Builders Turn to Upscale Projects in Inland Empire
Home builder Jim Previti knows firsthand that the Inland Empire can be a tough sell to the jet-set crowd.
Some of the executives at his own firm, Empire Cos., prefer to endure long commutes from their homes in coastal Los Angeles and Orange counties rather than live near the company’s offices in Ontario. Previti himself flies to work in a private plane from a second home in Carlsbad when the summer heats up.
Yet he and a growing number of developers are launching an array of upscale projects in Riverside and San Bernardino counties, hoping to woo a more affluent group of home buyers to the Inland Empire.
Convinced that Southern California’s surging real estate values will push more people east, with many looking for something more than starter homes, Empire and other builders are investing hundreds of millions of dollars in new luxury properties, penthouse apartments and high-end shopping centers.
Previti’s projects include a gated community in Corona called the Retreat -- 540 homes, priced from $450,000 to $900,000, nestled along a private golfcourse designed by Jack Nicklaus.
In Rancho Cucamonga, Randall Lewis, whose family amassed a real-estate fortune from affordable housing, is developing stylish apartment complexes where rent on the units would range from $1,400 to $1,900 a month. His target tenants: young executives.
“We are getting single professionals in much larger numbers than we did before,” Lewis said.
By Southern California standards, the Inland Empire is still a haven for first-time home buyers.
Half the homes sold in Riverside County last month were priced below $228,000 and half above that, while the median price in San Bernardino County stood at $175,000. That contrasts with $281,000 in Los Angeles County and $383,000 in Orange County.
But home prices in the Inland Empire are now rising as rapidly as those in neighboring counties, and builders are responding by putting up higher-priced dwellings. This year, about one-third of all new houses sold in the Inland Empire cost $300,000 or more. That may not seem like a lot, but five years ago less than 5% fell into that price category, according to DataQuick Information Systems, a real estate research firm.
John Husing, an independent economist who has studied the Inland Empire for 30 years, says all the signs point to a shifting market.
The area, Husing says, is entering its final stage of development, propelled by builders such as Previti, who this year sold his longtime business, Forecast Homes, and now is concentrating on upscale development.
“They’ve nailed a market that nobody knew was here,” said Husing, who thinks this new wave of building is going to make them rich.
Of course, that’s what a lot of developers thought in the 1980s during the region’s last housing boom -- before many of the firms went belly up in the early ‘90s after widespread job layoffs in the Southland depressed home values and led to soaring foreclosures.
Promising Growth
Although there are risks this time around as well -- home prices have been growing in the last year at a rate several times higher than inflation and personal incomes -- analysts don’t see the same pattern occurring.
With available land far more scarce, they say, builders haven’t overbuilt. Job growth in the Inland Empire, meanwhile, has been solid even during the economic slowdown, and the area has been creating better-paying jobs.
The ranks of managers and professionals living in three of the Inland Empire’s higher-income cities -- Corona, Rancho Cucamonga and Temecula -- rose 40% from 1989 to 1999, according to census data analyzed by regional economists.
What’s more, analysts say, many of the same first-time homeowners who flocked east during the last boom are now joining others in the Southland looking to buy larger homes.
There is a “tremendous” number of local buyers seeking to move up,” said Nicholas Coussoulis, chairman of Joseph Nicholas Homes. The company recently finished the first phase of Sunset Hills Estates in Redlands, where the most expensive of the sprawling residences top $600,000. “We have found a very, very good market,” he said.
Most of the high-end activity is taking place along the western edge of the Inland Empire. In Rancho Cucamonga, Lewis and a Cincinnati-based partner are building Victoria Gardens. The $300-million residential and commercial project features an outdoor mall where streets will be lined with swanky boutiques, movie theaters and a performance center.
“We want to create a place like Santa Monica or Pasadena where people can shop, stroll, dine and be entertained all at the same time,” said Colm Macken, whose firm, Forest City Development California Inc., plans to break ground on the project next spring.
Developing Expertise
For Previti, who along with partners has built about 20,000 houses -- most of them in the Inland Empire -- his latest work is a culmination of three decades of development in the area.
Previti moved to Southern California in the early 1970s, fresh out of the Marines. The New Jersey native landed in the home-building business by accident when he accepted two unfinished lots in Pomona as a down payment on a house he was selling. Unable to find a buyer for the lots, he and a partner constructed houses on the properties. Priced at $29,950 each, they both sold in a weekend.
“Then we went looking for more lots,” he said. Previti began developing homes in batches of 10 or 12, and eventually took on bigger projects as the region blossomed.
In the late 1990s, Previti and his partners helped convince others that the Inland Empire was ready to jump to the next level when they started construction on a master-planned community of 1,500 homes in the foothills near Corona. The last stages of that development featured $600,000 homes overlooking a public golfcourse and country club.
This year, with $320 million in cash and securities from the sale of his old company to Hovnanian Enterprises Inc., one of the largest developers in the state, Previti is planning more ambitious projects.
In Ontario, he is proposing a six-story office building topped with penthouse apartments. A short drive away, his aviation subsidiary has started construction on a new terminal for private and corporate jets at Ontario International Airport.
Greg Devereaux, city manager of Ontario, says his community, which has grown to a population of 162,000, needs more developments like that.
“We don’t have the upscale and more urban kinds of housing that managers and owners want to live in,” he said. “And if they can’t find someplace to live here, they won’t locate here.”
For his part, Previti knows his latest ventures may take years to pay off. But he and other developers are betting that time and geography will be on their side. They think ever increasing congestion and housing prices along the coast will keep pushing people and jobs in their direction.
“I think the growth is going to happen here because there is no other choice,” said Previti. “There is no other place.”
