Terms

• 15-year credit facility, with 5-15 year loans available for maturity laddering.

• Generally up to 15-year terms for fixed-rate loans, and 5-year terms for variable-rate loans (extensions may be available for a fee.)

• Up to 30 years for fixed or variable rate tax-exempt bond credit enhancement.

Interest Rates/Amortization 

• Fixed and variable-rate loan options available

• Fixed-rate loans generally have 30 year amortizations

• Variable-rate loans are generally structured ARMs

• Variable-rate loans typically require that the borrower purchases an interest rate cap (or other hedging arrangement to reduce borrower risk)

• For tax-exempt bonds, variable-rate loans can use a principal reserve fund instead of actual amortization

Fixed-Rate Conversion

Variable-rate options can be converted to fixed-rate (either in whole or part). If only part of the loan is converted to fixed-rate, a $25 million variable-rate portion must remain. 

Maximum LTV:  80% 

Minimum DSCR:  1.20x (depends on asset class and product type) 

Recourse:  Loans are non-recourse with standard “bad boy” carve-outs 

Covenants

Covenants are often required, may include borrower and corporate sponsor liquidity and net worth agreements.

Prepayment Penalty

Partially pre-payable debt, yield maintenance and declining prepayment premium options available.

Borrower Entity

"A single purpose, bankruptcy-remote entity is required for each borrower and any general partner, managing member, or sole member that is an entity. Borrowers must have common sponsorship."

Eligible Properties

Eligible properties include standard multifamily properties, student housing developments, and manufactured housing communities.

Other Considerations:  "Financial and operating covenants and geographic diversity requirements determined on a case-by-case basis."

Structure Options: 

• Single or multiple loans

• Single or multiple collateral pools

• No rebalancing required or unused capacity fees

Assumability

For conventional financing, assumption is not allowed on an individual basis, but the entire credit facility can be assumed, with approval. Loans for properties using exempt financing can only be assumed if they are released from the credit facility. 

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

• Substitution of properties is also allowed

• Flexibility allows for the quick sale of properties based on market opportunities

Disadvantages

• Requires third-party reports including Appraisals, Property Condition Assessments and Phase I Environmental Assessments

• Due diligence fee of $1,500 per property

• 10 basis points structuring fee on each advance

• Other fees, including substitution, release, assumption, and review fees, may apply

• Cross-defaulted loans could mean higher risks for borrowers

Case Study: Big Investments Across Florida

Consider a fictional scenario involving a well-established real estate investment firm, Sunshine Property Group (SPG), specializing in the acquisition and management of multifamily properties across the state of Florida. Given the current market conditions and growth potential, SPG plans to acquire a diverse portfolio of multifamily properties across various cities in Florida.

With the total investment size amounting to $75 million, SPG decides to explore Fannie Mae's Multifamily Credit Facility program, which caters specifically to large-scale investors needing a minimum of $55 million in financing.

The Credit Facility program offers loan terms ranging from five to 15 years, ideal for SPG's strategy of maturity laddering. With the portfolio being diverse in terms of geographic location and asset type, the program's up to 80% LTV allows SPG to secure substantial financing. This can go up to $60 million (80% of $75 million), enabling SPG to manage its capital deployment effectively.

SPG appreciates the flexibility of both fixed and variable-rate loan options offered by this program. Based on their risk appetite and financial modeling, they opt for a fixed-rate loan for stable and predictable monthly payments. Additionally, they foresee the advantage of a 30-year amortization period in easing the monthly repayment burden.

One of the critical deciding factors for SPG choosing this program is the option to cross-collateralize loans. They understand the risk of cross-default but are confident in their operational excellence and stringent property selection strategy to mitigate this risk.

Another aspect that adds to the appeal of the program is the ability to expand the credit facility quickly to add new properties. This aligns with SPG's future growth strategy, allowing them to scale their operations without the hassle of securing a new loan every time.

The program's disadvantage lies in the requirement of third-party reports and additional fees like structuring fees and due diligence fees. However, SPG acknowledges these as part and parcel of securing large-scale financing and takes it into account in their cost projections.

In conclusion, by leveraging the Fannie Mae Multifamily Credit Facility program, SPG can execute its large-scale investment strategy efficiently, contributing to the growth and vibrancy of Florida's multifamily housing sector.

This is a fictional case study provided for illustrative purposes.

In this article:

1. Fannie Mae Financing for Groups of Multifamily Properties
2. Sample Fannie Mae Terms for Credit Facility Financing in 2024
3. Terms
4. Interest Rates/Amortization  
5. Fixed-Rate Conversion
6. Covenants
7. Prepayment Penalty
8. Borrower Entity
9. Eligible Properties
10. Assumability
11. Advantages
12. Disadvantages
13. Case Study: Big Investments Across Florida
14. Get Financing