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Tuesday, May 24, 2022

Lake Forest Homebuilding Steps Out of Shadows

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Lake Forest, despite being in the shadow of California’s two best-selling master-planned communities, has been holding its own during the latest residential building boom.

Sales took place at close to a dozen housing projects there last year with nearly 1,500 home sites—the most of any Orange County city outside Irvine, according to local housing data. Lake Forest also encompasses the Foothill Ranch and Portola Ranch areas.

A handful of new projects that would bring several thousand more homes are meanwhile being considered or are in early development stages, according to data from Irvine-based land brokerage Land Advisors Inc.

Right now, “it’s a very developer-friendly city,” said Land Advisors’ Senior Vice President Mike Hunter.

Notable sites being considered for development include land owned by the Irvine Ranch Water District, which plans to sell the 82-acre Serrano Summit site near the intersection of Bake Parkway and Commercentre Drive that’s been entitled for about 600 homes.

The site holds water district facilities, field crops, and support structures, according to city filings.

The Irvine office of brokerage Province West recently got the listing for the project, according to recent water district records. A time frame for the land sale hasn’t been disclosed.

New offerings at Portola Center South also are on tap. A nearly 95-acre development there is headed by Irvine-based Landsea Holdings Corp., the U.S. arm of China-based real estate company Landsea Group.

It plans more than 550 single-family homes and townhomes and has done heavy infrastructure work over the past year.

Poised for Jump

The city’s inventory of current and proposed projects would have a big impact on the size of Lake Forest, whose 2016 population was 80,000 over 27,500 households, according to city data. It was Orange County’s 13th largest city by population, but it could enter the top 10 if sales continue at a solid clip for the next few years.

Combined sales taking place at the ongoing projects rival development a few miles east at the Irvine Ranch and Great Park Neighborhoods, which had 1,989 and 535 in sales last year, respectively, according to data from Irvine-based John Burns Real Estate Consulting.

The two projects were the state’s best-selling master-planned communities last year, and Irvine Ranch was the best-selling community in the country, according to the firm’s data.

The largest project under way in Lake Forest, the Baker Ranch development headed by Walnut-based Shea Homes and Horsham, Pa.-based Toll Brothers, sold 443 homes last year, making it the 19th highest selling master-planned community in the country.

Baker Ranch’s sales were up 25% year-over-year, according to John Burns Consulting, and represented a majority of home sales in Lake Forest last year.

The strong sales at Baker Ranch since it opened in 2014 have given more builders the confidence to tackle other projects in the area, according to Province West principal Marc Kleiman.

“It was a more challenging sell” prior to Baker Ranch, Kleiman said. Buyers, though, have gravitated to the project because it has a similar feel to the master-planned communities in Irvine, yet homes there are less expensive.

“Buyers saw it as a value,” Kleiman said.

Developable land in Lake Forest is held by a variety of development groups, unlike the Irvine Ranch and Great Park projects, which are overseen by Newport Beach-based Irvine Company and Aliso Viejo-based Five Point Holdings.

Other large landholders, along with Shea Homes and Toll Brothers, include Landsea, Newport Beach-based Baldwin & Sons, the Irvine Ranch Water District and Scottsdale, Ariz.-based Meritage Homes.

Six of the top 25 companies on this week’s list of OC’s top homebuilders by sales had projects under way in the city last year or plan to start sales soon, according to Business Journal data.

Attractive Traits

In some ways, Lake Forest’s homebuilding market is benefitting from the job creation taking place in Irvine, as well as existing and planned amenities there, said Land Advisors Senior Vice President Tom Reimers.

“There’s a drafting effect,” with the city taking advantage of the growth in Irvine, Orange County’s fastest-growing city, Reimers said.

Lake Forest has its own advantages. Homebuyers like the fact that there aren’t pricey community facilities districts there, unlike in Irvine, where Mello Roos fees can easily add $5,000 or more to their tax bills.

Homebuilders like that Lake Forest land developers don’t do profit-participation deals, a common feature of Irvine Co. land deals with builders, that can reduce their earning potential.

For builders, “It’s one of only a few places (in OC) where you can control your own destiny,” Reimers said.

Lake Forest land tends to sell at a roughly 10% to 15% discount per lot compared to that seen in Irvine recently, Land Advisors’ Hunter said.

Land further south at Rancho Mission Viejo, where 2016 sales totaled about 458, trades at a roughly 15% to 20% discount to Irvine, according to Hunter.

A few remaining big sites in Lake Forest hold development potential, although no plans have been announced. The largest of those appears to be a 121-acre site that currently holds the Nakase Brothers Nursery operations on Bake Parkway just south of Rancho Parkway.

City filings from last year show that homes could eventually be built on a 45-acre portion there, but there have been no signs of imminent development.

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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