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SABAL CAPITAL PARTNERS CLOSES $264 MILLION IN MULTIFAMILY LOANS IN FIRST QUARTER OF 2022

Bulk of 80 Loans Financing Affordable and Workforce Rental Properties, Emphasizing Current Demand within the Sector Amidst Housing Affordability Crisis

Irvine, Calif. – April 05, 2022Sabal Capital Partners, LLC, a wholly-owned subsidiary of Regions Bank and a nationwide commercial real estate lender, today announced the successful close of approximately $264 million in multifamily property loans during the period of January 1 through March 31 of this year. Totaling 80 loans for 80 properties across 21 states from coast-to-coast, the transactions include both acquisition and refinance loans, and represent transactions from three of the company’s many offered loan programs only. The bulk of the multifamily loans were financed through small balance Fannie Mae and Freddie Mac agency programs serving affordable and workforce rental properties, reflecting deep demand within the sector today amidst an ongoing home affordability crisis in the United States.

“Sabal continues to address borrower needs within the affordable and workforce housing sector and our Q1 pipeline reflects that,” says Ed Hussey, head of agency lending for Sabal Capital Partners. “These loans are important as they ensure that rental units across the country remain available to individuals and families who can’t afford market rate apartments near their places of employment.”

Current research indicates ten million low-income renter households routinely spend more than half, when ideally they should spend no more than 30%, of their income on rent. Additionally, the federal minimum wage of $7.25 per hour falls well short of both the two-bedroom and one-bedroom National Housing Wages. While 30 states, the District of Columbia, and numerous counties and municipalities now have minimum wages higher than the federal minimum wage, the average minimum wage worker must still work nearly 97 hours per week (almost two full-time jobs) to afford a one-bedroom rental home at fair market rate.[i]

27 of the 80 total loans were completed through Fannie Mae’s Multifamily Small Loan program, which provides loans up to $6 million for smaller rental properties that tend to be more affordable, are concentrated in urban areas close to transportation and jobs, and that provide housing for working families. 47 of the completed loans were financed through Freddie Mac’s Optigo® Small Balance Loans Program, which offers $1 million – $7.5 million loans nationwide for small apartment properties between 5 and 50 units and which serve the nation’s workforce.

The remaining six loans were closed via Sabal’s CMBS Conduit loan program, which provides non-recourse loans up to $50 million for core commercial real estate properties, including multifamily communities, located nationwide. All of the CMBS loans provided financed multifamily properties with the exception of one, which financed a self-storage asset. Of the 80 transactions, 18 financed acquisitions and 62 were refinance loans. The 80 loans do not include transaction activity for the remaining, combined Sabal Capital Partners and Regions Bank portfolio of loan programs. The company’s complete acquisition, refinance and construction solutions offering includes Fannie Mae DUS, Fannie Mae Affordable, Fannie Mae Small Loans, Freddie Mac Affordable, Freddie Mac Optigo® Small Balance Loans, Freddie Mac Optigo® Conventional, USDA, FHA/HUD (both MAP and LEAN), Bridge, Structured Adjustable Rate Mortgage Loans and CMBS Conduit programs.

The 2022 first quarter transaction closings follow the recent news of the Regions Bank acquisition of Sabal Capital Partners announced on December 2, 2021.

All of Sabal’s loan programs are accessible through SNAPÔ, the proprietary online lending platform that enables unparalleled efficiencies and convenience for brokers and borrowers throughout the loan process, from application through servicing. Visit www.sabal.com.

About Sabal Capital Partners

Sabal Capital Partners, LLC, a wholly-owned subsidiary of Regions Bank, is a national commercial real estate lender that has originated nearly $6 billion in financing and maintains a $5 billion servicing portfolio. Sabal Capital Partners keeps brokers and borrowers ahead of the curve with comprehensive debt solutions encompassing both agency and non-agency options. The lender is recognized for advancing the industry with SNAP™, an innovative proprietary technology platform that optimizes origination and servicing and enhances the customer experience. Sabal Capital Partners is a nationally rated Commercial Primary Servicer and Commercial Special Servicer by Morningstar with a CS2 ranking, an S&P Global rated Commercial Mortgage Loan Special Servicer with an average ranking, as well as a Fitch rated CMBS Primary Servicer with a CPS2- ranking and CMBS Special Servicer with a CSS3+ ranking. For more details, visit www.sabal.com.


