All Forum Posts by: Ian Stuart

You're doing it backwards. Find sponsor(s) first, deals second. If you don't have sponsorship, by definition you don't have a deal - full stop.

Recommend requesting the seller's existing ALTA Survey, building plans & floor plans, site map, seller's prior Phase 1 & environmental reports (easy for them to ask lender for copy), full rent roll detail (including renovated/classic unit indications by unit, sqfts, building #'s, full detail), aged receivables report (will allow you to identify hidden delinquency / bad debt yet to be reflected in T12's), general ledgers / capex ledgers back at least 3 years to ID major capital projects or damage that wasn't disclosed initially.

BP Multifamily Investors: 

Below is a link to our most recent Freddie Mac & Fannie Mae multifamily small balance loan rate sheet for loans between $1,000,000 - $7,500,000. With banks & credit unions pulling back recently, agency small balance financing is starting to look more attractive, to even the most dedicated bank & credit union borrowers. This is especially true for borrowers seeking fixed rate, 5-30 year term, partial-full term interest only, 30 year amortization, non-recourse debt sized to 1.20x-1.25x DCR max on an amortizing basis.

Agency Multifamily - Small Balance Loan Rates: https://issuu.com/berkadiamarketing/docs/berkadia_multifamil...

For context, Berkadia is the #1 Freddie Mac Optigo, #2 Fannie Mae DUS, and #1 HUD/FHA multifamily lender in the nation with 45+ life company correspondent lending relationships. Feel free to reach out with any questions or concerns on this.

BP Community:

Hope you’re all enjoying the bear market!

My name's Stuart, I'm an agency multifamily lender with Berkadia that finances apartment buildings throughout the Western US with Freddie Mac and Fannie Mae. Berkadia is #1 Freddie Mac Optigo, #3 Fannie Mae DUS, and #3 HUD/FHA multifamily lender in the country as of YE 2022, and my team originated ~$325,000,000 in agency loan volume last year.

Lately I’ve noticed many of you asking about multifamily financing options, and thought this would be an opportunity to host an AMA regarding Freddie Mac and Fannie Mae agency multifamily financing, an area in which I specialize.

Feel free to ask any questions you may have regarding Freddie Mac and Fannie Mae multifamily financing in the comments - or DM me directly. Below is a list of categories that you might have questions on. I'll do my best to answer your questions as directly as possible with minimal fluff. 

Thanks! Look forward to hearing from you all.

-Ian 

1. Loan Programs: Conventional loans (>$7.5M), small balance loans (<$7.5M), lease up / near-stabilization loans, 2nd lien supplemental loans, student housing, seniors housing, MHC, green financing, etc.

2. Loan Sizing Parameters: LTV, DCR, DY, amortization, stress tests, exit tests, etc.

3. Interest Only Term (IO): Partial term IO, full term IO, IO loan sizing parameters, IO pricing, etc.

4. Interest Rates: Current spreads, rate structure, buydowns, mission driven business, factors that influence your rate, etc.

5. Loan Costs, Deposits, and Escrows: Origination fees, application fees, third party reports, legal, insurance review, title & escrow, rate caps (floating rate loans), due diligence deposit, rate lock deposit, standard escrows, etc.

6. Rate Lock Process: Standard rate lock, Freddie Mac Index Lock, Fannie Mae SRL, extended delivery, etc.

7. Loan Closing Process & Borrower Forms: Soft quotes, hard quotes, loan application, underwriting period, standard loan forms, loan commitment, rate lock, loan closing, time to close (start to finish), etc.

8.  Prepayment Penalty (Defeasance, Yield Maintenance, Flexible Prepay Options): What is defeasance and how does it work?, What is yield maintenance and how does is work?, flexible prepayment penalty options?

9. NOI Underwriting Methodology: NRI and EGI, real estate taxes, operating expense underwriting rules of thumb, replacement reserves, appraiser’s impact on lender underwriting, expense comps, etc.

10. Borrower Financial Strength & Experience: Liquidity, net worth, prior multifamily experience, prior agency borrowing experience, etc.

11.  Management Company Requirements: Self management OK?, professional management requirements, onsite employee requirements, model units, etc. 

12.  Insurance Requirements: Standard agency insurance requirements, insurance review costs, etc.

13. Legal Requirements and Loan Documents: Do I need a lawyer when I do an agency loan?, how much does it cost?, what legal documents should I pay attention to and why?

14. Agency CMBS Market Mechanics (How It All Works): How does the agency CMBS market work?, is Freddie Mac my actual lender, what is the "secondary market", Freddie & Fannie's Mission, etc.

15. List of Licensed Agency Multifamily Lenders: Who to use, who to avoid, why you don't need a broker to secure agency debt. 

Hi Kristi - I recommend exploring multifamily perm financing options with Freddie Mac SBL ($1-$7.5M) and Fannie Mae Small Loans ($1-$6M). Rates range between high 5.0%’s to mid 6.0% handles today. 

General terms: 5-30 year term, partial-full term interest only, 1.20-1.25x DCR, 30-year amortization (loan sizing), fixed & hybrid rate structures, prepayment is typically greater of YM/1.0% (step downs available), non recourse (with bad boy carveouts), escrows for taxes / insurance / replacement reserves. Agency loans are fully assumable subject to assumption review and a (1%?) assumption fee.

