Home sales at Lennar Corp.’s Central Park West development in Irvine are being halted until the housing and mortgage markets show signs of recovery. And new construction at the 1,500-home project is being delayed, the Miami-based company said.
The shift at Central Park West, one of the few big projects to go forward amid the downturn, is the latest sign of the tough environment facing builders in Orange County.
Home sales here in September were down by nearly 40% from a year earlier, and builder concessions are knocking down new home prices by up to 20% in some cases.
It’s also a quick change in plans for Lennar,currently the county’s most active builder. Central Park West is the largest mixed-use development being built on former commercial space in Irvine near John Wayne Airport.
Some 40 projects on the board for the Irvine Business Complex would bring nearly 14,000 homes to the area.
The decision to pull back sales efforts was made last month, said Emile Haddad, Lennar’s chief investment officer who works out of Aliso Viejo.
It follows earlier company decisions to push back construction for Lennar’s two other big OC projects,Platinum Triangle’s A-Town in Anaheim and Irvine’s Great Park.
In Anaheim, Lennar last week opted to scale back the second, smaller planned section of its Platinum Triangle plan, called A-Town Stadium, by some 250 homes.
The big difference in the changes at Irvine is that homebuilding is well under way for Central Park West, the 43-acre site that runs along the San Diego (I-405) Freeway and Jamboree Road.
The first 500 homes at the 43-acre development are under construction and should be completed from January to November.
Officials at Lennar’s Aliso Viejo office,where most of the company’s day-to-day operations are run,haven’t determined when sales will resume for these homes.
The sales pullback doesn’t apply for Astoria, the two condominium towers being built on the site by Lennar and Canada’s Intergulf Development Group, officials said. Those towers total about 240 homes.
When the remaining 900 homes at Central Park West break ground, along with 90,000 square feet of planned office space and 19,700 square feet of retail space, depends on market conditions, Haddad said. A more concrete decision could be made by year’s end.
No Discounts
The company is opting to postpone sales rather than offload the homes at steep discounts, which is the norm at other projects going up in the county.
Central Park West’s location and unique design should command premium prices, Haddad said. Three of the six home types being built at the project have starting prices near or above $1 million. Two other home plans start in the $700,000s, according to Irvine-based Hanley Wood Market Intelligence.
“For that location, the last thing we want to do is engage in a sale program that (emphasizes) heavy discounting,” Haddad said.
Sales to date at Central Park West have been minimal. Not including the high-rises, there have been less than a dozen sales at the project through August, according to data from Hanley Wood.
If a builder can hold off sales now, and afford to keep housing inventory on its books, it might prove to be a smart decision. Factoring in discounts, nearly every new-home sale made in the area these days is being made at a loss, said Rich Knowland, formerly the head of OC operations for Lennar, who now is senior vice president for land developer Pacific Terra Holdings LLC.
Lennar’s decision to delay sales is an unusual one for a publicly traded homebuilder. Most builders would prefer to get their projects sold and off their books once construction begins, even if it requires steep price drops.
Company officials note that projects like Central Park West and the Great Park are typically bought through ventures with a number of well-funded private investors, so the pressure to offload product is not as high as with some other builders.
Lennar bought a controlling stake in the former Parker Hannifin Corp. site in Irvine for about $100 million. It began razing old buildings at the site in mid-2005.
Officials have said that interest from prospective buyers at Central Park West has been encouraging, though sales have lagged to date.
Recent troubles in the mortgage market,making it hard for buyers to get jumbo loans of more than $417,000,haven’t helped.
“Hopefully, the next few months will bring some clarity to the mortgage issue,” Haddad said. “The market will recover, but we don’t know what that period is.”
