The Anatomy of Public Corruption

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Catellus Development, a Murder Nexus Not an Octopus

Catellus Development, the Next Octopus?

Thirty-seven years before writer Frank Norris created the fictional Octopus in his 1901 novel, the U.S. Congress gave birth to its real-life counterpart by granting the Southern-Pacific Railway company a checkerboard pattern of right-of-way land parcels lining either side of their tracks from Texas to California. Although the railroad would dry up economically in the mid-20th century, and disappear entirely in 1994 when it was swallowed by the Union-Pacific Railroad in a merger, the Octopus that Congress created still lives on in the form of the real estate giant that it grew into from those 1864 checkerboard easements. This company, once known as Southern-Pacific Realty, has tentacles that span the continent. It is now known as Catellus Development, and it is an absolute Colossus.

Catellus is the second largest private landholder in the western United States with 817,000 acres in California alone. It develops commercial real estate, shopping centers, and housing, and acquired a number of properties on some defunct military bases during the Clinton administration’s base closure program. Catellus has also been very active in a number of land swaps, where it exchanged mostly worthless rural properties for prime development land within urban areas, or for land directly adjacent to planned freeways.

Catellus is headed by chairman/ CEO Nelson Rising, a big-time developer formerly with McGuire-Thomas. This is the development company that built Playa Vista in Los Angeles, the mixed-use development out on the Ballona Wetlands. Rising used to be a Hollywood producer whose 1971 film, The Candidate, examined the political corruption of an environmental idealist who sacrifices his principles to become elected as one of California’s U.S. Senators.

Catellus is one of the most politically wired development companies in California with significant ties to Senator Dianne Feinstein, outgoing San Francisco Mayor Willie Brown (who was formerly their attorney), California State Senate President Pro Tem John Burton (another ex-Catellus attorney), and John Foran, the MTC lobbyist who briefly served as Catellus’ lobbyist on a very provocative piece of legislation sponsored by Burton in 1997. Another client with Foran’s lobbying firm Nossaman, Guthner, Knox and Elliott is the LA Metropolitan Transit Authority, whose offices happen to be in another Catellus property, renovated with redevelopment money in downtown Los Angeles at Union Station.
In a 1997 article published in Forbes Magazine, writer Mary Beth Grover put it this way: “With real estate, politics matters a lot, almost as much as location. In California real estate, politics is the most important thing (and) aside from sheer corruption, there are a number of ways to appease these little gods. Catellus knows the game well.”

It certainly hasn’t hurt Catellus’ cause that the corporation and its officers, including ex-producer Rising, have 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 lot of cash from Catellus. So did Feinstein’s U.S. Senate campaigns. Over the past ten years, Feinstein’s campaigns have received over $150,000 from Catellus Development. Brown’s two mayoral campaigns landed a total of close to $50,000 from Catellus and individuals associated with the corporation.

Senator Feinstein has proven very successful in promoting a land-swap project that involves Catellus properties in Southern California. The Senator is very proud of this project and lists it as one of her prime accomplishments on her Congresssional website. This is the Desert Wilderness Protection Act of 1994 (the act was funded with additional legislation sponsored by Senator Feinstein in the 1999, 2000 and 2001 sessions of Congress). Now known as The Desert Wildlands Act, this bill involves the transfer of over 400,000 acres of Catellus land in the Mojave Desert to the federal government to create a natural preserve. Of the $56.5 million purchase price for the Catellus desert properties, $30 million of the money is coming from the U.S. government. while the additional $26.5 million is coming from a non-profit environmental group called The Wildlands Conservancy.

In a press release put out by Senator Feinstein’s office, Nelson Rising gave credit to Feinstein: “The successful completion of these transactions would not have been possible without the significant efforts of Senator Dianne Feinstein.” Rising then went on to credit David Myers and the Wildlands Conservancy for “rais(ing) the private funds necessary to complete these sales.”

But a few critics wonder whether this massive land swap was such a great deal for anybody other than Catellus.


