Investing in Land

A story posted to the Real Estate Channel, a self-described “Internet News & Property Information Network that distributes relevant and timely real estate news stories, market reports, expert industry opinions and property video profiles to real estate audiences – worldwide” has put a spotlight on the work of Walton International.

Walton, as readers of this blog know, is a Calgary-based raw land investment company.

According to REC, Walton’s “most recent transaction covers additional acreage for the 1,375-acre master planned Cottonwood project in Scottsdale, AZ.”  This is one of a continuing string of such announcements from the company that seem to paint a brighter economic picture than we see elsewhere.

I came across a new website that might be of interest to readers of this one.  It is devoted to and called “Florida Land Development News.”

The site seeks “to bring you the news affecting real estate development from a professional perspective.”  A quick glance of the news wire section offers reports on the $536 million purchase of 73,000 acres of land in Everglades, Palm Beach County’s decision to remove the affordable housing requirement from development and statewide transportation planning.

Other markets could benefit by creating such portals.

For all the noise created by the Federal Government’s efforts to jump start the economy (Cash for Clunkers, anyone?), it appears that, like politics, all “green shoots” are local.

One need look no further than the ocean side of Florida.  Here is bit of a story in The News-Journal, “The Independent Voice of Volusia and Flagler Counties” in Florida:  “Representatives of a company that owns 59,000 acres of land in southern Volusia and northern Brevard counties have worked behind the scenes for more than a year to refine a long-term development plan for the property.”

The company is the Miami Corporation, a near 100-year old land investment company that started out selling farm implements.  You would have to guess they know their land.  Add it to the list of companies like Walton International, now beginning to move to fill the front of the development pipeline.

As for the Florida deal, it reflects the growing support from developers for”…sustainable growth standards, such as limiting development on the bulk of the land until at least 2025, requiring water and energy conservation, and tying job creation to housing construction.”

Let’s keep an eye on that.

In recent weeks, news from both the East Coast and West Coast have strengthened the relationship between sustainable development and the future.

In Bordentown, New Jersey, the just-released land use plan flows from its commitment “To promote the orderly growth of lands within the City of Bordentown, taking into consideration the character of each district and its peculiar suitability for particular land uses, to generally encourage the most appropriate use of land through the police power, and to promote sustainable and orderly growth.”

In reporting on the plan, updated every five-to-six years, the Newark (NJ) Star-Ledger noted that “Perhaps the biggest changes to the plan were the removal of the terms ‘transit village’ and ‘redevelopment area.’ The result will be less emphasis on new, denser development within the historic, riverfront city that is home to about 4,000.”  This will clearly put more emphasis on outward development to accommodate growth without affecting the character of the town.

The character of the city is also a big part of an announcement made by the A.G. Spanos development company about its plans in Stockton, California, about 50 miles east of San Francisco.

The Company said it intends to create “The Preserve, a new community that will be a model for environmentally and economically sustainable development. The Preserve will generate a $2 billion investment, attract new businesses to Stockton, create new jobs, add a new community hospital, reduce reliance on automobiles, and is projected to cut greenhouse gas emissions by at least 50% compared to typical developments.”

In each case, one big, one small; one on the East Coast, one on the West; and one driven by government, the other by the private sector; the mission is the same — creating a sustainable land-use future.

With the critically acclaimed television show about advertising, “Mad Men,” soon to start its new season, the industry’s perennial question, “Will it play in Peoria?” may be on the minds of many.

It ought to be, and not just for marketers who were taught that the Illinois city of 375,000 people is a perfect test market for new products.  It ought to be a question on the minds of people thinking about investing in land.

Peoria County officials have just released their Comprehensive Land Use plan with projections stretching out to 2050.  According to Planning and Zoning Director Matt Wahl in the Peoria Star-Journal, “This is unique. Quite honestly, there isn’t another county comprehensive plan within the Midwest that has this type of information in it.”

The plan takes a matrix approach to making educated projections.  Population growth, commercial demand with a focus on retail and public services (streets, water, schools) all play a role.

Clearly, it plays in Peoria.

Is it possible the ancient proverb about big things starting out small is taking root in Arizona?

