REAL ESTATE CREDIT CRUNCH, RECESSION AND GROWTH CONCERNS CREATE PROJECT DELAYS, FORCES STAFF REDUCTION AT THE IRVINE CO.
REAL ESTATE CREDIT CRUNCH, RECESSION AND GROWTH CONCERNS CREATE PROJECT DELAYS, FORCES STAFF REDUCTION AT THE IRVINE CO. NEWPORT BEACH, Calif., Jan. 22 /PRNewswire/ -- The following was released today by John M. Galvin, William H. McFarland and Gary H. Hunt of The Irvine Co.: The bitter and painful reality of recession, exacerbated by a punitive real estate credit crunch and resistance to new growth, hit home today. In individual meetings, 60 of our employees were informed they are being laid off, reducing our staff to 326. For each, we will provide a generous severance package that exceeds industry practice, and professional outplacement counseling. Both reflect our personal concern as well as our gratitude for the significant contribution each has made to our company. Today's action was authorized by our board of directors following a comprehensive review of our operations and business plan assumptions. It is driven by a discouraging but, we believe, realistic reassessment of the prospects for near-term recovery in Orange County real estate. We simply could not justify existing staffing levels for projects in various stages of planning and development where progress has slowed to a trickle for the past year. Specifically, the majority of our layoffs will fall within our land development group. Virtually every community development plan we are pursuing has been slowed to a crawl by some crippling combination of depressed market conditions, a lack of credit for our homebuilding partners, political and environmental delays and debate over infrastructure issues. We feel fortunate that the number of employees affected is being held to 60. This is a measure of the diversity of our operations, the strength of our income-producing investment properties, the continued appeal of our land for those who have the financing to buy it and several resourceful moves we made in 1991 to take advantage of business opportunities in an otherwise bleak market (i.e., the sale of apartments built as condominiums, the sale of various ground leases that had been producing a marginal return for the company and a program to sell remaining residential ground leases.) Our challenge now is to aggressively pursue the selective business opportunities that exist in the very near term. To be sure, new office, industrial and retail development is largely stymied, but the leasing of our existing company-owned income-producing properties continues to outpace the rest of Orange County. We are moving forward with the custom lot program at the Newport Coast; as well as the residential communities of Village 38 in Irvine and Newport ridge in the Newport Coast, both of which will provide much needed housing at moderate prices in highly desirable locations. We believe our builders will be able to achieve financing to proceed because of the attractive potential of these communities. It's not simplistic to say that like most households during this recession, we have been forced to reassess our plans and expenditures, reduce our debt, postpone major new investments and position our company for the upturn that we know will come. The lack of construction financing remains the most difficult obstacle to recovery. Last week's Wall Street Journal noted that 82 percent of builders responding to a national survey reported restrictions on normal lending policy. About half also said that the lack of financing -- specifically, construction financing -- is a more serious problem affecting their business prospects than the sluggish market conditions or other significant concerns. While The Irvine Co. is not a home builder, per se, we rely upon builders to purchase our land and undertake development consistent with our comprehensive master plans. When builders can't buy, it impacts us, our employees and the local economy. More than a year ago -- in November 1990 -- we sounded a loud public warning that these onerous credit restrictions were bringing the nation's real estate industry to its knees. We have watched with considerable frustration as our elected representatives, appointed policy makers, regulators, economists and the media slowly recognized and acknowledged that the credit crunch exists, and that real estate development has been singled out for particularly punitive treatment because of the problems associated with the savings and loan debacle of the 1980s. Acknowledging the problem is a necessary first step. But doing something about it remains lost in the Byzantine world of Washington debate and political maneuvering. Virtually nothing concrete has been changed. And, as we wait, we have watched numerous friends and associates in the real estate development industry fold their tents, some for good. The latest victims are the employees we are laying off today. Fortunately, given the unique nature of our company -- a major landowner and a conservative real estate investor with a long-term outlook and relatively low debt -- we remain one of the strongest real estate companies in the nation. We have full access to credit to support our ongoing operations. But reality dictates that we adjust our operations to reflect changing economic and political conditions; and the reality is that there is a direct relationship between our business prospects and our ability to provide ongoing employment, as well as support for the communities in which we do business. In the long-term, we remain bullish on Orange County and its continued prospects of sustained economic growth. This expectation -- tempered by an ongoing concern about our region's ability to reasonably balance economic and environmental concerns, and to tackle and solve knotty public issues -- provides us with hope and a sense of excitement about the future. As we reflect on today's reduction in force, we do so with a sense of sadness. We will miss those who have contributed to our significant achievements. Each leaves with our gratitude, a shared sense of disappointment, and our hope that they will be successful in his or her next career move. -0- 1/22/92 /CONTACT: Larry Thomas, 714-720-3232 or Dawn McCormick, 714-720-3463, both of The Irvine Co. CO: The Irvine Co. ST: California IN: SU PER
EH-JL -- LA037 -- 2562 01/22/92 20:11 EST
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|Date:||Jan 22, 1992|
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