A new Houston Foreclosure

[Evan Polaski]

https://www.bisnow.com/houston/news/multifamily/greenspoint-...

Is this the beginning a a real wave?  There has been a lot of news lately about the "debt hydrogen bomb" coming in multifamily.

My take: we will continue to see many more foreclosures of assets than we have over the last several years.  I don't believe it will be a hydrogen bomb, though.  Strong operators, with strong assets, will get workouts with their lenders.  Marginal operators and/or marginal assets will take on capital from one of the many, many pref equity funds/rescue capital providers out there.

Ultimately, there is no sure fire way to guarantee any deal won't go south.  A couple ways I look at it:

Does the syndicator self manage?  Value-add deals, and especially deals in rougher areas like Greenspoint, have so many moving parts that need to be controlled.  If the syndicator is outsourcing that work to another group, which they have very limited control over, they are not bringing me any value.

Does the syndicator have a background in real estate?  As noted, there are a lot of moving parts in large real estate deals.  Running a successful non-real estate business does not give you knowledge in the nuances of real estate.  Being a good marketer does not give you experience in real estate.  While everyone has to start somewhere, when I choose to take the risk of investing my capital with someone else, I want people that have chosen to make a career in their niche.  And have proven they are making a career in it by putting in the work before starting their company.

I respect that even some of the best will have misses on their deals, but I as an investor, I want to mitigate that risk as much as possible.  

And if you have any details about this deal, I would certainly be interested to hear what caused this deal to go into foreclosure.