The second half of July brought news that several apartment properties moved into special servicing, while others had their values reduced.

Once again, Texas was at the epicenter of these transfers, though one property in Brooklyn, New York, is also facing challenges, according to a flurry of Morningstar reports.

Two Keener Investments properties in League City, Texas — Harbor Walk and The Shore — were transferred to special servicing after the Houston-based owner stated that it “could no longer come out of pocket for debt service and escrow shortages,” according to a July 31 Morningstar report. 

The properties are still listed on Keener’s website. It did not reply to a request for comment from Multifamily Dive.

At the 138-unit Harbor Walk, revenue is above the underwritten level, but expenses jumped enough, according to Morningstar. The revenue and expenses issues were similar at the 176-unit The Shore.

“Both have seen occupancy trend down into the mid-80s, but revenue has remained strong,” David Putro, associate managing director at Morningstar Credit, told Multifamily Dive in emailed comments. “Expenses have also risen on both, but the floating rate debt has pushed the payment higher, so the combination has put them in a spot where cash flow isn’t covering the payments.”

Servicing transfers weren’t just limited to Texas. In New York City, the 110-unit Georgetown Apartments was transferred after several months of delinquency. 

Through its first five years of reporting, the Brooklyn property performed well with a debt service coverage ratio in excess of 2.00x and 99% occupancy, according to a July 29 Morningstar report. The asset fell delinquent in April 2026, and Morningstar said servicer commentary was sparse.

Appraisal values change

While some new apartments fell into special servicing in July, loan values were updated at properties that had already faced issues.

At the Falls of Deer Park Apartments in Pasadena, Texas, a new appraisal was reported just above the loan amount, according to a July 30 Morningstar report. Still, the new value of $27.5 million is 27% lower than the $37.6 million valuation from March 2021.

The asset was owned by Houston-based apartment investor Rao Polavarapu’s Falls Apartment Group. The property moved to servicing in July 2025 “amidst delinquency stemming from sponsorship issues,” according to Morningstar. It became real estate owned in February 2026. 

“The appraisal on the Falls property was positive since the property is REO and it came in above the loan amount, but it looks like there is capex needed before it can sell, so the appraisal itself doesn’t seem indicative of a near-term sale,” Putro said. 

In addition, the appraised value at Waterford Grove Apartments in Houston was cut 32% from the $93.5 million value reported at issuance to $63.2 million, according to a July 20 Morningstar report. In 2025, net cash flow was 31% below the underwritten figure.

In March, Morningstar reported that the borrower was unable to secure the tax exemption required under the loan agreement, which pushed the property into special servicing. At that point, it was required to make a principal paydown to meet the required 1.25x DSCR and 8.5% debt yield thresholds, which it was refusing to do.

“Waterford seems like it’s going the modification route, so it doesn’t seem likely to prompt a sale,” Putro said.

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