TrueLane Homes has closed on the first loan in a Freddie Mac pilot program that targets affordable single-family rental properties.
The firm, which focuses on the working-class segment of the single-family rental market, obtained about $11.1 million in financing in a 10-year, fixed-rate loan secured by 195 homes and one duplex in nine different metropolitan areas across six states, reported Berkadia, the Freddie Mac seller/servicer involved in the deal.
Over 90% of the homes have rents considered affordable for families earning at or below 80% of the area median income (AMI). Moreover, 100% of the units are affordable for families at or below 100% of the AMI.
Headquartered in Newport Beach, Calif., TrueLane Homes owns about 1,000 homes across 11 markets. The recent financing, as well as other future capital-raising efforts, will help fuel the firm’s expansion into markets such as Atlanta, Cleveland, Columbus, Houston, and Oklahoma City, according to company officials.
Alan True, CEO of TrueLane Homes, says Freddie Mac’s involvement in the industry further validates the asset class.
“The working-class markets and price point we operate in have been largely overlooked by other institutional investors,” says True. “We have been using internal capital to invest in communities and rehabilitate homes since 2012, and it’s great to know that there is attractively priced debt to help fund additional acquisitions and renovations.”
TrueLane Homes officials emphasized that the deal will also help improve neighborhoods as the firm invests in and rehabs the homes.
The single-family rental space has a gap in liquidity and affordability, which Freddie Mac is well-positioned to fill as evidenced by this transaction, according to Anthony Cinquini, managing director at Berkadia.
Capital for single-family rental homes has often been of a private nature or with a local bank, and the terms often hindered certain borrowers, including those who had homes in areas that were highly affordable and a tenant base needing affordable rents, he says.
A few years ago, Berkadia financed a group of single-family homes that health-care providers were using to house developmentally disabled individuals. That sparked Cinquini’s interest as well as conversations with Freddie Mac about devising a platform that applies the multifamily lending discipline into the single-family rental space, he says.
“This includes detailed and thorough underwriting of the borrowers and homes at origination and throughout the term of the loan, which promotes the long-term sustainability of the rental homes,” he says.
The deal is the first time that Freddie Mac is using its balance sheet to finance a portfolio of single-family rental homes.
“We’ve said from the beginning that the goal of our single-family rental pilot is to increase the availability of affordable rental housing in communities across the country, and this transaction does exactly that,” says David Leopold, vice president, targeted affordable sales and investments at Freddie Mac Multifamily. “All of the homes in this transaction will remain affordable for working families, with over 90% affordable for low- and very-low income families.”
Freddie Mac did a previous structured finance transaction with CoreVest. In this case, it did not finance the acquisition or rehab of properties. Instead, it guaranteed the senior class of bonds issued by CoreVest.