Register real estate reporter Jeff Collins reports …
SunCal Cos., an Irvine-based land developer that traditionally sold its lots to homebuilders, has decided to launch a homebuilding unit of its own that will sell finished houses directly to consumers. The newly formed Mosaic Homes division will build homes on developed sites at approximately 20 locations in Orange County, Los Angeles, the Inland Empire and in Northern California, said SunCal spokesman Joe Aguirre. The new unit will be headed by Jay Moss, the former Southern California regional manager for KB Homes.
“We have long been a master developer, selling residential lots that have been entitled and graded to homebuilder partners, and they build the homes,” Aguirre said. “The company believes it’s an excellent time to start a homebuilder.”
Aguirre said SunCal will continue to sell home sites to builders like Lennar, Standard Pacific and others. But Mosaic Homes residences likely will rise in subdivisions alongside the those of other builders. SunCal has yet to decide when to start construction on its own homes.
Aguirre noted that as a private company, SunCal will have advantages that publicly traded homebuilders don’t have. As builder profits turned into multi-million-dollar losses, public companies have cut back on construction, cut costs, laid off staff and abandoned land-purchases, forfeiting millions in deposits.
“We’re less impacted by short-term market cycles,” he said, noting that private companies are more free to focus on long-term plans.
SunCal currently has more than 70 projects in various stages of development in California, Nevada, Arizona and New Mexico. Those projects contain about 250,000 home sites. Aguirre said that the company is expanding, recently opening offices in Texas, Florida and Washington, D.C.SunCal also announced that it’s abandoning “Mission Lakes,” a major development in the Kern County town of Shafter, after a dispute between Shafter and Bakersfield threatened to cut off the project’s water supply, Aguirre said.
“We believe it would be financially imprudent for us to continue with the project considering the uncertainty of water,” a SunCal statement said.
SunCal also has stopped paying for the land the project was to be built on, allowing ownership to revert back to Lennar Corp., which sold the property to SunCal. The Mission Lakes development consisted of 11,000 homes on 515 acres, according to the Bakersfield Californian. SunCal now is defaulting on a $74.3 million purchase loan from Lennar, the paper said.
does anybody know if any companies forfeited their land deals and whether SunCal, as a result, is now owning properties they wouldn’t own otherwise?
It just doesn’t make sense to me that they start building now. To state that they as a private company are ““less impacted by short-term market cycles,” doesn’t make that much sense either. That is unless you have dollars to burn for.
Good bye yellow brick road.
Well this will be my weirdest post yet and while not my last I will be breaking my blog addiction.
Once one establishes a habit it is incredibly hard to break. ROC(KEN) other names I know you know this.
So while we may know intellectually what to do , bringing the emotional side ( the years of contrary training) into line requires lots of practice. The obvious examples are quitting smoking or losing weight. Easy to see one should do it and hard to do.
Not so many years ago our forefathers were fighting Indians, or our forefathers were fighting white men, or more likely they were not in America at all.
Culture has always changed for 10’s of thousands of years, but the rate of change now is so much faster. Everyone “knows” that but it is hard to emotionally accept.
Computers and machines now do much of our work. But those of us who have given it any thought and are in the computing business could realize that 99%+ of the work today could be done by computers or machines (some would call these robots, but machines in general). And this all could be done in a sustainable fashion.
The titans of our industry today (the microsofts, the apples, the oracles, the amgens etc
and the hedge funds) claim to be moving us in this direction at break neck speed. In fact they are the source of resistance to this inevitable path.
So life today is not a “productive” one but a game of who gets paid and who gets laid.
This would be OK but it has tragic consequences for future generations because it is destroying the “environmental” infrastructure. Repairing this could be a far greater problem than that of building a machine to flip burgers, sew sneakers, or pick tomatoes.
So while I emotionally enjoy this game (or at least play it) I have decided to quit my addiction. My work now will be to make the obvious obvious. The way to do this is not so obvious. I will check in every week or so and then every month or so.
I think this blog has helped some people to become more comfortable with the reality
of realty, but it has had to contend with reality of OC politics. That is, the OC is run by short sighted business people.
If you look for me you will find me somewhere in LA in an apartment promoting the next generation of business. Hopefully we will not be going back to the gold standard.
Oh yeah they will do well now that they have former KrappyHomes people behind their home sales. Ask SunCal when and who originally started the Marblehead project? No more land right? Funny there wasn’t anymore land when they took over the Marblehead project and that was during the last bust. Good for them though. I just hope they hired the right people from KB and not the ones that are drunk from the kool aid. Otherwise we will have a third developer for Marblehead in the last 20 years.
Oh I can see no problems on the horizon with this plan, another real men of genius episode for sure.
From what I understand it is on land that builders dropped out of or was never purchased. Everything is ready to go, they just need to start building. I can only assume the cost of the land overtime is too much to not take a chance on actually constructing homes. The hope I believe is that the market will turn around come next spring or summer. If they take their time building than they shouldnt have too much of a problem.
The rumor is that the concept of starting a home builder buys Suncal a year or two before its large financing source (Lehman) has to take over the assets. It takes 12-24 months to get the architecture done and plans approved. It is a good story to tell Lehman however, it doesn’t matter the builder, the market is bad and not going to get better for some time.
Does anyone remember the last residential slowdown was from 1991 to 1998 (about 7 years). So we will be lucky if this one is over by 2010.
Suncal paid top dollar for most of its land holdings (220,000 lots) and may be underwater by hundreds of millions.
Well, I know of one development where the plans are already approved. They just have to pull permits.
The house that SunCal built
It appears that while historically SunCal has opted to largely stay out of the homebuilding business, they are throwing their hat into the already pretty saturated homebuilding biz in this soft real estate market. From the Orange County Business Jo…
Suncal’s management is just trying to protect their large salaries. Would you confess to Lehman that you overpaid for the asset and you need to sit and wait for the market to return? Starting a homebuilding operations allows Suncal’s management to collect 12 months salary and potential severance before Lehman fires them for lack of performance. This also allows Suncal’s managemnt time to setup a new land fund to purchase the distressed asset from Lehman. Lehman is getting screwed.