If you’ve been tracking Lennar Corp.’s massive redevelopment project at Hunters Point Shipyard in San Francisco, then you probably know that several years ago, after the Florida-based megadeveloper won an exclusive negotiating agreement with the city, it formed a limited liability company, Lennar-BVHP, LLC, to handle operations on Parcel A of the former naval shipyard.
Parcel A is the only parcel of the shipyard that the Navy has released to the city as cleaned up and ready for development. And since "Lennar-BVHP" pops up in court filings related to the developer’s failures to properly monitor asbestos at Parcel A failures that led Lennar to enter into a half-million dollar settlement with the local air district in July that entity has been central to activists’ efforts to uncover the giant developer’s local business secrets.
So we noted with interest the fact that that "Lennar-BVHP" has now sold its development rights at Candlestick and the Shipyard to "HPS Development Co., LLC" just as an environmental review is being prepared of the entire shipyard, including some of its most toxic and radiologically impaired hot spots.
The transaction took place quietly in August, but was mentioned at a Dec. 16 meeting of the San Francisco Redevelopment Commission, during which the Agency authorized a reimbursement-related amendment to the "Lennar-BVHP-HPS Development Co." acquisition agreement.
During this same Dec. 16 meeting, the SFRC also amended a contract with environmental consultants PBS&J/EIP Associates to add tasks and increase the budget so as to complete the long-awaited environmental review of the combined Hunters Point Shipyard/Candlestick development project. Until the EIR is complete and certified, nothing can move forward.
But before we get to the implications of the environmental review for Lennar’s proposed Candlestick Point/Shipyard development, it’s worth rewinding the tape to early 2008 to clarify just how, why, and when Lennar-BVHP became HPS Development and what that transfer means.
In the first six months of 2008 (see "Promises and reality," 04/23/08), Lennar spent more than $5 million to help ensure the victory of Proposition G, which folded the Shipyard and Candlestick Point into one huge redevelopment project, one that could include a new stadium for the 49ers.
And just as urban planners were beginning to wonder if Lennar really would be able to sell proposed luxury condominium complexes on heavily polluted Shipyard land in the face of a nationwide real estate nosedive the Irvine-based investment and development company Scala Real Estate Partners announced, in February 2008, that it had signed a multimillion-dollar letter of intent related to Lennar-BVHP’s development.
Founded by former executives of the Perot Group’s real estate division, Scala said it planned to invest up to $200 million and have equal ownership interests in the project.
The investment fulfilled a city-issued mandate that Lennar find a financial backer to guarantee its proposed multibillion-dollar project, regardless of market conditions.
Then this fall, Lennar demanded and got approval from the Redevelopment Commission for an additional 500 homes and a 7.5 percent increase in its profit margins (see "Bait and Switch," 11/05/08), as part of an Oct. 27 draft financing plan for the Candlestick Point/Shipyard proposal.
But at the time that this financing plan was negotiated, Lennar-BVHP had, in fact, already sold all of its title and interest in the project land and assigned all its rights and obligations under the related financing documents to HPS Development Co., LP, which filed a business license with the state on Aug. 28.
Records filed with the California Secretary of State show that HPS Development Co., LP, lists yet another limited liability company, CP/HPS Development Co., GP, LLC, which filed a license with the state on Dec. 11, as its general partner. Lennar Urban’s Kofi Bonner is listed as the authorized person for CP/HPS development. And HPS Development Co., LP’s office address is listed as being c/o Lennar Urban’s 49 Stevenson Street, Suite 600 address.
Land-use lawyer Sue Hestor told the Guardian that the move to form HPS Development Co., LP suggests that Lennar ran out of money.
"Forming a limited liability company means that people are just putting their money into that project," Hestor said. "It’s a way to segregate it from other projects."
The Redevelopment Agency also renegotiated the terms of its contract with consultants PBS&J for an environmental review of the combined Hunters Point Shipyard/Candlestick Development Project Dec. 16th and the results of that study could shed light on some very scary prospects.
According to Redevelopment Commission documents, the Agency and Planning Department staff, working with the Mayor’s Office, have dentified a number of additional tasks that are necessary to adequately complete this review.
These include the addition of an "analysis of windsurfing off Candlestick Point and evaluations of greenhouse gases and sea-level rise."
The most interesting part of the study, however, may be the analysis of geology and soils, to be prepared by Geotechnical Consultants, Inc. That report will look at the phenomenon known as liquefaction the tendency of landfill to melt into liquid during a major earthquake.
The development zone is situated on a heavily polluted Superfund site, within a stone’s throw from an existing residential community.
As the executive summary in the Redevelopment Commission’s Dec. 16 agenda, notes: "The Project Areas are underlain predominantly by historic artificial fill with moderate to high liquefaction potential, followed by tidal flats and bay mud deposits that are typically soft, weak, and highly compressible…. These include temporary soil/slope instability caused by grading; erosion potential and increased hazards produced by potential failure of foundation support; and strong seismic groundshaking."
Just what kind of liquefaction risks are involved?
According to a February 2005 memo from Navy environmental coordinator Keith Forman to the Hunters Point Shipyard Restoration Advisory Board, the USGS Hazard Zone Map, which represents potential liquefaction risks, is intended for planning purposes and is not intended to be site specific.
"It depicts the general risk within neighborhoods and the relative risk from community to community," stated Forman.
But that report concluded that during a 7.9 earthquake, Parcel E-2, which is the landfill site where an underground fire burned for months in 2000, may have a lateral shift of 4 to 5 feet and a settlement of about 10 inches.
"This amount of lateral shift and settling could cause some small breaches in a containment remedy, but would be quickly and easily repairable," Forman added.
But the Navy and the city are proposing to cap Parcel E-2, rather than excavate and remove contaminants, which are thought to include PCBs and radionuclides and there’s some fear that Hunters Point could be the next Hurricane Katrina when the inevitable major earthquake hits.
Members of the Health and Environment/Education Committee of the Bayview Hunters Point Project Area Committee invited Thomas L. Holzer of the US Geological Survey in Menlo Park to give a Dec. 5 beginner’s course in liquefaction and his remarks were grounds for some serious concern.
Dressed in a gray and white tweed jacket with suede elbow patches, Holzer described how "sand becomes like liquid, capable of flowing" during an earthquake.
"More importantly, where you have groundwater contamination, fluids are discharged to the surface of the contaminated water, from a depth of 40 to 50 feet," Holzer said.
Noting that according to the USGS, a 6.7 earthquake has a 62 percent chance of hitting the region in the next 30 years, Holzer told the crowd, "If it is close enough to Hunters Point, then it’s probably enough to trigger liquefaction in susceptible materials."
In theory, then, the toxic material that the city buried under a cap could become a major hazard. "The soil liquefies, the ground gets to slosh around, and because movement isn’t always uniform, you can get cracks," he said.
As Holzer told the Guardian after the meeting, "Different people and different entities will issue different levels of risk. For some, everything has to do with profitability. So, San Francisco has some soul searching to do. Is it worth it to fast-track a project that has the potential to impact the whole city, should a major earthquake hit? Because then it would no longer be just about BayviewHunters Point."
Wise words, given the reality that Lennar continues to hurt financially.
"In 2009, cash generation will continue to be our top priority," Lennar president and CEO Stuart Miller said Dec. 18, as Lennar’s fourth quarter revenues showed a 41 percent decrease.
"We will convert inventory to cash and reduce both our land purchases and homebuilding starts," Miller promised, blaming falling home prices, increased foreclosures, tighter credit, and volatile equity markets for eroding consumer confidence, depressing home sales, and furthering the decline of the housing market.