PARTNER CONTENT
H.I.G. Realty Partners is a leading investor in the lower to middle market, actively investing across sectors and geographies throughout the US. H.I.G. Realty Partners invests in value-add opportunities including undercapitalized properties that are in need of significant renovation and/or repositioning, executing effective business plans to generate value. Managing Directors and Co-Heads of H.I.G. Real Estate, US, David Hirschberg and Ira Weidhorn, outline some of the current challenges and opportunities in the real estate private equity market…
How are current economic conditions affecting the real estate private equity market?
H.I.G. Realty Partners, led by long-time Co-Heads, David Hirschberg and Ira Weidhorn, transacts in the lower to middle market across major cities in the U.S. and focuses on investments where we can add significant value to our properties and platform portfolios. We believe that current macroeconomic headwinds of higher interest rates, inflation and a potential recessionary environment will result in an array of distressed owners and lenders, leading to a multitude of acquisition opportunities in 2024 and 2025. H.I.G. Realty Partners has constructed a resilient portfolio which capitalises on positive secular trends – especially within the industrial, multifamily, and life sciences real estate sub-sectors – that is well positioned to deliver attractive risk-adjusted returns. H.I.G. Realty Partners benefits from a conservatively leveraged portfolio of investments that is diversified by geography and asset class, access to H.I.G.’s strong sourcing platform, and the application of value-add initiatives to its properties which positions the portfolio for successful exits, irrespective of market cycles.
Where do you see the most significant opportunities in the coming year, and what have been the biggest drivers for your portfolio?
Over the course of the past five years, H.I.G Realty Partners has identified significant opportunities within the industrial/logistics sector. The proliferation of e-commerce has driven demand for distribution centres and industrial properties, as well as the need for logistics, and warehousing. These positive fundamentals were the result of pent-up demand driven by a consumption boom during COVID-19 and a relatively balanced supply/demand dynamic. Recently, H.I.G. Realty Partners has focused its industrial acquisition pipeline on the industrial outdoor storage (IOS) sub-sector. IOS properties are characterised as smaller boxes with significant land parcels that are utilised for last-mile distribution and truck/cargo/material storage, located near end-consumers, transportation hubs, and labor pools. H.I.G. believes that IOS properties are expected to outperform the broader industrial market since municipalities rarely grant approvals for additional IOS development, creating a uniquely attractive supply/demand imbalance for early investors in this space. To-date, H.I.G. has aggregated a 59 property IOS portfolio spread across 20 states.
Which are the most significant challenges in the real estate private equity market right now and how can they be best mitigated?
Given the distress in the capital markets, we have maintained ample liquidity in our fund so that we have maximum flexibility to extend our loans and purchase interest rate caps, where required. Additionally, given our value-add strategy, we pursue operationally focused business plans that will position our investments for successful exits in any market condition. We believe that the market environment in 2024 and 2025 will be favourable with respect to acquiring new properties, in part due to a reset in valuations and the fact that many sellers have attractive properties with strained capital structures. To remain successful in this environment, H.I.G. Realty Partners has been proactive, monitoring interest rate trends and their potential impact on borrowing costs as well as demographic trends to adjust investment opportunities, business, and exit plans, accordingly.
Has your firm been prioritising ESG and sustainability – why/why not?
At H.I.G., many factors that are today recognised as contemporary ESG principles have long been foundational risk-mitigation assumptions and a valuable lens through which we look for opportunity. ESG, within the context of H.I.G.’s operations, is not an isolated concept; rather, it forms an integral part of a comprehensive framework designed to generate positive investment outcomes for our investors. As part of our prioritisation of ESG, in 2023, H.I.G. became a signatory to the UN Principles for Responsible Investment (“UN PRI”).
David Hirschberg, Managing Director and Co-Head of H.I.G. Realty Partners – David has more than 30 years of experience in real estate and investment banking. He is located in H.I.G.’s New York office and is responsible for the management and oversight of the Fund’s portfolio. Before joining H.I.G., David was a Managing Partner at Coventry Real Estate Advisors, an investment fund manager with $2.5 billion of real estate assets across the United States. Prior to Coventry, David was a Managing Director in Citigroup’s real estate investment banking group. Previously, David was an analyst at Goldman Sachs from 1989 to 1992. David earned a BS from Lehigh University and an MBA from New York University. David is a Council Member of the Urban Land Institute.
Ira Weidhorn, Managing Director and Co-Head of H.I.G. Realty Partners – Ira has more than 25 years of experience in real estate investing across all property types. He is located in H.I.G.’s New York office and is responsible for the management and oversight of the Fund’s portfolio. Before joining H.I.G., Ira was a Managing Principal and head of the New York office for Lubert-Adler, where he was responsible for new acquisitions and asset management. Previously, he was a Principal in Lehman Brothers Real Estate Partners and worked in Goldman Sachs’ real estate group. Ira is a graduate of the University of Pennsylvania with a B.S. in Economics and a Bachelor of Arts in History and earned an M.B.A. from the Wharton School of the University of Pennsylvania.
