Houston Investor Lands $68M Refi on Texas Apartment Buildings

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Morgan Stanley has lent $68 million to refinance a set of three apartment buildings in Texas.

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The deal closed last month and is getting the commercial mortgage-backed securities treatment in a forthcoming Bank of America issuance, according to Securities and Exchange Commission filings. The debt knocks out previous financing on the three residential buildings, which include a total of 671 apartments. The 10-year debt comes at a 3.8 percent interest rate, with no principal payments due until it matures in 2029.

The properties, owned by Houston-based Nitya Capital, are Treehouse Apartments in Austin, Waterstone Apartments in Stafford, and Stonecreek Apartments in Katy. Stafford and Katy are enclaves about 15 miles and 30 miles west of downtown Houston, respectively. In Austin, Treehouse is about three miles south of the city’s central business district, across the Colorado River. 

Nitya, a value-add investment firm led by Swapnil Agarwal, bought all three sites two years ago for $81.6 million and posits that they are now worth $100.1 million following renovations. Each is a garden-apartment-style complex with common amenities such as fitness centers, swimming pools and laundry rooms. They’re on lots that range from 11 to 19 acres.

In 2018 — the most recent year with available data — the three buildings brought in net earnings of $4.6 million on effective gross income of $8.9 million. Analysts at Kroll Bond Rating Agency who visited the two Houston-area properties noted signs of disrepair, including chipped paint and busted garage doors at Waterstone. On the plus side, the analysts said, the portfolio’s spread across three submarkets was a positive sign, because problems at one property might not affect the whole group.

Agarwal’s family immigrated from northern India when he was a teenager and his parents held working-class jobs in Houston while he was growing up, according to a recent Forbes profile []. Agarwal founded Nitya seven years ago with $300,000 he saved up from work in investment banking and private equity. The firm now controls assets worth $2 billion, including 16,000 apartments and office and retail buildings.

Neither Nitya nor Morgan Stanely responded to an inquiry right away.