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On Point: And that’s the word

Submitted by on 1, December 18, 2009 – 5:50 am16 Comments
Photo by Charles Howell

Photo by Charles Howell

The drama that surrounds Measure B, the February 2 ballot measure that could decide the fate of Alameda Point, is the gift that keeps on giving this holiday season, with Santa leaving the first pair of cranky pants under the tree of a Mr. Barry Fadem.

Fadem is one of the attorneys who helped draft the initiative for developer SunCal, and on December 3, he shot off a testy, two-page letter to five of its opponents, claiming some of the ballot-book language they wrote to protest the measure gave an inaccurate accounting of its shortcomings.

Specifically, Fadem contested the group’s assertion that residents of Oakland had sued SunCal for millions of dollars to abate hazardous conditions at the former Oak Knoll Naval Hospital and also their statement that the “developer’s shortfall of nearly $500 million in funding for public benefits will result in a failure to deliver promised benefits.”

The letter was addressed to City Councilman Frank Matarrese, City Auditor Kevin Kearney, School Board Trustees Tracy Jensen and Trish Hererra Spencer and anti-SunCal activist and onetime council candidate Ashley “Ash” Jones (who Fadem referred to as “Ms. Jones” in his letter but who, for all anyone else knows, has been a Mr. for his seven-plus decades on Earth). And it threatened legal action if the alleged deficiencies were not cured within a week.

“The proponents and opponents to the initiative may have differing opinions about the plan, but there is a duty for both sides to provide voters with factual information so they can make an informed decision,” Fadem wrote, using an argument that had to this point almost universally been associated with his client’s detractors.

As has become increasingly custom for SunCal and their associates, Fadem didn’t respond to a reporter’s request for comment. But recipients of the letter dismissed it as politics as usual (even as they conceded a wee political liberty or two of their own).

“It’s just a big joke,” said Jones, who signed the rebuttal to the argument in favor of the measure but said he did not have a hand in drafting it. “I don’t think it’s to be taken too seriously.”

In a one-paragraph response to Fadem a week later, Jensen admitted the group had made “an honest mistake” in assuming that only Lehman Brothers Holdings and not SunCal – which had purchased Oak Knoll at auction and partnered with Lehman to develop it – that had been subject to claims from the City of Oakland and neighbors who feared the derelict property had become a fire hazard.

(The $500 million figure, which the group did not budge on, is the sum of $175 in city staff-estimated cost overruns on public benefits, $184 in future tax revenues that are to be leveraged for roads, sewers and other infrastructure and the Navy’s $108 million asking price for the Point – give or take about $30 million.)

In the end, opponents agreed to remove just one of the 257 words they used to excoriate the developer and attack their initiative as a one-sided agreement that is damaging for the city: The first of four mentions of SunCal.

“They just wrote the letter because they didn’t like what we said,” Jensen said.

The letters, and the contested ballot argument (that’s courtesy of www.alamedapointinfo.com), below.

16 Comments »

  • Scott says:

    This February, let’s make a decision based on the facts:

    Bankruptcies: Each SunCal project is a separate entity. The recent bankruptcies were all projects financed with Lehman Brothers. The financial partner for Alameda Point is D.E. Shaw, which backs up the investment with $29 billion in worldwide assets; Lehman is not involved in any way.

    Control of the land: Once an agreement is reached, the Navy conveys the land to the city, not to the developer. The city has control of the release of land for development. Laws cannot be changed “at whim” by the developer or anybody else.

    Fiscal neutrality: Alameda Resolution 13642 requires that the project pay for itself and not burden the City of Alameda or residents outside of Alameda Point. The project must pay its own way for all city services.

    City fees: The project is required to pay for public benefits directly rather than paying for them via impact fees.

    Rent revenue: The city is spending about $2 million more per year ($2.3 million last year alone) in maintenance and security costs than it collects in rent revenue, and this loss is rising every year due to the deteriorating conditions of the Point. Redeveloping Alameda Point will increase revenue through transfer, sales and property taxes. Financial projections indicate a long-term surplus of funds for the city from the project.

    Selling parcels: SunCal based its proposal on the fact that it does the infrastructure and master planning, then sells to vertical developers who specialize in certain aspects such as building homes, business sites, transportation infrastructure, parks, etc. When the City Council selected SunCal two years ago, they considered this a good thing; it means that the project is not tied to only one type of development.

    Profit: We should hope that SunCal makes a profit on this project, because there is a profit-sharing mechanism in place between SunCal and the city.

    Risks: Alameda Point is blighted, full of toxins (the Navy is only required to clean below ground, not the lead and asbestos above ground), largely unusable, and costs the city millions in lost revenue each year. That is the real risk that looms larger for each day the project lies undeveloped.

