Dive Brief:
- Falls Management Group has transferred operational responsibility for 10 troubled Houston properties, totaling 3,633 units, to Lynd Management Group, according to a press release shared with Multifamily Dive. The multifamily operator is implementing stabilization initiatives, including lease-up execution, operating discipline and targeted cost-containment measures.
- Multiple lenders associated with the 10 properties have also retained ThirdEye Partners, a real estate advisory firm focused on distressed multifamily assets and lender-led workout strategies, to provide due diligence, strategic advisory services and recovery analysis and evaluate value restoration opportunities.
- Houston-based apartment investor Rao Polavarapu’s Falls Apartment Group has faced challenges on multiple fronts over the past year. Last summer, multiple Falls portfolios entered special servicing, according to a report that Morningstar Credit shared with Multifamily Dive. In November, Polavarapu filed for bankruptcy, according to The Real Deal.
Dive Insight:
Four of the 10 properties are currently operating under Chapter 11 bankruptcy proceedings. Lynd could provide debtor-in-possession financing and, subject to lender direction and court process, serve as a stalking-horse bidder or purchaser at those assets.
TEP and Lynd are jointly working with lenders and stakeholders on a comprehensive workout strategy for the six non-bankruptcy assets, according to the press release. As part of this effort, the apartment operator intends to deploy rescue equity capital and is evaluating potential joint-venture or co-sponsorship structures with the borrower.
TEP will provide detailed reviews of rent rolls and lease files, deferred maintenance and capital needs assessments, expense benchmarking, market positioning analysis, asset-level recovery planning and cash-flow stress testing.
Houston has been a hot spot for multifamily loan issues for several years now. For example, Dallas-based Applesway Investment Group defaulted on nearly $230 million in loans for 3,200 units in the city in April 2023.
Last year, other Houston-area apartment properties faced difficulties. 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 in early 2025, according to Morningstar. The property, which went into special servicing in October 2024, has been rebranded as Palm Beach Estates Apartments.
Earlier this month, Fannie Mae sued Houston-headquartered Kajal Housing Group for not conducting repairs it claimed to do on the Bellfort Village Apartments complex, which served as collateral on its $13.2 million loan, according to a lawsuit filed Feb. 18 in the U.S. District Court, Southern District of Texas - Houston Division.
Kajal took out the loan in August 2022 through Greystone Servicing Co., and it was later assigned to Fannie Mae. The lender alleges breach of contract, saying the defendant neglected upkeep, did not fix urgent safety issues per the loan agreement and also failed to repay the loan. In the suit, Fannie Mae is asking for a court-appointed receiver, as well as damages, attorneys’ fees and other costs.
Many Houston properties have been plagued by rising insurance, utility and tax costs over the past few years, as interest rates have risen. In Texas, apartment owners have seen insurance costs jump after storms in 2022. And with no state income taxes, property owners bear a larger share of the revenue burden, Venkat Avasarala, founder of Dallas-based Stryker Properties, told Multifamily Dive in 2023.
“A C-class property has lower rents, higher delinquency, higher capital expenditures and higher insurance costs,” Avasarala said.
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