After all the obstacles California land developer Emile Haddad has faced during the past few years of the extreme housing downturn, the most recent lawsuit by a coalition of environmental activists and Native Americans objecting to permits issued to develop Newhall Ranch in Los Angeles County seems but a minor annoyance.
“That’s normal business,” said Haddad, CEO of FivePoint Communities, an independent real estate development company owned by Haddad and Lennar Corp. “Normal is a great thing in today’s world.”
Almost nothing has been a normal challenge for Haddad during the last few years as the housing market crashed, leaving a number of huge land developments Haddad was working on as chief investment officer for Lennar stalled at best and in economic shambles at worst as the value of the land dissolved far below the loans that financed some of the projects.
Even at the market’s peak, Haddad had a difficult job. In addition to the Newhall project, which encompasses 19 square miles and is slated to become a new town with 21,000 homes and 60,000 residents, he was also working for Lennar at the complicated business of converting a number of former California military bases into massive housing communities big enough to be called towns. Besides their size, the developments’ challenges were and are major. Often there are environmental contamination issues to resolve as well as the need to achieve consensus with cities and counties on the high-profile development plans.
Newhall, then held under the LandSource entity, along with sister development Valencia, undoubtedly generated the most ink as it filed for bankruptcy not long after Lennar sold most of its interest in the community to an entity held by the California Public Employees' Retirement System (CalPERS).
In the end the bankruptcy wiped out $1.4 billion of debt, roughly $900 million of it lost by CalPERS alone, and the development was placed in the hands of the lenders, a Barclays-led banking consortium. Lennar bought back into the entity, gaining 15% of it; and Haddad resigned from his job at Lennar and went on to create FivePoint Communities to manage Newhall and four other Lennar projects.
That was the summer of 2009. Since, Haddad has been working to get LandSource as well as four other huge projects back on track and ready for an eventual housing rebound.
FivePoint is also managing the Hunters Point, Candlestick Park, and Treasure Island developments in San Francisco, and El Toro Marine Corps Air Station near Irvine, Calif.
While LandSource generated most of the press coverage of FivePoint’s projects, El Toro, to be called Great Park Neighborhoods, has been the biggest development challenge, said Haddad.
“The hardest thing I’ve ever worked on was the restructure of the capital on El Toro, mainly because of the number of entities that were involved with it,” said Haddad.
El Toro was mired in the Lehman bankruptcy. At some point, Lehman syndicated part of its debt on the land to others, so when the bankruptcy was filed there were multiple entities fighting for the assets.
“It was who has what rights, who’s on first,” recalled Haddad. “We found ourselves in the middle of that because we moved from having one lender (Lehman) to multiple lenders. We had to sort all of that out for over a year.”
On the 29th of December, El Toro got a refinancing deal with the original debt restructured and a new line of credit in place. All the former partners, except Cerberus, which was bought out by Lennar, are in place. The new line of credit will allow the build out of the project, which is being managed by FivePoint.
On the 10th of January, El Toro’s first phase development maps were filed including plans for 5,000 homes and 1.2 million square feet of commercial.
“We are shooting for the end of the summer to get our approvals and the plan is to immediately begin land development,” said Haddad. “So by the end of 2012, finished home sites can go up for sale. By 2013 we expect to have the first homes occupied in El Toro.”
The San Francisco projects have been moving forward as well.
Last July approvals for 11,000 home sites and three million square feet of commercial were filed for Hunters Point /Candlestick Park, and a settlement with the Sierra Club was worked out in January; a settlement is being worked on with another group as well, Haddad said.
Land development is underway on 900 home sites in Hunters Point and managers are evaluating when to go vertical with the construction.
At Treasure Island, Haddad said managers are shooting to have entitlements in place by mid-2011 for everything, including 7,500 home sites and between 250,000- and 200,000-square feet of commercial and a 250-room hotel.
Back at Valencia/Newhall in Los Angeles County, Haddad said Newhall is well on track to meet the plan that was put in place when it came out of bankruptcy.
The goal is to be in position to sell out of the Newhall Ranch in 2014,” as the balance of Valencia is sold out, said Haddad.
“We will be in the position of being the only private developer who can deliver finished home sites there when the market comes back,” said Haddad.
And what about the latest lawsuit?
“This group has sued me 16 times and lost 16 times,” said Haddad. “We’ll be working through that over the coming 12 months and, one way or another, I’m sure we’ll settle it.”
“Again, those are normal development challenges,” said Haddad. “That’s fun.”
Teresa Burney is a senior editor for Builder magazine.