Newhall Ranch Project to be Sold

Lennar has announced that it plans to sell its majority interest in the Santa Clarita Newhall Ranch project to MacFarlane Partners, a San Francisco real estate investment firm. Lennar will retain a minority interest in the Newhall Ranch project as well as the rights to collect management fees.

The Newhall Ranch project, which is scheduled for development in the Santa Clarita area near highway 126 west of Magic Mountain and extending towards the Ventura County line, encompasses 15,000 acres and is expected to include 20,000 homes at completion. The first phase of this project is due back on the agenda for the Los Angeles County Regional Planning Commission later this month.

Lennar is posting its first quarterly loss in 10 years due to land related write downs, meaning that its prior assessments of the value of its land holdings has been downgraded. Having been in the accounting industry myself not so long ago, I know that this is double-speak for the fact that they had overstated their land values in the past and now they're taking a one-time correction in their financial reporting to clear some of the skeletons from their closets. Note that this write down is not a cash flow deficit, but rather a devaluation of their "inventory" so to speak.

The fact that MacFarlane Partners jumped in with $1.3 billion for their 62% stake in the Newhall Ranch project shows that real estate investors remain confident that the Santa Clarita real estate market is indeed healthy and growing. One of MacFarlane's biggest backers of this investment is California Public Employees' Retirement System (CALPers), the nation's largest public pension fund.