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SunCal Capital Partner D.E. Shaw Halts Redemptions

Bloomberg news is reporting that hedge fund D.E. Shaw – SunCal’s financing partner for their Alameda Point project – is halting investor redemptions to avoid selling assets at a loss to raise cash.

Earlier this year, SunCal asked Alameda City Council, sitting as the Alameda Re-use and Redevelopment Authority (ARRA) to approve an amendment to the Exclusive Negotiating Agreement for Alameda Point that brought D.E. Shaw into the project as a capital partner. In September, Lehman Brothers, SunCal’s previous financing partner on numerous projects across California, filed for bankruptcy, leaving SunCal in the lurch. Some twenty-odd SunCal projects in California are in bankruptcy and D.E. Shaw is reported to be the financing partner behind SunCal’s attempt to salvage those projects with a $75 million injection of capital, senior to Lehman Brothers’ debt. $75 million times 20 projects equals $1.5 billion.

D.E. Shaw “raised the gates” (i.e. froze investor redemptions) after they received redemption requests for more than 8 percent of assets in their Oculus fund. Investors also asked for redemptions amounting to 6 percent of D.E. Shaw’s Composite fund.

Early in the master developer selection process for Alameda Point, SunCal bragged about a $600 million joint investment fund with Lehman Brothers. It’s not clear – so far as we can tell, SunCal never offered, and Alameda City Council never asked – which D.E. Shaw fund was putting up the money for Alameda Point and how much was in that fund. At this rate, SunCal may find the piggy bank empty.

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