In Uncertain Times, Borrowers Need Lenders Who Are Willing To Commit
At the beginning of July, a client came to Harbor Group International looking for a loan.
This client was looking for a bridge loan on a value-add property in central Florida and wanted the deal to close in 30 days. HGI, a global real estate investment and management firm, had recently launched a bridge debt lending division and after thorough due diligence provided them with the terms they needed in just a few days. But a month later, the client came back with an update that might have forced the deal off the rails.
“The property’s occupancy dropped significantly in the 30 days between agreeing to the terms and the closing of the deal,” HGI President T. Richard Litton Jr. said. “Other lenders would have backed out of the deal, but we didn’t. We stuck with our original terms because we understand that in order to be a trustworthy lender, your borrowers need to know that you will close on the terms that you promised.”
Since the start of the coronavirus pandemic, many banks have put commercial real estate loans in lockdown, while other lenders backed out of deals as borrowers faced unprecedented challenges. While most lenders saw this as a time to move away from funding bridge loans, HGI saw it as a time to step up to the plate. That's why HGI launched its whole loan platform, capitalizing on market conditions to fill an important role for the industry.
“When the economy started to shift in late March and early April, we were floored by how many lenders broke their deals with borrowers,” Litton said. “This inspired us to create our own lending division, because we believe that when lenders make a promise to borrowers, they should stay committed.”
While HGI is mostly known for its multifamily owner and operator arm, it has also been in the debt investment business for more than a decade. It has done preferred equity and mezzanine debt lending and has been a major buyer of Freddie Mac multifamily B-pieces. HGI has also participated in Freddie Mac’s bridge lending program, the Whole Loan Value-Add fund.
Litton said that once HGI noticed that many lenders were pulling out of deals, the company felt compelled to take all of this debt investment experience and use it to step in and offer a solution to borrowers who had been left in the lurch.
HGI Managing Director Matt Jones said that since the company is first and foremost a multifamily owner and operator, it does not approach transactions purely from the side of a lender and what lenders traditionally see. Instead, the HGI lending team is able to see transactions from the perspective of an owner, an operator and a borrower.
“We own more than 100 properties and 40,000 apartment units in markets across the U.S., so we understand the challenges that come with getting a real estate loan in different parts of the country,” Jones said. “Most of our competitors do not have that type of boots-on-the-ground experience that allows us to provide fast, knowledge quotes nationwide.”
Jones said that as a borrower, HGI earned a reputation as a company that could close quickly and always had a solid business plan in place. It’s the company’s long history of borrowing that helped the new lending team understand that the No. 1 thing borrowers are looking for from lenders is commitment.
“Borrowers need commitment and certainty from their lenders, especially when facing unprecedented, uncertain times,” Jones said. “Now is not the time to back out, it’s the time to step up.”
Looking ahead, Jones said that HGI is optimistic that the market will recover and lenders across the board will be comfortable sticking to their terms once again. Until then, HGI will continue to stand by its clients and give them the support they need to get through these difficult times.
This feature was produced in collaboration between the Bisnow Branded Content Studio and Harbor Group International. Bisnow news staff was not involved in the production of this content.