Industry Expert Discusses GSE Credit Facilities
When the leading owners of multifamily are in the market for flexible financing options, Fannie Mae and Freddie Mac credit facility products don’t always come to mind, but they should.
Ryan Nelson, manager of the Berkadia Boston office, sat down with Bisnow to compare and contrast these two loan programs in light of two recent transactions closed by Berkadia.
Ryan's team originated $170M in financing from a Fannie Mae Credit Facility to allow Zeman Homes to refinance 15 manufactured housing communities nationwide. This single, cross-collateralized loan includes multiple tranches of fixed and floating rate debt with maturities from seven to 12 years, and leverage of 75%. The staggered maturities allows Zeman to reduce risk by spreading out their future maturities all within a single loan structure.
The Fannie Mae Credit Facility further provides Zeman the flexibility to efficiently execute on acquisitions, dispositions, substitutions and upsizing the loan amount as the portfolio’s value increases.
“Berkadia’s strong relationship with Fannie Mae and our extensive experience with manufactured housing communities allowed us to fund a highly flexible loan at very competitive terms,” Ryan says. “We are big fans of Zeman Homes and were thrilled to expand our relationship with this financing.”
While the Fannie Mae Credit Facility is particularly well suited to stabilized portfolios, Ryan recommends the Freddie Mac Revolving Credit Facility to clients who will be active acquirers of value-add multifamily properties.
Berkadia recently closed a $150M Freddie Mac Revolving Credit Facility with an undisclosed borrower, and the differences in the two transactions highlighted their respective strengths.
The Freddie Mac facility is generally a non-recourse five year floating rate loan term. Labeling the program an “incubator financing vehicle,” he tells Bisnow this Freddie product has been incredibly popular for borrowers seeking fast, flexible and highly competitive acquisition loan terms.
Importantly, borrowers are also frequently using a Freddie facility to refinance out of construction loans prior to reaching stabilization to free up capacity for future projects.
Once the Freddie facility is in place, a borrower can tap into it very quickly—often closing within 30 to 45 days, making it very useful in today’s fast-paced closing environment.
The Freddie Revolving Credit Facility is a cross-collateralized loan that allows borrowers to execute their value-add business plan and then very efficiently upsize the loan amount based on the improved value, refinance the property out of the facility or sell the property to a third party.
Ryan went on to say “the Fannie and Freddie facility programs are geared towards borrowers with different objectives. Both programs are very powerful when utilized for the strategy they best align with.”
To learn more about Fannie and Freddie offerings and this Bisnow content partner, click here.
