Mecah Ventures Secures Rare Construction Loan

Mecah Ventures just secured a rare construction loan for a mixed-use property in downtown San Mateo.

The Menlo Park-based firm locked down $35 million in construction financing from private lender Nikols Company for a 45,000-square-foot building at 435 East Third Avenue, the Silicon Valley Business Journal reported. The score comes after Mecah principal Mike Field pitched about 150 lenders before eventually lining up funding.

Mecah Ventures plans to replace a former auto repair shop at the Third Avenue site with new offices and multifamily units near San Mateo’s Caltrain station. The $45 million total development, known as Parallel on Claremont, will rise five levels, with offices taking up most of the space and five multifamily units on the top floor. It would be the smallest of five buildings Mecah Ventures in its downtown San Mateo redevelopment portfolio, though it’s likely to benefit from a tech and artificial intelligence-driven rebound amid a general lack of new office space.

The financing comes as regional banks and other lenders largely take a step back from commercial construction lending; investor-driven lenders now make up 30 percent of all construction loans while regional banks’ share has fallen to 25 percent — well below the long-term average, per MSCI data cited by the Business Journal. As it stands, office construction starts are down almost 20 percent from a year ago, and no new office buildings are under construction anywhere on the Peninsula.

Construction could begin in a few weeks once final permits come through, Field said. “It’s taken a Herculean effort,” he said. “We’ve been trying to convince lenders now is the time to go forward, and I think they are starting to believe it.”

At the same time, Peninsula office leasing increased 76 percent last quarter. The strongest demand was for buildings near Caltrain stations and other transit hubs. “The leasing velocity has been really good,” Field said, noting that vacancy in downtown transit-oriented buildings is falling into single digits.

In addition to Parallel on Claremont, Mecah is pursuing the construction of another mixed-use development in San Mateo that could become the tallest building in the city. In August, the firm filed formal plans to build a 14-story structure at 1 East 4th Avenue consisting of 236 residential units across 174,700 square feet and 119,780 square feet of commercial space.

— Chris Malone Méndez