Executives of Luxor Capital Group LP likely hope the New York-based hedge fund operator’s second attempt at investing in an Orange County homebuilder goes more smoothly than its first.
Luxor is heading up a group of creditors that expects to own 51.5% of the equity of William Lyon Homes after a proposed reorganization plan makes its way through Delaware’s federal bankruptcy court early next year, according to regulatory filings.
The Business Journal first reported that the Newport Beach-based builder was moving ahead on a bankruptcy filing on Nov. 7. At that point, the plan called for the builder’s current owners, led by cofounder and Chief Executive Gen. William Lyon and his family, to reduce their ownership stake in the debt-strapped company to 20%, down from about 95%. Warrants and management incentives could eventually boost Lyon’s remaining stake.
The plan will cut William Lyon Homes’ debt to $328 million from about $510 million. A majority of the reorganized company’s equity would be placed in the hands of bondholders, whose names were not disclosed at the time.
A Nov. 17 filing with the Securities and Exchange Commission disclosed that Luxor, a hedge fund said to have more than $1 billion dollars in assets, was poised to head up that creditor group. Luxor has plenty of familiarity with area companies that have gone through bankruptcy. It bought debt that became a stake in Freedom Communications Inc., the Irvine-based parent company of the Orange County Register, and had a hand in another homebuilder.
Early last year, Luxor emerged as a white knight for Irvine-based California Coastal Communities Inc., the builder behind Huntington Beach’s 356-home Brightwater project near the Bolsa Chica wetlands. The initial plan called for $182 million in financing from Luxor but soon ran into complications and didn’t get approved as initially envisioned.
That resulted in more litigation for California Coastal, which along with its Hearthside Homes division had filed for bankruptcy protection in 2009. Luxor claimed it was due more than $6 million in break-up fees due to missed deadlines, which threatened to kill off any attempts at resolving California Coastal’s reorganization.
A compromise payment of about $1.5 million eventually was reached. Luxor and the builder’s two other main creditors—Anchorage Capital Group LLC and Bank of America Corp.—ultimately agreed on a deal that brought the now-privately held builder out of bankruptcy earlier this year.
Despite its recent financial issues, William Lyon Homes appears to be moving ahead on land buys. In addition to a $55 million deal for a Palo Alto-area property that closed in the past month, the builder said on Nov. 16 it had secured an option agreement on two new projects in South Orange County.
The two unnamed projects will total 194 single-family attached homes “in a highly desirable Orange County setting,” the company said. Units are expected to run as large as 1,500 square feet.
The builder expects to open the local projects in early 2013.
C-III Stays Local
Irving, Texas-based C-III Capital Partners LLC has closed on the purchase of an OC-based real estate company, but it’s not Santa Ana-based brokerage Grubb & Ellis Co.
C-III, an affiliate of Island Capital Group LLC, a New York-based real estate merchant bank led by Andrew Farkas, the former chairman of Insignia Financial Group Inc., said earlier this month it closed on the acquisition of two affiliated apartment property management businesses.
They include U.S. Residential Group, based in Carrollton, Texas, and Pacific West Management, based in Irvine.
The two companies currently manage about 24,000 apartment units in 12 states.
Terms of the sale weren’t disclosed.
Pacific West Management’s website says the Spectrum-area company, led by founder and Chief Executive Alan Fenstermacher, manages apartment communities with an estimated value in excess of $1 billion and annual scheduled income of more than $100 million.
C-III said the operations of the two companies have been combined and will operate as a subsidiary of C-III under the U.S. Residential Group name, and management will remain headed up by Fenstermacher.
Last month, Grubb & Ellis announced it had struck a financing deal with C-III Capital, and said it was is in negotiations with the real estate investor “regarding a strategic transaction.” That deal has yet to close.
C-III is also under contract to buy fellow brokerage NAI Global of Princeton, N.J. That deal also hasn’t closed yet.
