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.

“I had wished we could get the funding done, and I’m going to continue to try and help Lennar do it,” Lee said, suggesting San Francisco’s hot real estate market was ready to attract more domestic investment.

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.

Seeking better returns

For starters, under Beijing’s recently installed new leadership, the Chinese continually sought assurances of a better return on their investment. That meant that if certain performance measures weren’t met, they could take greater control of the project.

“They kept moving the goalpost,” said one source, who declined to speak for the record.

The locals also had their doubts – not about the Chinese bank’s financing, but about using Chinese Railway Construction Corp. as the general contractor, because the company wasn’t familiar with San Francisco’s local hiring requirements.

Add it all up, sources say, and it was simply time for Lennar to look elsewhere for financing.

“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.

Lennar’s plan

Lennar issued a brief statement late Thursday, saying only that it is “continuing to move forward with development of Hunters Point shipyard” and that “lenders continue to have significant interest in financing the shipyard and Treasure Island, which they believe are extremely attractive projects.”

As for the Chinese?

Well, they aren’t talking. But it’s worth noting that within the past couple of days, reports have appeared saying the longtime chairman of the China Development Bank, Chen Yuan - who only two months ago was reconfirmed by the new government – is being replaced.

Phillip Matier and Andrew Ross are San Francisco Chronicle columnists. Matier can be seen on the KPIX-TV morning and evening news. He can also be heard on KCBS radio Monday through Friday at 7:50 a.m. and 5:50 p.m. Got a tip? Call (415) 777-8815, or e-mail matierandross@sfchronicle.com.

Article source: http://www.sfgate.com/bayarea/matier-ross/article/S-F-China-development-deal-falls-apart-4427448.php

The young tech crowd rented — and sometimes bought — in commercial buildings in this former warehouse area, converting them into “work-live” spaces where they operated their nascent companies and slept (once in awhile).

The boom-and-bust cycles in the tech sector move quickly, and the pace of constant reinvention and innovation is relentless.

The same is true of tastes in real estate. Today a new generation of tech dreamers is back in the South of Market area. But this time they are breathing life into a start-up wave not previously seen in San Francisco: high-rise condo living.

A clutch of new condo buildings and condo-hotels, some with stunning views of the San Francisco-Oakland Bay Bridge and Twin Peaks, have sprung up downtown in the past five years. For what would be considered modest prices in Manhattan, they are offering a full-service lifestyle that locals have traditionally steered away from, preferring the single-family homes traditionally available in the City by the Bay.

In the late 1990s, if someone wanted to live in a high-end condo, the options were almost nonexistent. “There wasn’t any signature building that people said, ‘I gotta have it,’ ” said Max Armour, a real estate agent with TRI Coldwell Banker.

Today there are at least two, both a few blocks south of Market Street. In terms of quality, amenities and V.I.P. neighbors, the 60-story Millennium Tower is San Francisco’s version of 15 Central Park West, or perhaps the yet-to-be-completed One57.

At Millennium, tech millionaires from Google, Twitter, Zynga and Salesforce mingle with celebrity residents like the 49ers legend Joe Montana and the chef Michael Mina, who runs RN74, the restaurant in the building. Thomas Perkins, the venture capitalist, lives in a 4,500-square-foot penthouse he bought in 2009 for $9.35 million.

Just up Mission Street from the Millennium, and nearer the financial district, is the St. Regis, a more low-key building, though also lauded for its refinement. Last December a 17,100-square-foot penthouse there sold to a Hong Kong family for $28 million, said Gregg Lynn, the broker at Sotheby’s International Realty who represented the sellers.

Other buildings south of Market have been selling swiftly, including Madrone, or have sold out, like Infinity. Developers have taken advantage of zoning regulations in the newer neighborhoods of South Beach, Mission Bay and Rincon Hill to erect taller towers than would be allowed in better-established residential pockets of the city. Millennium Tower, at 645 feet, is San Francisco’s tallest residential building.

“There is a whole new generation of wealth that has found its way into San Francisco,” said Richard G. Baumert, a partner with the New York-based Millennium Partners, which developed Millennium Tower. “Whether through stock options or whatever, there has been this influx of buying from the tech sector that has had a positive impact on the whole market.”

Some of the wealthiest tech buyers have ranged beyond South of Market and bought trophy properties throughout the city.

In February Jack Dorsey, a founder of Twitter and Square, bought a two-bedroom house perched on a cliff overlooking the Pacific for $9.99 million. A few months later Mark Pincus, a founder of Zynga, paid $16 million for a seven-bedroom 11,500-square-foot house in the Pacific Heights neighborhood. Jonathan Ive, the Apple executive responsible for the design of the iPhone and iPad, bought an English-style manor on “Billionaire’s Row” in Pacific Heights for $17 million.

