Lehman Brothers Said to Seek Partner on Real Estate Development Projects
Alvarez & Marsal CEO Bryan Marsal
Alvarez & Marsal via Bloomberg
Bryan Marsal, co-chief executive officer of Alvarez & Marsal.
Bryan Marsal, co-chief executive officer of Alvarez & Marsal. Source: Alvarez & Marsal via Bloomberg
Lehman Brothers Holdings Inc. (LEHMQ) sent requests to at least six homebuilders and developers seeking partners for 75 real estate projects in 19 states, according to executives at three companies who reviewed the solicitations.
Homebuilders PulteGroup Inc., Standard Pacific Corp. (SPF) and Toll Brothers Inc. (TOL), along with developers DMB Associates Inc., FivePoint Communities Inc. and Newland Communities received proposals, said the executives, who asked not to be named because of a confidentiality agreement. The requests, which came from Alvarez & Marsal Inc., Lehman’s bankruptcy restructuring firm, didn’t detail the property portfolio, they said.
Chief Executive Officer Bryan Marsal said in December that Lehman is seeking to bring “strategic projects involving some very high-quality assets” to market in 2011 as property values rise. The company’s holdings include residential and master- planned communities valued at about $2 billion, down from as much as $8 billion before the real estate crash, said Tony Avila, CEO of Avila Advisors, a homebuilding consulting firm in San Francisco.
“It’s big,” Avila, who hasn’t seen the solicitation, said in a telephone interview today from London.
Kimberly Macleod, a spokeswoman for Lehman in New York, declined to comment.
Lehman listed total real estate assets of $23 billion the day before its Sept. 15, 2008, bankruptcy, the largest in U.S. history. They had a market value of about $14 billion nine months later, according to court papers.
‘Operational Expertise’
The Lehman “portfolio has obviously been on the radar screen of the real estate community since late 2008,” said Richard Gollis, principal at Concord Group, a real estate advisory firm in Newport Beach, California. “In our view, it will only move forward with long-term capital combined with specific operational expertise in entitlement and development.”
All of the companies that received solicitations develop master-planned communities. PulteGroup, which builds communities for older homeowners through its Del Webb brand, declined to comment, said Travis Parman, a spokesman for the Bloomfield Hills, Michigan-based company. Fred Cooper, a spokesman for Toll in Horsham, Pennsylvania, also wouldn’t comment.
Standard Pacific, which has announced plans to spend more than $500 million on lots for homes this year, mostly in California, declined to comment as well, said Scott Stowell, a spokesman for the Irvine, California-based company.
DMB, FivePoint
DMB Associates, based in Scottsdale, Arizona, develops master-planned communities in Arizona, California, Hawaii, Nevada and Utah. Aliso Viejo, California-based FivePoint Communities, which is 60 percent owned by homebuilder Lennar Corp. (LEN), is focused on the San Francisco and Los Angeles areas. Newland Communities of San Diego has communities in 14 states.
Brittney Kaufmann, a spokeswoman for DMB; Glenn Bunting, a spokesman for FivePoint; and Dana Hughens, a spokeswoman for Newland, all declined to comment.
Lehman foundered because of risky real estate bets and too much debt, according to a report by bankruptcy examiner Anton Valukas. Some of its properties are pledged to investors as backing for securities, according to court filings. One deal, called Fenway commercial paper, allowed Lehman to transform souring real estate investments into securities that the bank’s insiders dubbed “goat poo,” according to court records.
Apartment Owner Archstone
The company’s biggest real estate asset is apartment- complex owner Archstone, which completed a restructuring in December. Archstone, which a Lehman-led group acquired for $22 billion in 2007, may go public again, CEO Scot Sellers said in November.
Other Lehman real estate, such as properties claimed by SunCal Cos., an Irvine, California-based developer, remain tangled in bankruptcy court disputes.
“There’s going to be extensive litigation over the plans,” said Paul Couchot, a Newport Beach-based attorney with Winthrop & Couchot PC, who represents SunCal in a dispute over 20 bankrupt California housing projects. The projects are valued at as much as $461.5 million, according to court documents.
The most valuable of the SunCal properties are Marblehead in Orange County and Ritter Ranch Project in northern Los Angeles County, Couchot said. Marblehead, perched on one of the last undeveloped stretches of Southern California oceanfront, planned for 308 residences on 247 acres (100 hectares). The Ritter Ranch project consists of 10,625 acres in the city of Palmdale entitled for development of as many as 7,200 homes.
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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