$740,000 Commercial Construction Loan in San Francisco, CA
San Francisco’s office market has forced a lot of lenders to the sidelines over the past few years, but for sponsors with a real plan to reposition a building, a commercial construction loan is still available if you know where to look. Rubicon Mortgage Fund, LLC recently closed a $740,000 commercial construction loan secured by a two-story, roughly 13,000-square-foot office building at 1035 Battery Street in San Francisco, layering new capital directly behind a loan Rubicon had already made on the same property.
That existing relationship is the whole reason this deal was possible. Rubicon wasn’t underwriting a stranger’s building from scratch, it was adding a construction loan on top of an asset, a sponsor, and a business plan it already knew inside and out.
Deal Overview
Rubicon originally financed this sponsor’s acquisition of the Battery Street building, taking the first-position deed of trust. Once the acquisition closed, the sponsor came back needing capital to renovate the building’s vacant space for lease-up. Because Rubicon was already the lender of record and had lived with this deal since the acquisition closed, it was able to fund the construction loan directly, underwriting it to match the actual scope of work.
The Renovation Plan
This is a value-add play, not a ground-up redevelopment. Renovation scope of this kind is permitted through San Francisco Planning. The sponsor’s plan is to refresh the interior floor plate, update restrooms, and upgrade electrical systems, the kind of targeted improvements that make vacant office space market-ready without the cost or timeline of a full gut renovation. With the building’s footprint and layout already established, the renovation budget goes toward making the space competitive for lease, not rebuilding it from the studs.
A Second Position Most Lenders Won’t Take
Commercial construction loans are a niche product even among lenders who specialize in commercial real estate, and most banks that do offer them require a first-lien position, period. Rubicon Mortgage Fund, LLC didn’t have that problem. Because it already held the first-position loan on this exact property, it had firsthand knowledge of the asset’s condition, the sponsor’s track record, and how the deal had performed since acquisition. That built-in familiarity, not a fresh round of underwriting, is what made Rubicon comfortable layering a second-position construction loan behind its own loan. It’s a structure that only really works when the lender already knows the collateral and the borrower this well.
A Repeat Relationship
This deal also reflects the kind of borrower relationship Rubicon values. The sponsor came back once the renovation and leasing plan was fully formed, and that familiarity with the property, the sponsor, and the business plan let Rubicon’s underwriting team move quickly and with a level of comfort a new lender simply couldn’t match.
Exit Strategy
The plan is straightforward: renovate the interior, bring the vacant space to market, and lease it up to office tenants. Once the building is stabilized, the sponsor will be positioned to refinance or hold the asset for the long term.
Why This Loan Worked
- Rubicon Already Held the First Position: Rubicon was the existing lender on the property, so this construction loan was an add-on to a deal it already knew, not a new underwrite.
- Deep Familiarity with the Property, Sponsor, and Deal: That existing relationship, more than any new due diligence, is what made Rubicon comfortable going second position on a loan type most banks won’t touch even in first position.
- Contained Scope: A targeted value-add renovation, not a ground-up rebuild.
- Clear Exit: Lease-up followed by a refinance with a traditional lender.
Final Thoughts
Rubicon Mortgage Fund, LLC continues to look for opportunities to support experienced sponsors through every phase of a project, from acquisition through construction and lease-up. If you have a value-add opportunity that needs a flexible commercial construction loan, contact Rubicon Mortgage Fund, LLC to discuss how we can help you get to the closing table. Rubicon is a California lender licensed under the California Financing Law.
Frequently Asked Questions
Why was Rubicon comfortable lending in second position on this deal?
Because Rubicon already held the first-position loan on this exact property, it had firsthand knowledge of the asset, the sponsor, and the business plan. That existing relationship, not a new underwriting exercise, gave Rubicon the comfort to add a second-position construction loan directly behind its own loan, a structure most banks won’t offer at all, in any position.
What is a value-add construction loan used for?
A value-add construction loan funds targeted renovations, such as interior finishes, restrooms, and electrical upgrades, that prepare an existing building for lease-up, as opposed to funding a ground-up rebuild.
How does Rubicon manage the risk of lending in second position?
By already holding the first-position loan on the property, Rubicon has direct familiarity with the asset, the sponsor, and the business plan going into the construction loan, which is what allows it to underwrite a second-position structure that most banks won’t consider.
Related transactions and resources
Browse all Rubicon funded transactions.
