(Update: SunCal maintains that it has a buyer willing to pay $200 million for Marblehead and seven other developments. This post was revised to correct an inaccurate number of developments provided earlier.)
Irvine-based SunCal Cos. is fighting bankrupt Wall Street giant Lehman Brothers for the right to sell off the Marblehead housing project in San Clemente as well as 18 other Lehman-backed housing developments in California.
That battle resurfaced Tuesday in bankruptcy court in Santa Ana, Bloomberg News revealed, where a judge has tentatively ruled in SunCal’s favor.
Marblehead is one of the last big tracts of undeveloped land along the Orange County coast. Much of the roads and other infrastructure are completed for the planned development of 313 homes, parks and a commercial center.
But Lehman’s bankruptcy last September (which sparked the global economic meltdown) halted construction at Marblehead and other SunCal developments. SunCal filed for Chapter 11 bankruptcy on behalf of Marblehead and the other Lehman-backed developments in November, complaining that Lehman had cut off funding.
Lehman’s failure to pay halted construction and left SunCal’s mounting bills unpaid, totaling about $345 million, SunCal officials and its lawyer said. The lack of funding even halted maintenance needed for health and safety reasons.
Street work at Marblehead
Meanwhile, Lehman, which provided financing and has an ownership interest in some of the developments, is seeking to foreclose on the properties, transferring full ownership to itself.
SunCal is fighting those foreclosures and maintains it has a buyer willing to pay $200 million for Marblehead and seven other developments. The buyer, investment firm D.E. Shaw, eventually may be interested in buying all the Lehman-backed projects, SunCal officials say.
“What we’re asking the court to do is put the properties up for auction for the highest bidders,” said Louis “Skip” Miller, SunCal’s lawyer. “All we want to do is to get rid of the (Lehman) mortgages … so we can sell to the highest bidder, get as much cash into the property as we can so we can pay our creditors.”
SunCal filed a lawsuit in January to free up Marblehead Coastal and the other properties for sale so development can move forward, SunCal spokesman Joe Aguirre said. If SunCal is successful, D.E. Shaw (or some other buyer) would provide new funding, while SunCal would continue as development manager.
“We want to move Marblehead and the other projects forward,” Aguirre said. “Lehman continues to block our efforts.”
Bloomberg reported that Lehman has accused SunCal of wanting to sell off the projects at below-market prices to free the Irvine firm of bond obligations. For example, Lehman maintains that Marblehead is worth $187 million, compared to SunCal’s estimate of $74 million, Bloomberg said.
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