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Who really owns the Padres?

One Team, Countless Corporations

Construction workers remove metal building supports at the Westin Park Place hotel and condominium complex
  • Construction workers remove metal building supports at the Westin Park Place hotel and condominium complex

Who really owns the Padres? That question has remained unanswered since John Moores and Larry Lucchino proposed in 1996 that San Diego city taxpayers subsidize the team's venture to build a downtown baseball stadium. The team has maintained that Moores, a computer mogul from Houston, and Lucchino, a lawyer who is a partner in the Washington, D.C., firm of Williams and Connolly, are the ball club's principal owners. But the ownership trail ends there, at least as far as the public knows.

The team claims Larry Lucchino, a lawyer who is a partner in the Washington, D.C., firm of Williams and Connolly, and John Moores, are the ball club's principal owners.

The team claims Larry Lucchino, a lawyer who is a partner in the Washington, D.C., firm of Williams and Connolly, and John Moores, are the ball club's principal owners.

City officials, who when asked for documents in the city's possession that identify the team's ownership, say they don't have any records about it and have never asked for the information. The team is officially owned by Padres, LP, a Delaware limited partnership, but that's all the information legally available to the public. A courtroom attempt by attorney Bruce Henderson to require that the city council find out who is behind the team was turned aside by Superior Court judge Mac Amos, who ruled that ordinary citizens cannot compel the city council to find out who owns the team. The council has consistently refused to do so on its own.

Westin hotel site. The new city council voted unanimously to allow Moores to move ahead with a 512-room "Westin Park Place" hotel and condominium complex at the corner of Sixth Avenue and L Street.

Westin hotel site. The new city council voted unanimously to allow Moores to move ahead with a 512-room "Westin Park Place" hotel and condominium complex at the corner of Sixth Avenue and L Street.

Earlier this year, three state appellate court judges — Richard Huffman, Gilbert Nares, and Daniel Kremer — upheld Amos's ruling that Henderson's client, a local citizen, had no right to enforce a city charter section requiring that the city council find out the ownership of the companies it deals with. "To the extent Charter section 225 grants the city council discretion to decide that further disclosure should or should not be required, we are not in a position to dictate that such discretion should be exercised in any particular way," the judges averred. "Finally, this Charter section does not appear to have been adopted to create a private right of action by disgruntled citizens to torpedo measures with which they disagree."

Construction-site sign

Construction-site sign

For the time being, that appears to be the final word on finding out more about who owns the baseball team. But there is more to the downtown stadium project than the stadium. As part of its deal for the stadium, the city gave Moores development rights to a swath of the east side of downtown, about 26 blocks. Acting as the redevelopment agency, the city council has been condemning property both within and outside the footprint of the stadium, to be provided to Moores at subsidized prices.

In addition to the stadium and its so-called "Park at the Park," a commercial development in back of the baseball field, Moores has been given development rights and subsidized real estate for three hotels and an office building. In February, the new city council, chaired by Mayor Dick Murphy, who during the election cast himself as a ballpark skeptic, voted unanimously to allow Moores to move ahead with a 512-room "Westin Park Place" hotel and condominium complex at the corner of Sixth Avenue and L Street. At the time of the council vote, the Union-Tribune quoted deputy city attorney Leslie Girard as saying, "This hotel will go through whether or not the ballpark goes forward," because the rooms were "desperately needed."

The approximately one-block site of the hotel is on property acquired from the city's old-line Frost family in a condemnation action last December for about $6 million, according to a report in the Union-Tribune. City documents show that the Moores venture, called JMI Realty, Inc., will pay only about $2 million in cash for the land. The rest of the cost is being picked up by city taxpayers as part of the ballpark project.

Last September, Moores and his JMI Realty, Inc., announced they had lined up a $104 million loan from Bank One of Chicago and West-deutsche Landesbank Girozentrale of Germany. The balance of the financing for the development, which JMI said would cost a total of $148 million, was not disclosed.

On the strength of that announcement, the city council agreed to allow Moores to begin construction on the project without acquiring ownership of the property. In a so-called "Foundation Right of Entry Agreement" dated last December, JMI Realty was allowed to begin construction of what was billed as "foundation only improvements," including "garage slab-on-grade, garage structural wall and column system, and wall waterproofing systems."

Pam Hamilton, who is managing the project on the city's side, says that in return for the right of entry, JMI agreed to post a $400,000 "letter of credit" to provide sufficient funds to remove the foundation work just in case the developer failed to carry through with the project. Since beginning construction, the project has grown from a huge hole in the ground to an expensive-looking, four-story structure of concrete and reinforcing steel, encased in wooden forms. Hamilton says that all the work onsite to date is permitted under the foundation entry agreement. According to Hamilton, the project had been coming along nicely.

But last week, construction suddenly ground to a halt, and JMI announced that it was suspending the operation until the city came up with the cash to build the adjacent baseball stadium, on hold since last spring, when it came to light that then-city councilwoman Valerie Stallings had accepted gifts and stock tips from Moores. "Unfortunately, it is difficult to proceed much further with construction at this time because doing so requires coordination with multiple ballpark-related projects, such as a parking facility next door and a District Central Cooling Plant -- projects that will need to be redesigned or not built at all if there is no ballpark," according to a JMI news release. It turned out that the much-heralded bank loan JMI had announced for the project had never been made.

