DALLAS — Editor's note: This article originally appeared in the Dallas Business Journal here.
Lenders plan to foreclose on a newly built apartment complex just east of downtown Dallas anchored by a ground-floor Tom Thumb grocery store.
The 2-acre property at the intersection of Live Oak and Texas streets that includes the Gabriella apartments, just north of Deep Ellum, has been scheduled for a foreclosure sale on Feb. 6, according to Dallas County documents.
The lender, an entity tied to the New York offices of Ares Commercial Real Estate Management LLC, has requested foreclosure over a $127 million loan for the property originated by an affiliate of owner and developer Greystar in January 2022.
Charleston, South Carolina-based Greystar completed the property in 2020. Since then, Tom Thumb has operated a 55,000-square-foot ground-level grocery store and a gas station on the property. It's one of the closest grocery stores to Deep Ellum.
Last year, a Dallas County jury awarded more than $860 million to the family of a woman who died in a tower crane collapse during a severe storm during construction of the property in 2019, KERA reported.
A foreclosure likely would not mean any changes for renters at the property other than a change in management. Greystar did not immediately respond to a request for comment.
Despite being a newer complex with a great location and amenities, the high number of new apartments being constructed has forced this complex, like many others, to lower asking rents, according to Steve Triolet, a real estate analyst for Partners. Monthly rents currently range from $1,487 to $2,910, according to Apartments.com.
For five of the past six quarters, according to Triolet, the property has had negative rent growth, meaning management has been unable to pass on increased property taxes and insurance costs to its tenants.
"With increasing debt costs due to high interest rates, many apartment complexes are in for a great deal of short-term distress as near-record supply outpaces household formation for the current time period," Triolet said.
Aaron Amuchastegui, CEO of Roddy's Foreclosure Listing Service, said that capitalization rates used by appraisers for new loans and refinance appraisals have fallen in recent years in the face of rising interest rates, and multifamily properties are now appraising for 20% to 30% less than they were two years ago.
"Unfortunately, we are starting to see a lot of multifamily foreclosures being posted, even though most of them have been operating as expected," Amuchastegui said. "I am surprised to see this one being posted for foreclosure so soon after completion, and of the many postings we have seen over the last 12 months, this is one of the largest properties."
