Irvine-based Bacchus Development, one of Orange County’s most active builders of smaller buildings for sale to business owners, has filed for bankruptcy.
Bacchus and two related companies filed for Chapter 11 reorganization early this month in the Santa Ana division of the state bankruptcy court.
Bacchus said it sought bankruptcy protection after its largest lender, Union Bank, declared about $55 million worth of loans tied to the company’s two most recent projects to be in default and filed lawsuits against the developer.
More than 40 of 90 buildings at Bacchus’ two Irvine Spectrum developments,the Jeffrey Office Park and Bacchus Signature Series,remain unsold, according to court filings.
The bankruptcy filings were made “in order to obtain a breathing spell within which to reorganize (the company’s) affairs,” according to a statement made with the court by Stephen Muller, Bacchus’ chief financial officer.
The filings represent a turn of fortune for Bacchus, which made its niche building pricey, for-sale office condos in the Spectrum, on land sold to it by Newport Beach’s Irvine Company.
The president and owner of Bacchus is Steven Bren, son of Irvine Co. Chairman Donald Bren.
“I sympathize with Steve and his business associates as they find themselves, like many fellow Americans, overwhelmed by these extremely challenging financial circumstances,” Donald Bren said in a statement.
The elder Bren said his son plans to work through issues at Bacchus on his own and “has not asked for my involvement in the legal reorganization of his affairs.”
“I wish Steve nothing but the best as he works though this very difficult period,” Donald Bren said. “Bacchus developed a quality small-office product that met an important need here in Orange County. But as the local real estate market took an unfortunate turn, it led to depressed job growth, disappearing demand and extremely difficult financial circumstances.”
The largest of the three related bankruptcy petitions, for Bacchus Commercial LLC, lists $50 million to $100 million in debts for the company.
The Irvine Co. is owed about $465,000 by Bacchus Commercial, making it the third-largest unsecured creditor for that case.
The largest unsecured creditor for any of the three company petitions is the city of Irvine, which is owed $1.3 million by Bacchus Investment Group LLC.
All three cases are being handled by Newport Beach-based bankruptcy law firm Winthrop Couchot Professional Corp.
Bacchus expects to continue marketing and selling its buildings during the reorganization, according to company officials. About five buildings are said to be in escrow.
At the company’s newest development, the 20-acre Jeffrey Office Park near the intersection of Jeffrey Road and the San Diego (I-5) Freeway, about 18 of 50 buildings, which range from 5,000 square feet to 20,000 square feet, are sold. The project opened last year.
At its 18-acre Bacchus Signature Series project near the intersection of Irvine Center Drive and Lake Forest Drive, 29 of 40 buildings have been sold, according to court filings.
Union Bank holds a loan valued at about $43 million for the remaining unsold buildings in the Jeffrey Office Park, and a $12 million loan for the unsold buildings in the Bacchus Signature Series project. Both loans were made in 2006.
A third Bacchus development near Irvine Center Drive and Bake Parkway, the 79-unit Bacchus Office Park, is sold out.
