Sacramento: 301 Capitol Mall: A New Plan for The Towers Site

[innov8]

There's always hope... there's a lot of hope on this thread right now

[downtownserg89]

evidently.


maybe we should write more letters.

[friedpez]

Originally Posted by innov8

First, the project would be stalled even longer as the new
design would have to go back through the planning department.
Second, I would think any major change in the project
would void out any contracts signed with the hotel or
people who signed them because the whole image of the
Towers would have changed. An announcement of any major
down size would make the image that the Towers have been
selling a major disappointment.

I got wind of this project being dead last week... lets just
hope the Towers can pull off what Aura appears to be doing.

Yeah, your points are certainly valid. But I guess the larger issue may be asking whether or not a delay (as a result of going back to the drawing boards) is better, or if it's worth risking a total cancellation.

There are probably people who bought units because of the view, but I'm sure there's people who also bought units on lower levels just because they liked the all-in-one aspect of the project (hotel, shops, spa, etc). So, they could all be "moved" into a smaller tower and the "view" people could stay in the taller one.

[enigma99a]

Saca won't do a downscaled tower. It's all or nothing

[doriankage]

This is from Channel 10. Very positive.
SO LETS ALL BE POSITIVE!
This project will get built!


The project to build The Towers on Capitol Mall has hit another snag, but those who know developer John Saca are confident he can pull it off.

Wednesday, Saca announced he defaulted on a $22 million loan. The money was used to buy the land where a 53-story condominium and hotel towers project is supposed to be built in downtown Sacramento.

Just last month construction came to a halt because the project had run out of funds.

On Wednesday, Saca notified 400 buyers who have put down deposits on condominiums of this latest financial development.

In the letter, Saca writes:

“The First Note and Deed of Trust was due and payable the end of December. Currently, the LLC does not have the $22,000,000 needed to pay the note. I have proposed several alternatives to my partners on how to prevent the Notice of Default being filed; however, they have been rejected.”

“Rest assured that I am working diligently and doing everything possible to move this forward and fulfill the dream of bringing this project to the Sacramento Community.”

City Councilman Greg Trethway tells News10 he is hopeful Saca can pull the project together. He says the Towers project is the largest of its kind on the West Coast, and it is understandably difficult to put this project together. He adds Saca has been “genuine” in all his dealings.

[Phillip]

You're probably right, sugit. I hardly ever get to say "I told you so". Feels good to say it for once.

I have no special joy in seeing "big projects go down". I'm not prejudiced against big projects. I've commented before that I thought the Towers were fine looking buildings, just too big for Sacramento in 2007. By too big I mean way more units than Sacramento wants to buy. But in Chicago or Sydney I'd be all for them.

I'm against building big projects that have a high likelihood of financial failure, even if they're an aesthetic and architectural success.

Of course the default is bad news for Saca and for CalPERS and for Joseph Mohamed (who I never heard of before tonite). But the current situation is far from the worst possible outcome for Sacramento.

What if they'd built the Towers up 20 or 30 stories and then abandoned? That happens. Or built it out entirely but never succeeded in selling more than half the units; so prices nosedived and everyone who bought there lost $100,000 in the first year? That's a lot of places now too.

In a way Sacramento should be grateful that Downtown is behind the times....there were never enough condos built in Downtown Sacramento for there to be a "Condo Slaughter" now, like Miami and San Diego are suffering.

But ultimately I think there will be a lot more highrise residential Downtown and I look forward to that. I welcome big projects that are well located and can work.

To me the saddest thing from this episode is that for the money Saca and CalPERS had to spend a really fine 18 or 20 story tower could have been built Downtown, something much taller and nicer than Sacramento has ever seen. And at that scale it could have been built and sold out, and created the foundation for a record of success at highrise residential in Downtown Sacramento.

Anyhow...

The story's still not over, I admit. Something dramatic and unexpected could happen. I think a lot of us are surprised that Aura has come back to life again, to the degree that it has.

I don't enjoy flamewars so to curtail the possibility of one erupting now I'm going to refrain from posting to this thread for couple days.

