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SunCal Breached Terms of Exclusive Negotiation Agreement City Says

According to a June 15th City of Alameda Staff Report to City Council, SunCal violated the terms of their Exclusive Negotiation Agreement (ENA) with the City of Alameda when they met with the U.S. Navy at the Pentagon earlier this month.

The staff report says that SunCal representatives, incluing Robert Hertzberg and Frank Faye, met with Roger Natsuhara, Principal Deputy Assistant Secretary of the Navy (I&E) at the Pentagon on June 9th. The meeting constitutes a breach of SunCal’s obligations to the City under the ENA, according to the report.

According to the report, “neither Alameda nor the Navy officers in San Diego managing the Alameda Point conveyance process received any advance notice from SunCal of this meeting, despite repeated requests by both Alameda Staff and the Navy in San Diego.”

Section 20 of the ENA requires that SunCal not meet with nor engage in negotiations with the Navy without giving advance notice, and an opportunity to participate, to the City of Alameda. The agreement places similar restrictions on the City of Alameda as well.

In the report, City staff asserts that SunCal can communicate with the Navy only so long as they keep the City apprised of all communications, and that the ENA provides for such communications so long as they are informal – “it was not intended to authorize SunCal to meet and negotiate conveyance terms with the Navy without reasonable notice to Alameda and an opportunity for Alameda to participate to protect is very substantial interest [in] Alameda Point.”

SunCal is obligated to have a finalized term sheet with the Navy for the transfer of the land by July 20, 2010, in accordance with the ENA. The staff report notes that currently there is only a draft term sheet from the Navy that dates back to SunCal’s predecessor, Alameda Point Community Partners. That term sheet indicates a $108.5 million payment to the Navy for the property, to be paid in an initial installment of $40.3 million plus additional payments as housing units are constructed, and an additional $78,115 payment per unit for each housing unit in excess of 1,390 units.

According to the City, SunCal’s proforma assumes an initial $10 million upfront payment, including a $1 million deposit that SunCal paid to the City on execution of the ENA, and a $52,000 per-unit payment starting in 2017, when the 2,245th unit would be constructed. The total payment to the Navy would still be $108.5 million, but the final number of homes would be close to 5,000. SunCal’s proforma also assumes that the Navy would transfer to SunCal additional land, including the Northwest Territories, where they have planned a solar farm, that was not provided for in the Navy’s draft term sheet.

On or before July 20, 2010, Alameda City Council will have to vote whether or not to extend the term of the ENA, executed July 18th, 2007, with SunCal, or terminate negotiations with the developer.

June 15 2010 Staff Report

3 comments to SunCal Breached Terms of Exclusive Negotiation Agreement City Says

  • Barb

    Breach of a covenant or a condition of the ENA? How can one expect our City Council to responsibly enter or supervise a contract with such a morally and financially bankrupt entity?

    It is going to be a very costly and time consuming enterprise for the City to oversee any development of the Point by a third party. The history of SUNCAL points out that extracting compliance from SUNCAL as a developer would be catastrophic in terms of money and time. Let alone result.

  • Someone sent this in to us last night. Read the story and scroll down to read the comments too.

  • Anonymous

    So SUNCAL has sooooo many bankruptcies that its attorney is unable to keep them straight? What a bunch of losers! The comments are great.

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