Newhall to Sell Lots, Forgo Building of Homes : Valencia: Developer of master-planned community to follow trend pioneered by Irvine Co. in Orange County.

Newhall Land & Farming Co., developer of the master-planned community of Valencia in the Santa Clarita Valley, will leave the area’s home-building to outside merchants and concentrate instead on selling lots, following a trend begun in the mid-1980s by the likes of Irvine Co. in Orange County.

Newhall’s decision to parcel off the Valencia development will end more than 20 years of home manufacturing for the firm, and was based on a belief that companies specializing in residential construction would bring in more diversity of design, said spokeswoman Marlee Lauffer.

“We are controlling the general architectural themes of the community,” Lauffer said. “But each builder can bring special touches that can help make the community unique.”

Industry executives said few developers of master-planned communities still build homes themselves and that the move would improve Newhall’s chances of getting financing during a time when bankers are tight with credit.

Newhall, which owns the 37,300-acre parcel that it has developed into Valencia, has periodically sold completed lots to builders to avoid having to carry an inventory of unsold houses when the real-estate market weakened.

Such was the case in 1992, when Newhall’s profit tumbled 43% from the prior year, to $17.2 million, and its revenue fell 15%, to $128.2 million. (Newhall also develops commercial properties in Valencia.)

“There is no way of sharing the bonding or financial burden if you’re doing it yourself,” said Dee Boysen, executive officer of the Building Industry Assn., a trade group based in Calabasas. “To the extent that you can have someone else involved in the project, you can have someone else share the financial burden.”

The combined cost of building the infrastructure and the homes, Boysen said, “is really beyond the reach of most local builders.”

Ironically, Irvine Co., developer of the giant master-planned community of the same name in Orange County, this year is bucking the trend it developed.

In the mid-1980s, Irvine, which owns about a sixth of Orange County, decided to “focus more on our primary business, which was as a community developer” and leave construction to the home builders, spokeswoman Dawn McCormick said.

Now, however, Irvine has entered a fee-builder program with California Pacific Homes in which California Pacific, which is owned by Irvine Co. Chairman Donald Bren, will be paid to build homes in Irvine, McCormick said.

The rationale, McCormick said, is that the credit crunch has hit Orange County developers to the point where it is easier for Irvine to build both the homes and the infrastructure itself.

“We have access to financing whereas some of these other developers don’t,” McCormick said.

Newhall Land & Farming began selling lots to home builders in Valencia in 1967, and then started to construct houses itself in the early 1970s, Lauffer said. By the middle of that decade, the company was the predominant builder in its community.

It wasn’t until the late 1980s that a combination of the Southern California real estate recession and the company’s own change of heart about construction initiated a decline in Newhall’s home-building.

In 1989, Newhall’s building and selling of new houses peaked at 574 homes, Lauffer said, compared to only 88 homes last year. Newhall, however, continues to sell land for residential development, with 399 entitled and ready-to-build residential lots sold to merchant builders in 1992.

Over the next several months Newhall will complete an undetermined number of homes in its Northbridge community of Valencia, Lauffer said, but no further homes are being considered beyond the end of the year.

“Our strengths really are in community planning, setting up the community, implementing the landscaping and putting together the paseos,” or walkways that connect the neighborhoods, Lauffer said.

Home builders currently involved in construction in Valencia include Pardee, Warmington Homes, Bramalea California Inc. and M. J. Brock and Sons Inc.