May 25, 2011
SunCal Closes Bankruptcy Purchase of Three California Properties Related to Lehman Brothers 2008 Collapse
IRVINE, CALIF. (May 25, 2011) – SunCal, the leading private land developer in the U.S., has closed the purchase of three Southern California real-estate developments after winning an April bankruptcy auction related to Lehman Brothers’ 2008 collapse. Lehman was both an equity partner and lender in the projects.
The three projects, one in Kern County and two in Riverside County, represent more than 4,300 combined acres of land, and all were developments that were being built with Lehman Brothers’ financial participation. They include McAllister Ranch, a 2,070-acre golf-course community in Bakersfield that has been entitled for up to 6,000 homes; McSweeny Farms, a 673-acre master-planned community in Hemet that is approved for 1,600 residences; and SummerWind Ranch, a 1,583-acre-property in Calimesa that is envisioned to offer over 3,600 homes.
SunCal’s “all or nothing” winning bid of $71 million for the three-property portfolio last month exceeded the individual bids for the assets. As a result of the now-completed purchases, funds become available for the court-appointed trustee to pay claims of creditors in accordance with the trustee’s plan. The developments had been in limbo since 2008.
The affairs of the former partner of SunCal Cos., Lehman Brothers, are now being managed by Alvarez & Marsal, a New York restructuring firm that has led the billing of more than $1 billion in legal and services fees related to the Lehman bankruptcy.
“Because Lehman was not the majority lender, as they are in other related cases, Alvarez & Marsal was not able to block a resolution and prevent this 363 Sale from taking place. The public auction allowed SunCal to step up to the plate and become the high bidder,” said David Soyka, Senior Vice President of Public Affairs for SunCal. “This is how the bankruptcy system is supposed to work; a restructuring that allows the assets to be liquidated and move the process forward. Unfortunately, Alvarez & Marsal has blocked every attempt at similar efforts in the other pending Lehman cases.”
These three properties were the subject of a bankruptcy action that is separate from two other bankruptcy cases involving more than 20 projects where SunCal Cos. and Lehman Brothers partnered to create residential communities.
“We’re pleased to close the transaction for these three properties, and it would be great to see the same progress with the other pending Lehman-involved cases,” said Frank Faye, SunCal Chief Operating Officer. “Although these three developments have been tied up in court for three years, the market’s interest in them has consistently remained strong. Their true value has finally been determined and realized through an open bidding process.”
At McAllister Ranch in Bakersfield, the transaction involved the sale of 1,400 acres to the Rosedale Rio Bravo and Buena Vista water storage districts for use in water banking. SunCal retains development rights for the remaining 600 acres, and a major amount of infrastructure for the community is already in place, including a Greg Norman-designed 18-hole golf course.
McSweeny Farms in Hemet already had extensive development work completed when work was interrupted three years ago, including infrastructure, occupied Phase 1 homes and a completed community recreation center. SunCal collaborated with the hedge fund run by John Paulson on this transaction and will provide the firm with property management services.
SunCal plans to complete the development plans for SummerWind Ranch as intended before the collapse of Lehman Brothers.
SunCal acquires, entitles and develops major residential properties and commercial developments. The company specializes in creating distinctive master-planned and mixed-use communities that emphasize quality of life, environmental sensitivity and recreational opportunities. SunCal is the largest privately held land developer in the U.S. For more information, visit www.suncal.com.
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CONTACT: Joe Aguirre, SunCal Public Affairs, (949) 777-4043
