Freddie Mac has announced its last new offering of multifamily structured pass through “K” certificates for the year, a $1.1 billion deal set to price this week, and expects to close out 2012 with issuance up about 50% from 2011.
The year is expected to end with more than $21 billion in K deals with issued through 17 different offerings.
Mitchell Resnick, vice president of Freddie Mac multifamily loan pricing and securitization, told this publication that the increase in regular issuance through most of 2012 “cemented” the K deal market’s normalization, which began in 2011. (Freddie first began issuing K deals in 2009.)
Innovations such as a five-year deal, a floating-rate transaction and a fully wrapped deal were introduced at different points during 2012.
When asked about what the market might look like in 2013, Resnick said it is likely there will be “more of the same as far as regular issuance.” He noted that 10-year loans have been popular in origination recently as they allow borrowers to extend current low rates for a decade, so these will most likely be incorporated in future transactions.
JPMorgan and Merrill Lynch are the co-lead managers and joint bookrunners on the last K deal of the year, with Barclays, Guggenheim Securities, Morgan Stanley and Wells Fargo Securities as co-managers. That transaction is slated to settle on or about Dec. 21.
The last K deal of 2012 includes two principal and interest classes, one senior interest-only class, and a junior interest-only class. Seventy-six recently originated multifamily loans guaranteed by Freddie collateralize the transaction. Freddie said the deal is expected to receive top investment grade ratings from Fitch and Kroll Bond Rating Agency, subject to ongoing monitoring.