Sector developments and company hires

Student housing sponsor accused of ‘Ponzi-like’ scheme
The US$36m SkyLoft Austin loan - securitised in the UBSCM 2019-C16 CMBS - is over 30 days delinquent in payment, as of the August 2021 remittance period. The loan is sponsored by Patrick Nelson, who is reportedly being sued by dozens of minority investors involved in the acquisition of the property.

Nelson is accused of operating a ‘Ponzi-like’ scheme, whereby investor funds have allegedly been diverted to other projects or to enrich Nelson himself. Nelson Partners Student Housing is understood to have ceased paying cash dividends to private investors in 2Q20, citing pandemic-related financial challenges.

The SkyLoft Austin loan is collateralised by the fee interest in a 674-bed luxury student housing property in Austin, Texas, near the main campus of the University of Texas at Austin.

Nelson formed Nelson Partners in April 2018 to develop, acquire and manage student housing properties. According to the company’s website, Nelson Partners operates 22 student housing properties in 10 US states.

KBRA Credit Profile (KCP) cross-referenced these properties against KBRA’s CMBS coverage universe and researched loans that were sponsored by Nelson, Nelson Partners or a related entity at the time of securitisation. The analysis identified 11 non-defeased loans (accounting for US$262m) across 13 CMBS, the majority of which (US$177m) were current in payment, as of the August 2021 remittance. Three loans (US$85m), including SkyLoft Austin, are delinquent; two of the delinquent loans, along with one current loan are specially serviced (US$53.6m).

Although Nelson’s brother Brian Nelson has not been named in any reports citing allegations of wrongdoing against Nelson and Nelson Partners, KCP included loans sponsored by Brian Nelson in the exposure list. Patrick and Brian Nelson formerly operated Nelson Brothers Professional Real Estate, which also focused on investments in student housing. The pair reportedly disbanded in April 2018.