FivePoint Communities Inc. Chief Executive Emile Haddad continues to strike a positive tone on the future of Great Park Neighborhoods in Irvine, despite an election loss that will result in another change in plans for part of the former El Toro Marine base.
“We’ll be fine, one way or the other,” he said at a meeting on primary election day at his company’s Aliso Viejo headquarters as Irvine voters headed out to determine the fate of a proposed veterans cemetery.
FivePoint’s preferred location for the cemetery on 125 acres near the intersection of the Santa Ana (5) and San Diego (405) freeways now used for strawberry farming, had the support of Mayor Don Wagner, a majority of the city council but ultimately not voters, which rejected the location 63% to 37%.
Opponents of FivePoint’s preferred Strawberry Fields site for the cemetery had implied in their campaign that the ‘’no” vote will result in the return of the cemetery site to another 125-acre site closer to where homes and schools have already been built at Great Park Neighborhoods.
FivePoint officials note that the vote does not, in fact, automatically return the cemetery site to the other location.
A state law signed a year ago designating the Strawberry Fields site as the preferred location for the cemetery is not affected by last week’s vote, which technically only means that the proposed change in Irvine’s zoning code on the site will not occur.
Whether backers of the different site, which the city swapped out for the Strawberry Fields site—and which FivePoint officials argue is far more costly to convert to cemetery uses than the Strawberry Fields, and far less practical to develop for those uses—will find the political clout and associated funding to get the project built remains to be seen.
Haddad said he wasn’t optimistic that the politicians who successfully pushed for the “no” on the city’s Measure B vote would follow through with needed efforts to get the project off the ground at the other site.
FivePoint had offered to chip in at least $10 million to kick-start development at the agricultural site; it hasn’t done so for the other location.
“Ultimately, veterans deserve a resting place,” Haddad said. “We’ll see.”
FivePoint retains the same amount of entitlements for its land, regardless of where the cemetery gets built, if it is. It has the ability to build about 9,500 homes, plus commercial space on the land, which largely surrounds Orange County Great Park.
To date, about half of the homes and home lots have been sold.
Next Gen
Last week’s ballot box loss is one of the few negatives that Haddad and FivePoint have experienced recently at Great Park Neighborhoods, which continues to have a rapid pace of home construction.
Model homes at Cadence Park, the latest 1,007-home phase, have been opening in phases since March.
The seven homebuilders selected for the 103-acre project—which brought in about $475 million in land sales for FivePoint—have reported brisk sales, according to the master developer.
The project includes “a diverse product offering that can meet the needs of a wide range of buyers,” Haddad told analysts and investors; homes range from about $600,000 to nearly $2 million.
Future phases are in the works. Expect to see more density, more affordable prices for smaller units, and new approaches to building homes in Irvine for the offerings, according to Haddad.
One such project would feature a heavy supply of midrise product featuring residences above restaurants and shops. The European, city-like design is similar in some respects to Rick Caruso’s Americana at Brand mixed-use development in Glendale.
Haddad’s team, which includes his daughter, Serene, is exploring novel features for the company’s upcoming projects, such as shared-car programs and a minimal amount of garage space. They’re looking to save space and minimize housing costs for buyers at these projects, which are likely to appeal to younger homebuyers. The shared cars he envisions would use lower or zero-emission fuel.
Combined with a number of resident amenities planned alongside the homes and “it’s a prototype for how communities will look like in the future,” Haddad said.
The new housing types should fit in well with some of the commercial real estate projects planned for parts of Great Park Neighborhoods.
Across the street from the company’s first big office project, Five Point Gateway, it’s planning an 18-acre healthcare and wellness campus that could include about 10 buildings featuring a mix of medical offices, outpatient clinics, assisted-living housing for seniors, a hotel, interfaith center and retail.
A cancer center run by the City of Hope has already been announced for the site, and more notable partnerships are anticipated.
Stock Slip
The master developer’s parent company, Five Point Holdings (NYSE: FPH), went public in May 2017, raising about $420 million in its initial public offering and related private offerings.
The company’s stock has been on a downswing over the past few months; at a market capitalization of $1.7 billion, shares are off about 18% since the start of the year and since its market debut at $14 per share.
Haddad said he’s not concerned about Five Point’s stock price—and attributes some recent selling to expiring lockup provisions for institutional investors that adhere to shorter holding periods—and so he pays little attention to market swings.
He did note that if one factors in current land prices and the home entitlements the company has for projects in Irvine, Los Angeles County’s Newhall Ranch, and the San Francisco area, its valuation is at least fourfold compared to its prevailing enterprise value.
“We were selling land (in Irvine) for $3 million an acre before, and now we’re selling it for $5 million an acre. What does that say?”
Existing investors in the land that holds Great Park Neighborhoods would appear to be happy with the company’s recent performance. Five Point announced last month that it had made a $235 million dividend payment to holders of the legacy interests in the land, includes a variety of institutional investors, private equity firms and builder Lennar Corp. (NYSE: LEN), which also has an ownership stake in Five Point.
