Written by Adam Tempkin for Bloomberg on June 10, 2019.
Established in 2016, Freddie’s Green Advantage Program finances energy and water improvements on multifamily properties. The program issues loans over a two-year time frame, targeting affordable, below-market rental units for community-based workers, including teachers, nurses, and firefighters. The new series will exclusively securitize loans made through Freddie’s Green Advantage Program, ensuring that borrowers are committed to their mission of sustainability. Freddie mandates that borrowers reduce energy or water consumption by a total of 30%. If a borrower fails implement the efficiencies within two years, they functionally default on the loan.
Freddie Mac is launching a new commercial mortgage-backed security program, issuing its first green bonds. The series is backed by loans issued to apartment building owners who have agreed to make their properties more sustainable. The first bond, catered to money managers seeking ESG investments, is set to be sold on June 17 at a net value of $475 million.
Robert Koontz, senior vice president of multifamily capital markets at Freddie Mac, issued a statement on the new series of CMBS. “Our primary goal with this transaction was to accomplish two things; first, to acknowledge growing investor demand for ESG fixed-income products, and second, to highlight our successful green program, which benefits our borrowers, renters, and the environment.”
Freddie has now purchased $45 billion in green loans from its network of lenders. Estimates indicate that the program has resulted in efficiency improvements for 1,600 multifamily properties and lowered utility costs for 450,000 units nationwide. Rival GSE Fannie Mae launched a multifamily green financing business in 2010, issuing its first green bonds in 2012. It has sold more than $50 billion of social impact securities.
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