============

edited to add: If some of this post doesn't make sense it's because I was responding to a mildly inflammatory post to me from sugit (#1619), a post that he deleted after I read. sugit and I were edging into a flamewar but we worked it out in private and it's over. Rather than edit my post I'll just leave it as it is and add this edit to explain why some of my comments might seem without context.

[POGO]

This is what happens when little league developers try to do big league projects. Face it guys, Saca doesn't have what it takes, and the demand is not there in Sacramento for a project like this. If it was, this project would have been oversold many times over.

The litigation surrounding who gets paid is going to go on for years. Saca is screwed. No one is going to lend him money again with a default like this on his record. Too bad too. I really liked the design. Just never thought he could pull it off.

[sugit]

This is a VERY interesting article. Is it me, or does this sound like all this trouble might just be hard negotiating by both CalPERS and Saca??? It seems like CalPERS is still very comitted to this project if they were going to bring someone else in to finish. Where was Saca going to get the $$$ to buy out PERS? PERS must still think it's a good project if they won't take the buy out

...I'm so confussed

________________________________________________________________________________________________________

Towers developer defaults on loan
By Mary Lynne Vellinga - Bee Staff Writer

Published 12:00 am PST Thursday, February 15, 2007
Story appeared in MAIN NEWS section, Page A1

eveloper John Saca Wednesday said he has defaulted on a $22 million loan he used to buy the downtown land where he broke ground last year for two 53-story condominium and hotel towers.

The default -- the first step in a foreclosure -- doesn't necessarily mean the development is dead. Rather, it's a public exposure of the months-long private struggle between Saca and his equity partner in the Towers, the giant California Public Employees' Retirement System -- CalPERS.

Construction on the prominent site at Third Street and Capitol Mall stopped in January, leaving a hole in the ground, studded with piles, a few blocks down from the Capitol.

Nearly 400 buyers have paid deposits on condominiums in the Towers. That money is in a special escrow account and will be refunded if the development collapses.

Saca sent an e-mail Wednesday to all the buyers, assuring them he is "working diligently and doing everything possible to move this forward."

Contractors and professionals on the project have filed about $13 million worth of liens, bringing the project's total unpaid debts, including the land loan, to about $35 million, Saca said in a prepared statement.

As Saca's budget for what was introduced as a $500 million project ballooned by $70 million due to rising construction costs, CalPERS refused to give him more money.

The pension fund confirmed Wednesday that it has delivered just $25 million of the $100 million it had committed.

Ted Eliopoulos, CalPERS' senior investment officer, said the fund recently offered Saca a deal that would have allowed him to retain a financial stake in the project but would have given control to one of the large developers with whom CalPERS currently does business.

"We made a formal offer to John that would have paid all of his debts, including this note, and would have given him a good return," Eliopoulos said. "Unfortunately, he has turned that proposal down."

Eliopoulos said Saca also offered to buy out the pension fund by bringing in other investors. But CalPERS said Saca's offer didn't ensure the fund enough profit.

"We concluded it was not of the investment value we would even consider," Eliopoulos said.

Saca said Wednesday that the assertion that CalPERS had offered him a "good return" was a "complete misrepresentation of the facts."

He said he is bound by a confidentiality agreement that has prevented him from speaking about his dealings with the fund.

"I would like to make our offers to each other public record," he said. "I believe they won't allow this, because I don't think they'll want the truth to come out."

According to John Dangberg, Sacramento assistant city manager, CalPERS expects to earn a return of 21 percent on its money.

"While our first objective is to get the project done, we'd like to see everyone treated fairly. John has put a lot into this as a local developer, and has brought a new vision to our downtown. And we certainly would like to see him be a part of that if it's at all possible." In a written statement Wednesday, Saca placed the blame for the project's difficulties squarely on the pension fund.

"This predicament is out of my control," Saca said. "If it were my choice, all the outstanding invoices would be paid immediately. I have proposed several alternatives to my partner on how we can pay these bills; however, none have been accepted."

Saca went on to say that he's "not sure (CalPERS is) the right partner for this project."

