Lennar Gets Investment in San Francisco Project From TPG

Lennar Corp., the third-biggest U.S. homebuilder by revenue, received an investment from TPG Credit Management LP in its Hunters Point project in San Francisco.

TPG Credit purchased a “significant minority stake” in the project, the Miami-based builder’s Lennar Urban unit in San Francisco said in a statement yesterday. It didn’t disclose the amount of the investment.

Lennar broke ground two days ago on 480 studios and townhomes at the development, on the site of a former naval shipyard. Construction of as many as 10,500 residences, commercial buildings, job-training centers, parks, trails and open space is envisioned over two decades, under the plan by the Lennar-led group that controls the site.

“This public/private partnership is exciting because San Francisco needs housing and it needs jobs,” Lennar Urban President Kofi Bonner said in the statement. “Investors understand that the time is right for this project.”

TPG Credit, based in Minneapolis, invests in real estate through purchases of properties and debt. The independent company was founded in 2005 with private-equity firm TPG Capital as a silent minority partner, according to its website.

Owen Blicksilver, a spokesman for TPG Credit, said the company had no immediate comment on the transaction.

The San Francisco area topped the S&P/Case-Shiller index of home prices in 20 major cities, with a 24 percent jump in April from a year earlier. Values have been bolstered by a tight supply of home listings and growth at technology, health-care and hospitality companies. Employment has increased for 34 months on a year-over-year basis, according to California state labor data.

Prices Surge

The median price of a San Francisco single-family home in May surged 32 percent from a year earlier to a record $947,260, while condominiums gained 27 percent to $881,020, also a record, data from the California Association of Realtors show. San Francisco was the only county in the state to surpass its prior peak, according to the Los Angeles-based trade group.

“San Francisco is attractive to foreign investors and you’ve got low rates, low inventory and the Silicon Valley economy,” Leslie Appleton-Young, chief economist for the state Realtors, said in an interview.

Condo developers such as Lennar and Tishman Speyer Properties LP are benefiting from the supply shortage, luring both homebuyers and investors to their projects as heated demand shows no sign of slowing. A luxury high-rise with 655 units, a joint venture of New York-based Tishman and Shenzhen, China-based developer China Vanke Co., broke ground near San Francisco’s financial district the same day as Hunters Point.

Largest Redevelopment

The Lennar site covers 750 acres (300 hectares) and is the city’s largest redevelopment project, according to Mayor Edwin Lee, who spoke at the groundbreaking. About a third of residential units in the development’s first phase, which may total as many as 1,400 homes built over five years, will be priced below market, according to the builder.

“We are moving forward without delay to transform the blighted former shipyard to bring new housing, parks and thousands of construction and permanent jobs to San Francisco in the next three decades,” Lee said at the event.

TPG Credit’s investment with Lennar only applies to Hunters Point and not the Treasure Island location that is Lennar’s other San Francisco housing site, according to the builder. Talks between Lennar and China Development Bank Corp. for $1.7 billion in financing for both projects ended earlier this year, two people with direct knowledge of the matter said in April.

Lennar’s fiscal second-quarter orders climbed 27 percent from a year earlier to 5,705 homes, the company reported earlier this week. Earnings of 43 cents a share, which excluded a tax-related gain, beat analysts’ estimates. U.S. new-home sales in May climbed 29 percent from a year earlier to the highest since July 2008, according to the Commerce Department.

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