Inspirada, the massive Henderson project promoted as the valley’s leading example of new urbanism, has received court approval for its Chapter 11 bankruptcy reorganization plan.
Four of the original eight builders essentially agreed to buy the project for about $335 million, resolving the sprawling litigation that resulted when the project ran into trouble in the spring of 2008. Two other builders fell by the wayside due to their own bankruptcies, Las Vegas-based Focus Property Group dropped out as part of a part of settlement of its litigation and Meritage Homes of Scottsdale, Ariz., fought the plan to the end.
“The plan will end years of deadlock and litigation that have plagued (Inspirada) and its development and avoid the significant expense, great uncertainties and potentially extensive delays” that would come with continuing to slug it out in court, according to the order signed Thursday by U.S. Bankruptcy Court Judge Bruce Markell.
KB Home, which committed to take nearly half of Inspirada’s 1,953 acres, called this “a welcome conclusion” to the numerous cases surrounding the project. It will pay $226 million as part of the deal, according to court papers.
“This is a valuable asset in a very land-constrained market,” the company said in a statement. “Throughout this process, Inspirada has continued to be one of our best-selling communities in Las Vegas.”
However, the land value has plummeted steeply in line with general plunge in local real estate. KB estimated that its land had a build-out value of $75 million, but an appraiser hired by bankruptcy trustee Cynthia Nelson estimated a liquidation price of $37.5 million for the 1,179 acres that remain, or $31,800 an acre. The builders had previously purchased 774 acres from South Edge LLC, the corporate parent of Inspirada, before the real estate market crashed.
By contrast, the original tract was purchased from the Bureau of Land Management for $557 million in May 2004, or $290,000 an acre, then considered a record price for raw land.
Meritage officials could not be reached for comment on what steps it would take after losing its case.
The end of the bankruptcy, scheduled to come in November with the closing of the deals, will not settle all the differences between the builders and Henderson, which sold bonds to finance infrastructure improvements. However, the different sides hope to work out their differences through negotiation rather than in front of judges and arbitrators, where huge legal bills have piled up.
In September alone, the law firm Milbank, Tweed, Hadley & McCloy ran up fees of $748,000 representing the trustee. The Los Angeles office of the New York firm billed at rates ranging from $195 an hour for a paralegal to $1,075 an hour for partners.
The other law and consulting firms in several of the Inspirada cases accumulated undisclosed millions more in bills.
In contrast to many Las Vegas developments, which are sprawling housing subdivisions punctuated by shopping centers or offices, Inspirada was meant to appeal to buyers with its smaller scale and to try to build a community atmosphere from scratch. The master plan envisioned seven villages built around a 300-acre town center.
Inspirada was set up so that the builders would buy land from South Edge in defined doses, but the builders backed away from their obligation in April 2008. This triggered the long and winding road of litigation that ultimately prompted JPMorgan Chase Bank and two others to push South Edge into bankruptcy last December.
They consortium of lenders had financed the land purchase on other expenses with $585 million in loans, with the amount estimated to stand at
$382 million on Nov. 30. The plan will still leave them with a $47 million loss after the builders buy the project.
Focus Property, one of the original leaders of Inspirada, had battled with the builders over $26 million it controlled. As part of the settlement, Focus Property kept $5 million, while the other builders paid it $35.5 million.
Contact reporter Tim O’Reiley at
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