Lyon Maneuvers on Familiar Ground With New Real Estate Acquisition
It comes as no surprise to those who know him that Newport Beach builder William Lyon has struck a deal to pay $325 million for the far-ranging real estate enterprises of Pacific Lighting Corp.
At a time when many prepare for retirement, the 64-year-old Lyon--apparently restless after bowing out of AirCal, the airline that had taken much of his time and effort for the past few years--has been on the prowl for something to add to his already-formidable holdings.
Lyon, whose real estate ventures reportedly have been extremely profitable and who managed to turn a $15-million profit last year from what had been a money-losing regional airline, had both time and cash available for a new business foray. And, friends and competitors say, he is not a man who likes to sit on his laurels.
Real Estate a Challenge
Dick Randall, president of the Lyon Co., said that what propels Lyon into new ventures is “not an insatiable appetite for money but the challenge of doing it. “
More and more, he seems to be finding that challenge in real estate.
Peter Ochs, formerly president of Lyon Co. and now chairman of the Fieldstone building firm, said he believes it was “a timely move” for Lyon to sell AirCal to American Airlines. “The business he knows best and is most comfortable and experienced with is home building in California and the Southwest.”
Real estate industry experts say that, while Lyon will be acquiring a valuable management team and well-known brand name in Pacific Lighting’s Presley Cos. subsidiary, they believe he was mainly interested in the development potential of the thousands of acres of land the company owns.
According to Kenneth Leventhal & Co., an accounting firm that was the auditor for Pacific Lighting’s real estate group, Presley has more than 50 development projects under way in California, New Mexico and Arizona.
Additionally, other Pacific Lighting real estate units that Lyon purchased through Senior Corp., a Miami-based real estate firm of which he is half-owner, have residential, commercial and industrial land and buildings in California and throughout Hawaii.
One reason Lyon was looking when Los Angeles-based Pacific Lighting announced it wanted to sell its real estate operations was that he had time on his hands.
Lyon had been AirCal’s hands-on chairman since 1982, successfully guiding the airline through the financial turbulence caused by half a decade of fierce fare wars, the air traffic controllers strike and soaring fuel prices.
So, when he and fellow developer George Argyros sold the regional carrier, which they had purchased for just $61.5 million in 1981, it fetched a price of $225 million and earned each of the partners a $15-million profit.
That profit is just a small part of the fortune Lyon had available to pursue the Pacific Lighting real estate companies. In fact, Lyon insists he is not using the AirCal profits in this deal.
Sources close to Lyon say that business has been booming at Senior Corp., a commercial real estate development and management firm that Lyon and longtime friend James D. Harper Jr. bought in 1984. Booming so much, the sources said, that within a year of the acquisition, the two men had recouped the $141 million they paid for the company.
Nor is business slow on Lyon’s home turf.
The Newport Beach-based William Lyon Co., of which Lyon owns more than 90%, reported sales of $692 million last year--making it the nation’s eighth-largest home builder, according to a survey by Professional Builder Magazine.
Sales were boosted in part by the Lyon Co.’s acquisition last year of Golden West Homes, a Santa Ana-based manufacturer of mobile homes.
2,300 Homes Sold in 1986
Like most home builders, for the last several years Lyon has been riding high as falling mortgage rates boosted an already-strong consumer demand for housing--especially for the entry-level and mid-priced homes that have been the Lyon Co.’s trademark.
If the transaction with Pacific Lighting closes as expected, within a month Lyon will personally take ownership of the Irvine-based Presley Cos., a builder that sold about 2,300 homes with a sales value of about $250 million in 1986.
In addition, Senior Corp. will buy four other Pacific Lighting companies: Blackfield Hawaii Corp., a Honolulu-based developer of single-family homes, condominiums, office buildings and shopping centers, and three Santa Ana-based firms, Dunn Properties, a commercial-industrial developer, Fredricks Development Corp., which builds and sells apartment complexes, and Ankirk Co., a real estate management firm.
Pacific Lighting said that in 1986 its combined real estate companies earned $24 million.
