Lennar takes it all

This article first appeared in the PB April 2005 issue of Pro Builder.

With Orange County known as a land-limited area for building, the auction of the four-parcel property of El Toro — a famous Marine Air Station — has been a big deal for builders because of its implications on land development.

Sold during an online auction held by the Defense Department, the final bid came in at $649.5 million for 3,718 acres of El Toro, now being named Heritage Fields to launch the future project.

To start the bidding, the Navy — who handled the sale — asked for $525 million as the minimum bid and required all bidders to put up cash or letters of credit to enter the auction. Upon closure of the auction, the Navy brought in $124.5 million more than the minimum bid.

Although the El Toro base is within two miles of where most of Orange County's job growth is occurring, there were only three companies that bid on the base — Lennar, Standard Pacific and an unknown bidder. "Land opportunities like this come around once in a lifetime," says PB columnist John Burns. But, as Burn's says, "The development is incredibly complex as evidenced by Lennar's report that they spent two years and $2 million researching the development."

Burns explains that the complexities of this project include

Regional political battles that continue regarding Los Angeles' and Newport Beach's desire to keep El Toro as an airport;
Local political battles regarding the use of the open space;
Costs, including the construction of a Great Park that will be larger than the combination of Central Park in Manhattan, Golden Gate Park in San Francisco and Balboa Park in San Diego
Environmental cleanup issues
Regional transportation

The future of Heritage Fields

The master plan for Heritage Fields has already been established, and approved by the city. "One of the nice things about the El Toro's of the world is you become involved in the execution of the vision that's already been debated," states Emile Haddad, president of the California region for Lennar.

Besides the building of approximately 3,500 new homes by Lennar, Heritage Fields will also house a university campus, 225,000 square feet of retail space, 173 acres to be leased for agricultural land, 75,000 square feet of office development, a 45-hole golf course, a community memorial park (Great Park) and cemetery, a public exposition center, and 1.6 million square feet for an R&D industrial park.

So, where does Lennar start? "The thinking right now is we're looking at a July close, and a year of going through the final approvals and engineering," says Haddad. "By the end of 2006, we'll start the improvement for development, and delivering the first product in 2007."

Throughout the entire process Lennar will be closely engaged with the city and the Navy. "We'll be working very closely with them to make sure there's coordination in terms of the clean up, and with the developers of the Great Park, The Irvine Company," says Haddad.

Lennar expects homes in Heritage Fields will range from high density to low density single-family homes. Based on today's prices, the range will start at $350,000 and reach as high as $2.5 million. Affordable housing will also be included within the expected mix of product.

Regarding the overall project at Heritage Fields, Haddad says, "We believe the overall plan that was put together is one we're very excited to be part of. Now, we'll just roll up our sleeves and go to work."

A Storm Brews

It should come as no surprise that home building is one of the most regulated industries in the nation. One of the worst culprits of excessive paperwork requirements is the Environmental Protection Agency (EPA).

Through the National Pollutant Discharge Elimination System (NPDES) program, EPA issues storm water discharge permits to regulate construction activities that disturb an acre or more of land or a lot within a subdivision. When it started in 1992, the program's laudable goal was to improve water quality. Thirteen years later, the program's misguided focus on paperwork makes it in dire need of reform.

Here's one reason why: EPA's instructions for writing a Storm Water Pollution Prevention Plan are more than 40 pages long, but following those instructions to the letter doesn't guarantee compliance. Other permitting steps require builders to jump through even more hoops, and duplicative state regulations often add to the burden.

Perhaps the biggest consequence of the storm water program is its cost. Our members tell us that compliance can add anywhere from $1,500 to almost $5,000 to the cost of every lot. According to government figures, for every $1,000 increase in the cost of building a home, 400,000 fewer families can afford to purchase a median-priced new home.

It is time for a change. More than 700 builders are expected to converge on Capitol Hill on April 13 for NAHB's Legislative Conference. On this date, builders will be urge their members of Congress to direct EPA to reform the federal storm water permit program.

Builders are happy to cooperate with EPA to protect the environment, but there is no winner in the current system of completing endless paperwork. New home buyers lose and so does the environment.

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