Newhall

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While other developers were hunkering down during the early ’90s, Newhall Land & Farming Co. was spending millions pursuing the most ambitious residential development L.A. County has seen in 30 years.

Newhall Land’s decision to move forward with the Newhall Ranch, a self-contained city of 70,000 proposed for 19 square miles west of Valencia, came at a time when the company still had 7,000 acres of unsold residential lots in its planned community of Valencia.

But what might have seemed foolhardy or even reckless at the time appears to have been a shrewd move.

Home sales in Valencia have rebounded to 1989 levels, and the company is on track to sell its remaining inventory there by early next century, just as Newhall Ranch comes on line.

“Even as bleak and horrible as things got, we were absolutely convinced things would come back and that once again we would do even better than we had in the ’80s, which of course was just a phenomenal time for the company,” said Thomas L. Lee, the company’s chairman and chief executive.

Those who watch Newhall Land say the move is in keeping with the company’s highly methodical style, in which plans often are laid out decades in advance.

“Compared to your typical builder-developer, Newhall Land is much more far-reaching in terms of their vision,” said Dee Zinke, executive director of the Building Industry Association, Greater Los Angeles/Ventura Chapter. “Newhall Land & Farming is looking at 10-, 20-, 30-year time horizons.”

But critics, particularly officials in Ventura County, are less impressed than they are nervous about what they see as Newhall Land’s relentless approach to development.

They fear the company’s next big thrust will be 16,000 acres of farmland it owns on the Ventura County side of the border. Company officials insist they have no plans to develop the acreage, but Ventura County officials are unconvinced.

“They are in the business of land conversion. That’s what they do,” said Ventura County Supervisor Kathy Long.

Long’s colleague, Supervisor John Flynn, agreed. “I think in the long term they want to see thousands of homes in that area. They want to see the Valley grow homes instead of fruit,” he said.

As currently proposed, the Newhall Ranch project would entail more than 24,000 homes along the Santa Clara River, a valley dense with citrus trees and row crops between Magic Mountain and the Ventura County border.

The L.A. County Board of Supervisors recently decided to fast-track the project, provided that the developer agrees to set aside more open space, build 15 percent fewer homes and provide more low- and moderate-income housing.

Supervisor Mike Antonovich, who brokered the deal, estimated that after the compromise, the development would have 20,850 homes, about 3,500 fewer than planned. But Lee said the numbers won’t be finalized until the company finishes revising its plan.

The project goes back to the supervisors on Oct. 27 for conditional approval, with a final decision expected by the end of the year. Lee is confident the company and the county can come to terms.

“Newhall Land is painfully aware of the enormous lead time needed for a project like that. It can take 10 years or more and lawsuits are inevitable,” said Rick Peiser, an urban planning professor at the University of Southern California. “I’m sure they did a calculation when they would be in need of land for continuing development and decided they could be in a position of running out.”

The Sierra Club has filed a complaint with the Public Utilities Commission arguing that development will draw too much water from the Santa Clara River and from groundwater, threatening downstream aquifers as far west as Oxnard.

Ventura County officials echoed those concerns, noting that the project would deplete already-taxed groundwater supplies throughout the Santa Clara River valley. The county has gone on record supporting the Sierra Club’s complaint to the PUC.

“It could be a very significant problem,” said Long.

But Lee says the fears are overblown. The company will supply the project using a combination of state water, Castaic Creek water (which the company has entitlements to) and reclaimed water, which will be used for landscaping.

“I’m confident we’re going to overcome this issue, but it’s just one more thing you have to deal with along the way,” he said.

Ehud G. Mouchly, managing director of the real estate consulting group for PricewaterhouseCoopers LLP, said it was smart of the company to begin planning the project during a recession.

“Government regulatory bodies are just more responsive for getting these things done (during a recession),” he said. “They’re looking for things to do. It keeps the bureaucracy in business.”

Mouchly added that far from being reckless, Newhall Land’s decision to launch the project during the recession makes sense.

“These guys knew the market would turn around,” he said. “The question is, do you have the funds to carry this vision out and these guys did.”

Mike Haviland, manager of economic development for the city of Santa Clarita, said while other developers are looking for the quick kill, Newhall Land is in the business for the long haul.

The company has spent hundreds of millions of dollars developing Valencia’s infrastructure, including extras like pedestrian paths, green spaces and landscaped medians on which the company doesn’t see an immediate return.

Peiser and Mouchly agreed that few planned communities in the nation have been as successful as Valencia.

“They’ve had a huge advantage because they owned that land forever,” said Peiser. “Also, being a public company has helped them get capital when others couldn’t. But the main thing is they’ve been very conservative in not biting off more than they can chew.”

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