  • David Howard says:

    Ok, let’s get to facts, not spin:

    FACT: An analysis of ARRA financial documents since the base closed shows that lease revenues from the base exceed the cost to maintain it. Those revenues could increase if the buildings were aggressively marketed for long-term leases, instead of largely being held off the market in anticipation of tearing them down to build houses, as has been done for the past several years. SunCal proponents have been claiming $100 million in expenses for the base, but have not provided one shred of evidence for this figure.

    FACT: The City of Alameda election report states clearly that the initiative AS WRITTEN is NOT fiscally neutral. SunCal only PROMISES to make the project fiscally neutral IF their initiative is passed by voters.

    FACT: Just as Lehman was the sole-source financing partner for SunCal and their 30 bankrupt projects, DE Shaw is the sole-source financing partner. This is just as risky as the Lehman projects because of the concentration of financial reliance on DE Shaw.

    FACT: The $29 billion number is a red herring. Very little of that money is available to SunCal, and nobody has disclosed how much of it is committed to the Alameda Point project. The only figure we’ve heard to date is roughly $10 million for the ENA period.

    The D.E. Shaw Group, the name shown on deshaw.com does not exist, according to the Delaware or New York Secretary of State’s online entity search. (Similarly, the SunCal Companies name does not exist.)

    D.E. Shaw & Co., also as shown on the deshaw.com website also doesn’t exist. Instead, the Delaware Secretary of State alone shows 489 entities with the name “D.E. Shaw” in them. The New York Secretary of State shows 64 separate entities with the name “D.E. Shaw” in them.

    FACT: Those 500+ entities ARE NOT backing up the Alameda Point project with $29 Billion in worldwide assets, contrary to what proponents assert. The D.E. Shaw group are a series of over 500 limited liability companies, partnerships and a few corporations with the name “D.E. Shaw” in them. Those 500+ companies are the ones who have invested Mr. D.E. Shaw’s money, his key employees money and other people’s money. The $29 Billion is the figure for the 500+ entities, including other people’s money.

    FACT: No entity with the words “D.E. Shaw” it it has signed any document guaranteeing to the City of Alameda or the school district that any one of those 500+ companies will pay one penny relating to Alameda Point.

    One of the lawyers who work for those 500+ companies with the name “D.E. Shaw” in them has or will create a limited liability company relating to Alameda Point. That new limited liability company will then buy a membership interest investment in yet another limited liability company, jointly owned with a SunCal limited liability company, which will own the Alameda Point land.

    FACT: The whole purpose of limited liability companies is that the “members” i.e. principals behind them are not responsible for the promises or debts of the entity. As a result, no one will have the power to compel any of the 500+ entities with the name “D.E. Shaw” in them to pay one penny towards the promises, contracts or other financial obligations of the limited liability company which will/does own Alameda Point.

    FACT: The new D.E. Shaw entity and the new SunCal entity, which are members of the Alameda Point limited liability company, will decide how much cash to contribute to that new entity which does/will own Alameda Point, and that will be it. Under California, Delaware, New York and every other limited liability company law in the universe, there is no way for the City, School District or voters to compel a limited liability company member to contribute more cash to the limited liability company than the member wants to contribute. That was the problem with SunCal Oak Knoll in Oakland. Neither SunCal’s owners nor the Lehman organized entity which own SunCal Oak Knoll, LLC wanted to put more money into the LLC than their initial capital contributions, which were used up before all of the demolition and abatement work were done.

    The same thing could happen at Alameda Point.

    FACT: To the extent that the managers of the 500+ D.E. Shaw entities decide to “put cash into the development” of Alameda Point by way of loans rather than equity investment, the D.E. Shaw lender entity can cut off that money at any time justified under their loan documents, which the City, School District, voters and public will never get to see. That is exactly what Lehman Ali, Inc. did as mortgage lender at Oak Knoll. SunCal’s lawyer admits that in the letter.

    FACT: Upon review of the Delaware and New York Secretary of State’s records, it is readily apparent that the 500+ D.E. Shaw investment entities are structured in the same way, in terms avoidance of liability philosophy, as the 1000+ Lehman entities, including SunCal Oak Knoll, LLC, were set up. Scotts argument that all those bankrupt Lehman entities protect themselves from one another, is the same reason that all of DE Shaw’s entities and $29 billion is NOT backing the Alameda Point project.

    The ENTIRE PURPOSE of this – 500+ individual investment entities – is precisely to protect the rest of the $29 billion that is not invested in Alameda Point from getting drawn into Alameda Point should the project run into trouble!

