It’s a bad month to be a multifamily syndicator in Texas.
Some of the largest commercial loans headed to the foreclosure auction block on July 1 are attached to value-add apartment buildings that syndicators S2 Capital and Tides Equities bought when interest rates were low.
These loans and most of the others attached to apartment complexes facing foreclosure this month originated in 2022. That’s when investors swept through Texas picking up aging apartment complexes with plans to revamp and sell them for a profit. Instead, interest rates ballooned and values sank.
More than $400 million worth of commercial real estate loans in Texas are headed to foreclosure auction this month, according to Roddy’s Foreclosure Listing Service. Harris County, home to Houston, is the hardest hit, with 13 properties totaling $260 million in debt facing foreclosure.
Here are the biggest loans up for auction this month. It’s possible that some of these borrowers and lenders will reach agreements to avoid auction.
Houston
Harris County’s biggest loan facing foreclosure is a textbook example of a multifamily operator exploiting the “traveling” housing finance corporation loophole.
Massachusetts-based Colony Hills Capital bought 2828 at Royal Oaks, at 2828 Hayes Road. It then sold the property to Maverick County Housing Corporation — an affordable housing entity located 320 miles away — and leased the ground. Despite the ill-gotten property tax exemption, Colony Hills still couldn’t keep up with the $68 million loan it took out from Minneapolis-based AB CarVal in 2021.
Gov. Greg Abbott signed a bill closing the loophole, which became a popular cost-cutting tool for inexperienced multifamily syndicators.
San Antonio
Just one Bexar County commercial property is expected to hit the auction block this month, but it’s a big one.
CBRE lent ATX Capital $30.5 million for the purchase of Barcelo Apartment Homes in 2023. The 288-unit property, at 3501 Pin Oak Drive, was built in 1976. The debt works out to $106,000 per unit.
Dallas
As lawsuits mount, the foreclosure train hasn’t let up for Tides Equities.
The firm is facing foreclosure on the 370-unit Tides on Esperanza, at 13450 Esperanza Road, and the 232-unit Tides at North Dallas, at 13250 Emily Road. Tides on Esperanza was built in 1982, and Tides at North Dallas was built in 1981.
Tides defaulted on a $44.8 million loan for the former and a $28.5 million loan for the latter. Both were issued in 2022 by Claros Mortgage Trust. In total, the loans work out to $122,00 per unit.
Fort Worth
S2 Capital could lose a Tarrant County property to foreclosure on July 1. Scott Everett’s firm appears to have defaulted on a $36 million mortgage from CBRE for the Preslee Apartments, at 2504 Ivy Brook Court in Arlington. The 290-unit apartment complex was built in 1981, and the debt amounts to $124,000 per unit.
Repeat offenders
Of the 13 foreclosures in Houston’s Harris County, five properties are regulars. They’ve received multiple foreclosure notices but haven’t been sold yet.
- Frost Bank Building, at 10333 Richmond Avenue ($34.7 million);
- Perla 249, at 18828 State Highway 249 ($7.5 million);
- Decorative Center Houston, at 5120 Woodway Drive ($50 million);
- Reserve at 63 Sixty-Three, at 6363 Airport Boulevard ($37.3 million); and
- Perla 1960 Apartments, at 8719 FM 1960 ($5.7 million).
Read more
Town East Mall escapes foreclosure as Brookfield maps revival
Foreclosure looms for billionaire Charles Cohen’s Houston asset
$500M in Texas CRE loans are headed to auction this week
