Investors in Failed Project Offered 3 Cents on Dollar

Investors in the partnership that sunk nearly $105 million into the moribund Talega Valley development near San Clemente have been offered 3 cents on the dollar to settle a class-action suit against the partnership and Merrill Lynch & Co., which marketed the investment.

In all, Merrill Lynch sold $234 million worth of limited partnership interests during 1989 and 1990 to 20,000 investors in the Arvida/JMB Partners L.P.-II real estate portfolio, which included Talega and properties near Atlanta and Dallas.

Arvida Co. is a subsidiary of Chicago-based JMB Realty Corp. and was used as the development arm. The company formed various partnerships such as Arvida/JMB to finance its real estate ventures. Arvida Co. is also a co-owner with Chevron Land & Development of the gated Coto de Caza master-planned community southeast of Mission Viejo.

The settlement offer by Merrill Lynch has been filed in U.S. District Court in Chicago. In all, it offers investors $6 million, or 3 cents per dollar invested--to settle their claims against the brokerage and the investment partnership. After legal fees of more than $1.5 million are extracted, investors would get less than 2 cents per dollar.

The court has granted preliminary approval for the settlement and scheduled a Dec. 17 hearing for final action.