HERE AND THERE
As Big Developments Wane, Homebuilders Fill in Cracks
By Matthew Padilla
Pablo Leon’s job sounds fulfilling enough.
He finds overlooked sites,maybe a dilapidated building or piece of unused land,to transform into new homes.
That’s a good thing, considering the housing shortage here pundits say is driving up home prices.
But Leon, director of infill for the Irvine office of Western Pacific Housing, part of Arlington, Texas-based D.R. Horton Inc., said finding sites to build on in already developed areas isn’t easy.
“If you can close two or three deals a year, you are probably doing pretty well,” Leon said.
In real estate talk, what Leon and others do is called infill building,putting up a small number of homes amid existing buildings. Infill sites often have to be rezoned from industrial use to residential or even to mixed-use to fit houses in with stores.
Smaller builders long have done infill building. Now larger public builders,such as Western Pacific, Newport Beach-based WL Homes LLC’s John Laing Homes and the Mission Viejo office of Miami-based Lennar Corp.,are doing more infill building as large swaths of land for big developments become harder to come by.
But finding infill sites isn’t like getting lots at a masterplanned development.
Owners of an old industrial building, languishing lot or struggling strip mall may not realize their property could be turned into new homes.
Western Pacific’s Leon said one way to find infill sites is to drive around.
“You pick two or three days of the week, get out the Thomas Guide, focus on an area and drive it,” he said. “You learn to look for certain types of antiquated uses.”
Western is building new homes in developed areas of Anaheim, Buena Park and Garden Grove.
Other infill developers rely on real estate brokers. Others get more technologically sophisticated.
Costa Mesa-based The Planning Center, a real estate consultant, uses digital maps to help developers find potential sites, according to Dick Ramella, consulting principal with the firm.
The first thing to do is to eliminate residential areas, since prime infill sites usually are zoned for other uses, Ramella said.
Then Ramella said he can refine a search according to the developer’s needs, such as proximity to freeways.
“If you get all the data and then look at the property, you have a much more intelligent perspective,” Ramella said.
One company has sprung up just to help homebuilders find infill sites. In 2001, E. David Cortens and David Voss started Capistrano Beach-based CitiSphere, an affiliate of Southern California Real Estate Associates Ltd.
Voss said his firm focuses on developing relationships with brokers, planning companies, redevelopment agency officials and anyone else that can help put a client together with a landowner.
Infill sites typically aren’t big, which poses a challenge to publicly traded builders. Western Pacific’s Leon said companies like his need to build and sell homes within a reasonable time frame, which means they can’t spend a lot of time on a smaller site.
Western Pacific avoids doing any project smaller than 50 homes or condos and is willing to go as low as one acre, Leon said.
That means there still is some wiggle room for smaller builders.
Earlier this year, Downey’s Tri Star Group Inc. built and sold three two-story homes on Harbor Boulevard in Anaheim just north of the Disneyland Resort.
The 2,100-square-foot homes sold for about $450,000 each, a sign of the strong demand for new homes even in busy, developed areas.
City officials loved the three new homes, which were built on a vacant lot.
“We were thrilled with them,” said Greg Hastings, zoning division manager with the city. “They came out beautiful.”
Pablo Villanueva, president of Tri Star, also is a broker. He said he started refurbishing older homes and selling them more than 10 years ago. After developing ties with lenders, he said he was able to start building new homes from scratch.
Villanueva said he finds potential sites through the multiple listing service brokers use.
Tri Star paid $275,000 for a 17,000-square-foot lot, Villanueva said. The developer split the lot into two 5,000-square-foot lots and one 7,000-square-foot lot.
Villanueva lives in Fullerton, but he said prices are too high to build there, though others are doing infill building there.
It typically takes 12 to 18 months to finish a project, Villanueva said. He said once he begins a project he often locates other potential sites while driving around the area.
Sometimes Tri Star finds what appears to be a good site, only to find out later that it needs special work, such as extending a sewage line or adding a fire hydrant. That drives up costs, according to Villanueva. Once that happens, a deal may be scratched, he said.
Still, not every urban reuse developer needs to hunt for sites. People looking to do such deals often solicit Los Angeles-based CIM Group Inc., according to John Given, senior vice president with the company.
CIM has deep pockets via its urban real estate fund whose investors include two large pension funds: the California Public Employees’ Retirement System and the California State Teachers’ Retirement System.
The developer is set to build nearly 500 apartments, condominiums and 62,000 square feet of retail space on four blocks in Anaheim.
CIM’s Given has a background in city planning in Colorado and for the redevelopment agency of Los Angeles. Other companies, such as homebuilders, have hired away city planners to gain expertise in urban building, sources said.
Given said he still hits the streets to look for potential projects.
“Most people in various aspects of real estate are kind of urban junkies,” he said. “It’s hard to see a property that you don’t think you can do something with.”
