A few Home for the next few years.

NEW -> Contingent Buyer Assistance Program
<p>"but isn't SCAG (Southern California Association of Governments) going to be quite upset since Irvine just told them "we have no land for your affordable housing mandate." "</p>

<p>My guess is that the SCAG is a weak entity and that TIC knew all along they weren't going to comply. They probably had a strategy already outlined to deal with the issue.</p>

<p>The question to ask is who has more lawyers at their disposal, TIC or SCAG?</p>
 
<p><em>I guess I'm falling on deaf ears, but from a company's standpoint you cannot just stop your on-going operations on a dime like that. If I understand correctly, TIC already owns this land and is "leasing or selling" to the builders? If this is the case, TIC has already made their capital investments when they bought the land. It makes no business sense that they would make capital investments and then not try to generate revenues with it. If anything, the ones that have yet to make the full capital investments, the builders, may be the ones putting a halt to the build outs.</em> </p>

<p>gepetoh, it's not deaf ears. Your understanding of the specifics in the case is just off a bit. The Irvine Company has owned this land since 1878, so their original capital investment revenues have long since paid off and the company has more cash than most 3rd world nations. TIC stock also completely owned by one man, Don Bren, who can afford to wait out a down market for decades if he wants. TIC has plenty of income streams that have nothing to do with the building of homes and would remain profitable even if they immediately banned all new home construction forever, starting tomorrow.</p>
 
Nude,

I could not word it better.

The land was acquired during the 1870's for a quarter (25 cents) per acre. There is no debt and no taxes on the land. TIC owns most of the industrial cloned buildings in Irvine and some in Lake Forest, Fashion Island, Island Hotel, Hyatt Hotel, entire Irvine Spectrum, Pelican Resort and Hotel, all the golf courses in Irvine, IAC apartments in Irvine, La Jolla, San Diego West Los Angeles and San Jose, High rise office towers in Irvine, San Diego, and Silicon Valley, 20th Century Fox corporate tower in Century City, 3 gateway West LA towers and all the land between Jamboree and Lake Forest from Fwy 91to the Pacific Ocean. There is so much land a donation of several millions acres of mountain and scenic land to the US department of Interior to be forever preserved as a National Park. (yes, a National Park).

Why should TIC sacrifice some land for cash flow?

Bren is wealthier than Bill Gate if Forbes know how to find and assess what he owns.
 
I have made my opinion known here:





<a title="Permanent Link to Land Value 101" rel="bookmark" href="http://www.irvinehousingblog.com/2007/07/16/land-value-101/" linkindex="7" set="yes">Land Value 101</a>

<p><strong>The Irvine Company will capitulate. </strong></p>

<p>In the end, the Irvine Company will lose its battle to prop up the market. They don’t control the market, they only control the “ask.” Potential buyers determine the “bid.” If the bids don’t reach the ask, there is no sale (which is what is happening in Portola Springs.) If there are no sales, the Irvine Company has no revenue, and without revenue, they will cease to exist. They have more holding power than most organizations, which is why The Irvine Company has not been cutting prices and offering incentives like all the homebuilders, but the Irvine Company still must sell its holdings in order to survive. If they didn’t, they could just decide all houses in Irvine must sell for $10,000,000. In 300 years when those prices may be reasonable, they will start selling homes again. Do you see the absurdity of the Irvine Company holding to peak prices forever?</p>
 
Bkshpr and Nude





I think the two of you just stubbed your own toes on this one. It's not about TIC being able to sell land it's about TIC being able to sell land to the hand that feeds them. If builders are paying to much for land and can't make a profit on the land then they are not going to build....atleast that is what Econ101 tells me. Also...yes I think we all understand that some of the current builders are stuck and just have to finish out projects regardless of profitabilty.





For you to tell us that builders are going to come back in a few yrs and pay a premium again for land is a little absurd. We need to look at macroeconomics here. We are loosing a big part of our higher pay jobs here in OC via a' la the mortgage industry...we know this for sure. On top of that we are also going to start loosing RE jobs in the agent and building fields....which again are high pay jobs.





I think TIC's purpose of not selling more land or letting builders delay projects has to do with the fact that they are the face of Irvine. They want to preserve Irvine as the "Master Planned Community" and over building slaps that premise in the face.
 
So how long can the Irvine co. hold out? Is real estate their only way of generating revenue? There are no other investment in their portfolio other than real estate? Are they that naive to not diversify?
 
>>There is so much land a donation of several millions acres of mountain and scenic land to the US department of Interior to be forever preserved as a National Park. (yes, a National Park).





A few nits. Most of the land donated was unbuildable. They bought off various constituencies in a land swap. We'll give you the hot, rocky mountains that we can't build on anyway (or at least not without spending $$$$ for grading) and you let us build on the Coast. Also, the land is a National Natural Landmark, which is a different status under the US Code. The program is managed by the National Park system, but allows Bren to still own and control the land - and maybe even get a tax write off by donating it to <a href="http://www.irlrtrust.org/">a land trust</a>
 
The Irvine Companies has extensive cashflow properties including all of the apartments and commercial centers in Irvine. They can hold out a long time. The point is why own a non-performing asset? They are not simply going to sit on vacant land. It makes them no money, and it costs them overhead to keep staff in place. If they want to continue to grow their portfolio of cash producing properties, they are going to have to develop land. Unless they are going to make Irvine one large apartment complex with the occasional office or retail center mixed in, they are going to need to build out their land.