[i] National Low Income Housing Coalition, Out of Reach 2021: The High Cost of Housing, https://nlihc.org/sites/default/files/oor/2021/OOR_2021_Mini-Book.pdf 

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Pandemic Recovery is Underway, but Rising Rates a Concern

by Richard Rennell

We are now two years past the start of the pandemic in the U.S. Some real estate sectors have fared better than others, however research points to recovery across the asset classes and a greater willingness among finance providers, albeit to varying degrees, to lend. Yet a rise in interest rates was cemented when January’s 7.5% year-over-year inflation number marked the biggest gain since 1982. Thus, while lenders may be more comfortable financing more property types, borrowers will need to adjust to a new rate reality.

The recovery data is compelling. In February, the Mortgage Bankers Association (MBA) released a report on commercial and multifamily mortgage originations for the fourth quarter of 2021. The report pointed to the quarter as a record end to a record year of lending. MBA’s numbers demonstrated a 79% increase in originations year-over-year and a 44% increase over the previous quarter.[i] Notably, low interest rates were one reason cited for the jump.

The sector hit hardest by the pandemic, hospitality, is rebounding and finance availability is as well. MBA’s figures indicated a 167% year-over-year increase in the dollar volume of loans for hotel properties. Even so, borrowers should expect cautiousness among lenders as this sector continues to recover.

The MBA noted a 122% year-over-year increase in the dollar volume of office loans. COVID’s Omicron surge moderately slowed demand for new space inquiries in December, however sublease space availability fell.[ii] Office lenders today are looking at locations, tenant stability, credit of the tenants, as well as lease rolls during the loan terms.

The retail sector delivered a 109% year-over-year increase in the dollar volume of loans, per the MBA. Likewise, Trepp’s Year-End 2021 report found annual retail property loan delinquency rates declined, however, noted a significant drop specifically in CMBS loan activity, demonstrating that lenders remain cool and cautious on this sector.[iii]

The MBA found the year-over-year increase in industrial loans by dollar volume was 113%. In 2021, investors couldn’t get enough industrial space and the sector held onto its place as the top performing asset class. Lenders view industrial today favorably. Retailers and suppliers are stockpiling inventory and the move away from brick-and-mortar spaces continues as online shopping reigns supreme. 

Multifamily hit a 53% year-over-year increase in dollar volume of loans. Apartments continue to prove they are essential and the sector is still favored by lenders. Under the current administration, agencies Freddie Mac and Fannie Mae have strengthened their commitment to ensuring finance is available for affordable and workforce housing properties.

Borrowers must understand that, despite commercial real estate’s ongoing recovery from pandemic-related distress, inflation and rising rates are today’s realities. Buyers should consider moving more quickly on any present deals as lenders are being forced to increase their pricing. In specific cases discounts are emerging, for example with the agencies’ for some affordable and workforce housing transactions. Ultimately, borrowers and lenders both need to adapt to a changing interest rate environment, but expect commercial real estate transactions to continue.

About the Author

Richard Rennell is managing director of CRE Term Lending with Sabal Capital Partners, LLC, a wholly-owned subsidiary of Regions Bank and a nationwide commercial real estate lender. Visit www.sabal.com


[i] Mortgage Bankers Association (MBA), Commercial/Multifamily Borrowing Jumped 70 Percent to New Record in  the Fourth Quarter of 2021, February 14, 2022, https://www.mba.org/2022-press-releases/february/commercial/multifamily-borrowing-jumped-79-percent-to-new-record-in-the-fourth-quarter-of-2021

[ii] CBRE, Omicron Surge Slows U.S. Office Demand in December, January 26, 2022, https://www.cbre.com/insights/briefs/pulse-of-us-office-demand-omicron-surge-slows-us-office-demand-in-december

[iii] Trepp & CRE Direct, The Year-End 2021, https://www.trepp.com/instantly-access-trepp-cre-direct-year-end-magazine-2021

SABAL CAPITAL PARTNERS WELCOMES 14 NEW HIRES TO SUPPORT STRATEGIC GROWTH

Owen Bouton and Michael Cozza to join as CMBS managing directors, Christopher West to serve as production manager

Irvine, Calif. – February 16, 2021Sabal Capital Partners, LLC, a diversified financial services firm specializing in commercial real estate, lending and investing, today announced it has added 14 new hires to support its strategic growth as a nationwide lender providing a comprehensive range of multifamily and commercial real estate (CRE) debt solutions. The new team members span Sabal Capital Partners’ agency and non-agency programs, which include Freddie Mac Optigo Small Balance, Freddie Mac Optigo Conventional, Fannie Mae Small Balance, Bridge AFR and S-CRE, Sabal Capital Partners’ CMBS program.

