Secretive Hedge Fund TGS Pays $240M for Irvine Land

The operations of TGS Management LLC are often shrouded in mystery, but the company’s local physical footprint is anything but following its largest Orange County investment to date.

The Irvine-based quantitative finance hedge fund, run by one of the area’s most under-the-radar billionaires, Fred Taylor, has rapidly ramped up its OC real estate presence over the past three years via a series of acquisitions, development plans and leases.

It recently supersized its local holdings, with an affiliate it controls spending $240 million for 42 acres of vacant land in the Irvine Spectrum, records indicate.

It’s the largest real estate deal in the city since 2020.

Five Point Holdings LLC (NYSE: FPH) is the seller, marking the first commercial transaction disclosed by the Irvine master developer since CEO Dan Hedigan first shared information for “planned commercial opportunities” for its Great Park Neighborhoods division last year.

The deal with TGS represents more than one-fifth of the total land available for commercial development in the Great Park Neighborhoods, the FivePoint-controlled land the largely surrounds the city-run Great Park.

TGS, under a venture called Barranca Properties LLC, paid about $5.7 million per acre for the parcel in a deal that closed in late December.

Multiple sources told the Business Journal TGS is expected to develop the site into a large data processing hub for its local finance operations.

TGS now owns north of 60 acres in Irvine—including its headquarters in the Woodbridge area of the city—and leases a full-building totaling 115,000 square feet at the Irvine Co.’s Spectrum Terrace office campus.

Near City of Hope

TGS co-founder Fred Taylor formed Barranca Properties LLC—named after the Irvine land parcel— in late 2021, state records indicate, suggesting a deal with FivePoint has been a possibility for some time.

The site it just bought is off Barranca Parkway, near the intersection of the San Diego (405) and Santa Ana (5) freeway. The land is south of the 1-million-square-foot FivePoint Gateway office campus that now holds the growing Irvine medical campus of City of Hope, where work is now well underway for a new cancer-focused hospital.

­Hedigan confirmed the “very strong sale” during a fourth-quarter earnings call this month, but didn’t disclose a buyer or the planned use for the site.

“With over half of land in our initial commercial offering that Great Park already sold, and continued interest in negotiations on remaining sites, we remain confident in the continued demand in the commercial markets for not only industrial uses, but for other uses as well,” Hedigan added.

“In many instances, we have the only entitled and ready developed commercial and industrial land of its kind in the market.”

FivePoint’s shares rose more than 20% to about $2.80 the day following its earnings release on Jan. 19.

The purchase represents TGS’ largest local investment to date, and could lead to the development of facilities surpassing half a million square feet, real estate sources indicate, also marking the company’s largest property in its portfolio.

Like it has been for its other holdings in the area, TGS has been quiet on the deal and its plans for the site. It did not respond to Business Journal inquiries on the transaction.

721K-SF Site Plan

During an October earnings call, FivePoint’s Hedigan confirmed his company was “actively marketing” about 80 acres of commercial land at the Great Park Neighborhoods.

Hedigan told analysts such land opportunities were trading to industrial developers for between $5 million and $7 million an acre—in line with TGS’ acquisition price.

The three sites, previously used for farming, include a 31.9-acre site, a 6-acre site and the just-sold 42.1-acre site.

The Business Journal reported in November that a large occupier was said to be in negotiations for the largest site, which could accommodate nine buildings totaling 721,308 square feet, according to a site plan obtained by the Journal.

Those buildings, as initially designed by Irvine architecture firm Ware Malcomb, could range in size from 26,700 to 131,086 square feet.

CBRE represented FivePoint in the transaction. Brokers did not comment on the deal.

Irvine Data Hub

TGS is nearing the build out of a data center just off the San Diego (405) freeway at 23 Pasteur. It paid $28 million for the 4.6-acre site and is building a 48,260-square-foot data facility, which is expected to be used for its quantitative trading activities.

San Francisco-based Wells Fargo sold the one-time office site, situated next to a building used by Irvine retailer Tilly’s Inc. for its e-commerce operations, in 2020.

The data center will include “electrical equipment, limited office space and computers,” the city previously told the Business Journal.

More recently, TGS in 2021 paid nearly $50 million for the former South Orange County campus for California State University, Fullerton, a two-building complex in the Spectrum area that the school has since closed.

The pair of two-story offices at 1 and 3 Banting total about 138,000 square feet; the property traded hands for around $360 per square foot.

As in the case of the just completed deal with FivePoint, it is still unclear what TGS has planned for the former CSUF site, which runs some 12 acres. Both buildings appear to be unused, a site visit last week indicated, with DPR Construction vehicles hinting at early signs of development or tenant improvement work. DPR counts advanced technology companies as clients for one of its main business lines.

TGS, which launched more than 30 years ago as one of the first quantitative investing firms, uses computer algorithms to invest via a so-called “quant” strategy, and is estimated to employ less than 100 people in the city.

It appeared to make an investment for its local staff in 2020 when it inked a deal to occupy a newly built building at the second phase of development at Irvine Co.’s Spectrum Terrace office project.

Spectrum Terrace sits on the other side of the San Diego freeway as TGS’ new data center.

The Spectrum Terrace building is large enough to hold 400 or more workers, though the property may serve more as an amenity package than a standard office. The closed-to-the-public building appears to have its own gym and rock-climbing wall, and few traditional offices.

Recent visits to Spectrum Terrace by the Business Journal have indicated a minimal amount of activity at the TGS building.

“Our team includes researchers and engineers from some of the top universities in the world, winners of national and international competitions in math, physics, and informatics, former professors, and a cast of talented professionals,” TGS says on its website.

Its website didn’t indicate any open positions at the company’s Irvine base. TGS’ founding team includes Taylor; the late David Gelbaum; and Andrew Shechtel. TGS also has offices in Princeton, N.J. Estimates of Taylor’s wealth range from $1.3 billion to multiple billions. He is also reported to be a major philanthropist, although like TGS, his giving efforts are highly discreet and largely under the radar.

There’s been no reports of the firm investing in commercial real estate anywhere outside of Irvine. Outside of Business Journal reporting of TGS’ local real estate investments, there’s been no significant national news on TGS in several years.

Commercial Boost

Officials at Irvine’s Five Point Holdings LLC (NYSE: FPH) expects to maintain strong pricing for its two remaining commercial sites now being marketed for sake in its hometown, driven in large part by demand from industrial investors.

Sources previously told the Business Journal that several industrial developers have put in bids to acquire a 31.9-acre site that FivePoint owns, which could include four buildings totaling 547,092 square feet, ranging in size from 62,256 square feet to 199,028 square feet.

A third and final site is also said to have several offers from industrial developers and occupiers. That 6-acre site is currently envisioned to include a single industrial building spanning 116,568 square feet.

“We continue to have historic low vacancy rates in the industrial market, coupled with continued rent growth which we expect will continue to drive demand in this preferred asset class,” Chief Executive Dan Hedigan said last month.

FivePoint’s commercial land business establishes another source of revenue for the developer amidst an uncertain time for residential markets.

“Although we see 2023 as a transition year in residential, the one reality that cannot be denied is that in our California markets, housing is still in short supply and there is still demand for well-located homes in master planned communities,” Hedigan said.

He added the company is in discussions with builders at Great Park Neighborhoods to “sell land at prices that reflect the balance between current market conditions and a scarcity of entitlement inventory in our markets.”

FivePoint declined to share data on projected home site sales, indicating most land sales of this year will occur during the third and fourth quarters.

–Katie Murar

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