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

[doriankage]

This was on the News 10 website.

The major equity partner in the landmark Towers on Capitol Mall wants to replace local developer John Saca to finish the hotel and condominium project.

The California Public Employees Retirement System has been talking to a "world class" developer about taking over the stalled project.

The partnership consisting of Saca and the CalPERS broke ground last fall on the twin 53-story towers. But work stopped suddenly last month with contractors filing liens for $13 million in unpaid bills.

Rising construction costs have put the project at least $70 million over budget.

Saca notified by email hundreds of prospective condo buyers who placed deposits that he's defaulted on the $22 million loan for the block of land at 4th Street and Capitol Mall.

A default is the first step in the 111-day foreclosure process.

"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." Saca said in the message.

CalPERS confirms it has only invested $25 million of the $100 million it committed to the project.

Spokeswoman Pat Macht told News10 CalPERS stopped contributing to the partnership after Saca failed to meet his contractual obligations.
I wonder what they mean by this?

Saca is not yet able to access a $370 million construction loan from Deutsche Bank, or an $11 million grant offered by the city of Sacramento when the buildings are close to completion.

Macht suggests one possible solution is to remove Saca as the developer.

"We made him a great offer where we bring in a world class developer with extra money and he would still be a part of it and he turned us down," Macht said.

Macht said CalPERS is open to other alternatives, including the possibility of Saca finding new investors and buying out CalPERS.

[bennywah]

^
Within the next few weeks Saca will make an annoucement concerning his role in the towers, and my guess is he takes their offer, or is removed altogether, that brings up another question about the loan from Deutsche Bank, does that still go to the project if Saca isn't a partner, or because cal-pers is also a partner it still remains valid? Hell cal-pers could finance the whole thing if they wanted too. so many questions???? at least it does look like this project is going to live, just with whom at the helm???

[enigma99a]

Originally Posted by bennywah

^
Within the next few weeks Saca will make an annoucement concerning his role in the towers, and my guess is he takes their offer, or is removed altogether, that brings up another question about the loan from Deutsche Bank, does that still go to the project if Saca isn't a partner, or because cal-pers is also a partner it still remains valid? Hell cal-pers could finance the whole thing if they wanted too. so many questions???? at least it does look like this project is going to live, just with whom at the helm???

Well, what I'm trying to understand is.. If Deutsche was loaning up toward 400M, CalPERS, 100M, plus a 70M loan. What is Saca's portion?

[urban_encounter]

Originally Posted by enigma99a

Yeah it sucks, but I don't think it will be a hole in the ground. If Saca can't do it, I think he'll give up and CalPERS can just get a new developer

I think I'll have to agree with some of our long time naysayers on this point. I'm not sure Saca can get it done, and that's probably why Cal Pers wants him out of the way, so they can bring in somebody who can. The cost overruns, now estimated in the neighborhood of $100 million to $200 million above the previous cost estimates, represents a dramatic escalation.

I applaud John Saca for his bold vision, but, perhaps it's time for him to assume a minority role.

He can hold a public news conference and put the ball in their (Cal Pers) court. Then not only can he make a profit, but he can still receive credit for his vision of the Towers and then turn his attention to the Metropolitan or K street. (If he still wants to be in the highrise business..)

I'll go ahead and agree with joninsac (yes I'm flip flopping); after hearing everything that has been said, I feel more confident than ever the Towers will get built, because it sounds as if Cal Pers is 100% committed to the project, (once the issue of Saca's management is settled that is and assuming the parties can come to an agreement)..

This sounds very familar to the BCN fiasco in Reno, where lenders forced Craig Nassi aside. They were simply protecting their investment and trying to get costs under control. That's exactly what Cal Pers is trying to do.

[bennywah]

hmmm, even more questions , and who is this "world class developer" gee this soap opera is getting more interesting by the min!!!

reggie any thoughts on who this developer they've worked with in the past may be?

[enigma99a]

Originally Posted by urban_encounter

I think I'll have to agree with some of our long time naysayers on this point. I'm not sure Saca can get it done, and that's probably why Cal Pers wants him out of the way, so they can bring in somebody who can. The cost overruns, now estimated in the neighborhood of $100 million to $200 million above the previous cost estimates, represents a dramatic escalation.

I applaud John Saca for his bold vision, but, perhaps it's time for him to assume a minority role.

He can hold a public news conference and put the ball in their (Cal Pers) court. Then not only can he make a profit, but he can still receive credit for his vision of the Towers and then turn his attention to the Metropolitan or K street. (If he still wants to be in the highrise business..)

I'll go ahead and agree with joninsac (yes I'm flip flopping); after hearing everything that has been said, I feel more confident than ever the Towers will get built, because it sounds as if Cal Pers is 100% committed to the project, (once the issue of Saca's management is settled that is and assuming the parties can come to an agreement)..

This sounds very familar to the BCN fiasco in Reno, where lenders forced Craig Nassi aside. They were simply protecting their investment and trying to get costs under control. That's exactly what Cal Pers is trying to do.