Owen Bouton and Michael Cozza have been hired as managing directors of the company’s Commercial Mortgage-Backed Securities (CMBS) group, which provides non-recourse loans up to $50 million on commercial real estate properties nationwide.

With more than 15 years of experience, Bouton is a skilled CRE loan originator. Most recently, Bouton served as an executive director of loan production at CIBC, where he headed southeastern balance sheet and CMBS origination efforts for floating and fixed rate loans totaling $100 million. He has also served as vice president of loan production at Hunt Mortgage Group and vice president of loan production at LStar Capital. Based in Atlanta, he has been involved in more than $2.75 billion in financing throughout his career. He graduated from Wake Forest University with a bachelor’s degree in sociology and earned his MBA from Georgia State University.

“With an impressive breadth and depth of loan offerings, Sabal boasts some of the industry’s most comprehensive debt solutions,” said Bouton. “I look forward to leveraging my experience in the CMBS space to further expand Sabal’s presence in the marketplace.”

With more than 25 years of experience, Cozza is a knowledgeable and innovative originator with strong client relationships and extensive borrower and mortgage broker contacts.   Previously, Cozza served as executive director and senior loan originator at CIBC World Markets, where he generated more than $19 million in revenue across all property types and closed approximately $1.1 billion in fixed and floating rate CRE loans. Cozza has also served as vice president and loan officer at Northfield Bank as well as vice president and senior loan originator at JP Morgan Capital. Based in New Jersey, he earned his bachelor’s degree in business administration from Hofstra University.

“Providing a unique life of loan experience, Sabal’s CMBS offerings fill an important gap in the marketplace,” said Cozza. “The company is well positioned to expand its CMBS business in 2021, and I look forward to being part of such a dynamic, client-centric team.”

Additional hires for Sabal’s non-agency loan programs include:

  • Darius Rybinski, conventional underwriter (Nashville, Tennessee)
  • Lisa Dunn, conventional underwriting analyst (Lebanon, Ohio)
  • Luan “Jay” Tang, portfolio analyst (Pasadena, California)

On the agency lending side, Christopher West joins Sabal as production manager of term lending sales, where he originates loans through Freddie Mac and Fannie Mae. With 10 years of experience, West is a client-oriented originator with extensive experience in real estate finance, multifamily loan origination, underwriting and property valuation. He previously served as mortgage originator at Greystone Servicing Co., where he originated approximately $20 million in multifamily loans. He has also served various roles at Basis Investment Group, Walker & Dunlop and CBRE. Based in Atlanta, he earned his bachelor’s degree in management and entrepreneurship from Clemson University.

“These hires will be extremely instrumental in Sabal’s growth as we continue to expand our loan pipeline and teams to serve more borrowers and brokers nationwide,” said Pat Jackson, founder and CEO of Sabal. “We have continued to counsel and provide solutions for our customers without interruption throughout COVID-19 and look forward to a strong year in 2021 bolstered by the expertise of these additional team members.”

Additional hires for Sabal Capital Partners’ agency programs include:

  • Collin Rodgers, senior underwriter, term lending (Sarasota, Florida)
  • Varduhi Hunanyan, underwriter, term lending (Sunland, California)
  • Judy Huynh-Smith, underwriting analyst, term lending (Murphy, Texas)
  • Scott Regan, senior associate, production and sizing (New York City)
  • Gamil Saad, servicing associate (Pasadena, California)
  • Kerri Spalding-Thompson, underwriting manager (Irvine, California)
  • Brendan Whaley, underwriting analyst (Kansas)
  • James Nguyen, programmer analyst (Ontario, California)

For information on Sabal’s loan programs, visit www.sabal.com for details and eligibility.

