SF Projects Get China Loan, With String Attached

One of America’s largest property developers has secured $1.7 billion of financing from a Chinese bank to build two San Francisco housing projects, but on the condition that a Chinese state-owned construction company have a role. From Robbie Whelan and Dinny McMahon of The Wall Street Journal:

According to people familiar with the deal, Lennar Corp., one of the largest U.S. home builders, has lined up the loan from China Development Bank to fund the development of Treasure Island and Hunters Point Shipyard. The projects have the potential to reshape San Francisco’s real-estate market by adding 20,000 new homes, as well as an arena and office buildings.

People with knowledge of the negotiations between Lennar and CDB said that as a condition of the loan, Lennar must work with a Chinese state-owned contractor, and that the company has held meetings with China Railway Construction Corp., the company that is said to be the front-runner for the job.

While it isn’t clear what role CRCC would have—whether it be as a contractor, supplier or some other capacity—CRCC recently opened a U.S. office in San Mateo, Calif., and has been holding meetings with local San Francisco construction-management companies, these people said. The company’s China offices didn’t respond to questions faxed to it by the Journal. CDB didn’t respond to a request for comment.

The deal would represent the first U.S. loan by China Development Bank, according to the Miami Herald, and construction is expected to begin in the first quarter of 2013. One possible wrinkle for whichever Chinese state-owned company joins the projects, as pointed out by The Wall Street Journal, is that the contractor would likely need to use local, unionized labor.