Just this week, the economic prospects in the Grand Canyon State have been painted in dark colors.  A state budget crisis was described this way by the New York Times:

“Arizona finds itself in a worst-case scenario among states that have been hammered by the foreclosure crisis. One of the fastest-growing areas in the country for years, the state has seen its population — and needs — explode over the last decade, and development has more than helped cover the costs…With the number of new building permits plummeting, revenues from the big-ticket items associated with new homes, which had fueled much of the state’s budget in recent years, also fell.”

Less dark but still a mixed bag was a report from MDA DataQuick, the San Diego-based real estate analyst firm.  It reports that even though “Existing home and condo sales in the Phoenix area soared in June to the highest level seen in that month in four years…The level of newly constructed homes sold in the area has declined 50% from June 2008.”

The brightest data points may be those appearing earlier in the development pipeline.  Six months ago I saw a report from Walton International, the Canada-based raw land investment company, that its investment in Arizona in unabated.  According to the release, “Arizona has been and is expected to continue being one of America’s strongest economic regions, supported by long-term fundamentals in employment, population, economics, and housing affordability.”

Strong words and strong moves.  If Arizona’s governor can hold out, she may get rescued by the cavalry coming from Calgary.

In a recent report in the Phoenix Business Journal, people who ought to know say we are touching the bottom of a bad economy and should now start to look up.  And when investors cast their gaze in that direction, they ought to see land.

Sure, people like Land Advisors Organization CEO Greg Vogel, Arizona State business school real estate professor Karl Guntermann and Carter Froelich, managing principal of a real estate consulting firm are not with0ut a point-of-view.  But the pieces are starting to fall into place.

It was Vogel, in fact, who noted the “re-emerging investment market” in Arizona.  He added that “Investors are returning to Phoenix and snatching up undeveloped land at prices not seen for at least a decade.”  There is data, too.  As the decline in home prices slows, the Wall Street Journal reports that new home sales are up 11 percent.

This is not about repeating the mistake of what former Fed Chairman Alan Greenspan called “irrational exhuberance.”  There is too much evidence that says we still have miles to go.  The Associated Press just confirmed that home foreclosures in the first half of 2009 rose 15 percent.

But the signs are pointing up and that means they are pointing at the value of land.

It was only a couple weeks ago we noted that Arizona’s Pinal County was worth a long look from investors focused on raw land.

Now comes a report from Money Magazine that there is even more reason to take a longer look.  According to the editors there, “Pinal is forging into new territory by courting retailers, small businesses and medical-research companies. A major shopping center, the Promenade at Casa Grande, has already opened, bringing with it Dillard’s, Old Navy and a multiplex theater. A new hospital in Florence is projected to open in 2011 or 2012.”

At a time when there are few guarantees, it is good to see evidence pile up that suggests continued growth in The Grand Canyon State.

At the end of last week, two reports converged to add emphasis to the argument that the economy may be looking up.

First came word from the National Association of Homebuilders that the confidence level of the people who build the homes we live in had moved higher than it has been since last year.  The news is tempered by a still tight credit market and continued foreclosures, but good metrics are a path to the rebound.

Second came just some of that sort of news.  In the U.S., housing starts are up for the first time since last year.  The Commerce Department noted that “(s)tarts of single-family homes rose 14.4% last month to 470,000, the highest level since October. This is the fourth straight increase…”

These two elements of economic activity are at the end of a long line of events that begin with identifying, acquiring and developing the land beneath them.  And there are early signs that the land market is growing more active, too.

It will be best to keep a close eye on just what develops.

A lot of news clippings flash across my computer screen, but one earlier this month from the East Valley (AZ) Tribune caught my eye.

The headline read: “Pinal County Plan Prepares for 6M People.” Pinal County, to the south of the Phoenix metropolitan area, now has about 350,000 people.  That kind of growth requires a plan, a big plan and land, lots of it, which Arizona has.

It is not the first report on the importance of raw land investing in Arizona, but this article notes that the plan “looks farther into the future than 10 years, which is normal for comprehensive plans, and instead designates what land uses Pinal County should have when it’s built-out.”

It also was the product of input from multiple stakeholders — those who would use the land and those who would prepare and build on it.  As reported, “(t)he plan is the culmination of public meetings, multiple committees and consultations with private firms and public institutions…”

That’s foresight!