Lendyx funded a $7.1M ground-up construction loan on a nine-home SB 684 project in Santa Monica, at 83.5% loan-to-cost on a loan above $5 million. On paper it looked like a clean infill build. In practice, three things put it outside what most construction lenders will finance: a parcel that has not been subdivided yet, an affordable unit in the mix, and an as-is value that had doubled in under six months.
Santa Monica is one of the most supply-constrained residential markets in the country, with a deep buyer pool for new for-sale homes. SB 684 opened a path to build and sell nine fee-simple homes on a single parcel, the kind of for-sale infill that rarely gets built here. The opportunity was clear. Financing a deal built around a statute Lendyx had not yet worked with was the harder part.
Because the collateral changes legal form during the loan. SB 684, operative in California since 2024, lets a developer:
Until the subdivision records, the collateral is a single parcel, and a single parcel carrying a nine-home build underwrites like a commercial construction loan rather than nine residential lots. Residential construction lenders are not set up to lend against commercial-classified collateral, and commercial lenders are not built for an asset that becomes a row of individually owned homes. The deal falls into the space between those two desks.
This file added two more layers. One of the nine homes carries an affordable restriction, and that single unit reaches further into the deal than it looks. A restricted home does not carry the same value as the eight market-rate homes around it, which changes the blended exit the loan gets repaid from. It appraises against a different comp set and adds a compliance layer the collateral is subject to. Plenty of lenders will not lend on a project with an affordability requirement at all.
On top of that, the as-is value had doubled in under six months, and to a credit committee, value that moves that fast is a flag before it is an asset. There is no seasoning behind it, and rapid appreciation is exactly the pattern underwriters are trained to read as manufactured equity until someone proves otherwise. Crediting the current value meant doing the work to confirm the increase was real and supportable, not just printed on a fresh appraisal.
By underwriting the deal as it actually was, and by holding leverage most lenders won't at this size. Lendyx funded at 83.5% LTC on a loan above $5M. Once a loan crosses that size, most of the market trims proceeds, adds recourse, or both, and high leverage gets scarce. Holding 83.5% is what kept the sponsor's equity working in the project instead of backfilling a gap a more conservative quote would have left.
Getting there took work, not a template. This was Lendyx's first SB 684 deal, so there was no internal playbook to reach for. The team built one. They went deep on the statute, ran full diligence on every piece of the file, from the unparceled collateral to the affordable unit to the valuation, and worked the deal through with every party it touched. There were late nights and a lot of phone calls. None of it came down to one clever structure. It came down to refusing to leave any part of a complicated file unexamined.
The complexity here was structural and regulatory, not a problem with the project. A subdivision statute the team had never financed against, an affordable unit, and an as-is value that had doubled would each give most lenders a reason to pass. Closing all of it at 83.5% LTC came down to doing the work and standing behind it. Certainty of execution is the new pricing, and this is what it looks like.
Can you get a construction loan on an SB 684 project before the lots are subdivided?Yes, though most lenders won't. Before the subdivision records, the site is a single parcel that underwrites like a commercial construction loan rather than nine residential lots, which puts it outside the box for most lenders. It takes one willing to underwrite the project through that change. Lendyx funded this nine-home build at 83.5% LTC.
What loan-to-cost can you get on a construction loan above $5 million?It varies, and leverage usually compresses as loan size rises past $5M, where much of the market trims proceeds or adds recourse. On this Santa Monica deal, Lendyx funded at 83.5% LTC on a loan above $5M.
Will a lender finance a project with an affordable or restricted unit?Many won't, and those that do often discount the restricted unit heavily, because it does not carry the same value as the market-rate homes and changes the blended exit. On this deal, Lendyx underwrote the affordable unit into the exit rather than excluding it from the leverage.
What is SB 684?SB 684 is a California law, operative since 2024, that requires local agencies to ministerially approve qualifying small-lot subdivisions of up to ten parcels and up to ten homes, with no discretionary review, no CEQA, and no public hearing, within 60 days of a complete application.
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