While Tom Orradre was working as a senior director at Mountain Real Estate Capital, he kept noticing that deals in the $2 million to $20 million range weren't attracting as much investor interest as he had expected.
“I knew this was an underserved market, and that there were still builders and developers looking for financing for deals that size,” he recalls when asked what motivated him to launch Newport Beach, Calif.–based Isles Ranch Partners in August 2012.
His new company’s first transaction was modest: seven mostly finished lots at The Farms in Rancho Santa Fe, Calif., which the investor bought in partnership with The Michael Group for $3.7 million. Around the time Orradre was starting Isles Ranch, he had negotiated a strategic alliance with the global investment firm TPG Credit Management. Since striking that arrangement, TPG has committed $105 million in capital to nine of Isles Ranch’s deals, five of which were completed earlier this month.
While one of those deals is for 1,400 residential lots and 190 acres of commercial and partially developed land in the Charlotte area, the other four are considerably smaller: 68 finished single-family lots in Scottsdale, Ariz., and 32 partially finished single-family lots in Rancho Mirage, Calif., which Isles Ranch acquired in partnership with Family Development Homes; 32 undeveloped single-family lots in San Juan Capistrano it bought with developer Davidson Communities; and 12 mostly finished single-family lots in Tiburon, Calif., it acquired with developer Bekirk Enterprises.
Orradre says his company is particularly interested in hooking up with diversified partners like Palm Springs, Calif.–based Family Development Homes, a developer and home builder active in California and Arizona, which earlier this year entered into another land deal with Isles Ranch that includes 46 undeveloped lots at Sol-Palm Springs. “They can do everything,” says Orradre.
Isles Ranch benefits TPG, explains Orradre, because “we bring them deals they would not have seen otherwise. Plus, we’ve demonstrated that we can close and we haven’t retraded. There are a lot of funds out there, but people are looking for every reason possible not to do deals.” Neal Johnson, the company's other managing partner, who previously worked for the investment manager Varde Partners, adds that Isles Ranch helps TPG “leverage its platform” across different asset classes.
By this time next year, Isles Ranch’s owners hope to have at least $250 million in investment capital committed for land purchases. A good part of the company’s growth is likely to take place in California, where Orradre says “the [housing] recovery is in full swing.” However, Isles Ranch is already looking for land opportunities in Las Vegas, Chicago, Orlando, and throughout Texas. “We will continue to be submarket driven,” says Johnson.
John Caulfield is senior editor for Builder magazine.
Editor's Note: Subsequent to the publication of this article, Arthur Nevid, Mountain Real Estate Capital's Chief Investment Officer, emailed Builder to make clear that his company has been more than open to financing smaller land deals, an assertion that Orradre corroborated. In fact, during Orradre's tenure with that company, Mountain had closed 15 deals over a 15-month period that averaged $8.5 million each. And in 2013 so far, Nevid says Mountain has closed four land transactions, two of which were for under $5 million each. "We are among the most active land development investors in the country, with most of our investments actually being in the $2 million and $20 million range," wrote Nevid.