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Anatomy of a development, part II

Newhall Land’s long-term strategy full of twists, turns

Posted: April 15, 2012 1:30 a.m.
Updated: April 15, 2012 1:30 a.m.

Newhall Land leases land with active oil wells, like the one pictured on the right, to oil and gas companies. The leases generate income and, in part, help sustain the company while it waits to turn its first shovelful of dirt on the Newhall Ranch project.

 

While there are varied opinions of most new developments, the Newhall Ranch project has attracted more solicited and unsolicited input than most projects because of its size.

The project is a 20,885-home and commercial center development in the northwest Santa Clarita Valley, to be built in four distinct “villages” on 12,000 acres off Interstate 5 along Highway 126 near the Santa Clara River.

Randy Wrage, a Santa Clarita resident and spokesperson for Spirit Properties, said everything north of Lyons Avenue at Old Orchard was mostly carrots and onions at one time. The area was also home to several large pig farming operations and several dairy farms before Newhall Land embarked upon its master plan for the community of Valencia, he said.

“As a result of the stewardship of Newhall Land, this place is a heck of a lot nicer than it was 50 years ago,” Wrage said.
But as the master plan for Newhall Ranch has unfolded over the years, others say the project is too large and harmful to natural resources. On March 22, five organizations filed suit against Los Angeles County, after the project received its final approval.
The environmental groups claim the decision to allow the development will destroy one of the last remaining wetlands in Southern California, the Santa Clara River, and pose a threat to indigenous plants and rare species of animals and plants indigenous to the area.


The legal action, filed by Friends of the Santa Clara River, the Santa Clarita Organization for Planning the Environment, the Center for Biological Diversity, the Sierra Club and the Wishtoyo Foundation’s Ventura Coastkeeper program, asked the court to review the legality of the county’s approval process.


There are instances in which the environmental groups, whether it’s SCOPE, Friends of the River or Center for Biological Diversity have prevailed temporarily on issues requiring Newhall Land to put more documentation together or do another biological study, said Marlee Lauffer, senior vice president marketing and communications for Newhall Land.


Some projects can be awful and should never be built, said Lynne Plambeck, president of SCOPE. Community activists help a project become a better project because of the discussion, she said, and it’s a benefit to the community.


The developer, however, refers to those instances as a “fix-it ticket” which delayed the project some while adjustments were made, Lauffer said, but in the end never substantively changed anything in the master plan.


“Newhall Land has spent millions of dollars on reports, studies, surveys and assessments — far more than the environment will ever receive back,” Wrage said.


Saying the environmental community has become a cottage industry, Wrage believes if a portion of the money spent fighting over environmental issues were actually instead put to use protecting local habitat, the money would be better spent.

People think of environmentalists as only standing up for habitat and endangered species, Plambeck said. It involves more than that, she said, explaining that environmentalists speak to clean air and water where kids are playing outdoors. These are concerns of every “soccer mom” who don’t want their kids to suffer from asthma, Plambeck said.


An outdoorsman himself, Wrage said he likes to bicycle, hike and ski and appreciates the protection of land and habitat but that like with all things, sometimes people take issues to an extreme.


There are developers who haven’t seen a square foot of land that shouldn’t be developed, and likewise, there are environmentalists who are only interested in dragging out the development process, he said.


“I did a project in 1999 channeling a portion of Newhall Creek as part of the McGrath Elementary School,” Wrage said.


The process of channelizing the river involved shoring up a naturally eroding river bank by extending concrete lined banks from an upstream lined channel, but even that project took months of studies and hundreds of thousands of dollars in mitigation, he said.
“You would have thought it was a stream and uninhabited area instead of an urban wash full of empty beer cans, trash and people living in it,” he said.


Valencia example
Plambeck insists, however, that all development is not bad. Believing the community would be better served by smaller developers, Plambeck cited Valencia as an example of master planning that made sense.


“Master planning makes sense. Valencia made sense,” she said. “Newhall Land did some really wonderful things for the community.”


The way Valencia was developed when Newhall Land was a community developer was OK, Plambeck said, claiming Newhall Land really cared about the community.


But when a company begins planning projects to make the bottom-line right for investors, it’s no longer motivated solely to do the right thing for the community, she said.

The problem with developments like Newhall Ranch, she said, is that they are so large and involve so much land use that it takes away the planning process from future generations which might like to have some input about their community.


