Central Valley real estate deal scrutinized amid hot Congressional race

When the federal government closed Castle Air Force Base in Merced County in the 1990s, the dilapidated buildings and vast expanse of aging tarmac left behind seemed more like a liability than an opportunity.

But by 2018, the old runways that once carried B-52 bombers had found a new and unexpected customer: Google, which was testing its experimental self-driving vehicles there, far from the prying eyes of Silicon Valley.

At the urging of then-state Assemblyman Adam Gray, California gave Merced County $6.5 million that year to expand the self-driving testing program at the old base.

A few years later, Gray invested there, too.

In 2022, a company in which Gray is a minority owner bought four apartment buildings on the former base from Merced County, according to a Times review of business filings, property records and Gray’s financial disclosures. Gray’s link to the real estate deal has not been previously reported.

The sale closed for $600,000 in August 2022, records show, and the property is now valued at more than $2.5 million. Gray’s representatives said that the investment shows his interest in providing affordable housing, and that renovations have been so costly that he has yet to make money.

Nonetheless, the real estate deal in rural Atwater, Calif., has come under scrutiny as Gray, a Democrat, fights to unseat first-term Rep. John Duarte (R-Modesto). The race in California’s 13th Congressional District is a bitter rematch of 2022, when Duarte beat Gray by the second-closest margin in the nation: 564 votes.

The race is among the handful of contests across the U.S. that are seen as pivotal in determining which party controls Congress after the November election.

Republicans have questioned the timing of Gray’s purchase, which closed four months before he left the Legislature and less than a year before California officials awarded nearly $50 million in new funding for the site. The 2023 grant from the California State Transportation Agency helped Merced County build out a rail hub on the base site to handle cargo loaded onto trains from the ports of Long Beach and Los Angeles.

“Gray’s self-serving scheme reveals his true colors as a Sacramento politician who lines his own pockets at the expense of Valley families’ trust and hard-earned dollars,” said Ben Petersen, a spokesman for the National Republican Congressional Committee, which works to elect Republicans to the House of Representatives.

Petersen accused Gray of “mixing taxpayer money with personal profit” and said the apartment deal should be investigated.

Far from Gray lining his pockets, his campaign and company said, the old Castle Air Force Base apartments have required so much renovation that Gray has actually lost money.

Ben Rodriguez, Gray’s campaign manager, said the allegations were false and “intended to distract voters from John Duarte’s disastrous record.”

“While Adam Gray has brought back real help for families across this district, Duarte is making things worse for families every day he spends in Congress,” Rodriguez said.

Gray is a minority owner in Gemenii LLC, the company that owns the apartment complex at the base. Gemenii is a subsidiary of a family-owned residential and commercial construction company of which Gray is also a member, the firm said.

Gray learned about the Castle Air Force Base apartments about six months before the sale, when “partners that own other properties at Castle” approached him with the idea of renovating the 80-unit complex to provide affordable housing, the company said.

The four spartan buildings, once barracks for airmen, were in disrepair, and three were vacant. Merced County had classified the property as surplus and assessed the buildings and the 5.3 acres of land beneath them at $400,000 to $600,000, the company said.

When the county received “no other competitive offers,” the firm said, Merced County sold the buildings for $600,000.

The firm has since spent millions on renovations, “exactly as intended by Merced County when the property was sold in an open and public sale process,” company attorney Richard Marchini said in a written statement.

Gray was still representing the Modesto area in the state Assembly when the sale closed.

A Google Waymo autonomous vehicle navigates the roads inside the company’s facility on the property of the former Castle Air Force Base, which is now a municipal airport, in Atwater, Calif. in 2017.

(San Francisco Chronicle / Hearst Newspapers via Getty Images )

Gray has a 30% stake in the firm that owns the apartments, the company said. His name does not appear in the company’s state business filings.

Gray first disclosed his investment in his 2022 Form 700, the financial disclosure that California lawmakers are required to file annually with state ethics officials.

Government experts said it did not appear that Gray’s real estate deal broke the law.

But, they said, elected officials who invest in real estate must be aware of the appearance of conflicts of interest, particularly when investing in their districts.

Dan Schnur, the former head of the California Fair Political Practices Commission, said that Gray’s real estate investment at the site being bookended by the award of taxpayer funds seemed “suspicious.”

“Everyone deserves the benefit of the doubt, but the best way to receive the benefit of the doubt is to earn it,” Schnur said. “A public servant ought to be aware of how these things might be perceived.”

After Gray lost his run for Congress in 2022, he filed a federal financial disclosure with the House in which he did not disclose the real estate investment or his stake in the LLC that owns the buildings.

His campaign said that Gray did not mention the apartment complex investment because there was no revenue to report, but that he disclosed his position in the parent company.

In a new filing made public this month, for Gray’s second run for Congress, he said he received between $100,000 and $1 million from the LLC that owns the apartments in 2023, and between $50,000 and $100,000 in the first half of 2024.

Those figures represent the company’s total revenue, rather than Gray’s, and were listed “out of an abundance of caution,” the campaign said.

Gray has not received any income from the business in 2023 or 2024, the campaign said, and the investment has not made a profit.

The former air base, now called Castle Commerce Center, covers about 3 square miles. It’s home to miles of empty roads, as well as dozens of private and government tenants, including a federal prison, a post office, Merced’s commercial airport and Waymo, Google’s autonomous vehicle company.

After Gray helped secure the $6.5-million grant for the self-driving car testing site in 2018, Merced County converted vast stretches of unused tarmac at the base into a testing hub. There are now full intersections with traffic lights and signage and a 2.2-mile test freeway with on- and off-ramps where vehicles can practice driving in urban environments.

The site, operated by an Ohio-based company, has hosted two dozen companies from Silicon Valley and major automotive firms.

In the midst of that boom, Merced County’s supervisors continued selling portions of the base as surplus land. That included the 5.3-acre site and the 80-unit apartment complex, which the board sold on a 4-0 vote in May 2022 to Gemenii.

At the time of the sale, the land was valued at $465,000, and the structures were valued at $135,000, according to tax records provided by the company.

The company took out an $885,000, 30-year mortgage at the end of 2022, and a $3-million, 15-year mortgage in June of this year, to finance renovations at the building, the company said.

Two buildings have been gutted and renovated so far, a process that included asbestos removal and replacing windows and appliances, the company said.

The renovated buildings are now valued at more than $2 million, while the underlying land value has risen by $9,300, according to tax bills provided by the company.

The increase in value is “directly connected to the material financial efforts of Gemenii to revitalize the property,” the firm said. Any developments at the air base site, the company said, “have had no impact on the property’s value.”