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The Deal With Treasure Island 

Tony Hall's firing casts the spotlight on a real estate mega-deal that slogs along under a veil of secrecy

Wednesday, Nov 9 2005

Page 3 of 5

Having crossed the mayor, Hall's exit was cold and swift.

Although his contract stipulated that he remain executive director for 30 days from the time of his dismissal, the morning after he was fired his work computer was carted off, and the locks to his office door were changed. TIDA commissioner John Elberling notified Hall that he would need to go through Joanne Sakai, sent over from the Redevelopment Agency as an interim caretaker, if he wanted to retrieve his personal belongings. "You may not access that office at any time without Ms. Sakai's prior permission," Elberling wrote, adding, "and [you] must return all keys immediately."

Hall was by no means the first person to raise the specter of favoritism involving Treasure Island Community Developers, the team spearheaded by lobbyist Darius Anderson and Democratic mega-donor Ron Burkle. Back in 2002, while Willie Brown was mayor and on whose watch the city signed off on the exclusive agreement with TICD, urban planner Eve Bach of the environmental group Arc Ecology was among those who questioned the developer's financial proposals.

TICD has yet to submit a completed term sheet, the document that, among other things, spells out the financial framework of the deal, and little is publicly known about the city's negotiations related to finances. But in the run-up to its being granted the exclusive negotiating rights in 2003, TICD proposed that the city provide most of the investment capital for the redevelopment project on the island, over and above the land and buildings that would be given to TICD at no cost.

At the time, TICD suggested putting up less than $40 million of its own money and wanted a guaranteed 25 percent rate of return on its investment while proposing to finance a project -- then expected to cost hundreds of millions of dollars -- with public funds. "I saw a mismatch in that and, yes, I do think that if it were to happen, an agreement based on those kinds of terms would constitute a sweetheart deal," Bach says. If and to what extent TICD's early proposals may have changed may not be known until next June, when the developer is committed to presenting its overdue term sheet.

TICD is a limited liability partnership that was created specifically to compete for the massive Treasure Island makeover. Its two principal partners are Kenwood Investments, in which Anderson and Burkle are participants along with San Francisco attorney Jay Wallace and Lennar Corporation, the Florida-based home-building giant, through its subsidiary, Lennar Communities. Wilson Meany Sullivan, the firm responsible for renovating San Francisco's Ferry Building, was recently added as a third partner.

Anderson is the former chief fundraiser for ex-Governor Gray Davis who heads Platinum Advisors, an influential lobbying firm with offices in Sacramento and San Francisco. Anderson has a long association with Burkle, the one-time grocery magnate (Ralph's, Jurgenson's, Food-4-Less) and heavyweight political donor. Anderson was the former chief of staff of Yucaipa Companies, the privately held entity Burkle founded and on whose board of directors sits former President Bill Clinton.

Anderson and Burkle are also the principals in Treasure Island Enterprises, which separately in 2000 was awarded exclusive negotiating rights to develop a new marina on Treasure Island, a project that -- like the overall development plans for the former navy base -- has been slow to unfold.

TICD's choice as the island's master developer was not without controversy. Only two entities applied. And only TICD -- whose Lennar partners had won a fierce and controversial battle for the redevelopment rights to the former Hunter's Point Naval Shipyard -- was deemed qualified. "The general assumption was that considering who [TICD's] players were and what happened at Hunter's Point, other big developers who might have been interested in Treasure Island more or less knew to stay away," says Ruth Gravanis, the environmentalist.

At Hunter's Point, a financial services firm that the city hired to evaluate the bids recommended another developer. But in 1999 the city's Redevelopment Commission effectively ignored its own consultant and picked Lennar, inciting suspicions that then-Mayor Brown, whose supporters had orchestrated a last-minute campaign for Lennar, had intervened on the company's behalf. (As SF Weekly disclosed, Brown later assumed a financial interest in a Sacramento-area real estate development controlled by a Lennar subsidiary.)

There was a similar cloud over the Treasure Island process. In the summer of 2001 the city's redevelopment staff expressed interest in re-bidding the project to encourage more bidding after only the Anderson/Burkle/Lennar group and the one other entity chose to participate. A consultant hired by the city submitted a report saying that at least two additional firms, which it did not identify, had expressed enthusiasm for entering the competition as part of any second round. But that September the redevelopment staff did an about face, recommending that the TIDA board dispense with expanding the competition and focus instead on dealing solely with TICD.

"It was really amazing," recalls attorney Eugene Brodsky, who serves on a citizens' advisory panel for Treasure Island. "One minute the talk [out of the Brown administration] was we need more competition, and then someone just mysteriously pulled the plug."

Anderson had been a fundraiser in Brown's 1995 mayoral campaign. Burkle, for whom Brown had done legal work after leaving office as Assembly Speaker, had pumped $59,000 into Brown's legislative campaigns and had donated $100,000 to underwrite his U.S. Conference of Mayors meeting in San Francisco in 1997.

Those things occurred long before Newsom became mayor.

About The Author

Ron Russell

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