Prudential Mortgage Capital Company is planning an expansion of its bridge financing program to reach more borrowers who need to buy some time before they qualify for long-term government-sponsored enterprise (GSE) loans, officials announced Tuesday.
The new version of the program will provide financing for loan terms of up to three years allowing borrowers to make renovations and mature the properties. The previous program allowed financing for deals spanning less than 12 months, said Michael McRoberts, managing director and head of Prudential Mortgage Capital’s agency lending programs.
“We believe the multifamily housing stock in the country has been aging and is in need, many properties, of some light renovation,” he said. “In the last three years, we’ve seen pretty significant increases in rents. The time is right to do rehabilitations.”
The bulk of the program focuses on Class B assets where a buyer can purchase the property, realize the rent potential with renovations and then qualify to finance through a GSE at a later time.
“We’re talking about taking it from a B- to B+,” he said. “And we think that’s where the real demand is today. It’s where the real opportunity is for owners.”
The Enhanced Agency Gateway Program plans to double the loan volume for short-term, floating rate financing. The expansion will bring the target loan volume to $200 million compared to the original program’s goal of $100 million.
The lender also hopes to focus on Class B properties between $5 million and $100 million in hot markets.
“We’re looking at the major metro markets,” McRoberts said. “We’ll go to secondary markets as well, but we’re going to be very selective in the tertiary.”
In addition to that in certain cases, they’ll be providing equity, which is an added bonus to the newer program.
“We’re looking to make investments into multifamily oriented investment funds where we would become a partner in that fund,” he said. “And, we would do that in exchange to do agency financing for the fund.”