Stall: 3 big L.A.-area projects in trouble (Updated)

This has not been a good week for big real estate development projects. Three very big ones have failed, stalled or sputtered. Two words come to mind: credit crunch.

In Pasadena, from the Star-News: "The Ambassador West project [site pictured], one of the largest and most prestigious in the city's history, has been foreclosed on and the property is back on the market for the fourth time in a decade. 'We no longer own any of the property,' Howard Weinberg, a part-owner of Ambassador West, said Monday. 'A foreclosure sale has occurred.' " The L.A. Times matches the story here.

There's also the bankruptcy filing Sunday of CalPERS-backed LandSource, which was developing 15,000 acres north of Los Angeles. When big entities like LandSource file for bankruptcy, they still have enough money for lawyers and public relations executives, and they publish press releases that make it sound like bankruptcy is nothing special or unexpected, just another challenging chapter in the life of a business. This is not true. Nobody expects bankruptcy to happen. Do you really think honest, hardworking local businesses that did work for LandSource thought they would have to fight in court to get paid for work they've already done?  You can follow the bankruptcy at this site.

Lastly, government leaders in Los Angeles are threatening -- threatening -- to play hardball with the cash-strapped developers of the Grand Avenue project: "The government board overseeing the $3-billion Grand Avenue project on Monday unexpectedly rejected the developer's request for an eight-month delay to begin construction on the development across from the Walt Disney Concert Hall.  While both sides said they remain optimistic that the sprawling downtown Los Angeles development is on track, the vote is the strongest sign yet that government officials are growing concerned over repeated delays and hope to keep a tight rein on the developer they handpicked for the project almost four years ago."

Update: Barbara Casey, a public relations consultant to Related California, e-mailed this afternoon with these thoughts: "The Grand Avenue project is not in foreclosure or bankruptcy and neither is its developer, Related Companies. It is completely unfair to include it in your litany of bad news. In fact, Related is not cash strapped at all, having received a $1.4-billion investment from Goldman Sachs, Michael Dell, and sovereign funds of Abu Dhabi and Saudi Arabia at year end 2007. The JPA did not threaten in any way to take the project away and did not reject Related’s request to move the construction start to February 2009 but deferred a decision on this until its next meeting July 28 in order to gather more information. Nothing was indicated that the JPA would not approve the extension to February 15, 2009. I refer you to the Downtown News and Daily News for more accurate accounts of what occurred at yesterday’s meeting."

Those of you who want to take Casey's advice and compare and contrast the two news accounts of Grand Avenue, here they are:
L.A. Times: "Developer's request to delay L.A.'s Grand Avenue project is rejected"
L.A. Daily News: "Grand Developer gets extension"
I would happily include a link to the Downtown News story but can't for the life of me find the article on their website.

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo credit: Los Angeles Times

Comments

[Canyon Country Mom]

Yes, although Newhall Land is a Chapter 11 debtor unable to pay its bills, Newhall Land has hijacked The Signal, Santa Clarita's newspaper, as of 6/10/08, blowing smoke and b.s. about what's going on.

Yet, if you read LandSource and Newhall Land's bankruptcy court filing asking the court to approve their Debtor In Possession financing, you will see that they will shut down tomorrow if the court doesn't approve the financing's terms.

The bankruptcy court filings also show that: Barclays Bank, the first mortgage lender, owed $1.1 Billion, is offering to probide that financing, BUT ONLY IF the second mortgage lender (owed $244 Million) and the unsecured trade creditors (owed more than $15 Million) are put in the position where they will not be paid.anything.

LandSource and Newhall Land's lawyers court filing says that Barclays Bank will not provide money for the continued operation of LandSource and Newhall Land unless (1) a Chief Restructuring Officer approved by the bank is appointed to control the operation of the companies, (2) LandSource and Newhall Land strictly follow a budget which requires rapid sell off of land over the next year, (3) LandSource files a Chapter 11 Plan of Reorganization no later than 6 months from now, with terms satisfactory to Barclays Bank, (4) Barclay's Bank is paid in full the $1.125 Billion+ one year from now, (5) LandSource and Newhall Land irrevocably agree NOW that Barclays Bank can foreclose on everything LandSource and Newhall Land own, with no further muss or fuss, with the foreclosure taking place on the earlier of 1 year from now, or EARLIER if LandSource and Newhall Land fails to live up to the bank approved budget including timetable for land sales.

The Delaware bankruptcy court hearing on this proposal is occurring today 6/10, so we'll know whether the bankruptcy judge gives Barclays Bank what it wants, i.e. more than a pound of flesh to delay the implosion of LandSource and Newhall Land for some indeterminate period less than a year.

No, Virginia, there is no Santa Claus and what you read in local newspapers is 180 degrees opposite to the reality of what LandSource, Newhall Land and their adversaries are admitting in the bankruptcy court files.

If you are affected by Newhall Land's bankruptcy, take note of that website posted by Peter Viles above, save it and read the truth about what is going on...the court files.

