It looks like Alameda County and City of Oakland officials will be falling all over themselves to approve a deal to potentially keep the Oakland Raiders football team in Oakland. Unfortunately City and Alameda County staff have done nothing to investigate the potential pitfalls of the proposed deal. What could go wrong? The Fortress Investment Group (Fortress), who is proposed to be the major funder of the project has a bad history in previous deals involving the development of sports facilities. Nothing in the staff reports for the meetings discusses these previous projects where the public was left holding the monetary bag.
Fortress is a publicly traded corporation that was founded in 1998 by among others, Wesley Edens. Mr. Edens is currently a member of the board of directors for Fortress and his LinkedIn account lists him as the chairman and founder of the company. Prior to founding Fortress, Mr. Edens was a partner at BlackRock Financial Management, Inc, and prior to that he was a partner and managing director of Lehman Brothers. Fortress purchased Nationstar Mortgage in 2006 in what the Fortress website describes as an “opportunistic buyout.” In 2014 Mr. Edens was part of a group that purchased the Milwaukee Bucks basketball team.
On Tuesday December 13, 2016, both the Alameda County Board of Supervisors and the Oakland City Council will have both closed session and open session agendas to discuss and approve a Term Sheet for the development of a new Oakland Raiders stadium at the current Coliseum site. (The County staff report is here. The City Staff Report is here.)
To date I have seen no mention in the press of the significance of Fortress being involved in the proposed Oakland Raiders stadium deal. The City of Oakland and Alameda County should be looking very carefully at the proposed deal, and more specifically looking at the involvement of Fortress given the history of recent events in Milwaukee, Wisconsin and previously in Vancouver, Canada. A simple internet search would have disclosed a plethora of previous questionable deals involving Fortress.
During the preparation for the Vancouver Winter Olympics in 2010, Fortress became a major player because is owned the Whistler Blackcomb ski area where many of the events were to be held. Fortress was involved in the development of housing in Vancouver for the athletes participating in the Olympics. Because economic factors were not favorable at the time, Fortress was unable to fulfill their commitments to funding the development of the housing, and the City of Vancouver and the province of British Columbia were left filling the financial void. Do some internet searches and see all the stories out there about the Olympics incident. You will see how Fortress overestimated its abilities and left others with the responsibility of cleaning up the economic mess.
As the LA Times reported, in 2012 Fortress was sued over a deal involving a financing deal involving Sony Pictures.
The most recent activity that relates to Oakland involves the Milwaukee Bucks professional basketball team. After purchasing the team in 2014 the ownership group decided a new arena was needed for the team. When it was all said and done the State of Wisconsin agreed to put $250 million into the new $500 million arena in downtown Milwaukee. Some have speculated that the money for the arena came from cuts to public education; the New York times reported on it here.
Fortress is the majority stockholder in Nationstar Mortgage, possibly the worst mortgage servicing company in the country. Because of the impact Nationstar has had on Milwaukee, a local group, Common Ground, pressured Nationstar, Eden, and the City to negotiate a deal that brought $30 million of relief to Milwaukee homeowners. The people of Milwaukee and Wisconsin are still subsidizing the new arena, but the community was able to get a little something back.
Our involvement with Nationstar goes back to the loan we obtained in 2005 to purchase our home. There was fraud during the origination of the loan and we have been in court for the last five years trying to resolve the problems. Unfortunately the California court system is unfriendly to any homeowner and the process is slow and difficult. Nationstar assumed the servicing of our loan in 2013 after purchasing the mortgage servicing rights from Bank of America. We have battled with Nationstar for over three years, and the problems are never ending. Most recently we lost $89,000 in mortgage assistance because Nationstar Vice President Marisa Barker misled us about the necessity to sign a recast for our loan in order to finalize the award of $89,000 in Keep Your Home California money. Our travails with Nationstar were documented in a previous post.
Why didn’t city or county staff do a simple internet search to learn about the past dealings of Fortress, Edens, Nationstar and others? Shouldn’t the elected officials making the decisions about this potential development be informed about the past financial debacles involving Fortress and related entities? It’s time for the elected officials in Oakland and Alameda County to hold staff responsible for failing to fully inform them of all the potential pitfalls of the development, and the possible problems with the parties involved.
Finally the City and County should demand Fortress provide relief to homeowners at least equivalent to what was provided those in Milwaukee. An Urban Strategies report concluded there were 10,500 completed foreclosures in Oakland between 2007 and 2011 and we know to total count has gone higher since 2011. Given how severely Oakland was impacted during the mortgage meltdown, Nationstar better show up with more than $30 million. But most importantly the Oakland City Council and the Alameda County Board of Supervisors must stop and investigate whether Fortress can be trusted to not leave the city and county left holding the bag, responsible for financial overruns and shortfalls like those in the Vancouver and Milwaukee.