Conglomerate bagman flying quietly under the radar

Castle Farms, Toronto-based Brookfield’s stake in Merced County, has a big interest in a vote the Merced County Board of Supervisors will be taking on Dec. 12. If the noise zone of Castle airport is diminished from two miles to one mile, Castle Farms may be able to develop the back part of its property, which it has claimed would be left in open space.

The board is voting on this Castle Aviation and Economic Development issue because, since the Castle joint powers agreement between the County and the cities of Merced and Atwater fell apart, the County has had sole land-use authority over the former airbase. They also have land-use authority over the RMP land, which in unincorporated. So, wearing one hat, supervisors will vote to diminish the noise zone of the Castle airport, and wearing another, they will vote – according to best informed guesses – to approve the racetrack.

Then, the supervisors will sit back and watch the lawsuits fly, knowing they are indemnified by RMP from having to pay legal fees and costs arising from their decision, irresponsible to the environment and public health and safety.

However, from the public point of view, considering the mutually reinforcing negative environmental impacts of the three projects -- the airport, the RMP, and the Castle Farms should be considered one and the same from the viewpoint of the California Environmental Quality Act. Both RMP and Castle Farms plans rely to a significant extent on the decision to reduce the airport’s noise zone. All three of the projects look to one land-use authority, the County. If the CEQA legal term, cumulative impacts, is to retain any meaning in law or policy, the decision to override “for economic reasons” the airport’s 2-mile noise zone will have cumulative impacts from the western part of the City of Merced into an area stretching to the Merced River Corridor, Atwater, Winton, Cressey, Ballico, and Delhi because it will pave the way from the RMP project and permit expansion of the Castle Farms project.

A representative of the Canadian financial conglomerate, Brascan, of which Brookfield is a subsidiary and Castle Farms is a project, will be watching the supervisors’ vote on the airport with deep interest.

The Roseville-based conglomerate’s representative is described in the Sacramento business press as a “veteran land-development consultant,” linked with Angelo Tsakopoulos and Eli Broad in projects in Natomas (a major flood plain) and about 6,000 acres west of Roseville. He came to Merced about two years ago and began to show up in all kinds of interesting groups.

In the past year, an entity called Brookfield Castle Del Mar directed $43,000 to the measures A and G campaigns to raise sales taxes to pay for new roads, a direct benefit to Castle Farms and RMP. How much Brookfield money has been directed into the campaign war chests of supervisors is an interesting question.

Toronto-based Brookfield Homes is a subsidiary of the Canadian conglomerate, Brascan. According to the Brookfield website:

Brascan is engaged in the business of asset management with a focus on real estate and power generation. The company’s assets include about 70 office properties in seven major North American cities and London and 120 power generating facilities, primarily located in the northeast. In addition, the company provides a host of management and advisory services, primarily in the real estate sector to corporate and individual clients. Brascan is recognized as a developer of master planned residential communities in both Canada and the United States. The primary operations are real estate, power generation and asset management.

Brascan operates in many areas of the real estate business. The company owns and manages a portfolio of office properties, develops master planned residential communities and offers its clients an array of bridge and mezzanine lending, alternative asset funds and financial and advisory services. The company’s master planned residential community business is conducted under established trade names Brascan, Brookfield Homes and Carma, with operations in six North American markets: California, Virginia, Denver, Calgary, Edmonton and Toronto and two markets in South America: Rio de Janeiro and Sao Paulo. Brascan also builds homes for sale and develops commercial lands and income properties for investment and sale.

The company has created a platform of alternative asset funds within the real estate sector. The funds managed by the company and its co-investors include: Brascan Real Estate Finance Fund, Brascan Real Estate Opportunity Fund, and the TriContinental Capital Fund. The company also manages the Royal LePage Franchise Services Fund, a royalty fund targeting primarily retail investors … Brascan's asset management activities are focused on alternative investments, including private equity and direct investments in real estate; and energy and resource assets. The asset management business of Brascan has clients which include pension funds, life insurance companies, financial institutions, corporations and high net-worth individuals. In addition, Brascan also develops and manages structured investment products and companies designed to appeal to specific investors including income trusts, split-share companies and asset securitizations. Brascan also manages a number of hedge funds. The company also has investments in privately-held investment management and mutual fund companies that manage equity and fixed income investments.

-- http://www.brookfield.com/

So, on Tuesday, follow the money to discover why the supervisors don’t take the obvious step that would stop the racetrack: voting down the airport noise-zone reduction.

Brookfield is one of the biggest, richest development corporations operating in California. This Canadian assets/real estate/energy conglomerate last year bought Olympia & York, which, until its spectacular collapse in the London commercial real estate market, was the largest development company in the world.

The rumor is that distressed developers with unfinished subdivisions are flocking to the deep pockets represented by the veteran Roseville development consultant.

