An investor in Houston apartment buildings has defaulted on their loans, resulting in a foreclosure of four multifamily communities. Applesway Investment Group had borrowed nearly $230 million to purchase the pre-1981 Class B and C complexes with over 3,200 units during the pandemic. Arbor Realty Trust, a publicly traded mortgage company, foreclosed on these properties after Applesway’s default. Fundamental Partners reportedly purchased them for an amount below that of the loan value.
Rising interest rates were cited as being responsible for this situation; The Wall Street Journal reported that Applesway’s rate had risen from 3.4% to around 8%, according to data firm Trepp Inc., while Green Street Analytics estimates values of apartment buildings have decreased by more than 20% since their peak – meaning some floating-rate mortgages no longer generate enough profits for debt payments to be made effectively.
