Irvine Co. land grants mix altruism and financial strategy

The GMC Yukon trundled past a barbed-wire fence and up a dry grassy hillside — the brush scratching loudly against its underside — toward a peak with sweeping views.

Below, the blue and glassy Irvine Lake stretched toward the 241 Toll Road. In the other direction, parched hills rolled out in rust- and khaki-colored swatches.

“It’s funny to think that just over the hill is civilization,” Irvine Co. spokesman Mike Lyster said, stepping out of the SUV.

This land in East Orange is part of a proposed 2,500-acre gift from the Irvine Co. to Orange County — 1,400 acres here and 1,100 in Anaheim Hills.

From here, it is indeed easy to forget that much of the rest of the Irvine Ranch — more than one-fifth of the county’s 798 square miles — has become picturesque suburban neighborhoods and aggressively manicured shopping centers.

From here, it’s not hard to imagine the 93,000-acre ranch — a massive swath from Newport Beach to the Cleveland National Forest — as it once was: vast and nearly untouched.

The land gift, company officials have said, culminates 50 years of open space preservation and completes the company’s master plan.

With the additional 2,500 acres, about 60% of the ranch will be open space and parkland used by millions of residents who bike, hike and ride horses on a network of trails and recreation areas.

“The lands represented by this new gift are last pieces of a spectacular open space puzzle that has been assembled on the Irvine Ranch,” Michael O’Connell, executive director of the Irvine Ranch Conservancy, said in a statement. The nonprofit works with the county to manage the land.

Through the decades, the Irvine Co. has granted pieces of the ranch to the county as open space preserves. Most recently, in 2010, the company donated 20,000 acres in the same area as the new gift.

As with past land grants, the 2,500-acre deal won’t become final unless the county accepts the donation. The terms of acceptance are the subject of negotiations between the company and the county that are expected to take months.

The negotiations, which aren’t open to the public because they involve a real estate transaction, are aimed at ensuring that the county will have adequate resources to manage the land.

According to a staff report and a letter of intent laying out the terms of the 2010 deal, the Irvine Co. gave the independent nonprofit Orange County Parks Foundation $4 million to help pay for the land management.

This time there’s a key difference: While many of the 20,000 acres the company gave in 2010 had already been protected as open space, the land up for discussion now was essentially shovel-ready for 5,500 homes.

As Daniel Miller, Irvine Co. senior vice president of entitlement and public affairs, put it, “We could go down and pull a permit today and build.”

Why would the company give up a chunk of a shrinking pool of prime real estate?

Irvine Co. officials say the decision largely traces back to Donald Bren, the company’s chairman, whom Forbes called “the wealthiest real estate developer in the U.S.”

Open space, company officials say, is a major facet of Bren’s utopian vision for the communities the company has built and continues to shape.

“He believes it’s important not to just build houses,” Miller said. “Mr. Bren is always looking at the overall master plan.”

With the company celebrating its 150th anniversary, Bren decided the time was right to complete its open space legacy, Miller said.

An Irvine Co. website titled “Forever” — the word emblazoned over photos of wildlife and poster-worthy landscapes — details how the master plan has guided land preservation “for present and future generations.”

That kind of long-range planning sets the Irvine Co. apart from other major developers, Miller said. For example, he said, in 1960 the company transferred 1,000 acres of the ranch for $1 to the University of California to build UC Irvine.

Beyond altruism, the company’s calibrations for maximizing residents’ quality of life are part of a broad financial strategy. Happy residents draw more families looking for a nice community to put down roots. And with those happy residents living in nice neighborhoods, property values rise.

That’s why the company held on to the ranchland when other large-scale landholders sold property piecemeal to developers, Miller explained.

Miller spoke on a recent afternoon in a window-walled conference room at the company’s spotless headquarters across from Newport Beach’s Fashion Island — another Irvine Co. property.

He gestured toward the luxury shopping center.

“Another developer is going to give you a neighborhood park and call it a day,” he said. By also including amenities such as retail centers, which bring in sales tax revenue, the Irvine Co. is buoying municipal services necessary for prospective homebuyers, he said.

The Irvine Co.'s quasi-governmental role in building communities falls in line with suburban development trends around the country, said Larry Rosenthal, an adjunct faculty member of UC Berkeley’s Goldman School of Public Policy who teaches housing and urban policy.

When it comes to suburbs, he said, the line between public and private entities has become blurred, with homeowners associations — or in the case of the Irvine Co., developers — taking on regulatory functions traditionally held by local governments.

But an “idiosyncratic” set of circumstances that led to the company’s growth, coupled with what Rosenthal described as enviably shrewd operations over the years, have made the privately held Irvine Co. unique.

In the case of the company’s land grants, Rosenthal said: “They have a portfolio of built units. The more those units enjoy open space, the more valuable they’ll be over time.”

Still, Rosenthal cautioned that “the devil’s in the details” of such land deals.

“There is such a thing as unadulterated altruism,” he said. But “what is expected in exchange for a gift, if only informally, often helps determine ultimately what the arrangements are.”

The Irvine Co., he added, has been “extraordinarily sophisticated” at fostering political relationships in the county.

County Supervisor Todd Spitzer, whose district encompasses the ranch, said the county’s ties to the company are mutually beneficial.

Though he emphasized that the county is doing its “due diligence” in making sure the public is getting a fair shake, he said the donation is significant.

“At the end of the day, it’s a business decision,” Spitzer said. “I think Mr. Bren knows exactly how he wants to leave the county.”