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In The News

Scottsdale-based developer DMB works on big projects

by Catherine Reagor
The Arizona Republic, 2/19/12

Scottsdale-based DMB Associates is spending a lot of time focusing on properties in a state next door to Arizona: California.

The developer has several master-planned projects in various stages across the state: in the Lake Tahoe area, the San Francisco Bay Area, central California and in Southern California's Orange County.

In a state known for its regulations and attention to the environment, DMB is proving it can modify plans to work with neighbors, community groups and environmental interests to develop prime sites.

In January, DMB opened a Pacific division headquartered in San Francisco to be closer to its California projects, particularly the redevelopment of Cargill's historic salt plant in Redwood City, near Silicon Valley. Eneas Kane is president of the new operation.

Although DMB is developing 150,000 acres of communities in the West and building communities on some of the highest-profile pieces of land in California, including the redevelopment of the Saltworks site in the Bay Area, it has maintained its low-key style.

"It feels like though the housing market hasn't recovered yet, it has hit an inflection point," Kane said. "We believe our greatest opportunities are in California right now."

California's housing market is much larger and more diverse. And some parts of the state, including the Bay Area and the Lake Tahoe area, haven't suffered as much during this housing crash.

Evolving focus

"DMB" stands for the first names of its prominent Arizona founders. The D is for the company's chairman and real-estate attorney, Drew Brown. The M is for Mark Sklar, whose family owned Mundus Travel. The B is for Campbell Soup heir Bennett Dorrance.

In 2010, the developer attracted some prominent investors, including Madrone Capital Partners, which includes Walmart heirs, and Argonaut Private Equity of Oklahoma.

Best known for its DC Ranch community in north Scottsdale, DMB formed after metro Phoenix's last real-estate crash in the late 1980s investing in bargain commercial properties. But after DC Ranch, DMB's business plan evolved to partnering with landowners and investors on large residential projects that can be built slowly and with plans constantly updated for changes in the economy and in homebuyers' preferences.

The partnerships, such as the one it has with Caterpillar on Buckeye's Verrado, allow for private agreements that don't require fast shareholder profits and but do allow for a long-term planning and development.

"We build for people," Brown said. "We are trying to create neighborhoods that will last and evolve."

The developer has garnered a reputation as a meticulous planner, an amiable neighbor to other projects and a company that won't sacrifice quality growth for short-term projects, said national housing analyst Tim Sullivan.

In Arizona, DMB continues to develop or plan the communities DC Ranch and Silverleaf and mixed-used project One Scottsdale in the north Valley, Verrado in Buckeye, Marley Park in Surprise and its latest project, Eastmark in Mesa, while considering another residential project on state-owned land in the northwest Valley.

Outside Arizona, it is partnering with other companies on high-profile projects that could be under development for the next few decades.

In 2006, the developer saw the housing crash coming but no one knew how bad it would be for the home-building market.

In 2009, DMB had to restructure and downsize its staff by at least one-third. Then, the developer's chairman said the company had no plans to sell off any of its current assets and would continue looking for special land for developments in the West.

"We are finally bringing some money in this year instead of just spending," Brown said. "Of course, we are in development to make money, but what's as important is the footprint we leave on this country with our projects. If our projects thrive and evolve for decades, we know we will have succeeded."

DMB's projects outside Arizona include:

Redwood City Saltworks

On 1,436 acres between San Francisco and San Jose, DMB is working with Cargill to redevelop an industrial salt mine into a community that would provide workforce-priced housing. The two groups started a partnership in 2006. Cargill, an international agriculture and food company, owns the former salt-mining site.

The Redworks site is prime for redevelopment because there's little other developable land left in the infill community along the waterfront.

Exact plans for the development are still being worked out, but the current goal is to set aside half of the land for conservation and public access to the bay, 200 acres of parks and privately funded restoration of industrial land into tidal marshes.

Originally, 12,000 homes and apartment had been planned on the historic site. But after many meetings with neighbors of the land and community and conservation groups, the plan is being scaled back.

DMB's research found that 40,000 people commute to Redwood City for work so it's trying to develop high-density, affordable housing on the site while still conserving much of the land.

Martis Camp

Halfway between Truckee, Calif., and the northern shore of Lake Tahoe, DMB is building a community on 2,177 acres. One side of the project overlooks the lake, while the other side faces the Sierra Nevada. This community has a golf course and a ski lodge. The clubhouse is a large red barn called the Family Barn.

Kane said many of the buyers so far are from San Francisco, particularly Silicon Valley. A few executives from Apple have been spotted at Martis Camp.

About half of the 653 lots at Martis Camp have sold for a total of $280 million. In 2011, 43 home sites sold for a total of $33 million, making it one of fastest-selling resort communities in the country, according to housing analysts.

The DMB Martis partnership managed negotiations that led to an agreement with Sierra Watch, the League To Save Lake Tahoe, the Mountain Area Preservation Foundation, Sierra Club, and the Planning & Conservation League in 2008, which let the project be built.

Tejon Mountain Village

In the middle of central California's 270,000-acre Tejon Ranch, the largest privately owned piece of land in California, DMB is developing 8,000 acres of a 28,000-acre site.

Plans call for about 80 percent of the site to be left undeveloped. The deal, worked out with the Sierra Club, Natural Resources Defense Council and Audubon California, also means 240,000 acres of 90 percent of the Tejon Ranch property will be preserved.

Ladera Ranch

Through a partnership the the Moiso and O'Neill families, DMB is developing 4,000 acres in central Orange County. About 8,000 homes have been developed in the project so far, and only 8,100 are planned for it.

Ladera Ranch is similar to DMB's Verrado community in Buckeye, with a variety of midpriced to high-end homes surrounding a town center.

When DMB partners with landowners, the developer usually pays for the communities infrastructure and then works out a deal to split profits from land sales. DMB is private and very private about its finances. Most of its partners are also private firms.

Kukui`ula

Located on the southern shore of the Hawaiian island Kauai, the 1,045-acre high-end resort is a project DMB is developing with Hawaiian firm Alexander & Baldwin.

DMB signed onto the project in the midst of the housing crash, but Kane said the site and opportunity were too good to let go by. So DMB has spent the past few years developing the resort while selling very few of its expensive home lots.

The development has a golf course, spa and collection of swimming pools. It also has a 50-acre farm for residents to pick their own fruits and vegetables. About 1,500 high-end homes, most priced above $1 million, are planned for the community. So far, about 100 houses and lots have sold there.

Planning for the development started in 2001, long before the housing crash, but the project's development has been slower than expected, Brown said.

 

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