Communities Southwest Cashing In on Tight Land Market
Commercial
Boeing’s Commercial Information Systems unit is in the market for 100,000 square feet of R & D;/office space, and the word on the street has the company looking at some of the Irvine Co.’s many buildings in the Irvine Spectrum.
The space is for the division that works on the company’s in-flight Internet access applications. Currently, that operation is housed at Boeing’s Huntington Beach facility. Roughly 300 people would take part in the move, mostly engineers and sales personnel.
Terrence Scott, a Boeing spokesman, said the move would involve a relocation of the division’s headquarters to a “new location consistent with a high-tech environment.”
Deals:
Santa Ana-based First American Title Insurance Co. has acquired Destin, Fla.-based Advance Title Inc. Terms of the deal were not disclosed.
“The Florida panhandle is the leading sector for change in the state, with the counties of Walton and Okaloosa being critical growth areas for First American,” said Gary Kermott, president of First American Title.
Advance Title, which has an office in Ft. Walton Beach, Fla., will operate under its own name as a First American branch. Advance Title was founded in 1981 by Joe Butler, who along with his son Brett will remain with the company. Both have been named vice presidents of First American Title.
Residential
Tom Pomeroy should be a very happy man these days. As head of land developer Communities Southwest, Pomeroy oversaw an aggressive acquisition plan in the mid-1990s that has the Anaheim-based company’s phone constantly ringing today as homebuilders look for finished lots. Moreover, since Pomeroy acquired most of the land just before the market began its current rise, he stands to make a nice profit on resales.
Then again, Pomeroy seems to be one of those people who rarely can look at the present and simply enjoy it. There’s always tomorrow to worry about. These days, he’s fretting about the state of the residential market.
“I’m so concerned about the housing industry as a whole, mostly because I find the housing industry has changed in terms of the amount of land inventory any one builder wants to carry,” he said.
As a result, Pomeroy sees another round of consolidations, and Brookfield Homes’ current effort to acquire Catellus Residential is but one example.
“It’ll be driven by (a need for) lot supply,” Pomeroy said. “How many builders do you think there are today in Southern California? Roughly 250. If all of those builders need to re-fill their lot supply now that Los Angeles County is back up to 90,000 jobs and starting to contribute to the rebound, how long before lot supply is so tight that builders will have to start either buying or closing their doors?
“If you don’t have lots, builders just don’t build houses. It’s that simple.”
As a company with roughly 5,500 California and another 6,000 Arizona lots in its portfolio, why should Pomeroy fret? After all, Communities Southwest will be one of the prime beneficiaries of a tightening market, a fact Pomeroy acknowledges.
“This is my industry concern, not my company concern,” he said. “The company will do fine and is doing fine. The bigger issue here is how do we create a balance between the creation of new building sites and the use of those sites?”
Because of the tightness of the land market, many companies with too much land in one geographic area are very careful about how they go about unloading that excess inventory.
“The large home-builders aren’t selling land as much as trading it,” Pomeroy said. “The theory behind it is, ‘You know, I can’t replace the asset. If I just sell the lots, I can’t go out and buy 100 more. So I don’t want to sell the lots, I want to trade them for lots in an area where I want market share.’ ”
Given this market, Communities Southwest finds itself a prime acquisition target, something Pomeroy is well aware of.
“If somebody who wants to take a position in Southern California who hasn’t been here … if they were to walk in and say ‘Let’s do business,’ that wouldn’t be that surprising to me,” he said. “Hey, everything I’ve got is for sale.”
On the other hand, the price Pomeroy would want may include a steep premium. Just ask Lennar Homes of California. The Mission Viejo-based company had a deal in place to acquire Communities Southwest, but in the end the whole thing fell apart because of the valuation of Communities Southwest’s land. As a result, Pomeroy isn’t exactly waiting around for someone to offer him a deal he could take.
“We’re going to just continue to develop the properties we’ve got both in Arizona and here in California and be patient,” Pomeroy said. “When the expectations of land sellers come back to a realistic viewpoint, well go back and buy some more.
“The toughest thing to do is sit back and wait,” he continued. “When you’re deal junkies like we are, it’s tough to sit back and do nothing. It’s making me crazy the last 18 months not buying anything. I’m built to buy.”
Oops
In my June 12 column, I inadvertently left off some names of brokers representing Founders Financial. For the record, Rick Putnam, Jeff Cole, David Nazaryk, Camilla Kostic and Ernest Brambilla all were involved in the various Founders Financial building sales.