[Duke of Moral Hazard]

Ok, for normal people... what is a bookrunner? The court docs say that Barclays and the "Marathon Special Opportunity Fund" are co-bookrunners for the b/k.

Marathon is a hedge fund. Gee... what a surprise a hedge fund is involved. Now *why* are they involved? Hedge fund bubble was concurrent with our real estate bubble, right? Huge gobs of money, flowing around the world, and no risk to the money managers (they make their fees up front) except that when the bubble pops people won't invest with them again.

Here's one definition for bookrunner: "Book runner — the lead bank that manages the transaction process for an equity or debt financing, including documentation, syndication, pricing, allocation and closing."

Will be extremely interesting to see who buys this land, and of course, for how much.

[TakeFive]

You missed one. The ginormous Rosedale development in Azusa has some unhappy homesteaders:

Rosedale residents up in arms
Some seek buybacks by builders
By Bethania Palma, Staff Writer
Article Launched: 06/03/2008 09:55:03 PM PDT

AZUSA - Frustrated over problems at what will be a new 1,250-home community, some residents want a home builder to buy back their homes.

Two of four home builders at Rosedale, Fieldstone Homes and William Lyon Homes, stopped construction this year at the city's first master-planned community in the foothills.

Neighbors living in Fieldstone's Arborview neighborhood said they feel cheated, others said being surrounded by vacant homes and unkempt grounds causes safety concerns.

http://www.pasadenastarnews.com/news/ci_9470699

[CD]

Sort of out of subject but soooo good.
You want a new kind of real estate, here it is :
www.asilverston.blog.lemonde.fr
He is trying to be a French "Peter Viles".
The picture is great you have got to see this. I love it, I want it, this is my white trash dream come true. This is the future guys!!!!!!!!!

[nelcisco]

Peter,
may I suggest you investigate a deveopement going up in Santa Maria that I've mentioned before. Its called Rice Ranch,they're devloping acres and acres of 750 high end cookie cutter homes starting @ $500k to $650k and in five yrs. developing another section of about another 100 homes @ a million and up in $10/hr jobs Santa Maria

One can make the arguement that its for Santa Barbara retirees, but with everything happening in this market and in light of this article with the developers, I'm curious to know how it is that Developers in LA, where there's better income across the board to support the developement of high end homes compared to Santa Maria are failing yet in Santa Maria
think they can pull it off.

[William E. Jones]

I don't wish bankruptcy or failure on anyone, but as one who lives in Pasadena I am happy to see the Ambassador Project stalled yet again. My fine City is getting more and more like the Westide every day, and I don't mean that in a good way. Crowded streets, high-priced parking, and skyrocketing rents may be a sign of progress, but we need a breather.

[JK]

I've been hoping the Ambassador project crashes and burns for a long time now. I hope it totally goes down in flames. Decent people can't afford Pasadena now and the more they build up the more expensive it becomes. Selfish... yes! So what?

[puckhead]

JK,

I'm glad that the Ambassador project is gone also, but because the traffic around Old Town is out of control. I wish they would turn it into one big park, but we know that the land is too valuable and that'll never happen. If you want cheaper housing in Pasadena, you want MORE development/condos, not less.

[Doug]

I recently posted an article on the Pasadena building boom and all of the new condo / townhome projects on the market. Some developers are beginning to take price concessions. Several other new projects are in the construction phase featuring mixed use with retail shops on the street level and housing units on the upper floors. All high end projects coming on the market by years end. There is currently about an 8 month supply of inventory in this segment of the housing market.

http://www.up2daterealestate.com/2008/05/21/
pasadena-condominium-townhome-building-boom/

[tew]

Oh yes, cash infusions from Abu Dhabi and Saudi Arabia in late '07. Now that's a sign of strength. PR flacks like this are stuck in old media land. Wake up and smell the blogs, Ms. Casey. You can't just spoon feed propaganda to a blog and get away with it like you can with a lapdog journalist. ...Well, yes you can, but you get called on it here.

[Duke of Moral Hazard]

Can't seem to find it in the downtown news either.

Ms. Casey writes: "Nothing was indicated that the JPA would not approve the extension to February 15, 2009"
Maybe she was tired?

As for including Related in the litany... well maybe it was unfair to include it in *that* litany, but Relateds local boss shows up as a campaign contributor to guess who.... our friend in the politics business, Laura Richardson. There, now they must feel really slighted.

Check out opensecrets.org for other "personal" contributors as well. Interesting list... includes a tobacco company, plenty of medical related folks (mlk?), tons from washington and virginia and maryland. Then we have a few interesting locals too, like Richard Ziman's Daphna, who strangely enough doesn't use her married name when contributing to Laura. Is that legal? And then there's Michelle (daughter?) who does use the Ziman name.

Best named contributors: Grumpy Old Men LLC, who are land use consultants.

...and a number of jewellers. Jewellers. Now why would jewellers like her so much?

What else we got... oh yes, Owners of the "Bicycle Casino" and Hollywood Park

And of course, our old friend, Dick Gaylord, new head of the NAR.