Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Leveraging Small Multifamily Loans in 2017: How to Growth Your Multifamily Investment Portfolio and Maximize Returns

270 views

Published on

Small apartment assets — think 5 to 50 units, secured by $1MM to $7MM loans — play a critical role in U.S. housing. They are home to roughly one-third of all renters, and nearly 80 percent of lower-income renters.

Based on a recent webinar from Arbor Realty Trust, Inc. and Freddie Mac, this presentation explores what you need to know to strategically grow your portfolio as the multifamily cycle matures, and will address the following:
• Top markets for small asset rent growth
• Investing in a rising interest rate environment
• How to qualify for discounted loan rates
• Pairing the right terms with your investment goals
• How new technology can get you financing faster

Published in: Real Estate
  • Be the first to comment

  • Be the first to like this

Leveraging Small Multifamily Loans in 2017: How to Growth Your Multifamily Investment Portfolio and Maximize Returns

  1. 1. ARBOR.COM | 800.ARBOR.10 Leveraging Small Mul/family Loans in 2017 How to Grow Your Mul,family Investment Por8olio and Maximize Returns
  2. 2. 2 Today’s Panel Ivan Kaufman Chairman, President & CEO Arbor Realty Trust, Inc. Steve Johnson Vice President, Small Balance Loan Business, Freddie Mac Sam Chandan Silverstein Chair, NYU SPS Schack & Founder, Chandan Economics Speakers Moderator
  3. 3. ARBOR.COM | 800.ARBOR.10 What is a Small Balance Loan?
  4. 4. 4 What is Considered a Small Balance Loan? Although small mul/family proper/es are commonly defined as those with five to 50 units, Freddie Mac recently announced a new Small Balance Loan (SBL) program designed for: •  Mul/family loans ranging from $1 million to $6 million in all markets (proper/es with 5+ units). •  Mul/family loans from $6 million to $7.5 million in Top and Standard markets for proper/es with 75 units or less.
  5. 5. 5 Sizing the Small Mul/family Loan Market 42,459 63% 15,379 23% 9,127 14% Less than $3 million $3 million to $10 million Greater than $10 million $37.0 14% $68.0 26% $154.1 60% Mul:family Lending by Size 2015 Based on 2015 MBA Annual Report on Mul/family Lending Number of Loans Volume of Loans (Billions) The small mul/family loan market (proper/es with 5 to 50 units), which represents 65% of loans but 20% of volume*. *Chandan Economics.
  6. 6. 6 Sizing the Small Balance Loan Market Es:mated Total Small Balance Origina:on Volume ($Billions, 2016 is Q1 only) Source: Chandan Economics, ALEX Chager $0 $5 $10 $15 $20 $25 $30 $35 $40 $45 $50 2009 2010 2011 2012 2013 2014 2015 2016 $Billions Es:mated Total Small Balance Origina:on Volume The small mul/family loan market (proper/es with 5 to 50 units) has more than quadrupled since 2009 — from $11.1B to $47.6B.
  7. 7. 7 Why So Much Growth? Demand for safe, clean and affordable housing higher than ever Investors turning to secondary and ter/ary markets for value Rise of the value-add strategy New, standardized capital sources make financing accessible Investors looking for alterna/ves to the equity markets
  8. 8. 8 Why Did Freddie Mac Launch SBL Program? Previously offered smaller loans to exis/ng clients on a one-off basis. Saw an opportunity to provide liquidity to an underserved and onen fragmented part of the market. A dedicated business with dedicated staff would bring new efficiencies to the market. Exis/ng rela/onships with expert sellers allowed us to create an extremely /mely product.
  9. 9. 9 Rapid Growth Since 2014 Launch SBL Program Volume (Incep:on to Q1 2017) $- $200,000,000 $400,000,000 $600,000,000 $800,000,000 $1,000,000,000 $1,200,000,000 $1,400,000,000 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2 2016 Q3 2016 Q4 2017 Q1 (Source: Freddie Mac)
  10. 10. 10 Arbor’s Long History in the Small Loan Space v  Arbor (NYSE: ABR) is a na/onal direct lender that provides debt capital for the mul/family and commercial real estate industries. v  From its beginnings as the mul/family small loan mortgage specialist, Arbor con/nues to ensure that this once underserved market receives the professional and personalized treatment it deserves. v  Partnered with Freddie Mac to help launch the Small Balance Loan program which debuted in 2014. v  Arbor’s long history in the small loan space has con/nued dedica/on to the market has helped us become the industry’s leading small loan lender. v  Arbor is an industry innovator that’s heavily invested in developing technology to streamline mul/family loan origina/on and processing opera/ons.
  11. 11. 11 Who is the Small Balance Borrower Key Features of a Small Balance Borrower Non-ins:tu:onal More concentrated in small proper:es Geographic focus on secondary & ter:ary markets
  12. 12. 12 Who is the Small Balance Renter? Key Features of a Small Balance Renter Tend to be younger renters — especially those with children — as smaller proper/es feature more affordable rents and larger unit footprints. Source: Chandan Economics, U.S. Census Bureau