Freddie Mac SBL rates are typically structured as a flat fixed rate coupon, and lock rate at loan application (unless you pursue a hybrid rate). Fannie Small Loan rates are structured as a spread over treasuries. Typically, Fannie Small Loans rate lock after loan commitment is issued (45-60 days after signing loan application).

When it comes to borrower strength requirements, loan guarantors need to have liquidity & net worth equal to (i) 9 months P&I, and (ii) 100% of the loan amount - respectively. 

Given that this is your first “big deal”, the agencies will want to see (i) experienced partners with larger assets under management, (ii) an experienced multi family manager (no BS single family / AirBNB managers), or both.

Context - my team closed $325,000,000 in agency loan volume last year, and our firm is the #1 Freddie, #2 Fannie, and #3 HUD/FHA multifamily lender in the nation. Agency is our bread and butter - reach out anytime with Q's.

How about Freddie Mac / Fannie Mae affordable housing financing programs? Standard program is generally is 5-30 year term, partial-full term IO, 1.20x DCR, 30-year amortization (loan sizing), non-recourse (with carveouts), priced in the low-mid 100's over treasuries (low 5% coupons). Property needs to be restricted by a LURA along other requirements, but might be worth the look. Full disclosure - our shop is the #1 Freddie Mac Optigo, #2 Fannie Mae DUS, and #3 HUD/FHA multifamily lender in the nation.

Hi George: 

I'm a Freddie / Fannie originator with Berkadia based out of Seattle. My team closed ~$350M in Freddie/Fannie multifamily loans last year, many of which were Freddie Mac "Green Up" and Fannie Mae "Green Rewards" deals.

The gist of the program is as follows. You commit to installing "green improvements" (LED lights, low flow showerheads/sinks/etc, energy efficient appliances, heat retentive windows, etc.) that lower the property's energy consumption by ~30% (15% of which needs to be attributed to electricity savings). In return, Freddie & Fannie give you a 10-30bps spread discount, which (i) improves your rate, (ii) boosts loan proceeds, and (iii) results in utility savings over the long term. It's a win/win - especially if the property is older vintage 1970's-2000's that hasn't been substantially upgraded. 

You have to order a third party report called the "High Performance Building Module", which identifies all the areas  you can upgrade / save on utilities - and then presents them back to you in the form of a "menu", so to speak. Then, you simply choose which upgrades to make in order to get over the 30% utility savings hurdle and (poof) you're now on track for green financing. 

Feel free to reach out anytime with Q's on this.

-Ian 

Hi Paul: 

Late to the party here, but I'm a Freddie Mac & Fannie Mae multifamily loan originator with Berkadia who solely focuses on agency multifamily finance. Some context, my team did ~$350M in Freddie & Fannie loans throughout the Western US last year, and our firm is the #1 Freddie, #2 Fannie, and #3 HUD shop in the nation by loan volume. We focus primarily on Freddie, Fannie, and HUD conventional loans >$7.50M (our average deal size last year was around $20M), but we also originate small balance loans (Freddie SBL & Fannie Smalls).

Feel free to reach out anytime w/ questions on these. Happy to send over ballpark program sheets, talk high-level terms, and generally be a resource / sounding board.

Cheers, 

Ian

Depends on how much equity you have available to put in the deal, how much leverage you need (LTC %?); the value-add renovation business plan (renovation scopes - units / buildings / common areas), the value add capex budget (how much are you looking to spend on the rehab, broken down by unit interiors / building exteriors / common areas / amenities), the team doing the renovations, your team's track record executing value-add multi projects, your stabilized NOI proforma (stabilized DCR, DY, etc.?), target renovated rents, expense comps, sale / exit assumptions, etc. Then - of course - general deal optics (does it make sense to rehab this deal given the market / tenant base / demos / etc).

If this is your first time doing value-add multi, probably need a hard money bridge loan (which isn't cheap - probably SOFR+500bps+). Hard money guys will rip your eyes out on rate, fees, etc. - but they'll get you the leverage you need. 

If experienced, probably a regional bank deal priced at SOFR+350-400bps sized to a stabilized 1.25x-1.30x DCR; 7.50%-9.00% DY on exit.

Also depends what your takeout financing plans are, when it comes to refinancing out of the value add bridge debt.   

Generally speaking, if you're going to call commercial multifamily owners of large 50+ unit buildings - you have to have valuable information to share, and you have to be able to speak the language. Otherwise they'll sniff you out a mile away and tell you to pound. Keep in mind, these guys are getting called 3x+ per day from dipshit Marcus brokers fresh out of school who don't know a doorknob from a debt yield (trust me, I used to be one!). If you're going to call, make it worth their while. As a matter of principle, I tend to email first with "value-add" information (live loan quotes w/ property names redacted, materially relevant market news like WaFD Bank pulling out of construction lending until late 2024, specific expense comps from the Fannie Mae data based related to a property they own, etc.). Then I follow up with a call. Easier to get people to talk if you send tailored, materially relevant information first that benefits their business and feed them high quality, vetted information vs. throwaway corporate garbage.