Orange County’s second most active homebuilder is reorganizing its local operations and bringing in two new managers to oversee the realigned division.
Kaufman & Broad, which sold 608 homes locally in 1999, has separated management of its OC operations from those of Los Angeles and the Inland Empire.
“At the end of every year, we evaluate how our business is doing,” said William Cardon, who now is K & B;’s regional general manager for San Diego and Orange County. (He will remain based in San Diego.) “Senior management thought one of the things we could do better was to take an individual approach to each specific market.”
Cardon used to oversee the company’s Los Angeles division as well. Taking over that role, along with K & B;’s Inland Empire business, is Jay Moss. He had been president of the company’s division in the Bay Area that included Sacramento.
Moss will be both president and regional general manager in Los Angeles.
“Once he gets going and his business grows, Jay will probably look to hire some more people while retaining the RGM role,” said Cardon.
Eric Wittenberg, 42, has been shifted from his position as K & B;’s president of greater Los Angeles operations to a similar spot in Irvine. He replaces John Warner, who left the company earlier this month along with another high-ranking Orange County executive, Rick Schroeder.
Linda Edwards, who had been K & B;’s director of sales and marketing in San Diego, has been promoted to executive vice president in Orange County.
Warner had been looking for a position closer to his home in San Diego, according to Cardon.
“He told me he had other opportunities,” said Cardon. “He was looking for a San Diego position when I hired him about a year ago.”
Cardon characterized Schroeder’s departure as one tied to Warner’s decision to leave the company.
“They worked as a team,” said Cardon. “It’s not unusual in this business that when one leaves the other does, too.”
Warner did not respond to requests for an interview.
Schroeder could not be reached for comment.
While Warner ran the OC operation for K & B; from San Diego, Wittenberg will run it locally. He has been a resident of OC since 1980 and is well known within homebuilding circles. Wittenberg has been president of the Southern California region for Newport Beach-based Presley Cos. Before that, he was co-founder and partner of Wittenberg Livingston Homes and treasurer of The Fieldstone Co.
“It’s closer to home for me, and I’m very familiar with the Orange County market,” said Wittenberg. “And I think this office is poised for good growth.”
Local Activity
K & B; has seven developments in OC with homes being offered on the market, according to Cardon. In addition, it plans to start nine new projects in coming months.
The existing projects are (including city and total number of homes):
n Summerhill (Corona, 58).
n Cambria (Anaheim Hills, 167 ).
n Sedona (Tustin, 130).
n Lori Lane (Garden Grove, 40).
n Stonegate (Anaheim, 57).
n Bellagio (Orange, 63).
n Bella Vista (Orange, 76).
Communities slated to open later this year include:
n Two totaling 218 new homes in Corona, which is part of K & B;’s OC division, to be marketed as Autumnwood and Morning Sky.
n Three in Brea being called Hidden Trails, Bridalwood and Quail Run. Home totals are not yet available for these, according to a K & B; spokeswoman.
n Four in San Clemente totaling 385 new homes. Those developments will be marketed as Forrester Ranch, Villa Pacifica, High Grove and Ashton.
Wall Street Blues
The changes come as K & B;’s stock price, like those of most other major public homebuilders, is viewed as out of favor on Wall Street.
But Jim Wilson, research director at Jolson Merchant Partners in San Francisco, says K & B;’s overall financial health is fine.
“The bigger companies, like Kaufman & Broad, are continuing to dominate the industry,” he said. “The problem is that with interest rates going up, the stock market isn’t very anxious to put money into the homebuilding industry.”
Wilson, like other industry observers, doubts the local moves reflect anything out of the ordinary for K & B.;
“There are a lot of talented people over there, but change is a constant in that organization,” said Steven Vliss, president and CEO of Highpointe Communities in Tustin and a former K & B; executive.
Robert Curran, an analyst with Merrill Lynch, agreed.
“There is quite a bit of cross-fertilization of management in that company just in terms of re-evaluating employees and making transfers,” he said. “But the bottom line is that the company does try to grow aggressively and is very hard-nosed about what it expects out of managers at different levels.”
Market-Share Strategy
K & B; makes no secret of its desire to dominate each market where it operates. Much of that strategy has taken the form of gobbling market share by aggressively buying smaller competitors.
Last year, K & B; took a commanding lead in the Inland Empire by acquiring Lewis Homes, which had a large inventory of land and projects.
In Orange County, the company hasn’t been able to break from the pack, trailing Lennar Corp. in units sold here last year, according to Irvine-based The Meyers Group. And Lennar is expected to complete an acquisition of U.S. Home in May.
Although the purchase won’t impact the local market directly, K & B;’s claim of being the largest homebuilder in the U.S. is being challenged by the merger. Lennar’s pro forma sales figures will climb to 21,600 homes delivered annually, which will still trail K & B;’s national total in 1999 of 22,000. But a combined Lennar and U.S. Home homebuilding operation would have about $4.9 billion in annual revenue, outpacing K & B;’s $3.8 billion total for 1999.
“K & B; builds bare-bones homes, then lets buyers go in and pick and choose upgrades,” said John Burns, The Meyers Group’s senior managing director. “It’s a complete contrast to what Lennar does, which is to deliver a more finished product.”
K & B;’s strategy allows it to target first-time homebuyers and lower-priced markets in Orange County. But local industry professionals point out that it also means the company has to sell more homes to generate revenue comparable to that of other firms’.
“It wouldn’t surprise me to see them make another acquisition or two in the coming year,” said Burns. “But it will have to be something major,they want to expand and do it aggressively.” n