In a column titled “A Succession of Land Deals” by Sacramento Bee columnist Dan Walters published in March of 2001, Walters wrote that the Catellus desert swap amounted to a deal where “Catellus walked away with cash and valuable land and gave up virtually nothing of real value. It was a coup for the company’s top executive, Nelson Rising.” Walters went on to state that the Catellus desert bill bore some similarities to the Headwaters Forest bill in that both were used to appease envirnonmentalists who favored the desert park and wanted to preserve the forest. Senator Feinstein negotiated the half-billion dollar Headwaters deal right before she authored the Desert Wildlands bill.
Jeffrey Baird, a computer programmer who works for the County of San Bernardino, says that the whole thing stinks to high heaven. “I believe that non-profits (e.g. The Wildlands Conservancy) masquerading under the cloak of “environmentalism” are being used as vehicles to initiate a series of land purchases/swaps that will ultimately benefit Catellus Corporation and their friends at the expense of John Q. Public.” Baird says that Catellus is giving up desert lands that are undevelopable in exchange for lands adjacent to freeways that are well traveled and worth considerably more.
Baird pointed out that there seems to be a connection between Catellus Development and The Wildlands Conservancy that constitutes a direct conflict of interest, and says that he fears “that the resulting charitable gift/sales of ‘ostensibly appreciated land’ are inconsistent with the underlying land values of these properties as determined by the county assessor.” Baird says that the assessed values of the land when they are transferred from Catellus ownership to the Wildlands Conservancy increase sharply, as high as 300% in some cases, yielding huge tax benefits to Catellus. Baird has been trying to get a number of investigative agencies to look into the issue without success.
Baird also believes that some of the federal land transfers involve public lands that have been illegally transferred to private ownership by the federal Bureau of Land Management. Baird has shown this reporter a series of land parcels with map overlays that seems to establish his contention that the parcels were in fact public lands as little as ten years ago. “I think the whole thing is a money pump,” said Baird.
In a May 1997 issue of Media ByPass magazine, writer Karen Lee Bixman explored an area of the land swap that made some of Baird’s concerns look pale by comparison. In this story titled “The Great Gold Heist: The Desert Wilderness Protection Act,” Bixman characterized Senator Dianne Feinstein as “The Modern Jesse James.” Exchanging worthless desert land for more viable commercial land alongside interchanges is bad public policy, but swapping worthless land for rich, gold-bearing deposits was also scheduled.
Bixman wrote: “the real motivation for the passage of (the Feinstein) bill lies with the special interest groups that would benefit monetarily.Through a complex series of land exchanges, Catellus will receive land that contains some of the richest gold deposits in the world.”
Part of the Catellus land exchanges in the Mojave included a swap for a decommissioned military base called Chocolate Mountain. Bixman said geologists told her that Chocolate Mountain has deposits worth somewhere between $40-100 billion. Catellus owns the nearby Mesquite mine in the Chocolate Rift zone, which, Bixman wrote, “is one of the ten most profitable mines in the United States and has some of the most profitable gold deposits of any mine in the world.”
Catellus Development is based in San Francisco at 201 Mission Street — just across the street from the Transbay Terminal. Catellus has a number of high profile, multi-billion dollar projects underway in the Bay Area, including the $3 billion Mission Bay project in San Francisco, and the $1.5 billion military base conversion project in Alameda, at the former Fisk Naval Air Center. Both of these projects are mixed-use developments that will include commercial office space, retail space, and housing.
There is a strong possibility that Catellus (CDX on the New York Stock Exchange listings) could be the latest publicly-traded stock which might experience a sudden price rise from a process related to transportation projects. These projects include the planned redevelopment of the Transbay Terminal in San Francisco and the so-called Mid-Bay Crossing bridge being studied by the Metropolitan Transit Authority.
On the first project, a Transbay Terminal bill was passed in the 2000 California legislative session that was carried by Assemblyman Dion Aroner, an East Bay legislator. This bill, AB 1409, proposed a new 900,000 square foot transit building with commercial offices above it that was initially pegged to cost $900 million. Although Aroner was the bill’s nominal author, sources at the State Capitol told this reporter that outgoing San Francisco Mayor Willie Brown had a large hand in drafting the legislation.
The bill was essentially a land swap with the City of San Francisco. With a new tower atop the Transbay Terminal, and adding in the adjacent lands that were then scheduled for the swap, the City of San Francisco would have received approximately $4 billion worth of prime development land for a buck. One of the potential developers surely to be considered for this project is Catellus Development, whose corporate headquarters at 201 Mission Street, is adjacent to the terminal site.
The Aroner bill also carried an exemption in it stating that the State of California would not receive fair market value for the exchange. At the end of that year’s legislative session, then-Governor Gray Davis vetoed the bill but said that he would try to accomplish the same goal by handling the matter “administratively,” which presumably meant that the package could go through without the legislature having to enact a new piece of legislation. Neither Davis nor Governor Arnold Schwarzennegger would comment for this story. At present, the new, so-called “Great Expectations” terminal project is still on hold.
The second potentially profit-producing process involves a possible new bridge across the San Francisco Bay.
Almost directly after San Francisco Chronicle columnist Alan Temko’s article touting the bridge of his good friend, the late T. Y. Lin, appeared on the newspaper’s front page in its March 10, 1997 edition, the MTC’s chief lobbyist, John Foran, was hired as a lobbyist by Catellus Development to work on behalf of SB 1215. This piece of legislation was authored by San Francisco’s State Senator John Burton, the man who describes himself as “Willie Brown’s best friend.” Burton was also once Catellus’ lawyer. The bill was co-sponsored by the two Assembly members from San Francisco, Carole Migden and Kevin Shelley, both of who are part of what former State Senator, now Sam Mateo Superior Court Judge, Quentin Kopp calls “Willie Brown’s cabal.”
The Burton bill resolved a long-standing dispute between the City of San Francisco, the State of California, and the private developers, Catellus, doing business under the name of Western Realty. The bill allowed the development of filled tidelands to take place in Mission Bay and also provided for a new University of California San Francisco campus. SB 1215 was passed as an emergency measure that took effect immediately when it was signed by then-Governor Pete Wilson in August, 1997. The bill didn’t receive one nay vote as it went through the legislature, nor did it generate one single news story despite its huge potential impact on the long-stalled Mission Bay project.
