Aug
14

Fannie and Freddie Find a Bright Spot in Apartment Financing

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August 12, 2008

By TERRY PRISTIN – NY Times

One of the last huge transactions involving a leveraged buyout of a public real estate company was last year’s $22.2 billion acquisition by Tishman Speyer and Lehman Brothers of Archstone-Smith, an apartment landlord with a national portfolio of nearly 88,000 luxury rental units.

The mortgage giants also supported the Pegasus Apartments in downtown Los Angeles.
But not long after the deal was announced, the credit markets stalled, and some analysts predicted that the transaction would never be completed because banks were no longer able to sell their loans on Wall Street.

The purchase did close in October, however, but only because the two now-beleaguered mortgage powerhouses — Fannie Mae and Freddie Mac — provided $8.9 billion of the financing.

In recent weeks, Fannie Mae and Freddie Mac have experienced painful losses stemming from the housing crisis; their shares have plummeted and an emergency bailout plan has been enacted in case either government-sponsored company fails.

But though financing for multifamily housing, including Archstone, as the national apartment company is now known, represents only a small portion of their multitrillion-dollar business, “it has been a rare bright spot for both of them,” said Richard C. Anderson, a senior real estate investment trust analyst at the financial services company BMO Capital Markets.

As a result, both Fannie Mae and Freddie Mac, though often associated exclusively with single-family housing, are rapidly increasing their multifamily portfolios.

ARTICLE SHORTENED DUE TO LENGTH….

LINK TO ARTICLE HERE:

http://www.nytimes.com/2008/08/13/business/economy/13fannie.html?_r=2&ref=business&oref=slogin&oref=slogin
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