Harbor Group International Completes $245M Equity Raise for New Multifamily Platform
Harbor Group International (HGI) has completed a $245 million equity raise for its new, multifamily, whole loan platform, with the Canada Pension Plan Investment Board (CPP Investments) as lead investor, the company announced Tuesday.
CPP Investments committed $110 million of equity capital for the initiative launched last year, in which HGI will provide senior mortgage bridge financing on multifamily assets throughout the U.S. HGI is forecasting that it will close in excess of $300 million in multifamily senior loans by the end of January, and anticipates reaching aggregate of $450 million to $500 million in loans by the end of the first quarter of 2021.
The lending program will target value-add and new construction assets nationwide.
Richard Litton, president of HGI, told CO equity raise multifamily initiative began at the start of the COVID-19 pandemic in late March, when it was determined that other debt players faced challenges with loans in the hospitality and retail sectors. Litton noted that HGI had always had eyes on originating multifamily loans, prior to the pandemic, after 35 years of investing in the sector on the buy and sell side.
“We are so active in the multifamily market anyway on the buy and sell side, and we were getting a lot of data points in the industry that there were not nearly as many active bridge lenders,” Litton said. “We closed our first loan in August and felt like, with the pipeline that we had, that we could complete a large equity raise and work toward equity capital that would support up to a billion dollars in loans over the next year.”
Litton noted that many new apartments in the works prior to the pandemic were tied to construction loans, with the properties not stable enough to receive Freddie Mac or Fannie Mae loans, making bridge financing an effective tool for these assets. He said overall demand for multifamily housing should remain strong in the U.S. in 2021 and beyond, especially in suburban areas.
HGI has been sourcing and managing debt investments for more than a decade to go along with its real estate portfolio. The Norfolk, Va.-based firm has made preferred equity investments and mezzanine loans on multifamily properties across the U.S., and is also one of the largest buyers of Freddie Mac multifamily subordinated debt positions.
In November, HGI nabbed a $513 million Freddie Mac loan to refinance a bundle of eight multifamily assets in the mid-Atlantic region.
“As a well-known owner and operator with a strong understanding of the U.S. multifamily market, HGI has the ability to approach lending transactions with a comprehensive perspective that gives them a unique advantage,” Geoffrey Souter, managing director, head of real assets credit at CPP Investments, said in a statement. “We look forward to continuing our relationship with HGI to address a growing market need.”
Update: This post has been updated with additional background and quotes from the HGI president