What is most interesting about the hiring of John Foran on the Burton/Catellus bill was the length of his contract with Catellus and how much money he was paid. Foran’s term of employment was 22 days — from March 20 through April 11 of 1997, for which he was paid almost $17,000. That’s an astronomical rate of pay for a contract lobbyist to represent a client on one piece of legislation only. During that same time, Foran’s yearly pay for the MTC was $50,000.
What was a transportation lobbyist, the man who founded the MTC, doing on behalf of a real estate company like Catellus?
When I asked Willie Brown about this bill at a televised press conference in the summer of 1998, he denied that he knew anything about it. This seemed puzzling, as the main lobbyist for Catellus Development, Marsha Smolins, then happened to be the main lobbyist for the City and County of San Francisco. Smolins began her career in politics as an aide to U.S. Senator Dianne Feinstein.
Brown’s first response to my question was that he didn’t know what I was talking about. When I pressed him with a follow-up question, he said, “I’ll have my people get back to you about it.” Since this bill provided for a new UCSF campus, and since such a campus would likely demonstrate a significant demand for transit, I asked him whether or not he had given any thought to the possibility of a new Mid-Bay Crossing bridge. “You’d better watch yourself, or you’re going to go off that bridge,” said Mayor Brown.
A year-and-a-half after he had chided me about “going off that bridge,” and almost directly after being reelected Mayor of San Francisco in the fall of 1999, Willie Brown received an appointment to the $100 billion California Public Employees Retirement System (PERS) pension fund investment board — the investment fund that once owned 80% of Catellus Development stock and is still its largest institutional shareholder at somewhere close to 40%. Shortly after Mayor Brown was appointed to PERS, Dianne Feinstein wrote a letter to Governor Gray Davis asking for an updated study of the Mid-Bay Crossing bridge. If such a bridge design included a landfall at either of the two Catellus properties — at Mission Bay or the Fisk Naval Air Center base conversion — it would likely have a beneficial effect on Catellus stock prices.
In near record time, MTC approved the Mid-Bay Crossing study, which is currently underway. Then Willie Brown, Dianne Feinstein and the San Francisco bunch took a shot at winning the trifecta: three stocks with three bills.
The first bill was the Catellus-sponsored legislation, SB 1215, from the 1997 session (As a matter of fact, during the passage of SB1215, Catellus stock went from below $10 a share to $18 a share. On November 26 and 28, 1997, after Burton’s SB 1215 had become law, almost 4.25 million shares of Catellus stock were traded at over $18 a share. Insider activity was heavy, with over 3 million shares traded.) Senator John Burton’s additional bill in the 2000 session, SB 1562, called for development of a new rail link between San Francisco Airport and another airport on land owned by a city and county and located in another county. There’s only one likely place that this can be: the former Fisk Naval Air Center in Alameda. By some strange quirk, part of this airbase is within the city and county limits of San Francisco. The Fisk Center is presently being developed as a mixed-use commercial office and retail center with 350 dwelling units. The developer is Catellus.
Directly after Senator Burton’s first bill, SB 1215, was passed in the 1997 session, Burton’s campaign received three contributions totalling $55,000 from the Southern California District Council of Carpenter’s Political Action Fund. Richard Blum, Senator Feinstein’s husband, is this union’s pension fund manager.
Then, on the day that he introduced SB 1562 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 have been active on every speculation-driven stock from the bullet train in 1982 until now.
When the legislature went to conference committee in June, 2000, a new paragraph was amended into the trailer bill that was the financing scheme for the purchase of the Cargill Salt Flats near San Francisco Airport. Cargill Salt is another Nossaman, Guthner client. The trailer bill was Assemblywoman Carole Migden’s AB 398. Migden’s original bill called for $150 million in state funds to help acquire the Cargill salt flats. (When Governor Gray Davis signed the bill into law, the amount of state funds had been reduced to $20 million). Besides acquiring the Salt Flats for environmentalists, the land was also scheduled to be used for the estimated $3 billion expansion of the San Francisco Airport.
During the hearing for AB 398, Migden mentioned the fact that Senator Feinstein was carrying the ball for the acquisition in Congress with a “spot” bill. The same type of legislative vehicle that drove the Bay Bridge and Bullet Train profit-making processes. What she didn’t mention was that URS Greiner, Richard Blum’s company, was chosen as the engineering design firm in charge of the $3 billion SFO expansion, presently on hold.
Like all the other transportation bills dating back to the bullet train in 1982, the Burton-Migden-Feinstein package began as “spot” bills that contain the famous California Environmental Quality Act (CEQA) exemptions and other key elements these legislative wizards have been refining ever since. It also involved an airport runway “competition” for SFO that was very like that for the Bay Bridge competion. This time, the notice for the competition was posted the very day the competition closed. But this time, there were five finalists, not two. It wasn’t much of a surprise to learn that URS, Blum’s firm, won.
All the usual players were present when the deal was going down in conference committee during the 2000 session. Mayor Willie Brown and his people were there. Willie called the airport expansion “a golden opportunity” when he gave testimony on the bill’s behalf. Senator John Burton was up on the dais. The MTC’s Executive Director Steve Heminger was circling around, and so was MTC founder, John Foran. So were other lobbyists from the Nossaman, Guthner group. Notably absent were Richard Blum and his wife, Senator Dianne Feinstein.
In the weeks leading up to the Burton-Migden-Feinstein legislative package, the savvy investors were furiously buying stock. Richard Blum was purchasing URS stock in 100,000 share lots; it had fallen from 28 to 12 in the time that Willie Brown and Dianne Feinstein made every effort to kill the new eastern span of the Bay Bridge that the MTC had chosen in May, 1998. Then URS turned around and began rising again, from $12 to $20 a share in six months. Lockheed-Martin (LMT on the NYSE) would experience a significant jump in 2001-2002 when the new high-speed train legislation went through. The MTC was studying a new southern crossing bridge. Can you imagine the effect on Catellus stock if the bridge runs from one of their properties to a landfall on another property they own? The previous MTC study in 1991 alluded to such a possibility. As a matter of fact, the late T.Y. Lin already had a bridge designed for a Mid-Bay crossing. And who cares if it ever gets built? Just take the speculation-driven profit and move on to the next process.
RICHARD TRAINOR is an investigative reporter living in Eugene,
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Santa Fe Pacific Realty Corporation , Catellus Group, The Anschutz Corporation