About Sabal Capital Partners, LLC

Headquartered in Irvine, California, Sabal Capital Partners, LLC and its commercial real estate lending and servicing subsidiaries and affiliates have originated over $4 billion nationally through their highly specialized wholesale lending platform. Sabal strives to keep clients and investors ahead of the curve, representing a corporate philosophy based upon the core practices of innovation, partnership, commitment to excellence and entrepreneurship. Sabal’s dedication to advancing the financial services industry has led to the development of SNAP™, an innovative platform designed to optimize the lending and investment processes and enable a highly efficient interaction between Sabal and its client and investor base. Sabal is a nationally rated Commercial Primary Servicer and Commercial Special Servicer by Morningstar with a CS2 ranking, an S&P Global rated Commercial Mortgage Loan Special Servicer with an average ranking, as well as a Fitch rated CMBS Primary Servicer with a CPS2- ranking and CMBS Special Servicer with a CSS3+ ranking. For more information about Sabal, visit www.sabal.com.

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SABAL CAPITAL PARTNERS CLOSES $73 MILLION PORTFOLIO THROUGH FANNIE MAE SMALL LOAN PROGRAM

Portfolio to refinance 25 affordable apartment properties in the San Fernando Valley, Palms and Mar Vista Areas of Los Angeles

Irvine, Calif. – Jan. 27, 2021Sabal Capital Partners, LLC, a diversified financial services firm specializing in commercial real estate, lending and investing, today announced the close of a $73 million portfolio encompassing the refinance of 25 multifamily properties in the San Fernando Valley, Palms and Mar Vista areas of Los Angeles. The portfolio, called LA 25, represents 25 loans and 403 units that were refinanced by Sabal Capital Partners using its Fannie Mae Small Loan Program.

Comprising affordable apartment units, the portfolio provides lower cost rentals in key regions of Los Angeles County, which is commonly considered one of the country’s most expensive regions. Sabal closed the portfolio in 30 days, from term sheet to funding, with 65% loan-to-value (LTV).

“With a speed to close well below industry average, as well as low LTV, this portfolio demonstrates the efficiency of Sabal’s loan programs,” said Pat Jackson, founder and CEO of Sabal. “We were able to deliver quickly and efficiently even during the end of year rush, reflecting our steadfast commitment to providing streamlined service to borrowers and brokers nationwide.”

Sabal financed the properties through the Fannie Mae Small Loan Program, which provides fixed- and variable-rate financing up to $6 million for the acquisition or refinance of existing, stabilized, conventional multifamily properties with five or more units. Program highlights include lower cost of execution, competitive rates, certainty and speed of execution for borrowers and streamlined third-party reports.

All of the properties included in LA 25 are classified as affordable rental housing, a class of apartment properties which is confounded by significant supply and demand issues. According to The State of the Nation’s Housing Report 2020, by Harvard University’s Joint Center for Housing Studies, regulatory barriers – often at the state and local levels – make it difficult for the private market to supply well-located, affordable housing. The lack of new development drives heightened demand for existing affordable rental units.

“Our country is experiencing a dire shortage of affordable housing, and this problem is only amplified in high-cost areas such as Los Angeles,” added Jackson. “Financing lower cost apartment properties, such as the ones included in this portfolio, is crucial to keeping them available to lower income renters.”

For information on Sabal’s full suite of loan programs, including the Fannie Mae Small Loan Program, visit www.sabal.com for details and eligibility.

About Sabal Capital Partners, LLC

Headquartered in Irvine, California, Sabal Capital Partners, LLC and its commercial real estate lending and servicing subsidiaries and affiliates have originated over $4 billion nationally through their highly specialized wholesale lending platform. Sabal strives to keep clients and investors ahead of the curve, representing a corporate philosophy based upon the core practices of innovation, partnership, commitment to excellence and entrepreneurship. Sabal’s dedication to advancing the financial services industry has led to the development of SNAP™, an innovative platform designed to optimize the lending and investment processes and enable a highly efficient interaction between Sabal and its client and investor base. Sabal is a nationally rated Commercial Primary Servicer and Commercial Special Servicer by Morningstar with a CS2 ranking, an S&P Global rated Commercial Mortgage Loan Special Servicer with an average ranking, as well as a Fitch rated CMBS Primary Servicer with a CPS2- ranking and CMBS Special Servicer with a CSS3+ ranking. For more information about Sabal, visit www.sabal.com.

