12/06/24 Hearing Update and Axonic Settlement Final Approval
The Texas court approved all motions referenced in the 11/12/24 update below, including final approval of the class settlement with the Axonic Parties. Here is a link to the court’s Class Action Settlement Approval Order and Final Judgment. The settlement becomes effective in early January 2025 and will fund in first quarter of 2025. As explained in prior updates below, the NP Skyloft DST is now being dissolved and its remaining assets transferred to the newly formed liquidating trust for the benefit of Investors (the “Skyloft Investor Trust”). The court also entered the Order Approving Joint Motion to (i) Approve Skyloft Liquidating Trust Agreement; (ii) Appoint Liquidating Trustee; (iii) Assign Claims, Rights, and Interests to Liquidating Trust; and (iv) Approve Transfer of Reserve Funds to Liquidating Trust. Pursuant to this order, the Plan Administrator and Intervenors are transferring the Nelson Judgment, the Sanctions Award, causes of action, and $250,000 of the Liquidation Proceeds to the Skyloft Investor Trust for benefit of the Investors. The Plan Administrator will be distributing the remaining $900,000 in Liquidation Proceeds to the Investors, in addition to the settlement proceeds Investors will receive when the Axonic settlement funds.
11/21/24 New Filings for:
1) Class Representatives, Axonic Parties, and Settlement Administrator’s Joint Motion to (I) Approve Skyloft Liquidating Trust Agreement; (II) Appoint Liquidating Trustee; and (III) Assign Claims, Rights and Interests to Liquidating Trust. Pursuant to the August 22, 2024 Settlement Stipulation described below and related Texas court orders, the NP Skyloft DST will be dissolved and its remaining assets transferred to a liquidating trust for the benefit of Investors. This motion submits the proposed liquidating trust agreement for the Texas court to approve. A similar motion was filed separately in the Nelson Parties related severed action as noted below. The Texas court will decide these motions at the final hearing scheduled for December 5, 2024 at 9:00 a.m. (Prevailing Central Time) before the Honorable Karin Crump, District Judge, at the Travis County Civil and Family Courts Facility, Courtroom 9B, located at 1700 Guadalupe, Austin, Texas 78701.
2) Plan Administrator and Intervenors’ Joint Motion to (I) Approve Skyloft Liquidating Trust Agreement; (II) Appoint Liquidating Trustee; (III) Assign Claims, Rights and Interests to Liquidating Trust; and (IV) Approve Transfer of Reserve Funds to Liquidating Trust. After distributing $6 million to the Investors under the Plan of Liquidation, the Plan Administrator is holding approximately $1.15 million in remaining Liquidation Proceeds. Since the Nelson Parties defaulted on the Plan of Liquidation, the Plan Administrator expects future recoveries to come from the Nelson Judgment the Texas court entered in favor of the Intervenors and the Sanctions Award the Texas court entered in favor of the Plan Administrator instead of from property sales under the Plan of Liquidation. With this motion, the Plan Administrator and Intervenors request the Texas court approve the transfer of the Nelson Judgment, the Sanctions Award, causes of action, and $250,000 of the Liquidation Proceeds to the same liquidating trust that will hold the DST’s remaining assets to pursue collection for benefit of the Investors. The Plan Administrator will distribute the remaining $900,000 in Liquidation Proceeds to the Investors.
