By Lou Hirsh, visit the original article post.
Ken Baumgartner’s most daunting project of the moment is building and growing a whole new home-construction and development company from the ground up.
Having worked more than 30 years with locally based builder The Corky McMillin Cos., including stints as president and chief operating officer, Baumgartner is well aware of the challenges in the current environment, but he is relishing the chance to take them on.
“I’ve been through several of these cycles over the years,” said Baumgartner, 66, who recently teamed with Josh Santa to form KirE Cos., with headquarters in Poway. Baumgartner is the new firm’s chief executive officer, and Santa is president.
“What we’re doing is looking at some very specific opportunities to develop, and we’re doing it by not starting out in debt,” Baumgartner said. “In a way, it’s good that construction lending is tight, because that also helps keep us out of trouble.”
He said the company has a limited amount of startup capital, but will be tapping into a wide network of potential investors. It will also be scouting for stakes in existing but unfinished developments around San Diego County, giving the new firm a foothold in projects at a low cost basis.
For instance, its first two official projects were acquired from banks that had foreclosed on the original developers after the first homes had been built and sold.
Two Projects to Complete
In gradual phases, KirE will be completing Black Canyon Estates, a 44-lot single-family housing development in Ramona where 35 homes have yet to be built; and City Square, a 102-unit residential townhouse project in central Escondido with 84 units to be constructed.
The Escondido project will represent an investment of about $25 million by the time it is fully built out. Baumgartner said the firm will also serve as a general contractor for other developers, including Carlsbad-based Chelsea Investment Corp., for which it is currently building an apartment complex in Huntington Beach.
The firm’s launch comes as the construction industry slowly bounces back from the recession, although lenders remain reluctant to finance new residential or commercial projects because of lingering problems with loan delinquencies.
According to the latest available data from the Construction Industry Research Board, developers took out building permits for San Diego County single-family projects totaling $106.6 million, representing 307 future homes, in the first two months of 2011.
That was nearly double the amount of local single-family building activity seen in the same period of 2009, though less than half the level of January-February 2006.
Santa said he worked with Baumgartner during the past several years on occasional home renovation and investment projects done by Santa’s locally based company, JNL Development Inc. Santa has led that firm since its founding in 2002, and will remain involved with it.
Santa said the new firm will initially employ six full-time staff, but seasonal full- and part-time positions combined could eventually range up to 30.
Baumgartner said a “great source of satisfaction” in starting the company was the chance to work with and mentor a group of partners who are all experienced in construction and development, but still in their 30s. In addition to Santa, that includes fellow principals Jason Shepard, Bryan Nimer and Guy Oliver.
Shepard and Oliver also worked previously for McMillin divisions. Similar to the company Baumgartner left in 2010 after 31 years, there are family links to the origins of KirE.
Baumgartner said the firm’s name is a backwards-spelled tribute to his late son, Erik, who died in a 2002 auto accident while attending The University of Arizona. Shepard was Erik’s roommate at the university and a longtime friend.
Baumgartner said he decided to leave McMillin for the chance to try something on his own, and because he could not bear the thought of retirement from the industry.
THE SAN DIEGO BUSINESS JOURNAL