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 TypePrivate Multifamily Permanent & Bridge Capital
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 TypesMultifamily; Independent Living Communities; Affordable Housing; Manufactured Housing Communities; Student Housing
Use of FundsAcquisition; Refinance; Renovation Costs; Interest Reserves. Will fund cash out assuming the property has received added value, or has been seasoned.
ConstructionCapital expenditures for existing assets only
Mixed UseUp to 20% of the economic occupancy
SponsorshipSponsor 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
Check Size$5MM to $300MM
Loan to Value80% LTV/LTC on an as-is basis; 75% LTV on an as-complete basis (subject to underwriting criteria)
Sponsorship Equity ContributionMay 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 RateFixed 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 Fees1% at closing
Payment Structure1-3 years of IO payments are typical; 30 year amortization. IO will be granted based on A) level of leverage; B) market strength
Term1-10 year options are available
Prepayment StructureStep-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 RequirementsPermanent: 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 RequirementsFirst mortgage
Intercreditor RequirementsWilling to allow subordinated debt and preferred equity in second position.
DepositsMarket 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 Frame30-60 days
Approval ProcessIf 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.

AssumabilityLoan 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