Land Inventory Depleted Before Enough Homes Are Built

Demand is depleting homebuilders’ land inventory faster than they can build homes.

In response, land asset management and global real estate investment company Walton Global announced the launch of its US capital markets business line with two new funds, which aim to support the escalating need for land by US homebuilders.

“Homebuilders are searching for a steady flow of land into their pipelines, so they can bring new homes to the market as quickly as possible,” Todd Woodhead, executive vice president of Capital Markets for Walton, said in prepared remarks.

“Our new funds are intended to help home builders with land inventory while intending to provide our investors with attractive returns and continuous cash flow. Based on projections, the real estate market isn’t anticipated to slow down anytime soon, which will fuel our funds well into the future.”

The funds’ focus is on acquiring land in strategic submarkets near growing metropolitan cities in Texas, California and Colorado, to name a few.

A Chance to Gain Land in Growth Markets

Its US Residential Growth Fund offers the investors the opportunity to acquire land assets within major US growth markets where land assets are targeted by public homebuilders for their future development. 

Its US BILT Fund allows investors to participate in the growing demand of near-term home construction parcels alongside some most homebuilders. Cashflow for this fund is projected to begin within 6 months.

Walton’s ambitious goal is to raise $100 million to $200 million in differential real estate funds.

According to a recent study from the National Association of Realtors, the US has a 5.5 million housing deficit that will take years to accommodate.

Finding Buildable Land a ‘Local’ Issue

“While there may appear to be an abundance of available land in the outskirts of many of our nation’s largest MSAs, the majority of that land is difficult to develop either due to limited economic viability or infrastructure, including availability of water, sewer or drainage and access to major thoroughfares,” Managing Director Davis Adams, Land Group Leader, JLL Capital Markets, tells GlobeSt.com. “These challenges often constrain most sites for immediate or near-term development.”

In Texas, for example, “buying up land for development in Texas requires local expertise, understanding the local rules from agriculture to oil & gas and working with regulators such as the Texas Department of Transportation,” Kip Sowden, Chairman and CEO of RREAF Holdings, tells GlobeSt.com.

Peter Curry, partner, real estate practice, Farrell Fritz, Uniondale, N.Y., agrees, and tells GlobeSt.com that the announcement of a fund to acquire residential development land throughout the United States is an interesting one.

“The ability to find buildable land tends to be a local one,” Curry said. “The developer needs to identify so many different factors, ranging from access to water, sewage and transportation to the willingness and ability of affected municipalities to approve development, in order to determine to buy land.

“This cannot be done from a distance. The development team also needs institutional knowledge of the success or failure of other recently-constructed projects in the community to focus on a product most likely to succeed with the potential renters or purchasers.

“Further, it must have an ear to the ground to see if other new communities are being planned or built to determine whether a glut of the desired housing type will exist at the completion of its project.”

Finally, Curry said it requires experience with the types of lenders that will finance the construction of such a facility.

“All of this points to a necessary partnership between the types of funds mentioned in the article and developers with local expertise.”