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“Spin and Lies” Produced by SunCal’s Public Relations Department

Hot on the heels of the federal government’s bailout of Fannie Mae and Freddie Mac, comes word of impending doom at investment bank Lehman Brothers, an investor in several SunCal projects.

Within a time frame of roughly one week, the Lehman Brothers crisis developed from the disclosure of their intention to spin off several billion dollars in commercial real estate assets – including investments in SunCal – to the news that Lehman is shopping for a buyer, possibly Bank of America. In March of 2007, Lehman Brothers reported that it purchased a 20% stake in the country’s fourth-largest hedge fund, D.E. Shaw & Company. Earlier this year, SunCal turned to D.E. Shaw to help finance their obligations under their master developer agreement for Alameda Point, and they asked the City of Alameda to approve attaching D.E. Shaw to the agreement as a partner. Lehman Brothers has some tremendous exposure to SunCal at this point.

Searching for more background on the Lehman Brothers relationship to SunCal, we found this blog entry on the Lehman debacle, which borrows heavily from the Wall Street Journal’s reporting on the issue. The blog also references a detailed examination of the relationship between Lehman Brothers and SunCal in a spring 2008 article. In that article SunCal and Lehman executives dismissed the suggestion that “A number of developers and distressed-asset investors were believed to be considering bids for some of the Lehman-SunCal projects.” Yet the Lehman write-down of their real-estate assets and spin-out to a new company doesn’t seem that much different.

But most interesting about this blog is a comment by a self-proclaimed SunCal employee writing under the pseudonym ‘irvine insider.’ He or she writes “Believe me, I work for SunCal, but I am tired of the spin and lies produced by our public relations dept.” However, there is no reference to SunCal’s work in Alameda.

Getting back to the bigger picture – Lehman holds only a minority stake in D.E. Shaw, but would a buyer like Bank of America, having familiarized themselves with Lehman’s losses on SunCal projects, put pressure on D.E. Shaw to minimize their SunCal exposure?

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