TheBakersfieldCalifornian.com

A developer has pulled out of a major housing project planned on acreage Shafter annexed two years ago north of 7th Standard Road.

Irvine-based SunCal Companies told The CalifornianTuesday it is ending its involvement with the proposed Mission Lakes development.

SunCal owns 515 acres of the project, more than a third of its footprint, which spreads northwest from 7th Standard's intersection with the Calloway Canal.

The company last week defaulted on a $74 million loan against the property.

SunCal's decision to withdraw was based on "the dispute between Shafter and Bakersfield over water supplies for the Shafter region," said spokesman Joe Aguirre.

The development "doesn't have an identified stable water supply," Aguirre said.

Bakersfield has a trio of lawsuits against Shafter regarding water supplies proposed for three residential projects north of 7th Standard -- including Mission Lakes -- that could eventually house some 35,000 people in 11,000 homes. Bakersfield officials say the water in question can only be used for agricultural activities.

Shafter annexed the land in June 2005, part of a 5,226-acre addition southeast of the city's core.

The expansion followed a bitter turf war with Bakersfield, which previously held land north of 7th Standard in its sphere of influence.

The two cities have been at odds ever since.

Alan Tandy, Bakersfield's city manager, said SunCal's exit wasn't a surprise.

"No prudent developer would proceed" without a legally sound water supply, Tandy said.

Shafter City Manager John Guinn said he expects the project to go forward with another developer, Lennar Homes of California Inc..

Lennar sold the property to SunCal last February, loaning SunCal subsidiary SunCal Mission Lakes LLC $74.3 million at the time.

That loan defaulted last week. SunCal now owes Lennar more than $83 million with interest and fees, the default notice shows.

Emile Haddad, chief investment officer for Miami-headquartered Lennar Corp., said Lennar will take the property back.

"It's unfortunate SunCal chose not to pay the note," said Haddad, speaking from the company's western base in the Orange County city of Aliso Viejo.

The company has not immediately determined plans for the acreage, he said.

"We like the asset," Haddad said.

Both Haddad and Aguirre, SunCal's spokesman, said the two companies have an excellent relationship and plan to work together on other projects.

Lennar is developing another project, Coberly West, in Shafter's north-of-7th-Standard region. More than 3,400 units are planned. That project also is named in Bakersfield's lawsuit over water supplies.

A third developer involved with Mission Lakes could not be reached.

Lee Jamieson of Bakersfield group 7th Standard Ranch Investors LLC has not returned phone messages left since Friday regarding the project's status.

The 7th Standard Ranch group owns the remaining 841 acres of the Mission Lakes project. The group bought the land in August from a Utah company affiliated with the Mormon church.

The Mission Lakes project would cover about 1,360 acres. More than 5,300 homes, including multi-family units, are planned. On paper, the community is built around a man-made lake.

The development would sprout north from 7th Standard with the Calloway Canal forming its eastern boundary. Its western edge juts beyond Zerker Road.

The land is currently used for agriculture.

SunCal is a privately owned company focused on master-planned communities in California, Arizona, Nevada and New Mexico.