‘For Sale’ Sign Put Up on Mission Viejo Co.

Mission Viejo Co., one of Southern California’s pioneer developers of master-planned communities, is for sale.

Tobacco and food giant Philip Morris Cos., Mission Viejo’s parent since 1972, has hired New York investment banker Morgan Stanley Realty to market the company that developed the communities of Mission Viejo and Aliso Viejo.

The company now owns a total of 13,000 acres, but the bulk of its residential land holdings is in the Denver area. It owns about 1,100 undeveloped acres in Orange County.

The company should fetch between $300 million and $350 million, sources said.

A sale is expected in the next six to 12 months, according to Steven Delson, executive vice president of Mission Viejo Co.

Delson said the real estate concern, which generates less than 1% of Philip Morris’ sales, has always been profitable but was not providing the same level of return as cigarette manufacturing.

“Wall Street penalizes companies not focused on their core business,” Delson said. “As the company evolved, it wanted businesses that could grow the way its other businesses could.”

The company’s most valuable asset is the 11,000 acres it owns in the 22,000-acre Highlands Ranch planned community south of Denver. This community should take about 10 years to complete, Delson said.

The Mission Viejo sale reflects the changing expectations for Southern California real estate. When Philip Morris purchased the company in the early 1970s, real estate prices were going straight up and returns of 30% were possible. After the recession of the early 1990s, large companies realized it was almost impossible to get those kinds of returns and began shedding their real estate operations.

“The glory days of [development] in Orange County are gone,” Placentia-based real estate consultant Alfred Gobar said.

Mission Viejo Co. was founded in 1963 by a partnership of billionaire real estate developer Donald Bren and the O’Neill family, major landowners in south Orange County. Bren later sold his interest and bought Irvine Co. Philip Morris made its initial investment in the real estate concern in 1969 and purchased the company outright in 1972 for $52 million.

Rumors of a sale have been circulating for almost a decade, sources said. They intensified when the company stopped building homes in 1989 and began selling land.

In Orange County, Mission Viejo Co.’s developments are nearly complete. Mission Viejo, a 10,300-acre project with 84,000 residents, has only 300 acres left to sell. Aliso Viejo, a 6,600-acre development, is 80% complete.