A disputed proposal for a massive warehouse in the Irvine Business Complex will likely instead lead to a 25-acre housing development.

Real estate developers from Von Alton, LLC, hoped to demolish a corporate center to build a 540,000-square-foot warehouse complex at Von Karman Avenue and Alton Parkway.

After the Irvine City Council expressed apprehension about allowing a warehouse in the middle of a neighborhood where city leaders hope 15,000 residential units are added in coming years, the two sides struck a deal that paves the way for housing in lieu of warehousing.

“The whole idea of creating walkable communities is absolutely destroyed by a warehouse complex that’s an entire square block,” Mayor Larry Agran said previously.

But the City Council was caught in a bind.

First, it was unclear if Agran had enough votes on the six-member board to nix the warehouse plan.

Second, if the council did vote to deny the warehouse application, which had previously been approved by the City Planning Commission, the developers intended to sue.

Rather than risk litigation, the sides struck a deal.

The city will grant the developers their coveted industrial entitlement, but the developers promise to build housing instead.

The developers say they want the industrial entitlement not to pursue their original warehouse plans, but to boost their land’s value.

For its part, city officials vow to expedite the planning and approval process for a new housing proposal.

Details about the new plans, including what sort of housing would be built, remain undecided.

City Manager Oliver Chi said he expects new plans to be finalized and brought back to the City Council for consideration by late September.

He also acknowledged that the new plan carries risk.

“It’s great to have good intentions, but what guarantees does the city have that this project will come to fruition?” he asked rhetorically during a council meeting on Tuesday, Feb. 11.

With the developers given their industrial permit, they could ostensibly renege on their promise to build housing and go back to their pursuit of warehousing.

Chi said that scenario is unlikely.

But in case it unfolds, the city and the developers agreed on an option that would allow the city to purchase the 25.41-acre lot at a price of $12.5 million per acre.

That works out to more than $317.6 million minus a $2.5 million fine the developer would have to pay to the city.

Chi likened the plan to the city’s 2023 purchase of the All American Aslphalt Plant for $285 million.

There, the city is working with a real estate developer to build homes, and Irvine could ultimately profit from the deal.

In this case, Chi says the city would not be in a position to make a profit should the City Council exercise its option to buy the land that constitutes the Von Karman Corporate Center.

The $12.5 million per acre price point is at the upper end of fair market value for residential land, he said.

Rather, the purchase option is intended to function like a safety valve.

“It’s our hope that we’re never going to have to trigger that option,” Chi said.

“All of our conversations with the property owner have us convinced they are operating with the city in good faith,” he added.

This project notwithstanding, the City Council intends to consider stricter citywide zoning regulations related to warehouses — perhaps even a ban on new large warehouses — at a forthcoming meeting.