LandSource Communities Development, a company rich in land, but heavy with debt, dies today, July 31, only to re-emerge Phoenix-like from the pyre of bankruptcy, free from debt and with more than $90 million in cash and its most precious land asset intact.
With its reincarnation, the California-based company gets a fitting new name with old roots--Newhall Land Development, named for the Newhall Ranch land 30 miles north of Los Angeles which forms the core of its remaining land holdings and future hope.
It might have just as easily been ripped to pieces and sold for its parts under a Chapter-7 liquidation under bankruptcy. At various times its creditors called for that. Instead, after 14 months of sometimes contentious negotiations, it managed to convince creditors to take less with the hope that they will get more later when the real estate market returns.
"For a while there it looked like it might not" survive, said Larry Webb, a home-building industry icon who was hired, along with Timothy Hogan formerly of Warmington Homes, as neutral parties to manage the LandSource assets through bankruptcy.
On Monday, Aug. 3, Webb will be leaving LandSource to return to his favored job--running a home building business of his own.
"Actually, I am pretty proud that we saved a bunch of jobs," he said of his work with LandSource. "It all worked out. It was good for us all that the classes (of creditors) agreed to the plan. That was a goal, but we weren't necessarily sure that we would get that."
LandSource has new owners now. A Barclays-led banking consortium, which financed a giant loan to purchase the majority of the company from Lennar Homes and LNR Property Corp. just 2 ½ years ago, took back their $1 billion investment from MW Housing Partners.
The consortium will be contributing more than$100 million more to help re-capitalize the company.
MW Housing Partners, a partnership among the California Public Employees' Retirement System (CalPERS), MacFarlane Partners, and Weyerhaeuser Real Estate that bought the majority interest in the company from Lennar using the Barclays loan, lost their interests in the bankruptcy.
The other major owner in the new Newhall will be its old owner, Lennar. It was Lennar that put together the original LandSource assets. After the sale to MW Housing Partners in early 2007, Lennar retained 16% interest in the company, which was wiped out in the bankruptcy. But Lennar bought much of that back. It spent $140 million for 15% of reorganized Newhall, full ownership of several of LandSource's other assets, and the elimination of any potential legal awards related to its 2007 sale of LandSource.
Management of the reorganized company won't fall far from the Lennar tree either. It will be managed by Five Point Communities, a management company run by Emile Haddad, Lennar's chief investment officer who will resign from that position to become CEO of Five Point.
Haddad is investing $1 million of his own cash in Newhall, giving him 0.4% of the new company. To secure the position, the steering committee of the reorganized company told him he needed some personal investment in the game.
"The members of the Steering Committee explained to me that they wanted to make sure that I believed strongly enough in the business plan and the prospects--that I was willing to make an investment on the same terms as they were," Haddad said in a court document he filed supporting the company's reorganization plan.
Haddad said several months ago that Newhall will have a board of seven members, five representing the five top lenders on the project, one from Lennar and Haddad himself. Five Point will be managing several other assets besides Newhall. Five Point will manage other Lennar land assets including El Toro, Treasure Island, Hunters Point, and Candlestick Point.
"It's very exciting," Haddad said of managing Newhall. "Those are great assets and I've lived with them since God knows when."
Learn more about markets featured in this article: Los Angeles, CA.