HENDERSON, NV-Some of the lenders for and former homebuilders of the 2,000-acre South Edge/Inspirada project have come to an agreement following a forced bankruptcy and a year of negotiations. The two sides, along with a court trustee, have agreed to a creditor reorganization plan that will allow lenders such as JP Morgan Chase to gain back about $335 million after the large project was stopped when the housing market crashed.
Eight homebuilders, including Horsham, PA-based Toll Brothers, Los Angeles-based KB Home, Atlanta-based Beazer Homes Holdings, Las Vegas-based Focus Property Group and Los Angeles-based Pardee Homes had planned to build up to 14,000 single-family homes and up to 700,000 square feet of retail. The builders, using loans from lenders such as JP Morgan, purchased the 2,000 acres here in the southwest corner of the Las Vegas Valley in a June 2004 federal auction for $557 million.
However, the recession hit the Vegas area hard, and only a small fraction of the property was developed. About 600 homes were constructed and sold. Mark Edelstein, the attorney for JP Morgan, tells GlobeSt.com that the homebuilders were able to pay off a portion of the loan, so that about $327 million was left. “That’s when the music stopped,” he tells GlobeSt.com. Edelstein is with Morrison & Foerster.
In December 2010, the lenders commenced an involuntary chapter 11 bankruptcy petition against the entity formed by the homebuilders. A trustee for the property, Cynthia Nelson, was assigned by the United States Bankruptcy Court for the District of Nevada in February 2011.
On Friday, the four homebuilders that remain a part of the bankruptcy case (Toll, KB, Beazer and Pardee) agreed to settle the case for about $335 million. Two of the companies, Woodside Homes and Kimball Hill Homes, declared bankruptcy themselves and are no longer part of the agreement. Focus worked out an earlier settlement.
Meritage Homes, based in Scottsdale, AZ, is appealing the bankruptcy and did not sign the order. However, the order was approved by bankruptcy court and went into effect Friday.
Robert Moore, a partner at Milbank, Tweed, Hadley & McCloy LLP and the attorney for trustee Nelson, says the land has now been turned over to Inspirada Builders LLC, comprised of the four remaining builders, which will work with the city to decide what will be done with the property. “They will have to continue to negotiate to modify or amend the development agreement with the city of Henderson to establish what the builders are willing to do at this point, and what the city will accept,” Moore says.
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