Blackstone signed an agreement Thursday with Fannie Mae for a $2.7 billion loan backing its $5.3 billion acquisition of the Stuyvesant Town and Peter Cooper Village apartment complex in Manhattan, PERE sister publication Real Estate Capital has learned.
Wells Fargo is originating the 10-year, fixed-rate loan, which carries a 50 percent loan-to-value.
Through what sources close to the deal described as an intensive, “dual-pronged process,” launched immediately after the acquisition was announced in mid-October, Blackstone enlisted the bank to procure bids from agency lenders, while Eastdil Secured was tapped to seek competing — and ultimately losing — CMBS bids.
Blackstone and partner Ivanhoe Cambridge agreed to purchase ‘Stuy Town,’ Manhattan’s largest apartment complex, about six years after Tishman Speyer paid $5.4 billion for the massive property. Tishman was said to have fronted just $112 million of its own equity, which ended in disaster after the firm defaulted on more than $4 billion of debt.
Global head of real estate at Blackstone, Jonathan Gray, stated shortly after the announcement of purchase that his firm would seek comparatively “very low” leverage and that the assets were being viewed as a “long-term” hold.
The private equity giant struck a deal with the city of New York and Mayor Bill de Blasio’s administration to reserve 5,000 of the property’s 11,232 units as “affordable” under city guidelines for the next 20 years. The firm also agreed not to pursue a condominium conversion or build new towers atop the buildings.
In return, the city is providing Blackstone with a $144 million “low-interest loan” through the Housing Development Corporation and waiving $77 million in mortgage recording taxes.
A string of billion-dollar-deals
In another of the largest financings of the year, Lone Star tapped Freddie Mac on its $7.6 billion acquisition of Rochester, New York-based REIT Home Properties, Inc. in June, which included 107 multifamily properties across nine US states, securing a seven-year, $5.121 billion Freddie Mac loan from Berkadia.
Thanks in large part to such large, multi-billion-dollar deals, multifamily investment sales and lending — particularly among agency lenders — into the asset class have ballooned this year.
“You have people like Blackstone, Lone Star and Starwood out there who were traditionally in other food groups but have expanded and are able to raise giant funds with the capital to do bigger deals,” said one source. “For those looking to divest, this allows them to exit in one fell swoop, in six months instead of 5 to 6 years. That certainty of execution is more than worth giving up a bit up on proceeds.”
One week after news broke that Blackstone had purchased Stuy Town, Starwood Property Trust also said it had purchased a multifamily portfolio from Equity Residential for nearly $5.4 billion. Starwood declined to comment on the financing behind that deal.
The government-sponsored enterprises, combined with the Federal Housing Authority (FHA), originated loans totaling $73 billion in 2014, but that number was expected reach $102 billion by the end of 2015, according to the Mortgage Bankers Association. Experts expect about $90 billion of that to come from Fannie and Freddie.