IN A PRECEDENT-SETTING INTERNET auction that is being hailed by industry insiders as the way of the future for disposing of shuttered military installations, Lennar Corp. placed the winning bid to purchase the 3,718-acre former El Toro Marine Corps Air Station in Orange County, Calif.
Lennar, along with three joint venture partners, bought the property now known as Heritage Fields with a bid of $649.5 million. But the Miami-based company also agreed to pay $400 million in development fees to the City of Irvine, which pushes the total purchase price up to more than $1 billion.
All told, Lennar is paying about $1.2 million per developable acre. Even at that heady number, company executives gushed with excitement at winning the property. “We believe this is an excellent opportunity to develop a premier community in one of the nation's most desirable and supply-constrained home building markets,” said Emile Haddad, who heads the firm's California region.
Strategic Purchase Picking off Heritage Fields is consistent with Lennar's strategy of acquiring old military bases for reuse.
Since 1998, the Miami-based company has partnered with six communities to redevelop closed military facilities. Five of those properties are in California: the Mare Island Naval Shipyard in Vallejo, Hunters Point Naval Shipyard and Treasure Island in San Francisco, March Air Force Base in Riverside County, and the Marine Air Corps Station in Tustin. The sixth, the South Weymouth Naval Shipyard, is near Boston.
Plans for Heritage Fields call for 3,400 units, ranging from apartments to estate-sized homes and priced from $350,000 to more than $2 million, as well as commercial and retail uses on 862 acres. The rest of the property will be given over to public uses.
Lennar, which anticipates a 10 year build-out, will take over only a portion of the lots. The remaining lots will be sold to other builders.
Barring any obstacles, such as further action by opponents of the project or the inability of the Navy Department to finish disposing of any environmental hazards on the property, the company and its partners will begin to break up the old airplane runways and install utilities and roads in the fall.
Although construction is scheduled to begin on a sports park and wildlife corridor in 2006, work on the first phase of homes won't start until 2007. Initial deliveries are set for fiscal 2008, with the final phases closing out in 2015.
In addition to LNR Property Corp., which Lennar spun off several years ago and is now owned by N.Y.-based investment management company Cerberus Capital Management, partners in the joint venture include: MSDCapital, which manages investments for Dell Inc. founder Michael Dell; the Rockpoint Group, a global real estate investment and management firm; and Blackacre Institutional Capital Management, the real estate investment arm of Cerberus Capital.
Learn more about markets featured in this article: Los Angeles, CA.