Freddie Mac Value-Add Loan Program
Freddie Mac and its Program Plus Seller/Servicers are a preeminent source of financing to the multifamily industry. With the advent of Freddie
Mac’s Capital Markets Execution (CME) program in 2008, Freddie Mac has financed and securitized over $120 billion of multifamily loans.
With this program, Freddie Mac has ensured liquidity to the multifamily market and has sold off the majority of that risk to private investors.
JLL and Freddie Mac offer programs to serve a wide variety of multifamily properties, with loan terms to meet many different financing
objectives. Outlined below are the parameters of Freddie Mac’s Value-Add loan product for multifamily properties.
Program Benefits:

One-stop shopping for the interim and permanent financing for a property in need of rehabilitation work.

Up to 85% loan to purchase price, exceeding the standard 80%, making additional proceeds available for
necessary renovations.

Interest only floating rate loan.

Non-recourse financing
Eligible Properties:
Market rate and affordable multifamily housing properties with no more than 500 total units, requiring moderate
repair. This includes market laggards that require capital infusion and new/improved management and REO
properties in receivership that are capable of improved performance. Properties built in the 1990s or later are
preferred.
Eligible Borrowers:
Developers/operators with the requisite financial capacity and experience in multifamily property rehabilitations.
Borrowers should have extensive knowledge of the local market and have completed the successful upgrade of
three properties to be considered.
Eligible
Transactions:
Acquisitions and refinances.
Loan Terms:
Three years with one 12-month extension based on the borrower’s request and one optional 12-month extension
based on Freddie Mac’s discretion.
Interest Rate:
Floating-rate. Unlike Freddie Mac’s standard Floating-rate product, no interest rate cap is required.
Loan Amortization:
Full-term interest-only.
Loan
Proceeds/Sizing:

Maximum loan-to-purchase (LTPP) / loan-to-value (LTV) ratio: 85%.

Minimum amortizing debt service coverage (DCR) ratios: 1.10x – 1.15x depending on market.

Sizing based on the 7-year fixed-rate equivalent.

Appraisal must include as-is and as-stabilized values; underwriting must support a 1.30x DCR and 75% LTV
based on as-stabilized value supported by the appraisal.

Standard Freddie Mac underwriting based on as-is income and expense.

No pro-forma underwriting of future performance.
Rehabilitation:
Rehabilitation must commence within 90 days of loan origination and be completed within 33 months. Acceptable
budget of $5,000 per unit to $15,000 per unit, with at least 50% of the budget to be spent on unit interiors. The
cost of the renovations are not included in the cost allocations noted in the loan proceeds/sizing section.
Rehabilitation is to be made from borrower equity.
Prepayment:
No lock-out, as the borrower may pay off the loan at any time but must remit an exit fee of 1%. The exit fee will be
waived if the loan is refinanced with Freddie Mac.
The information contained herein is provided for discussion purposes only and is subject to change in any and all respects. This information
is not, nor should it be construed as, a commitment by Jones Lang LaSalle to provide a loan or any other service. Further, if Jones Lang
LaSalle does commit to lend via execution of future documentation, such future documentation, and the process required to secure said
documentation, may differ materially from the information provided herein
10/28/2015
At Loan Maturity/
Refinance:
Final engineer review of work completion and quality is required. Refinance with Freddie Mac with no exit fee;
otherwise 1% applies. Freddie Mac will re-underwrite the loan according to then-current credit policy parameters.
One-year borrower extension option is available for a 0.5% extension fee, assuming no event of default.
Additional Freddie Mac extension option is available thereafter with 1% extension fee.
Recourse:
Non-recourse with Completion Guaranty required. If a default occurs with respect to the renovations, a 2% Exit
Fee will be charged.
Supplemental
Loans:
Supplemental loans are not available.
Escrows:
Real estate taxes, insurance premiums and replacement reserves. A repair escrow will be required for the repairs
identified at loan closing.
Timing:
Typically 60-75 days from engagement to closing.
Fees and
Expenses:

Third party reports – Appraisal, Phase I ESA and Physical Condition Assessment (PCA)

JLL financing fee

Freddie Mac fee equal to the greater of $2,000 or .1% of the loan amount

Other standard real estate transactional costs (legal, title, survey, etc.)

2% rate lock deposit paid at time of rate lock and refundable after Freddie Mac purchases loan
For more information, please contact:
Jeff Patton
Managing Director
Phone: +1 205 402 4246
Email: Jeff.Patton@am.jll.com
The information contained herein is provided for discussion purposes only and is subject to change in any and all respects. This information
is not, nor should it be construed as, a commitment by Jones Lang LaSalle to provide a loan or any other service. Further, if Jones Lang
LaSalle does commit to lend via execution of future documentation, such future documentation, and the process required to secure said
documentation, may differ materially from the information provided herein
10/28/2015