Wall Street Journal: Lehman’s Land Legacy

Lehman’s Land Legacy

Wall Street Journal
September 9, 2014

Lehman Brothers Holdings Inc. continues to sell prime California land left over from its ill-fated partnership with SunCal during the boom years. The failed investment bank is listing for sale the Pacifica San Juan project in San Juan Capistrano, Calif., a 318-lot subdivision that is one of the last large undeveloped tracts in Orange County.

Lehman and SunCal, once one of the largest land developers in the Western U.S., were partners on dozens of land development deals before the financial crisis, when Lehman stopped financing them. In response, SunCal took nine of these deals into bankruptcy. Lehman failed in 2008 and emerged from bankruptcy itself in 2012 as a much smaller company.

In a settlement reached in 2012, Lehman took control of several SunCal projects, including Pacifica San Juan. The project spans roughly 250 acres with ocean views from certain lots. The median listing price for houses in Orange County is $640,000.

SunCal obtained several government approvals for housing development and installed some infrastructure before relinquishing Pacifica San Juan to Lehman. Now, Lehman has hired broker Terry Ruckle of Land Advisors Organization to list the property for sale. Brokers expect it to sell for more than $150 million.

This year, Lehman sold SunCal’s former 308-lot Marblehead subdivision in San Clemente to Taylor Morrison Home Corp. and a partner for $205 million. It also sold a 167-acre redevelopment site in Oakland known as the Oak Knoll project back to SunCal for an undisclosed price. Lehman estimates that it has roughly $4 billion of real estate still to sell.

—Kris Hudson