FREDDIE MAC VALUE-ADD LOANS

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

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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:

Short-term, negotiable financing for upgrades of $10,000 to $25,000 per unit
Allows for a wide variation in borrower term and structure needs.
Funds up to 50% should be spent on unit interiors.
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.