During the recession FKC Properties hunkered down in the business of commercial real estate and income-producing properties. But now the company is moving out of the bunker with a new name, Kraemer Land Company, and a new business plan: return to its residential development roots.
Kraemer Land recently kicked off its focus by spending $3.1 million on 19.4 acres in Fontana, Calif., part of the state’s hard-hit Inland Empire area. The deal is a partnership with CenterStone Communities, a Santa Ana, Calif.–based developer that has approval for 201 townhomes. Kraemer and CenterStone are reviewing whether that is the best use of the land.
“The mandate from our board of directors for the last 10 years or so has really been focusing on commercial,” said Brett Albrecht, Kraemer’s managing director. Now, he says, the board has decided to move back into the residential land market, diversifying its interests.
Kraemer, a privately held, fully integrated real estate company, has long roots in Orange County, Calif., real estate. The family settled there in the 1860s and became one of Orange County’s largest land developers, creating communities such as Placentia and Yorba Linda. It has been building out Yorba Linda’s Eastlake Village in partnership with Shapell Industries since the late 60s, said Albrecht.
Albrecht said to expect more land purchases funded by Kraemer soon. It plans to focus on infill opportunities in coastal communities and in other “very select key markets” in the Inland Empire.
While the Inland Empire still has many distressed areas, Kraemer says there is opportunity in some areas. For instance, the Fontana purchase is in a sub-market well located near major highways, in a good school district, and where there is only a two-month supply of homes on the market. And a lot of those existing homes are what he calls “second hand, damaged goods” homes. “There is a growing number of buyers who don’t want to purchase somebody else’s problems," Albrecht said.
CenterStone plans to build homes with features not found in older homes in the area, such as solar power and master-down bedrooms. “That just doesn’t exist in some of the existing inventory that is for sale,” Albrecht said.
Unlike the decades-long relationship Kraemer has had with Shapell, the CenterStone partnership is a new one for Kraemer. “While it’s a newer relationship with us, it’s refreshing. We look forward to doing other projects with them in the Inland Empire and coastal [areas],” Albrecht said.
While Kraemer has land development expertise, typically it partners with developer builders who would prefer to do multiple projects in financial partnerships with Kraemer, rather than fewer projects using just their own financial resources, Albrecht said.
“The timing and the economic status of the market makes it a prime time for a number of investment deals across California,” he said.
Teresa Burney is a senior editor for Builder magazine.