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At Valencia Realty Capital, we are seeing an increasing number of multifamily refinance requests from sponsors who acquired projects between 2020-2022, completed substantial construction, renovation, and operational improvements, but still fall short of traditional permanent refinance qualification requirements. A recent conversation with a private credit relationship revealed a solution: a relatively low-cost private perm facility that functions as a hybrid bridge/perm product, providing flexibility for sponsors who have completed the heavy lift, but need additional time to push rental rates and maximize refinance or sale proceeds. Ultimately, this lender is providing a bridge product that acknowledges the value creation of so many sponsors in today’s market and also provides a feasible solution for them to reach a permanent takeout or sale.
With pricing generally in the mid-200s to low-300s over SOFR and a flexible minimum DSCR covenant at closing, this structure offers meaningful relief for multifamily sponsors facing extended stabilization timelines.
Product Overview
This private credit facility serves as a transitional take-out loan for projects at or near stabilization. The lender targets deals with experienced sponsors who encountered delays during development or repositioning but have completed all major capex and are now focused on leasing and operational stabilization.
The primary value drivers for this product are twofold: First, immediate cash flow relief through a lower interest rate compared to the existing bridge or construction loan. Second, additional time to mature rents and bridge to either a perm loan or sale. With these objectives in mind, the lender requires only a 12-month minimum interest period, allowing sponsors to refinance or sell opportunistically once the asset reaches perm-loan parameters and the capital markets window improves.
It’s important to note that this loan product does not fund material future capex. Sizing focuses largely on in-place and trailing cash flows, reflecting the lender’s focus on more stabilized assets.
Key Loan Terms (Indicative)
- Typical deal size: $15MM – $100MM
- Rate: SOFR + 200–300 bps (indicative)
- Term: 3 years with two 1-year extensions (3-1-1); 25 bps extension fee (each)
- Recourse: Non-recourse
- Lender fees: 100 bps origination; no exit fee
Targeted Deal Types and Underwriting Criteria
- Asset types: Primarily multifamily; selectively open to industrial and retail
- Geography: Geographically agnostic, with pricing/leverage adjusting by MSA liquidity and performance
- Sizing metric: Debt yield-driven
- Core markets / newer vintage: typically targeting ~7% debt yield
- Secondary/tertiary: typically targeting ~8%–9% debt yield
- Multifamily concentration: 400-unit cap to limit overconcentration exposure
Common Scenarios
This facility addresses situations where a sponsor has maximized NOI in the current market, but timing, documentation, or performance seasoning prevents a clean bank/agency/HUD takeout today. Common use cases include:
- Extension avoidance or bridge fatigue: The sponsor is facing another extension on an existing bridge loan (often with step-ups, reserve top-ups, or an expensive extension fee schedule) and wants to reset terms while finishing the last phase of stabilization.
- Lease-up runway after capex completion: Major renovations, unit turns, or operational upgrades are complete, but the property still needs time to achieve consistent occupancy and demonstrate steady collections.
- Delay-driven refinancing gap: Construction or repositioning delays pushed the timeline beyond original underwriting, and while the asset is now substantially complete, the sponsor is still short of the DSCR/seasoning required by perm lenders.
- Perm-takeout preparation: The sponsor expects a perm execution (agency/bank/life company/HUD) but needs a transitional structure that is more flexible on DSCR while the NOI profile normalizes and the trailing financials “catch up.”
- Market window optionality: The sponsor believes spreads and perm proceeds will improve in the next 6–18 months and wants a cost-effective facility that provides time to choose the best exit rather than being forced into a suboptimal takeout.
Next Steps
For sponsors with a project that is substantially complete but not yet eligible for a perm loan takeout or sale, this facility provides a cost-effective path to additional runway, often with improved economics versus repeatedly extending a conventional bridge loan. It serves as a strategic stabilization buffer, giving sponsors time to season operations and improve trailing metrics without the heavy burden of the more expensive bridge/construction loan.
If you have a nearly stabilized asset and need time to finish leasing and seasoning, call Valencia. We can help evaluate whether your project is a fit for capital source and provide a preliminary outline of terms quickly.
If this capital source may be of interest, book a call to discuss a potential capital arrangement.
Read our last Capital Spotlight: “90% LTC Debt Fund Capital Targeting Horizontal Lot Developments”