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E-mail StoryMcAllister Ranch developer defaults on $235 million loan
| Thursday, Apr 24 2008 12:18 PM
Last Updated: Friday, Apr 25 2008 7:30 AM
An Irvine developer defaulted on a $235 million loan borrowed against Bakersfield’s planned McAllister Ranch golf course community, chalking up what’s probably Kern’s largest soured debt so far in the current market downturn.
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What’s happening at McAllister Ranch parallels other setbacks for developer SunCal Cos.
Across the West, Irvine-based SunCal is bogged down by foreclosures, lawsuits and charges of unpaid debts, various media outlets report.
Here’s a round-up of a few SunCal projects in the news:
• Last month, the Orange County Register published a round-up of SunCal sorrows.
Seven lawsuits filed in Orange County accuse the company of failing to pay more than $105 million in debts, the paper reported.
In Sparks, Nev., SunCal lost a 1,300-acre tract planned for homes and businesses to foreclosure, the Register wrote.
A Santa Ana apartment complex owned by SunCal was also repossessed, and two more of the developer’s apartment complexes were at risk of foreclosure, the Register reported.
• SunCal recently asked the city of Alameda for a six-month extension to submit plans for a major redevelopment project set to transform an old naval base into housing, shops and offices, the San Francisco Chronicle reported last week.
But elsewhere, the company’s still pushing big, bold new projects.
In just one example, SunCal is pitching a massive development for the city of Barstow. Plans call for a 200-acre man-made lake and about 25,000 homes over the coming decades, according to newspaper reports and SunCal Web sites.
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An affiliate company of SunCal Cos., the Irvine-based developer of the McAllister Ranch project in southwest Bakersfield, has defaulted on a $235 million loan from creditor Lehman Commercial Paper Inc. It's the latest in a series of filings suggesting the proposed 6,000-home community may be in financial trouble.
An aerial view of McAllister Ranch on Thursday, March 20, 2008.
Aerial view of McAllister Ranch, Thursday, March 20, 2008.
Idle golf carts are lined up at the McAllister Ranch Golf Course in this Jan. 14, 2008 photo.
The construction of the clubhouse at McAllister Ranch Golf Course is at a standstill earlier this year.
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A default notice recorded Tuesday in Kern County shows SunCal Cos., the company behind the 6,000-home project, owes late payments totaling more than $4 million to lender Lehman Commercial Paper Inc., a New Jersey-based financial company.
The future southwest community near Panama Lane and South Allen Road is also plagued by claims from construction companies and subcontractors who say they haven’t been fully paid for work and supplies. As of Thursday, their liens and lawsuits totaled more than $14.5 million, an ongoing Californian tally found.
A SunCal spokesman did not respond to questions submitted Thursday about the debts.
Tuesday’s default filing is the first legal step in a possible foreclosure. The property could ultimately be repossessed if SunCal — through the affiliate formed for the project, LBREP/L SunCal McAllister Ranch LLC — fails to right the debt.
The 2,070-acre site already features a Greg Norman-designed golf course and a partially built clubhouse. SunCal’s promise the course would open for public play by the end of March hasn’t been realized. Estimates for the start of home construction, meanwhile, have come, gone and evaporated altogether.
Court filings show construction companies are keenly worried they could be left with painful amounts of red ink.
Bakersfield company Superior Pipelines Inc., for example, won a temporary protective order last week that was initially kept secret from SunCal, court documents show, due to the “danger” SunCal could hide assets if it knew about the legal maneuver. Superior is owed nearly $6.4 million by SunCal, the suit alleges.
A declaration from Superior Pipelines’ president, Walter E. Alexander, also indicates a skittish mood at the work site.
The statement says Alexander was told about a month ago by the SunCal project superintendent “that SunCal was going to walk away from the project and shut it down.”
PRIOR FORECLOSURE
SunCal has already allowed one big debt borrowed against acreage in Kern to go belly up this year.
Last month, a defaulted $74 million loan against property in Shafter was foreclosed on by the lender, national homebuilder Lennar Corp.
The 515-acre site, north of 7th Standard Road and west of the Calloway Canal, was part of a 5,300-home project involving SunCal subsidiary SunCal Mission Lakes LLC, Lennar and another developer.
Prior to Tuesday’s default, the delinquent Shafter loan was by far the largest recorded by a developer in Kern since the real estate market crumpled, according to a Californian survey.
Up and down the state, developers are facing the same types of problems plaguing SunCal, said Christopher Thornberg, a Los Angeles-based economist and principal at Beacon Economics, a consulting firm.
Today’s market conditions for developers fall “somewhere between brutal and death-defying,” Thornberg said.
Major developers constantly borrow money to finance land purchases and keep future projects in the pipeline, he said. The money’s still out there, but banks have started to balk at lending to residential housing projects, he said.
“The markets just went dry,” Thornberg said.
A LAKE, PARKS AND SHOPS
Although it’s located on the far edge of town, McAllister Ranch has existed on paper since at least 1993, when its specific plan and environmental impact report were approved by the Kern County Board of Supervisors.
The project went forward in starts and fits, with SunCal taking it over in 2005 from Jasman Development LP. SunCal made a number of improvements to the land, including grading and preparing more than 1,000 home lots. SunCal advertisements boast plans for an artificial lake, parks, shops and restaurants at McAllister Ranch.