LOS ANGELES (AP) — Creditors in a failed deal with Lennar Corp. to build massive housing tracts on the last major parcel of undeveloped land in Los Angeles County have dropped a lawsuit accusing the construction giant and a former subsidiary of defrauding California’s public pension fund and others.
The plaintiffs, identified as the LandSource Creditor Litigation Liquidating Trust, wrote in a court filing last week that they were voluntarily dismissing the suit, which had claimed that Lennar and the subsidiary, LNR Property Corp., engineered a transaction to cash in on $1.4 billion of debt they knew they would never be able to repay.
The suit was filed in Delaware in July, but U.S. Bankruptcy Judge Kevin J. Carey signed off on several delays over the year that kept it from ever going to trial. The filing did not stipulate terms of the dismissal of the suit, which had sought $700 million that plaintiffs alleged was fraudulently transferred to LNR.
The complaint did not name Lennar, which was released from liability in claims concerning the venture, known as LandSource Communities Development LLC, as part of a bankruptcy settlement.
The suit was dismissed with prejudice, meaning the LandSource creditors who filed the complaint are barred from filing another case on the same claim.
Plaintiffs’ lawyer Michael Lynch refused to comment Friday, citing a confidentiality agreement.
Jen Brown, a spokeswoman for LNR, which is now co-owned by Cerberus Capital Management LP, had no immediate comment. Lennar spokesman Marshall Ames did not respond to an email.
The California Public Employees’ Retirement System, which during the venture’s bankruptcy lost the nearly $1 billion it invested in LandSource, was not among the suit’s plaintiffs. CalPERS spokesman Wayne Davis had no comment on the dismissal.
The suit had accused Lennar and LNR of using an appraisal that overstated LandSource’s value when, as the venture’s sole owners in 2006, they secured up to $1.55 billion in financing for development projects from investors led by Barclays Bank PLC.
LandSource’s primary holding was the planned 21,000-home Newhall Ranch project on a 15,000-acre expanse of rugged hills on Los Angeles County’s northwestern fringe.
Lennar and LNR each took $700 million of the borrowed money in exchange for their shares in LandSource when CalPERS and its investment partners bought into the venture in February 2007, the complaint had said.
CalPERS and the ventures’ other creditors were left with that debt when falling land prices pushed LandSource into Chapter 11 bankruptcy protection in June 2008, according to the suit.
The suit also accused Lennar and LNR of telling lenders and investors that they would buy back the majority of LandSource’s property during the three years after they sold their stake in the venture, but they failed to do so.
The suit was filed about a year after a judge gave final approval to the LandSource’s reorganization plan, which gave the venture’s main financial backers equity in a reorganized company in exchange for the more than $1 billion they were owed.
The reorganization deal also allowed Lennar to buy 15 percent of the Newhall Ranch project for $140 million and to install an affiliate company as its manager.
Newhall spokeswoman Marlee Lauffer said the project’s planners are working on securing environmental clearances and other entitlements and that they hope to break ground by late 2012 or early 2013.
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The proposed 20,000-home Newhall Ranch development reached a milestone Tuesday with the release of a U.S. Fish and Wildlife Service report finding that no endangered species would be jeopardized by the project.
The agency’s biologists anticipate that, over the next 25 years, no more than one California condor will become dangerously accustomed to humans and have to be captured and removed.
“Condors are real curious animals. They’re attracted to human activity, so when they see humans around, working on structures, they might get into some kind of trouble,” Fish & Wildlife Service biologist Rick Farris said.
The service’s biological opinion to the U.S. Army Corps of Engineers stipulates that construction crews aren’t to interact with the condors, including handfeeding them. Newhall Ranch officials have offered to have a biologist monitor construction activities, too.
“They can’t get used to being handfed,” Farris said. “If they become habituated to being fed, then they aren’t functioning as part of the wild.”
The service’s biological opinion also found that other species — including the southwestern willow flycatcher, the unarmored three-spine stickleback and the arroyo toad — would not be jeopardized by the project, service officials said.
Newhall Land Development Inc. spokeswoman Marlee Lauffer said the company was pleased with Tuesday’s development.
“This is an important part of a very detailed process,” Lauffer said.
Newhall Land’s Newhall Ranch project, which will spread south and west from Interstate 5 and state Route 126, will mirror the size and scale of Valencia, the development firm’s first planned community.
Newhall Land expects to receive its permit from the Army Corps within the next few weeks. The Los Angeles County Regional Planning Commission approved the first two phases of Newhall Ranch, Landmark Village and Mission Village. Both are awaiting hearings before the county board of supervisors, Lauffer said.
Earlier this week, the Santa Clarita Organization for Planning and the Environment appealed the commission’s approval of Mission Village, adding an additional public hearing to the process for that phase.
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Santa Clarita Organization for Planning and the Environment is appealing county planners’ recent approval of the 4,200-unit Mission Village housing development, according to the local nonprofit’s leaders.
Along with Friends of the Santa Clara River, SCOPE appealed the Los Angeles County Regional Planning Commission’s May 18 vote approving the Newhall Ranch development project’s second phase, saying the plan doesn’t address rising chloride levels in the Santa Clara River and will leave taxpayers to foot the bill for chloride-regulating technology.
Mission Village is one part of the planned 20,000-home Newhall Ranch development.
Now, the county board of supervisors will have to hear the local groups’ appeal before the project can move forward. No date has been set for the public hearing.
Along with the commission’s approval of the 4,200-home development is a plan to pump its sewage through the Valencia Water Treatment Plant instead of via a new, updated sanitation plant as required under the county-approved Newhall Ranch specific plan, said Lynne Plambeck, SCOPE’s president.
But that arrangement will be temporary, said Marlee Lauffer, spokeswoman for Newhall Ranch developer, Newhall Land Development Inc.
“Newhall Land will be paying all the applicable sanitation district fees … and per the interconnecting agreement with the sanitation district, by the time there are 6,000 homes in Newhall Ranch, there will be a water treatment plant online,” Lauffer said.
Building a new wastewater plant before those homes are built would be inefficient, she said.
The Newhall Ranch specific plan, approved by the county in 2004, requires that the project’s developers build a new sewage treatment plant that meets Clean Water Act standards for lowering chloride in the Santa Clara River — requirements the Valencia plant doesn’t yet meet, Plambeck said.
Last summer, downstream Ventura County farmers claimed water released from the SCV was damaging their crops because the water carried relatively high levels of chlorides, a naturally occurring salt.
Local water users learned that removing chlorides from the SCV’s water supply to prevent regional water board fines could cost them millions of dollars.
Adding Newhall Ranch’s waste to the sanitation plant would only add to the burden local taxpayers have to shoulder to cover the cost of new, chloride-regulating upgrades, SCOPE members say.
And they argue, the SCV is already full of approved homes waiting to be built due to the economic downturn.
“We need to be good stewards of the Santa Clara River, and it’s not like we need new housing right now … We can make a considered opinion about it,” Plambeck said.
Edel Vizcarra, Antonovich’s planning deputy, said there could be an appeal hearing as soon as August.
He noted that for a development project of this size, there are frequently appeals from different groups.
“A lot of folks want to make sure everything’s vetted before they approve anything,” Vizcarra said.
Lauffer said Newhall Land and the county have been careful to do that.
“But we’ll vet it again, before the board of supervisors,” she said.
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