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May 2017 — Multifamily Properties Quarterly —

Page 9

www.crej.com

Lending

can help communities, like Denver,

deal with the increasing shortage of

workforce housing. These programs

are aimed at preserving and enhanc-

ing workforce housing by providing

more efficient capital to spur invest-

ment and capital investment into

older multifamily assets. As shown on

the acquisition-financing chart, both

GSEs have been very active in financ-

ing new acquisitions in metro Denver

– accounting for over 75 percent of

new acquisition financing of proper-

ties over 100 units in 2016.

For properties in metro Denver with

units that are affordable at 60 percent

of AMI, both GSEs offer reduced inter-

est rates based on the percentage of

units deemed affordable at 60 percent

of AMI. The rate benefit typically rang-

es from 15 to 30 basis points, depend-

ing on the percentage of units deemed

affordable. For assets that do not have

units affordable at 60 percent of AMI,

but still are considered workforce

housing with rents affordable at 80

percent or even up to 100 percent of

AMI, both GSEs will provide improved

pricing for those assets versus an

asset commanding much higher

rents.

In addition, both GSEs have devel-

oped “green” products that are

designed to incentivize investment

in older assets that generate utility/

energy savings. These programs target

capital improvements that generate

minimum energy savings in the 15 to

20 percent range. Typically, the older

the asset, the easier/less expensive

it is to capture the required energy

savings, making these products great

options for investors and owners of

older multifamily assets. The GSEs

incentivize owners to “go green”

through improved rates and pricing,

typically ranging from 20 to 30 bps.

Finally, both GSEs have developed

value-add products designed to pro-

vide investors and owners of older

multifamily assets short- and long-

term, cost-effective financing options

for moderate and extensive property

upgrades, providing updated housing

and extending the remaining useful

life of the asset. These programs are

competitively priced and designed

either to compete with the more tra-

ditional bridge lenders via short-term

financing or to provide immediate

mid- to long-term financing for assets

that typically would require a bridge

loan during the rehab stage.

While the GSEs continue to focus on

affordable housing and housing for

low-income families, their expanded

product line will help maintain and

increase investment in workforce

housing across the country. Freddie

Mac, for example, is working to devel-

op a mezzanine product as well as a

construction product for workforce

housing that it hopes to launch this

year. For a city like Denver, with an

aging multifamily stock, and strong

population and employment growth,

these products could prove instru-

mental in maintaining and facilitat-

ing additional capital investments

into the older assets – and who

knows, perhaps lead to construction

of new workforce housing.

Berkeley Point Capital LLC

Berkeley Point Capital LLC