The foreclosure auction block across Texas is usually crowded with dilapidated Class C apartment complexes, but that’s not the case with this suburban Austin multifamily asset.
Canada’s largest private landlord is facing foreclosure on Emerson at Buda, built in 2021. The property, at 950 FM 2001, is scheduled to be auctioned after owner Starlight Investments defaulted on a $47.7 million loan from Natixis, according to a foreclosure notice.
Mannion Auctions is handling the sale, which is scheduled for Oct. 17 at 10:30 a.m.
The Toronto-based firm bought the 304-unit property in April 2022. The mortgage works out to $157,000 per unit.
Emerson at Buda is a garden-style community with a gym, pool, cabanas and co-working spaces. The property is about 16 miles south of downtown Austin in Buda, a fast-growing town of about 15,000 people in the Austin-San Antonio megaregion. Its population has grown more than 8 percent since 2020.
A historic wave of apartment supply came online in Austin over the last two years, causing rental rates and occupancy levels to plummet.
Rents have fallen so much in Austin that the city leads the country in rental affordability, JLL’s Kai Pan said at a recent Texas multifamily conference hosted by Connect CRE. Decreased rents, paired with high salaries, mean Austin renters, on average, spend 16.8 percent of their income on rent.
Emerson at Buda’s website archives make it possible to track how the Austin rent rate rollercoaster affected the property.
Three years ago, one-bedroom apartments at Emerson at Buda started at $1,238 per month. Today, those same units are starting at $1,019, a drop of almost 18 percent. Rates for two-bedroom units have dropped even more. They started at $1,598 three years ago, and are now being offered for $1,278, a reduction of 20 percent.
Even with the price drops, the property is offering concessions: a $1,000 credit for renters who sign a lease for a one-bedroom apartment and one month free for those who rent a two-bedroom apartment.
Experts warn Texas multifamily distress is just beginning. In the next five years, $19 billion in CMBS loans tied to Texas multifamily will mature, CWCapital’s James Shevlin said.
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