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  • About Us - Catellus

    www.catellus.com/about/index
    About Us. Catellus is a national leader in mixed-use development, solving some of America’s most complex land challenges. With nearly 30 years of experience as a master developer, Catellus has transformed former airports, military bases and urban industrial sites into thriving retail, residential and commercial communities.
  • Projects - Catellus

    www.catellus.com/projects/index
    Mission Bay is one of the most significant redevelopment projects in the United States. A collaboration between City of San Francisco and Catellus Development Corporation, Mission Bay is located adjacent to the AT&T Park and close to SOMA and the Financial District. This former rail yard has emerged as a thriving waterfront mixed-use community.
  • Catellus | About | Mueller Austin

    www.muelleraustin.com/about/catellus
    About CatellusCatellus was founded in 1984, following a proposed merger of two railroad giants. When Santa Fe Industries (which owned the Atchison, Topeka and Santa Fe Railway) proposed a merger with the Southern Pacific Company (which owned the Southern Pacific Railroad), the new company created a wholly owned subsidiary named the Santa Fe Pacific Realty Corporation.
  • Welcome to Catellus Group | Catellus Group

    catellusgroup.com/index.html
    Catellus Group is a small, privately owned real estate development company located in Charlotte, North Carolina. Our philosophy is simple: We visualize what others can't. So much of real estate is about opportunity - seizing the idea, tinkering with the process, and staying true to your potential until a viable and investment quality result is attained.
  • Gates Center Advisory Board | School of Medicine ...

    www.ucdenver.edu/.../whoweare/Pages/Community-Advisory-Board.aspx
    The School of Medicine on the Anschutz Medical Campus trains future MDs, PhDs, physical therapists and physician assistants. ... Prior to that, Sperling was Managing Director and the chief operating executive at Catellus Development Group, a wholly owned company of ProLogis. ... She also serves as an advisory board member for IAALS (University ...
  • Schools and Colleges | CU Anschutz | University of ...

    www.ucdenver.edu/anschutz/education/Pages/Schools-and-Colleges.aspx
    Programs may be on either the CU Anschutz Medical Campus or CU Denver. On the Anschutz Medical Campus, students learn to expand the frontiers of human health and disease in more than a dozen basic science, analytical, clinical and nursing disciplines. ... Collaboratively formed by the University of Colorado, Colorado State University and the ...
  • 2018 Courage Classic: Prologis - Children's Hospital ...

