Biz Interview: Bill Doherty, CEO, Walton International Group Inc
In business for over 30 years, Walton International Group Inc is one of North America’s most experienced real estate investment groups.
Walton focuses on the purchase of undeveloped land strategically located in the path of growth in major cities in North America. Tradi- tionally reserved for institutional investors or corporations, Walton makes these large areas of land into smaller and more affordable plots for retail investors.
More popularly known as land banking investment, the aim is to hold on to these plots until the value matures over time and sell it to devel- opers for a significant profit. The proceeds are then reinvested into additional parcels until the financial goals have been achieved.
According to its audited accounts, Walton’s investments as at Decem- ber 2009 have averaged returns of about 28 per cent a year, with average holding period of about seven years.
Walton typically launches about two projects a month. Recently, the company launched a sale of Sherwood North, a 355-acre parcel of land located in the state of Virginia, to potential landowners in Singa- pore.
Chief Executive Officer Bill Doherty shares his insights with Biz Daily.
1. Can you give a brief description of your operations?
We are a family-owned operated company. It was founded by my mother Maureen and my father Patrick in 1979 in Calgary, Alberta, Canada.
The genesis of our operations is to create real estate investment structured opportunities that traditionally are for high net worth individuals, institutional investors or corporations. Now we take it out to the retail marketplace.
The business is growing significantly since then and as it evolves, we now operate in seven countries. Currently we have over 55,000 acres of land under our management and we have over 68,000 clients.
What we do in essence are two things: firstly, we acquire, syndicate, and plan pre-development land or land in the path of development. There is no company in Canada or US who does this much and through thorough research, Walton has been picking the right target markets and lands within those target markets and we have an incredible ability to raise money to buy and hold on to these proper- ties. This then goes on to our asset managers through what we call the reselling process.
We are also into horizontal development. We develop residential, industrial and commercial properties and we partner with institutional investors located primarily in Canada and US in this regard.
2. It has been 14 years since Walton International introduced land banking investment in Singapore. Do you think local inves- tors are educated enough about this form of investment?
The investors that are with us, they understand what Walton does. And they understand our investment methodology. We’ve delivered significant returns for our investors. That stated, there’s always room for us to improve in terms of educating individuals about Walton and what sets Walton apart from other real estate investment companies.
3. How do land banking investments differ from other invest- ment instruments like bonds/equities/ETFs?
First and foremost, it would have to do with liquidity. ETFs, equities, among others are very liquid investments. And when you invest in ETFs, bonds, or what not, you really do not directly deal with the management of those companies.
With Walton, it is an illiquid investment; however, it is well-researched and well-managed. Not saying that the other liquid investment are not well-managed, but unlike those investments, our investors, be it here in Singapore and other parts of the world where we do business, they usually come in and speak with the management and find out what is going on directly with their investments.
4. How does a real estate investment company like yours try to maximise returns or payouts to investors while minimising risks?
We are able to do that through what we call our four pillars of strength. Pillar one is our land research methodology. There is no development or real estate company who does this much thorough research as our company. Before going in, we do minimum of two years of research in each target market and if, we decide to start acquiring lands, we make sure we are the market dominant (pillar two).
We pick up properties at least 2,000 acres at a time. We invest in the community and we are able to influence change. Speaking of change, that has to do with our third pillar- land planning or asset management team. This team which takes these properties into reselling process working with the municipalities, counties, administrators, politicians and the surrounding land owners to make sure when there’s a devel- opment taking place in these lands, it’s in unison with what the community wants to see.
Finally, our ability to exit successfully (pillar four). It is in our track record that we have delivered for our clients year-in, year-out.
5. Profitable Plots, a land banking company who also offers investment schemes like Walton, has recently been investigated by the Commercial Affairs Department (CAD) for defraud. How does Walton feel about this incident and how is the company different from Profitable Plots?
To be fair to Profitable Plots, I’d prefer not to comment mainly for the reason that I really don’t know what their investment structure is. We at Walton have enough to do with our own investors and our own opportunities to be considerate of our competitors. That said, I hope everything works out for Profitable Plots and their clients for them to settle whatever difference they have.
