International Shoppes LLC into Chapter 11 bankruptcy, in which he declared approximately $6.7 million in assets and $20 million in debt. He has pending lawsuits of his own against four tenants of the retail center for unpaid rent.

"International Shoppes filed Chapter 11 reorganization due to a complaint filed by the current lender on the (retail) center," Mathin said Tuesday. "This has nothing to do with iSquare project or the developer. ... The current loan may be paid off during the Chapter 11 reorganization." 

Planned for a 5.6-acre retail center parcel at the southeast corner of I-Drive and Kirkman Road, Mathin bought the site in 2007 for $12.5 million.

In March 2016, he earned City Council approval for rezoning and entitlements on the site for up to 23 stories with two hotel towers totaling 539 keys, up to 434,831 square feet of retail/commercial space, and a seven-story parking garage.

Balfour Beatty Construction was the first general contractor to provide pre-construction services for Mathin's project in 2014. Scott Skidelsky, COO of Florida for the company, told GrowthSpotter that Mathin paid "small amounts" of its pre-con service fees for a few months before he declined to pay the first "substantial bill." 

The general contractor then stopped its pre-con work on the project. Mathin said in mid-October he fired Balfour Beatty for cause.

PCL Construction, Mathin's current pre-con provider on the project, did not respond to requests for comment. 

HKS Architects, the current design architect on the project signed in April 2015, had hired Kimley-Horn's Orlando office to serve as civil engineer. Kimley-Horn was instructed by HKS to stop work on the project earlier this year.

HKS also hired Walker Consultants as a consultant for parking garage design on the project. That firm is no longer working on iSquare because HKS is involved in a legal mediation process with Mathin to recover unpaid fees, said Bill Reiter, executive vice president and managing director for Walker Consultants overseeing projects on the east coast. 

"We are in mediation now, so I can't comment further," he told GrowthSpotter. "We will not do business with (Mathin)" in the future. 

Matthew Clear, principal with HKS and director of its Orlando office, declined to comment for this story.

HKS was hired as lead architect on iSquare after Orlando-based Scott Architecture had the initial contract in 2014 with Mathin to conceptualize iSquare's design plans, file with the Federal Aviation Administration for a height variance and lead the project through master plan approvals with the city. 

Ray Scott, now principal with Scott + Cormia Architecture, said he was directed by Mathin to prepare a second contract for the next phase of design, and proceeded to hold kickoff meetings and procure consultants from around the country.

Mathin then opted to switch to HKS as lead architect, leaving Scott with approximately $100,000 in design effort and time invested that went unpaid, toward what was expected to be a second contract worth close to $12 million.

Mathin has said no value is owed because Scott never had a second contract with him. Scott was left frustrated, saying "we've done this with developers all the time to move forward, with an understanding they would pay us for our time."  

New York-based Chesterfield Faring, Ltd. had been hired and fired by Mathin in 2015 over just a few months, originally charged with rounding up private investors or lenders for the iSquare project. The parting was mutual, said CEO Lawrence Selevan.

"When we got hired we were looking to refinance his existing strip center to free up $2 million to $3 million of working capital to do a feasibility study, which (Mathin) didn't have," he told GrowthSpotter. "We liked the project's concept and location, but when (Mathin) sent us his financials he showed us a balance sheet that was out of whack," with numbers reflecting future income from a built and operating iSquare Mall + Hotel.

"We got two to three offers for him on refinancing the strip center, but he turned them down," Selevan continued. "(Mathin) has no track record in this line of development. We always anticipated having to bring in a co-general partner with a development record. He didn't have the financial capacity by himself to obtain a construction loan." 

Chicago-based investment bank and real estate financing advisor Ablum Brown & Company has been working with Mathin since 2016 on trying to procure lenders and private equity for iSquare. 

"The first thing we needed to do was refinance International Shoppes because it had a loan that was maturing in the middle of its runway, and we accomplished that earlier this year," said president Tom Ablum. "Now we're in the incubation process of waiting on responses from equity investors for the iSquare project. We initially went to a couple of lenders, but the issue is 'chicken or the egg.'"

Ablum claimed that Mathin has one term sheet from a lender to finance a majority of the iSquare project's proposed $400 million budget, but it is contingent on having all the equity in place. 

"Do we have imminent signing of an equity partner today? No. When will we have one? It could be weeks or months," he said. "People have shown interest, but unfortunately none are signing today. Until we have a commitment from an equity player I don't believe it's wise to sign up any (lender). In my opinion this is an equity-driven deal, and not lender-driven." 

The iSquare project is still achievable, Mathin says, and only requires he secure up to $500 million in financing from private equity and institutional lenders. 

As an alternative to development, Mathin "did a great thing in improving vastly the zoning and entitlements" of his International Shoppes property, Ablum said. 

"He has improved the value of his property considerably in just doing that. Even if he turns around and sells it, he'll probably have a pretty good profit here. This land is now highly valuable." 

But Mathin won't necessarily be able to sell the property with the full value of all its approved entitlements, if the market does not think those are realistic to achieve on the site, said Don Stephens, director of HVS' Orlando office.

The rich entitlements in the iSquare Mall PD zoning will expire if a building permit is not obtained for the work within five years, or March 2021. 

While Mathin has long-presented his iSquare project as a "five-star" caliber resort with luxury amenities planned, density of the International Shoppes site naturally prohibits the large outdoor amenities that are typical of a five-star resort property, Stephens said. 

"I think that is too intense of a use for that particular site," he added. "Resort properties typically require a significantly larger amenity base in order to achieve the type of rates that a five-star resort would require." 

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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