The sinking Titanic

Just as San Francisco trusted the Florida mega-developer Lennar with its naval base, the Hunters Point Shipyard, and hundreds of surrounding acres of the city, Vallejo trusted Lennar with its naval base, the Mare Island Shipyard (foreground). The recent bankruptcy of Lennar Mare Island LLC and its parent company, Landsource, is widely believed to be a major factor in the tragic bankruptcy of the City of Vallejo.

by Ahimsa Porter Sumchai, M.D.

“The housing market has continued to deteriorate throughout the first half of 2008. We expect this trend to continue for at least the remainder of the year.” – Stuart Miller, CEO, Lennar Corp.

Like a colossal ship navigating through the uncharted ocean of financial uncertainty, the Miami homebuilder Lennar Corp. is a “sinking Titanic.”

Like a steam powered ocean liner cruising full speed ahead into the icebergs of Chapter 11 bankruptcy, Lennar hosts the dreams of millionaires, ministers, an army of paid consultants and corrupt politicians venturing toward a new world of dirty development in San Francisco. Without enough lifeboats for those on board!

Ruling out the prospect of an economic recovery this year, Lennar’s CEO Stuart Miller disclosed the company’s financial report card for the three month period ending May 31, 2008, revealing a loss of over $120 million for a corporation with over $1.09 billion in revenues from operations in 14 states. After analysts predicted Lennar would lose 55 cents per share, its loss in the last quarter was 76 cents per share.

Like an enormous “hull” plummeting into the freezing depths of the north Atlantic, according to the July 2, 2008, Miami Herald, Lennar’s shares posted an eight-year low on July 1. Continuing a downward trend, they fell by 51 cents to $11.83, their lowest value since August 2000. And in the words of Lennar’s CEO, the nation’s housing market “has yet to hit bottom.”

The Wall Street Journal sounded an early “foghorn” in September of 2007 when Lennar issued a quarterly report for April through June of 2007 documenting a 44 percent decline in revenue and a 35 percent cut in its workforce.

After Lennar spent close to $5 million to pass Proposition G and defeat Proposition F on the June 3 ballot in San Francisco to secure redevelopment rights for the Hunters Point Shipyard and Candlestick Point, the San Francisco Chronicle released the news that Lennar failed to secure $25 million in state funding earmarked for parks at the Parcel A development site – adding that the city is expected to pick up the shortfall in funding. This information was known to city government officials before Election Day, according to documents obtained by the office of Supervisor Chris Daly.

“Were you really not aware of the bankruptcy problems associated with Lennar at Mare Island?”

In a strategically timed move, five days after the San Francisco election, on June 8, Lennar Mare Island LLC petitioned for Chapter 11 bankruptcy, along with parent company Landsource. Together, they have been involved in the redevelopment of the naval station at Mare Island near the city of Vallejo for over 11 years.

Landsource defaulted on a $1.24 billion loan two months prior to the Lennar bankruptcy filing in early June. The city of Vallejo, as a municipality, has also filed for bankruptcy in recent months.

According to press reports, Vallejo City Manager Rob Stout told City Council members on June 10 that their $6 million municipal service fund could suffer as a result of the Lennar Chapter 11 filing.

And now astute thinkers in San Francisco are asking whatever happened to that “legally binding” backroom deal that labor leaders and grassroots housing activists pledged to sign with the Miami homebuilder guaranteeing 32 percent affordability when polls showed Lennar’s Proposition G was about to “go under.”

In an open letter to Tim Paulson and the San Francisco Labor Council Executive Committee, community activist Pat Monk asks: “Were you really not aware of the bankruptcy problems associated with Lennar at Mare Island? Were you really not aware of the loss of the $25 million state grant and Lennar reneging on the inclusion of parks at the Parcel A development site?”

Giuliana Milanese is reported to have said at last month’s Harvey Milk Club Annual Dinner, “I have been a strong and avid labor supporter for decades and will remain so. But this deal with Lennar by Labor, ACORN and SFOP stinks!”

Who, even in the “love boat” city of San Francisco, would be fool enough to enter into a legally binding “prenuptual agreement” with a homebuilder in one of the two states hit hardest by the housing market – California and Florida!? This is certainly not the makings of a “gay” or otherwise happy marriage!

Attorneys for the San Francisco 49ers made it clear in a 2006 hearing of the Board of Supervisors that their decision to pursue the erection of a new stadium complex in Santa Clara was factored by their unwillingness to risk financial partnership with Lennar Corp.

Contact Bay View Health and Environmental Science Editor Dr. Ahimsa Porter Sumchai at (415) 835-4763 or asumchai@sfbayview.com.