Crazy write up in the ABJ
https://www.bizjournals.com/austin/n...reclosure.html
World Class files more bankruptcies, fights with lenders at foreclosure auctions.
By Paul Thompson – Assistant managing editor, Austin Business Journal
May 5, 2021, 2:28pm EDT
A wild day of Travis County foreclosure sales May 4 saw several high-profile properties owned by Nate Paul's World Class Holdings hit the auction block, including the 156-acre former 3M campus in Northwest Austin, but little clarity as to what comes next after an afternoon marked by chaos.
After months of battling in court, key players fighting over World Class properties convened on the back steps of the Heman Marion Sweatt Travis County Courthouse for a series of cash auctions.
Nate Paul was bidding, as was Will Hardeman, who along with his father has been accused by Paul of perpetuating a fraudulent scheme to wrest control of World Class properties through foreclosure, with the aid of a federal judge and a court-appointed receiver. The group, which also includes real estate professional Justin Bayne, has scooped up a handful World Class bank notes over the past months, prompting contentious legal disputes in the process. Austin Business Journal has found no evidence that the Hardeman group has broken the law.
Bryan Hardeman, Will's father, was also in attendance, though he preferred to talk about the future of the Dog's Head area of East Austin rather than his own plans. Mark Riley, attached to the Hardeman Group as trustee for several of the contested properties, was flanked by private security as he conducted a pair of auctions.
Multiple observers suggested the scene was unlike anything they had ever scene at a foreclosure sale.
World Class is a major owner of Austin real estate, rising to local and national prominence in recent years as Paul employed a "buy and hold strategy." But it has been hobbled since federal authorities raided its offices in August 2019. World Class has filed more than 20 bankruptcy cases in federal court in Austin, including three new cases filed May 4 to head off other foreclosures.
After a chaotic day at the courthouse, there were as many questions as answers. But here's what we know:
• Three foreclosure sales were conducted for World Class-owned properties — for the former 3M campus owned by Silicon Hills Campus LLC, a shopping center at 8209 Burnet Rd. owned by WC Teakwood Plaza LLC and vacant land along South Congress Ave. in South Austin owned by WC 4811 South Congress LLC. Two of the sales appeared to have been successfully completed, though the threat of legal challenges hangs over both. However, the auction for the old 3M campus failed because the winner failed to produce payment. Learn more about the sales below.
• World Class filed three bankruptcies to avoid foreclosure. They were for WC 5th and Waller LLC, which owns an East Austin building at 501 Waller St.; WC 6th and Rio Grande, which owns the Rio night club at 601 Rio Grande St.; and WC Culebra Crossing SA LP, which owns property in San Antonio. The bankruptcies were all filed by Mark Ralston of Fishman Jackson Ronquillio PLLC, who declined comment.
• World Class avoided foreclosure on WC 2101 W. Ben White LP, which owns property off Ben White Boulevard near Menchaca Road in South Austin, by obtaining financing to pay off its $4,955,086.74 debt to BBVA USA. The property has an assessed value of more than $12 million.
By 1 p.m. May 4, tempers were flaring at the Travis County courthouse. Paul shouted expletives at trustee Mark Riley, and the two engaged in multiple heated exchanges throughout the afternoon, including during an auction for WC 4811 South Congress LLC.
As Paul protested, the bids slowly ticked upward: $10.6 million, $10.75 million, $11 million.
Riley had allowed one auction participant to bid with reserve funds but said that if "the funds don't qualify by 2 p.m., then we're going to start over."
The winning bid was for $11,751,000. The man who submitted it declined to identify himself other than saying he was a Houston businessman. He said the 4811 South Congress property could be a site for future multifamily development. It was unclear if the 2 p.m. deadline was met, but the sale did not restart.
World Class had attempted to resolve its debts in the bankruptcy case of WC 4811 South Congress LLC before that auction but a judge denied the motion because it did not propose paying post-petition interest and costs to the secured lender: the Hardeman group's 4811 Soco LP. World Class said in bankruptcy filings it had secured $4.8 million in new financing from an entity called South Congress Lender LLC. According to the Texas Comptroller's office, the LLC was registered April 29 by Jules Caplin, who declined to comment.
Controversy also swirled around the 156-acre former 3M campus — owned by World Class' Silicon Hills Campus LLC — which has been tied up in litigation since World Class defaulted on a $64 million loan for the property in August 2019. That was the same month 3M moved out, to new digs in Northeast Austin, and the property has been vacant ever since.
World Class Holdings bought the former 3M campus in Northwest Austin in 2018. It August 2019, shortly after 3M moved out, it defaulted on a $64 million loan for the property.
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World Class Holdings bought the former 3M campus in Northwest Austin in 2018. It August 2019, shortly after 3M moved out, it defaulted on a $64 million loan for the property.
ARNOLD WELLS / ABJ
With roughly 1.3 million square feet of space, the campus is among the largest and most prominent properties owned by World Class. The firm has been fighting foreclosure for about 20 months.
