McLEAN, VA–Freddie Mac is, once again, targeting affordable housing with a new initiative that uses its existing toolset. Essentially, the GSE is providing financing in exchange for the apartment owner keeping rents affordable.
It is doing this via is MultiAsset Commitment structure, which Freddie is using to purchase and aggregate up to $500 million in loan over a one-year period to allow the first user — Bridge Multifamily Fund Manager, an affiliate of Bridge Investment Group — to acquire and preserve workforce and affordable housing stock around the US. After the one-year term Freddie Mac will place the aggregated bonds in a single securitization and Bridge will be required to purchase the subordinate bonds. Wells Fargo will originate $400 million of the commitment and KeyBank will originate the remaining $100 million.
“We're using an existing product to look at different ways we can try to target workforce housing, what we call the missing middle or forgotten middle,” Freddie Mac's Lauren Garren, who is heading up the initiative, tells GlobeSt.com. “What we want to do is provide a financing vehicle that would provide attractive spreads and credit in return for an annual check on the rent.” Specifically, the agreement is that the majority of rents must be affordable to those earning below 80% of area median income and will remain that way for the life of the loan.
That particular piece — making sure that the rents remain affordable — is new to Freddie Mac. The GSE will check to make sure that the rents have remained affordable on an annual basis. If the rents have been raised, the GSE will assess a fee. Garren declined to say how much the fee would be.
This first deal will likely be followed by others. Garren says that there are several in the pipeline. “It's something we are targeting with sponsors that we're familiar with, sponsors that we know have a well proven track record in this type of property set,” she says.
The first asset to be acquired with this vehicle is a 352-unit multifamiy project in Plant City, Fla., which currently has 82% of rents affordable to residents earning less than 80% AMI. Bridge plans to improve the unit interiors and common areas, including a soccer field and revamped family areas. It will also built and onsite social and community center that will be run its its non-profit partner, Project Access.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
