SunnyvaleRTC

April 26, 2005

SUBJECT: Sale by Lehman Brothers to Stanley Thomas of All Rights and Interests in the Town Center Mall Property, Fourth Quarter Properties XLVIII, LLC, and the Former JC Penney and WHL Properties

REPORT IN BRIEF

Lehman Brothers has selected Stanley Thomas, principal equity investor in Forum Development Group of Smyrna, Georgia, as developer for the redevelopment of Town Center Mall. The attached letter from Lehman Brothers reports the selection process to the Agency. Also attached is a report describing the transfer transaction from Lee Rosenthal of Goldfarb & Lipman, who has reviewed the transfer documents on behalf of the City’s Redevelopment Agency.

Mark Calvert, representing Lehman Brothers, will be present at the Agency meeting to describe the developer selection process, to announce the transfer of ownership, and to answer questions from the Agency. No action by the Agency is required.

BACKGROUND

On August 17, 2004, the Redevelopment Agency approved a Disposition and Development and Owner Participation Agreement (DDOPA) with Fourth Quarter Properties XLVIII, LLC (the Developer) regarding the redevelopment of Town Center Mall. On December 21, 2004, the Agency approved minor revisions to the DDOPA, including a revised date of December 31, 2004, for the Developer to acquire the property from the Mall and from Lehman. The revised document was subsequently executed by Fourth Quarter Properties and the Agency Executive Director.

When Fourth Quarter Properties failed to acquire the subject properties on December 31, 2004, Lehman Brothers acquired Fourth Quarter Properties from the Forum Development Group and proceeded to solicit proposals from developers to assume responsibilities and rights under the DDOPA for redevelopment of the Mall property. Lehman also requested that the date for acquisition of the subject properties be extended from December 31, 2004, to March 31, 2005, which request was granted by the Agency Executive Director in accordance with the DDOPA.

On March 23, 2005, Lehman Brothers, in accordance with Section 6.03(v) of the DDOPA, submitted to the Agency a list of six potential developers. On March 4, 2005, the Agency responded that four developers were acceptable to the Agency. Lehman also requested a further extension of the date to acquire the properties to May 31, 2005, which extension was granted by the Agency on March 29, 2005.

DISCUSSION

On April 14, 2005, Lehman Brothers notified the Agency that it had completed its developer selection process and had sold all of its rights and interests in the Town Center Mall property, Fourth Quarter Properties XLVIII, LLC, and the former JC Penney and WHL properties to Stanley Thomas, principal equity investor in the Forum Development Group (See Attachment A). This transfer has been subsequently verified by Agency Special Counsel Lee Rosenthal, who inspected all of the legal documents effecting the transfer (See Attachment B). Lee reports that the result of the transfers and conveyances is that Stanley Thomas owns Fourth Quarter, and that Fourth Quarter owns all of the property necessary to redevelop the Mall except for the portions owned by the Agency, Macy’s and Target. Therefore, Fourth Quarter Properties XLVIII, LC, under its new ownership of Stanley Thomas, retains all of the rights and obligations granted to it under the DDOPA. The project has been transferred to the new owner “as is”, with no proposed or requested changes to the Special Development Permit approved by the City Council on August 17, 2004, or to the DDOPA approved by the Agency on August 17, 2004, as revised and amended.

The overall effect of this action is that the redevelopment of the Mall will be undertaken by the principals of the Forum Development Group through an entity known as Fourth Quarter Properties XLVIII, LLC. This is the same group who prepared the plans for the project which were approved by the City Council, and who negotiated the business deal which was approved by the Redevelopment Agency. The developer is bound by these approvals to proceed with the project as originally proposed. Although the commencement date (i.e., the date for acquiring the property) has been extended by four months, all other milestone dates provided in the DDOPA (including the completion of the retail portion of the project by September 30, 2007) remain intact.

Mark Calvert, representing Lehman Brothers, has requested the opportunity to address the Agency to describe the developer selection process, to announce the transfer of ownership, and to answer questions from the Agency. No action by the Agency is required.

PUBLIC CONTACT

Public contact was made through posting of the Agency agenda on the City's official notice bulletin board, posting of the agenda and report on the City's web page, and the availability of the report in the Library and the City Clerk's Office.

Prepared by:

Robert Paternoster,

Secretary

Approved by:

Amy Chan,

Executive Director

Attachments