    Below is a list of just SOME of the existing businesses at Alameda Point many of which will get squeezed out if SunCal gets their hands on the property:

    Da Vinci Fusion (warehouse), 650 West Ranger, Alameda Point, Alameda 94501 510-522-2662
    Da Vinci Fusion (office), 1077 Howard Street, San Francisco 94103 415-864-1000
    http://www.davincifusion.com/

    Callahan Piano Services, 1800 Ferry Point, Alameda 94501
    http://www.callahanpiano.com
    (featured in Oscar-winner John Korty’s new documentary: “Miracle In A Box: a piano reborn”)

    Alameda Food Bank (warehouse), 650 West Ranger, Alameda Point, Alameda 94501
    510-523-5850
    http://www.alamedafoodbank.org

    American Red Cross (warehouse), 650 West Ranger, Alameda Point, Alameda 94501
    510-814-4200

    Operation Dignity
    http://www.operationdignity.org
    Veterans helping veterans

    Alameda Naval Air Museum, 2151 Ferry Point, Alameda 94501
    510-522-4262
    http://www.alamedanavalairmuseum.org

    USS Hornet
    http://www.uss-hornet.org
    707 West Hornet Avenue, Alameda Point, Alameda 94501
    510-521-8448

    Event Productions, Inc., 651 West Tower Avenue, Alameda 94501
    510-263-0228
    http://www.eventproductions.com

    Cycles of Change APC Bike Shop, 650 West Ranger, Alameda Point, Alameda 94501
    http://www.cyclesofchangeapc.org

    NRC Environmental Services, 1605 Ferry Point, Alameda Point, Alameda 94501
    http://www.nrces.com
    510-749-1390

    Nelson’s Marine
    1500 Ferry Point, Alameda 94501
    510-814-1858
    http://www.nelsonsmarine.com

    http://www.Instructables.com
    2175 Monarch Street (control tower), Alameda Point, Alameda 94501

    Rock Wall Wine Company, 2301 Monarch Street, Suite 300, Alameda Point, Alameda 94501
    510-522-5700
    http://www.rockwallwines.com

  • David Howard says:

    Oh! I meant to add…

    My sources tell me that DE Shaw’s real estate investment group consists of about 12 people, plus some clerks and admins, headed up by a guy with the name….

    Wait for it…

    George Riszk

  • Richard Bangert says:

    There is a library of facts at the above-mentioned http://www.alamedapointinfo.com. If voters wish to read the conclusions drawn by many noteworthy individuals and groups after reading all the facts, they can click on the “Election Reports” tab at the top of the AlamedaPointInfo homepage.

  • Scott says:

    The FACTS that matter most are:
    The City of Alameda should be a place where families can raise their children and enjoy our beautiful scenery along the San Francisco Bay. But an enormous piece of our island is off limits because it is a toxic mess. After more than 100 years of military and industrial use, Alameda Point sits in decay and disrepair. It is our responsibility to clean up Alameda Point to make way for outdoor recreation, schools and housing. Doing nothing is no longer an option.

    Construction of Alameda Point will begin in 2010! Lead, Follow, or Get out of the way

  • Scott says:

    http://www.devenscommunity.com/about_us/history.html

    This was a base outside of Boston that closed in 1996 and now has a beautiful community. After 10 years of construction this will be the Alameda Point.

  • David Howard says:

    Well, Scott and I agree on one thing – everyone should be able to enjoy open space at Alameda Point. Maybe we can follow the model they used in Sonoma, to put it into a trust for open space, for recreation and for the birds (least tern, pelicans etc.) and other wildlife.

    http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/12/18/MN0L1B5DJQ.DTL

    And yes, we are leading, by proposing other economic uses for Alameda Point that expand on the existing uses and businesses already listed (light industrial, small businesses and co-operatives) that generate revenue, B2B sales tax and property tax for the City.

    http://www.actionalameda.org/soca/SOCA-Alternate-Development-Plan.pdf

  • David Howard says:

    Ok, here are the numbers.

    From 1999 through 2008 (fiscal years….) By all accounts, there was really no activity from base closure in 1997 through 1999.

    Total revenue to ARRA from Alameda Point was over $100 million. Expenditures: less than $80 million.

    Over the long-term, revenues exceed expenditures.

    This ballyhoo about a single transfer from the general fund to ARRA in any single year is just guff and spin from a desperate campaign team.

    More to follow. Now, let’s see Scott, and Measure B proponents back-up their claims about the cost to maintain Alameda Point.

  • Richard Bangert says:

    Well, thank you Scott for the reference to Ft. Devens in Massachusetts. But if you like their model, you will have to vote against the SunCal plan. Housing is just now being talked about. And they funded the infrastructure through a state redevelopment grant of $200 million. They started with jobs first, because, guess why? That’s what they lost when the biggest employer in Massachusetts, the U.S. Army, shut down.

    Here is what I wrote over a year and a half ago:

    Fort Devens: Model for Alameda Point?
    Written by RICHARD BANGERT Published: THURSDAY, 06 MARCH 2008
    http://www.alamedasun.com/index.php?option=com_content&task=view&id=2905&Itemid=11

    Glad you’re taking a fresh look at development at Alameda Point.

