The recent struggles of two Irvine, Calif.-based apartment firms have shone the spotlight on exactly how bad things are on the West Coast, particularly in Arizona.

In early June, five Phoenix properties owned by Bascom Arizona Ventures, an affiliate of The Bascom Group (No. 29 on Multifamily Executive's Top 50 list of apartment owners), were foreclosed upon, according to Inside Tucson Business. The complexes owed a combined $53 million in principal, according to the paper. Bascom would not return calls from Multifamily Executive.

“There are a multitude of owners facing the same challenges,” says Bill Hahn, managing director of Sperry Van Ness Real Estate Services in Phoenix. “There’s nothing unique about that the company [Bascom] having trouble with their five deals here.”

He’s right. In the same week, the Orange County Business Journal reported that 20 properties related to Pacific Property Assets, which has 49 apartment complexes consisting of nearly 2,400 units in Long Beach, Calif., the Inland Empire, and Arizona, declared bankruptcy in Santa Ana, Calif. A broker familiar with the deal said 11 of the company’s Phoenix properties were in bankruptcy. The firm’s problems came to light when it skipped about $500,000 in interest payments to about 750 investors in May and its lenders later pursued action, according to The Orange County Register. Pacific CEO Michael Stewart and the company’s attorney declined to comment for this story.

The Orange County Register reports that Pacific typically refinances its debt to pay off the investors. But because of the downturn, its buildings’ values have plummeted and it's impossible to refinance. Hahn estimates that property values have fallen 35 percent to 50 percent in value in the Phoenix. And it may be moving even lower, making it nearly impossible for other owners with the same strategy to refinance their apartments.

“We closed one deal last week that was 35 cents on the dollar from the previous price. That’s what you’re going to see [in the market],” Hahn says.

Earlier this year, the Bethany Group, also based in Irvine, declared bankruptcy. It had 13 properties in the Phoenix area, according to The Arizona Republic. Real Capital Analytics reports that Phoenix has 58 assets worth $959.7 million in trouble. “There’s going to be a huge wave of foreclosures of apartment buildings,” Hahn says. “It started with smaller properties owned by individual mom-and-pop-type owners, but now even well-capitalized owners will struggle through this. Banks and lenders will get whatever they can and move on.”

These foreclosures promise to only accelerate price erosion in the Sunbelt and West Coast market. On top of that, oversupply continues to create problems. “The shadow inventory of single-family homes has [further] softened the Phoenix apartment market,” says Tyler Anderson, vice chairman for the Phoenix office of brokerage firm CBRE.

But the problems go beyond oversupply. Demand is also an issue with unemployment at 8.7 percent and a 2008 that drove undocumented workers out of the state, further sapping apartment demand. Hahn says vacancies are at 18 percent in Phoenix and rising. “It’s much higher than that,” he says. “Every building is offering one to three months' free rent."