OC Homebuilders Looking to Milk Profits From Dairy Preserve
COMMERCIAL
A couple of former Pacific Gulf Properties folks are striking out on their own.
J.R. Wetzel, who was Pacific Gulf’s executive vice president of operations and chief operating officer, and Robert Dewey, who was senior vice president of industrial operations, have left the Newport Beach-based company to launch their own real estate development and management firm, PGP Partners Inc.
Pacific Gulf Properties is disbanding and has sold most of its assets and begun the process of disbursing the funds to shareholders. Recently, Pacific Gulf Properties agreed to an $853 million deal to sell its 15-million-square-foot industrial portfolio to CalWest Industrial Properties LLC, a joint venture of the California Public Employees Retirement System and RREEF, a San Francisco-based investment and pension-fund advisor. The 66 industrial complexes that make up the portfolio are in California, Washington, Nevada, Arizona and Oregon.
Pacific Gulf Properties had been asked by CalPERS and RREEF to stay on and oversee management of that industrial portfolio. But that will not happen, as PGP Partners has purchased that management contract and will use it as the base to launch its operations, said Wetzel, managing partner of the new venture.
Additionally, PGP Partners will oversee development for RREEF of a 107,000-square-foot light industrial building in Renton, Wash., and a 115,000-square-foot office and light industrial project in Rancho Santa Margarita.
PGP Partners,named to take advantage of the Pacific Gulf Properties brand recognition and housed in the same Newport Beach building where that company resided,also will continue to look for new opportunities, preferably doing work on behalf of pension funds and insurance companies, Wetzel said.
“It’s a great platform from which to start a new entity,” Wetzel said of the PGP Partners name.
The new company, which has 10 satellite offices on the West Coast, has hired 33 former Pacific Gulf Properties employees. PGP Partners is owned 50-50 by Wetzel and Dewey.
“Phase one is to do a great job for RREEF and keep them happy,” Wetzel said. “Phase 2 is to go out and look for value-added acquisitions, ones that take some work where we maybe have to build a building on the site or reposition the asset in some way.”
RESIDENTIAL
Corona has been one of the havens sought by Orange County residents who find themselves unable to afford a new home here. Now that market is seeing rapid price appreciation as demand increases and supply slowly dwindles.
The result has been that homebuilders are looking to make the 8,000-acre Dairy Preserve area the next Corona.
Increasingly, OC homebuilders and developers are moving forward on projects in the Dairy Preserve in the Inland Empire, an area that is bordered by Riverside Drive in Ontario on the north, Euclid Avenue in Ontario on the west, the Santa Ana River on the south and Interstate 15 on the east.
“There are a lot of new projects out there,” said Les Whittlesey, a principal with the Irvine-based brokerage firm of Whittlesey/Doyle who is active in the Dairy Preserve area. “A lot of major players have bought holdings out there.”
Among the local companies that have made investments in the area are John Laing Homes, K. Hovnanian Enterprises, Kaufman & Broad and William Lyon Homes.
The major motivation has been the dwindling supply of available land for new construction in the Corona area and the correspondingly steep prices for the few lots that are available. Whittlesey points to the hike in the average sales price of new homes in that area, which has increased in the past 18 months from roughly $200,000 to more than $280,000.
Among the new masterplanned communities drawing interest from builders are Corona Valley and Providence Ranch, each a 1,200-unit project that offers homes for substantially less than the Corona area. Of course, with the lower prices, homebuyers will have to drive a little farther to reach these communities. And as the Dairy Preserve is still in the initial stage of development and continues to be dominated by dairy farms, there are,to put it delicately,issues. In fact, the smell from the cows can at times be a major hindrance during a sales presentation.
Recently, a process was established to clean up the methane that has built up in certain pockets of the Dairy Preserve resulting from the land’s longtime traditional use. Still, the constant press for new housing will eventually address these issues in what Whittlesey calls “the housing preserve, because they’re not preserving it for dairies anymore. It’s going to be housing.”
The sections of the Dairy Preserve currently being developed are those closest to existing roads and sewer lines. Expensive infrastructure costs will have to be addressed by developers before they are able to move into other areas.
“There is lot of infrastructure that needs to go in there because there’s been no development,” Whittlesey said.
