ELIZABETH HAYES

Staff Reporter

L.A.’s sixth-largest homebuilder didn’t even exist until 1993 the thick of the real estate recession.

The remarkably fast growth of Western Pacific Housing is an anomaly for the homebuilding business, in which most of the major players either started out years ago when developable land was ample, or owned huge parcels they’ve been slowly building up for years.

Western Pacific had neither of these advantages.

What it did have in its start-up phase was $5 million of its partners’ capital, financing from a major Wall Street firm, and a conviction among the principals that there would be pent-up demand once California recovered from the recession.

At the time, “everyone was afraid of the market,” said co-founder and Chief Executive Eugene Rosenfeld, a housing-industry veteran who wanted to build an entrepreneurial organization. “Our only bet was there would be an economic turnaround.”

The company has doubled its sales each year, hitting $423 million for the year ended March 31. Last year, Western Pacific sold 1,662 homes 600 more than in 1997.

And now, Western Pacific is laying the groundwork to go public within the next year to 18 months, if market conditions are favorable.

“With the infrastructure we’ve put in place, we’re nowhere near our maximum capacity. We expect to continue to grow in California,” Rosenfeld said.

The company’s growth has been fueled both by good timing and the ability to move quickly into booming areas.

Rosenfeld, who formerly was president and chief executive of Kaufman & Broad Home Corp., hired away talent early on from other homebuilders, including Craig Manchester, former chief operating officer of Newport Beach-based Presley Cos. and now president of Western Pacific. Others came from Ryland Group Inc. and Kaufman & Broad’s Northern California division.

In all, Western Pacific has 375 employees in five divisions around the state.

Rosenfeld and his partners secured financing from Apollo Real Estate Advisors L.P. and set about acquiring land, first in Orange County, then San Diego, Northern California, and northern Los Angeles and Ventura counties.

In the beginning, they bought properties in foreclosure as well as small parcels close to one another that combined for a larger project, and hillside properties that some builders would consider too costly to build on.

“They’ve done a tremendous job of getting into the housing market and growing the company. They’ve done that by setting up strong regional offices with a strong management team with experience in the homebuilding industry,” said Bob Bray, national marketing director with Meyers Group Real Estate Information LLC, which provides new-home data.

Helping fuel growth is the fact that prices have been climbing over the past three years and new homes have been in short supply. At the same time, it’s becoming increasingly difficult for homebuilders to secure a dwindling supply of lots.

Western Pacific usually acquires lots in groups of 150 or less in many cases, smaller than the majors would consider.

“What we’re trying to do is turn over stone and look at deals further in the pipeline,” Manchester said. That often means tying up vacant land with a small deposit while the company secures entitlements, which can be a drawn-out process.

“(Sellers are) willing to take less money because we’re taking the risk,” Manchester said.

Part of Western Pacific’s advantage has been its ability to move quickly. One seller in Ventura County recently offered the company a discount if it could close the deal within 45 days. “We were able to have an advantage and get a good land buy,” said Manchester.

Growth also has come through acquiring other companies and their land holdings. Last year, Western Pacific picked up Porter Homes, a 45-year-old homebuilder in the East Bay and Central California, which added 500 home sales to last year’s total and accounted for half of the company’s revenue growth over the previous year.

“We feel we’ve covered all the large California markets and have quite a bit of room to expand,” Rosenfeld said.

In preparation for the day when Western Pacific goes public, the company sets quarterly goals for revenue, closings and profitability. “So when the time comes, everyone will be trained,” Rosenfeld said.

The product mix has shifted over the past five years, from homes for first-time buyers to higher-priced houses for second-time move-up buyers. The average price last year was $250,000; this year it should rise to $300,000. The price change translates into $85 million in revenue growth.

The company has a 2.5-year supply of land, or 5,500 lots under its control. The key will be to continue feeding the development pipeline by buying more land, which may mean moving to more remote locations.

The next L.A.-area purchase, which is about to close, covers 300 lots in three projects in the Santa Clarita Valley. In addition to those more outlying areas, Rosenfeld said the company will continue to look at in-fill locations and others that may be more complicated.

“It’s not as easy as it was. But we’re confident we’ll be able to continue to feed our pipeline,” Manchester said. “We’re opportunistic.”