Big Homebuilders’ Retreat Opens Door for Smaller Players

There’s a housing boom going on in Orange County.

While most big homebuilders have pulled back during the recent slowdown, some midsize and smaller players are busy putting up houses or laying plans for them across the county.

They aren’t the glitzy condominium towers or sprawling developments of the boom years. Instead, developers are remaking aging strip malls, old school sites or building townhomes and condominiums on small pockets of land nestled amid already developed areas.

By the Business Journal’s count some 2,500 homes are under way or are in advanced stages of planning in the county, not including big holdover projects from the boom, such as Lennar Corp.’s Central Park West in Irvine.

The number is small compared with a couple of years ago, when 5,000 or more homes were being built here each year. But the projects tell a tale of how smaller builders are taking advantage of cheaper, attainable land at a time when many bigger builders have hung up their tool belts for now.

Santa Ana-based Far West Industries, which has built homes in inland California and in the desert, is planning its first project in its own backyard.

It snapped up a Fountain Valley site that Del Mar-based Brookfield Homes Corp. backed away from when city officials rejected plans for more homes on the land in favor of a park.

The parcel at 9300 Gardenia Ave. had been appraised at $23 million before the slowdown.

Privately held Far West has agreed to pay $19.5 million, and it’s spreading that out over several years based on sale milestones.

“We don’t have a huge corporate underwriting process,” said Ira Glasky, Far West’s vice president and general counsel. “We’re able to put more of our money at risk than a public builder would do, so we can be more creative with our deals.”

Far West is planning 54 homes on 14 acres at what it’s calling San Marino. The site is graded with work on models and is about to get under way, Glasky said.

Home prices are expected to start at just less than $1 million.

Far West’s buy of the former school site from the Fountain Valley School District includes quarterly interest payments and closing on the land only when the company begins to sell houses, he said.

The company has a personal link to the area: Scott Lissoy, Far West senior vice president, grew up in Fountain Valley.

“We knew the area and we liked that it was infill in central Orange County,” said Lissoy, a trustee of Lissoy Family Trust, which actually is buying the land for Far West to develop. “With public builders pulling back, it gave us an opportunity to come in.”

Discounted Land

Dallas-based Centex Corp.’s pullback from a $58 million buy of two Huntington Beach school sites opened the door for Ranco Huntington Investments LLC, a partnership of Ranco Realty Group of Temecula and Huntington Land Development LLC of Newport Beach.

The developer now is buying the land for $40 million.

Like Far West, Ranco Huntington is buying the land in stages to cut its risk.

The company isn’t disclosing its timetable but the project is on track and “going smoothly,right on schedule,” said Tom Williams, president of HLD.

The developer plans grading for 2010 or 2011, if zoning for the land is changed to allow for homes. Williams said he expects 100 homes starting at “in excess of $1 million.”

Project Under Way

Irvine-based Brandywine Homes has two projects under way in Stanton and neighboring Anaheim that call for about 350 homes.

Renaissance Plaza is in its second phase at Beach Boulevard and Orangewood Avenue. In the first phase, Brandywine tapped Britain’s Taylor Woodrow PLC to build 106 townhomes. In the second phase, Brandywine plans to build 51 homes and some commercial space on about 4 acres in the next 18 months.

Homes could sell for $430,000 to $680,000.

The homes are set to replace a rundown retail center and other uses.

Also on Beach Boulevard, Brandywine plans The Garden District, which calls for 200 homes at the site of theme parks Adventure City and Hobby City, which straddle the Stanton-Anaheim line.

The homes are set to sell in the $600,000s.

Brandywine President Brett Whitehead hopes to start work in the first quarter, pending Planning Commission approval in November.

The developer also is set to build on the site of a former church in Westminster in the Little Saigon section of the city.

Brandywine is spending $6 million for 2.5 acres to build 38 homes, which would be priced from the $500,000s. It plans to begin grading in December.

Some midsize builders also have projects in the works.

One of them is Brookfield Homes, which has turned to urban infill projects to weather the downturn.

Orange County is about half of Brookfield’s business right now, according to Vice President John O’Brien, who heads up the company’s urban infill group as well as Brookfield’s OC work.

Brookfield has built or is in some stage of developing a half-dozen projects in Anaheim, several in and around the city’s downtown.

Changing Plans

Like others pushing ahead during the downturn, Brookfield has had to change its plans. It has cut prices on one development that’s selling and delayed work on three others.

At Colony Park in downtown Anaheim, townhomes are now topping out in the high $400,000s, down from the $600,000s set price when the project was planned.

“It sure is a function of what’s going on in the market,” O’Brien said. “Prices previously projected much higher have been reduced.”

Meanwhile, Brookfield has pushed three projects totaling about 275 homes back from a 2008 start to 2009 or later.

OC still is a good place to build, he said.

“We just think there needs to be some correction,” O’Brien said, referring to homes on the market now where owners still are clinging to unrealistically high prices.

If prices are lowered on existing homes, it would boost sales, O’Brien said, and send those sellers flush with cash back into the market to buy new.

Still, O’Brien said he sees demand for infill homes and is upbeat about the county’s population growth.

Newport Beach-based John Laing Homes, part of Dubai’s Emaar Properties, has two projects coming next year.

In La Habra, John Laing plans 91 homes at its Brio development. The site was previously a cold storage facility. John Laing bought the land in December 2005. Models are due in April.

In Huntington Beach, the company’s Blue Canvas project calls for 201 homes, a mix of attached triplex townhomes and semi-detached larger homes. Sales are set for mid-2008.

“Long term we are incredibly bullish on OC,” said Dan Flynn, vice president of land acquisitions and community development for John Laing. “It’s not that builders forget that markets slow down. We’ve been through the most incredible cycle of our careers (2000 to 2005) and we just have to work through this side of it.”

Flynn declined to offer prices for the two projects in development since the market is too volatile to put it in writing.

“We think we know where we would price it today, but over the next six months our competitors could slash their prices,” he said. “Public builders are aggressively cutting prices to move their inventory. We are offering incentives if the competition dictates that.”

Flynn said he expects it to take at least a year before the market stabilizes.

At least one other builder is moving ahead because it had no other choice.

In Fountain Valley, Los Angeles-based KB Home paid $24.7 million for 13 acres near the San Diego (I-405) Freeway.

When the market retreated, KB tried to sell the site but found no takers. Now it plans to build 54 homes and a one-acre park.

City planner Robert Franklin says KB told his department it plans to begin grading in January.

“They don’t need any other approvals,” to begin, he said. “They just have to pay fees.”