Freddie Mac Backs Deal Under Defunct Pilot ProgramThe nearly $26 million pact with Atlanta-based Promise Homes provides financing for more than 300 affordable rental homes
Freddie Mac is providing financing for a portfolio of more than 300 rental homes under a now-defunct pilot program intended to help address the shortage of homes for middle-class families.
Promise Homes, an Atlanta-based single-family rental owner, purchased the portfolio of homes spread out over the Atlanta metropolitan area and central Florida last year. Most of the homes are affordable to residents making less than 80% of the area median income and a number of residents also receive Section 8 rental-assistance vouchers.
The nearly $26 million deal with Freddie allows the company to obtain fixed-rate financing in a rising rate environment.
The two-year-old company also provides credit counseling to residents and incentives such as a $100 gift card if they improve their credit score by 25 points or a 10% rental reduction if they get their score over 700 points. The model is intended to create more stable tenants who pay their rent on time and to help residents eventually purchase a home.
“When you have a 580 credit score I’m chasing you for rent. I’m hammering you for late fees. You hate me. At a 700 credit score you pay like a coupon,” said John Hope Bryant, chief executive of Promise Homes.
Freddie Mac announced in April 2018 that it had provided financing to Promise Homes for a different portfolio of 117 homes, as well as toFront Yard Residential Corp. , another rental-home provider, under a $1.3 billion pilot program. The Federal Housing Finance Agency, which oversees Fannie and Freddie, announced several days later that both firms were getting out of the single-family rental market, saying there were enough sources of financing there without the firms’ involvement.
This deal is one of the last of that $1.3 billion allocation, but Mr. Bryant said he is still hopeful the company can work with Freddie on future financing deals.
Mr. Bryant grew up in the Compton neighborhood of southern Los Angeles and spent his early 20s as an investment banker. At the age of 26 he created Operation Hope, a nonprofit that provides credit counseling and other services to help improve financial literacy among lower-income families.
Government-backed mortgage-financing firm Freddie Mac and its counterpart Fannie Mae already back loans to apartment owners, typically allowing them to get lower rates. The firms have a mandate to support affordable housing. Both tiptoed into the single-family rental market, most prominently with a deal Fannie Mae did with one of the country’s largest single-family rental owners, Invitation Homes, to guarantee up to $1 billion of debt.
That deal received significant blowback from Realtors and other groups, which said the firms were arming investors to compete with ordinary home buyers.
“They did not stop the pilot because of financial performance or because there was something amiss with the underwriting criteria,” Mr. Bryant said. “The narrative became, why is Freddie and Fannie financing Wall Street players that can get capital anywhere?”
David Leopold, vice president of targeted affordable sales and investments at Freddie Mac said the pilot program had a much different character than the Invitation Homes deal. “There is a lack of predictable liquidity for single-family rentals, particularly for smaller, middle-market operators. The intent of the pilot was to fill that void,” he said.
With Promise Homes, Freddie Mac Delivers Affordability and Community Support
NEWS RELEASE | 08-6-2018
Source: Freddie Mac
Freddie Mac, CBRE Announce Transaction to Bring Affordability to Atlanta, Orlando and Tallahassee
MCLEAN, Va., Aug. 06, 2018 (GLOBE NEWSWIRE) — Freddie Mac (OTCQB: FMCC) today announced a new financing as part of its affordable single-family rental pilot that supports both affordable housing and the surrounding community. In a new transaction with CBRE, Freddie Mac Multifamily has provided $7.8 million in funding for the acquisition of 117 single-family rental (SFR) units by The Promise Homes Company, an owner/operator of SFR properties focused on affordable housing for low-income and working families.
Promise Homes’ mission is to offer affordable housing to families that choose to live in single family homes, but were unable to buy their home due to financial and credit history. As part of the company’s innovative business model, Promise Homes residents have access to free financial literacy and economic support services through Promise Homes’ contract with Operation HOPE—the leading non-profit, global provider of financial dignity education and economic empowerment programs. Promise Homes and its property management providers place a priority on contracting with local, minority- or women-owned small businesses to provide property maintenance services for its homes, thereby supporting local job creation. Tenants are also provided incentives for improving their credit scores.