# # #

SABAL ANNOUNCES RATINGS WITH S&P GLOBAL AND FITCH

Sabal’s Servicing Portfolio Now Exceeds $4.3 Billion in Approximately 1,500 Commercial Real Estate Loan Assets

Irvine, Calif. – January 5, 2021Sabal Capital Partners, LLC, a diversified financial services firm specializing in commercial real estate, lending and investing, today announced its servicing entity, SCP Servicing, LLC, has been assigned ratings by both S&P Global Ratings and Fitch Ratings. The company, whose servicing portfolio now encompasses 1,500 commercial real estate loans valued at $4.3 billion, is also Morningstar rated.

“These ratings reflect the institutional strength of our lending and servicing platforms,” says Pat Jackson, founder and CEO of Sabal Capital Partners. “As both a commercial real estate lender as well as an investor in distressed and non-performing debt assets, Sabal’s ratings are notable for building added trust among our investors, customers and sellers.”

S&P Global Ratings assigned SCP Servicing a Commercial Mortgage Loan Special Servicer rating with an average ranking and an above average sub-ranking for management and organization. S&P Ratings indicates that the ranking reflects Sabal’s experienced senior management and well-designed organizational structure that supports the special servicing platform; comprehensive training regime that is largely delivered on-the-job; good leverage of third-party asset management and special servicing system; internal control environment built on a solid framework for its current volume; small dedicated asset management team; and special servicing resolution track record.

Fitch Ratings assigned Sabal a new rating for CMBS Primary Servicer with a CPS2- ranking, as well as a new rating for CMBS Special Servicer with a CSS3+ ranking. Fitch notes the primary servicer rating reflects Sabal’s strong primary servicing experience, including a concentration in loans secured by multifamily properties; experienced yet small management team with key-person risk; well-integrated servicing systems yielding strong reporting abilities for quality control and streamlined loan boarding; sufficient controls with limited internal reviews; and robust asset administration capabilities.

According to Fitch, Sabal’s CMBS Special Servicer rating reflects the company’s workout history, including resolving FDIC commercial real estate portfolios and securitized non-performing loan transactions; sufficient technology to handle a large volume of defaulted loans; the small size of the special servicing group, including two asset managers; and sufficient internal controls primarily relying upon technology and credit committee reviews.

Sabal is also a Morningstar rated Primary and Special Servicer with a MOR CS2 ranking. Additionally, Sabal is SOC 1 Type 2 and REG AB Compliant by Grant Thornton.

“Being rated by all three of these agencies renders significant third-party credibility to Sabal’s business, teams, infrastructure and controls, as well as our ability to scale up in assets,” adds Jackson.

For information on Sabal and its robust suite of multifamily and commercial real estate loan offerings, visit www.sabal.com.

About Sabal Capital Partners, LLC

Headquartered in Irvine, California, Sabal Capital Partners, LLC and its commercial real estate lending and servicing subsidiaries and affiliates have originated over $4 billion nationally through their highly specialized wholesale lending platform. Sabal strives to keep clients and investors ahead of the curve, representing a corporate philosophy based upon the core practices of innovation, partnership, commitment to excellence and entrepreneurship. Sabal’s dedication to advancing the financial services industry has led to the development of SNAP™, an innovative platform designed to optimize the lending and investment processes and enable a highly efficient interaction between Sabal and its client and investor base. Sabal is a nationally rated Commercial Primary Servicer and Commercial Special Servicer by Morningstar with a CS2 ranking, an S&P Global rated Commercial Mortgage Loan Special Servicer with an average ranking, as well as a Fitch rated CMBS Primary Servicer with a CPS2- ranking and CMBS Special Servicer with a CSS3+ ranking.  For more information about Sabal, visit www.sabal.com.

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EDWARD HUSSEY JOINS SABAL CAPITAL PARTNERS AS HEAD OF AGENCY LENDING

Irvine, Calif. – Dec. 7, 2020Sabal Capital Partners, LLC, a diversified financial services firm specializing in commercial real estate, lending and investing, today announced it has hired Edward Hussey as head of agency lending. Based in Virginia, Hussey will be responsible for managing production across all of Sabal’s Freddie Mac, Fannie Mae and other agency products and overseeing the recruiting, training and management of the lender’s nationwide production team. Hussey brings more than 30 years of experience in mortgage lending across credit, underwriting and production, including eight years as vice president at Freddie Mac, to his new role at Sabal.

