Building a Stake for a Turnaround : Real estate: With the purchase of 2,250 lots, Pacific Greystone is positioned to take advantage of a resurgence in property values.

Amid California’s depressed real estate market that has hammered homeowners and financial institutions, a new home builder based in Burbank has gone on a buying spree, hoping to cash in if the state’s housing market rebounds.

Pacific Greystone has been buying lots up and down the state ever since it was formed a year ago with $85 million from the well-known Wall Street investment firm Warburg, Pincus.

In October, Pacific Greystone completed one of the country’s biggest home builder acquisitions in recent years, analysts said, buying the assets of A-M Homes of Santa Barbara from its cash-strapped majority owner, Jennings Group Ltd. of Australia.

Analysts estimated the value of the A-M acquisition between $80 million and $100 million--including the assumption of $40 million in debt. The transaction included more than 1,000 lots for single-family homes, many of them in Orange County. With its previous purchases, Pacific Greystone now owns 2,250 lots and has options on another 1,200 lots in California, in various stages of development.

The A-M purchase symbolizes the state’s troubled housing market. Jeff Meyers, president of the Meyers Group, a Newport Beach real estate consulting firm, said A-M’s assets were acquired at discounts up to 50% from the market peak in 1988. “It was a great purchase” for Pacific Greystone, he said.

In the acquisition, Pacific Greystone added about 100 former A-M employees to its small payroll of 20 workers in Burbank. A-M had its largest division in Newport Beach, and through that and other offices, Pacific Greystone has already begun selling homes, although virtually all of Pacific Greystone’s holdings are currently just lots.

Jack R. Harter, 61, Pacific Greystone’s chairman and president, says his goal is to sell 1,500 houses a year by 1995. “I see a lot of opportunities for California,” he said.

Although Pacific Greystone plans to build homes for first-time buyers, with prices ranging from $150,000 to $250,000, many of the homes it acquired from A-M included properties in luxury planned communities, including developments in Lakewood and the private Coto de Caza area in Orange County.

Because Pacific Greystone bought lots--which make up about 30% of a home’s cost--at a big discount, some analysts believe the company could undercut prices of existing homes. Harter disagreed, saying prices will be dictated by what happens in the California housing market, which he doesn’t see improving until 1994.

Nonetheless, Harter does think this is the right time to buy. “I think we bought at near-bottom,” he said.

Meyers and other industry analysts believe the A-M purchase may be a harbinger of more purchases and investments in California’s troubled residential real estate. And with savings and loans and other traditional sources of development financing all but dried up, more investments are expected to come from private institutions. These new sources include pension funds, insurance companies and investment firms--all of them looking at a big payoff when the real estate market recovers.

Certainly, that’s why Pacific Greystone was formed in October, 1991. Warburg, Pincus approached Harter, a longtime executive with the Los Angeles operation of the home builder M. J. Brock, and asked him to run a new real estate firm. Warburg, Pincus has majority control of Pacific Greystone, but Harter has a small stake.

Currently, most of Pacific Greystone’s Southern California properties are in Orange County and the Inland Empire region. It also has properties in northern San Diego County and in the East Bay region near San Francisco. Pacific Greystone focuses on single-family homes in vacant or redevelopment sites in urban areas.

With the purchase of A-M’s assets, Pacific Greystone bought “good properties in good areas,” said Randall Lewis, co-owner of Lewis Homes, a leading private home builder based in Upland.

Warburg, Pincus has put up all the capital it plans to in the Pacific Greystone venture. Right now, only a couple of hundred of Pacific Greystone’s lots are in construction, which means the firm will have to raise development funds--a task Harter admits will be difficult given the demise of many S&Ls; and the reluctance of others.

“We’re going to have to find other sources of money for development,” Harter said.

But most real estate executives think the firm will find additional financing. “My guess is they will be able to get financing because of their backing,” Lewis said. Warburg, Pincus reportedly has more than $2 billion in its investment portfolio.

Harter said Pacific Greystone doesn’t plan on buying any more lots in the near future, hoping instead to focus on getting its properties ready for the day the California market turns around.