Eber: Concord’s “partner in development” Lennar-Urban-Five Point in dire financial trouble (corruption?)

Corruption has many forms.  Some pay off think tanks and foundations to get favorable actions or reviews.  In the case of Lennar, they know all the forms—one of which cost CalPERS ONE BILLION DOLLARS.  But, it looks like they bought off the Leftists Think Tank, Brookings Institute!  Yes, the Left can be bought—just ask the donors to the Clinton Foundation.

“Also not to be forgotten is the scandal that the New York Times recently uncovered of Kofi Bonner being honored by the Washington D.C. think tank the Brookings Institute. They openly supported Lennar’s and Kofi’s work on the Hunter’s Point Project, despite the obvious toxic waste problems.

Absent in this high praise from the Brookings Institution was the fact that Lennar donated $ 400,000.00 to the group in 2014 as a down payment and continued to pour money into the non-profit in a quid-pro-quo pattern. At the same time the think tank continued to heap accolades on the work of Kofi and Lennar.

This pay to play model of Lennar has been widely criticized for its similarity to accusations made against the Clinton Foundation where donations to the organization have been followed by favors allegedly granted by Hillary Clinton when she was working as Secretary of State.

Rich Eber has done a magnificent job of investigating—also finding that the family of San Fran Nan may be involved in the corruption.  Anybody surprised.  This is the first of a two part report on Lennar.  Please pass this on to your friends.  Pelosi, Brookings—the Left can be corrupted.

price cost expensive money

Concord’s “partner in development” Lennar-Urban-Five Point in dire financial trouble

Rich Eber, Contra Costa Bee,  9/4/16

A warm late summer evening found Concord Councilman Edi Birsan introducing Kofi Bonner to the Holbrook Heights neighborhood watch group as the President of Lennar-Urban’s West Coast operations. He was quickly corrected by Bonner who told the small audience that after more than a decade of being at the helm of Lennar in the Bay Area, he was now switching job titles to hold a similar position at Five Point Holdings Inc.

The credit rating firm  of Dun & Bradstreet is not bullish on Lennar’s long term prospects these days

It is this Lennar-controlled entity which is their shell company for handling the operations of military base conversion to civilian purposes in California. Bonner explained that the Concord Naval Weapons Station (CNWS) project, which will someday house almost 40,000 people, will be managed under the Five Point umbrella.

This move is consistent with Lennar’s previous practices of using subsidiaries to their main corporation to shield themselves from legal and financial responsibilities should these ventures fail.

Perhaps there is a good reason why Bonner wants to separate himself from the orbit of the mother ship Lennar-Urban by changing his corporate identity to Five Point.  On September 2,  just prior to the Labor Day weekend, the credit rating service Dun & Bradstreet downgraded Lennar to the Financial Stress class “poor”. This is close to the bottom of the barrel. In their words “it’s a rating that predicts the likelihood your company will experience financial difficulty in the next year such as bankruptcy.”

This move came after D&B changed their PAYDEX Credit Rating to “fair” on July 5  and their Delinquency Predictory Class to “poor” on April 29.  Despite this the City of Concord apparently feels comfortable in becoming a partner with Lennar on the CNWS project. They seem to be suffering from amnesia when it comes to financial ruin associated with Lennar in the not so distant past.

This occurred in 2008 when Lennar’s LandSource LLC, the predecessor of Five Point, was placed into bankruptcy by Lennar for the express purpose of wiping out investors, lenders, and unsecured creditors. This move ended up killing their Mare Island Project which to this day has never recovered.

Focusing on the Mare Island development, even taking into account toxic waste problems at the former Naval Base where Liberty ships were constructed during World War II, Lennar has done little of what they originally promised. Instead of using their own capital, they have opted to use property tax revenues to finance their activities which to date has not included constructing any affordable housing units.

Even more distressing is the billion-dollar hit the California Public Employee Retirement System CalPERS took with their ill fated investment into LandSource. This legacy of financial ruin under Lennar management lives on today in Five Point.

Under Lennar’s guidance, the value of Five Point’s principal asset, Newhall Ranch, has been all but wiped out. The consequences of this failure continue to adversely impact both Five Point and Newhall’s principal investor – The Third Avenue Fund group.

