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Bankruptcy judge OKs vote on residential project

Jacob Adelman
AP Writer

Los Angeles  — A U.S. Bankruptcy Court judge in Delaware issued a ruling Monday that could allow a massive Southern California residential development to emerge from bankruptcy protection.
Judge Kevin J. Carey’s approval of the so-called disclosure statement outlining the reorganization plan allows creditors to vote on the proposal ahead of a planned July 13 confirmation hearing.

If endorsed by creditors and then confirmed by Carey, the proposal would allow Miami-based home builder Lennar Corp. to buy 15 percent of the Newhall Ranch project on the last major tract of undeveloped land in Los Angeles County, along with other properties, for $140 million, court records showed.

The deal would also put an affiliate of Lennar in charge of the planned 21,000-home development.

The homebuilder had a 16 percent stake in the developer of Newhall Ranch before falling land prices pushed the venture — officially known as LandSource Communities Development LLC — into Chapter 11 protection last June.

Lennar spokesman Glenn Bunting declined to comment.

Creditors in the bankruptcy case, led by Barclays Bank PLC, have endorsed the proposal, under which they would get equity in exchange for the more than $1 billion they are owed, according to the court records.

An additional $140 million would be raised by selling equity in the reorganized company to take it out of bankruptcy and finance development.

Other equity holders, including the California Public Employees Retirement System, would see their investments wiped out in the deal.

The pension fund paid nearly $1 billion for a majority stake in the venture.

CalPERS said it will not make any new investments in the project. Spokesman Clark McKinley said in a statement that the fund determined the Lennar proposal “does not fit well with the future strategic director of our real estate program.”

LandSource’s primary asset is the Newhall Ranch project.

In addition to the Newhall property, which is on a 15,000-acre expanse of rugged hills in northwest Los Angeles County, Lennar would acquire complete control of a collection of properties containing more than 3,500 home sites and about 5 million square feet of industrial and commercial space in various stages of construction in California and five other states, according to court documents.
A message seeking comment from Barclays was not immediately returned.

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