“Given Ed Hussey’s deep credit and production expertise, including extensive experience working closely with Freddie Mac and Fannie Mae, I’m confident that he will add immense value to Sabal from day one,” says Pat Jackson, founder and CEO of Sabal. “He understands the nuances of our agency lending programs and has the skill to build out our production team while furthering its reputation as the leading resource for those seeking to acquire, refinance and rehabilitate commercial properties.”

Sabal is a nationwide leader in agency finance solutions, with programs including Fannie Mae® Small Loans, Freddie Mac Optigo® Small Balance Loans and Sabal’s newest offering, Freddie Mac Optigo® Conventional Loans.

Before joining Sabal, Hussey served as senior vice president, head of multifamily production for agency lending at SunTrust Bank, now Truist Bank, where he managed a nationwide loan production platform and served as the primary liaison to both Fannie Mae and Freddie Mac. He also played an instrumental role in preparing Pillar Financial for acquisition by SunTrust Bank. Prior to that, he held several vice president roles at Freddie Mac overseeing multifamily credit risk for the enterprise risk management division, credit policy and asset valuation for the credit management division and terms of business management for the multifamily division. Hussey also previously held roles as chief underwriter and senior vice president of Wells Fargo Multifamily Capital and chief underwriter and vice president of Standard Mortgage Corporation.

“Sabal is a powerhouse in the agency lending space, and I am honored to be joining this nationally respected team,” says Hussey. “I look forward to leveraging my expertise to further expand Sabal’s presence in the market while delivering excellent service for brokers and borrowers.”

Hussey earned an MBA from George Washington University and a bachelor’s degree in civil engineering from Louisiana State University. He is a Certified Commercial Investment Member (CCIM) and earned his sustainable management certificate from Duke University.

Edward Hussey joined Sabal in his new role on December 1.

For more information on Sabal’s complete multifamily and commercial real estate lending offerings, visit www.sabal.com for details and eligibility.

About Sabal Capital Partners, LLC

Headquartered in Irvine, California, Sabal Capital Partners, LLC and its commercial real estate lending and servicing subsidiaries and affiliates have originated over $4 billion nationally through their highly specialized wholesale lending platform. Sabal strives to keep clients and investors ahead of the curve, representing a corporate philosophy based upon the core practices of innovation, partnership, commitment to excellence and entrepreneurship. Sabal’s dedication to advancing the financial services industry has led to the development of SNAP™, an innovative platform designed to optimize the lending and investment processes and enable a highly efficient interaction between Sabal and its client and investor base. Sabal is a nationally rated Commercial Primary Servicer and Commercial Special Servicer by Morningstar with a CS2 ranking, an S&P Global rated Commercial Mortgage Loan Special Servicer with an average ranking, as well as a Fitch rated CMBS Primary Servicer with a CPS2- ranking and CMBS Special Servicer with a CSS3+ ranking. For more information about Sabal, visit www.sabal.com.

One Property, Two Strategic Finance Solutions

By Pat Jackson, President and CEO, Sabal Capital Partners

In April 2018, Sabal’s clients were acquiring a 96-unit apartment community in West Memphis, AK and encountered some financing hurdles. Though 97% occupied, the property was experiencing volatile collections and poor tenant credit underwriting. As a result, the asset did not qualify for financing under Freddie Mac’s Small Balance Loan Program.

Through some strategic maneuvering, Sabal was able to quickly deliver an interim and efficient solution. “We provided a flexible short-term, $2 million loan for the acquisition of the property,” said Richard Rennell, national production manager at Sabal. “This Bridge AFR loan was an ideal solution to our borrower’s problem, providing a 15-month term with two three-month extensions, which is our standard program.”

The borrower’s business plan called for the improvement and stabilization of property operations. He accomplished this by completing upgrades and hiring an experienced property management firm, which was able to replace the nonpaying tenants. Through the borrowers’ efforts, they were able to turn the property completely around in 12 months. Sabal was able to step in once again, refinancing the asset in April 2019 with a 10-year fixed rate loan of $2.95 million utilizing the Freddie Mac Small Balance Loan Program.

