Friday, March 12, 2010

Lehman Brothers Real Estate Partners 1, 2 and 3...

"" ... Mark Walsh and Brett Bossung, to keeping a watch over what is going to happen with ownership of the general partner entity in Lehman Brothers Real Estate Partners I, Lehman Brothers Real Estate Partners II and Lehman Brothers Real Estate Partners III (all Delaware limited partnerships).

.... Lehman Brothers Holdings Chief Restructuring Officer, Bryan Marsal, acquiesced in the disclosure of information, roughly 9 months ago, saying that the general partner entities were going to be sold to Mark A. Walsh, Brett Bossung and Mark Newman. I think the purchase price was in the neighborhood of $10 Million to $15 Million.

... working to help communities harmed by environmental and public safety problems created by bankrupt lenders and bankrupt developers.

... Concerning Walsh, Bossung and Newman's purchase of LBREP I, LBREP II and LBREP III's general partner entities, .....

... stories speculated, in a veiled manner, that the sale was being held up by the New Jersey Attorney General's lawsuit against Dick Fuld, Mark A. Walsh and both Bossung and Newman if I remembered correctly, i.e. some of the limited partners were withholding their consents to the supposed "bad actors" Walsh, Bossung and Newman getting back in the LBREP drivers seats.

Through bankruptcy court, securities, and state pension agency filings, we've discovered that LBREP I, LBREP II, and LBREP III's limited partners are pension funds, investment funds and iindividuals, and that they own about 98% of each company, with the respective Lehman owned and affiliated general partner owning the other roughly 2% of each of LBREP I, LBREP II and LBREP III. (We're read that the general partners are named LBREA I, LBREA II and LBREA III.)

Even though neither LBREP I, LBREP II nor LBREP III are bankrupt, nor are the entities which are their general partners bankrupt, apparently about 6 months before the Lehman Brothers Holdings bankruptcy in September 2008, Walsh, Bossung, Newman, and a few other employees in their department at Lehman, decided to stop funding money to development projects in which LBREP II had invested, including many so called Lehman/SunCal entities' projects.

As a result, all of the Lehman/SunCal entities real estate got blistered with mechanics liens for unpaid subcontractor bills, and they all ended up in Chapter 11's...some involuntary Chapter 11's because Walsh, Bossung, Newman and Lehman's NY based bankruptcy lawyers wouldn't consent to the filing of voluntary bankruptcies.

All of the Lehman/SunCal related real estate entity bankruptcies are listed below FYI. There is very complicated litigation ongoing between SunCal and Lehman, as part of those bankruptcies as an adversary proceeding in the "In re Palmdale Hills" case, relating to the Lehman entities acting as equity owners (like LBREP II) and Lehman entities acting as mortgage lenders (like Lehman Ali and Lehman Commercial Paper, Inc.) failing to fund to pay pre-existing construction related bills. That mess is probably going to go on for several years.

The informal bankruptcy task force got involved in one of the Lehman/SunCal projects in bankruptcy, when Walsh, Bossung, Newman and pals failed to fund in excess of $15 Million to pay bills at a project called "Oak Knoll" in Oakland, CA.

The City of Oakland had issued an "abatement order" requiring the Lehman/SunCal entity controlled by LBREP II, and the bankruptcy trustee over the Oakland project to "Abate a Nuisance" in the form of a horrific fire hazard at the "abatement order" which Bossung and Newman simply ignored.

... document called SunCal865 from the bankruptcy court, or do a search with the words Oakland, Oak Knoll, fire, Lehman and SunCal to see all the news stories, which were carried in the SF Chronicle, Oakland Tribune and a few national publications about the severe fire hazard. Also a local blog called had good stories. The action on the fire hazard at the Oak Knoll project was happening between June 2009 and January 2010.

Bossung, Newman and pals running LBREP II were completely recalcitrant in coming up with the money to do the City-ordered fire hazard abatement work at Oak Knoll, and ultimately the Oakland City Attorney and Alameda County District Attorney apparently "convinced" Bryan Marsal (who is the CRO/CEO of bankrupt Lehman and thereby currently the boss of LBREA II's staff) and the bankruptcy trustee over the Oak Knoll project, that they were looking at jail time if they refused to come up with the money to abate the fire hazard. [Of course, we were not first hand participants in the meetings.

We got the information from the Oak Knoll bankruptcy trustee's timesheet entries.] As a result, Bryan Marsal and another partner in Alvarez & Marsal convinced another Lehman entity Marsal runs, Lehman Ali, Inc., to lend the money to the bankruptcy trustee to do the fire hazard abatement work at Oak Knoll under a first lien real estate secured loan to the trustee.

LBREP II's 90% indirect ownership interest in Oak Knoll is "out of the money" because a $150+ Million mortgage to Lehman Ali, Inc. is senior to it, and the extra $7.7 million in fire and asbestos hazard abatement work simply puts LBREP II further out of the money. However, kvetching by Walsh, Bossung & Newman on behalf of LBREP II's limited partners would not have been helpful in the process of resolving the Oak Knoll fire hazard abatement problem.

So far, all has ended well, because Bryan Marsal got the situation resolved before Walsh, Bossung & Newman bought LBREA I, LBREA II and LBREA III, i.e. before Walsh, Bossung & Newman could stick their finger in the bankruptcy case independently of Marsal, in the name of LBREP II, and try to screw things up on resolution of the fire hazard issue as a means of getting leverage on Lehman Ali, Inc.

