MCLEAN, VA-With its first mezzanine funding behind it, executives at Freddie Mac are looking forward to robust demand for its latest product. Just what exactly the pipeline is, however, is a little bit hazy. “We believe there is healthy interest but we don’t have good pipeline information given that we don’t actually close the mezz loans,” explains David Brickman, vice president of multifamily and CMBS Capital Markets at Freddie Mac. “That is the nature of the program--we have partnered with various mezz investors who directly provide the funding,” he tells GlobeSt.com.

In short, the financing is done in tandem and is complementary, but the actual competitive bidding and sizing of the loans is handled by the mezz partners. Brickman’s best guess? The agency is optimistic it will see $500 million to $1 billion of first mortgage purchases with a mezz component within a year. By extension, that translates into $50 million to $150 million of mezz volume for the first year.  

The deal Freddie Mac just closed using the new mezzanine finance arrangement was a $47 million first mortgage from M&T Capital Realty Corp. for a property in the Washington, DC suburbs. The borrower, Metropolitan Apartments at Camp Springs LLC, secured a mezzanine loan for $6.75 million from Berkshire Properties.

The property, Metro Place at Camp Springs, is a 397-unit garden-style affordable apartment community located in Camp Springs, MD, close to Andrews Air Force Base. The property was constructed in 2007, but the economic downturn caused the value to decline, making refinancing difficult.

Announced in March, and formally launched in the summer, Freddie Mac’s mezz lending program has four partners. Berkshire Properties, Carmel Partners, Essex Property Trust and Waterton Capital Solutions. It was launched to help borrowers refinance properties whose values have dropped. In a typical deal, Freddie originates a first mortgage with a fixed rate and the mezz lender provides another 15% at either a fixed or floating rate.