Fannie Mae to back Stuy Town deal

Jonathan Gray (photo by Sabina Mollot)

Jonathan Gray (Photo by Sabina Mollot)

By Maria Rocha-Buschel

Mortgage giant Fannie Mae recently announced that it will be backing Blackstone and Ivanhoe Cambridge’s acquisition of Stuyvesant Town and Peter Cooper Village with a $2.7 billion credit guarantee.

The government-backed company made the announcement last Monday, The Real Deal first reported, noting that to finance the acquisition, an affiliate of Blackstone will secure the loan from Wells Fargo’s multifamily division, one of Fannie Mae’s lenders. This mean that Wells Fargo will originate the acquisition loan and pass it on to Fannie Mae, then sell it off to investors in the form of commercial mortgage-backed securities.

The agreement means that the federal government will effectively back Blackstone’s $5.3 billion acquisition, on top of the $225 million subsidy from the city for the buyers.

The loan carries a 10-year term, although Fannie Mae did not disclose its interest rate.

Fannie Mae has its own shareholders but the company is also backed by the federal government, and investors are usually willing to accept low yields on mortgage securities backed by Fannie Mae because of an understanding that the government will intervene if the company can’t keep to its commitments.

Most of the loans from Fannie Mae are single-family mortgages but the multifamily division guarantees more than $16 billion in loans just in New York. There is a $30 billion cap on the total volume of multifamily loans it can insure in a year, but the cap can be exceeded if affordable housing is involved.

The announcement is a win for US Senator Charles Schumer who had previously secured a commitment from Fannie Mae and Freddie Mac, another mortgage giant, not to finance any deal that didn’t have the backing of the tenants or the city.

Jonathan Gray, the head of real estate at Blackstone, said that Fannie Mae and Wells Fargo were important partners in the deal.

“Fannie Mae understood the complexity of the transaction and provided long-term financing, which will ensure that the community will serve as a home for working and middle-class families in New York City for years to come,” he said.

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