Origination and brokerage in multifamily debt and equity is an important part of the real estate industry. It is the process of sourcing capital for the purchase, refinance, and/or development of multifamily property. It involves understanding the needs of the borrower and finding the right lender or investor to provide the capital needed. Those involved in the origination and brokerage of multifamily debt and equity must have a deep knowledge of the market, the processes and the players involved in order to be successful. They must also have a keen eye for the kinds of deals that can provide the greatest returns for both the borrower and the lender/investor.
In this article, Henry Stimler, an expert in origination and brokerage in multifamily debt and equity, will provide an overview of the benefits of multifamily origination and brokerage and how to make the most of the opportunities available.
What are Origination and Brokerage?
“Before I dive into the ins and outs of multifamily origination and brokerage, it is important to understand the basics of how this process works and what the participants in this process are. As stated earlier, origination and brokerage is the process of sourcing capital for the purchase, refinance, and/or development of multifamily property. To do this, the various participants in this process must have a deep knowledge of the market, the processes, and the players involved in order to be successful. In short, origination and brokerage involves an experienced real estate professional who has the expertise to find lenders and investors that may not otherwise be interested in an asset class. The real estate professional will then structure and negotiate the transaction on behalf of the borrower, work to close on time/without delay, and make sure that the deal is a good fit for both the lender/investor and the borrower,” explains Henry Stimler, an Executive Managing Director at Newmark (a primary lender of agency financial products).
Benefits of Multifamily Debt and Equity Origination and Brokerage
As stated earlier by Stimler, the goal of origination and brokerage is to source capital for the purchase, refinance, and/or development of the multifamily property. While that may be the end goal, the process itself can yield some serious benefits for both the borrower and the lenders/investors involved.
First and foremost, a seasoned real estate professional will be able to identify opportunities that may not be readily apparent to a lending officer or investor. They will also be able to work with the borrower/property owner to identify ways to make the project more appealing to lenders/investors, such as structuring the deal to include certain concessions or providing a higher rate of return. As a result, lenders and investors will receive higher yields that may otherwise go unreported, and borrowers/property owners benefit from lower interest rates and/or more favorable terms.
The Process of Origination and Brokerage
Once the borrower has identified a potential opportunity and reached a preliminary agreement with the seller/contractor, they will begin the process of seeking financing.
During this process, there will be multiple meetings with investors and lenders to help the borrower/property owner determine their financing needs and specifications. This process can take a few weeks or even months, depending on the type of project and the number of meetings required to close the deal.
Once a deal has been signed and a deposit has been received from the seller/contractor, then the loan documentation (loan documents, loan application, due diligence, etc.) will be completed and presented to the appropriate underwriter/participant in the origination and brokerage process.
Types of Multifamily Debt and Equity
Once the loan has been approved and the necessary documentation has been completed, then the loan will be assigned to the type of financing determined during the underwriting process. Henry Stimler shares that the most common types of financing are construction loan and equity.
Construction loans are designed for the purchase and/or refinance of the asset with the expectation that it will be repaid once the project is completed and economic rent is generated. Economic rent is the portion of the rent that is based on the property condition, location, and other factors. Equity financing is used to fund the acquisition of an asset. Once the loan is paid off or the property is sold, the proceeds will be used to pay back the loan.
Final Thoughts
Multifamily debt and equity origination and brokerage is an important part of the real estate industry. It is the process of sourcing capital for the purchase, refinance, and/or development of the multifamily property.
We hope that this article by Henry Stimler has helped you understand the origination and brokerage process.