NEW RITTER RANCH DELAYS DEVELOPER WINS 3RD EXTENSION TO SECURE FUNDING.

Byline: Jim Skeen Staff Writer

PALMDALE - The new developer trying to take over the 7,200-home Ritter Ranch project will be granted a third extension to finalize the bankruptcy recovery plan.

Sage Community Group, a Newport Beach company, has been given until Nov. 30 to close out the recovery plan, city officials said last week.

Sage is working on its financing with the help of the project's major bondholder, The Franklin Fund, officials said.

``It's a matter of due diligence on Sage and Franklin's part,'' Mayor Jim Ledford said. ``This is a big, big project. It's complex and it's going to take some time.''

Sage was originally scheduled to finalize the recovery plan by June 30 but has been granted two previous extensions to go through the more than 200 agreements between the original developers and other entities for the master planned community.

Sage will go back to federal bankruptcy court for a status conference on Dec. 1.

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

The recovery plan calls for Sage to pay $7 million in cash to the bankruptcy estate and provide a letter of credit for $10 million to the Franklin Fund, which holds $33 million in bonds issued for improvements to the Ritter Ranch property.

The Ritter Ranch project has been tangled up in lawsuits, foreclosures and bankruptcy for more than three years.

The project's original developer, Ritter Ranch Associates, was able to get the project approved by the city, then fended off lawsuits from Leona Valley residents who feared the project would destroy their rural lifestyle.

However, before a single home was built, the developers lost the project in a foreclosure by their lender in January 1997.

Palmdale, which is the administrator of the $50 million bond issue for the project improvements, 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.