Jordan Slone’s Harbor Group International is fixing its focus on multifamily debt as interest rate hikes and economic uncertainty scare off lenders from the sector.
The firm raised $1.6 billion for its first apartment debt fund, Bloomberg reported. The liquid allows Slone’s company to reap the benefits of higher interest rates, which could offer strong returns if investments succeed.
The fund offers a variety of loans, including fixed and floating-rate senior, mezzanine and preferred equity rates, ranging from 8 to 12 percent depending on the type of debt. A unit of the Canada Pension Plan Investment Board is one of the biggest contributors to the fund, committing $585 million.
Roughly half of the money in the fund is already committed. Outside of multifamily assets, the company will also invest in mortgage bonds and loans sold by other investors through the fund.
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Company president Richard Litton sounded an optimistic note to Bloomberg about the fund, citing good fundamentals in the multifamily market as high mortgage rates divert potential buyers to the rental market.
Harbor Group started raising money for the fund in late 2021, before interest rates surged as the Federal Reserve took action to tame inflation. Since then, many lenders have limited their commercial deals, fearful of falling property values and the risk of increased defaults.
In New York City alone, more than $16 billion in loans secured by commercial properties are set to mature this year, according to Trepp data. That’s almost 30 percent more than what came due a year ago.
Harbor Group has made a number of significant purchases of multifamily assets in recent years. In July, affiliates of Harbor Group and Azure Partners purchased a 617-unit community in Westchester County for $306 million. The partners previously combined on a $147 million purchase in Rockland County, selling it three years later for $180 million.
— Holden Walter-Warner