11/05/24 New Filings for (1) Final Approval of Proposed Derivative and Class Action Settlement with Axonic Parties and (2) Related Attorney’s Fees and Expenses and Class Representative Service Awards
No Investors requested exclusion from the proposed new settlement with Axonic Credit Opportunities Master Fund LP, Burgundy 523 Offshore Fund Ltd., Axonic Special Opportunities SBL Master Fund LP, ACO Skyloft Manager LLC, Axonic Capital LLC, and Clayton DeGiacinto (collectively, the “Axonic Parties”). Accordingly, on November 5, 2024, counsel for the class representative investor plaintiffs filed a Motion for Final Approval of Class and Derivative Settlement. Counsel also filed their Motion for Attorney’s Fees and Expenses and Class Representatives Awards, and, on November 6, 2024, a related Notice of Errata to Motion for Attorney’s Fees and Expenses and Class Representative Service Awards. The Texas court will decided these motions at the final hearing scheduled for December 5, 2024 at 9:00 a.m. (Prevailing Central Time) before the Honorable Karin Crump, District Judge, at the Travis County Civil and Family Courts Facility, Courtroom 9B, located at 1700 Guadalupe, Austin, Texas 78701. As detailed in earlier updates and related notices to Investors, under the new proposed Axonic Parties settlement, the Axonic Parties will pay $9 million in new funds to settle Investors’ litigation claims pending against the Axonic Parties. After payment of the attorney’s fees and related expenses the Texas court allows, the net settlement proceeds will be distributed to Investors. This is separate and apart from the 2023 distributions paid to Investors from settlement funds received through the prior settlement with the Nelson Parties. If the Texas court approves the settlement with the Axonic Parties, distributions should issue in the first quarter of 2025.
08/30/24 Notice of Proposed Derivative and Class Action Settlement with Axonic Parties
Two Separate Settlements and Two Different Defendant Groups, but both relate to NP Skyloft, DST - The Axonic Parties (defined below) Notice of Proposed Derivative and Class Action Settlement sent to investors on August 30, 2024, as well as the 2023 distributions from the earlier settlement with the Nelson Parties (Mr. Pat Nelson and his related entities) relate to litigation claims in Texas state court brought on behalf of investors in NP Skyloft, DST (the “Investors”). However, each settlement relates to distinct agreements with separate sets of defendants, and each settlement provides a separate fund from which Investors to receive distributions. Additional information on each settlement is detailed below.
The Prior Nelson Parties Settlement - Investors received partial initial distributions in 2023 from the settlement with the Nelson Parties that the Texas court and Investors previously approved. As previously reported on this website, the Nelson Parties defaulted on their remaining obligations under this settlement, and there is no current path to further recoveries without additional contested litigation against Mr. Nelson. Copies of the contempt and sanction order against the Nelson Parties is provided here. A complete copy of the judgment against the Nelson Parties is provided here. As a result of the entry of the judgment, the Investors are no longer limited to recovery from the specific assets the Nelson Parties included in the original settlement; however, as indicated above, it will require further litigation before additional funds, if any, will be recovered from the Nelson Parties and available for distribution to Investors. The settlement with the Axonic Parties detailed in the August 30, 2024 notice is unrelated to the Nelson Parties defaults. The settlement funds the Axonic Parties propose to pay will be distributed to Investors regardless of whether further funds are collected from the Nelson Parties.
The New Axonic Parties Settlement - The August 30, 2024 settlement notice provides investors information and an opportunity to opt-out of the proposed new settlement with Axonic Credit Opportunities Master Fund LP, Burgundy 523 Offshore Fund Ltd., Axonic Special Opportunities SBL Master Fund LP, ACO Skyloft Manager LLC, Axonic Capital LLC, and Clayton DeGiacinto (collectively, the “Axonic Parties”). Please note Mr. Nelson and the other Nelson Parties are not involved in the proposed settlement with the Axonic Parties, and the proposed settlement with the Axonic Parties does not impact claims against Mr. Nelson for his breaches of the Nelson Parties settlement.
New Settlement Funds - Under the new proposed Axonic Parties settlement, the Axonic Parties will pay $9 million in new funds to settle Investors’ litigation claims pending against the Axonic Parties. As detailed in the Notice of Proposed Derivative and Class Action Settlement, after paying attorneys’ fees and the costs of administering the settlement, the balance of these settlement proceeds will be distributed pro rata to all Investors based on the amount of each Investor’s interest in NP Skyloft, DST. This is separate and apart from the 2023 distributions paid to Investors from settlement funds received through the prior settlement with the Nelson Parties. If the Investors and the Texas court approve the settlement with the Axonic Parties, distributions should issue in the first quarter of 2025.
