Lawsuits halt ambitious East Austin redevelopment 

The ambitious redevelopment of East Austin’s former Motorola campus has hit a major roadblock, with funding shortages, stalled work and a flurry of legal accusations throwing the project into turmoil.

Once envisioned as a site for towering structures away from downtown, the project has ground to a halt since September. Five subcontractors have filed lawsuits against the property’s owner and lender, Canada-based Romspen Mortgage LP, as well as the general contractor, Panache Development and Construction, the Austin Business Journal reported. 

Separately, an LLC primarily owned by Romspen now faces bankruptcy following an involuntary petition filed by Panache. Allegations include Romspen withholding project funds and engaging in behavior detrimental to progress. Romspen, which bought the 375,000-square-foot campus in 2012, maintains it is merely a lender with no control over the project.

According to the lawsuit, Romspen allegedly made at least three loans from 2012 to 2018 that were never fully funded. In 2019, Romspen ceased funding altogether, leading to a standstill in progress, and in 2020, the project was put into involuntary bankruptcy. The Rompsen-affiliated LLC purchased the property out of bankruptcy in October 2020.

“The persistent breaches of funding obligations and intentional distress caused to projects by such conduct has been used on multiple occasions to generate additional revenue through bad faith and unlawful behavior,” the suit reads. “Ultimately, Romspen has followed its unpublished playbook to perpetuate a fraud. Such fraud should not be rewarded.”

Romspen filed a motion to dismiss the lawsuit in November, contending that the LLC is the actual owner and a separate entity. Panache, which took over as general contractor in 2018, filed a general denial to the suit in December and filed a third-party petition that same day, alleging damages of $12.1 million caused by Romspen and its affiliated LLC. 

Efforts to secure payment for subcontractors have been met with resistance. In response to the plaintiffs’ demands, Romspen claimed it “had taken over its accounts payable and it no longer had the ability to handle its own affairs regarding the campus,” the outlet reported.

Panache has not received payment from Romspen since July and has halted all work since September. 

Despite Romspen’s 2020 purchase of the property and subsequent rezoning approvals from Austin City Council, progress has been marred by financial disputes. The former Motorola Campus was slated to be transformed into a modern tech and research hub, with towers rising as high as 400 feet and up to 4.8 million square feet of development. 

—Quinn Donoghue 

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