Land. Despite what one might have heard on job sites around and about, it's home building and development's most powerful and most seductive four-letter word.

Mike Naples at Wallis Ranch

Consider the 184-acre Wallis Ranch parcel, in East Dublin, in what's known as California's Tri-Valley, a few miles east of San Francisco bay, pictured above. The tract cast its spell on Trumark Homes' ceo Michael Naples some years ago, and it's he who's lord of all he surveys in the image. The spread's destiny--a reported $175 million deal that will lead to breaking dirt in May and eight new neighborhoods with some 805 new homes slated to start delivering late in the third quarter of 2015--is a 2014 lot and land strategy microcosm for home building and development.

If 2011, 2012 and early 2013 land strategy was about pulling the trigger fast and first on all-cash transactions for lots, late 2013 and early 2014 have become a variation on that theme. Now, the land deals tend to come layered with creativity, complexity, and a time-release factor in the return on invested capital.

While public builders continue to throw their heft around, using their impressive dry-powder cash troves and newly-bolstered revolving lines of credit, to plunk cash down on land deals they covet, land committee meetings at both public and private multi-regional players have taken on a different complexion in early recovery's stage two.

"The committees will still approve an all-cash deal at the publics," observes a friend who's participated in many such public home builder conference room session. "But, they're looking for a bit more validation and a proof-of-concept before they green-light the investment."

Senior strategic managements face a conundrum. They've got a lumpy, choppy, and iffy near-term demand scenario to navigate effectively, and, assuming they move in tact through 2014, they meet a real challenge for profitability in 2015 and beyond. All thanks to that little old four-letter-word land.

And the operative term, especially if you look into Metrostudy chief economist and director of consulting Brad Hunter's analysis of 2013 and 2014 trends, is land shortages. Vacant developed lots are the lifeline of home builders, so while the battle for the moment looks as if it's going on in the model homes of existing and new neighborhoods, the war rages on the land acquisition and development front for 2015 and 2016 and beyond.

Depleted municipal planning, zoning, and environmental agency departments and agencies in the wake of seismic financial convulsions late last decade are not helping matters any in the approval and entitlement process.

This brings us back to the 184-acre, rolling, golden-pastured Northern California site called Wallis Ranch. If the reported figure is correct, per-lot averages would be in the range of $200,000 to $220,000, which in today's home building math, convert to average selling prices in the $900,000 to $1 million neighborhood.

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"It's one of those unique pieces," Naples tells us. "It's pristine, and it's in San Francisco-core area that is so constrained that a number of builders' current projects and holdings will be sold out by the end of 2014."

Here's the key part of the press statement on the deal to get work on Wallis Ranch underway.

Trumark Homes announced today it has secured funding to purchase the 184-acre Wallis Ranch, a residential housing development in East Dublin, Calif., that is approved for 805 single-family homes as part of a joint venture with Isles Ranch Partners, LLC and Castlelake, L.P., both alternative investment firms.

Wallis Ranch, one of the last remaining parcels of fully entitled land in the Bay Area, represents the most significant master-plan single-family land transfer over the past year.

“Wallis Ranch symbolizes Trumark's entrance into the master plan development marketplace,” said Michael Maples, principal and co-founder of Trumark Companies and related entities. “We want to be a company that creates thoughtful, environmentally sensitive master plans that create community interaction, a sense of place and pockets of interaction with nature.”

The community, which lies north of Roxbury on Tassajara Road and extends uphill to the Alameda/Contra Costa County line, will include eight new home communities. Grading and other infrastructure work will begin in May, when lots will be offered for sale to homebuilders.

Trumark aims to have the first model homes open by September 2015.

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Wallis Ranch, designed by KTGY and Dahlin Group Architects, will offer a broad mix of home styles and sizes, including executive homes, single-family detached homes and townhomes ranging in size from approximately 1,700 to 4,100 square feet. Some homes will include first-floor bedrooms, California rooms, indoor-outdoor floor plans and multi-generation suites. Generous lot sizes will be up to 8,000 square feet.

Approximately 100 of the development’s 184 acres will be dedicated to neighborhood parks, open space, semi-public use and a water-quality basin. Designed by Gates Associates landscape architects, the community grounds will include walking and biking trails; 83 acres of open space; a three-acre common area for the clubhouse, spa and fitness center; an outdoor kitchen; community gardens; a yoga lawn; a town square and a fire pit area.
Existing components of the original Antone School Building will be repurposed to create a new structure on the community green that will serve as a community center and home for numerous historic documents that date back to Dublin’s early days.

"It's a beautiful piece of land, and given the fact that there are fewer than 800 vacant developed lots left in that area, the demand should be strong," said Greg Gross, regional director for BUILDER's sibling analytics and consulting unit Metrostudy. "The concern, of course, starts to be affordability as you nudge up to that seven-figure level. Bay Area money never seems to run out, of course, but you have to wonder."

Partnered as it is with Isles Ranch Partners, LLC and Castlelake, L.P., Trumark was able to creatively structure access to the capital it needed to capture the prize, control the nearly one-thousand home lots, and participate in the upside of apportioning lot sales to other builders.

In this, we see a similarity to the deal McGuyer Homebuilders (MHI) and Hillwood Communities completed, where MHI cut Hillwood into a majority share in the equity on the land holdings in exchange for a favored-nation position on lot take-downs and land sales to fellow builders in the south Houston-area masterplanned community called Pomona.

Agile, relationship-oriented, and environmentally-sensitive land-use proposals from private home builders joint ventured with powerful capital sources in select cases may trump sheer cash heft and instant-closing capacity of the big publics.

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At the very least, it will make coups such as Trumark's landing of Wallis Ranch part of a fascinating narrative over the next stretch of the protracted subpar recovery housing is digging through this year.

Learn more about markets featured in this article: San Francisco, CA, Los Angeles, CA.