As two key deadlines approach--one April 15 and one at the end of May--Lennar chief investment officer Emile Haddad was to meet yesterday in Santa Clarita, Calif. with a steering committee of first lien holders of LandSource Communities to try to reach agreement on a deal structure that could take the vaunted land venture out of bankruptcy, according to an executive familiar with the meeting.

The steering committee, which consists of representatives of five hedge funds--Och-Ziff, TPG, Marathon Capital Management, Anchorage Capital, and Third Avenue Management--together represent more than 50% of the first lien debt in LandSource. Lennar/Emile Haddad has had a letter of intent that offers $140 million for 15% of a new operating company accepted by the steering committee.

Now, Haddad and the steering committee must hash out a deal structure and business plan designed to generate cash so that the hedge funds can get their money out--probably in about three years. The $140 million Lennar has offered comes with conditions that would relieve Lennar of previous obligations--bonds, development costs, etc.--estimated to be worth about $55 million. See Big Builder senior editor Teresa Burney's previous analysis of Lennar's proposed purchase of LandSource assets out of bankruptcy.

Lennar's accepted letter of intent sets tomorrow as the deadline for its offer of $55 million for an additional 10% of equity in LandSource.

This would indicate a value of $550 million for a land venture that was purchased for $1 billion in 2005, had a book value of $1.3 billion in 2006, and was valued at $2.6 billion in 2007, when Lennar sold 68% interest in the company to MW Partners, a partnership of CalPERS, CalPERS advisor MacFarlane Partners, and Weyerhaeuser Real Estate Co.

A $300 million valuation for the land in the venture would be a figure that executives familiar with current land trends estimate would be closer to market realities.

The other, more critical deadline is May 31, which is when the LandSource Debtor-in-Possession (DIP) financing expires. Set up by Barclays, the DIP allows LandSource funds to keep operating while bankruptcy proceedings occur. The next scheduled LandSource reorganization hearing under Kevin J. Carey, Chief Judge, U.S. Bankruptcy Court--District of Delaware, is scheduled for 10 a.m. April 17.

Here's an additional topline from the Lennar offer letter from Burney's earlier article.

The land Lennar would gain title to through its investment includes Mare Island, Kingwood/Royal Shores, Placer Vineyard, and interests in Lennar Bridges and HCC Investors.

The reorganization plan, which requires approval by creditors and the court, also calls for a non-public rights offering for shares in the newly reorganized LandSource to be sold to generate capital. Barclays would buy whatever isn't farmed out to other investors.

The challenge with the Lennar proposal is that it takes care of the first lien holders, but it leaves second lien holders and unsecured creditors out in the cold, according to the executive familiar with the offer. The court has indicated it wants a plan that addresses not only the first lien holders, but second and unsecured as well.

"The judge can cram down the amounts owed to all the parties if it comes to that, but if any plan to come out of bankruptcy is going to move forward, there'll probably have to be accommodations for the second liens and unsecureds, because they can make things difficult if they're wiped out," said the executive familiar with the proceedings.