The Out-of-towners

By DEBORA VRANA

Feb. 11, 1996 12 AM PT

TIMES STAFF WRITER

COSTA MESA —

The names William Lyon, Jim Peters, Kathryn Thompson and the Baldwins have always been golden when it comes to home building in Orange County.

But for the identities of the building powerhouses of tomorrow--look to Wall Street.

In what essentially is a “Wal-Martization” of the local real estate industry, major national firms such as Lennar Corp., K. Hovnanian Enterprises Inc. and Centex Corp. are flexing their muscles in Orange County’s housing market.

These publicly traded companies not only are purchasing land and setting up branch offices here, but they also are buying out some of the local mom-and-pop developers who helped build Orange County.

“There used to be a lot of camaraderie here,” said Kathryn Thompson, a local home builder for more than 30 years. “Now, you don’t know who these players are. The people coming in from back East are coming in as unknowns.”

Up until the 1990s, local developers ruled Orange County. A network of friends and enemies monopolized the available land, which was much more pricey than buildable land in the rest of the country.

But a five-year recession has crushed land prices and left some builders here weakened or bankrupt. The national home-building heavyweights now see a more affordable market with less local competition and a region ripe for development if home prices rise again.

“Outside builders moving into Southern California are trying to capitalize on the recession,” said Ivy Schneider, a housing analyst with Salomon Bros. “It’s a market that has always been too pricey in terms of land for outsiders to come in.”

In 1990, Orange County public builders controlled 4.4% of the housing market. In the last quarter of 1995, their market share had increased to 35.4%, according to the Meyers Group, a real estate firm in Irvine.

Building giants from as far away as New Jersey, Miami and Dallas are gaining footholds here. Armed with easy access to Wall Street money and geographically diverse balance sheets that ensure them against regional downturns, the national home builders can operate on slimmer profit margins and even pay for housing lots in cash.

For example:

* Catellus Development Corp., a publicly traded San Francisco developer, recently bought the Akins Cos., a 47-year-old home-building company started by Ed Akins in Tustin when he was 23 and now run by sons Bruce and Carl.

* After buying about 900 home sites in Foothill Ranch from beleaguered builder William Lyon two years ago, the nation’s largest builder, Centex Corp. of Dallas, is looking for more land or other companies to purchase.

* The nation’s second-largest public home builder, Pulte Home Corp. of Michigan, reportedly is about to revitalize its Orange County operations with at least one building project.

* Miami-based Lennar Corp., one of the nation’s top 10 home builders, is purchasing one bankrupt Orange County builder and looking at buying another.

“It’s become a public builders game,” said Jeff Meyers, president of the Meyers Group.

It’s unclear what this trend will mean for future home buyers in Orange County, a market known nationally for leading the way in master-planning and home design.

Says John Shumway, president of a Costa Mesa real estate data firm: “In order for the public builders to keep competitive here, they are going to have to innovate.”

One firm that knew it had to change to stay competitive was Akins Cos. At the firm’s Irvine offices, grainy black-and-white photos of two young boys, one tall and thin, the other a little rounder, grace the lobby.

You can still recognize brothers Bruce and Carl, who recently made the decision to sell the company their father founded to developer Catellus to get the access to capital they need.

Catellus Chief Executive Officer Nelson C. Rising said the $9-million purchase of Akins allows the publicly traded firm to harness the years of experience the Akins brothers have here. Bruce and Carl Akins say they will still be calling the shots.

“Real estate has long been an entrepreneurial business,” Rising said. “Now, because of the access to capital and competitive forces, public companies have an unequal advantage. We want to be public and keep our entrepreneurial spirit.”

Akins will be building on 70 acres in Buena Park and 682 acres in Stockton. Catellus also is planning a 600-unit mid-rise condominium project at Union Station, in downtown Los Angeles.

The biggest name to enter the local market is Centex Corp., the nation’s largest home builder, with single-family homes in 44 markets nationwide.

With 1994 revenue of $3.3 billion, the company has beefed up its building presence here and plans to sell 1,200 homes in Southern California in 1996, with about 200 homes sold in Orange County.

Although Centex had built in the Inland Empire and San Clemente before the recession, the firm is busy locally, constructing single-family homes and condominiums in Foothill Ranch.

“We don’t generally come into a market for one opportunity. We look long-term, and that’s the way we look at Orange County,” said Larry Ludwig, president of Centex’s Southern California division. “But now there is a lot of competition from other public builders.”

Tim Eller, CEO of Centex Real Estate Corp., agreed. He said the company’s strategy is to make profitable moves and not rush things. “To be the largest is not our goal,” he said.

Centex recently looked at buying hundreds of housing lots from Chevron Corp., which was selling its land in Coto de Caza. But the timing wasn’t right, company officials said. The company also is considering a bid for the Baldwin Cos., a longtime local builder now in bankruptcy court.

