city of alameda notice of default to suncal

8/14/2019 City of Alameda Notice of Default to SunCal

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City of Alameda California

February 4 , 2010

SCC Alameda Point LLCc/o SunCal Companies300 Frank H. Ogawa Plaza, Suite 342Oakland CA .946.12Attn: Pat Keliher

Re: Default Notice.under the Exclusive Negotiation AgreementdatedJuly18 2007by and between the Alameda Reuse and RedevelopmenfAuthority (" ARRA"),the Community Improvement Commission of the City of Alameda (" CIC" ) and theCity of Alameda (" City ) (collectively, " Alameda ) and SCC Alameda Point LLCSunCal" . as. amended (the " ENA"

Dear Mr. Keliher:

UnderSection.7. 6.ofthe .ENA, Alamedaherebyprovides noticethatSunCal hasdefaultedunder the ENA for failure to achieve a Mandatory Milestone by the applicable date setforth inthe Mandatory Mi lestone...Schedule..ofPerformance. ...SunCalfailed. . to meet th ENA'Mandatory Milestone requiringSunCal tosubmit, once it has. opted to doso anOptionalEntitlement Application.

The ENA governs the negotiations between SunCal and Alameda concerning the AlamedaPoint project (the "

Project" ). As permitted by the ENA , SunCal elected to pursue a BallotInitiative for the Project. That Ballot Initiative was placed before the voters of the City onFebruary 2 , 2010 , and did not pass.

Under the ENA , where SunCal has decided to pursue a Ballot Initiative , SunCal is provided theoption to submit an " Optional Entitlement Application. " (Section 3. 2) Whether to submit anOptional Entitlement Application is a decision left to SunCal' s discretion. The ENA requires thatwhere SunCal has elected to submit an Optional Entitlement Application , however , the OptionalEntitlement Application is a Mandatory Milestone and must be achieved by January 15 , 2010.(Section 3. 2) Failure to comply with a Mandatory Milestone is an Event of Default under theENA. (Section 7.

Here, SunCalhas opted. to submit an Optional EntitlementApplication . .

..

SunCalmadeasubmission to the City on January 14 , 2010 of two alternative entitlemenfpa.ckagesi(collectively,the " Submittal" ) The cover letter accompanying the Submittal stated that SunCal " is expresslyauthorized. by the City, the ARRAandtheCICtosubrnitan OptionalEntitlementApplication tothe City for the entitlement of AlamedaPoint.Developer sOptiona.1 EntitlernentApplica.tion isattached." Cover Letter to Submittal

1 Because it opted to submit an Optional EntitlementApplication, SunCal was requiredtoachievethe. Optional Entitlement ApplicationMandatory

Office of the City Manager2263 Santa Clara Avenue, Room 320Alameda, Caliornia 94501- 4477510. 747.4700 Office 0 Fax 510. 747. 4704. TDD 510. 522. 753873280191.


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Milestone by January 15 , 2010. SunCal' s Submittal does' not , however , meet the requirementsunder the ENA for an Optional Entitlement Application , for the reasons set forth below.Accordingly, SunCal has not met this Mandatory Milestone.

SunCal' s failure to meet this Mandatory Milestone has triggered SunCal' s default. UnderSection 7. 6 of the ENA , SunCal shall have thirty days within which to cure this default. IfSunCal fails to cure , Alameda has the right to terminate the ENA.

A. The Submittal is not an Optional Entitlement Application Because the SubmittalConflcts with the City Charter

Article XXVI of the Alameda Charter (also known as Measure A) limits development in Alamedain two ways. First , no multi- family housing is permitted to be constructed in Alameda. SeeAlameda City Charter , Article XXVI 26- 26- 2. The only exceptions to this prohibition allowrehabilitation or remodeling of existing multi- family dwellings and replacement of specific,identified , Alameda Housing Authority and senior citizens ' units. Second , the maximum densityfor res identialdevelopment within Alameda is one housing unit per2 000 square feet of land (adensitypf approximately 21 units per acre), with the only exceptions being the "replacementunits " described above and replacement of existing units that are damaged. or destroyed.

The development plan included in SunCal' s Submittal includes multiple dwelling units. TheSubmittal also includes dwelling units at a density of more than one unit per 2 000 square feetor 21 units per acre. Indeed , SunCal' s Submittal includes land use areas with densities ofgreater than 70 units per acre. Development of multi-unit housing, and development atdensities exceeding 21 units per acre , isin direct contradiction to the City s Charter. SunCal'scover letter acknowledges this. .See Cover. Letter toSunCal Submittal , p.4(" Theland use plandescribed in this Optional EntitlementApplication seeks the ability to. construct , in somelocations within the Alameda Point property, multiple dwelling units at . adensity of more thanone unit per 2 000 square feet of land area.

