UPFRONT: NEWS
APARTMENT FINANCE TODAY • FEBRUARY 2008
BofA Buys Countrywide
Charlotte, N.C.—Bank of America announced plans to
buy troubled home loan giant Countrywide for about $4 billion
Jan. 11. The purchase will make Bank of America the
nation’s largest mortgage lender and loan servicer at a time
when crisis in the home mortgage business threatens to
push the U.S. economy into a recession.
“Countrywide presents a rare opportunity for Bank of
America to add what we believe is the best domestic mortgage
platform at an attractive price,” said Bank of America
Chairman and CEO Kenneth D. Lewis.
The deal follows Bank of America’s $2 billion investment
in Countrywide last August and will give Countrywide
stockholders about $6.90 a share in Bank of America stock,
based on BofA’s share price at press time. That represented a
19 percent premium to Countrywide’s closing share price at
press time.
The market value of Countrywide, based in Calabasas,
Calif., has plunged 87 percent to $3.36 billion over the past 12
months as defaults and foreclosures drove the lender to
declare a $1.2 billion loss in the third quarter, the home
mortgage giant’s first loss in 25 years. The company is also
vulnerable to shareholder lawsuits and questions about its
conduct in bankruptcy proceedings involving its customers.
However, Bank of America has denied rumors that
Countrywide was on the brink of bankruptcy.
Bank of America expects the transaction to close in the
third quarter and plans to operate Countrywide separately
under the Countrywide brand, with integration occurring no
sooner than 2009.
Boston Capital Sells REIT
Boston—Boston Capital sold its real estate investment
trust (REIT) to an affiliate of BPG Properties, Ltd., a private
equity real estate fund manager based in the Philadelphia
area that owns more than 24,000 apartments in 21 states.
The transaction closed Jan. 15.
Formed in 2003, the Maryland-based REIT owns interests
in a portfolio of 11 apartment properties consisting of
3,098 units in Washington, Oregon, Utah, Florida, and Texas.
The REIT’s parent company, Boston Capital, is a leading
investor in affordable housing, though the units in the
REIT’s portfolio rent at market rates.
The all-cash transaction offered the Boston Capital REIT
stockholders a price of $13.30 per share, which represented a
33 percent premium to the REIT’s initial $10-per-share
offering price, plus a pro rata portion of the regular monthly
dividend.
The purchase agreement was announced last November.
Since then, BPG has purchased 483 units at three communities
in Kansas City, Mo., for $22.4 million, and 308 units in a
Class A apartment complex in Upper Gwynedd, Pa.
Dutch
Pension Fund
Commits to
Multifamily
Following its initial $100 million
commitment last spring, Dutch pension
fund PGGM will invest an additional
$100 million in Behringer
Harvard’s expanding portfolio of
Class A apartment communities.
PGGM has an option to increase its
commitment to a total of $300 million.
PGGM is a pension fund for Dutch
health care workers with more than
$100 billion in assets. It is the secondlargest
pension fund in the
Netherlands, the eighth-largest in
Europe, and the 17th-largest in the
world.
Robert Behringer, founder and
CEO of Dallas-based Behringer
Harvard, said that since initially partnering
with PGGM in May, his company
“has completed, or is in the final
stages of completing, transactions in
11 outstanding Class A apartment
assets.” They are or will be located in
the metropolitan areas of Atlanta;
Dallas; Denver; Houston; Fort
Lauderdale, Fla.; Las Vegas; and
Washington, D.C.
This is the pension fund’s first
direct investment in U.S. real estate.
Behringer Harvard and PGGM are
co-investing with multifamily developers
such as Fairfield Residential,
Trammell Crow Residential, and the
Altman Cos.
The duo plans to focus on upscale
developments in areas with high barriers
to entry and hold the assets for
seven to 10 years.
Behringer Harvard will provide
strategic management for each joint
venture, including acquisition, asset
management and disposition services,
legal and accounting services, and
property management.
East Palo Alto Imposes
Six-Month Rent Freeze
The East Palo Alto, Calif., City Council passed an ordinance imposing a sixmonth
rent freeze after some community members expressed concern over a
move by locally based Page Mill Properties to increase rents at about 1,300
units Dec. 1. The proposed increases range from $36 to $150.
Page Mill Properties has acquired 1,620 apartments in the community over
the last 15 months. About 1,300 of the company’s units are governed by the
community’s rent stabilization ordinance, which covers about 2,500 apartments
in all. Page Mill CEO David Taran has said he plans to file a lawsuit,
according to a report in the San Jose Business Journal.
Landlords whose properties are covered by rent stabilization laws are permitted
to raise rents annually by the rate of inflation as set by the federal government.
In question is whether those annual increases can be saved from year to
year when they are not applied, and then imposed later.
MBA Praises
HUD’s MIP
Decision
The Mortgage Bankers
Association (MBA) lauded the
Department of Housing and
Urban Development’s (HUD)
decision to rescind a notice that
would have increased the mortgage
insurance premiums (MIP)
of a number of multifamily programs.
“After the administration proposed
the fee
increase in its
2008 budget,
117 members
of the House
and 38 senators
signed
letters to
HUD opposing
the premium
increase.
HUD listened
to those concerns as well as the
229 letters submitted by the
industry stating the Federal
Housing Administration is a vital
financing mechanism, particularly
in the current volatile credit markets,”
said MBA Chairman Kieran
Quinn in a prepared statement.
The MBA provided evidence
that the programs affected by the
increased fee were providing
affordable housing. The MBA survey,
which looked at programs
affected by the proposed MIP
increase, found that 98 percent of
the properties had average rents
affordable to families earning 80
percent or less of the area median
income.
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