Driving southwest on U.S. Route 175 out of Dallas, curving through the city of Kaufman, sloping downwards at the Cedar Creek Reservoir, cutting through Eustace, Mabank and Malakoff, and a few extra turns eventually brings you to Star Harbor, Texas.
At last count, it had a population of 482.
On a good day, it takes about an hour and 15 minutes from Dallas. That was always long enough for four-year-old Graham Sowden, to listen in on his dad’s work calls on the way to the family lakehouse.
When Graham’s dad, Kip, purchased the property, there was no sign that listening in on those calls would help in his son’s future real estate career. There was also no indication that he’d join his father in business.
Nearly 25 years later, Graham, 29, has joined his father’s company, this one founded in 2010, and is working eventually to take over real estate platform RREAF Holdings.
Kip, 61, is the firm’s chairman and CEO; Graham is its chief investment officer. The latter joined the company after graduating from Rhodes College in 2016.
Since 2020, RREAF reports its assets have skyrocketed more than 4,000%, from about $100 million to $4.5 billion. That was mainly due to the firm’s aggression, leaning into opportunities and distress during and in the wake of the COVID-19 pandemic.
Though interest rates slowed the firm’s activity last year, it has not laid off employees. It is growing instead, expanding from a headcount of 279 in 2020 to 491 today.
A spokesperson on behalf of the firm declined to provide employment and asset figures for the years between 2020 and 2024.
Graham said 2024 is about positioning RREAF to snap up properties from firms that overleveraged themselves, especially in the multifamily space — the post-pandemic pop-up syndicators.
“We’ve seen challenges in acquisitions that slowed things in 2023, but we think 2024 could be one of our biggest years yet,” said Graham. “There’s a really good opportunity for groups like ours that are well-capitalized and ready to take advantage of what’s ahead. There are going to be owners in distress due to the way they capitalized the deals, and we’ll be able to go in and buy them at extremely attractive [prices].”
The firm has a potential acquisition pipeline between $600 million and $700 million, Graham said.
According to Kip, he’s tried just about everything in commercial real estate over the last 37 years.
“This is my last go around, and I’m going to really set up more of a legacy company that all of our kids can build out and grow with,” said Kip. “Nothing is more exciting than having your son follow in your business and know that he’ll be the CEO at one point.”
Graham said it’s a unique vantage point to be working at a company he knows he will one day lead. He learned fast and furious, with many of the firm’s young employees becoming integral in its growth story over the past several years.
Kip’s legacy approach led to RREAF’s focus on assets in places that Kip believes are recession-resilient. That sums up the firm’s key tranches in multifamily residential, development, drive-to leisure and beachfront hospitality, master-planned communities featuring both single-family and build-to-rent homes, and outdoor living.
“All of that caters to the biggest segment of the U.S. population, which is Middle America and middle income,” said Kip. “I have friends running companies only focused on urban, high-end skyscrapers. You have to get comfortable that you have a big segment and a growing segment of the population that can’t afford $4-a-foot rents.”
Building cities
The crux of RREAF’s rapid growth is its growing pipeline of employees and keeping them. That means catered-in lunches to its Dallas office overlooking Klyde Warren Park, a hands-on, multi-week training program and assigned mentors within the firm.
The other secret sauce is RREAF’s proprietary software platform, which pulls and culls data from its internal assets and other sources.
“It’s hard to grow from $100 million to $4.5 billion and not keep up with everything, but it’s because of our systems we have in place,” said Kip.
RREAF is poised for further growth and expansion in all of its business lines.
The firm is positioned to build 12 to 15 properties a year under its extended-stay hospitality division. While every other tranche at RREAF sticks to the southeast U.S. for developments and acquisitions, this arm has no geographic constraints. It has plans to delve into Marriott, Hilton and Hyatt extended-stay brands.
“The idea behind that is once we’ve built enough where it’s at a billion dollars or more, we’ll sell to one of the REITs,” said Kip.
The pair is especially thrilled about having two properties that will be branded with Margaritaville Resort.
“The Margaritaville Resort we’re doing in Galveston is by far going to be the coolest Margaritaville Resort ever done,” said Kip. He admits he’s a Parrothead, a fan of the late musician Jimmy Buffett.
It will have 334 hotel rooms and 278 cottages, averaging about $2 million apiece, on the beach in Galveston. At two acres and 25 feet above grade, the resort is expected to include the biggest podium-built waterpark in the country, with amenities like lazy rivers and swim-up bars.
Bullish on the Interstate 35 corridor, the firm has multifamily projects in Salado, Belton and Temple. “From Dallas to San Antonio, everything is just exploding,” said Kip.
That observation, in turn, led RREAF to launch its outdoor living vertical last year with the acquisition of five properties.
