Storm-Damaged Suburban Houston Apartments Face Foreclosure

A Houston-area apartment complex lost more than half its value and faces potential foreclosure after back-to-back storms last year damaged the property and sent occupancy rates tumbling.

The 881-unit Palm Beach Estates, formerly known as Rockbridge Apartments, dropped in valuation from $86.3 million in September 2023 to $38.1 million this month, Bisnow reported, citing a CMBS alert from Morningstar Credit.

The complex, at 16818 City View Place in Greenspoint, was hit last May by a derecho — a long-lived, damaging windstorm — and was slammed again by Hurricane Beryl in July.

The property’s occupancy dropped from 95 to 70 percent in that span. Its owner, tied to Houston-based Kalkan Capital, has not made a payment on the $54 million loan since June. The complex entered special servicing for loan default in October.

The lender is dual-tracking foreclosure, simultaneously pursuing a foreclosure process while continuing negotiations with the borrower, according to servicer commentary cited by Morningstar.

Kalkan Capital, founded by Fercan Kalkan, has been connected to other distressed multifamily properties, including the Village at Piney Point, where it faced a $73 million foreclosure attempt from Fannie Mae in August. That case was delayed after a minority equity partner sued to block the sale, accusing the lender of “manufactured technical defaults” to force a takeover.

Kalkan was also connected to a group of assets involved in a $384 million foreclosure auction last November.

The extent of the storm-related damage to Palm Beach Estates is unclear; the servicer noted that capital repairs are underway.

The property, a Class-C complex built in 1976, was one of many Houston multifamily properties affected by the severe weather last year, which caused widespread power outages, fallen trees and property damage.

The U.S. multifamily distress rate is second only to office properties, according to Cred iQ, as elevated interest rates and rising insurance costs squeeze landlords — especially in storm-prone regions like Houston.

Others still have struggled to recover after declines in occupancy and rental rates in Houston’s multifamily market, recently including New York-based Nord Group, whose $38 million loan backed by La Solera Apartments in the southwest Houston suburb of Alief was sent to special servicing in February.

— Judah Duke