April 07, 2011

SunCal Wins Auction for Three Lehman-Backed California Developments

By Patrick Fitzgerald
Dow Jones Daily Bankruptcy Review

An investment affiliate of SunCal won a bankruptcy auction for three stalled Southern California real-estate projects the land developer began building with Lehman Brothers Holdings Inc. (LEHMQ), according to people familiar with the matter.

SunCal’s winning bid of $71 million topped the stalking horse bid of real estate investment firm Terra Verde Group, which had made an initial $60 million offer for the projects, following an auction that began Wednesday.

The three projects encompass more than 2,000 hectares in Southern California and include McAllister Ranch, an 838-hectare planned residential community near Bakersfield, and a pair of developments–McSweeny Farms and SummerWind Ranch–in Riverside County.

Those properties, which took on more than $300 million in debt in 2006 and 2007, had recently been valued at about $62 million.

The projects have been caught up in the bitter legal fight between SunCal and Lehman Brothers, its former financial backer.

Craig Martin’s Terra Verde Group, an investment firm that specializes in distressed real estate, has agreed to serve as the stalking horse, or lead bidder, for the SunCal-affiliated real estate projects, subject to higher bids at auction.

Terra Verde replaced a group of Lehman-led lenders that had initially bid $45 million under a deal struck with Alfred H. Siegel, the Chapter 11 trustee overseeing the real-estate projects, to sell the properties through a Chapter 11 plan.

A spokeswoman for Lehman Brothers and a lawyer representing the trustee weren’t immediately available for comment.

The three properties in question are separate from two other bankruptcy cases involving SunCal-related projects. These properties were drawn into Chapter 11 when a lender filed an involuntary bankruptcy petition against the projects in September 2008, days before Lehman filed for bankruptcy.

Lehman was both an equity partner and lender the projects. In 2006, Lehman, along with other senior lenders, lent the SunCal projects at issue more than $300 million, with $144 million of that amount going to the projects’ owners as a dividend.

Siegel, the Chapter 11 trustee, is also suing the former owners–among them SunCal-related affiliates and a private-equity real-estate fund spun out from Lehman–to recover that dividend payment.

The trustee’s Chapter 11 plan, however, would allow Lehman and other first-lien lenders to escape legal action aimed at reclaiming the dividends, while allowing them to share in any money reclaimed from the SunCal affiliates.

Lehman and SunCal, a family owned developer based in Irvine, Calif., were allies during the California real-estate boom. The investment bank pumped more than $2.3 billion of financing for SunCal projects.

In recent years the two have fallen out with SunCal’s Bruce Elieff, whose family controls the SunCal projects, claiming Lehman reneged on financing commitments. Lehman says SunCal, which itself isn’t under court protection, failed to maintain the projects.

Privacy & Disclaimer

Not an Offer to Sell

This website and the information and material provided at this website are not intended to nor do they constitute an offer or solicitation for sale and should not be construed as such. Offers to buy or sell property may be made only at our Information/Sales Center. Some jurisdictions require prior registration or other advance qualification of real property in order to solicit in that jurisdiction. Responses to inquiries in such jurisdictions may be prohibited or limited. Void where prohibited by law.

SunCal reserves the right to change ANY specifications, materials, terms, features, prices, availability and sales procedures without notice. Please note that variations in floorplans and elevations may exist, and square footages are approximate. Brokers/agents must register their clients in person upon their client's first visit in order to qualify for a Broker Referral Program, if offered. If a Priority Purchase Program has been established, SunCal reserves the right to change the Priority Program at any time without notice and reserves the right to sell homes to individuals not specified on the Priority List. No one may assign, sell or trade their priority position to any other person.

While we endeavor to display current and accurate information, we make no representations or warranties regarding the information set forth in the Website and, without limiting the foregoing, information may be estimated or approximate, out of date or inaccurate, and there may be typographical errors. We may at any time revise this website. We are not responsible for any technical failures or problems that are beyond our control, or any results of any such failures or problems. USE OF THE WEBSITE IS PROVIDED "AS IS WHERE IS," AS AN ACCOMMODATION, AND WITHOUT WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF TITLE, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT. IN NO EVENT SHALL WE BE LIABLE TO YOU FOR DAMAGES OF ANY KIND, INCLUDING WITHOUT LIMITATION DIRECT, INDIRECT, PUNITIVE, INCIDENTAL SPECIAL OR CONSEQUENTIAL DAMAGES WITH REGARD TO THE USE OF THE WEBSITE, FOR ANY DEFICIENCY, ERROR OR INTERRUPTION IN THE OPERATION OF THE WEBSITE, OR SUSPENSION OR TERMINATION OF THE OPERATION OF THE WEBSITE OR THE ABILITY OF YOU TO ACCESS AND USE THE WEBSITE, WHETHER BASED IN CONTRACT, TORT, STRICT LIABILITY OR OTHERWISE EVEN IF WE HAVE BEEN ADVISED OF THE POSSIBILITY OF THE DAMAGES. YOU EXPRESSLY AGREE THAT YOU ACCESS AND USE THE WEBSITE AT YOUR SOLE RISK. BECAUSE SOME STATES OR JURISDICTIONS DO NOT ALLOW THE EXCLUSION OF IMPLIED WARRANTIES OR THE EXCLUSION OR LIMITATION OF LIABILITY FOR CONSEQUENTIAL OR INCIDENTAL DAMAGES, ONE OR MORE OF THE EXCLUSIONS AND LIMITATIONS SET FORTH ABOVE MAY NOT APPLY TO YOU.

The term "SunCal" as used in this website is in reference to the SunCal trademark and does not refer to any individual, corporation, partnership, limited liability company or any other entity. Each separate real estate project described, displayed and otherwise referenced herein is owned, operated and managed by one or more distinct, separate entities with unique and distinct ownership, which entities may not be separately identified herein.

Privacy

SunCal will not sell, rent or share your personal information with any third party not associated with SunCal. To ensure our e-mail updates reach your inbox, please enter info@suncal.com into your e-mail address book.

SunCal in the news