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REAL ESTATE

As projects grind to a halt, home sites turn to wasteland

The dual weight of the credit crunch and the housing crisis prompt developers to abandon plans.

March 04, 2009|Roger Vincent

By day, it's far too quiet at the site of a planned housing and retail development on a former Navy base in Oakland.

At night, neighbors can hear the thieves come out.

They rip out copper wire, haul away pipes and take anything else they can steal from dozens of buildings on the site, abandoned after Irvine developer SunCal Cos. fell victim to the economy.

It's a scene not uncommon throughout California, as residential construction grinds to a halt under the dual weight of the credit crunch and the housing crisis: a rusty chain the only barrier between the community and a half-built structure in Hollywood; a bare dirt lot in Pasadena; old stoves amid the trash at the site in Oakland.

"I hear hacking and see scary bonfires in the middle of the night," said Don Johnson, a retired Coast Guard employee who lives near the defunct Oak Knoll Naval Medical Center in Oakland.

Nearly 250 residential developments with a combined total of 9,389 houses and condominiums have been halted in California, according to research firm Hanley Wood Market Intelligence. The units, worth close to $3.5 billion, were in various stages of development.

Now, many are in bankruptcy or have been foreclosed by lenders. Developers have halted sales on an additional 370 new-home developments -- about 30,000 units worth $11.9 billion.

"It's a sad state of affairs," said Greg Doyle, regional director of Hanley Wood.

LandSource Communities Development, the parent company of the developer building the 21,000-home Newhall Ranch community near Santa Clarita, filed for Chapter 11 in June.

In Hollywood, a chain secures a seven-story building still sheathed in yellow insulation panels and surrounded by steel scaffolding.

The Madrone condominium and retail complex at Hollywood Boulevard and La Brea Avenue had been scheduled for completion this spring.

But the developer, John Laing Homes, stopped answering its phones weeks ago and on Feb. 19 filed for Chapter 11 bankruptcy protection.

Across the street, Tony Boon worried about the effect on Pink Pepper, a Thai restaurant he manages. He had hoped that residents, shoppers and employees at the complex would stop in for meals. Now his customers gaze out on the stagnant site.

"It should have been a beautiful building, but it's just kind of an eyesore," he said.

Similar sites abound.

On the edge of Old Pasadena, the Pasadena Athletic Club and an office building on Fair Oaks Avenue were demolished to prepare for a six-story hotel, condominium and retail project. Work halted last year when financing fell through, the developer's attorney said.

The dirt lot sits empty, surrounded by a chain link fence and green plastic netting.

In the Lincoln Heights neighborhood of Los Angeles, the contractor stopped work more than a year ago on Fuller Lofts, a $20-million transformation of a 1920s-era Fuller Paint warehouse into condos on San Fernando Road.

The developer, Livable Places, has gone out of business and blames high construction costs, tightening credit for home buyers and a glut of competition.

Walking away from partly completed projects is not unusual in a real estate downturn, said Don Walker, senior vice president of Irvine-based John Burns Real Estate Consulting. The difficulty, he said, is making sure health and safety issues are not ignored as the sites languish.

SunCal, the company that was supposed to revitalize the former Navy site in Oakland, concedes that its abandoned projects could be dangerous.

At its Oakland site, structures dating to World War II were to have been demolished by now to make way for 1,000 homes and a shopping center.

But workers walked off the job when their payments stopped, leaving behind piles of debris. A nine-story hospital the developers planned to raze was invaded by squatters.

In the Sacramento River Delta area of Contra Costa County at SunCal's planned Delta Coves housing development, blowing sand is filling in a new lagoon, and crucial water pumping systems are unmonitored.

"No one is manning those pumps," said Kevin Emigh, the county's assistant public works director. In theory, the pumps will operate without oversight, but no one will know whether they lose power or break, he said. Hard rains or rising groundwater could put the neighborhood next to Delta Coves at risk.

"More than 100 homes would flood" if the pumps didn't function, Emigh said.

Late last year, SunCal filed for Chapter 11 protection on more than 20 big real estate developments throughout the West, said Frank Faye, the developer's chief operating officer, although the company itself is not in bankruptcy.

At some of those projects, urgent problems include blowing dust and overgrown brush that could become a fire hazard. Busy public roads have been torn up and left that way, he said.

Faye and other SunCal executives blame failed investment bank Lehman Bros., saying that when Lehman declared bankruptcy, all funds to the projects were cut off.

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