Plans to build upward of 20,000 new homes in San Francisco got a big jump-start this week, as sources said that homebuilder Lennar has come to a basic agreement with the government-owned China Development Bank on a $1.7 billion loan for major construction at Hunters Point and Treasure Island.
Those two shuttered U.S. Navy bases are at various stages of being obtained by The City, and Chinese capital behind the projects could mean 1,400 newly built homes for sale at Hunters Point by the end of 2013, sources close to the negotiations said.
Smaller aspects of the deal are still being discussed, and could come with conditions that the Chinese Railway Construction Co. — the world’s second-largest construction company — becomes the general contractor on the project.
China’s involvement in U.S. development on this wide a scale is largely unprecedented. The accelerating superpower focuses on the developing world for most of its foreign construction projects.
Sources said that besides the predetermined general contractor and closing the deal before a foreign federal tax deadline Dec. 31, the project will have to comply with all of San Francisco’s many other development regulations — including The City’s local hire ordinance, requiring a portion of workers to be residents. China’s development activities abroad often involve importing a massive Chinese workforce to complete projects such as new arenas, roads and other infrastructure.
San Francisco Labor Council Executive Director Tim Paulson said last summer that while the ailing construction industry desperately needs any kind of investment, he would have preferred to see such big projects receive domestic funding. Lennar began talks with China in November of 2011 after lax interest from American investors.
“I’m extremely disappointed that they had to go outside the United States,” Paulson said. “I just think it’s incredibly ironic that the Chinese financial institutions are more interested in jobs and housing than American corporations.”
Were the deal finalized in its current form, Treasure Island would receive $700 million and Hunters Point would get $1 billion. That translates to six years of development and construction for both projects, sources said. Plans call for 8,000 new homes at Treasure Island and 12,500 at Hunters Point, with both projects projected for
completion in 20 years.
The initial loan deal was struck following a delegation trip to Beijing led last week by Lennar President Kofi Bonner.
China Development Bank’s Fiscal Oversight Committee voted 6-0 to approve the deal, sources said.
Lennar, a Miami-based company, is partnering with local firms Wilson Meany, Kenwood Investments and Strockbridge Capital Group. The relationship between Lennar and the China Development Bank was initially brokered by the San Francisco-based Prometheus Group investment firm.