The developer of the Great Park Neighborhoods is looking to gain entitlements for another 1,300 homes at the Irvine master planned community, as the city looks to address state demands for more housing in the area.
Irvine-based Five Point Holdings (NYSE: FPH), which oversees the Great Park Neighborhoods and other larger development projects in coastal California, last week saw its plans to expand housing on land that previously held the El Toro Marine Corp base brought before Irvine’s Planning Commission.
The developer, better known as FivePoint, currently has entitlements for 10,566 homes at the 2,100-acre site, which sits adjacent to the city-run, 1,300-acre Great Park.
If approved, the expansion would boost housing entitlements to 11,856 units. The additional homes would largely be built in areas at the Great Park Neighborhoods previously expected to hold offices, retail and other commercial property types, close to Barranca Parkway, and just north of the San Diego (5) Freeway.
“In response to current market demands, the applicant has determined that introducing residential uses within the project area represents the highest and best use of the land,” stated city filings related to the Nov. 6 planning commission hearing, where the proposal was discussed.
“This shift is intended to maximize housing production, assisting in addressing the City’s and State’s ongoing housing needs.”
Running Low on Lots
The Great Park Neighborhoods saw its first neighborhood open in 2013; it has subsequently been one of the best-selling housing projects in the country, with homebuilders reporting over 7,000 home sales to date. Last year, it saw nearly 450 home sales, making it the fifth best-selling master planned community in California, according to data from John Burns Real Estate Consulting.
FivePoint has sold over 9,000 home lots to builders over that time, with several new neighborhoods currently in the works.
The addition of another 1,300 housing unit entitlements could provide a big boost to the bottom line of FivePoint and its varied financial partners.
The developer’s latest batch of lot sales to builders worked out to an average price of nearly $790,000 a lot. A similar price for the additional housing units could bring in close to $1 billion in land sales for FivePoint, which counts a market capitalization of about $410 million.
The developer has received other boosts in housing entitlements from the city over the years. The Great Park Neighborhoods initially called for 4,894 homes; that figure was increased to its current level in 2013, in exchange for FivePoint assuming more responsibility for the development of the city-owned Great Park.
191-Acre Plan
Concurrently with the move to add residential entitlements, FivePoint has filed initial applications with the city of Irvine for a series of new housing projects on 191 acres of its land, for a total of 1,814 townhomes, duplexes and single-family homes.
According to city filings, 691 of those housing units are already approved under prior entitlements, while 1,123 units would be part of the 1,300 new entitlements FivePoint is now seeking.
The proposed neighborhoods “will serve as an extension of the existing Great Park Neighborhoods community,” filings with Irvine’s planning commission said. “The overall architectural vision emphasizes a pedestrian-friendly design, with building frontages that foster a walkable and active streetscape.”
Commercial Cutbacks
FivePoint currently has entitlements for about 6.1 million square feet of nonresidential development on its land. To date, about 1.7 million square feet of that space has been built or is under construction, much of it at the office project that holds the local operations of chip designer Broadcom (Nasdaq: AVGO) and the new hospital and cancer center for City of Hope.
Under the latest plan, FivePoint would reduce the amount of additional nonresidential development it has yet to build by 755,000 square feet, leaving just under 3.7 million square feet of remaining nonresidential entitlements going forward.
The developer has been eyeing a pivot from commercial development towards more housing for some time.
Last year, FivePoint CEO Dan Hedigan told analysts that “while we’re still seeing interest from both developers and users for (commercial) sites, we’re also looking at opportunities to repurpose these sites for residential use, given the depth of demand and values being driven by residential uses.”
The proposal presented to Irvine’s planning commission last week also includes a series of land exchanges between the city of Irvine and FivePoint, whereby the city would receive 35 acres of land from the developer in return for 26.4 acres of land now owned by the city.