The benefit to Castle Farms from reducing the airport noise zone may prove once again the ancient political truism: No matter how screwed up and destructive a situation is – politically, economically and environmentally -- it always benefits somebody, usually the guy with the deepest pockets.

Tsakopoulos also owns 900 acres to the north and west of Roseville, at the intersection of Fiddyment Road and Sunset Boulevard West. Much of the acreage between that piece and his west-of-Roseville holdings is controlled by major land developers, including insurance magnate Eli Broad and Brookfield Homes, a major Canadian homebuilder.

-- Sacramento Business Journal, March 21, 2003

In order to approve the reduction of the airport noise zone and approve the RMP environmental impact report, the supervisors will have to employ something called an “economic override.” In the case of the EIR, they will have to find that economic benefits override 34 “significant and unavoidable” environmental impacts. But, whose economics are overriding whose? No economic benefits from the project for Merced County are liable to offset the economic disruption to agriculture in the whole region from Highway 99 to the Merced River Corridor and Delhi to west Merced.

Badlands editorial staff
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Notes:

10-25-06
Merced Sun-Star
Supervisors override ban on building near airports
...Corinne Reilly
http://www.mercedsunstar.com/local/story/12933413p-13590023c.html
The Merced County Board of Supervisors issued a preliminary decision Tuesday to override a 2003 finding that plans for the Riverside Motorsports Park conflict with land use rules at Castle Airport. The Airport Land Use Commission ruled three years ago that plans to build the 1,200-acre motorsports venue adjacent to the airport conflict with the county's 1999 Airport Land Use Plan. Specifically, raceway plans conflict with a safety zone rule that bans development within 10,000 feet of an airport runway. Questions over the legitimacy of the commission's finding were raised when the county's Department of Commerce, Aviation and Economic Development began updating Castle Airport Aviation and Development Center's master plan four months ago to reflect new state guidelines on land use near airports. Under the new state guidelines -- on which local airport land use plans are often heavily based -- development is only banned within 6,000 feet of runways...the conflict between raceway plans and airport rules would be eliminated, said John Fowler, the county's director of commerce, aviation and economic development. "The problem is that the local plan is inconsistent with the state of California's plan," Fowler told the board during Tuesday's meeting. Tuesday's unanimous vote doesn't mean an end to the debate...board's decision kicks off a 45-day comment period during which local, state and federal aviation agencies can give their input on whether the raceway's proximity to Castle poses a risk...board is scheduled to make its final decision to approve or deny plans for the raceway on Dec. 12.

6-3-05
The Wall Street Journal Online
Brookfield Consortium Buys O&Y Portfolio

http://www.realestatejournal.com/propertyreport/office/20050603-heinzl.html
By Mark Heinzl and Ryan Chittum
TORONTO -- A consortium led by the Canada Pension Plan Investment Board and Brookfield Properties Corp. agreed to acquire O&Y Properties Corp. and a related real-estate investment trust for about 1.1 billion Canadian dollars (US$880 million).
O&Y Properties' flagship property is Toronto's First Canadian Place, a 72-story office complex in the heart of the city's financial district and home to Bank of Montreal's headquarters. Including liabilities, the value of the transaction is about C$2 billion, Brookfield said.
Brookfield, controlled by Toronto conglomerate Brascan Corp., owns 46 commercial properties, including New York's World Financial Center. The Canada Pension Plan Investment Board makes investments on behalf of the country's national pension program…

3-21-03
Sacramento Business Journal
Placer university land gift could net developer hundreds of millions

by Mike McCarthy
http://sacramento.bizjournals.com/sacramento/stories/2003/03/24/story2.html

Borrowing a page from local history could put hundreds of millions of dollars in the pockets of land developer Angelo Tsakopoulos and his investment partners.

Many local real estate players believe that Tsakopoulos is donating land west of Roseville for a Catholic university to help him eventually win development approval for land he controls around the college parcels.

If they are correct and Tsakopoulos gains urban zoning for the agricultural land, he and his partners stand to garner huge profits. Some estimate the value of the land that could be rezoned for home construction could reach $800 million — a 1,094 percent increase from average current values.

Real estate observers are neither shocked nor surprised that Tsakopoulos might donate the land to gain leverage. On the contrary, it is seen as a very smart move, and not at all unusual in the land game.

"That's how the public gets a lot of things, and it's nothing new," said Cameron Doyel, a veteran Sacramento land-development consultant. "There's nothing wrong with the profit motive, if it's a clean deal.”

Locally, the practice of giving land in hopes of improving one's nearby investment dates to the mid-1800s when John Sutter Jr. laid out Sacramento's land plan, including parks to be donated to the city in return for development of surrounding parcels, Doyel said.

Environmentalists resent the Placer County move because it could lead to the development of so much open space, on and even beyond the university land.

