That $6 billion Treasure Island development promising to house 20,000 people is looking awfully uncertain at the moment, as the developers are hauling each other to court and making nasty charges.
The vision to turn Treasure Island into an 8,000-unit housing village that would be home to as many as 20,000 people dates back to 2001, and the lineup of developers and investors has understandably morphed a bit in the 20-plus years since the original announcements. But this decades-long dream seemed to be kicking into high gear when construction did eventually start in 2016, and we got glowing progress reports as recently as last October, with the project now being managed by by a coalition of the private-equity real estate firm Stockbridge Capital Group, developer Wilson Meany, and real estate VC firm Kenwood Investments.
Today I visited Treasure Island where we are building 8,000 mixed income units, which is incredible. But our work can’t stop here.— London Breed (@LondonBreed) November 3, 2021
This project is 20 years in the making and it shouldn’t take this long to get housing built in San Francisco. We need more housing everywhere now. pic.twitter.com/Wu3Y3MBEen
Yet that coalition appears to be imploding. The San Francisco Business Times reports that those parties are now suing each other — or more specifically, Stockbridge Capital and Wilson Meany sued Kenwood Investments, and Kenwood Investments promptly countersued Stockbridge Capital and Wilson Meany. All of this happened this week.
NEW: Three main investors in the redevelopment of Treasure Island and Yerba Buena Island are engaged in war of words — and lawsuits — over the financial realities of the megaproject in the #SanFrancisco Bay.https://t.co/I6G11dyTo9— Laura Waxmann (@laura_waxee) April 6, 2023
Let's take both suits chronologically. On Monday, Stockbridge Capital and Wilson Meany sued Kenwood Investments in San Francisco Superior Court, in the words of the Business Times, “seeking to declare a deadlock in their negotiations to boot partner Kenwood Investments out of the project with little or no compensation for its stake.”
Kenwood Investments’ countersuit (filed in the same court the very next day) claims that “Kenwood has since learned that Stockbridge and WM [Wilson Meany] breached the parties’ agreement” and adds that “Stockbridge and Wilson Meany’s actions place the entire Treasure Island project at risk and leave Kenwood with no option but to protect its own interests.”
“Kenwood is now forced to protect its interests and has brought suit against Stockbridge; its affiliate, Stockbridge TI, and WM for breach of contract and fraud,” that suit continues.
But there’s a potentially telling paragraph in the Stockbridge and Wilson Meany lawsuit. “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,” that suit says, per the Business Times. “By mathematical inevitability, this has driven the rate of return on the project down dramatically, at least relative to expectations five or ten years ago.”
This states the obvious: COVID-19 hit, construction costs have soared, and everyone’s looking to offload commercial real estate. None of this is really the fault of any investor or developer. But the financial returns on this project look to be diminishing, and that may be why the knives are coming out among its backers.
A few notable things have happened on that project in the last two years. A 124-condo complex called the Bristol opened over on the Yerba Buena Island end, a veterans’ affordable housing complex called Maceo May apartments has opened too, and an apartment building called Tidal House says it's “Leasing in 2024.” Plus that $5-a-ride Treasure Island Ferry is up and running.
But all of this was built against the backdrop of a much larger question of whether people will actually want to visit or even live on Treasure Island. And now it appears three’s another big question of whether the developers and investors will ever see much of a return on these billion-dollar efforts.
Related: Kamikaze Seagull Attempts To Thwart Controversial Treasure Island Development [SFist]
Image: Treasure Island Community Development