Yeah exactly. And one good thing is that CalPERS has already sunk 25 Mil into it. They are not going to just walk away now. If they can get it done now, they will get their 25 mil back and then some.

[urban_encounter]

Originally Posted by doriankage

This was on the News 10 website.

The major equity partner in the landmark Towers on Capitol Mall wants to replace local developer John Saca to finish the hotel and condominium project.

The California Public Employees Retirement System has been talking to a "world class" developer about taking over the stalled project.

"We made him a great offer where we bring in a world class developer with extra money and he would still be a part of it and he turned us down," Macht said.

Macht said CalPERS is open to other alternatives, including the possibility of Saca finding new investors and buying out CalPERS.

This tells the whole story. Cal Pers recognizes that Saca is in way over his head, (and i don't think any of us can dispute that anymore).. They've been preparing for this contingency for some time now. I give Cal Pers credit for being prepared...



BTW early on in the life of the Towers I predicted Cal Pers would be Saca's equity partner..

A walk down memory lane....

Originally Posted by joninsac

Ch. 3 news just had a story about 301 CM. They said Saca spent $20 million of his own money on demolition and wants the city to cut or eliminate the various fees involved with the project to make it easier for him to start construction. Saca also said that 301 CM is now a $500 million project and that he will shortly announce his equity partner who will be financing the majority of the project.

Originally Posted by urban_encounter

Equity partner will be Cal Pers

Originally Posted by Schmoe

Jim, is that speculation?

Originally Posted by urban_encounter

Yep

The rest is history....



Now for my latest prediction...(which may be a no brainer)

The "world class developer with extra money" Cal Pers is negotiating to bring in is.... (drum roll please)....

Trump


Btw I am in no way insinuating that I'm always right. In fact, the difficulty that the Towers and Aura have experienced have demonstrated just how wrong I can be at times...

[SacTownKing916]

I just watched news 10 and they said that if CalPERS does buy saca out they will most likely scale the project down a bit to reduce cost. But they also said they are still open for negotioations including saca buying them out of the deal. And they are negotioating everyday.

[urban_encounter]

Originally Posted by enigma99a

Yeah exactly. And one good thing is that CalPERS has already sunk 25 Mil into it. They are not going to just walk away now. If they can get it done now, they will get their 25 mil back and then some.

Yeah I've always said the smartest move Saca made to guarantee the success of the Towers was to bring in Cal Pers as his partner. (Now he may not see it that way), but as an observer, it is looking like it may just be the one detail that saves this project.

[urban_encounter]

Originally Posted by SacTownKing916

I just watched news 10 and they said that if CalPERS does buy saca out they will most likely scale the project down a bit to reduce cost. But they also said they are still open for negotioations including saca buying them out of the deal. And they are negotioating everyday.

I don't think that's a bad idea at all.

Phase the project as origionally planned, one tower now and the second in a few years. Or build a 53 story tower alongside a 38 story tower (or a smaller tower that compliments the first).

Without Cal Pers, I wouldn't give the Towers much chance of getting built (should Saca buy them out)... I seriously doubt anyone in their right mind would be willing step into this mess now as an equity partner. Secondly I'm sure the only reason DB agreed to loan him the money was because Cal Pers is a partner on the project..

[Phillip]

Originally Posted by enigma99a

And one good thing is that CalPERS has already sunk 25 Mil into it. They are not going to just walk away now.

If CalPERS concludes that investing $100 million in SacTowers will probably result in a $100 million loss then I think they would walk away from the $25 million (or whatever) that they've spent already.

CalPERS board is accountable to the retired state employees whose pensions they're supposed to be funding. The membership will scream bloody murder if CalPERS increases their stake and loses it all. Highrise condominiums are a high risk investment now.

Of course CalPERS wants to recoup what they've already invested and hopefully get some return. OTOH there's "Don't throw good money after bad". I'd guess there's raging debate within CalPERS now about which direction to go.

Michael McFall was SacTowers biggest proponent inside CalPERS. He was instrumental in getting CalPERS to commit the $100 million last spring. McFall is gone now. Does anyone know if he quit or was fired? If McFall was let go then I'd have to question how strongly committed CalPERS board is to SacTowers now. Does McFall's successor have a mandate to get this project done no matter what? Or is his mandate to minimize CalPERS losses?

[urban_encounter]

Originally Posted by Phillip

If CalPERS concludes that investing $100 million in SacTowers will probably result in a $100 million loss then I think they would walk away from the $25 million (or whatever) that they've spent already.

CalPERS board is accountable to the retired state employees whose pensions they're supposed to be funding. The membership will scream bloody murder if CalPERS increases their stake and loses it all. Highrise condominiums are a high risk investment now.

Of course CalPERS wants to recoup what they've already invested and hopefully get some return.

I agree. It's entirely possible Cal Pers could conceivably cut their loss. But I think we'll see Cal Pers invloved in developing 301 CM, since this is their home turf and it would really not look good for Cal Pers to commit to a project only to pull the rug out from under it. That isn't good for business either. I'm pretty sure that's what Steinberg and Jones are reiterating... The only question is, will it be the Towers as proposed or scaled down project???

