Miami, Florida-based homebuilder Lennar in talks with China Development Bank on possible US$1.7B funding for two major housing developments on former San Francisco naval bases

Wendy Lisney

LOS ANGELES , June 26, 2012 (Industry Intelligence) –

U.S. homebuilder Lennar Corp. is in talks with the China Development Bank (CDB) about it providing approximately US$1.7 billion in funds for two long-delayed housing projects in San Francisco, California, said people familiar with the matter, reported The Wall Street Journal on June 26.

The Treasure Island and Hunters Point Shipyard projects, which are expected to cost $10.5 billion in total over the next few decades, would transform two former naval bases into large-scale housing developments with nearly 20,000 new homes, substantial office and retail space, and a sports arena.

China typically invests in projects in the developing world and usually makes that funding conditional upon Chinese developers, contractors, and some laborers being used in the construction, the Journal reported.

This would be a problem in San Francisco because local laws and deals with local governments require that the developers use local laborers and pay customary wages. The city has committed hundreds of millions of dollars in the form of tax-increment bonds, to the projects.

The CDB is using the Treasure Island and Hunters Point developments as a test case to become familiar with green building and affordable housing projects, which are of interest to Chinese builders, said people familiar with the talks, reported the Journal.

Chinese companies also are becoming more interested in opportunities in developed countries like the U.S., but the negotiations with Miami, Florida-based Lennar could break down and the CDB could walk away, the people said.

Hunters Point, which was a shipyard since 1870 and an important shipbuilding site for the Navy during World War II, would be developed into 12,500 homes, a hotel, 3.5 million sq. ft. of research-development and commercial space, and 80,000 sq. ft. of retail space.

The Treasure Island project includes up to 8,000 homes, a 500-room hotel, and about 300,000 sq. ft. of commercial space. On adjacent Yerba Buena Island, Lennar plans about 210 homes, the Journal reported.

The partnership between CDB and Lennar would include China Railway Construction Corp. (CRCC), a state-run contractor that would participate in developing Treasure Island and Hunters Point, although its role is unclear.

CRCC could act as an advisor, a consultant, or even invest in a local construction company that uses U.S. workers, said the people familiar with the discussions, the Journal reported.

The primary source of this article is The Wall Street Journal, New York, New York, on June 26, 2012.
 

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