Lehman obtains $1bn portfolio of California land

After a three-year battle, the former investment banking giant has finalised its plans to obtain ownership of 14 California residential development sites from developer SunCal.

Following a “long and complex process,” the estate of Lehman Brothers Holdings has gained control of a portfolio of 14 residential land development sites throughout northern and southern California that previously were owned by Irvine, California-based developer SunCal Companies. 

A spokeswoman for Lehman told PERE that the former investment banking giant originally had provided financing for these development sites between 2005 and 2007. Various media reports valued Lehman's investment in SunCal at $1.64 billion when the bank failed.

This latest move comes after a three-year battle for the portfolio between the fallen bank and the land developer. The plans for Lehman to take over the portfolio were confirmed by the Lehman bankruptcy court in California in October 2011 after being approved by the bank's master bankruptcy proceedings in New York in July 2011. The plans now have been finalised, giving Lehman title to 14 projects throughout the state including Marblehead Residential, a 247-acre parcel of beachfront property situated above the Pacific in San Clemente. 

Although the Lehman spokeswoman declined to comment on the portfolio’s value, a report by the Wall Street Journal values the portfolio at $1 billion, citing sources familiar with the matter. The WSJ also stated that Lehman plans to find joint venture partners to finish the projects and sell them.

Jeff Fitts, Lehman's head of real estate, said in a statement: “Our strategy for the SunCal portfolio has been to gain control over the assets so we could position them in a way that would provide the best result possible for Lehman creditors.” He added: “It has been a long and complex process.”

Late last year, US Bankruptcy Judge James Peck approved Lehman's $65 billion plan to pay back its creditors and emerge out of Chapter 11 bankruptcy protection. The plan was put into motion in the first quarter of this year.