Texas syndicator Elevate drives another Arbor foreclosure

Jorge Abreu’s Elevate is the latest Texas syndicator to face foreclosure.

The Dallas-based investor defaulted on a $38 million loan tied to the Selena, a 446-unit apartment building at 250 Uvalde Road in Houston, after falling delinquent on loan payments late last year, according to Morningstar.

This month, Arbor Realty Trust, a lender with exposure to the struggling multifamily space, filed to foreclose, BisNow first reported. Arbor also foreclosed on a portfolio owned by Jay Gajavelli’s Applesway Investment last year after the syndicator defaulted on a $229 million loan.

Over a quarter of Arbor’s $7.6 billion CLO loans are delinquent, according to a Monday update by Viceroy. Arbor’s stock has dropped about 8 percent since the market opened Monday. Short sellers stand to profit when a company’s shares fall.

Abreu is in negotiations with Arbor and could come to an agreement before the foreclosure, Abreu said. Abreu co-sponsored the loan with the head of private equity firm Careventures Capital, Saji Salam, according to loan documents.

Arbor did not immediately respond to a request for comment.

The filing follows months of trouble at the Houston property, according to an investor in the deal.

The investor, who requested anonymity, said Abreu had made a capital call on the Selena and another Texas deal in the first half of 2023. The investor had already put $100,000 into both properties and declined to put up more cash.

One of the properties was struggling with occupancy, he said — a common problem for syndicators who rely on renovations to raise rents. Some have struggled to complete planned work and weathered the hit to revenues as their monthly debt payments have soared.

On the Selena, Abreu and his co-sponsors borrowed with floating-rate debt in November 2021, according to Morningstar, just a few months before the Federal Reserve kicked off rate hikes. By the end of that year, revenue at the Selena was covering just half of debt service.

Two other Houston deals sponsored by Abreu — the Milo and the Peri — have also been hit by higher rates. Both properties were watchlisted last year.

The Selena foreclosure follows similar troubles for Austin-based syndicator GVA.

The multifamily investment firm, headed by Alan Stalcup, has defaulted on properties across the Texas Triangle. Lender LoanCore Capital has filed to foreclose on a handful of them. Stalcup has similarly struggled with cash flow amid rising debt payments on his floating-rate loans.

Arbor’s move to foreclose signals the lender had little confidence Elevate and Careventures could shore up property performance. Lenders don’t like to own assets, but they will move to take back the keys if they believe another operator can do a better job managing a building.

The underlying health of Arbor’s collateralized loan obligations – pools of floating-rate, short-term debt — came under scrutiny after short-seller Viceroy Research released a report noting the firm’s reliance on “high-risk” multifamily bridge loans made it vulnerable to a wave of defaults.

Viceroy’s more recent report noted Arbor’s share of delinquent loans had surged 50 percent in January from December.

The Selena, valued at $36.2 million by the Harris County Appraisal District last year, has been plagued by resident complaints, including prolonged periods without air conditioning. The complex is also burdened with over 20 mechanic’s liens from contractors alleging non-payment for their services.

This article has been update to clarify the sponsorship of the Selena’s debt and that Arbor filed to foreclose in January.