In today’s uncertain investment climate, many investors are seeking durable, high-quality assets with consistent income. Gray Harbor Capital has built its strategy around a simple premise: own and manage single-tenant properties leased to federal agencies backed by the full faith and credit of the United States.
I sat down with Founder and CEO Ed Stanton and Chief Operating Officer Shawn Egan, CFA to discuss the strategy and its role in a diversified portfolio.
Wendy: This space is so unique it immediately caught my attention. Can you share how you got into it?
Ed Stanton: Sure, I was introduced to this field over two decades ago, and my path into it was largely serendipitous. While earning my MBA at Georgetown, I landed a structured finance internship in D.C. I ended up working on a project for the firm’s government practice group, and that opportunity changed everything. I was fortunate to learn from partners with deep expertise in this specialized corner of real estate.
What really cemented my focus was the global financial crisis: When most asset classes came under severe stress, federal-leased properties performed resiliently. That stability made it clear this was a long-term strategy that I could build my career around. In the years that followed, I launched three separate ventures in federal government real estate, with the most recent being Gray Harbor, which I co-founded in 2020.
Wendy: What makes your approach distinct from other commercial real estate investment strategies?
ED: There are countless firms investing in multifamily, industrial, office, or retail — but there are only a few focused solely on federal government-leased real estate. We embrace being specialists: that’s our lane, and we stay firmly in it. We have only one tenant, the United States of America, and its credit has a proven history of performing through all financial cycles.
Wendy: What type of properties do you acquire?
Ed: The portfolio focuses on specialized, mission-critical properties leased to a range of essential federal agencies. Key examples include the U.S. Department of Veterans Affairs, U.S. District Courts, Social Security Administration, and other major federal organizations. These tenants carry far less location risk than typical commercial real estate as federal agencies don’t rely on high-visibility corners. They are destinations that people will seek out. Additionally, because the government invests heavily to tailor each facility to its exact specifications, these tenants tend to remain long-term and are highly committed to the property, as relocating is costly and complex.
Gray Harbor Capital’s recent acquisition, US Department of Veterans Affairs, Victoria, Texas
Wendy: How would you describe the competitive landscape in this space?
ED: It’s a very fragmented market. Much of the ownership is held by local players and single-property mom-and-pop owners. That creates meaningful opportunity for us. Gray Harbor brings a national footprint, a long track record in the niche, and a singular focus on this asset class. We also handle asset management in-house, which provides tighter operational control. Finally, our ability to raise capital on an ongoing basis allows us to be consistent and disciplined buyers.
Wendy: Shawn, what drew you to the firm, as you have a unique background as well?
Shawn Egan, CFA: Prior to joining Gray Harbor, I was a General Partner and Chief Investment Officer for a single-family office. In that role, I researched and analyzed thousands of investment funds, yet I had never encountered an investment strategy focused on federal government real estate. The strategy quickly resonated with me as I saw how compelling it is as a standalone investment or as part of a larger portfolio. I felt my family office experience and perspective on portfolio construction would be a great complement to what the team was already doing.
Wendy: How should investors think about the fund as part of a broader portfolio?
Shawn: During my time as CIO, I found it challenging to find funds that I could rely on to perform well during periods of market stress. Funds will say they can deliver in tough markets, but many fail when put to the test. Gray Harbor’s investment returns are derived from a single, highly reliable source: rents paid in full and on time by the U.S. Government. This revenue is paid in-full and on-time regardless of what is transpiring in the financial markets. Because of this, I see Gray Harbor as a great addition to investor portfolios. It seeks to deliver a consistent 10% to 12% return, serves as an inflation hedge, and can help buffer one’s portfolio when other investments are struggling.
Wendy: How has the portfolio performed during difficult market periods since launch?
Shawn: In 2022, the S&P 500 declined by more than 18%, while Gray Harbor delivered a positive return of 6.0%. That’s outperformance of roughly 24 percentage points – not bad. Having that kind of downside protection in the portfolio is incredibly valuable because it helps investors stay disciplined and make rational decisions during periods of market stress. In addition, over the past five years, the S&P 500 has posted 19 months of negative performance, while Gray Harbor has had one such month. The consistency and downside protection serve investors well.
Wendy: Looking ahead, what are your near-term priorities, and what is your long-term vision for the fund?
Ed: We just marked our fifth year, along with our 60th consecutive monthly tax-deferred distribution and have consistently met our performance targets since inception. In the near term, our focus is on thoughtfully growing the portfolio – increasing the property base, expanding agency diversification, and continuing to grow distributions. Long term, our vision is to scale the platform beyond $1 billion in assets, diversified across agencies, geographies, and lease maturities. Because we’re structured as an evergreen strategy, we truly believe we’re just getting started.
Wendy: Ed and Shawn, thank you for sharing your time and insights. It’s been a pleasure learning more about Gray Harbor Capital and your thoughtful approach to investing. ☐
www.grayharborcapital.com
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