This is the expanded story in the Bee this morning. It gives more information than the previous Bee article.
Towers project on hold
Construction stops as developer Saca seeks more cash to pay bills.
By Mary Lynne Vellinga and Jon Ortiz -
Last Updated 12:34 am PST Friday, January 12, 2007
Story appeared in MAIN NEWS section, Page A1
Construction on the 53-story Towers project at Third Street and Capitol Mall in downtown Sacramento has come to a halt after a pile driving company, a former contractor and the buildings' architect filed liens against developer John Saca. City officials, concerned about having a hole at the gateway to Capitol Mall, say they support Saca and his quest to get more money from CalPERS to continue construction. Sacramento Bee/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.
"John has been working every single day on this project for over three years and would not continue to do so if he didn't think there was sufficient reason to do so," Rasmusson said. "We're all confident that this project remains on everybody's hot list."
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.
"Mr. Saca has advised us that he's closing down the project to reorganize its financial structure and obtain additional financing," said Ted Eliopoulos, who joined the giant state pension fund this week as its new head of real estate investment.
"He is looking to CalPERS and to other sources as well," Eliopoulos said. "We'd like to be as helpful as possible to understand the financial issues that he has raised and to ensure that our investment is protected."
As to whether the pension fund would put in more money, Eliopoulos said, "We'll evaluate it and complete our due diligence."
Eliopoulos said the Towers project has been a significant focus for him in his first few days on the job.
He said he's been "working with Mr. Saca very closely on a daily basis" and also has spoken with Sacramento City Manager Ray Kerridge.
After Saca complained that construction costs on the $500 million project had skyrocketed by more than $100 million, the Sacramento City Council in October approved an $11 million subsidy for the hotel portion of towers.
City officials, concerned that a marquee project may falter, are "doing everything we can to support John in his discussions with CalPERS," said John Dangberg, the city's assistant city manager for economic development.
"We believe they've made a commitment to the project, and we want them to follow through with their commitment and their investment on that site," Dangberg said. "This is a very important project to the city of Sacramento, particularly since a building has been torn down and there are piles in the ground. We want it to proceed, and we think it will proceed. We're not interested in having a hole at the gateway to the Capitol Mall."
For months, crews at the Towers construction site have been driving piles deep into the relatively unstable ground of the site at Capitol Mall and Third Street to support the 600-foot towers, which would be the tallest residential structures on the West Coast.
Many of the piles hit solid ground at different depths, leaving a hodgepodge of different length piles sticking out the ground. Saca previously told The Bee these piles will have to be sawed off -- an unexpected expense.
On Jan. 5, the pile driving company, Oakley-based Foundation Constructors Inc., filed a $5.5 million construction lien on the Saca project with the Sacramento County Recorder's Office.
A manager with the company, who asked not to be named because of ongoing negotiations, said the company filed the lien to "protect its position" in case Saca does not restart construction. He said the $5.5 million was owed for work already performed.
Also filing liens last week was the former contractor on the project, Turner Construction -- whom Saca recently said he was replacing with another firm -- and the buildings' architect, Mul-vaney G2 of Bellevue, Wash. Officials at neither of those companies could be reached for comment.
Saca's announcement in October 2004 that he would build the ambitious high-rise residential project was greeted with skepticism and disbelief in the Sacramento real estate community. But the developer -- with no previous high-rise experience -- surprised skeptics by landing Cal-PERS as an investor and obtaining a commitment from Deutsche Bank for construction financing.
While his sales have slowed in recent months with the slump in the residential market, Saca is very close to meeting the Deutsche Bank requirement that he presell 400 units. According to Hanley Wood Market Intelligence, a Costa Mesa-based housing analyst, he had collected non-refundable deposits on 383 units as of November.
Many of these buyers are enthusiastic champions of the Towers as a way to help boost the fortunes of downtown Sacramento.
Steve Ayers has already bought one unit in the Towers, and said he intends to buy another. "As a buyer, I have no worry at all about the project getting built," said the steel company owner. "John Saca is a very resourceful individual."
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