Saw this coming...

A $1.7 billion deal between Lennar Corp. and a pair of Chinese government entities to construct 12,500 homes on the former Hunters Point Naval Shipyard in San Francisco and a string of high-rises on Treasure Island has collapsed.

 

Sources familiar with the deal - an effort more than a year in the making and involving the China Development Bank and Chinese Railway Construction Corp. - tell us it fell apart largely over demands by the Chinese for more control over the developments than Lennar was willing to give.

Word of the deal's collapse came Thursday, just after Mayor Ed Lee returned from a weeklong trip to China.

 

He had been hoping to trumpet news that Lennar and the Chinese had reached final terms on the landmark agreement. Instead, he got to answer questions about whether the two biggest development projects on the boards in San Francisco were DOA.

The timing was especially ugly, coming just a day after Gov. Jerry Brown, on his own trade mission to Beijing, announced a $1.5 billion deal with a different Chinese outfit to build a big residential project in Oakland.

 

Lennar had secured a tentative agreement from the Chinese late last year to finance thousands of new homes and offices at the former naval shipyard, Candlestick Point and Treasure Island. Construction was set to start as early as the end of this year.

 

Lee said he was not privy to all the discussions between Lennar and the Chinese that led to their deal collapsing. But sources inside and outside City Hall privately tell us both sides had been uncomfortable with how the talks were proceeding.

"The housing market in San Francisco is hot, hot, hot, and moving with speed is incredibly important these days," said one source outside City Hall. "And waiting around for the Chinese central government to act probably is not the best way to capture a free-enterprise market." Despite the deal's collapse, Lennar is still planning to begin construction on at least 200 homes at the Hunters Point shipyard this summer using a San Francisco-based contractor.

 

However, it wasn't immediately clear what the absence of deep Chinese pockets will mean for the rest of the shipyard project or for the development on Treasure Island, where Lennar hopes to build several 30- to 40-story residential towers