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Sunday, May 12, 2024

FivePoint Sells $75M In Great Parks Area

Real estate company Five Point Holdings LLC (NYSE: FPH) has sold 11.6 acres of its Great Park Neighborhoods development in Irvine for $74.6 million, the company said.

The buyer of the 82 homesites, Fort Washington, Pa.-based homebuilder Toll Brothers Inc. (NYSE: TOL), paid an average of $909,000 per homesite, or $6.4 million an acre.

Great Park Neighborhoods, adjacent to the city of Irvine’s Great Park public recreation area, is a mixed-use, planned community being developed on the former site of the U.S. Marine Corp’s El Toro Air base. It spans 2,100 acres, which could include up to 10,500 homesites.

To date, FivePoint has sold more than 8,000 homesites in the development.

The company’s business model is to develop large, mixed-use, master-planned communities in California by acquiring and packaging land parcels, obtaining entitlements for development, then selling the land to companies that further develop it, typically primarily through building construction.

The model has performed somewhat better than the real estate industry average this year.

FivePoints’ shares were down 4.7% in May 3 intraday trading, compared to the 9% drop in the Dow Jones Real Estate U.S. Index year-to-date. But since FivePoint went public in 2017, its stock price had plummeted 81% as of May 3, compared to a drop in the DJREUSI of 7% over the same period. By comparison, the S&P is up 125% since 2017, and 8% year-to-date.

A Time to Buy

FivePoint has been striving to take advantage of the current housing supply shortage, reporting “strong financial results despite a challenging economic landscape,” GuruFocus Research wrote last January. Noting that FivePoint’s “success is largely attributed to its strategic land sales in the Valencia and Great Park segments” of its business.

“We have seen strong builder interest in our residential land offerings, as well as sustained new home demand,” FivePoint Chief Executive Dan Hedigan told analysts during a conference call in April.

“The continued lack of existing home inventory, [shortages of entitled land,] coupled with low unemployment and fairly strong consumer confidence, has helped sustain strong demand for our land and our communities.”

All the same, Hedigan noted a limit to the company’s ability to profit from current housing market conditions.

“The limiting factor in demand [continues to be] affordability” he said, “which is driven in large part by the impact of higher interest rates and stubborn inflation.”

Upcoming Residential Land Sales

The company this quarter completed the bidding process for another approximately 400 homesites at Great Park Neighborhoods, Hedigan told analysts. Contract negotiations are underway, he said.

FivePoint also started the bidding process for four other programs in Great Park Neighborhoods, consisting of 300 homesites, the company said.

FivePoint’s last residential land sale, of 798 homesites on 84 acres at Great Park Neighborhoods for $357.8 million, closed in 2023.

Commercial Land Sales

In commercial real estate, last December the company sold two land parcels, totaling nearly 38 acres at Great Park Neighborhoods, to industrial developers for a combined $174.2 million, property records show.

The sale, among the largest real estate deals in Orange County in the past year, comes weeks after the company submitted proposals for four industrial buildings totaling north of 700,000 square feet on the two sites.

In the larger of the two deals, New York-based real estate investor Tishman Speyer last month paid $145.9 million for a fully entitled 31.9-acre site located near the intersection of Bake Parkway and the Santa Ana (5) Freeway. Tishman, through a joint venture with Japanese real estate developer Mitsui Fudosan, will build four industrial facilities on the site.

The new owner of FivePoint’s other commercial lot, a 5.9-acre parcel at the southeast corner of Alton Parkway and Muirlands Boulevard, is Dermody Properties.

Dermody, based in Reno, Nev., purchased the parcel last month for $28.3 million, records indicate. It aims to build a more than 100,000-square-foot warehouse on the lot.
FivePoint currently has two commercial lots for sale adjacent to the recently sold 31.9-acre Bake Parkway site.

The parcels, which span 71 acres combined, sit on the other side of the Bake Parkway and Santa Ana (5) Freeway intersection. The southern parcel is 36 acres, while the northern lot is 37 acres.

Marketing materials describe the lots as ideal development sites for biomedical, healthcare, life science, R&D and corporate campus facilities.

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