    chcof.convio.net/site/TR/CourageClassic/General?team_id=4073&pg=...
    Catellus Development Corporation Antenucci Foundation Beau Terrell Mr. William Gray Mr. Hamid R. Moghadam Prologis Matching Gift David B. & Gretchen W. Black Family Foundation ... Anschutz Medical Campus. 13123 E. 16th Ave., Box 045. Aurora, Colorado 80045. 720-777-1700. Colorado Springs.
  • UCHealth Anschutz Medical Campus

    https://www.uchealth.org/locations/UCHealth-Anschutz-Medical-Campus
    The Anschutz Medical Campus is home to the University of Colorado School of Medicine, University of Colorado Hospital, and many other clinical education, research and treatment facilities.. Conditions we treat. The Anschutz Medical Campus is the largest academic health center in the Rocky Mountain region.
  • Philip Anschutz - Wikipedia

    https://en.wikipedia.org/wiki/Philip_Anschutz
    "Philip Anschutz, Chairman and CEO, The Anschutz Corporation, Denver, CO", The Horatio Alger Association of Distinguished Americans. Bruck, Connie, "The Man Who Owns LA" , The New Yorker , January 16, 2012.
    • Children: 3
    • Net worth: US$11.3 billion (September 2018)
  • Anschutz North America - Official Site

    https://www.anschutznorthamerica.com
    Anschutz North America is the North American importer of the German Anschutz rifles. Home Factory Rifles ANA Exclusives Custom Shop Specials Parts & Ammo Service ... Help for your Anschutz air rifle! Download our new 2018 Catalogs! Anschutz Target Line Catalog.
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    Combining the two REITs will result in an entity that will have warehouse and distribution centers valued at $21 billion.

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    Catellus to Be Bought by ProLogis

    Combining the two REITs will result in an entity that will have warehouse and distribution centers valued at $21 billion.

    June 07, 2005|Roger Vincent | Times Staff Writer

    Catellus Development Corp., one of California's largest private landowners thanks to a lineage that dates to the earliest days of railroads in the West, has agreed to be sold for $3.6 billion in cash and stock to warehouse and distribution giant ProLogis.

    Both companies are real estate investment trusts that develop and operate industrial properties. Catellus also owns Union Station in Los Angeles and a portion of the residential and office development at Mission Bay in San Francisco.

    ProLogis will continue to develop Catellus' properties, including Kaiser Commerce Center, a 588-acre former Kaiser steel mill in San Bernardino County near truck routes that serve the ports of Los Angeles and Long Beach. Catellus also is constructing office buildings at Los Angeles Air Force Base in El Segundo with Kearney Real Estate Co.

    Under terms of the deal, ProLogis would pay $33.81 a share, a 16% premium over Catellus' closing price Friday, or 0.822 share of ProLogis for each Catellus share. The total value of the deal is $4.9 billion including debt, the companies said, and marks the biggest U.S. real estate acquisition of 2005.
    The announcement drove Catellus' shares up $3.75, or 13%, on Monday to $32.99. ProLogis' shares fell $1.26 to $40.11.

    The combined company would have more than 350 million square feet of warehouse and distribution centers valued at $21 billion.

    "Catellus has the best industrial portfolio in the United States," said Jeffrey H. Schwartz, chief executive of ProLogis. The majority of Catellus' holdings are in California, which Schwartz called the top industrial real estate market in the country, with six times more buildable land in the state than ProLogis.
    "We wanted a much larger presence in Southern California, and that was a driving reason to do this" acquisition, Schwartz said.

    Catellus is "one of the most aggressive of the developers of new industrial land at the moment," Jim Ulmer, a senior vice president at Baltimore-based LaSalle Investment Management, told Bloomberg News. LaSalle owns 3.2 million shares of ProLogis and no Catellus shares.

    "It's a good deal for Catellus, and it's a very good deal for ProLogis," he said.

    Nelson Rising, chairman and chief executive of Catellus, said, "We believe this is an excellent way for our shareholders to realize the value of the platform we have built and to participate in the future growth of ProLogis."

    Rising, 63, has been Catellus' CEO since 1994 and previously was a senior partner at Maguire Thomas Partners, where he was in charge of major Los Angeles projects including the Library Tower and Playa Vista. Rising, whose 1.4% stake in Catellus is worth about $47 million, would join ProLogis' board of directors, but he would not have a management post.

    Catellus' president of commercial development, Ted Antenucci, would become president of global development for ProLogis. Schwartz declined to speculate on possible layoffs of Catellus employees.
    The union of the two companies "is very complementary in terms of what they bring to the table," said John Long, chairman of the Richard S. Ziman Center for Real Estate at UCLA and a private real estate investor through Highridge Partners and Golden Boy Partners.

    Catellus, based in San Francisco, has a huge inventory of land and expertise at getting government approvals for new construction, while ProLogis is a respected large-scale developer, Long said.

    Aurora, Colo.-based ProLogis owns and manages 2,043 warehouse and distribution centers totaling 310.8 million square feet in North America, Europe and Asia. Its customers include FedEx Corp., Home Depot Inc., General Electric Co., Sears Holdings Corp., Unilever and Wal-Mart Stores Inc.
    Catellus became a REIT at the start of last year as it shifted its focus to building and operating industrial parks instead of developing urban mixed-used projects such as Union Station and Santa Fe Place in San Diego. It has 40.6 million square feet of property, mainly distribution centers, across the U.S.
    Santa Fe Pacific Corp. spun off Catellus to shareholders in 1990.

