GREENCROSSING REAL ESTATE COMPANIES NEWSLETTER JANUARY 2010 |
| Our Take on the Land Market in 2010 By Jason Perrin and Tom Banks "The only constant is change, continuing change, inevitable change that is the dominant factor in society today. No sensible decision can be made any longer without taking into account not only the world as it is, but the world as it will be." – Isaac Asimov While 2009 is a year that most of us in this business would like to forget, we do feel it is a year that we will reflect back on as an inflection point. In the markets we track, land prices in "A" and "B" locations bottomed over the summer. As big builders aggressively purchased finished lots, land developers and investors moved down the food chain to purchase half-built projects and "paper" or "platted" lots, thus sowing the first seeds of recovery. As bad as 2009 was, the seeds of change requisite to promote new and healthy market dynamics in 2010 are a product of the past year and in so being, we can be thankful for more than its expiration.
"Be ready when opportunity comes...Luck is the time when preparation and opportunity meet." – Roy D. Chapin, Jr. As we launch into 2010, a quick glance at 2009 real estate dynamics will help us prepare for the opportunities ahead. Public builders did a good job jettisoning their land holdings between 2006 and 2008, paring down staff (G&A), streamlining operations and taking advantage of the federal tax loss look-back provision, thus improving their balance sheets. While the immediate benefit of this strategy is self evident, the longer term ramifications are now playing out in today’s market. With a dwindling supply of finished lots in good locations, public builders are faced with two decisions; close their divisional doors or acquire finished lots. What we witnessed as a result of this dynamic was multiple public builder offers on every finished lot deal that hit the market and a steady - if not somewhat alarming - increase in finished lot prices. There are several examples of finished lot transactions that occurred in early 2009 that already have doubled in value. As we look next at market analysis in general we see numerous examples where expert market analysts generalize to the point that taken literally, one would be believe that all markets are homogeneous i.e. the Inland Empire has a five year supply of finished lots. Markets are not homogeneous and the inherent market recovery will be, as in the past, highly localized with better locations recovering first. The finished lot supply in “A” and “B” markets is perilously low and being consumed at a rapid rate by public builders who are underwriting to very thin margins. Putting this brief journey down memory lane into context; today’s successful real estate investors will have one thing in common – they will be those that are among the first to stop looking for yesterday’s opportunities (and Wall Street Journal headlines) and start looking in earnest for tomorrow’s opportunities where competition for land has not created upward pressure. It is too late in the cycle to expect finished lot bargains; that window closed in 2009. We believe 2010 will be a new window of opportunity for paper lots, broken and complex deals, and creative financial engineering and partnering. Real Estate Insight of the Month Are you better buying finished or paper/platted lots? It may run counter to conventional wisdom, but in many cases you are better buying paper lots if you’re greatest risk is the timing of your exit. Click here to see the comparative analysis… Greencrossing in the News Greencrossing has received widespread media coverage both locally and nationally this past year, raising public awareness of our re-entry into the land acquisition market. Here are some highlight articles published in the past few months; to see a full list of our 2009 media coverage click here. Crittenden Builder's Report: "Proof in Ventures Rising to Buy Land." Dec. 7, 2009. Big Builder magazine: "Spotlight on SoCal." Nov. 16, 2009. Globest.com: "Land Sales Rise, Venture Seeks Sites." October 29, 2009. USA TODAY: Wall Street News. "Greencrossing Real Estate Companies Re-Enters The Market For Distressed Properties." October 9, 2009. Published Columns by Greencrossing Executives As respected leaders in the industry, the Greencrossing executives have been asked to author various articles for industry publications. You can check out this work in the recent editions of two prestigious magazines: Scotsman Guide Commercial Edition: "REOs Are a Group Effort." January 2010. Excerpt: "Ultimately, what drove value in the past may not drive value today, and everyone should be thinking about alternative scenarios…" Sustainable Land Development Today: "Where Are We One Year Later?" October 26, 2009. Excerpt: "While equity capital is becoming more available, it does come with conditions that may keep it out of reach for some developers…" Want to do Business with Greencrossing? We are always looking to expand our relationships with prospective capital partners. If you are looking to deploy capital into the land space, we would like to get to know you and demonstrate our operating platform and philosophy. Additionally, Greencrossing offers a range of consulting and asset management services to select clients. If you want principal to principal engagement, please contact us. About Greencrossing Real Estate Companies Greencrossing Real Estate Companies was formed in June 2006 as an opportunistic real estate development, asset management and consulting platform. The firm seeks opportunities to acquire, entitle and develop land in California and other key Western markets. Greencrossing also provides a wide range of asset management and consulting services targeting all facets of the residential real estate space. For more information, please visit www.gxcompanies.com. |
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Tom Banks Principal/Co-Founder |
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Jason Perrin Principal/Co-Founder |
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www.gxcompanies.com
6 B Liberty, Suite 140 | Aliso Viejo, CA 92656 | Phone: (949) 900-6050 | Fax: (949) 900-6051