Housing Project Investor Moves In
The Santa Margarita Co. said Wednesday that it plans to team up with a major Arizona investor to develop its 4,000-acre Ladera project, the fourth planned development on the giant Rancho Mission Viejo.
Phoenix-based DMB Associates will provide the financial backing that the cash-strapped Santa Margarita Co. needs to proceed with the new project, industry sources said.
Neither Santa Margarita nor DMB would disclose financial terms. One source said Santa Margarita Co.’s partner in the 1,000-acre Las Flores planned community now under construction on the ranch brought about $10 million to that much smaller deal.
Anthony Moiso, president of Santa Margarita Co. and a member of the family that owns Rancho Mission Viejo, called DMB’s participation critical. The partnership “is a significant step and perhaps the last one we need to take” in the financial reorganization of the Santa Margarita Co., he said.
Drew Brown, a managing partner of DMB, said the investment company would handle all the financing internally.
Plans for Ladera call for up to 8,100 homes, plus commercial and retail development, on about 2,400 acres. The property, south of Rancho Santa Margarita, is hilly and a substantial amount of grading will have to be done to prepare it for construction, Moiso said.
The Santa Margarita Co. will be managing partner of the Ladera project under terms of the proposed joint venture agreement with DMB.
But Moiso and Brown both said they expect that the Arizona firm, which owns a 50% stake in home builder UDC Homes Inc. will play an active role in development of the Ladera community. “Unlike some of our other financial partners, DMB is a developer in its own right,” Moiso said. “I’m looking forward to working with them.’
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Santa Margarita Co. is the privately held firm that oversees development of Rancho Mission Viejo, which will have about 26,000 acres of raw land left after Ladera is completed. Moiso said that while planning for future development is “always” going on, the company has not yet obtained permits or zoning for any developments to follow Ladera.
“But there’ll be people [planning developments] here long after I’m gone,” he said.
While the Santa Margarita Co. has always taken on investment partners for its developments, it had been a silent partner until last year, when the San Juan Capistrano development company underwent restructuring to stave off bankruptcy and turned over operational control of the Rancho Santa Margarita development to investment partner Copley Real Estate Advisers.
Moiso said at the time that the arrangement would give him freedom to pursue new development on the ranch while Copley oversaw build-out of the 5,000-acre Rancho Santa Margarita community. The city of Mission Viejo, which covers about 11,500 acres, was the first community built on the ranch.
Hank Adler, head of the real estate services group at accounting and consulting firm Deloitte & Touche in Costa Mesa, said that joint venture deals are the norm rather than the exception in Southern California’s real estate market these days.
“You use a joint venture partner for capital, to share the risks or because they have some specific expertise you need--or for all three reasons,” he said.
DMB, which has developed several larger master-planned communities in Arizona, “is a sophisticated investor group that will give [the Santa Margarita Co.] strong liquidity to move forward,” said real estate industry consultant Michael Meyer, managing partner of E.Y. Kenneth Leventhal Co. in Newport Beach.
