New York, NY – Centerline Holding Company (NYSE: CHC), the parent company of Centerline Capital Group (Centerline or the Company), and Freddie Mac (NYSE: FRE) announce completion of a securitization of Centerline’s $2.8-billion tax-exempt affordable housing bond portfolio with Freddie Mac. The transaction closed December 27, 2007.
Freddie Mac provided $2.8 billion in financing to Centerline for low-income multifamily properties located in underserved areas of the country. This is one of Freddie Mac’s largest multifamily transactions, and represents a refinancing of Centerline’s tax-exempt affordable housing bond portfolio. For Centerline, the transaction represents a major step toward Centerline’s evolution to an alternative asset management company.
“Securitization of our bond portfolio with Freddie Mac has accelerated our progress to transform Centerline to an alternative asset management company. The transaction materially improves our risk profile by reducing the funding- and interest-rate risk inherent in our liability structure,” said Marc D. Schnitzer, president and CEO of Centerline. “With a leaner balance sheet and an increased percentage of revenues derived from asset management services, we aim to produce returns and growth comparable to other publicly traded alternative asset managers.”
The $2.8-billion transaction comprises: 383 bonds secured by 275 multifamily low-income housing tax credit properties in 31 states and the District of Columbia representing approximately 52,000 currently occupied apartment units, with an additional approximately 5,500 units in construction or substantial rehabilitation. The properties are considered affordable rental housing for families and individuals.
Commenting on the transaction, Mike May, senior vice president Multifamily Sourcing for Freddie Mac said, “We’re proud to help finance a portfolio comprising so many affordable housing properties. It reaffirms our commitment to making adequate housing available and affordable to individuals and families of low- to moderate-incomes. This transaction demonstrates that we are capable of meeting more of our customers’ needs and the housing needs of families across America. We have the capability and expertise to complete complex deals of this size in compressed time frames. We are thrilled to work with Centerline, our long-term customer, as they transition their business.”
Securitization of Centerline’s bond portfolio was executed through Freddie Mac’s Tax-Exempt Bond Securitization (TEBS) product. Through TEBS execution, Freddie Mac issues senior and subordinate tax-exempt and taxable securities, with the senior securities guaranteed by Freddie Mac and supported by pools of tax-exempt and taxable multifamily housing revenue bonds.
Centerline retained a high-yield first-loss position, the B-piece, in the portfolio and will remain primary and special servicer of the portfolio.
“We are excited to partner with Freddie Mac on this innovative transaction,” said Mr. Schnitzer. “The repurchase of the B-piece and our ongoing servicing arrangement creates a fund management structure for the bond portfolio similar to our other funds.”
Centerline used proceeds from the Freddie Mac bond securitization to redeem its existing financing arrangements, retire corporate debt and repay the costs and expenses associated with the transaction. “Centerline’s goals are to increase assets under management and create greater earnings power. This transaction with Freddie Mac helps provide the resources to achieve our goals and capitalize on opportunities in the current capital markets,” added Mr. Schnitzer.
Last summer, Centerline became the first to achieve Freddie Mac Delegated Underwriting for Targeted Affordable Housing lender designation. Centerline now originates loans and underwrites them on behalf of Freddie Mac in accordance with Freddie Mac’s Delegated Underwriting Guide. This designation is expected to enhance Centerline’s affordable housing business and expand its assets under management. Centerline’s current assets under management are $11.6 billion.
About Centerline Capital Group
Centerline Capital Group, a subsidiary of Centerline Holding Company (NYSE:CHC), is an alternative asset manager with a core focus on real estate and more than $18 billion of assets under management.Centerline is headquartered in New York, New York and has over 500 employees in nine offices throughout the United States. For more information, please visit Centerline’s website: http://www.centerline.com/ or contact the Corporate Communications Department at (800) 831-4826.
About Freddie MacSince launching its current multifamily business in 1993, Freddie Mac has purchased more than $165 billion in multifamily mortgages, financing rental housing for more than four million families. Freddie Mac is a stockholder-owned corporation established by Congress in 1970 to support homeownership and rental housing. Freddie Mac purchases single-family and multifamily residential mortgages and mortgage-related securities, which it finances primarily by issuing mortgage-related securities and debt instruments in the capital markets. Freddie Mac has made home possible more than 50 million times, ensuring financing for one in six homebuyers and more than four million renters.
Certain statements in this document may constitute forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on management’s current expectations and beliefs and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties are detailed in Centerline Holding Company’s most recent Annual Report on Form 10-K and in its other filings with the Securities and Exchange Commission, and include, among others, inability to successfully implement the Company’s new strategy outlined in this press release, uncertainty of the market’s reception of the new strategy and dividend policy, adverse changes in real estate markets; competition with other companies; interest rate fluctuations; general economic and business conditions; environmental/safety requirements; changes in applicable laws and regulations; our tax treatment, the tax treatment of our subsidiaries and the tax treatment of our investments; risk of default associated with the mortgage revenue bonds and other securities held by us or our subsidiaries; risks associated with providing credit enhancement; risk of loss under mortgage loan loss sharing agreements; risk of loss from direct and indirect investments in CMBS; the risk that relationships with key investors and developers may not continue; our ability to generate fee income may not continue; and risks related to the form and structure of our financing arrangements. Words such as “anticipates”, “expects”, “intends”, “plans”, “believes”, “seeks”, “estimates” and similar expressions are intended to identify forward-looking statements. Such forward-looking statements speak only as of the date of this document. Centerline Holding Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in Centerline Holding Company’s expectations with regard thereto or change in events, conditions, or circumstances on which any such statement is based.