When the federal government closed Castle Air Force Base in Merced County in the 1990s, the dilapidated buildings and vast expanse of aging asphalt left behind felt more like a liability than an opportunity.
But by 2018, the old runways that used to carry B-52 bombers had found an unexpected new 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 Rep. Adam Gray, California gave Merced County $6.5 million that year to expand the self-driving test program at the old base.
A few years later, Gray invested there as well.
In 2022, a company in which Gray is a minority owner bought four apartment buildings at the former base in Merced County, according to a Times review of business filings, property records and Gray’s financial disclosures. Gray’s link to the real estate transaction has not been previously reported.
The deal closed for $600,000 in August 2022, and the property is now worth more than $2.5 million. Gray’s representatives said the investment shows his interest in providing affordable housing and that the renovations have been so expensive that he has yet to make any money.
Even so, 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 for 2022, with Duarte beating Gray by the second-closest margin in the nation: 564 votes.
The race is one of a handful across the United States that are seen as pivotal in determining which party controls Congress after the November elections.
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Republicans have questioned the timing of Gray’s purchase. The deal closed four months before he resigned from the legislature and less than a year before California officials provided nearly $50 million in new funding for the site. A 2023 grant from the California State Department of Transportation helped Merced County build a rail hub at the base to handle freight loaded onto trains from the ports of Long Beach and Los Angeles.
“Gray’s selfish plan reveals his true colors as a Sacramento politician who lines his own pockets at the expense of the trust and hard-earned dollars of Valley families,” said Ben Petersen, a spokesman for the National Republican Congressional Committee. elect Republicans to the House of Representatives.
Petersen accused Gray of “mixing taxpayer money with personal gain” and said the housing transaction should be investigated.
According to his campaign and company, Gray would not be lining his pockets, the old castle airbase apartments have required so much renovation that Gray has actually lost money.
Grey’s campaign manager Ben Rodriguez said the allegations were false and “intended to distract voters from John Duarte’s disastrous record.”
“While Adam Gray has brought real help to families across the region, Duarte is making things worse for families every day he spends in Congress,” Rodriguez said.
Gray is a minority shareholder in Gemenii LLC, the company that owns the underlying apartment complex. Gemenii is a subsidiary of the family-owned residential and commercial development company, of which Gray is also a member, the company said.
Gray learned about the Castle Air Force Base apartments about six months before the sale, when “partners who own other properties in Castle” approached him with the idea of renovating the 80-unit complex to provide affordable housing, the company said.
Four Spartan buildings, once airmen’s barracks, 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.
After the county received “no other competitive bids,” the company said, Merced County sold the buildings for $600,000.
The company has since spent millions on renovations, “exactly as Merced County intended 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 deal closed.
Gray has a 30 percent stake in the company that owns the apartments, the company said. His name does not appear in the company’s state business documents.
Gray first disclosed his investment in a 2022 Form 700, a financial disclosure that California lawmakers must file annually with state ethics officials.
Government experts said it did not appear that Gray’s real estate transaction broke the law.
But they said elected officials who invest in real estate need to be aware of potential conflicts of interest, especially when investing in their own districts.
Dan Schnur, former director of the California Commission on Fair Political Practices, said Gray’s real estate investment in the seat, which was reserved for a grant of taxpayer funds, appeared “suspicious.”
“Everyone deserves the benefit of the doubt, but the best way to get the benefit of the doubt is to earn it,” Schnur said. “A public official should be aware of how these things can be seen.”
When Gray lost his bid 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 Gray did not mention the apartment building investment because it had no reportable income, but that he disclosed his position at the parent company.
In a new filing released this month for Gray’s second term in Congress, he said he received $100,000 to $1 million from the LLC that owns the apartments in 2023 and $50,000 to $100,000 in the first half of 2024.
Those numbers represent the company’s total revenue, rather than Gray’s, and are listed “out of an abundance of caution,” the campaign said.
According to the campaign, Gray has not received income from the business in 2023 or 2024, and the investment has not produced a profit.
The former air base, now called the Castle Commerce Center, covers approximately 3 square kilometers. There are miles of empty roads and dozens of private and government tenants, including a federal prison, the post office, Merced Commercial Airport and Waymo, Google’s autonomous vehicle company.
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After Gray helped secure a $6.5 million grant for a self-driving car test site in 2018, Merced County converted huge swaths of unused asphalt at the base into a testing center. There are now full intersections with traffic lights and signs, and a 2.2-mile test highway with on- and off-ramps for vehicles to practice driving in an urban environment.
The site, run by an Ohio-based company, has hosted two dozen companies from Silicon Valley and major auto companies.
Amid the boom, Merced County supervisors continued to sell off parts of the base as surplus land. It included a 5.3-hectare plot of land and an apartment building with 80 apartments, which the government sold in May 2022 by a vote of 4-0 to Gemenii.
At the time of the sale, the land was valued at $465,000 and the structures 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 to the building, the company said.
Two buildings have been gutted and renovated so far, and the process included asbestos removal and replacement of windows and appliances, the company said.
The renovated buildings are now valued at more than $2 million, while the land below has increased in value by $9,300, according to tax bills provided by the company.
The increase in value is “directly related to Gemen’s material financial efforts to revitalize the property,” the company said. According to the company, the development of the air base has not had an impact on the property’s value.
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This story originally appeared in the Los Angeles Times.
