Multi Housing News August 2012 : Page 21

acquire another 2,000 units in Florida, says Lewis. The company targets value-add properties in secondary markets and stays away from what he sees to be the overpriced primary markets. Developers can seek short-term bridge fi nancing to fund renovations that are not covered by reserves set aside under the senior debt. However, many types of loans, such as those provided by Fannie Mae and Freddie Mac, carry prohibitions on junior debt. But, supplemental loans provided by the GSEs can offer a solution: If the value of the property increases after the renovation, a supplemental loan pro-vided by the agencies can be added to the original loan, Lewis notes. Another solution for funding rehabs is presented by preferred equity. “Preferred equity can give you extra money needed to pay for the renovation, and it can be structured in a manner that does not vio-late the covenant with Fannie and Fred-die,” says Lewis. However, the issue with private equity is that it is senior to the de-veloper’s equity and costly. In practice, renovations are often fund-ed by developers’ own equity, says Lewis. “This is not an issue. There is plenty of equity around. The problem is because multifamily is so sought after, [the un-derfunding] bids up the values.” Bidders for properties begin to cut back on the reserves funding and as a result can pay more aggressively for the properties, thus MHN driving up property prices. To comment on this story, e-mail kfoong@ multi-housingnews.com Better Relationships Better Solutions $27,700,000 Wisper Palms 308 UNITS | ORLANDO, FL LENDER: LIFE COMPANY deliver RE CEN T D E A L S $23,400,000 Rosehill Pointe 498 UNITS | LENEXA, KS LENDER: FREDDIE MAC Park Central Apartments 172 UNITS | SANTA CLARA, CA LENDER: LIFE COMPANY $31,000,000 Capital Markets 952.356.0080 | 33 OFFICES COAST-TO-COAST www.multi-housingnews.com | August 2012 northmarq.com 21

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