An apartment portfolio in Austin owned by Keller Capital has seen its appraised value fall sharply, dropping by nearly half just months after its commercial mortgage-backed securities (CMBS) loan was sent to special servicing. The two-property portfolio is now valued at $98.9 million, a 47 percent decrease from its 2023 appraisal of $187.9 million, according to Morningstar Credit.
The updated valuation puts the properties below the outstanding balance of their $110 million CMBS loan. The loan, which covers the Orbit Apartments and Starburst Apartments in far northeast Austin, has been delinquent since April and was transferred to special servicing for default, as reported by Trepp. Issued in 2023, the loan is scheduled to mature in May 2028.
Keller Capital, based in Orem, Utah, acquired the properties in 2019 from Laurel Ridge of Tampa. Together, Orbit and Starburst Apartments comprise 840 units located at 8800 and 8900 North Interstate Highway 35. The current debt equates to about $131,000 per unit. Both complexes were built in the early 1980s and underwent renovations in 2022. Appraisal district records show Orbit Apartments are valued at $43.7 million this year while Starburst Apartments are valued at $58.1 million.
Texas’ multifamily sector is facing challenges due to an oversupply of apartments and rising interest rates. In Austin alone, approximately 25,000 new units were delivered last year according to Yardi Matrix data, leading to declining rents and lower occupancy rates across the city. MRI ApartmentData recorded citywide occupancy at 84.5 percent in April; rents fell by 7.6 percent compared with a year earlier.
Many investors had previously purchased older apartment complexes with plans for renovation and profit during a period of low interest rates but have since faced increased borrowing costs and construction expenses alongside falling valuations.
Industry experts have warned that Texas could see more distress as roughly $19 billion in CMBS loans tied to multifamily properties are set to mature over the next five years.
