Judge upholds $50M arbitration ruling against Gregory Malin and Troon Pacific

A judge has sided with an arbitrator who ruled that San Francisco developer Gregory Malin and his Troon Pacific must pay more than $50 million in damages and legal fees to investors.

Superior Court Judge Harold Kahn upheld the arbitration award by denying a request by Malin to vacate the multimillion-dollar decision last spring, the San Francisco Business Times reported.

Malin and his San Francisco-based Troon Pacific had promised to build five spec mansions as homes for healthy living.

In April, the arbitrator —  former San Francisco Superior Court Judge David Garcia — ordered the developer to pay $48.1 million to the unidentified investors who backed four of the projects and accused Malin and his firm of squandering $35 million through self-dealing, fraud and embezzlement.

An additional $2.25 million for attorney’s fees brings the award to more $50 million.

Malin and Troon denied wrongdoing, saying the fees they received were authorized and that they acted in good faith. Rather, they said losses stemmed from COVID, changing economic conditions and San Francisco’s lengthy permitting and approval process. 

Kyle Withers, an attorney for investors in four Troon projects, had accused Malin of clinging to a “false narrative” that was rejected by the arbitrator.

Malin founded Troon Pacific in 1999 with his late wife. In 2010, he sold a Pacific Heights house for $13.5 million after buying it for $6 million and turning it into a platinum LEED-certified green residence with fresh filtered air. Malin then began marketing healthy living, including clean air, as an amenity on his projects. 

As a tech boom fueled San Francisco’s luxury market between 2012 and 2016, Troon snapped up five San Francisco properties for between $1.4 million and $16 million, with plans to develop them into luxury single-family homes, according to property and court records cited by the Wall Street Journal.

In 2017, Troon was accused by the city of demolishing parts of a historic house on Russian Hill, which he bought five years earlier for $4.5 million, without a permit. Troon paid a $400,000 settlement to the city without admitting wrongdoing.

The developer rebuilt the house at 950 Lombard Street, adding a basement art gallery, and listed it in 2018 for $45 million. It also listed a 12,200-square-foot spec home in Cow Hollow with a 72-foot lap pool and a steam shower with a chromotherapy rain head for $46 million.

Troon became a rare high-end developer in San Francisco, where steep land and construction costs deterred other builders. Local agents said Malin’s properties were priced unrealistically high, and he initially seemed unwilling to negotiate.

The Russian Hill house sold in 2020 for $27 million, 40 percent less than its asking price. In 2021, the Cow Hollow home sold for $32 million, or 30 percent lower than its original price.

In 2022, investors backing the four projects filed a demand for arbitration, saying Malin only completed two of the homes, and lost their money. 

They accused Malin of paying himself more than $14 million, including development and general-contracting fees, which he collected because he owned 50 percent of Impact Builders, the general contractor on the projects. They accused him of double billing. 

And they accused Malin of commingling investor funds, treating Troon’s assets as his own.

In July, Malin filed for bankruptcy on behalf of the fund bankrolling the four projects, arguing that costs swelled to more than $40 million because of “exorbitant” permitting times, increased taxes, interest rates and construction costs that coincided with a market slowdown. The filing was dismissed in August.

Ultimately, the arbitrator sided with investors, saying Malin and Troon had breached their fiduciary obligations.

— Dana Bartholomew

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