In 1979, with interest rates heating up and the housing market cooling down, Rossmoor Corp. bet $1 million that there were still buyers for lavish homes with luxury price tags.
At the time, the company was almost ready to start building the last tract of typical Leisure World retirment condominiums in Laguna Hills, Calif. The grading was finished and some utilities were installed.
Instead, the builder tore out the utilities and bulldozed the hillside anew at a cost of about $1 million, readying the site for a different kind of Leisure World home.
It was named Grand Finale and grand it would be: 110 homes of at least 2,200 square feet and including such touches as Italian marble walls and doorbells programmed to play 27 different tunes.
The prices were grand, too: $259,000 to $359,900 on Oct. 25, 1980, when sales began. Now they start at $319,900.
But the bet paid off.
While other homebuilders struggled to pay mounting interest charges out of dwindling sales, Grand Finale homes have been selling at a rate of a little more than one home every two days. Now only five remain.
And if the pace doesn't match that of the frenzied 1960s, when buyers lined up by the hundreds to purchase a Leisure World Manor, it is still a suitably dramatic concluding chapter to the Rossmoor Corp. story.
After all, Grand Finale is more than the end of a housing development. It also signals the end of the Rossmoor Corp. The company that developed five leisure Worlds across the country -- including one near Olney, Md. -- and once was described as the nation's largest homebuilder is liquidating. Corporate officials announced last month that the company, known worldwide for its comprehensive retirement communities, will be dissolved in June after anticipated shareholder approval of a liquidation plan.
In an interview, Rossmoor Corp. founder and chairman Ross W. Cortese said he began positioning the company for possible liquidation about three years ago.
"I kind of felt the money market was getting bad and that we should pull our oars in," said Cortese, who owns 61 percent of the corporation's stock.
"I felt we should get in a liquid position and finish (Leisure World in Laguna Hills) out and then see what the money market was like."
As it turned out, the financial market was not right to build another Leisure World, with its combination of senior citizen housing and extensive private recreational facilities.
"To build a Leisure World, the way we know how to build a Leisure World, is extremely risky," says Rossmoor Corp. President Albert R. Ceresa.
"Building a subdivision is one thing. Building a Leisure World is another. We had $154 million invested in Leisure World Laguna Hills before the first home was occupied. I think we're talking hundreds of millions of dollars today."
Ceresa said selling off the company's assets promises to produce the highest return for shareholders. Their returns have been mediocre over the years. The company never paid a dividend and, until the announcement that the firm might liquidate, its stock never even approached the $14.50 price per share it reached in its initial year on the American Stock Exchange. The stock was trading between $4 and 48 a share until the announcement of the liquidation plan. Since then, it has risen to over $12, and closed last week at $1325.
Liquidation of the profitable corporation -- even one with declining profits like Rossmoor's -- is not unprecedented, but it is rare.
But Rossmoor Corp. and its maverick founder never have been part of the building industry's mainstream.
While other builders were throwing up tracts piecemeal in the late 1950s, Cortese built the walled community of Rossmoor in Los Alamitos -- using a theme, slick advertising and decorated model homes to sell nearly 3,800 homes in three years.
And at a time when retirement communities consisted primarily of age-segregated housing, perhaps with gold courses and a clubhouse, Cortese introduced Leisure World -- with its multitude of facilities and its medical care package -- and marketed it nationwide to men and women over age 52.
The first Leisure World was born of frustration. Cortese says he had been trying to build a hospital adjacent to Rossmoor to serve the walled community, but was frustrated by delays in obtaining federal funding.
Finally, Lewis Letson -- a Cortese friend who was administrator of a Lynwood hospital -- proposed an alternative.
"Lewis was saying, 'You know, Ross, there's a big need for housing and medical care for the elderly," Cortese recalls.
At the same time, A. Oakley Hunter -- a former congressman who had served as general counsel to the U.S. Department of Housing -- told Cortese about a new federal program aimed at encouraging construction of cooperative housing.
"We decided to drop the hospital and get into housing for the elderly, provided we could get the [Federal Housing Administration] financing," Cortese says.
The financing was critical. The new program provided FHA insurance for 40-year mortgages at 5 1/4 interest, which enabled the company to hold inital monthly payments on the 6,500 homes built in Seal Beach Leisure World to between $93 and $104.
Cortese was so apprehensive that the project would turn out to be a monumental flop that he refused to be on hand when sales began in late 1961.
