Left High and Drywalled : Million-Dollar Homes Adjoin Ghost Town of Houses Left Unfinished in the Recession

Just where did this recession begin? The collapse of the savings and loans? Defense industry cutbacks? Bloated consumer debt?

Bruce and Barbara Darra can show you exactly where it started: 7 feet north of their family room. That’s the property line between their million-dollar home and the ghost town next door. The contrast could not be more stark.

You enter their street through the elaborately posh security gates of Coronado Pointe (“Don’t forget the e-- we paid for it”) and drive past closely grouped, 4,000-square-foot houses built along the top of a ridge.

On the left, the houses look down past two miles of natural hillsides to Aliso Creek Golf Course, South Laguna and the ocean. From houses on the right, you can see virtually the entire Saddleback Valley.

But this strip of scenic luxury ends at the Darras’ house. Next door is a chain-link fence and the first of eight lifeless, weathered hulks of houses, their wooden frames covered with paper and plastic as if wrapped for storage.

For about a year, no workers have appeared, despite buyers who have already signed on the dotted line. The houses remain uncompleted and their futures uncertain, according to their builder, because of the double whammy of a collapsing savings and loan industry and a slumping economy.

More than just the builder is affected.

“This is our dream home, and it’s been a nightmare,” Barbara Darra said.

Not only has the developer left derelict houses next door, the firm has left subcontractors unpaid. They, in turn, have placed liens against the Darras’ and others’ homes. Some subcontractors have refused or been reluctant to correct defects in the houses, such as leaky roofs and missing vents, Barbara Darra said.

Some Coronado Pointe residents have consulted an attorney about filing suit against the Newport Beach-based developer, Custom Living Homes & Communities of Southern California. Those residents, among them Joe Irani, said they no longer have faith in promises and explanations offered by the builder.

Irani said his house is one of many in which marble floors have cracked: “They screwed around with me for a year, a whole year. They sent maybe half a dozen people. . . . In the final analysis, I still have no tile fixed, and I have a gash in the entry hall.”

So far, no suit has been filed.

Custom Living insisted that it is as much a victim as are the home buyers. “It’s not a problem with Custom Living, it’s a problem with the industry,” marketing director Gregg Schaeberle said.

The savings and loan providing construction funds was seized by federal regulators in December, 1989, choking off Custom Living’s money source. No other source has been found, because of a recession-ridden real estate industry, he said.

A New Jersey developer created Custom Living to cash in on the trend toward more expensive houses. Three years ago--when a third of South Orange County’s new houses were in the over-$300,000 bracket and more than three-quarters of them were selling--Custom Living bought the Coronado Pointe land and prepared to build 72 high-end houses.

But when the real estate slump began, expensive developments such as Coronado Pointe suffered first and most. In January, about a fifth of South County’s new houses were in what is now the high-end category--more than $450,000--and only about 7% of them were selling.

Custom Living’s plan was to sell, then build expensive “semi-custom” homes. Buyers would have to select one of five floor plans and one of three exterior styles but could choose from an extensive list of interior options.

“We offer options,” Schaeberle said, “from granite countertops to different styles of kitchen cabinetry--about 47 pages of selections and choices. While they can’t add a window or a door, they can determine the hardware inside the house.”

A New Jersey lender, City Savings, loaned money for construction, but only enough for eight to 10 houses at a time. Money from their sales would pay off the construction loan, then another loan would pay for the next batch of houses.

But like many another shaky savings and loan, City Savings was seized by federal regulators, and loan activity ceased. So did construction.

According to Louis I. Mont, Custom Living’s vice president of finance in New Jersey, purchasers were lined up to buy the houses, but there was no money to complete them. And without sales, the firm could not pay off the existing loan and defaulted.

Now Custom Living is facing the possibility of losing the land through foreclosure, although federal authorities have made no move yet.

“They certainly have the option of beginning foreclosure proceedings,” Mont said. “We have been negotiating for many, many months and had many meetings and lots of discussion. There’s absolutely no movement. We’ve offered many solutions to complete the project and ultimately pay off the obligation.”

At stake, Schaeberle said, are the lush profits the project still promises: “There are no more hilltops. When this land is gone, there won’t be any more opportunity to build an ocean-view custom home. I can always try to sell the lots, but I don’t want to. The most potential is obtained by building it out completely. It is a unique location.”

The Darras, who waited 1 1/2 years to move into Coronado Pointe, agree. “It’s beautiful, a unique area,” Bruce Darra said. “The view--the hills, ocean, canyon, golf course, Catalina--even with all the trouble, I might still have bought this house.”

“We love the house,” said Barbara Darra. “We love our neighbors. We like the development. We like where we are--to have this view and this quiet. We had a deer in the front yard. We’re getting the problems fixed, and eventually, it will be a wonderful area.”

The Darras, however, are skeptical of Custom Living’s claims that the collapse of its lender caused all the problems. Residents had serious complaints before that, they said.

“People have paid for improvements and upgrades that were never delivered, and Custom Living says they can’t refund the money,” Barbara Darra said.

“We ordered an upgraded oven, but they didn’t install a vent. When you turn on the self-cleaning, it fills the house with smoke. There are hundreds of stories like that. But they didn’t pay the subcontractors, so we’re having a hell of a time getting even warranty work like that done.”

She said long-existing street lights were not turned on until this month. The security gate regularly breaks down and remains so for long periods, allowing anyone access to the private street, she said.

Custom Living’s other county projects--Fairway Fifteen and Fairway Ridge, part of Dove Canyon in Trabuco Canyon--got into similar trouble. Dozens of subcontractors’ liens and lawsuits were filed there after the lender, Westinghouse Credit Corp., stopped paying for the project for undisclosed reasons. Laguna Landmark Development of Newport Beach announced Tuesday that it had acquired the Fairway projects after liens were settled.

“We’ll handle this. We’ll get over it,” said Bruce Darra. “What bothers me is the fact that it can happen. I’ve bought 10 or 12 houses in my lifetime, and there’s never been anything like this. It’s like the system doesn’t always work right.”

Ironically, the developer agrees.

“You’d think,” Schaeberle said, that federal regulators “would take a look at a project like this (and resume construction funding). We have purchasers who would love to own these homes. The prices are to the current market ($750,000 to $1.2 million). You’d think the best way out is to fund this to completion. It’s a far cry better than doing nothing.”