Texas’ multifamily real estate sector continues to face increasing challenges, with industry experts warning that the current difficulties are only the start of a broader problem. During a Connect CRE conference on Texas multifamily properties, panelists discussed growing distress in the market as $19 billion in commercial mortgage-backed securities (CMBS) loans tied to Texas multifamily assets are set to mature over the next five years.
CWCapital’s James Shevlin described the situation succinctly: “It’s trouble.”
Recent foreclosure data reflect this outlook. In September, more than $700 million in commercial real estate (CRE) loans across Texas’ largest counties were marked for foreclosure, an increase from about $400 million in July. Most affected properties are older apartment complexes financed with loans issued in 2022. Many operators acquired these buildings using floating-rate debt when borrowing costs were low, planning renovations and rent increases before reselling at a profit. However, rising interest rates have significantly increased their debt service costs, disrupting those plans.
Harris County, which includes Houston, has been particularly impacted. At the September auction, 10 properties with nearly $350 million in associated debt faced foreclosure. Some of these cases carried over from previous months; among them was multifamily operator Fercan Kalkan’s portfolio of 3,000 units targeted for default.
The Dallas Federal Reserve’s latest Beige Book reflects a “cautious” perspective on local commercial real estate conditions and mentions “scattered reports of distressed property sales.” The report also notes slow activity in both construction and investment sales.
In other state news this week:
On CNBC’s Squawk Box, Federal Housing Financing Agency chief Bill Pulte declined to comment on allegations of mortgage fraud involving Texas Attorney General Ken Paxton. He also addressed similar accusations concerning Federal Reserve Governor Lisa Cook during the segment.
Land Tejas co-founder and CEO Al Brende died at age 80. Since its founding in 1997, Land Tejas has developed 15,000 acres and more than 20 communities in Houston. Its Sunterra development ranked fourth nationally among top-selling master-planned communities in 2024.
Austin’s top single-family home sale recently involved a new five-bedroom house at 1001 Bluebonnet Land in Zilker. The property was listed for $3.25 million on May 8, removed from MLS on August 14, then relisted at $3.4 million one day later by Benjamin Goudy of Texas Crossway Realty.
“It’s trouble.” — James Shevlin, CWCapital
