In 2022, Alan Stalcup and his firm, GVA, a syndicator known for pooling money to buy up apartment complexes in the hope of flipping them at a profit, bought 11 apartment complexes across North Carolina, South Carolina and Oklahoma for $132 million.
The deal was supposed to be financed with a single loan of $95 million. Or so one equity investor, Overwatch Fund, thought.
Overwatch has filed a lawsuit against Austin-based GVA and Stalcup, claiming the firm and its principal misrepresented the deal to investors by saying the properties would be financed with a $95 million, but then going with a $153 million loan instead.
That $153 million loan was backed by the 11 properties, plus five more that Overwatch never invested in, the investor fund claimed in a suit. Overwatch claimed it never knew about the $153 million loan, provided by Benefit Street Partners, nor did it know the properties would be pooled in with five others.
“Overwatch would not have invested in the project had this material fact been disclosed,” the fund said in its complaint.
In its own claim against Overwatch, GVA did not deny that it scored the $153 million loan, but blamed Overwatch for not doing its due diligence.
“In over fifteen transactions with GVA, [Overwatch principal] Ben Loughry and Overwatch have never once requested to review loan documents, closing statements or any other transaction-related documents prior to closing a deal,” GVA and Stalcup said in their legal filing.
GVA was also never “required” to go with the $95 million loan, and no agreement with Overwatch banned GVA from cross-collateralizing, GVA said in its cross-complaint.
Neither Stalcup nor Loughry at Overwatch responded to requests for comment.
The suit marks the second time Overwatch has sued GVA claiming the syndicator obtained a loan without the fund’s permission or knowledge.
In April, Overwatch sued after allegedly suffering a $7 million loss in equity after a lender foreclosed on the 285-unit Solara apartment complex in San Antonio last year.
GVA, under Stalcup’s reign, more than doubled the size of its portfolio between 2022 and 2023, as the Federal Reserve started to hike rates. Many of those properties were bought using floating-rate loans — as interest rates rose, so did GVA’s monthly debt bills.
Besides the Solara in San Antonio, GVA has lost many other properties to foreclosure, and is delinquent on more than half a billion dollars worth of securitized debt tied to his portfolio.
If the five properties at the center of the lawsuit run into financial issues and GVA failed to pay off the larger loan, Benefit Street could foreclose, wiping out Overwatch’s equity.
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In its suit, Overwatch said it could happen, given GVA has defaulted on a number of loans tied to its properties and faces foreclosure on tens of other assets.
“The multifamily empire that Mr.Stalcup built — largely using money he solicited from other independent investors — is crumbling,” Overwatch said in its complaint.