Credit Facility

A Bulls Capital Partners’ Credit Facility provides both long-term and short-term flexible financing at a competitive price for a single pool of cross-collateralized and cross-defaulted multifamily mortgages.  Click here to download a printable version of our Credit Facility Products sheet.

Benefits of a Credit Facility

Borrowers want:	Credit Facility delivers:
Flexible options for collateral	Properties may be substituted, added, or released, and additional borrowing on existing properties may be permitted
Flexible options for financing	Facility may have fixed-rate and/or variable-rate portions, with multiple options for funding both
Predictable financing terms	Terms and conditions for borrowing under the Facility are established up front. Pricing is set for the first 12 months.

Credit Facility Structure
The Credit Facility (“Facility”) provides for one or multiple borrowings over the term of the facility, secured by a single pool of cross-collateralized and cross-defaulted multifamily mortgages.

The Facility may consist of a fixed-rate portion and/or a variable-rate portion. Fixed-rate borrowings are funded by a loan purchased for cash by Fannie Mae, the sale of interest bearing, fixed-rate Fannie Mae MBS, and/or the sale of tax-exempt bonds with Fannie Mae credit enhancement. Variable-rate borrowings are funded by the sale of discount MBS (“DMBS”) or tax-exempt floating rate or auction rate bonds with Fannie Mae credit enhancement.

Terms and conditions for inclusion of tax-exempt bond credit enhancement are negotiated as part of the Facility and may vary somewhat from those described below.

Facility Size
Typically $50 million and over.

Eligible Collateral
First mortgages on multifamily real estate, and multifamily real estate financed with tax-exempt bonds.

Eligible Borrowers
May be one or more single purpose, bankruptcy-remote entities.

LTV and DSCR
A Credit Facility is a negotiated transaction, and LTV and DSCR will depend on borrower strength and other risk characteristics of the transaction.

Minimum Term
5 years. Minimum maturity for tax-exempt bond credit enhancement may be longer.

Maximum Term
• Fixed-rate: Up to 15 years. Terms up to 30 years are available for tax-exempt bond credit enhancements.

• Variable-rate: Generally 5 years. Extensions may be available, subject to repricing of fees. Terms up to 30 years are available for tax-exempt bond credit enhancements.

Interest Rate Structures
Any fixed-rate or variable-rate portion of the Facility may be interest-only and/or amortizing, based on property performance.

• Fixed-rate portion: If amortizing, generally on a 30-year schedule.

• Variable-rate portion: If funded by DMBS (non-interest-bearing securities with 3-month maturities), proceeds are determined by the market discount.

• Tax-exempt bonds: Variable-rate transactions may use a principal reserve fund in lieu of actual amortization. Bonds are seven-day floating rate demand bonds or auction rate bonds.

Conversion to Fixed Rate
Variable-rate portion may be converted in whole or in part to a fixed-rate portion for the remainder of the term of the Facility. If converted only in part, a minimum $25 million outstanding variable-rate portion must remain.

Interest Rate Cap
Required for variable-rate borrowing and variable-rate tax-exempt bonds.

Recourse
Both recourse and non-recourse structures are available.

• Recourse structures require loan balancing; i.e., debt pay down or delivery of additional collateral if the pool LTV or DSCR falls outside the terms of the facility.

• Non-recourse structures do not require loan balancing.

Covenants

• Operating covenants required for all transactions.

• Recourse structures require financial covenants.

• Non-recourse structures generally require borrower and corporate sponsor net worth and liquidity covenants.

Geographic Distribution
Requirements determined on a case-by-case basis.

Underwriting
Underwritten to DUS™ standards.

Substitution of Properties
Permitted. New collateral is subject to underwriting requirements as specified for the Facility.

Release of Properties
Permitted. Prepayment premium will be based upon the financing structure selected (fixed or variable), with prepayment options available at negotiated pricing levels.

Expansion of Facility
Permitted. Amount of allowable expansion will be determined at initial funding. Additional assets are subject to underwriting requirements as specified for the Facility.

Additional Borrowing
May be permitted based on improved property performance. When the loan amount is increased either by adding new collateral or by additional borrowing on existing collateral, the minimum increase is $3 million.

Prepayment Premiums
• Yield Maintenance: Required upon early termination of all or part of the fixed-rate portion of the Facility. Borrower pays an index-based yield maintenance fee for the remaining term of the Facility. A defeasance option is also available. Yield maintenance is not required for termination of the variable-rate portion of the Facility.

• Fee Maintenance: Required upon early termination of all or part of the fixed-rate or variable-rate portions of the Facility. Borrower pays the present value of the guaranty and servicing fees for the remaining term of the Facility.

• Other options are available on a negotiated basis.

Assumability
Tax-exempt financing is assumable upon release of the asset from the Facility. Assumption of conventional financing is not permitted for individual assets, but assumption of the entire Facility is permitted.

Change of Borrower Management or Control
Subject to approval by Fannie Mae and payment of applicable fee.

Documentation
Credit Facilities must be documented in a Master Credit Facility Agreement.

To learn more about the DUS product line, borrowers should contact Herman Bulls, CEO, or Mark Van Kirk, COO, at Bulls Capital Partners at (703)848-8001.