The recent fall in stock prices for companies like Facebook and Zynga hasn’t done a whole lot to slow the buying, brokers say. “If that hadn’t happened our inventory probably would be at zero now,” Mr. Lynn said.

The inventory in the San Francisco area, which includes the East Bay, dropped by 42.2 percent over the past year, the biggest drop after Sacramento among the country’s 30 largest metro areas, according to Zillow, the real estate Web site.

As for the young tech professionals, the catalyst for their condo purchases — often in developments South of Market — is San Francisco’s exceedingly tight rental market. What the buildings lack in proximity to supermarkets and night life they make up for with an easier commute to tech companies in Silicon Valley, which can take up to 90 minutes during rush hour. A train station for lines running south to the valley is in Mission Bay, as are on-ramps for the expressway.

“It’s like living in TriBeCa and working in New Jersey,” said Alan Mark, president of the Mark Company, a real estate marketing and sales firm.

Follow Alexei Barrionuevo on Twitter: @alexeinyt.

Article source: http://www.nytimes.com/2012/10/21/realestate/in-san-francisco-glass-and-steel-condos-rising-by-the-bay.html?pagewanted=all

That vision may have once been largely accurate. But now, in a post-recession world buffeted by persistently high unemployment and a housing market yet to regain its footing, poverty has taken a profoundly a different shape. In places like the San Francisco Bay Area, it’s been moving from areas surrounding the high-rises of city centers into the formerly empty spaces on their outskirts.

A DIFFERENT KIND OF HOMELESSNESS

A recent study by the Federal Reserve Bank of San Francisco found that, over the past decade, poverty in the Bay Area has shifted out of the cities and into the suburbs. From 2005 to 2009, the percentage of people living in poverty in the suburbs grew by 16 percent, compared with a 7 percent increase in urban areas.

This migration of many of society’s neediest has been an issue for years. Yet a new trend — an upward spike in real estate prices in the area between San Francisco’s tech-fueled economic success story and the economically depressed towns of the California’s San Joaquin Valley — threatens to push the phenomenon into overdrive.

“We’re seeing a different kind of homelessness,” said Capt. Michael Paugh, who has run the Salvation Army in the central California city of Modesto for about a year. “There’s fewer chronic homeless and more people just lost their jobs and couldn’t keep up on their home payments.”

The Salvation Army has been in Modesto since 1890, providing hot meals, emergency shelter, job training and free child care for people in need. Rarely have those services been in higher demand, said Paugh.

“During the summer, there are whole entire families coming in for a meal. With school out, these are the only hot meals these kids are getting,” Paugh explained. “It’s been an eye-opener to me. When you think of the homeless, you think of people that–for whatever reason–can’t or don’t want to work. But homelessness here is seniors, veterans, people living on a small amount per month and have to chose between food and shelter. It’s good people who just lost their jobs.”

Modesto is unquestionably full of good people who have lost their jobs. The unemployment rate in the region is 15.7 percent, down from a mind-boggling 17.4 percent earlier this year. That’s not counting the chronic underemployment of people who do have jobs, and therefore aren’t counted in the statistics, but aren’t able to book enough hours to make ends meet.

In a recent Forbes list of the most “miserable” cities in America, Modesto ranked fourth. Neighboring Merced and Stockton were third and first, respectively.

“There are certain subdivisions in Modesto where one out of every two or three houses are in foreclosure,” said Ruben Villalobos, an attorney and Modesto school board member.

THE BUBBLE AND THE WAVE

Many of the area’s problems can be traced to the collapse of the housing bubble. During much of the 2000s, scores of Bay Area residents took advantage of cheap, sub-prime financing and bought homes in the San Joaquin Valley. Housing prices shot through the roof and the construction industry boomed.

When the bubble popped, home values plummeted and new home construction, a driving force of the region’s economy, slowed to a crawl. A sea of wealth quickly evaporated.

It wasn’t just the lure of big houses for low prices that drew many to the outer rings of the Bay Area. Some people could no longer afford the growing cost of living.

“In [East Bay cities like] Oakland and Richmond, the most recent census saw the African American population there decreasing by about 25 percent due to people in those communities being priced out of the market,” said Gloria Bruce, deputy director of East Bay Housing Organizations. “Minority groups like African Americans are often the most vulnerable to being pushed out of their homes when prices rise.”

If the housing bubble, and its subsequent collapse, left many of the most vulnerable on the geographic edges of the Bay Area, the shape of the local recovery will likely have the same effect.