SunCal' s cover letter to the Submittal indicates two theoretical approachesthatSunCal might

use to achieve compliance with the Charter. Specifically, . SunCalindicated, '(t)hismaybeachieved. either through an amendmenttoArticleXXVlof the City Charter of the GityofAlameda or through application of the City s density bonus ordinance. Thus, the cover lettersuggests that SunCal will pursue either an amendment to the City s Charter or application of theCity s Density Bonus Ordinance. But the Submittal does not do anything more than hypothesizeabout how SunCal might comply with Alameda . Iaw. in developing the. Project.. The Submittaldoes not committo undertaking one or both of these two approachesfortheProject.iNordoesit explain howeither. of these theoretical approaches might be implemented. Section 3. 2 ofthe ENA requires an Optional Entitlement Application to meetthe criteria of an EntitlementApplication. Thus , an Optional Entitlement Application " shall include the following: (a)anapplication for all land use entitlements and approvals it will seek from the City. . . " (Section

1) SunCal' s Submittal does not commit to an approach and thus is unable to include allnecessary approvals. On its face, the Submittal is not

an Optional EntitlementApplication withinthe meaning of the ENA.

B. The Submittal is Not an Optional Entitlement Application BecauseSunCal Does Notand Cannot Comply with City s Density Bonus Ordinance

1. SunCal' s Submittal Contains No Application for a Densitv Bonus

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As provided above, in orderJor the SubmittaUo be considered an Optional EntitlementApplication it must include " an application for ailiand use entitlements and approvals it will seekfrom the City. " To th~extent SunCal seeks , as itstated in its cover letter it may, to apply theCity s Density Bonus Ordinance to the Project SunCal requires specific approvals from the Cityand it failed to apply for those approvals in the Submittal.

The City s Density Bonus Ordinance, adopted as City Ordinance No. 3012 on December22009 (" Ordinance ), sets out numerous specific Jequirements forprojectsthatseek to receiveconcessions or waivers . underthe Ordinance. First. amongthese is the requirement thatanapplicant submit a Density Bonus Application. . (Ordinance 30- 17.4. a) Not only has SunCal notformally applied for the approvals it would need to utilize the City s Density Bonus because theSubmittal included no Density Bonus Application , SunCal' s Submission does notcontainthespecific information required in a Density Bonus Application.

Perhaps more significantly, the Density Bonus.(rdinancerequiresthatanapplicantfor aDensity Bonus must first present a " base projectthat cOmplies vvith(existinggeneral. plan.andzoning requirements. (Ordinance 30- 17.4. ) A " base " projectwouldbe one thatis fullycompliant with the City s Charter and , specifically, with the provisions of Measure A. . Forexample, Alameda s.. Prelim inaryDevelopment Concepti(" PPC" ) providedJorthe . development .of

735 new units, at densities and dwelling unittypesconsistentwithMeasureA. . Here theSubmittal does not contain a " base project developmentplan , andsignific:antlyexceeds thedensity permitted by Measure A. Forexample, the PDC project contains a Measure A-compliant" base " of 1 735 units where the Submittal at4, 831 units containsa.far greaternumber of units.

The Submittal also . Iacksother required. featuresofa Density Bonus Application, including aProject description providing affordable housing un itcou nts( Ordinance 30- 17 2);adescription.of whatispecificconcessionsor. incentives. SunCal wou Id.. requestfrom. theCity( asdescribed in Ordinance 30- 17. 10); and justifications for why concessions of increased density tothe Project woul dbe necessary to .provide foriaffordableihousingcost(Ordinance30- 17.4. 6).The Master Plan attached as partofJhe. Submittal states only that " When an applicant seeks a

density bonus for a housing development withinthePlanArea theCityshall.providetheapplicants with incentives or concessions for theproductionof housing units and child carefacilities as described in GovernmentCode section 65915. " (SubmittaIAttachment" AlarnedaPoint Master Plan

15. ) ThisdoesnotmeettherequirementsoftheDensityBonusOrdinance.

