UPDATED: June 15, 2017 11:45 AM — Virginia-based commercial real estate investors Harbor Group International paid $44.35 million on Tuesday to re-enter the Greater Orlando market, buying the recently completed 244-unit The Courtney at Lake Shadow apartments in Maitland.
The company has shifted its investment focus in the past year to newly-built multifamily in growth markets, and wants to place more capital in Orlando this year, president Richard Litton told GrowthSpotter.
"We've had very good investment success in Orlando, found the overall economy to be very positive, and were very successful in selling out of our Orlando portfolio several years ago. So from an investment diversity perspective, we've had our eye on the market for the right opportunity to buy again," he said.
"Most of our prior acquisitions have been older Class B product with (value-add) potential in good markets like Orlando, but we frankly have found that segment to now be overheated," Litton continued. "We've seen less competition on newer product, and better buy propositions directly from the developer. So we're now implementing that strategy across the country."
Located at 545 S. Keller Road across 11.5 acres that border Maitland's Lake Shadow, the Courtney apartments feature seven buildings of three and four stories that were built in 2015 and 2016 by ContraVest, which developed, owned and managed the property through affiliates.
The sale deed was recorded Thursday morning in Orange County, with the price reflecting a per-unit value of $181,762.
"It was a good time to exit with interest rates so low and Cap rates favorable, so we and our JV partner agreed to put it on the market," ContraVest principal and CFO John Schaffer told GrowthSpotter.
That joint venture partner was a Canadian investment group that Schaffer declined to name.
ContraVest will redeploy the proceeds of its sale in future developments. The company has six other multifamily projects in varied stages of development and construction across Central Florida.
HGI invested more than $850 million in equity in 2016 and is on track to invest even more this year, Litton said. The company has a CRE portfolio currently valued near $4.7 billion, with more than 5.1 million square feet of commercial properties and 25,000 apartment units nationwide.
That includes 11 multifamily properties in Florida following this acquisition.
"We will continue to look for newer product where we think there's less competition from the buyer pool, and want to be in submarkets where there is limited opportunity for new development, and in proximity to major job growth and jobs that pay incomes in relation to the rents we want to charge," Litton said. "We were drawn to The Courtney in Maitland because of the ADP employment right across the street, and the overall Maitland office jobs market."
HGI also invests in retail, office and industrial properties, but only owns one other non-apartment property in Florida at the moment.
"We do look at multi-tenant office and urban retail, but think multifamily is the best risk-adjusted investment at this time," Litton said. "We also make mezzanine loans."
HGI sourced a seven-year, floating-rate loan of $32 million from Freddie Mac with three years interest only, secured by Berkadia.