Luke Brugnara Makes His Point

All the city's most bombastic commercial landlord wants is a San Francisco-themed casino in Las Vegas ... or absolute misery for anyone who gets in his way

In March, Nevada's Gaming Control Board rejected Brugnara's request for a gaming license, raising concerns about his license application, accounting practices, and character. Among other things, it was noted that he had allegedly threatened violence against a former mistress, a deputy city attorney, and a court-appointed receiver -- and then did not list those incidents on his gaming license application. Brugnara responded with nearly pyrotechnic anger, accusing the commissioners of being controlled by a cartel of insiders and threatening to sue.

Now, Brugnara is reapplying for his gaming license, apparently in the same spirit that took him to the Health Department. He's consulting with an attorney he considers one of the masters of misery-for-point-making's sake, renowned San Francisco barrister Joe Alioto, who is weighing the merits of filing an antitrust lawsuit against Las Vegas' gaming interests.

Or, in Brugnara's parlance, the merits of making a "bloody mess."

Luke Brugnara, 38, is the son of a juvenile hall manager. He grew up in the Sunset District, where he attended St. Ignatius College Preparatory and spent his time heavily involved in sports, particularly track. He was fast enough in the 400 meters to run for San Diego State.

He spent six years "relaxing" in college, where he met his eventual wife, Kay. (Today they have three children, ages 6, 3, and 1.) After school, he got a job with the Buchanan Group, a San Francisco-based mortgage firm. Not long after, he met one of the biggest players of 1980s commercial real estate in San Francisco.

Richard Deringer tapped Brugnara to work on a deal for a near-vacant building at 939 Market St. that he was trying to buy as cheaply as possible. By the recollection of both men, the building -- owned by a limited partnership that included Deringer -- had fallen into bankruptcy court when some government agencies decided it was seismically substandard after the Loma Prieta earthquake and moved out.

Deringer, though, knew the building was structurally sound. He set out to negotiate with creditors and drive the price of the mortgage on the building low enough for him to purchase, which would give him control of the property. And he was succeeding: He'd managed to crunch the note on the $10 million building down to about $1.5 million. Brugnara was doing legwork for the promise of a 2 percent payoff, which would have come out to about $30,000, a lot of money for a 28-year-old.

But then something not-so-remarkable happened: Deringer, who was at the time under indictment on 13 counts of bank fraud, couldn't convince any lenders to give him the $1.2 million that he needed to buy the note. (Deringer later was convicted and sent to prison.)

With Deringer out of the picture, the only person left with knowledge of the bargain price that had been negotiated was Brugnara, who had accumulated some contacts with real estate investors. He let them know about the bargain and came up with enough cash to buy the note, cutting Deringer out. Suddenly, Luke Brugnara was the sole owner of a commercial building in downtown San Francisco. "I was 28 and I had like a hundred grand pouring in every month," he recalls. "It was pretty cool."

While Brugnara was always outspoken, success seemed to embolden him. He bought three more buildings by the end of 1993, and was looking for more. His method was simple: He worked without partners, and pounced quickly on attractive properties. His lenders appreciated the decisiveness. "It's easier dealing with someone like Luke because you don't have layers of decision-making to deal with," says Nick Barbato of New York's Cooper-Horowitz Inc., a Wall Street firm specializing in finding and negotiating loans. "He seems focused on his game plan, and he doesn't linger."

Playing the commercial real estate game at high speed requires good instincts, which Barbato says are evident in Brugnara. He bought 814 Mission St. for $2.1 million in 1994, and sold it in 1995 for more than $12 million, according to published reports. Last year, Brugnara says, he sold 490 Post St., for which he paid $22 million in 1998, for $46.5 million, a transaction that timed the city's real estate boom perfectly. "That's why institutions will lend money to somebody like me," he says. "I've hit 12 home runs."

By the time he bought his best-regarded property, the Pacific Bank Building at 351 California St., for more than $20 million, his portfolio was bulging with eight other properties. Not bad for a 36-year-old who started with no family money.

As gifted as Brugnara proved to be at buying properties, however, he seems to have had problems managing them. And as his gift for acquisition, and ineptitude at management, became apparent, Brugnara also displayed a near-genius in the realm of pissing people off with sheer pugnacity.

In 1998, the San Francisco City Attorney's Office filed a lawsuit against Brugnara seeking $17 million in fines for alleged fire and health code violations at his buildings. In the complaint, the city alleged that he was illegally mixing ordinary garbage and medical waste in the trash hauled from 490 Post, a medical office building. Among a laundry list of other violations, the city also alleged that Brugnara refused to have the Pacific Bank Building's fire safety system tested properly and its elevators maintained.

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