Developer Will Reimburse City Close To $500K

As part of the reorganization of Newhall Land and Farming Co.’s bankrupt owner, Santa Clarita will see the repayment of a nearly half-million dollar construction bill.

The city spent $449,000 widening Newhall Ranch Road between Rye Canyon Road and Dickason Drive, with the promise that Newhall Land would reimburse the city, according to an attorney for the city.

On Monday, a U.S. Bankruptcy Court judge approved a reorganization plan for LandSource Communities Development, LLC, which filed for Chapter 11 bankruptcy protection in June 2008.

As part of the reorganization plan, the developer is paying that construction bill.

“It’s very good news,” said an attorney for the city, who spoke with The Signal on the condition of anonymity.

Had the Chapter 11 case been converted to a Chapter 7 liquidation, the attorney said the city would have been less likely to see that bill paid back.

LandSource will emerge from reorganization as Newhall Land Development.

Lennar Corp., one of the owners of LandSource, announced Monday that the reorganization plan allows the Miami-based home builder to buy about 15 percent of the Newhall Ranch project, along with other properties, for approximately $140 million.

Lennar had a 16 percent stake in LandSource before falling land prices pushed the venture into Chapter 11 protection last June.

When LandSource filed for Chapter 11 protection last year, the company received debtor-in-possession financing of $1.185 billion from a group of lenders led by Barclays Bank, which Big Builder magazine reported will remain one of the majority owners.

Creditors in the bankruptcy case — a list that includes multi-million dollars’ worth of local claims — are set to get equity in exchange for the more than $1 billion they were owed.

It remains to be seen how the reorganization plan plays out.

“I just need to see where the dust settled,” said Lou Esbin, Valencia bankruptcy attorney representing several companies that had contracts with Newhall Land and Farming. “Time will only tell whether it was a good or bad economic decision.”

By Monday’s hearing, Esbin said, Judge Kevin J. Carey seemed to have changed his view on the proposed reorganization.

“Are you going to tell me that out of this chaos has arisen order?” Esbin quoted Carey as asking LandSource’s attorneys.

“The judge seemed happy,” he said. “He’d been very doubtful that they’d be able to do anything.

“The devil is going to be in the details as to what the plan actually says.”

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LandSource To Reorganize

LandSource, owner of Santa Clarita-based Newhall Land and Farming, will emerge from bankruptcy with $90 million in cash and a new company name after a federal court approved a reorganization plan on Monday.

U.S. Bankruptcy Court Judge Kevin J. Carey accepted a plan that allows LandSource to emerge from Chapter 11 bankruptcy as the newly named Newhall Land Development.

Lennar Corp., one of the owners of LandSource Communities Development, announced Monday that the plan allows the Miami-based home builder to buy about 15 percent of the Newhall Ranch project, along with other properties, for approximately $140 million.

Lennar had a 16 percent stake in LandSource before falling land prices pushed the venture into Chapter 11 protection last June.

Creditors in the bankruptcy case are set to get equity in exchange for the more than $1 billion they were owed.

Newhall Land Development will still boast The Newhall Land and Farming Company as its primary holding, said Marlee Lauffer, Newhall Land and Farming spokeswoman.

The plan allows Newhall Land and Farming to focus on developing homes in the Santa Clarita Valley, she said.

“Today’s action by the bankruptcy court is a very positive outcome for Newhall Land and Farming,” Lauffer said. “We can continue to focus on planning the remaining parts of Valencia and on our Newhall Ranch project.”

Rick Patterson, president of the Santa Clarita Valley Facilities Foundation, said the move could affect the future of a high school in Castaic.

“I’m pleased that there were positive compromises made, especially for the benefit of local creditors,” Patterson said. “I hope that that opens the door for Newhall Land (and Farming) to consider waiving the deed restriction on the Commerce Center property.”

The William S. Hart Union High School District had pursued property just outside the Valencia Commerce Center for a high school location.

However, it met with opposition from businesses in the center, and also found that a school was banned at the site under an agreement between Newhall Land and Farming and the property owner.

Patterson suggested Newhall Land and Farming might now revise its stance on the agreement.

The Facilities Foundation is charged with finding and purchasing school sites for the Hart district. A high school in Castaic has been in the works for some nine years and still hasn’t found a home.

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Critics Doubt Newhall Ranch Developer

Newhall Land and Farming’s finances and the environmental impacts of a proposed project fueled a protest at a public hearing Thursday.

“I hope (Newhall Land and Farming) bonds this project to assure the mitigations happen,” said Carole Lutness during the public comment period.

Lutness’ comments came in reaction to news that a committee of unsecured creditors submitted a request to have the U.S. Bankruptcy Court convert LandSource’s Chapter 11 bankruptcy plan to a Chapter 7 filing at a July 13 hearing in Delaware. LandSource owns Newhall Land and Farming.

The California Department of Fish and Game along with the U.S. Army Corps of Engineers held a public hearing to take testimony from Santa Clarita residents on the proposed Newhall Ranch project, said Kirsten Macintyre, Fish and Game spokeswoman.

Fish and Game and the Army Corps will have to give final approval on the proposed project before construction can begin, she said.

If the Newhall Ranch project is approved, Newhall Land and Farming would build 21,000 homes southwest of the Interstate 5-Highway 126 interchange.

After a PowerPoint presentation on the environmental study, residents aired their concerns about the time allotted to digest the 17,000 report.

Cam Noltemeyer, of Santa Clarita Organization for Planning and the Environment, harped on the financial pitfalls in allowing Newhall Land and Farming to move forward with the development.

“How will the Army Corps ensure the mitigation will happen when the company is bankrupt?” she asked.

Noltemeyer was also concerned about the environmental impacts on the project including the impacts on the water supply.

“We are wondering how the water supply can be accounted for when everybody in the state is being asked to cut back,” said Noltemeyer. Newhall Land and Farming, which also owns Valencia Water Company, plans to recycle much of the water used in the Newhall Ranch Project.

However, Noltemeyer said current resident interest should supersede the water needs of any proposed project.

“Why is water being used to supply Newhall Ranch instead of the rest of the Santa Clarita Valley?” Noltemeyer asked.

Not all the comments at the public hearing were in opposition.

Larry Mankin, president of the SCV Chamber of Commerce, said the project represents smart planning on the part of Newhall Land.

“Our organization (SCV Chamber of Commerce) has been in support of Newhall Ranch for several years,” he said. “The more than 20,000 permanent jobs and 40,000 with the eventual buildout of Valencia is testimony to good planning.”

The public hearing is not the last chance for residents to comment on the project. The public comment period ends June 26, barring any extension by Fish and Game or the Army Corps.

The final environment approval for the project won’t be complete until early 2010, said Marlee Lauffer, Newhall Land and Farming spokeswoman.

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