Aliso Viejo-based master developer FivePoint Holdings LLC is planning the next step in its evolution: becoming one of Orange County’s largest commercial real estate landlords.
The developer of Great Park Neighborhoods in Irvine is planning an ambitious batch of commercial construction on the former El Toro Marine base over the next year to go along with the next phase of home development, according to FivePoint Chief Executive Emile Haddad.
Shops, restaurants, creative offices, and hotels are being planned for the northwestern edge of the company’s Irvine land, with some of the projects scheduled to open next year.
The commercial development just off Trabuco Road would serve current and future residents of the 3,700-acre Great Park Neighborhoods property, as well as visitors to the 175-acre sports park that’s planned at the adjoining Orange County Great Park.
The Business Journal reported last week that FivePoint plans to open its latest phase of homes—a 727-home development featuring six builders—in January 2017.
FivePoint isn’t planning to sell off individual land sites for the commercial projects in the works, the first batch of which will open later in 2017. The plan for now is “to build and own our own income-producing properties” to be leased out, Haddad said.
New commercial projects will likely be done in partnership with other developers, depending on property type, he said.
“The goal is to hold on to” the properties, rather than build and sell them to other investors, Haddad said.
It’s a business model that calls to mind Newport Beach-based Irvine Company, Orange County’s largest landowner and its dominant real estate owner.
Local Investments?
In addition to building and owning its own properties, Irvine Co. has been one of California’s most active buyers of existing investment properties in OC and other markets, particularly over the past decade.
FivePoint could follow a similar path, at least in the case of buildings now in the works on its Irvine development.
Haddad said his company is interested in buying back one or more of the office buildings now going up on the campus of Broadcom Ltd. on the southern edge of the former Marine base.
The chipmaker is building four large offices on a 73-acre site it owns near the intersection of the San Diego (I-405) and Santa Ana (I-5) freeways close to Irvine’s train station.
At least two of the four buildings under construction are now being shopped by Broadcom, according to multiple real estate sources.
Broadcom bought the land last year for a reported $156 million, but later cut back its local operations following its $37 billion sale to Avago Technologies Ltd. this February.
FivePoint could use part of one of the new offices for its own operations while leasing out additional space to other tenants, according to Haddad.
Debt Free
It has plenty of financial capacity to acquire the new offices; it’s now debt free after a series of financing moves in recent years, according to Haddad, the former chief investment officer of Miami-based builder Lennar Corp. who started FivePoint in 2009.
The latest restructuring move took place this month when it completed a deal that gave FivePoint and its investors unified ownership of the Irvine development and three other large projects the company already managed in the state: Newhall Ranch in Los Angeles County, along with Candlestick Point and the Shipyard in San Francisco.
The four mixed-use communities will combine for nearly 40,000 homes and 20 million square feet of commercial space when they are built out.
FivePoint now is the largest developer of mixed-use communities in coastal California, although Haddad says he “think(s) of the company (more) as a community-builder.”
Plans for the reorganization were first announced last July, with expectations that FivePoint would take the newly created company public via an initial public offering.
A sluggish IPO market and a choppy market for housing stocks in general put those plans on hold. The stock offering could still move forward if market conditions improve.
The restructuring leaves Lennar as the largest shareholder and Haddad as the fourth-largest shareholder in FivePoint. Additional investors include Castlelake LP, Anchorage Capital LLC, Third Avenue Management LLC, Och-Ziff Capital Management Group and Marathon Asset Management LP.
Prior investors in the ownership group for Great Park Neighborhoods, including Michael Dell’s MSD Capital and a number of institutional investment funds, remain involved in the Irvine project but are not part of the larger FivePoint Holdings.
FivePoint could buy other larger master-planned communities in the state, he said.
“I’m a huge believer in California.”
