The answer depends on the business plan. If the investor wants to hold their apartment building long-term, they typically use longer-term debt. The investor may choose a short-term option with more flexibility if they plan to sell.
J.P. Morgan provides both types of financing and aims to cover as much of the debt capital market landscape as possible. “Given the breadth of our CRE platform, we do a lot of lending on transitional properties,” Hofmann said. “After that phase, our goal is to give sponsors as many takeout options as possible. We’re agnostic about their decision—we just want them to choose what’s best for their business plan and the asset.”
Multifamily construction financing takeout options
There are abundant debt capital sources for multifamily properties including banks, insurance companies, private credit and CMBS. The other multifamily takeout financing providers are Fannie Mae and Freddie Mac. The Government-Sponsored Enterprises (GSEs) offer early and forward rate-lock options or lease-up programs.
“Both Fannie and Freddie are looking for ways to let sponsors lock in rates early or engage earlier in the process while the property is still stabilizing,” Hofmann said. “That way, multifamily investors can take interest rate and capital markets risk off the table as soon as possible.”
Conventional multifamily investors’ construction loan takeout programs include:
- Freddie Mac Conventional Forward Commitment: Offers permanent financing upon conversion from construction to stabilization using an unfunded forward commitment. To-be-built or major rehabilitations are eligible. Non-recourse fixed and variable rate options are available.
- Fannie Mae Near-Stabilization: Provides permanent, non-recourse financing for newly constructed or renovated multifamily properties once they achieve certain occupancy levels. Rate lock and fixed- and variable-rate options are available with up to 30-year amortization.
- Fannie Mae Streamlined Treasury Lock: Enables borrowers to fix the Treasury Index during the quote or underwriting process. After the Treasury Lock, the borrower can use the Streamlined or Standard rate lock process.
- Freddie Mac Lease-Up: Offers permanent, non-recourse financing for newly constructed multifamily properties that achieve sustainable occupancy levels, with stabilization expected. A Lease-Up Credit Enhancement may be required during the ramp-to-stabilization period.
- Freddie Mac Standard Rate Lock: Offers a rate lock to the lender once they accept the commitment.
- Freddie Mac Index Lock: Allows fixed-rate mortgage borrowers to lock the Treasury Index—the most volatile part of the coupon—faster than standard delivery during the quote or underwriting process. After an index lock, borrowers can complete the early rate lock process.
- Freddie Mac Early Rate-Lock: Allows borrowers to set key mortgage provisions—most notably locking in the interest rate for a fixed-rate mortgage or the spread for a floating-rate mortgage—after the preliminary underwriting review and before the lender submits the full underwriting package.
Non-recourse fixed and variable rate options are available through all programs. Note that while Freddie Mac’s rate lock program is new for conventional buildings, both GSEs offer early rate lock options for affordable multifamily properties.
How your agency lender can help
Your multifamily lender can help you find the right takeout financing for your goals, assessing key factors such as current market conditions, your risk appetite and the building’s occupancy status and timeline.
Choosing the right lender matters for both parties. “It’s important to work with the right Fannie Mae or Freddie Mac agency lender so the sponsor benefits from the nuances of the programs,” Hofmann said. “The right debt provider can help the sponsor pick the best capital structure that meets their needs.”
J.P. Morgan Agency & Institutional Capital prides itself on its knowledge and experience:
- Seat in the debt markets: The team sees capital flows across commercial real estate asset classes. “From that vantage point, we’re uniquely positioned to guide clients,” Hofmann said.
- Capital markets expertise: J.P. Morgan Agency & Institutional Capital offers world-class debt capabilities across all types of real estate financing, a unique quality in the industry.
- A relationship focus: The team does more than close loans—it builds relationships. Often, that means providing financing for construction, then stabilization and lease-up, then permanent financing, and in some cases, refinancing. “When we have multiple touchpoints in a relationship, that’s when we can provide the most value,” Hofmann said.
