CATELLUS & MISSION
BAY
Not long after the first bullet train smoke-and-mirrors show was
terminated by the City of Tustin, California’s 1983 White Paper, which set out
in detail the politics behind the sleazy political process, a major land use
project in San Francisco was put forward in 1986 by a real estate development
corporation called Catellus Development.
San Francisco Mayor Dianne Feinstein fought hard to win approval
for the Mission Bay project throughout her two terms as Mayor, but it was
turned down by San Francisco voters in 1990.
Mission Bay is a 303-acre mixed-use neighborhood located on the
central bayshore of San Francisco, bounded by Townsend Street on the north, San
Francisco Bay on the east, Mariposa Street on the south, and Interstate 280
(the John Foran freeway, named for the former California State Senator turned
lobbyist) on the west.
Mission Bay was re-created in 1998 by the San Francisco Board of
Supervisors as a redevelopment project. Much of the land was railyard and
warehouses owned by Southern-Pacific Railroad. When Southern-Pacific was
bought by Sante Fe Railroad, Sante Fe established a real estate arm, and that
division was transferred to Catellus Development Corporation. Catellus
subsequently sold or sub-contracted several parcels to other developers.
In 1997, Catellus agreed to donate 29.3 acres to the University of California,
and the City of San Francisco donated an additional 13.3 acres, allowing UC San
Francisco to double its size and grow its research capability.
Materials published on the Internet and derived largely from
Catellus’ own corporate papers tell an interesting story. As the Funding
Universe website on Catellus states, “The largest private landowner in
California, Catellus Development Corporation is a diversified real estate
operating company supported by a large portfolio of income-producing
properties, and land awaiting development. Catellus was formed in 1984 as an
indirect subsidiary of Santa Fe Pacific Corporation to oversee its parent
company’s non-railroad real estate activities. Catellus gained its name and its
independence when it was spun off from its parent company in 1990. During the
late 1990s, the company’s portfolio of industrial, residential, retail, and
office projects were located in major markets in California and 10 other states.
Of Catellus’s total property, 76 percent of its industrial property, 65 percent
of its office property, and 85 percent of its retail property were located in
California. The balance of the company’s properties was located primarily in
Texas, Illinois, and Arizona.
“Catellus began life on its own in 1990, although the assets of
the company–its vast real estate holdings–had roots stretching back to the 19th
century-predecessors of the Santa Fe Pacific Railroad. Until 1990, Catellus
operated as Santa Fe Pacific Realty Corp., the massive real estate development
arm of the Chicago-based railroad company. Financial difficulties during the
late 1980s prompted the railroad company to spin off its real estate businesses
to shareholders, creating a new, independent company that emerged from the
expansive corporate umbrella of Santa Fe Pacific Corp. as Catellus Development
Corporation.
“… The company was rich in land holdings, owning 1.5 million acres
of land, but needed to develop its properties to realize the full financial potential
of its assets. It also was hobbled by the heavy debt load it inherited from
Santa Fe Pacific Corp., which made the difficult and costly task of financing
its development projects that much harder. Further, the company broke free from
the starting blocks at the outset of a pernicious economic recession.
The early 1990s were tenuous years for many businesses,
particularly for those companies like Catellus: positioned in a real estate
market weakened significantly by an anemic economy. The boom years of the
1980s, when the California real estate market grew energetically, were over,
leaving Catellus in the unenviable position of having to contend with nearly $1
billion of debt while it tried to develop mammoth industrial and commercial
projects in a market stripped of its vitality. Against this backdrop, the
company steeled itself for the difficult challenges ahead.
“From Catellus’s starting point in 1990, conditions worsened
before they improved. One month before the company’s debut on the New York
Stock Exchange, San Francisco voters dealt Catellus a serious blow, stalling
the company’s efforts to develop what was regarded as the prime property within
its portfolio. On the site of an old Santa Fe railyard, Catellus owned 166.9
acres of a 313-acre site adjacent to downtown San Francisco called Mission Bay.
Undeveloped, the property was not worth much, at least in comparison to its
potential value if the site, by all accounts an industrial wasteland, was
developed into a residential and commercial property. The decision to develop
the property, however, was not strictly up to Catellus. In the business of real
estate development on the scale that Catellus operated, politics played a
major, and a frequently decisive, role in determining whether development
projects could break ground. In November 1990, San Francisco voters contributed
their part in the decision-making process concerning the Mission Bay project by
narrowly defeating Proposition I, which would have exempted Mission Bay from
growth limits. It was the first stumbling block of many that slowed the
company’s progress during its first several years of business; ahead were
further obstacles.
“As the company’s management scrambled to discover alternative
means to turn Mission Bay into a revenue-generating property, Catellus began
trading as a public company, making its debut in December 1990. Shortly
thereafter, in early 1991, the company announced a new Mission Bay development
plan, declaring its intention to transform the property into a residential and
commercial neighborhood that would include five million square feet of new
office space. As the national economic recession deepened, however, the
redevelopment project was put on hold. Critics contended the project drew its
strength from the halcyon days of the 1980s, when the fertile real estate
market gave birth to one major development after another. In the bleaker
economic climate of the early 1990s, the project withered on the vine.
