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The Out-of-towners

Builders: Capitalizing on the recession, many national, publicly traded developers have been moving into the Orange County and regional markets, once dominated by local firms.

February 11, 1996|DEBORA VRANA | 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.

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