Lennar Corp. is seeking to turn over redevelopment of the former El Toro Marine base in Irvine to a key executive going out on his own.
Emile Haddad, the Aliso Viejo-based chief investment officer of Miami’s Lennar, is nearing a deal that would give him an ownership stake and control of redevelopment at El Toro and two other projects.
Haddad also would take over the bankrupt Newhall Ranch housing project in Los Angeles County and a Lennar project near San Francisco.
Under the plan, Haddad would leave his position at Lennar and start a new company,tentatively named 5 Point Communities,that would run the three projects.
The projects, now stalled amid the housing downturn, could hold close to 35,000 homes.
Plans for El Toro call for thousands of homes, commercial buildings as well as park space, museums and other public uses at the former Marine base that closed more than a decade ago.
Lennar now heads up a venture that paid $1 billion for the El Toro land in 2005. The homebuilder has invested about $83 million into the 3,700-acre property, according to company filings.
Lennar would have a 60% stake in 5 Point. Haddad, 5 Point’s chief executive, would own the rest and have a controlling vote on operational matters.
Haddad would bring about a dozen Lennar employees from the homebuilder’s Aliso Viejo regional headquarters.
Big names expected to move to 5 Point would include Bob Santos, previously the division president of Lennar for El Toro, and Tom Martin, a regional vice president.
The new company would be based in Aliso Viejo and operate from the same building that holds Lennar’s local operations.
El Toro would keep its existing financial partners on board, including Lennar. Governance of the project would still be through an executive committee, but with Haddad’s 5 Point having the controlling vote on decisions.
Haddad handles Lennar’s land acquisitions across the country and oversees its largest Orange County projects including those at El Toro and in Anaheim’s Platinum Triangle.
Moving to the new company is expected to free up more time for Haddad and his team to push the redevelopment of El Toro, once the market begins to show signs of recovery.
The changes Haddad has proposed are contingent on getting court approval on a Lennar-endorsed plan to take Newhall Ranch’s parent company out of bankruptcy.
Delaware’s bankruptcy court this week is expected to take up a reorganization plan proposed for Miami-based LandSource Communities Develop-ment LLC, whose key asset is the 12,000-acre Newhall Ranch, some 30 miles north of Los Angeles in the Santa Clarita Valley.
News of the reorganization plan first was floated in mid-March. Specifics of Haddad’s involvement in the plan weren’t disclosed in court filings until earlier this month.
Close to 20,000 homes are planned at Newhall Ranch, which filed for bankruptcy last June after LandSource defaulted on loan payments.
The land had a book value of about $2.6 billion in 2007, when Haddad engineered a deal for Lennar to sell a large portion of its stake in the company to the California Public Employees Retirement System for about $700 million.
The land’s now valued closer to $550 million, based on details of the reorganization plan.
Lennar has proposed investing $140 million in return for a 15% stake in the reorganized company, as well as the settlement of some prior obligations.
Five Point initially would have a 2.5% ownership stake in the reworked LandSource, with Haddad investing his own money into the reorganized company.
The new company would see its stake in LandSource increase to more than 10% after a few years, assuming certain goals are met by 5 Point, according to court records.
Observers expect the plan, which has the backing of hedge funds that represent about half of LandSource’s secured debt, to be confirmed.
Haddad and 5 Point are expected to get a similar ownership stake in El Toro, as well as in the Hunters Point Naval Shipyard project that Lennar runs in San Francisco. Those details are still in negotiation, according to sources close to the situation.
According to court documents, 5 Point also could take on two additional housing projects,potentially including Platinum Triangle projects by Lennar in Anaheim,in a year, assuming entitlement-related milestones for LandSource are met. No deal for those properties is in the works as of yet.
As things now stand, day-to-day opera-tion of Lennar’s projects in the Platinum Triangle, and in Irvine’s Central Park West development, would fall to Jon Jaffe, Lennar’s Aliso Viejo-based chief operating officer, once Haddad starts his own company.
Restructuring of LandSource now is being overseen by two other locals, Lawrence “Larry” Webb and Timothy Hogan, who run Costa Mesa-based HoganWebb LLC. Neither Webb nor Hogan is expected to remain involved in LandSource once it emerges from bankruptcy.
