Treasure Island and the Bay Bridge are seen in San Francisco on Oct. 9, 2015. (Josh Edelson/AFP via Getty Images)
Three real estate companies overseeing the revitalization of San Francisco’s Treasure Island are now suing each other over their expected returns on the former naval base project.
It’s unclear whether the infighting will delay what’s slated to be the largest single housing development in Northern California. The massive, multiyear effort to transform Treasure Island into a dense neighborhood includes a mix of retail space, parks, transportation services and new housing totaling about 8,000 units.
“This could definitely throw a stone into the gears and bring development to a halt,” said Sam Singer, a spokesperson representing Kenwood Investments, one of the real estate companies in the dispute.
Two real estate companies, Stockbridge Investments and Wilson Meany, filed a lawsuit last weekend against the third developer, Kenwood Investments, claiming the lengthy development timeline for Treasure Island will diminish their anticipated profits.
Kenwood on Tuesday filed a counter lawsuit, alleging that Stockbridge and Wilson Meany are conspiring to breach a contract among the three groups and steal profits.
“Stockbridge and WM tried to keep Kenwood in the dark on their plans,” the complaint from Kenwood reads. “Stockbridge and WM’s actions place the entire Treasure Island project at risk and leave Kenwood with no option but to protect its interest.”
Stockbridge representatives denied that the dispute would further delay constriction. The Treasure Island Development Authority did not immediately return a request for comment.
“Work is continuing at Treasure Island. This is a dispute between members of KSWM, an entity that, along with a Stockbridge affiliate, owns half of the Treasure Island venture,” a spokesperson for Stockbridge wrote to KQED. “The dispute involves the distribution and allocation of any future profits from the venture. We expect to resolve it without any impact on the development.’’
In 2001, Kenwood entered an agreement with real estate company Lennar Urban to redevelop Treasure Island, a 400-acre island situated between the East Bay and San Francisco. Kenwood and Lennar held a 50% interest in the Treasure Island Community Development (TICD) project, the Kenwood complaint reads.
Four years later, Stockbridge and Wilson Meany joined Kenwood as partners, and the groups formed a company called KSWM Treasure Island. As part of that partnership, Kenwood claims it transferred its 50% share to the KSWM group.
Then in 2016, a separate investor and affiliate of Stockbridge, Stockbridge TI, joined TICD. As a result, KSWM and Stockbridge TI then shared the 50% interest. Kenwood claims in its lawsuit that Wilson Meany and Stockbridge “never requested Kenwood’s consent to this amendment and Kenwood did not agree to this amendment.”
Kenwood is now alleging that by allowing Stockbridge TI to invest directly into TICD, the partners “diluted” the 50% share for KSWM. Stockbridge and Wilson Meany deny both claims.
In their original complaint, Stockbridge and Wilson Meany assert that the projected values of KSWM’s interests are “much lower today than they were a few years ago, before the COVID pandemic and economic shocks that came in its wake, and before unanticipated cost increases and delays pushed out the reduced projected revenues by several years, all of which have depressed expected returns,” the document reads. “Because of these setbacks, none of KSWM’s members can look forward to the financial rewards they had hoped for when this project started in the early 2000s.”
Treasure Island represents both a massive opportunity and challenge for developers. Unlike many parts of the city, the former naval base has tremendous space for new developments and housing, which is sorely needed to address the region’s housing crunch. But the former military site has a history spotted with environmental lawsuits, permitting hurdles and other barriers.
The most recent project to break ground was Star View Court, a 138-unit development that includes 71 units for formerly unhoused families transitioning out of interim supportive housing, 43 units for lower-income households, and 23 homes for current Treasure Island residents.
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About 27% of the homes and apartments slated for the Treasure Island/Yerba Buena Island Development Project, which the San Francisco Board of Supervisors approved in 2011, are earmarked to be affordable.
“On Treasure Island we have an incredible opportunity to create a whole new neighborhood that serves all San Franciscans,” Mayor London Breed said in 2022 when the Star View Court project was announced. “As we do that work, it’s essential that we have affordable places for people to live that also provide housing for the existing residents of this community.”
Supervisor Matt Dorsey and Assemblymember Matt Haney, whose districts include Treasure Island, did not immediately respond to requests for comment.
This story has been updated to include a statement from a Stockbridge Investments spokesperson.
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