Kip describes the firm’s own forthcoming developments in the space as building “horizontal resorts.” Beyond traditional RV spaces and hook-ups, RREAF is adding outdoor cooking facilities, family entertainment buildings and restaurants.
Between 25 percent to 50 percent of the space will be occupied by tiny homes, allowing non-RV travelers to use the sites, too. Kip’s daughter, who lives on a farm in Virginia in a renovated log cabin with a near-zero carbon footprint, inspired the concept.
With RREAF Communities, the firm’s master-planned entity, school districts and proximity of 20 to 30 minutes to a major MSA are the key emphases.
That brought RREAF to Heirloom, a community spread across 3,300 acres in both Midlothian and Waxahachie. The amenity-heavy development will have about 8,500 single-family homes, with 3,000 rentals between multifamily communities and build-to-rent.
“With RREAF communities, we’re actually building cities,” said Kip, noting also its built-to-rent community in Royse City known as Capstone Court and a more than 3,200-acre master-planned community along Texas 130 Tollway between Austin and San Antonio.
The firm’s expansion has also been bolstered by growing its base of capital sources. It now works with registered investment advisors and more common equity, “quasi institutional-type investors,” as Kip terms it.
RREAF also has utilized institutional money on acquisitions when it comes to big portfolio deals.
The Bubblegum King
Kip recently built a new lakehouse for the family at the site of his original property, fronting Cedar Creek Lake, a locale chosen for its proximity to Dallas. Of course, it has an office from which he can keep up with the firm’s fast growth.
The latest iteration of the lakehouse is more spacious, with room for family and friends.
The design incorporates his passion for his alma mater, the University of Texas at Austin, with its burnt orange accents. Shark emblems, a mascot of sorts for RREAF, are found throughout the property, too.
The entire orientation of the home celebrates its access to water, with bedrooms featuring views over the lake and an expansive porch with an outdoor kitchen.
“We’re water babies. I had the kids on skis as soon as I could,” said Kip, who taught waterskiing as one of his many side businesses growing up.
That early entrepreneurial spark is something Kip and Graham share.
Kip’s first venture involved using his lunch money — 60 cents — at Bradfield Elementary School to buy gum in the third grade.
“I’d wait until I saw my mom’s station wagon turn the corner and I would sprint across the street to the 7-Eleven in Highland Park Village and buy 60 pieces,” recalled Kip.
He then sold them for a nickel apiece during his lunch period, making five times his money daily. During other lunch periods, he recruited classmates and split the sweet profits with them. The principal eventually burst his bubble and the booming business.
“He was the bubblegum king of Bradfield,” said Graham.
“I spent many Saturdays cleaning gum off the bottom of desks,” Kip retorted with a laugh.
Graham started by painting sidewalk curb numbers himself for about $25 (with the benefit of receiving $100 tips from some patrons). He then turned to a similar business premise to his father’s at Highland Park High School. He ordered 5,000 power balance bands from China at about 5 cents apiece and sold them to classmates for $20.
“He had a much bigger margin than I did,” said Kip.
Kip was never cut out to work for anybody, he’d tell you. He cut his teeth working for Lomas and Nettleton’s real estate investment banking arm. What was once the nation’s largest mortgage company offered Kip the opportunity to move to Tampa to set up and run a new office.
“I thought to myself, if they had that much faith in me, then I ought to have that much faith in me,” said Kip.
So, he moved back to Dallas in 1987 to start his own shop.
No room for error
The freedom Kip found running his own shop persists in RREAF’s insistence on staying independent.
“One of the reasons our company is successful and wants to stay private is because we can take advantage of disconnects we see in the market and move pretty quickly,” said Kip.
During the COVID-19 pandemic, for instance, RREAF saw RV sales go through the roof and focused on that area. The same was true for drive-to-leisure and hospitality deals.
“We get asked to go public all the time, but we want to remain a family company. I’m hopeful that with Graham’s kids and their kids, RREAF will be around long after I am gone,” said Kip.
Kip and Graham acknowledged there have been challenges in the market as of late, especially as the firm maintains spreads and yields to equity investors with continued upheaval around interest rates and construction costs.
“You’ve got to pay very, very close attention to the economics — much more so than you did before. There is no room for error,” said Kip. “You have to be laser-focused and sure you’re picking the right locations and the right product to develop at the right time. It’s much more difficult today than it was 24 or 36 months ago.”
But what’s up next for the family isn’t all business.
Graham is marrying Caroline Palms in June. Kip is the best man, an ask made after Sunday mass over breakfast at Angela’s Cafe in Dallas.
The coming years will likely involve Kip taking steps back to allow Graham and the children of some of the other leaders at RREAF to begin to take the reins.
“I’m 61, so I’ve got another 30 years of work in me at least,” Kip said with a chuckle. “Maybe not working as hard and maybe spending more time in my office that overlooks Cedar Creek Lake rather than Klyde Warren Park.”
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