Stop, Drop and Roll

04 June 2008 | Alameda Community Development Forum, redevelopment | John Knox White

The good news is that Prop 98 failed and Obama was able to claim the Democratic nomination. The bad, clearly, that Measure H failed by 115 votes and Wilma Chan lost. There will be time to look at this another time.

Tonight, the ARRA (Alameda Reuse and Redevelopment Association), aka City Council—yet another public body that supposedly nobody votes for but looks exactly like our city council—will be discussing major changes to the Exclusive Negotiating Agreement between the city and SunCal.

SunCal has an agreement with a new financial partner, D.E. Shaw, and is interesed in setting up a new development entity as a partnership with them. Under the terms of the existing deal, the city has the right to approve any partners and partnerships. What’s interesting is that the existing deal also give SunCal the right to keep this deal confidential and only share it with the city’s economic consultant, Economic & Planning Systems (EPS), which they have done. So the ARRA will be discussing provisions that must be in place withing this new entity, and EPS will make sure that they are while the city and SunCal work out the deal.

Essentially, the city is insisting that:

1. SunCal retain responsibility of day-to-day management of the entity.
2. SunCal maintain a 15% equity share in the relationship.
3. SunCal cannot be removed from the new entity, except for cause like default on the ENA.
4. An initial $10 million be given to the new entity to fund all of its obligations.
5. SunCal retains decision making authority (except for major decisions).
6. Protect the new entity from going into default based on othe business agreements the two partners have in other projects.

EPS has reviewed the proposed agreement and has found that the term sheet does not meet the following two provisions: requirement of an equity share (B), putting forth a minimum financial commitment (D).

What this means to Alameda?

As long as SunCal and DE Shaw can come to terms of agreement on items B & D, the city will most likely approve the new partnership and this new entity will have the financing to move the Alameda Point project forward. SunCal’s business model has always been to set up each development as a separate entity with separate financing, and so the financial problems it is facing on projects in Bakersfield and Albuquerque, are much more muted than they would be if they were self financing and their stock started tumbling.

Word is that given its location, Alameda Point has a high level of interest both within SunCal and within the financial markets. It’s not some far flung slumburb that taking a major hit in the real estate turmoil. If the city and SunCal can come to terms on these items, it would seem that the project will begin moving ahead this summer with public meetings before Labor Day.

Tomorrow: developments at the national level?