Wells Fargo, the multifamily industry’s largest lender, has rejuvenated its floating-rate bridge loan program for multifamily properties.
The news comes fresh on the heels of a similar move from Prudential Mortgage Capital Co., as more institutional lenders see greater demand for, and grow more comfortable with, debt for transitional assets.
Wells Fargo’s bridge loan, a balance sheet-execution, acts as a feeder to the company’s agency permanent loan programs, buying some time for a property to build up occupancy. Since the bridge loans are highly structured based on each borrower’s needs, the pricing, terms, and parameters of the program are relatively fluid.
“It’s really more of a customization, and we continue to adjust and tweak it,” says Vince Toye, managing director and head of government-sponsored enterprise (GSE) production at the San Francisco-based bank. “We haven’t tried putting specific parameters out there because each deal is customized to the sponsor and really varies depending on the transaction.”
While the company never fully shut down the program, it hasn’t seen much use in the last two years. But the company now sees an opportunity in binding the bridge loan program to the company’s Fannie Mae, Freddie Mac, and Federal Housing Administration executions. While properties coming out of construction are one of the program’s targets, Wells Fargo has also seen an increasing demand in other areas of late.
“The last month or so, we’ve seen a good number of acquisition-related deals, where someone wants to come in, maybe do some work on the property, and get it re-stabilized,” Toye says. “We’re not looking at rent growth, though. It’s really more about fixing what needs to be fixed, getting it leased up or burning some concessions off, and then putting it into a permanent financing position.”
Toye came over to Wells Fargo through its $15.1 billion acquisition of Wachovia on Dec. 31, 2008. The acquisition added an enormous portfolio, new client base, and large East Coast presence to Wells Fargo’s already sizable business.
In fact, Wells Fargo was named the multifamily industry’s largest lender by volume in 2009, at $7.5 billion, according to the Mortgage Bankers Association’s annual rankings. This was the first time Wells has occupied the top spot—it was the fourth-largest lender in 2008, with $6.1 billion in multifamily originations, while Wachovia was the second-largest lender at $6.8 billion.
“We have long-term clients from the Wachovia days that we hadn’t done any balance-sheet lending for, but have now done some construction loans for those clients,” Toye says. “And we can now provide bank services for them, where we really didn’t have the distribution network from a branch perspective in the past.”
The company also says that other balance-sheet executions, such as construction financing, never really took a hiatus. “Wells remained in the market when other people just completely backed out and stopped lending,” Toye says. “But Wells continued to grow their real estate portfolio, and never really stopped doing construction loans.”