Too Much to Handle : Irvine Co. Unit Confirms It Plans to Sell 5 Projects

The president of Irvine Co.’s home-building subsidiary acknowledged Thursday that the company is reining in its building activity by selling five of its housing projects.

Roland Osgood, president of Irvine Pacific, said that the company had bitten off more than it could chew and that escalating building costs had pushed housing prices on certain projects out of reach of the entry-level buyers that the company targets.

He said the objective of the land sales is to make the company’s business more manageable and retain its focus on first-time home buyers.

“We are not laying off a person. We are not going out of business,” Osgood said. He also denied reports that the Irvine Co. is seeking an emergency infusion of cash from the home-building subsidiary to beef up its financial statements.

857 Homes Planned

Osgood, however, confirmed reports from consulting engineers who work for Irvine Pacific that they had been instructed earlier this week to halt work on several Irvine Pacific projects nearing the construction phase in Irvine and Orange.

Irvine Pacific is selling two housing projects in Upper Peters Canyon in Orange and three projects in the Westpark community of Irvine that are to include 857 homes on a total of 84 acres.

Irvine Pacific has sold off individual parcels in the past when they did not suit its business plans, but “I can’t remember when we had this many sites (for sale) at one point in time,” said Chick Willette, president of the Irvine Land Management Co. subsidiary of the Irvine Co. He said he already has been contacted by numerous builders who have expressed interest in buying the Upper Peters Canyon and Westpark properties.

The cutback in home-building activity at Irvine Pacific follows a major reorganization of the Irvine Co., which culminated this week in the removal of the position of corporate president formerly held by Thomas H. Nielsen.

Work Force Reduced

In July, the Irvine Co. announced an 18% reduction in its work force and said it was stopping further office construction because of the county’s glut of new office high-rises. At the time Nielsen described the giant land developer as being caught in a cost-profit squeeze and adjusting to an era of slimmer real estate profit margins.

In view of this recent top-level shake-up of management and policy at the Irvine Co., Sanford Goodkin, a national real estate consultant familiar with the Orange County market, said Thursday that he believes Irvine Pacific is selling its projects prematurely in order to raise quick cash and help retire its debts.

Goodkin said that in today’s “dynamic” housing market, it is “very, very unusual” for Irvine Pacific to cut back its building activity. “It is not what I would consider a market move,” he asserted.

Osgood, however, retorted that Irvine Pacific’s decision to sell five of its projects has nothing to do with management changes or any financial problems at the Irvine Co.

He said the development sites being offered for sale were selected because the homes ultimately constructed on them will be priced above $150,000 and thus will be too expensive for first-time home buyers.

After Donald L. Bren acquired majority control of the Irvine Co. in 1983, Osgood said, Irvine Pacific decided to concentrate exclusively on building apartments and housing priced between $75,000 and $125,000 where the “(profit) margins aren’t as great but the risk is lower.” Osgood blamed skyrocketing construction costs for driving up the projected prices of houses beyond $150,000 on the five project sites that Irvine Pacific is selling. “We were getting out of our niche,” he said.

Moreover, Osgood said, Irvine Pacific had taken on more projects than it could handle. He said that while Irvine Pacific’s goal has been to complete 700 to 1,400 for-sale homes and apartments annually, it expects to build 2,000 units in its current fiscal year, even after the cutback.

He said he plans to cut the number of homes that Irvine Pacific completes next fiscal year to about 1,100 units and build 1,400 homes the following year.