Ritter Ranch Turned Over to Bank

PALMDALE — Property foreclosures are nothing new in Palmdale, where the real estate recession has been lengthy and severe, but Wednesday’s dwarfed all others to date.

The foreclosure was against Ritter Ranch Co., the group behind what had been billed as one of the largest new housing developments in the state. A brief court proceeding turned ownership of the 18-square-mile Ritter Ranch property over to its lender, Bankers Trust Co. of New York.

Ritter Ranch was to be a planned community for 20,000 people located on the fringe of this High Desert city. But before a single house was built, the project became mired in debt and Bankers Trust began foreclosure proceedings in July, citing $26 million in outstanding payments.

About the same time, the city of Palmdale, frustrated with the slow pace of the development, moved to freeze payments raised through bonds to the developer for drainage projects and other public improvements on the land.

Still, Palmdale City Manager Robert Toone said he was surprised at the abrupt ending in this current chapter of the saga of Ritter Ranch. “I am still at a loss to understand why they walked away from this project so quickly,” he said.

A Ritter Ranch Co. spokesman did not return phone calls Wednesday. The company’s backers, Lorimar Telepictures executives Merv Adelson and Irwin Molasky, first launched plans for the massive development of 7,200 homes, and schools, golf courses and fire stations in the late 1980s, just before the real estate market collapsed.

A Bankers Trust spokesman, Tom Parisi, declined comment beyond confirming that the foreclosure had taken place.

Although the project had its critics, many local boosters welcomed the prospect of a Valencia-style planned community in a city that some felt had grown too fast, with too little control. Welcome, too, was the developers’ heady optimism about the future of real estate in Palmdale despite declining values and dismally high foreclosure rates.

Toone said Wednesday that the city’s top concern now is how to meet its obligations to the holders of $50 million in municipal bonds issued on Ritter Ranch. About $18 million of the bond money has already been spent, said Palmdale Finance Director William Ramsey.

It remains to be seen whether Bankers Trust will bring in a new developer to finish the project, sell the property or hold on to it, Ramsey said. He added, however, that the bond funds are separate from the city treasury so public funds may not be tapped to cover the debt.

The city must also resolve the question of how to complete an unfinished drainage project on the development site funded with the bond money, said city bond counsel Paul Thimmigg.