With last week's bankruptcy court ruling clearing the way for homebuilder Lennar Corp. to purchase a controlling stake in the Newhall Ranch development, the massive project appears to be getting back on track.

The Chapter 11 reorganization of LandSource Communities Development LLC, effective by the end of the month, will result in a new ownership group led by Miami-based Lennar and five lenders.

The restructuring will allow the new company, called Newhall Land Development LLC, to emerge from bankruptcy free of debt and with $90 million in cash a positive turn of events for the Santa Clarita Valley residential real estate market.

The new venture will have as a subsidiary Newhall Land and Farming Co., the original developer of Valencia and Newhall Ranch, a 21,000 home development yet to be built on a huge swath of land west of the Golden State (5) Freeway.

"This reorganization venture will allow us to focus all of our attention on the remainder of Valencia and our future Newhall Ranch community," said Newhall Land spokeswoman Marlee Lauffer.

Lennar and a partner purchased Newhall Land in 2004 for about $1 billion. Later, in 2007, the company sold a 68 percent interest in the development to California Public Employees' Retirement System for $970 million. The pension fund's purchase was made at the top of the market and was a disaster for CalPERS, which later wrote off the entire investment when the venture went bankrupt.

Lennar is now the majority owner of Newhall Land because it had retained a 32 percent interest in the bankrupt development. The company's latest investment totals $138 million.

However, it's unclear how the ownership group's reorganization will impact the plans to build Newhall Ranch. During the real estate boom, the developers hoped to break ground by 2010 and start selling houses shortly thereafter. Now, with the glut of homes in the area that timeline is dated.

Local brokers said that sales of existing properties are actually better than expected, but so-called "hidden inventory" typically foreclosed homes held by banks could weaken the marketplace once it is made available. When a state-imposed 90-day moratorium on foreclosures is lifted in early fall, it is likely that the hidden inventory will only grow.

Bob Glenn, a longtime residential broker in the area, isn't so sure the Santa Clarita Valley needs a brand-new development.

"I don't think it's quite ready yet," said Glenn, a Coldwell Banker Vista broker. "It won't be ready yet until the hidden inventory is known."

Meanwhile, Lennar's River Village development in Santa Clarita, which has approvals for 1,089 homes, is only about 25 percent built, said Jessica Frank, an associate planner for the city.

"They are holding off on construction based on sales," she said.

Another Lennar project in Santa Clarita, Soledad Crossing, is approved for 437 residences, but construction hasn't been started.

For reprint and licensing requests for this article, CLICK HERE.