SunCal’s decision prompted by Lehman Brothers fallout.
The Northlake Development in Castaic has filed for Chapter
11. Somehow, in the often upside down world of land dealings, this is actually
a good thing.
The development is owned by Irvine
based developer SunCal, although it is being developed in Castaic through a legally
defined financial partnership with Lehman Brothers.
When Lehman Brothers filed for bankruptcy a few months ago,
the funding for the partnered developments came to a screeching halt. This left
areas like Northlake without the money necessary to continue or complete
According to SunCal Spokesperson Joe Aguirre, the only way
to get a new financial partner for the projects is to file Chapter 11.
“The filing will permit another lender to come in, use new
capital to address the outstanding issues and allow development work to
resume,” he said. “So we’re looking at this as a positive action.”
Since Lehman was the sole source of funding for the
development, Aguirre said that their hand was forced.
“Despite our ongoing efforts, Lehman has provided no
meaningful response to our repeated requests for funding, and they appear to be
either unwilling or unable to fulfill their obligation.”
The bankruptcy filing will also allow access to SunCal
reserve funding of about $75 million that could help Northlake start paying
bills again very soon.
Northlake is not the only SunCal development that partnered
with Lehman Brothers; several other developments throughout California
have filed for bankruptcy seeking the same kind of opportunity to reorganize.
It is also important to note that SunCal itself is not
declaring bankruptcy. Each of their developments is classified as a separate
legal entity with specific funding partnerships.
So while the word “bankruptcy” may leave a bad taste in the
mouth, in this instance it just may be music to the ears.