This week, CRED iQ calculated real-time valuations for 5 multifamily properties that are REO. REO properties are of particular interest to distressed investors looking for value-add opportunities. After title is taken by a lender, these properties are typically sold within a short time frame or after a period of stabilization. Due to the nature of distress surrounding most REO properties, the assets can often be acquired at a discount relative to stabilized comps. Featured REO assets include a student housing property in Pennsylvania, a senior housing facility in South Carolina, and two garden-style apartment complexes in Texas. To explore a complete list of all multifamily properties in CRED iQ’s platform, click on the link below!
CRED iQ valuations factor in base-case (Most Likely), downside (significant loss of tenants), and dark scenarios (100% vacant). Select valuations are provided for the properties below. For full access to the valuation reports as well as full CMBS loan reporting, including detailed financials, updated tenant information, and borrower contact information, sign up for a free trial here.
University Gate Apartments
485 beds, Student Housing, Erie, PA [View Details]
This property, which has outstanding debt of $18.9 million, has been with the special servicer since July 2019. Title transferred to Torchlight Loan Services, acting as special servicer, in October 2020 via foreclosure. The special servicer sold the property, on behalf of a CMBS securitization, through an auction on ten-x.com in early-December 2021. The property is under contract to sell with an expected price of $13.5 million, equal to $27,753 per bed. The sale was expected to close in February. The sales price provides an updated reference for pricing discovery on distressed student housing properties in the region such as The Depot, which caters to the University of Akron, and Pratt Studios, which caters to the Indiana University of Pennsylvania.
University Gate Apartments primarily serves students attending Penn State Behrend, a satellite campus for Pennsylvania State University located in Erie, PA. The student housing facility initially exhibited occupancy declines in 2018 after Penn State Behrend opened a new on-campus residence building named Trippe Hall. Students’ preference for the new on-campus residence hall led to cash flow issues at University Gate Apartments, which culminated in the property’s receivership and transition to REO. For the full valuation report and loan-level details, click here.
|Property Name||University Gate Apartments|
|Address||5086 Station Road|
Erie, PA 16510
|REO Title Date||10/20/2020|
|Most Recent Appraisal||$26,900,000 ($55,464/bed)|
|Most Recent Appraisal Date||3/31/2014|
Boston Creek Apartments
349 units, Garden-Style, Lubbock, TX [View Details]
This property, which has outstanding debt of $15.7 million, has been with the special servicer since May 2019. Less than 5 months after its transfer, CWCapital, as special servicer, was able to take title of the property through foreclosure. The property appears to be near the end of a repositioning effort following renovations and upgrades throughout the complex’s units. The renovations have allowed leasing activity at the property to improve and has increased the rental rates at units that have turned over. The apartments were significantly inferior to competing multifamily properties in the Lubbock MSA. Renters’ preferences for newer, higher quality housing options with more amenities was a primary factor that caused occupancy declines at Boston Creek Apartments in 2018 and 2019. Prospective buyers can expect the property to be marketed for sale following a period of stabilization after the completion of renovations. For the full valuation report and loan-level details, click here.
|Property Name||Boston Creek Apartments|
|Address||2701 44th Street|
Lubbock, TX 79413
|REO Title Date||10/1/2019|
|Most Recent Appraisal||$13,610,000 ($38,997/unit)|
|Most Recent Appraisal Date||12/19/2019|
63 units, Assisted Living, Irmo, SC [View Details]
This assisted living and memory care facility, which has an outstanding balance of $8 million, has been with the special servicer since September 2019. In fact, Harbison Shores (fka Agape at Harbison) is the only REO property across all of Freddie Mac’s K-Deals securitizations. The property transferred to CWCapital for special servicing after operational issues and resident attrition caused cash flows to decline. The foreclosure of the property was briefly delayed in early-2020 due to the pandemic, but the facility became REO in June 2020. The pandemic has been a barrier in the property’s path toward stabilization; however, occupancy has recovered to about 91% as of November 2021. The facility has 83 total beds, across 63 units, and most occupants are private-pay residents (approximately 94% of total revenue) with only a handful of Medicaid residents (approximately 4% of total revenue). The properly likely needs additional time for stabilization before it can be sold, which may occur by the end of 2022. For the full valuation report and loan-level details, click here.
|Property Name||Harbison Shores|
|Address||990 Columbia Avenue|
Irmo, SC 29306
|REO Title Date||6/8/2020|
|Most Recent Appraisal||$6,130,000 ($97,302/unit)|
|Most Recent Appraisal Date||6/14/2021|
|CRED iQ Base-Case Value||$6,533,000 ($103,705/unit)|
56 units, Garden-Style, Baytown, TX [View Details]
This apartment complex, which has an outstanding balance of $3.4 million, has been with the special servicer since October 2020. The loan transferred to KeyBank, acting as special servicer, after the former owner requested an extension related to a forbearance agreement that was granted in May 2020. A forbearance extension did not come to fruition and the former owner attempted to sell the property. A subsequent purchase offer was not sufficient to pay off the outstanding balance plus additional exposure for the mortgage. Without a satisfactory sale, the special servicer pursued foreclosure and the property became REO in July 2021. The property was auctioned in September 2021 but failed to trade. CRED iQ observed a high bid between $63,000 and $66,000 per unit, which failed to meet a pre-determined reserve price. AL thought, the property failed to sell at auction, it will likely be auctioned again in the near term after additional stabilization, which includes management of tenant rollover and improvement of rent collections. Tenant management is an issue that can be traced back to the previous owner and the property’s initial operational struggles that led to it becoming REO. For the full valuation report and loan-level details, click here.
|Property Name||Verve Apartments|
|Address||3201 Garth Road|
Baytown, TX 77521
|REO Title Date||7/6/2021|
|Most Recent Appraisal||$4,800,000 ($85,714/unit)|
|Most Recent Appraisal Date||5/30/2019|
2817 Palisade Avenue
13 units, Mid Rise, Union City, NJ [View Details]
This mid-rise apartment building, which has an outstanding balance of $1.5 million, has been with the special servicer since August 2019. The property’s distress was related to poor property management, which eventually became non-existent after the borrower faced legal troubles. Additionally, the property had issues with insufficient insurance coverage and unauthorized liens. The property became REO in July 2021. The next step is for the property to be sold. Based on the size of the property, it may be sold individually or as a package with other similar or distressed properties in the local market. For the full valuation report and loan-level details, click here.
|Property Name||2817 Palisade Avenue|
|Address||2817 Palisade Avenue|
Union City, NJ 07087
|REO Title Date||7/19/2021|
|Most Recent Appraisal||$950,000 ($73,077/unit)|
|Most Recent Appraisal Date||8/17/2020|
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About CRED iQ
CRED iQ is a commercial real estate data, analytics, and valuation platform providing actionable intelligence to CRE and capital markets investors. Subscribers to CRED iQ use the platform to identify valuable leads for leasing, lending, refinancing, distressed debt, and acquisition opportunities. Our data platform is powered by over $2.0 trillion of CMBS, CRE CLO, SBLL, Ginnie Mae, FHA/HUD, and Agency loan and property data.