North Bay real estate investor in alleged Ponzi scheme out on bail

North Bay developer Kenneth Mattson’s arrest by FBI agents and release on $4 million bail after facing the aggrieved investors who claim he defrauded them out of millions in an alleged Ponzi scheme dominated the Bay Area’s real estate news this week.

FBI agents arrested Mattson on May 22 in a gym parking lot in Napa after a federal grand jury indicted him on charges of defrauding about 200 investors in his real estate company — mostly senior citizens — out of $46 million over 17 years, according to court documents. Securities and Exchange Commission investigators also filed suit to freeze Mattson’s assets and stop him and his company, KS Mattson Partners, from doing business in California. Along with former business partner, Tim LeFever, Mattson owns a real estate portfolio worth more than $400 million, the vast majority in the Sonoma area.

Prosecutors had asked for Mattson to be held without bail while he awaits trial, citing the “serious” risk of flight and potential danger he poses to the public. But after a four-hour hearing in San Francisco on Wednesday that packed the courtroom and brought forth emotional testimony from some of Mattson’s alleged victims, U.S. District Court Judge Alex Tse released him to the custody of his wife, Stacy, to live in their Sonoma home. The bail was set at $4 million, which Mattson secured with $200,000 in cash, a Piedmont home owned by his wife and a property in Reno owned by her sister and brother-in-law.

Mattson will be under GPS monitoring during his release, and cannot leave the Northern and Eastern Districts of Northern California. His passport was turned over to authorities and he is barred from possessing any firearms, or retaliating against or harassing any victims, witnesses or jurors.

Mattson’s first trial appearance is set for June 6. The developer is facing seven counts of wire fraud, plus one count each of money laundering and obstruction of justice. If convicted, the charges are likely to carry a penalty of more than 15 years in prison, plus restitution payments and fines totaling more than $2 million, according to court documents.

On the retail front, an East Bay shopping center that is nearly full is still at risk of default. 

An $180 million commercial mortgage-backed securities loan on Sunvalley Shopping Center in Concord is heading into special servicing for a second time, according to the San Francisco Business Times. The borrower, Simon Property Group subsidiary Taubman Realty Group, told the lender it doesn’t have the money to meet its $135.7 million debt before its maturity date in September. 

The mall’s net cash flow last year was down 39 percent from the time of the loan’s underwriting in 2012, despite the complex maintaining 95 percent occupancy as of the end of last year. Its value fell from $350 million at the time of origination to just $170 million in 2022. 

One issue may be that, though the mall was nearly full just a few months ago, several prominent businesses are near the end of their leases and others have recently departed. Round 1 Bowling & Arcade, a 53,000-square-foot arcade that moved in in 2016, wraps up its current lease next August. Nordstrom’s lease for 48,000 square feet is up in September 2028. A 24 Hour Fitness that took up 31,000 square feet over two floors left in October, while the mall’s Forever 21 location recently closed as part of its bankruptcy. 

Pac Heights mansion with Sam Altman connection sells at loss 

In residential news, an “extremely quietly marketed” Pac Heights home sold earlier this month at a loss over its last sale less than two years ago. 

How much of a discount? It depends who you ask. Last time, 2750 Vallejo Street sold in August 2023 for $23.5 million, and the transfer tax on the May 12 sale indicates a price of almost $22.5 million. But San Francisco Multiple Listing Service records show a sales price of about $20.6 million. 

Sotheby’s International Real Estate confirmed that its agents represented both sides of the deal, but did not specify who, declined to comment further and did not answer questions about the price discrepancy.

The home was built in 2013 by Troon Pacific, the same developer OpenAI CEO Sam Altman sued last year for selling him a Russian Hill “lemon” with alleged structural defects. But the association with Troon, which sold the Pac Heights home shortly after construction wrapped up for $20 million, was unlikely to be the cause of the discount, according to Compass agent Nina Hatvany. She toured the “very nice” home with a buyer client who “didn’t love” the finishes. 

The buyer this time around was the Lomax Trust, whose trustee is Lonnie Dorn, according to the deed. Dorn is a senior adviser at ClearRock Capital and did not reply to a request for comment. The seller was The 2750 Vallejo Trust, whose trustee is Tracy Keyser. She could not be reached for comment.

CBRE: AI’s impact on downtown could be huge

In some positive news for San Francisco’s commercial sector, CBRE predicts that over the next five years AI companies could nearly halve the city’s current 36 percent vacancy rate. 

AI companies could expand into as much as 21 million square feet of office space by 2030, according to the newly released report. 

That’s more than four times the 5 million square feet that AI companies currently occupy across San Francisco, and is already up substantially from the 1.7 million square feet AI companies were in just last summer. 

“AI is a big deal, every bit as big as mobile was to the recovery during the post-financial crisis,” Colin Yasukochi, executive director of CBRE’s tech insights center, told the Business Times. “When you talk to venture capitalists, they will tell you this is still in the early innings.” 

What do top commercial executives make?

Even with the tough times in the commercial sector, some commercial executives are still seeing higher salaries than ever, according to The Real Deal’s analysis of publicly traded companies’ comp packages. 

Hudson Pacific Properties’ chief executive received a 2024 compensation boost that amounted to three times his salary just one year prior, even as the L.A.-based real estate investment trust experienced mounting losses, TRD found. Chairman and CEO Victor Coleman raked in about $25 million in 2024, according to the company’s latest proxy statement filed April 23, compared to $8 million in 2023.

TRD looked at the 2024 pay of the C-suite at 10 publicly traded, commercial real estate companies headquartered in Los Angeles, several of which have substantial holdings in the Bay Area. No other company saw such a stark contrast when it came to executive compensation, losses and profits than Hudson Pacific, whose Bay Area portfolio includes the Ferry Building and Rincon Center in San Francisco, the Metro Center and Palo Alto Square on the Peninsula and Concourse and Gateway in San Jose, according to its website.

Alexandria Real Estate Equities’ founder and executive chairman, Joel Marcus, received the equivalent of nearly $18 million in total compensation last year, roughly $2.5 million more than in 2023. The 2024 sum included a special $30,000 bonus to mark his 30-year anniversary at the firm, which owns 8.4 million rentable square feet in the Bay Area, including five “Megacampus Ecosystems,” according to the life science developer’s website. 

Another life science developer with a big Bay Area presence, Kilroy Realty, brought in Angela Aman to replace John Kilroy last year. Her compensation was valued at about $11 million in 2024 and included a one-time equity boost to partly induce her to accept the job, the proxy reads, as well as almost $700,000 in relocation expenses like temporary housing, travel, broker fees and taxes. Aman’s predecessor, who helmed Kilroy Realty for three decades and whose father founded it, earned around $12.5 million in 2023.