Dive Brief:

• Areeif Lender W LLC, an affiliate of New York City-based lender Ares Commercial Real Estate, has foreclosed on Greystar’s Gabriella high-rise located east of downtown Dallas, according to The Dallas Morning News.
• Charleston, South Carolina-based Greystar, which did not respond to comment from Multifamily Dive, received a $127 million mortgage from Areeif in 2020, according to The Dallas Morning News. 
• The lender bid $80 million for the property in a foreclosure auction last week, Curtis Roddy of Roddy’s Foreclosure Listing Service, a company that tracks foreclosures, told The Dallas Morning News.

Dive Insight:

The Gabriella, a 14-story apartment tower, opened in 2020. It holds 378 apartment units and a 56,000-square-foot Tom Thumb supermarket.

Monthly rents range from $1,487 to $4,281 in The Gabriella, which has studios through three-bedroom units, according to Apartments.com. The building’s high-end amenities include three “micro” conference rooms, a yoga studio, separate walk-in showers in select units, French door refrigerators, a golf simulator, an infinity edge pool and wine fridges.

The property sits next to the former Elan City Lights apartments, where a construction crane collapsed and killed 29-year-old Kiersten Smith in June 2019. After that incident, a jury found that Greystar was at fault and awarded $860 million to Smith’s family and estate.

Greystar developed 11,351 units in 2022, putting it at No. 2 on the 2023 National Multifamily Housing Council’s Top 25 Developers list. The company, which was also the largest manager in the country with 726,826 units on the most recent NMHC list, has 120 rental communities in the Dallas area, and it recently put its 23-story Ascent apartment tower in Victory Park on the market, according to The Dallas Morning News. 

The paper reported that the building was “the largest recent Dallas-area forced property sale by lenders.” However, most of the problems in the metro area have been confined to the office space, unlike Houston, which has seen an uptick in apartment foreclosures.

Many of the struggles have hit class C owners harder, such as Dallas-based Applesway Investment Group, which defaulted on nearly $230 million in loans on Houston properties last April.

“People couldn’t get their hands on enough class A properties,” Avasarala, founder of Dallas-based Stryker Properties, told Multifamily Dive. “So then they went after class B, and then they went after class C. Then, all of these properties were trading at five caps — A’s, B’s and C’s — as if there was no difference between them. That is where the business model broke.”

Many investors bought apartments with cheap debt. Then, when their interest rates rose, these owners faced skyrocketing costs as rent growth began to slow.

“Back in 2021, nobody was expecting rates to go up,” Avasarala said.

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