China Loaning Miami's Lennar $1.7 Billion for New San Francisco Housing Projects
It was bound to happen, sooner or later. China is bankrolling two major housing developments in San Francisco. A total 20,500 new homes are planned. The loan is for $1.7 billion.
The borrower is Miami, FL-based Lennar Corp. (NYSE: LEN.N). Terms of the deal have not been disclosed since the transaction is not expected to formally close until Dec. 31 of this year.
The loan took a year to complete.
Lennar spokesman Marshall Ames told World Property Channel
publisher Michael Gerrity in an email Wednesday that Lennar has not issued a press release, could not confirm the loan and would not comment at this time on the pending transaction.
The deal is believed to be unprecedented in United States real estate financial circles to date.
So is a specific clause in the deal that names China Railway Construction Co., the world's second largest contractor, as the general contractor on the projects.
An estimated 5,000 new jobs are expected to be created during the six-year construction period. U.S. union labor will be utilized.
However, it was still not clear if the Chinese general contractor plans to bring over Chinese workers to also work on the projects. That could create a firestorm of controversy in the U.S., say some U.S. construction industry observers who admit they are still unfamiliar with the entire loan transactions.
Total fully-built-out development is expected to take 20 years.
The projects are Hunters Point Shipyard which will receive $1 billion for a total 12,500 homes and Candlestick Point at Treasure Island which will receive $700 million for the construction of a total 8,000 homes. An estimated 1,400 homes could be ready for occupancy at Hunters Point by the end of 2013. Both sites are former U.S. Naval bases.
The projects mark San Francisco's biggest residential development opportunity in the last 10 years.
Despite Lennar's hesitancy in confirming the loan, San Francisco Times Real Estate Editor J.K. Dineen reports the loan committee of the China Development Bank has already approved the general outline of the transaction.
Dineen reports the approval came after Lennar Urban Executive Vice President Kofi Bonner, Wilson Meany principal Chris Meany and Lennar international president Chris Marlin spent a week in Beijing negotiating the loan. It was Bonner's sixth trip to China since negotiations started in November 2011.
Dineen reports Alexis Wong, founding partner and chief executive officer of the San Francisco-based Prometheus Group, represented both sides in the negotiations. Wong is also a founder of San Francisco-based developer AGI Capital Group.
Dan Schreiber of the San Francisco Examiner reports China Development Bank's Fiscal Oversight Committee voted 6-0 to approve the deal.
China Development Bank, Lennar and its partners are anxious to close the deal before Dec. 31. That is when 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.