Investing in Land

In a May 24, 2010, the Malaysia Business Times reported that:

“WALTON International Group, a Canada-based real estate investment company, is calling on Malaysian retail investors to invest in pre-development land in Jackson County, Georgia in the US.

“Its senior vice president for marketing and training in Asia, Wyman Chan, said there are 161ha for investment, divided into 1,800 units or plots and the minimum investment for each is US$10,000 (RM33,200).

“‘We have sold 100 units worth more than US$1 million (RM3.32 million) since late April, when we launched the project in Asia. Up to 30 per cent of the investors are Malaysians. We are bullish to sell the remaining units by July this year,’ Chan told Business Times.”

Read more here. And here.

A recent Associated Press report on the most recent fluxuations in the stock market painted a stark picture:

“The 348-point, or 3.2 percent, drop on the Dow was the worst day for the index since February 2009 when the market was swooning and headed toward a 12-year low. The Dow has lost 631 points, or 5.7 percent, over the last three days.”

Just days later, CBS MarketWatch noted the rise in commodities, likely in response to volatility in the stock market:

“Gold futures inched up Monday after fluctuating for most of the session, with concerns about the global recovery ultimately gaining the upper hand.”

Of course there is no commodity that has held its value longer than land.  A number of companies have been at the forefront of making an investment in raw land accessible to a broad range of investors, but increased interest is being driven by uncertainty elsewhere.

As one blogger put it, “…land investment can produce good medium to long term returns and it can be one of the safest and smartest ways of investing your money, particularly if the land is located in an up and coming area.”

A number of blogs have sprung up examining the value of an investment in raw land.  Likely in response to the uncertainties of the stock market and a renewed interest in self-directed retirement investing, these outlets are diving into the approaches and methods that can best serve an individual’s planning.

These new sources supplement the more traditional opportunity and advice to be gained by working with companies, like Walton International,  with a history of raw land investing.  One of the new breed blogs blog had this to say recently about the matter:

“The value of land has been soaring over the years thus making it a highly profitable investment alternative. Because land is a finite commodity, it becomes more valuable as the years go by.  So if you want a stable medium to long-term investment that offers the potential to earn astounding returns, then why not consider a land investment?

“The continuously increasing population and migration of more people to towns and cities has brought about an ever increasing demand for housing.  Because of the growing population, there is a need for towns and cities to increase in size, thereby leading to mounting demand for the development of the surrounding land.  All these factors are what make land investment an appealing proposition.”

Read the rest of the story here.

A recent story in the Calgary, Alberta, Canada Herald highlighted a subtle but significant shift in the approach one developer is taking to meet its needs and the needs of the market.  Even as signs of life in the housing market begin to surface, particularly in places like Texas, developers and land investment firms are open to new things.

The Herald story focused on Walton Development and Management, a unit of long-standing, raw land investment company, Walton International.  Both are based in Calgary.   Here is the nub of the story:

“‘This spring, we made the decision to essentially lower our lot pricing,’ says John Plastiris, president of the fledgling company under Walton International.

‘In part, it was because it was a new community and we wanted to achieve momentum and an increase in the northeast market share. It’s a value and price-driven market.’”

It is refreshing to see companies open to change in the face of changed circumstances.  Let’s keep an eye out for a trend.

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.

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.

Last August 1 in Financial Planning magazine, Morningstar Investment Services director of research William Harding encouraged advisors to design a different mix in their individual investors’ portfolios.  In confronting a difficult stock market, he suggested, it was time to give thought to alternative investments that, in Morningstar’s world,  “includes nontraditional asset classes such as commodities, real estate, infrastructure, private equity and venture capital”

Good advice and well in advance of what became a deeper market trough.

In Harding’s view, real estate “can include raw land, commercial real estate and residential real estate…”  And there is no better, long-term investment than raw land.  Fact on the ground have shown him to be right.

One to look at is the payout just announced by Walton International on one of its Canadian properties.  In any market, a better than 13 percent annual compound rate of return is worth notice.

In any new venture, like this blog, it is important to find allies — or at least people who are thinking along the same lines.  It is one thing to be on the leading edge, but quite another to be out there along on what cynics might call the “bleeding edge.”

As media and analysis moves from print to the web, there is a growing universe of information and advice to be found.  On a recent trip, I found this.

In an article on the link between land and financial returns, it says, in part: “Investing in raw land brings its best return when the land lies along a path of expanding economic growth and prosperity. But such expansion is not guaranteed, and its path can often change directions. Increases in land value are virtually always dependent upon the land’s future use, economic growth, and demographics, which all boil down to the fundamental law of supply and demand.”

So, while every one can see the land spread out before them, the best partners are those who best forecast its “future use.”  A company with which I am affiliated has a pretty good model and track record for such foresight.   Who would you nominate?

It may seem an odd time to launch a blog on investing and even more so to promote that investment in land.

What with the global economic dislocation and distress buffeting markets and governments there is a flight to nothing as much as stability.  But where is that?  With the financial news in print and on television creating a-near hypnotic, minute-by-minute focus on global stock markets, there is a chance that we might miss the road signs.  LandInvesting.biz hopes to draw you attention to one, very key one.

In a review of author and Professor Niall Ferguson’s 2008 book, “The Ascent of Money: A Financial History of the World,” was this bit of insight made more urgent by the distress in the global securities markets.  “Land and the buildings on it—or in modern parlance ‘bricks and mortar’—have played a crucial part in the development of the financial (and economic) system, because ‘the land can’t run away,’ and is therefore easy to use as collateral.”

To our eye, this suggests that at a time when investors’ are making hard decisions about what to hold, what to buy and what to shed, it might be worth taking a longer look at the long-term benefit that can attach to investing in land.

Let us know what you think.