  13. 13. ARBOR.COM | 800.ARBOR.10 State of the Mul:family Industry
  14. 14. 14 Why is Mul/family So Hot? Homeownership Rate vs. Mul:family Occupancy u  Dawn of the ‘Rentership’ Era u  Millennials and Baby Boomers Ren/ng by Choice u  Real median household income is not much higher than it was in 2000, but rents have con/nued to grow 86% 87% 88% 89% 90% 91% 92% 93% 94% 95% 59% 60% 61% 62% 63% 64% 65% 66% 67% 68% 69% 70% MultifamilyOccupancyRate(5+Units) HomeownershipRate Source: U.S. Census Bureau Homeownership Rate Multifamily Occupany (5+ Units)
  15. 15. 15 Mul/family Market Fundamentals 0.0% 2.5% 5.0% 7.5% 10.0% $800 $950 $1,100 $1,250 $1,400 4Q11 4Q12 4Q13 4Q14 4Q15 4Q16 Average Asking Rent ($/Unit) Vacancy (%) Asking Rent and Vacancy United States, Mul/family Source: Arbor, Reis $75,000 $100,000 $125,000 $150,000 $175,000 $0.0 $15.0 $30.0 $45.0 $60.0 4Q11 4Q12 4Q13 4Q14 4Q15 4Q16 Sales Volume ($, Billions) Sale Price ($/Unit) Sales Volume and Price United States, Mul/family Source: Arbor, Real Capital Analy/cs •  Mul/family asking rents increased 3.7% year-over-year as of 4Q2016. •  In spite of increased unit deliveries, na/onal vacancy finished at 4.2% — in line with with one year prior. •  Sales volume reached a record- high of $158.4 billion during 2016.
  16. 16. 16 High Demand for All Types of Rental Housing 25.9 5.7 19.7 24.2 8.5 11.1 4.9 27.4 6.1 18.7 22.8 8.6 11.6 4.7 28.4 6.3 18.1 22.5 8.4 11.6 4.6 1, DETACHED 1, ATTACHED 2-4 5-19 20-49 50+ OTHER* DISTRIBUTIONOFRENTEROCCUPIEDSTOCK(%) 2007 2010 2015 Source: Census Bureau * Other includes manufactured/mobile homes, boats, RVs, vans etc. U.S. Renter Occupied Stock by Structure
  17. 17. 17 Select Interest Rates Selected Interest Rates Monthly, Not Seasonally Adjusted 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% Mar-01 Mar-03 Mar-05 Mar-07 Mar-09 Mar-11 Mar-13 Mar-15 Mar-17 U.S. Recession 10-Year Treasury 30-Year Fixed Rate Mortgage Federal Funds Rate LIBOR 1-Month U.S. Dollar Source: Arbor, Freddie Mac, Board of Governors of the Federal Reserve System, ICE Benchmark Administra/on
  18. 18. 18 Top Markets by Income Growth Metropolitan Market 2017 Annualized Growth in Gross Income 2017 Vacancy Rate Sacramento 6.4% 2.2% Seagle 5.9% 5.6% Tacoma 5.8% 3.2% Portland 4.9% 5.8% Colorado Springs 4.7% 3.8% Phoenix 4.5% 5.4% Tampa 4.4% 5.2% Chicago 4.4% 3.8% Jacksonville 4.3% 6.9% Los Angeles 4.2% 3.7% United States 3.4% 5.2% The pace of mul/family rent growth is star/ng to slow down as new units come online. In 2017, for example, the na/onal vacancy rates is projected to breach 5% for the first /me since 2011. (Source: Freddie Mac projec/ons)
  19. 19. 19 Arbor’s Top States for Loans Under $5MM (Based on 2016 Agency volume for loans under $5,000,000.)
  20. 20. ARBOR.COM | 800.ARBOR.10 Why Pursue Small Balance Financing?
  21. 21. 21 A Closer Look at the Terms 5-, 7-, 10- year terms Fixed-rate or hybrid ARM Interest-only (part or full) Up to 80% LTV 30-year amor:za:on Non- recourse Assumable Coupon pricing Step-down prepayment Cash-out op:ons $1MM to $5MM Loan Amount for Proper/es Na:onwide with 5+ Units $6MM to $7.5MM Loan Amount for Proper/es in Top and Standard Markets with less than 75 units.
  22. 22. 22 Freddie Mac SBL Eligibility Loan/borrower is… Yes Case-by-Case No $1M - $7.5M Duplex, triplex or quadraplex 5 or more units Located in a top market Located in a non-top market Borrower is local and experienced Borrower w/ minimal mul:family experience Purpose-built Students, Seniors or Military Property condi:on: average or beher Property condi:on: below average Borrower poriolio concentrated in small apts. Ins:tu:onal borrower
  23. 23. 23 Arbor & Freddie Mac SBL Case Study — Oregon REFINANCE •  42 units in Portland, OR •  $3 million •  $1.5 million cash-out •  5-year hybrid ARM •  1-year interest-only PURCHASE 1 •  22 units in Portland, OR •  $1.3 million •  7-year hybrid ARM •  2-years interest-only PURCHASE 2 •  20 units in Portland, OR •  $1.3 million •  5-year hybrid ARM •  1-year interest-only PURCHASE 3 •  26 units in Portland, OR •  $1.3 million •  7-year hybrid ARM •  2-years interest-only
  24. 24. ARBOR.COM | 800.ARBOR.10 Technology in the Mul:family Loan Space
  25. 25. 25 Meet ALEX (Arbor LoanExpress) The commercial real estate industry’s first online agency lending plaiorm for brokers, borrowers and correspondent lenders.
  26. 26. 26 ALEX Takes the Guesswork out of Processing
  27. 27. 27 Benefits of ALEX Faster Loan Evalua/on Accessible & User Friendly E-Signature Streamlined Documenta/on Real-Time Diligence Tracking Loan Status on the Go
  28. 28. 28 Tips for Geung Started Advice for Geung Started q  Pick loan terms that align with your individual goals q  Select a top property management firm in your market q  Partner with a more experienced key principal q  Look to employment growth corridors with room for price apprecia:on
  29. 29. 29 ALEX Chager – News, Research & Insight www.ALEXChaher.com Go.Arbor.com/Research

×