On May 4, Travis Funding LLC submitted a winning bid of $90.5 million for the campus and the auction concluded at 2:50 p.m. But the buyer failed to materialize with the funds by a 3:45 p.m. deadline. Angela Zavala, substitute trustee for the property, attempted another auction but did not complete it by a 4 p.m. deadline.
"The sale has been voided. The original people did not get here at 3:45 p.m. with their checks," Zavala said at the courthouse, according to a video provided to Austin Business Journal by an associate of Paul. "The auction did go past 4 p.m., which we cannot do."
Travis Funding LLC had been in a bidding war with Silicon Hills Campus lender ATX Debt Fund 1, which topped out with a credit and cash bid of $90 million.
In the bankruptcy case of Silicon Hills Campus, World Class similarly attempted but lost an attempt to stop the auction in court. World Class claimed in court filings that it had obtained $85 million in debtor in possession financing from Travis Funding LLC. That would have been enough to pay off ATX Debt Fund 1's entire claim, estimated to be in excess of $78 million.
"We offered to pay it in full," Paul said May 4 at the courthouse, adding that he put up a total of $100 million in bankruptcy court in the days before the foreclosure sales with the hope of clearing all of his debts.
Travis Funding LLC was incorporated in Delaware on May 3, according to public records. In a May 3 letter submitted in bankruptcy court, the entity agreed to place the $85 million in escrow, to accrue at a fixed rate of 8%.
Attorney James Billingsley, who represented ATX Debt Fund 1 at the sale, said if the winning $90.5 million bid went through it would have resulted in his clients being "paid in full, and we'll have no further involvement."
Asked if there would be relief in that outcome, after being tied up in the case since the fall of 2019, Billingsley quipped: "If I make my flight back to Dallas, there will be."
In the end, it appears the fight over Silicon Hills Campus will continue. If a resolution is not reached before next month's slate of foreclosure sales — either by resolving the debt or through legal action — the campus will likely be back on the auction block June 1.
The original lender for Silicon Hills Campus LLC was Ladder Capital Finance LLC.Then in January, ATX Debt Fund 1 bought the $64 million note, according to Travis County records. It is not clear who is behind ATX Debt Fund 1.
Another foreclosure sale was held May 4 for WC Teakwood Plaza, which owns property at 8209 Burnet Road in North Austin.
Though the sale was scheduled to be conducted between 10 a.m. and 1 p.m., it didn't conclude until after 2 p.m., drawing the ire of Paul. However, Riley contended that the sale was permissible because he had announced it at 11 a.m. It's unclear what might become of that dispute. The lender attached to the WC Teakwood Plaza bank note, the Hardeman group's 8209 Burnet LP, won the auction with an $8.8 million credit bid.
The property is tied to a $7.6 million loan from April 2017, and the notice of foreclosure was filed April 13. That was the same day a federal bankruptcy judge granted a motion for relief from stay, which effectively allowed 8209 Burnet LP to sell the property.
In addition to the foreclosures, here are some additional details about the Chapter 11 bankruptcies filed by World Class-connected entities on May 4.
• WC 5th and Waller LLC, which owns an East Austin building at 501 Waller Street, reported assets of $10 million to $50 million against liabilities of $1 million to $10 million. The entity reported having less than 50 creditors.
On April 14, an entity called 501 Waller Lender LLC filed a notice of foreclosure against WC 5th and Waller LLC related to a $6,640,000 debt guaranteed by a guaranty agreement dated Sept. 19, 2017. The sale was set to take place between 10 a.m. and 1 p.m.
The property was most recently assessed for tax purposes at just over $7.2 million, according to Travis Central Appraisal District records.
501 Waller Lender in September earned a $6.2 million judgment against World Class and Nate Paul over a defaulted bank note it purchased from a World Class lender in February 2020.
The LLC traces back to a San Francisco-based real estate investment group called Spear Street Capital, according to information obtained from the Texas Secretary of State's office. Spear Street Capital has been buying and selling large commercial properties in Austin for years. According to the firm's website, it was formed in 2001 and has since invested in more than 70 properties throughout the world, with a combined value of more than $8.6 billion.
• WC 6th and Rio Grande, which owns the Rio night club at 601 Rio Grande St., reported assets between $10 million and $50 million against liabilities between $1 million and $10 million.
On April 7, an entity called COMM 2013-CR13 West Sixth Street LLC filed a notice of foreclosure against WC 6th and Rio Grande LP. COMM-2013 holds the note on a $7.5 million loan from December 2, 2013. The sale was scheduled to take place between 10 a.m. and 1 p.m. May 4.
The property was most recently assessed for tax purposes at $5.56 million, according the Travis Central Appraisal District records.
• WC Culebra Crossing SA LP, which owns property in San Antonio at 8323 Culebra Street, filed for bankruptcy protection in the Western District of Texas May 4. The entity reported $10 million to $50 million in assets against $1 million to $10 million in liabilities.
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