News | Oct 7th, 2019

ATX Real Estate News — Oct. 7, 2019

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Greetings, everyone, I hope your Monday has been productive and that the week just gets better and better. Yes, there is a little update on World Class Capital Group this week, but just in terms of a couple of lawsuits I discovered. Austin real estate investor extraordinaire Moton Crockett passed away at 96 after an incredibly interesting life. His daughter and granddaughter will manage the Crockett family real estate holdings, which are substantial. I’ve included a few nuggets of information about WeWork, Amherst Holdings and the 2020 Greater Austin Parade of Homes. Happy reading and thank you. Jan

WCC faces new lawsuits; Moton Crockett passes at 96; More on WeWork, Amherst Holdings, 2020 Austin Parade of Homes

Good morning, everyone,

Let’s get right to it.

As you likely know by now there were some developments involving properties owned by Austin-based World Class Capital Group. Two foreclosure sales that had been scheduled for Oct. 1 were canceled in advance of the public auction.

Just a quick interjection, this morning I spotted some new lawsuits filed against WCC entities on the Travis County Court website. Endeavor Real Estate Group filed action against WC Braker Portfolio LLC on July 15. A court hearing is scheduled for Oct. 30. I was told by sources not involved in the case or with either parties that allegedly unpaid leasing commissions may be the issue in this matter. Endeavor is represented by Michael Deitch.

A person named Beverly Cummings filed a lawsuit against WC 6th and San Jacinto GP LLC on Sept. 18. Cummings’ attorney is John Wallace Carlson, according to court documents. A hearing is scheduled for Oct. 17. Buena Vista Music LLC filed a lawsuit against WC 103 East Fifth Street Sept. 12. Russell Chalk is the plaintiff’s attorney. Specifics of these cases are not available online, and I don’t know the merits of any of them. But back to recent WCC history.

The Austin American-Statesman first reported the cancellation of the sale of the former 3M campus in northwest Austin, which WCC obtained with big debt earlier this year. The Austin Business Journal published a good overview of what happened in court — delaying any immediate change of ownership.

With respect to the biggest note default ($64 million), a hearing will be held Oct. 14. World Class Capital secured a two-week stay in court, but a receiver will be appointed by Travis County Judge Tim Sulak.

The appointment of an independent third-party receiver likely benefits the lender, Tuebor REIT Sub LLC. World Class Capital, led by founder and CEO Nate Paul, has experienced a cascade of financial difficulties over the summer — narrowly dodging other foreclosures and being raided by the FBI for reasons yet unknown. Read more here and here.

Last week I compiled a list of WCC real estate holdings.

As ABJ reported, the other foreclosure involves several smaller properties that were obtained with a $22.9 million loan from an entity named U.S. Real Estate Credit Holdings III-A LP. A new lender has suddenly surfaced in deed records— ATX Lender 5 LLC now replaces U.S. Real Estate Credit Holdings. I’ve tracked multiple resources without any luck uncovering a person or people behind that legal entity. So if you know, please share with me jrbuchholz@gmail.com orjan@atxrealestatenews.com.

Moton Crockett Jr., a legend in Austin real estate, died Sept. 25. He was 96. The Austin-American Statesman had a lengthy and fitting tribute.

I’ve compiled a list of the Crockett family holdings in Austin. Crockett managed nearly $100 million in Austin real estate right up until the last few days of his life. The family definitely has a preference for holding onto premium real estate and only granting ground leases. The most prominent holding is property northeast of South Congress Avenue and Riverside Drive that abuts the Austin American-Statesman former printing plant and current offices.

The Crockett property is not a part of the massive Statesman redevelopment proposal that was unveiled earlier this year and directed by Austin-based Endeavor Real Estate Group. For awhile, veteran commercial broker Mike Kennedyrepresented the Crocketts in locating an investor that would redevelop the prime south Austin land but on a land lease basis. The valuable property is substantially under utilized. Statesman reporter Shonda Novak says Crockett’s daughter and granddaughter will now manage the family’s real estate, so we’ll see if any changes come to pass.

