Two more real estate properties in Texas’ capitol city owned by subsidiaries of World Class Holdings filed for bankruptcy earlier this month as the fallout of owner Nate Paul’s apparent foreclosure avoidance strategy continues to unfold.
Austin based real estate companies WC 6th and Rio Grande, LP plus WC Culebra Crossing SA, LP — both affiliate partners of principal owner World Class Holdings — petitioned for Chapter 11 bankruptcy on May 4, adding to the growing list of now over two dozen such filings on the embattled World Class’s controlled properties.
The string of filings as of late are a part of a larger restructuring process from World Class Holdings, as the Central Texas real estate behemoth continues to reel from legal battles and numerous threats of foreclosure on establishments. Paul continues to assert they will eventually open for business.
A Chapter 11 bankruptcy, known as a “reorganizing bankruptcy,” allows filing business owners to avoid fully liquidating their assets, retaining hope of preserving their business. This process involves filing a petition with the courts and involves a written statement and plan of reorganization, listing all creditors associated with the business in question and the amounts they claim are still owed to them.
As some of the latest parties subject to World Class Holdings’ larger bankruptcy pattern, both affiliate business partners, both 6th and Rio Grande and Culebra Crossing, represent a sole property that operates a business venture.
Culebra Crossing owns a 140,400 square foot commercial strip mall in San Antonio by the same name, while 6th and Rio Grande own the property at 601 Rio Grande Street in World Class Holdings home city of Austin, which houses the Rio Lounge Nightclub.
Each property’s creditor list accounts for at least three construction contractors that are still owed funds for work performed on the estate.
According to a court document, amongst Culebra Crossing’s list of creditors with the 20 largest unsecured claims include Helotes, Texas’ Bolin Plumbing for $6,053.55, Boerne’s Texas Parking Lots for $7,498.47, San Antonio based architects Rehler Vaughn & Koone, Inc’s claim of $4,950.00, and lastly, LED of San Antonio’s $11,415.00.
6th and Rio Grande, on the other hand, lists Austin’s own ABC Home and Commercial Services’ claim of $2,546.89, Stafford’s Federal Maintenance Inc. for $2,435.64, and finally Los Angeles’ KONE Elevators for $20,679.70.
The $55,579.25 total of both contractor based claims across the two filings may seem paltry compared to World Class Holdings’ owner Nate Paul’s reported worth of over $800 million — although the state of the once-prestigious real estate portfolio has been marred by controversy over the past few years.
World Class Holdings’ owner faces large (and growing) debt
While revered as a media darling during his rise to becoming a real estate mogul, Paul’s reputation has been sullied in recent years due to an upswing in bankruptcies, ugly legal battles, and a very prominent raid by the FBI on both his Austin residence and World Class Holdings’ downtown corporate office in 2019.
‘Flagship Location’ of World Class Holdings Bankrupt as Real Estate Company Struggles With Debt, Foreclosures
Before this, the now 34-year-old Nate Paul, born Natine in Victoria, Texas to Indian immigrant parents, started World Class Holdings in 2007, and began purchasing properties at the height of the 2008 recession.
Soon, the combination of the nation’s lower property cost and interest-rates would reward the “wunderkind”’s company over $1.2 billion in assets with 10 million square feet of commercial space, including offices, retail outlets, and storage facilities, according to Forbes magazine.
However, things would take a turn for the once booming World Class Holdings after some heated lawsuits and details of mounting debt began to become public in 2018 and 2019.
While Paul and World Class Holdings would move to settle some cases, such as a $15 million suit from oil tycoon Michal Macs, other disputes would be spoiled by alleged shadowy behavior and dealings — such as a 2018 feud between themselves and the non-profit the Roy F. and Joann Cole Mitte Foundation over the lack of financial transparency in several joint-invested properties in the Austin area.
An arbitrator would rule in February 2021 that the Mitte Foundation is entitled to $1.9 million in financial relief after claiming that Paul and World Class intentionally defrauded the non-profit that provides grants to charities organizations and academic scholarships for underprivileged students.
Paul’s apparent pattern of filing bankruptcies on properties in foreclosure — and even bidding on his own defaulted and foreclosed properties — has earned scrutiny, possibly resulting in the 2019 raid — the reasoning behind it remaining a mystery, as feds are still keeping it close to their chest.
However, Paul is not the only prominent Texas fixture that is caught up in such troubles.
Nate Paul embroiled in controversy with Texas Attorney General Ken Paxton
Now-infamous Texas Attorney General Ken Paxton, who notably brought a suit alleging election fraud in the 2020 Presidential Election to the Supreme Court, has been linked to Nate Paul during his own recent spells of legal trouble, with his own aides claiming of a quid-pro-quo type relationship between the two and apparent efforts to intervene in legal matters befalling World Class.
After Paxton’s office moved to offer a legal opinion on the Mitte Foundation case in the summer of ’18, Paul made a $25,000 contribution to the Attorney General’s reelection campaign.
Little is known publicly as to the extent of Paxton and Paul’s alleged friendship, although a deposition from the latter over the case would reveal on the record statements that classified the relationship as “positive” — even stating to lawyers that an employee of his, recommend to him by Paxton for her work as a project manager, was allegedly having an extramarital affair with the Attorney General at the time.
As Paxton faces even further accusations of fraud and abuse of power from his own “rogue employees,” more information is likely to come concerning to what extent these purported abuses directly concern Paul.