    But the company's roots and gigantic land holdings date to the 1850s, when civil engineer Theodore D. Judah built a 23-mile line called the Sacramento Valley Railroad. It later became the Central Pacific Railroad, the first to conquer the Sierra Nevada. In 1869, the line linked up with the Union Pacific, coming from the East, with the driving of the famed golden spike at Promontory Point, Utah.

    As part of its mandate for a transcontinental railway, the federal government gave the railroad builders vast tracts of land as an incentive to complete the historic rail linkage.
    Later, with its name changed again, this time to Southern Pacific, the railroad heavily promoted its territory in the West to attract residents and businesses and became one of the most powerful players on the economic scene in 19th century California.

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    TPG Capital Buys Catellus Assets for $505M

    TPG Capital Buys Catellus Assets for $505M


    Buyout shop TPG Capital will pay roughly $505 million for a portfolio of U.S. retail and mixed-use assets currently owned by ProLogis. The properties include Los Angeles Union Station, four shopping centers, two office buildings and two residential development joint ventures, among others. The assets were acquired when ProLogis merged with Catellus Development Corp. in 2005. Private equity firm TPG Capital has more than $48 billion under management.
    PRESS RELEASE
    ProLogis (NYSE: PLD), the leading global provider of distribution facilities, announced today that it has entered into a definitive agreement with affiliates of
    TPG Capital (TPG) to sell a portfolio of U.S. retail and mixed-use assets and the Catellus name for a total purchase price of approximately $505 million.
    The properties, owned directly or through equity interests, to be sold in the transaction include: four shopping centers, two office buildings, 11 mixed-use projects with related land and development agreements, two residential development joint ventures, Los Angeles Union Station, certain ground leases and other right-of-way leases. The transaction is expected to be substantially completed in the first quarter of 2011, subject to customary closing conditions. Net proceeds will be used for the repayment of debt and to fund future development activity.
    “These assets were acquired in our 2005 merger with Catellus Development Corporation. We have built upon Catellus’ legacy for the past five years and are pleased to see these assets and people transfer to TPG, which has significant experience in real estate and a commitment to building the business. The Catellus assets are high-quality with good long-term prospects, but they are not in keeping with our strategy to concentrate our investment in core industrial properties in the world’s major logistics corridors,” Walter C. Rakowich, ProLogis chief executive officer, said.
    “We are excited to partner with the strong Catellus management team in the next chapter of the company’s evolution,” said Kelvin Davis, TPG senior partner. “The company is already well positioned through its diverse portfolio of high-quality, well-occupied assets in growing markets. As a standalone company, we believe the new Catellus will be in an excellent position to capitalize on the economic recovery and build on its strong footprint.”
    Ted R. Antenucci Expected to Join New Catellus Entity Mid-2011
    It is anticipated that the majority of ProLogis employees associated with the retail/mixed-use properties will be offered employment with Catellus. Following the closing of the sale to TPG, it is expected that ProLogis’ president and chief investment officer Ted R. Antenucci, who joined ProLogis with the Catellus merger in 2005, will rejoin Catellus after a transition period concluding in mid-2011. Mike Curless, managing director of global investments, is expected to assume Antenucci’s investment role upon Antenucci’s departure.
    “I would like to thank Ted for his many contributions over the past five years,” Rakowich said. “Not only was he instrumental in the seamless integration with Catellus in our merger, but his efforts as we worked through the de-risking and de-leveraging of ProLogis over the past two years were invaluable. We wish Ted the best in this anticipated next phase of his career with Catellus.
    “At the same time, we are fortunate to have Mike Curless with us to take Ted’s place. Mike was formerly the president of Lauth, a major real estate development company, and was with ProLogis from 1995 to 2000. He has been leading our land review and other investment processes throughout the latter part of this year and will work closely with Ted through the anticipated transition.”
    ProLogis will retain a preferred equity interest in Catellus of approximately $70 million, which will earn a preferred return at an annual rate of 7 percent for the first three years of the term, 8 percent for the fourth year of the term and 10 percent thereafter until redeemed. Partial or full redemption can occur at any time at TPG’s discretion or after the five-year anniversary at ProLogis’ discretion. ProLogis also will provide $30 million first mortgage financing on Los Angeles Union Station, which will bear interest at 7 percent.
    Update to Anticipated Impairments and Other Fourth Quarter Charges
