Several of the industry’s heavy hitters were expected to be bidders for 749 lots within the Rosedale master planned community in Azusa, Calif., which was scheduled to be offered at a courthouse auction on Sept. 2. That auction, though, was abruptly cancelled when the entire master plan's ownership and management were placed under control of two California developers [see Editor's Note at the bottom of this article]. Before it was cancelled, at least one potential bidder thought these lots that were to be auctioned, which are mostly developed and cut out, could go for $70 million or even higher.
This community, located in the San Gabriel Valley was conceived and started about four years ago by Azusa Land Partners, a joint venture that included PLC Land Co., Fieldstone Communities, Rockpoint Group, and Starwood Capital Group Global. The plan called for 1,250 homes (a mix of condos and single-family houses) to be built by five builders, and was to include, according to its website, “a series of intimate neighborhoods with parks, trails, a community recreation center, a new K-8 elementary/middle school, fire station, proposed future Metro Gold Line Station, and acres of permanently preserved natural hillsides.” (Whoever had won the bid would have been obligated to complete the school, whose cost is estimated at $25 million.)
The housing recession changed all that. While about 125 homes were built and sold to individuals, and most of the community’s infrastructure is installed, the rest of the lots eventually wound up being repossessed by lenders.
For example, GMAC retrieved 150 lots, which it subsequently sold to the three builders. JPMorgan Chase currently holds another 150 lots, according to Peter Kiesecker, senior vice president of mergers and acquisitions for Irvine, Calif.-based Standard Pacific Homes, which intends to bid on the lots next week. He describes them as “move-up type assets.”
Earlier this month, StanPac paid $150 million to acquire the rights to purchase 468 acres of land in San Diego, on which it intends to build 737 homes and sell developed lots to other builders. Kiesecker tells BUILDER that his company had intended to follow the same pattern if it had won the bid for the Rosedale lots.
Kiesecker says he’s been keeping an eye on Rosedale’s predicament—about which there has been very little press coverage—since last fall when US Bank, which provided financing collateralized by this land, issued a letter of default against the developers. Scott Lorenzini, who works in US Bank’s special assets group in Los Angeles, confirmed that the bank was to officially foreclose on the 749 lots on Sept. 2. He also noted that the bank had postponed this auction a number of times already because, he says, “we’re still trying to get our arms around the asset.” Neither Lorenzini nor Ed Fontes of San Diego-based Stewart Default Services, the trustee appointed to oversee the disposition of the Rosedale lots, would disclose how much debt is involved.
They wouldn’t reveal any bidder names, although Lorenzini did say there had been considerable interest. Kiesecker expected the auction to attract several major builders and developers, as well as investment firms that could include Starwood Capital and possibly the hedge fund billionaire John Paulson, through his Rain Tree Investment Corp. in San Diego. (Marc Perrin, Starwood Capital’s managing director of acquisitions in San Francisco, did not return several calls from BUILDER requesting comment.)
US Bank had not revealed what it would accept as a minimum bid. A winning bidder, however, would have had to remit the entire amount at the auction, and Kiesecker thought that winner could end up forking over between $50 million and $70 million. He said he would have been at the auction with a cashier’s check, but he wouldn’t say how high StanPac has authorized him to bid. “They’d kill me if I told you that,” he laughed.
[Editor's Note: On August 31, the auction for these home sites was cancelled, and the ownership and management of the master plan's entire 517 acres, which are entitled for up to 1,250 home sites, were placed under the control of Rosedale Land Partners, a partnership between Brookfield Homes' Southland Group and Christopher Development Group (CDG), which is owned by Christopher Gibbs, who also owns Newport Beach, Calif.-based lluxury home builder Christopher Homes.
[Lorenzini of US Bank declined to comment on this turn of events, claiming he was prohibited by a confidentiality agreement from discussing the transaction. Neither Gibbs nor Adrian Foley, Brookfield's president, responded to numerous calls from BUILDER requesting comment.
[A brief statement issued by the partnership did not disclose the terms of this acquisition or even details about the ownership setup. In that prepared statement, Foley is quoted as saying that Brookfield and CDG would use the next few months to "review the existing Rosedale community plan," and discuss options about moving its development and construction forward. Foley added, without elaboration, that this project is "complex" and "not without its share of challenges."]
John Caulfield is a senior editor for BUILDER magazine.