Irvine-based real estate developer SunCal Cos. says it has restructured deals for several projects, even as it defaulted on a big Bakersfield development last week.
SunCal has reworked or is in talks to restructure financing on 30 projects, company officials said, as it copes with falling land values amid the real estate downturn.
Several of the reworked projects are backed by Lehman Brothers Holdings Inc., including San Clemente’s Marblehead Coastal housing development.
SunCal and Lehman have been in talks for weeks regarding several projects, primarily in Southern California.
“The terms of the loans were reworked to provide for more patient money,” said Frank Faye, SunCal’s chief operating officer.
Not all of SunCal’s projects have been shored up. Last week, a group of lenders including Lehman filed a default notice that shows SunCal owes more than $4 million in late payments on a Bakersfield project.
The notice, the first step in the foreclosure process, is for McAllister Ranch, a golf course community that calls for 6,000 homes. The project also has seen legal filings alleging unpaid construction bills, according to the Bakersfield Californian.
SunCal has reworked projects on which Lehman is the sole lender, according to a SunCal spokesman. The Bakersfield project is more complicated because it includes several lenders, he said.
The company said it is working to restructure the Bakersfield project.
The particulars of SunCal’s reworked deals with Lehman,including which besides Marblehead are affected, and the impact on SunCal’s ownership stake,weren’t disclosed.
SunCal is retaining a stake in all of the affected projects, according to Faye.
“The good news is that SunCal remains manager of the assets in question,” he said.
The company continues to talk with lenders on other projects, according to Faye.
SunCal sets up projects under different companies and counts a number of other big partners, including New York investment manager D.E. Shaw & Co., which is minority owned by Lehman.
Lehman and SunCal closed their investment fund in 2006. Including debt, the fund was valued at about $2 billion.
The most prominent land holding the partnership bought is San Clemente’s 248-acre Marblehead Coastal. The planned mixed-use development, just off the San Diego (I-5) Freeway, saw some bridge and road-related work start again in March after a lengthy delay and $2.5 million in subcontractor liens filed against the developer.
SunCal is in talks with the city to put together a revised timeline for the project, according to Faye.
The company, led by Chief Executive Bruce Elieff, has built itself into one of the country’s largest masterplanned developers in the past decade. It has more than 250,000 lots in various stages of development, in California, Arizona, New Mexico and Nevada.
SunCal acquires land, plans housing and stores and then sells parts of the entitled land to homebuilders and retail developers.
Last year, the Business Journal estimated SunCal to have about $4 billion in assets, a figure that’s undoubtedly fallen with the housing downturn.
Like other developers, SunCal has faced tough choices.
In the past six months, the company opted to walk away from projects in Nevada and California, including a pair of local apartment complexes. That’s resulted in more than $415 million in loan defaults.
Those figures don’t include the company’s onetime controversial plan to build 1,500 condominiums in Anaheim next to the Disneyland Resort, a project that since has been abandoned.
Big properties SunCal has opted to walk away from include a 1,300-acre development in Sparks, Nev., and a 500-acre project in Shafter in Kern County.
The company is believed to have seen big drops in the value of much of its land holdings.
“In our current engagements to value and sell similar assets for other clients, we are seeing valuation discounts over the last year in the 50% to 70% range,” said Tom Reimers, executive vice president of Irvine-based land brokerage O’Donnell/Atkins, which earlier worked with SunCal to buy land.
A SunCal spokesman said the company’s hasn’t seen drops as steep as that.
SunCal has been “taking the necessary steps to preserve the land value” at its projects, Faye said.
“Certain submarkets are holding up better than others,” he said.
The company has cut staff, including workers at a new homebuilding division, Mosaic Homes, while opting to back away from some projects and readjust development timelines at others.
Some real estate sources speculate about the future of SunCal’s Mosaic Homes division. The unit is viable despite recent layoffs, Faye said.
SunCal started its homebuilding division last fall. The unit is headed by Jay Moss, who came from the Orange County operation of Los Angeles-based KB Home.
The Bakersfield default and word of reworked deals with Lehman follow weeks of heavy speculation about several of SunCal’s properties.
Buzz in the industry was that SunCal and Lehman were holding talks with potential investors and developers for projects they have together.
Lehman in particular was said to have held talks directly or through representatives with other developers to take over some of SunCal’s projects, according to sources.
A number of developers and distressed-asset investors were believed to be considering bids for some of the Lehman-SunCal projects.
Executives with SunCal and Lehman dismissed the speculation.
“We have heard the same rumors,” Faye said.
