Repo to Revive Rancho Murieta


The union pension fund that originally developed Rancho Murieta has repossessed 1,100 acres it sold in 1985 to Davis developer John “Jack” Anderson.

Originally reported October 26, 1997 by Mike Mccarthy  –  Staff Writer
Source: Sacramento Business Journal (https://www.bizjournals.com/sacramento/stories/1997/10/27/story1.html)

The union pension fund that originally developed Rancho Murieta has repossessed 1,100 acres it sold in 1985 to Davis developer John “Jack” Anderson.

The fund plans to seek approval for 2,000 new lots on the land.

The property, which includes Rancho Murieta’s two famed golf courses, was reacquired by the pension fund in an auction on the courthouse steps in Sacramento. There were no other bidders.

Anderson defaulted on $40 million in debt that had been secured by the land.

The repossession could give Rancho Murieta, located in the foothills of southeastern Sacramento County, a new lease on life. A planned community with a population of about 4,300, Rancho Murieta is running out of approved lots for new houses.

The repossession also could benefit the Rancho Murieta Country Club. Anderson’s property included the Country Club, with its two golf courses, tennis courts and restaurant.

The pension fund has offered to sell the golf courses to the Country Club, which operates the links.

The land was repossessed from Anderson’s Rancho Murieta Properties Inc. by the San Francisco-based Pension Fund for Operating Engineers Local No. 3.

The pension fund had sold Anderson 1,400 acres at Rancho Murieta in 1985, carrying a $26 million loan. But after selling several hundred acres, Anderson defaulted on the loan. The debt was driven to some $40 million by accumulated interest and penalties.

Anderson could not be reached for comment.

To repossess the land, the pension fund bid $20 million for the property at a foreclosure auction Sept. 29, said Paul Morton, a vice president with McMorgan & Co., the San Francisco real estate adviser that is managing the property for the pension fund.

An employee-owned company, McMorgan & Co. specializes in managing pension fund investments. It manages some $20 billion worth of property.

The repossessed tract consists of 800 acres of undeveloped land, on which an estimated 2,000 homes could be built. It also includes a 50-acre parcel designated for retail, and another 50 acres for industrial development. The commercial land could hold more than 1 million square feet.

The two golf courses take up 300 acres.

McMorgan is going to study the possibilities before moving ahead with development.

“With the foreclosure just completed, there’s no immediate development planned,” Morton said. “There’s a lot of issues to assess. We need to get current on the market. There’s lots of getting smart to do.”

Real estate experts believe McMorgan will move quickly toward developing the land while the Sacramento region’s housing market has some strength.

The conventional wisdom on Rancho Murieta is that its housing development is dead in the water because of the community’s relatively isolated location, about 25 miles southeast of Sacramento on Highway 116. But the 3,500-acre development adds a slow-but-steady 50 to 60 new homes every year, said Ed Crouse, general manager of the Rancho Murieta Community Facilities District, which administers the development’s water, sewer and other public services.

Rancho Murieta is planned for 4,787 homes ultimately. But so far it has only 2,008 lots approved — all of them outside the pension fund’s land. Of the approved parcels, 1,553 have been developed, leaving 455 undeveloped. But only 276 of these are single-family home lots, with the balance townhouse lots, Crouse said.

The recent widening of Highway 116 for safer driving has eased Rancho Murieta’s isolation and, in effect, brought malls and big-city services a little closer, said Tom Shaffer, a broker with Lyon & Associates Realtors who works in the area.

“I look for 1998 to be a good year for Rancho Murieta,” he said. “It’s more accessible now, and the other golf course communities — Serrano and Granite Bay — are higher priced.”

But the thing that may most affect Rancho Murieta’s future is that Folsom is rapidly filling with the high-paid employees of expanding high-tech companies like Intel Corp. and others, said Mike Lyon, head of Lyon & Associates.

Employees of those companies will be looking for move-up homes, and they will like Rancho Murieta because of its foothill setting, relatively inexpensive high-end homes, and its combination of golf, an equestrian center and an airport. It’s also a gated community with security patrols, he said.

But Rancho Murieta is not for everybody. “It’s definitely a niche market,” said land broker Doug Bayless. “I don’t see it as a high-volume market. It’s a different kind of area — not in the middle of everything. But some of the people who live out there really love it.” Among them are members of the Rancho Murieta Country Club.

For years, the club has had a tumultuous relationship with its landlord, farmer-developer Anderson. The club had tried to buy the property from him without success, and even successfully sued him for failing to support the club financially as promised.

Now, the pension fund investment manager, McMorgan, has offered to sell it to the club. The club’s directors have scheduled talks with the company, according to club president Bruce Lish, writing in a recent club newsletter. Lish could not be reached for comment. But Morton confirmed the possible deal.

One big question behind the foreclosure is whether the pension fund will ever recover the money Anderson lost on the venture.

“It would probably be very difficult if that property is put on the open market today to find someone who would pay even half the $20 million they repossessed it for,” said Dave Jarrette, a principle in the Roseville appraisal firm of Gianelli, Jarrette & Filipiak.

Even land with the hottest locations isn’t selling at prices good enough to cover the Rancho Murieta debt, he said. For instance, Whitney Ranch in Rocklin sold for $16,500 an acre two years ago, and Ferrari Ranch near Lincoln sold this year for $11,000 an acre to Del Webb Corp. for an expansion of Sun City.

The pension fund would need around $36,000 an acre to recoup its full losses.

The way the new owner could generate maximum income is to hold onto the property and gradually “build out of it,” slowly eking out the best value possible from the land over the long term, Jarrette said.

There’s probably no quick fix for the pension funds losses.

“It’s a beautiful community. But it’s a classic example of how location can really ruin your day,” he said.

Basically a farmer, Anderson borrowed heavily during the 1970s to amass a massive agricultural empire.

As a real estate investor, Anderson hit the financial gong harder than anybody from this area during the 1980s. A large man with a voracious appetite for land, he acquired thousands of acres of farmland around the country. He also bought several Nevada casinos, including the Dunes Hotel and Casino in 1984.

In 1986, he bought 300 Capitol Mall for $62 million and resold it the same year to a Chicago investment company for $81 million.

It was an empire that any mogul would have admired, until taking a closer look. Anderson had borrowed very heavily from savings and loans, and his defaults reportedly reached $120 million through the 1980s. It led to a dismantling of much of his empire.