Developing smaller plots of land would have been more expedient for the company, Lauffer said, but if the land is built in a piecemeal vs. master planning fashion, one can’t plan for the community in a comprehensive fashion.


“When you approve huge tracts, people tend not to revitalize their neighborhoods,” Plambeck said. “If you just build a bunch of new housing, you get the ‘throw-away house’ idea. I won’t repair my house, ‘I’ll just sell my house and buy in a new community.’”
In the end, however, regardless of whether residents are pro or anti-development, the lengthy delays of projects eventually add to the cost of each home for home buyers, Wrage said.


The cost to build a home has grown over the years and with each project delay the impact fees a builder pays for permits, water, schools and more grow as well. Locally, the impact fees, on average, add $88,000 to the cost of every home built, said Wrage.


Over the course of nearly two decades market conditions change, the business of developing and building continues to be hit with more regulations and the money spent on so many environmental reviews all add up, he said.


Economy
The other issue is that despite the protracted recession, the population in California continues to grow according to census records.

Local economists have pointed to a pent up demand where multiple generations of families have been living together under one roof, and as the economy improves, jobs return and consumer confidence rises the experts predict there will be a housing shortage.
While it’s anyone’s guess how long building Newhall Ranch will take to complete, Lauffer said depending on market conditions it may be about 15 years or more before the development is finished.


If the economists are correct, however, builders at the Newhall Ranch development may find it difficult to keep up with the demand in the not too distant future.


“Home sales in West Creek and West Ridge are higher than they have been for a long time,” Lauffer said.


In the meantime, how does a developer stay in business for nearly two decades without anyone building a single structure?

Long-term planning
A lot has happened in the 17 years since Newhall Land first envisioned the Newhall Ranch development.


During the planning years, Newhall Land was acquired in 2004 by homebuilder Lennar, which subsequently filed Chapter 11 in 2008. When Lennar emerged from bankruptcy in 2009, Newhall Land became a privately owned company once again, although Lennar retained a 15-percent stake in the company.


Although two members of the Newhall family remained on the board of directors until the company was acquired in 2004, no one from the family remains involved with Newhall Land.


“You just have to be conservative and focused,” Lauffer said. “We know that Newhall Ranch is going to go forward. We have investors that understand the challenge of doing a master plan so they’re sticking with us as we go through it.”


The company, which employs only 30 to 35 people, has used a variety of consultants to fill vital roles while it waited in limbo for final approval to begin developing.


“We’re very low right now, we’re very lean,” Lauffer said. “It’s been a tough economy. Once we get into active selling of the lots we’ll certainly see our company grow in size again.”


But working on the Newhall Ranch development for close to two decades, which the developer estimates has cost millions and millions and millions of dollars, Newhall Land has had to rely on other sources of income to remain in business.
Remaining operational


For the company that once developed and or built Valencia, there came a time when it needed to sell some of its property to remain operational while it worked for 17 years to secure approval for Newhall Ranch.


Whereas at one time Newhall Land maintained a portfolio of income property when it was publically traded, it later went on to sell the Valencia mall to Westfield, the Hyatt hotel, many of the apartment complexes in Valencia and more, Lauffer said.


“We have our oil and gas operations that bring in some income, our agriculture, cattle grazing, and the filming brings us some income,” Lauffer said. “We have a little land sales here and there. And we’ve sold home sites to KB Home in the last year.”


Despite the long-term planning costs and delays, the company has proceeded with work on the entitlement process throughout that period so that when the economy picks up Newhall Ranch is not delayed and can move forward right along with an improving market, she said.


“We’re a long-term planner. We’ve always been,” Lauffer said. “Valencia has been through four recessions so we know that you’ve got to be able to ‘batten down the hatches’ and keep focused.”


But despite the large Newhall Ranch project, the company still owns land beyond it.


Future
“We still have 16,000 acres in Ventura County at this point, but their policies are not supportive of growth,” Lauffer said. “Who knows if that may ever change, but we’re not pushing it.”


Taking one day at a time, Newhall Land’s immediate focus will be on developing the 295-acre Landmark Village community of 270 single-family home lots, condominium complexes, apartment buildings, 16 commercial lots, a park, school, fire station and 119 lots for open space in the Newhall Ranch project.


So what does the company that once began with the five sons of the original land owner see itself doing in the future?


“We like to brand ourselves as premier community planners and we’ve been involved in assisting other master planners,” Lauffer said. “So I think there’s another role the company could take and it might not involve land Newhall Land owns.”
jadkins@the-signal.com
661-287-5599

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