A $60 million commercial mortgage-backed securities (CMBS) loan tied to the Langdon at Walnut Park apartments in Austin has been transferred to special servicing after the borrower, Langdon Street Capital, failed to make a required principal paydown. The payment was contingent on the property retaining its affordable housing property tax exemption by August 29, which did not occur following changes brought about by Texas’ House Bill 21.
Langdon Street Capital, based in Beverly Hills, California, had previously agreed to maintain a debt service coverage ratio of 1.28 if the exemption was not granted. After losing the exemption due to HB 21, the firm did not make the necessary payment. The property’s value is now estimated at $67.1 million without the exemption, compared to $90.1 million with it.
The company acquired the property at 12101 N. Lamar Boulevard in 2021 and structured a sale-leaseback with Pleasanton Housing Finance Corporation, an organization located over 100 miles from Austin. This arrangement used what is known as the “traveling” housing finance corporation loophole, which allows multifamily operators to secure property tax exemptions by partnering with distant affordable housing organizations—removing properties from local tax rolls without municipal approval.
House Bill 21 was authored by Rep. Gary Gates of Houston and targets such arrangements by requiring apartment owners to partner only with organizations within their own jurisdiction and introducing new affordability requirements. “I could see where an appraisal district would take the position: we think your deal is a scam, and we’re not going to give a tax exemption until you have a court determine that it’s a valid HFC,” Gates said. “I think they have every right to deny it.”
Although HB 21 gives existing deals until 2027 to comply with its new rules, some appraisal districts are already denying exemptions for these properties. Cynthia Martinez, chief strategy officer for Travis Central Appraisal District, stated that property owners “must submit an application and meet the requirements outlined by Chapter 394 of the Local Government Code” in order to receive an exemption.
This situation is central to a lawsuit filed by the Texas Workforce Housing Commission and ground lease tenant of Willowbend Apartments in San Antonio—a project involving Los Angeles-based Post Investment Group and Brownsville’s housing finance corporation—challenging HB 21’s impact on existing agreements before its full implementation in 2027.
Rep. Gates noted that some appraisal districts have filed temporary restraining orders against organizations commonly involved in traveling HFC deals but indicated that Travis Central Appraisal District had not taken such action.
Langdon Street Capital founder Adam Daneshgar did not respond to requests for comment regarding this development.
Several lawsuits have emerged since HB 21’s passage as developers challenge both its constitutionality and how quickly appraisal districts are moving to enforce its provisions prior to their official effective date.