  • Barbara Thomas says:

    The Navy is and has been cleaning up the Base, but mainly to levels that would sustain recreational and commercial uses, not the residential uses that SUNCAL wants for 6000 new homes. It may a “Toxic mess” to some but to others it is a delightful place to go NOW. Ride a bike, take a walk, play soccer, play softball, ride a skateboard (for the younger set), go to the Antique Faire, and Michaan’s Auction house, the Library book sale, take dogs, take children, go to the offstreet car club races. There are lots of things that people can do there, right now. Sounds like some just like to complain rather than admit the many uses to which the POINT is being put, at no or very little cost to most outdoor users.

    SUNCAL’s commercial development will displace not only the existing uses, but harm Webster, Marina Village, and the proposed new Army Reuse area. That is if people are willing to get off the freeway, take 15-25 minutes to drive to the Point, shop and then drive for 24 minutes plus to get back to the freeway and then continue their drive home to Hayward or Berkeley or Fremont. Totally unreal. Why did Good Chevrolet, and Ron Goode Toyota finally leave Park Street with five minute access to 880? Limited access, limited population demographics.

    If one is oblivious to all the good things that are going on at the POINT now, how one be trusted to evaluate how much, what and when SUNCAL will actually produce in light of the 288 pages of goobledeegook?

  • Richard Bangert says:

    And here is an example of the results that come with a commitment to attracting businesses and creating new economic vitality: The Bristol-Myers-Squibb plant being built at Devens. Visit their website: http://www.pharmaceutical-technology.com/projects/bristolmyers/

    Devens didn’t end up with such a large corporate investment and high-paying jobs by waiting for someone to drive through on a fall foliage tour. Nor would they have accomplished this with a wishy washy “no particular order, or anything at all” philosophy that is written into Measure B. Devens’ single-minded focus on business results has produced what? Results. The only residential permitted at Devens, per the reuse plan, was the reuse of about three hundred former military housing units.

    Alameda’s Measure B has no requirements for job creation ahead of, or in tandem with, residential that would prevent a repeat of the FISC (Bayport/Alameda Landing) property experience.

  • Barbara Thomas says:

    Richard is right. The push pull of economic development. If you want a development that will pay for itself as opposed to being a total drain on the existing economy, one needs to focus on jobs first, the rest will follow, ala Adam Smith basic economics.

  • Barbara Thomas says:

    PS. And jobs will produce traffic in the OPPOSITE DIRECTION of the current traffic peak flows! Just like the base did with the Navy and civilian traffic flows. When Alamedans are leaving, workers will be coming in, and vice versa. After time, the base workers that live in Alameda will increase over time. If housing is needed it can be built. It will be much better to respond to the real impacts of development, than anyone’s “future projections”!

  • David Howard says:

    SunCal, DE Shaw Face Foreclosure in Albuquerque, New Mexico

    http://actionalameda.org/actionalamedanewsblog/2009/12/19/suncal-de-shaw-facing-foreclosure-on-albuquerque-new-mexico-project/

    Saturday, December 19, 2009

    SunCal May Face Foreclosure

    By Sean Olson
    Copyright © 2009 Albuquerque Journal
    Journal Staff Writer
    A huge tract of land slated for residential and commercial development on Albuquerque’s West Side could be turned over to creditors because of foreclosure proceedings against California-based SunCal Cos.
    Lenders filed a foreclosure lawsuit against SunCal Cos. in state court in New Mexico this week to collect more than $180 million in outstanding loans their developer used to finance the property purchase from Atrisco Land Grant heirs.
    Barclays, Five Mile Capital and iStar Financial jointly loaned SunCal about $220 million for the project, which SunCal co-owns with New York firm D.E. Shaw.
    The lawsuit asks that SunCal be compelled to pay $182 million, plus accrued interest and late fees, immediately. SunCal put up its project’s assets, including the land, as collateral, according to the lawsuit.
    That means the lenders could seize the project from SunCal if it doesn’t come up with the money.

  • DLM says:

    I saw something else in the article that’s worth mentioning also (secondary to the foreclosure issue), in the paragraph below:

    “It is unclear, however, how a default would affect the Atrisco Heritage Foundation. The foundation was set up as part of the land sale to SunCal, and the developer had promised $1 million a year to the foundation. The foundation benefits Atrisco heirs by providing college scholarships and community projects. ”

    The property in question was originally part of a Spanish land grant, and was inherited by the grantee’s decendants, “the Atrisco heirs”, the sellers.. Most likely SunCal negotiated the $1 million a year benefit to the Atrisco heirs in exchange for concessions, on the price for example.

    That’s what SunCal promised — if this property goes into foreclosure, then what they’ll deliver will be nothing. The Atrisco heirs should have gotten their money upfront, because they won’t be getting it from Suncal’s lenders.

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