Company at Crossroads With New Chief in Charge
In the past 13 years, Peter M. Ochs has constructed Southern California’s largest privately owned home building firm--the Fieldstone Group of Cos.
Since its formation, the Newport Beach home builder has sold more than 12,500 homes throughout California, generating a total of nearly $2.5 billion in revenue.
But Southern California real estate watchers say the building concern is at a turning point. Although Fieldstone will surely do well after Ochs leaves the helm in a few months for an extended sabbatical in Spain, it is unclear how much success the company will have in the increasingly competitive regional home building market.
A well-respected company that Ochs said he operates on Christian principles, Fieldstone must continue to find steady sources of building capital and continue to innovate if it wants to recapture the influential industry position it held in the mid-1980s, real estate watchers said.
“Fieldstone needs to go back and look at what it did at the beginning, when it was innovative and creative,” said Kenneth W. Agid, a real estate consultant in Irvine, who said the company used to be more of a leader in home design and promotion.
“It’s like they’ve gone from being I. Magnin to being a Ross Dress for Less. They shouldn’t just look at the bottom line, the company should reassume its leadership position,” he said.
Now, Keith Johnson, who owns a minority stake in Fieldstone Co. and a 23% stake in the two affiliated companies--Fieldstone Communities Inc. and Cypress Homes--will be the leader to decide the company’s fate.
“It’s a great challenge and opportunity for Keith--it’s like following a baseball coach who won 20 World Series,” said Randall Lewis, executive vice president with Lewis Homes of Upland, which builds homes priced around $200,000 in Orange and Riverside counties. “But Keith is extremely capable and will leave his imprint on the company.”
Johnson, a wiry, 6-foot-4 executive with a passion for duck-hunting and fly-fishing, said that he plans to steer the company in the same direction as its chief executive officer, fine-tuning as he goes.
“Only the future will tell whether our decisions are right or not, and that is part of what’s fun about this industry,” Johnson said.
And these days, the industry is pondering Fieldstone’s future. Several experts suggest that Fieldstone is either a prime acquisition target for a larger, perhaps out-of-state builder, or a good candidate to become a publicly traded company, though Ochs and Johnson say there are no plans for a public offering of stock.
When the market for real estate fell in the late 1980s, Fieldstone was saddled with large amounts of land it couldn’t sell. The company is still trying to restructure loans on two troubled projects.
In July, 1993, Fieldstone made headlines when it defaulted on a $150-million loan for a 2,300-acre community in northern San Diego County called La Costa, which is not connected to the famed spa of same name. Fieldstone purchased the property in a joint venture with a Canadian builder at the height of the market in 1988, and planned to build 3,600 homes on the site. Only a handful have been built.
Company documents show the La Costa project is now worth about $75 million. Ochs said Fieldstone is currently working with lenders to restructure the debt and begin building again.
Another formerly troubled project was called the Vistas, a 584-acre residential development in Rancho Santa Margarita.
Fieldstone went into default on several construction loans for the Vistas project, but has restructured that debt with $140 million in construction loans obtained in August from Bank of America and First Interstate, according to Ochs.
The company has built and sold only about half of the 1,800 homes planned for the project. But it plans to build more with the recent construction loans.
And at least one banker said that Fieldstone is a good long-term bet.
“I don’t think there’s a real estate developer that hasn’t suffered in this market,” said Kurt Kraushaar, manager of the real estate department for Union Bank in Irvine, which has about $50 million in loans outstanding to Fieldstone.
“But they are very well-regarded. Fieldstone is a company that Union Bank is going to continue to work with. They will be a force in this market,” he said.
Last year, Fieldstone built 1,084 homes and condos for an average price of $309,000, making it the largest private home builder in Southern California--second only to Kaufman & Broad Home Corp., the publicly traded Los Angeles firm that built 2,642 homes. But Fieldstone said it expects its revenues to decline this year to $235 million from $254 million in 1993.
Ochs is a former president and Johnson used to head the San Diego division of the William Lyon Co. in Newport Beach, once Southern California’s largest home builder. Ochs left Lyon in 1981, in the middle of an earlier housing slump, to form Fieldstone Co. with Johnson.
Their company built 89 homes that first year on its San Diego holdings, which had room for 2,000 homes, posting sales of $11 million. By 1985, the company had sold 994 homes and had expanded into Orange, Los Angeles and Riverside counties.
Though known for its management strengths, sound business principles and support of employees, in recent years few in the industry have considered Fieldstone a leader in home design. Ochs has said he leaves experimentation to others and concentrates on delivering a well-built home at a competitive price. But Fieldstone is not considered an entry-level builder like Kaufman & Broad.
“It’s not the flashiest or the boxiest product, it’s somewhere in the middle,” said Lewis, of Lewis homes. “Fieldstone’s product is like Kellogg’s cereal, it’s not focaccia and it’s not sushi.”
The average Fieldstone house is priced about $50,000 higher than the average of $250,000 paid for a typical home in Orange County, although many buyers and real estate watchers say that Fieldstone homes still provide a good housing value.
But homeowners are not always happy with Fieldstone. In 1991, the San Diego district attorney’s office launched a preliminary investigation into a local housing project where buyers complained of unfair pricing practices by Fieldstone. No action was ever taken, according to Cliff Dobrin, assistant chief of the fraud division in San Diego.
