TRI Pointe Opens New Home Building Division in Sacramento

Division president Tom Lemon is focused on building his team and completing the division's first development.

6 MIN READ
On behalf of TRI Pointe Homes and KTGY Architecture + Planning

Late this summer, Tom Lemon became the first and only full-time member of TRI Pointe’s new home building operation in Sacramento. He was far from alone, as members of TRI Pointe’s San Ramon division had stepped in to provide support on business fundamentals as the new office got up and running. Still, with the division’s first community already under development and a full-time staff to build from the ground up, Lemon found himself, in his own words, wearing a lot of hats.

Tom Lemon, President, TRI Pointe Homes Sacramento Division

Courtesy TRI Pointe Homes

Tom Lemon, President, TRI Pointe Homes Sacramento Division

“In a mature division you’d have a purchasing manager, a construction manager, a land acquisition manager, and then coordinators and support, and people supporting them,” says Lemon, who was named division president of the builder’s Sacramento division in August. “In our case, it’s a few of us that are crossing functions and doing whatever needs to be done to get us up and operating.”

Over the past few months, Lemon has set his sights on finding new land opportunities, promoting the division’s growth and building a team to match that growth. He’s hired one full-time staff member and has postings out for two more: a land acquisition analyst and a project manager. In the next half-dozen years he hopes to scale up new home production from a single 94-home community to about 400 units a year, which would place TRI Point Homes Sacramento among the top home builders in the market in terms of volume.

New Beginnings

Lemon’s involvement with TRI Pointe’s Sacramento plans began at the conceptual phase. He had been the vice president of acquisition and development for Maracay Homes for seven years before the builder was acquired by the TRI Pointe Group in 2014. He retained the same position as the builder joined TRI Pointe, which gave him the opportunity to work closely with Doug Bauer, TRI Pointe Group’s CEO, and with the land committee, which includes TRI Pointe’s top leadership.

In the course of his work, he happened to mention to Bauer that he was interested in exploring new markets. “I said, ‘If you’re looking for expansions or new markets or organic opportunities, my hand’s up. I’d love to have the opportunity to help the company grow,’” Lemon says. “And one day I got a call that said, ‘Hey, we’re looking at an organic expansion in Sacramento and we need to help putting the business plan proposal together. Would you be interested in having a look with us?’ And I said absolutely.”

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TRI Pointe had eyed the Sacramento area over the years, according to Lemon, but hadn’t found the right opportunity until about 18 months ago. As TRI Pointe’s core Bay Area market was heating up, the company reached a decision point: Could TRI Point extend its operations into Sacramento? If so, would it cover the city from its San Ramon office 80 miles away or create a new division entirely?

In order to answer this question, Lemon teamed up with TRI Pointe Homes Northern California division president Jeff Frankel to create a business plan for a then-hypothetical Sacramento division. As Lemon and Frankel developed the proposal, they immersed themselves in Sacramento and its market with the help of national market consultants. Based on their observations and the analysis provided by their consultants, Lemon and Frankel pulled together a business plan that outlined the market’s advantages and the ways in which TRI Pointe could grow a division there. These included the needed capital allocations, ideal land positions, and the potential for organic division growth.

Overall, Lemon and his team were pleased with what they found in Sacramento. “There’s job growth, there’s in-migration, and there’s a good, diversified, solid base economy,” Lemon says. “And Sacramento is the state capital, with all of the state government functions. There’s several really good universities, a high-tech sector, a huge regional service sector, and growing construction jobs and manufacturing.”

Lemon estimates that Sacramento’s new home permit activity is currently around 7,000 per year, down from 18,000 at the peak of the housing boom but up from 1,800 at the bottom of the houing bust. The resale market is tight – according to Lemon, well-located resale homes in good neighborhoods can sell in a week or less if the price is right. Many of the top-ten national builders are already in the market, plus a few private builders.

The biggest driver of the Sacramento’s tight housing market is an influx of buyers from the super-heated Bay Area 85 miles to the west. Many of these buyers are seeking larger homes at more affordable prices. “There is a lot of interest and lot of people from the Bay Area that want to maintain their connectivity to the Bay – their families, or social lives, or employment,” Lemon says. “What you can get for a home for say, $400,000 to $500,000 in this market would be a million or more in the Bay Area.”

Lemon and Frankel took these observations to the TRI Pointe Homes board of directors in fall 2016. While their proposal was popular, the builder’s senior leadership wanted more time to observe market conditions through the winter and spring. The market’s indicators remained positive through the start of 2017, and when Lemon and Frankel brought the proposal back to the board they came away with a green light.

On behalf of TRI Pointe Homes and KTGY Architecture + Planning

The Next Step

Now that Lemon and his growing team have set up shop in Sacramento, their first development project can start in earnest. Natomas Meadows, an entry-level single-family home community set to open for sales in fall 2018, is located on an 8-acre site acquired with the TRI Pointe Group’s Pardee Homes in 2014. The site is located on a “mini master-plan” in suburban Natomas, Calif., where Lennar, Woodside, DR Horton, and local private builder Anthem United are already opening sales.

The Natomas Meadows plan calls for 11.5 detached single-family homes per gross acre, for a total of 94 homes on small lots. According to Lemon, this highly dense, entry-level single-family model fits the Sacramento market very well, and it allows the fledgling division to put down roots and showcase many of the premium features for which the builder is known.

“It has great access to downtown, great access to the airport, good access to employment and shopping, but it’s on the affordable end of the spectrum,” Lemon says. “We see it as a great opportunity to get open for sales, get hopefully good market response and good absorptions, and give us a good running start in the market.”

As the years go on, TRI Pointe aims to position itself in Sacramento’s premium market, and scale up to its usual move-up price point on future projects. The division currently owns or controls 250 more lots in the area, which it plans to bring online in 2018 and 2019.

“This volume target is good, but it’s not what we’re focused on,” Lemon says. “We’re not just the value-play builder. Our core buyer is an aspirational home buyer and we want to deliver the home that they’re just going to really appreciate, that they’re looking for, and do a great job for their satisfaction. It’s going to be a very high priority for us.”

About the Author

Mary Salmonsen

Mary Salmonsen is a former associate editor for Zonda and a graduate of the S.I. Newhouse School of Public Communications at Syracuse University.

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