Firms controlled by mortgage bond pioneer Lewis Ranieri and billionaire investor Wilbur Ross are partnering to buy Deutsche Bank Berkshire Mortgage, a major lender to investors in U.S. apartment buildings, the companies said Monday.
Ranieri Real Estate Partners LP and private equity funds affiliated with WL Ross & Co. are paying an undisclosed amount for the unit of Deutsche Bank AG which makes loans to apartment building owners and then sells them to Fannie Mae and Freddie Mac. The unit originated more than $4 billion a year in mortgage loans at the market's peak and is the second largest originator of Fannie Mae-backed multi-family loans.
The deal reflects the strength of the multifamily market, which has bounced back faster than other types of commercial real estate, such as office and retail. Demand for rental apartments has been strong as the home ownership market has continued to suffer problems.
Many are betting that homeownership rates will stay low, buoying the apartment sector for some time to come. Still, the sector could take a hit if the economy declines, and the commercial real estate market has generally begun to cool recently. The U.S. Census Bureau reported last week that multifamily construction starts in August were down 10.3% from a year earlier.
The deal, which hasn't yet closed, comes as other investors have been buying up competitors in the space. In May 2010, a group led by Orix Corp. bought Red Capital Group, another Fannie Mae and Freddie Mac multifamily lender, from PNC Bank. And in June 2010, Fortress Investment Group LLC bought CW Financial Services, a broader commercial real estate firm that made loans for Fannie and Freddie.
