REAL ESTATE
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‘Wounded Builder’: How bad is it out there right now in real estate?
A few comments from Peter Ochs, chairman of The Fieldstone Co. in Newport Beach, one of Southern California’s largest home builders. Ochs spoke at a recent breakfast meeting on a phenomenon he calls “the wounded builder”:
“We have seen a number of small- and medium-size builders already go out of business in this cycle.
“Overall, builder margins have been under severe pressure for two full years. I think the optimists are hoping to break even this year. I have talked to half a dozen major Southern California builders in the last couple of months. As we talked about 1991, their profit plans and what they hope to do, they say with a tinge of hope in their voice: ‘I think we can break even this year.’ Now those to me are the optimists. I’m talking about well-financed, well-run, well-positioned companies.”
The upshot, says Ochs: Builders in the 1990s will look much different in terms of their financial structure. Basically, the survivors will be better-capitalized and will have to put more equity into their deals.
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