Residential Still Booming, but Commercial Contracts Down; Catellus Unit in Limbo
Looks like the residential boom will continue for a while longer, but the folks on the commercial side of the business are starting to pull back a little bit.
Orange County contracts for future construction totaled $256.4 million in February, the latest month for which figures are available, a 21% increase from the $211.5 million total posted in February 1999, according to the F.W. Dodge Division of The McGraw-Hill Cos.
Residential contracts totaled $166.9 million, up 55% from the year-ago period. Nonresidential contracts, however, totaled $89.5 million, a 14% decline from February 1999.
Year-to-date, construction contracts awarded so far total $508.2 million, up 19% from the first two months in 1999. Residential contracts totaled $311.9 million, up 49%, but nonresidential contracts totaled $196.3 million, off 10% from the first two months of 1999.
COMMERCIAL
Helping build hotels no longer is enough for Bob Olson of R.D. Olson Development. Now, he wants a piece of the action, too.
Olson, founder and president of the Irvine-based company, is putting up the land and 30% of the estimated $21.5 million in development costs for the 174-room Marriott Residence Inn his company is building in Irvine. He acquired the 4.4-acre site across from Jamboree Center at 28455 Main St. in March 1999 from the Carter Family Trust. The other 70% will be financed through construction and other bank loans.
“We have been minority partners in the past on some of the hotels we’ve done, but this is where we’re going to take a majority stake in the property,” said Olson, who also oversees his R.D. Olson Construction Co., which builds restaurants and clubhouses and renovates existing hotels. It was the hotel renovation work that led to his entry into the development side of the business.
The Marriott Residence Inn project will include meeting rooms, a fitness center and a swimming pool. Construction will begin this month, creating approximately 350 construction jobs, Olson said.
In addition to taking on the construction portion of the Marriott Residence Inn project, his R.D. Olson Construction Co. also will build a full-service upscale restaurant on an adjacent pad. Olson said his company is trying to strike a deal with a restaurant in anticipation of opening the hotel and the restaurant at the same time.
In addition to the Marriott Residence Inn, Olson said his companies are building two hotels in Anaheim. The first, for Bass Hotels and Resorts, is a 264-room, nine-story Holiday Inn Select. Olson said he sold the 6 acres where that hotel is being built for $7.1 million to Bass Hotels and Resorts. The other Anaheim property is a 143-room, seven-story Staybridge Hotel.
As for the Irvine hotel, Olson said he is confident that his first major ownership stake will prove to be a successful one.
“There’s a very strong market (there) for the product type and for the (Marriott) flag,” he said.
Still, while confident of his prospects, Olson indicated he would be willing to give up a portion of the equity,”we may go up to 50%”,for the right price.
R.D. Olson Development will continue to look for deals in which it can take a major stake, Olson said, hoping to parlay the experience gained in this venture and in past hotel construction projects.
“We actually have a couple of other projects we’re looking at now,” he said. “We feel that with the knowledge we’ve learned over the last 20 years in the hotel segment, that we can bring a lot to the table in terms of creating future value.”
Aware of the cyclical nature of hotel construction and the tendency of developers to overbuild a market, Olson said he will look to expand into other niches besides his companies’ standard hotel, restaurant and clubhouse projects.
RESIDENTIAL
Word on the street is there’s some confusion as to what Catellus Development Corp. wants to do with the homebuilding portion of its Irvine-based residential arm.
The San Francisco-based development company has said it is exploring “strategic alternatives” for the homebuilding arm of its Catellus Residential Group, which is headed by longtime OC residents and builders Bruce and Carl Akins. The company plans to retain the community-development portion of Catellus Residential Group, which focuses on acquiring, permitting and masterplanning property and then selling lots to builders.