"There are environmental considerations," said Al Green, a spokesman for the Sierra Club's Placer Group. "We have to speak for wildlife. It can't speak for itself."

Whether Tsakopoulos' group eventually tries to get the land near the proposed school developed, the aging developer really wants to make a lasting cultural contribution to the Sacramento area in the form of the university, said Kyriakos Tsakopoulos, Angelo's son and the spearhead for the project.

"I've been very fortunate in life," added the younger Tsakopoulos. "I'd like to do something really meaningful, so I could look back and say I left this place a little better."

Angelo Tsakopoulos last week announced that he and his associates would donate 600 acres for a university site to the Brothers of the Christian Schools, the system that owns Saint Mary's College in Moraga and other colleges around the world. Another 500 nearby acres would be donated to be developed and sold for up to $100 million, and all of the proceeds would go to pay for building the university, said Kyriakos Tsakopoulos.

All of the land is located west of Roseville on land now zoned for agriculture. The younger Tsakopoulos stressed that the donation is not accompanied by any request that additional lands be entitled for development.

If, someday, the landowners decide to seek those entitlements, they will still have to pass muster with local officials, he pointed out. "Something like that would be a long way down the road," added Tsakopoulos, who expects his own company, KT Development Corp., will spend four years or more working to get the donated land approved and ready for construction.

But who's counting? Pundits say Angelo Tsakopoulos, who has tried unsuccessfully in the past to get zoning changed on much of the land, stands to reap a sweet harvest if he can do it this time around, when local developable land is scarce and demand is breaking all records.

He controls more than 6,000 acres of agricultural land in south Placer County, including some 5,400 acres just west of the West Roseville Specific Plan area that the city plans to annex, said Dave Jarrette, a partner and land expert in the Roseville appraisal firm of Giannelli, Jarrette & Waters.

Land like that is now selling for $10,000 to $15,000 an acre, and Tsakopoulos bought much of it for considerably less, said several veterans of the Sacramento land market.

The higher prices are for land closer to Roseville, where the likelihood of urbanization is greater. Figuring an average value of $12,500 an acre, the total current value is around $67 million.

If Placer County rezoned the land for residential development, the value would instantly skyrocket to about $60,000 per acre, estimated experts in the land business.

Tsakopoulos would not likely be able to get zoning for home construction on all of the acreage, however. From one-third to 40 percent of the land would likely be for schools, parks and other nondevelopment uses. More would be used to preserve wildlife habitat.

But if Tsakopoulos were able to win rezoning for only 2,000 acres, not counting the 1,100 acres of university land — a reasonable possibility — the value would be some $120 million. That's a 79 percent increase.

If he won the next level of approvals, the creation of tentative maps for parcels, the value would shoot to $150,000 per acre for a total of $300 million, estimated veterans of the land game.

If he took the project further, developing the infrastructure and "finishing" parcels so they are ready to build houses on, he could get at least $400,000 per acre — $800 million in today's dollars.

All of these calculations are based on the observers' estimates of current land value — $67 million. Most of the pundits figure Tsakopoulos and his partners bought or optioned the land for about $2,500 an acre — a normal value for agricultural land, reflecting an investment of less than $14 million.

Should the land be declared permanent open space, the value would probably drop back to that basic, agricultural amount.

At least one professional estimated Tsakopoulos would need to pump another $12 million into getting the land entitled. He surely has already invested millions in the land, including his purchase price of the land and any mortgage payments he may have. But it seems likely that the increase in value would more than compensate for his expense, they said.

A land developer's view: Tsakopoulos' huge landholding west of Roseville runs from the 3,100-acre West Roseville Specific Plan, which Roseville is about to annex, westward to the Sutter County line, Jarrette said.

The stretch runs about four miles east to west and approximately the same distance north to south at its widest point.

The tract is clearly in the path of growth.

On the east, Roseville is annexing toward the Tsakopoulos holdings. To the south, Placer County is processing development approval for the 5,200-acre Placer Vineyards area, in which Tsakopoulos is a major landowner. Just south and west of Placer Vineyards, Sacramento County is processing large tracts for development near Elverta and east of Interstate 5 near Sacramento International Airport. To the west, Sutter County is pushing to develop a huge industrial park.

The combination of these with the Tsakopoulos land would create a new urban corridor between Roseville and the airport.

On top of that, Placer County is planning to build Placer Parkway, an expressway that would connect Highway 65 to Highway 99/70 near the airport. The route would likely pass through Tsakopoulos' land, just north of the future university site.

From a land developer's perspective, the scenario means the land in west Placer is a natural for urban zoning. "It will all fill in someday," said one prominent land expert who asked not to be named.

But there are obstacles. For one, Placer County in 1994 declared the whole area out of bounds to development. Also, the Placer Parkway proposal includes no offramps — a move intended to inhibit growth along the expressway, said Terry Davis, a spokesman for the Sierra Club.

