California investor joins in Lewis Group's purchase of 800 lots

When the Lewis Group of Companies bought nearly 800 residential lots in northern Nevada out of bankruptcy this summer, it was accompanied by a deep-pocketed partner that believes the region's residential market is near a bottom.

PCCP LLC, an El Segundo, Calif., real estate investor that has more than $4 billion in assets under management, said last week that it has partnered with Lewis Operating Group on the big purchase.

The two companies had been talking before the 800-lot acquisition was completed, said Robert Lewis, president of the Nevada division of Lewis Group. The acquisition was announced by Lewis Group in August.

But Lewis Group and PCCP LLC were unable to get all the paperwork for their partnership together before they needed to move fast on the purchase.

The lots, which include about 575 in Damonte Ranch, were sold at a bankruptcy auction. They previously were owned by LandSource, a joint venture of homebuilder Lennar Corp., LNR Property Corp. and MW Housing, which invested funds from the California Public Employee Retirement System.

Along with the Damonte Ranch lots, the residential package included about 200 lots in Dayton and 34 lots in Pioneer Meadows.

The properties sold for $6.6 million.

Jim Galovan, a vice president in Sacramento for PCCP LLC, said the companies are likely to seek local government approval to change the potential uses of some of the lots to better meet the demands of the residential market.

"The business plan is to then bring the lots to market for sale to homebuilders beginning in 2011, market permitting," Galovan said.

He said PCCP LLC believes the residential market is closer to a bottom than other segments of the real estate industry.

"Reno is now in its fourth year of downturn, and housing prices have backed up to approximately 2001-2002 affordability levels," he said. "Even in this down market, there is still strong demand for new homes that are priced correctly, specifically in this region of Nevada."

The northern Nevada acquisition fits exactly with PCCP's overriding strategy: Buying distressed properties in the West at opportunistic pricing, then adding value before reselling them.

Previous investments in northern Nevada by the company, formerly known as Pacific Coast Capital Partners, have included Silverada Plaza, a retail property in Reno, along with other retail and industrial properties in Reno and Carson City.

Galovan and Lewis said the two companies are actively looking for other acquisitions in Nevada and elsewhere. The Lewis Group is headquartered at Upland, Calif.

PCCP says it brings skill at financing complex real estate deals. The Lewis Group, one of the nation's largest privately held development companies, has developed office, retail and multi-family projects in the West in recent years. Its Lewis Homes unit built homes in Reno and elsewhere before its sale to KB Home in 1999.

PCCP LLC said it made the northern Nevada acquisition through its California Smart Group Fund IV, a limited partnership that's raised $748 million in discretionary equity.

Although the two companies will be looking for further deals together, Lewis Group also will continue to seek transactions on its own, said Gigi Chisel, a vice president with Lewis Operating Corp. in Sparks.