Downsized high-rise is developer's comeback bid
Saca, whose Towers project failed, hopes to rebuild image.
By Mary Lynne Vellinga - Bee Staff Writer
Last Updated 1:43 am PDT Tuesday, June 26, 2007
Story appeared in METRO section, Page B1
John Saca is reaching to the sky for redemption.
The developer says his reputation was tarnished by the failure of his audacious quest to build the tallest residential project on the West Coast: two 53-story condominium and hotel towers on the Capitol Mall.
Saca, 40, thinks the best way to undo the damage is to succeed in erecting a different, albeit smaller, high-rise condominium tower at 10th and J streets. At 40 stories, this new project still would top anything on the Sacramento skyline.
"It's less about business, and more about trying to redeem myself and show people (the Towers) really wasn't my fault," he said about his plans for the new project, dubbed the Metropolitan. "In my mind, a man is judged not by how hard he can get hit, but by how fast he gets up after he gets hit," he added. "I'm stronger than I was a month ago."
Saca's determination has won him a measure of respect in Sacramento's real estate community, some of whose members initially voiced skepticism that a shopping center developer with no high-rise experience could pull off such an ambitious project.
"The world needs guys like him, so God bless him," said Charles DeLoney, senior vice president of brokerage firm CB Richard Ellis. "It's a real tough market right now, and it takes a lot of courage to be out there doing this kind of thing. "But he's a visionary who sees beyond the current difficult market conditions. He believes in the town, and he puts his money where his heart is."
Saca acquired the shuttered collection of buildings on J Street across from Cesar E. Chavez Plaza for $7.6 million in the heady days of 2005, when downtown was abuzz with talk of high-rise condo living. He had planned to build on the J Street property when he finished the Towers. Instead, he said, he'll be pressing ahead with it right away. Last week, the project went before the city's Design Commission for comment.
This week it's before the Planning Commission. Saca said he hopes to have city approval within 60 days.
The Metropolitan is designed to soar 39 stories and contain 330 condo units. But Saca plans to add another story and is exploring the possibility of making part of the tower a hotel, which would reduce the number of condos he needs to sell, city officials said. Saca said he wants to capitalize on the momentum remaining from the Towers, which had taken deposits from about 400 buyers before construction stopped in February.
The developer said he has been barraged with e-mails from supporters in the two weeks since he announced he would sell his interest in the Towers site to his equity partner, the California Public Employees' Retirement System. This news came after months of wrangling between Saca and CalPERS, which had cut off funds to the project amid concerns about cost overruns.
The pension fund gave Saca a chance to pay off its $25 million investment and take control, but he couldn't come up with the $60 million required to do this and satisfy the project's debts by the deadline. During this protracted tussle, construction stopped, contractors went unpaid, and the Saca-CalPERS partnership defaulted on the note used to buy the land in the first place.
Those are black marks that will be hard to erase, Saca said. "In my industry, it's like a bankruptcy; it's about as bad as you can get."
Saca said the Towers experience taught him one important lesson: Never give a financial partner control of your destiny. In the Saca-CalPERS duet, the pension fund giant's voice dominated. It had committed $100 million in equity. When pension fund managers pulled the plug, the partnership no longer had the money to pay contractors. CalPERS is now exploring the possibility of building a scaled-down condominium tower on the Capitol Mall site.
In a phone interview last week, Saca said the Towers took a significant personal toll.
"I lost a tremendous amount of money, well into the seven figures," he said. "And I've lost a tremendous amount of time. But that's not what's disheartening. What's disheartening was that I thought the Towers project would be a major catalyst for the Sacramento region."
While the Towers would have cost more than $600 million to build, Saca said the Metropolitan likely would have a budget of less than $200 million. Saca said he owns the half block at 10th and J free and clear, and has enough money to contribute the needed equity without a partner.
City officials wish him well.
"After what happened with the Towers, I think it's very important that John get back in the saddle and move forward with another project," said City Manager Ray Kerridge.
Kerridge noted that there are a number of significant housing developments in the works for downtown. While the slump in the housing market might mean they don't get built right away, having them in the pipeline puts Sacramento in a better position to jump on the next housing cycle, he said.
"We're going to be explosive at the start of the next cycle, and I think that's what's going to make the difference."
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