Robert Gehrke explains how a developer left hundreds of USU students without housing for a second year

Hundreds of students were left in the lurch when the 800 Block wasn’t finished last year. It’s still not done and students are again scrambling to find apartments.

(Francisco Kjolseth | The Salt Lake Tribune) Robert Gehrke.

Last year, I wrote about Utah State University students who were forced to scramble to find housing days before the semester started because the 800 Block, a complex that was promised to be completed and signed leases with students, still wasn’t finished.

Now it’s happening again.

With the building a year past its original completion date, the developer, Nelson Partners, notified students last week that it would not be done before classes start on Aug. 29. In the letter they blamed supply chain issues and labor shortages for the delay.

It has, once again, left students desperately trying to find housing in an incredibly tight market.

“This letter totally flipped us on our head,” K.C. Carlson, whose son planned to move into the 800 Block, told me this week.

Carlson had jumped on a lease with the complex early in the summer because nearly all of the other housing around campus was already booked. Even though the building wasn’t done and he had seen my reporting about delays last year, the sales team promised it would be finished or else they would find a unit in one of Nelson Partners’ other buildings near campus.

It wasn’t and they didn’t.

That left Carlson rushing to come up with a backup plan. In some cases, units they were touring were put under contract while they were still visiting them. They put their name on a waiting list for an apartment that already had 100 people ahead of them.

“It was a fight to get a place,” he said.

Eventually, they found an apartment in Providence, about four miles away.

It’s not far, but a lot farther from school than the 800 Block, which was touted for its proximity just 27 feet from campus. It also promised students sparkling new apartments, rooftop views, a hot tub and garage parking.

Nelson Partners had tried to convince the city to issue a temporary occupancy permit for the part of the building that might be ready in time, but the city said no.

In a letter sent to would-be tenants, the 800 Block quoted correspondence with the city:

“After evaluating this project in its current state and considering the amount of outstanding issues to be resolved, the city is not willing to assume any liability that may stem from allowing students to move into a potentially dangerous and unfinished project, especially one of this size and scale.”

“We just didn’t feel good about” granting a temporary permit, Ben Anderson, Logan’s chief building officer told me this week. “They’re still so far from being complete that it’s hard for us to give them an answer at this point.”

Jilted students posted a flurry of negative reviews for the 800 Block online.

It’s unclear how many students had signed leases at the 800 Block and are now in limbo, but it appears to be in the hundreds. It was intended to house 374 students and a few weeks ago the Facebook page for the building urged students to hurry and snatch up one of the last remaining spots.

The notion that a building could be more than a year late and leave students in the lurch for a second time seems implausible. But it may have as much to do with Nelson Partners’ financial struggle as supply chains and labor.

Typically the built-in demand for housing near college campuses provides reliable revenue and guaranteed profits. In recent years, Nelson Partners had expanded aggressively to the point it operated two dozen investor-owned properties in 13 states, including Washington, Oregon, Arizona, Indiana, West Virginia.

In Utah, they operate complexes near USU, Utah Technical University and the University Gardens by the University of Utah.

But when COVID-19 shut down in-person learning, it was a blow to the company, its founder, Patrick Nelson, who is a USU alumnus, wrote in an essay posted on the company’s Website in May. Rents dried up, the federal government prohibited evictions for unpaid rent, and the company lost a total of $12 million.

Nelson also blamed the government, which he said forced campuses to close and prevented landlords from evicting tenants who weren’t paying rent — yet he was still expected to make loan payments.

News stories from around the country have reported on deplorable living conditions at some Nelson Partners properties, including air conditioning that was shut off in an Arizona complex last year. And court records from around the country reflect a company struggling to stay afloat.

Last month, a federal judge in Arizona awarded a default judgment of about $511,000 to an architectural firm that had worked on two of the Nelson projects and had not been paid.

The Auraria Student Lofts, a high-rise housing project in Denver, had been managed by a receiver since Nelson Partners filed for bankruptcy last month just before it was put on the auction block in a foreclosure sale. Nelson took the $46 million loan for the property in 2019 and, according to a court filing by the lender, never made a payment.

A Utah architectural firm sued Nelson Partners in January for more than $1 million it says it has yet to be paid for work done on a student housing project in Pocatello, Idaho, and Pullman, Wash. The case is pending.

The New York Times first reported on a dispute over ownership of the Skyloft Apartments near the University of Texas at Austin, where investors sued Nelson Partners after the building was foreclosed upon and sold, leaving them without anything to show for their investment.

In May, Nelson Partners settled a lawsuit, agreeing to pay the Skyloft investors $50 million — a move that may have exacerbated some of the developer’s other problems.

In Mississippi, Nelson Partners filed for bankruptcy just before another foreclosure sale, court granted the lender permission to sell off the property, deeming it “abandoned” due to the state of disrepair and unpaid utilities.

In May, a bankruptcy court in Texas approved the sale of the second of two student housing projects in that state, one in Fort Worth, the other in Houston.

Additionally, there are hundreds of thousands of dollars in various liens filed against the company by vendors who said they hadn’t been paid.

I contacted Nelson Partners and was told someone would call me right back.

They didn’t.

There’s no reason to doubt that Nelson encountered very real hardship, but at some point, this string of broken promises, jilted investors, unpaid lenders and unsettled debts needs to end.

Not to mention the students, those stuck in dilapidated conditions elsewhere in the country and especially those USU students, who were once again left scrambling to put a roof over their head after Nelson promised that this time they would make good on their promises.

They didn’t.