A student housing operator that tenants and investors say has Poorly managed luxury real estate across the country added a large statue of Wall Street to its list of legitimate opponents.
Fortress Investment Group, an investment firm that manages money for institutional and private clients, attempted to acquire control of a high-rise student apartment building in Denver from Patrick Nelson and his firm, Nelson. Partners Student Housing.
Nelson Partners, which operates housing complexes in eight states, has been sued by investors who say Nelson owes them tens of millions of dollars. His tenants say they have been trapped in properties with broken elevators, malfunctioning fire alarms, utilities that have been closed for weeks and piles of uncollected trash.
Over the past year, Mr. Nelson has battled lenders and investors, sending three properties into bankruptcy in hopes of preventing foreclosures. Last week, a judge removed Mr. Nelson from his position as manager of another estate, a luxury building near the University of Texas at Austin that was seized by Axonic Capital, a $4 billion hedge fund.
But Fortress, which manages $54 billion in hedge funds and private equity assets, is a competitor with even deeper pockets.
Earlier this month, a company controlled by Fortress filed a legal notice in Denver to begin the foreclosure process of a $46 million loan that Nelson’s company borrowed in November 2019 to finance its the purchase Loft for Auraria students.
Fortress affiliates took action after declaring Mr. Nelson’s company without a loan and went to district court in Denver to ask for a recipient to be appointed to oversee the property.
One of the first steps the recipient took was to replace Mr. Nelson’s company as property manager for the building, where several students had complained of broken elevators and the overall poor maintenance of the building. residential facility, occupying the top 13 floors of the building- a high rise building and located atop a hotel.
Michael Staheli, chief executive officer of Cordes & Co., a default consulting firm that Fortress installed as a receiver, said his firm would not discuss the case.
Mr. Nelson said he was taken advantage of by Fortress.
“The Fortress vuls bought the loan just weeks before it expired for one reason: to foreclose on a healthy property that had been performing well for more than seven years with the intention of stealing millions of dollars. equity to which they are not entitled,” Mr. Nelson said in a written statement. “Fortress doesn’t have any interest in students or investors.”
Mr. Nelson’s company, based in San Clemente, California, generates most of its revenue from real estate management jobs for nearly two dozen student residences. Some of them are wholly owned; Others buy with tens of millions of dollars raised from small real estate investors. He also generates millions of dollars in fees from funding the investment vehicles those investors put their money in, known as private placements – a type of offering that is not regulated by brokers stock.
But when he and his company have Criticized about management of some of those properties, he was faced with a series of problems. Local health officials and construction officials have issued fines or have to pay to clear the property, and lenders include Fannie Mae, the mortgage giant’s mortgage finance giant. controlled by the state, sought to control the buildings he operated. His bankruptcy on three properties — near the University of Mississippi, Texas Christian University and the University of Houston — failed, and by the end of last year, his company no longer had control of them.
The complex near the University of Texas, known as Skyloft, is the subject of lawsuits by hundreds of investors, who allege that the $75 million they pledged to buy the building is missing. They also stated that they were not aware that Axonic could foreclose the property if Nelson Partners defaulted on a $35 million loan to finance the purchase. After Axonic’s foreclosure, it sold Skyloft to another investment firm.
Mr. Nelson has repeatedly blamed the pandemic and Covid-19 restrictions on his investors’ ability to collect rent, hire maintenance workers and pay monthly dividends.
He bought the Auraria property in Denver just months before the pandemic. The $46 million loan was arranged in November 2019 by a division of Cantor Fitzgerald, a Wall Street investment firm. The loan was quickly sold to another hedge fund before Fortress affiliates bought it last fall.
Fortress is not the only entity claiming that Mr. Nelson owes Auraria money. At least two contractors who had worked for Mr. Nelson’s firm on the property received the court ruling, which stated that they owed about $100,000 for the work they did.
But that’s not bad news for Mr. Nelson. In December, he sold a student building in Tempe, Ariz., for $36 million — nearly double the price his company bought in 2015.
The closing statement that Mr. Nelson sent investors encouraged them to move some of the proceeds into new properties that Mr. Nelson’s company said it was in the process of acquiring in California and Utah. .
Kirsten Noyes research contributions.
https://www.nytimes.com/2022/02/21/business/nelson-partners-student-housing.html Patrick Nelson vs. students, investors and a big hedge fund