Fall Real Estate 2008

Publication Date: Friday, October 10, 2008

Rising to the challenge
SummerHill Homes builds housing on infill sites

His parents built the Saratoga home from scratch.

"The thrill for our family to move into that house was something I enjoyed. It was a gathering place of family," Freed, a Palo Alto-based builder, said.

Projects include University Park, a development on Channing Avenue; Promenade, a Park Boulevard development; Echelon, a condominium project on East Meadow Drive; and Lane Woods in Menlo Park off Middlefield Road. The company has begun building Redwood Gate, 45 condominiums on the Elks Club property on El Camino Real.

The 32-year-old company focuses on urban infill projects that often come with baggage -- with political, neighborhood, contamination or other sensitive land-use issues -- such as the 93-unit University Park development on Homer and Channing avenues. The builder had to contend with the historically sensitive University South neighborhood, designing its new units compatibly with the surrounding neighborhood and several restored vintage homes. Those sites cost more to develop, but are more lucrative in the end, he said. University Park homes sold in the high $800,000s to low $3 million range, according to a company report.

SummerHill is a subsidiary of Marcus & Millichap Real Estate Investment Company, an Encino-based, privately held company involved in commercial investment, service and development businesses. Freed won't say what SummerHill's value is, but the company has completed more than 40 developments, including projects from South San Francisco to Gilroy and in the East Bay. SummerHill doesn't try to compete in large housing markets such as Brentwood. Instead, it focuses on areas with limited new-home competition, Freed said.

Freed views the recent meltdown in the housing market as an opportunity to position the company ahead of its competitors. At a time when other firms are gutting staff and liquidating planned properties to make quick cash -- as was the case with the Echelon project, which SummerHill acquired from Standard Pacific Homes in January -- SummerHill is buying.

"I believe there will be great opportunities. I want to stay active and ... work through the tough time and position the business for growth. We have the capital and the talent for it," Freed said.

An industry veteran, Freed, 51, joined SummerHill in September 2007, at a time when the housing market was beginning its slide as a result of the subprime mortgage crash. Most recently he was president and regional general manager for KB Home, Northern California, and senior vice president of national investment strategy for KB Home. In the latter capacity, he ran all of the company's Northern California divisions and handled land acquisitions nationally.

SummerHill's focus on higher-density infill development near transit corridors will continue to attract buyers who want to live near their work or want to reduce their carbon footprint, he said. The company for years has had "a very scientific definition" of building within a 45-minute drive from Palo Alto, he said.

Housing stocks in the Bay Area have been shifting and will continue to shift increasingly toward higher-density housing, he said. That trend will continue for years to come, with mixed-use developments and condominium densities of 40 to 50 units, he added.

Such high-density housing is based on urban-policy plans created by cities. "Most long-term plans call for very dense developments," Freed said.

It's a design that appeals to younger buyers, but not to everyone, and it is a challenge to match consumer demands with good planning, according to Freed.

"I've been in the business for nearly 30 years. I've never had a planning commissioner or council member ask what the consumer is asking for. It would be a healthier process if some of that was taken into consideration beyond the policy issue," he said.

If people can't get that single-family American dream home with the white picket fence and backyard, SummerHill is creating value-added incentives in its higher density homes, using feng shui in the home's design and environmental features. Although the company's commitment to "green" building is mostly related to Energy Star appliances, SummerHill has created a green-building task force within its organization and is working with Build It Green to attain Green Point Certification for its homes, Freed said.

A Lane Woods home was featured on the Build It Green South Bay Home Tour in late September. Construction waste recycling, tree preservation as well as use of energy-efficient features were cited as plus points.

Freed is a proponent of creating an adequate supply of housing in all price ranges, he said. He was a member of the Santa Clara County Housing Authority and built Section 8 housing. And he owns a home near Calistoga with "funky houses and funky people," which is how any healthy community should be, he said.

SummerHill has developments ranging from the $400,000s to more than $4 million. A development is planned in Mountain View for 30 larger, higher-end units in traditional single-family homes at an old nursery site, but there are also plans for a development of lower-cost, high-density units on a large piece of land at Communication Hill in San Jose -- more than 1,300 units of "very high-density housing," he said. In Palo Alto at Echelon, town home-style condominiums range from $700,000 to $1 million, and Redwood Gate condos will start well over $1 million.

Freed said the company continues to look to do more in Palo Alto, where the market is appreciating. But "it's very demanding and challenging. You put a lot of money out there for your return," he said.

The challenge SummerHill thrives on is exemplified by the debate it had over its Elks Club property development plans. The plans were approved by the Palo Alto City Council, despite a split vote over its layout by the city's Planning and Transportation Commission. Access and parking were major issues during the adjacent D.R. Horton development at the former Rickey's Hyatt site.

Freed said there are tradeoffs with higher density housing such as the Elks and Rickey's sites.

"You have to start with what then existing land use was. My guess is the housing has less traffic impact than Rickey's, but you have to take a bigger view. If 50 percent of the people can live closer to their jobs, you've done something that reduces the impact on the infrastructure, with a potential positive regional impact. My guess is that at the end of the day, this type of community has a positive impact," he said.