by Ernie B. Calucag
First in a three-part weekly series on Walton’s Pre-development Land Investment Strategy
One should really have a decent portfolio to have a better future. Your portfolio should have at least one house property, land, precious stones and metals, bonds, stocks, unit trusts, among many others.
Among the myriad of investment solutions in the market today, ownership of pre-development land has been, for many, a boon in their wealth building and retirement plan.
Traditionally reserved for institutional investors or corporations, ownership of pre-development land has now captured the attention of retail investors worldwide, thanks to Walton International Group, which for the past 30 years has made these opportunities available to investors here in Asia.
The Calgary-based group’s pre-development land investment strategy is built around the concept that a piece of land experiences the most significant value increase between its undeveloped phase and the point at which it is bought for development.
The firm acquires “land in the path of growth”, so that when demand for that plot of land increases, it can be sold at a higher value and investors are able to harvest the difference.
Walton’s successful business model is carried out in four phases, by four different teams.
The land research and acquisition team locates qualified land and performs extensive due diligence, after which the syndication team packages the land into “saleable products” to be offered to investors.
The land planning team, in turn, is responsible for preparing the land for future development through conceptual planning and land entitlement. Last but not least, the exit strategy team seeks and reviews offers for the land.
Growth Corridors in North America
With more than 800 employees in Canada, US, Hong Kong, Singapore, Malaysia and Germany, Walton has a history of successful land investments in North America.
The group and its 74,000 clients worldwide own approximately 60,000 acres of land, worth around C$2.9 billion.
Sean Cooney, Executive Vice President of Land Research and Acquisitions at Walton
Sean Cooney, Executive Vice President of Land Research and Acquisitions at Walton, explained that the group is currently focusing on the “growth corridors” of Phoenix-Tucson in Arizona, Dallas Forth Worth and Austin-San Antonio in Texas, Atlanta in Georgia and Washington DC.
Cooney said Walton conducts in-depth research and evaluation before it decides to acquire each property in the area. The real estate investment firm usually spends around two to four years analysing various macro and micro data, including economic indicators and local planning initiatives in each area.
Cooney’s group has four buyers that are supported by a team of 10. These people in turn, manage an army of surveyors, lawyers, and consultants of various kinds to collate and analyse extensive data on factors such as population growth, economic prospects, housing demand, employment and infrastructure; before coming with a decision whether it’s a buy or not.
“Walton’s market selection is well-researched. From a housing perspective, we believe that the US market will continue to grow. For example, in the past three years, more homes have been bought in Phoenix Tucson than anywhere else in the US,” he said.
“We know where the consumers are buying, we know where the builders are building, and we are in those markets,” added Cooney.
As part of its strategy, Walton enters every market more aggressively; making sure it is one of the dominant owners of pre-development land. Going forward, Walton wants more. The group hopes to acquire around 35,000 acres of strategically located land in North American growth corridors by 2015.
“When we conduct our research, we try to determine how much land we need to buy in the market to take a dominant interest. When we talk about 2-4 years of research, we speak to every landowner, and then we grade how probable we can buy that land. It’s a skill; you have to be persistent in identifying the likelihood of probable sellers. It’s amazing what comes out when you stay focus to a buying campaign,” Cooney explained of the group’s land acquisition strategy.
But why not acquire land assets in Asia, where most of their investors reside?
“We don’t go to Asia not because of politics but more on familiarity. We are a Calgary-based company, we understand Canada, and we understand the US, because culturally, we are the same. And the appetite for investment is all here in North America because people understand and believe the security of title that is issued in North America is absolutely sacred. It’s not the same way in many countries because titles are often contested. Or they don’t have the growth that the US does,” said Cooney.
(Next week, part 2 will discuss Walton’s investment structure for its Asian investors)