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FREDDIE MAC VALUE-ADD LOANS

Low Rate, Short Term Financing for Apartment Unit Upgrades, Renovation and Rehabilitation Loans in Dallas Fort Worth.

Apartment Loan Amount

$10,000 to $25,000 per unit

Freddie Mac Multifamily Value-Add Upgrade Rehabilitation Loans in Texas

Description

Offers short-term, cost-effective financing for modest property upgrades. Borrowers receive competitive pricing and lower execution costs. Options for both interest-only and uncapped floating-rate loans are available. This loan is non-recourse and provides “one-stop shopping” for upgrade and permanent financing.

Product Snapshot:

  1. Short-term, negotiable financing for upgrades of $10,000 to $25,000 per unit
  2. Allows for a wide variation in borrower term and structure needs.
  3. Funds up to 50% should be spent on unit interiors.
  4. Budget can be adjusted up to 20% without additional approval

Eligible Borrowers

  • Developers/operators with experience in multifamily property rehabilitation and in the local market with sufficient financial capacity
  • 5x the standard minimum net worth and liquidity requirements for guarantors

Eligible Property Types

  • Properties with no more than 500 total units in good locations
  • Well-constructed properties requiring modest repairs
  • Market laggards that require capital infusion and new/improved management
  • Real-estate owned properties in receivership capable of improved performance
  • Seniors housing, student housing and manufactured housing are not eligible

Terms

  • Three years with one 12-month extension based on the borrower’s request and one optional 12-month extension based on Freddie Mac’s discretion
  • Floating-rate loan with full-term interest-only; no cap required
  • No lock-out; borrower may pay off the loan at any time but must remit an exit fee of 1%; the exit fee will be waived if the loan is refinanced with Freddie Mac
  • Acquisitions and refinances; not assumable
  • Loan documentation at origination will include the Value-Add Rider, which will detail the terms/requirements of the rehabilitation
  • Escrows will include real estate taxes, insurance and replacement reserves
  • 15% cash equity generally required
  • For longer term ownership, cash-out is available provided a completion guaranty

Amount

  • Maximum loan-to-purchase / loan-to-value (LTV) ratio: 85%
  • Minimum amortizing debt coverage ratios (DCR): 1.10x – 1.15x depending on market
  • Sizing based on a 7-year sizing note rate
  • Appraisal must include as-is and as-stabilized values; underwriting must support a 1.30x DCR and 75% LTV based on as-stabilized value supported by appraisal
  • Standard Freddie Mac underwriting based on as-is income and expense
  • Refinance Test not required
  • No pro-forma underwriting of future performance

Rehabilitation

  • Rehabilitation must commence within 90 days of loan origination and be completed within 33 months.
  • Acceptable budget of $10,000 per unit to $25,000 per unit
  • Budget can be adjusted by as much as 20% without additional approval; 50% of the budget should be spent on unit interiors.
  • Completion Guaranty or rehabilitation escrow required
  • Borrower/Servicer reporting required

At Loan Maturity/Refinance

  • Final engineer review of work completion and quality is required
  • Refinance with Freddie Mac with no exit fee; otherwise 1% applies
  • Freddie Mac will re-underwrite the loan according to current credit policy
  • One-year borrower extension option is available for a 0.5% extension fee, assuming no event of default
  • Additional Freddie Mac extension option available with 1% extension fee

Fees

Standard fees apply, including application fee and good faith deposit

For current rates on Freddie Mac apartment rehabilitation upgrade loans, contact our multifamily loan advisors.

Call For a Quote:

(214) 679-9673

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