Colonial Properties Bucks Trend, Snagging $350M Credit Facility from Beleaguered Fannie Mae

Sizeable loans are eluding most real estate concerns these days, but Colonial Properties Trust has proven to be one of the exceptions. The Birmingham, Ala.-based REIT just closed a $350 million credit facility originated by PNC ARCS L.L.C. for repurchase by troubled mortgage lender Fannie Mae, which, despite a 2008 loss of $58.7 billion, is apparently not shying away from big deals. Colonial’s new credit facility, secured by 19 multi-family assets encompassing an aggregate 6,565 residential units, comes with a 10-year term and a 6.04 percent weighted average fixed interest rate. The REIT will use the proceeds to pay down its $675 million unsecured line of credit, leaving the balance at only $35 million. Additionally, the facility allows for the increasing of the company’s liquidity for the management of debt maturities through 2010, and the shoring up of its unsecured bond repurchase program. Having suffered a dismal year, Fannie Mae–which, along with Freddie Mac, was taken over by the government last year–on bended knee, requested $15.2 billion from the U.S. Department of the Treasury on February 25 under the Senior Preferred Stock Purchase Agreement to erase its net worth deficit. If all goes as planned, Fannie Mae will get its multi-billion rescue by March 31. Despite its woes, Fannie Mae remains relatively active outside the single-family housing market. “While their volume levels are down, Fannie Mae and Freddie Mac continue to lend on multi-family; they made up over 90 percent of all multi-family lending in 2008,” Rod Petrik, managing director with brokerage and investment banking firm Stifel Nicolaus & Co., told CPN. “Their criteria have gotten tighter, loan-to-value is a little lower, but they continue to lend. They generally look for sponsorship–larger companies with equity–so they have become very aggressive lending to apartment REITs; despite their lower share prices, apartment REITs still have equity.” Colonial Properties, which closed 2008 with an owned or managed portfolio of 35,504 apartment units, 16.5 million square feet of office space and 8.9 million square feet of retail space, saw its stock hit a high of $26.35 and a low of $3.43 over the last 12 months. Also benefiting from Fannie Mae’s sustained willingness to lend, Equity Residential closed a $543 million Wells Fargo-originated secured loan with Fannie Mae in December, and UDR Inc. wrapped up a $225 million secured loan, obtained through PNC ARCS L.L.C., with the mortgage lender earlier that month.