SAN DIEGO—The most common incentives being offered for multifamily financings are from the agencies and involve pricing discounts, such as affordable components and green rewards, Ory Schwartz, SVP-managing director in NorthMarq's Los Angeles office, tells GlobeSt.com. As we recently reported, the firm has arranged refinancing of $40 million for two multifamily properties in California and Nevada, and the buyer took advantage of green rewards and year-end promotional pricing to secure the deals.
We spoke with Schwartz about the types of financing incentives multifamily buyers are using to close deals.
GlobeSt.com: What are the most common financing incentives buyers are using to close multifamily deals?
Schwartz: The most common incentives being offered for multifamily financings are from the agencies (Freddie Mac and Fannie Mae—deals that qualify as “uncapped” deals, which are either fewer than 50 units and/or have an affordable component, receive pricing discounts. Additionally, properties that can qualify for the green-rewards programs will also receive pricing discounts. It is important to note that a borrower cannot “double dip” and receive both pricing discounts on a given deal.
GlobeSt.com: Why are incentives like green rewards and end-of-year pricing promotions used, and how prevalent are they in closing deals?
Schwartz: By the fourth quarter of 2017, Fannie Mae had excess capacity in “capped” business (more than 50 units and market rate). As a result, Fannie Mae was offering pricing discounts on deals that would close by year end, and many borrowers were able to take advantage of this. Regarding the green rewards, this was very popular in 2017, as many properties qualified. Both Fannie Mae and Freddie Mac have each increased their threshold from 15% and 20%, respectively, to 25% for water or energy savings. We anticipate that there will be a material drop in properties that can qualify going forward.
GlobeSt.com: What other trends are you noticing in multifamily financing?
Schwartz: Multifamily financing remains very stable, and both Fannie and Freddie have lease-up and value-add programs in addition to their core products.
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Carrie Rossenfeld
Carrie Rossenfeld is a reporter for the San Diego and Orange County markets on GlobeSt.com and a contributor to Real Estate Forum. She was a trade-magazine and newsletter editor in New York City before moving to Southern California to become a freelance writer and editor for magazines, books and websites. Rossenfeld has written extensively on topics including commercial real estate, running a medical practice, intellectual-property licensing and giftware. She has edited books about profiting from real estate and has ghostwritten a book about starting a home-based business.
