The Importance of Trust: A Cautionary Tale

May 18, 2023

By Carson Halley

Portland, Oregon

Earlier this month, Applesway Investment Group out of Houston, Texas, announced a pretty remarkable foreclosure. The group lost four multi-family buildings which they had purchased during Covid after borrowing over $230 million. Those four buildings included a whopping 3,200 units, and represent a LOT of losses – for residents, for investors and for the community.

This news came as a shock to many, since multi-family investments have historically proven to be the safest asset class in real estate – for all the reasons we have written about before (see our July 2022 article: Rental Housing, a Perennial Safe Bet.) These fundamentals still hold true (people will always need a place to live!), but rising interest rates in an era when investors harnessed loans with floating rate mortgages are starting to feel the burn. Couple this with falling rental prices and the inability for the group to execute on a business plan, and you can see how large problems like this one can arise. 

We think about scenarios like these all the time, especially during difficult economic times. But with the benefit of experience – we have been in the real estate investment business for nearly half a century and seen many boom and bust cycles – and with “skin in the game,” we have learned how to balance risk and returns. It might sound simplistic, but since we invest hand in hand with our investors, our group can be trusted to seek less risk than our competitors who get greedy reaching for short term profits. We don’t want to ever leave our investors “on the hook” as Wolf Street said in this recent article. According to another recent article in the Wall Street Journal: “At one property, the interest rate on Applesway’s loan had risen from 3.4% to around 8%....and at least two of the properties were financed with about 80% debt, which is considered high leverage in commercial real estate.” This is just plain scary stuff that puts an investment in major jeopardy.

As we see more investment fallout from poorly structured deals in the upcoming months, the issue of trust becomes more and more critical. Thankfully, a careful look under the hood at Westland will show that our house is in order. In 99% of our transactions we lock in fixed rates and use a more careful percentage of debt to equity to ensure we avoid problems like Applesway experienced. In the scenarios we do elect for variable rate debt, we use it for a short term purpose and always purchase a long term cap on the interest rate, thus giving us a ceiling where the note effectively becomes a fixed rate.  Add to this that we focus on operating with a long term business plan and will forego short term returns for long term outperformance, we are able to execute in all market environments.  Our investors can rest assured that as investor/partners ourselves, we are thoughtful in our approach and especially prudent about taking on risk that will force our hand during a difficult economic cycle. We’ve learned the great virtue of patience – which makes us worthy of our investors’ trust in both good and bad market cycles. 

For more information on how we structure our deal flow and make investment decisions, please contact me at


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