April 11, 2013
$1.7B Treasure Island/Hunters Point Development Deal Falls Apart
While $1.5 billion has just been secured to develop Oakland's Brooklyn Basin, the $1.7 billion loan needed to develop San Francisco's Treasure Island and Hunters Point has fallen through as Lennar and the China Development Bank have failed to reach terms.
As noted in December when Lennar had announced the Bank's approval of the loan:
While the deal is not complete, both sides have incentives to wrap it up before Dec. 31 in order to avoid the Foreign Account Tax Compliance Act, which starting in 2013 will require foreign financial institutions to enter into disclosure compliance agreements with the U.S. Treasury.
Unresolved tax issues and issues of control have been identified as the deal breakers.
∙ Oakland's Brooklyn Basin Development Secures $1.5B To Build [SocketSite]
∙ Treasure Island Redevelopment Plans Approved! (Appeal Rejected) [SocketSite]
∙ Hunters Point Redevelopment Plan For 10,500 New Units Approved! [SocketSite]
∙ $1.7 Billion Approved For Hunters Point/Treasure Island Development [SocketSite]
First Published: April 11, 2013 2:45 PM
Comments from "Plugged In" Readers
This is a shame. Hopefully there was a backup plan...
Posted by: WH at April 11, 2013 2:59 PM
If the Treasure Island deal is temporarily dead, can the city re-negotiate the single-family homes that were planned for Yerba Buena Island? I have felt strongly that the valuable high ground should be preserved for public enjoyment, and the development (if it happens) kept solely on Treasure Island. Just a thought.
Posted by: Adam at April 11, 2013 3:15 PM
Let's make it happen. I got 5 on it.
Posted by: Rob at April 11, 2013 3:46 PM
Adam -- That would make very nice squirrel habitat. Maybe, like, an American bank could fund this (SOM's plan?). (Think jobs).
Posted by: Invented at April 11, 2013 4:07 PM
From the the Matier and Ross piece:
Sources familiar with the deal tell us the effort, more than a year in the making, fell apart over demands by the Chinese for more control over the development than Lennar was willing to give.
…The Chinese had intended to use the project as an entry into more development deals in the U.S.
I hope they find local, or at least U.S.-based funding. What is the point of The Fed raining cheap money down on banks and other "financial institutions" if projects like this one can't get funded?
Anyway, as I guess they say in the U.K., "when you take the King's shilling, you do the King's bidding", and if the Chinese were trying to over play their hand, Lennar did the right thing by not taking the money. I wish more corporations here had that kind of fortitude.
Posted by: Brahma (incensed renter) at April 11, 2013 4:30 PM
Would be nice if you linked to an external source. All the links to other SocketSite posts are becoming quite tiring. Off to search for an article now.
[Editor’s Note: If you find a source with better information please let us know, we’d be happy to provide a link. The background links are provided for those who might not already know it all, please feel free to ignore them if you do.]
Posted by: BernalDweller at April 11, 2013 4:31 PM
I realize that China is kind of a big country, but is it possible that there was only [one] pot of money among Chinese financiers earmarked for a big Bay Area project and Jean Quan bid the best deal over in Oakland?
The timing of this seems to be more than just a coincidence.
Posted by: The Milkshake of Despair at April 11, 2013 4:37 PM
Who would have thought building a huge neighborhood with only one way in and out (via a bridge that often has bumper to bumper traffic) would have a hard time getting funding (maybe we can put high rises on Angel Island)?
Posted by: FormerAptBroker at April 11, 2013 5:53 PM
Not insurmountable but that's a big blow. Have to wonder if the Oakland deal could suffer the same fate.
Posted by: Micheal at April 11, 2013 6:21 PM
A solution: the City should simply divide up Hunter's Point into smaller parcels to allow smaller investors finance the work ie. sell the idea to big tech companies that it is in their best interests to have plentiful housing supply if they want to grow and hire the best and brightest workers
Also, separating TI from Hunter's Point would make more financial sense since I don't really see a huge incentive for any private investor, REIT, etc. to develop TI right now in this market.
