When the federal government closed Castle Air Force Base in Merced County in the 1990s, the dilapidated buildings and vast expanse of aging asphalt that remained seemed more of a liability than an opportunity.
But by 2018, the former runways that once carried B-52 bombers had found an unexpected new customer: Google, which was testing its experimental self-driving vehicles there, away 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 former base.
A few years later, Gray also invested there.
In 2022, a company in which Gray is a minority owner purchased four apartment buildings at the former Merced County base, according to a Times review of Gray’s business records, property records and financial disclosures. Gray’s connection to the real estate deal had 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 the investment demonstrates his interest in providing affordable housing and that the renovations have been so costly that he has yet to make money.
But the real estate business in rural Atwater, California, 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 from 2022, when Duarte beat Gray by the nation’s second-narrowest margin — 564 votes.
The race is among a handful of contests across the United States that are seen as crucial to determining which party will control 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 a rail hub at the base site to handle cargo 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 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 gain” and said the apartment deal should be investigated.
Far from Gray lining his pockets, according to his campaign and company, the former Castle Air Force Base apartments have required so much renovation that Gray has actually lost money.
Gray's campaign manager, Ben Rodriguez, said the allegations were false and “meant 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 of Gemenii LLC, the company that owns the base's apartment complex. 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 who own other properties in 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 had valued the buildings and the 5.3 acres of land beneath them at between $400,000 and $600,000, the company said.
When the county received “no other competitive offers,” the firm said, Merced County sold the buildings for $600,000.
Since then, the company has 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 still represented the Modesto area in the state Assembly when the sale closed.
A Google Waymo self-driving car drives on roads inside the company's facility on the property of the former Castle Air Force Base, now a municipal airport, in Atwater, California, in 2017.
(San Francisco Chronicle/Hearst Newspapers via Getty Images)
Gray has a 30 percent stake in the company that owns the apartments, according to the company. His name does not appear in the company's state business records.
Gray first disclosed his investment on his 2022 Form 700, the financial disclosure California lawmakers must file annually with state ethics officials.
Government experts said Gray's real estate deal did not appear to violate the law.
But, they said, elected officials who invest in real estate should be aware of the potential for conflicts of interest, particularly when investing in their districts.
Dan Schnur, former director of the California Fair Political Practices Commission, said Gray's real estate investment in the site, accompanied by the provision of taxpayer funds, seemed “suspicious.”
“Everyone deserves the benefit of the doubt, but the best way to get it is to earn it,” Schnur said. “A public official needs to be aware of how these things can be perceived.”
After Gray lost his 2022 congressional bid, he filed a federal financial disclosure with the House in which he failed to disclose the real estate investment or his stake in the LLC that owns the buildings.
His campaign said Gray did not mention the investment in the apartment complex because there was no revenue to report, but did disclose his position in the parent company.
In a new filing made public this month for Gray’s second bid 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, not 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 generated a profit.
The former air base, now called Castle Commerce Center, covers about 3 square miles. It houses 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 self-driving car company.
After Gray helped secure the $6.5 million grant for the autonomous vehicle test site in 2018, Merced County converted large stretches of unused asphalt at the base into a testing center. There are now full intersections with traffic lights and signage and a 2.2-mile test highway 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 Silicon Valley companies and major automakers.
Amid that boom, Merced County supervisors continued to sell off parts of the base as surplus land. That included the 5.3-acre site and the 80-unit apartment complex, which the board sold in 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 at $135,000, according to tax records provided by the company.
The company took out an $885,000, 30-year mortgage through 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.
So far, two buildings have been gutted and renovated, a process that included removing asbestos and replacing windows and appliances, the company said.
The renovated buildings are now valued at more than $2 million, while the value of the underlying land has increased by $9,300, according to tax receipts provided by the company.
The increase in value is “directly related to Gemenii’s material financial efforts to revitalize the property,” the firm said. Developments at the airbase site, the company said, “have had no impact on the value of the property.”
