Multifamily Experts Say Private Equity Would be Good For Troubled Freddie Mac

By Anuradha Kher, Multi-Housing News and Paul Rosta, Commercial Property News Washington, D.C.–Government-sponsored entities Fannie Mae and Freddie Mac may well be in line for a further infusion of capital, this time from private equity. According to a report published yesterday by The Wall Street Journal, the search is on for investors to shore up the finances of Freddie Mac, whose stock has fallen in value more than 90 percent in the past year, to  $3.12, after earlier hitting a low of $2.95.While the future of the two government-sponsored residential mortgage companies is still up in the air, several multifamily experts believe a private investment would be better for the markets than a Fed bailout. The companies’ shareholders would take a hit if the federal government rather than private investors bought those shares. “I do believe there is a good chance that the private equity deal will happen because it is a good buy for them—buy when shares are low,” Lisa Maysonet, executive vice president, Prudential Douglas Elliman, tells MHN. Maysonet is also founder of the company’s Group Maysonet, which specializes in luxury multifamily development. “The private equity money is good money and it will help stabilize and bring integrity back to the markets. My feeling is that if somebody thinks it’s a good investment, then psychologically, or because of the money going into it, this move will have a positive impact. A Fed bailout would certainly be less positive.”The situation can only get better, Maysonet adds. “Prices in recent years were high and buying an apartment was an insane proposition. Similarly, the mortgage industry wasn’t functioning based on reality anymore. It was going crazy and it wasn’t safe. Now things are definitely normalizing. If someone says they have a lot of money, they have to show it.”Although the GSEs are experiencing big problems tied to the housing market’s downturn and the sub-prime crisis in particular, top capital markets professionals and industry insiders like Maysonet point out that the GSEs still have a critical role. “From what we see, they are continuing to support (multifamily) in a disciplined way,” Tom McManus, chairman & CEO of Cushman & Wakefield Sonnenblick Goldman, tells CPN. “That could bode well for a silver lining.”Finance professionals cite Freddie and Fannie’s increasing significance even as its leaders seek more capital to boost its finances. A telling study published last month by Real Capital Analytics Inc. concluded that the GSEs provide an increasing proportion of hard-to-get acquisition financing—5 percent at mid-year, up from only 1 percent between January 2006 and 2007. And an executive for one top intermediary recently told CPN that Freddie continues to rank among the top 10 capital sources his firm does business with—as it did last year. Lenders, too, report a steady stream of business with the GSEs. Only yesterday, KeyBank Real Estate Capital disclosed that it recently closed a pair of loans with Fannie Mae valued at $47.6 million for a Class A multifamily development project in Jersey City, N.J., and a Class B apartment acquisition in New Castle, Del. “Fannie and Freddie are important to the stability of the overall market as well as the economy and anything that adds to their stability to provide liquidity and stability would only be positive,” Ted Patch, senior vice president and chief production officer at multifamily lender, Green Park Financial, tells MHN.While it is still unclear whether there will be a private equity investment of Fed investment, Patch believes, in the grand scheme of things, either would be positive. “In general, however, I do agree with the sentiment that a private equity investment would be better than the Fed coming in and bailing out the companies with taxpayers’ money.”