Fannie Mae Blocked From Foreclosing on Houston Apartments

A minority shareholder in a massive Houston apartment complex temporarily blocked a Fannie Mae foreclosure after the owner made a deal to sell it for an estimated $95 million.

Investment firm SITG Capital requested an emergency restraining order last week in an attempt to protect its $5 million stake in Village at Piney Point, a 1,094-unit complex at 2601 Lazy Hollow Drive. SITG claimed Fannie Mae was carrying out an “imprudent, if not illegal, foreclosure” that’s based on “manufactured technical, non-payment defaults.” On the same day as the scheduled foreclosure sale, a Texas Southern District court judge approved an injunction that expires on Aug. 15, when a hearing will be held to determine if the restraining order should stay in effect, court records show.

The complex sits on 30 acres along Westheimer Road. The owner, Houston-based Kalkan Capital, is under contract to sell the property to an unidentified buyer for just under $87,000 per unit. SITG wants the sale to go through to preserve its preferred equity in the project.

Kalkan Capital took out a $73 million loan on the asset in June 2023. It was valued at $110 million at that time. Before Kalkan closed on the mortgage, SITG invested $5 million in the ownership LLC. Kalkan was also named as a defendant in SITG’s lawsuit.

This is not the first time Fannie Mae has been prevented from foreclosing on the property. Kalkan got an earlier injunction to block a foreclosure sale scheduled for July 2.

Fannie Mae filed its second foreclosure notice on the asset last month. SITG claimed that the lender “refused to engage in meaningful negotiations” and demanded that Kalkan repay the entire $73 million balance on the loan.

“Since the second foreclosure notice, defendants have not been able to find a way to allow the PSA (purchase and sale agreement) to close and plaintiff to recover its investment, and plaintiff now remains on the brink of losing $5 million and potentially more due to the impending foreclosure sale,” the court filing read.

Kalkan and SITG are trying to prevent the Piney Point complex from joining an expanding list of large foreclosure cases in Houston. The Life Tower, a student housing complex built for Texas A&M, is reportedly set to be sold at a foreclosure auction after developer Medistar defaulted on a $135.8 million loan. Interra Capital also acquired the landmark Esperon complex in a foreclosure auction earlier this week.

Fannie Mae did not respond to a request for comment.