Firm that CalPERS invested in files for Chapter 11

A California real estate partnership that the California Public Employees’ Retirement System poured about $1 billion into has filed for Chapter 11 bankruptcy protection.

LandSource Communities Development’s assets include 15,000 acres of undeveloped land in the Santa Clarita Valley, among the largest land deals to falter amid the national housing glut. The land was appraised at $2.6 billion at the time of the CalPERS investment, but has dropped considerably in value since then.

CalPERS, the nation’s biggest pension fund, provides pension, healthcare and other retirement services for about 1.5 million public employees. CalPERS did not immediately return calls Monday. Last month, its president, Rob Feckner, told the Los Angeles Times he hoped to forestall a bankruptcy filing but stressed that “if we incur any losses, they will be minor” because the pension fund is “very well diversified, in good shape.”

LandSource issued a news release late Sunday to announce its filing in U.S. Bankruptcy Court in Delaware.

Santa Clarita-based LandSource had been trying for months to restructure a $1.24-billion debt, the company said. It received a default notice on April 22 after missing a payment when a decline in the assessed value of that northern Los Angeles County land holding triggered an additional charge.

“LandSource believes Chapter 11 provides the most effective means for the partnership to preserve the values of its business . . . while it works with creditors to achieve a long-term restructuring,” spokeswoman Tamara Taylor said in the release.

Attempts to reach Taylor and LandSource were unsuccessful.

LandSource operates in California, Arizona, Florida, New Jersey, Nevada and Texas.

The partnership announced that it had received a $135-million line of credit from a group of lenders led by Barclays Bank, allowing it to fund operations during the Chapter 11 period.

CalPERS, with $254.8 billion in assets, is involved in LandSource through its participation in MW Housing Partners, an investment fund managed by MacFarlane Partners.

MW Housing Partners acquired 68% of the Santa Clarita property, along the Interstate 5 corridor 30 miles north of Los Angeles, from home builder Lennar Corp. and LNR Property Corp., a unit of Cerberus Capital Management.

Lennar and LNR each maintained a 16% interest in LandSource.