The judge and the creditors have approved of a plan that will bring LandSource Communities out of bankruptcy on July 31, free of debt, with more than $90 million in cash and a new name: Newhall Land Development.

The large California-based land development company will also have new majority owners: a banking consortium that underwrote a giant loan to buy the majority of the company from Lennar Corp. and LNR Property Corp. in February 2007.

MW Housing Partners--a partnership between the California Public Employees’ Retirement System (CalPERS), MacFarlane Partners, and Weyerhaeuser Real Estate that bought the majority interest in the company from Lennar--lost their interests in the company in bankruptcy.

What isn’t new is that Lennar Corp. will retain almost the same ownership (15%) it had in the company as before the bankruptcy. (It kicked $140 million into the deal to retain that.) Lennar will also, in an arms-length manner, essentially, retain management of the asset. Under the reorganization plan, a new management company headed by Emile Haddad, Lennar’s mega California land deal maker, will manage the LandSource assets. Haddad will resign from Lennar to take over these new responsibilities.

It was Lennar that announced the approval of the plan by U.S. Bankruptcy Court judge Kevin J. Carey of the Delaware district late on Monday. Haddad said early Tuesday morning that he wanted to wait until LandSource is officially clear of bankruptcy at the end of July to talk about the future of the company.

Debra Dandeneau, an attorney for Weil, Gotshal & Manges who represented LandSource in the bankruptcy said the company is just happy to finally strike an agreement palatable to the company’s many creditors. It took the company, which filed for bankruptcy court protection on June 8, 2008, nearly 14 months to navigate through the process.

“We are very pleased that all our key constituencies--our DIP lenders, our second lien lenders, and our trade creditors--ultimately came together to support the emergence of LandSource from bankruptcy,” she said late Monday via e-mail. “In this wave of restructurings, I believe this is the first real estate-oriented case that did not end up in liquidation.”

Analysts, who have long criticized Lennar for the potential of hidden risk in its joint ventures, began to issue positive notes in the aftermath of resolving the case. Citi analyst Josh Levin said the deal represents another joint venture de-levering by Lennar and also proves that non-recourse joint venture debt, which is what Lennar had in the LandSource deal, is truly non-recourse.

“With today's court ruling, LandSource's $1.4 billion of debt will be wiped out," Levin wrote. “As a result, the aforementioned $3.8 billion of total JV debt will drop by an equivalent amount or 37% to $2.4 billion.”

Teresa Burney is a senior editor at BUILDER and BIG BUILDER magazines.


Learn more about markets featured in this article: Los Angeles, CA.