Starwood Land Ventures has made the opening bid on virtually all of bankrupt TOUSA’s Forida assets.

The Bradenton, Fla.-based real estate development and investment company has bid just more than $61 million for 5,499 home lots and 36 model homes that TOUSA owns mostly through its Engle Homes brand, according to court documents filed in U.S. Bankruptcy Court's Southern Florida district. That amounts to just more than $11,000 per lot, not including the model homes.

The Starwood offer, called a stalking horse offer, sets a bottom for an auction that will be conducted Jan 22. It has put down $2 million in earnest money for the deal. If another bidder offers more for the land, Starwood will be paid a “break-up fee” of 3% of the purchase price, $1.83 million, plus as much as $250,000 for expenses.

Last spring TOUSA abandoned the possibility that it would build itself out of bankruptcy. It stopped building any new homes, worked to finish the ones it was currently constructing, and started marketing its land.

At first, TOUSA executives expected to sell off the land community by community, but after Starwood expressed interest in buying the bunch, executives decided it made more sense to move the land fast than to wait for better offers on the individual assets.

In addition to Starwood, four other entities made offers on substantially all the un-started lots in Florida, the bankruptcy file says. But Starwood was chosen as the stalking horse bidder.

The auction is scheduled for 10 a.m., Jan. 22, 2010, which is seven days from the second anniversary of the Hollywood, Fla.-based company’s filing for Chapter 11 protection. The company is saddled with huge debt and substantial lawsuits from investors, who allege the company pushed the company into bankruptcy by taking out a loan to absorb a joint venture just eight months before filing Chapter 11.

A ruling in that lawsuit has the potential to upend bankruptcy tradition of putting shareholders' interests behind secured creditors. Judge John K. Olson of the U.S. Bankruptcy Court's Southern District of Florida ruled in October that lenders "did not act in good faith and were grossly negligent" when they loaned money to TOUSA to pay off an earlier loan that the company made to buy Transeastern, a Florida-based land developer, in August 2005.

Olson said a group of investors syndicated by Citicorp should have known that the company was already insolvent when it loaned TOUSA roughly $500 million in 2007 to pay off a an earlier loan made by a Deutsche Bank-led investor syndicate. That syndicate had loaned TOUSA money in 2005 to buy the Transeastern company's land assets in a joint venture. TOUSA was behind in loan payments to Deutsche Bank, which had sued the company and demanded re-payment.

Olson ruled that the Citicorp loan made to pay off Deutsche Bank's earlier loan was a fraudulent conveyance of the company's assets and ordered the Deutsche Bank syndicate to "disgorge" roughly $483 million to a special account. Citicorp's loan to TOUSA was wiped out, and it was ordered to pay interest and professional fees.

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

Learn more about markets featured in this article: Miami, FL, Bradenton, FL, Orlando, FL.