Capital Spotlight – Highlighting featured capital investors. We regularly publish the detailed criteria of our most unique real estate capital sources.
Fund Manager Providing Flexible $5MM to $300MM Senior Loans for Agency Debt and Regional Bank “Fall Outs”
In today’s rising interest rate environment, many deals have been “hard-to-pencil” with Fannie Mae or Freddie Mac agency debt. This private investor provides bridge and permanent capital to multifamily property where the alternatives may be higher-cost bridge debt, or lower leverage agency debt, which satisfies a gap in the marketplace. With a lower cost of capital than most other “bridge to agency” platforms, while retaining flexible underwriting and higher leverage, the investor’s capital can be an attractive first mortgage financing option.
Terms Highlights
- Leverage Up to 80% (Subject to underwriting)
- Fixed Rate Pricing between 6.30% – 8.5% (Market and leverage dependent)
- Can underwrite a sub 1.0x DSCR on trailing NOI (Most aggressive pricing is for “healthier” DSCR coverage)
- Non-Recourse
If this capital source may be of interest, book a call to discuss a potential capital arrangement.
| Capital Type | Private Multifamily Permanent & Bridge Capital |
| Geography | Nationwide Top Markets: New York, Los Angeles, Chicago, Washington D.C., San Francisco, Miami, Boston, San Diego, Minneapolis, Denver, Portland, San Jose and Stamford, CT MSA’sStandard Markets: Typically greater than 105k rental population as determined by CensusSmall Markets: Typically, 30-105k rental population (e.g., Fayetteville, BC, Salem, OR, Green Bay, WI)Very Small Markets: Less than 30k rental population |
| Property Types | Multifamily; Independent Living Communities; Affordable Housing; Manufactured Housing Communities; Student Housing |
| Use of Funds | Acquisition; Refinance; Renovation Costs; Interest Reserves. Will fund cash out assuming the property has received added value, or has been seasoned. |
| Construction | Capital expenditures for existing assets only |
| Mixed Use | Up to 20% of the economic occupancy |
| Sponsorship | Sponsor should be able to demonstrate a “management story” that complements the business plan of the property. Net worth should be equal to 50-75%+ of the loan amount; liquidity equal to 9 months of debt service, or greater. Exceptions will be granted based on the borrower’s experience |
| Recourse | None |
| Check Size | $5MM to $300MM |
| Loan to Value | 80% LTV/LTC on an as-is basis; 75% LTV on an as-complete basis (subject to underwriting criteria) |
| Sponsorship Equity Contribution | May consider imputed equity as part of the sponsor’s equity contribution; however they must verify that the sponsor has added value to the property. Otherwise, will look for cash equity from the sponsor and/or investors. |
| Interest Rate | Fixed 250-500 bps over comparable term treasuries. Based on today’s index rates, a 1.25x DSCR will have a rate in the low- to mid-6% range; 1.0X-1.25x will be in the 7.0%’s; sub 1.0x will be in the 8%’s |
| Origination Fees | 1% at closing |
| Payment Structure | 1-3 years of IO payments are typical; 30 year amortization. IO will be granted based on A) level of leverage; B) market strength |
| Term | 1-10 year options are available |
| Prepayment Structure | Step-down: 3-5% in the first year declining to 1% over the term. Prepayment penalties may be bought down with an increase in rate or fee. |
| Underwriting Requirements | Permanent: 1.25X DSCR and 90% occupancy for best pricing. 1.15X min DSCR; 85% min occupancy. Bridge: Usually want to see at least a 0.9X DSCR based on in-place P&L, and 85% occupancy. However, will consider bridge to permanent loans for newly delivered new construction properties. Occupancies below 85% will require OpEx and interest reserves. |
| Collateral Requirements | First mortgage |
| Intercreditor Requirements | Willing to allow subordinated debt and preferred equity in second position. |
| Deposits | Market standard deposit required upon signing of term sheet to fund appraisal, environmental, title, legal and property condition reports. These deposits mimic a standard agency loan. |
| Closing Time Frame | 30-60 days |
| Approval Process | If all required underwriting information is available, a term sheet can be turned around in as little as 24-48 hours, but is usually a week. Credit committee is a small group who can turn around decisions quickly. If loan size is <$20MM, will fund on balance sheet. If >$20MM, they will utilize institutional partners. |
| Assumability | Loan is assumable depending upon qualifications of the assuming borrower. |
If this capital source may be of interest, book a call to discuss a potential capital arrangement.
Read our last Capital Spotlight: S. FL-Based Family Office Investing $3-7MM Into Multifamily JV Equity