Multifamily Monday: Time to Refi Now
Fannie Mae and Freddie Mac plan to cut 2013 lending by 10% from the almost $63B amount in 2013. To do that, agency spreads will likely widen gradually (as they have over the last several months). That is causing an urgency to look at refinancing immediately, even when a pre-payment exists, says Beech Street Capital SVP for originations Larry Sneathern (right, with colleague Sam Jones at ourDallas Multifamily Summit last June). Already, several clients have taken advantage of Fannie Maes extended rate lock program, which allows a rate-lock six months before closing to take advantage of todays rates while allowing pre-payment penalties time to reduce, Larry says.
CMBS and life companies will become more competitive this year and are expected to increase market share, but the agencies will still do a bulk of the multifamily lending this year as Congress debates their futures, he says. (Does that mean it's an everything must go sale?) Fannie Mae has revamped a 12-year loan program through reduced pricing providing borrowers an attractive platform, in particular on acquisitions.Larry says Beech Street is able to underwrite this program at 1.25x based on the actual rate with no floor rate.With cap rate compression, this translates into stronger proceeds and is also attractive for long-term holders.
Qualified buyers outpace available acquisitions creating a strong demand for off-market acquisitions, Larry tells us, like the recently completed $9M Fannie Mae conventional loan for an off-market acquisition in Euless (pictured) for anout-of-state borrower. The seller needed to close fast on the 384-unit project, Larry tells us. Beech Street compressed the due diligence period and funded a capital improvement escrow at closing to help the borrower implement an asset enhancement plan that includes bringing five units back on line. The loan is a FNMA DUS execution with one year of interest-only. Other recent deals include a statewide portfolio refi for $21M through the FNMA Extended Rate Lock Program with staggered closing dates over the course of a year to accommodate the borrowers pre-payment penalty expiration; a $19M Dallas portfolio refi; and three others in San Antonio, Corpus Christi, and Bentonville, Ark.
