$384M In Houston Multifamily Properties Set For Auction Block Tuesday As Distress Mounts

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. 

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 

• 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

• 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 

• 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.