“This transaction represents a true win-win for the families renting these properties and the broader community,” said David Leopold, vice president of Targeted Affordable Sales and Investments at Freddie Mac Multifamily. “Promise Homes does more than provide affordable housing to its residents – it brings financial literacy and economic growth in the form of sustainable employment. This is exactly the type of transaction we’re looking for with our single-family rental pilot, and we thank our friends at CBRE for helping to make this transaction happen.”
“We would like to thank David and his entire team at Freddie Mac for this investment, one we hope to be the first of many, and CBRE for its efforts to close this transaction. This portfolio addition will enhance the lives for more than 100 working middle-class families, both in terms of the quality of homes they live in as well as financial literacy and credit score resources through our partnership with Operation HOPE,” said John Hope Bryant, Founder, Chairman, & CEO of The Promise Homes Company. “The Promise Homes Company has a double bottom-line, and we appreciate the opportunity to work with two leading companies to help the strength of our communities and working middle-class families.” Introduced in 2017, this represents the latest transaction in Freddie Mac’s $1.3 billion limit for its affordable single family rental pilot. Of the 117 properties in the transaction, 96 percent qualify as “affordable housing,” based on 80 percent of the area median income. Six percent will be rented to market-rate tenants or tenants with Section 8 vouchers. The units are located in the Atlanta, Orlando and Tallahassee markets.
About Freddie Mac
Freddie Mac Multifamily is the nation’s multifamily housing finance leader. Historically, nearly 90 percent of the eligible rental homes we fund are affordable to families with low to moderate incomes. Freddie Mac’s Duty to Serve plan aims to expand affordability and address America’s most persistent housing problems.
Freddie Mac makes home possible for millions of families and individuals by providing mortgage capital to lenders. Since our creation by Congress in 1970, we’ve made housing more accessible and affordable for homebuyers and renters in communities nationwide. We are building a better housing finance system for homebuyers, renters, lenders and taxpayers. Learn more at FreddieMac.com, Twitter @FreddieMac and Freddie Mac’s blog FreddieMac.com/blog.
About Promise Homes
Launched in May 2017, the Promise Homes Company is one of the largest minority-led owners of institutional-quality, single-family residential rental property in the United States, with a focus on working class and middle class communities. Promise Homes offers its residents quality housing at affordable prices as well as financial empowerment and assistance that would position them financially to eventually own a home. Promise Homes also contracts with local, minority-owned businesses for property maintenance services, thereby creating local, sustainable jobs in the communities where it invests.
Promise Homes is led by Chief Executive Officer John Hope Bryant, an entrepreneur, author, philanthropist, and prominent thought leader on financial inclusion, economic empowerment and financial dignity. He is also the Founder, Chairman, and Chief Executive Officer of Operation HOPE, Inc.; Chairman and Chief Executive Officer of Bryant Group Ventures, and Co-Founder of Global Dignity. Chief Operating and Investment Officer Jason Stewart, who has more than 17 years of experience overseeing portfolios of real estate, fixed income, equities and derivatives, leads the day-to-day management and operations of the company. For more information, please visit http://www.thepromisehomescompany.com.
For Promise Homes
ATLANTA-BASED PROMISE HOMES NEARLY DOUBLES IN SIZE; MISSION THE SAME
NEWS RELEASE | 06-14-2018
If all goes according to its business plan, Promise Homes Company will boost financial literacy, show people how to cut their taxes and add to affordable housing stock.
And also make a profit.
“It is possible to do everything we do and provide a good return, without being a jerk,” said John Hope Bryant, chief executive officer of the Atlanta-based company, founded almost exactly a year ago as an institutional owner of single-family homes.
This week, Bryant told The Atlanta Journal-Constitution that Promise had made an acquisition that nearly doubles its size. With the purchase of 167 properties from Invitation Homes, the Promise portfolio is swelling to more than 400 homes, most of them in metro Atlanta.
Bryant is best known for being founder, chairman and CEO of Atlanta-based Operation HOPE, Inc., which describes itself as “the largest not-for-profit provider of financial literacy, financial inclusion and economic empowerment tools and services in the United States.”
