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GREENBELT, MD–Recently KeyBank Real Estate Capital provided a $56.25 million permanent mortgage loan to a joint venture between The Dolben Co. of Woburn, MA, and Atapco Properties in Baltimore. The 10-year, fixed-rate loan, which was executed through Freddie Mac's Lease-Up program, refinanced the construction debt for the development of Verde at Greenbelt Station here.

Sounds routine right? In many respects it was. But one element of this execution was unique: it used Freddie Mac's Lease-Up Program while also taking advantage of Freddie Mac's index lock program.

Here is why that was significant, at least to the borrower: it was able to lock in its interest rate when the property was only about 75% occupied. Then, it was able to secure funding the property were only about 90% occupied. KeyBank accomplished that via two programs — the index lock and Freddie Mac's lease up facility — which are not usually blended.

GlobeSt.com caught up with KeyBank's Dirk Falardeau who originated the loan to find out more.

Can you explain why this deal is unusual?

What made this deal a little unique was the fact that we were able to index lock it when the property was just coming out of construction. In order to tie up the interest rate, we used Freddie Mac Lease Up Program. The issue, though, is that typically you need to be at 50% occupied to lock and 65% occupied to fund. Usually, you have to put up additional collateral, meaning a line of credit for 10% of the appraised value. That's how the program typically works.

What happened next?

Well, the client had a very good relationship with Keybank and with Freddie Mac, and we got them to index lock us for 60 days, after which we would go into an early rate lock. We were looking to do probably 120 days to 180 days, depending on how the occupancy progressed. Freddie Mac worked with us and closed it that way.

We were very fortunate, when we got to day 60 of the index lock — which means you need to fully rate lock — our occupancy was really spiking, was really doing well. At that point, we made the decision that it was probably going to be more cost effective to hang out on that index lock a little bit longer — which is stretching the program — and then go right to closing. That's what we ended up doing.

So the deal was initially structured as an index lock with an early rate lock. But due to the leasing velocity, you were able to extend the index lock slightly beyond the parameters, and go right to closing?

Correct. It made good business sense at that time to just go right from the index lock rate to the closing, because the leasing velocity was there.

What did the deal look like when you closed?

By the time we funded, we had reached the 90% occupancy, so we were able to close based on that. In order for it to be a fully stabilized deal, you're supposed to be 90% for 90 days, for three months. We were able to close after one month at 90%.

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