land development INTERVIEW
“It’s the Best It’s Ever Been” Written by Janis Arnold
foreseeable future .
Stan Creech, President of Stan Creech Properties, is a Houston land broker who has been in the industry for forty years. Stan has been through the Texas markets ups and downs, and, in his words, ‘today’s market is just incredible, unbelievable.’ After five years of pent-up demand, Houston has become the strongest land market in the nation. In today’s market, it’s a matter of supply and demand, and even with a possible plateau in the offing, Stan expects business in Texas to remain strong for the
Residential is off the charts; properties going on the market today are receiving multiple offers at above the asking price. Then the buyer goes to the bank and there aren’t appraisals. An appraiser told Stan that ‘our problem is we’re not looking down the road, we’re looking in the rear view mirror’. There’s a difference in the comps that can be obtained from the different perspectives. Buyers and sellers need to remember that when a property sells, particularly a commercial property, the price likely was negotiated 6-12 months prior to the closing. Ignoring this fact alone can lead to the creation of unrealistic expectations for some land owners as prices have been rising so quickly of late. It is often the case that a property will be closing for $1 a square foot as the property next door already posts an asking price of $1.50 per square foot. The general perception has been that one thing Houston doesn’t lack is land for development. And now, for the first time in as long as Stan can remember, there’s not enough land in Houston. People from out of state come here and look at what is available, and at first glance, it seems as if there are lots of options. But then prospective buyers start looking at land that can be developed fairly quickly in terms of drainage, utilities, wetlands, detention, and multiple other factors specific to the developers goals and all of a sudden much of the available property is eliminated. Land development requirements are more complicated today due only in part to an everincreasing regulatory environment that oversees what landowners
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can do with their land. For various reasons, many related to events that occurred in the most recent downturn, banks are leery of raw land. It takes longer to develop land in accordance with today’s regulatory requirements, and not many buyers have the time to go through that extensive process. The toughest loan to get is a land loan, because land isn’t liquid, and banks don’t want to foreclose on land. So while land that isn’t ‘shovel ready’ is selling, most developers want something they can close on quickly. They need to get their building done; in many cases these developers already have their tenants lined up. Not that land that isn’t ‘shovel ready’ isn’t still selling, but not nearly as easily and almost effortlessly as land that can be developed within a 90-120 day period. In the state of Texas land developers have to consider water and transportation. “Take a look at the traffic in Houston and ask yourself: how on earth are we going to keep up in light of the increasing population?” Stan asks. Infrastructure needs of the growing population are going to have to be addressed. Toll roads are certainly useful, but toll roads are only feasible for the primary routes. Stan can’t see secondary roads being built as toll roads. The ‘magic’ of Houston is that it remains the energy capital of the world. Stan isn’t just talking oil and gas. He’s thinking solar, wind, whatever works! Ultimately, Stan, among others, is predicting that Houston will become the largest city in the United States at some point, because there are no geographical constraints to its continued growth. Stan is amazed and gratified and feels incredibly lucky to be here. This city is so diversified and has such a wonderful energy and momentum. Land prices peaked back in December 2007, and went down 50% due to the recession, but today they’ve come back about 150%. Land here is so good that people resist selling because they don’t have any other place to put their money that is nearly as lucrative. Stan has ‘never seen it this strong and real.’ This market is really different from the market seen back in the 1970s with the syndicators, or the 1980s with the savings and loan companies. Today, to get a land loan or even a construction loan, the buyer is going to have to infuse significant equity into the deal. And it is more than ever true that today, banks are doing their due diligence before they grant loans.