Freddie Mac Rolls Out Latest $1B K Certificate Offering
- Jun 07, 2010
Dees Stribling, Contributing Editor
McLean, Va.–As with all commercial real estate in recent years, liquidity in multifamily housing has been problematic. About a year ago, Freddie Mac launched Structured Pass-Through Certificates (“K Certificates”) to provide some liquidity to the market, and later this week the GSE is offering another $1 billion in the certificates.
K Certificates are multifamily mortgage-backed securities. In the case of the latest offering–known as K-007–the certificates are backed by 83 recently originated multifamily mortgages and are guaranteed by Freddie Mac. The loans were originated using Freddie Mac’s Capital Markets Execution product.
The K-007 offering represents the third K-deal of the year, with Freddie Mac planing a total of six such deals during 2010. Before this offering, the GSE’s most recent K Certificates offering was K-006, which was backed by about $1.1 billion of multifamily loans and settled on April 6.
The new offering is expected to price on June 11 and settle on June 24. The certificates will be brought to market by a network of dealers led by Bank of America Merrill Lynch and Deutsche Bank Securities Inc. as co-lead managers and joint bookrunners for the transaction. Barclays Capital Inc., Goldman Sachs & Co., J.P. Morgan Securities Inc., Jefferies & Company Inc. and Wells Fargo Securities LLC have been tapped as co-managers.
According to the GSE, the advantage of K Certificates is that they offer investors credit protection in the form of both Freddie Mac’s guarantee and principal subordination, and they’re structured to provide stable cash flows due to the diversified pool of call-protected multifamily mortgages underlying the certificates.
“Freddie Mac is responding to difficult conditions in the multifamily housing financing market by finding ways to link rental housing to the capital markets,” says Mike May, Freddie Mac senior vice president of multifamily, in a statement. “By offering multifamily loan securitization through our K Certificates, we’re providing critically