Posted by: Live Smart at April 11, 2013 7:47 PM
Both of these developments were terrrriblyy boring! Hopefully this will allow something more ambitious and forward-thinking than a remake of downtown Irvine with an eco-farm. Maybe China could loan us back our talented architects...
Posted by: TGL at April 11, 2013 11:07 PM
I don't see the practicality of creating a "habitat" for thousands of people on a sandbar in the middle of a body of rising water, but go ahead, I just won't live there. Yerba Buena Island on the other hand would make a great public park, but instead they want to cover it in condos. I have had a problem with that from the day this was announced, and I stand by that.
Posted by: Adam at April 12, 2013 12:50 AM
So is anyone else seeing a pattern here? A lot of real estate projects getting funding from China. A lot of local real estate being sold to investors from China. I'm surprised that nobody else has brought this up yet, but China has a massive real estate bubble that dwarfs what we had here a few years ago, and it's now spilling over into the U.S. Anyone else see the recent 60 Minutes piece on the ghost cities?
Posted by: Legacy Dude at April 12, 2013 10:15 AM
"So is anyone else seeing a pattern here? A lot of real estate projects getting funding from China..."
So what? Honestly, if this was a European investment nobody would blink twice. The China paranoia is getting old. Much like Japan in the 80's...
Posted by: Willow at April 12, 2013 11:02 AM
I am with Willow.
The '89 Japanese purchase of Rockefeller center in NY marked closely the peak of their decades long hyper-expansion with infrastructure led projects that were shoddily built, and anticipated a decades long economic malaise.
China Vanke Folsom Street?
My Chinese great aunt used to say, "Those who do not learn history are destined to force their kids to take Mandarin Immersion classes unnecessarily."
I know I know, you've been to Shanghai, and it's different this time.
Posted by: soccermom at April 12, 2013 11:14 AM
The CEO of Vanke was one of the people interviewed in the 60 Minutes piece. See name link.
Posted by: Legacy Dude at April 12, 2013 11:41 AM
And Manhattan is being taken over by Dubai.
Posted by: Mark at April 12, 2013 1:11 PM
I don't think this was an anti-China comment (although China is hardly the democratic Japan). The poster was just saying that they have a bubble and now are - perhaps - creating a bubble here.
Why so defensive?
The tax point is bogus - there is always withholding on interest paid to banks anyway - FATCA ain't got nothin' to do with it (besides I can't imagine lots of US people parking money in Chinese banks - yet).
Posted by: wrath at April 12, 2013 1:12 PM
What makes people uncomfortable is that we have no say in any of their internal or external policy.
Whereas connections with Japan or Europe are a bit tighter and more controlled. Plus we have military bases there just in case ;)
Posted by: lol at April 12, 2013 1:27 PM
Correct, wrath. The outflow of investment money from mainland China has been getting a fair amount of press lately, both nationally and locally.
Too lazy to find it online, but I recall seeing a recent Mercury article where a peninsula realtor estimated that 1/10 bay area homes were being bought by investors on the mainland.
But I don't think the Noe Valley Voice has written any articles on it yet, which might explain why the SocketSite regulars find it hard to believe...
Posted by: Legacy Dude at April 12, 2013 2:03 PM
Posted by: SocketSite at April 12, 2013 2:04 PM
"Too lazy to find it online, but I recall seeing a recent Mercury article where a peninsula realtor estimated that 1/10 bay area homes were being bought by investors on the mainland."
Again, help me understand the underlying concern? Even if this is accurate, providing no laws are being broken, who cares?
Posted by: Willow at April 12, 2013 3:29 PM
Found the article, see name link. The underlying concern, Willow, is that this sort of blind overbidding could fuel another speculative bubble. Dong bu dong?
Posted by: Legacy Dude at April 12, 2013 3:41 PM
LD: I read the article...it's anecdotal at best. So what's the answer? We either let foreign buyers in or not.
It's kind of funny that we are worried about a bubble again...
