Articles

Video: Dr. Sam Chandan Discusses Investment Opportunities in Multifamily

As the interest rate outlook brightens, unique opportunities for outsized returns abound, Dr. Sam Chandan, Founding Director of the C.H. Chen Institute for Global Real Estate Finance at the NYU Stern School of Business and the Non-Executive Chairman of Chandan Economics, explains in this top-level overview of Arbor’s latest Special Report.

Current Reports

Affordable Housing Trends Report Winter 2024/2025

Continually challenged by low inventory, affordable housing sits at a crossroads following the 2024 election. Incoming leadership plans to introduce market-based principles to an agenda that may also include an expanded Housing Choice Voucher program. Arbor’s Affordable Housing Trends Report Winter 2024/2025, developed in partnership with Chandan Economics, provides insight into a pivotal multifamily sector about to embark in a new direction.

Articles

Investors Upbeat on Multifamily as Rate Cuts Stimulate Deal Activity

The skies surrounding commercial real estate markets are clearing, suggest the Emerging Trends in Real Estate 2025 (ETRE 2025) findings. As pandemic-related structural changes settle into place, cyclical economic trends, such as interest rates, demand, and construction levels, are now the key drivers to watch.

Articles

Annual Build-to-Rent Starts Hit Another High in Q3 2024

As more single-family rental (SFR) operators rely on build-to-rent (BTR) development to supply new inventory, construction starts have steadily risen, reaching another record high in the third quarter of 2024. SFR/BTR construction has eclipsed 92,000 units in the last four quarters — an all-time high and an annual increase of 31.4%.

Articles

LIHTC Program: An Impactful Affordable Housing Financing Resource

As renters face a national shortage of 7 million low-income rental homes, the U.S. Department of Housing and Urban Development’s (HUD) Low-Income Housing Tax Credit (LIHTC) program is pivotal in helping to close the affordability gap for renters. It is the nation’s most significant resource for affordable apartment housing construction, which gives state and local agencies approximately $10 billion in annual budget authority to issue tax credits for affordable housing development.

Articles

FHFA Loan Caps for 2025: What Multifamily Borrowers Need to Know

The Federal Housing Finance Agency (FHFA) announced a $3 billion boost to Fannie Mae and Freddie Mac’s volume cap for loan purchases in 2025 to $146 billion ($73 billion for each agency). This increase in FHFA loan caps for 2025 aligns with industry expectations, given the anticipation of improving market conditions and lending activity expected in a lower interest rate environment. Next year’s cap for the Government-Sponsored Entities (GSEs) is an increase of approximately 4% from the $140 billion limit set for 2024.

Analysis

U.S. Multifamily Market Snapshot — November 2024

The U.S. multifamily market held steady in a more normalized cycle through the first three quarters of 2024, following its skyrocketing recovery from the pandemic-related contraction. Rental demand remained strong, driven by the continued nationwide housing shortage and strong wage growth, while the high levels of new construction seen over the last two years appears to have peaked.

Current Reports

Small Multifamily Investment Trends Report Q4 2024

Small multifamily’s normalization pushed forward last quarter as the Federal Reserve made a long-awaited reduction to the target federal funds rate. Arbor’s Small Multifamily Investment Trends Report Q4 2024, developed in partnership with Chandan Economics, shows signs of stability have multiplied. Robust rental demand, a limited supply of quality affordable housing, and several other promising developments should support the subsector’s strength heading into 2025.

General: 800.ARBOR.10

Home | Freddie Mac | Student Housing Value-Add Loan
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FREDDIE MAC®

Student Housing Value-Add Loan

Arbor’s Student Housing product provides attractive terms and competitive prices for the purchase or refinance of properties that, because of construction and location, specifically cater to a student tenant base and may or may not be readily convertible to conventional multifamily housing.

  • Offers 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
  • Up to 50% of funds may be spent on unit interiors
  • Up to 75% of funds can be spent on exteriors
  • Budget can be adjusted up to 20% without additional approval
  • Interest-only and uncapped floating-rate loan
  • Eligible mixed-use properties are supported

Eligible Borrowers
  • Experienced borrowers who have successfully demonstrated expertise with comparable student deals.
  • 1.5x the standard minimum net worth and liquidity requirements for guarantors
Eligible Property Types
  • Properties with no more than 250 total units or 625 beds
  • 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
School Size 15,000 student enrollment minimum; this standard is greater than the student housing policy minimum of 8,000; properties must be within 2 miles of campus and have convenient access to campus by either public transit, shuttle or pedestrian access
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
  • Required Escrows will include taxes, insurance, replacement reserves and Priority Repairs. A three-month debt service escrow is required for all transactions during the renovation phase. Upon completion of 40% of the renovation work and subject to DSCR requirement, 50% of the escrow may be released. Upon completion of 80% of the renovation work and subject to DSCR requirement, the remaining amount of escrow may be released. In addition to the completion requirements, the DSCR must be 1.25x or higher to qualify for release of escrow
  • 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 service coverage ratio (DSCR): 1.20x
  • Sizing based on a 7-year sizing note rate
  • Appraisal must include as-is and as-stabilized values; underwriting must support a 1.35x DSCR 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
  • A scope of work is required; budget may range from $10,000-$25,000 per unit or $4,000-$10,000 per bed; the budget must allocate at least 25% to interior improvements
  • Budget can be adjusted by as much as 20% without additional approval; up to 50% of the budget may be spent on unit interiors
  • Completion Guaranty or rehabilitation escrow required; subject to Freddie Mac discretion
  • 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 to then current property performance.
  • 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, at Freddie Mac’s discretion, thereafter with a 1% extension fee
Fees Standard fees apply, including application fee and good faith deposit

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