Northwind Group has provided a lifeline in the form of a $111 million first mortgage condo inventory loan to the recently completed high-rise the Hawthorne, in the affluent Tanglewood neighborhood of Houston.
Developed by a joint venture of Pelican Builders and Ember Group, about half of the 67 units in the building, at 5656 San Felipe Street, are pre-sold, according to Northwind, a New York City-based real estate private equity firm. The loan comes to almost $1.7 million per unit.
The building offers two- and three-bedroom condos with square footage ranging from 1,770 to 3,440, ranging from $1.3 million to $4.2 million.
Northwind’s financial injection to the 17-story luxury building comes after the building opened in July.
By leveraging unsold inventory as collateral, the loan allows the developers to refinance existing debt, thereby extending the repayment timeline for construction loans. John Fenoglio and Brock Hudson of CBRE facilitated the financing.
“We’ve been able to provide loans to higher quality sponsors and properties than what we were doing three years ago. In normal times, commercial banks would have provided this sort of loan,” said Ran Eliasaf, founder of Northwind Group. “But now, commercial banks have taken a huge step back, so private lenders like us are stepping up and picking up the slack.”
Banks’ commercial real estate losses began mounting last year, prompting them to tighten their lending practices. According to Newmark, debt origination declined year-over-year 52 percent for the second consecutive quarter. Banks’ lending activity plummeted by 48 percent in the first quarter, and their commercial real estate holdings dropped for the first time in a decade.
The Hawthorne is a microcosm of the challenges and opportunities confronting the city’s luxury condo market.
Northwind’s financial intervention raises questions about the health of the market. The struggle of a high-end property like the Hawthorne to attract buyers suggests broader challenges facing the city’s real estate sector. Condo and townhome sales declined consistently throughout 2023, down upwards of 10 percent between 2023 and 2022, according to the Houston Association of Realtors. The slump continued last month, with a four percent dip year-over-year: the 2024 market is on trend for decreases similar to last year.
Despite fluctuations in the market, the construction pipeline is booming. Marriott and Satya are planning the Lone Star State’s first St. Regis Residences, a 35-story tower expected to begin construction in Upper Kirby next year. Howard Hughes Holdings is bringing another hospitality-branded condo project to the Bayou City, with its Ritz-Carlton Residences starting construction near Lake Woodlands. Northwind sees Houston as one of its growth markets, as it makes the rounds outside its home base in Manhattan. In 2022, the firm provided a $26.1 million bridge loan to Deiso Moss’ upcoming 43-story mixed-used project at 2120 Post Oak Boulevard, which is set to have 343 residential units atop a 100,000-square-foot office and 25,000 square feet of retail.
