This week, agents from the Federal Bureau of Investigation descended unannounced on the home and business of Nate Paul, a young Texas real estate investor who became known for buying up prominent real estate assets in the state capital of Austin.
The FBI confirmed the raids to Forbes, but declined to specify the nature of its search at Paul’s sprawling 9,175 square-foot Austin home or the downtown Austin offices of his World Class Holdings. Local media reported FBI agents were spotted leaving World Class’ offices with documents.
Paul, 32, and World Class Holdings, were the subject of a complimentary Forbes article in 2017, which described how Paul had snapped up commercial real estate in Austin, including valuable downtown locations and 3Ms 158-acre campus, and built a large self-storage company with 60 or so sites across the nation. In certain deals, Paul had the financial backing of prominent investors, like private equity billionaire Robert Smith, the Austin Police Retirement System, and a real estate debt fund managed by Ares.
Paul declined to comment about the FBI’s raid on his home and business this week.
Forbes had previously estimated that World Class owned $1.2 billion of real estate assets and that Paul was worth $800 million. Those estimates were based on a valuation report and unaudited financials that were prepared by third-party firms and were viewed by Forbes, as well as bank documents.
Forbes had previously noted that Paul sometimes wound up in court, like when Texas oil man Michael Macs sued World Class a few years ago to retrieve the $15 million he had invested with the firm. The lawsuit ended up in arbitration and settled. Forbes also reported that Paul had been sued by former employees at his Austin rooftop bar and pool lounge who claimed the bar cheated them out of tips. That suit was also settled.
In recent months, Paul has had to deal with some other litigation. A family trust that had invested $1.5 million in a World Class property in Dallas claimed earlier this year that the family trust never received its share of the proceeds after the building was sold without the trust’s knowledge. The lawsuit was dismissed last month. Paul has also been locked in litigation with One Group Hospitality, which was supposed to open an STK restaurant at a World Class building in Austin. The plans were abandoned because of the inability to secure a parking lot for the restaurant.
In March, Princeton Capital Group, which is based in North Andover, Massachusetts, sued Paul for $7.3 million, claiming Paul’s Great Value storage operation had defaulted on notes it sold to Princeton Capital’s predecessor firm starting in 2012. The lawsuit is still pending. In December, a charitable group, The Mitte Foundation, sued World Class claiming it was being kept in the dark about the financial performance of its World Class investment in an Austin property.
Paul was also sued by two New York-based investment entities, RB Manhattan Place and North Oaks, that claimed Paul failed to make good on commitments he made related to $4 million the entities invested in some World Class properties, including his guarantee to buy out the investors by August 2017. A New York judge kicked the case to arbitration and the dispute was settled.
Paul seems to have struggled with some aspects of his business in 2019. The real estate fund managed by Ares that previously loaned significant funds to World Class no longer has a business relationship with Paul’s firm. The Dallas Morning News reported that one of Paul’s most high-profile properties, a skyscraper in Dallas, had recently been posted for foreclosure until Paul managed to secure a new $59 million loan from JPMorgan Chase. The Austin Business Journal reported that contractors had filed 21 liens on World Class totaling $1.7 million, claiming World Class had failed to pay them for work.
For its part, 3M has reported no problems with the sale of its Austin campus, which closed in February 2018, or the leaseback of the facility, which continued to house some of its employees. 3M’s leaseback terminates at the end of August. No new tenant for the campus has been announced.