Philip Morris Will Sell Mission Viejo Co.

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

Tobacco and food giant Philip Morris Cos.--the Mission Viejo Co.’s parent since 1972--has hired New York investment banker Morgan Stanley Realty to market the company, which 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 are in the Denver area. It owns about 1,100 undeveloped acres in Orange County.

A sale is expected in the next six to 12 months, according to Steven Delson, executive vice president of the 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,” he said. “As the company evolved, it wanted businesses that could grow the way its other businesses could.”

The Mission Viejo Co. sale also reflects 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, large companies such as Philip Morris, Chevron Corp. and Mobil Corp. 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,” said real estate consultant Alfred Gobar of Placentia.

The 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 County. Bren sold his interest and later bought the 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.

The Mission Viejo Co. should fetch between $300 million and $350 million, sources said. It reported revenue of $157 million last year. The Mission Viejo Co. has 64 employees, half in Orange County and half in its larger Denver operation.

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 off land.

“The Mission Viejo Co. had been basically liquidating its assets,” Gobar said.

Sales packages on the company were sent out last week to about 40 builders, land developers and investors, including Morgan Stanley’s partners on the Chevron land purchase in Huntington Beach, home builder Lennar Corp. of Miami and Newport Beach-based land developer Christopher Gibbs, as well as Shea Homes in Walnut. Groups can begin bidding on the property after financial information is released in the next couple of months.

Real estate sources said it is likely that a developer will purchase the land and sell off smaller pieces to home builders.

In Orange County, the 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 acquired from the Moulton family in 1976, is now 80% built out.

More than 28,000 people live in Aliso Viejo, and more than 350 businesses with 7,000 employees occupy its commercial center, Pacific Park. The Mission Viejo Co. also owns about 500 acres near Beaumont in Riverside County.

But the company’s most valuable asset is in the Denver area, where it owns 11,000 acres in the Highlands Ranch planned community. That community should take about 10 years to complete, Delson said.

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Mission Viejo Co. at a Glance

* Headquarters: Mission Viejo

* CEO: Craig McCallum

* Business: Real estate development

* Founded: 1963

* Parent firm: Philip Morris Cos., which purchased majority interest in 1969 and completed the full purchase in 1972

* Employees: 64

MASTER DEVELOPER

Master-planned communities developed by the Mission Viejo Co.:

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Mission Aliso Highlands Viejo* Viejo Ranch Location South Orange South Orange Colorado County County Size 10,300 6,600 22,000 acres acres acres Population 84,000 28,000 40,000 Occupied dwelling units 28,969 12,700 14,200 First homeowners moved in 1966 1982 1981

*--*

* Only planned-community portion

Source: Mission Viejo Co., Times reports; Researched by JANICE L. JONES / Los Angeles Times