He is also an author of several books, including “How the Poor Can Save Capitalism: Rebuilding the Path to the Middle Class.”
With $130 million in capital, Promise Homes launched in June of 2017, immediately becoming one of the largest minority-owned companies owning and renting single-family homes.
And in some ways, Promise reprises the goals of Operation HOPE. Tenants are offered a series of educational programs aimed at boosting their financial literacy and advice on eligibility for the earned income tax credit. Tenants are rewarded for improving their credit scores.
“And if you do, we will give you a gift card for Target or a grocery store,” he said.
Hit a high rating and Promise will cut your rent by 10 percent.
While the company might sacrifice some short-term profit, the idea is to benefit both landlord and tenant in the long run, Bryant said. “The tenants that we have will be left stronger, and they will become more valuable both to themselves and to us.”
Like any property owner, Promise needs to hire workers to do maintenance, plumbing and electrical work, as well as general management. But the company will hire local, minority employees and contractors to perform those services, Bryant said.
The result will be a recycling of millions of dollars back into the community, he said.
Typically, Promise is paying between $100,000 and $125,000 for each home it buys and it charges rent of $1,000 to $1,200 a month, Bryant said.
The business model is aimed squarely at renters with modest incomes who work hard and need a break, he said. He calls them the “invisible class.”
“The invisible class are the majority of Americans who are living from paycheck to paycheck with too much month left at the end of their money,” Bryant said. “They are middle class and working middle-class people. If you are making $40,000 to $50,000 – that is our sweet spot.”
After the crash, some investors – some backed by deep-pocketed hedge funds — swooped into Atlanta, snapping up foreclosed homes at depressed prices. Some like Dallas-based Harbour Portfolio made controversial rent-to-buy offers that enticed people who might not have qualified for a mortgage. Others just wanted the steady cash flow of rent with the idea of selling the homes once prices climbed back.
But the profit at Promise does not depend on price appreciation, Bryant said. “We are not an appreciation model. Our business depends on cash flow. This is a long-term buy and hold play.”
It also helps the bottom line to grow the business – a bonus of the deal announced this week, he said.
Larger owners have “economies of scale,” that is, they can spread out expenses and bargain for volume discounts when purchasing materials or services.
Promise Home Company
CEO: John Hope Bryant
Typical value of home purchased: $125,000
Rent charged: $1,000-$1,200
Income, typical tenant: $40,000-$50,000
Home purchases announced this week: 167
Number of homes owned: 400-450
THE PROMISE HOMES COMPANY LAUNCHES WITH $130 MILLION INITIAL INVESTMENT & COMPLETES FIRST ACQUISITION OF A $22 MILLION PORTFOLIO OF SINGLE-FAMILY HOMES IN THE ATLANTA AREA
NEWS RELEASE | 08-07-2017
THE PROMISE HOMES COMPANY LAUNCHES WITH $130 MILLION INITIAL INVESTMENT & COMPLETES FIRST ACQUISITION OF A $22 MILLION PORTFOLIO OF SINGLE-FAMILY HOMES IN THE ATLANTA AREA
Acquisition Makes Promise Homes One of the Largest Minority-Controlled Owners of Institutional-Quality, Single-Family Residential Rental Property in the U.S.
ATLANTA, GA—August 7, 2017—The Promise Homes Company, a newly-formed single-family residential rental property asset manager, announced today its official launch with $130 million in initial funding from private investors.
Founded by social entrepreneur and businessman John Hope Bryant, Promise Homes has established an innovative business model that seeks to provide residents with quality housing at affordable prices as well as free financial and economic support services through a contract with Operation HOPE—the leading non-profit, global provider of financial dignity education and economic empowerment programs. Additionally, Promise Homes partners with local, minority-owned small businesses to provide property maintenance services for its homes, thereby supporting local job creation.
“Promise Homes was established with the clear objective of creating a new relationship between owner, resident and the community,” said Mr. Bryant. “We know that by supporting residents with financial and economic support services through Operation HOPE, we will be able to improve the lives of residents, while also making Promise Homes a stronger and more resilient company. By treating residents as partners in shared prosperity, Promise Homes will also improve the communities that it serves. Promise Homes will do well by doing good.”
