Erez Law is currently investigating brokers across the country who recommended their clients invest in Skyloft Austin, a troubled luxury 18-story student housing building located close to the University of Texas. The private real estate placement posed an inherent risk to investors, who now could lose some or all of their investment.
The building was marketed by property management firm Nelson Partners, which marketed the deal in 2019; the property management firm sued the hedge fund that provided $30 million in additional financing. Investors invested between $100,000 and $500,000 in Skyloft.
Public records indicate that investors in Skyloft have accused the CEO of Nelson Partners, Patrick Nelson, of fraud and diverting funds to pay for operations at other properties. It is alleged that Patrick Nelson engaged in a Ponzi-like scheme and transferred investment money into offshore accounts.
Patrick Nelson has put three additional properties into bankruptcy since 2019.
In April 2020, Nelson Partners suspended monthly payouts to investors.
In May 2020, Axonic, a hedge fund that loaned Nelson Partners $30 million for the investment property.
In December 2020, Axonic seized the property and resold it to a real estate firm based in New York.
As reported by the New York Times, in 2022, a Texas judge ordered Nelson Partners to pay a $50 million preliminary settlement to a group of investors; Nelson Partners would have 18 months to pay, if the settlement is approved. As part of the liquidation plan, Nelson Partners planned to sell as many as 20 properties to raise money to repay investors.
In May 2022, Axonic was ordered to pay $17 million in damages to Skyloft Austin investors. The jury placed 75% of the blame on Nelson Partners to which Axonic claimed they should only have to pay $4.25 million; they are appealing the verdict.
Skyloft Austin Investment Loss Options
There is increasing concern that investors in the private real estate placement could lose all of their investment, because the property management firm Nelson Partners has yet to pay back a loan from Axonic. Public records indicate that in the wake of the COVID-19 pandemic of 2020, the property management firm began preserving funds when the parents of many college students ceased paying rent.
Additionally, investors in Skyloft Austin claimed that they were not informed about the dispute until they were notified by Axonic that the hedge fund took control of the building and had intentions to sell the property. In fact, investors allege that the memorandum did not inform them of the risk of Axonic taking control over and selling the property.
The risky investment lacked transparency for investors, making it unsuitable for many investors, especially conservative or retired individuals. Brokerage firms are required to conduct all necessary due diligence to ensure investments are in the best interest of their clients and are suitable to meet their investment portfolio and goals.
Furthermore, it is alleged that some investors utilized a 1030 exchange to purchase shares of Skyloft Austin, which allowed them to exchange one property for another without incurring any capital gains taxes.
Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, Nelson Partners may be liable for investment or other losses suffered by its customers.
Erez Law represents investors in the United States for claims against brokers and brokerage firms for wrongdoing. If you have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.
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