| A Commercial Lending Solutions Publication | Issue No. 5 | Week of July 27, 2026 | | | The Legislative Edge | | California housing bills, decoded into deals. |  | | | This Week's Featured File Measure ULA Is Durable Now: Underwrite the Cliff, Not the Repeal For a year, too many LA deal desks kept a silent line item: "ULA goes soft if Jarvis wins in November." That trade is gone. The July 2026 settlement reshaped the statewide fight so it targets future special tax rules, not a clean wipe of existing Measure ULA. Thresholds also stepped up on July 1. The tax is still here. The cliff still taxes full consideration. Price the exit to net proceeds. | What Changed in July Court of Appeal already held ULA up in December 2025. The political overtime was supposed to be November. Instead, the path capital treated as an ULA repeal lane narrowed into a forward looking vote threshold fight about new local special taxes. Existing ULA is not sitting on the ballot as "delete the mansion tax." City Hall also dropped the proposed new construction exemption this cycle. Two free options left the model at once. Capital translation: stop carrying ban mythology as a probability weighted NPV add. Carry the cliff as permanent exit friction on City of LA product. | Today's ULA Math (Closings After June 30, 2026) Source: Los Angeles Office of Finance Measure ULA FAQ | Gross consideration | ULA | Illustrative ULA $ | | $5,000,000 | None | $0 | | $5,400,000 | None* | $0 | | $5,400,001 | 4% of full base | ~$216,000 | | $10,000,000 | 4% of full base | $400,000 | | $10,900,000 | 5.5% of full base | $599,500 | *Mid band is greater than $5.4M (not "at or above"). One dollar over the line is the point. City base RPTT (~0.45%) and County documentary tax stack on top. Figures are illustrative. | Cliff rule: when a band triggers, the elevated percentage applies to the entire consideration (gross, including assumed debt for ULA purposes), not just the overage. That is why $5,400,001 is a different underwriting case from $5,399,999. | | Financing Implications | Scenario | How it hits the loan | | Exit under $5.4M | No ULA. Still model City/County base transfer tax. | | Straddle / just over $5.4M | Six figure cliff. Price architecture and hold vs sell dominate the memo. | | Sale at/over $10.9M | 5.5% on full ticket. Residual land value and promote run off net, not gross. | | 1031 | Do not bank a free ULA deferral. Model tax on the City of LA relinquished leg. | | Entity interest transfer | Recharacterization risk is real. If the deal only works at $0 ULA, the deal does not work. | | Refi / hold / ground lease | Common ways to avoid a cliff realization when cash-out is the true need. | Lender rule: size construction, bridge, and permanent packages to the residual that survives transfer taxes. Headline contract price is marketing. Net at escrow is credit. | Three Underwriting Rules | 1. | Gross is vanity. Net after transfer taxes is the number. | | 2. | Price architecture near $5.4M and $10.9M is a workstream (with counsel): assemblies, close timing, multi APN packaging, hold length. | | 3. | Map + stack set basis on the way in. ULA sets residual on the way out. Issue 4 was ZIMAS over pure SB 79 statute. Issue 5 is cliff over pure ballot hope. | | Also on the Board RSO still bites NOI. City formula at 90% of CPI (1% to 4% band). Published allowable for July 1, 2026 through June 30, 2027 is 3%. Pair tight rent growth with a cliffy exit and hold vs sell gets clearer on pre-1978 books.
November bond. Veterans and Affordable Housing Bond Act of 2026 (~$11.25B) is a demand story for affordable debt if it passes, not ULA relief.
Federal ROAD Act. FHA multifamily limit uplift and NEPA streamlining landed this month (P.L. 119-101). We will cover tables when HUD forms catch the statute. Do not let federal optimism scrub local transfer tax reality on City of LA exits. | | Closing Thought The capital mistake was treating ULA like weather. The capital edge is treating it like gravity: every City of LA acquisition, recap, and exit should show the cliff before the promote. If you are buying, bridging, or exiting around five to eleven million in the City, send expected hold, exit path (sale vs refinance), and target residual range. We will structure construction, bridge, or permanent around net proceeds, not wishful ballots. Until next Friday, | Trevor Damyan President, Commercial Lending Solutions
The developer's first choice for construction lending |  | | | Commercial Lending Solutions | | 5665 W. Wilshire Blvd #1284, Los Angeles, CA 90036 | | O (310) 758-4042 | M (805) 455-0051 | | trevor@clscre.com | www.clscre.com | | CA DRE License #02244836 | | | | | | Disclosures. This newsletter is for informational purposes only and does not constitute legal, tax, or investment advice. Thresholds, rates, and procedures change. Verify current Measure ULA figures at the Los Angeles Office of Finance and with qualified counsel and escrow before any transaction. Illustrative tax dollars are estimates. Loan programs subject to underwriting, credit approval, and market conditions. Law current as of July 25, 2026. Sources: finance.lacity.gov Measure ULA FAQ; LandToYield master database (July 2026 refresh); Legislative Edge Issue 4 (SB 79 day-one). | | |