Basis poised to grow multifamily lending via Fannie Mae DUS designation

Basis Investment Group, which last month became a part of Fannie Mae’s Delegated Underwriting and Servicing program, believes the designation will allow the New York-based investment manager to significantly expand its US multifamily lending platform.

Tammy Jones, founder and CEO, said being a part of the program will help Basis to offer a broader array of lending solutions to its clients. The firm is the first African American- and women-owned lender to obtain a DUS designation, she added.

“As a person who is committed to workforce and affordable housing, and who grew up in workforce and affordable housing, this is a critical tool to be able to provide liquidity into a space that is so necessary because of the affordability and housing crisis in the US,” Jones said. “The Fannie Mae DUS license was the piece that has been missing from our offerings and having this designation will propel us into being able to really scale the multifamily practice.”

DUS lenders underwrite, close and deliver loans to the agency, retaining one third of the risk, and aim to help Fannie Mae expand its mission of growing the number of workforce and affordable housing units in the US, according to a press release from Fannie Mae. There are only 24 other lenders that are part of the 30-year-old DUS program.

Basis, which was already a Freddie Mac lender, believes the DUS designation will allow it to more seamlessly provide take-out financing for clients for which it has originated bridge loans. “Frankly, in the multifamily space, to truly compete, you need to be able offer an array of different products to attract top talent and to provide the best financing solutions to your clients,” Jones added.

Investment platform 

Basis takes a three-pronged approach to the sector, investing via a real estate private equity credit platform, an equity platform, and multifamily platform that is focused on workforce and affordable housing. The firm was also the first African American- and female-owned seller-service in the Freddie Mac network.

“Through the multifamily platform, we are focused on providing liquidity for all borrows in all markets in the multifamily space,” Jones said. The firm has invested and loaned more than $1.3 billion of financing to diverse sponsors across the US. Basis anticipates the Fannie Mae designation will help it to expand the liquidity it is able to provide to this part of the market.

This approach and the ability to provide debt and equity across the capital stack means Basis is well-positioned for what is widely expected to be a volatile year.

“We have a debt and equity platform that can invest and lend across the capital stack, which makes us very nimble in markets like this,” Jones said. “There has been a risk-off environment from our investors, who are really focused on capital preservation given all of the uncertainty we are seeing. Having a credit bucket, the mezzanine, preferred equity, bridge and gap equity strategies has been a competitive advantage on the credit side.”

The firm has also been opportunistically closing transactions on the equity side. “A resilient platform is one that has multiple strategies so you can pick the best targeted risk-adjusted investments and positions for your investors, which is what Basis has been able to do,” Jones said.

Outlook 

The coming year will be one of caution and opportunity, Jones said.

“We have a diverse network of sponsors that we hope to introduce the Fannie Mae and Freddie Mac products to,” Jones said. “And as we get through some of the initial volatility, hopefully in the second half of the year, there will be additional debt and equity opportunities.”

Again, as the firm assess opportunities, its ability to invest across the capital stack will be key. Going into 2023, the firm has a large pipeline of gap equity, preferred equity and rescue equity situations that will help borrowers to refinance maturing debt or recapitalize equity deals, Jones said.

“Whether it’s stable or more transitional deals, we will be able to lend or invest across the capital stack. There is more than $1 trillion in debt maturing in the CMBS space over the next couple of years and not all of those deals are going to be able to be taken with senior debt. I do think there is going to be a need for additional preferred equity and mezzanine debt to fill out the capital stack,” Jones said.

Bigger picture, there needs to be more diverse lenders in the pipeline like Basis. “We are trying to provide access to capital and credit for other qualified diverse sponsors and it is critical to have a company like Basis as a [DUS] seller and servicer,” Jones said. “We bring a unique lens and access to a niche clientele and customer base. Having Basis at the table to provide capital to folks who look like us is particularly important in the affordable space where many diverse developers begin their careers.”