Investor scores a first from Freddie Mac on affordable resi

BWE facilitated $150M transitional line of credit secured by developments in Texas, Oklahoma

BWE's Jon Killough and Freddie Mac's Michael DeVito; Aspen Park and Red Hill Villas (Getty, Freddie Mac, BWE; Aspen Park, Red Hill Villas)
BWE's Jon Killough and Freddie Mac's Michael DeVito; Aspen Park and Red Hill Villas (Getty, Freddie Mac, BWE; Aspen Park, Red Hill Villas)

An affordable housing investor in Alabama has landed a $150 million transitional line of credit from Freddie Mac using properties in the Dallas, Austin and Houston markets as security.

Bellwether Enterprise Real Estate Capital facilitated the loan for Envolve Communities, which plans to use the funds for acquisitions, rehabilitations and recapitalizations.

The deal marks the first time Freddie Mac has approved a transitional line of credit for affordable housing, The Real Deal has confirmed.

Freddie Mac is a quasi-governmental enterprise that has private shareholders but is sponsored by the Federal Housing Finance Agency. The deal with Ohio-based BWE reflects a growing push for Freddie Mac to get involved with financing workforce and affordable projects, said Jon Killough, a BWE executive in the company’s Alabama office, who helped close the deal.

“I think what Freddie Mac realized is that they need to be relevant in the affordable housing space,” Killough said. “It was probably a mix of them realizing they’ve done these TLCs for market-rate properties. They want to do more for affordable housing and the workforce housing space because it’s something their regulator wants to see them participating in.”

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A transitional line of credit–or TLC– is a flexible multifamily financing option secured by real estate that can be customized to meet a variety of short-term needs for a borrower that intends to eventually refinance to a long-term option with Freddie Mac. BWE’s deal includes five-year adjustable-rate loan terms and two 12-month extension options, according to a news release from BWE.

The four affordable housing communities securing the credit line are Aspen Park, a 256-unit multifamily complex in Houston; Center Ridge, a 224-unit complex in the Dallas suburb of Duncanville; Red Hills Villas, a 168-unit complex in the Austin suburb Round Rock; and Brookhaven Plaza, 120 units in Bartlesville, Oklahoma. All of the properties are 90-100 percent dedicated to affordable housing, with units set aside for disabled tenants.

Targeted Affordable Housing is relegated to low-income and very low-income residents, which are typically defined as households at or below 80 percent and 50 percent of the Area Median Income, respectively. Texas has a dearth of affordable rental housing for some of those households. Most notably, very low-income households have a 687,000 surplus deficit of available, affordable rental units in the state, according to data from the National Low Income Housing Coalition. Only 51 out of 100 very low-income households have access to available, affordable rental housing and 82 percent are cost-burdened with 30 percent of their income going toward housing-related costs.

“Last year we were at approximately $1.2 billion in affordable housing debt production,” Killough said. “Over the next three years, we want to consistently be at $2 billion of assets financed nationwide in the affordable housing and workforce housing space.”