A Texas judge has temporarily blocked a controversial student housing operator from using the $14 million in commissions it received last month from the sale of an Arizona student housing complex.
On Friday, Travis County judge Karin Crump ordered Patrick Nelson’s company, Nelson Partners Student Housing, to transfer the $14 million to a registry maintained by the Texas courts for safekeeping until the lawsuit over who owned the would be allowed to keep sales proceeds has been resolved. .
“It appears to me that your client has engaged in very inappropriate behavior,” Judge Crump told Mr. Nelson, Gregory Noschese. “You have to have a very difficult and long conversation with your client. It doesn’t look good.”
The ruling comes in response to a motion filed this week by the trustee of a court-approved fund that would collect and distribute $50 million to more than 100 people who invested in Skyloft, a luxury student housing complex that Nelson Partners purchased. and operated in Austin, Texas. The administrator had asked the court to temporarily hold the $14 million in commissions paid to Nelson Partners for the sale of Arizona real estate until it could determine whether the money should have been placed in the $50 million restitution fund.
Investors in Skyloft have said in lawsuits that Mr. Nelson defrauded them and improperly diverted investor money to other purposes, including the purchase of a student housing complex in Tucson, Ariz., called Sol y Luna.
The settlement between Mr. Nelson and investors in Skyloft required him to sell other properties to raise money for the restitution fund.
Lawyers for the fund manager said Mr. Nelson told the court a few weeks ago that the sale of Sol y Luna would raise about $18 million for the restitution fund. But the sale netted the fund just $9.3 million, with Mr. Nelson’s company receiving $14 million in commissions, according to legal documents.
Mr. Noschese told Judge Crump that Mr. Nelson were entitled to the commissions from the sale of an unrelated property and that the $18 million figure was only an estimate.
The court’s ruling is the latest twist in a long-running battle Mr. Nelson has waged over the past two years with investors, student residents, lenders and creditors over the operation of a housing company that once managed nearly two dozen apartment complexes for the university. students living off campus.
Due to financial problems at Nelson Partners, the company lost control of four buildings. The company also faces a legal battle to retain control of two other properties, as well as numerous student complaints about poor property maintenance. This week, Fannie Mae, the federally backed mortgage financing firm, sued Mr. Nelson and related companies to recover $12.6 million from a loan on a foreclosed property.
Mr. Noschese declined to comment on the judge’s ruling or her comments about his client after the hearing. Mr Nelson did not participate in the hearing, which was held via Zoom and broadcast on the court’s YouTube channel. The judge ruled from the bench and has yet to sign a written order.
Investors in Sol y Luna only received 70 percent of their original investment after the sale, according to letters from Nelson Partners to investors.
