In its first major move into Southern California, Miami builder Lennar Corp. has bought 2,200 acres here and will become manager of this large gated community in South County.
One of the nation's largest home builders, Lennar teamed up with the Tiger Real Estate Fund, L.P. of New York to buy the property from a Chevron Land and Development Co. partnership. The price was not disclosed, but sources estimated the deal's value at $50 million.
"We have always wanted Coto," John Jaffe, a vice president in Lennar's San Juan Capistrano office, said Wednesday. "From a development standpoint the infrastructure is already in place, so there's not a lot of risk. This is a desirable community."
Lennar will develop or sell the last 1,700 vacant housing lots at Coto, which originally had 5,600 housing sites. The development will net Lennar $150 million, the company said.
"This is going to keep Lennar busy for a while," said Stephen Kim, a housing analyst in New York. "California is on the rebound, so this positions Lennar well. They also have a good track record of managing properties."
Lennar is considering building single-family homes on some of the lots at Coto, Jaffe said. Remaining lots will be sold to other builders. Lennar plans to enhance the community's southern gate and build more parks and ball fields.
Formed in the early 1980s, Coto de Caza is a private community with two golf courses, an equestrian center, baseball and soccer fields, a wilderness park and a network of hiking and riding trails that occupies a four-mile-long valley southeast of Rancho Santa Margarita.
"Coto's always been a well-managed asset--they sell lots at the right prices and the homes have sold well," said Jeff Meyers, president of the Meyers Group real estate data firm in Irvine. "Homeowners there won't see a lot of change."
No layoffs are planned among the 20 employees at Coto de Caza Ltd., a partnership that has operated the master-planned community for Chevron.
Although this is the first major California move for Lennar's home-building division, its mortgage banking division has operated here, and the commercial real estate division has an office in Los Angeles. Lennar builds in Florida, Texas and Arizona.
"This is an important step in our overall strategy of building a strong residential presence in California," said Leonard Miller, Lennar's chairman and chief executive officer, in a statement.
Lennar's stock price rose 37.5 cents Wednesday, closing at $23.375 a share in trading on the New York Stock Exchange.
Lennar joins other building giants from New Jersey and Dallas that are gaining footholds in Orange County's once cloistered housing industry.
"We've just been waiting for the right time to enter the Southern California market," Jaffe said. "Our crystal ball is no better than anyone else's, but if it's not at the bottom it's near the bottom."
A five-year recession that has hurt land prices and left some builders here nearly bankrupt has created a more affordable housing market with less local competition. This has attracted national home builders, especially those with access to Wall Street cash. Publicly traded home builders' share of the Orange County market increased from less than 5% in 1990 to nearly 36% last year.
Lennar recently purchased Bramalea of California Inc., a bankrupt home builder in Newport Beach, and considered buying another troubled builder, Baldwin Cos., before becoming consumed with the Coto purchase.
Chevron announced plans last year to sell its massive California land holdings, including thousands of acres in Orange County. Local home builder Christopher Gibbs and a Morgan Stanley real estate fund, which were once in negotiations to buy Coto, are buying other Chevron land in the county, including 450 acres in Huntington Beach.
Jaffe said Lennar was encouraged by the recent improvement in Orange County home sales, including a 31% spurt in February over sales for the same month a year ago. "Two good months don't make a cycle, but it's an improvement," he said.
At Coto de Caza, more than 40 homes were sold in the past month, more than double the sales of a year ago, said Tom Martin, vice president of sales and marketing for Coto de Caza Ltd.
"The timing couldn't be more perfect," he said. "We're smoking here."
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Lennar Land Purchase
Miami-based Lennar Corp., one of the nation's largest home builders, has moved into Orange County with a large purchase in Coto de Caza. Here's a look at the company and where they bought:
Lennar Corp. at a Glance
Chairman: Leonard Miller
Orange County office: San Juan Capistrano
1995 total assets: $1.4 billion
1995 sales: $870.5 million
1995 net income: $70.4 million
Sources: Coto de Caza Ltd., Bloomberg Business News; Researched by JANICE L. JONES / Los Angeles Times