Broker-Dealers Sold Private Placement Shares In Texas Luxury Student Housing To Retail Customers, Including Retirees
Our Texas brokerage firm of investment lawyers and arbitration attorneys are looking into claims of losses involving Nelson Partners’ Skyloft Austin investors. Many of those who invested in this troubled luxury student housing building close to the University of Texas have sued Nelson Partners. Which is the property management firm that marketed this deal in 2019. They sued Axonic Capital, the hedge fund that provided $30M in additional financing to buy the 18-story property.
Skyloft investors, each invested $100K to $500K, accuse Nelson Partners CEO Patrick Nelson of fraud and allegedly diverting some of their funds to pay for operations at his other properties.
Some contended that they were the victims of a Ponzi-like scam and believed that Nelson transferred some of the money to offshore accounts.
Earlier in 2022, a Texas state judge approved a preliminary settlement in which Nelson Partners would pay a group of investors $50M. If approved, the company would have eighteen months to develop the funds.
Investors May Have Lost All of Their Investment in Skyloft
Meanwhile, there is growing concern that Skyloft Austin investors could lose their entire investment because the property management firm has yet to pay back the loan from Axonic. In court filings, Nelson Partners indicated that it was forced to preserve funds in the wake of the Covid-19 pandemic because parents of college students stopped paying rent.
April 2020: Monthly payouts to investors were suspended.
May 2020: Axonic took charge of the Skyloft property.
Nelson Partners Skyloft investors are claiming that they were never informed about the dispute between Axonic and the property management firm until the hedge fund notified them by letter that they had taken over the student housing building and intended to sell it. This is unfortunate for many of those who had sought an investment that would provide a reliable payout. Some investors even used a 1030 exchange to purchase their Skyloft shares. This allowed them to exchange one property for another without incurring a capital gains tax.
They allege that Nelson Partners’ private placement memorandum never stated that Axonic could take over the student housing property and put it up for sale. The hedge fund has sold the building to a New York real estate firm.
In May 2022, a jury ruled that Axonic should pay Skyloft investors $17M in damages. This same jury placed 75% of the blame on Nelson Partners. Axonic, meantime, said it should only be liable for $4.25M and would appeal the verdict.
When Brokers Sell Private Placements To Retail Customers
Skyloft Austin is a private real estate placement. This can be a risky investment and typically lacks transparency. Private placements are unsuitable for many retail customers, including most retirees and others with conservative risk tolerance levels.
Brokerage firms are obliged to ensure that any investment they recommend is in a customer’s best interests and suitable for them according to their investing profile. They are also required to conduct the proper due diligence to verify that any recommendation is legitimate and that clients are not being placed in financial harm.
Skilled Texas Broker Misconduct Attorneys Representing Skyloft Austin Investors
Even with the ongoing litigation against Nelson Partners and Axonic, you may wish to consider pursuing your own Financial Industry Regulatory Authority (FINRA) arbitration claim against your broker-dealer for damages. Seasoned investment lawyers with decades of experience have represented clients facing losses, nationwide.
Suppose you want to evaluate your options to determine whether your broker unsuitably sold you shares in Nelson Partners’ Skyloft Austin and should be held liable. Investment lawyers can help you explore your legal options with a free, no-obligation case assessment.
Our Dallas stockbroker negligence attorneys: (214) 613-5306
Our Houston private placement lawyers: (713) 227-2400
Nationwide: (800) 259-9010