Lyon to Buy Thompson’s Share in Project : Transaction: The developer’s sale of interest in Laguna Audubon II ‘seemed to be the best use of our individual resources,’ she says.

Confirming a deal that has had tongues wagging in the development industry for more than a week, developer Kathryn G. Thompson said Thursday that she will sell her interest in the Laguna Audubon II project to a company owned by home-building magnate William Lyon.

Thompson has been developing Laguna Audubon for several years, and the development has been considered her company’s signature project.

Lyon, who already owns a 50% interest in the 1,700-home development through a company called LM No. 1 (San Juan Capistrano) Inc., would acquire 700 undeveloped but graded lots in the deal. His flagship William Lyon Co. has been hired to build and sell the rest of the project, which is at El Toro and Aliso Creek roads in Aliso Viejo.

In separate interviews Thursday, Thompson and a spokesman for William Lyon Co. said that the sale was not required by their companies’ lenders. “It is just a transaction that made sense and seemed to be the best use of our individual resources,” Thompson said.

Rick Sherman, senior vice president and general counsel at William Lyon Co. in Newport Beach, said that management of Laguna Audubon II has already been transferred to William Lyon Co. while sales negotiations proceed.

Neither Thompson nor Sherman would divulge the value of the transaction. A builder familiar with Orange County land prices said 700 partly finished lots in that area could be worth $70,000 apiece in an arms-length transition but probably would be valued at much less in a sale between development partners.

At $70,000 a lot, the deal would be worth $24.5 million at half interest.

Homes in Laguna Audubon II have been priced from about $110,000 to more than $300,000. Sherman said pricing polices are being “re-evaluated” as part of a change in project management.

While it was managed by Kathryn G. Thompson Development Co., the Laguna Audubon II partnership built and sold 1,000 homes. Other Lyon-Thompson partnerships developed and sold 289 homes in an earlier project, Laguna Audubon I, and 153 homes in the nearby Sycamore Hills project.

William Lyon Co. is now developing a project “right across the street” from Laguna Audubon II, Thompson said, and her own company is beginning work on the first 445-home phase of its wholly owned Audubon Vistas project, also in Aliso Viejo.

“It made sense for him to finish this one (Laguna Audubon II) and for me to go on to Audubon Vistas,” she said of Lyon.

Thompson said that sale of her company’s interest in the Laguna Audubon II project “gives us a better balance sheet and more equity capital” but is not critical to the company’s ability to continue other projects.

Audubon Vistas alone could have as many as 1,245 homes when fully developed, Thompson said, “if the market turns around” and people start buying again.