Berkadia, Berkshire Hathaway’s joint venture with Leucadia National Corporation, has arranged financing totaling nearly $1 billion for the acquisition of the Beacon multifamily property portfolio.
Managing Directors Laura Cathlina and Sharon Plattner of Berkadia’s Chicago office secured the Freddie Mac loan on behalf of affiliates of Harbor Group International. The deal closed on November 30.
“Our team was pleased to have been given the opportunity to assist Harbor Group International with the financing of this exclusive portfolio that supports their diversified investment strategy,” said Cathlina. “The end result was a creative multi-faceted loan structure which will provide Harbor a significant amount of flexibility for future decision making. Our partners at Freddie Mac did an outstanding job in working with us to structure this transaction.”
The Freddie Mac financing encompasses 16 properties located in Boston, Baltimore, Chicago, Washington D.C. and Philadelphia, which are part of an overall 25 property portfolio. Eleven of the properties were financed with a fixed rate vehicle for over $789 million. The remaining five properties were financed with a floating rate vehicle for over $138 million.
“The acquisition of the Beacon portfolio represents a milestone transaction for Harbor Group International (HGI) as we continue to grow our investment portfolio,” commented T. Richard Litton, Jr., HGI president. “We are very appreciative of Berkadia’s work on our behalf to structure almost $1 billion of Freddie Mac fixed and floating rate debt.”
Since the beginning of 2017, Berkadia’s mortgage banking team has closed over $19 billion in production volume – an increase of 22 percent compared to the previous year. In 2016, Berkadia’s loan origination volume was $20 billion, ranking first with U.S. Department of Housing and Urban Development, second with Freddie Mac and fourth with Fannie Mae in delivered loan volume.
Founded in 2009 as a 50/50 joint venture between Berkshire Hathaway and Leucadia National Corporation, Berkadia is a third-party commercial mortgage servicer, as well as an approved lender for Fannie Mae, Freddie Mac, and HUD/FHA.
The company is among the top Freddie Mac and Fannie Mae multifamily lenders. In 2016, Berkadia’s loan origination volume was $20 billion, ranking first with U.S. Department of Housing and Urban Development, second with Freddie Mac and fourth with Fannie Mae in delivered loan volume—the only lender in the top four for all three organizations.
Berkadia owes its origins to GMAC Commercial Mortgage Corporation, which was acquired in 2009 by Kohlberg Kravis Roberts & Co., Five Mile Capital Partners LLC, and Goldman Sachs Capital Partners. Christened Capmark Financial, the company had $10 billion of originations in 2008 and a servicing portfolio of more than $360 billion before running into bankruptcy in October 2009.
In a deal approved by the bankruptcy court, Capmark sold its mortgage loan and servicing to the newly formed Berkadia in a deal worth $515 million.
The deal brought Berkshire into the heart of the commercial loan serving business, and the company has one of the largest commercial real estate servicing portfolios.
© 2017 David Mazor
Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.