State Street Refinances 5,000-Home California Project
State Street Corp. agreed to a $595 million restructuring to help restart a $1.4 billion project in Orange County, California, that is planned to have 5,000 homes once completed.
State Street agreed to write down debt on the development to $210 million from $625 million and provide a $180 million revolving credit line, said Emile Haddad, chief executive officer of Aliso Viejo, California-based FivePoint Communities Inc., the project’s lead developer.
“It allows us to have the capital we need,” Haddad said today in a telephone interview. “We’re hoping to see lots finished and sold to builders in late 2012.”
Lennar Corp., a Miami-based homebuilder and developer that owns 60 percent of FivePoint, acquired a 3,700-acre (1,500- hectare) site, formerly home to the El Toro Marine Corps Air Station, for $700 million in 2005.
Lennar paid the city of Irvine $200 million for development rights to the site, which will include a 1,347-acre park, to be known as Great Park, and 5.2 million square feet (483,000 square meters) of commercial space, Haddad said.
Under the agreement signed Dec. 29, State Street will buy out the stake held by Lehman Brothers Holdings Inc., which went bankrupt in 2008, while Lennar acquires Cerberus Capital Management LP’s interest, said Haddad, who is FivePoint’s controlling partner, with 40 percent of the company.
State Street’s Position
State Street’s position in the development, formerly known as Heritage Fields, totals about $380 million, Carolyn Cichon, a spokeswoman for the Boston-based firm, said in an e-mail.
“Our objective in managing the former Lehman assets is one of realizing the intrinsic value of the assets over the long term,” she said. “This investment with Heritage Fields is consistent with that goal.”
Other equity partners in the project are Rockpoint Group LLC, a Boston-based investment company; MSD Capital LP, the private equity firm of computer executive Michael Dell; and LNR Property Corp., a real estate investment company formerly owned by Lennar and later by Cerberus, Haddad said. He declined to disclose the size of each partner’s stake.
The refinancing is a sign that housing prices in Orange County have reached bottom and there’s a shortage of new homes in the area, said Haddad, who was chief investment officer for Lennar before starting FivePoint last year. Homes offered by Irvine Co. near Great Park sold quickly last year, he said.
‘Good Benchmark’
“That obviously gives us a good benchmark,” Haddad said. “It gives us confidence the market here has legs.”
FivePoint’s other projects include Newhall Ranch, a 19- square-mile (49-square-kilometer) community in Los Angeles County with a planned 21,000 homes and 60,000 residents, and Hunters Point/Candlestick Park, a San Francisco development for more than 10,000 homes, according to the company’s website.
All the projects share proximity to jobs in large metropolitan areas with limited opportunities for new housing construction, Haddad said.
The agreement with State Street was reported yesterday by the Wall Street Journal.
To contact the reporter on this story: John Gittelsohn in New York at johngitt@bloomberg.net
To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net
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