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Wednesday, January 25, 2023

Harbor Group Raises $1.6 Billion for First Condo Debt Fund

(Bloomberg)—Harbor Group Worldwide closed on a $1.6 billion fund to finance residence buildings and different multifamily properties as larger rates of interest provide enticing returns for lenders keen to place cash in danger.

A unit of the Canada Pension Plan Funding Board dedicated $585 million to the HGI Multifamily Credit score Fund, the corporate mentioned Wednesday. The fund presents mounted and floating-rate senior, mezzanine and preferred-equity loans at charges of about 8% to 12% relying on the kind of debt, in line with Richard Litton, president of HGI.

The fund, HGI’s first devoted solely to multifamily debt, started elevating cash in late 2021 earlier than final 12 months’s rate of interest surge and concludes as many banks and different lenders pull again from industrial property offers due to considerations about falling values and rising default dangers. Lending for multifamily properties is predicted to say no 11% to $393 billion this 12 months, in line with the Mortgage Bankers Affiliation.

HGI, which has $20 billion of actual property belongings underneath administration, may also put money into mortgage bonds and loans offered by different traders by way of the fund. About half of the fund’s cash is already dedicated.

Different nonbank lenders are gearing up funds to benefit from the altering residence market, together with Madison Realty Capital and the Carroll Group, as debtors have to refinance or safe extra financing at larger charges.

“We predict we’re going to be in the next fee interval for an extended time period,” Litton mentioned.

The industrial actual property sector has come underneath stress because the market has shifted, with costs on these properties falling 13% in 2022, in line with Inexperienced Road. However Litton says he expects residence bets to fare higher as larger mortgage charges push extra potential homebuyers into the rental market, maintaining demand for models in these buildings excessive.

“Fundamentals are excellent,” he mentioned.

To contact the creator of this story: John Gittelsohn in Los Angeles at [email protected]

© 2023 Bloomberg L.P.

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