Buyers complained that Fieldstone agents told them to buy soon because home prices were going up, when in fact, Fieldstone lowered prices on later homes in projects, reducing the values of their homes. Fieldstone argued that its prices were reduced because of the real estate downturn.
Angry homeowners picketed Fieldstone developments and a group of San Diego homeowners filed a lawsuit against Fieldstone that year. The suit was later settled through arbitration.
Fieldstone has also tangled with environmental groups, especially after Ochs’ very public efforts in 1988 to defeat Measure A, a countywide, slow-growth initiative. The building industry put up most of the $1.8 million raised to defeat the measure.
“I certainly don’t think too highly of Fieldstone,” said Craig Beneville, an activist with Earth First! in Orange County. “They are just making profits off the plunder of the Earth.”
But despite the foes Fieldstone has made through the years, real estate experts single out the company as a competitor to be reckoned with--an ethical builder in an industry not always known for its ethics, with a reputation for quality leaders and good timing.
John Shumway, president of Market Profiles, a Costa Mesa real estate consulting firm that works with many builders, suggested that Fieldstone will prosper into the next century because of its good reputation and savvy management.
“If they don’t, it would shake my faith in the whole industry,” he said.
However, Roland F. Osgood, a president with Kaufman & Broad’s home building division in Newport Beach, said Johnson and Fieldstone may be in for some rough going.
“They started that company in 1981 and they couldn’t have hit the market any better. They had a good run,” he said. “They’re good people, but I think they’re going to have a tough time. They are not real aggressive in the land market right now, and their competitors are very aggressive.”
Larry Webb, president of the south coast division of Greystone Homes in Newport Beach, said that Fieldstone may be wise to sit back and wait, especially as land prices are dramatically increasing and the company has sufficient land holdings to build on for the next few years.
“They know what they are doing,” he said.
Fieldstone Group
* Founded: 1981, by Peter M. Ochs and Keith A. Johnson * Business: Home design and construction * Headquarters: Newport Beach * 1993 sales: $84.3 million * 1994 sales: $85 million for first six months * Current projects: 19 in Southern California, including 11 in Orange County. Recently introduced “home-fitting” program, giving buyers various custom options. * Philanthropy: Fieldstone Foundation contributes to community, educational, cultural, humanitarian and Christian organizations and programs. It also maintains the Fieldstone Collection, a group of 250 early California paintings. Source: Fieldstone Group of Cos.; Researched by JANICE L. JONES / Los Angeles Times
Fieldstone’s Current Projects
Fieldstone Group of Cos., comprising three separate firms, is Southern California’s second-largest builder. It has 19 residential developments in progress, including 11 in Orange county. An overview of the projects and locations:
RANCHO SANTA MARGARITA A. Cabo Vista * Homes planned: 204, priced in low $100,000s * Square footage: 1,158-1,498
B. Cresta Vista * Homes planned: 210, priced in high $100,000s * Square footage: 1,635-1,983
C. Buena Vista * Homes planned: 228, priced in low $200,000s * Square footage: 1,847-2,156
D. Mira Vista * Homes planned: 173, priced in mid-$200,000s * Square footage: 2,217-2,610
MISSION VIEJO E. Fieldstone Expressions * Homes planned: 108, priced in low $200,000s * Square footage: 1,677-2,005
F. Fieldstone Seasons * Homes planned: 77, priced in mid-$200,000s * Square footage: 1,920-2,255
CYPRESS G. Cypress Gallery * Homes planned: 198, priced in low $300,000s * Square footage: 2,424-2,900
H. Cypress Collections * Homes planned: 269, priced in high $300,000s * Square footage: 2,860-3,495
OTHER PROJECTS I. Concordia, Irvine * Homes planned: 152, priced in mid-$400,000s * Square footage: 2,418-3,185
J. Fieldstone Arbor, Fullerton * Homes planned: 84, priced in high $200,000s * Square footage: 2,505-3,000
K. Fieldstone Legends, Placentia * Homes planned: 142, priced in mid-$200,000s * Square footage: 2,150-2,861
Outside Orange County
Fieldstone plans involve more than 1,000 homes in a wide variety of sizes and prices.
LOS ANGELES COUNTY
Spinnaker Bay, Long Beach * Homes planned: 241, priced in mid-$500,000s * Square footage: 1,902-2,540
SAN DIEGO COUNTY
Huntington, San Diego * Homes planned: 132, priced in high $100,000s * Square footage: 1,624-1,914
Tiburon, Mira Mesa * Homes planned: 201, priced in high $100,000s * Square footage: 1,818-2,295
Fairway Ridge, Chula Vista * Homes planned: 73, priced in low $200,000s * Square footage: 2,226-2,408
Fairways, Carlsbad * Homes planned: 132, priced in low $200,000s * Square footage: 2,006-2,638
Williamsburg, San Marcos * Homes planned: 74, priced in high $100,000s * Square footage: 1,470-2,400
RIVERSIDE COUNTY
Fieldstone Palms, Corona * Homes planned: 143, priced in mid-$100,000s * Square footage: 1,825-2,200
Fieldstone Copper Ridge, Temecula * Homes planned: 169, priced in low $100,000s * Square footage: 1,420-1,950
Source: Fieldstone Group of Cos.; Researched by JANICE L. JONES / Los Angeles Times