In last week’s newsletter, I listed the landlords that may be watching the traumas and foibles of WeWork with some added interest — they all lease space to the co-working company that went from real estate titan to a enterprise teetering on collapse. One thing I didn’t mention at the time is the WeWork also owns a big chunk of property in the Rainey Street District — adjacent to land owned by World Class Capital. Unlike WCC, WeWork has no financing on the parcels along Riverside Drive — about four acres. Is WeWork still a viable company? Read this great column — about the absurd lack of common sense by brash, maybe delusional, entrepreneurs of some startups — that published a few days ago in the New York Times.

I came across a story that ran in Fortune magazine earlier this summer about Sean Dobson, CEO of Amherst Holdings, a real estate conglomerate with offices overlooking Pennybacker Bridge.

Amherst plays it close to the vest. I learned that shortly after arriving in Austin in 2012. After a lengthy tour of the company’s newly renovated offices, I was told to forget that I’d even been there. Someone put the kiboshes on the story.

At the time Amherst, which has tentacles throughout the world of high finance, was ramping up its control center for buying single family homes as rentals. Many homeowners across the U.S. were still reeling from the Great Recession.

I wasn’t sure whether corporate ownership of single family rentals could be adequately scaled. Boy, was I wrong. Today, a few companies such as Amherst, Invitation Homes and American Homes 4 Rent own about 300,000 single family homes across the country, about 2% of that market niche, Fortune reported. In fact, Amherst is adding hundreds each week.

Anyway, this is the first in-depth look I’ve seen about Amherst and its camera-shy leader. An interesting read. It’s kind of sad, though, that what was once an element of the American dream — home ownership — has now become an institutional financial play. Home ownership will be the privilege of the minority, along with Corporate America. That”s a huge upheaval within our culture.

My former copy editor at the Phoenix Business Journal texted me last week about the curious purchase of several downtown buildings in Aberdeen, Washington. The enclave in a remote area of the Pacific Coast southwest of Seattle seemed like a weird place for a prominent Portland, Oregon investor named Terry Emmert to amass a portfolio. Kat Bryant, now an editor at The Daily World in Aberdeen, wondered what could be going on — so she texted me, the real estate reporter.

“Most of the buys so far have been clustered around specific points in Aberdeen and Hoquiam, with one all the way near Ocean Shores,” Kat wrote me.

“Why?” she asked.

I quickly ascertained that those parcels have been designated opportunity zones, which I wrote about earlier this year. This is a federal program that encourages investors and developers to sink money into low-income or distressed neighborhoods. A tax break provides the temptation.

Kat initially didn’t think that was the case, but I tracked down the parcels on the Washington Department of Commerce’s website. Yep, opportunity zones.

“Thanks, Jan!” she wrote. “I’m kind of giddy. This will be my first ‘real’ news story ever. I’ve been writing columns and features for the past couple of years.”

Read her story here.

Later this week, I spoke on the phone with a West Coast reporter who is writing a national story about whether opportunity zones are improving the fortunes of struggling towns and neighborhoods or merely providing rewards for developers that would have invested there no matter what. That’s a compelling question.

The East Riverside Drive opportunity zone in Austin that I wrote about involves the development of Urban East, which has yet to break ground at 6400 E. Riverside Drive. It looks like everything has been approved at the city for the $55 million multifamily mixed-use project and building permits are listed as “pending.” Ryan Cos. Is shown on those documents as the general contractor.

The 2020 Greater Austin Parade of Homes will be held next June at The Reserve at Lake Travis on the south shore at Calcasieu Point. See renderings of the featured homes below:

Don’t forget to send your transactions for this week’s edition of Herding Deals. Also be on the lookout for an indepth people profile of Jay Lamy, co-founder of Aquila Commercial. We’ve spent about six hours talking in recent weeks, and if you don’t know him, he’s a guy really worth getting to know. I’m honored that he’d spend so much time with me sharing his life.

Many thanks to sponsors Austin Title (Chris Kemp), WGI engineering (Matthew Stewart) and LEVY design firm (Stephen Levy). Send them some love — or a little business! OR BOTH!!

Enjoy your week. All my best, Jan


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