A troubled student housing company would pay investors tens of millions

Hundreds of investors in a Troubled apartment building for luxury students near the University of Texas at Austin they are close to recovering much of the $ 75 million they pledged to the project, with most of the bill paid by a management company that has attracted complaints from tenants across the country.

Nelson Partners Student Housing will pay $ 50 million to the investor group that includes doctors, lawyers, teachers and engineers under a preliminary settlement approved by a Texas state judge. You may need the agreement or the “liquidation plan”. Nelson Partners will sell many of its nearly 20 properties to collect the money. Investors could also raise several million dollars from a New York hedge fund that provided funding for the settlement, following a jury’s verdict in a related lawsuit.

The proposed deal would settle a bitter legal struggle in which investors in the Skyloft student housing complex claimed to have been scammed by the company’s chief executive, Patrick Nelson, who has aggressively purchased property over the past four years.

But Mr. Nelson and his firm met financial problems and bankruptcies in various properties while students residing in several complexes complained of poor living conditions including broken elevators, darkened corridors, uncollected trash, insect infestation and algae-covered pools.

The Skyloft deal, which received preliminary approval from a Texas state judge late last month, would force Mr. Nelson to drastically scale back his ambitions to become a major regional player in the 100-year student housing industry. billions of dollars. If the plan receives final approval, Mr. Nelson and his company would have up to 18 months to raise funds for the fund, which will be supervised by the court.

Contributions from the San Clemente, California company will come from stakes in properties it controls in multiple states. Many of them were purchased using private investment agreements similar to the Skyloft agreement that Mr. Nelson and the securities brokers had proposed to other investors.

Mr. Nelson did not respond to requests for comment.

Skyloft investors could also receive millions more from Axonic Capital, the New York-based hedge fund that helped finance the purchase of the 18-story student building with a $ 30 million loan. After filing Nelson Partners in default, Axonic seized the property in December 2020 and then quickly resold the building to a New York real estate firm.

A jury in Austin on Wednesday ruled that Axonic was responsible for some of the losses and awarded investors $ 17 million in damages. But it may take a while for investors to see that money – the jury, when asked to share the blame for the investors’ losses, pinned 75 percent of the blame to Nelson Partners.

Axonic, in a statement, said it believed it should only owe $ 4.25 million to investors.

“We strongly believe we were collateral damage to Nelson’s fraud in this case,” the company said.

Investor attorneys Robert Brownlie and Doug Brothers said they were happy with the ruling.

Mr. Nelson has repeatedly blamed the Covid-19 pandemic for creating cash flow problems that forced him to stop paying dividends to investors in Skyloft and other properties. Since last July, he has filed for bankruptcy three other properties.

in a recent press release, Mr. Nelson said the federal government’s “heavy” lockdowns during the pandemic created problems for his company.

“Even though the government has prohibited landlords from evicting non-paying renters, it has done nothing to protect companies like Nelson Partners from their backers,” said Nelson, whose company has received just over $ 1 million in aid from the federal salary protection program.

Skyloft investors, in court documents and interviews, claimed that Mr. Nelson had hijacked some of the $ 75 million he raised from them to finance the operation of other properties. Mr. Nelson denied these allegations.

Mr. Nelson began taking steps to sell some of the properties his company managed prior to the settlement agreement. In January, Nelson Partners sold a high-rise student apartment building in Tempe, Arizona, for 36 million dollarsand has received several offers for a luxury student housing complex in Tucson.

Nelson Partners should have little trouble finding buyers. Student housing is seen by investors as a stable source of income because rents are often paid for with student loan dollars. Luxury off-campus housing has become popular in recent years as universities and colleges spend less money building dormitories and some students crave accommodation with extra amenities.

The student housing market recently got a big boost with the announcement of the large private equity firm Blackstone Group an agreement to purchase American university communities, the largest publicly traded student housing company in the country. The deal values ​​American Campus at $ 13 billion.