    “We are pleased with the progress we have made during the fourth quarter to reposition the company through non-strategic and non-core asset sales, as well as a successful equity issuance and debt tender offers,” Rakowich said. “As a result of these actions, as well as a review of our land bank and other assets and certain restructuring activities, we will incur charges in the fourth quarter associated with the following initiatives.”
    * As disclosed on October 26, 2010, in connection with the anticipated disposition of its retail, mixed-use and ground lease assets noted above, the company determined that it expected to recognize a non-cash impairment charge in the fourth quarter. In addition to the charge associated with the planned sale of the Catellus non-core assets, the company expects to incur non-cash charges and impairments related to various other real estate investments (other than land) that are expected to be sold in 2011. The total of all the charges and impairments associated with these activities is expected to range from $170 to $190 million.
    * As disclosed on October 25, 2010, the company made a strategic decision to more aggressively pursue land sales, which was expected to result in further land impairments roughly in line with discount ranges presented in the company’s recent investor presentations. As this analysis is now nearing completion, the charges to be taken in the fourth quarter are expected to be $640 to $680 million, representing roughly 27 to 29 percent of the land book basis at September 30, 2010.
    * As planned in conjunction with the company’s equity offering and disclosed on December 7, 2010, ProLogis purchased approximately $1.3 billion aggregate principal amount of notes in its senior debt tender offers, which will result in a charge of approximately $139 million to earnings and funds from operations (FFO) in the fourth quarter of 2010. In addition, ProLogis will recognize a loss of approximately $15 million on the repurchase of $303 million aggregate principal amount of convertible debt and a charge of $6 million due to the reduction in capacity on its credit facility from $2.3 billion to $1.6 billion. The total debt-related charge is expected to be approximately $160 million, of which $33 million is non-cash.
    * Finally, as previously disclosed on October 25, 2010, in the fourth quarter the company intended to close out various derivative positions in light of the current and anticipated interest rate environment and has identified potential cost savings from platform and organizational efficiencies. Implementation of the derivative cancellations and the efficiency initiatives are expected to result in one-time cash charges of approximately $25 to $30 million.
    Additionally, the company is undertaking its standard review of goodwill in conjunction with the preparation of its year-end financial statements. Total goodwill is approximately $400 million, with roughly 60 percent of that amount associated with assets in North America, one-third in Europe and the remainder related to ProLogis’ investment management business.
    William E. Sullivan, chief financial officer, said, “All of the items and related charges detailed above have been previously communicated. We are happy to have completed the analyses and to be putting this process behind us, thereby simplifying our reporting. As we move into 2011, we look forward to focusing on growth in our core business.”
    2010 Guidance for Core Funds From Operations Unchanged
    Excluding all the cash and non-cash charges noted above, the company’s most recent 2010 per diluted share guidance for core FFO and for FFO, excluding significant non-cash items and non-recurring charges, remains unchanged. The charges outlined above equate to per share losses of $2.02 to $2.16 based on the anticipated full-year weighted average share count for 2010.
    About ProLogis
    ProLogis is the leading global provider of distribution facilities, with more than 475 million square feet of industrial space owned and managed (44 million square meters) in markets across North America, Europe and Asia. The company leases its industrial facilities to more than 4,400 customers, including manufacturers, retailers, transportation companies, third-party logistics providers and other enterprises with large-scale distribution needs. For additional information about the company, go to www.prologis.com.
    About TPG Capital
    TPG Capital is the global buyout group of TPG, a leading private investment firm founded in 1992, with more than $48 billion of assets under management and offices in San Francisco, Beijing, Fort Worth, Hong Kong, London, Luxembourg, Melbourne, Moscow, Mumbai, New York, Paris, Shanghai, Singapore and Tokyo. TPG Capital has extensive experience with global public and private investments executed through leveraged buyouts, recapitalizations, spinouts, growth investments, joint ventures and restructurings. TPG seeks to invest in world-class franchises across a range of industries. Real estate-intensive businesses constitute a core area of investment focus and expertise for TPG, including ST Residential (a $4.5 billion portfolio of mortgage loans and REO assets previously owned by Corus bank), Harrah’s Entertainment, Fairmont Raffles Hotels International , Neiman Marcus, ParkwayLife REIT, PETCO and Surgical Care Affiliates
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    Catellus was founded in 1984

