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Long Arm of Banning Ranch: From OC to Delaware

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RESIDENTIAL

A jurisdictional battle is brewing in the reorganization of Colorado’s Banning Lewis Ranch, the massive development that’s being overseen by Newport Beach’s Makar Properties LLC and others.

Banning Lewis Ranch Co.—a company owned by a unit of developer Makar and investors Greenfield Partners LLC and Farallon Capital Management LLC—filed Chapter 11 petitions last month, citing more than $242 million in debts.

The 21,400-acre Colorado Springs-area project is slated to hold some 75,000 homes upon completion. Early development work was being overseen by Makar and sister homebuilding company Capital Pacific Holdings Inc., which paid a reported $55 million for the land in 2001.

The filings appear to be the result of an impasse between the company’s partners.

In addition to citing “uncertain economic and financial conditions,” the bankruptcy filing said Greenfield and Farallon took the action to “break the deadlock” between them and a unit of Makar that was the minority partner in the project.

The case was filed in Bankruptcy Court in Delaware, widely considered to be the most pro-debtor in the country. But it’s not certain it will remain based there.

Since the case concerns a large chuck of Colorado land—and most of the unsecured creditors, assets, and witnesses in the case are locals—the city of Colorado Springs is pushing to get the venue of the case moved to its state’s bankruptcy courts.

The debtors are fighting the city’s attempts to move the case, efforts that have taken up the bulk of the case work related to the bankruptcy filing so far, according to court records.

A decision on jurisdiction is expected in the next month or two.

The cases will be “administered most efficiently in Colorado,” the city has argued.

Despite the jurisdictional issues, local developers assume that ownership of the Banning Lewis Ranch project will remain largely unchanged when all is said and done. There appears to be few other big developers willing to step in and take over the project’s entire operation.

“I suspect Banning Lewis will end up being developed by the current team, because nobody understands the property better than they do,” local developer Steve Schuck told the Pueblo Chieftan, an area paper.

“The horse has to be ridden, and these guys know how to ride it better than anybody,” Schuck said.

COMMERCIAL

Irvine brokerage 360 Commercial Partners has kicked off an aggressive marketing plan for the 170,000- square-foot plant near John Wayne Airport that’s currently used by Irvine-based women’s clothier St. John Knits International Inc.

St. John, the county’s biggest apparel maker by workers, sold the plant at the corner of Michelson Drive and Jamboree Road in 2006.

It opted to lease back the plant, which was bought by developer Hines Interests LP of Houston, along with pension fund California Public Employees Retirement System, in a five-year deal.

That lease is set to expire by summer, and St. John has yet to announce a renewal or plans to relocate elsewhere locally. About 61,000 square feet of the space is currently vacant at the site.

360 Commercial was brought in a few months ago to find prospective replacement tenants in the event St. John leaves the rest of the building, said Louis Tomaselli, the brokerage’s chief executive.

In addition to finding another tenant that could take up the entire space, the brokerage’s marketing the property as potentially two separate facilities—a nearly 110,000-square-foot corporate headquarters building with industrial uses, and warehouse and office building in the 61,000 feet that remains empty.

Monthly rents at the buildings would likely run in the 45 cents to 49 cents range, according to 360’s marketing material.

Buchanan Buy

Newport Beach’s Buchanan Street Partners has snapped up an office and industrial park in Phoenix that had fallen into financial distress.

The real estate investment firm paid $7.8 million for Mountain Vista Commerce Center, a 133,600-square-foot multitenant industrial and office park a few minutes from Phoenix Sky Harbor International Airport.

The seller was Horsham, Pa.-based Berkadia Commercial Mortgage, which was acting as the special servicer for the three-building property, which was foreclosed on in 2009 by bondholders.

Officials for Buchanan Street said the property was bought at less than 50% of its replacement cost. It’s currently about 72% occupied.

The deal shows that “markets are beginning to capitulate and also shows the willingness of institutional sellers to liquidate at prices appropriate to today’s market conditions,” said Robert Brunswick, Buchanan Street’s chief executive and chairman, in a statement.

Mark Mueller
Mark Mueller
Mark is the Editor-in-Chief of the Orange County Business Journal, one of the premier regional business newspapers in the country. He’s the fifth person to hold the editor’s position in the paper’s long history. He oversees a staff of about 15 people. The OCBJ is considered a must-read for area business executives. The print edition of the paper is the primary source of local news for most of the Business Journal’s subscribers, which includes most of OC’s major corporate and community players. Mark’s been with the paper since 2005, and long served as the real estate reporter for the paper, breaking hundreds of commercial and residential real estate stories. He took on the editor’s position in 2018.

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