Bay Area commercial real estate loans

The Bay Area has more local rent ordinances than any other part of the state Corin covers. Cities on Corin's review list include Alameda, Berkeley, East Palo Alto, Hayward, Los Gatos, Mountain View, Oakland, Richmond, San Francisco, and San Jose, and the list is not exhaustive. Each property is checked by hand, because the local cap, the exemptions and the covered building age differ from city to city, and from the statewide AB 1482 rule.

Under AB 1482 (5% plus regional CPI, capped at 10%), the Bay Area is not one CPI region in Corin's table: San Francisco, Alameda, Contra Costa, Marin and San Mateo counties use the San Francisco area figure, while Santa Clara County falls back to the statewide figure. The facts above show both.

Major faults run through the region, so seismic diligence is part of almost every apartment and care-facility loan. Lenders order a probable maximum loss (PML) report when their guidelines call for one, and a high result can require earthquake insurance or a lower loan.

San Francisco, Oakland and Berkeley each run soft-story retrofit programs for older wood-frame buildings. Lenders ask whether a building is covered and whether the required work is complete, since an open retrofit obligation affects both cost and risk.

Land and construction costs are high, which puts pressure on loan-to-cost and on the equity a developer needs. HUD 221(d)(4) is a long-term, non-recourse construction-to-permanent option at 87% loan-to-cost and 1.15x coverage in the market-rate box, over a 40-year term.

HUD-insured new construction carries Davis-Bacon prevailing wage requirements, and projects with public subsidy can trigger California prevailing wage rules too. Both change the construction budget, so they belong in the first sizing, not in a late revision.

Bay Area apartment buildings fall into two very different groups. Older buildings under a local ordinance carry capped rents, which usually makes coverage the limit and favors long-term fixed-rate debt such as HUD 223(f) or an agency loan on a stabilized property. Newer or exempt buildings can be underwritten on market rents, with the statewide cap as the ceiling on growth.

A value-add owner who plans renovations and a repositioning usually starts with a multifamily bridge and refinances once the income is in place. A developer with entitlements in hand compares construction lending with HUD 221(d)(4). In every case the first step is the same: confirm which rent rule covers the building, because it changes the income a lender will underwrite.

Hotel demand across San Francisco, the Peninsula and Silicon Valley leans on business and convention travel. Lenders weigh the trailing-12 trend heavily, and a hotel whose income has not yet recovered to a level that clears the debt yield floor (11.0% to 12.5% by hotel type in Corin's assumptions) may be a bridge candidate rather than a conduit one.

Care facilities need a license in good standing from the state before any lender proceeds, and high labor costs flow straight into net operating income. Lenders underwrite expenses as they find them, so a stabilized facility with documented cost control is the most natural candidate for HUD 232.