Jimmy Previti is not quite 50, but he’s enjoyed a whirlwind career that’s included starting his own company, leaving the home building business after the housing crash, and, in 2013, basically starting all over again.
Today, Previti’s Frontier Communities is the largest private builder in California’s Inland Empire. It expects to record 375 closings in 2016, with plans for expansion on the horizon. “Competitive nature is in my blood,” Previti says. “Frontier has always had the drive and passion to be the best.”
In 2002, when Previti launched Rancho Cucamonga, Calif.–based Frontier Homes, success didn’t take long. It reached the BUILDER 100 in 2004. From 2002 to 2008, Frontier Homes built approximately 3,000 homes.
When the housing market crashed, Previti had to face reality. “When the cost to [build] a new home exceeded the value, there was no new-home building business remaining,” he says. “It was an easy decision to make from an economic view. However, it was a difficult decision from an emotional basis since home building and real estate is what I have known since childhood.”
Builder by Birth
Previti’s father co-founded Forecast Homes in 1972, eventually selling to Hovnanian Enterprises in 2002. In the fiscal year ending Oct. 31, 2001, Forecast delivered 2,139 homes.
Previti joined his father’s company in 1989, finding an entrepreneurial culture in which employees were given autonomy to make decisions with set goals in mind. After Forecast was sold, Previti launched his own venture with a similar company culture in mind.
When he started Frontier Homes at age 33, he did so with only $1.4 million in startup capital, some of which he raised by mortgaging his house. “I figured I’m young enough, if this doesn’t work out I can always sleep on a family member’s couch and rebuild,” he recalls.
By 2003, Frontier Homes closed 202 homes, followed by 731 closings in 2004. It peaked in 2006 with 933 closings.
Then came the crash, which was particularly severe in the Inland Empire, one of the epicenters of the foreclosure wave. Previti adjusted by starting a distressed asset business—“fix and flip,” as he calls it—under a different name in 2009. He wasn’t sure how the public would react to acquiring foreclosed homes and wanted to keep Frontier’s name synonymous with home building. The company, Canterbury Lots 68, acquired more than 2,100 homes and resold them at a value exceeding $600 million.
With the focus primarily on the distressed asset business, Frontier Homes was left with a skeleton staff. But Previti kept his eye on the home building market, fully expecting a correction in the not-too-distant future.
“We knew the time was coming for new-home building once again,” he says.
Starting Anew
During the second quarter of 2012, it became apparent that it was time to refocus on home building. Frontier Homes became Frontier Communities with the new cycle. The company began to secure land in the third quarter of 2012 and closed on its first property of the new cycle in January 2013. Within the calendar year, Frontier delivered 39 homes and turned a profit, says chief financial officer Rich Munkvold.
Since it primarily builds in the heavily contested Inland Empire, acquiring land can be difficult. But Previti’s lifelong knowledge of the market and his company’s smaller stature set Frontier apart from the competition.
“I can tell a land owner exactly what I will do in terms of acquisition deal points, and he will know that I am a man of my word,” he says. “Public companies have several layers of approvals needed for land acquisition. Frontier has a layer of one.”
The company also has a good rapport with trade partners, Previti says, because it has a shorter pay cycle than other builders. “They can use Frontier for their business’ cash flow and other builders for their profit,” he says.
For the first time this cycle, Frontier Communities closed on a piece of land outside of the Inland Empire—a 45-acre property in Rosamond, Calif.—in November 2015. The land was developed in 2005, Previti says, and sat after the original proposal for the site went belly-up. There are 93 lots on the property and construction has started on half, says Munkvold.
California Struggles
Frontier Communities builds homes in the $240,000 to $550,000 price range, but Previti says he’d like to build more homes within the Federal Housing Authority loan limit of $356,500. The trouble is, building homes at that price point isn’t easy in California.
“Unless the government increases the FHA limit or municipalities begin to reduce fees,” Previti says, “the residual land value to the land seller will decrease, which will probably freeze the market since land sellers are struggling to understand how the value of their land is decreasing in a marketplace where sales prices are increasing.”
California’s zero net energy (ZNE) homes mandate goes into effect in 2020. In a recent BUILDER story on this topic, Bob Raymer, senior engineer and technical director with the California Building Industry Association, said ZNE could add another $20,000 to $25,000 to the construction of homes in the state.
“Many new-home building companies will leave the first-time home buyer space due to the substantial increase in the cost to produce the house,” Previti says. “It’s an important segment of the market to work to help.”
Despite the obstacles, Previti says Frontier should continue to grow in the Inland Empire in the coming years and will evaluate opportunities in the southwestern U.S. to potentially branch out of California.
