CEO quit
Calpers-Linked
Land Partnership
Gets Default Notice
By MICHAEL CORKERY
April 26, 2008; Page A3
A large California land partnership involving one of the largest U.S. pension funds has received a notice of default on a $1 billion loan after failing to meet certain terms of its lenders.
LandSource Communities Development LLC, a partnership that involves the California Public Employees' Retirement System, received the default notice Tuesday, amid talks to restructure $1.24 billion of debt. The partnership, which owns 15,000 acres in Southern California, had received an extension to meet its current loan terms, including a required payment, but the deadline expired on April 16. The default notice applies to about $1 billlion of the total debt.
LandSource spokeswoman Tamara Taylor said that the default notice won't accelerate the company's debt payments and that negotiations with lenders are continuing.
Hundreds of lenders, including banks and institutional investors, hold the syndicated debt. Barclays Capital arranged the financing in early 2007. At the time, LandSource's assets were appraised at $2.6 billion.
Partnerships such as LandSource were a common way to own and develop land during the housing boom. They provided high returns to investors and lenders and a way for builders to keep highly leveraged land off their books. But the ventures have run into trouble as the value of undeveloped land has plummeted and as demand for new homes has eroded.
MW Housing Partners, which includes Calpers, took a 68% financial stake in LandSource in early 2007 amid the slowing housing market. Cerberus Capital Management's LNR Property Corp. unit has a 16% stake, and home builder Lennar Corp. has a 16% stake. Lennar and LNR operate the management of LandSource. None of these equity partners is liable for the debt if LandSource defaults. Calpers and Cerberus representatives declined to comment.
One problem with ventures such as LandSource is that they typically require builder partners to acquire land on a schedule, even if they don't need the lots. They also can require partners to contribute more equity if the land's value falls below a threshold.
LandSource's trouble followed mounting stress at two large joint ventures in Las Vegas, called Kyle Canyon Gateway and Inspirada, involving many of the nation's largest home builders. One partner in these ventures said Friday that it is unlikely that it will meet its obligations to the deals. The partner, home builder Kimball Hill Homes, announced Wednesday that it had filed for Chapter 11 bankruptcy protection.
Write to Michael Corkery at michael.corkery@wsj.com |
