Ex-Wunderkind Nate Paul Unloads Self-Storage Assets, Plots Comeback | Ezine Daddy

Nate Paul of World Class Holdings (World Class, iStock)

Nate Paul is planning his comeback.

The former Austin real estate prodigy just sold a huge portfolio of self-storage properties out of bankruptcy, leaving him enough cash after creditors paid off, he says, to pursue new opportunities and revisit old ones.

While the size of Paul’s war chest has dwindled after years of foreclosures and battles with lenders, his ambitions are as big as ever.

“We’re back,” Paul said in an exclusive interview with The only true. “We are looking for exciting opportunities. We have a large amount of capital to go out there and invest.”

Paul, 35, by the age of 30 has built a real estate empire valued at $1.2 billion by Forbes. If he manages to rebuild his fortune, it would be one of the economy’s great comeback stories. Although real estate is an industry known for second chances, Paul’s road back to the top has been more complicated than most, including pending litigation and foreclosures, and many broken bridges between business partners and lenders.

The sale of nearly all of Paul’s self-storage portfolio — 64 properties that were the cash cow of his holdings — for $588 million will set him at least $130 million and up to $178.8 million, according to a rep leave. While Paul gave few details about his plans, he said his company, World Class Holdings, will likely continue to invest in the self-storage industry and he’s looking at properties where he already has a presence, including Austin and Los Angeles, where the company has self-storage properties as well as creative office space, he said.

“There are certain asset classes where we have a core competency, like self-storage, that we expect to continue making significant investments in,” he said.

The amount of existing debt Paul or his firm has is unclear, but in 2020 creditors claimed they were owed about $135 million through 16 bankruptcies involving 28 properties, the Austin Business Journal reported.

The size of Paul’s current portfolio also remains unclear, although a spokesman said that about 95 percent of World Class Holdings’ assets are wholly owned by him. It’s also unknown which of its holdings could be the focus of an ongoing legal battle. He’s still on trial over a number of properties he bankrupted to stave off foreclosures.

“We’re getting back to doing exactly what we did before, which was buying, developing and executing a strategy that has worked exceptionally well,” said Paul. “We will continue to do so for many decades to come.”

Nate Paul’s rise

Paul, a college dropout from the University of Texas at Austin, made his way in the depths of the financial crisis buying real estate self-storage facilities. His bet on the reputable sector proved lucrative, and he soon began amassing commercial properties in the Austin area, such as the Galleria Oaks mall.

Paul’s funding source remained a subject of speculation in Austin, though he did attract the interest of Robert Smith of private equity firm Vista Equity Partners, who has invested tens of millions of dollars in five of his businesses, according to Forbes.

As his portfolio grew, so did Paul’s vision, telling the media he wanted to become “the youngest self-made real estate billionaire.”

He became a prominent figure in Austin, where his world-class black signs were seen all over the city. Paul himself drove around in a Bentley while tabloids covered his attendance at Leonardo DiCaprio’s birthday party.

Over the years, Paul has acquired 20 acres on Research Boulevard in North Austin, which includes the Arboretum Crossing luxury shopping mall. 13 office building in North Austin; a 34-story tower in downtown Dallas; and locations along South Congress in Austin.

But it was his 2018 purchase of the 1.3 million square foot campus of multinational materials company 3M in Austin that really caught the eye. The company was already planning to move out, and Paul said his plan was to buy the asset and hold it for the long term. This $100.9 million property was acquired out of foreclosure last year by Los Angeles-based development group Karlin Real Estate.

Paul suggested, without giving details, that he believes he could regain the property he lost in the foreclosure.

“I think it’s a phenomenal asset and something that we see great long-term value in,” he said.

Paul’s fall and comeback

The first cracks in Paul’s empire began to appear around 2019, when the FBI and US Treasury Department raided his personal office and home.

Former associates of Texas Attorney General Ken Paxton filed a whistleblower complaint alleging that Paxton abused his office to do Paul a favor. Paxton has denied the allegations. Paul later sued the FBI, arguing that the raids violated his civil rights and harmed his businesses.

“The hysteria and the kind of concern that ensued certainly had an impact,” Paul said. “There were a lot of people who were concerned that that was happening, as were we. It is very unfortunate to have such a situation.”

Since then, World Class has filed for dozens of bankruptcies to ward off foreclosures by its lenders. In 2019, a debt fund claimed that Paul defaulted on a $64 million loan secured by the 3M site because he failed to repay it before its due date and failed to make payments as guarantor.

Paul says the financial problems aren’t his fault. He blames opportunistic investors who bought his loans at a time when portions of his portfolio were experiencing declines in occupancy and revenue in an attempt to take control of his properties.

Turnbridge Equities, which bought one of the World Class loans after World Class stopped making payments, said the company expects to be repaid through a refinancing or sale.

“Nate has a long history of pointing the finger at others about his own problems, rather than just following the rules,” said Turnbridge founder Andrew Joblon.

Paul’s financial troubles reached a boiling point when an auction last summer was disrupted by protesters outside the courthouse, angry about nine foreclosure auctions linked to Paul’s properties. The disharmonious protesters chanted, “Illegal sales!” and “We want pizza!” ABJ said. Paul denied any involvement.

Paul now says many of those financial problems are in the past.

“I’m very confident about our positioning now as some of them are obviously realizing through sales and making significant gains,” Paul said. “Some of the others we’re refinancing to get out of loans that were bought from third parties.”

In the last three years, World Class has filed at least two dozen bankruptcy cases, according to the ABJ, although some have since been resolved.

In a recent case in which Paul is fighting for control of a handful of properties, a Texas court ruled against him. On March 23, US Bankruptcy Judge Tony Davis ordered Paul to relinquish control of five companies associated with several world-class properties — including the downtown Dallas skyscraper and a 19.5-acre property in the southeast of Austin — after a US trustee claimed Paul had been moving money between companies without court approval, according to the ABJ.

He also lost control of three other companies to a chief restructuring officer who will oversee the companies through bankruptcy.

“I don’t want Mr. Paul to be in control of the money, period,” Davis said during the hearing, according to the ABJ.

Paul insists he is looking ahead rather than back.

“Are there things I would have wished for or anything I regret?” said Paul. “Yes there is, but my focus now is really on how we can continue to go out there and make the best decisions.”

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