THE HUGHES CUTBACKS : Housing Developers Covet Choice Property in Fullerton : Real estate: Hughes has been quietly marketing large portions of its 350-acre facility for more than two years. Demolition costs could complicate the sale.
Home developers are eagerly considering hundreds of acres owned by Hughes Aircraft Co. in Fullerton, now that the defense electronics company plans to put nearly all of its Orange County property up for sale.
For more than two years, Hughes officials have quietly been shopping portions of its 350-acre campus location to such developers as Kaufman & Broad Home Corp. of Los Angeles, Fieldstone Co. of Newport Beach, Lewis Homes of Upland and others, real estate insiders said.
“Every major developer has seen that site,” said Clyde Stauff, a commercial broker in Anaheim with the Seeley Co. “Hughes and the city are going to have a big vacant eyesore. Nobody wants a 350-acre industrial park--but it’s a terrific site for homes.”
On Monday, the company said it would sell 286 acres of its rolling green campus, but keep 64 acres used for parking, a railroad easement and two office buildings the company plans to continue leasing, a spokesman said.
Hughes has more than two dozen buildings, some as small as 500 square feet, at the remote, high-security site. The defense giant holds leases on two of the buildings until the year 2011. Those two buildings hold 384,000 square feet of office space, enough for about 700 workers.
Working closely with Fullerton city officials, Hughes is hammering out a plan to have a developer build at least 600 single-family homes on 140 acres. The company is also considering selling the remainder of the property directly to home builders, a move that could avoid flooding Fullerton’s real estate market with about 2 million square feet of vacant industrial and office space, sources said.
As far back as 1992, Hughes attempted to sell a 140-acre parcel of mostly vacant agricultural land located north of the Hughes compound and bordered by Pioneer Avenue and Sunny Hills High School. But the project was unveiled in the midst of the real estate downturn, with home prices falling and developers unable to borrow money. After several public meetings, the project was shelved.
Now, with the local real estate market picking up and the company phasing out its operations, the property is again up for grabs.
Sources said Hughes does not intend to be a master-developer or to become a partner with a home builder, but wants to sell the land outright to a developer.
The Hughes campus is next to the high school and surrounded on three sides by homes that range in price from $400,000 to $1 million. The property is bordered by Malvern Avenue on the south, Bastanchury Road on the east, Pioneer Avenue on the north and Gilbert Street on the west.
The entire site could support more than 2,000 homes and about 6,700 additional residents, predicted Al Gobar, a real estate economist who lives in Fullerton.
The anticipated job losses in Fullerton would not necessarily mean a drop in sales of existing housing or damage surrounding property values, according to Gobar and other real estate experts. Only about 15% of the Hughes plant’s workers live in Fullerton.
“One employer leaving Fullerton won’t shut down the housing market,” said Jeff Meyers, president of the Meyers Group, a Newport Beach real estate consulting firm. “And that location allows people to commute to Los Angeles. If priced right, those North County in-fill locations are some of the best-selling housing projects in Orange County.”
Gobar said that Fullerton land prices have increased about 20% in the past two years, with a finished lot of roughly 5,000-square-feet selling for about $125,000. That compares to a county average of about $115,000 per lot. If an acre holds six housing lots, he estimated a $100-million price tag to a developer for the 140 acres. And the finished homes, he said, would probably be priced about $350,000.
But Gobar suggested that it is difficult to establish a current market value for the entire site because existing buildings would have to be demolished, which could make the per-lot costs prohibitive for most builders. There is also the cost of any environmental cleanup of the site, which could be extensive and delay development.
“We’ve done surveys, but so far we haven’t found anything that requires significant remediation or cleanup,” said Dan Reeder, company spokesman. “This is very clean for an industrial site. We don’t have any problems here.”
Eric Lunde, director of land acquisition for Kaufman & Broad, acknowledged that California’s largest home builder is looking at the 140-acre parcel and would be interested in even more land, but he questioned whether it would be a cost-effective deal if his company had to tear down existing buildings.
And city officials caution that putting homes on the entire 286 acres might not be the best solution for the property.
“Hughes has been working with us and trying to come up with a plan for the 140 acres,” said Barry Eaton, chief planner for the city of Fullerton. “We’d like to take a look at the rest of the property and see if residential is the best thing for the city. Maybe it would be better to create an office park.”
Mike Russell, a Marina del Rey consultant, is marketing the site to various builders for Hughes.
“We’re just in the early stages,” he said. “It’s a big piece of property. You have to look at the surrounding uses--what the community wants and what the city wants.”
Several developers said interest in the Hughes property is likely to be very aggressive. “This thing is a winner,” said one prominent home builder, who was actively considering the site and did not want to be identified. “It’s a nice location and a pretty piece of property.”
But Paul S. Williamson, a broker with Cushman & Wakefield in Orange, who represents a parcel of land near the Hughes facility, described the site as a potential “white elephant,” if the company tries to find an industrial tenant.
Williamson said building homes there makes more sense, especially compared with the difficulty of finding a new tenant.
“You can’t just dump that on the market. Someone who manufactures widgets is not going to move in there,” he said. “The alternative is to let it sit vacant for five years, so why not make it a residential community?”
Division of Hughes
Hughes Aircraft Co. will offer most of its 350-acre property for sale. The company will retain 64 acres and two buildings with 384,000 square feet of office space:
Source: Hughes Aircraft Co.
