Origin Launches $350 Million Multifamily Credit Fund

Origin Investments Launches $350 Million Multifamily Credit Fund

Investing in Freddie Mac mortgage-backed “B-Piece” certificates, fund targets net annual IRR of 8-10% while providing downside protection, inflation hedge and tax advantages

CHICAGO—(BUSINESS WIRE)—Origin Investments, a top performing private real estate manager, launched a $350 million Multifamily Credit Fund designed to give qualified purchasers a passive income stream substantially higher than most other fixed income investments such as ETFs, corporate bonds and certificates of deposit. The Fund’s low-risk passive income stream comes from conservatively leveraged Freddie Mac K-Deal and SBL B-Piece certificates backed by cash flowing and geographically diversified multifamily mortgage loans. The Fund targets a total net annual IRR of 8% to 10% and a 6%-8% net annual yield.

Primary Benefits of Origin’s Multifamily Credit Fund

• Downside protection: Freddie Mac has a low historical loss rate (.076%), and the B-Piece certificate position is senior to common equity owners and provides a 30% cushion.
• Monthly income: A net distribution yield of 6–8% is targeted.
• Built-in inflation hedge: The yield on the Fund’s floating rate bonds rises in tandem with rising interest rates.

REIT Structure Adds Additional Tax Advantages

Additionally, the Fund is structured with a REIT subsidiary, which under provisions of the Tax Cut and Jobs Act provides a 20% tax deduction on all taxable dividends, regardless of an investor’s income. The REIT structure also blocks Unrelated Business Taxable Income (UBTI) for tax-exempt investors, including IRAs.

“Origin’s Multifamily Credit Fund underscores our firm’s ability to conceptualize, build and deliver an expanding range of sophisticated investment opportunities and strategies to meet investors’ goals and objectives,” Origin Co-CEO David Scherer said.

The new Multifamily Credit Fund, the first of its kind for Origin, comes less than 90 days after the firm closed its first Qualified Opportunity Zone Fund. With $265 million raised, the Origin QOZ Fund ranks in the top two percent of the largest opportunity zone funds to date.

Based on its various investment and performance-related accomplishments, Origin has met Freddie Mac’s stringent requirements to become an approved B-Piece purchaser. Freddie Mac’s requirements include:

• A proven high level of operational expertise gained by owning and investing millions of dollars of multifamily assets.
• A thorough understanding, through active participation, of the inner workings of Freddie Mac.
• A significant capital base. The equity required to buy B-Piece certificates is between $25 and $65 million.
• A demonstrated track record of being long-term partners rather than looking to buy and resell quickly on a secondary market