Northwind Funds $111M Condo Inventory Loan for Pelican Builders

Northwind Group has provided an $111 million first mortgage condo inventory loan to 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.

By leveraging unsold inventory as collateral, the loan allows the developers to refinance existing debt. John Fenoglio and Brock Hudson of CBRE facilitated the financing.

“With our construction having gone smoothly and an end in sight, and with our strong sales to date, we realized we could save our project cost by getting better priced construction financing,” said Derek Darnell, president of Pelican Builders. “We were under no pressure from existing lenders, and we had plenty of time left on our loan.”

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 financing of the 17-story luxury building came just before it opens, on Friday, March 1. Construction will continue on upper floors, and the project is expected to be completed this summer.

“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.

Condo and townhome sales in Houston declined in 2023, down more than 10 percent between 2023 and 2022, according to the Houston Association of Realtors. Last month saw a 4 percent dip year-over-year, and the 2024 market is on trend for decreases similar to last year.

But the city’s luxury condo market is “so small that you really do not even have enough data to formulate any trends,” Darnell said.

The condo 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.