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IRVINE, CA-Scala Real Estate Partners has launched a $200-million investment program designed to acquire, develop and recapitalize residential and mixed-use projects in California. L.M. Cummings, who is co-managing partner of the firm along with Frank Zaccanelli, tells GlobeSt.com that the program reflects the locally based firm's belief that housing demand will remain strong in California over the long term and that current conditions present a window of opportunity for programs like Scala's.
With the liquidity issues that many if not most builders are facing, “we're expecting that they will be amenable to working with new, fresh capital,” Cummings says. Scala Real Estate Partners will manage the program, in which it will be a co-investor along with Lehman Brothers Private Equity and the Oxford Properties Group. Oxford is the global real estate platform for the Ontario Municipal Employees Retirement System, one of the largest pension plans in Canada.
Initially, Scala is targeting projects in Greater Los Angeles, Orange County, San Diego and the San Francisco Bay Area. Cummings tells GlobeSt.com that the partners plan to invest the $200 million over 18 months and that, “we believe there will be more to follow,” after the initial $200 million.
Cummings says that the investment program, which Scala was planning well before the capital markets began to turn, will aim for a hold of three to seven years on its investments, depending on the nature of the projects. Although the fund is designed as an equity investment vehicle, it has debt capabilities as well.
The program will partner with homebuilders and residential developers in a variety of ways, providing capital for existing or planned projects and drawing on the Scala partners' development expertise to add value to the investments. Cummings and Zaccanelli are both former senior executives with the Perot Group's Hillwood development and investment company.
Cummings notes that the new Scala program is comparable to the strategy that he and Zacanelli executed on behalf of the Perot Group in California in the early and mid-1990's by partnering with multiple builders to reposition their existing assets and restructure their balance sheets.
The types of projects that Scala will consider will range from residential to mixed-use residential and retail to mixed-use residential, retail and office. “There might be some cases where we would have the opportunity to take over a master plan and be the master developer,” Cummings says.
Over his 26-year career in real estate, Cummings has been involved in more than $1.3 billion of real estate transactions, which have included residential and industrial land, single-family residential homebuilding and commercial property development. He joined Hillwood in 1992 to open its West Coast operation, Hillwood West, where investment activities focused initially on California and later expanded to include Hawaii.
Zaccanelli, before co-founding Scala Real Estate Partners, was president of Hillwood. During his 14 years with Hillwood, the company completed the acquisition, development and sale of more than 15 master-planned communities, along with other property types. He is also the former president, general manager, and minority owner of the Dallas Mavericks of the National Basketball Association.
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