Orange County’s master planners are doing a lot more planning these days.
The coronavirus has prompted residential developers to up their organizational efforts, from communication with builders and their respective contractors, to increasing and enforcing safety protocols, and managing timelines to ensure communities are delivered on schedule.
For the three largest master-planned communities in OC—Rancho Mission Viejo, Irvine’s Great Park Neighborhoods and Irvine Ranch—an undersupplied market has helped maintain demand for new homes, and, they say, kept building schedules on track.
“We need to be careful about comparing this to the previous recession, because the dynamics are totally different,” said Emile Haddad, chief executive of FivePoint Holdings LLC (NYSE: FPH).
“That was a recession driven by the real estate market, whereas we currently don’t have enough inventory. Demand has been much higher than supply.”
Still, job sites look a lot different these days, with fewer workers, a decline in potential buyers touring sites and nearby models, and of course more masks and hand washing.
Esencia, Rienda
At Rancho Mission Viejo, all builders are still at work, with a focus on the buildout of the neighborhood of Esencia, where just 134 homes of the 2,900 total remain to be sold.
“We are still averaging five to eight sales a week, which we are very pleased with,” said Paul Johnson, executive vice president of community development at RMV, speaking to the Business Journal on April 13.
The company said it is still on track to begin construction on its newest community, Rienda, by the end of the year, or early next.
The first, 670-home phase of Rienda is slated to begin delivering by 2022; the neighborhood will ultimately include 2,700 homes with a cumulative value in the neighborhood of $2 billion.
“We are in constant communication with our homebuilders, and when any teams enter the site they are under strict regulations,” Johnson said.
“Builders are still building, but with increased sensitivity toward separation and cleanliness.”
The privately held company has yet to see any significant impact on sales pricing or pace.
“Orange County has been severely undersupplied in housing, and as long as builders haven’t gotten ahead of themselves with too much construction, then I think pricing will remain the same,” Johnson said.
Homes available at Esencia range from about $500,000 to nearly $1 million.
The company is doing construction of its own with some infrastructure work.
“We are building a large bridge that will connect to Rienda, which is still scheduled to complete this fall,” said Jack Morales, senior vice president of construction.
Work Continues
A new daily duty for FivePoint’s Haddad has included working with different agencies in California to ensure construction is deemed an essential business.
“Local jurisdictions have been making their own call on whether construction is essential, and we have been involved in that effort,” said Haddad, noting that several communities in Northern California, where the company has its Candlestick development in San Francisco, “were pushing for construction to not be essential.”
“We are making the argument that this would have negative impacts on the economy and the lives of residents,” said Haddad, who on April 17 was tapped to Gov. Gavin Newsom’s state task force addressing economic impact of the coronavirus.
In Orange County, construction continues.
There are 26 lines of homes under construction at the Great Park, where nearly 4,100 homes have been built to date. Prices range from around $400,000 to nearly $2 million.
There are 10 builders at the development; its most recently announced neighborhood, Rise, counts Lennar, Pulte and Shea Homes as initial builders.
Land sales to individual homebuilders are still closing, with Haddad noting that “a builder recently closed on a land transaction at the Great Park,” though he was not able to yet share specifics on the deal. Other recent land deals at the development have been in the $5 million an acre range.
Of the 10,500 home sites planned for Great Park Neighborhoods, more than 6,100 had been sold to individual builders as of the start of 2020.
Home sales are ongoing, too, albeit at a slower clip. Tours of most models now require an appointment.
Still, any slowdown isn’t likely to result in a slowdown in home deliveries.
“That goes back to the inventory issue,” Haddad said.
“We don’t have any concern yet on pricing discounts. The biggest issue we are hearing from builders is the lack of financing available for buyers,” said Haddad, whose FivePoint is one of two master-planned developers currently building in Irvine.
Home sales for the other, Newport Beach’s Irvine Co., is largely headed by the company’s in-house builder, Irvine Pacific.
In terms of changing operations and safety issues, “Irvine Pacific and Irvine Co. have enforced strict measures to ensure our job sites are safe as we continue to build our village communities,” the company said in a statement last week.
Healthcare Push
The coronavirus’ mark on business will be more prevalent in another sector of the Great Park Neighborhoods: healthcare.
FivePoint has been a growing advocate for the industry, and has pushed for the sector to be a focal point within the 2,100-acre neighborhood on the former El Toro Marine base. Most notably, it struck a deal with the City of Hope for a $1 billion medical campus, the first phase of which is expected to open next year.
“We have been focusing a lot in the past several years on our healthcare partnerships, and I think you will see us be much busier on our healthcare initiatives” as a result of COVID-19, Haddad said.
“The world is becoming much more sensitized with healthcare, and there are so many opportunities within the industry to meet demand,” such as utilizing virtual technology to diagnose patients, and more options for healthcare delivery services.
“The focus on healthcare innovation has been accelerated.”
Landsea’s National Work: Varied Rules, Creativity Emphasized
Landsea Homes, the Newport Beach-based subsidiary of China-based real estate company Landsea Group, builds across California, as well as New York and Arizona.
Construction regulations differ based on each market.
“All cities have a unique approach, from New York, which has a full ban on sales and construction, to the Bay Area, where construction is technically non-essential, unless the builder has more than 10% below market rate units, which most builders are, including us,” said Chief Operating Officer Mike Forsum.
In Southern California, the company is still able to build, “but under very rigorous protocols.”
This includes no stacking of trades, like a plumber working at a job site at the same time as an electrician; social distancing while building; and stringent cleaning requirements.
“While the building process is not as efficient as before, we are very grateful to cities and agencies that are allowing us to deliver these homes,” Forsum said.
It’s also allowed for some creativity, like home inspections via FaceTime.
Private Appointments
In Landsea’s Southern California communities, which include the 608-home development IronRidge in Lake Forest, the company is still able to meet with prospective buyers via private appointment.
Last year, the company boosted home sales in OC by nearly 70% to 135, its busiest year ever here. That momentum continued into 2020, with the first few months marking “the most robust sales market I’ve ever seen,” Forsum said.
That demand has significantly dropped off in recent weeks for Landsea, the area’s 12th largest homebuilder.
Still, Forsum is optimistic.
“It’s been encouraging to see how the sector has rallied to work together, and figure out ways we can move forward and improve our overall business.”
—Katie Murar
