Berkadia, Berkshire Hathaway’s joint venture with Leucadia National Corporation, has acquired a 50 percent ownership interest in Riverside Capital, a full-service tax credit investment company offering capital solutions to developers of high-quality affordable housing across the country.
Riverside has guided the financing and syndication for more than 7,500 affordable units across the country, representing $900 million of equity capital.
“This acquisition gives Berkadia the opportunity to expand our presence in the affordable housing space by enabling access to a deep network of developers and investor relationships,” said Berkadia CEO Justin Wheeler. “Riverside’s reputation as an established tax credit syndication platform, with its proven track record of providing capital solutions to the affordable housing industry’s leading development companies, appealed to our desire to grow within this increasingly important asset class.”
The acquisition creates a joint venture between Berkadia and The Michaels Organization, the nation’s largest privately-held owner and developer of affordable housing. Riverside, which is national in scope, has provided tax credit syndication services for top-tier affordable housing developments across the country, including for Michaels.
“We are proud to partner with Berkadia, one of the multifamily housing industry’s most respected and successful full-service mortgage banking, loan servicing and investment sales firms,” said John J. O’Donnell, president of The Michaels Organization. “This partnership propels Riverside into a position ripe for growth as an industry-leading capital provider and tax credit syndicator for much-needed affordable housing.”
“The partnership allows us to expand Riverside Capital’s capacity while continuing to offer our clients best-in-class opportunities and services,” said Sebastian Corradino, president of Riverside Capital. During Corradino’s tenure with Riverside, the firm more than doubled its volume and expanded its originating, underwriting and asset management teams.
Consistent with this strategy of growth in the affordable housing market, Berkadia has named Steve Ervin as the head of its prominent affordable housing group, charged with growing this platform. Mr. Ervin will lead the coordination of Berkadia’s affordable debt products including Fannie Mae, Freddie Mac and HUD. In his time at Berkadia, Mr. Ervin launched the Seniors Housing and Healthcare group and is currently the head of Berkadia’s HUD production team, who was ranked #1 for volume in fiscal 2017. He will draw upon that experience to manage Berkadia’s expansion in the affordable housing industry.
In 2017, Berkadia’s loan origination volume surpassed $24 billion while its investment sales platform totaled nearly $8 billion.
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.
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.
© 2018 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.