Newhall Land and Farming Co. plans to continue operating including moving forward with several Valencia developments despite its parent company's financial troubles.
LandSource Communities Development LLC, a joint venture that owns Santa Clarita-based Newhall Land, filed for Chapter 11 bankruptcy protection June 8, several weeks after defaulting on a $1.1 billion loan.
The venture, majority owned by the California Pubic Employees' Retirement System, has been rocked by the plummeting real estate market and the tightening credit markets.
The bankruptcy filing has called into question the future of the 21,000-home Newhall Ranch in Santa Clarita, a 12,000-acre project west of the Golden State (5) Freeway that would be one of the largest residential developments in California.
However, LandSource won approval in court last week for access to up to $35 million of debtor-in-possession financing "to meet its post-petition obligations," the company said in a statement. A hearing for additional financing has been set for June 30.
Marlee Lauffer, a Newhall Land spokeswoman, said the company is moving forward with getting county approvals for Newhall Ranch, which the company had hoped to break ground on in 2010.
"At this point we are continuing to focus on our day-to-day operations," Lauffer said. "We do have financing, which allows us to move forward."
More immediately, Newhall Land has several other projects under way in Santa Clarita.
The company has already done most of the land preparation on the West Creek project, in Valencia on the east side of the Golden State Freeway, which will have about 2,200 homes at full build-out. Another project that has already been graded is the nearby 1,089-unit River Village development.
As part of River Village, located north of the Santa Clara River and east of Bouquet Canyon Road, the company is on the hook for the partial funding of an 1,100-foot-long bridge over the river being built by the city of Santa Clarita.
"I don't think (the bankruptcy filing) is holding anything up," said Jeff Hogan, a Santa Clarita senior planner. "The city is continuing to move forward with completing the cross-valley connector."
Lauffer said the company has already contributed about $25 million to the project. Newhall Land also has near-term plans for a 400-unit town home development, called Villa Metro, that has not yet gotten under way.
LandSource is a joint venture of M/W Housing Partners III LP and Miami-based homebuilders Lennar Corp. and LNR Property Corp. M/W has the majority stake through its $960 million investment of Calpers funds. San Francisco-based MacFarlane Partners LLC, which invests money for Calpers, and Weyerhaeuser Realty Investors, a unit of timber company Weyerhaeuser Co., also are members of M/W.
Calpers invested nearly $1 billion in the venture in early 2007. Last week a spokesman said the fund is reviewing its residential land holdings and may sell its stake in LandSource.
LandSource defaulted April 22 on a first-lien loan obtained as part of a $1.55 billion refinancing in March 2007 led by Barclays Capital Inc. and syndicated with 100 lenders. As the housing market crumbled, the venture was unable to complete land sales that were intended to keep it afloat until the Newhall Ranch development came on line.
Newhall Land remains the venture's most significant holding. Founded in 1883, the company has been developing land across California for much of the last century, with its major focus in the Santa Clarita Valley.
Newhall Land broke ground in 1965 on the planned community of Valencia, ultimately building more than 20,000 homes, as well as parks and other community features. It was independent until it was bought in 2004 for $1 billion by Lennar and LNR as a 50-50 joint venture. M/W was brought into the venture in early 2007.
Newhall Land owns about 50,000 acres of land in California. Lauffer said the long-term value of the holdings should help the company weather the current storm.
"Were a 125-year-old company and we've been developing Valencia for over 40 years," she said. "We've seen lots of fluctuations and retrenchments in the market and we know that our assets enjoy long-term value."
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