A storm’s brewing for Cyclone Investment Group.
Two of the multifamily investor’s San Antonio properties, The Grove and Westlake Villas, have been scheduled for August foreclosure sales, according to Bexar County records. The properties include 600 apartments purchased for $70.5 million, or $117,500 per unit, just two years ago.
The Grove, located at 11955 Parliament Street, contains 276 units. Westlake Villas, at 1455 Cable Ranch Road, is slightly larger at 324 apartments.
Cyclone had planned on a standard value-add play, according to a fundraising memo circulated to potential investors around the time of the acquisition. The firm felt the previous landlords, a “social impact investing firm,” were keeping rents between $300 and $450 below those at comparable properties.
“This will allow Cyclone to quickly increase rents through re-branding and taking advantage of San Antonio’s incredible market growth,” the memo read.
It planned to take on $62.4 million in debt to acquire and renovate the properties, working out to a 79 percent loan-to-value ratio. The loan would come at a 3.7 percent interest rate, with a $500,000 rate cap, and mature in April 2025.
Cyclone planned to spend about $10,000 per unit at the 1980s-vintage apartments, while raising rents by 4 percent each year. After three years, it would sell or refinance at an implied value of $107.7 million, leading to $31 million in net proceeds, the memo concluded.
Those plans did not come to fruition.
San Antonio’s rents fell 1.3 percent last year and are expected to fall 3 percent this year, according to MRI ApartmentData. A glut of new supply has significantly challenged landlords’ abilities to increase rents.
Now, both apartments are scheduled for foreclosure, and Cyclone appears to be facing wider issues.
The company’s website is expired, and several representatives did not return requests for comment.
Last August, the firm was sued for negligence at apartments it owned in New Jersey, where conditions grew so bad that one building racked up 235 violations and was condemned, forcing tenants to move out with almost no notice. Charles Aryeh, a co-founder of the firm, told local news he felt “terrible” at the time.
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Two months later, Cyclone was sued by the city of Plainfield, New Jersey, which wrote in the suit that Cyclone had “shown a complete disregard for the condition of their buildings and have failed to make any repairs to these abominable, deplorable, and uninhabitable properties that they own and charge others to live in.”
Cyclone is based in Hewlett, New York, and was co-founded by Aryeh and Archie Eichorn, formerly of Meridian Capital Group.
While Cyclone’s website is no longer operational, it was running as recently as April, according to records from the Internet Archive. At the time, it said Cyclone owned apartments in seven states including Florida, Texas and Illinois. It said it targeted stabilized apartments with room for cost cuts and “minor unit and common area upgrades.”