The Easing Credit Crunch II

Includes: FMCC, FNMA
by: Greg Newton

Tishman Speyer and Lehman (LEH) closed on their $22.2 billion purchase of Archstone-Smith Trust late last week, in a development widely interpreted as yet another sign of the easing credit crunch. Yeah?

Fannie (FNM) agreed to buy a $7.1 billion loan backed by 105 apartment buildings that were part of the transaction. Freddie (FRE) agreed to purchase $1.8 billion of loans backed by mortgages on 32 buildings.

The vast majority of the coverage either relegated the somewhat material fact of the GSEs’ involvement well down the story (The New York Times got to it in the sixth para) or left it out entirely. So congratulations to the The Wall Street Journal for getting the GSEs into the lede, even if it did manage to knock about a third off the consensus value of the transaction. And couldn’t resist bulling the impact of what is essentially subsidized property speculation by one company—FNM— that aspires to become current in its financial reporting obligations by Feb. 2008, and another—FRE— that only recently buried the remnants of its own fraud.

The closing is a positive sign for commercial real estate, which has been buffeted by the credit crunch, and for the overall mergers and acquisitions market, where hundreds of billions of dollars of deals are backed up, waiting for credit to ease.

Deal for Apartment Giant Completed [$$]
by Ryan Chittum and James R. Hagerty
The Wall Street Journal Oct. 6 2007

Deal Is Complete to Take Archstone REIT Private
Google News

Disclosure: Author is Short (NYSEARCA:IYR), (MUTF:SRPIX).