The Submittal also fai ledto incllJde an Affordable Housing Unit Plan , another Jequiredelementof a Density Bonus Application. ...(Ordinance 30- 17. 15. ) AnAffordableHousingPlanisrequiredto include forthe dwelling units required to be made availableatspecific levels of afford ability(" Aff ordable.. U nits ) specific information about. the Affordable Housi ngU nits incl uding unitlocation , type and size; floor plans; target income levels; phasing plans , marketing plans andafinancial pro forma. Id.

Even had SunCal submitted a DensityBonus Application with. alL required elements , securingbonus units .award~dunderthe Density Bonus Ordinance (" Density Bonus Units ) requires theproject to adhere to many specific Jules, none of which SunCalhasdemonstratedthatitwilibeable to adhere to. Affordable Units must be constructed concurrentlYiwithmarket-rate units andwith comparable infrastructure, constructionqualityand exterior design , and must be " integratedwithin the project" (Ordinance 30- 17. ) The statementappearingintheAlameda PointCommunity Plan attached to the Submittal that " New affordable housing units shouldbe

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reasonably dispersed throughout the phases. of development. . . " and "Affordable housingshould be constructed so that it is coordinated with the overall residential construction program.(Submittal Attachment " , Alameda PointCommunityPlan

15) do not provide anyinformation as to how SunCal would comply with this requirement.

In addition , all projects for which Density Bonus Units are granted are required to be the subjectof an " Affordable Housing Unit Agreement." (Ordinance 30- 17.16. ) Additional conditions arerequired for the Affordable HousingUnitAgreementwheretheAffordable Units are for sale(Ordinance 30- 17. 17), and where the Affordable. Units are for rent. (Ordinance30- 17. 18). . TheSubmittal contains no information as tohowSunCalwould.complywiththis requirernent either.

SunCal has failed to show in its Submittal a sufficient application forthe approvals thatwould berequired under the Density Bonus Ordinance.

2. Even WereSunCaltoSubmita DensitvBonusApplicationBased ontheSubmittal. theProiect in.the Submittal Would NotOua.lifvfor aDensitvBorlus

The City s Density Bonus Ordinance requires submittal of a developmentplanillustrating thethat the " base " project meets all existing generalplanandzoningdevelopmentstandards,which includes compliance with Measure A SeeOrdinance30- 17.4. citedinSectionB.above. The Project as presented inSunCal'sSubmittal does not complywith MeasUre A.Thus , even if SunCal. were to. submita DensityBonus. Application .basedon. the SUbrnittal theProjectwouldnotbeeligible for a Density Bonus. There are numerousaspectsoftheSubrnittalwhich do not comply with Measure A. For example, the Submittal contemplates very highdensity development at levels of up to 40, 50 and 70 units per acre. (Submittal , Attachment "AlamedaPoint Specific Plan

4) Measure A, however , limits density to approxirnately 21units per acre , as described. above. The high density units provided forintheSubmittalappearto represent a significantportionof the Project. Elsewhere , the Subm ittalcontemplatesrnulti-family housing.in all five of its residential land use categories (Preservation Mixed Use MixedUse , Hesidential.. Medium , Residential Medium High , andResidentiaIHigh), andmulti- familyhousing appears to represent a significantportibnofthe Project. (/d. at 7- 5) Accordingly,

without a Measure A-compliant base plan , there can be no Density Bonus.

C. The Submittal is NotanOptionalEntitlement Application Because SunCalisNotSeeking to Amend the Charter in Accordance with theENA

The ENA does not permit an Optional Entitlement Application that does not comply with theCity s Charter. Rather , the ENA providesthatifandonly iftheBallotinitiativeissuccessfulOptional Entitlement Application maybe submitted containing only the approvals andentitlements necessary to perm it development of the Project consistentwiththeBaliot Initiative.(Section 3. lfthe Ballot Initiative was not successful , the Optional EntitlementApplicationwas required to be complete and thus incompliance with the City s Charter. (ld.

This structure is fully consistent with the RFO process , the initial ENA , and the ENAamendments. . As you know

, .

SunCal' s involvement with Alameda Point dates back to itsResponse to theRFQ fora Master Developer for Alameda Point datedDecernber4 , 2006

RFQ Response ). The RFO Response emphasized the importance of developing a project inaccordance with the strict development standards imposed by the citizensbf Alameda: Thesestandards are designed topreservethe history of NAS Alameda and many existing structures,limit the number of units and the density of development provide affordable housing evenbeyond the statutory redevelopment requirement , and promote mass- transit and transit oriehted

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development , all while maintaining revenue neutralityfortheGity. " RFQ Response

(emphasis added). SunCal's RFQ Response stated in plain terms thatSunCal' splan wouldmeet() all of the policy goals and objectives contained inthe PDC and other policy documents

and that Suncal was " fully confident(the) policy goals and objectives contained inthe PDCwilibe successfully met." RFQResponse, p. a. ln other words, SunCal' s initial commitmenttotheProject was a commitment to develop in accordance with Measure A.

