Sam Zell and Bob Lurie first entered the game in the early 1960s when they managed student apartment buildings at the University of Michigan. On the foundation of that partnership, they grew their business into one of the most well-known
ad successful investment companies in the world. These days, Zell is chairman of
Equity Group Investments, the parent company of Equity Residential.
In its own right, EQR is one of the most widely respected multifamily enterprises
in the country. In fact, the S&P 500 company celebrated its 25-year anniversary as a
publicly traded entity this past summer. Focusing on the acquisition, development
and management of urban and high-density suburban rental apartments primarily
located in coastal gateway markets. The REIT owns or has investments in 306 properties in more than 79,000 units nationally.
David J. Neithercut Mark J. Parrell
The firm has shaken up both its strategy and executive ranks in recent years.
Beginning in 2015, EQR started exiting non-core markets, selling off assets in South Florida, Denver and New England, and shed its
US-based military housing holdings. The move shrunk the size of the portfolio by nearly a quarter, but it also improved its overall quality.
Meanwhile, EQR revealed this past September that its top executive will soon step down. After serving as president and CEO since
2006, David J. Neithercut will retire at the end of this year. The firm moved Mark J. Parrell in the post of president. The former EVP and
CFO will join the EQR board of trustees and prepare to take the helm of the company at year’s end. Neithercut, meanwhile, will remain
a member of the board following his retirement.
Earlier this year Fannie Mae completed a transaction in which seven reinsurers and insurers took on about $166 million of multifamily credit risk on a pool of debt that totaled around $11.1 billion. The transaction, a credit insurance
risk transfer, was the first time Fannie Mae widely marketed these assets to reinsurers and was pleasantly surprised to
find the deal oversubscribed.
It shouldn’t have been. For years Fannie Mae, as well as its counterpart Freddie Mac, have been expanding and
tweaking their investment product lines to make them more attractive to a broader array of investors. Fannie Mae, in
particular, has gotten quite good at that, introducing a number of innovations that have appealed to investors outside
of Fannie Mae’s usual audience in 2018 alone. For instance, it made a change to its benchmark Connecticut Avenue
Securities structure so they would better suit mortgage REITs’ portfolios. Briefly, Fannie Mae is now structuring CAS
offerings as notes issued by trusts that qualify as Real Estate Mortgage Investment Conduits.
In another move, a Fannie Mae Multifamily Green GeMS REMIC has been added to Bloomberg Barclays MSCI
Green Bond Index, opening the door for a more diverse investor base and improving its liquidity to boot.
Multifamily borrowers—alongside the investors—have also benefited from the GSE’s innovation spree. At the start
of the year Fannie Mae added a new product to its Healthy
Housing Rewards initiative called Enhanced Resident Services.
Its goal is to encourage multifamily borrowers to provide services that improve the health and well-being of tenants in
affordable housing. Examples include health and wellness
screening, connecting residents with government health benefits, after-school programs, on-site food banks, financial literacy
classes and job training or GED programs.
Jeffery R. Hayward
From January through August 2018, Fannie provided $37.3 billion in financing to support multifamily housing. It’s a telling
number, as last year neither Fannie nor Freddie used the 2017
Michele M. Evans
Fannie Mae has been lauded for other green initiatives—
indeed its overall green finance programs are seen as a trendset-ter in the field. It earned the 2018 ENERGY STAR Partner of the
Year Award for Sustained Excellence, for example. Also, the
Climate Bonds Initiative recognized Fannie Mae as the largest
issuer of green bonds in the world last year, when Fannie Mae
issued $27.6 billion in green mortgage-backed securities that
were backed by either green building certified properties or
properties targeting a reduction in energy or water consumption. This was up from $3.6 billion in 2016 and $111 million in
2015. With its award, Fannie Mae became part of a community
of “organizations and individuals who are amongst the new
leaders of global finance, creating new markets and mobilizing
the green capital urgently needed to address climate change,”
according to Climate Bonds’ CEO, Sean Kidney.
48 REAL ESTATE FORUM OCTOBER 2018