Student Housing Value-Add Loan

• Experienced Borrowers who have successfully demonstrated expertise with comparable student deals.
• 1.5x the standard minimum net worth and liquidity requirements for guarantors.

• Properties with no more than 250 total units or 625 beds.
• Well-constructed properties requiring modest repairs.
• Market laggards that require capital infusion and new/improved management.
• Real-estate owned properties in receivership that are capable of improved performance.

• 15,000 student enrollment minimum. This standard is greater than the student housing policy minimum of 8,000. Properties must be within 2 miles of campus and have convenient access to campus by either public transit, shuttle or pedestrian access.

• 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.
• Floating-rate loan with full-term interest-only; no cap required.
• No lock out; 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.
• Acquisitions and refinances; not assumable.
• Loan documentation at origination will include the Value-Add Rider rider, which will detail the terms/requirements of the rehabilitation.
• Escrows will include taxes, insurance, replacement reserves and Priority Repairs must be escrowed. A three-month debt service escrow is required for all transactions during the renovation phase. Upon completion of 40% of the renovation work, 50% of the escrow may be released. Upon completion of 80% of the renovation work, the remaining amount of escrow may be released. In addition to the completion requirements, the DSCR must be 1.25x or higher to qualify for release of escrow.
• For longer term ownership, cash-out is available provided a completion guaranty on budgeted improvements in an amount at least equal to the cashout in place.

• Maximum loan-to-purchase / loan-to-value (LTV) ratio: 85%.
• >Minimum amortizing debt coverage ratios (DCR): 1.20x.
• Sizing based on a 7-year sizing note rate.
• Appraisal must include as-is and as-stabilized values; underwriting must support a 1.35x DCR and 75% LTV based on as-stabilized value supported by the appraisal.
• Standard Freddie Mac underwriting based on as-is income and expense.
• Refinance Test not required.
• No pro-forma underwriting of future performance.

• Rehabilitation must commence within 90 days of loan origination and be completed within 33 months.
• A scope of work is required. Budget may range from $10,000 – $25,000 per unit or $4,000 -$10,000 per bed. The budget must allocate at least 25% to interior improvements.
• Budget can be adjusted by as much as 20% without additional approval; up to 50% of the budget may be spent on unit interiors.
• Completion Guaranty or rehabilitation escrow required.
• Borrower/Servicer reporting required.

• 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 to then current property performance.
• 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.

Standard fees apply, including application fee and good faith deposit.