HGI secures $440m for multifamily property portfolio refinancing

The firm retained some pre-payment flexibility. 

Harbor Group International this week secured $440 million of financing to refinance debt on 25 multifamily properties across the US. HGI secured mid-to-long range, fixed-rate loans through individual transactions with KKR, Freddie Mac and Fannie Mae.

The Norfolk, Virginia-based investment firm made the move to lock in the debt, while also retaining some prepayment flexibility, Lane Shea, managing director, told Real Estate Capital USA. The firm was able to retire variable-rate debt and lock in fixed-rate debt without investing additional capital.

“HGI puts long-term debt on the assets it sees as a long term holds,” Shea said. “There are assets in the same portfolios that were not refinanced for this reason. We were positioned to take advantage of the market turbulence and lock interest rate indexes as the rates dipped around the banking crisis earlier this year.” 

Tailored business plans 

Lane broke the properties down into four geographically distinct portfolios.

Freddie Mac provided a $44 million loan for the eight property Empire Portfolio in Indianapolis, arranged by Berkadia. Meanwhile, Freddie Mac and Capital One provided $73 million of financing for the nine-property Florida Cardinal portfolio, arranged via Meridian Capital. Then KKR originated a $122 million loan on a single property, Alesio Urban Center in Dallas.

Finally, Newmark arranged a $201 million loan on a seven-asset group of properties known as the Piedmont Portfolio. Freddie Mac funded that loan.

Pete Petron, managing director and head of asset management, said part of the negotiation was finding the right debt for the business plan of each property.

HGI’s relationships with lenders such as KKR, Freddie Mac and Fannie Mae has also allowed them to navigate various market cycles, added Shea.

Taking risk off the table 

HGI has continued to transact on what it sees as attractive multifamily investment opportunities throughout the country despite recent market instability. Most recently the firm acquired Mezzo, a 378-unit, Class A multifamily property in Aubrey, Texas and invested in the ground-up development of Springside Middletown, a 240-unit Class A multifamily community in Middletown, Connecticut.

Still, the lending markets are in flux as spreads are wide and benchmarks are elevated, Shea said.

“HGI’s focus is about seizing the moment and taking the market risk off the table, rates can move in either direction. We believe in accepting the rate now and knowing where you are instead of trying to guess the future,” he said.