Re: 115 Winthrop Square | Financial District
The whole point of incorporation is limited liability. Every major company in every industry is actually a bundle of dozens and dozens of incorporated legal entities among which assets and liabilities are distributed to optimize exposure to risk and taxation (among other things).
Having done no research - i fully expect that there is an on-paper corporation called 'MP SF Liabililty Vehicle Inc." or something similar that is going to be holding the bag here - and which is separated by a gigantic legal firewall from everything else that we have in mind when we say 'Millenium Partners'.
tl;dr - corporations are people; specifically people with valuable legal privileges
Your post is entirely accurate but your conclusion reaches too far. There is no such thing as a firewall big enough to protect a firm from every possible scenario. To take just one glaring example: Lehman Brothers. Lehman had vastly more firewalling of the sorts you describe than Millennium Partners, by an enormous margin. And vastly deeper pockets, too. Lehman got vaporized over the course of one weekend. No one is safe from all risks, limited liability laws are not a perfect panacea.
Millennium is certainly not facing a risk as staggering as what Lehman backed itself into. But Millennium is certainly nowhere nearly as big either. I'm confident they've done very professional and extensive firewalling between that SF tower and their Winthrop project. My point is that the problems in SF are of a dramatically larger potential than is usual for a real estate project, and the uncertainties of where the liabilities will fall are also quite abnormal.
Millennium Partners cannot at this point define their risk in SF. The media is reporting a collective pool of insurance coverage in the $150M - $200M range, but with possible exclusions that put much of that $150M out of play. Cost of problem has not been defined. This is a case where those carefully built firewalls could be breached (and not just Millennium).
Maybe they come out fine. If I were on the investment committee at either a lender or equity investor looking at the Winthrop sq project, there'd be some hard questions for the loan officer or acquisitions manager.
ETA: on the first pass, I made this sound like a legal thing mainly. Well it clearly is all tied up in legal issues. But it's also a question of how much protection Millennium obtains for each deal behind each firewall. There's no such thing as limitless insurance coverage, that would carry limitless costs. Each firewall can be breached if the coverage for that deal's risk gets exceeded. That's what is more clearly possible on their SF deal: the risk burning through the firewall. It's a fairly uncommon thing to see, but not at all impossible, and not as rare as many think it is.
