Three of Irvine-based SunCal Cos.’ largest developments in California could be sold as a package out of bankruptcy by the end of March.
The three were among the largest active projects in SunCal’s portfolio before getting mired in bankruptcy a few years ago. They total more than 5,000 acres with potential for more than 11,000 homes.
Plans are moving ahead to sell SunCal’s stalled McAllister Ranch project near Bakersfield as well as the unfinished McSweeny Farms and SummerWind Ranch developments in Riverside County.
Santa Ana’s federal bankruptcy court gave approval to two land brokers—the Irvine office of Land Advisors Organization and Los Angeles-based Madison Partners—to begin marketing the properties earlier this month.
“We’re marketing these (properties) across the gamut” of builders, developers and investors, including both publicly traded and privately held companies, said Terry Ruckle, founding principal at Land Advisors.
The plan is for bids to be received by March 25, with an auction four days later, according to court records.
The minimum bid for the three-property package is expected to be $45 million, according to court documents.
SunCal opposes the plan and is appealing the court’s earlier decision to give Chapter 11 trustee Alfred Siegel approval to move ahead with a sale.
Lawyers for SunCal, which hasn’t filed for bankruptcy itself, argue that the decision largely benefitted the project’s financiers over other creditors, who are owed close to $47 million for unpaid work.
The developer is expected to file its own bankruptcy exit plan for the properties.
SunCal questions whether any outside buyers can be found to bid on the projects in less than two months, according to documents filed to support its appeal.
Separate From Marblehead
The legal wrangling is nothing new for the three projects, which have been operating under bankruptcy protection since 2008. They are being handled separately from the bulk of SunCal’s other bankrupt properties in South-ern California, including San Clemente’s Marblehead development.
McAllister Ranch is a 2,070-acre master planned community in Bakersfield that calls for a total of 6,087 homes. Only one of five subdivisions was completed before SunCal sought bankruptcy protection.
McSweeney Farms is a 673-acre community in Hemet, where 1,640 homes are planned but only one phase of construction has been completed, according to court records.
Summerwind, a 2,591-acre project in Calimesa, has plans for 3,683 homes but has seen only seen limited work.
The three projects have more than $300 million in debt tied to them through a series of loans first struck in 2006.
New York’s Lehman Brothers Holdings Inc., which itself is in bankruptcy, and other first-lien lenders are owed $230 million, according to court documents.
An appraisal of the properties in early 2008 put their “as is” value at $180.7 million. The court received an appraisal of $62 million less than a year later, according to court filings.
Lehman will be allowed to make a credit bid of at least $45 million and as high as $70 million in the auction for the properties, according to court documents.
If Lehman is the winning bidder—as SunCal appears to fear—it will have an unlimited timeline to sell off the properties. That could keep creditors from getting any money back for years, SunCal’s lawyers argued.
There have been “multiple third parties” who have expressed an interest in buying one or more of the properties, according to court documents.
“Activity so far has been strong,” said Land Advisors’ Ruckle.
