An upheaval in the Irvine Co.'s home building unit appears to be occurring on the heels of this week's shake-up of the giant land development firm's top management. Although Irvine Co. officials insist that it is business as usual at the company's Irvine Pacific home-building subsidiary, several civil engineers who are consultants to Irvine Pacific said Wednesday that they were taken by surprise this week when company officials instructed them to stop work on six projects planned for more than 1,200 apartments, condominiums and single family homes.
Pat Fuscoe, president of Santa Ana-based Fuscoe Williams Inc., estimated that the six projects in the Irvine community of Westpark and in Upper Peters Canyon, east of Orange, represent about half of Irvine Pacific's active developments. "They are stopping the projects that they feel are in a salable condition," said Fuscoe, who added that such an action by Irvine Pacific is unprecedented in his memory.
Fuscoe said staff level employees at Irvine Pacific said they were told by higher-ups in the Irvine corporation that "the company needed to improve its balance sheet and therefore they should freeze projects that could be converted to cash."
Fuscoe said it is as yet uncertain whether the Irvine Co. wants a "quick fix" for its financial statement to appease its lenders, who may be dismayed by high vacancies in the company's high-rise office buildings, or if it plans to sell Irvine Pacific or permanently cut back the subsidiary's operations. He said workers at Irvine Pacific are "nervous about their jobs."
Gary H. Hunt, senior vice president of the Irvine Co. and a close associate of Irvine Co. chairman and majority owner Donald L. Bren, denied Wednesday that any layoffs or change in operations at Irvine Pacific are in the offing. While refusing to comment on what properties might be up for sale, he said that land sales to outside builders is "nothing that does not happen all the time."
Hunt also denied that the Irvine Co. is selling land at this time to improve its financial position and thus satisfy its lenders. "We don't need to improve our financial statement. Our statement is just fine," he said. He added that he believes speculation has been fed by the recent dramatic organizational changes at the Irvine Co., including the layoff of 240 workers in July. The top level reorganization was capped this week by the elimination of the position of corporate president formerly held by Thomas H. Nielsen.
But Jesse Green, project manager for Adams Streeter Civil Engineers Inc. in Irvine, said he was surprised when Irvine Pacific staff members called him Tuesday and asked him to "stop work" on 112 single-family lots in Upper Peters Canyon in Orange and two other projects containing a total of 530 units in the Westpark community of Irvine. Green said he was asked to "submit a final billing" on the work his firm has done on the projects to date.
Unusual Action for Firm
It is unusual for Irvine Pacific to sell land it has prepared for development, Green said. "Normally they build them out."
Green said he already has been contacted by three potential buyers of the properties who wanted to see the engineering blueprints. He said the land shoppers were three builders: the Newport Beach-based J.M. Peters Co., Costa Mesa-based Standard-Pacific Corp. and the Donald Bren Co., owned by Irvine Co. Chairman Bren.
Fuscoe said he also had received inquiries from the same three builders, although Standard Pacific and J.M. Peters officials denied that they were considering purchasing Irvine Pacific property. Bren Co. officials could not be reached late Wednesday for comment.
A member of a third firm that does consulting work for the Irvine subsidiary, who asked not to be identified because he had been sworn to confidentiality, said "we have been told to stop work and not to do anything more" on two big housing projects. He said that employees at Irvine Pacific seem baffled by the land sales. He said "everybody has a different opinion" about what the sales mean for the future of Irvine Pacific. "Nobody really knows."
Fuscoe, who said he was instructed to stop work on one of three Irvine Pacific projects undertaken by his company, said that the "common thread" linking the projects that have been shelved is that "working drawings are complete and they are ready for the construction phase." Therefore, he said, it is an optimum time for their sale. "Builders can buy them for cash and in 30 to 60 days could have building permits."