Duration Counts When Bidding For Single Family Rental Deals
Freddie Mac is very competitive with its ten-year offering in the affordable single-family rental home space.
WASHINGTON, DC–Managing Director Anthony Cinquini of Berkadia’s Los Angeles office doesn’t know which insurance company or investment bank tried to beat out Freddie Mac in its $508.7 million financing of Front Yard Residential’s affordable single-family home housing portfolio acquisition announced last week. But if he had to guess it was a combination of factors, such as the interest rate and the duration of the loan. Especially the duration of the loan, which was ten years. “The duration of the loan is a critical component to single-family rental home financing,” he tells GlobeSt.com.
Berkadia Commercial Mortgage arranged the loan via Freddie Mac’s affordable SFR pilot program. Front Yard acquired HavenBrook Partners, a Duluth, GA-based single family home property manager, as well as its portfolio of US-based 3,236 managed properties for $485 million.
The competitive landscape for single-family loans is starting to shift as more lenders enter the space — namely the GSEs, Cinquini says. Freddie Mac entered it several months ago with its inaugural financing of $11.1 million for TrueLane Homes, an owner of single-family affordable homes. The portfolio consisted of 195 homes and one duplex in nine different metropolitan areas across six states and the fixed-rate loan Freddie Mac provided, again through Berkadia, was for ten years.
In the private sector loans are typically for five years, Cinquini says, although there have been a few at six years, one at 7 years and a few at ten years some years ago. These five-year loans are usually structured as three-years with two one-year extensions. “Freddie has been comfortable going in at 10 years since the beginning,” Cinquini says.
It will remain to be seen if the private sector follows suit as Freddie Mac ramps up its activity in this space. Shortly before the Front Yard transaction, Freddie Mac also provided a $6 million loan under its pilot program for Single-Family Rental that was secured by a pool of 55 single-family rental homes. CoreVest arranged that transaction. The properties, located in and around Kansas City, Missouri, are owned by Golden Pacific Capital’s GPC Fund I. Said Andrew Tush, senior production manager of Targeted Affordable Housing Structured Transactions at Freddie Mac Multifamily in response to the CoreVest deal: “We continue to learn from these pilot transactions using our unique position in the market to drive financing towards greater affordability in the single-family rental market.”