Again, what sets us apart is this: we’ve been around for 31 years. If
you are to take other land banking companies out there, add their years of experience, I don’t think it would come even close to our 31 years. The founder of Walton, my father, has been in the real estate development and marketing business for over 50 years. I learnt the business; I run the global company now and literally learnt the business at the kitchen table.
Now when you take every single business unit starting from our land research team (made up of 16 individuals), asset management team (35 individuals) plus everybody that makes up the global entity, we have a collective experience of 350 years in real estate asset management and development that rivals the top development companies globally.
My advice to anybody who’s looking to make an investment on retail and institutional level, you must do your diligence, you must do your research, and then come in to us. Do we have the historical founda- tion? Yes we do. Do we have the methodology which we continue to do and evolve? Yes we do. Do we have the ability to manage those assets and do we have the right people in place? Yes we do. The most important thing is do we have the track record? Yes we do and our track record is audited by PWC (PriceWaterhouseCoopers).
6. Having said that, do you still have a hard time convincing Singapore clients?
Absolutely! because it is an education process. When I first came out here, we opened our first office in Hong Kong, and then here in Singa- pore in 1996, that time we were selling pre-development land located in Calgary, Alberta, Canada; and to talk to people about Canada and North America and to explain the opportunity that we saw to people in other side of the world, it was a challenge!
Looking back at those initial investors here in Singapore, maybe we were just lucky or maybe they just had faith in Walton. They took a chance on us and they’ve been rewarded with returns that we’ve been able to deliver them.
The company has evolved because the people that we brought in over the years are the best in their fields. So our business team here in Singapore has this great ability of taking our business model and being able to explain it to retail investors at a simple way of doing so. We are here to answer questions and build up a comfort level for our investors here and abroad.
7. Walton’s land portfolio is all in North America. Have you considered tapping property beyond North America?
The simple answer is no. The foundation of the company is in Canada and the US and that is where our understanding of the marketplace is. Likewise the opportunities in that region, we understand it. So for us to go to another part of the world, establish the know-how and the connection of finding the right people to do business with, it would take us a very long time to do so.
8. How about slowdown in US economy – how will it affect your properties/investments in that region?
Slowdown in the US economy for our business of pre-development land is the best thing for us. In 2002, we began our research in the US marketplace, and it was that time when we became aware of subprime crisis, so this created tremendous buying opportunities for us.
In 2004, we made our first acquisition in the US, in Arizona. In Janu- ary 2008, we made a deliberate decision to move our land research and acquisition department from Calgary down to our office in Scotts- dale, Arizona because it was already starting to crater and the oppor- tunities were becoming greater and greater in all of our target markets.
In our target markets, there is no company who has purchased more pre-development lands than Walton. And we’re buying these lands from the banks, distressed builders…so to speak, we were picking those properties for a song.
So the US slowdown is great for our business. Of all our US acquisi- tions, 89 per cent happened from mid-2007 (beginning of US financial meltdown) until now, so we were buying when the opportunity was greatest.
9. As Walton’s land plots are priced in US dollars, what would it mean to investors who may face forex risks if the dollar further weakens years later?
The forex risk is prevalent, no doubt about it. From my perspective, if you are to buy a US investment, wouldn’t the best time to do it is when the US dollar is at its lowest? And you are able to buy more with your home currency?
For the next five years, the foreign exchange (US$ to S$) will either go higher or lower. It’s as simple as that.
10. What are your growth plans for the future? How do you intend to fund them?
We currently operate in 10 sub-markets in Canada and US. It is our intention that in the next five years, we will add seven more sub-markets in our portfolio of pre-development lands under manage- ment. We have identified lands in Phoenix, Tucson in Arizona, Dallas in Texas and our latest in Washington D.C.
This translates to additional 23,000 acres of land under management in those identified sub-markets in the next three years.
It is also our intention to raise US$2.5 billion to create exit advance for our existing clients. We project that raising money through institu- tional investors, through retail marketplace and through Canadian banks; it will represent approximately 60 per cent of the US$2.5 billion exit advance.
On the 23,000 acres of pre-development lands, we will raise money through our retail investors here in Singapore, Malaysia, Hong Kong, Japan, Germany, US and Canada, through IFAs (independent finan- cial advisers), banking relationships, broker-dealerships, and direct selling.
My family co-invests in every single project for a minimum of 5 per cent to 10 per cent. So our interests are aligned with our investors.