Dissolution of NP Skyloft, DST - The Axonic Parties settlement also provides a means to terminate and wind up the NP Skyloft, DST entity.
07/01/23 Plan Administrator’s Update to Investors
The contempt hearing scheduled for June 20, 2023 was continued to July 31, 2023 pursuant to a Rule 11 Agreement reached with the Nelson
Parties. A complete copy of the Rule 11 Agreement is provided here. (Note: Both payments in the total amount of $500,000 have been made
to the Plan Administrator.)
Note 1: Both Payments in the total amount of $500,000 have been made to the Plan Administrator.
Note 2: The Court developed a conflict with the July 31, 2023, contempt hearing date referenced above, and the hearing has been reset to
September 26, 2023.
05/31/23 Bradley D. Sharp, Chief Strategy Officer, resigned as May 30, 2023.
03/29/23 Plan Administrator’s March 29, 2023 Update to Investors
February 24, 2023 Contempt Hearing. The Plan Administrator was ready to proceed at the 9:00am hearing on the Plan Administrator’s Motion for Show Cause and Contempt; however, immediately prior to the start of the hearing, Pat Nelson and counsel for the Nelson Parties indicated a desire to settle or partially settle the claims at issue, so all parties and counsel spent the balance of the day negotiating the terms of an agreed order, which terms were announced to the Court at approximately 4:30pm. A complete copy of the Agreed Order Concerning Plan Administrator’s Motion for Contempt and Sanctions (the “Agreed Order Concerning Contempt and Sanctions”) is provided here.
In the Plan Administrator’s judgment, the primary concession from the Nelson Parties justifying the Agreed Order Concerning Contempt and Sanctions is Nelson Parties’ agreement to provide joint decision-making authority to an independent third party selected by the Plan Administrator and the Nelson Parties. To that end, Bradley D. Sharp has been appointed as Chief Strategy Officer ("CSO") and serves as an officer of Nelson Partners, LLC and Nelson Brothers Property Management, Inc. d/b/a Nelson Partners Property Management, LLC (the "CSO Entities"). The CSO will have:
1. Joint collective authority with Patrick Nelson over all the Nelson Parties' cash and distributions, except Patrick Nelson, individually;
2. Authority to create a proposed amended plan of liquidation in cooperation and coordination with Patrick Nelson to propose to the Plan Administrator and Intervenors that funds the existing obligations under the Plan of Liquidation;
3. Full access to the Nelson Parties' business books and records, including all employees' records, and transparency regarding ongoing transaction negotiations; and
4. As an officer of the CSO Entities, full access to privileged information from the Nelson Partners' inside and outside counsel, but not as to Pat Nelson's separate, individual personal counsel.
All business decisions related to the CSO Entities must now be approved by both Pat Nelson and the CSO. Pat Nelson can no longer take unilateral action regarding the CSO Entities, as restricted above. Of equal importance, the CSO will have access to all business records and attorney-client information of the CSO Entities to propose a revised, independent, and viable plan of liquidation to fund the balance of the $50 million due to investors under the Plan of Liquidation. The Plan Administrator and Intervenors are not required to accept any revised plan proposed by the CSO.
In the event of a deadlock between the CSO and Pat Nelson, Mark Hawkins has been appointed as arbitrator, paid for by the Nelson Partners, to resolve any disputes. The Agreed Order Approving Chief Strategy Officer and Arbitrator is provided here.
Additional concessions obtained from the Nelson Parties for the benefit of the Plan of Liquidation include:
1. The Nelson Parties paid an additional $250,000 to the Plan Administrator for distribution to the Investors and another $250,000 to cover the Plan Administrator’s expenses, for a total of $500,000; and
2. The Nelson Parties have agreed to pay interest at a rate of 5.5% per year on approximately $20.7 million owed under the Plan of Liquidation until that amount is fully paid. Under the Plan of Liquidation, Nelson was obligated to pay $30 million by January 26, 2023, but only paid approximately $9.3 million from the sale of Sol Y Luna. Consequently, the unpaid amount due as of January 26 is now accruing interest.
