Builder - September 2008 - (Page 38) INSIDE STORY allowed for around 1,400 active adult units on land Silver sold to the builder. Pulte diverged from the plan when it attempted to move water management ponds that defined a conservation easement. At the time, Pulte believed it had an understanding with the county that it could modify the easement restrictions; the county thought otherwise. So while the changes Pulte started making affected only a handful of lots and 500 feet of an eight-mile road, the county’s supervisors in September 2006 voted 6-1 to send the builder back to the planning commission, according to the Free-Lance Star, a local newspaper. Pulte resubmitted a plan that rerouted the subdivision’s entrance roads, but the ENVIRONMENTAL ISSUES Nose Dive Lot liquidations by big builders drive down finished lot values in Southern California. L Del Webb now markets Celebrate as a “more pristine” community. process delayed completion of the community for more than a year. Evans says the delay gave Pulte pause to rethink the project, which now has more open space than originally planned including 20 miles of hiking and walking trails. Del Webb markets Celebrate as “more of a pristine, natural community,” says Evans. To strengthen that image, Pulte applied to certify Celebrate at Del Webb under the NAHB’s green building standards. When the project stalled, Pulte offered buyers their money back. Forty of them, however, rode it out with the builder and have since moved into one of the few active adult communities in the area that include a golf course. The homes range from a two-bedroom, 1,269-square-foot model selling for $249,900 to a three-bedroom, 2,919-square-foot unit selling for $379,900. Three of the six models come with lofts. A 6,000-square-foot Discovery Center doubles as a sales office and, during off-hours, a meeting place for residents. Celebrate at Del Webb’s primary marketing tool has been the Internet, and it’s been drawing interest from a wider area than Evans anticipated: Through early July, half of its buyers were from out of the area including two from Washington state.—J.C. GOT AN INSIDE STORY? E-MAIL JOHN CAULFIELD AT: jcaulfield@hanleywood.com ennar’s blockbuster land deal What’s driving this has been the with Morgan Stanley last year willingness of production builders to may have had more impact on set- mark down lots “quicker and more ting the bar for future land values realistically” than lenders have done. than most analysts at the time thought The catalysts, he says, include the it would. That’s one conclusion Mack- Morgan-Lennar deal, where the buildey O’Donnell draws from the sharp er sold 11,000 homesites for 40 percent declines in fi nished lot values that of their $1.3 billion book value; CenSouthern California is experiencing. tex’s sale of 8,500 lots (out of 25,000 it O’Donnell is president and CEO put up for bid) for $161 million, of Irvine, Calif.–based O’Donnell/ compared to their book value of Atkins, California’s largest land broker. MARKET PROFILES The accompanying PERCENT CHANGE PERCENT CHANGE chart is based on SUBMARKETS 2004 TO 2005 2005 TO 2008 data his company 13.21% -51.67% culled from closings Chino in 2004 and 2005, Perris 33.3% -62.50% and in 2008 from Lake Elsinore / Wildomar 45.45% -70.83% closings and residuMenifee / Winchester 14.29% -65.00% al analyses of what 88.00% -78.72% buyers have been Hemet / San Jacinto willing to pay for Temecula / Murrieta 20.00% -53.70% lots. source: o’donnell/atkins and market profiles “The data tell me that what peo- SINKING FAST: Land values in Southern California took ple are willing to a steep dip in the first half of this year as builders liquidated pay for finished lots distressed real estate at more realistic prices. is less than the value of improving them,” says Boyd $528 million and their original worth Martin, a partner with Market Pro- of $900 million; and a land deal by files, a consultant and research firm Standard Pacific at the end of its last in Santa Ana, Calif., that worked with fi scal year that the builder completed O’Donnell/Atkins on assembling the to realize tax benefits. (O’Donnell made his comments before Merrill chart. O’Donnell agrees with builders and Lynch, in late July, sold a portfolio of developers who assert that land prices mortgages for what amounted to 22 are still falling. In Temecula, Calif., cents on the dollar.) O’Donnell believes continued for example, fi nished lot prices in June 2008, at $125,000, were roughly at pressure from eroding home prices 2001 levels. In a presentation on dis- will drag finished lot values down tressed land he delivered in Las Vegas more before the market hits bottom in June, O’Donnell detailed a case sometime next year. He also expects study of a land deal his company com- public builders to conduct another pleted in Chino, Calif., for $20.5 mil- round of land sales over the next sevlion in 2007. If that land were marked eral months to cash in on tax lookto June 2008 market value, it would backs for their 2006 earnings. “It will have sold for $6.78 million, he be the last bite at the apple for estimates. them.”—J.C. 38 ■ B U I LD E R sep t e m ber 2 0 0 8 W W W.BUILDERONLINE.COM http://WWW.BUILDERONLINE.COM
For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.