Construction on downtown towers halted
By Mary Lynne Vellinga and Jon Ortiz - Bee Staff Writers
Published 7:43 pm PST Thursday, January 11, 2007
The 53-story Towers hotel and condoinium project at Third and Capitol Mall, Thursday, January 11, 2006. (Sacramento Bee/ Michael A. Jones) Sacramento Bee Staff Photo/Michael A. Jones
Construction has stopped on downtown Sacramento's most ambitious development project ever - two 53-story condominium and hotel towers planned for the foot of Capitol Mall.
In a sign of developer John Saca's ongoing financial struggle to build his skyscrapers, several contractors filed liens against him in the past week for unpaid bills totaling $7.3 million for such items as architectural work and pile driving.
Hit with millions of dollars in cost overruns, Saca is seeking additional financing. Without it, he likely won't be able to close on his $375 million construction loan from Deutsche Bank.
Eric Rasmusson, a spokesman for Saca, called the work stoppage "a short temporary regroup" while the developer tries to reconstruct a workable budget and secure his construction financing.
Saca is seeking a greater infusion of cash from the California Public Employees' Retirement System, which had already agreed to invest $100 million in the project. The pension fund hasn't said yes yet.
As to whether the pension fund would put in more money, Ted Eliopoulos, who joined the giant state pension fund this week as its new head of real estate investment, said, "We'll evaluate it and complete our due diligence."
^ Think about it. If CALPERS doesn't invest more, they will lose everything they've already invested. It's a win-win for Saca, because he's getting money, which guarantees he can get more money.
It will be interesting to see what, if anything, the Sac Business Journal says about The Towers tomorrow. Their focus this week is "Downtown Development."
There are a couple of senarios from here on out...
#1 Deutsche, provides the $375 million construction loan...
I'm guessing that this is doubtful without another large infusion of cash or loan guarantee from CalPers...
Which brings me to my next point....
#2 Cal Pers agrees to provide more cash
They may give Saca more money, but will they want to assume control of the entire project,
to protect their investment?? Probably and who would blame them?
Deutsche Bank may insist on it.
I still think the Towers will move forward, since they've inked approximately 50% of the units,
which is nothing to sneeze at. But I don't think Saca will be involved if it is able to move forward.
But i'll go ahead and say this (and I don't mean to be a naysayer, because i still believe this project will move forward (somehow)...
The Towers were too abitious for Sacramento.. (They would be ambitious for any city, since we're basically talking about a 108 story building...)
Saca probably bit off more than he could handle...(Which vindicates what ConstructionGuy said, so I will give CG credit for calling that)..
But Saca's one Ace in the hole??? CalPers...
Having the largest pension fund in the world with $230 Billion in investments involved from the beginning will pay off, in seeing this project through to it's completion.
Long before CalPers was announced as Saca's partner (Brandon and I) predicted that Saca would bring CalPers in on the project as an equity partner (which he did).. That was the best decision he could have made and I'm still betting that that's the one wid card that will ensure this project get's completed.
The Towers are still two years from completion and the economy will have turned around in Sacramento by then. (Heck if BCN doesn't get off their butts and start Aura I can think of 222 customers who might be willing to jump over to 301 CM.)
Lastly I wouldn't think that any design changes. This was approved as two 53 story buildings and it was marketed as a lifestyle.
Reducing the height of one tower would probably change the marketability of the entire project. Something that I
doubt CalPers wants to see happen.
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Last edited by urban_encounter; Jan 12, 2007 at 5:24 AM.
^ Think about it. If CALPERS doesn't invest more, they will lose everything they've already invested. It's a win-win for Saca, because he's getting money, which guarantees he can get more money.
My guess is CalPERS hasn't put anything into it yet. I would bet their money is contingent on Saca closing a deal with Deutsche Bank.
The "I told you so" people in Sacramento are going to have a field day with this...
That's not to say that I'm not impressed with Saca trying.
I kind of think he would have had a much easier time had the housing market not started tanking, just as he got the project off the ground. Or perhaps he should have stayed with his origional plan of building one tower at a time.
That may very well be what we see; Tower I constructed now with the Hotel and holding off on Tower II, for a couple of years...
I tend to think Saca's problems have more to do with construction costs instead of the housing market. As you said, selling 50% in a building this big is no small acomplishment. Problems started when the project went from 500M to 570M potentially climbing.
Yikes!!! This is worse than I had heard about. Well, when
the letter arrive from the Towers people to the buyers,
please fell free to share with us what they say... I'd like to hear
what Saca's point of view is.
Quote:
Originally Posted by sugit
The "I told you so" people in Sacramento are going to have a field day with this...
I'm now afraid to read the comments posted to the bee online section
Yikes!!! This is worse than I had heard about. Well, when
the letter arrive from the Towers people to the buyers,
please fell free to share with us what they say... I'd like to hear
what Saca's point of view is.
I'm now afraid to read the comments posted to the bee online section
I just don't want to hear what the naysayers here have to say!! Personally, I think CalPers will loan him the money and the project will go forward!
Well if there's one silver lining to this cloud, it's that the Bee always paints the worst possible senario and they're not always very accurate............
A lot of this is also due to Sacca changing construction companies. The previous contractors now want payment immediately from the source instead of the main contractor.
Look for financing from somewhere, too much is already invested in the project.
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A lot of this is also due to Sacca changing construction companies. The previous contractors now want payment immediately from the source instead of the main contractor.
Look for financing from somewhere, too much is already invested in the project.
There are a couple of senarios from here on out...
#1 Deutsche, provides the $375 million construction loan...
I'm guessing that this is doubtful without another large infusion of cash or loan guarantee from CalPers...
Which brings me to my next point....
#2 Cal Pers agrees to provide more cash
They may give Saca more money, but will they want to assume control of the entire project, to protect their investment?? Probably and who would blame them?
I thought CalPERS funds wouldn't be spent before Saca Tower had 100% financing secured. If CalPERS hasn't spent anything yet what investment do they need to protect?
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