Developer of Pacific Hills Project Is in Default

Back in the good ol’ boom days of 1988, the San Diego real estate company Home Capital Corp. bought 416 acres of undeveloped land from the Mission Viejo Co.

Plans were to build 1,500 homes on the property, located between the Oso and Marguerite parkways.

But since then, the real estate market has collapsed and Home Capital’s parent company, Home Federal Savings of San Diego, has seen a lot of the loans it made to developers go sour.

Now the thrift’s real estate subsidiary has become a delinquent borrower itself.

The Bank of California recently filed a notice of default against Home Capital for $52.3 million--money still owed on the original $72.7-million purchase loan for the Mission Viejo residential development, named Pacific Hills.

Home Capital managed to sell or transfer into joint ventures more than half of the property before the loan came due last month, so “only 185 acres are covered by the default,” said Don Faye, director of real estate operations for Home Capital. He said Home Capital is the sole owner of the land in default.

A portion of the original loan was paid down as 800 of the development’s lots were sold or moved into joint ventures by Home Capital, Faye said.

“We had been in the process of negotiating a mutually acceptable arrangement with the bank,” Faye said. “But the Bank of California decided that it needed to put (the loan) into default rather than renew it. The real estate market is such that all lenders are doing their best not to extend additional credit.”

The next step, Faye said, could be foreclosure by Bank of California. That’s because the prevailing reluctance to grant or extend real estate loans has hindered Home Capital’s ability to unload all of the property, Faye said. “We’ve done everything we could to sell it.”

He added that the land involved in the default has been partially developed, with sewage lines and some roads.

Homes already have been built on many of the Pacific Hills lots not included in the default, among them 160 houses constructed by Irvine builder Barratt American Inc. in a joint development venture with Home Capital.