Eber: What Lennar really wants?

Some corporations literally buy politicians and government.  Others charge high prices to government.  Some corporations put sibling and spouses of politicians on their payrolls.  Lennar is try to bankrupt the city of Concord—in order to get the unions off their backs.

“Lennar through their subsidiary Five Point Holdings LLC is so serious that when the disagreement between them and the union started last October, they withheld some $ 37,000 per month that they were giving to the city to subsidize the work on planning the Naval Base project. 

Since then this figure has risen to almost $200,000.   The total is a mere drop in the bucket considering  over 5 billion dollars is planned to be spent over the next 25 years on residential  housing for 50,000 people, mass commercial space, and maybe even a new State College campus.  However, for a city like Concord that is struggling to survive on its existing revenues, missing the payments from Lennar is no laughing matter.”

When you look at all the lawsuits lost by Lennar, the bankruptcies involving Lennar, this action is no surprise.  The surprise is that the City of Concord got into bed with Lennar in the first place.  This outcome was expected.  Years ago the mayor of concord was a guy named Grayson.  He is now the Assemblyman..but in those days he took $16,000 from Lennar—when caught, he gave the money back and there was no prosecution!.  Did the city council of Concord expect Lennar to be different today?

What Lennar really wants?  By Richard Eber

Richard Eber, Exclusive to the California Political News and Views 2/20/20

The March 31st deadline imposed by the Concord City Council soon approaches for Lennar-Five Point Holdings LLC and The Contra Costa County Building and Construction Council. They are trying to reach an agreement on a Project Labor Agreement (PLA) for the first phase of the Naval Weapons Depot Project.

It would appear that both sides are putting in all of their chips on the table to come out victorious in this struggle.

Much is at stake. At the end of March if the two parties cannot agree on terms, the City Council has an option to extend the negotiations or say “adios” to Lennar and find another developer to work with.

Lennar through their subsidiary Five Point Holdings LLC is so serious that when the disagreement between them and the union started last October, they withheld some $ 37,000 per month that they were giving to the city to subsidize the work on planning the Naval Base project.  

Since then this figure has risen to almost $200,000.   The total is a mere drop in the bucket considering  over 5 billion dollars is planned to be spent over the next 25 years on residential  housing for 50,000 people, mass commercial space, and maybe even a new State College campus.  However, for a city like Concord that is struggling to survive on its existing revenues, missing the payments from Lennar is no laughing matter.

Even though current discussions have centered on the impasse for the proposed PLA, there are many other issues to be settled by all parties in the months ahead.  Lennar’s President Jonathan Jaffe, has argued that if union labor is used on every phase project, they would end up not making a profit.  Therefore they want concessions that could include:

  • Reduce community benefits such as parks, soccer fields, nonprofit meeting  centers, walking trails, and recreational facilities
  • Get help from the State to pay for infrastructure costs by getting special legislation passed similar to the Redevelopment program that Jerry Brown terminated in his third term as governor in 2009. To do so they have enlisted the help of their old friend Assemblyman Tim Grayson (D-Concord) to be sponsor.
  • Lower labor costs by as much as 20% utilizing non-union workers for part of the work on the Naval base

As a matter of practicality it is virtually impossible for the City Council to agree cutting down on promised community benefits.  These perks are a vital part of gaining public approval for this vast undertaking.

 It is also going to be difficult for the City to allow a significant amount of non-union labor. They are committed to provide local hire and training that only unions can provide. Politically speaking, a limited PLA is a non-starter because support of Labor has been historically instrumental in electing virtually every office holder in Concord for the past quarter century.

This leaves assistance from the State with legislation to help subsidize infrastructure expenses at the Naval Base similar to what Lennar was able to obtain in San Francisco.  This might not be a slam dunk because of Lennar’s sketchy record in the past in their crony capitalism endeavors.

With this being the case it must be asked what Lennar really needs in their negotiations with the city to provide operating capital that they either don’t have or are unwilling to spend getting the project started. The list includes:

  1. Lennar wants to be named the master developer for both the 1st and 2nd phases of the CNWS project.  This would allow them to be able to gain access to capital thru the banking system which is still leery of LandSource’s bankruptcy in 2009. 
  • Being designated as Master Developer would also put Lennar Five Point in position to sell land which is their major source of revenue in the initial stages of this project.

Lennar has to make the Concord project profitable from the start because this is their last real opportunity to make their Five Point subsidiary viable.  Their San Francisco developments are in shambles.  Lennar has been embroiled in litigation with unsuspecting homeowners at Hunter’s Point who bought home from them sitting on top of toxic soil.  They share similar problems at Treasure Island where billions in lawsuits face them and other vendors on the former naval base

El Toro in Orange County and Newhall Ranch have limited revenue potential because any profits needs to be shared with investors who lost hundreds of millions by the bankruptcy of LandSource. 

They need to avoid a similar fate in Concord as Five Point Holdings LLC stock is hovering around $ 6.00 less than when it was issued.

It is noteworthy to understand Lennar cannot afford to walk away from Concord no matter what Jaffe might say.   There are no other opportunities available to them of similar scope in California.  With this in mind the Concord City Council is in a strong position to stand up to any threats the Miami developer might make.

Other Issues involved

Although the battle between Lennar and The Contra Costa County Building and Construction Council appears to center on their adherence to a comprehensive PLA, this is not the only issue involved.   Labor is concerned if Lennar actually has access to capital that will enable them to keep the promises they have made to secure exclusive negotiating rights to be Master Developer. 

In addition labor groups and other local business groups are concerned with Lennar’s past history in California and throughout the country of massive lawsuits, broken promises, bankruptcies and other shady dealings with their Chairman Stuart Miller at the helm.

In San Diego they were found to be bribing the Planning Director, forcing her resignation.  And then there was the recent case in Fort Meyers Florida where Lennar created fictitious straw buyers for their unsold properties to fraudulently secure bank loans from two federally-insured institutions.  The FDIC sued and forced a settlement on the courthouse steps when the trial was set to begin.

Lennar recently lost a fraud and breach of contract suit in Maryland Federal Court. They paid over $250,000,000 to the plaintiffs in that suit after they lost in the appeal process.

Lennar is also potentially liable to the State of California for over three billion dollars.  A false claims lawsuit is now pending against them that involve theft of assets from CalPERS.  The California Attorney General has already certified the validity of the lawsuit.  These scandals pertaining to bribes on loans made by the pension fund, eventually led to a prison term for CalPERS former CEO Fred Buenrostro.

For these reasons, which include Lennar’s conduct in gaining exclusive rights to negotiated with Concord to become Master Developer for the Naval Weapons Depot lands, there is sentiment among the labor unions and other community members to terminate their relationship with Lennar-Five Points, regardless of the outcome settling the PLA controversy.

This will all come to a head next month when Concord City Council members, under intense pressure from all sides, will likely determine Lennar’s fate in being their partner in developing this massive 2,300 acre site.

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.

Comments

  1. In other words, Rich, all is normal in Concord (and California). One must ask if there is anybody in California, other than my two favorite Richs, that are not corrupt. I enjoy reading these updates as it verifies my decision to move to Arizona.

  2. The first question is why with all the legal problems this company has is why they are even allowed to bid on any govt contract? The other question why is there ever a PLA anywhere? Any company should have the right to hire who they want without being force to pay them union wages. There are plenty of independent contractors out there that are not union and do just as good a job if not better than unions.

    • Dennis Harry Owen says

      I am conservative, but also pro union, this company has made a mess of things, get rid of them, lets help our military.

  3. Sebra Leaves says

    Thanks for this very detailed expose.

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