An Old Lyme investment firm that recently purchased Hartford’s Bushnell on the Park apartment complex is looking to raise another $25 million to start a second investment fund.
Hamilton Point Investments, which concentrates on buying financially distressed assets through the commercial mortgage backed securities market, is looking to nearly double the size of its investment portfolio to try to take advantage of a struggling real estate market.
The firm has already raised about $7 million for its new fund, which will focus on buying class A and B multifamily apartment properties from special servicers and banks. They’ve also recently closed on a deal to acquire a $16 million apartment complex in Atlanta.
Hamilton Point co-founder Matthew Sharp said the goal is to acquire about $100 million worth of property in 2012, which could amount to about eight or nine deals.
The firm’s strategy is centered on taking advantage of poorly financed deals, likely ones signed at the peak of the market, that are likely to go bust in 2012.
“Mortgages that were originated in 2006 and 2007 were the worst mortgages based on ridiculous valuations,” Sharp said. “A lot of those deals were five-year fixed rate loans coming due now.”
As those mortgages come due, Sharp said, many developers are finding that the properties are worth less than the original mortgage, making them not worth paying off and nearly impossible to refinance.
That leaves an opening for investors to swoop in and purchase the properties at significantly discounted prices, which is the business model Hamilton Point follows.
Sharp said the fund typically searches out suburban garden-style apartments that are well-occupied, located in growth submarkets that are often overlooked by institutional and national investors, and require some maintenance but not a complete overhaul.
The firm’s first fund had about $34 million raised from mostly institutional investors, which sparked deal sizes ranging from $5 million to $20 million.
Hamilton has more than a dozen properties in its portfolio, and all of them are performing, said Sharp, who started the firm with partner David Kelsey.
“There are no duds so far,” Sharp said.
The portfolio includes the 129 rental units within the Bushnell on the Park property, which the firm acquired in 2011 after the downtown Hartford landmark sank into foreclosure.
The former owners, Bushnell Regency, stopped making payments on a $12.7 million mortgage. Sharp said the apartment complex is nearly 100 percent occupied and the building has undergone interior renovations including mechanical work and rehabbed common areas.
Bushnell’s 30,000 square feet of commercial space, however, remains only about 65 percent occupied.
Sharp said there are no plans to sell the apartment complex in 2012 as the property still needs further renovations, particularly on the exterior.
HPI also owns The Wilcox property in Middletown and The Crocker House building in New London, each of which has 82 units.
Besides the new fund, Sharp said Hamilton Point has been growing. The firm, which started with just four employees now has 60 people on its payroll and recently moved to a newly purchased office building in Old Lyme. HPI spent about $1 million buying an 8,000-square-foot office building located at 2 Huntley Rd.
Sharp said HPI will occupy about 6,000 square feet, and the remaining space is being leased to another tenant.
Approximately 10 people will work out of the new office, Sharp said.
• • •
Bank expanding to Wallingford
The $917 million Naugatuck Savings Bank is expanding its presences in New Haven County.
The bank has asked state regulators for permission to build a new branch in Wallingford, which, if approved, would give the small Naugatuck lender, its first presence in that town.
Naugatuck Savings Bank has an 18-branch footprint in New Haven and Litchfield counties, but the new real estate in Wallingford would inch them closer to Hartford County.
The bank, which has been around since 1870, is led by Mark Yanarella, who is chairman and CEO.
Â
Â
Greg Bordonaro writes the Financial Sense column every other week. Reach him at gbordonaro@HartfordBusiness.com.
