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Freddie Mac

Value Add

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 on budgeted improvements in an amount at least equal to the cash-out in place.
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 the 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 then-current credit policy parameters.
  • One-year Borrower extension option is available for a 0.5% extension fee, assuming no event of default.
  • Additional Freddie Mac extension option is available thereafter with 1% extension fee.
FEES

Standard fees apply, including application fee and good faith deposit.

 

This sheet sets out the general guidelines of a loan program and is designed solely as an aid to prospective borrowers and other clients. It does not represent or imply a contract or a commitment to lend funds. A commitment to lend funds may only be made by a written letter issued by NewPoint to a prospective borrower. This term sheet is subject to change at any time without notice at the sole discretion of NewPoint Real Estate Capital LLC.