Oaktree JV buys former Lehman development site

The Los Angeles-based alternative investment manager has purchased one of the last major assets in the failed investment bank’s property portfolio.

Oaktree Capital Management, along with Taylor Morrison Home Corporation and DMB Pacific Ventures, has formed a partnership to acquire Pacifica San Juan, a 250-acre residential community in San Juan Capistrano, California. The development site, which traded for approximately $150 million, was one of the last major tracts of land remaining in the real estate portfolio of Lehman Brothers Holdings.

Lehman and SunCal, an Irvine, California-based real estate developer, had partnered on numerous land development acquisitions in the western US, with Lehman financing the deals, prior to the global financial crisis. In 2012, the two parties reached a settlement where Lehman took over about 15 of the projects, including Pacifica San Juan and Marblehead, a 195.5-acre coastal residential development site in San Clemente, California, that was sold to Taylor Morrison, Oaktree and TPG Capital last year for a reported $205 million.

SunCal began development on Pacifica San Juan in the early 2000s but only 98 of the planned 416 homes were built before the project ran into trouble during the recession. The site has since remained dormant. Pacific Point Development Partners, the joint venture between Oaktree, Taylor Morrison and DMB Pacific Ventures, now intends to restart the community and complete the original development plan.

Lehman Brothers originally had retained DMB, a San Francisco-based real estate investment and development company, as its development manager in 2013 to help position and prepare Pacifica San Juan for sale. However, the firm subsequently joined Taylor Morrison and Oaktree Capital Management on their ownership and development venture.

“We are excited to be teaming up with Taylor Morrison and DMB Pacific Ventures, two high quality organizations on this incredible opportunity,” said Jason Keller, a managing director with Oaktree, in a statement. “We are looking forward to working with the city and other local interests to move the project forward and develop this attractive coastal project in San Juan Capistrano.”

Taylor Morrison Home Corporation is a national homebuilder and developer based in Scottsdale, Arizona. Formerly the North American arm of UK homebuilder Taylor Wimpey, the company was sold on to Oaktree and TPG in 2011. The two private equity firms subsequently took Taylor Morrison public in 2013 and remain the homebuilder’s two largest shareholders.

Oaktree, a Los Angeles alternative investment manager, had $100 billion of assets under management as of March 31, and invests in distressed debt, corporate debt, control investing, convertible securities, real estate and liquid equities. The firm has been an active investor in residential real estate in the US, having also formed a joint venture in March 2014 with The Bascom Group that to date has purchased seven multifamily properties across the country.

Lehman, which emerged from bankruptcy in 2012, has been selling off its property holdings over the past few years. According to bankruptcy court filings in January, it has approximately $1.6 billion of real estate assets still remaining.