Treasure Island, a 400-acre former military base with stunning views of Downtown San Francisco, has long been considered a dream site for high-rise development in a city desperate to add more housing.
And Darius Anderson, a lobbyist, political fundraiser and entrepreneur, has been involved in that dream from the beginning. After the base closed in 1997, he formed a bidding consortium stacked with Democratic Party power players that won development rights to build up to 8,000 apartments there. And he persevered through years of delays involving radioactive waste, economic downturns and Covid. Today, rebar and concrete is being formed into high-rise apartment buildings.
But a pair of dueling lawsuits, both filed this month, suggest that he could end up with little or nothing for his efforts.
According to court filings from Anderson’s financial backers Stockbridge Capital Group LLC and Wilson Meany, Anderson sold some interest in the project for a $6.5 million payment in 2005, and under that deal, his potential earnings were tied to the other investors first making their share.
Internal profit estimates made in 2016 and in 2019 showed Anderson’s stake in the multibillion-dollar project had “substantial value,” the lawsuit said, without revealing precisely how much it had been worth.
But in a meeting held in February 2021, Anderson was informed that his stake “had no value,” thanks to delays related to the coronavirus lockdowns, the financial backers claimed in their suit.
This means that Anderson must sell his interest for an unspecified fire-sale price to his investors, the suit says.
Anderson, through his company Kenwood Investments, sued his backers on the same day, April 4, disputing these claims. Through a spokesman, he told The Standard that they are fraudulent. At the same time as claiming his stake was worthless, those same financial backers have been trying to sell Treasure Island as a rosy investment opportunity to outsiders, Anderson says.
Stockbridge and Wilson Meany say in their suit that Anderson’s assertions are based on a misreading of financial records.
An open financial brawl over whether Treasure Island is an economic flop could hurt prospects for new funding and create additional delays. Already, Wilson Meany and Stockbridge say in court papers they have made multiple attempts to obtain fresh financing, and to sell rights to additional investors, receiving “tepid reception.”
“Over recent years, nearly every financial input in the financial return equation for Treasure Island has been going in the wrong direction: costs have increased, timing of land sales and bond offerings have been delayed even further, and revenue expectations have declined,” the Stockbridge suit said.
The Standard asked both Stockbridge, and Anderson, to provide financial information backing their claims. Total potential costs for the project have been estimated at more than $5 billion.
A spokesman for Anderson said that financial information that might corroborate his claims is confidential.
A spokesman for Treasure Island Community Development, a partnership with Stockbridge, Wilson Meany and Lennar Corporation, responded with an emailed statement.
“This is a dispute involving the distribution and allocation of any future profits from the venture. It shouldn’t surprise anyone that this project, like most in the Bay Area, is taking longer than originally expected. But as far as this dispute goes, it’s simply a disagreement among investors, and we expect to resolve it without impact on the development itself,” the statement said.
Infrastructure investments are already in the ground for the planned first phase of 2,100 apartments, evidenced by rebar and cement rising before the eyes of Bay Bridge commuters.
Last year, Anderson's group completed a six-story building on Yerba Buena Island, the outcropping that geologically anchors Treasure Island. The Bristol, built in 2021, contains 124 apartments selling for between $800,000 and $3 million.
Northward on the flat landfill heptagon that is Treasure Island, builders have completed roads, electricity installations, building pads and mini-dike-like reinforcements meant to keep rising seas away from the man-made island, which was built by filling in a shoal with dirt and rocks in the 1930s.
The nonprofit developers Swords to Plowshares and the Chinatown Community Development Center have finished a subsidized building called Maceo May containing 105 apartments slated for military veterans, with a grand opening scheduled for May 18. Mercy Housing and Catholic Charities have broken ground on a 138-unit building with plans for having residents move in by the middle of next year.
The Navy’s exit from Treasure Island was at first envisioned as a golden opportunity—for city residents, and for any investors who managed to get permits to build there. Ideas floated in those days included casinos and power plants, but ultimately, only two groups made official proposals.
One was led by Anderson, a lobbyist and fundraiser who had been a factotum for billionaire Democratic Party donor Ron Burkle. Anderson's group also included Burkle, an employee of Anderson’s lobbying firm and a Beverly Hills financial advisor. Together, they brought in Florida-based builder Lennar Corporation, and investment firms Stockbridge Capital Partners and Wilson Meany.
The group competing against Anderson’s was led by a local lawyer, and was controlled by a self-styled Native American entrepreneur who was later fined for unrelated securities fraud, according to a consultant’s analysis of competing bids and separate litigation filings.
From the beginning, the development was fraught with criticism. Investigative reporters at the San Francisco Chronicle cited the city’s reliance on Democratic fundraisers for the city’s most important housing development as a purported example of then-Mayor Willie Brown’s insider-first style of politics. Good government watchdogs condemned the contracting process as a giveaway to cronies.
According to Tony Hall, who led the Treasure Island Development Authority during 2004 and 2005, the authority’s 2003 decision to award the contract to Anderson’s group had never been in doubt.
Hall himself was appointed by Brown’s protégé and mayoral successor, Gavin Newsom, in a move publicly derided as an effort to put a loyalist in charge. But once at the helm overseeing the Treasure Island development, Hall, formerly a member of the Board of Supervisors, quickly molted into an anti-corruption gadfly.
Development plans were “a farce and a comedy,” he said in an interview, suggesting political leaders overstated the project’s viability for political reasons. “It’s something to sell to the public: 'Look at what we’re doing.'"
Aaron Peskin joined the San Francisco Board of Supervisors in 2001 as an anti-development opponent of then-Mayor Brown, and made a point of bird-dogging the Treasure Island project for years. He sees the current feud over whether the project makes economic sense for investors as the kind of wound that will heal with time.
“Willie Brown was a mayor who was extremely ambitious and would tilt at all kinds of pie-in-the-sky windmills," Peskin said. "Some of those took off. Some didn’t. What did he once say? With the Transbay Terminal, all he had to do was dig the hole, and eventually somebody would have to fill it. Two billion dollars later, we have the greatest local bus terminal since the building of the great pyramids. He tilted at a number of those long-term projects. He was interested in anybody who would try to put those things together. It just had to be people with the political acumen to sell a dream.”
Attorneys for Anderson, as well as his investment partners, are still in the process of serving each other court papers, according to the San Francisco Superior Court court docket.
While Stockbridge and Wilson Meany said in their lawsuit that they had been trying to market some of the remaining parcels to potential buyers, they have made visible progress building out the high-rise community planned for the island.
Already, completed and planned infrastructure on the island includes water reservoirs, a wastewater treatment plant, new roadways and underground utilities. Old military buildings have been demolished, and ferry service has been established at a terminal accompanying a marina constructed earlier by an Anderson-led consortium as a preliminary stage of the project.
The 250-unit, 22-story Tidal House is expected to be ready for occupancy next year. The 178-unit Hawkins building suffered setbacks as heavy rains soaked the underground pit dug in preparation for construction, a minor setback, Treasure Island director Robert Beck said in a January meeting.
Contractors began preparatory work on the 149-apartment Portico building in October, with a planned 117-unit building, and a planned 83-unit building, slated to begin construction next year.
Editor's note: This story has been updated with details of a 2005 deal between Anderson and his fellow investors.
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