THE NEW PIONEERS : Not Quite According to Master Plans : Downturn in Home, Business Market Forced Many Developers to Rethink Ideas for the Foothills Communities

Near the southern end of this small community in the foothills of South County, a 100-acre parcel of partially graded land sits dormant, waiting for the industrial development that never came.

Just to the west, in the neighboring, unincorporated community of Foothill Ranch, 130 acres initially improved for commercial use are also vacant.

And down the road in Rancho Santa Margarita, a steadily growing village that its planners say will one day emerge as the urban center of South County, more than two-thirds of the 450 acres of land in the business park have not been sold.

These parcels of unsold, mostly undeveloped industrial land in the young communities of the foothills region represent one of the most visible signs here of the prolonged recession that crippled the Southern California construction industry and threw at least a temporary wrench into the ambitious plans of the area’s developers.

Baldwin Co. President Al Baldwin, whose firm is the master developer of Portola Hills, said plans to develop an industrial park and neighborhood commercial center in the now-empty 100 acres on Glenn Ranch Road have existed since the community first opened in 1985. When the recession hit, though, the few inquiries he had received simply dried up.

“And right now, there are just no users willing to buy those parcels,” Baldwin said. “There’s been no interest at all.”

And even with encouraging signals that the worst may be past--including recent figures showing that Orange County home sales in 1993 were substantially ahead of 1992--the downturn’s devastating effects on the developers and builders working in the region remain clear.

“In the late ‘80s, the master developers of many of these new communities were in the middle of opening their doors and putting together a strategy for the next five to seven years,” said Irvine development consultant Kenneth Agid.

“Suddenly,” he said, “there was this tremendous interruption, and it affected everything from the timing of their plans to ultimately, the survival of many of the builders.”

In its wake, developers like the William Lyon Co. of Newport Beach, the master developer of Robinson Ranch, have undergone painful restructurings.

Many others have had to cut employees and learn to operate more efficiently including the Santa Margarita Co., the master planner behind Rancho Santa Margarita that is run by Anthony Moiso, which laid off nearly a third of its employees between 1990 and 1993.

In the region’s unincorporated, master-planned communities, several of which opened in the heady days of the late 1980s, the recession’s bite was seen most dramatically in a sudden slowing of the furious pace of development.

“All the developers had to postpone their plans because of the lack of money,” said Sanford Goodkin of Goodkin and Associates, a real estate consulting firm in San Diego. “There was hardly any money around for the improvement of land, and construction financing just shut down completely.

“While it would have been very difficult for anything to be hit harder than residential home sales, all the demand also dried up for anything commercial and industrial,” Goodkin said.

For instance, if everything had gone according to the original plans for Rancho Santa Margarita--and every acre of it is planned--the community by the turn of the century was expected to be home to 50,000 residents and support 26,000 jobs. Built on 5,000 acres just east of Mission Viejo, the village was designed to allow residents to live, work and play within its bounds.

With six years to go toward that self-imposed but much-publicized deadline set by the master planners, nearly 21,000 people now make their homes in Rancho Santa Margarita. And the Santa Margarita Co.’s official goal for its population has now been revised to 40,000, which officials say is more realistic after plans for high-rise apartment buildings in the town’s center were scrapped.

More significantly, though, for Rancho Santa Margarita residents hoping to find work within the community, the recession pushed back plans for job creation. Even with Loral Aeronutronic of Newport Beach moving its aerospace division and 1,300 employees this spring to a building vacated two years ago by Hughes Aircraft, the community’s work force will stand at just about 5,000.

Company president Moiso--whose family has owned land in the region since the late 19th Century--declined to be interviewed for this story, referring questions to his senior vice president, Donald E. Moe.

Moe said land sales for factories, warehouses and corporate office space in the vast business park, which lies near the center point of Rancho Santa Margarita’s Y-shaped design, have been flat for four years.

From 1990 to 1993, the company sold 20 acres of commercial land, or about half the amount sold in 1989 alone, officials said.

