Dive Brief:
- The Texas SH Portfolio, comprising two buildings in Waco and Denton and 318 units, has gone into special servicing, marking another deal gone bad after being unable to secure a tax exemption, according to an April 24 report that Morningstar Credit shared with Multifamily Dive.
- Swapnil and Deepika Agarwal are the loan sponsors, David Putro, head of analytics at Morningstar Credit, told Multifamily Dive in emailed comments. Swapnil Agarwal, the founder and managing principal of Nitya Capital, didn’t respond to a request for comment from Multifamily Dive.
- After not being able to secure a property tax exemption due to the change in Texas law, the borrower was required to pay down the loan to meet a 10.33% debt yield hurdle. “Negotiations are underway to modify the loan to allow that paydown to occur over time,” Morningstar said.
Dive Insight:
Swapnil Agarwal has also faced challenges in his portfolio. He was listed as the borrower for the $63.5 million loan backing Muse in Dallas and Eden Pointe in Houston, which went into special servicer last October, according to a Morningstar Credit report shared with Multifamily Dive.
At the time, Swapnil Agarwal told Multifamily Dive that the assets were not going into special servicing for performance. “There are some code violations [at the Muse] from the city and we’re addressing those concerns,” he said in emailed comments. “So, [it] should be fully taken care of very shortly.”
However, the Agarwal Waco and Denton properties appear to face different challenges than the properties Nitya previously saw enter servicing. The inability to secure a tax exemption mirrors those problems seen at other Texas properties over the past couple of months.
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.
In May 2025, Texas lawmakers enacted House Bill 21, which significantly changed how the state’s housing projects could access property tax exemptions.
The bill was a response to concerns surrounding “traveling” housing finance corporations that partner with developers to acquire properties in other parts of the state and claim tax exemptions outside their founding jurisdictions without local consent, per a June 2025 analysis from law firm Holland & Knight.
Previously, under Texas law Chapter 394, if developers partnered with a publicly sponsored Housing Finance Corporation and rented to low- or moderate-income tenants, they would receive a 100% property tax exemption. HB 21 changed the laws governing these deals and applied them retroactively to some contracts signed under the old Chapter 394.
For lenders financing projects that rely on the property tax exemptions that finance corporations can provide, HB 21 created immediate and long-term uncertainty, per Holland & Knight, as well as “new and meaningful compliance risks, timeline delays and underwriting complexities for lenders and developers.”
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