When the City of Irvine last year entered into a deal with Brookfield Residential to turn a roughly 80-acre parcel of developable land in North Irvine into a housing development, initial signs pointed to an astute deal for the city.
Brookfield’s purchase price for the land, to hold the 1,138-home Gateway Village development, is expected to run as much as $654 million, or over $8 million an acre.
That’s well over the $285 million Irvine paid to close a nearby asphalt plant, as part of a deal with Irvine Company, which in turn gave the city control of the future housing site.
The deal looks even better for the city with a recent appraisal conducted by CBRE for the city, which estimates Brookfield’s land to have a fair market value of $412 million, or just $5.1 million an acre.
A closer look at the appraisal raises some questions.
The report includes less expensive, year-old infill deals in Huntington Beach and Orange as comparable transactions and lists a 2024 land deal at Irvine’s Great Park Neighborhoods, for $6.9 million an acre, as another relevant comp.
In fact, land at Great Park Neighborhoods is now selling for close to $11.7 million an acre, Irvine developer FivePoint reported last month.
If the city and its real estate advisors believe residential land in one of the better parts of Irvine to be worth about $5.1 million an acre, why is it willing to pay $12.5 million an acre for the VKCC office complex near the airport, for an infill housing project?
When Irvine Company began pitching a proposal to replace several big-box spaces on the Irvine side of its Market Place shopping center with 1,261 apartments in 2023, it teased housing affordability as a key benefit of its plan.
“This is the first community as part of a master planning framework designed to bring homes near jobs for Irvine’s young professionals and essential workers,” officials with the developer, OC’s largest apartment owner, said at the time.
Under an agreement struck with the city, roughly 20% of the units at the new development were designated as affordable housing units, with an additional 60% of the units geared toward local workers making between $50,000 and $110,000 per year.
The first portion of the development, dubbed Colonnade at the Market Place, recently opened. I checked the website for the project to see what’s currently in the price range for the area’s essential workers. Not much, it seems.
The smallest apartments now available, one-bedroom units running 630 square feet, have monthly rents starting at $3,270. Two-bedroom units top $4,000 a month.
A tenant would need a salary in the $130,000 range to afford the one-bedroom unit, assuming they put 30% of their gross earnings toward rent, which is the recommended maximum amount.
The average salary in Irvine runs roughly $80,000 a year, according to ZipRecruiter.
Colonnade is the first of two complexes being built next to each other at the Irvine Market Place. The second phase, Meridian, is anticipated to have more affordable offerings than Colonnade.