“The recession just shut down business property land sales across the board,” Moe said. “When companies are trying so hard just to survive, they’re obviously not expanding; they’re not buying new corporate headquarters or even thinking about moving.”

As they did virtually across the board, home sales also slipped in Rancho Santa Margarita during the recession, falling from a high of 1,175 in 1989 to 702 in 1993.

But capitalizing on its market niche as a center of lower-priced homes, often for first-time buyers, the community still managed to rank first in the county for new home sales for both 1992 and 1993, according to the Research Network, a real estate research firm in Laguna Hills.

Another bright spot has been the pace of deals in the Town Center, a business, retail and entertainment hub that will become Rancho Santa Margarita’s downtown.

Nine acres have been sold to Target, and Edwards Cinema has signed a letter of intent to build a multiscreen theater complex. And the first phase of the Town Center, a 162,000-square-foot shopping area known as Plaza Antonio, is completed and 95% is leased, according to company officials.

In Foothill Ranch, too, the retail picture has been relatively rosy recently, helped along by the opening last October of the first phase of the Foothill tollway, a 30-mile roadway that at completion will connect San Clemente and Irvine.

Nearly 900,000 square feet of retail space is now under construction at Foothill Ranch Towne Centre, including such large stores as Mervyn’s, Wal-Mart and HomeBase. A 24-screen theater project is also in the works for the center, which will ultimately include 1.3 million square feet and is expected to be completed in 1995, said a spokesman for Hon Development.

Of the 142 acres originally intended for industrial use, though, only 12 have been sold so far--and all in the past 18 months--said Dougall Agan, vice president of marketing.

“Obviously, there’s hasn’t been a huge demand for that type of property since the community opened in 1991, but we’re relatively pleased with it right now,” Agan said.

In nearby Coto de Caza, a gated residential community that borders Rancho Santa Margarita, the changing real estate realities of the 1990s have meant plans for a greater mix of homes, including some starting in the low $200,000 range.

Despite the slump, the community’s developers late last year unveiled plans for the southern half of Coto de Caza, including 4,000 new homes and a second golf course, a move that was cited by industry analysts as an early signal of a potential residential real estate turnaround in Orange County.

The developers--a partnership of Chevron Land Co. and Arvida/JMB Partners--also unveiled plans for about 1,200 attached and detached single-family homes that will be built just outside the gates and priced from $120,000 to $250,000. The lower-priced neighborhood, still unnamed, will satisfy the affordable housing guidelines required by the county when plans for Coto were first processed.

And in the aftermath of the recession, Coto’s marketing campaigns will no longer cast the community as quite so exclusive or expensive, geared only toward those able to afford its luxury, custom homes, many on huge lots with equestrian easements.

“Where Coto was marketed before as exclusive, high-end, horse property, we want to position the community now to target a broad range of buyers, all the way from young families to older couples,” said Tom Martin, vice president of marketing for the Coto de Caza Ltd.

With housing prices throughout Orange County down about 20% from the market’s peak, the company wants “to make it clear that living here is a reality now for many who might not have been able to afford it before,” Martin said.

But both Coto de Caza and Rancho Santa Margarita were more fortunate than Dove Canyon, which was hit with plummeting housing prices just after it opened its doors.

For example, the first homes in Dove Canyon, a small, gated community that borders the Cleveland National Forest and will eventually include 1,300 units, were completed and occupied in early 1989.

Over the next few years, the homeowners watched their real estate values plummet an average of $50,000. Building slowed, then virtually stopped, as developers holding the land parcels were forced to sell out to others.

But the pace of building--and sales--has quickened again, with nine developments now under construction.

Pamela Smith, vice president for marketing of the Dove Canyon Co., said that because of the real estate slump, officials also have decided against including any custom homes in Dove Canyon. The developers recently sold off a parcel of lots originally intended for that purpose to a builder who plans to put up tract housing, she said.