Newport Beach-based developer and builder TR Co. is wrapping up construction on the first of 24 homes in Costa Mesa, one of a handful of projects to test the housing market’s fledgling turnaround.
The project, called the Grove at Mesa Del Mar, is about half a mile from the OC Fair & Event Center and sits on land that used to house a shopping center. The project is surrounded by older homes.
The first eight homes at the Grove should be done next month, with the rest finishing up later this year, based on how sales go, said Erik Weeks, vice president of acquisitions for TR.
While small compared to housing projects under way in neighboring Irvine, the Grove is notable for Costa Mesa, where homebuilding has dried up in the past few years, thanks to the housing downturn.
“There isn’t much going on (in Costa Mesa),” Weeks said.
There were just 10 single-family housing building permits issued in the city during all of 2009, according to data from the Burbank-based Construction Industry Research Board. In 2008, there were only 14 home permits issued in Costa Mesa.
In comparison, Irvine saw 234 single-family home permits issued last year. Yorba Linda developers were issued 211 permits as homeowners rebuilt from the fires of late 2008.
Besides rebuilding, Yorba Linda also is seeing infill development similar to the Grove project.
Santa Ana-based master developer City Ventures this month announced the acquisition of a 5.8-acre Yorba Linda site near the corner of Prospect Avenue and Imperial Highway. The developer is hoping to have homes built there by 2012.
The site, which used to house a commercial building, can hold up to 123 homes, according to City Ventures. That’s more than four times the density levels seen at nearby single-family home projects in the largely suburban city.
Years Away
The biggest source of homes planned for Costa Mesa—expensive condominium tower projects envisioned for the city’s arts district near South Coast Plaza—appears years from breaking ground, if at all.
The Grove’s backers are honing in on locals who want an affordable single-family home and aren’t interested in waiting six months or longer to close on a foreclosed property, according to Brian Gehl, principal for Costa Mesa-based Diverse Holdings Co., an investor in the project.
The highest-priced home at the Grove is $769,000, according to the development’s Web site. Homes in the first phase run from 2,165 square feet to 2,383 square feet.
Right now, there’s one home in escrow and another sale should be completed soon, according to Weeks.
The project hasn’t been without its difficulties. The developer and its investors bought the site about four years ago, got the city to approve the project at the end of 2006, “and then the market turned soft,” Gehl said.
In late 2007, the builder went back to the city to get a two-year extension on the redevelopment project. The company opted to begin building after feeling comfortable that
its prices would draw buyers, according to Weeks. TR also faces little in the way of competition from new homes in the area, he said.
Construction funding dried up during the financial crisis, so the project’s largely being funded internally, according to Gehl.
That’s one reason the company’s being cautious with its spending at the project.
“We’ll build eight homes at a time, and then see how the market responds,” Gehl said.
Upside
The upside of building now is that construction costs are down 30% from the peak of the market, keeping the project well under budget, according to Gehl.
In normal times, the company would package the development for sale to a larger national builder, but with those builders having issues of their own, TR opted to handle the project itself, according to Weeks.
TR has other land holdings in the Coachella Valley, Las Vegas and Northern California.
Marketing has been limited to local publications but should be ramping up soon with its investors’ backing.
In addition to its real estate investments, Gehl’s Diverse Holdings also owns Tustin-based Media Nation LLC, a company that builds advertising signs and manages the people who twirl them on street corners.
