SPECIAL FOCUS: AFT'S TOP 50 MULTIFAMILY LENDERS

APARTMENT FINANCE TODAY • FEBRUARY 2008

Collateral, Laureate Join Forces

Grandbridge Real Estate Capital sets aggressive goals for 2008.

By Jerry Ascierto

The name Grandbridge Real Estate Capital may not be familiar to developers now, but that should change by the end of 2008.

Grandbridge was formed in October 2007, when BB&T Corp. purchased Collateral Real Estate Capital and combined it with its existing commercial mortgage-banking firm, Laureate Capital, which it purchased in 2000.

The new entity leverages Collateral’s strength as a Fannie Mae, Freddie Mac, and Federal Housing Administration (FHA) lender with Laureate’s expertise in institutional and commercial mortgage-backed securities (CMBS) lending.

Laureate relied on the CMBS market for about 40 percent of its originations up until that market’s decline in June 2007, a void the company expects to fill with its new agency lending programs.

“As a company, we’re determined to have a multidiscipline approach,” said Thomas Dennard, CEO of Grandbridge and a former founder of Laureate Capital. “We now have the products that work wherever we are in the cycle, between our life company activity, the CMBS side, and now we have a full complement of Freddie, Fannie, and the Department of Housing and Urban Development.”

For its own part, Collateral Real Estate Capital has been steadily growing over the last few years. In last year’s APARTMENT FINANCE TODAY rankings, Collateral took the No. 20 slot with more than $1.4 billion in multifamily loan volume, but just one year later, the firm climbed to the No. 15 slot with more than $2.1 billion.

Grandbridge has its sights set higher for 2008. The company believes it has the potential to do more than $3 billion in multifamily lending in 2008. In all, the acquisition created a company with more than 325 employees, and 27 origination offices throughout the country. The acquisition also more than doubled Laureate’s servicing business, from about $10 billion to nearly $20.2 billion.

Filling the void

The acquisition brought Laureate the ability to originate Fannie Mae loans, and expanded its Freddie Mac efforts. Laureate was already a part of Freddie Mac’s Program Plus network, but it couldn’t originate loans in some key areas where Collateral had a Freddie Mac license, such as Florida and Ohio.

Collateral’s status as a member of the FHA’s Multifamily Accelerated Processing program was also attractive to Laureate. In November and December alone, Grandbridge lined up more than $80 million in construction and permanent financing through the FHA’s Sec. 221(d)(4) and Sec. 223 programs. The company expects to close these deals this summer.

The company said it is looking to add staff to these programs in 2008 in anticipation of increased volume. Fannie Mae, Freddie Mac, and FHA financing continue to be lower-priced than CMBS, Dennard said. Government-sponsored enterprise loans for new multifamily construction are featuring interest rates of about 5.7 percent on average, with CMBS pricing closer to the high-6 percent range.

The company expects the CMBS market to pick up around the middle of the year. “CMBS is on the sidelines, you’ve only got a very little bit of water coming out of that spigot right now,” said Dennard. “I think it’s going to be mid-summer to fall before we see any reasonable [CMBS] activity.”

In addition to beefing up its agency programs, Grandbridge plans to develop a proprietary lending program in 2008, a bridge loan program that the company hopes will lead to more permanent loan opportunities.

Stay tuned.