Lone Star opts for Freddie Mac financing on $7.6bn portfolio buy

Lone Star Funds has secured a $5.121bn Freddie Mac loan from Berkadia on its multi-billion-dollar acquisition of Home Properties, Inc.

Lone Star Funds has secured a $5.121bn Freddie Mac loan from Berkadia on its multi-billion-dollar acquisition of Home Properties, Inc.

The seven-year mortgage financing — backing 107 multifamily properties across nine US states — assists with the previously announced acquisition of the Rochester, New York-based REIT, a deal that was valued at $7.6bn including $2.5bn of debt.

header-6[1]The financing marks one of the largest ever Freddie Mac loans, eclipsing the $4.4bn in Freddie Mac loans Berkadia completed in all of 2014, when the firm ranked second only to CBRE Capital Markets’ $5.7bn in originations.

The financing also marks an apparent diversion from Lone Star’s previously stated intentions to finance the purchase using $6.1bn from Goldman Sachs, which had served as the company’s financial advisor on the purchase.  

It comes at a time when agency loans — and multifamily financing more broadly — continue to increase thanks to an uptick in the number and size of investment sales across the asset class.

Freddie Mac and Fannie Mae, the government-sponsored enterprises (GSEs), completed about $57bn in multifamily loans last year, but most experts anticipate that the number will surpass $80bn this year.

The Lone Star deal should help to hit that mark and could encourage GSE financing on other recent billion-dollar deals, which included Blackstone’s $5.3bn takeover of Stuy Town and Starwood Capital’s $5.4bn acquisition of an Equity Residential portfolio.

While Blackstone is seeking a relatively low $2.3bn of leverage on its deal, Starwood has so far declined to comment on how much debt it will seek. One selling point for the GSEs is that they will entertain up to 80 percent loan-to-values, more than some of the alternatives.

Dallas-based Lone Star bought the Home Properties on behalf of its Lone Star Real Estate Fund IV, through which it raised $5.8bn of equity commitments earlier this year.

It paid $75.23 for each of Home Properties’ common shares. Home Properties also agreed to sell a portfolio of six remaining properties to another US REIT, UDR.

Anthony Cinquini, a managing director in Berkadia’s Los Angeles office, arranged the new financing.