Vice President Harold Cunliffe with The Pacific Group joins the Atlanta Real Estate Forum Radio podcast to dive into the real estate development business, founding The Pacific Group and more. Cunliffe joins host Carol Morgan on the tenth guest on the Legends of Real Estate series.
A graduate of the University of British Columbia, Cunliffe earned a degree in civil engineering and went on to work for several construction companies with real estate developer clients. Seeing the wealth of these developers (think Rolex and Mercedes), Cunliffe was inspired to go down the same path.
After accruing some savings, he purchased a small piece of property to begin amassing his wealth. During this experience, he became familiar with zoning, development regulations and many other things, and started to realize the real estate business is far from simple. Situated in British Columbia in the 80s, Cunliffe was front row to a commodity boom and a market flooded with cash.
Cunliffe said, “It was pretty easy for me to stumble into this particular real estate deal, pull it off and make a bunch of money.”
As he was doing this, he worked for a construction company where the boss acted as his mentor, aiding him along the way. During development, Cunliffe was able to get a sewer line attached to his property, allowing him to transfer from one unit per acre to two units per acre. Luckily at the time, lot values were increasing by the thousands. Lots Cunliffe intended on selling for $30,000 became worth $80,000 in value.
Seeing the incredible increase in value, Cunliffe’s boss congratulated and terminated him, forcing him to complete the real estate transaction and search for another job. At this time, the commodity market crashed, and jobs were scarce.
A friend and company partner, Mike Kilgallon, attended the University of British Columbia with Cunliffe and went into business with him. Eventually, the two also went broke together. Kilgallon was able to secure employment with a Canadian developer in the Los Angeles market and ran into some partners in Texas with access to savings and loan (S&L) money by chance. The meeting prompted the partners to ask Kilgallon to open an Atlanta office.
Cunliffe said, “At that time, Atlanta had created 100,000 jobs, and I knew that should equate to about 60,000 housing starts. But at that point, Atlanta was only doing 20,000, so there was a big lack of supply and a big demand.”
After looking around, Cunliffe secured a 200-acre piece of land in Roswell for $12,000 per acre. Cunliffe quickly secured citizenship and went to work before the S&L crisis. At this time, Kilgallon’s Texas partners had gone under while Cunliffe formed The Pacific Group.
A big fan of the analogy “you have to keep swimming,” Cunliffe believes it’s key to keep your nose above water as a real estate developer. Becoming involved, positioned and furthering your education is a crucial part of the business.
Cunliffe said, “There’s going to be a low tide. You’re going to get down there and be able to pick up all the treasure. All you have to do is pick it up and get to shore as fast as possible. Don’t go back in the water when it’s high tide again because you’ll lose all your treasure. That’s what happened to me three times.”
After operating in metropolitan Atlanta for a time, a partner in Texas with access to S&L money approached Cunliffe’s team with a deal. The partner would front the funds if his team handled the deals, resulting in a 50/50 split. When the S&Ls ran out of money in 1992, the Resolution Trust Corporation searched for people to complete the projects to return as much money as possible to the FDIC.
The managers of the Resolution Trust Corporation recognized that Cunliffe and Kilgallon were not discredited borrowers and tasked them with finishing real estate projects. This resulted in the duo entering into a forbearance agreement that stated the two were to pay off the corporation with a certain amount of money over three years. During this time, they would develop and operate the projects, selling them and reducing the debt. Whatever was left, Cunliffe and Kilgallon could keep.
After a year, Cunliffe realized they were close to paying off the forbearance agreement and would have ample land left over – a small fortune. When Cunliffe realized this, he formulated a plan to compile all their money and arrange simultaneous closings to close out and pay off the Resolution Trust Corporation.
They approached the closing with a large amount of cash after exhausting all their resources, taking an entire day to complete the process.
Cunliffe said, “On the way back, I said to my partner, ‘It’s hard to believe Mike, but we’ve just made several million dollars.’”
After this experience, Cunliffe and his partner spent a few years treading water and selling off properties, swearing they would never sign a personal guarantee again. This rang true until opportunities arose in the early 2000s. With more industry experience under their belt, the pair decided to borrow more money, and when 2007 struck the market, having debt was no longer a benefit.
At the beginning of the Great Recession, Cunliffe was developing a project in Roswell with 95 units for Monte Hewett Homes. Over 100 people signed up to prepurchase homes in the community. When sales officially opened and no one showed up, Cunliffe knew the real estate market was in serious trouble. For five years, The Pacific Group team worked their way out of personal guarantees. Cunliffe soon realized that the banks were under more pressure than real estate developers.
Cunliffe took this opportunity to work on relationships with the company’s lenders and prioritize paying them back. During this time, banks began foreclosing on properties and taking them back as real estate owned (REOs), advertising them for sale.
With money set aside, The Pacific Group cobbled together money to bid on these packages. One of the company’s strengths was the ability to close on properties easily, and after five years, they purchased 10,000 developed lots in the metro area. Then, it became a question of reducing costs until the market improved.
Cunliffe said, “We went from being a real estate developer to a real estate speculator within a really short period.”
The Pacific Group focused on holding the properties and maintaining them for five to 10 years as they increased in value. Of the 10,000 lots, the company has eight remaining lots currently under contract.
In Cunliffe’s opinion, a change is occurring. The Pacific Group is uniquely positioned to carry land through to the next cycle. The company has strayed away from residential deals unless they are in tandem with national builders to reduce the risk factor. The company has also done a fair share of warehouse distribution deals south of Atlanta with big-name companies such as Amazon and Walmart.
Cunliffe said, “We seem to be on a fairly conservative course.”
In 2015, Cunliffe decided to gradually reduce his role in the company. Now, his son has taken over, leaving him and his college roommate running The Pacific Group.
Immediately upon arriving in Atlanta in 1984, Cunliffe became a member of the Greater Atlanta Home Builders Association. He did not participate often until he received a call encouraging him to work towards becoming president of the association. In 2001-02, Cunliffe served as president, allowing him to make several valuable connections with industry members. In his opinion, the Atlanta community is exceedingly welcoming.
A very flexible company, The Pacific Group has always been able to ebb and flow with the market. Now with his son at the helm, Cunliffe can watch the company grow from the outside.
Over the years, The Pacific Group has been a money partner, lender, developer and eventually, a homebuilder. During market downturns, the company had to transform empty lots into houses to turn a profit, leading to the development of 30 to 40 homes over the years.
A favorite development of his, Cunliffe recently received a phone call from a resident of Emory Park Manor in DeKalb County. A pedestrian-friendly development, the community was a highly successful development for The Pacific Group and has been home to some residents for over 20 years. The community even went on to be recognized as a Project of Excellence by the Atlanta Regional Commission.
To increase the community’s walkability, traffic islands reduce the speed of vehicles, and specific zoning designates a space for cars and a space for pedestrians to enhance the safety and design of the community. A large community, Emory Park Manor consists of 85 single-family houses and 50-60 townhomes.
Cunliffe said, “It became a popular and very safe development.”
For those entering the real estate development industry, Cunliffe recommends forming a foundation in sales, marketing, finance and civil engineering. Increasing your knowledge of these skills allows for easy navigation of the market’s ups and downs.
Tune in to the full episode above to learn more about The Pacific Group or visit https://PacificGroup.com.
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