AUSTIN (KXAN) — A company controlled by Austin real estate investor Nate Paul and his business World Class Holdings that used a north Austin shopping center as collateral for a $16 million commercial real estate loan has been sued in Travis County District Court for failing to make payments and meet its obligations, according to a lawsuit filed Nov. 19.
The plaintiff and lender in the case, WF 2018-C43 Galleria Oaks LLC, has asked the court to appoint a receiver for the Galleria Oaks strip mall property located at 13376 North Research Boulevard “because the Property is in dire financial condition,” and the borrower defaulted on the loan, the lawsuit states. The court-appointed receiver would take complete control of the property and be authorized to sell it, according to the lawsuit.
The lender claims the defendant and borrower, WC Galleria Oaks Center, LLC, which is controlled by Paul and World Class Holdings, missed two loan payments causing a default, according to the lawsuit and Texas Secretary of State records.
“Borrower is currently two months’ behind on monthly loan payments. And the Property does not generate sufficient revenue to pay critical expenses, including at least $25,119.89 owed to Property vendors over the past seven months, which resulted in mechanic’s liens and other charges that diminish the value of the Property,” according to the lawsuit.
The lender also says Paul’s company will not allow an environmental inspector to check the property for possible contamination from two dry cleaning businesses and a tire shop. The lender said it would prefer to sell the property through a “non-judicial foreclosure sale,” but it cannot move forward with such a sale until any environmental issues are addressed.
WF 2018-C43 Galleria Oaks, LLC lists its manager as Midland Loan Services in Overland Park, Kansas, a division of PNC Bank, according to state business filings.
The lawsuit says Paul’s company has also failed to provide financial records for year-end 2019 through the third quarter of 2020.
KXAN requested comments from Paul, his attorney Michael Wynne, and the plaintiffs attorneys. None of them responded before publishing.
FBI raid and ties to Attorney General Ken Paxton
Paul and his World Class real estate companies have come under financial pressure and law enforcement scrutiny in the past two years.
Paul’s home and two office locations were searched by FBI agents on Aug. 14, 2019, according to media reports and lawsuit records. It is not clear why federal authorities executed those search warrants, and Paul has not been accused or charged with any crime.
Since 2019, at least 20 businesses under Paul’s and World Class Holdings’ control have filed for bankruptcy, according to reporting by Austin Business Journal.
Paul’s relationship with embattled Texas Attorney General Ken Paxton has pushed the real estate investor further into the spotlight. Paxton has been accused by several former high-ranking attorneys in his own agency of crimes, including abusing his office to assist Paul with legal matters.
Four of those whistleblowers sued Paxton’s office for violating the Texas Whistleblower Act in mid November.
It is not clear exactly how Paul, who is 33, and Paxton, who is 57, became involved with one another. Paul donated $25,000 to Paxton’s political campaign in 2018, according to state records.