In the News
IN THE NEWS
HGI, Garrett Companies, Telis Group Form JV, Close $630M Multifamily Portfolio Recap
The bubblings of new transaction activity are palpable as we enter 2025, and Harbor Group International (HGI) just closed its first — big — multifamily investment of the year.
The real estate investment firm just formed a joint venture (JV) with The Garrett Companies and Telis Group to complete the $630.5 million recapitalization of a 2,192-unit multifamily portfolio in various stages of development, Commercial Observer can first report.
The complex recap involves a 2,192-unit, 11-property portfolio in various stages of development, located across Colorado, Minnesota, Indiana and Arizona. HGI came in as a new equity partner, and the portfolio’s nine existing construction lenders remained in the transaction.
“We worked with Garrett on all the terms and conditions of what our JV relationship will look like for this portfolio, and then worked with each of the existing lenders on any terms that needed to be considered, and to approve us as part of the JV,” Richard Litton, president of HGI, told CO.
The transaction was negotiated by Mo Beler, co-head of Walker and Dunlop’s structured finance group, and Aaron Appel, co-head of Walker & Dunlop’s NYC Capital Markets practice.
HGI had a relationship with Garrett prior to the recap, having purchased two of the firm’s Denver properties in early 2024. “We had a good, productive experience in that transaction,” Litton said. “That kick-started the relationship, and was, I think, important to what we were ultimately able to accomplish here.”
Litton said HGI only invests in markets where it feels very good about fundamentals and has some level of operating experience. With the majority of the portfolio properties in Colorado, and most either in Denver or within an easy drive of Denver, the opportunity was a good fit for HGI.
“We have a large portfolio in Denver, and are very experienced with the market,” Litton said. “We also have a big history and presence in Phoenix and Indianapolis. Minneapolis is a new market for us, but it’s frankly a market we’ve looked at for a long time.”
HGI also liked the submarkets Garrett had selected for the development sites, which neighbor highly regarded school districts. “I went to see every single one of the sites, so I felt very good about all that,” Litton said. “And then, nothing is as important as your partner in a deal.”
Eric Garrett, CEO of The Garrett Companies, said in prepared remarks that the new partnership presents “an exciting opportunity to leverage our expertise in multifamily development across a wide array of markets across the nation,” with the firm positioned “to deliver high-quality, sustainable projects that meet the growing demand for housing.”
Broadly speaking, HGI is bullish on multifamily fundamentals, looking toward the future on a two- to three-year basis, as the supply pipeline dwindles, Litton said.
“Obviously, a lot of markets have experienced a lot of supply that needs to be absorbed, but the pipeline — in terms of new supply starts and new permits — has really fallen off precipitously,” he said. “As we look forward two years, you see — as an investor and a landlord — a very good supply-demand dynamic, and so investing in development today that will be delivered a little bit in the future feels particularly well positioned to take advantage of those of those supply metrics.”
HGI invested $909 million across 25 multifamily communities last year, and this new recap starts its year off on solid footing.
“There was a little bit of a twist and turn at the end of the year, but broadly speaking in the development sector we expect to see continued, very strong deal flow,” Litton said. “It could be developers that are getting ready to come out of the ground on construction and need new equity partners, or there could be other situations where a developer or existing equity needs some sort of recapitalization. We think that sector will be very active for us.”
Outside of the multifamily sector, HGI is also an active investor in the office sector, and continues to see transaction flow there, too, he said. Together with AmTrust, the firm acquired the office building at 360 Lexington Avenue at the end of last year.
“As office fundamentals have started to pick up and the market seems to have a better sense of the bottom, so to speak, lenders are more willing to force transaction activity on owners,” Litton said. We expect to see a more robust pipeline of ways we can invest in the office sector.”
Circling back to the recent multifamily portfolio recap, Yisroel Berg, chief investment officer – multifamily at HGI, described the deal as a “multistep effort that required extensive negotiations, meticulous planning and alignment across multiple financial institutions and markets. The successful outcome is a testament to our team’s deep expertise in managing complex transactions.”
Walker & Dunlop’s Beler said the transaction highlights the strength of institutional investment in quality multifamily developments.
“By uniting sophisticated sponsors such as HGI, The Garrett Companies, Telis Group and other lending partners, we closed the transaction swiftly, reflecting strong demand for well-located assets in growth markets despite challenging capital conditions,” he said.
