Real Estate Investor Linked to Allegations Against Texas Attorney
Nate Paul - CEO of World Class Capital Group. Photo by World Class website.
Who is Nate Paul, the real estate investor linked to abuse-of-office allegations against Texas Attorney General Ken Paxton?
"Who is Nate Paul, the real estate investor linked to abuse-of-office allegations against Texas Attorney General Ken Paxton?" was first published by The Texas Tribune, a nonprofit, nonpartisan media organization that informs Texans — and engages with them — about public policy, politics, government and statewide issues.
Editor’s note: This story contains explicit language.
Walk through downtown Austin or its rapidly developing nearby neighborhoods and it’s impossible to miss the massive black banners draped over office buildings, warehouses and bars. “Another World Class Project,” reads one posted to the metal siding of a squat industrial building downtown. Other banners riff on their own ubiquity with a pithy line popularized by DJ Khaled: “Another One.”
The promotional campaign belongs to an Austin-based real estate investment firm owned by Nate Paul. World Class Capital Group has acquired an enviable portfolio of some of Austin’s choicest parcels with ambitious plans to lease or develop them. Paul has described himself in media reports as wanting to become “the youngest self-made real estate billionaire.”
These days, Paul’s name is associated not just with a real estate empire but with a series of recent high-profile bankruptcies and a much-publicized raid on his home and business office last year by FBI and U.S. Department of Treasury agents. The investigation remained active as recently as April, though no criminal charges have been filed, according to the Austin Business Journal.
And now he has been linked to bribery and abuse-of-office allegations made against Texas Attorney General Ken Paxton.
According to the Houston Chronicle, former top aides to Paxton have alleged that the attorney general inappropriately appointed a special prosecutor to target “adversaries” of Paul, who donated $25,000 to Paxton’s reelection campaign in 2018. Those “adversaries” appear to include agents who raided Paul’s home and business office, though Paxton has confirmed only that he authorized an investigation into “allegations of crimes relating to the FBI, other government agencies and individuals” and that the investigation involved Paul.
A Paxton-appointed special prosecutor, Brandon Cammack, obtained subpoenas to look into allegations Paul made accusing federal authorities of wrongdoing when they raided his home and offices, according to the Austin American-Statesman.
And a text message, which was first obtained by the Houston Chronicle, sent last week by senior staff at the attorney general’s office to Paxton does not specify the nature of the real estate investor’s involvement in the “violations of law” they accuse Paxton of committing, but the aides mention Paxton’s “relationship and activities with Nate Paul.”
Paxton has said the allegations made against him by high-ranking attorneys at his agency are false, brought by “rogue” employees, and that he does not intend to resign. He also said he appointed a special prosecutor to lead the investigation to keep the investigation “independent” of his relationship with Paul.
Paul did not respond to interview requests for this story.
Earlier in his career, media reports called the now 33-year-old investor a “wunderkind,” a “rising star” and a “prodigy,” with an estimated net worth of nearly $1 billion. Raised in Victoria by Indian immigrant parents, Paul changed his name from Natin to Nate, moved to Austin, enrolled at the University of Texas and then dropped out after acquiring a taste for flipping real estate, according to media reports.
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He founded World Class in 2007 and has said he got his start purchasing property at low prices and in a low-interest-rate environment after the 2008 financial crisis. He bought storage facilities, land in Austin, a marina on Lake Travis and a building being used by a call center in south Austin, according to a profile in Forbes. “I was buying at the pit of the crisis,” he told the magazine. “In many of those deals, there was no other bidder.”
By 2015, he had amassed hundreds of millions of dollars, primarily from institutional investors such as pension funds and insurance companies, according to the Austin Business Journal.
“Is this guy for real?” the publication asked in a 2015 profile of Paul. The next year, he claimed a spot on Forbes’ “30 under 30” list of promising young financiers.
“I started with zero,” Paul told the Business Journal. “There was no legacy. I’m self-made.”
In brief media appearances, Paul has shown off a taste for luxury. In 2013, a New York Post report documented his attendance at Leonardo DiCaprio’s 39th birthday party. In 2017, he drove a Forbes reporter around Austin in a Bentley to point out his real estate holdings. He has posed for photos in the Austin Business Journal in his office in the penthouse of Austin’s iconic Frost Bank Tower. And he owns a nearly 9,200-square-foot mansion in a wealthy West Austin neighborhood appraised at $2.4 million, according to local tax records.
A 2017 Forbes profile pronounced him a “Texas Tycoon” and estimated his net worth to be about $800 million. Paul’s company at the time had $1.2 billion in assets and 10 million square feet of commercial space, ranging from offices to retail outlets to self-storage facilities, according to Forbes.
As his real estate ventures expanded across state lines, with World Class and its related companies opening offices in New York and Los Angeles, Paul attracted controversy at home. Former employees of one of his rooftop bars in Austin sued after the bar allegedly cheated them out of tips, according to Forbes. The case was settled privately in 2014.
