Taxpayers May Be Funding Billionaires' Biggest Apartment DealsBarry Sternlicht’s Starwood Capital Group and Stephen Schwarzman’s Blackstone Group LP are in talks with
Freddie Mac to finance two transactions totaling more than $10 billion, according to people with knowledge of the negotiations. Those discussions come after the government-owned mortgage giant already agreed to back Lone Star Funds’ $7.6 billion deal to buy Home Properties Inc. and Brookfield Asset Management Inc.’s $2.5 billion takeover of Associated Estates Realty Corp.
The mortgage guarantor -- which along with its larger counterpart
Fannie Mae was rescued in a $187.5 billion taxpayer bailout in 2008 -- is boosting its multifamily lending as their regulator eases restrictions on that part of their business. Cheap debt from the U.S.-backed companies is helping sustain a five-year surge in values for apartment buildings and fueling some of the biggest real estate deals since the financial crisis.
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Freddie Mac’s deals are getting bigger
as its regulator expands the definition of affordable housing, enabling the company to make more loans. Properties that are deemed affordable by the Federal Housing Finance Agency are exempt from a $30 billion cap that limits how much the government-sponsored entities can lend to apartment landlords each year.
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Freddie Mac provided $34.1 billion for multifamily acquisitions and refinancings this year through September, more than double the $14.1 billion for the same period in 2014.
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Other than the government-sponsored companies,
there aren’t many lenders that have the capacity to fund a purchase as large as Blackstone’s, according to Sam Chandan, president of Chandan Economics, a provider of real estate data and analysis.
“You could argue convincingly
that the deal wouldn’t get done in its current form without agency financing in the market,” he said.
Freddie Mac granted its largest apartment loan ever to Lone Star, a $5 billion mortgage to fund the private equity firm’s takeover of Home Properties
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