That move seemed to some observers as though JMI and Moores had left city taxpayers once again holding the bag, in that the land has never been sold to JMI and that the construction work on the project to date seems far too elaborate to be taken down for just $400,000, the amount of the JMI letter of credit. The city's Hamilton says not to worry, that the redevelopment agency's right-of-entry agreement with JMI requires that JMI Realty, along with its parent, JMI Services, make good on any expenses arising from the project's shut-down.

But who is behind Moores and his JMI companies? According to agreements between the redevelopment agency and the companies, JMI Realty is entirely owned by JMI Services, which in turn is wholly owned by Moores and his wife Rebecca. Both JMI entities are Delaware corporations. The city's agreement with JMI Realty allows it to syndicate its interest in the hotel venture, as well as the other taxpayer-subsidized stadium-related projects, as long as it discloses the identity of the new investors to the city. The agreement also requires JMI to continue to stand behind the project financially. Under terms of the deal, the city shall not "unreasonably refuse" its approval for JMI-requested changes of ownership.

So far, says Hamilton, JMI has not made any disclosures of new ownership. But, she notes, such filings would not yet be required because the so-called "disposition and development" agreement between the city's redevelopment agency and JMI has not yet gone into effect. The construction work to date, she points out, has been covered only by the interim "right-of-entry" agreement, and JMI has not yet paid for the land or taken legal title to it. "We have not closed the financing and conveyed the property yet. As part of the closing, we will know where the equity dollars are coming from."

A hint as to from where those new investors might be gleaned was provided in February 2000, when JMI announced that Legg, Mason, Wood, Walker, a Baltimore-based investment-banking firm, would act as "financial advisor and exclusive placement agent for the Padres in connection with the downtown Ballpark and Redevelopment Project." The company contact for the deal was said to be John A. Moag, Jr., the former chairman of the Maryland Stadium Authority.

Beginning last spring and summer, yet another clue to the ultimate ownership of the Moores-related downtown development ventures emerged when John C. Kratzer, president of JMI Realty, began registering what has become a total of 20 Delaware limited liability companies, many of which appear to have a direct relationship with the downtown development.

Each of the companies begins with the name JMIR and include JMIR-B Parcel; JMIR-Campus at the Park Manager; JMIR-Campus at the Park; JMIR-Central Plant Ground Lessor; JMIR-Central Plant Ground Lessor Manager; JMIR-D Parcel; JMIR-Downtown Acquisition; JMIR-Downtown Acquisition Manager; JMIR Guaranty Company; JMIR-Master Development; JMIR-Produce Acquisition; JMIR-Produce Acquisition Manager; JMIR-San Diego Harbor Hotel Company Manager; JMIR-San Diego Harbor Hotel Company; JMIR-San Diego Suites Hotel; and JMIR San Diego Suites Hotel Manager.

The latest JMIR entity, JMIR-San Diego Condo Company, state records show, was registered this March 20 by Karen E. Trimble, its "organizer/authorized person."

On August 10 of last year, according to county records, JMIR Acquisition, LLC, purchased for $24 million approximately eight blocks in the ballpark area from San Diego Gas and Electric. According to a trust deed recorded at the same time, San Diego National Bank lent the company $17 million for the purchase. The city's Pam Hamilton says that she is not aware of the firm or the identity of its owners. The city is ultimately slated to buy the land as part of its deal to subsidize the baseball stadium but has no ownership-disclosure requirement as part of that transaction.

According to a document signed by Kratzer and filed with the California Secretary of State's office, the JMIR entities are wrapped together in a byzantine web of interlocking ownerships. For instance, JMIR-Downtown Acquisition, LLC, is managed by JMIR-Downtown Acquisition manager, "its sole manager," which in turn is managed by JMIR-Master Development, LLC, its "sole and managing member." JMIR-Master Development is in turn managed by JMI Realty, Inc., "its sole and managing member."

But the complexity doesn't stop there. Shortly after the JMIR companies were formed last year, many of them filed a so-called "Form D" with the federal Securities and Exchange Commission. According to those filings, individual shares in many of the JMIR companies have been sold to unidentified investors for just a dollar apiece.

For example, according to the Form D for JMIR-Campus at the Park, dated August 19, 2000, 11 individual investors paid a grand total of $11 for their "limited liability company membership interests." The $11 was earmarked for "working capital," the filing says. It is signed by Kratzer, who is listed as "President of JMIR-Campus at the Park Manager LLC as Manager of JMIR-Campus at the Park LLC."

Similar forms, showing sale of 11 ownership interests in each limited liability company, are on file for JMIR-Downtown Acquisition, JMIR-Harbor Hotel Company, and JMIR-San Diego Suites Hotel, among others. The city's Hamilton says she's not aware of any of these transactions but that they do not concern her. "John Moores can either put all the equity into the project himself, or he could bring other investors into it. His financial statements have been provided to our attorneys, who have assured us his financial equity is strong and that's what matters to us."

Epilogue

Late last week, Sempra Energy Solutions, a subsidiary of the utility giant Sempra Energy, sued JMI Realty, Inc., and 50 anonymous defendants in San Diego Superior Court, alleging that JMI owes Sempra $142, 629.47 worth of "design and engineering services." Sempra alleges that the work was done in conjunction with an agreement for a "Ballpark Project Chilled Water District Plant," which JMI canceled in September of last year.

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