Arbor Realty Moves To Foreclose On Houston Complex As Short Seller Highlights Distressed Loan Book

Arbor Realty Trust has filed a foreclosure sale notice for an apartment complex in Houston amid renewed claims from a short seller the company faces a delinquency crisis.

According to online records, Arbor moved to foreclose after a limited liability company borrower tied to The Selena Apartments defaulted on a $37.88M loan made in November 2021. The 250 Uvalde Road complex in east Houston, formerly known as The Graham, is listed in the portfolio of CareVentures Capital. 

The Selena Apartments is also listed in the portfolio of Dallas-based syndicator Elevate Commercial Investment Group. CareVentures is the deal sponsor, Elevate CEO Jorge Abreu told Bisnow.

CareVentures Capital did not respond to a request for comment. The company characterized itself on its website as a “Houston-based group of physicians, management consultants and entrepreneurs who have come together to invest in opportunities in the commercial real estate sector and innovative startups.”

The filing comes as short seller Viceroy Research issued a new report, its second critical hit on Arbor since November, highlighting an almost 50% month-over-month increase in delinquent loans making up Arbor’s leading profile. Delinquent deals represent almost $2B of Arbor's $7.6B collateralized loan obligation book, according to the report.

Viceroy used Arbor’s CLO performance data for January to claim that there is “no rate cut large enough, no rate caps cheap enough, and no investors dumb enough to save Arbor.” 

Viceroy Research did not respond to an emailed question about its data, and Arbor Realty did not respond to requests for comment. 

Houston's Selena Apartments, a 494-unit Class-C complex worth about $36.2M as of January 2023, per Harris County data, has been troubled for months. 

Residents of The Selena took to local media in 2022 to air grievances about their living conditions. Complaints included not having air conditioning for more than a month during the summer. The complex name had changed by that time, the article states. 

The Selena also has more than 20 mechanic’s liens filed against it, according to a review of Harris County Clerk records. Electricians, a gate repair company, roofers and others allege in the liens that they were not paid for their work. One contractor claimed he was out $236K for work performed at the complex from February to September of 2023.  

Meanwhile, Arbor Realty has been a target of short sellers since early 2023, when it foreclosed on a portfolio of four Houston multifamily properties carrying $229M worth of loans. Arbor managed to find a buyer for those properties, where residents had complained about uninhabitable conditions and vermin, and numerous investors stood by the REIT.

“And what is so ironic is that they took one of the most successfully restructured transactions in our history, that was highly lucrative for our shareholders, and tried to turn it into a negative,” Arbor CEO Ivan Kaufman said about the short sellers during a Q1 2023 earnings call.

Arbor remains the lender for those four complexes, all bought by New York-based Fundamental Partners during an April 2023 foreclosure auction, Arbor previously told Bisnow.

A 2023 report from short seller Ningi Research managed to tank Arbor stock, causing it to temporarily tumble 24% in March. Viceroy Research's initial 29-page report in November, in which they dubbed Arbor “slumlord millionaires,” also caused its stock to fall late last year.

Zacks Equity Research noted this week that Arbor Realty’s stock price fell despite a market uptick. Zacks did not attribute the decline to the Viceroy reports, but noted that “shares of the real estate investment trust have depreciated by 10.53% over the course of the past month, underperforming the Finance sector's loss of 2.71% and the S&P 500's gain of 2.08%.”

UPDATE, JAN. 26, 9:11 A.M. CT: This article has been updated to add information about The Selena Apartments' ownership.

CORRECTION, APRIL 18, 10:15 A.M. CT: An early version of this story had a headline that has been modified for accuracy.