"You can be the brightest person in the world and still be stupid," Cortese said in his Laguna Hills corporate headquarters office. "You never know the public."
His fears proved unfounded.
Besides its fast-paced sales, the retirement housing project that would become synonymous with the name of Rossmoor turned out to be a trailblazer in other ways.
It was the largest cooperative housing project in the United States and the first of any size west of the Mississippi River. It was also the first all-electric community in the nation.
The success of Seal Beach sent Cortese on a land-buying spree from coast to coast: 3,700 acres in Golden Hills, Ariz.; 1,000 acres in northern Silver Spring, Md.; 600 acres in Coconut Creek, Fla.; and, of course, 2,500 acres in Laguna Hills. The company launced five Leisure Worlds on its own. Two others, in Florida and Arizona, were developed in joint ventures with other companies. There was even talk of taking Leisure World worldwide.
The National Association of Home Builders named him "Builder of the Year" in 1963, and Practical Builder magazine described him as "the biggest home buider in the United States" in a 1966 issue.
Ironically, however, the man who created the most social of retirement communities socialized little himself.
He spurned the building organizations in which he might have been a leader and rarely socialized beyond his family and a tight circle of friends. A quiet man who dropped out of high school to sell produce door-to-door, he endured without zest the public appearances success required.
"I never finished my education, and I'm kind of embarrassed," explains Cortese. "I'm afraid I won't say quite the right thing in the way I want to say it."
The distance the builder put between himself and outsiders, the stories that circulated about his legendary temper and the ire that inevitably arose when buyers found something wrong with a new home occasionally provoked hostility toward Cortese among some people who bought his houses.
Cortese recognizes the antagonism but is largely philosophical about it.
"You can't say it doesn't disturb you, but what can you do about it?" be mused. "That's life."
Eventually, the success that created the publicity waned under the weight of one of the building industry's inevitable slumps.
The company suffered losses of $2 million in 1966 and of $6.5 million in 1967, prompting a temporary halt to Leisure World sales in California, Maryland and New Jersey.
Officials began selling off assets, first the Walnut Creek project and then the New Jersey Leisure World, to pay off debts. Plans for the Laguna Hills project were scaled down from 18,000 homes to 12,000.
In 1968, the cooperative concept was abandoned because interest rates has risen to 8% and 9% and lenders refused to finance the FHA-backed loans frozen at 5 1/4 %.
Discussions loccurred about selling the corporation altogether.
The belt-tightening eventually paid off and, by the late 1960s, the company had returned to profitability. After going public with an issue of 1 million shares in 1971, it had capital available for another round of expansions.
That lasted until the Arab oil embargo and another building industry slump from which Rossmoor never fully recovered.
The firm suffered record losses of $9.4 million in 1975. Assets in Arizona, California, New Jersey were sold, including commercial properties such as a half-interest in the Laguna Hills Mall.
Subsidiary Rossmoor Construction Corp., which had been losing money for years, was spun off in 1977 to finish Leisure World in Silver Spring, Md., as an independent company known as RCC Inc.
A second subsidiary that had become unprofitable, the Lagune Hills Utility Co., also was spun off as a separate publicly traded firm providing water and sewer services to the Laguna Hills Leisure World.
By 1978, the Laguna Hills project and a few commercial ventures outside its walls were the only active Rossmoor Corp. developments, and they visibly were winding to a close.
After it sold 530 new homes in 1978 and posted record profits of $6.3 million, Rossmoor's sales dropped to 148 homes in 1979 and 23 dwellings in 1980. Profits shrank to a mere $884,000 in the fiscal year ended last September, although they bounced up in the first quarter of the current fiscal year, reflecting the start-up of sales on the Grand Finale project.
A few more homes will be built in Leisure World after the Laguna Hills project is complete and the Rossmoor Corp. is gone.
A piece of surplus land next to the original Seal Beach Leisure World has been bought by a developer who is building 126 condominiums to be incorporated into that community.
Additionally, 3,000 retirement homes remain to be built in the Silver Spring Leisure World, which is a joint venture between RCC Inc. and Giuseppe Cecchi with the former as limited partner and the letter as general partner.
And the man who started it all, Ross W. Cortese, now 64, will remain as active as the residents in one of the developments he created.
The Rossmoor Corp. founder said he plans to continue as chairman of the two former subidiaries in which he still holds majority interests and expects to dabble in other small undertakings.
"I'm certainly not going to hang up my hat," he said. "There's lot to do. I wouldn't know what to do with myself if I retired."