Background
Construction of MCAS El Toro began in 1942 on a parcel of land acquired from the Irvine Ranch Corporation, a precursor to the Irvine Company. Throughout its history, MCAS El Toro has served the country as a training facility in peacetime and a staging area for support of overseas military missions in times of conflict. The base formally closed on July 2, 1999. The County of Orange was designated the Local Redevelopment Authority (LRA) for development of a Community Reuse Plan to guide future development of the former MCAS El Toro. In 1994, Orange County voters narrowly approved Measure A which zoned the property for use as an international airport. This touched off a multi year legal and political battle that ended when 58% of Orange County voters approved Measure W, the Orange County Central Park and Nature Preserve Initiative, on March 5, 2002. This initiative overturned Measure A and amended the County General Plan to create a park at the former MCAS El Toro site. The day after Measure W was approved, the Department of the Navy issued a press release stating that disposal of the former Base would be accomplished by means of a public auction.

The services of Norris Realty Advisors was required in order to estimate the probable range of value for the property, given the complicated nature of the entitlement process and the unique size and location of the property.

Property Description
MCAS El Toro, is comprised of 3,719 acres with over 10.5 million square feet of older improvements. The site has the potential to be developed with over 4.1 million square feet of commercial improvements, 2,100 residential dwelling units, and land set-aside for 650 acres of public parks, wildlife corridors, and sports parks.

Process
The Heritage Fields site represents the largest single remaining developable property in Orange County, and perhaps the prime development opportunity in the Western US. The site enjoys a prime location at the intersection of the 5 and 405 freeways. The overall development plan dedicates a significant amount of land area for public parks, public uses, and drainage/riparian corridors. The inclusion of these park and public uses places an additional infrastructure and maintenance cost on the overall property that would not exist to the same extent under a more conventional development plan that involved more intensive use of the land.

Even with the added costs and development complexity of the Heritage Fields land use plan, the overall site remains a very desirable location in the south-central portion of Orange County.

Based on discussions with the client, our work consisted of a detailed developmental cash flow analysis, completed in conjunction with the designated brokerage firm for the property auction, Colliers-Seely. Our analysis contained over 50 different input assumptions, including estimates demolitions costs of existing improvements, entitlement costs, development fees, estimated finished land value, and return rates. As a part of our research, we conducted interviews with a wide variety of disciplines in residential and commercial real estate, in order to understand the broader market perspective of development of the El Toro property.

Our analysis included estimates of the "low end" and "high end" value ranges for the overall development, based on a present value residual to the land, considering the potential entitlements for the overall property.

Conclusions
Our recommendations were summarized in a 64-page report submitted to the client. The final range of value for the property reflected an overall spread of over 175%, due to the differing assumptions of the "low end" and "high end" cash flow analyses. Given these conclusions, the client placed the property up for public auction, conducted over the Internet.

Results
On January 5, 2005, 3,719 acres of the former MCAS El Toro property were officially made available for sale to the public via an online auction process. After six weeks of active bidding (with very little activity during the first five weeks - similar to behavior in online auctions at EBay), the auction was closed on February 16, 2005, with a joint venture partnership between Lennar Communities and LNR Property Corporation as the sole successful bidder on the entire property. The sale closed on July 12, 2005 for $649.5 million. As such, the sale of MCAS El Toro has been hailed as the most successful Base Re-Alignment and Closure (BRAC) installation sale/transfer to date. The proceeds realized from the sale will be used to fund further BRAC project activities nationwide, and will also be utilized to offset costs associated with all ongoing environmental stewardship activities at El Toro and other BRAC installations.

Time/Resources/Value
The assignment took over six months, but was also based on years of prior experience of our firm with other base closure activities. Compensation was based on a set fee with the client, the General Services Administration, acting as the property consulting and brokerage agent for the Department of the Navy.

The results of our consulting assignment were used by the GSA and the Navy as a part of preparation for the public auction of the property.

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