Dive Brief:

• The Villas Del Sol property in Austin, Texas, has moved to special servicing and enhanced U.S. Immigration and Customs Enforcement could be to blame, according to a May 4 report that Morningstar Credit shared with Multifamily Dive.
• The 294-unit property fell delinquent on its Freddie Mac loan despite its 2023 cash flow exceeding the underwritten level and 2024 falling just short. “However, servicer commentary alludes to decreasing local employment and ICE operations in the area as the proximate cause of a sharp drop in occupancy down to 75% as of September 2025,” according to Morningstar.
• Over the past months, the “loss of pricing power in immigrant-heavy locations” has been “stunning,” according to LeaseLock Chief Economist Greg Willett. Citing RealPage data, Willett said the March annual rent change for move-in leases in class C product was -9% year over year in Colorado and Arizona and -7.5% in Texas. In Austin, the drop was even more severe at -14%.

Dive Insight:

Austin Capital Advisors acquired the north Austin property in 2016 and sold it to Rap Villas Del Sol LLC in 2018, according to Travis County, Texas, property records and a press release. The property is currently managed by ACA Property Management, which didn’t reply to a request for comment. The asset was appraised for $35.6 million in 2026.

For months now, apartment observers have been speculating that increased ICE enforcement could be the “straw that breaks the camel’s back” for troubled properties, as Chris Nebenzahl, vice president of rental research at Irvine, California-based John Burns, put it.

“Where you’ve got occupancy at 85%, economic occupancy at 78% and the loan is coming due, I think the lenders are going to say, ‘Yeah, the jig is up. Either sell and get what you can or we’ll take the keys back,’” Nebenzahl told Multifamily Dive earlier this year.

“The challenge is not just that there's been a decline in occupancy and, in turn, rent,” Willett said in emailed comments. “There's also the problem of few prospects to re-fill a unit when it goes vacant. These massive revenue drops clearly are going to lead to financials that don't come close to what's needed to service property debt obligations for some communities.”

And, Willett said there’s no short-term fix to the problem. “If the renter audience that the property typically serves is just not there anymore, pricing adjustments or operational repositioning can't fill that void,” he said.

Tax abatement issues are also becoming a bigger issue for Texas properties. The 191-unit Villas of Ocean Drive in Corpus Christi, Texas, is the newest in a growing number of properties facing issues because its sponsor was not able to secure a tax exemption. The borrower was required to pay down the Freddie Mac loan by $8.5 million plus a prepayment penalty, but it has "not cooperated," according to a May 1 Morningstar report. 

Last July, the Nueces County Appraisal District denied tax exemption requests for apartment complexes, including the Villas of Ocean Drive, in the Corpus Christi Housing Authority's workforce housing program, according to KRIS TV. 

Other apartments have recently gone into servicing after losing tax exemptions.

The Texas SH Portfolio, comprising two buildings in Waco and Denton and 318 units, entered special servicing after it was unable to secure a tax exemption, according to an April 24 report that Morningstar Credit shared with Multifamily Dive. 

At Waterford Grove Apartments, the borrower was unable to secure the tax exemption required under the loan agreement. Now it must make a principal paydown to meet the required 1.25x DSCR and 8.5% debt yield thresholds, which it is refusing to do, according to a March 20 Morningstar report.

In Richardson, Texas, The Riley was also transferred to special servicing, according to a March 2 Morningstar report. The 262-unit property was completed in 2016, according to S&P Global. Though the servicer provided no details, prior commentary noted that a cash trap has been sprung for several reasons, including a tax exemption, according to Morningstar.

The Riley participated in the Garland Housing Finance Corporation program, which allowed the property to be exempt from real estate taxes if it met certain conditions and required mandatory prepayments if it failed to qualify or lost that exemption, according to Morningstar.

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