Pricing for residential land in the city remains on an upward trajectory, according to officials at Five Point Holdings LLC (NYSE: FPH).
The master developer of the Great Park Neighborhoods, which operates under the FivePoint name, reported the sale of 105 homesites on 12.3 acres of land last quarter, for an aggregate purchase price of $96.1 million.
That deal works out to a price of $7.8 million an acre.
FivePoint said in a July 18 call with analysts that the sale, worth more than $900,000 per homesite, counted a 70% profit margin. The name of the homebuilder involved in the deal wasn’t immediately disclosed.
Pre-pandemic, residential land at Irvine’s larger housing projects was likely to trade closer to $5 million an acre, with per-lot prices in the neighborhood of about $500,000.
“We were not surprised that we received strong builder interest in these homesites with continuing increases in per acre land values,” FivePoint CEO Dan Hedigan told analysts.
While “increases in per acre land values can be attributed in part to market conditions, we’ve begun allowing builders to design the home programs in our communities, (and) this change has contributed towards the higher land residual values for us.”
Builders reported sales of 63 homes last quarter at the two communities actively selling at the Irvine development, Solis Park and Luna Park.
Other recent deals in the city also highlight rising land valuations.
A plan for the development of the new 1,200-home Gateway Village project in North Irvine expects land prices to ultimately trade for over $8 million an acre, according to city documents.
Brookfield Development has been tapped to oversee the Gateway Village project, which is on city-owned land.
Approaching $10M
The end of 2024 should see an even larger residential land deal at the Great Park Neighborhoods, FivePoint officials said during their call with analysts.
During the second quarter, “in addition to the previously mentioned closed sale, our Great Park Venture also signed a contract to sell additional home sites in our next development area for $9.6 million an acre for a total purchase price of just over $300 million,” Hedigan said.
“Our venture also recently marketed for sale additional residential land in another development area in the Great Park that we would anticipate closing in the first half of next year,” he said.
Commercial Swap?
In a little more than a year, FivePoint has inked several profitable deals for commercial land at its Irvine master development, with industrial developers and investors spending over $400 million.
A pair of additional sites are being marketed for similar uses, but a switch could be made, Hedigan noted.
“While we’re still seeing interest from both developers and users for these sites, we’re also looking at opportunities to repurpose these sites for residential use given the depth of demand and values being driven by residential uses,” he said.