Third Avenue Real Estate fund has failed to report the loss of equity in the Newhall Ranch development while continuing to issue rosy quarterly reports, even while a sister fund – Third Avenue Focused Credit Fund – was forced into an SEC-supervised liquidation in December of 2015. Third Avenue had purchased the distressed debt created by Lennar’s manipulated bankruptcy of LandSource LLC and later converted to equity after the bonds went unpaid.

Ironically, if Five Point were ever able to obtain approval for a stock offering, Third Avenue Fund would be the first creditor to be in line to be paid. This would, leave little if any of the proceeds for capitalizing Lennar’s California base conversion projects including Concord should they join the Five Point team.

This brings us to Five Point and their ability to borrow money to finance their endeavors.  Recently, they tried to float a stock offering for their military base conversion projects in California. This IPO of Five Point Holdings Inc. did not include the CNWS. At this time Lennar has not secured the final rights to development of the project. The CNWS is projected to be a big money maker given the shortage of affordable housing in the Bay Area

In May of 2016, Lennar and Five Point abruptly cancelled the Five Point IPO process citing a “choppy market”. This  explanation was not exactly true. Confidential sources close to the SEC tell a different story. If the truth be known, complaints were filed with the agency about the truthfulness and reliability of  data supplied to the SEC by Five Point.

If environmentalist’s have their way, The unspoiled Santa Clara River will stay that way which would halt construction of  Lennar’s Newhall Ranch development indefinitely.

When the SEC asked for more information pertaining to these complaints , the choppy market conditions became a tsunami. At that juncture, Lennar and Five Point either elected or was forced to withdraw the offering. Keep in mind this all happened prior to D&B’s dire warnings about Lennar’s overall financial health which was to follow.

Even if Lennar was successful in obtaining the development rights to the CNWS project prior to bringing the Concord project into the Five Point fold, there are many questions that must be satisfactorily answered. For example:

Newhall Ranch, in Santa Clarita California, is the largest current asset under their control. Unfortunately, the project is now in a near-worthless condition after the California Supreme Court stripped the development project of all of its entitlements in November of 2015. Lennar then moved for reconsideration from the court but was soundly rejected.

Lennar apparently failed to include this information in their initial mandated SEC filings which might have partially accounted for the cold shoulder they received for their proposed stock offering.

Of major concern were the facts and assumptions made in their Environmental Impact Report (EIR) that did not take into account the habitat of the Santa Clara River or the effect of traffic, smog, and increased green house gases on adjoining communities. In a rare move the California Supreme Court told Lennar to start their new EIR from scratch rather than to fix it in small segments as is normally done.

While Kofi Bonner initially predicted that this was a minor problem and could be “fixed” in a matter of weeks, Lennar  issued a press release shortly after the cancellation of the Five Point IPO that stated the problems with the Newhall Ranch entitlements were considerably more serious. They predicted a minimum of 1.5 to 2 years to solve the problem.

Outside observers predict it is more like 10 years, if ever. The bottom line is that as long as this development slowly works its way through the courts and a new EIR is written, the shovels Five Point has in storage will be getting rusty waiting for ground breaking ceremonies to commence.

One of Five Point’s better properties that they manage is El Toro-Great Park in Orange County. This project was procured in 2005 with a $775,000,000 loan from Lehman Bros.  When Lehman collapsed the note was purchased by State Bank in Boston for $ 150,000,000 which gave them effective control of the project.

State  brought in several investors including MSD Capital, Rockpoint Ventures, and Castle Lake.  Currently, these opportunity funds effectively own the majority of equity in El Toro. Lennar’s and Five Point’s role is essentially as manager which leaves little upside potential.

Looking at other parts of the Five Point Empire, “choppy markets” are very much in place. In San Francisco the Hunter’s Point Project is in a major state of discord. This undertaking has been a political football from the start.

Lennar oeiginally obtained the project in the mid 90’s by hiring Nancy Pelosi’s nephew, Laurence Pelosi as director of “Real Estate Acquisitions” along with Willie Brown, then mayor of San Francisco, who brought in  his protégé Kofi Bonner to run the operation.

The management group later hired, as a political consultant Keith Jackson, another associate of Willie Brown,  He is currently under FBI supervision awaiting sentencing. Jackson, the former San Francisco School Board President and political fundraiser admitted arranging to accept bribes from undercover agents in exchange for political favors for then State Senator Leland Yee.

