January brought more reports of apartment distress around the county.
The 322-unit Boulder Crossroads Apartments in Denver went into servicing over a preferred equity clause in the Freddie Mac loan agreement, according to a Morningstar Credit report shared with Multifamily Dive. The property was strong with a 1.45x debt service coverage ratio and 94% occupancy.
The Freddie Mac loan backing Meadows at Town Center Apartments, a 104-unit property in Thornton, Colorado, went into servicing, and the preferred equity holder is in the process of taking over the asset to make the loan current, according to Morningstar. Cash flow shortfalls were due to the timing of late fee collections and sharp increases in utilities and insurance.
The loan backing the 288-unit Falls of West Oaks in Houston moved into special servicer as its sponsor, Falls Apartment Group, filed for bankruptcy. According to Morningstar, the property's performance had been “adequate,” and all payments had been made on time until a late payment in November 2025.
Outside issues
External situations beyond on-the-ground operating fundamentals proved to be issues for these three properties. For instance, Morningstar noted that a new Colorado law preventing landlords from billing certain expenses back to tenants was a problem at Meadows at Town Center Apartments.
For the Houston properties, ownership was the issue.
Last summer, multiple portfolios owned by Houston-based apartment investor Rao Polavarapu’s Falls Apartment Group went into special servicing, according to a report Morningstar Credit shared with Multifamily Dive.
In November, Polavarapu filed for bankruptcy, according to The Real Deal. In addition to Falls of West Oaks and Falls Westpark, his other troubled properties included:
- The Falls of Las Villas and the Falls of Alta Vista in Pasadena, Texas, according to The Real Deal.
- The Falls of Deer Park Apartments in Pasadena, Texas, according to Morningstar.
- The Falls of Braeburn Apartments, Falls of Chelsea Lane Apartments and Miami Gardens Apartments, according to The Real Deal. All three are located in Houston.
Houston problems
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, 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.
Despite issues in Texas, the multifamily CMBS special servicing rate declined 54 basis points to 8.08% in December, according to data firm Trepp. That was a decrease from six months ago, when it sat at 8.18%, and a year ago, when it was 8.72%.
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