Tierra Del Rey is the initial development for Metro Housing Partners, a privately held company founded last summer by Golden Boy Partners, a partnership of De La Hoya’s Golden Boy Enterprises and John Long’s Highridge Partners, Trimark Partners LLC, an arm of California home builder Trimark Pacific, and CarVal Investors, an affiliate of agribusiness giant Cargill, Inc. that has overseen 2,900 transactions in 41 countries and today manages $15 billion in managed assets.
The partners recruited Lawrence Scott from AvalonBay Communities last July to serve as president and oversee Metro Housing Partner’s development, construction, sales and marketing efforts throughout California. The following month, Scott brought aboard Walter Johnson, formerly of Lennar Urban, as development director.
Joining De La Hoya for the groundbreaking were Scott, Long, Trimark Partners President Clinton “Randy” Stevenson and South Gate’s Mayor Bill De Witt.
South Gate, a city of approximately 100,000 residents, is located 12 miles southeast of downtown Los Angeles. “Hispanics have immigrated into the area and there is a lot of private ownership and pride of ownership and a great sense of history. Tierra Del Rey’s message, as stated on the Website, is: revitalize, reconnect, renew, relive, rebuild. It’s all about coming back to where you grew up and being able to buy back in. Our goal is to provide new housing for current residents of South Gate and to offer an opportunity for young people to purchase homes near their families and become residents of the community where they grew up,” said Scott.
Scott expects all-in costs for the market-rate project to run approximately $325,000 per home. But with initial price points starting in the mid-$300,000 range, well below the $475,000 median price of a home in Los Angeles County, the three-story gated townhouse development with in-line garages will introduce new affordably priced housing to an area dominated by single-family homes built as workforce housing for the nearby Firestone plant from the 1930s through the late 1940s. Sales of the condos that were designed by Withee Malcolm Architects of Torrance, Calif., will commence in July with delivery of first homes in March 2009.
Metro Housing conducted a focus group with a Hispanic buyer profile to understand what the project’s target buyers would look for in everything from upgrades to financing to how South Gate compared to other sub-markets in Los Angeles.
“We found that the Hispanic buyer wants a nice level of finish. They value the technology of new buildings, the pre-wiring for surround sound and flat screen television, but they also are cost conscious.
If the price point for the upgrades is too high, they will wait and do it themselves. So we focused on those areas of highest impact,” said Scott.
The town homes feature walk-in closets, master baths with dual sinks and garden tubs, interior laundry rooms and in-home security systems.
Buyers have the choice of three levels of packaged upgrades professionally coordinated by Metro Housing’s interior designers.
Feedback also showed that Latinos value a single-family home with a backyard. The only private outdoor spaces at Tierra Del Rey are balconies and there is no swimming pool–an amenity found to be not that important to those in the focus group–but the project includes two outdoor pocket parks with barbecues, park benches and large canvas sun shelters. “These are safe places for families to gather and kids to run and play,” said Scott.
Another desired feature of the focus group was a spacious living room and additional bedrooms. “One important item we provide in our town homes is some type of living space on the ground floor, because we expect many of our buyers will have extended family,” said Scott.
Two of the three floor plans have a downstairs den or bedroom. The second floor is the main floor, and consists of the living room, kitchen and dining room.
“Our biggest challenge was to create the desired living space taking into account the 1,400 sq. ft. average size of the town homes,” Scott said, revealing some interesting facts that surprised him about the existing housing stock in South Gate. “The average homes here were built in 1948 and the average size is 1,230 sq. ft. You’d typically think of a town home as being a move-down from a single-family house, but our average town home is larger than the average house in the area,” he said.
Already at a good price point to offer unmodified HUD conforming to Tierra Del Rey buyers, Metro Housing is taking the necessary steps to qualify the property for the FHA conforming program, which is raising its limits to the low $600,000s.
