This month’s sale of the 82-acre Serrano Summit development site in Lake Forest is the most expensive reported land sale in Orange County this year.
But the $136 million transaction doesn’t represent the most valuable real estate investment property in seller Irvine Ranch Water District’s portfolio, at least by its internal valuations.
In last week’s Business Journal, I broke the news of the water district selling the property to a local affiliate of Lennar Corp., which plans a 608-home project there. Sales at the development near the intersection of Bake Parkway and Commercentre Drive will likely start in early 2019, according to sources familiar with the property.
Property records show the deal closed on Sept. 1, though the water district has yet to confirm the transaction or its ultimate proceeds in public filings. It said last year that it had budgeted nearly $7 million for planning and entitlement costs prior to taking the land to market this year with land brokerage Province West.
Going through the agency’s recent public records in search of sale details, I came across a recently proposed but declined deal for another water district property: the 450-unit Sycamore Canyon apartment complex in Anaheim Hills, which it bought in 1992 for a reported $34 million.
This past July, Irvine-based apartment investor Bascom Group LLC offered to buy the complex for about $131.2 million in an all-cash deal, or about $292,000 per unit. The complex is near the intersection of the Riverside (91) Freeway and the Eastern Transportation Corridor (241) Toll Road.
The water district’s asset management committee turned down the Bascom offer, believing the bid to be undervalued.
Other large OC complexes have been trading at cap rates of 4.5% to 5%. With Sycamore Canyon bringing in net operating income of $8 million, the water district estimates its value at $160 million to $177.8 million.
Bascom’s offer translated to a 6.1% cap rate.
Even an offer at the high end of its estimated valuation, which is well above what it got in the Serrano Summit sale, wouldn’t necessarily get the water district to sign off on a sale, according to filings.
The apartment complex “continues to provide an excellent return to IRWD,” the NOI of $8 million representing an annual return on cash of 18.45%, the agency’s asset management committee said.
The complex is nearly 95% leased, and its rents have increased about 4% a year since 2011, water district documents said.
The agency also owns a midsized office near The Market Place in Irvine for investment purposes. It leases land used for cellphone towers and for the Strawberry Farms Golf Club in Irvine, among other investments.
Back to Brea
Western National Group has begun work on an apartment complex in Brea, its 11th property there.
The Irvine-based apartment investor and developer said it started work on the 206-unit Calligraphy project, which will be part of the 15-acre Central Park Village development on Central Avenue about a mile west of the Orange (57) Freeway.
The development on the former site of the Brea Community Hospital will also include homes, offices and retail.
Western National plans to open the apartment complex in early 2019. Its partners in the midrise project are Anchor Real Estate Capital and Fantasia Holding Group.
Irvine-based Anchor Real Estate facilitates Asian capital from a variety of sources to invest in U.S. development projects. Fantasia is a property developer and property-related service provider in China.
Western National says it’s the largest apartment owner in Brea. Its executives say they’re looking for other infill development opportunities throughout Southern California.
