Sunburst Apartments

Case Study: Small Loans

Property Info

Property Type: Small Loans
Date Closed: July 2021
City, State: Stockton, CA
Lender: Freddie Mac SBL
Loan Amount: $2.8 million
Purpose: Refinance
Rate: 3.8%, 7 years
LTV: 65%

Property Objectives

Sunburst Apartments fills the critical supply of “workforce housing” that provides affordable rents and a safe environment for primarily lower income earners in Stockton. This property was purchased in 2017 and was fairly neglected and in need of a refresh. Berkadia’s challenge was to justify the large increase in value since purchase, by verifying the capital improvements and bottom-line NOI growth at the property, given the short ownership period. The goal was to give the borrower the confidence needed to continue to acquire and improve neglected assets, while also improving the tenants’ quality of life.

Berkadia Solution

Many Bay Area-focused bank lenders were still reluctant to lend in the Central Valley, despite very strong rent growth and historically low vacancy. The Freddie Mac SBL program has been a good fit for these under-banked tertiary markets, which contain a good amount of Class C workforce housing. Berkadia was able to get comfortable with a little higher leverage on the loan amount, which reimbursed the borrower for the out-of-pocket improvements made to the property. This in turn, gave the borrower the additional capital to purchase another asset, with the goal of updating and improving that property as well.

Client Results

Since purchasing the subject in March 2017, the borrower has driven GPR from $21,000/month to $34,500/month as of 2021, a 64 percent increase in GPR. Renovations included exterior paint and landscaping, flooring replacement, new kitchen cabinets and an appliance package, new windows/patio doors, and a motorized carport gate for additional security for the tenants.

The Berkadia Advantage

Berkadia reached out to the borrower to make them aware of the new partnership between Freddie Mac and Esusu. We informed borrower of the benefit of a discount to the interest rate on their loan, in addition to the ongoing benefit to its tenants and the potential impact to its bottom line. Our borrower had a desire to further deepen their relationship with Freddie Mac and Berkadia and saw this as an opportunity to be an early adopter of the Esusu product by folding it into the in-house management arm. In addition to cost incentives, implementing Esusu assists in the property objective of maximizing NOI, supporting the borrower’s long-term goal of acquiring new assets and improving the quality of life for tenants.

Mortgage Banking

Berkadia Small Loans

Berkadia Small Loans offers Fannie Mae Small Loans and Freddie Mac Optigo® Small Balance Loans for multifamily loans up to $7.5 million. Comprised of dedicated management and mortgage banking professionals, the team’s intimate knowledge of Fannie Mae and Freddie Mac loan programs provides a seamless process and customized solutions.

Learn more about Berkadia Small Loans.

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Client Stories

Sunburst
Apartments

Berkadia is dedicated to leading the digital transformation of commercial real estate with investments in technology like Esusu, a rent-reporting platform created to build tenants’ credit. Multifamily property owners who implement Esusu can decrease evictions and vacancies and maximize NOI. As partners, Berkadia borrowers may receive closing cost credits and discounted rates.

551 W PRENTICE AVE

As Freddie Mac’s #1 Optigo® Lender and Fannie Mae’s #2 DUS Producer, Berkadia Small Loans is skilled in navigating GSE programs to find the best loan executions for our clients. Though the lending landscape continues to evolve, agency small loan executions remain one of the best options for investors who recognize the value of optionality and take advantage of rate locking.

Credit facility executions allow borrowers to arrange flexible financing terms for a portfolio of properties on a cross-collateralized and cross-defaulted basis, with property addition, property release, property substitution, and borrow-up capabilities for all asset classes. Kairos Investment Management Company and Berkadia secured a $175 million credit facility backed by Fannie Mae.

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