Distress at Scott Everett’s S2 Capital is behind one-third of the value of commercial real estate loans flagged for foreclosure in Texas this month.
After projecting an equity wipeout for its multifamily real estate investment trust in May, the firm will likely hand keys back to five North Texas apartment properties at Tuesday’s auctions. The apartments are tied to $311 in troubled loans from Computershare Trust, Benefit Street Partners, Citibank and U.S. Bank Trust.
The foreclosures are likely to ramp up for S2, which told investors on July 1 that it’s dissolving its $400 million first fund with “no returns of capital.”
Loans flagged for foreclosure in July dipped to $913 million, after surging past $1 billion in May and June, according to Roddy’s Foreclosure Listing Service. Of the 39 loans flagged for auctions, 11 are tied to properties in Dallas County. Harris County (home to Houston) and Bexar County (home to San Antonio) each have 7 CRE loans flagged for foreclosure.
Here are the biggest loans up for auction. It’s possible that some of these borrowers and lenders will reach agreements to avoid auction.
Houston
Rao Polavarapu’s Falls Apartment Group is facing foreclosure on Miami Gardens Apartments, a 441-unit property at 9540 Kempwood Drive. Falls borrowed $64.5 million from Computershare Trust for the property in 2024. The debt works out to $146,000 per unit. It’s the latest in a slew of foreclosures for the firm, which has been struggling with distress for over a year. Since the firm filed for bankruptcy in November, Lynd Management Group has taken over troubled properties in Falls’ multifamily portfolio.
Austin
A $6.5 million loan backed by a 55-bed rehabilitation center at 3509 Rogge Lane is the biggest new loan in Travis County to be flagged for July’s foreclosure auction. The owner is Apollo Healthcare, which is based in Houston. The lender is Enclave Equities, which is based in Purchase, New York.
San Antonio
Blue Sky Bank provided the $11.5 million loan for the 46,000-square-foot office property at 12672 Silicon Drive in San Antonio. It’s one of the properties owned by San Antonio physician and investor Dr. Sanjay Misra that’s facing foreclosure this month. Misra could also lose control of The Vogue Building in Downtown San Antonio, two other office buildings, a retail strip and a 91-room Comfort Suites hotel, the San Antonio Express-News reported.
Dallas
The tables have turned for Blackstone, which is facing foreclosure on a North Dallas property at this month’s foreclosure sale. Usually on the lender side of the equation, the alternative asset manager allegedly defaulted on the $90 million loan backed by 75 West Apartments. Los Angeles-based Ares Management provided the loan in 2022. The debt works out to about $184,000 per unit.
Fort Worth
S2 Capital’s biggest troubled loan hitting the auction block this month is the $92.2 million loan tied to The Kace Apartments, at 2301 Avenue H East in Grand Prairie. Computershare Trust provided the loan for the 720-unit property in 2022. The debt works out to $128,000 per unit.
Repeat offenders
Of this month’s distressed loans, nine have been flagged for foreclosure sales multiple times, sometimes reflecting continued lender negotiations or ongoing litigation. Here are the properties that have been on the block before, according to Roddy’s Foreclosure Listing Service data:
- The Republic Apartments, a 1,300-unit apartment complex at 241 East I-30 in Garland ($78.6 million loan);
- Reserve at 63 Sixty-Three, a 468-unit apartment complex at 6363 West Airport Boulevard in Houston ($37.3 million loan);
- The Interlace Apartments, a 432-unit apartment complex at 3801 Gannon Lane in Dallas ($31.4 million loan);
- Algarita Lakeside, a 292-unit complex at 8555 Laurens Lane in San Antonio ($33.3 million loan);
- Falls of Westpark Apartments, a 352-unit complex at 6130 Southwest Freeway in Houston ($29 million loan);
- A retail property at 13376 North U.S. Highway 183 in Austin ($16 million loan);
- A plot of land at 3531 McLarry Road in McKinney ($5.8 million loan);
- A motel at 3203 Kirnwood in Dallas ($5.3 million loan); and
- The Social, a 222-unit complex at 1817 Oltorf Street in Austin ($4.8 million loan).