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February 28, 2020  

Barings Puts Agency-Lending Unit in Play

Barings is looking to sell or recapitalize a business unit that originates mortgages for Fannie Mae and Freddie Mac.

The investment-management arm of MassMutual is in talks with one or more parties about selling its Barings Multifamily Capital subsidiary or raising a substantial chunk of capital from an equity partner to expand the Plano, Texas, operation. A deal could be finalized in 60 days or so, sources said. Barings, headquartered in Charlotte, is being advised by Bank of America.

It’s unclear how investors might value the business. On the plus side, Barings Multifamily Capital is among a relatively few multi-family lenders licensed by both Fannie and Freddie. Fannie’s Delegated Underwriting and Servicing (DUS) program encompasses 25 lenders, while Freddie counts 23 in its main multi-family production line, called Optigo.

But the unit’s loan-origination volume has stagnated since Barings acquired the business in a 2016 deal in which it paid Ares Management $93 million for its ACRE Capital subsidiary. Last year, $361 million of loans written by Barings Multifamily went into Fannie and Freddie securitizations, for a 0.4% market share, according to Commercial Mortgage Alert’s CMBS Database. That was up from $322.2 million the year before, but down from $531 million in 2015 — the last full year under Ares’ ownership. The decline has occurred even as overall agency multi-family volume has spiked in recent years.

All told, Barings Multifamily’s originations amounted to $812 million last year. The total included mortgages that weren’t securitized by Fannie or Freddie, as well as FHA loans it originated.

The narrow field of agency lenders, combined with the prospect of acquiring a turnkey underwriting and servicing operation, could make the business appealing to a range of possible buyers. Among them: large brokerages that might want to expand their debt capital-markets services with the addition of an agency-origination platform. National brokerage firms including CBRE, JLL and Newmark already are among the most active agency-loan originators.

When Barings acquired ACRE, it named Jamie Henderson to lead the operation. Henderson had been head of structured real estate investments at Barings Real Estate Advisers. But six months after the deal closed, he left to join Ares’ real estate group as co-head of real estate debt. Henderson has since moved on to Capital One, where he took over as head of real estate in November.

Robert Little, head of debt underwriting and servicing for Barings’ real estate division, now also serves as president of Barings Multifamily. Senior managing director Brad Casey chairs the unit’s investment committee.

MassMutual formed Barings in September 2016 by combining Babson Capital and Cornerstone Real Estate with two other investment units.