Investing in Land

The first thing I ever heard about Phoenix was that it was hot.  But, quickly added, it was a dry heat.  According to recent reports, development in Arizona’s Valley of the Sun is heating up once again.  Perhaps in advance of the rest of the nation’s housing market.

The Arizona Republic, in reporting on the “2050 Vision for the Valley,” starts out this way:  “Picture new Phoenix-size cities beyond the mountains to the far south and west of the Valley, and you get a glimpse of how the region’s future might unfold over the next half-century.”  Phoenix-size cities?  Phoenix proper has 1.6 million residents.

Many of the details can be found in the activity reports of the Maricopa (County) Association of Governments.

For development companies, like Walton International,  that focus on raw land investing the move by local government organizations to set a path for growth is good news.

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.

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.

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!