Also considering a bid for Baldwin is Lennar Corp., the Miami-based builder that also is in the process of buying bankrupt Bramalea of California Inc., which is based in Newport Beach.

Lennar, with $626.3 million in revenue from housing in 1994, is looking closely at Baldwin, a major building firm started in 1956 by Noel Baldwin on a Temple City chicken ranch and now run by sons James and Alfred.

With its major land holdings, Baldwin could be an attractive purchase, said John Jaffe, a vice president with Lennar in San Juan Capistrano.

“We’re looking at all different ways of entering the market, either buying land or builders. We’re comfortable with either strategy,” said Jaffe, who said the company will build about 150 homes here this year and could build as many as 500 next year.

“Lennar has made it clear that they want to get into Southern California, and they are not going to inch their way in,” said Walter Hahn, economist at EY Kenneth Leventhal. “Others have just put their toe in our waters.”

One of those toe tippers is K. Hovnanian Enterprises Inc. of New Jersey, the nation’s eighth-largest home builder.

The firm moved into the Orange County market in June 1994 with the purchase of StoneBrook Homes in Newport Beach and about 100 housing sites in Yorba Linda.

StoneBrook was formed in March 1993 by the owners of Woodcrest Development, a 20-year-old firm that once was one of Southern California’s 15 largest builders before it fell victim to the real estate downturn.

Analyst Schneider said while Centex and others have done well in this market, Hovnanian might have acted too quickly when it bought StoneBrook two years ago.

But Nick Pappas, Hovnanian’s California division president, said his company made a wise move with the purchase, because it gained local management and building expertise.

“The difficulty we’ve had is no different than the difficulty every builder has had. Timing is everything, Pappas said. “When we got here in 1994 things looked real good--we bought some lots and were ready. Then things stalled in 1995.”

After a consolidation and reorganization last year, Hovnanian has eight communities open in Southern California. It plans to build about 322 homes here during this fiscal year, which ends in October.

No regional firm is feeling the competitive heat from national builders like Kaufman & Broad Home Corp., California’s largest builder and the nation’s fourth largest.

A publicly traded company, Kaufman has the same access to capital as the other firms but its concentration in a region hard hit by recent years has hampered profits.

Still, although the trend here is toward bigger and bigger, some long-term real estate players think it’s only a matter of time before the market heats up again and small and mid-sized builders take a place of prominence.

“The easiest place to make money is in an up market in real estate--you certainly don’t have to be a rocket scientist,” said one analyst. “When things pick up, the small players remaining will become mid-sized. These companies will be back.”

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Shifting Market Share

In 1990, nearly all Orange County homes were built by privately held companies. But the balance between private and public has shifted, mirroring a trend at work in Southern California as well. Now, about two-thirds of builders in both the county and the region are private:

Orange County (4th qtr.)

*--*

Private Public 1990 95.6% 4.4% 1993 75.8 24.2 1995 64.6 35.4

*--*

Southern California avg. (4th qtr.)

*--*

Private Public 1990 86.5% 13.5% 1993 73.3 26.7 1995 69.0 31.0

*--*

Sources: Myers Group; Researched by JANICE L. JONES / Los Angeles Times

Big Builder Profile

Eight of the nation’s large, publicly held home builders are at work or have a presence in Orange County.

Centex Corp.

Headquarters: Dallas

Assets: $2.0 billion

Purchased: 900 lots in Foothill Ranch from longtime Orange County builder William Lyon

Active Orange County projects: Crestview, Meadow View Condos and Summerview, all in Foothill Ranch; El Encanto and Sunset Ridge in San Clemente

Catellus Development Corp.

Headquarters: San Francisco

Assets: $1.8 billion

Acquired: Irvine-based Akins Cos. for $9 million in Catellus stock, effective first quarter 1996

Active Orange County projects: None

Kaufman & Broad

Headquarters: Los Angeles

Assets: $1.5 billion

Active Orange County projects: California Summit, Aliso Viejo; California Renaissance, Anaheim; California Cortina, Dana Point; California Vista and California Coventry in Foothill Ranch; California Crest, Mission Viejo; California Del Sol, Rancho Santa Margarita; California Crossing, Santa Ana; California Crosswinds, California Landmark and California Silverado, all in Wagon Wheel Canyon; California Colony, Westminster

Lennar Corp.

Headquarters: Miami

Assets: $1.3 billion

Acquired: In the process of acquiring bankrupt Bramalea Ltd. and eyeing the Baldwin Cos.

Active Orange County projects: Bel Mira II in Mission Viejo

Del Webb Homes

Headquarters: Phoenix

Assets: $925 million

Active Orange County projects: Concord in Mission Viejo

Richmond American

Headquarters: Denver

Assets: $725.4 million