A Private Lender’s View on Multifamily Opportunities

Ray Cleeman, head of capital markets at Pensam, on why the company’s longstanding approach is still a good fit for a changed economic climate.
Ray Cleeman, Principal & Head of Capital Markets, Pensam. Image courtesy of Pensam

While the pandemic has prompted certain lenders to take a step back in the past months, some players have done the opposite.

Pensam Capital, a private provider of debt and preferred equity, has “never been busier,” according to Ray Cleeman, principal & head of capital markets. Cleeman spoke to Multi-Housing News about the company’s strategy why it is “now more relevant than ever.”


READ ALSO: Why Nontraditional Financing Makes Sense in a Crisis


What measures has Pensam taken to remain active amid restrictions imposed in the wake of COVID-19?

Cleeman: Pensam is fortunate in that we never experienced lending restrictions or a slowdown in our business through the initial COVID-19 shutdown or now. In fact, it’s just the opposite—we have never been busier. Our structure permits us to put out capital without relying on warehouse or credit facilities, and, because of that, we have remained incredibly active in making loans over the last few months.

What can you tell us about available liquidity in the multifamily debt market?

Cleeman: Through the months of March to June, there was a very limited number of lending options for borrowers, with only a handful of players providing quotes and being in a position to actually close on deals. Today, commercial banks remain extremely limited in their appetite for new loans, their underwriting standards have become stricter and they are less eager to take on new clients. Of course, the agencies remain active, and some of the debt funds have come back into the market, while other debt funds—particularly those that rely on warehouse or credit facilities—have had to increase their rates and put on more restrictive terms.

Pensam’s target market has been transitional assets. How does that strategy fit into the current capital markets landscape?

Cleeman: Our strategy has stayed consistent over the years and, if anything, is now more relevant than ever. Pensam’s core focus is on sponsors and properties that require a near-term solution to bridge them to longer-term financing or liquidity events. By way of example, we are seeing numerous lending opportunities today for projects impacted by COVID-19. These pandemic-related effects include, among other things, slower lease-ups than initial sponsor projections considered, higher concession rates, and, for mixed-use projects—multifamily with retail—the retail components are taking significantly longer to fill.

Many properties that would otherwise go directly from construction loan to agency now require an interim step, and that is exactly where Pensam and our lending platform can be a valuable partner. We can take out higher-cost construction loans, enable sponsors to repatriate dollars today—instead of waiting for stabilization that could be delayed by months or years—and provide this capital at competitive rates and on flexible terms.

How do you determine what is a favorable financing opportunity? 

Cleeman: Pursuing the same thesis that we have maintained since our inception, we are always seeking to provide capital to support sponsors with transitionary business plans or those that have interim capital needs that require flexible loan terms. We offer them competitive rates and provide certainty of closing.

In July, we closed on a $52 million loan on a brand-new 230-unit property in Beaverton, Ore., which fit our lending parameters perfectly. The project was in lease-up and the sponsor wanted to replace their construction loan and repatriate dollars prior to full stabilization. They needed certainty of closing and had a specified date by which they wanted to close.

Currently, we are lending on several projects where sponsors are seeking additional time to lease-up units through the COVID-19 crisis, and providing financing to replace construction loans and repatriate dollars to give sponsors additional flexibility with their apartment communities.

Do you focus on specific U.S. markets when delivering capital solutions?

Cleeman: Pensam considers lending opportunities across the U.S. and we have lent in over 18 states so far. We are more driven by the lending opportunity and have no geographic constraints. Today our portfolio is slightly biased toward the Eastern half of the U.S., so we are eager to see more opportunities in the West.

How do you expect the multifamily sector to perform in the next 12 months?

Cleeman: Many people in the market initially thought that, with the advent of the pandemic, there would be a complete reset in the real estate sector. While certain asset classes such as hospitality and retail might have been immediately impacted, multifamily has gone through relatively unscathed. The National Multifamily Housing Council rent payment tracker found that 79.4 percent of apartment households made a rent payment by Oct. 6, a figure unchanged from the same interval last year. Clearly, for the near term, with the confluence of a recovering economy and additional governmental support programs, it seems that the multifamily sector will continue to perform well.