jmintz@VenturaCountyStar.com

LandSource Communities Development, the company behind the massive Newhall Ranch project near Santa Clarita, has been swept up in the turbulent real estate market.

The Miami-based company, which operates in California, Arizona, Florida, New Jersey, Nevada and Texas, has filed for Chapter 11 bankruptcy protection. It would allow the company to restructure its $1.24 billion debt, while continuing to operate "our business as usual," LandSource spokeswoman Tamara Taylor said in a release Monday.

"Because of the downturn in the real estate market, we found ourselves in the same situation as other land development companies; the terms of our loans no longer work in today's environment," said Taylor.

The company said it does not plan to shut down offices or reduce its work force. Vendors will be paid for all supplies and services rendered after the filing, the company stated. A $135 million revolving line of credit from a group of lenders led by Barclay's Bank will allow LandSource to fund operations during the Chapter 11 period, according to the company.

LandSource did not rule out the possibility of being sold.

The company's assets include 15,000 acres of undeveloped land north of Los Angeles. Twelve thousand acres are allocated for Newhall Ranch, a mixed-use project that comprises 20,885 housing units, up to seven schools, and 5.5 million square feet of industrial and business parks.

The community, which will take an estimated 20 years to build, will stretch west of Magic Mountain to the Ventura County line, said Marlee Lauffer of Newhall Land & Farming, a division of LandSource.

Despite LandSource's reorganization, the Newhall Ranch project will continue, Lauffer said, and the company expects to start development around 2010.

Ventura County Supervisor Kathy Long, whose district borders the development in Los Angeles County, has her doubts that the development will advance.

"I don't know if they're strong enough to go forward," she said.

The plan for Newhall Ranch has sparked more than a decade of friction between Los Angeles and Ventura counties. Local officials fear the project will increase traffic, air pollution and water pollution.

In January, the Los Angeles County Regional Planning Commission approved the first of five villages to be built, but it still needs approval from the Los Angeles County Board of Supervisors, Lauffer said.

"We know that Newhall Ranch will be an excellent place for people to live and work in the future," she said.

There is some concern how the company's financial woes will affect its investors, including the California Public Employees' Retirement, which provides pension, healthcare and retirement services to its members. Through MW Housing Partners, a fund managed by MacFarlane Partners, CalPERS, the nation's largest public employees pension fund, has a 68 percent stake in the 15,000-acre real estate partnership.

Clark McKinley, a spokesman with CalPERS, said there is no way to assess the effect on CalPERS until the process is over, which could take several months.

If losses do occur, they won't have a material effect on CalPER's overall portfolio, he said.

"The LandSource deal is less than one-half of our total investment portfolio," he said.

CalPERS is "well diversified" among many asset classes, including stocks, bonds and cash, private equity, real estate, and inflation-linked assets, he said.

CalPERS has been "very aggressive" on lending for real estate, said Jack Kyser, chief economist for the Los Angeles County Economic Development Corp.

"Generally, CalPERS does their homework well, but with this deal, obviously there were some unforeseen problems," Kyser said.

— The Associated Press contributed to this report.