Owner Delinquent on Houston Senior Housing Real Estate Loans

The owner of several Frontier Senior Living locations in Greater Houston is delinquent on three loans attached to the real estate.

The loans were transferred to special servicing in August. With November and December maturity dates, a lender-forced foreclosure sale of the three properties could be looming.

Loans for Reserve at Katy, at 21601 Provincial Boulevard, and the Reserve at First Colony, at 13825 Lexington Boulevard, are set to mature on Dec. 31. The Reserve at Braeswood, at 7800 North Stadium Drive, has a maturity date of Nov. 30.

The properties comprise 232 units and a combined appraised value of $57 million, according to Morningstar. They were previously called Colonial Oaks. Frontier Senior Living doesn’t own the properties, and the owner’s identity couldn’t be determined.

The loans are being transferred to special servicing because of “imminent monetary default,” according to servicer commentary. Despite having relatively high occupancy rates — they range between 84 to 95 percent occupied — cash flow has declined significantly since 2019. Their DSCR, or the ratio of income divided by debt payments, fell below the breakeven point in September 2022.

The Reserve at First Colony is the best-performing location with an .87x DSCR, while the Reserve at Katy and the Reserve at Braeswood have .40x and .33x DSCRs, respectively. All three loans had been delinquent on payments since July, according to September servicer commentary. As of October, the loans are still labeled delinquent. They were previously transferred to special servicing in February also due to delinquency.

The impact of COVID-19 is a key contributor for depreciated revenue, as all locations saw a steady decline in cash flow and DSCR post-2020, with the Reserve at Katy and the Reserve at Colony experiencing prolonged periods of zero occupancy in 2021. Frontier has recently reassigned an in-house marketing director to the Reserve at Braeswood in hopes of boosting the property’s financial performance.

The loans originated in 2016 as part of a $1.1 billion agency CMBS loan securitized against 49 multifamily, healthcare and mobile home complexes across the nation. Agency CMBS loans refer specifically to government-sponsored CMBS loans, such as Fannie Mae and Freddie Mac, pooled together. Should the locations default, it is unclear what would happen to the residents if the lender forces a foreclosure sale. In some instances, residents have been forced to vacate the premises and relocate.

Correction: An earlier version of this story misidentified the owner of the properties.