“The broker and I were in constant contact for the entire duration that improvements were made to the asset, which allowed us to step in immediately with a permanent loan when the time was right,” added Rennell. “This particular property is just one example of the diverse small balance programs we offer and how they can be combined for use on one asset.”

For more information on our AFR Bridge Program or any of Sabal’s additional Small Balance Loan Programs, please contact Sabal’s Multifamily Lending Experts at lending@sabal.com.

Four Ways Freddie Mac’s Targeted Affordable Housing Express Debt Product Benefits Borrowers

By Pat Jackson, President and CEO, Sabal Capital Partners, LLC

Nearly every market in the U.S. is currently faced with a lack of affordable housing. Increased cost of living, lack of supply, zoning restrictions, growing cost of construction and many other factors all contribute to the estimated 7.2-million-unit shortage nationwide. As the public and private sectors explore how to work together in hopes of filling this gap, debt programs focused on the financing of existing affordable housing are in steep demand.

Freddie Mac’s Targeted Affordable Housing Express (TAHX) program is one program that provides a simple and efficient solution for affordable properties nationwide. For borrowers seeking a small balance loan up to $10 million, here are just a few of the many benefits Freddie Mac’s TAHX product offer:

1.) Streamlined Process: Freddie Mac’s TAHX program provides easier pre-screening, streamlined loan documents and an abbreviated list of required project paperwork, simplifying the underwriting process.

2.) Lower Fees: Freddie Mac’s TAHX fees are significantly below industry norms. For a standard deal structure, fees are typically less than $25,000.

3.) Broad Definition of Affordable: The definition of affordable housing under the TAHX program is rather flexible. Where affordable housing often more narrowly describes a category where occupants pay no more than one third of their income for housing, the definition of affordable housing under the TAHX program is much more flexible. Properties under this typical definition of affordable as well as workforce (often defined as housing for those earning 60 to 120% of the area’s annual median income) and below-market multifamily can qualify.

Specifically, uncapped multifamily stabilized properties with one or more of the following characteristics are eligible:Low-Income Housing Tax Credit (LIHTC) properties in at least year 11 of their compliance period

– Long-term Housing Assistance Payment (HAP) contracts

-Regulatory agreements that impose rent/income restrictions

-Section 8 vouchers

-Tax abatements

4.) Payment Flexibility: The TAHX program offers a variety of pre-payment options for borrowers, including a declining schedule and yield maintenance for all loan types. It also offers a cash-out option, which is nearly unheard of in current bank products.

As the conversation surrounding the shortage of affordable housing units continues, programs like Freddie Mac’s TAHX will give borrowers easier access to much-needed capital for affordable properties nationwide.

What Borrowers Should Know about Investing in Affordable/Workforce Housing

By Pat Jackson, President and CEO, Sabal Capital Partners

With an estimated 7.4 million-unit shortage of affordable housing nationwide, the need for more apartments in this category is stronger than ever. As we learned from the latest National Low Income Housing Coalition “Out of Reach” report, 71% of extremely low income renters are severely housing burdened, and only 37 affordable homes exist for every 100 extremely low-income households. In looking to address this issue and meet housing needs nationwide, ground-up construction isn’t the only option. As unmet demand for affordable housing continues to expand, the acquisition of existing multifamily properties presents a compelling opportunity for borrowers to help fill the housing gap while capitalizing on a promising investment opportunity.

Supply

Before exploring an acquisition, it’s important to understand the incomes of current tenants. The existing asset needs to have rents below market rate to allow for a manageable purchase.

Though there isn’t a widely agreed upon definition, workforce is often defined as 60-120% Area Median Income (AMI). However, in large markets such as San Francisco and New York City, AMI is closer to 140%. Affordable, on the other hand, often refers to units where tenants pay no more than 30% of their income on rent.

Acquisitions typically require at least some repositioning, so the right equity and debt structure is critical, as is the right improvement plan, since tenants will already be in place.

Property Selection

Finding the right property is the biggest challenge for borrowers. Many viable assets are off market, and the price must be discounted due to the lower rents paid by affordable and workforce tenants. Additionally, specific metrics must be met beyond rent and income for a deal to pencil.

