Fannie Mae hit a milestone this week when it closed its 500th Green Financing transaction of 2017. The latest transaction was a portfolio of 10 multifamily properties the organization says demonstrates the broad market adoption of its innovative green finance execution.
As of the second quarter of 2017, since its inception, Fannie Mae’s Green Financing business is projected to have saved enough energy to power 31 million cell phones and save the equivalent of 15.6 billion glasses of water annually.
The portfolio of 10 multifamily properties is owned by Goldrich Kest of Culver City, Calif. The $179.6 million transaction consists of 1,252 units throughout California, including San Jose, San Francisco, Oakland, Los Angeles, Orange County, and San Diego. The average age of the properties in the portfolio is 44 years.
The Fannie Mae Multifamily Green upgrades are projected to save the Goldrich Kest portfolio a total of 16.6 million gallons of water and 9.2 million kBTU annually, and include investing in energy-efficient lighting systems, replacing refrigerators with Energy Star refrigerators, and installing low-flow faucets, showerheads, and toilets, according to Fannie Mae. Also, tenants are expected to save an average of $95 each year on their utility bills. On average, each property is projected to reduce its utility expense by more than $26,000 a year.
“Fannie Mae is an industry innovator with its Green Financing program,” said Mike Drandell, COO, Goldrich Kest, in a statement. “This program has allowed Goldrich Kest to improve operating costs at our properties as well as improve the quality of life for our residents, all while benefiting the environment. Rarely is there such a win–win–win opportunity for everyone involved.”
Fannie Mae Multifamily relies on its Delegated Underwriting and Servicing (DUS) program to finance rental housing. The DUS lender for the Goldrich Kest portfolio is Walker & Dunlop of Bethesda, Md. To finance the portfolio, Walker & Dunlop chose a 15-year loan term with 30 years of amortization and a debt service coverage ratio of 1.35x to 1.40x.
“Goldrich Kest is realizing significant benefits from the Fannie Mae Green Rewards product, but the real game changer is that any property can enjoy these benefits,” said Donald King, executive vice president, multifamily, Walker & Dunlop, in a statement. “Whether the property has 10 units or over 1,000, our team has helped many owners improve net operating income while keeping the loan process simple and fast. As the top 2016 Fannie Mae lender in Green Financing, we are proud to say that Fannie Mae has really changed the landscape of multifamily lending, encouraging all owners to consider ‘going green.’ ”
Fannie Mae Green loans are secured by multifamily properties that either are targeting a 20% or greater reduction in energy or water consumption or have been awarded a green building certification, such as LEED or Energy Star. Fannie Mae introduced its Green Financing products to the market in 2012 and securitizes these loans as Green MBS. Fannie has grown the Green Financing book of business each year since, culminating in the issuance of over $10 billion in the first half of 2017.
“Goldrich Kest and Walker & Dunlop had the foresight to coordinate investments in significant property improvements at the time of refinancing with Fannie Mae,” said Chrissa Pagitsas, director, Multifamily Green Financing Business, Fannie Mae, in a statement. “We are committed to helping each owner realize the full financial and environmental potential at their property.”
