Daniel Chu’s Tricolor Sparks Private Credit Panic

Accused fraudster Daniel Chu was moving money in and out of real estate all over the country as his company Tricolor Holdings fell apart.

The collapse of the Dallas-based sub-prime auto lender has implications for real estate that extend beyond his recent mansion transactions in Aspen, Surfside, Beverly Hills and Dallas’ exclusive Highland Park neighborhood.

Tricolor filed for bankruptcy in September. Chu is facing federal charges of lying to banks, falsifying loan data and “double pledging” collateral or using the same collateral to bank multiple loans.

The unraveling of Tricolor has laid bare its business practices, like targeting undocumented immigrants and other people outside of traditional banking systems. Borrowers report being lied to about the history of the cars they purchased and struggling to get the loans suspended after the bankruptcy due to the costs of having to appear in federal court.

JPMorgan, Barclays and Fifth Third are on the receiving end of lawsuits from Tricolor investors accusing the banks of negligence.

The whole mess has unsettled Wall Street, which is implicated in the rapidly growing use of private credit. Non-bank lenders, the purveyors of private credit, make loans backed by money from private funds, but they also borrow from traditional banks.

The use of private credit proliferated after increased regulation after the Great Financial Crisis made traditional financing harder to get. It’s also become popular among real estate developers frustrated by a tight lending environment caused by high interest rates.

The bankruptcy of Tricolor, followed by auto parts company First Brands a few weeks later, sparked anxiety that has been exacerbated by developments like Blackstone tapping top executives to raise money amid a wave of redemption requests for a private credit fund and later limiting withdrawals.

Boring into Dallas

A Dallas development is one of three winners of a nationwide contest initiated by Elon Musk’s Boring Company for incorporating tunnels into local transit infrastructure. The tunnel in question would connect Hoque Global’s $1 billion University HIlls development with a Dallas Area Rapid Transit station near the University of North Texas at Dallas campus. Next comes the feasibility study. Another winning project is in New Orleans, whose erosion, flooding, hurricane vulnerability and land subsidence (it’s sinking at a rate of 2 inches per year) seem to make it a dubious candidate for an underground tunnel.

Jones Day ditches Harwood

It’s official: Jones Day is leaving Harwood District. The global law firm, which has had offices in Harwood since the 1990s, was supposed to anchor Harwood No. 15, but Harwood International’s rapid financial unraveling killed those plans. Instead, Jones Day is heading to Knox-Henderson. It will anchor Knox & McKinney, a 12-story, 280,000-square-foot office building being developed by Trammell Crow Company at 4544 McKinney Avenue.

Lurin’s fourth bankruptcy

Fitzroy Grove in Arkansas is now the fourth property Lurin Capital is trying to save with a bankruptcy filing. Jon Venetos’ struggling Dallas-based multifamily firm filed for Chapter 11 bankruptcy protection to maintain control of the Rogers, Arkansas property that’s at the center of a recent default lawsuit against Lurin. It’s Lurin’s fourth bankruptcy filing this month. The firm also filed for bankruptcy protection for Latitude 2976 in Houston on March 2; and both the Emory Apartments in Pensacola, Florida, and the Aria Apartments in Fort Walton Beach, Florida on March 5.

Texas puts the squeeze on hemp

We’re a few days out from March 31, the day new state regulations are scheduled to take effect limiting the sale of hemp products. New rules cap total THC in consumable hemp products at 0.3 percent — a shift from prior interpretations that focused only on Delta-9 THC. That distinction had allowed manufacturers to sell products rich in THCA, a compound that converts to intoxicating THC when heated. Under the new testing requirements, those products would effectively be banned. The hit could be immediate for retailers, as hemp shops have proliferated across Texas in recent years, filling strip centers and high-traffic retail corridors with an estimated 1,500 stores occupying millions of square feet, according to Bisnow.