 2011-04-27 Dirt Cheap Real Estate.pdf | [ ] | 331 Kb | 0 Downloads | 7/27/2011 14:26 CST |
Christine Perez reports in "D CEO Magazine issue MAY-JUN 2011":
As more banks take back property assets from loans that have gone bad, land funds and developers are on the prowl for bargains.
“AT THE END OF THE DAY, BIG
MONEY IS GOING TO BE MADE HERE
IN LAND,” RAY UTLEY SAYS.
“HISTORY HAS PROVEN THAT.”
About half of Craig Ranch's 2,200 acres in McKinney have been developed. Much of the land that remains available is slated for commercial use. Twelve acres were recently snapped up by Traxxas, which has tapped Dallas-based KDC to build a new corporate headquarters on the site. Initial plans called for a 12S,OOO-squarefoot campus; Traxxas has since upped that to 250,000 square feet in three buildings, says David Craig, who owns the sprawling mixed-use community.
Craig says he has an advantage when developers are looking for parcels, not just because of the project's prime location along the new Sam Rayburn S.H.121 Tollway, but also because Craig Ranch has infrastructure and amenities in place.
"There is not a lot of raw, speculative land out in the marketplace, unless someone has gotten in trouble, which, of course, creates opportunities;' he says. "I'm blessed to have a very strong capital partner, so we have continued to grow. We're attracting corporate projects and the residential sales are strong. Home sales at Craig Ranch were up 74 percent in 2010 compared to 2009, and I can tell you that the first quarter of201I will far exceed what we had in 2010."
'PRICES WILL SPIKE OVERNIGHT'
One of the area's foremost authorities on land is Ray Utley, who oversees about a dozen brokers in the land and ranch division at Henry S. Miller. He got into the business 30 years ago, after seven years of coaching football at Southern Methodist University.
Utley has brokered a number of high ~ profile deals, including the sale of Ross Perot's exotic ranch in Jacksboro and Boone Pickens' ranch in Pampa, but his bread and butter is residential.
"As one of our brokers puts it, 2011 is a 'feel good' year," Utley says. "Starting in October of 2010, you could sense that everyone was getting ready to make a move." It may be a while- 18 to 24 months-before the market works through the flood of REO properties, he says. ''But when it breaks, we will have a tremendous run. Prices will spike overnight."
It's critical that land gets back in the hands of private developers, to spark economic growth. Until then, the nonperforming REOs will continue to be a drag. It's another reason that now is a good time for investors to buy, Utley says.
"They're waiting, but they're making a mistake," he says. If a piece of property is a good investment, they need to go ahead and make the move. The market is depressed, so they're now in a position to pick and choose. If it's going to be a good real estate deal in the future, they should go ahead and buy it now."
The land guru cautions, however, against unrealistic expectations. People should plan on a five to seven year hold; they can hope for a three-year turn, but are "foolish" to expect it, he says. "If someone calls me and wants to double their money in two years, I tell them I keep all those deals for myself," he jokes. "I'm making the point that they're being unrealistic."
Patience, however, can certainly be rewarded. The Perots, for example, have done pretty well. In the early 1980s, Ross Perot Sr. bought 2,700 acres in Plano and began developing Legacy business park. About 50,000 people now live and work there; corporate tenants include JCPenney, Frito-Lay Co., Dr Pepper Snapple Group, Pepsico, and Ericsson.
Similarly, Ross Perot Jr. developed the 17,000- acre AllianceTexas in North Fort Worth. It's now home to more than 250 companies, 78,000 employees, and 7,400 single-family homes, and generated an economic impact of about $2 billion in 2009.
"At the end of the day, big money is going to be made here in land," Utley says. "History has proven that."
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