  1. Key market fundamentals to look for include: A gentrifying area with increasing rents
  2. Location in a moderately populated area (urban or suburban)
  3. Presence of a nearby employment center
  4. Acceptance of Section 8 vouchers (a standard requirement for affordable properties)

Financing

Low-Income Housing Tax Credits (LIHTC) are one option for financing affordable properties. However, it’s important to keep in mind that these projects typically take 4-6 years to develop, have an extensive underwriting process and use a narrow definition of “affordable.”

Freddie Mac’s Targeted Affordable Housing (TAHX) Program is an alternative, ideal option for borrowers and brokers looking to finance an acquisition. The most significant benefit of the TAHX program compared to others is its more expansive definition of affordable housing. Going beyond the “affordable” definition of tenants that pay no more than one third of their income for housing, workforce and below-market multifamily can also qualify. Additional benefits include closing timelines of less than 45 days (compared to market averages of 90 days) and fees well below industry norms (at or below $25,000).

The TAHX product itself does not allow for renovation beyond simple improvements, but Sabal has filled that gap with our bridge AFR product. Our AFR program allows an owner/investor in both the affordable and workforce space the opportunity to pay off the unpaid principal balance and improve the property over a 12-month period while we work with Freddie Mac and the borrower to ensure a smooth transition to the TAHX program. 

Three Trends to Watch in CRE Financing

By Pat Jackson, President and CEO, Sabal Capital Partners

Sabal’s position as a nationwide commercial real estate lender allows us the benefit of seeing a wide range of deals and markets, ultimately giving us a macro-level view of trends occurring across the country. As we move deeper into the second half of 2019, below are three trends the Sabal team expects to continue impacting the commercial real estate industry over the coming months.

1)     Heightened Multifamily Lending in Secondary and Tertiary Markets

More and more, we are seeing multifamily activity growing in secondary and tertiary markets. There is a shortage of workforce housing across the country, and we’re seeing that people living in markets like Charleston struggle just as much as those trying to find an affordable place to live in larger cities like Chicago. Financing existing product in these markets is key to keeping workforce housing available – and the current marketplace dynamics in these regions, including lower competition, higher cap rates and the opportunity for strong year-over-year rent growth, create an excellent investment opportunity for multifamily owners and buyers. Obviously, all deals should be evaluated for risk, as with any real estate transaction.

2)     Greater Acceptance of Agency Product in the Small Balance Marketplace

Agency products like Freddie Mac’s Optigo Small Balance Loans Program and Fannie Mae’s Small Loan program are becoming increasingly accepted and popular options for financing multifamily assets. For example, in 2018 Freddie Mac’s Small Balance Loan program financed 2,771 small balance loans, a year-over-year increase of a little more than 3%. With $7.4 billion in funding, this represented 10% of Freddie Mac’s Multifamily volume. In 2017, Fannie Mae reported $2.3 billion in funding in its Small Loans program, a 21% increase from the year prior. While Fannie’s numbers remained relatively flat in 2018, the continuance of the program’s strong performance year-over-year is indicative of the marketplace’s need for this type of financing.

At Sabal, we’ve seen broker awareness and desire for these programs’ financing increase significantly, as well. Annually, our Freddie Mac pipeline continues to grow significantly, and we’ve seen a strong start to our Fannie Mae program, which was approved in early 2019.

3)     Increasing Diversity in the CRE Workforce

Over the course of the past decade, there has been a marked increase in the number of women in the CRE workforce. According to CREW Network’s “2015 Benchmark Study Report: Women in Commercial Real Estate,” 9% of c-suite positions in CRE are held by women. Additionally, asset management and development have seen increases in the number of women working in each field. This change is welcomed and much needed to keep the talent pipeline fresh.

Despite this progress, there is still much room for change in the workforce. A study released by CREW Network found the percentage of women in brokerage and finance declined between 2006 and 2015, from 39% to 29% and from 44% to 42%, respectively.

While there has been significant focus on diversity in the commercial real estate space, it’s imperative that the industry continue to welcome and grow in diversity. Commercial real estate assets – whether apartments, retail, office, industrial or other – are utilized by a wide range of people. It’s key that the industry designing, developing, funding and investing in these assets reflect that same level of diversity.

Heightened multifamily activity in secondary and tertiary markets, greater acceptance of agency product in the small balance marketplace and a push for increased diversity in the industry are all trends that we will continue to watch this year and beyond.