KBRA Credit Profile (KCP) Releases a Special Alert: CMBS Exposure to Patrick Nelson and Nelson Partners Student Housing

NEW YORK--(BUSINESS WIRE)--Investor reporting indicates the $36 million SkyLoft Austin loan (UBSCM 2019-C16) is over 30 days delinquent in payment as of the August 2021 remittance period. The loan is collateralized 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. News reports indicated in May 2021 that dozens of minority investors involved in the acquisition of the property had filed lawsuits against the mortgage loan sponsor, Patrick Nelson, who had reportedly promoted the investment opportunity. Nelson is accused of operating a “Ponzi-like” scheme, whereby investor funds have allegedly been diverted to other projects or to enrich Nelson himself. In Q2 2020, Nelson Partners Student Housing reportedly ceased paying cash dividends to private investors, citing pandemic-related financial challenges.

Patrick 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 U.S. states. KBRA Credit Profile (KCP), a division of KBRA Analytics, cross-referenced these properties against our CMBS coverage universe and researched loans that were sponsored by Patrick Nelson, Nelson Partners, or a related entity at the time of securitization. Our analysis identified 11 non-defeased loans ($262 million) in 13 CMBS securitizations, the majority of which ($177 million) were current in payment as of the August 2021 remittance. Three loans ($85 million), including SkyLoft Austin, are delinquent; two of the delinquent loans, along with one current loan, are specially serviced ($53.6 million).

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

As the story develops, it is possible the list of loans with exposure to Patrick Nelson will grow. KCP will continue to monitor ongoing developments and potential consequences for CMBS collateral. For subscribers of the KCP platform, the list of loans examined can be found here.

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About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.