COLORADO DEVELOPER TRIES TO REVIVE RITTER RANCH CITY OFFICIALS SAY DEAL MUST STICK TO PLAN, REPAY BONDS.

Byline: Jim Skeen Staff Writer

PALMDALE - A Colorado developer is working on a plan to revive Ritter Ranch, a plan that would include addressing the city of Palmdale's concerns about repaying the holders of $50 million in bonds for the 7,200-home project, the developer's attorney said Wednesday.

Developer John Musick, who had tried to take on the project but ended up in federal bankruptcy court, has held preliminary discussions with potential partners and financial backers, Musick attorney David Neale said.

With Newport Beach-based Sage Community Group bowing out of the project, Musick hopes to be able to devise a plan that bondholders and the city of Palmdale can approve, Neale said.

``We've never stopped trying to get something going,'' Neale said. ``The opportunity has fallen back to us.''

In February, a federal bankruptcy court approved a city-backed plan for Sage to take over the project from Musick's Ritter Ranch Development LLC, which took over the stalled project in August 1998 only to file for Chapter 11 bankruptcy protection soon afterward.

Initially arguing that his agreement with the city gave him exclusive development rights to the project, Musick dropped his opposition to the Sage plan with the understanding that if the company failed to perform, he would get another opportunity to put together a recovery plan.

Sage, despite a series of extensions, was unable to finalize its plan and notified the city in a Nov. 30 letter that it was dropping its bid to take over the project.

Musick was limited in his ability to put his own deal together because of an obligation to allow Sage an opportunity to finalize a recovery plan, Neale said.

Neale said he could not disclose what partners or backers Musick is trying to line up.

Neale also declined to comment on how likely it is that Musick can complete a deal, noting the difficulties in appeasing all the parties, especially bondholders.

``I've learned from this case you've got to stay away from prognostications,'' Neale said.

City officials say they want to see a recovery plan that addresses a full repayment of the bonds and that adheres to the specific plan for the development.

``I would not be inclined to lessen the standards,'' said Councilman Jim Root.

The Ritter Ranch project, envisioned as a state-of-the-art master-planned community in the hills of west Palmdale, south of Elizabeth Lake Road, has been entangled in lawsuits and bankruptcy proceedings.

The project's original developers, a company formed by Lorimar Telepictures executives Irwin Molasky and Merv Adelsen, were able to get the requisite approvals for the project and fend off lawsuits from neighboring homeowners concerned about the loss of their rural lifestyle. The company, however, lost the project in a foreclosure by its lender in January 1997.

Palmdale, which is the administrator of $50 million in bonds issued for improvements to the project but is not responsible for the payments, began its own foreclosure proceedings in May 1997 against the lender, Bankers Trust.

In May 1998, a settlement agreement was reached to hold off foreclosure proceedings and allow Bankers Trust to find a developer to take on the project.

In August 1998, Musick stepped in to try to take on the project, but he filed for Chapter 11 reorganization protection three months later.