3. Nelson Partners, LLC has agreed to seek permission from its first lienholder to grant a lien on its headquarters building in favor of the Plan Administrator.
4. Pat Nelson has agreed to seek permission from the family court in his divorce proceeding to grant a lis pendens on his primary residence and residential rental property in favor of the Plan Administrator.
Neither the Agreed Order Concerning Contempt and Sanctions nor the Agreed Order Approving Chief Strategy Officer and Arbitrator alter or amend the Nelson Parties’ obligations under the Plan of Liquidation. Further, all rights and remedies of the Plan Administrator and Intervenors under the Plan of Liquidation remain in place. The Plan Administrator believes the Agreed Orders, including the appointment of the CSO, provide the best path forward for the Investors at this time, minimizing litigation cost and risk, while providing independent management inside the Nelson Parties to improve both transparency and the opportunity for Investors to recover the full $50 million under the Plan of Liquidation; however, should this approach fail, the Plan Administrator has only continued, not withdrawn, his Motion for Show Cause and Contempt and stands ready to reset the motion and pursue other remedies as necessary to protect the Investors’ interests.
Initial Distribution to Investors Approved. On February 24, 2023, the Court approved procedures for the distribution of the net proceeds from the sale of Sol Y Luna. A copy of the Unopposed Order Approving Distribution Procedures (“First Interim Distribution Order”) is provided here. The Plan Administrator delayed the implementation of the First Interim Distribution Order until the Nelson Parties paid the additional $500,000 referenced above. The Plan Administrator received these additional funds and will begin implementation of the distribution procedures no later than March 31, 2023. (Note: This does not mean distribution checks will be issued before this date, rather the Plan Administrator will file and serve notice of the proposed distribution schedule to all required parties for comment prior to March 31, 2023 and timely take all other actions required by the First Interim Distribution Order.)
Initial Payment to Intervenors’ Counsel Approved. On February 24, 2023, the Court approved fees and expenses for Intervenors’ counsel related to the First Interim Distribution Order. A copy of such approval order is provided here.
02/15/23 Plan Administrator’s February 15, 2023 Update to Investors
The Plan Administrator provides this update to the beneficial interest holders in NP Skyloft, DST on the collection and distribution of settlement
proceeds under the Plan of Liquidation resulting from the Court approved resolution of the Derivative Action.
Settlement Funds Collected to Date . As of this update, the Plan Administrator has only received approximately $9.3 million from the sale of one
property owned by the Nelson Parties, significantly less than the $30 million the Plan of Liquidation required the Nelson Parties to fund by the first
funding deadline of January 25, 2023 and well short of the Plan of Liquidation’s overall agreed funding total of $50 million. Although the Plan
Administrator received less than the total funds expected from the first closing and due under the Plan of Liquidation, the Plan Administrator
still seeks to distribute collected funds to Investors as quickly as possible and in accordance with the Plan of Liquidation, as explained below.
Proposed Interim Distribution . The funds collected to date enable the Plan Administrator to propose an interim partial distribution to Investors. On
January 27, 2023, the Plan Administrator filed a motion with the Court to authorize distributions and approve proposed distribution
procedures (the “First Distribution Motion”). A copy of the First Distribution Motion and proposed distribution procedures are available here. The
Court is scheduled to hear the First Distribution Motion on February 24, 2023. Please note that the distribution the Plan Administrator proposes is
only an initial and partial distribution of the limited funds collected to date. The Plan Administrator hopes to collect additional funds in the future to
enable additional distributions at later dates; however, the Plan Administrator cannot currently estimate or guarantee the amount or timing of any
potential future distribution(s) at this time. If the Court approves the Plan Administrator’s proposed interim distribution and procedures, each
Investor will receive detailed information on their proposed initial distribution amount and how this amount was calculated. The Plan Administrator
will provide a further update following the February 24 hearing on the First Distribution Motion. In conjunction with the First Distribution Motion,
Intervenors’ counsel are requesting a distribution from the limited funds collected to date of attorney’s fees and expenses authorized by the Plan
and previously approved by the Court. The motion for attorney’s fees and expenses is included here.
