Austin's dance music community has taken a hit. Two venues responsible for many high-profile electronic acts coming through town abruptly shuttered in July. Owners of each business, Kingdom and Ethics Music Lounge, found themselves locked out by their new landlord – the same one who just purchased Empire Control Room.

The buildings of the two dance clubs were recently acquired by World Class Capital Group, an investment firm whose owner, 31-year-old homegrown real estate tycoon Nate Paul, makes headlines for major property deals and as the subject of million-dollar lawsuits. Last year, Forbes pegged Paul's assets at $1.2 billion, a significant portion being prime commercial space in Austin.

Ethics and Kingdom

Ethics Music Lounge, a rooftop venue at 422 Congress that opened in 2013, specialized in house music and hosted ticketed shows with internationally touring DJs like Black Coffee and Damian Lazarus in addition to local residencies. Owner Vincent Salvaggio claims he dropped off a rent check in July at the office of his previous landlord, Alex Bahrami, not knowing the building had been sold. World Class Capital then locked his doors for delinquent payment.

"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," says Salvaggio. "They're trying to raise the rent on everything, so it's good for [them] to get people out who are playing lower rent."

Insisting this isn't the end of Ethics, Salvaggio says he's already secured a "temporary home" for the club on Sixth Street, which he plans to have open by mid-September.

Since establishing in 2011, the 300-capacity Kingdom built a legit reputation for booking acclaimed DJs in the EDM, house, and techno fields for improbable underplays. Owner Garrett Boyd, reached on Monday, declined to comment, but sources with knowledge of the situation say the club's operators may not have been made aware of the building's sale prior to rent being due to World Class Capital, which had also purchased that property – 103 E. Fifth – from Bahrami. Similarly, they found their locks changed.

Karma Lounge, a nightclub employed annually by the South by Southwest Music Conference, shared a wall with Kingdom. It too shuttered last month. A World Class Capital vinyl banner appeared on the building: "Moving from California? What took you so long?"

"It's sad for the dance music community," says Todd Burgener, who's spun house music in Austin for 20 years as Toddy B. "In this little city, we only have a couple real dance venues and those were the main ones. Not having them is detrimental to the scene, both for the fans and the DJs, who now have fewer places to play."

Burgener believes Kingdom and Ethics helped put Austin on the map internationally with DJs and booking agents.

"The biggest names in the game knew those clubs and wanted to play there, even if they had to take a pay cut because they were small," he says. "Seeing John Digweed play to 300 people is unheard of and he did that at Kingdom."

Capital Gains

Since Nate Paul's founding in 2007, World Class Capital has made a lot of deals. Music venues haven't always fared well in them.

WCCG evicted Metal and Lace, formerly Headhunters, in 2014. Since then, the two-building lot has remained empty – the only unoccupied shell other than the old Emo's in the Red River Cultural District. Two years earlier, historic venue La Zona Rosa went dark under WCCG ownership. Thereafter, the building was repurposed for offices and an event space.

Venues, which notoriously eke by on small profit margins and exist in cheap rent zones, aren’t ideal tenants for property investors looking to redevelop, sell, or rent at higher rates.

Beloved Momo's might still be open today if WCCG hadn't allegedly forced its closure. A source with direct knowledge of events tells "Playback" that in late 2011, shortly after WCCG purchased the West Sixth property, a construction crew cut a support beam while renovating the former Katz's Deli space below it, causing Momo's floor to buckle. The venue, which still had a decade worth of options on its lease, ceased operation after WCCG made it clear they didn't want a music club as a tenant. Operators took a settlement and vacated.

Venues, which notoriously eke by on small profit margins and exist in cheap rent zones, aren't ideal tenants for property investors looking to redevelop, sell, or rent at higher rates. On the other hand, they're crucial in creating the cultural value Austin's enjoyed for the better part of three decades.

Not all real estate speculation is adversarial to live music. Gary Keller, billionaire co-founder of Keller Williams Realty, is investing heavily in Austin music preservation via his All ATX nonprofit. When Keller buys your property, as he did with the Saxon Pub in 2016, venue owners breathe a huge sigh of relief.

World Class Capital did not respond to an interview request for this story.

Building Empires

"This is where local acts cut their teeth," says Stephen Sternschein of Control Room, the 5,000-square-foot interior space of his live music complex on Seventh near Red River.

Empire Control Room & Garage is actually two properties. The larger Garage parcel, typically used for touring acts, is owned by one of Sternschein's business partners, Trey Spaw. The Control Room, at 606 E. Seventh, is rented.

Sternschein had been paying monthly on it for some time, unable to secure a favorable lease with his landlord. Aware that the property owners were eager to sell, Sternschein tried to raise capital to buy it, knowing that if he secured the lofty $2 million-plus sale price, he would have to essentially double his own rent. He ran out of time. His landlord recently informed him that a sale to WCCG was imminent.

As of last Thursday, Sternschein felt his days were numbered at 606 E. Seventh, but after finally meeting with Paul on Tuesday, he says he's "cautiously optimistic" a deal can be worked out in which Empire keeps the Control Room. Financial specifics of a lease had yet to be negotiated.

If the two parties cannot come to terms, it will mean one less quality stage for Austin. In that event, Sternschein will consider rehoming shows at the Parish, which his company, Heard Presents, co-owns. He's also exploring the idea of putting a garage door on the Garage to make it scalable for smaller concerts. Meanwhile, he's also still working on securing a lease, alongside Elysium owner John Wickham, on the former Sidewinder building around the corner. Still, he knows venue/developer incompatibility will remain an issue in Austin.

"It's a problem for our scene and we've known about it for years," says Sternschein. "We've asked the city to do something, we put together focus groups, and you know what's come out it? Nothing. Checkbooks talk and these guys are writing big checks. I'll give them the benefit of the doubt. I don't think their goal is to shut down music, but we haven't made any meaningful changes to our code to protect venues from getting pushed out."