“Think of the housing bubble like a wave,” said Eli Davidson of the real estate firm Marcus Millichap. “Depressing home prices in Stockton and Modesto, then coming through the East Bay and the finally making its way into San Francisco. As it recedes, it’s going to see increases in San Francisco first and then the East Bay and finally make its way back into the Central Valley.”

While that wave has yet to wash all the way back to the San Joaquin Valley, the resurgence of the housing market in the Bay Area’s urban core is already well at hand.

San Francisco has arguably the strongest housing market in the country. Rents are the priciest of any major city. The home sale prices aren’t just the highest in the nation; they’re increasing faster than anywhere else. Funding cuts to the city’s affordable housing programs have increasingly made San Francisco unaffordable to people on the lower rungs of the economic ladder.

The city’s high cost of living has long pushed residents, especially families, into East Bay cities like Berkeley and Oakland. However, over the past six months, home prices in some portions of the East Bay have also soared. Demand continues to rise sharply as employees of the surging, social media-fueled economies of San Francisco and Silicon Valley search for affordable housing.

The supply of new East Bay housing units, on the other hand, is still being constrained by the recession. Since it can take up to a decade to get from Point A (“Let’s build some houses!”) to Point B (“Here are the keys!”), there aren’t a lot of new residential properties opening.

This mismatch between between supply and demand has the potential to further exacerbate the new trend of poverty moving to the outskirts while people with money remain in urban cores. And its effects aren’t difficult to predict.

“I can see people being forced further and further out from the immediate Bay Area and moving into the Central Valley,” said Maeve Elise Brown, executive director of Housing and Economic Rights Advocates.

LIFE ON THE MARGINS

Far-flung suburbs lack the services regularly utilized by the working poor. There aren’t as many housing shelters, soup kitchens or job training centers as in cities. Public transportation infrastructure isn’t as developed: Modesto has a solid bus system that hooks into the Bay Area’s larger public transportation grid, but access can be spotty and, in some areas, nonexistent.

Paugh explained that emergency shelters in Modesto offer space for less than a dozen families, woefully inadequate for a region where some 20,000 individuals have undergone foreclosures.

The lack of strong city governments hurts the situation further. A recent article by California Watch found that areas like Modesto are spotted with unincorporated zones that have little access to government services.

“It’s like people are living in colonies of the United States,” Miguel Donoso, a longtime Latino community advocate in Stanislaus County, told California Watch. “Living in a Third World country, that’s close to what you see here today.”

Moreover, the collapse of the housing bubble and the drop in the tax base has made maintaining governmental services more difficult.

Nearby Stockton, which recently became the largest American city to ever file for bankruptcy, was forced to lay off 40 percent of its government workforce.

Resources at the state level has also decreased precipitously. “We’re only receiving 60 cents on the dollar from what we’re supposed to getting from the state,” Villalobos said, noting that school dropout rates have increased not only in his community but across the board. “Without that funding, students are more likely to slip through the cracks.”

Villalobos was also quick to point out that while much as the effects of poverty’s suburbanization are economic, there’s also a devastating social aspect. Housing instability has made it more difficult for individuals to cultivate roots.

“Modesto is a different place now,” he explained. “Ten years ago, if you went to the grocery store, you’d run into people you know. That’s not as true anymore. We seem to be a far more transient community.”

HuffPost Live will be taking a comprehensive look at the persistence of poverty in America Sept. 5 from 12-4 p.m. EDT and 6-10 p.m. EDT. Click here to check it out — and join the conversation.

Check out these aerial photos of California’s Central Valley region:

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• Looking south over the Delta from the South Fork of the Mokulmne River

• Looking north up the Sacramento Deep Water Ship Channel

• Hog Slough in the California Delta

• Farm patterns on Prospect Island in the California Delta

• Oxbow Marina on Georgianna Slough near the town of Isleton in the California Delta

• Delta Coves on Bethel Island in the California Delta is waterfront community development that was halted in 2008 when owner, Lehman Brothers, went bankrupt.

• A private water feature near Stockton, Calif., in the California Delta.

• “Grindstone Joe’s” island marina on Little Potato Slough in the California Delta.

• The pumping station near Tracy, Calif., that delivers water from the California Delta into Bethany Reservoir and down to Southern California via the California Aqueduct.

• At center, the California Aqueduct runs adjacent to Interstate 5, with the Delta-Mendota Canal at left, through farmland, and the barren foothills at right, near Patterson, CA.

Article source: http://www.huffingtonpost.com/2012/09/05/bay-area-poverty_n_1855189.html