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Aura Condos with Sacramento as BANK
February 11th, 2007 categories: Condo, Downtown, Real Estate, Sacramento
Sacramento City Council member met on February 6, 2007 to discuss the first step toward being the Lender for the project overage costs on the Aura which has not been built nor the Land purchased. Due to the slump in the Real Estate market and the high cost of construction, there is a shortage of funds to start this project. The total project costs are $175 Million. The Sacramento City Council Members had not been brought up to speed with this proposal and therefore had many questions and concerns during the City Council meeting. It seems that the Developer, Craig Nassi of BCN Development out of Denver, Colorado had not bothered to meet with the City Council members privately until a week ago. Mayor Fargo addressed the staff members and asked that in the future any project that goes through the Planning Dept. should also come before the City Council so that the Council Members are kept up to speed and not put in this position in the future. All Sacramento City Council members believe that this is a good project for the City of Sacramento and in turn will generate revenue for the City. Because Sacramento does not have a history of Downtown Condo projects, Lenders are uneasy to loan all the monies required to fund a new project such as this. Therefore, the Lender puts a maximum limit on the funds being loaned since there is no history to determine if the project would fail in our City or not. Once we as Sacramentians, have established a history and need for High-Rise upper end Condos, then Lenders will not have difficulty loaning for future projects. This would be a first for Sacramento. Do you think a high-end Condo High Rise is a good thing for our City?
The Developer, Craig Nassi and undisclosed investors are putting up money as well as Corus Bank of Chicago for $132 Million and Meecorp Capital Markets for $14.5 Million for what’s called a Mezzanine Lender (which is for loans where you need more assistance when you fall short of money for a loan). The City of Sacramento is being asked to loan $10 million toward the building of the Aura which would be paid off within 3 years time at the current prevailing interest rate, thereby making money for the City. This of course does not come without risk. Should the project fail, the City of Sacramento would have a lien on the property and negotiate with the 1st Lender, Corus Bank for payoff. Naturally, as in any Real Estate Loan deal, the first would be paid first. The City of Sacramento is essentially a third. The Developer for the Aura would not disclose who the Investors are which troubled a few of the City Council Members (as it should). The Developer was asked several times to disclose who the Investors in the Aura project are but Craig would not disclose. It was also noted at the Sacramento City Council Meeting that this Developer is having financial difficulty with a similar Condo project in Reno and is renegotiating with the bank on that loan slippery! However, Craig Nassi did address to the Sacramento City Council members that if the project fails, all monies would be returned to those future Condo Buyers (which represent 65% of the 268 units) who have placed their non-refundable monies into this project. Apparently, eager to advertise the Aura condo project, one City Council member noted that the brochure for the Aura specifies that the project is already built and on a different site location…slippery! Do you think the “Secret” Investors should be exposed?
As a side-note: during the Sacramento City Council Meeting, a council member asked Mr. Nassi if it was true that he was having financial problems with a condo project in Reno…Nassi indicated that he was simply renegotiating his loan with the bank…slippery! I couldn’t find anything about the Reno Condo project having financial problem…have you?
The February 6th City Council meeting was merely to acknowledge that the City of Sacramento would consider loaning $10 Million to the project of the Aura but the Developer will need to come back to the City with more information and negotiate the specifics of the Loan as well as provide all documents of any other loans for this project. The City Council of Sacramento voted yes on the first step towards becoming a bank for the Aura project. What are your thoughts on Sacramento being the Bank for Aura?
It seems that the purchase of the Land where the Aura is to be built was allowed to expire by the Developer and Investors since funds were short & they were looking for ways to fund this project. Now, the work begins and the Developer for the Aura has 7 days to secure the contract of the Land Purchase Agreement with the Landholder. At which point the Developer has 90 days to negotiate with the City of Sacramento and secure all loans in order to get the project moving. If this is not done in 90 days, Sacramento would cease to be a banker. All bank loans & hopefully the Secret Investors will be disclosed as well as a profitable margin is determined by the City and the Aura.
You may be confused when I say all Bank Loans the Developer is putting monies up however, they are coming from a secured loan that his company has been approved for and since the Investors are at this point considered a secret group who knows if they also have loans with Banks and for how much. My take on the City Council meeting is that all will be disclosed and I certainly hope that the Sacramento City Council Members do adhere to that. Do you have confidence in our Mayor and City Council to obtain all the information necessary to make a good decision before continuing with a $10 million loan?
The worst case scenario is that the project is completed and does not sell all the condos thereby leaving a gap of profit in order to pay off the loans, specifically Sacramentos money. It was my understanding that the remainder of the condos would be rented until such time as the Real Estate Market could secure higher end Condo Buyers. Due to the Real Estate market today, do you think that Aura will have difficulty selling the remaining Condo’s? Do you think that renters will be able to afford living at the Aura?
Either way, it appears that the Aura Condo project, will put Sacramento on the map with this artistically 
designed by Daniel Libeskind High Rise which will be an iconic for Sacramento and it will also bring businesses, jobs, a sense of Neighborhood to Downtown and revenue for the City of Sacramento for years to come. Much work needs to be done to get this project underway and to change Sacramento’s skyline. What are your thoughts on bringing condos to Downtown? Do you think that these projects will help to make a neighborhood out of Downtown Sacramento?
In the end, it appears a win; win even if it has some slippery moments…tune into more as it developes …Aura as well as The Towers which is also looking for additional funding through PERS. If you have questions that I have not addressed, please feel free to comment below. Comments are always welcome.
Hi Gena!
Thanks for joining my forum earlier today. I have actually stumbled across your blog a few times in the past and enjoyed reading the articles I viewed. I look forward to communicating with you!
Sincerely,
Vincent Talerico (Convey)
Vince, thanks for the drop by and the thumbs-up. Drop by anytime!
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