Tustin is working on Plan B to kick-start development of Legacy Park, an 820-acre project that takes up about half of the city’s former Marine base.
The city plans to raise $40 million through a bond sale to pay for an extension of a key road and other work at the site, officials said.
Bidding for the road work—an extension of Tustin Ranch Road through the heart of the former base—is set to take place next year. The hope is that the extension will spark more interest from developers, officials said.
Beyond that, the city still is “refining our disposition and business strategy” for the land, said Christine Shingleton, assistant city manager.
A decision isn’t expected until early next year on the city’s next moves.
Tustin also is exploring commercial development near the former base, including a recently signed agreement that’s expected to bring a pair of hotels.
“We’re taking a thoughtful approach to this,” Shingleton said. “We need to look at (the Legacy Park project) in a business role, not just as a city.”
It’s been a tough business to manage recently.
An initial Legacy Park development deal was signed in 2006. Plans called for 2,100 homes and 6.7 million square feet of offices, restaurants, shops and hotels, with work starting within a few years.
Original Developers
Original development partners in the project, set to be one of the largest in Orange County, included Aliso Viejo-based Shea Properties and sister company Shea Homes of Walnut, along with Dallas-based Centex Corp.
The recession put plans by the group, known as Tustin Legacy Community Partners LLC, in limbo.
Centex pulled out in 2007. The Shea partners opted to hold off on construction as they awaited a real estate rebound.
Last year, the city and Shea entered a forbearance agreement designed to spur some activity, which failed to materialize.
Earlier this year, Shea pulled out of the stalled megaproject due to the slow real estate market and a disagreement over the value of the land.
The parties came to a termination settlement a few months ago. The development partnership handed back 335 acres it controlled at the site to the city in August.
“There’s no ongoing relationship, we’re free of any encumbrances,” Shingleton said.
The city’s been “bombarded” with developer interest about parts of the land since the prior deal ended, she said.
Housing development, especially apartments, has been getting the most interest in terms of work that could begin sooner rather than later, she said.
Commercial development options appear limited in the near term. Plans for Legacy Park run nearly 20 years, according to Shingleton.
Figuring out the best way to proceed with any type of work still is being discussed by the city, which hasn’t decided whether to try working with one large master developer again or to negotiate with several smaller developers for individual parts of Legacy Park.
Last month, the city spent about $100,000 to hire a handful of real estate consultants, including Irvine’s John Burns Real Estate Consulting, San Juan Capistrano-based Vandermost Consulting Services Inc. and Newport Beach-based Concord Group.
Among the questions facing the consultants: What to do next? What is projected for the market? And what is the city’s land worth in today’s market?
Shea initially had been expected to pay $236 million for the land. It argued earlier this year that the value of the land was closer to zero, factoring in falling land prices, rents and home prices and the significant amount of infrastructure work needed to get the project moving ahead.
The city contested that appraisal.
“I still think the property has significant value,” Shingleton said.
Next Steps
Consultant reports are expected back in a few months. The City Council is expected to take up matters on a plan around springtime, according to Shingleton.
Bidding on construction work tied to the extension of Tustin Ranch Road, which now dead ends near the former base’s iconic blimp hangars, is expected to take place by mid-2011.
The city cleared the way for $40 million in bonds for the project in mid-November, officials said. The city hopes the extended road’s access to the base will help convince developers to build.
The decision by Shea Properties and its partners to back away from Legacy Park doesn’t appear to be holding back interest on other projects in the city.
Tustin last month entered into talks with Irvine’s R.D. Olson Development to build a pair of hotels on about nine acres next to the Costa Mesa (55) Freeway and Edinger Avenue, near a Micro Center electronics store.
Olson has proposed building two hotels—a Marriott Residence Inn and a Hilton Garden Inn—which together would total at least 300 rooms and include additional restaurant and retail space.
If things go as planned, construction could begin by late 2011, with completion of the project about a year later, said Robert Olson, chief executive of the hotel developer.
Olson was one of the first developers to agree to build at Legacy Park and had proposed a trio of hotels at the site, totaling about 480 rooms. The lack of construction elsewhere on the site kept those plans from moving ahead.
The Hilton Garden Inn was one of the three hotels originally planned for Legacy Park.
“We’re taking that flag” to the new site, Olson said. “We’re active right now. (The market) will come back.”
