Investing in Land

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.

No two places could be as dissimilar than Grand Junction, Colorado and Escanaba, Michigan but each has seen the value of managing land development issues for both the future and the here and now.

In his year-end report, Escanaba City Manager Jim O’Toole said that “In this depressed time of land development, the city still experienced almost $4 million in improvements.”   As reported in the Escanaba Daily Press, “Though this figure is down compared to previous years, he said he was pleased to report what was accomplished during the poor economy.”

For a small town (population 13,000) along the water on the south short of Michigan’s Upper Peninsula, these numbers are nothing to sneeze at!

A little further south sits Grand Junction, Colorado.  A little higher (about a mile above sea level), a little bigger (population 43,000) and a little drier (locked among Colorado, Idaho, Arizona and New Mexico), it too found value in dealing actively with land development.

As reported in the Grand Junction Free Press, the Mesa County governing body is helping to address its micro needs with some macro changes.  According to County Commissioner Craig Meis,  “In this economy, we feel your pain.  We’re sharpening our pencils to find ways to help by cutting county taxes and fees.”

Key though was the link between making changes that have an effect now and in the future.  “As a business owner himself, Meis has spearheaded this effort called ‘Open for Business,’ identifying key areas where business expansion could be encouraged, and obstacles to growth eliminated.”

Forward thinking and land development have been synonomous for a large group of companies who are committed to helping cities like Escanba and Grand Junction get the most of their real estate.  Companies like Walton International have, for more than 30 years, been just that kind of partner to communities.

It looks like it is paying off.

It is about 800 miles from Round Rock, Texas (hard by Austin) and Avon, Colorado (as close to Vail) but the air the leaders of each city are breathing must be the same.  In recent days, each has stepped up its efforts to participate more fully — and thoughtfully — in planning for the future of development.  Long a product of the expertise of companies like Walton International, development is becoming a team sport.

In Avon, there is a new community development director and assistant town manager.  Here is how the new hire was described:

“We believe (her) experience will help Avon move forward with its long-term goals such as developing the east and west town centers, affordable housing and improving our overall land use and planning practices,” said (the) Town Manager.

In Round Rock, it is not just a focus on the people, but the plan to make development happen.  As they put it:

“The City of Round Rock in early 2009 began work on improving its land development processes. This effort is part of the City’s overall philosophy of continuous improvement, and builds on previous efforts to streamline the land development process.”

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.

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.

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.

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.

Between Buffalo and Detroit is a wide swath of Southern Ontario Canada where land development issues and opportunities are on the rise.

As reported in the region’s Brantford Expositor, a “…Comprehensive Review of Employment Lands, presented to the planning advisory committee, argues in a detailed, zone-by-zone analysis that major swaths of mainly farmland currently designated industrial
or commercial in the county’s official plan are in places that aren’t practical for development. They are not on major roads, it points out,. Or, it wouldn’t be efficient to install expensive infrastructure services to develop them.”

What is striking is the symmetry between good local decisions and good strategic decisions.  Investing in raw land is all about vision.