Irvine Co. Said To Be Hiring Homebuilders

NEW -> Contingent Buyer Assistance Program
[quote author="Fishy333" date=1248157789]Orange County Business Journal



07/20/2009

Irvine Company is looking to spur homebuilding on its land with a shift in strategy, according to real estate industry sources.



The company plans to pay builders to put up houses in Irvine and retain ownership of the land and homes until they?re sold to buyers, sources said.



Irvine Co. declined to comment on the speculation.



Under what?s being called an "executive builder program," homebuilders would work like general contractors without an ownership stake in the homes they put up, sources said.

Irvine Co. would finance construction loans, they said.

.</blockquote>


IMO, this is a brilliant move by Irvine Company, if it is true. This strategy kills two birds with one stone:



a. Finance.

Many builders are hesitant to build right now as it takes huge sum of working capital to finance the projects. In a normal market, they can be relatively sure about the timing and price of sales to recouprate their invesetment, therefore easier to get bank financing. But this is not a normal market, and price can continue to go down. Now that Irvine company is willing to provide their balance sheets to backstop the entire financing, that changes the game. Builders know this financing is not free, therefore they expect lower margins on these deals. But risk is also a lot lower.



b. Pricing Power

Needless to say, by doing so, Irvine Company further gained pricing power in Irvine.



This move effectivly makes Irvine Company the landowner, and family housing developer. With their balance sheet, they can freely throttle "the supply" nob, "the price nob", and "the timing nobs" they control in order to create the optimal "demand" at the price point they desire.



This is bad news for potential buyers at the Ranch, and good news for existing Irvine home owners.
 
Welcome Erica sorry for the mistake. First poster rarely was this eloquent and your style is extremely professional which could be easily mistaken as troll.
 
[quote author="irvine123" date=1248216250][quote author="Fishy333" date=1248157789]Orange County Business Journal



07/20/2009

Irvine Company is looking to spur homebuilding on its land with a shift in strategy, according to real estate industry sources.



The company plans to pay builders to put up houses in Irvine and retain ownership of the land and homes until they?re sold to buyers, sources said.



Irvine Co. declined to comment on the speculation.



Under what?s being called an "executive builder program," homebuilders would work like general contractors without an ownership stake in the homes they put up, sources said.

Irvine Co. would finance construction loans, they said.

.</blockquote>


IMO, this is a brilliant move by Irvine Company, if it is true. This strategy kills two birds with one stone:



a. Finance.

Many builders are hesitant to build right now as it takes huge sum of working capital to finance the projects. In a normal market, they can be relatively sure about the timing and price of sales to recouprate their invesetment, therefore easier to get bank financing. But this is not a normal market, and price can continue to go down. Now that Irvine company is willing to provide their balance sheets to backstop the entire financing, that changes the game. Builders know this financing is not free, therefore they expect lower margins on these deals. But risk is also a lot lower.



b. Pricing Power

Needless to say, by doing so, Irvine Company further gained pricing power in Irvine.



This move effectivly makes Irvine Company the landowner, and family housing developer. With their balance sheet, they can freely throttle "the supply" nob, "the price nob", and "the timing nobs" they control in order to create the optimal "demand" at the price point they desire.



This is bad news for potential buyers at the Ranch, and good news for existing Irvine home owners.</blockquote>


They already had the pricing power of which you speak. It is interesting that they would take on the builder risk as well as the land risk. I suppose when you get to the point that nobody likes the deal you are offering for the land, building yourself is the only alternative. Developers actually do this often, but they end up bringing in other builders to increase absorption and get rid of their land. Since the Irvine Company seems to be in no hurry to build out, they can take over all the building until demand increases enough to bring in other builders.



The Irvine Company is being forced to make a decision between price and volume, and they are choosing price; volume will be low. This is what a monopoly should do to maintain its advantage.



It is hard to say who benefits. Prices are going to do what they are going to do. The Irvine Company can seek to sustain higher prices by restricting supply, but prices will still fall to levels supportable by savings and incomes. The Irvine Company needs to continue attracting the highest wage earners in the county to sustain higher prices.
 
[quote author="IrvineRenter" date=1248221545][quote author="irvine123" date=1248216250][quote author="Fishy333" date=1248157789]Orange County Business Journal



07/20/2009

Irvine Company is looking to spur homebuilding on its land with a shift in strategy, according to real estate industry sources.



The company plans to pay builders to put up houses in Irvine and retain ownership of the land and homes until they?re sold to buyers, sources said.



Irvine Co. declined to comment on the speculation.



Under what?s being called an "executive builder program," homebuilders would work like general contractors without an ownership stake in the homes they put up, sources said.

Irvine Co. would finance construction loans, they said.

.</blockquote>


IMO, this is a brilliant move by Irvine Company, if it is true. This strategy kills two birds with one stone:



a. Finance.

Many builders are hesitant to build right now as it takes huge sum of working capital to finance the projects. In a normal market, they can be relatively sure about the timing and price of sales to recouprate their invesetment, therefore easier to get bank financing. But this is not a normal market, and price can continue to go down. Now that Irvine company is willing to provide their balance sheets to backstop the entire financing, that changes the game. Builders know this financing is not free, therefore they expect lower margins on these deals. But risk is also a lot lower.



b. Pricing Power

Needless to say, by doing so, Irvine Company further gained pricing power in Irvine.



This move effectivly makes Irvine Company the landowner, and family housing developer. With their balance sheet, they can freely throttle "the supply" nob, "the price nob", and "the timing nobs" they control in order to create the optimal "demand" at the price point they desire.



This is bad news for potential buyers at the Ranch, and good news for existing Irvine home owners.</blockquote>


They already had the pricing power of which you speak. It is interesting that they would take on the builder risk as well as the land risk. I suppose when you get to the point that nobody likes the deal you are offering for the land, building yourself is the only alternative. Developers actually do this often, but they end up bringing in other builders to increase absorption and get rid of their land. Since the Irvine Company seems to be in no hurry to build out, they can take over all the building until demand increases enough to bring in other builders.



The Irvine Company is being forced to make a decision between price and volume, and they are choosing price; volume will be low. This is what a monopoly should do to maintain its advantage.



It is hard to say who benefits. Prices are going to do what they are going to do. The Irvine Company can seek to sustain higher prices by restricting supply, but prices will still fall to levels supportable by savings and incomes. The Irvine Company needs to continue attracting the highest wage earners in the county to sustain higher prices.</blockquote>


The Irvine Company has a luxury that probably no other land development company has. They easily can afford to wait. They are private, so no quarter-to-quarter Wall Street demands, plus they have plenty of income from thier rental properties, plus already own all the land, plus have near total control of a large, desirable city. They are almost Japanese in the length of thier long term planning.



So, for now, they will release new product in a tiny trickle until the market improves. Restricting supply will help keep prices high.
 
[quote author="bkshopr" date=1248217613]Welcome Erica sorry for the mistake. First poster rarely was this eloquent and your style is extremely professional which could be easily mistaken as troll.</blockquote>No problem, and thanks for the welcome. :-)
 
Bren has very high standard for architecture. By having full control over product development and builders are just there for a construction and management fee TIC can eliminate many the previous short comings in products. I would not be surprised to see Inland Empire builder seeking for fame would jump on to this opportunity.
 
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