Eric Rasmusson, a spokesman for Saca, said Deutsche Bank remains willing to lend Saca up to $400 million for construction. The city has agreed to provide an $11 million subsidy for the hotel portion of the project, which would be used for furniture and fixtures once the buildings were complete.

The land for the Towers is owned by Towers on Capitol Mall, LLC, a partnership of Saca and CalPERS.

The $22 million Saca borrowed from First Bank & Trust to buy the prime real estate on Capitol Mall was due at the end of December, Saca said in his statement.

Last week, local investor and developer Joseph Mohamed Sr. bought the note from First Bank & Trust, meaning that the Saca-CalPERS partnership now owes him $22 million. Mohamed said he filed a notice of default on the loan Wednesday with the county.

Mohamed said he doesn't expect to have to go through with a foreclosure but thinks Saca and CalPERS will pay off the debt and move forward.

"We try to buy only notes we feel are reasonably secure, and that's how we felt on this one," he said. "I don't throw money to the wind."

In its quest to restart the Towers project, Sacramento enlisted state Sen. Darrell Steinberg and Assemblyman Dave Jones, who have been talking to CalPERS.

Steinberg said Wednesday he's confident the issues can be worked out and that high-rise condominiums will materialize.

"Projects of this magnitude have their ups and downs," Saca said. "I am very confident that this project is going to succeed consistent with the vision that has rightfully excited this community."

[Majin]

It looks like the project isn't quite 100% dead as of yet. Seems theres quite a bit of negotiating to do.

[POGO]

Originally Posted by urban_encounter

The demand for highrise living has never been in question.....

Sales will be ongoing and i would suspect that the towers will be completely sold prior to their completion date.


The numbers certainly bode well for the Metropolitan, Epic and the Capitol Grand Tower...

In retrospect, this is a pretty funny quote.

[sugit]

Originally Posted by Majin

It looks like the project isn't quite 100% dead as of yet. Seems theres quite a bit of negotiating to do.

I'm starting to think the same thing. The fact that CalPERS made an offer to pay all the debt and keep moving forward seems to me they are still interested in this project and think it still makes a solid return.

First rule of negotiating, never accept the first offer given to you. Maybe this is the case here. Though I think CalPERS hold the upper hand.

For some reason I expected a higher return to CalPERS than 21%

[skyscaper mamma]

Rumor is, this is how CalPers works. Goes into a project as a partner, makes the first partner use all his money, blood, sweat and tears, doesn't release any more of their funds, then steps in and takes over the project forcing out the first partner. A friend of mine predicted this would happen several months ago. The project will probably get built, may be a long down time though. I feel bad for John, he put his heart and soul into this.

[urban_encounter]

urban_encounter
The demand for highrise living has never been in question.....

Sales will be ongoing and i would suspect that the towers will be completely sold prior to their completion date.


The numbers certainly bode well for the Metropolitan, Epic and the Capitol Grand Tower...

Originally Posted by POGO

In retrospect, this is a pretty funny quote.

Not as funny as the fact that you probably spent quite a bit of time researching my quotes just to come up with that...


Amazingly, your still convinced that a project that is nearly 50% sold represents slow sales... Do you have any idea how many highrise condo towers are already complete in Chicago and are well under 50% occupied. Secondly I don't think there's any question that by the time the towers are complete (in two years), the housing market in Sacramento will be well on it's way to a recovery... Tell me how many suburban housing developments sell out entirely before the first house frame goes up???

There's a reason why they keep models open and a sales representative on site while construction is ongoing. Do you think it would be any different with a highrise???

But there's no escaping the reality that nearly 600 high end condos have been sold between both Aura and 301 CM and that's before either project has even gotten off the ground. You don't think that such sales numbers don't represent a strong demand??

Now maybe it's just me, but if you don't think that those sales prove there is a market for highrise living in Sacramento, then you need to get out more often. There's only a certain number of people who have the money to invest in a high end unit in Aura or the Towers. However I still stand by my statement that there is a huge demand for more affordable highrise living, that wont include the amenities found in Aura or the Towers.
Every major hosuing component built in DT and MT over the past 5 years has enjoyed strong sales. Without question the market is tempered right now. But that's the housing market as a whole. But most projects wont be coming out of the ground for a couple of years.