[bennywah]

^
and as urban can be witness too, in chicago the fordham spire was above carly's head so a much more experienced wealthy developer has stepped in and looks more and more like the chicago spire will happen. Cal=pers will get it done, but do you really think trump will invest in sac yet? wasn't it rumored he was considering going in on the project in its infancy, or just fancy marketing?

[innov8]

Originally Posted by SacTownKing916

I just watched news 10 and they said that if CalPERS does buy saca out they will most likely scale the project down a bit to reduce cost. But they also said they are still open for negotioations including saca buying them out of the deal. And they are negotioating everyday.

Did CalPERS say they would reduce the size or did the report
speculate that CalPERS would? I have not once heard Saca
or CalPERS state that the size of the project was to big.
Only talking heads in the news have referred to the size
stating that they might be to big.

The sticking point in this whole deal is between
both partners agreeing on who will head up this
project. Maybe Saca knows they have a plan to down size
the towers and because of that he won't relinquish his
stake in the project. I don't blame him one bit.

Saca has stated that he has offered to buy out the
pension fund by bringing in other investors.

[SacTownKing916]

Originally Posted by innov8

Did CalPERS say they would reduce the size or did the report
speculate that CalPERS would? I have not once heard Saca
or CalPERS state that the size of the project was to big.
Only talking heads in the news have referred to the size
stating that they might be to big.

The sticking point in this whole deal is between
both partners agreeing on who will head up this
project. Maybe Saca knows they have a plan to down size
the towers and because of that he won't relinquish his
stake in the project. I don't blame him one bit.

Saca has stated that he has offered to buy out the
pension fund by bringing in other investors.

The news didnt specifically say that they would lower the buildings but thay implied it and said that it would be made "cheaper" if CalPERS took over. They interviewed Saca and he said he does not want to give anyone else control over the buildings because he wants them built exactly how they are now and he feels anyone else would try to change that.

[urban_encounter]

Originally Posted by bennywah

^
and as urban can be witness too, in chicago the fordham spire was above carly's head so a much more experienced wealthy developer has stepped in and looks more and more like the chicago spire will happen. Cal=pers will get it done, but do you really think trump will invest in sac yet? wasn't it rumored he was considering going in on the project in its infancy, or just fancy marketing?

Good points Benny and your 100% spot on about the Spire..

I'm only speculating about Trump.. Would Sacramento look attractive as a market?? Probably with all things being equal, normally not.

However..... A few points....


#1 Cal Pers would be a strong partner and Trump would probably see the project as an opportunity to score points with a future investor in some of his other projects.


#2 Trump is considering his signature Trump towers in other second tier cities.


#3 The Towers at 301 CM are already nealry 50% sold out. Putting his name (Trump) on the project would probably bring in additional buyers and by the time the project is done, I think the project would probably be fine... Despite pogos delusions to the contrary, having nearly 50% of the project presold prior to the building rising from the ground, is fairly impressive for any project. Sacramento is a new market and naturally lenders have set a threshold for lending. (Makes good business sense).


#4 Last but not least... Trump's ego....




Of course all of this is just fun speculation...

But I wont be surprised should Trump be the person Cal Pers is talking about when they say that they're talking to a "world class developer with extra money"..

Understand of course that my statement above doesn't mean that I wont be surprised if Trump actually does step in and take over the project.

It's one thing to be right about who CalPers is tallking to. It's another for Trump to actually build a project of that caliber in Sacramento...

[urban_encounter]

Originally Posted by innov8

Saca has stated that he has offered to buy out the
pension fund by bringing in other investors.

No offense Mike, but that wont happen. And if Saca does buy out Cal Pers, then I think Sacramento can put a fork in this project.

Saca has already burned bridges going through a number of contractors... He has liens against him filed by Foundation and Mulvanny G2 and I suspect that were there really any (viable) equity partners or additional capital out there, he would have already brought them in.


The best chance for this project to go forward is for Cal Pers to take the lead. (Or that's my guess)..

We can applaud the vision that John Saca had by proposing the Towers; but I seriously question his ability to pull this off without Cal Pers...

[innov8]

Originally Posted by SacTownKing916

The news didnt specifically say that they would lower the buildings but thay implied it and said that it would be made "cheaper" if CalPERS took over. They interviewed Saca and he said he does not want to give anyone else control over the buildings because he wants them built exactly how they are now and he feels anyone else would try to change that.

Well, if that's the case, CalPERS is the evil empire IMO.
Saca has taken the project this far, further than anyone
could have imagined. I'll give him the benefit of the doubt
that he now has another way (partner) lined up to finance
and see his vision become reality.

[Majin]

This project is an emotional rollercoster. It seems like every article released contradicts the last, as if this project is going from the living to dead and then back living each passing hour.

[urban_encounter]

Originally Posted by innov8

Well, if that's the case, CalPERS is the evil empire IMO.

Unfortunately nobody can actually say what is really going on. Saca may be feeding the media a line
in order to strengthen his bargaining hand. But it sounds as if Cal Pers is now the majority parter,
(based on their investment).. Let's just hope they can come to an agreement...