Centerline Completes $2.8B Securitization

(Read more on the multifamily market and more on the debt and equity markets.)

NEW YORK CITY-Centerline Holding Co., the parent company of Centerline Capital Group Inc., has completed a securitization of the company’s $2.8-billion tax-exempt affordable housing bond portfolio with Freddie Mac. The bond portfolio is secured by mortgages on approximately 59,000 units of affordable multifamily properties in 31 states.

For accounting purposes, most of the securitization will be treated as a sale, according to Centerline, who explained on a conference call Friday morning, that the transaction represents a major step in the company’s plan to transform itself into an alternative asset management company. Centerline also secured a $131-million equity investment commitment from an affiliate of Related Cos., its largest shareholder, through a newly issued convertible preferred stock. The preferred stock will pay dividends at an 11% annual distribution rate and will be convertible at a $10.75 per share conversion rate for an aggregate of approximately 12.2 million common shares of Centerline Holding. The transaction is expected to close in January, Marc Schnitzer, CEO and president of Centerline, noted during the call. Centerline will use the net proceeds to reduce corporate debt and fund the company’s growth plans. Morgan Stanley & Co. Inc. and Bear, Stearns & Co. Inc. acted as financial advisors to Centerline.