Twelve multifamily properties backing loans of at least $10M are scheduled to appear at Tuesday’s Harris County foreclosure auction, up from just a handful last month, as the number of apartment complexes facing potential foreclosure steadily rises.
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Although less than half of the properties filed to appear will likely be auctioned on the day, the sheer number of filings is indicative of a wave of distress crashing over Houston’s multifamily market, said Terri Clifton, president of Better World Properties.
“You're starting to see the lenders that are to the point where they've tried to work with the individuals that have gotten themselves in trouble, and they're taking it to foreclosure with the possibility that they'll come up with something,” Clifton said. “Some sort of agreement, some sort of extension.”
Property data firm Attom Data Solutions reported last month that Houston ranks fifth nationally in commercial foreclosure starts, with 1,791 in the third quarter alone. And with interest rates dropping and bargain hunters potentially entering stage left, lenders and borrowers are finally reaching impasses as extending and pretending looks less attractive, FCP Vice President of Multifamily Acquisitions Cole Kellogg said last month.
Clifton estimates that maybe a third of the properties will go on the block Tuesday, while the remaining lenders will either strike a new deal with borrowers or find an off-market solution, such as getting someone else to take over the loans, she said.
Lenders sometimes initiate foreclosure filings even though that is not their immediate intention. Foreclosure filings can be used as a negotiation tactic or to put the lender ahead in the process in case another incident pushes it to foreclose, Bisnow previously reported.
Most of the distress stems from buyers overpaying for multifamily properties during the low-interest-rate years when capital was cheaper and easier to get, Clifton said. Values have corrected by dropping about 20%, meaning properties are no longer worth what they were when borrowers initially secured financing, she said.
While some lenders find it preferable to hand off a loan to another borrower behind the scenes, avoiding the costs associated with foreclosure, deferred maintenance and marketing the property for sale, that isn't always feasible.
“Sometimes that lender would love for one of these key players to take over and take the loan over,” Clifton said. “But they're doing their underwriting, and it's not worth what they loaned them.”
But off-market deals are happening, and the number of properties filed for foreclosure represents just a fraction of the multifamily distress in the Houston market, she said.
Bisnow compiled the following list of properties filed to be sold at Tuesday's Harris County foreclosure auction using public records from the Harris County Clerk’s Office. Bisnow reached out to all borrowers and only received one response from Next Investments Group.
Village at Piney Point
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Loan Size: $74M
Note Holder: Fannie Mae
Borrower: Piney Point 2023, an LLC with ties to Kalkan Capital
Address: 2601 Lazy Hollow Drive, Houston
Date Borrowed: June 6, 2023
The Palms on Westheimer
Loan Size: $54.6M
Lender: DLP Lending Fund LLC
Borrower: Westheimer 2021, an LLC with ties to Kalkan Capital
Address: 6425 Westheimer Road, Houston
Date Borrowed: Dec. 27, 2021
Pecan Square Village
Loan Size: $38.7M
Lender: DLP Lending Fund LLC
Borrower: Pecan2020, an LLC with ties to Kalkan Capital
Address: 14531 Ella Blvd., Houston
Date Borrowed: March 20, 2023
Pine Lake Village
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Loan Size: $10.6M
Lender: Lument REO LLC
Borrower: Pine Lake Property, an LP with ties to Vision & Beyond Capital Investments
Address: 1325 Greens Parkway, Houston
Date Borrowed: April 29, 2022
Ridge Point
Loan Size: $18.8M
Lender: Lument REO LLC
Borrower: Ridgepoint Apts Holdings, an LLC with ties to Vision & Beyond Capital Investments
Address: 2700 Westridge St., Houston
Date Borrowed: April 29, 2022
Green Tree Place Apartments
Loan Size: $20.1M
Lender: Lument REO LLC
Borrower: Green Tree Place Holdings, an LLC with ties to Vision & Beyond Capital Investments
Address: 700 Dunson Glen Drive, Houston
Date Borrowed: April 29, 2022
Falls of Las Villas and Falls of Alta Vista
Loan Size: $33.5M
Lender: Owemanco Mortgage Holding Corp. and TIG Romspen US Master Mortgage LP
Borrower: Falls of Las Villas and Falls of Alta Vista, LLCs with ties to Falls Apartment Group
Address: 407 S. Richey St. and 621 Richey St., Pasadena
Date Borrowed: Jan. 27, 2022
Reserve at 63 Sixty Three
Loan Size: $37.3M
Lender: Reserve 63 LLC
Original Lender: Capital One
Borrower: 6363 Partners DE, an LLC with ties to Omni + Brook Holdings
Address: 6363 W. Airport Blvd., Houston
Date Borrowed: April 5, 2022
Context: The property has been filed for multiple other foreclosure auctions.
Park North
Loan Size: $56.3M
Lender: Arbor Realty Trust
Borrower: A group of LLCs with ties to Inman Equities
Address: 16112 North Freeway, Houston
Date Borrowed: May 3, 2022
Context: The property has been filed for multiple other foreclosure auctions.
Sutter Ranch
Loan Size: $18.2M
Lender: Berkeley Point Capital LLC
Borrower: Sutter Ranch Holdings, an LLC with ties to GenWealth Capital Group
Address: 10445 Greens Crossing Blvd., Houston
Date Borrowed: April 1, 2021
Context: The property has been filed for at least one other foreclosure auction.
The Vintage
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Loan Size: $24.7M
Original Lender: CBRE Capital Markets
Borrower: Next Vintage Park, an LLC with ties to Next Investments Group
Address: 6500 W. 43rd St., Houston
Date Borrowed: Sept. 10, 2020
Context: The lender is working on a deal to sell The Vintage off-market, so foreclosure won't happen on Tuesday, according to a representative of the LLC.
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