REAL ESTATE : Irvine Co. Offering to Sell Leased Land to Business Tenants

In a break with past practices, the Irvine Co. is offering to sell 300 acres near Newport Center in Newport Beach and around John Wayne Airport to commercial tenants who already lease the land.

At one time the giant landowner didn’t sell any of its vast properties, instead leasing them to homeowners and businesses. That strategy hit a snag in the early 1980s, when the company sought to increase the lease payments of affluent homeowners in Newport Beach. They protested publicly, embarrassing the company into selling them the land.

Commercial property is another story. Those leaseholders have long complained that they can’t finance expansion or renovations of their businesses because they don’t own the land underneath.

Meanwhile, the company’s strategy regarding its land has changed drastically. When a group of investors bought the company in 1977, the new owners began selling land rapidly to repay the money they had borrowed to buy the company.

And the strategy changed again in 1983, when Chairman Donald L. Bren bought control of the Irvine Co. He fashioned a more middle-ground strategy of selling some of the land to finance construction of offices, factories and other commercial buildings on the portion of land the company retained.

The company’s approximately 200 commercial leases were signed years ago and don’t bring in a lot of money, officials said.

In the depressed real estate market, the Irvine Co. hasn’t been selling much of the rest of its vast landholdings. So the company recently decided to sell to the leaseholders, said Larry Thomas, a company spokesman.

If all 300 acres are sold, which Thomas says is unlikely, the land could bring as much as several hundred million dollars.

Money from the sale will be welcome, Thomas says, although he says the move wasn’t forced on the company by cash-flow problems.

“You have to keep in mind, not all our income comes from land sales anymore,” he said. “Although everybody can use cash in this environment, we also have a portfolio of 125 income-producing properties.”

The Irvine Co. owns about a sixth of the land in Orange County, the remnants of a 19th-Century ranching empire that turned out to be worth billions when the county started to grow rapidly in the 1950s.