Deal Revives Major Housing Development
In a sign that the Antelope Valley may finally be emerging from years of economic stagnation, Newhall Land & Farming Co. said Friday that it is entering into a joint venture with Kaufman & Broad Home Corp. to build a long-delayed, 5,000-home development on the western edge of Palmdale.
The project ranks among the largest residential developments in Los Angeles County since the economic bust of the early 1990s and signals that the Mojave Desert area may be poised to resume the growth it achieved in the last real estate cycle.
“I think this shows the economy is arriving in the Antelope Valley,” Palmdale Mayor James C. Ledford said. “We are again building what this area is known for: affordable housing.”
Los Angeles County leads the nation in the demand for housing. A study earlier this year found that just one new home is being built for every six new jobs, and that during the 12-month period ended in March, just 12,224 residential building permits were issued in the county.
Approvals for the 1,900-acre development, called City Ranch, were obtained in 1993 by Kaufman & Broad. But that company only recently began grading a small part of the high-desert site that will eventually hold about 500 houses. The rest of the housing and other structures in City Ranch will be built under the joint venture, with Newhall as majority owner.
Newhall officials say they expect construction under this arrangement to begin in early 2000, with the first of the new homes ready to be occupied late the same year.
Kaufman & Broad officials said they entered into the joint venture because they had never before developed an entire master-planned community.
“What we do best is build entry-level, single-family homes,” said Mary McAboy, a spokeswoman for Kaufman & Broad. “When it comes to master communities, we recognize the Newhall has the expertise.”
Newhall Land is best known for developing Valencia, a master-planned community in the Santa Clarita Valley.
Kaufman & Broad will not be the only builder to participate in the project, McAboy said. “By adding other builders, you get a much greater diversity in what will be built there.”
Newhall Land Chairman and Chief Executive Tom Lee said his company got involved because of indications that the real estate market in the Antelope Valley, which took a dire plunge during the Southern California recession of the mid-1990s and then stayed in the doldrums, is on the comeback trail.
“I think it is doing a lot better than people think,” said Lee, speaking from the Santa Clarita offices of the company. “Sales are improving and pricing is up. That’s when we like to get involved, when an area is in the upswing stage rather than when it has matured.”
Lee said pricing of the City Ranch homes has not yet been determined but will be lower than those in Valencia, where most new homes are selling for $200,000 to $300,000.
Ledford said Newhall Land officials met with city planners for several months before getting involved with the project. He said the company told him homes in City Ranch would be “affordable but on the upscale side for the area, selling for about 15% more than average.”
One of the factors that made the project attractive to Newhall Land is that the necessary approvals were already in place. The company’s largest proposed development--the 21,600-home Newhall Ranch on the banks of the Santa Clara River--has been stalled for years because of opposition from environmental and other groups. Newhall Ranch got its approval last year from Los Angeles County supervisors, but still faces court battles before construction can begin.
Lee called the absence of challenges to City Ranch “refreshing.”
Newhall Land plans to ask for some minor changes to the master plan, but Ledford said he doesn’t foresee problems getting them improved.
The joint venture was announced before the start of trading Friday. Shares of Valencia-based Newhall Land closed at $22.69, up 25 cents. Shares of Los Angeles-based Kaufman & Broad closed at $21.06, down 69 cents. Both trade on the New York Stock Exchange.
Newhall Land’s shares have languished under $25 for months, despite the fact that the company is posting record sales and earnings.
Lee said he had no idea if the stock would benefit in the longer term from the City Ranch development.
“That would be nice if it happened,” he said. “But when it comes to real estate companies, the stock market seems to be kind of impervious to news.”