Lyon’s acquisition of the Presley Cos. will make him undisputedly the region’s leading residential builder. But making money has never been Lyon’s sole motivation for doing things.
An active pilot, retired Air Force brigadier general, big game hunter, collector of classic automobiles and philanthropist, Lyon--”the General” to almost everyone who has ever dealt with him--”enjoys what he is doing and thrives on it,” his wife, Willa Dean Lyon, said in a telephone interview.
Lyon’s friends speak of his attachment to his family, courtliness, dry wit and affection for his workers--noting that he will scout out the lowliest laborer on a construction job site to inquire about the welfare of his wife and children.
But Lyon can seem curt and testy to outsiders, especially journalists--a trait that his wife says reflects his desire for privacy and his irritation with inaccuracies he has spotted in stories published about him and his businesses. He refused to be interviewed for this article.
Lyon has nurtured a love affair with flying since he was a teen-ager growing up in West Los Angeles. He got a pilot’s license at age 16, flew for the military in both World War II and during the Korean War and worked as a commercial pilot between his stints in the service.
And the sale of AirCal did not end Lyon’s fascination with aviation. He keeps a Falcon 50 jet at John Wayne Airport for business and fun, recently piloting it to Africa on a hunting safari, his wife said.
Besides flying, Lyon takes pleasure in classic cars. Since his wife surprised him with a Duesenberg on his 60th birthday, he has acquired many eye-catching automobiles, including 82 from the famous Harrah’s automobile collection that he bought last year for $28.8 million, doubling the value of his own collection.
He currently is building a new home for himself, his wife and their 13-year-old son in the private equestrian community of Coto de Caza in southeast Orange County. The property will include a mammoth garage for the car collection, Randall, the Lyon Co. president, said.
Lyon also is a philanthropist, giving time and financial support to a myriad of organizations. As chairman of the Orangewood Children’s Foundation, he is described as the driving force behind a campaign that raised $8 million to build a new emergency shelter operated by Orange County for abused and neglected children.
In business, to which his wife says he devotes 10 to 12 hours a day, Lyon is described as an entrepreneur who can smell a good real estate deal and as a no-nonsense chief executive who keeps staff meetings brief and to the point and surrounds himself with talented managers to whom he can comfortably delegate responsibility.
Randall said Lyon’s main strength is knowing how to manage people and inspire loyalty. It is typical, Randall said, that Lyon has decided to keep the all of the Presley Cos. managers--a team that is highly rated in the industry--and that he plans to give them an equity interest in the company.
Similarly, Randall said, at the Lyon Co. “we have five vice presidents and all of them own a small piece of the company.” A piece of the action, Randall said, gives executives an incentive to work harder.
Another of Lyon’s management rules, Randall said, is to keep his staff lean.
He said the Lyon Co. has 210 employees, including 11 managers. “We subcontract everything we can,” he said, including architectural and legal services and full construction crews. He said that only two Lyon employees are assigned to a construction job--a superintendent and his assistant.
Already Making an Impact
Randall, whose office is in San Jose because that is where he prefers to live, said Lyon gives his managers “tremendous responsibilities and the authority that goes with it.”
Lyon, he said, sees his role as that of trouble-shooter. “Where he is needed is where he is at,” he said. Now, after spending several years guiding AirCal, Lyon is back full-time in the world of real estate and, with the Pacific Lighting acquisitions, already is making a big splash.
Ken Agid, a Newport Beach-based real estate marketing analyst, said that, because of a rising political tide to curb development throughout Southern California, land already zoned for development has become a dear commodity. “Builders are paying a premium for any land they can get right now,” Agid said.
“What Bill Lyon did is, instead of buying land retail, he bought it on a wholesale basis” by acquiring the Pacific Lighting subsidiaries.
Always tuned to changes in the marketplace, Lyon was one of the first home builders during the early 1980s to spend his company’s own money to provide below-market mortgage rates when soaring rates were putting houses beyond the reach of prospective buyers.
