Dive Brief:
- Multiple portfolios owned by Houston-based apartment investor Rao J. Polavarapu’s Falls Apartment Group are heading to special servicing, according to a report Morningstar Credit shared with Multifamily Dive.
- The Falls of Deer Park Apartments in Pasadena, Texas, which has a current outstanding balance of $25 million, was put into special servicing after falling 60 days delinquent. The loan had not appeared on the servicer's watchlist, and the reason for the transfer is unknown. The property had a 2024 net cash flow that was 16.7% above the underwritten level.
- The Falls Houston Multifamily Portfolio, which has a current outstanding balance of $64.5 million, is backed by three apartment communities in suburban Houston. The servicer cited "imminent monetary default" as the cause for the move.
Dive Insight:
The reason for the Falls Houston Multifamily Portfolio going into servicing “is not entirely clear” since the servicer didn’t offer additional details, according to Morningstar. That loan is backed by the Falls of Braeburn Apartments, Falls of Chelsea Lane Apartments and Miami Gardens Apartments, according to The Real Deal.
Currently, all three properties are listed on Falls Apartment Group’s website, along with Falls of Deer Park Apartments. The company did not respond to a request for comment from Multifamily Dive.
The portfolio’s reported 2024 net cash flow was only marginally below issuance underwriting. It was 89% occupied as of December 2024, after sitting at 88% at loan issuance. The loan is not set to mature until July 2029.
Last Fall, Falls Apartment Group faced foreclosure on two other Houston properties — Falls of Las Villas and the Falls of Alta Vista, according to The Real Deal.
Houston has been a hot spot for multifamily loan issues for several years now. Dallas-based Applesway Investment Group defaulted on nearly $230 million in loans for 3,200 units in Houston in April 2023.
Earlier this year, other Houston-area apartment properties went into servicing. 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.
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.
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