'This is the Time' to Try GSEs

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NEW YORK CITY—Some multifamily borrowers have been hesitant about arranging mortgages through Fannie Mae or Freddie Mac, but Grace Huebscher believes that such hesitancy is misplaced. “If you haven't tried agency, this is the time to do it,” Huebscher told the audience at a recent panel discussion sponsored by Capital One Multifamily Finance, where she's president of agency multifamily finance. “They're incredibly aggressive on price right now, and one of the things I've been really impressed with over the past six to nine months has been the structuring flexibility. We did a $270-million deal here in New York City, a highly structured deal, and a broker whose name you'd all know was shocked that we got this done with the agencies.”

Huebscher moderated a recent panel discussion at the Union League here that brought together representatives from the two GSEs and some of their largest clients. Along with Hilary Provinse, VP of multifamily at Fannie Mae, and Richard Katzenstein, managing regional director at Freddie Mac Multifamily, attendees also heard from Lisa Pendergast, managing director and co-head of CMBS strategy and risk at Jefferies & Co.; Paul Nasser, CFO and COO with Intercontinental Real Estate Corp.; and Michael Bar, VP of finance at TF Cornerstone.

Both Provinse and Katzenstein expressed confidence with the current lending environment and the current FHFA environment, albeit not without some concerns. “We're absolutely working with our regulators and we feel like this loosening of the regulatory landscape is going to continue for the coming years,” said Provinse. “They've been much more flexible about innovation, encouraging innovation. We don't see a legislative solution anytime soon, so we're settling into a longer-term regulatory relationship.”

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Although satisfied with what she called “a ton of activity” in the realm of transactions, Provinse saw a few potential trouble signs in the market's deal volume. “We're seeing things heat up, particularly some of the prices on some of the bigger transactions,” she said. “Borrowers are paying up for size. In the old days, there was a discount for scale. Now it's almost the opposite. I wouldn't say the market's overheated, but we're looking pretty closely at the margins right now. That being said, we're typically a seven- and 10-year lender, and feel we're being appropriately aggressive.”

For his part, Katzenstein said there's cause for some concern in the fact that leverage is “starting to widen out a little bit.” That's more the case, though, with deals that involve securitization; “the GSEs don't really move the needle much” in that regard.

Asked whether he's been seeing more interest in acquisitions or in refinancing, Katzenstein pointed out that his Northeast backyard is prone to “generational holds,” especially in the New York tri-state area. “You have generations of families owning these properties, so there's not that much velocity in the market,” he said. “With that, you get less acquisition and more refinance. We're probably seeing 20% acquisition and 80% refinance. But if you look at all other regions of the country, you're seeing the reverse,” with a mix of about 75% acquisition financing to 25% refi.