Now I will concede (and already have done so) that this project was far too ambitious for Saca and for Sacramento. The Towers should have been phased as origionally proposed; or even proposed as smaller towers.
But i still don't think that you can say that these projects haven't proven that there's a market for highrise living in Sacramento just because they didn't sell out 100% prior to construction. If you can, then your simply kidding yourself, and i doubt many people on this forum will buy into to your delusion either.


In retropsect (I will concede) that it was rather comical, for me to assume that strong sales at Aura and the Towers might translate into a benefit for the Metropoltian, Epic or The Capital Grand. (Actually I'm surprised that I included the Capital Grand, because i have never put much stock into that proposal). In fact I will concede that there's probably little chance any of the three projects will get built. John Saca will probably return to building strip malls, Mohanna is a joke, and BCN probably recognizes the market for high end condos is pretty well tapped for a while. That is unless the "Towers" never get off the ground and then there will be 385 (+ or -) who will be looking at other options. But there will be other prosals in the months and years to come. I supect BCN will propose something more in scale with DT Sacramento, as will most future proposals.

[urban_encounter]

Originally Posted by sugit

I'm starting to think the same thing. The fact that CalPERS made an offer to pay all the debt and keep moving forward seems to me they are still interested in this project and think it still makes a solid return.

First rule of negotiating, never accept the first offer given to you. Maybe this is the case here. Though I think CalPERS hold the upper hand.

For some reason I expected a higher return to CalPERS than 21%

I agree Sugit and Majin

With Steinberg and Jones being involved with negotiations, it sounds as if there is a local full court press ongoing. I actually feel much more confident about "The Towers" chances of getting built this morning than I did last night. It also sounds like Cal Pers remains committed to the project.

But as skycrapermama pointed out (and as I have already pointed out), it's fairly obvious that in order to do so, John Saca will be pushed aside and that Cal Pers will want to hire thier own people to oversee the project.

Let's hope cooler heads prevail...

[urban_encounter]

Originally Posted by Phillip

I hardly ever get to say "I told you so". Feels good to say it for once.

Well no offense Phillip, but you may want to hold on to that "I told you so" for just a bit longer. In fact i will concede that my observation last night that this project was basically done, might also have been a bit to hastie...


Cal Pers interest gives a bit of hope to this project still.


It should be a dramtic resolution regardless....

[What is a Rivercat?]

Folks this sort of thing happens in every industry. How many stories have you heard of a small-time guy with a big time idea who doesn't have the means to bring it to market - and the idea eventually gets co-opted by a bigger dog?

Saca has the vision, the commitment and the desire - but what he apparently doesn't have is the bottom line - i.e. cash money. For these towers to get built, his baby will have to go up for adoption.

[Los_Lobo]

KFBK is supposed to be interviewing Saca shortly. You may be able to hear it on-line @ kfbk.com

[innov8]

Thanks Los Lobo. Saca said the Towers has sold $262 million in
real estate and he has also lined up another bank to commit the
additional $70 million needed. He just needs CalPERS to
agree to what the next step will be.

[Phillip]

Originally Posted by urban_encounter

Well no offense Phillip, but you may want to hold on to that "I told you so" for just a bit longer. In fact i will concede that my observation last night that this project was basically done, might also have been a bit to hastie...


Cal Pers interest gives a bit of hope to this project still.


It should be a dramtic resolution regardless....

I don't mind admitting when I'm wrong. If Saca and CalPERS still put together financing for two 53-story towers I'll eat a dead crow on Capitol Mall and you all can take pictures.

[Phillip]

This story about Trump Tower in Tampa is interesting because it has so many parallels to SacTowers. 52 stories. Big name backers. Unexpected construction costs due to underground water. Strong sales but no financing. And both stories came to a head on the same day, Valentines Day.

http://www.tbo.com/news/money/MGBN7FA45YE.html