Buyer of luxury home on S.F’s Lombard Street claims they bought a ‘$27 million lemon’

Jul 15

San Francisco Chronicle

Troon Pacific, the luxury home developer already on the hook to pay $48.1 million to defrauded investors, has been slapped with a new lawsuit accusing the company of failing to disclose significant construction defects to the buyers of a $27 million home on Russian Hill.

The lawsuit, filed Friday in San Francisco Superior Court, claims that the homebuyer, 950 Lombard LLC, “was misled into buying a $27 million lemon” that was riddled with defects that include issues with “the interior walls, ceilings, floors, roof(s), foundation, and plumbing/sewer/septic systems, or any other structural components of the building.”

The lawsuit says the homebuyer will have to pay $4 million in order to correct the issues and that Troon Pacific CEO Gregory Malin was “aware of pervasive and significant defects in connection with poor or unfinished installation of irrigation and drainage systems, plumbing and sewer systems, waterproofing, and other mechanical issues, as well as the defective design and installation of the cantilevered pool system.”

Yet the lawsuit says “only a small fraction of these defects” were disclosed “creating the illusion that all significant issues had been resolved and lulling (the property owner) into a false sense of comfort.”

The lawsuit comes six weeks after arbitrator David Garcia, a retired San Francisco Superior Court judge, ordered that Troon Pacific pay back investors who had put $48.1 million into a fund dedicated to renovating and flipping four deluxe residences in the city: 2646 Union St., 2582 Filbert St., 2950 Pacific St. and 63 Carmel St. Garcia ruled Troon Pacific had squandered investors’ money through a combination of “fraudulent self-dealing” and “wanton dereliction of responsibilities.”

While the investors never saw a dime of their money, Troon Pacific — which is headed up by Malin — pocketed $14 million in fees, according to the final award of arbitration. The group took $2.8 million in developer fees, $2.1 million in construction management fees, $1.7 million in general contractor fees, $1.9 million in interior design fees, $1.1 million in asset management fees and $230,000 in lighting design fees.

The petition claims that Malin’s group “stole the company’s funds through various fraudulent and criminal schemes, artificially inflated their costs and the projected asset values of the properties to justify excessive and improper fees.”

On July 5, Superior Court Judge Harold Kahn upheld the multimillion-dollar arbitration award, denying a request to vacate the decision. Troon Pacific had sought to appeal that arbitration award.

The Lombard Street lawsuit claims the defects included “an unconnected bathroom sewer line that dumped raw sewage on the ground” as well as “numerous leaking irrigation lines that were incorrectly installed on the rooftop garden.” There were also leaky skylights and contractor bags jammed into sewer lines “apparently by a disgruntled, unpaid subcontractor.”

Before the pandemic, the company was featured regularly in glossy magazines like Mansion Global and Lux Expose, with fawning coverage that touted Troon Pacific’s “high performance homes with cutting-edge form and function dedicated to the health and wellness of our homeowners and our planet.”

The 950 Lombard home, designed by Willis Polk, was originally listed in 2018 for $45 million, but the price plummeted during the pandemic, eventually selling in December of 2020 for $27 million.

Articles on the home published in 2018 gush about the property featuring a “Japanese water-filtration system that allegedly improves your skin and hair.” In addition to “a cantilevered infinity pool and a shower and sauna with glass walls overlooking the city,” the home has a “gated entrance with a Batcave-like tunnel; a garden with olive trees; an outdoor kitchen; a humidity-controlled, two-story art gallery; and a glass elevator to all four floors.”

Attorney Adrian Sawyer, who represents Troon Pacific, did not respond to requests for comment.

The Lombard Street lawsuit says the property owner had provided formal notice of claims to Troon Pacific and invited Malin to inspect the defects “in an attempt to meet and confer in good faith to settle the dispute.” But Malin hasn’t responded, according to the lawsuit.

Malin’s net worth is between $40 million and $50 million, according to the arbitrator.

A 2018 profile of Malin in Haute Living magazine portrays him as “one of those fine gentlemen who seem to only exist in the pages of a Victorian novel or in a film where the hero comes to save the day.” The article, focused on Malin’s fundraising efforts on behalf of OCD dance company, says “the world needs more gentlemen such as Malin who generously take on the task of bringing art and culture to a broader, more expansive audience.”