Real Estate: Thistles in the New Towns

By the time it turned five years old this spring, Sunset/Whitney Ranch was supposed to have grown into a thriving city-in-the-country, with a blend of homes, stores and factories and a population well on its way toward an ultimate 100,000. So far, the place has attracted only two plants and 1,200 inhabitants; lack of sales halted home building two years ago at the 12,000-acre site 25 miles northeast of Sac ramento, Calif. Now “For Sale” signs dot Sunset’s vacant lots—also some of its occupied homes spotted here and there amid the expanse of thistles.

Despite a $25 million investment, Sunset has flopped—leaving Sunasco, the Los Angeles-based oil-finance-realty company that started the project, with a continuing debt of $1,500,000 a year. “We can’t do anything with it,” admits Sunasco President Bruce Rozet. “We can’t even find a buyer to take it off our hands.”

Similar woes afflict all too many of the nearly 300 large-scale planned communities and “new towns” that have sprung up across the U.S. Their troubles are a source of particular concern because architects and developers alike feel that the best of the projects could teach the whole country how to surround homes with a more pleasant environment. Moreover, planners consider new towns a promising antidote to the suburban sprawl. Such haphazard building, they say, could wreck the countryside as the U.S. doubles its stock of housing over the next 30 years.

Suspended Sales. Even though John Hancock Mutual Life Insurance Co. has just increased its underwriting from $7,000,000 to $14.5 million, construction has slowed to a near standstill at six-year-old El Dorado Hills, a 10,000-acre new town 25 miles east of Sacramento. Ross Cortese, one of the nation’s foremost developers of self-contained retirement villages, was forced to suspend sales and refund some down payments recently at four of his “Leisure World” communities in Maryland, New Jersey and California. To reduce his heavy land-carrying costs, he is also trying to sell the developments. Despite brisk business (1,000 houses and 600 rental units in five years), Joppatowne, Md., a 1,400-acre community near Baltimore, ran out of cash this spring; and Developer Leon Panitz filed for a bankruptcy reorganization.

This month, misfortune of another kind hit Robert E. Simon Jr., the mild-mannered millionaire developer of Reston, Va., best-known and by far the most architecturally visionary of the new towns. In a corporate reshuffle, Gulf Oil Corp. took control of the financially ailing project, kicked Simon upstairs from president and chief executive officer to a consulting role as chairman of a newly formed subsidiary, Gulf-Reston Inc. As the new boss, the oil company named Robert H. Ryan, a Pittsburgh realty consultant and onetime vice president of Boston-based Cabot, Cabot & Forbes, itself the developer of the floundering new town of Laguna Niguel between Los Angeles and San Diego.

Urbanity in the Boondocks. Reston, which lies on 11 sq. mi. of wooded fox-hunting country 18 miles west of Washington, D.C., has long been strapped for funds. In his zeal to create a town of beauty, Simon, heir to a Manhattan real-estate duchy, plunged ahead with construction in 1962 without calculating how much his dream would cost—or even securing a loan. Simon recalls that “Reston never recovered” after the collapse of an oral deal with the Washington Gas Light Co. to supply $6,000,000 at a low interest rate. Gulf bailed him out with $15 million only five days before lack of funds would have halted buildine in 1964.

Still cash-shy despite Gulfs investment, Simon borrowed $20 million more in 1966 from John Hancock Mutual Life Insurance Co.—and surrendered title to most of Reston’s land, for which he had paid $13 million. But expenses mounted while house sales (only 582 so far) lagged behind. Many of Reston’s starkly modern town houses proved too costly ($35,000 to $47,000) to lure buyers. In an effort to assure full occupancy of the 15-story apartment tower that makes Reston a symbol of urbanity in the boondocks, rents were set too low to repay the mortgage loan. As Gulf took over, Vice President William L. Henry estimated that Reston would need an injection of $12 million more cash by 1970 to move out of the red.

Promise of Riches. Despite their immense cost, some new towns are prospering, often because the developer acquired strategically placed land decades ago at a bargain price. Around Los Angeles, not only the Irvine Ranch (TIME, Sept. 22) but also Valencia and Janss-Thousand Oaks are being transformed into cities by the families that once only farmed them. Goodyear Tire & Rubber Co. is converting its onetime cotton farm outside Phoenix, Ariz., into Litchfield Park, a planned town for 100,000. McCulloch Oil Corp. has attracted more than 2,500 settlers to its resort-and-industry town of Lake Havasu City in the sparsely inhabited Arizona desert along the Colorado River. Humble Oil’s Clear Lake City, which is on 23,000 acres of oil and gas-bearing grassland near Houston, shows promise of success after suffering some fumbles at the outset. Against more difficult odds because of recent costly land acquisitions, Shipping Tycoon Daniel Ludwig’s Westlake Village near the San Fernando Valley and Mortgage Banker James W. Rouse’s Columbia near Baltimore are also making a quick start. “The worst that can happen to us,” insists Rouse, “is that we’ll get rich slowly.”

Even Simon, who retains a minority interest in Reston, figures that he will recoup his $1,800,000 investment in time, if only from soaring realty values. On land that cost $1,900 an acre in 1961, Reston industrial sites already are bringing as much as $40,000 an acre.