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CRE Finance World, Winter 2013

The Freddie Mac K Program: Quality, Stability, Liquidity Liquidity and the Investor Base in the Freddie Mac K Program The investor base in Freddie Mac K deals is well diversified with Since the launch of the program in 2008, the program has been banks currently accounting for about one third of the investor base, well received by investors resulting in explosive issuance growth. insurance companies and pension funds accounting for just under During 2009 two deals worth approximately $2 billion were issued. one third (30%) and money managers for just above a third (35% Deal issuance then tripled to six in the following year totaling just to 40%). Hedge funds have also participated, most typically in the over $6 billion and then more than doubled again with 12 deals lower rated, non-guaranteed classes, attracted by a combination worth almost $14 billion in 2011 (see Figure 11 below). So far this of generous yields and a favorable opinion of the credit quality of year, issuance is on pace to increase 50% to approximately $20 the deals. billion on an annualized basis. To put this amount in context, we expect a similar amount of issuance, approximately $25 to $30 Consistent and Regular Freddie Mac K-Deal Issuance billion of total non-agency CMBS 2.0 conduit deals, in 2012. Given Since the first K-Deal settled in June 2009, Freddie Mac has the market’s acceptance of this product and the general strength continued to consistently issue K-Deals. The characteristics of of the multifamily sector, we expect K issuance to continue to grow these K-Deals are comparable across many key features including rapidly in 2013 albeit a bit slower than the torrid pace of the last transaction size, credit characteristics and geographic concentration. few years. A regular issuance schedule of about one deal every three or four weeks contributes to the market’s reception of the product. Figure 11 K-Deal Issuance Source: Freddie Mac A publication of Winter issue 2013 sponsored by CRE Finance World Winter 2013 35


CRE Finance World, Winter 2013
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