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Multifamily Viewpoints

International Interest in K-Deals Takes Me to Asia

By Mitchell Resnick*
Published on June 23, 2015

I recently traveled to Asia and back — quite literally around the world — to talk to investors about investing in our multifamily securities and U.S. rental housing.

I went there with a delegation from the trade organization Commercial Real Estate Finance Council (CREFC).  We made presentations to dozens of Asian investors from more than 30 countries who were interested in U.S. commercial mortgage debt products, including our K-Deal securities. Feedback was positive and reinforced the importance of educating the global investor community about opportunities to invest in U.S. commercial real estate debt.

Mapped Trip.jpg

Asia is a key focus for expanding sales of our multifamily securities.  In Kuala Lumpur, Beijing (remarkably smog free), and Tokyo, I visited a number of banks and financial institutions, both private and state-affiliated. Despite the long journey, I was reminded that it is in fact a small world:  At China’s state-run foreign exchange agency, I was surprised to be greeted by a former Freddie Mac colleague.

I found that investors — who know and like the Freddie Mac brand — weren’t always aware of our role in rental housing and the multifamily securities we offer.  My message was that our K-Deals may offer a superior return profile compared to other GSE products. Another selling point:  With K-Deals, investors new to commercial mortgage-backed securities can familiarize themselves with CMBS structures, while still enjoying a GSE guaranty on some tranches. Our securities are a good option because we remove the real estate credit risk by placing a Freddie Mac guaranty on the senior bonds. We use our guaranty to cover catastrophic risk, which we believe is the appropriate role for a GSE. Investors are also impressed with our collateral performance: We’ve done more than $100 billion in K-Deals and 99.9% of the collateral is current.

Today, foreign investment makes up a small share of our K-Deals. But after my recent trip, I’m excited by the prospect of expanding our Asian investor base.

foreign investor growth graphic

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*Mitch Resnick left Freddie Mac in April 2016. He was vice president of capital markets.

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