Developer Default on $62-Million Bond Issue Seen

A real estate development company is expected to default on a $62-million bond issue for the 2,290-acre Talega planned community near San Clemente, according to an official at the Santa Margarita Water District, which sponsored the bond issue.

Robert Lay, a board member for the district, said Friday that Chicago-based developer Arvida/JMB Partners Ltd. is not expected to make a $5.7-million bond installment payment that was due on Thursday.

Lay said the water district will likely have to foreclose on the undeveloped property. The Talega project was intended to be the site of 4,965 luxury homes with a nature preserve and two golf courses.

Water district ratepayers are liable for the $60.9 million in outstanding Talega bonds, which the district sponsored in August, 1990, to pay for water and sewage lines for the property. But ratepayers won’t be affected, Lay said, because the district has bond insurance.

It also has $5 million in a special reserve funded by Arvida/JMB, Lay said. Thus, the district can keep current on the bond payments for three years, he said. During that time, a buyer could be found for the property.

If that doesn’t happen, the district, which is the priority lien holder on the property, could foreclose and recover its money by selling the property, Lay said.