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KB Lake Forest Buy: Big Interest Returns

Publicly traded homebuilders are taking a closer look at Orange County, if a sizable deal in Lake Forest this month is any indication.

Los Angeles-based KB Home recently outbid close to 20 other builders for 11 acres in Lake Forest known as Whisler Ridge, according to brokers at the Irvine office of Land Advisors Organization.

The land could hold 68 homes as large as 3,200 square feet. KB Home is expected to have homes going up on the site at Regency Lane and Osterman Road later this year or in early 2012.

It’ll be the first OC project for KB Homes beyond Irvine in a couple years. The builder currently has two housing projects selling in the county, both in Irvine Company’s Portola Springs neighborhood near the Orange County Great Park.

KB ranked No. 5 among builders here last year, with 142 home sales, according to the Business Journal’s February homebuilders list.

Terms of the Whisler Ridge deal weren’t disclosed. Sources put it in the $15 million range.

The project is expected to cost KB Home another $10 million or so to complete, according to initial marketing materials for the land.

The project won’t have any Mello-Roos taxes, giving Whisler Ridge’s new owner “a good niche” in which to market the home, said Land Advisors’ Winn Galloway, who worked on the deal with colleagues Mike Hunter and Allison Rawlins.

Land Scarcity

KB Homes’ acquisition is a rarity of late.

As of mid-February, only four of the 18 largest land sales here—a combination of raw land, busted projects and other deals covering lots for about 1,500 homes—were made by publicly traded builders, according to Land Advisors.

Deals instead have been dominated by upstart and smaller builders, most of them backed by institutional investors.

The largest raw land deal here in the past year is believed to be the sale of Irvine’s Lambert Ranch, a family owned tract of raw and agricultural land that sits amid the Portola Springs development.

That land was sold to Aliso Viejo’s New Home Co., a builder started two years ago by an executive team that includes former John Laing Homes chief executive Larry Webb.

The Lambert Ranch deal is believed to have traded hands for close to $50 million. New Home Co. officials said they’re breaking ground at the gated-community project in early May.

With Irvine Co. handling home building on its land for now through its Irvine Pacific LP unit, there’s a lack of entitled, ready-to-build land sites in the county for other builders.

The shortage is starting to draw more public and private builders. It also is pushing land prices up, according to Land Advisors’ Galloway.

“Without a doubt, the story here is the lack of buildable lots,” he said. “The value that has to a homebuilder is significant.”

Whisler History

While terms of the Whisler Ridge deal weren’t disclosed, it appears to have been profitable for the seller, Irvine-based Trumark Homes.

The builder, a unit of Danville’s Trumark Cos., bought the land from a family trust for about $4.5 million in mid-2009.

Trumark initially planned to finish entitling the land and break ground on homes last year. It reconsidered once interest from potential buyers emerged.

“The property is now worth three times what we paid for it,” said Michael Maples, Trumark Homes chief executive, in a statement. “It simply made more sense to sell it than to build it out.”

Trumark got 20 offers from public and private homebuilders “at an extremely attractive price point,” Maples said.

The builder has raised more than $95 million in the past two years and closed nine deals. It now has more than 1,800 lots in “core urban areas” of California, according to Trumark officials.

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Mark Mueller
Mark Mueller
Mark is the Editor-in-Chief of the Orange County Business Journal, one of the premier regional business newspapers in the country. He’s the fifth person to hold the editor’s position in the paper’s long history. He oversees a staff of about 15 people. The OCBJ is considered a must-read for area business executives. The print edition of the paper is the primary source of local news for most of the Business Journal’s subscribers, which includes most of OC’s major corporate and community players. Mark’s been with the paper since 2005, and long served as the real estate reporter for the paper, breaking hundreds of commercial and residential real estate stories. He took on the editor’s position in 2018.
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