Lansner: Texans betting on Calif. housing?

Business Columnist

Go figure. Wealthy Texans are investing in California real estate.

Why would a property giant from purportedly the best business climate in the nation put its spare cash into allegedly one of the worst places to do business?

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Larry Webb, CEO of New Home Co., left, and LM Cummings of Hillman Development stand in front of model home at Lambert Ranch project in Irvine.

Well, says L.M. Cummings, California is nowhere as troubled as its critics say it is. And the firm Cummings works for – Hillwood – likes to be different.

“There are many reasons why California is the most populated state,” Cummings says.

Cummings has lived in California for the past quarter century. But Hillwood is the Texas-based real estate slice of the business empire of H. Ross Perot’s family. Perot, a computer-service pioneer, took the national stage as an independent candidate for president in 1992 and 1996. His son – Ross Perot Jr. – now controls Hillwood, a developer of properties including homes, hotels, arenas and logistics centers, such as one at an old air base in San Bernardino.

Cummings, president of Hillwood West, chose New Home Co. in Aliso Viejo for the first housing investment in this cycle because the 3-year-old Orange County builder had plenty of real estate experience in management, but no financial baggage left from the housing crunch.

Also, the two companies had a similar site-selection strategy: They prefer to develop in high-quality – and yes, high-priced – areas.

“We don’t mind paying a premium,” Cummings says.

Already New Home Co. and Hillwood have teamed up to acquire and build a 250-home project in San Jose. Another project – a mix of retail and residential – is planned next door to city hall in Foster City. Also in the works: a small collection of high-end condos in Newport Beach.

Hillwood and Cummings are no strangers to California real estate cycles.

Cummings came to Orange County in 1988 to help start a Western real estate operation for the property firm controlled by former Dallas Cowboys quarterback Roger Staubach.

By 2002, Cummings was working for Hillwood. He says it was a time much like today – when California real estate “was starved for capital.”

Hillwood built a Western real estate portfolio that included partnerships with numerous homebuilders, other work that constructed 1 million square feet of commercial space in San Diego and some modest commercial projects in Orange County.

In 2002, Hillwood execs figured the Western real estate market had run out of steam. By 2004, the firm had sold off most of its holdings.

“Too early,” admits Cummings, who left Hillwood after the divestitures.

Still, early is better than bust after the bubble burst a few years later. Cummings – who’d been working on his own deals in the interim – rejoined Hillwood six months ago as the company returned to the California homebuilding game. The partnership with New Home Co. – financial details weren’t provided – is just a start, Cummings says. Hillwood likes to invest in places like California where it is hard to develop, so the finished product is more valuable.

“Counter-investment mindset,” Cummings says.

New Home Co. now controls up to 3,000 lots costing in the $200 million ballpark. On that land, the developer hopes to build $1 billion worth of new homes and related development.

The builder’s CEO, Larry Webb, says he’s been thrilled with his company’s Lambert Ranch project in Irvine, where half of the 169 luxury homes planned have sold in half a year.

Still, that success hasn’t made getting fresh cash easy. For a privately owned builder like New Home Co., a partner like Hillwood is a “godsend,” Webb admits.

Banks are still scared of real estate – especially deals to acquire raw land. And when it came to nontraditional partners, Webb said that Hillwood provided fresh thinking in the capital-raising game compared to, say, classic Wall Street money sources.

New Yorkers, Webb says, “Don’t get California.”

Somehow, these Texans think they do.

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