Look, the Irvine company would love for the people who populate this blog to believe they will never lower prices. It is no different than the ploys realtors use to knock fence-sitters off and get them to buy. As I documented in Land Value 101, there is a huge multiplier effect with raw land, so the Irvine Company really, really wants prices to remain high. Unfortunately for them, they don't control the bid, they only control the ask.
 
I hope you're right, IR, because the more I look at real estate, the less I like ANYTHING currently out there. For one reason or another, nothing within reasonable driving distance to my job is attractive to me at this point, even if prices were 50% lower. (Mind you, I do not really consider anything west of the 405 to be a reasonable distance to my job). So I really, really have my heart set on OH, for the smaller (about 2000 sf) detached homes to be built in the Northwood HS school district. That's what I want and I'm willing to wait 2-4 years, but anything longer than that and I'm gonna get very unhappy.
 
um... if TIC stops selling land, the company will still be generating revenue from its vast commercial lease and income properties. Plus those agricultural fields have been income-producing for the last how many decades? I'm pretty sure TIC is a profitable company and won't turn into a money-losing "hobby" just because it halted selling land.





This is a company wholly owned by the richest real estate mogul in the US, who gave away half the city (50,000 acres) to a land reserve. If Mr. Bren decides to sell additional land, for certain it's not because he needs the $ to eat like us. Perhaps he has a master plan, or he's playing Sim City.






 
<p>Then it seems to me. </p>

<p>What Mr. Bren and his co. is saying in essence is, "If you can't afford it here. Tough. The fact that you are arguing for prices to drop. Tell us that you want to live here. You want safety? You want good schools for your kids? You want a good job market? So how bad do you want it? If not bad enough? Then there are plenty of choices in the surrounding cities. We will run it the way we want to."</p>
 
For Irvine company is really really simple: they have a diversified porfolio of business that generates cash, so short term to medium term they are ok not to lower the land price...longer term, it is simple also: if they believe the market is "oversold" due to many factors, they can simpley wait it out...if they believe the market is going to be down for a long long time, then they can slowly release some land to generate some income as hedging. History will always repeat itself - and this time will be NO differet...this market goes up, and comes back down...and then goes up again...I think one thing Irvine Company won't do is to dramatically lower price in a very fast way regardless what happens.



Personally, I like Irvine's real estate because of Irvine company's presence. They are a rational private developer - this translate into business / pricing discipline for the longer term. For those of us work at public companies, we all know how hard it is to maintain business discipline during down cycles due to EPS pressure. The development I worry about is the great park. I think Lennar can potentailly depress irvine real estate market buy flooding the market with cheaper homes just bc they want to move on. Or they can run out of money and go belly up in the middle of the project and leave behind a mess.
 
>>The development I worry about is the great park. I think Lennar can potentailly depress irvine real estate market buy flooding the market with cheaper homes just bc they want to move on. Or they can run out of money and go belly up in the middle of the project and leave behind a mess.





That's pretty funny. Lennar got into California by cleaning up the mess now known as Coto.
 
Eval,





Excellent point...Lennar paid min. to get into the Coto development, and did a good job. This time around, they are sitting at an opposite position. I am not saying they will screw up, i am just a bit concerned, and they have a very big shoe to fit in...that is all...Personally, I don't think they did a good job at VOC...Not sure I understand the "funny" part.
 
Not "funny" as in "ha ha," but "funny" as in ironic.





My main concern with Lennar at this point is the quality of construction. As noted back in the day by someone else, they are focusing on "front of the drywall" improvements and not putting much care into "behind the drywall" quality. In fact, we were thinking of looking at The Gables again, but (1) I want fruit trees, and (2) I didn't have faith in the quality of construction.
 
<p>I have heard that about Lennar. They will say "everything included". But to compensate for the free upgrades. They will cut back somewhere else in their construction. </p>

<p>In the county now, there's a lawsuit against Lennar for shoddy workmanship. </p>
 
EvalSeraphim,



I agree with you completely on the quality of construction. It is a pitty that their quality has come down sooo much. Two of my good friends live in Coto, and those homes were built in 2000. They were done nicely. What impressed me the most is that their customer services were still willing to take care of little stuff after 4 years.



If you were to compare their coto homes with their Villa Rose track, it is day and night. The quality of the home is not very nice...I don't like their everything included tatic...this makes all the homes look exactly the same inside...I think when it comes to resell, those homes will suffer quite a bit for lack of personality.



In terms of Gables, man...i will stay away from that track. I will be very concerned when someone tells me I can't plant fruit trees. This means you also can't plant and eat any tomatos, vegs, and herbs?? that will suck! If I have to choose between Gables / VOC area, and Villa Rose, I will consider Villa Rosa. Their plan 2 and plan 3 prices have dropped a bit...it is around $1.05mm for about 3000 sq ft.
 
CalGal,



Now that you mentioned it, you are right!!! What is deal with that?? if they want to donate, they can do themselves, why force buyers to do it??



In terms of quality, I found standard pacific to be very good lately from my personal experiences and my friends' experiences.
 
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