Over the next few years, True Life Companies, the San Ramon, Calif.–based real estate investment and management firm, has two goals: to be the “brand” that home builders in the western U.S. turn to for developed lot inventory; and to be recognized as a leading developer of luxury second-home communities.
On that first score, the five-year-old company expects to complete several acquisitions that, over the next 12 months, would increase its finished lot portfolio to 8,000, from its current 1,500 lots. Those deals come at a time when builders are regularly complaining about the shortage of available quality lots. “Builders won’t buy anything that’s not entitled, but very few lots out there actually work,” observes Scott Clark, True Life’s managing partner. “So over the next 12 to 36 months, inventory is what we’ll be concentrating on.”
He says True Life's seven-person land team is focusing on striking joint ventures with landowners, with the promise of “materializing” that land’s value through development and sale. As for entitlement, “we like a great location with a little ‘hair’ on it,” in which True Life has to expose as little upfront capital as possible.
The other part of True Life’s business is community development. “Our strategy is to identify and purchase land in partially completed subdivisions and large community developments that can be reinvigorated and re-launched in the current market at favorable competitive price points,” says Clark.
On Nov. 2, True Life completed its acquisition of Pine Canyon, a 600-acre luxury golf course community located two hours from Phoenix in Flagstaff, Ariz., adjacent to the Coconino National Forest. The company did not disclose the transaction price.
All of Pine Canyon’s myriad amenities—which include a 35,000-square-foot clubhouse, an onsite kids camp, an 18-hole golf course, and an extensive private creek and fishing pond system—were completed in 2007. But its housing—which includes detached mountain cabins, paired homes, triplexes, and custom estates, priced from $400,000 to $800,000—is only about 45% built out, says Taber Anderson, a principal at True Life who heads up its acquisitions.
Anderson, who has 25 years’ experience as a residential developer, has had his eye on Pine Canyon since 2002, when he first came into contact with the community’s original developer/owner, Lone Tree Investments. Four years later, Lone Tree sold the project to someone whom Anderson says had no development experience. The second owner eventually ran afoul of its lender, which ultimately resulted in Pine Canyon being placed into bankruptcy under Chapter 11. The community’s debt ended up in the hands of a note-portfolio outfit in Salt Lake City, “which suddenly had a master-planned community in its lap that needed cash,” says Anderson.
In October 2011, Anderson Googled the note holder and called its CEO, who at the time wasn’t interested in selling Pine Canyon but said he’d consider a joint venture with a developer. Negotiations dragged on for nearly a year, partly because “at no point was this asset ever actually sold to anybody, so it never went through a real due diligence process,” says Anderson. Pine Canyon has a lot of moving parts, including a real estate company, a golf-course company, and a homeowners association. While the two parties haggled, the community’s existing management “was left to figure things out on its own,” says Anderson, who notes that a part-time resident used his own money to keep the operation temporarily afloat.
The court finally discharged Pine Canyon’s bankruptcy in August 2012. While negotiations were going on, $20 million in real estate within the community had been bought or sold, “and we were beating our two competitors. I find this really remarkable,” says Anderson. Aside from Pine Canyon’s popularity with buyers, True Life was hot to secure this project because so much of it was still to be built out “so there was opportunity for future revenue.”
Anderson says True Life is sticking with Pine Canyon’s “well-conceived” house designs, and hasn’t needed to make adjustments to prices because previous ownership had already lowered house prices in response to the recession. Anderson says his company is working with a “large private regional builder,” whose name he wouldn’t reveal, to build out this community. He adds, too, that True Life has been talking with this builder about forming a more captive relationship to ensure that the developer has sufficient labor available to complete this and other projects.
Pine Canyon’s profile fit True Life’s acquisition strategy perfectly, but Clark was reticent about what’s makes a community right for his company. He did say, though, that any future acquisitions would avoid “big-lot communities,” as True Life prefers neighborhoods “with density and lots of open space, even ag.” True Life is also staying away from “fly-to” communities (i.e., those reachable primarily by plane), communities that feature mostly starter homes, and those that “go north,” meaning their residences are mid- or high-rises.
True Life is currently financed by several family funds and private equity, although Clark says his company’s strength lies in its ownership, composed of 15 partners “who have their life savings in the company.” Clark says the company and its investors are looking through a five-year window, after which the intention is to either take the company public or sell it to a larger entity. Already, some institutional investors “have been knocking on our door.”
John Caulfield is senior editor for Builder magazine.
Learn more about markets featured in this article: Phoenix, AZ.