However, our little group of "environmental/public safety bankruptcy problem solvers" are still shocked that the sale of those general partnership interests in LBREP I, LBREP II and LBREP III to Walsh, Bossung and Newman is really going to "close escrow", because of the New Jersey Attorney General's litigation.

.... Although the fire hazard abatement work is just about to physically start, at a cost of about $7.7 Million (including make-up payments to the asbestos demolition contractor), if the money provided by Lehman Ali, Inc.'s secured loan to the Oak Knoll trustee "runs short" or if other problems develop, Walsh, Bossung & Newman would end up being parties with an opportunity to gripe, on behalf of LBREP II, about further expenditures. So I guess you could say that the well-informed neighbors of the Oak Knoll project will not be thrilled to hear that Walsh, Bossung & Newman are going to get control of LBREP II's decision making free from Bryan Marsal's supervision.

..., the Lehman/SunCal bankruptcy case numbers,
all pending in the Central District of California are:

Earliest Involuntary Chapter 11 Cased Filed by Unhappy Mechanics Lien and Junior Mortgage Creditors, where Chapter 11 Trustee Now Controls Projects. All case in U.S. Bankruptcy Court, Central District of California, Santa Ana branch, Hon. Erithe Smith, Bankruptcy Judge:

LBREP/L-SunCal Master I LLC - Case No. 08-bk-15588-ES (Lead Case for Motion Filing Purposes)

LBREP/L-SunCal McAllister Ranch LLC - Case No. 08-bk-15637-ES (Bakersfield project)
LBREP/L-SunCal McSweeney Farms LLC - Case No. 08-bk-15639-ES (CA Inland Empire Project)
LBREP/L-SunCal Summerwind Ranch LLC - Case No. 08-bk-15640-ES (CA Inland Empire Project)

4 total.....These 4 cases have a Chapter 11 Trustee other than Steven Speier

Voluntary Chapter 11 Cases Filed by SunCal management. All case in U.S. Bankruptcy Court, Central District of California, Santa Ana branch, Hon. Erithe Smith, Bankruptcy Judge. Steven Speier is Ch. 11 trustee on involuntary cases:

Palmdale Hills Property, LLC - Case 8:08-bk-17206-ES (Lead Case for Motion Filing Purposes on All 26 Bankruptcies below)
SunCal Beaumont Heights LLC - Case 8:08-bk-17209-ES (Inland Empire Project)
SunCal Bickford Ranch LLC - Case 8:08-bk-17231-ES (Penryn, CA Project)
SunCal Communities I, LLC - 8:08-bk-17248-ES (Investment Entity)
SunCal Communities III, LLC - 8:08-bk-17249-ES (Investment Entity)
SunCal Emerald Meadows Ranch, LLC - 8:08-bk-17230-ES (Inland Empire Project)
SunCal Johannson Ranch, LLC - 8:08-bk-17225-ES (Inland Empire Project)

SunCal Summit Valley, LLC - 8:08-bk-17227-ES (Inland Empire Project)
SCC/Palmdale, LLC - 8:08-bk-17204-ES (Palmdale, CA project called Ritter Ranch)
Acton Estates, LLC - 8:08-bk-17236-ES (L.A. County project north east of Santa Clarita, CA)
Seven Brothers, LLC - 8:08-bk-17240-ES (Victorville Project)
SJD Partners, LTD - 8:08-bk-17242-ES (Investment Entity)
SJD Development Corp. - 8:08-bk-17249-ES (Investment Entity)

Kirby Estates, LLC - 8:08-bk-17246-ES (Inland Empire) ....................................................14 cases

First 4 of 9 Involuntary Cases Filed by SunCal management in Santa Ana to avoid Lehman consent problem :

SunCal Heartland LLC 08-bk-17407-ES (Riverside County Project)
LB/L-SunCal Oak Valley LLC 08-bk-17404-ES (Riverside County Project)

LB/L-SunCal Northlake LLC 08-bk-17408-ES (L.A. County Project in Castaic, north of Santa Clarita)
SunCal Marblehead LLC 08-bk-17409-ES (San Clemente, Orange County Project)................................4 cases

Second 4 of 9 Involunary Cases Filed by SunCal management on 11/14 in Santa Ana to avoid Lehman consent problem:

SunCal Century City, LLC Case 8:08-bk-17458-ES (City of Los Angeles Century City Project, Danske Bank as assignee of Lehman mortgage already OK'd to foreclose)

SunCal PSV, LLC - Case 8:08-bk-17465-ES ("Palm Springs Village" in Palm Springs Area)
SunCal Torrance Properties, LLC - Case 8:08-bk-17472-ES (Del Amo Fashion Center land, Torrance CA)

Delta Coves Venture, LLC - Case 8:08-bk-17470-ES (San Joaquin delta area near Sacramento, CA).................4 cases

More voluntary Chapter 11 cases filed on 11/19/08 in Santa Ana:

Tesoro SF, LLC - Case 8:08-bk-17523 (L.A. County Project north of Santa Clarita, CA)
SCC Communities LLC - Case 8:08-bk-17572 (San Bernardino Co., CA Project )
North Orange Del Rio Land, LLC Case 8:08-bk-17574 (City of Orange CA).......................3 cases

Last 1 of 9 involuntary Chapter 11 cases filed by SunCal management on 11/19/08 in Santa Ana:
SunCal Oak Knoll, LLC, Case 8:08-bk-17588 (Oakland, CA Project)...............................1 case,

30 Lehman/SunCal bankruptcy cases total as of 11/19/08. None filed thereafter. ""

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