Innovation for a challenging multifamily housing market

More renters are delaying home purchases as housing affordability becomes a critical issue nationwide. At the same time, higher interest rates are making multifamily investments more challenging.

With the right bank, however, deals can still succeed. Recently, California Landmark secured a $24.6 million Freddie Mac loan from Capital One to refinance Woodlark Residences, an 80-unit apartment community in Larkspur, California. The sponsor acquired Woodlark Residences in 2014 and has invested $3.7 million in capital improvements, such as upgrading all units, common areas and amenities.

“As we continue to work through a challenging interest rate environment, we leveraged Freddie Mac’s index lock program to mitigate interest rate volatility,” said Gregory Reed, a senior vice president on Capital One’s Agency Finance team in Southern California. “This transaction supports [Fannie Mae and Freddie Mac’s] focus on creating and preserving mission-driven housing properties in an effort to close the gap between supply and demand in affordable and workforce housing.”

Another transaction that supports the agencies’ workforce housing focus closed a few weeks later. Capital One provided SC Development a $43 million refinancing package for 2 multifamily communities in Fullerton, California, that the borrower has owned since the properties were built nearly 50 years ago. The transaction included 2 separate 10-year fixed-rate loans with interest-only payments.

“Given our long-standing relationship with Fannie Mae and our existing knowledge of these assets, we were able to move quickly to rate lock,” said Tina Quirin, a senior vice president of Agency Finance at Capital One.

The transactions help meet the growing need for more affordable multifamily inventory nationwide, both by maintaining existing units and with new construction. New construction efforts continue to face obstacles, however, as supply chain disruptions have been replaced by higher interest rates and lower availability of construction debt.

Meeting the demand for housing affordability in the current environment requires innovative financing products that can be applied across the multifamily industry, including the Class A, workforce and affordable housing markets.

Since 2022, Capital One’s Agency Finance team in Southern California has completed 40 multifamily transactions totaling more than $2 billion*, and ConnectCRE, the commercial real estate news site, recognized Reed, Quirin and fellow Senior Vice President Kristen Croxton —among this year’s top mortgage lenders nationally.

Their Agency relationships and long-standing customer ties helped solidify Capital One’s position last year both as a top-5 Agency lender and a top-5 Mortgage Bankers Association multifamily lender.** Nationwide, Capital One was the number 4 lender for Freddie Mac, number 9 lender for Fannie Mae, with a $50 billion-plus*** Agency servicing portfolio. 

With decades of experience in handling property acquisition and refinancing transactions, and lending products covering all asset types in the multifamily space including conventional, affordable, small balance loans (SBL), manufactured housing communities (MHC), students and senior housing, the team understands the market, financing structures and agency lending. Team members know how to use their expertise to best serve clients’ commercial real estate investment plans and financial needs to help clients achieve their long-term goals.

Reach out to the Southern California Agency Finance team to discuss your next deal.

 

Products and services provided by Capital One, N.A., Member FDIC.

*Capital One-reported data as of 11.15.2023, unless otherwise noted.

**MBA Commercial/Multifamily Annual Originations Rankings, Year-End 2022.

***Freddie Mac reported 2022 Multifamily Lenders. Fannie Mae reported 2022 Multifamily Lenders. Capital One-reported data, reported as of 1.17.2023 unless otherwise noted.