By JOYZELLE DAVIS
Staff Reporter
Newhall Land and Farming Co. is gearing up for the final build-out of its vast Santa Clarita Valley landholdings.
The development company plans to spend almost $100 million this year to put the finishing touches on its master-planned community of Valencia, which it began in 1965. The Valencia-based firm will finish its “main street”-style retail center and polish off its 750,000-square-foot “power center” retail project as part of its plan to complete the town by the year 2005.
Meanwhile, the development company has its designs on its next master-planned project: Newhall Ranch, a controversial 24,000-home community that could be the largest development ever undertaken in Los Angeles.
“This has been the plan since the inception of the Valencia,” said Thomas Lee, Newhall’s chief executive. “We’re finally at critical mass. Santa Clarita was a smattering of small communities when we started. Now it’s a community large enough to support a more urban kind of development.”
It’s also a plan that will capitalize on the rebounding real estate market.
Newhall Land owns more than 37,000 acres in the Santa Clarita Valley, located 30 miles northwest of downtown L.A. It is one of the few areas in the county where land is available for new commercial and residential development. And as Los Angeles continues to press its suburban boundaries, the Santa Clarita Valley no longer seems as far-flung as it once did.
“It’s now just within reach of the county’s major employment centers, particularly in the (San Fernando) Valley,” said G.U. Krueger, deputy chief economist with the California Association of Realtors. “It’s a lot closer than Southern Orange County.”
Last year, Princess Cruises announced that it is relocating its 600-employee headquarters to Valencia, the first corporate coup for the suburb. Lee said the company is aggressively courting other companies to join it.
Newhall Land has adopted a more aggressive growth strategy as well. It lined up government approvals during the recession and now focuses more on developing and selling commercial property. It has expanded its residential product line as well, going after more first-time homebuyers and increasing home density in some neighborhoods to grab market share.
Now it’s reaping the profits: Earnings have increased for four consecutive years. Sales of residential lots and joint-venture homes in Valencia reached an eight-year high in 1997, as did the absorption of commercial and industrial land.
Lee said 1998 will be a “record year” for the company, noting that he expects to sell more than 1,000 residential lots topping the record of 800 in the home-buying frenzy of the late ’80s.
“It’s an ambitious goal, but we’ve got a lot of (very interested) local and national developers,” Lee said. Seven of the eight new projects that opened in Valencia last year sold out. The company expects to have 12 builders and 17 product lines available in Valencia this year.
(Newhall Land got out of the home-building business in the late ’80s and instead sells land to builders or forms joint ventures in which it provides the property and acts as the bank, participating in the profits as the homes are sold.)
Newhall Land similarly plans to sell off parcels at its two industrial parks, where vacancy rates were 1.1 percent for the fourth quarter, the lowest in the county, according to Grubb & Ellis Co.
After kick-starting its industrial market in 1996 through speculative development meaning construction begins without tenant commitments Newhall has shifted to selling off parcels to other developers.
It sold 62 acres to three outside developers last year, which means “there will finally be buildings for companies to move into,” according to Jim Linn, industrial specialist with Grubb & Ellis. He noted that 1.5 million square feet of industrial buildings are in the works for Valencia this year.
Newhall Land still has 11 million square feet of land entitled for industrial use in Valencia to sell off.
Newhall Land was started by the railroad financier Henry Mayo Newhall, who bought the 48,600-acre Rancho San Francisco in 1875. The land was ranched and farmed until the 1960s, when Newhall Land entered the development business.
As essentially the only landlord in town, it can make money two ways: through rent increases from the buildings in its commercial portfolio or through rising land prices in the property it sells. And prices spiked last year: Industrial land prices went up 18 percent last year, to $10 per square foot.
Len Diamond, vice president of research at the trading firm Josephtal & Co., said the company’s growth hinges on development of the Newhall Ranch project.
The project, which could one day be home to 70,000 people, is located in unincorporated L.A. County territory along Highway 126 between Interstate 5 and the Ventura County line. It was approved by the Regional Planning Commission last December, and next it goes to the county Board of Supervisors where it faces a battle.
Ventura County and the cities of Santa Paula, Moorpark and Santa Clarita want to scale down the project, saying it would generate too much traffic congestion, air pollution and school overcrowding. Ventura County officials say that the environmental impact studies have not thoroughly considered the effect the project would have on their side of the county line.
Lee responds that his development company has addressed all of the cities’ concerns, and that Ventura County officials “just don’t like the idea of a project this large being built next to the county line.”
Development of Newhall Ranch isn’t expected to begin any earlier than 2000, and the build-out will take 30 years. Meanwhile, Newhall Land plans to finish off Valencia by the year 2005.
The company is also “actively looking” for other parcels of land in the Western U.S. where it can develop master-planned communities.
