After interest rates rose in 2022, the first hints of problems with the multifamily sector bubbled up when Dallas-based Applesway Investment Group defaulted on nearly $230 million in loans for 3,200 units in Houston in April 2023.
Now, more properties are facing distress in the city, though the causes vary, according to a report Morningstar Credit shared with Multifamily Dive.
In February, The Onyx, a 438-unit property now known as La Solera, was transferred to special servicing with payment default cited as the cause. The property was built in 1979 and renovated in 2019.
The sponsors of the property at issuance were Khaled Noor, principal of New York City-based private equity group Nord Group, and Jason Ormsby, according to Morningstar. The loan was structured with interest-only payments through maturity in December 2031.
The Onyx’s 2023 net cash flow was down 36% from the issuance of its $38 million loan in December 2021, which Morningstar said was due to a combination of weakened revenue and increased expenses. The property’s occupancy fell from 94% at loan issuance to 88% in June 2024.
As The Onyx hit servicing, the Rockridge Apartments, an 881-unit property in Houston, saw its value fall from $86.3 million in September 2023 to $38 million, according to an updated appraisal reported last month by Morningstar. The property, which went into special servicing in October 2024, has been rebranded as Palm Beach Estates Apartments.
In 2024, a windstorm and Hurricane Beryl damaged Rockridge Apartments, causing a 56% reduction in value. The property’s $54 million loan was transferred to special servicing for payment default in October 2024. In September 2024, the asset was 70% occupied, down from 95% in 2023.
Fercan Kalkan, founder of Houston-based distressed community investor Kalkan Capital, is the owner of the Rockridge Apartments, according to Morningstar. He had been using the loan proceeds to pay for repairs.
Neither Kalkan Capital nor The Nord Group responded to Multifamily Dive’s request for comment.
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