The roads, sewers, and street lighting are nearly installed. The financing is said to be in place. And on May 21, representatives for Lennar are scheduled to meet with San Francisco’s Office of Community Investment and Infrastructure to request final approval to begin vertical construction of the first phase at Hunter’s Point Shipyard, a controversial 770-acre redevelopment project that Lennar has been attached to since 1999.
If, as expected, the office grants its approval, Lennar, the housing industry’s third-largest builder, will finally have overcome numerous community, economic, political, legal, and financial stumbling blocks that have delayed the start of this project’s construction for at least three years, and in all likelihood have added to its estimated $8 billion price tag.
For readers just catching up on the details of this project, Lennar outbid several other builder/developers for the rights to redevelop the shipyard, which the Navy abandoned in 1974 and the Defense Department closed for good in 1991. This site, with its stunning bayfront view, was the last big piece of developable real estate in San Francisco. The redevelopment was also pitched as a catalyst for revitalizing the largely African-American Bayview neighborhood it’s adjacent to. But Hunter’s Point was highly toxic, and remediation on the first 63 acres earmarked for residential redevelopment, known as Parcel A, wasn’t completed by the Navy until 2004.
(A few years ago, the San Francisco Chronicle reported that the city’s cleanup of Hunter’s Point, paid for by the Navy, would be conducted in four phases at a cost of between $300 million and $500 million.)
In 2007, even though not a single housing unit had been built yet, the city and Lennar agreed to a plan to merge the Hunter’s Point project with redevelopment of nearby Candlestick Point, the ramshackle home to the football stadium where the San Francisco 49ers played. Lennar’s plan was to build 1,200 townhouses and condos in the first phase of the larger project, and 10,500 more units in subsequent phases. The build-out was expected to take 10 years to complete, and the finished project would include 700,000 square feet of retail, 2.2 million square feet of office space, 300 acres of open space for parks and recreation, an artists’ loft community, research and science centers, a sports arena, and possibly a new stadium.
The 49ers have since decided to relocate to Santa Clara, Calif. Kofi Bonner, president of Lennar Urban in San Francisco, has stated that the plan now is to tear down Candlestick Park stadium and repurpose the space with an urban retail center for which Lennar is already soliciting tenants. “There’s a lot of enthusiasm for this,” says a source familiar with Lennar’s plans, noting that this area of the site is closest to Highway 101.
A proposed bridge that was to connect Hunter’s Point and Candlestick Point will now be limited to pedestrian traffic and public transportation. Builder could not reach Bonner for further comment.
Lennar has already spent well in excess of $150 million on infrastructure, community outreach, local contracts, and trade apprentice training for this project. And it’s ready to move ahead, despite the fact that its year-long negotiations for a $1.7 billion loan from China Development Bank to help finance construction at Hunter’s Point fell through in March, reportedly over issues of taxation and the bank’s insistence that Lennar use Chinese contractors.
Builder was unable to contact Lennar for comment. But the source familiar with its plans, who asked not to be named, says the builder is seeking new investment partners. This source also says that a 50-50 partnership Lennar struck in 2008 with Hillwood Development and Scala Real Estate Partners to defray horizontal development costs was still in place.
“We’ve been told that the financing is in place to start Phase 1,” says Scott Smith, president of James E. Roberts-Obayashi, a Danville, Calif.–based general contractor that has been attached to the Hunter’s Point project for “at least five years,” says Smith.
Smith explains that June 1 is the target date to begin the first two blocks of homes: Block 50, as it’s called, is 29,000 square feet for 25 three-story townhouse units, each averaging 1,060 square feet and having its own parking. Block 51 will be 68,000 square feet for 63 condominiums that will average around 1,100 square feet each.
Three months later, Blocks 53 and 54, which will have a total of 159 condos and townhouses, should get started. Smith says Lennar is working with a community developer on these two blocks, but it’s his understanding that the housing units will be roughly the same size as those in the first two blocks. He could not comment on what pricing will be for the housing units.
Smith notes, though, that it’s been three years since the vertical portion of Phase 1 was put out to subcontractors for bid. And with San Francisco’s housing market percolating again, labor and materials costs will inevitably be more expensive.
When asked why this project has taken so long to start, Smith blamed the housing recession primarily, “when no one could get lending for anything.” Now, San Francisco “is very hot again, and investors are coming back in.”
John Caulfield is senior editor for Builder magazine.