Houston Multifamily Investor Faces $125 Million in Defaults

More than 3,000 apartment units across the Houston metro are slated for foreclosure next month as lenders move against an investor once touting a $1 billion portfolio.

At least eight properties tied to LLCs associated with Kalkan Capital and its founder, Fercan Kalkan, are scheduled for auction on Aug. 5, Bisnow reported. The defaults total more than $125 million. Lenders allege deteriorating conditions and unaddressed safety risks at multiple sites.

The bulk of the properties are Class C buildings. They include the Retreat on Rosslyn, La Plaza, Mar De Sol, Timbers of Cranbrook and La Escencia in Houston, plus several complexes in the Houston suburb Pasadena.

Kalkan previously pitched his strategy as a mission-driven effort to clean up high-crime communities, but lenders and regulators now describe the portfolio as distressed and poorly maintained.

Morgan Stanley, which originated multiple loans between 2019 and 2021, filed notices of foreclosure for three properties this month after winning dismissal of a Chapter 11 bankruptcy case that Kalkan used to delay seizure. A federal judge barred the entities involved from refiling for bankruptcy for six months.

In filings and emails, Morgan Stanley’s legal team raised concerns about alleged misuse of collateral and properties in “deteriorating condition” that could pose health hazards.

The developments mark a sharp reversal for Kalkan, who once claimed a minimum 25 percent annual growth rate and publicized $250 million in acquisitions during the first quarter of 2022.

Interest rate hikes and market cooling have exposed overleveraged operators, with Kalkan Capital becoming one of the most visible examples of high-risk growth strategies unraveling in Houston’s multifamily market.

Other externalities include damage from last year’s storms and hurricanes, as in the case of at least one of Kalkan’s properties; the 881-unit Palm Beach Estates complex’s appraised value dropped about 56 percent from 2023 and, as of March, it hadn’t received a payment on its $54 million loan from Kulkan since Hurricane Beryl hit in July 2024.

Some of the same properties were previously shielded from foreclosure via bankruptcy filings or legal delays, but that strategy appears to be reaching its limit. A foreclosure filing doesn’t guarantee a sale will occur, but it signals that lenders are no longer waiting for repayment.

— Judah Duke