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Home builder Lennar seeks to regain some or all of Newhall Ranch stake

The company had sold a 68% interest in developer LandSource to CalPERS at the top of the housing bubble. It has a tentative agreement to buy back an undisclosed amount -- presumably at a big discount.

March 21, 2009|Roger Vincent

Home builder Lennar Corp., which sold a controlling interest in the the massive Newhall Ranch project to the California Public Employees' Retirement System, now wants to buy back some or all of its stake.

Lennar had sold 68% of LandSource Communities Development to CalPERS for nearly $1 billion at the top of the real estate bubble. It now has a tentative agreement to buy back an undisclosed amount -- presumably at vastly discounted rates.

LandSource, which is developing Newhall Ranch, defaulted on a $1.24-billion debt and in June filed for bankruptcy protection from its creditors.

Florida-based Lennar, the second-largest home builder in the country, is ready to put "substantial equity" into a reorganized LandSource, according to the summary of a proposed agreement sent to hundreds of LandSource creditors Thursday and obtained by The Times.

Lennar did not respond to requests for comment, but Marlee Laufer, a spokeswoman for LandSource, confirmed that Lennar had executed a nonbinding agreement to acquire a larger interest in LandSource and manage the continued development of Newhall Ranch.

"We are very encouraged with this development in our Chapter 11 case," Laufer said. "We look forward to the day when we are a reorganized company."

CalPERS had paid Lennar $970 million in early 2007 for the controlling interest in the project.

Lennar maintained a 32% interest in LandSource and rights of first option to purchase land owned by the partnership.

Laufer said she did not know how much Lennar had offered to pay for an expanded stake in LandSource.

LandSource's 15,000 acres in Newhall and Valencia were worth $2 billion when assessed in 2006, according to documents filed in Bankruptcy Court, but real estate values have fallen substantially since then.

Still, the property is attractive because Newhall Ranch is one of the few large residential development sites left in Southern California.

If Lennar's plan is approved by a Bankruptcy Court judge, it would leave the company well positioned to start building houses in Newhall Ranch when the housing market turns around.

The tentative agreement calls for Emile Haddad, chief investment officer of Lennar, to manage development of Newhall Ranch after the reorganization.

LandSource received a $135-million line of credit from a group of lenders led by Barclays Bank last year, allowing it to fund operations during the Chapter 11 period.

But in November, Barclays called for LandSource to sell the property to settle its debts.


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