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Thursday, May 23, 2024

Cherry Tree’s Marsh Eyes Millennial Housing

Chris Marsh isn’t done building homes for Southern California residents.

His company, Newport Beach developer Cherry Tree Capital Partners, just launched a new townhome building business in partnership with Bain Capital, the Boston-based investment firm co-founded by Mitt Romney.

The joint venture, called BCT Development, aims to build townhomes for SoCal renters, particularly the millennial population, who officials say have been priced out of homeownership.

“Homeownership affordability is at a 40-year low,” Marsh told the Business Journal last week.

Land acquisitions for the venture are already underway. The firm is looking to build inland communities in Orange County, Los Angeles, San Diego, Ventura County, San Bernardino and Riverside.

The venture says it plans to deploy “several hundred million dollars of gross capital over the next several years.”

Irvine Co. Push

The initiative marks a pivot from Marsh’s prior experience as the president of Irvine Co.’s apartment division, where he led one of the largest development pushes in the company’s long history, adding nearly 22,000 luxe, coastal multifamily units to the privately held firm’s portfolio.

Land acquisitions in Silicon Valley, Los Angeles and other markets, plus construction costs for those new units were estimated to cost Irvine Co. nearly $10 billion. It was one of the biggest apartment development investments seen in the country in recent memory.

Marsh expanded the Newport Beach developer’s multifamily footprint during his tenure by over 50%, around 40,000 to 62,000 units. Irvine Co. is now the largest apartment owner in Orange County, as well as California as a whole.

Its portfolio, now around 65,000 units, likely brings in over $2.3 billion in rents annually, assuming an average monthly rent per unit of $3,000, in line with Orange County averages for higher-end properties.

Rental units are now Irvine Co.’s largest source of revenue.

Lego Lover

Marsh was born in Northern England, the son of two factory workers.

“That taught me very early the value of hard work,” he said.

He grew up in a home built by the factory his parents worked for, a product type—workforce housing—that he would later invest in through Cherry Tree.

As a kid, he enjoyed playing with Legos to craft structures of his own, an interest that would eventually manifest itself as the retail centers and apartments he developed over the course of his career.

Marsh attended Birmingham City University, earning a degree in quantity surveying, or construction financing and contracting, in 1992.

A year later, he graduated from University of Reading with a master’s degree in project management, learning skills that would later come in handy as Irvine Co.’s apartments division president.

Crossing the Pond

Marsh’s development career began with building retail centers in England and Spain.
In 2000, he moved from his native country to Orange County.

“I was attracted by the opportunity here in the States,” he said. “And how it can be more of a genuine meritocracy.”

About a year after his move, Marsh contemplated returning to the U.K.

“My modest savings were almost depleted,” he said.

But an unexpected call he received from Irvine Co. extended his stay.

The developer referred him to Newport Beach-based real estate company Martin Potts & Associates.

There, as a senior project manager, he exclusively worked on Irvine Co. projects, at the developer’s request.

Within two years, he moved to Irvine Co., becoming the senior VP of commercial property development.

Pelican Hill Resort

Marsh’s first project with Irvine Co. was Crystal Cove Shopping Center in Newport Beach, one of Orange County’s premier coastal retail centers.

The shopping center, completed in 2002, reported $110.3 million in taxable sales last year, up 5.6% from the year prior. It ranks No. 21 among the largest shopping centers in OC.

Major tenants at the 131,762-square-foot outdoor mall include seafood and steakhouse restaurant Mastro’s, Mexican restaurant Javier’s, Gap and Gap Kids and Trader Joe’s.

Following the delivery of Crystal Cove, Irvine Co. Chairman Donald Bren assigned Marsh to what many call Bren’s passion project: The Resort at Pelican Hill.

Marsh led much of the development of the 332-room resort, located in Newport Coast. The property is on a 504-acre site. It boasts ocean views, architecture reminiscent of a seaside Italian village, one of the world’s largest circular pools and a golf course designed by renowned architect Tom Fazio.

