3,000 Apartment Units Head To Auction As Houston Investor Loses Grip On $1B Portfolio
A Houston-based multifamily investor who aimed to revitalize high-crime communities is now facing a mounting debt crisis and appears to be losing control of what was once a $1B portfolio.
At least eight apartment complexes owned by LLCs tied to Fercan Kalkan, founder of Kalkan Capital, are slated to appear at the Harris County foreclosure auction on Aug. 5, according to records reviewed by Bisnow.
The investor who was once growing his portfolio of deep value-add communities at a 25% minimum per year, according to an archived version of his website, is now accused of letting communities fall into disrepair, presenting potential health and safety hazards, and defaulting on tens of millions of dollars of financing.
The LLCs facing potential foreclosure defaulted on at least $125M worth of loans backing the eight Houston-area properties with more than 3,000 total units, foreclosure filings indicate. They include:
- The Retreat on Rosslyn at 5801 N. Houston Rosslyn Road in Houston
- The Pointe at 4101 Shaver St. in Pasadena
- Veranda Village at 3635 Shaver St. in Pasadena
- La Plaza at 5909 Glenmont Drive in Houston
- Villa Nueva at 5300 W. Gulf Bank Road in Houston
- Mar De Sol at 9303 Woodfair Drive in Houston
- Timbers of Cranbrook at 14000 Ella Blvd. in Houston
- La Escencia at 300 N. Vista Drive in Houston
The primarily Class-C properties reflect Kalkan Capital’s stated mission of investing in distressed, crime-ridden communities — a strategy outlined on its website before it was taken offline.
Kalkan spoke in 2021 about his journey to a billion-dollar portfolio, and Kalkan Capital put out a press release about acquiring $250M worth of properties during the first quarter of 2022.
“Our partnership continues to successfully push crime out of community after community and enables families to live safely in the neighborhoods they love,” Kalkan said in a press release about a 2022 acquisition.
The loans for the properties facing potential foreclosure were issued from 2019 to early 2023, before interest rates reached their peak and halted a spree of multifamily acquisitions.
Lenders have previously moved to take possession of Kalkan-related properties, but Kalkan has prevented foreclosure through legal maneuvers and bankruptcy filings, The Real Deal, Law360 and court records indicate.
U.S. Bankruptcy Judge Eduardo Rodriguez in May dismissed a Chapter 11 bankruptcy case for three of the properties slated to appear at next month’s auction: Retreat on Rosslyn, La Esencia and Timbers of Cranbrook.
Morgan Stanley issued three loans with those properties as collateral from 2019 to 2021, but the lender-borrower relationship had severely deteriorated by this year, according to court records.
Vadim Rubinstein, an attorney at Loeb & Loeb representing Morgan Stanley, emailed Kalkan’s counsel shortly after the bankruptcy filing, raising concerns that the properties were in disrepair and “may pose life and safety hazards.”
Rubinstein also questioned whether the debtors, LLCs solely owned by Kalkan, were using the bank’s cash collateral.
“Morgan Stanley is extremely concerned about the deteriorating condition of its collateral and this will be a significant issue in the case … There is significant mistrust and anger at the highest levels of the Bank, and I am not exaggerating,” Rubinstein said in a subsequent email.
Morgan Stanley and a U.S. trustee moved to dismiss the case, citing the debtors’ apparent refusal or inability to comply with bankruptcy code requirements. Judge Rodriguez granted the dismissal with prejudice for 180 days, barring the entities from refiling for bankruptcy within that period.
On July 14, Morgan Stanley filed foreclosure notices for the three properties. A filing does not guarantee that foreclosure will occur.
The bank declined to comment. Kalkan did not respond to requests for comment.
