CalHFA approves Sutter Street financing for mixed‑income San Francisco tower after HUD fair‑housing sign‑off

The California Housing Finance Agency on June 23 approved permanent and MIP loans for the affordable portion of Sutter Street, a 22‑story, mixed‑income development in San Francisco, after agency staff said HUD’s Fair Housing Office and the city had signed off on the project’s unit allocation.

The board approved Resolution 25‑17 to provide a $15,300,000 permanent loan and a $4,000,000 MIP loan to finance the 102 affordable units that will be one of two condominium ownerships within the single building. The vote was recorded by roll call and passed with the majority of directors voting yes.

CalHFA staff described the structure as novel for the agency: the building will be divided into two aerial condominium parcels. Condo 1 will hold 201 market‑rate units, the public parking garage and commercial space; Condo 2 will hold 102 affordable units and will be the CalHFA‑financed parcel. The total development includes 303 units, a parking garage and a childcare center. Underwriting shows a total per‑unit development cost of roughly $827,000.

“This is a very unique transaction. It’s extremely complicated,” said Stephanie McFadden, CalHFA director of multifamily programs, during the board presentation. McFadden said the agency required additional legal protections because the two condominium owners will share the same building and amenities while having separate financing stacks.

Key elements the board discussed: - Land and land use fee: CalHFA underwriting showed a total land value of about $30 million, of which approximately $10 million is attributable to Condo 2. About $7 million of that allocable share is capitalized at closing and the remaining portion is being amortized into an annual land‑use payment of $250,000 paid to Condo 1 over 40 years. CalHFA will require a new reserve equal to one annual land‑use payment that the agency can access if the fee harms the affordable condos' operations. Kevin Brown, CalHFA housing finance officer, explained the calculation during board questioning. - Fair housing review: McFadden said HUD’s Fair Housing Office reviewed and approved the unit allocation and that the HUD National Loan Committee had approved the related construction loan. She said the city and county of San Francisco had also approved the allocation and CalHFA counsel issued an opinion supporting the fairness analysis. - Amenities and parking: Developer Patrick McNerney told the board the project includes 28 new parking spaces in the new structure; 12% of those spaces are earmarked for affordable units in compliance with San Francisco inclusionary requirements. McNerney said the adjacent existing parking garage will be public and not part of the affordable condo ownership. McNerney also described shared amenities — gym, rooftop spaces, co‑working areas and an on‑site childcare operator (Wuyi Child Care Services) — that will be open to all residents.

Board members pressed staff and the developer on how the condo split, unit designations and amenities would operate in practice. Director Velasquez, referencing past litigation elsewhere, asked staff to explain how unit distribution and access would be enforced; McFadden and counsel summarized the approvals and the recorded CC&Rs that will govern the two condo owners.

No public commenters addressed the item. After discussion a motion to approve the loans for Condo 2 and associated documents carried; roll call showed the resolution approved and was entered as Resolution 25‑17.

The approval authorizes CalHFA to proceed with the permanent loan and MIP loan for the affordable condo parcel; staff noted additional closing documentation and monitoring will follow.

Ending: CalHFA staff said they will continue to monitor the project’s implementation, enforce the recorded CC&Rs and retain the required land‑use fee reserve to protect the affordable parcel’s operations.