Freddie Mac Offering New Green Mortgage Bonds for Investors
The KG-Deals will be securitized by loans in the Green Advantage program, with the first offering of about $475 million set for marketing next week.
Freddie Mac is launching a CMBS program securitized by workforce housing loans made through the company’s Green Advantage program aimed at investors seeking “green” bonds. The first green K-Deal is projected to be $475 million and will be marketed starting June 17, a company spokesperson told Multi-Housing News.
The KG-Deals are the environmental and social impact series of Freddie Mac’s flagship K-Deal securitization program that is part of the company’s business strategy of transferring a portion of the risk of losses away from taxpayers and to private investors who purchase the unguaranteed subordinate bonds. Freddie Mac securitized $72.8 billion in loans in 2018, with $61.6 billion of that spread across 63 K-Deals.
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Since Green Advantage was created in 2016, Freddie Mac has purchased more than $44.7 billion in green loans. While numbers for the first part of 2019 haven’t been released yet, the 2018 volume was $23.1 billion.
Robert Koontz, head of capital markets at Freddie Mac, noted that every K-Deal since 2016 has had some Green Advantage loans in them but the KG-Deal program will go further and offer environmentally and socially conscious investors a specific opportunity to support their mission.
“We’re launching the KG deal to help meet the clear investor demand for fixed-income ESG products,” Koontz told Multi-Housing News. “The Freddie Mac Multifamily Green Advantage program is benefiting borrowers, renters and the environment, and now investors will have an opportunity to directly invest in that success.”
Green Advantage requires borrowers to reduce energy or water consumption by a total of 30 percent with a minimum of 30 percent of those efficiencies to be found through energy improvements. Borrowers have two years to make the improvements, which are tracked in an ENERGY STAR database. To date, improvements made to more than 1,600 properties financed through Green Advantage loans are projected to save 4.7 billion gallons of water a year and nearly 1.8 billion kBtu per year in energy annually. Tenants also benefit through lower utility costs, saving on average about $138 a year on reduced energy or water bills.
The Green Advantage program also addresses the housing affordability crisis in the United States as nearly 86 percent of the units financed are affordable to tenants with incomes equal or less than area median income (AMI).