In 2005, real estate developer Lennar Corp. and several other groups (LNR Property Corp., Lennar’s commercial operations, Rockpoint Group, Blackacre Institutional Capital Management and MSD Capital) won the auction to buy the El Toro Marine Corps Air Station for $649.5 million. Today, it is the site of the emerging 1,347-acre Orange County Great Park. Note: Lennar has bought six closed military bases to build housing on.
Currently, Lennar, through FivePoint Communities Management, a Lennar spinoff headed by Emile Haddad (Haddad was the chief investment officer at Lennar) is managing the Great Park homebuilding and negotiating with the city of Irvine to take over the building of the park. Lennar, et al. (the “developers”) are not satisfied with to progress of the park development and need to salvage their massive real estate investment.
The developers gave the city of Irvine the land for the park and $200 million in development money (the lender was Lehman Brothers, which filed the largest bankruptcy in U.S. history in 2008), but currently only about 200 acres have or are being developed. Further, the park development took a huge hit when the state pulled back $1.4 billion in funding.
The developers have approval to build 4,894 homes, with five million sq. ft. set aside for commercial use, including several education institutions. The developers have broken ground on the first 726 Great Park Neighborhood homes. The developers, however, seek approval to build 5,800 more homes. Note: The Irvine Co. is also building thousands of homes nearby.
The developers are offering the city $641 million in funding to improve and temporarily maintain most of the park's undeveloped acres. The first installment is $211 million, but the developers are not going to just “hand over” the entire $211 million to the city, given the city has already burned through $200 million of their money without much to show for it. The developers, through FivePoint Communities Management, want to oversee the development of the sports complex and bosque before it gives the city the $211 million. The other $430 million would be dispersed over 30 years, bringing the developers’ investment in the park to $2 billion (including infrastructure). The offer is off the table after Oct. 31, 2012, although negotiations could extend past the elections. A ballot initiative is also possible. Haddad said FivePoint’s public outreach efforts indicate a ballot initiative to let the developers take over the building of the park would pass.
The developers plan on building a 250-acre Olympic-style sports village within five years that includes 24 soccer fields with a 2,500-seat center field arena, 18 tennis courts with a 400-seat center court, baseball and softball diamonds, an aquatics center, hockey rink and sand volleyball courts. The city will garner the venue revenues. The developers also plan on restaurants, sports bars, sports-related retailers and perhaps a hotel. It envisions a sort of downtown area for the new neighborhoods built on the former base.
But wait, there’s more for this park whose partially developed outline is twice the size of New York City’s Central Park. As per the park master plan, the developers want to build a 178-acre wooded area, a 21-acre lake and miles of hiking and biking trails, however, Lennar wants the wooded corridor on the housing side, not the park side.
How does the Irvine City Council feel about the deal? "We are not desperate," Councilman Larry Agran told the O.C. Register. Let’s just say the council has concerns about “how much the city will get”: how to pay for park maintenance; how it would affect traffic; how much the new plan would “distort” the master plan. Note: The developers say park maintenance ($430 million over 30 years) would come from a special Mello-Roos property tax bond on the homes.