Legal battle puts housing site in peril
A deal to build a 100% affordable housing project at the 16th and Mission BART Station is in jeopardy of falling apart because of a legal dispute between the partners that own the property.
In a lawsuit filed two weeks ago in Delaware, Baupost Group, the Boston hedge fund that has a controlling interest in the property, alleges that Maximus Real Estate Partners, its joint venture partner, is refusing to sign off on the $45 million sale of the property. Developer Crescent Heights is planning to purchase the property and donate it to the city for lowincome housing to satisfy its affordable housing requirement for a skyscraper it plans to build at 10 South Van Ness.
In the court filing, attorneys for Baupost claim the matter is “simple but urgent,” because the purchase and sale agreement with Crescent Heights expires in September.
While a legal dispute between two East Coast investment firms — Maximus is based in New York — would normally be of little interest to San Francisco residents, this one has serious implications for one of the city’s most highprofile development sites, known as the “Monster in the Mission.”
For eight years Maximus, which is the managing partner of its association with Baupost, has clashed with Mission District residents over the future of the parcel, a blighted plaza with a boardedup Walgreens in the heart of the Mission District. The project — 304 units were proposed — was stalled with scant political support until Crescent Heights stepped in and agreed to purchase it and donate it to the city for affordable housing. Mission residents had demanded for years that the building contain more lowincome housing than originally proposed.
In a statement Friday, Mission District Supervisor Hillary Ronen accused Maximus of “playing games” with the key parcel.
“Rather than working to create a project that the community could support and the city could approve, their tactic was to pit neighbor against neighbor and cause havoc,” she said. “I’m glad that their investment partner has accepted the reality that there’s a ready and willing buyer and that it’s time to sell, and I hope this is the final hurdle to clear before the city can take ownership and we can realize the dream of green, transitfocused, communityfriendly, affordable homes at 16th and Mission.”
In the lawsuit, Baupost says its agreement with Maximus includes a provision where Baupost has “undisputed right to force the sale of the property to a third party.” Baupost owns 90% of the partnership that controls the property, while Maximus owns 10%.
“All that is left is for Maximus, as manager, to finalize and sign the (agreement), which it has admitted it is contractually obligated to do,” the lawsuit states. Instead, “Maximus has engaged in a series of obstructionist tactics meant to prevent Crescent Heights from successfully purchasing the property.”
Paul O’Connor, an attorney for Maximus, said that “the lawsuit is without merit and that Maximus would ‘defend themselves vigorously.’ ”
In a court filing Wednesday, Maximus attorneys said the Crescent Heights deal is likely to fall through, and called the lawsuit “a last minute and obvious effort to try to blame Maximus in the likely event that Crescent Heights refuses to close the purchase at the required $45 million price.”
The attorneys said that “it is more likely that Crescent Heights, sensing Baupost’s unnecessary desperation to exit the transaction” would seek a lower price.
The court filing details months of back and forth between Baupost executives and Maximus founder Rob Rosania. Baupost claims that it repeatedly attempted to reach Maximus to discuss the sale to Crescent Heights, but that Maximus has refused to meet.
Finally, on May 20, Baupost requested that Maximus sign the letter of intent on the deal.
Instead of signing the agreement Rosania emailed: “Let me be clear — I’m signing nothing and when I’m ready to speak we will. I will never be bullied. Good try. Sorry. Do what you need to do.”
In those emails, Rosania says that his group intends to purchase the property itself. Baupost claims that Maximus’ only firm offer of $38 million came in December, and that it rejected the offer as too low.
In subsequent emails, Rosania claimed that Maximus was close to a deal with a new investor and would make a new offer. But on June 5, when Baupost asked Maximus to commit to a closing date, Rosania said that Maximus would close the deal on the “1st Tuesday after the pope gets married,” according to the lawsuit.
“Maximus has been explicit that it has undertaken this course of action for selfish and disloyal reasons: It has attempted to block a sale to Crescent Heights so that it may purchase the property itself, or else purchase Baupost’s interest in the company, at a price less than what Crescent Heights is willing to pay,” the lawsuit claims.
No hearings have been scheduled in the case, which was filed in Delaware Court of Chancery on July 31.