When a stabilized multifamily property owner on the San Francisco Peninsula needed to refinance out of floating-rate bank debt, the timing couldn't have been better for an agency execution. This $16.16 million permanent financing for an 88-unit apartment community in San Mateo showcased exactly why the agency market remains the gold standard for income-producing multifamily assets in premium locations.
The Deal
The borrower owned a well-located apartment community in San Mateo, sitting in one of the Bay Area's most resilient rental markets. The property had been financed with a regional bank at a floating rate, but with interest rate volatility creating uncertainty around debt service, the sponsor wanted to lock in long-term fixed-rate financing. The asset was fully stabilized with strong occupancy and a solid rent roll, making it an ideal candidate for agency financing.
The borrower's primary objectives were straightforward: maximize proceeds, minimize rate, and secure a long-term fixed structure that would provide cash flow predictability for the next decade. Given the property's location on the Peninsula and its stabilized performance, this looked like a textbook agency deal from day one.
The Challenge
While the fundamentals were strong, the competitive landscape required careful navigation. Both Fannie Mae and Freddie Mac were actively lending in the Bay Area, but their execution standards and pricing had subtle differences that could impact the final terms. Additionally, the life insurance market was showing renewed interest in West Coast multifamily, potentially offering competitive alternatives to the agencies.
The borrower had existing banking relationships that complicated the timeline, as the current lender was naturally interested in retaining the business. This created pressure to move efficiently while still running a thorough competitive process. The sponsor needed confidence that they were achieving best-in-market execution without leaving money on the table.
The Solution
We structured a competitive process between Fannie Mae, Freddie Mac, and two national life insurance companies. The agency lenders were both targeting similar structure—10-year fixed rates with 30-year amortization schedules and LTV ratios in the mid-70s range. The life companies offered slightly different structures, including potential for higher leverage in exchange for marginally higher pricing.
The key was presenting the deal consistently across all four capital sources while highlighting the asset's strengths: its Peninsula location, stable tenant base, and the borrower's track record. We coordinated site visits and due diligence processes to ensure each lender had complete information for their underwriting.
The agencies moved quickly through their initial underwriting, with both providing detailed term sheets within two weeks of initial submission. The life companies took slightly longer but came back with competitive proposals that pushed the agencies to sharpen their pencils on final pricing.
The Outcome
The Fannie Mae execution ultimately won the competition, coming in 40 basis points tighter than the next best offer. The final structure provided the borrower with a 10-year fixed-rate loan at an LTV of approximately 75%, with 30-year amortization. The rate locked during a favorable window, protecting the borrower from the interest rate volatility that had driven them away from floating-rate debt in the first place.
The 40-basis-point advantage translated to meaningful savings over the loan term—exactly the type of execution difference that justifies running a competitive process. The life companies, while not winning on rate, provided valuable market validation and helped establish the pricing floor that ultimately benefited the borrower.
Beyond the rate advantage, the Fannie Mae structure offered the long-term certainty the borrower sought. The 10-year fixed term aligned with their hold strategy, while the 30-year amortization optimized cash flow during the loan term. The agency's streamlined closing process also allowed the borrower to refinance out of their existing bank debt ahead of schedule.
This transaction reinforced why agency financing remains the benchmark for stabilized multifamily assets in strong markets. When you have a clean story—good location, stable cash flow, experienced borrower—the agencies can deliver execution that's difficult for other capital sources to match. The 40-basis-point advantage wasn't just about Fannie Mae's cost of capital; it reflected their confidence in both the asset and the market, translated directly into better terms for the borrower.