OAKLAND -- The last remaining decrepit structures at the former Oak Knoll Naval Hospital, including an 11-story concrete building, will be demolished this year by the property's owners after a federal bankruptcy judge agreed to release $1.7 million to complete the work.

Judge Erithe A. Smith approved the funding Tuesday allowing property owner SunCal Oak Knoll LLC to demolish the former hospital building, a warehouse and a former bachelor's quarters, which still stand as a symbol of the country's financial crisis and Oakland's failed attempts to redevelop closed military bases.

The money will be paid by bankrupt financial firm Lehman Brothers, which joined with SunCal half a decade ago to win approval for a master-planned community at the site including construction of 960 homes, 82,000 square feet of commercial development, and 50 acres of parks and open space.

That plan, however, never materialized because Lehman Brothers, which served as the financial muscle behind the project, went bankrupt in 2008.

Ever since, Oakland officials have battled with the firm and SunCal to clean up the site that City Attorney John Russo labeled a public safety hazard.


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In 2009, SunCal, Lehman Brothers and the bankruptcy judge approved an agreement that called for the court to release Lehman Brothers' funds to begin cleaning up the former Navy base. The court initially released more than $4 million for the cleanup, which paid for security, removal of asbestos and maintenance of the property's overgrown brush.

On Tuesday, an additional $1.7 million was approved for the demolition of an 11-story former hospital and several concrete warehouses.

"I hope this supplemental amount will complete the work," said Russo, whose staff successfully petitioned the bankruptcy court for the money to clean up the site. "If it doesn't, we will be back in court again."

Frank Fay, the chief operating officer for SunCal, said he expects all the remaining buildings at the site to be removed by the end of the year with a dramatic implosion of the former hospital building to be completed in the summer.

"Now, we are in the final stages," Fay said. "This is the continuation of a nearly yearlong project."

While the additional funds will be used to clear the former base of structures, a timetable as to if and when a new development sprouts on the land is unknown.

Fay said SunCal expects to return to bankruptcy court in two weeks for mediation in hopes of resolving legal issues and freeing the land for development. He said SunCal continues to search for new financial partners and continues to hope that the original development approved by the city's planning commission eventually is constructed.

"It would be our intent to finish the entitlement of the plan that has already been approved," he said. "We have a number of capital sources that would like to do this with us."