Great Park project in Irvine gets financing to proceed
The private developer partnering with the city of Irvine to build its Great Park project said that he has the financing to move forward — more than two years after the housing bust and economic crisis put the project on hold.
FOR THE RECORD:
Irvine project: An article in the Jan. 10 Business section about private developer FivePoint Communities Inc.’s securing additional financing to move forward with a housing project said construction of homes at the Great Park would begin next year; in fact, construction at the Orange County Great Park is expected to begin in 2013. The article also said that the developer and the city of Irvine reached a deal to expand the number of homes, among other things. In fact, the city’s decision to expand the number of homes was not part of that deal. The article also said that Boston-based State Street Bank & Trust Co. was an original investor in the project; State Street was actually a lender. —
Emile Haddad, chief executive of FivePoint Communities Inc., said Sunday that he has $400 million worth of fresh financing for the deal, which will help the company move forward on about 5,000 new homes and 5.2 million square feet of commercial space. Construction of the homes is expected to begin next year, he said.
“We are very excited,” Haddad said. “It’s a great thing to take a project that was stuck and allow it to get out of the quicksand.”
The private development is a key part of the Great Park project because proceeds from the sale of homes will go toward the park. Also, much of the infrastructure needed for the park — such as sewers and streets — is shared with the private part of the development and is FivePoint’s responsibility to build.
“It’s great news,” Irvine Mayor Sukhee Kang said. “What we are about to unfurl is a major step forward in the public-private partnership that will bring jobs, economic growth and many public benefits.”
Irvine City Councilman Steven Choi said he was pleased that the project would move forward after years of setbacks.
Miami home builder Lennar Corp. bought the El Toro Marine base in 2005 and signed a deal with Irvine to build the park. The company and its investors borrowed $775 million from New York investment bank Lehman Bros. to finance the purchase of the land. Lennar added about $700 million from its own funds and from investors.
Then the housing market stalled, prompting the company to put the residential part of the project on hold. The subsequent economic turmoil caused the retail and office space planned for the site to be delayed as well.
In September 2008, Lehman declared bankruptcy. Lennar created FivePoint in summer 2009, and Haddad, who had served as Lennar’s chief investment officer, was named CEO. Irvine and FivePoint struck a substantially amended deal that raised the number of homes in the project, transferred an additional 131 acres to the park, required FivePoint to put up $58 million for site improvements over three to five years and scrapped plans for golf courses and a 171-acre agricultural preserve.
Since then the city has moved forward with a modest $65.5-million initial development of the park, turning a 225-acre western portion into lawns, exhibition space, sports fields, farmland, citrus groves and a wildlife corridor.
Lehman sold the $775-million Great Park Neighborhoods mortgage in December to Boston-based State Street Bank & Trust Co., which had been one of the original investors in the deal, for a substantially discounted $153 million.
On Sunday, Haddad said he had struck a deal with State Street and other investors that called for $400 million in new cash and credit to the project. Under the restructuring, Lennar bought out the position of private-equity firm Cerberus Capital Management, he said.
FivePoint also settled a lawsuit by Forest Lawn, which had wanted to put a cemetery on the property.
