Homebuilder Centex Corp. is looking to get out of a partnership that’s developing the largest part of Tustin’s former Marine base, according to city officials.
Centex is in discussions to withdraw from Tustin Legacy Community Partners LLC, the partnership that’s building Legacy Park, a roughly 820-acre masterplanned development. It’s the biggest project at the 1,500-acre former Marine base currently under construction.
The departure of Dallas-based Centex would make the partnership an all-local affair. Two units of Walnut-based J.F. Shea Co. as well as the city of Tustin are the other partners.
Legacy Park calls for 2,100 homes and 6.7 million square feet of offices, restaurants, shops and hotels in the next six to eight years. The project broke ground late last year.
The entire former Marine base is set to see about 4,500 homes when completed. The local office of Miami’s Lennar Corp., Newport Beach’s William Lyon Homes Inc. and John Laing Homes are building an additional 2,500 or so homes elsewhere at the site.
Centex has a 50% stake, in the Tustin Legacy partnership. Aliso Viejo-based Shea Properties has a 25% stake, with Walnut’s Shea Homes owning the other 25%.
No new owners are expected to be brought into the partnership, and no slowdown in development is expected to result from the change, according to Christine Shingleton, Tustin’s assistant city manager.
The Shea divisions would instead double their investments in one of the biggest remaining development projects in OC.
Shea Properties officials have put a total development price tag on Legacy Park at about $3 billion.
Centex’s withdrawal from the partnership still requires approval by the city, according to Shingleton.
“Currently, we are reviewing the information, and looking for any concerns,” she said. “We still have to work through some issues with the council.”
The city is expected to make a final decision in a few weeks, Shingleton said. The operating agreement between the developers and the city includes no financial penalties for a buyout of a partner.
Officials from Centex and Shea couldn’t be reached for comment.
Centex’s decision is said to be more a result of national market conditions, and the company’s slimmed-down business strategy, than of any issues pertaining to the Tustin project.
“We’re not viewing this in a negative manner,” Shingleton said.
Last quarter, Centex Chief Executive Tim Eller noted that his company was “navigating through one of the most challenging housing environments in the past 25 years.”
As a result, the company decided to reduce its land holdings, and focus more on its core homebuilding operations. This month, it completed the sale of its commercial construction division, Centex Construction, to Britain’s Balfour Beatty PLC for $362 million.
About two-thirds of the $3 billion price tag put on the Legacy project is tied to commercial development, with the rest being homes.
Shea Properties is expected to lead up the commercial side of the development.
That made Centex’s role in the commercially-focused project harder to justify, considering its current focus on homebuilding.
Commercial projects in the works at Tustin Legacy include mid-rise offices similar to those built by The Irvine Company for chipmaker Broadcom Corp. in Irvine’s University Research Park, along with hotels, restaurants and shops.
Centex first approached Tustin officials with its intentions earlier this month.
It’s not the first big California redevelopment project that Centex, working in conjunction with Shea, has walked away from.
Last September, a 700-acre Bay area project proposed by Alameda Community Partners,a partnership including Centex, Shea Homes, Shea Properties, Morgan Stanley and Industrial Realty Group,was abandoned.
The companies had planned to turn the former Alameda Naval Air Station into a mixed-use development with homes, offices and other buildings.
The partnership opted against moving forward in the midst of the housing slowdown and the Navy’s $108.5 million asking price for the Alameda property.
A Lennar unit and Catellus Development Group now are working together on the Alameda project.
