S.D. Developer Hopes to Revive Projects
A San Diego developer has wrested control of three real estate projects, including two in Carmel Valley, that were taken over by the government when Imperial Savings was seized last year.
R.B. McComic Inc. has reached an agreement with the federal Resolution Trust Corp., conservator of failed savings and loans. The RTC agreed to relinquish to McComic control of the three residential developments in exchange for a share of potential profits.
Of the two projects in Carmel Valley, one is a 420-lot subdivision named Palacio del Mar already under way. The other project has not yet been started.
An Orange County project, tentatively called Saddleback Ventures One, is in an unincorporated area east of Mission Viejo, near Coto De Caza. A 705-lot subdivision is planned on the property, which is still vacant.
The unusual deal is being watched as an example of how to revive projects that foundered because of the failure of S&Ls; involved in them.
“To our knowledge, this is the first time a private corporation has successfully negotiated itself out of a partnership with an RTC-controlled entity,” said R. Barry McComic, the company’s chief executive.
The developments fell into limbo last year after the RTC seized control of San Diego-based Imperial Savings and quit funding the projects. McComic had been in a 50-50 joint venture with Imperial’s real estate subsidiary, having sunk some $6 million into the investments.
Without Imperial’s funding and with other potential investors shying away because of the government’s presence, R.B. McComic sought Chapter 11 bankruptcy protection on the Orange County project and on one of the San Diego projects.
Through its agreement with RTC, announced Tuesday, McComic is now free to seek new investors to replace Imperial’s former stake, finish the projects and then try to recoup its losses on the open market.
If profits remain after McComic recovers its costs on one of the Carmel Valley projects, the RTC will get a fixed sum of $3 million, said James Wait, R.B. McComic’s chief financial officer. Consequently, the RTC won’t receive any profits from the eventual sales of the other two projects.
Typically, the RTC has tried to sell such projects as a whole after seizing a failed thrift. The agency would then divvy up the proceeds, often resulting in substantial losses to the government and the former partners.
But the markets are jammed with failed thrifts and troubled real estate ventures. The RTC is having increasing difficulty selling such projects.
Wait said the agreement means the RTC won’t be stuck with a potential loss.
“This is a case of doing what was best for both entities involved,” Wait said. “The RTC is not in the business of real estate development. It was in their best interest to get out and allow us to earn money doing what we do best.”