And among local musicians, Paul became known as something of a venue-killer, as World Class developed a reputation for buying properties leased by bars and clubs and promptly evicting them as tenants.
Vincent Salvaggio, the owner of downtown rooftop venue Ethics Music Lounge, told the Austin Chronicle in 2018 that World Class Capital locked the bar’s doors for delinquent payment immediately after purchasing the property, unbeknownst to Salvaggio.
“They had me locked out before I even got the legal paperwork that they owned it and they haven’t let me back in to get my shit — not my sound system, not even my checkbook,” Salvaggio told the Chronicle at the time. “They’re trying to raise the rent on everything, so it’s good for [them] to get people out who are playing lower rent.”
Recent local news reports and bankruptcy filings indicate Paul’s business may have fallen on difficult times. At least 18 entities connected to World Class Holdings have filed for bankruptcy in the past year, according to the Austin Business Journal. Paul’s firm has used the bankruptcy process to “fend off creditors and provide a degree of breathing room as it tries to find a way out of default on multiple loans tied to real estate across the city,” the publication reported.
In September, American Express sued Paul and World Class Capital seeking to collect more than $300,000 in credit card debt, court records show.
Meanwhile, Paxton’s office has come to Paul’s defense in at least one other legal matter, records show. Paul’s World Class firm works through a complex web of more than a dozen affiliated business partnerships, which jointly own properties with investors.
A dispute arose two years ago between companies affiliated with World Class and the Roy F. and Joann Cole Mitte Foundation, which invested in multiple Austin properties with the companies. The foundation is an Austin-based nonprofit that provides grants to charitable organizations and academic scholarships for students with financial needs.
The Mitte Foundation sued Paul in 2018, claiming he wasn’t sharing financial information on their jointly owned investments that Paul’s businesses managed. The case went to arbitration, and on July 1, 2019, a company affiliated with World Class agreed to buy out Mitte’s interest in the real estate partnerships for $10.5 million with payment due that August.
It never came, said Ray Chester, the lawyer representing the Mitte Foundation in the case.
In October 2019, the judge in the case ordered a receiver to take over the business partnerships, which would compel Paul to reveal the financial records that Chester said still hadn’t been shared with the Mitte Foundation. Chester said that within days, Paul “blatantly defied” the arbitrator’s ruling and said he had sold the partnerships at less than half of their market value.
But the sale was to another company affiliated with Paul, Chester said.
“He basically sold it to himself at below market value,” Chester said, although court records show the sale was never consummated.
As Paul’s firm cycled through teams of attorneys and held back on making the $10.5 million payment, Paxton’s office intervened in the case on behalf of World Class and its business affiliates this June, court records show. Paxton argued that his office needed to “protect the interests of the public” because the suit involved a charitable trust.
In July, Paxton asked a judge to halt the case. During that time, Chester said Paxton’s office called him five to 10 times per day to try to get him to settle for “pennies on the dollar,” calls that Chester characterized as “vaguely threatening.”
On Sept. 20, less than two weeks before news broke about the allegations against Paxton, the attorney general’s office reversed itself and announced its intention to step away from the case, which is still ongoing.
After filing for bankruptcy in August, the World Class affiliate handling investments in the property did not pay the $10.5 million or turn over the records, Chester said. But a clause in the settlement agreement does allow the Mitte Foundation to take a valuable, larger ownership share in the downtown property, Chester said.
As media reports surfaced detailing Paul’s connection to the allegations against Paxton, Texas Republican politicians who had received campaign contributions from Paul announced they would donate the funds to charities. Campaigns for Lt. Gov. Dan Patrick, Comptroller Glenn Hegar, Land Commissioner George P. Bush and U.S. Rep. Chip Roy distanced themselves from Paul’s campaign contributions, which ranged from $2,500 to $10,000.
Roy, formerly a top Paxton aide at the Texas attorney general’s office, also called on Paxton to resign.
Although Paul has not said much publicly since garnering attention in the past year for the FBI raid and his bankruptcy lawsuits, he frequently shares inspirational quotes on his LinkedIn profile. He shared a Sun Tzu quote this summer: “Pretend to be weak, so your enemy may grow arrogant,” appending the hashtag #WorldClass.
On Monday, he posted another update: “Work Hard in Silence, Let Success Make the Noise.”
In the Austin Business Journal’s 2015 profile of Paul, outside observers praised him with a tinge of skepticism. David Armbrust, a real estate attorney at Armbrust & Brown, called Paul’s meteoric rise “very impressive.”
“I suppose like many in the real estate business, he may fit into one of two categories — either a rising star or a shooting star,” Armbrust said at the time. “Only time will tell.”
Shannon Najmabadi and Emma Platoff contributed reporting.
Disclosure: The University of Texas at Austin, Frost Bank and the Texas Comptroller of Public Accounts have been financial supporters of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune's journalism. Find a complete list of them here.
This article originally appeared in The Texas Tribune at https://www.texastribune.org/2020/10/07/nate-paul-ken-paxton/.
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