On Jan. 21, a Houston oil executive closed on a $12 million purchase of an 11,246-square-foot beachfront lot within The Strand at Headlands community in Dana Point, Calif. That price tag, a record for Orange County to that point, is equivalent to $46.5 million per acre, and this lot isn’t even the most expensive among the 118 that Headlands Reserve, the developer, has been rolling out on this 121-acre property overlooking the Pacific Ocean.
With that transaction, Headlands Reserve had sold 34 homesites at The Strand for an aggregate $222 million. The largest lot is 26,900 square feet, but pricing is based on proximity to the water, and despite the state’s economic turmoil, “pricing of our homesites continues to rise,” says Sanford Edward, whose company, Newport Beach–based Master Plan Development, bought this property 12 years ago. While some lots go for as low as $2.1 million, the community’s most expensive lot, at $17.25 million, is 11,773 square feet with 108 feet of beach frontage. And buyers expecting discounts have been disappointed: Headlands Reserve priced the 48 lots in its South Strand section in January 2009, “so they’re marked to market,” says Edward.
A decade ago, it looked like this site would never see a house or a street on it. The Chandler family, longtime owners of the Los Angeles Times and major real estate holders in California, had owned this property for 70 years and spent 25 of them trying unsuccessfully to get it entitled. Edwards had to sue the city to keep 85 of The Strand’s acres from being down-zoned. His company also battled with the state’s Coastal Commission, the Sierra Club, and the Surfrider Foundation before it received final approval in January 2004. The first 18 lots were released in September 2006 and found buyers within 48 hours.
This $200 million-plus project includes a 90-room hotel and spa, a 35,000-square-foot commercial center, and five parks over 68 acres. A 9,200-square-foot beach club is slated to open in September, says Edward. Financing has come from the California Public Employees Retirement System (CalPERS), through its advisory group International Housing Partners (IHP). Edward and CalPERS have also kicked in equity. (Headlands Reserve is the LLC formed to develop this land.)
The one- and two-story custom homes being constructed on these lots range from 9,000 to 12,000 square feet. The developer lets owners build to whatever architectural style they prefer. It also offers a custom home program, which will manage the design and construction process from start to finish.
Like his buyers, though, Edward isn’t finding many new land bargains. “This has been the best acquisition cycle in 20 years, but over the last six months lot prices along the I-15 corridor have gone up 20 percent to 25 percent.” But investing in land in California is still worth it, he says, because “demand outstrips supply, and prices aren’t getting any cheaper.”