In the least it shows "a pattern of financial irresponsibility." I'd say it's more like a pattern of ripping off tax payers and hurting state, city and local governments through deception and cluelessness.
URL: http://www.abqjournal.com/news/metro/294172metro03-17-08.htm
California-based SunCal, developer of Albuquerque's massive Westland project, has had a rough year with some of its California and Nevada ventures— but insists that will have no bearing on its plans here.
SunCal Companies defaulted on $184 million in loans— losing five properties in foreclosure. At least nine lawsuits are pending in those states.
Moody's last month removed a bond rating on one SunCal company responsible for four developments in Southern California.
About $17.5 million in liens have been filed in two of its California projects.
But SunCal, which bought 57,000 acres from the heirs of the Atrisco Land Grant on the West Side last year for $250 million, insists none of its struggles to the west will affect the Westland project here.
"The issues involving some of our other developments have no bearing on Westland, as each is a legal entity that is separate from the other," SunCal senior public affairs vice president David Soyka said in an e-mail last week. SunCal, along with investor D.E. Shaw, financed the Westland purchase, Soyka said. The companies used more than $100 million in equity and some third party debt, Soyka said.
Barclays Capital loaned money for the transaction and holds a deed of trust for the land, he said. That means, if SunCal defaults on its payments, Barclays would gain control of the land.
Bernalillo County, which has been negotiating with SunCal to provide tax incentives for the first 4,000 acres of the development, is not at risk if the company runs into money trouble in New Mexico, County Manager Thaddeus Lucero said Thursday.
The county was not aware of financial difficulties for SunCal in other markets until a Journal inquiry, Lucero said.
Money problems
SunCal divides its projects among a number of separate companies with differing financial backers and partners.
Among the problems in the past five months:
- A 1,300-acre development in Sparks, Nev., was returned to lender D.B. Zwirn after SunCal defaulted on a loan worth $35 million.
- Three apartment complexes in Orange County, Calif., were returned to D.B. Zwirn after SunCal defaulted on a separate loan. This one was worth $75 million.
- A roughly 500-acre development in Shafter, Calif., was returned to lender Lennar Corp. after SunCal defaulted on a $74 million loan, SunCal confirmed.
-Moody's lowered one SunCal company's bond rating from "substantial risk" to "in poor standing" on Dec. 20. Moody's removed the bond rating altogether Feb. 21 for "business reasons." It was the only SunCal company with a bond rating, Soyka said.
-About $2.5 million in liens have been filed against the company in a San Clemente, Calif., project, according to a lawsuit. Another $15 million in liens were filed against a 2,000-acre project in Bakersfield, Calif., The Bakersfield Californian reported.
-California contractor McCoy and Sons Inc. sued SunCal in November for $940,000, claiming SunCal never paid it for services. SunCal has counter-sued for $25,000, calling the McCoy and Sons' work faulty.
- Genesis Golf Course Builders of Nevada filed a lawsuit in December claiming SunCal still owes it $830,000 for a Greg Norman-designed golf course Genesis built in Bakersfield. SunCal had no comment on the lawsuit.
- Young and Associates filed a lawsuit last month claiming SunCal owes it $275,000 for utilities installed in a Los Angeles County development. SunCal had no comment on the lawsuit.
"Like every other home-building and development company, we are facing market challenges," Soyka said.
The housing market, which has been especially harsh in California, has much to do with SunCal's lost projects, Soyka said.
Soyka said SunCal decided not to continue development of the five properties foreclosed upon and is cooperating with its lenders.
The liens and lawsuits, filed mostly by SunCal subcontractors, are also a product of the housing market, he said.
"We're in the process of asking our subcontractors to work with us and help absorb some of the effects of the nationwide building downturn," Soyka said. "Some of these subcontractors have been cooperating and some have, regrettably, filed suit."
Pattern noted
City Councilor Michael Cadigan, who has been an outspoken critic of SunCal, said Thursday the problems in other states show "a pattern of financial irresponsibility."
He said a half-finished development, regardless of whether the county is on the hook to pay for completion, could force governments to step in and take care of residents already living there.
"If (SunCal) defaults on (its) responsibility, the taxpayers may have to pick up the pieces," Cadigan said.
But Lucero said there is no possibility for the county to be stuck with a bill.
He said no houses can go up in the development until all roads, utilities and other requirements are built.
If SunCal does default on any bonds to build that infrastructure, the county can still use those bonds to finish without SunCal— and still not have to take control of the debt, Lucero said.
Commissioner Teresa Córdova said the county's preliminary agreements with SunCal regarding incentives place the county in no danger regardless of any company's financial outlook.
"This is the reason we were so careful (with agreements)," she said.
Soyka said SunCal can easily afford to build infrastructure within its developments.
And he maintains the outlook for the housing market in New Mexico looks good to the company.
"This is a cyclical market correction that is currently taking place. We are very bullish on the future of New Mexico," he said.
SunCal is pushing forward with two developments inside city limits— a 500-acre housing development west of the Stormcloud and Crossing neighborhoods, and a 20-acre commercial site on the corner of Unser and Ladera. Those developments— which are separate from the 4,000-acre county plans, but still part of the 57,000-acre purchase— will go before the Environmental Planning Commission later this month.
SunCal had a setback at the state Legislature last month as lawmakers failed to pass a bill that would have ensured incentives for the company's county developments. However, SunCal officials said they would ask for a similar measure next year.
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