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Stock woes hit home

Development of Castaic high school on hold after backers declare bankruptcy

Posted: September 15, 2008 9:24 p.m.
Updated: November 17, 2008 5:00 a.m.
 

If plans to build Castaic High School on the NorthLake site seemed remote before, the outlook appears bleaker now that the company backing its developer declared bankuptcy.

Lehman Brothers Holdings, Inc., of New York, a 158-year-old investment bank choked by the credit crisis and falling real estate values, filed for protection from creditors Monday in the biggest bankruptcy filing ever and said it was trying to sell off key business units.

Lehman invested heavily over the last few years in California's real-estate market through its financing of Irvine-based SunCal Companies.

The firm wrote down its investment in SunCal from $2.2 billion to $1.6 billion earlier this year, the Wall Street Journal reported.

There is no direct link between SunCal and NorthLake but the links between SunCal and four of its large land-development projects similar to NorthLake are causing worry among some who hoped to see the developer make good on its promise to build a high school on the site overlooking Castaic Lake.

"Where do we go now?," said John Kunak, president of the Castaic Area Town Council and longtime advocate for Castaic High School.

The council struggled for years with school officials to get a high school built in Castaic.

"We aren't going to get that high school until SunCal comes in and builds that project," he said about NorthLake, "And, now they're not going to have the financial capacity to build the thing."

Nestled in the shrub-dotted bluffs that wrap around the southeastern part of Castaic Lake, NorthLake was named the site of Castaic High School in November 2003, when William S. Hart Union High School District board members voted to sign a contract with SunCal.

The deal called for a 60-acre site overlooking the picturesque Castaic Lake Recreational Area.

Kunak has not seen or heard from SunCal in months.

In February, Kunak said the big stumbling block standing in the way of a high school is the school's developers SunCal Northlake has not met with Los Angeles County planners.

SunCal, through its subsidiary company, SunCal Santa Clarita, agreed to purchase another coveted piece of real estate in Santa Clarita Valley - 996 acres in the city's core on the old Whittaker-Bermite site.

But SunCal officials announced Thursday it would no longer purchase the property but offered no explaination.
"You asked if SunCal is directly affected by Lehman's situation," Aguirre said. "We cannot speculate on what may or may not occur in the future. SunCal partners with many lenders and investors throughout its many developments."
SunCal spokesman Joe Aguirre stressed that each land development project must be weighed on its own merits and remains distinct and separate from any of its other projects.

A source close to the Bermite deal said cash flow problems played a significant role in the decision by Bermite site owners, RFI/Avion, to terminate SunCal's purchase agreement.

Aguirre said SunCal partners with various firms on various projects and that each partnership is unique.
SunCal acquired thousands of acres of land it planned to develop, from the desert to the Pacific Ocean with investment money obtained from Lehman and other East Coast firms.

SunCal's partner on the Bermite site was Cherokee Investment Partners.

"While we partnered with SunCal on the Bermite project we are currently not involved in the NorthLake project," said Cherokee spokesman David O'Neill on Monday.

Large projects linking SunCal to Lehman in California include: McAllister Ranch, a 6,000-home development near Bakersfield, and two SunCal projects in Riverside County; the 1,600-home McSweeney Farms project in Hemet, and the 3,683-home Summer Wind Ranch project in Calimesa.

Lehman fell under the weight of $60 billion in soured real estate holdings, and the credit market's dislocation ultimately forced it to seek court protection. The credit crisis caused global banks to write down more than $300 billion in asset value since last year and caused the shotgun sales of Merrill Lynch & Co. and Bear Stearns Cos.
Lehman said that as of May 31, it had assets of $639 billion and debt of $613 billion.

The Associated Press contributed to this report.

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