Article Excerpt:
TWST: What is California Coastal Communities?Mr. Pacini: We are a small, exclusively Southern California-based land development and homebuilding company with more of an emphasis on the land development side of the business than the homebuilding side. Today, we have just under 1,900 lots that we either own or control. About 1,000 of these lots are not yet fully entitled. In December 2005, we ended a three-year battle with the Coastal Commission and various environmental groups over our approximately 350 home Brightwater project. Brightwater is located on the Bolsa Chica Mesa adjacent to Huntington Beach, and it overlooks the Pacific Ocean and the Bolsa Chica wetlands. Last July, Brightwater was appraised at $302 million, in connection with a recent bank financing; however, the carrying cost on our books was only $142 million as of June 30, and $148 million as of September 30. We have been leveraging the entitlement expertise we demonstrated with Brightwater for another project in Oxnard, which we call SouthShore. This project is a 1,000- unit program, half of which will be single-family detached units. The other half will be townhouses and condominiums. While we will consider building the single-family units, we will sell the multi-family units to other builders. Our company was formed in 1988 as a spinoff from The Henley Group, Inc., and in 1994 we acquired our homebuilding business, which operates under the name Hearthside Homes. We have 57 employees and are currently active in the six Southern California counties that stretch from Ventura to San Diego. Aside from Brightwater, most of our projects are in the Inland Empire region, which is in San Bernardino and Riverside Counties, and in Lancaster, which is in northern LA County. These are extremely tough markets today, because of the pricing competition from the large national builders. Also, the dramatic slowdown that we've experienced in Southern California has caused homebuyer reluctance and low consumer confidence. Everybody is on the sidelines, waiting for prices to drop further. However, we do not believe that our Brightwater and SouthShore projects will be significantly impacted by this slowdown because they are located in regions with very limited supply and minimal competition from the national builders. It is extremely difficult to get permits to build on the California coast and there are only two other projects along the Orange County coast that might compete with our Brightwater project. Those other projects are in South County, in San Clemente and Dana Point, whereas Brightwater is in North County near Huntington Beach, and we really are not in competition with them. Ventura County, where SouthShore is located, is a very growth-constrained region. They passed an initiative in 2000 called SOAR, "Save Open Space and Agricultural Resources," which requires any developer within the SOAR boundaries to obtain a county-wide vote in order for their project to proceed. Our SouthShore project is not within the SOAR boundaries so we don't have to deal with those development constraints. SouthShore is currently the largest project in Ventura County that is going through the entitlement process. We think that we are uniquely positioned with our two largest assets, Brightwater and SouthShore, because they are located in areas that face limited competition.
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