Harbor Group International has purchased a $1.85 billion apartment portfolio in the biggest multifamily transaction in the US since 2016.
The company led by Jordan Sloan acquired a portfolio of 36 apartment properties comprising of 13,243 units from Aragon Holdings.
“The purchase of the portfolio demonstrates Harbor Group International’s significant growth and evolution as a leading industry player as we continue to execute on larger, more complex, and attractive opportunities for our investors,” said Jordan Slone, CEO of HGI.
“This transaction marks a significant step for HGI as we continue to grow our portfolio in lucrative markets and provide our investors with a strong, diversified portfolio.”
The deal is part of Aragon’s broader $2 billion sale of its entire apartment portfolio consisting of 15,000 units located in 12 cities and eight states across the nation.
“We decided to sell our portfolio because we recognized that, in the present market conditions, the properties would have the greatest value in the hands of a ‘value-add’ operator,” said Larison Clark, Founder, Chairman and CEO of Los Angeles-based Aragon Holdings. “Harbor Group targets value-add opportunities, making this an ideal transaction for both firms.”
Harbor’s new portfolio is primarily concentrated in the Dallas/Fort Worth and the Denver areas, with properties also located in Houston, San Antonio, Atlanta, Orlando, Phoenix, Salt Lake City, Albuquerque, St. Louis and Kansas City, Mo.
The properties, which had been acquired over the last 10 years, average 350 units each, comprised of two- and three-story buildings located in suburban areas near employment centers, shopping, highly rated schools and easy transportation access.
HGI plans to invest approximately $90 million in property upgrades and enhancements throughout the portfolio, including $51.5 million of in-unit renovations. Harbor Group Management Company, HGI’s in-house property management firm, will assume management of the portfolio .
Dan Guy, Aragon’s President and Chief Operating Officer, noted that Aragon Holdings initially focused on multifamily housing because “we saw the opportunity for strong investor returns in the wake of the 2008 economic crisis. Since then we have achieved exceptional cash-on-cash and IRR returns for our investors.”
Guy added, “Our team is now analyzing commercial real estate opportunities that provide the best risk-adjusted returns for our investors.”
Newmark Knight Frank represented the seller in the sale and the buyer for the debt financing. Thefirm’s Capital Markets Strategies and Multifamily Capital Markets groups were led by Henry Stimler, Bill Weber and Matt Mense. NKF’s Zach Springer brokered the sale and with the portfolio team in local offices comprised of Mac Crowther, Brad Goff, Terrance Hunt, Brian Murphy and Scott Ramey.
NKF arranged approximately $1 billion of combined new financing, while $400 million of existing debt was assumed directly by HGI. The new debt was placed in two separate pools: an NKF-originated fixed-rate loan with Freddie Mac and a short-term floating-rate loan arranged by Bank of America.
“This was a landmark deal for us in terms of size and scope as we were able to work across all Newmark business lines to successfully achieve spectacular results for both the buyer and seller,” stated Anthony Orso, president of NKF’s Capital Markets Strategies group.
NorthMarq Capital represented the Seller for debt assumptions and defeasance. Meridian Capital Group was used by the buyer as an advisor.