Cyclone faces foreclosure on two of its investments in San Antonio, Texas

By Elias DaSilva | September 16, 2024.

A financial storm is brewing for Cyclone Investment Group, as it risks losing 600 housing units following the disappearance of its online presence.

Two of the multifamily investor’s properties in San Antonio, The Grove and Westlake Villas, are scheduled to be sold through foreclosure. According to Bexar County records, these properties, which comprise 600 apartments, were acquired for $70.5 million, or $117,500 per unit, just two years ago.

The Grove, located at 11955 Parliament Street, has 276 units, while Westlake Villas, at 1455 Cable Ranch Road, is slightly larger with 324 apartments.

Cyclone had aimed for a typical value-add strategy. According to its memorandum, the company believed that the previous owners had kept rents between $300 and $450 below those of other similar properties.

“This will allow Cyclone to quickly raise rents by rebranding and taking advantage of the remarkable growth in the San Antonio market,” the memorandum stated.

The plan was to secure $62.4 million in debt to acquire and renovate the properties, resulting in a loan-to-value ratio of 79 percent. The loan had an interest rate of 3.7 percent, with a $500,000 rate cap, and was set to mature in April 2025.

Cyclone intended to invest about $10,000 per unit in the 1980s apartments while increasing rents by 4 percent annually. After three years, it planned to sell or refinance at an implied value of $107.7 million, generating $31 million in net proceeds, according to the memorandum.

However, these plans did not materialize, as rents in San Antonio dropped by 1.3 percent last year and are expected to fall another 3 percent this year. An oversupply of new units has significantly hindered landlords’ ability to raise rents.

Now, both apartment complexes are heading towards foreclosure, and Cyclone appears to be dealing with broader issues, as its website has expired and several representatives did not respond to requests for comment.

Last August, the company faced a negligence lawsuit over its New Jersey apartments, where conditions deteriorated so badly that one building racked up 235 violations and was condemned, forcing tenants to vacate with minimal notice. Charles Aryeh, the company’s co-founder, told local media he felt “terrible” at the time.

Two months later, the city of Plainfield, New Jersey, sued Cyclone, alleging in the lawsuit that Cyclone had shown a complete disregard for the condition of its buildings and had made no repairs to these properties, which were in deplorable and entirely uninhabitable states.

While Cyclone’s website is no longer active, it was operational in April, according to Internet Archive records. At that time, according to the site, Cyclone owned apartments in seven states, including Florida, Texas, and Illinois.