Two new agency lenders were created this month. And while the company names are new, the faces behind them are very familiar.
This week, Enterprise Community Partners merged with Bellwether Real Estate Capital to form Bellwether Enterprise Real Estate Capital. And earlier this month, Ranieri Real Estate Partners and WL Ross & Co. completed their acquisition of Deutsche Bank Berkshire Mortgage, renaming it Berkeley Point Capital.
The Enterprise/Bellwether merger is a highly complementary affair. Bellwether was already a Freddie Mac Program/Plus and Federal Housing Administration (FHA) lender, and focused on market-rate transactions in the midwest and southeast. Enterprise, on the other hand, held a Fannie Mae special affordable license, as well as a Freddie Mac affordable license, which are both national in scope.
“The merger was attractive to us because of the fact that we could add additional products—we have experts now that we can turn to as far as affordable housing,” says Ned Huffman, president of Cleveland-based Bellwether Enterprise. “We’ve always been more regionally based and this merger really allows us to have a national platform.”
Enterprise’s Fannie Mae license not only applies to affordable housing, but workforce housing as well, defined as housing affordable to tenants making 115 percent of the Area Median Income. “Most of the product in the Midwest fits within that workforce housing test, so we should be able to provide good product flow into that program,” says Huffman.
Last year, the companies combined for about $1.3 billion in multifamily debt production, and hope to do about $1.4 billion this year. All told, Bellwether Enterprise will hit the ground running with about 90 employees.
For Enterprise, the merger quickly rounds out its product offerings and provides a springboard for the kind of growth that comes very slowly when done organically, internally.
“We had significant goals to grow the business at Enterprise, and we felt that merging with someone would be the best execution,” says Lamar Seats, previously senior vice president at Enterprise, will be CEO of the new company. “And now, once we get the two companies put together, we have a prudent but fairly aggressive growth plan in place.”
DBBM now Berkeley Point
Deutsche Bank Berkshire Mortgage was already one of the biggest agency lenders out there, having originated about $3 billion in Fannie, Freddie and FHA debt last year. Now dubbed Berkeley Point, the company is hoping to further expand its reach.
Given the background of Lewis Ranieri—considered a founding father of the CMBS industry—one would assume that Berkeley Point would complement its agency offerings with a conduit execution. But given the volatility of the conduit business model, it’s a difficult business to rationalize.
“We haven’t ruled it out, but what we’re really looking to do is fill out some of the geographic areas that we’re probably a little weaker in,” says Jon Vaccaro, head of real estate at Uniondale, N.Y.-based Ranieri partners. “And we’re looking at adding some other products—a correspondent insurance company or Wall Street relationship probably makes more sense for us than the conduit business. And a bridge program is high on our priority list.”
The company hopes to process between $3 billion and $4 billion this year as the multifamily industry continues to ride a wave of demand driven by favorable demographic trends and limited supply. But while the fundamentals are solid, Vaccaro doesn’t expect to see much cap rate compression this year, as alternative investments start to draw more capital away from the multifamily sector.
“There are a lot of reasons to look at the demand side and say that rents should rise and vacancies should fall,” he says. “But I think cap rates have come a long way and are going to flatten out. It’s hard to predict that cap rates are going to continue to rally, because there are alternative investments now; for instance, people are starting to get interested in the stock market again.”
The re-branded and now independent firm will be led by CEO Jeff Day, former CEO of DBBM. Berkeley Point begins life with 175 employees operating out of Bethesda, Md., Boston, Irvine, Calif., Dallas, Los Angeles, Nashville, Tenn., and Seattle.
