Nate Paul scores in Texas court skirmish

Judge clears World Class bankruptcy case to continue

Commercial Real Estate, Lawsuits, Nate Paul, World Class Holdings
Nate Paul (Getty)

Embattled Austin investor Nate Paul has scored a small, rare victory in bankruptcy court.

The beleaguered real estate magnate has been in a legal battle with ATX Braker, a shell company owned by Los Angeles-based Karlin Real Estate, over loans involving 11 commercial properties in North Austin.

A New York Supreme Court judge issued a temporary injunction in April to stop Karlin from proceeding with a Uniform Commercial Code foreclosure sale of the properties. At the time, World Class said it intended to refinance the debt.

Two weeks later, a corporate entity tied to Paul’s World Class Holdings filed for Chapter 11 bankruptcy to protect the properties from foreclosure. In response, ATX Braker filed a motion seeking dismissal of the bankruptcy case shortly after it was filed.

The properties affected by the bankruptcy case are located at 1836 Kramer Lane, 1908 Kramer Lane, 1901 West Braker Lane, 1909 West Braker Lane, 1817 West Braker Lane, 11109 Metric Boulevard, 11101 Metric Boulevard, 11009 Metric Boulevard, 11500 Metric Boulevard, 1910 West Braker Lane, and 2100 Kramer Lane.

Karlin originally issued a $29 million mezzanine loan for the office campus. It later acquired the $63 million senior mortgage on the properties from JP Morgan.

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In its motion to dismiss the bankruptcy case, ATX argued that World Class filed the suit without authority because it was not approved by two independent managers. In addition, ATX stated, the Chapter 11 filing was made in bad faith simply to forestall foreclosure.

Filing for Chapter 11 bankruptcy is a common move among real estate debtors facing foreclosure, since the process stops the foreclosure and gives the debtor more time to refinance or sell its properties.

Federal bankruptcy Judge Tony Davis denied the dismissal motion Monday, noting that the authority issue had been resolved, that ATX is “adequately protected by a substantial equity cushion, and that “retaining the case is in the best interest of creditors.”

Paul, who was hailed as an investing wunderkind when he amassed a billion-dollar real estate empire before he turned 30, has since seen multiple foreclosures, bankruptcies and a raid of his offices by the FBI.

But after selling 64 of his self-storage properties through bankruptcy for $588 million, he told The Real Deal in March that he’s plotting a comeback.