As negotiations between the City and SunCal progressed , the ENA was amended to allowSunCal an option to submit a development application that was not in accordance with MeasureA. Specifically, SunCal was permitted to put a Ballot Initiative before theyotersofAlameda.(Section 3. 5) As it was expected by all that an election would be held in November 2009, theOptional Entitlement Application was anticipated as a safeguard so that should the BallotInitiative fail , SunCal could then submit a Measure A-compliant plan by January 15, 2010(Section 3. 2). The election was actually held on February 2 , 2010 and the Ballot Initiativewhich contained an amendment to the Charter , was rejected by the voters. The January 152010 deadline remained in place , however , and when SunCal electedtosubmitanOptionalEntitlement Application , the ENA required it to be in compliance with the City Gharter.

SunCal' s January 14 , 2010 Submittal is not in compliance with the City Charter. The Submittal

Cover Letter s listing of the contents of the application includes item P

Charter Amendmentwhich in the "Purpose of Submittal" column cross-references Section30ftheCoverLetter.This section acknowledges that the Submittal is not in compliance with the City s Charterstating that the land use plan " may be achieved either through an amendment to Article XXVI ofthe City Charter of the City of Alameda or through application of the City s density bonusordinance. Submittal Cover Letter , pA. Thus , the Submittal is not an Optional EntitlementApplication. Again , SunCal has failed to meet the Mandatory Milestone of submitting anOptional Entitlement Application on or before January 15 , 2010.

The City wishes to further note that SunCal had one route to submit a non- Measure A- compliantdevelopment application , and it has been unsuccessful. It appears SunCalmaynowbeseekinganother option: another election. As described above , the Submittal does notincludeanydirect

provisions for a Charter amendment; it appears SunCal is contemplating a future Charteramendment , perhaps initiated through a ballot measure to be placed before the voters ofAlameda in some future election. (" This may be achieved either through. an amendmenttoArticle XXVI of the City Charter of the City of Alameda. . . ). Submittal Cover Letter , pA To theextent SunCal seeks yet another election on a non- Measure A compliant project , such furtherelection is simply not permitted under the terms of the ENA.

The City of Alameda has strict development standards pertaining to development density, asevidenced by Article XXVI of the City Charter and as acknowledged bySunCalin itsRFQResponse. The ENA was clear in its terms that SunCal had one and only one way in which topresent a development plan relying on a Charter amendment , and onlyoneofthosewasanopportunity to present a plan directly to the voters of Alameda. SunCal has had its chance atthe ballot box on February 2 2010 and was not successful. SunCalmay not rely on any futureelection to extend the ENA, which expires on its terms on July 20 2010.

Conclusion

SunCal opted to submit an Optional Entitlement Application , thereby requiring SunCal achievethe Optional Entitlement Application Mandatory Milestone by January 15 2010. HoweverSunCal' s Submittal does not fulfill the requirements of an Optional Entitlement Application under

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the ENA. The City s Charter and the ENA together require either submission of a non- MeasureA compliant plan that has been. approved by the City s voters , or submission of a Measure A-compliant Optional Entitlement Application. SunCal has provided neither , thereby defaultingunder the ENAforfailing to comply with a Mandatory Milestone. lfSunCal does not cure thisdefault within thirty days, Alameda will havethe right to terminate the ENA.

Sincerely,

Copies as provided in ENA:SCC Alameda PointLLCc/o SunCal Companies2392 Morse Ave

Irvine , California 92614Attention: Marc Magstadt

SCC Alameda Point LLCc/o SunCal Companies2392 Morse Ave

Irvine, California 92614Attention: Bruce Cook

Cal Land Venture LLCc/o D. E. Shaw &Co. , L.L.C.120 West 45th Street

Tower 45 , 39th FloorNew York , New York 10036Attention: Chief Financial Officer

Courtesy. copies:

Alameda City CouncilAlameda City Hall2263 Santa Clara AvenueAlameda, CA 95401

SCC AlamedaPoint LLCc/o SunCal Companies

300 Frank H. Ogawa Plaza Suite 342Oakland, CA 94612Attn: Amy Freilich

N73 280191.

city of alameda notice of default to suncal

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