Promise Homes also announced today its first acquisition of a $22 million portfolio of single-family homes in the Atlanta area from an institutional owner of single-family homes, making Promise Homes one of the largest minority-controlled owners of institutional-quality, single-family residential rental homes in the U.S.
“This initial transaction demonstrates both the power of our real estate expertise as well as our desire to impact communities throughout the metropolitan Atlanta area,” added Mr. Bryant. “This is an important step for both Atlanta and our business model that embraces our residents as partners.”
In addition, Promise Homes also announced today that it has executed two vendor contracts for property management and maintenance. Specifically, the company has contracted with Atlanta-based minority supplier/contractor K3 Hauling & Grading to provide maintenance services for Promise Homes’ Atlanta portfolio.
“K3 is excited to partner with The Promise Homes Company and continue our commitment to improving Atlanta communities,” said Kegdrick Smith, Sr., Chief Executive Officer of K3 Hauling & Grading. “At K3, we are focused on hiring minority professionals who are local to the communities where we operate, which also results in building their economic resiliency from the grass roots.”
Renters Warehouse, a nationally-recognized firm that currently services more than 19,000 homes across 42 markets in 25 states, will provide property management services for the initial portfolio as well as serve as a preferred provider for additional acquisitions across the U.S.
“Renters Warehouse is incredibly proud to be partnering with Promise Homes,” said Anthony Cazazian, Chief Investment Officer & President of Portfolio Services at Renters Warehouse. “We love their mission and are very excited to help bring their practical and innovative vision to life. This transaction also validates the benefit of our ‘stapled’ property management solution for other institutional owners that may sell portfolios to buyers that don’t have their own internal infrastructure.”
Promise Homes is led by Chief Executive Officer John Hope Bryant and Chief Operating Officer and Managing Partner Jason Stewart. Members of its Investment Committee include Tony Ressler, Co-Founder, Chairman and Chief Executive Officer of Ares Management, L.P. and Principal Owner of the Atlanta Hawks Basketball Club, and Michael Arougheti, Co-Founder, Director and President of Ares Management, L.P. and Executive Board Member of Operation HOPE. Each has also made an investment in the company. Promise Homes plans to expand its portfolio of affordable, single-family residential rental homes to lower and middle income urban and suburban communities across the U.S.
About Promise Homes
Launched in May 2017, the Promise Homes Company is one of the largest minority-controlled owners of institutional-quality, single-family residential rental property in the United States, with a focus on working class and middle class communities. Promise Homes offers its residents quality housing at affordable prices as well as financial empowerment and assistance that would position them financially to eventually own a home. Promise Homes also contracts with local, minority-owned businesses for property maintenance services, thereby creating local, sustainable jobs in the communities where it invests. Promise Homes is led by Chief Executive Officer John Hope Bryant, an entrepreneur, author, philanthropist, and prominent thought leader on financial inclusion, economic empowerment and financial dignity. He is also the Founder, Chairman, and Chief Executive Officer of Operation HOPE, Inc.; Chairman and Chief Executive Officer of Bryant Group Ventures, and Co-Founder of Global Dignity. Chief Operating and Investment Officer Jason Stewart, who has more than 17 years of experience overseeing portfolios of real estate, fixed income, equities and derivatives, leads the day-to-day management and operations of the company.
K3 Hauling & Grading
Founded in 2009, K3 Hauling & Grading is a minority-owned small business located in Metro Atlanta with more than 15 years of experience providing hauling and grading services to individuals and businesses throughout the State of Georgia. In addition, K3 Hauling & Grading provides masonry, landscaping, and other types of construction and property maintenance services. For more information, please visit our website at www.k3haulingandgrading.com.
About Renters Warehouse
Renters Warehouse is one of the fastest growing and highest reviewed residential property management companies in America. Backed by growth equity investor and majority stakeholder Northern Pacific Group, and under the leadership of President and CEO Kevin Ortner, Renters Warehouse now manages more than $3 billion in residential real estate, servicing 13,000+ investors across 19,000+ residential homes over 42 markets and 25 states. For more information, please visit our website at www. http://renterswarehouse.com.