    Catellus was founded in 1984, following a proposed merger of two railroad giants. When Santa Fe Industries (which owned the Atchison, Topeka and Santa Fe Railway) proposed a merger with the Southern Pacific Company (which owned the Southern Pacific Railroad), the new company created a wholly owned subsidiary named the Santa Fe Pacific Realty Corporation. The subsidiary was charged with managing the company’s non-railroad landholdings and turning unproductive parcels across the country into revenue generating assets.

    In 1990, after the merger of the railroads was denied, Santa Fe Pacific Realty Corporation spun off as a publicly traded company named Catellus Development Corporation (NYSE:CDX). Catellus quickly became nationally known for its visionary brownfield redevelopment projects built in coveted locations near major metropolitan areas and along some of the country’s most scenic shorelines, active seaports and busy transportation routes. Over time Catellus grew its land and building portfolio, as well as a reputation as one of the country’s most notable pioneers for mixed-use land development.

    Catellus became a Real Estate Investment Trust (REIT) in 2004 with a land and building portfolio consisting of extensive mixed-use, retail and industrial developments. A year later Catellus merged with ProLogis, a leading provider of industrial real estate. In 2011, TPG Capital (TPG) purchased Catellus’ mixed-use and retail assets from ProLogis. Today the company operates as Catellus Development Corporation (Catellus). TPG Capital is the global buyout group of TPG, a leading private investment firm with offices worldwide.

    Click here to visit Catellus' website.


    Catellus was derived by the assets of Southern Pacific which was split off during Bennett v. Southern Pacific.  That litigation died an ugly death when a key witness was murdered.  

    Blood is on their hands but they may not know it but they really do as I've told them.  




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    The Catellus Derailment : Ouster of CEO is Latest Chapter in Saga of Struggle


    The Catellus Derailment : Ouster of CEO is Latest Chapter in Saga of Struggle

    February 28, 1994|DAVID W. MYERS and CHRIS KRAUL | TIMES STAFF WRITERS

    The news last week that the top executive at Catellus Development Corp. in San Francisco will resign is the latest twist in a long struggle by California's largest private landowner to turn nearly 1 million acres--once owned by the nation's railroad barons--into a vast real estate empire.
    The expected departure of Catellus Chief Executive Vernon B. Schwartz was engineered by the California Public Employees Retirement System (CalPERS), officials close to the company and pension fund say privately. CalPERS owns more than 40% of the company's stock.
    Schwartz declined to be interviewed. So did senior officials at CalPERS, the giant pension fund in Sacramento that invests the retirement money of more than 800,000 of the state's current and retired workers.
    CalPERS officials had been lobbying for drastic changes at Catellus because they were tired of seeing the company's stock go nowhere and of listening to management blame the firm's misfortunes on California's weak real estate market.
    The pension fund has seen the value of its initial $473-million investment in Catellus cut in half in recent years. Even its financial adviser, who initially recommended that CalPERS buy the stock, now doubts that the fund can recoup these losses any time this century.
    "This whole thing has turned out to be a catastrophe for investors, especially CalPERS," said Burland East, an analyst who follows Catellus for Kemper Securities in Chicago. "It's not all Catellus' fault--there's plenty of blame to be spread around."
    (The losses represent no danger to the health of the fund itself, East noted. CalPERS has assets that exceed $80 billion, making it the largest public pension fund in the nation.)
    Catellus--which transportation giant Santa Fe Pacific Corp. established as an independent, publicly traded company in 1990--is involved in about a dozen megaprojects from San Francisco to San Diego. It also owns more than 900,000 acres of land across the state--an amount twice the size of Orange County.
    While Catellus' once-bright prospects have certainly been dimmed by California's real estate recession, it has also been hurt by forces ranging from slow-growth advocates to toxic waste.
    Catellus' joint-venture in the once-thriving Pacific Design Center in West Hollywood is suffering, as its wealthy clients have cut back their spending. A plan to build a massive mixed-use complex at downtown Los Angeles' Union Station has been caught up in controversy and legal disputes. So has another proposal to develop a 16-acre site in downtown San Diego.
    And then there is Mission Bay in San Francisco, the company's most ambitious project--and perhaps its most problem-plagued.
    The 313-acre, $2-billion development would front the bay about a mile south of downtown and would be the largest in the city's history. Plans call for 8,700 homes and more than 6 million square feet of offices, shops and light-industrial space.
    But the project has languished on the drawing boards for years, as first Santa Fe and then Catellus wrangled with everyone from local no-growth advocates to government environmental officials.
    Conservationists wanted the company to build fewer offices and preserve more of its wetlands. Housing advocates pushed for lower rents and cheaper selling prices. Environmental agencies wanted Catellus to clean up the toxic-laced site, which was previously used as a dump for everything from 1906 earthquake rubble to parts from old locomotives.
    Catellus worked out a compromise with each of the groups and received the city's conditional approval for the project in 1991. But the permission came with so many strings attached that Catellus does not expect to break ground until next year at the earliest.
    "Mission Bay is a great project, but it has just taken too long to get it off the ground," said John Lutzius, an analyst who follows Catellus for Newport Beach-based Green Street Advisors. "And all the while the land just sits there, it's eating up cash without generating any income."
    No one expected delays this long back in the 1980s, when Santa Fe started mulling the plan to establish Catellus as an investor-owned company to develop vast real estate holdings acquired in the previous 100 years.
    Much of the property stood in the middle of key transportation hubs, bustling commercial areas or fast-growing suburbs. Raw-land prices for less desirable parcels were rising as much as 20% a year.
    CalPERS first got involved in 1989 when, in a private sale of stock, it bought a 20% stake in Catellus at the urging of advisers at Chicago-based JMB Realty Corp.
    The pension fund paid $398 million for about 10.5 million shares--or nearly $38 a share--and also invested another $75 million in a convertible security. CalPERS felt the move was a smart long term investment that would pay off when the properties were developed.
    But by late 1990, when shares in Catellus began trading publicly for the first time, California real estate prices had already begun their steep descent.
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