Posted by: Willow at April 12, 2013 4:05 PM
@soccermom at April 12, 2013 11:14 AM
David Letterman Show NYC man in the street interview:
Q: Sir, what do you think of the Japanese purchase of Rockefeller Center?
A: Who gives a rats’ ass, they aint takin it back to Tokyo with em.
Posted by: Salzigtal at April 13, 2013 2:41 PM
Look how far we have come. Not long ago if an agent said that foreign buyers were helping lift the market they were mocked and ridiculed, now we get links to articles with realtors saying the same thing and it is factual but bad for the market.
Posted by: sparky*b at April 14, 2013 8:47 AM
Riddle me this, sparky*b:
When is it ever good, for the local real estate market or any market for that matter, when prices advance significantly ahead of the fundamentals because of the actions of speculators?
Posted by: Brahma (incensed renter) at April 14, 2013 12:02 PM
I also wonder if in the LONG term it is good to for the regional economy to have so many absent foregin buyers. I lived in London at one time in my life, and when I visit London now, I am astonished at how much of central London real estate is owned by absent foreign owners. The whole West End is a giant collection of empty expensive homes and condos owned by people thousands of miles away who might visit once in every two years or so.
Take the new "One Hyde Park" complex in London, if you walk by this enormous expensive condo complex at night it is dark since all the "owners" live in Dubai, China, etc. etc. If the same buying patterns were to take place in San Francisco, you could have completely sold out empty buildings that any working professional in the region would not be able to afford, or even visit. If this happens, you can kiss the creative class that is driving the regional economy good bye.
Posted by: anon94123 at April 14, 2013 12:45 PM
Sparky*b, what changed for me is understanding how much money is being concentrated by the corrupt of a few foreign countries, to a degree that Wall Street can only envy. Foreign "investment" made a lot more sense when I started thinking of it as hot money frantically diversifying. "Good for the market" is in the eye of the beholder of course.
Why is it so hard to figure out whether foreigners, bankers, or tech millionaires are disproportionately driving the current rise? What fraction of SF owners are hidden behind LLCs?
Posted by: heynonnynonny at April 14, 2013 2:19 PM
Brahma, I didn't say it way good or bad for the market. I also don't have any idea if it would be a big deal at all if there was a reasonable amount of inventory.
But that is not my point. My point is a lot of people bust on Realtorspeak and particularily when then market was down but rising. Now what we are talking about in the linked article is quotes from realestate agents. Why are you not just saying 'ha ha asian buyer, doubt it, just more realtor 101 talk'
All I am saying is just say sorry for all the realtor bashing when they were out ahead of this.
Posted by: sparky*b at April 14, 2013 5:11 PM
"Why are you not just saying 'ha ha asian buyer, doubt it, just more realtor 101 talk'"
because this time it's true? even a broken clock is right twice a day.
"when [the realtors] were out ahead of this."
if you keep saying the market is on the road to recovery over and over and over until it does, eventually you'll be right.
what happened to that in the trenches realtor that said "San Francisco never really took a price hit and it won't, either" right before it tanked?
Posted by: nonanon at April 14, 2013 6:55 PM
I'm not Brahma, but I do think realtors are just as biased by self-interest as the rest of us.
Really, it should be possible to do better than anecdotes by looking at family names in public records.
Posted by: heynonnynonny at April 14, 2013 8:15 PM
Ah that is more like it.
Posted by: sparky*b at April 14, 2013 9:09 PM
sparky*b, okay that clarifies a lot.
I went back and checked the thread where the mainland chinese buyer meme was floated (at least the first one I remember) and speaking only for myself, I wasn't engaged in a lot of busting on Realtorspeak when it comes to PRC-based buyers. I admitted it was at least possible that they were having a detectable impact, at least on California as a whole.
I may have done a lot of busing on Realtorspeak with respect to other hypotheses, and will probably do so again in the future if it's called for.
Posted by: Brahma (incensed renter) at April 15, 2013 12:04 PM