At first glance, the project seems typical of the many public/private real estate partnerships recently backed by the retirement system, widely known as CalPERS. The system, an investing giant that boasts more than $150 billion in total assets, provides most of the capital. A real estate adviser contributes financial expertise. A developer is brought on board to manage the project and, it is hoped, bring high returns to public pensioners.
In one respect, however, the Whitney Oaks project almost certainly is not a typical CalPERS real estate investment.
The partners in Whitney Oaks include a firm in which San Francisco Mayor Willie Brown has long held ownership. And two large entities involved in making the Whitney Oaks project profitable -- and, thereby, involved with Brown's personal financial fortunes -- have benefited greatly from official actions taken by Mayor Brown and his administration.
This intersection of Brown's private finances and public acts creates apparent conflicts of interest that can be summarized in a direct, if perhaps oversimplified, way:
1) Willie Brown benefits financially from a publicly funded real estate deal near Sacramento.
2) Those who help him make money near Sacramento reap the bounty of development decisions Brown and his subordinates make in San Francisco.
One potential conflict involves CalPERS itself. Since backing the Whitney Oaks project, CalPERS has benefited enormously from Willie Brown's official actions.
Almost immediately upon taking office, Mayor Brown began publicly supporting the Catellus Development Corp.'s long-stalled plans to build Mission Bay, a multibillion-dollar development in the China Basin area of San Francisco. Brown's advocacy was successful: Catellus has received city permission to press forward with the project.
Brown's support for Mission Bay benefited not just Catellus, but also CalPERS, which, according to public documents, owned more than 40 percent of Catellus at the time the Whitney Oaks project started. CalPERS subsequently was able to sell more than half its Catellus stake on extremely favorable terms -- terms made possible, at least in part, by the city's new attitude toward Mission Bay.
A second apparent conflict involves the Lennar Corp., of Miami, Fla.
A Lennar subsidiary is paying the owners of Whitney Oaks for the right to build one section of the Whitney Oaks development. Meanwhile, Lennar won a hotly contested competition and was selected as master developer for the former Hunters Point Naval Shipyard -- even though a consultant to the city Redevelopment Agency recommended another bidder get the award.
Whitney Oaks is located about 20 miles north of Sacramento, in southern Placer County, one of the state's fastest-growing contributions to urban sprawl. A mere whitecap on the tidal wave of development breaking on Sacramento's exurbs, Whitney Oaks is in many ways an unexceptional, midsized, retiree-friendly golf course development.
Its entrance is marked by stylish stone pylons embellished with distinguished deep-green signs emblazoned with a Whitney Oaks logo faintly reminiscent of a royal coat of arms. Beyond the pylons, what once was savanna and rolling woodland has been graded and laced with streets that describe a series of minicommunities, some with model homes ready for inspection. Inside one of those models, potential buyers can examine a wall-sized photograph showing that oak trees once carpeted the hills of the area. Outside the showroom, however, the developed vista is a moonscape, cleansed of vegetation except for the fringes of the golf course, where a few lonesome stands of blue oaks, valley oaks, and live oaks survive, and the corner of Old Oak Tree Street, where a handful of staked striplings shoot up in a tiny environmental preserve required by the state.
The Whitney Oaks development is split into distinct enclaves bearing high-toned, slightly WASPy names: Sterling Collection, Meritage, Springfield. Depending on the enclave and type of construction, homes will sell for anywhere from $120,000 to $500,000. The enclaves each appear to be connected to a different home builder.
For example, Renaissance Homes, a subsidiary of the Lennar Corp., is building four- to six-bedroom residences in one of the enclaves, named, for what seems an obvious reason, Renaissance Whitney Oaks. The homes are large, luxurious, and set on oddly tiny lots.
According to CalPERS documents, Whitney Oaks has about 1,800 single-family lots. The residences built on these lots will surround a golf course -- which has already been completed -- designed by professional golfer Johnny Miller. The development includes 340 acres designated for schools, parks, and other public uses.
CalPERS documents show that the retirement system is providing about 90 percent of the acquisition and development capital for the Whitney Oaks project. The remaining equity in the project comes from two sources. One involves the principals in a La Jolla-based firm called Newland Capital Advisors LLC.
The final major player in Whitney Oaks is a partnership of two lawyers that held about 4 percent of the project -- until the lawyers, CalPERS, and Newland quietly cut yet another partnership into that 4 percent piece of the deal. This secondary investor in Whitney Oaks is named Live Oak Associates III.
And Live Oak III is where Willie Brown comes in.
According to financial disclosures on file with the state and city governments, Willie Brown has acquired interests in three Live Oak Associates partnerships since 1984. These limited partnerships -- known as Live Oak Associates, Live Oak Associates II, and Live Oak Associates III -- are headed by two attorneys, William A. Falik and Jonathan A. Cohen, who also have organized other firms in which Brown has invested.
Brown is a limited partner in the Live Oak groups, meaning that he is an investor, not an active manager of the ventures. The mayor's most recent public disclosure values his interest in each of the three partnerships at somewhere between $10,000 and $100,000. It is unclear whether those values represent initial investment, or that investment plus appreciation and reinvestment of profits over the years.