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FivePoint Increases Stake in Great Park

The developer of the Great Park Neighborhoods in Irvine is increasing its ownership stake in the massive project at the former El Toro Marine Corps air station, where a new batch of residential, commercial and park construction is about to begin.

FivePoint Communities Management Inc. recently upped its stake in Heritage Fields LLC, the investment group backing Great Park Neighborhoods.

An investment group led by Aliso Viejo-based FivePoint bought out a 12.5% stake in the venture previously owned by Boston-based investment firm Rockpoint Group LLC.

Terms of the buyout weren’t disclosed, but the deal makes FivePoint one of the larger investors in the 3,700-acre Great Park Neighborhoods, according to Emile Haddad, the developer’s chief executive.

The stake acquired from Rockpoint would appear to be valued at $100 million or more, based on the last financing deal reported for Heritage Fields, struck in late 2010.

Biggest Investment

Haddad said the deal is the largest investment that FivePoint—which also oversees a pair of major developments under way in north Los Angeles County—has made to date.

Haddad and FivePoint, which spun out of Miami-based homebuilder Lennar Corp. in 2009, already had an unspecified stake in project.

Lennar led the purchase of the El Toro land from the Navy in 2005, when Haddad was the chief investment officer of the homebuilder.

That deal was reportedly backed by $775 million in financing from Lehman Brothers Holdings Inc.—which went bankrupt in 2008—plus $700 million more in equity from a variety of investors.

Investors in the project following the 2010 recapitalization included Lennar, FivePoint, and Rockpoint, along with Michael Dell’s MSD Capital LP, Stanford University, State Street Bank & Trust Co., and a number of state retirement funds.

Boston-based State Street, which reportedly bought Lehman’s mortgage note for about $150 million and subsequently wrote down that debt to closer to $200 million in the 2010 recapitalization, was said at the time of that deal to have a $380 million stake in the development.

Breaking Ground

The deal to buy out Rockpoint comes amid a flurry of new construction planned in and around the Orange County Great Park, which is adjacent to FivePoint’s property.

Haddad said he’s close to selecting the builders for the second phase of homebuilding at the Great Park Neighborhoods.

Construction is expected to start next year on the nearly 960 homes slated for that phase, which is on land now being graded between Trabuco Road and Irvine Boulevard. The builders selected for the 14 product types planned in this phase should close escrow by December, according to Haddad.

The lot sales could bring in between $325 million and $350 million for the developer, assuming an average per-lot price in the $325,000-or-higher range, according to estimates from real estate sources.

That per-lot estimate factors in the expectation of some condominiums or townhouses along with single-family homes.

It’s believed that builders will pay for all of their respective lots at close of escrow rather than in phases, according to sources familiar with the land sales.

Pavilion Park

Pavilion Park, the first phase of home development at the Great Park Neighborhoods, has seen nearly 90% of its 726 homes sold since opening a little more than a year ago.

The development, which features eight builders, is believed to be the fastest-selling new masterplanned community in the country over that time.

FivePoint reached an agreement with the city last year to build up to 9,500 homes on the land it owns surrounding the Great Park, nearly double the original residential entitlements for the land.

The deal provided saw FivePoint provide the city an additional $200 million to kick-start construction on 688 acres of the city-owned park land, which has seen its development stalled by a cash shortage.

FivePoint hosted a groundbreaking event last week for that project, with a ceremonial breaking up of runways at the decommissioned air station, which was previously eyed for a new commercial airport.

Construction will begin in earnest in a few months on the 688-acre portion of the 1,347-acre Great Park, which will feature a sports park that should be open by the end of 2016.

Haddad said that last week’s event is emblematic of the transition of the land from military use to civilian use, and the tearing up of the runways would give area residents tangible proof that progress was being made for the long-awaited park.

Commercial development is also on the fast track for a portion of the former air station.

An undisclosed company could break ground as soon as January for a 2-million-square-foot headquarters campus at the southern edge of the development, according to Haddad.

Broadcom

He didn’t comment on numerous reports that Irvine-based chipmaker Broadcom Corp. is the company.

An official announcement from Broadcom on its headquarters plans has yet to be made, and FivePoint is not authorized to disclose the company’s name. Haddad referred to the occupant of the proposed campus at last week’s event as the “company that cannot be named.”

Plans for an eight-building, 2-million-square-foot office campus have been filed with Irvine’s planning commission.

The campus would be built on 78.5 acres near the intersection of Barranca and Alton parkways, close to the Irvine train station.

The largest of the eight offices would run 455,000 square feet, according to city filings.

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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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