Irvine-based Standard Pacific Corp. is among several local and national builders and land developers eyeing San Clem-ente’s Marblehead Residential site now that the long-stalled coastal project appears poised to emerge from bankruptcy-related limbo.
Standard Pacific—the largest homebuilder based in Orange County—is “absolutely” considering the high-profile, 247-acre site for a potential joint venture or outright purchase.
“And we’re probably not the only builder,” said Scott Stowell, president of Standard Pacific.
Marblehead is “a very high priority, and high on our list” for potential acquisitions, Stowell said during the builder’s recent third-quarter earnings call with analysts.
Standard Pacific has already spent some $350 million on land acquisitions this year, much of it in California. The company expects to be an active buyer of land again next year.
A deal for Marblehead, if done without one or more partners, would be among the builder’s largest buys since the onset of the housing downturn. Last year, the company struck a $150 million deal in northern San Diego County.
Marblehead, slated for some 310 high-end homes and other development, was once valued at more than $300 million.
Recent Appraisals
More recent appraisals have put the site’s value closer to $100 million.
Despite the drop in value, West Coast developers still consider projects like Marblehead to be “one of the big bogeys out there on the horizon, from a master-plan perspective,” said Tom Reimers, president of Irvine-based land brokerage Land Advisors Organization.
The property has seen little work over the past four years, with the unfinished site overlooking the ocean just west of the San Diego (I-5) Freeway serving as a constant reminder of the ongoing troubles in the real estate market.
In addition to stalling home construction, the project’s bankruptcy has postponed work on a 600,000-square-foot outlet center planned by Newport Beach-based Craig Realty Group.
Prospects for development of any type at Marblehead improved in late October with a settlement agreement between the project’s former master developer, Irvine-based Sun-Cal Cos., and its one-time financier, New York-based Lehman Brothers Holdings Inc.
SunCal and Lehman worked together on land deals valued as high as $4 billion before the housing crash and have been fighting for years over the fate of Marblehead and nearly 20 other bankrupt California developments. The battle has been waged in bankruptcy courts in Santa Ana and New York, and the settlement agreement was unexpected by many observers.
The agreement calls for Lehman—which is being liquidated as part of its own 2008 bankruptcy—to assume control of most of the projects, including Marblehead.
The agreement gives SunCal an option to buy back two projects—one in Riverside and the other in Contra Costa County—that total about 1,300 acres. SunCal will also receive a $3 million payment from Lehman, among other concessions.
In addition, the agreement relieves SunCal Chief Executive Bruce Elieff from responsibility for more than $230 million in personal guarantees he signed on bonds related to deals with Lehman.
The projects that would be turned over to Lehman under terms of the proposed settlement are expected to be put on the sales block in the not-too-distant future, although a disposition plan has yet to be disclosed in court filings.
“Clearly, the details still are not completely known,” said Land Advisors’ Reimers, whose firm had an inside track on selling Marblehead and other area developments had SunCal remained in control of the projects.
“At least they’re at a place where (Lehman) can take it back to the market, in one way, shape or form,” Reimers said at a recent Urban Land Institute conference in Los Angeles.
Lehman has already been doing some marketing for Marblehead and other one-time SunCal projects as part of a nearly 30,000-acre land portfolio, according to trade and national reports.
Along with Standard Pacific, other builders that have reportedly been approached by Lehman include Toll Brothers Inc. and PulteGroup Inc.
Standard Pacific, which focuses more on move-up and higher-end homes than most of its publicly traded peers, would appear to be a good fit for the Marblehead project, with homes expected to go for $1 million and more.
“It’s going to be home prices right up our alley,” said Standard Pacific Chief Executive Ken Campbell.
Five Points
Aliso Viejo-based FivePoint Communi-ties Inc., developer of Great Park Neighbor-hoods in Irvine, also is said to be among several master developers that have received proposals for all or some of the former SunCal portfolio, including Marblehead.
At this point, Lehman is “trying to take their time, and they’re looking more at land developers than homebuilders right now,” Campbell said.
Campbell, slated to hand over the chief executive’s job at Standard Pacific to Stowell at the end of the year, said during the recent earnings call that he’s been tracking Marblehead and a potential sale since before he joined the company about three years ago.
He’s still not convinced a quick sale of Marblehead, which made up 35% of the SunCal-Lehman portfolio in terms of dollar value, is in the cards.
“It’s going to be subject to the vagaries of bankruptcy, and employees trying to keep their jobs—it’s going to be a political outcome, probably,” Campbell said. “If you asked me to guess when it’s actually going to get sold to somebody, I don’t know. Someday, someone is going to build real nice homes at Marblehead.”
Possible Twist
In an interesting potential twist, one company that could potentially make a play for some of the assets now under control of Lehman, including Marblehead, is SunCal.
Nothing appears to restrict SunCal from lining up other funding sources to buy individual assets once they’re put up for sale by Lehman, based on a reading of last month’s settlement agreement.
Officials for SunCal, which has been active of late buying land on the East Coast, have said they have the financial backing to get deals done.
In a recent court filing, Stephen Elieff, SunCal president and brother of Bruce Elieff, said SunCal and its affiliates are among the most financeable land developers in the country, “and there are several capital partners willing to confirm that.”
SunCal has been working of late with financial partners that include Santa Monica-based hedge fund Colony Capital Inc., which also is a lender to William Lyon Homes in Newport Beach.
