Freddie Mac Value-Add Loan

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Terms

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
  • 1.5x 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 that are capable of improved performance
  • Seniors housing, student housing and manufactured housing communities 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