In 1852, four years after gold flakes were first discovered at Sutter’s Mill, Henry Wells and William Fargo founded a company that would play a crucial role in the California Gold Rush. Wells Fargo’s bankers would buy gold and guarantee transactions, and its six-horse stagecoaches would hurtle across the Great American West, delivering the goods.
Fast forward more than 150 years and the gold is all gone, but Wells Fargo now finds itself at the center of a potentially even more lucrative industry: the New York multifamily market. Its outsized influence in the Stuyvesant Town-Peter Cooper Village deal emphasizes this: the bank was the master servicer and lead lender under the old ownership, it owns Eastdil Secured, the firm that brokered the transaction, and it is also originating the acquisition loan for the new buyers.
On Monday, government-backed mortgage insurer Fannie Mae announced that Wells Fargo is originating a $2.7 billion acquisition loan to the Blackstone Group and Ivanhoe Cambridge for Stuy Town. The loan will be passed on to Fannie Mae, stamped with its guarantee, and repackaged and sold on as commercial mortgage backed securities. According to a statement from Fannie Mae, Wells Fargo will retain a portion of the credit risk.
Nadeem Meghji, Blackstone’s co-head of U.S. acquisitions, told The Real Deal that the buyers considered both private-market financing and financing backed by the so-called agencies – Fannie Mae and Freddie Mac. In the end, agency-backed financing proved cheaper, although he claimed that “people would be surprised by how narrow the spread was even on this transaction.”
Blackstone executives were clear from the start that if they chose the agency route, they’d go through Wells Fargo. “We have a long track record of doing business with the bank,” Meghji said. Earlier this year, Wells Fargo and Blackstone partnered to buy GE Capital in a $26.5 billion deal, with the bank buying up $9 billion in mortgages.
Wells Fargo declined to comment for this story. One prominent mortgage broker who spoke on the condition of anonymity said Wells Fargo’s track record as a major multifamily lender makes it an unsurprising choice to finance the Stuy Town acquisition. Between the first quarter of 2014 and the second quarter of 2015, the bank originated 818 commercial real estate loans worth $4.9 billion in New York City, according to finance database Credifi.
Barring any gargantuan last-minute deals in December, the Stuy Town financing will be the largest commercial real estate loan for a New York City property originated in 2015.
“You’re dealing with two of the largest players in industry and one of the largest deals,” the broker said. “It makes sense that one of the biggest banks would do it.”
What makes Wells Fargo’s involvement somewhat unusual is that it also played a big role under the old ownership. The bank is the master servicer on two CMBS loans totaling $1.75 billion that financed Tishman Speyer and BlackRock’s acquisition of Stuy Town in 2006, meaning it accounted for a large chunk of the $3 billion in debt on the property. After Tishman Speyer and BlackRock defaulted in 2010, special servicer CWCapital took control of the property on behalf of the lenders.
Sources said Wells Fargo played no significant role in the sales negotiations this year, which were driven by CWCapital. But as the master servicer tasked with making sure CMBS bondholders get paid, the bank likely still held some sway.
“Wells Fargo has dedicated much manpower and time into seeing that a resolution for these loans are met,” said Sean Barrie, a research analyst at Trepp, which tracks CMBS loans. “A master servicer/lender does hold notable influence over the potential sale of a loan since it’s their money at play.”
And while Wells Fargo may not have been directly involved in the negotiations between CWCapital and Blackstone, it certainly was involved indirectly. The bank owns Eastdil Secured, whose Doug Harmon, in Meghji’s words, “orchestrated a very complicated transaction and played a big role bringing multiple stakeholders together.”