Surrounded by his legal team, Lennar’s former political consultant Keith Jackson  pleads guilty to receive a more lenient sentence

Naturally Lennar, who paid Jackson over $ 500,000 as political consultant on the Hunters Point project, claims they were not aware of Jackson’s activities, including a murder for hire scheme that got him sentenced to nine years in Federal Prison.

Jackson, former head of the San Francisco Board of Education, has been known as an individual who can open doors. One of these doors was his involvement, with bid rigging accusations in carrying hazardous waste from the Hunter’s Point site utilizing minority owned contractors.

Concerns continue to this day that housing and commercial properties are being developed in toxic waste areas that have yet to be properly cleaned up.  More to worry about.

Also not to be forgotten is the scandal that the New York Times recently uncovered of Kofi Bonner being honored by the Washington D.C. think tank the Brookings Institute. They openly supported Lennar’s and Kofi’s work on the Hunter’s Point Project, despite the obvious toxic waste problems.

Absent in this high praise from the Brookings Institution was the fact that Lennar donated $ 400,000.00 to the group in 2014 as a down payment and continued to pour money into the non-profit in a quid-pro-quo pattern. At the same time the think tank continued to heap accolades on the work of Kofi and Lennar.

This pay to play model of Lennar has been widely criticized for its similarity to accusations made against the Clinton Foundation where donations to the organization have been followed by favors allegedly granted by Hillary Clinton when she was working as Secretary of State.

Back to Hunter’s Point. To date after 20 years following the start of the project very little that Lennar has promised (less than 10% of affordable housing  projections) have been delivered by them.

In fact Lennar through their friends in San Francisco City Hall are trying to pass Proposition M this November which would allow for building more lucrative office space instead of housing intended for Hunters Point in close proximity to the area surrounding where the Giants and 49ers once resided affectionately known as Candlestick Park.

In addition to the Hunters Point development, Lennar has a large interest in the Treasure Island Project which is converting the former Naval Base to housing and commercial use.  Preliminary construction has begun, but problems persist with sinking land on the man-made Island.

In addition, there is a need for a 8 million dollar plus sea wall that is required to combat sea level intrusion from the Pacific Ocean. Who is to pick up the tab for this costly improvement has yet to be determined? Even construction of a sea wall will not solve the fact that the island is slowly sinking.

Could this be another Lennar development headed underwater?

What’s left? Five Point’s material source of revenue to finance their projects is EB-5 money raised by none other than Kofi Bonner’s close friend Willie Brown. It is his Golden Gate Development company that has been a major source of funding for Lennar’s San Francisco activities.

Under a government sponsored program, rich folks in foreign countries, (mostly China) are allowed to gain green cards for themselves and family members by investing $500,000 to $1,000,000 dollars in the United States that create 10 new jobs in the workforce.  However, this EB-5 Program with all the investigations currently surrounding it including Congress and the FBI just might be on life support, and could be terminated at any time.

Should this be the case, Willie Brown and his partner attorney Steven Kay can gracefully exit having made a handsome return on their politically connected dealings with Lennar.

At the end of the day, the bankruptcy of LandSource  created difficulties borrowing from banks. Along with the SEC’s discovery that Lennar was supplying misleading information (designed to swindle a new crop on investors) has resulted in an inability to do stock offerings on Wall Street. Along with the collapsing EB-5 Program, portend finding investors willing to fund Five Point developments will not be an easy task.  Added to this bleak assessment is the dismal  rating from Lennar  put out by D & B.

This is why getting the Concord CNWS project into the fold is so important to Lennar as they need new developments to place in their arsenal of properties.

The parallels between Five Point Holdings Inc. and its predecessor, LandSource LLC are remarkable; which is not a good thing. Despite these facts of life, the city of Concord has been more than willing to stake their future on a company and their subsidiaries which are demonstrably dishonest and currently on the financial ropes.

Next – How and why Concord decided Lennar should be their “partner” in development.

 

About Stephen Frank

Stephen Frank is the publisher and editor of California Political News and Views. He speaks all over California and appears as a guest on several radio shows each week. He has also served as a guest host on radio talk shows. He is a fulltime political consultant.