Property substitutions are typically allowed when: 

• The substitute property has a value equal to or greater than the greater of:

  • The property being released (immediately before release)

  • The original value of the property being released

• OR, the substitute property has net operating income equal to or more than the greater of:

  • The net operating income (NOI) of the property being released (immediately before release)

  • The original NOI of the released property

Advantages

• Competitive interest rates

• Loans are non-recourse

• 30-180 day rate locks (streamlined rate locks also available)

• Supplemental financing is available

• Fast closings

• Expansion allows quick addition of new properties

Disadvantages

• Requires third-party reports including an Appraisal, a Property Condition Assessment and a Phase I Environmental Assessment

• Due diligence fee of $1500 per property

• 3 basis points structuring fee on each advance

• Other fees may apply

Case Study: Refinancing a Houston Portfolio

Consider the case of James, a real estate investor based in Houston, Texas, who owns a portfolio of multiple multifamily properties. His portfolio consists of standard multifamily developments, senior housing, and student housing, totaling over 1,000 units spread across the metro. Recognizing the need for significant financing to better manage his extensive portfolio, James turned to Fannie Mae's Bulk Delivery Loan program.

Given the size of his portfolio, James needed substantial funding – significantly beyond the minimum threshold of $55 million required by the Fannie Mae Bulk Delivery Loan program. This program was specifically designed for large investors like James, offering the flexibility to finance a diverse range of properties under a single, bulk loan.

James's properties were collectively valued at $200 million. The Fannie Mae Bulk Delivery Loan allowed for an LTV of up to 80%, enabling James to secure a loan of up to $160 million. The terms of the loan ranged between five and 15 years, providing James with the flexibility to stagger the maturity of his loans — a strategy known as maturity laddering.

With both fixed and variable-rate loan options available, James could choose the option that best suited his financial strategy and risk tolerance. Also, the loan program offered both interest-only and amortizing loans, depending on the performance of the properties, providing James with more flexibility in managing his loan repayments.

The non-recourse nature of the Fannie Mae Bulk Delivery Loan was another key advantage for James. This meant that in the event of a default, he wouldn't be personally liable beyond the collateral itself. Furthermore, the program allowed for individual loans to be fully assumable with lender approval, increasing the marketability of his properties in the future.

One particular aspect of the Bulk Delivery Loan that stood out to James was the ability to substitute properties within the loan structure. As long as the substitute property had a value or net operating income equal to or greater than the property being replaced, he could make the switch, giving him the flexibility to manage and adjust his portfolio as needed.

While the program required several third-party reports and due diligence fees per property, James found these requirements to be reasonable given the size and scope of his portfolio. The competitive interest rates, fast closings, and option for supplemental financing made the Fannie Mae Bulk Delivery Loan a suitable and efficient choice for James's extensive property portfolio.

This is a fictional case study provided for illustrative purposes.

In this article:

1. Fannie Mae Bulk Financing for Groups of Multifamily Properties
2. Sample Fannie Mae Terms for Bulk Delivery Loans in 2024
3. Advantages
4. Disadvantages
5. Case Study: Refinancing a Houston Portfolio
6. Get Financing