Contempt Motion . The Nelson Parties’ sale of a property called Sol y Luna, a student housing complex located in Arizona, funded the
approximately $9.3 million of limited settlement funds the Plan Administrator collected to date and referenced above. Disputes among the
Nelson Parties, the Plan Administrator and the Intervenors arose regarding the Nelson Parties’ compliance with the Plan of Liquidation in
calculating the amount of proceeds from the Sol y Luna closing paid to the Plan Administrator. On November 14, 2022, the Administrator filed a
Motion for Contempt and for Sanctions and Request for Show Cause Hearing (the “Contempt Motion”) against the Nelson Parties to enforce the
Plan of Liquidation. The Court initially scheduled a hearing on the Contempt Motion and related proceedings for January 30, 2023 which has
been continued to February 24, 2023. Copies of relevant documents include:
· Motion for Show Cause and Contempt (11.14.22)
· Plan Administrator’s Application for TRO and Motion for Expedited Discovery (11.17.22)
· Temporary Restraining Order (11.18.22)
· Second Agreed Order Extending TRO (12.20.22)
· Order Setting Show Cause Hearing (01.12.23)
· Third Agreed Order Extending TRO (01.12.23)
Other Plan of Liquidation Updates . The Plan of Liquidation requires the Nelson Parties to file monthly reports with the Court on the status of
liquidation of real estate assets to fund the Nelson Parties’ settlement obligations. The Nelson Parties have not filed a monthly report since
October 5, 2022, and are now four months delinquent in reporting obligations. As noted above, the Nelson Parties also failed to fully fund the
initial $30 million obligation due by January 25, 2023. Neither the Plan Administrator nor the Court extended these deadlines. The Plan
Administrator is conferring with Intervenors’ counsel and assessing the next steps to address these developments and reserves all rights.
05/10/23 Seventh Report to the Court filed by the Nelson Parties
11/16/22 Sixth Report to the Court filed by the Nelson Parties
10/05/22 Fifth Report to the Court filed by the Nelson Parties
08/24/22 Fourth Report to the Court filed by the Nelson Parties
07/25/22 Third Report to the Court filed by the Nelson Parties
07/21/22 The Court entered a Final Order of Approval of Liquidation Plan (“Final Order”). The Final Order:
- granted final approval of the Plan of Liquidation as fair, reasonable, and adequate;
- ruled that the notice to and the opportunity for Investors to be heard satisfied the requirements of due process and applicable laws; and
- approved attorney’s fees and costs of 20% of the anticipated Liquidation Proceeds as fair and reasonable to compensate plaintiffs’ counsel in
connection with the litigation.
06/24/22 Second Report to the Court filed by the Nelson Parties
05/25/22 First Report to the Court filed by the Nelson Parties
05/24/22 Plan Administrator sent supplemental service to additional addresses provided by Investors and the Nelson Parties.
05/17/22 Plan Administrator sent the Notice to Investors by first class mail and email to all known Investors based on the contact information provided
by the Nelson Parties.
05/16/22 The Court approved the form of notice regarding the Plan of Liquidation to all Investors.
04/25/22 The Court entered a Preliminary Order of Approval of Liquidation Plan (“Preliminary Order”).
The Preliminary Order:
- granted preliminary approval of the Plan of Liquidation as fair, reasonable, and adequate;
- appointed the Plan Administrator to implement the Plan of Liquidation;
- set forth a procedure for notice to and opportunity to object for Investors; and
- scheduled July 21, 2022, for the hearing on final approval of the Plan of Liquidation.
