land development INTERVIEW
Development of
MPCs in North Texas
Written by Janis Arnold Landry Burdine, who has been involved in land brokerage for the better part of 15 years, is a Dallas broker with Land Advisors Organization. Landry is the director for the Dallas-Fort Worth area. His office specializes in masterplanned communities and everything that goes with that type of land brokerage and related development. He focuses on home builders and private equity and the myriad aspects that it takes to put a planned community development together. One of the community developments that Burdine has been involved with includes Trinity Falls in McKinney, a 4,200 lot project that went into distress during the recent downturn, and is now being developed by Castle Hill out of Austin. Castle Hill has expertise in mixed use and master-planned communities as well as just about ‘every asset class out there’. Another of the master planned communities that went into distress was Phillips Creek Ranch in Frisco, which was bought by Republic Property Group early in the downturn and is now well underway. The Terra Verde Group, another group that Burdine represents, bought Windsong Ranch in Prosper. There are about 3,500 lots in that community. There are three major master plans in the northern Collin County market that have come online recently. They were getting ready to start when the downturn hit, rode through the downturn, and are just now coming out of the ground. Most of the recent larger deals were purchased by private equity that is based out of the northeast. They use local operator partners in Dallas-Ft. Worth to execute the development; at least they are trying to. In some cases banks are making it a little more attractive and are coming into play for development. Obviously, bank money is cheaper than the private equity money. But it is the case that a lot of these master-planned communities are being developed for cash. In today’s market, it appears as if local banks can’t move quickly enough. Dallas area land is moving very well if it’s in the right location. In northern Tarrant, Denton, and Collin County, prices are exceeding peak pricing already. Approximately 75% of today’s starts are located in those areas. Burdine’s company handles the initial land transactions for their clients, and may or may not stay involved throughout the entire development process. Sometimes Burdine will take the lot package out to the builders, and handle the marketing efforts. Often Land Advisors Organization will handle resale of some of the tracts in the deal as well. These are very large planned community developments. Windsong Ranch, located on Highway 380, is a couple thousand acres and has significant commercial potential. Trinity Falls has 1,700
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acres. Communities that are located near major intersections are seeing commercial activity that is really, really hot. Related to infrastructure to meet the needs of increasing population, the city of Dallas is coming up with some creative ways to finance needed infrastructure. Toll roads are having a significant impact upon transportation and developers are becoming increasingly adept at figuring out ways to get water and sewer services to their sites. Development agreements, and reimbursement agreements with cities of facility districts are illustrative of the ways in which infrastructure needs are being addressed. The availability of water to meet increasing demands as communities grow and develop is a concern, bu current projections are that suppy will be adequate to meet demands. Even though business is booming, the Dallas area will continue the present trajectory as it moves toward a normalized start space. During the peak years (2005/06), there were 52,000 starts. Right now the number of starts is in the low 20s and a normal start space would be somewhere in the low 30s, so business should continue to grow for the foreseeable future. When asked the question regarding what advice Burdine has for newcomers to the commercial real estate market, his response was: “A lot of research is needed because land brokers have to learn the market. It’s crucial that brokers know the market in order to provide the best possible service to their clients. Going out there trying to see and sell properties that the broker knows little or nothing about probably isn’t going to work all that well, especially with the private equity buyers. These guys are much more sophisticated today. The underwriting for today’s deals is more stringent and significantly more complicated than it was in the past. It’s not hard, but brokers need to learn as much as possible about the properties they hope to represent to prospective buyers.”
Most of the recent larger deals were purchased by private equity that is based out of the northeast. They use local operator partners in Dallas-Ft. Worth to execute the development; at least they are trying to. In some cases banks are making it a little more attractive and are coming into play for development. Obviously, bank money is cheaper than the private equity money. But it is the case that a lot of these master- planned communities are being developed for cash. In today’s market, it appears as if local banks can’t move quickly enough.