“The once bleak forecast for Catellus’ Mission Bay began to alter
in 1995 when Willie L. Brown Jr., the former Speaker of the California State
Assembly was elected Mayor of San Francisco. As soon as he was elected, Brown
began pushing to revive the Mission Bay project, and in 1997, a bill carried by
his best friend, State Senator John Burton, was introduced in the legislature.
The bill was designated an emergency status, meaning that it became law
immediately as soon as it was passed by the legislature and signed by the
Governor. When the bill was passed and signed during the fall of 1997, Mission
Bay finally was underway.”
This was the background I was able to collect on Catellus
Development and Mission Bay in 2000. All I knew about Catellus when I left
California in the fall of 2000 was that they were a major development
company, once the real estate wing of the Southern-Pacific Railroad. I
knew that S-P Realty’s progeny, Catellus Development, was supposed to build a
mixed-use, pedestrian-oriented development in San Francisco’s Mission Bay. I
remember reading about the project designed by ROMA Associates when I lived in
San Francisco during the 1980s. ROMA was also in on the Bay Bridge deal. They
were the firm that designed the tourist theme park on Treasure Island. This was
also the same firm who drew all the pretty pictures of the proposed new S-P
depot cité in Sacramento in 1991, which was another of those mixed-use, “smart
growth” developments that I used to tout in my stories in the Sacramento Bee
and other publications. Then I remembered that Mission Bay somehow came unglued
around 1990, although I didn’t remember why.
I also knew that Catellus had hired John Foran and his lobbying
firm, Nossaman, Guthner, Knox and Elliott to lobby on behalf of SB 1215, the
Catellus-sponsored Mission Bay bill carried by John Burton.
The language of the Burton land swap bill was particularly illuminating:
The language of the Burton land swap bill was particularly illuminating:
“It is therefore the intent of the Legislature, on and subject to
the terms and conditions set forth in this act, (1) to authorize, ratify and
confirm any agreement by the city to enter into an exchange or exchanges of
granted tidelands and to terminate the public trust or the Burton trust
(in reference to John’s brother, Phil Burton’s federal parks law, author’s
note), or both trusts, over granted tidelands consistent with the findings and
declarations set forth in this act, and (2) to authorize the city to dispose of
any and all granted tidelands originally laid out and reserved to the state for
street purposes for private use free from those trusts.”
John Burton’s bill from the 1997 session was co-authored by
legislators Carole Migden and Kevin Shelley, two of Willie Brown’s hometown
political allies. When I showed former State Senator Quentin Kopp this bill
during my interview with him in August, of 1998, he said, “I always had a
strange feeling about that bill. You’ll notice that there’s only one person
missing from the San Francisco delegation in the authorship of it. That person
is Quentin Kopp.”
John Foran of Nossaman, Guthner, Knox and Elliott was the lobbyist
on SB 1215, hired by Catellus Development to work on this bill on March 20,
1997, and terminated by them three weeks later on April 11, 1997, with a nice fee
of over $16,000. Foran filed his lobbying statement as a one-page late
amendment to his regular report, seemingly trying to veil his involvement.
Mission Bay was included in the language of the Burton bill, and
it was a potential bonanza for Catellus if they were allowed to proceed with
Mission Bay.
Burton, Foran and Nossaman, Guthner shepherded SB 1215 through the
legislature so silkily that SB 1215 didn’t generate a single nay vote, nor did
a single word about it ever appear in any Bay Area newspaper or magazine, until
the deal was done.
It certainly didn’t hurt Catellus’ cause that the corporation and
its officers had been significant contributors to the political war chests of
both Willie Brown and Dianne Feinstein. Besides the $140,000 in legal fees that
Willie Brown received from Catellus as one of its attorneys from 1982 until
1994, Brown’s two San Francisco mayoral campaigns also received a whole lot of
cash from Catellus. So did Dianne Feinstein’s U.S. Senate campaigns. Over ten
years, Feinstein’s campaigns received over $200,000 from Catellus and
individuals associated with the corporation, including Nelson Rising. Brown’s
two mayoral campaigns received close to $150,000 from Catellus and individuals
associated with the corporation.
Directly after Burton’s first bill, SB 1215, was passed in the
1997 session, Burton’s campaign received three contributions totaling $155,000
from the Southern California District Council of Carpenter’s Political Action
Fund. Richard Blum, Senator Feinstein’s husband, is the union’s pension fund
manager.
On the day that he introduced SB 1562, another Catellus-related
bill in the 2000 session, Burton’s campaign received a $4,000 contribution from
Nossaman, Guthner, Knox and Elliott, the lobbyist group headed by John Foran,
who has been active on every speculation-driven transportation stock from the
bullet train in 1982 until now.
During her second term as Mayor of San Francisco, Feinstein fought
for the development of Mission Bay but lost. When Willie Brown became Mayor in
1995 he said that the first call he was going to make was to Catellus to see
what he could do to get Mission Bay back on track.
While the political process of John Burton’s SB 1215 was
proceeding through the California State Legislature, Catellus stock went from
below $10 a share to $18 a share. On November 26 and 28, 1997, right after SB
1215 had become law, almost 4.25 million shares of Catellus stock were traded
at over $18 a share. Insider activity on Catellus stock was heavy on both of
those days.
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