“The great American dream of owning a home is one that is shared very deeply by Latinos. Studies show that Latinos are expected to make up 40 percent of the first-time home-buyers over the next 20 years. In today’s challenging lending environment, we are planning to provide the broadest spectrum of lending products available, including qualifying our communities for FHA, CalFHA and VA approved programs, and are working with lenders, the counties and municipalities to obtain access to grant funds and “soft second” programs for our prospective buyers. The modification of these program’s lending limits will further assist our buyers in obtaining financing across a broader spectrum,” said Scott.
Going the rounds
The first round of Metro Housing’s multifamily real estate developments will be in the Golden State’s Southland, where Latino neighborhoods are older and need updating with new housing and retail.
“But Golden Boy Partners has ambitious long-term goals and we hope to have affordable, urban housing and mixed-use communities underway in several states by the end of the decade. Metro Housing Partners is our development partner to build and market the housing. In addition, we have two other partners responsible for the retail development,” said De La Hoya, referring to affiliates Manarino Realty in California, and Balcones Realty Partners in Dallas, which was formed around 12 months ago.
Balcones is close to finalizing the 37-acre site plan for a $90 million Spanish mission-styled mixed-use retail and restaurant center called West Love Market near Dallas’ Love Field that is expected to come online in Fall 2009. Meanwhile, Balcones Managing Director Jorge Ramirez is in negotiations for two additional redevelopment parcels.
The entitlements for Tierra Del Rey were completed by Pablo Leon, president of Golden Pacific Partners, a wholly owned subsidiary of Golden Boy Partners that focuses on urban infill in the Los Angeles area for commercial and residential development. The eight-acre site for Tierra Del Rey housed two industrial buildings. One was torn down to make way for the condos and the other is being converted by Golden Boy to a mini-storage facility that will be added to the company’s portfolio of like properties. “Our research has shown that there is significant demand for self-storage in inner city neighborhoods. Most self-storage is available in suburban, or far-out, areas not convenient for urban residents,” said De La Hoya.
Housing from both sides
Metro Housing Partners also has an ambitious business plan, which includes the right of first look at all land acquired by Golden Boy that is earmarked for multifamily. “But we also will do our own land acquisition,” said Scott, referring to Metro’s goal to deliver 500 to 700 units per year, divided equally between for-sale and rental housing. The company is mostly scouting infill industrial distribution sites and old office buildings and currently is under contract on a site for condos, in the design and entitlement phase on three additional for-sale projects and is looking at a number of parcels for apartments.
“Our goal for the company is to create a residential housing provider that can do both rental and for-sale and there are very few companies that can. Being private, we don’t have to contend with the confusion — or concern of confusion– of the Wall Street analysts. It’s almost impossible for a public company to be both a home builder and an apartment company. The analysts just don’t know which category to put them in,” said Scott.
The majority of Metro’s for-sale housing will be workforce town homes in Latino inner city neighborhoods. “Workforce for-sale will continue to have strong demand. It’s a great niche, but not so for rental.
Although there is an absolute need for workforce apartments, the cost to build them is prohibitive,” said Scott. For that reason, the company will look for opportunities to build and hold luxury apartments in Los Angeles, Orange and even San Diego Counties, but likely will outsource the property management. “We will, however, be our own general contractor and an extension of our business plan is to conduct third-party GC work for residential developers that don’t have their own in-house capabilities. We’re augmenting our construction team right now,” Scott said.
Metro Housing also has the ability to look outside the company fold for joint venture and equity partners. Golden Boy and Trimark are equal partners in Metro and to that extent will be invested in all the company’s projects. They also control Strategic Investment Partners, a firm that was formed last year to buy troubled loans and assemble REO foreclosed land until the market turns.
For Trimark Partners, the ventures couldn’t have come together at a better time. Trimark Pacific’s California-based home building business slowed considerably when last summer’s mortgage mess hit the fan.
“I’m very excited about the partnership and it’s potential,” said Randy Stevenson “It’s a partnership of companies and individuals that I respect and I think our skills are complementary. I’m looking forward to a beneficial relationship,” he said.