El Toro: Balancing Hoopla, Reality

Now the fun starts.

Fun, that is, if you get your kicks out of deciding whether to commit millions of dollars of your company’s money to developing land now littered with weeds and rickety, abandoned buildings.

But real-estate developers see with different eyes than you and me. Where we see weeds, they see the back nine. Where we see rickety buildings, they see three-car garages.

A lot of those types congregated Monday at the Officers Club at the former El Toro Marine base. If it hadn’t been 10 in the morning, it would have made for a great cocktail party as a confluence of buyers, sellers, brokers, deal-makers, deal-breakers and other people with big dreams showed up to hear about this autumn’s online auction for some 3,700 acres of prime, centrally located real estate that is Orange County’s version of the Louisiana Purchase.

Take note: The market is up from 200 years ago. A young America paid France $15 million for the 800,000 square miles. This year, the government hopes to reap around $1 billion for the 6 square miles in the heart of Orange County.

Yes, people will pay. That doesn’t mean they won’t have sleepless nights beforehand.

One of those at the confab Monday was David Pittman, the affable 47-year-old president of a Newport Beach real estate development company named Acacia. “We have a level of interest,” he says. He wasn’t being coy; it’s just that lots of things will determine the company’s willingness to dive into the bidding fray.

With four parcels up for grabs -- each with its own opportunities and challenges -- potential bidders have homework to do. It’s possible, if not likely, that more than one company will develop a given parcel. A homebuilder, for example, may buy an overall parcel but have no interest in developing the golf course or cemetery that is on the drawing board.

Unknowns abound -- like who will be the big bidders and how high they’ll go -- but that won’t last. “There are no secrets in real estate,” Pittman says, meaning that word gets out.

I ask Pittman if the land, by definition, is both appealing and lucrative. “Appealing is correct, lucrative is an unknown,” he says. Buyers had better have a game plan that is rock-solid right from the start, he says, because the massive amounts of borrowing likely needed will generate significant debt payments. Lenders will want to see early signs of success.

Amid the El Toro auction hoopla, the savvy business owner must keep his or her head. Showboats often end up with theirs on platters. “What makes this unusual is the whole controversial nature of this particular piece of real estate,” Pittman says. “There’s no question that with all the lawsuits and voting off and on for the airport or not, this obviously is a high-profile piece of dirt.”

It’s not lost on him that things can change. “Right now, it’s still an airport,” he says of the land. “And it could easily be converted to one tomorrow, if they had to.”

Still, like the other players in the crowd Monday, he’s got to be thinking auction.

“It takes a lot of time and effort to go through and analyze all those parcels as to which one or ones you might want to go after,” he says, describing the task all serious bidders face. “Each one has its own pros and cons.”

I ask if he’ll be in local real estate’s version of the Fall Classic. “We haven’t decided one way or the other,” he says. “There’s a very strong possibility we might.”

From now till then, there are questions to be answered, unknowns to ponder.

Fun, yes, but this is no game.

“We’re talking about a serious commitment,” he says. “It’s going to be a big check. It’s going to be a big number.”

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Dana Parsons’ column appears Wednesdays, Fridays and Sundays. He can be reached at (714) 966-7821, at dana.parsons@latimes.com or at The Times’ Orange County edition, 1375 Sunflower Ave., Costa Mesa, CA 92626.