And a Placer County committee working to create a huge habitat preserve in the west county sees the Tsakopoulos land, rich in habitat, as a prime candidate to be part of the preserve, he added.

Strategic maneuvering: Tsakopoulos' donation is seen by many as a business strategy that accomplishes several ends for him, beyond the philanthropic contribution.

First and foremost, observers generally expect that the gift of higher education will prompt the county to ease its development restrictions on Tsakopoulos' surrounding land. The gift of the additional 500 acres to fund the university simply makes the idea of zoning the land for development even more compelling for authorities.

Also helping Tsakopoulos, the university land would need public works infrastructure if the county wants to see the university developed. That means lines for electricity, water and wastewater, as well as roads, would have to be built there. This infrastructure in turn would make it easier to develop his adjacent land.

Moreover, the university land is close to the likely route for the Placer Parkway, putting enormous pressure on the county to create one or more connections from the parkway to serve the university, Davis noted. An interchange on the parkway also would make it easier to develop adjacent land.

If the donation ultimately leads to development approval for the balance of Tsakopoulos' land, the likelihood that his land would be used for a habitat area is reduced, Davis said.

Tsakopoulos also owns 900 acres to the north and west of Roseville, at the intersection of Fiddyment Road and Sunset Boulevard West. Much of the acreage between that piece and his west-of-Roseville holdings is controlled by major land developers, including insurance magnate Eli Broad and Brookfield Homes, a major Canadian homebuilder.

10-14-06
Merced Sun-Star
Smoother roads ahead?
...Leslie Albrecht
http://www.mercedsunstar.com/local/story/12897397p-13556945c.html
Measure G...For the third time in four years, voters will be asked to support a sales tax increase for road improvements...needs approval from 66.7 percent of voters to pass, debuted in November 2002 as Measure M. It failed, earning 61 percent of the vote. In June 2006 it was reborn as Measure A and garnered 63 percent of the vote, falling 795 votes shy of winning. Just five months later, it's back as Measure G. But with each failure, the voices of those opposed to the measure have grown louder. While there is no organized campaign against Measure G, grumblings from the Letters to the Editor section of the Sun-Star show the battle to finally pass the measure is far from over. If it passes, Measure G will hike the sales tax in the city of Merced to 8.25 percent -- within spitting distance of San Francisco's 8.5 percent -- for the next 30 years...would generate $446 million to help fund transportation projects countywide, from reconstructing Livingston's Main Street to building a new Bradley Overhead. Half the money would go to road maintenance. Kelsey said a Caltrans representative told the county earlier this week that if the governor's infrastructure bond measure passes and Merced achieves self-help status with Measure G, the county will be eligible for funding to widen Highway 99 from the Stanislaus County line to Livingston. The measure's most prominent critic is Cathleen Galgiani, a Democrat running for Assembly against Republican Gerry Machado...said the statewide transportation bond measure on the November ballot will provide funding for Merced County roads...noted that the transportation bond will set aside $614 million for eight Central Valley counties in addition to the $1 billion earmarked for widening Highway 99. William Stockard, a retired superintendent of Merced County schools, said Measure G only benefits developers and other businesses like the proposed Riverside Motorsports Park and the proposed Wal-Mart distribution center that "want to get free money."...said the county should cover the cost of road maintenance by charging developers higher impact fees when they build here. Charles Magneson, a farmer near Ballico-Cressey, said he's opposed to Measure G because some of the projects it would fund will create sprawl and eat up farmland..."(Measure G is) heavily funded by developers that are looking for those roads to encroach on farmland to make their developments possible." In June, fliers denouncing Measure A as "welfare subsidies for the Building Industry Association" appeared in the Sun-Star three days before the election. Measure G campaign has tweaked its strategy...raised about $200,000...with the large contributions from donors like developer Brookfield Castle LLC, Del Mar; construction company Teichert & Son, Sacramento; Foster Farms, Livingston; E&J Gallo Winery, Modesto; K. Hovanian Forecast Homes, Sacramento; Wellington Corporation, Morgan Hill; Team 31, inc., Morgan Hill; Atwater East Investors, Danville; and Ferraire Investment Company; Balico...endorsements from Rep. Dennis Cardoza, all three Merced chambers of commerce, five county newspapers including the Sun-Star, the entire County Board of Supervisors and the entire Merced City Council. If it doesn't win, Measure G could come back, but by law supporters would have to wait until the November 2008 election.

10-23-06
Badlandsjournal.com
Re: Public hearing to consider the issuance of a proposed decision and findings regarding the Airport Land Use Commission's Finding as to consistency between the Airport Land Use Plan and the Riverside Motorsports Park Project- PH #2-10:00am

For more background on the airport noise-zone issue, see this letter of comment from San Joaquin Raptor Rescue Center and Protect Our Water (POW) to the Merced County Board of Supervisors.