The luxury resort opened in 2008, during what was the beginning of the financial crisis.

“Not the best time to be opening up a six-star resort,” Marsh said. Some rooms at the resort were mothballed until market conditions improved, at which point the resort began operating at full capacity.

The resort is the only hotel property remaining in Irvine Co.’s portfolio, after the sales of the former Fashion Island Hotel and Hotel Irvine following the pandemic.

22,000 Units

When the market showed signs of recovery after the Great Recession, Bren appointed Marsh to another ambitious Irvine Co. initiative: an aggressive multifamily expansion.

Marsh led the $10 billion effort by putting together a team to entitle, design and build the 22,000 units Irvine Co. sought to develop. Within three years of inception, he grew the apartment division from six to 150 people, he said.

“I realized I love building teams and culture as much as I love building structures,” he said.
The last of the units delivered in 2021, nearly nine years after Marsh became the apartment division’s president.

The project’s completion gave Marsh the opportunity to pursue his dream of founding his own company—Cherry Tree, which he named after the village where he grew up in England.

Workforce Housing

Cherry Tree started out acquiring existing workforce housing apartment communities in the Midwest, through a partnership with Revitate, a Newport Beach investment firm co-founded by brother-sister duo Alex Bhathal and Lisa Bhathal Merage (see story, page 20).

The venture hits home for Marsh, who “grew up in workforce housing,” he said.

Marsh describes the Revitate Cherry Tree initiative’s acquisition focus as Class B, older vintage homes completed in the 1980s and 1990s, located in suburban communities with low crime, highly rated schools and populations with anticipated employment growth.

“It’s a fundamental need and it’s a very steady, stable investment strategy,” he said. “You need that kind of predictability when another side your business is real estate development, which is highly cyclic in nature.”

Cherry Tree to date has acquired about 2,000 workforce units through their joint funds, one of which has raised $110 million. Its apartment communities include Timber Lakes in Kansas City, Mo., the Vue Apartments in Omaha, Neb. and Walnut Trails in Elkhart, Ind.

The companies last November launched a second fund, which is aiming to raise $150 million.

SoCal Townhomes

The townhomes that the newly created BCT venture is looking to build will be a more expensive product type than the workforce housing the Cherry Tree-Revitate partnership has invested in.

The Class A properties will have a “home-sweet-home feel with multifamily density,” Marsh said.

Each unit will have its own front door and yard, despite being closely packed to “make sense of California land prices,” he said.

The communities will also offer amenities, such as pools, and proximity to schools
and entertainment venues, according to officials.

“We’re drastically undersupplied with housing,” Marsh said. “These townhomes will serve as the ‘missing middle’ rental housing product that will help meet the currently underserved demand from middle-income families.”

Cameo Shores Home

While Chris Marsh has kept busy with workforce housing investments and building plans, he hasn’t lost his touch with luxury development.

An 8,154-square-foot home he developed in Corona del Mar’s Cameo Shores retraded last December for $22 million, above its asking price of $21.5 million.

Marsh sold the house in 2021, when it traded for $16.7 million.

The latest deal for the property, located at 4639 Gorham Drive, marked the fifth priciest overall sale for CdM in the coastal town’s history.

The home, which includes an infinity pool, wellness spa and 200-bottle wine wall, touts ocean views enabled by floor-to-ceiling glass windows.

“Coming from a dark and gloomy corner of England to sunny California, I challenged myself to build the most porous house I could, one that maximizes the enjoyment of coastal California’s light,” Marsh said.

“Pelican Hill was Donald Bren’s passion project; this is mine,” he added.

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Sonia Chung
Sonia Chung
Sonia Chung joined the Orange County Business Journal in 2021 as their Marketing Creative Director. In her role she creates all visual content as it relates to the marketing needs for the sales and events teams. Her responsibilities include the creation of marketing materials for six annual corporate events, weekly print advertisements, sales flyers in correspondence to the editorial calendar, social media graphics, PowerPoint presentation decks, e-blasts, and maintains the online presence for Orange County Business Journal’s corporate events.

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