Homes sell for less

Illustrating the shaky state of the housing market, 17 model homes at the Brightwater development on the Bolsa Chica mesa were sold to a private investor for $25 million.

Seven other homes at the development were sold by California Coastal Communities Inc. to individual buyers during the fourth quarter of 2008, the company said, at an average price of about $2.1 million a home.

By comparison, the properties sold to the investor averaged just $1.47 million a home.

The investor will lease the models back to Brightwater over the next three years, so they will continue to operate as model homes. There also will be two one-year renewal options, the company said.

“The sale and leaseback of the model homes at our Brightwater project increases our liquidity and improves our company’s financial position during this extraordinarily difficult time in the housing market,” company chief executive Raymond J. Pacini said in a statement.

The investor paid California Coastal Communities $22.5 million in cash; $2 million will be made in two years, after certain unspecified conditions are met.

The remaining $500,000 will be set aside as a reserve that will be used to convert the model homes for sale when the lease ends, the company said.

Once an unspecified return is made by the investor on the properties, California Coastal Communities will receive 75% of the resale profits, the company said, including a 5% sales commission.

“This transaction and the September 2008 amendments to our credit agreements provide the flexibility we need to continue to meet our strategic goals for the Company’s financial position,” Pacini said.

California Coastal Communities used $10.2 million of the cash from the sale to trim down the repayments due for Brightwater this year.

In addition, $10.7 million was used to reduce its revolving credit balance, the company said, giving it a total liquidity amount of $16 million.

The company plans to list the transaction as financing, rather than a pure sale, since it expects to profit from the units in the future.

Other than the 25 homes sold to the investor, the company has sold 15 homes at the site this year — and 24 to date.

However, two more sales have been initiated since the end of the company’s fourth quarter on Sept. 30.

“The continuing loss of consumer confidence during the financial crisis worsened in mid-September, and coupled with the moribund state of the residential mortgage market, has negatively impacted our new orders in the fourth quarter,” Pacini said.

“While traffic at Brightwater has been significant and buyer interest healthy, the combination of factors affecting consumers and the mortgage market have constrained our business in the fourth quarter. We are hopeful that the federal government’s measures, designed to revive the mortgage market and restore consumer confidence, will enhance our efforts as we begin the 2009 selling season.”

Seven completed homes remain unsold; nearly one in five orders was canceled in 2008, the company said.

California Coastal Communities owns builder Hearthside Homes and landowner Signal Landmark. The community, which will total 356 homes over 110 acres, is the site of a notable Native American village and grave site, and has been in the news for artifact discoveries before and during construction.

CANDICE BAKER can be reached at (714) 966-4631 or at [email protected].