FivePoint Communities Inc. has completed the blockbuster $443 million purchase of Broadcom Ltd.’s campus where construction is wrapping up in Irvine.
More deals could be on the way as the Aliso Viejo-based master developer fixes its gaze on building a larger commercial property portfolio across its large land holdings in California.
An affiliate of FivePoint, along with some of its existing financial partners in the Great Park Neighborhoods development in Irvine, completed the purchase of the four buildings at the campus, two of which were completed on Aug. 10.
The campus—which has been renamed Five Point Gateway—includes a little more than 1 million square feet of office space.
The Business Journal first reported in May that a buy-back of the campus was in the works, after FivePoint said it was considering exercising a buy-back option.
The deal is one of the largest office transactions ever in Orange County and gives FivePoint its first big commercial property asset in the area.
“It’s a good example of our long-term strategy” to be both a commercial property owner and a residential developer, much like Newport Beach-based Irvine Co., Chief Executive Emile Haddad said during the company’s quarterly earnings call with analysts last week.
FivePoint went public in May; it has a market value of about $2 billion.
As operations continue as a public entity, “you will see the parallels between the two companies” in terms of their varied business operations, Haddad said of FivePoint and Irvine Co., OC’s dominant commercial property owner and land owner.
The plan is to take cash from residential land sales “and redeploy it into commercial opportunities,” Haddad said. That will help “create a new revenue stream” and eliminate some risk inherent in the timing of large land sales, which can be choppy, he said.
Well-Leased
The Irvine office campus is about 77% leased now, Haddad said.
Chipmaker Broadcom will lease back about 660,000 square feet in two of the buildings under a 20-year lease.
Homebuilder Lennar Corp., FivePoint and other affiliates will lease an additional 135,000 square feet in another building under a 10-year lease. FivePoint was spun off from Lennar in 2009, and the Miami-based builder, which runs much of its operations from Aliso Viejo, is the company’s largest investor.
FivePoint officials said they estimate the annual stabilized net operating income from the office campus to be about $27 million. It might take two or three years to get the remainder of the campus fully leased; Haddad said his company hasn’t done much in the way of marketing it, other than talking to a few area brokerages.
Along with the office buildings, the deal with Broadcom includes excess land at the 73-acre site that’s entitled for nearly another 1 million square feet of office space.
FivePoint said the entitlements could eventually be switched to other product types, including commercial, retail and residential—with apartments and homes as a potential option.
FivePoint sold Broadcom the land at the Great Park Neighborhoods development in 2015 for about $128 million. Factoring in taxes and other fees, the deal cost the chipmaker about $156 million.
The following year, Broadcom was sold to Avago Technologies Ltd., which kept the Broadcom name but moved its executive offices to San Jose and laid off a big portion of the company’s workforce in Irvine, where it had been the area’s largest office tenant, at one point leasing more than 900,000 square feet at University Research Park.
It listed the site for sale more than a year ago.
Brisk Sales
On the residential front, FivePoint said it plans to close on the sale of land to homebuilders for the next round of homebuilding at Great Park Neighborhoods in the next quarter, and that the 1,000-home project should be open for sales in the spring.
The 727-home Parasol Park community at the former El Toro Marine Base, which opened this year, is 46% sold.
Land sales are expected to be at a higher price point than those at Parasol Park, Haddad said.
He said his company last week filed an application with Irvine for the next two sets of development at Great Park Neighborhoods, one for a for-sale residential development, the other for a mix of commercial and residential uses.
