Haven't executed a Freddie/Fannie agency debt financing for a new acquisition in several years. I'm getting updated pricing and sizing metrics from various sources, but was curious as to how either agency pegs the NOI which is used to ultimately size the funding amount.
I am used to using the existing (i.e. T-12 or T-3) income and expenses, but assuming the expenses are above market due to mismanagement etc, would either lender allow for a re-calibrated expenses to be used to size the loan?
On the income side, I am assuming that whatever the current in place rents are (along with vacancy/concession/bad debt) would be used, regardless of how potentially below market they might be?
You're correct on the revenue although vacancies have standard UW %. Expenses can be underwritten lower if the borrower can prove it out and comps also show lower expenses.
Thanks. I am assuming that agencies still use the greater of 5% or actual market/submarket vacancy rate when designating a loss factor? What about concession/bad debt/etc? Can I get away with using 5% total or will they want to show additional loss factors beyond "vacancy"?
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