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Posted by: In: Newsletter 13 Sep 2011 0 comments

By Jim McAlister, IV

President and Chief Executive Officer

I am absolutely convinced that the real estate adage – “the one key to success is location, location, location” – rings more true today than ever.

The Great Recession and anemic recovery have really taken their toll on the U.S. economy these past few years.  By anyone’s count, more than eight million jobs have been lost and the few new ones that have been added don’t come close to the pay and skill levels of their predecessor.  The official unemployment rate hovers above nine percent with many more underemployed with no good job prospects in sight.  U.S. home values have plunged more than 33 percent since the 2006 peak, according to the well-respected Case-Shiller index, and some markets still remain in freefall.  We recently traveled to several Midwest cities where the population is the same as it was in the 1950s!  While driving down Main Street, you can’t help but feel for the young people in these cities and shudder at the grim prospects of a large employer or new industry relocating to the area to jumpstart the local economy.

Texas and its “Texas Triangle” – Houston, San Antonio, Austin and Dallas/Ft. Worth – could not be more different and is a lone shining star of prosperity to the rest of the nation.  Texas has been a job machine – creating more than 730,000 jobs in the past decade, all while the second closest state created less than 100,000.  In fact, Texas created more jobs in the past decade than all the other 19 states with positive job growth combined!  California recently sent a delegation to Texas to learn how we have been stealing all their companies and jobs.  In the latest 2010 census, Texas was ranked No. 1 in population growth, surpassing the closest state by almost 1 million people.  Texas home values have gained a steady 3.7 percent annually over the past decade and home building continues to be robust in well-conceived and well-located projects.  The governors of Ohio and Wisconsin recently stated that they cannot compete in attracting residents (population!) and companies (jobs!) against the Texas model of no state income taxes, low cost of living and a business-friendly government.  With diverse economic engines driving each of these Texas cities, the state is poised to build upon the unprecedented recent boom.

The fundamental of our business – Texas land – has followed a very similar theme as the economy.  Many areas of the country are in terrible shape and will take years of new demand to absorb existing supply.  Atlanta – the epicenter of the lending binge and consequent FDIC bank failures – has more than 27 years of vacant developed residential lots waiting to be built on.  For land investors that used leverage during this timeframe, the severe national downturn has often resulted in near or total loss of investment principal.

On the other hand, our company and its investment partners have held up considerably well despite the greatest national real estate crash since the Great Depression.  Our economists tell us that Texas will be quickly facing a shortage of quality land and new houses.  People are continuing to move here at a clip of 1,000 people per day. Our funds are still projected to protect investor principal and provide decent-sized profits despite the implications of the recession and the challenging national market.

Posted by: In: Newsletter 10 Sep 2011 0 comments

By Beau Ryan

CFO and COO

Rockspring Capital is teaming up with Houston Habitat next month to build a new home for a deserving family.  This project will be a tremendous success with the help of employees, family and friends.

Houston Habitat is the local affiliate of Habitat for Humanity International.  Established in 1987, Houston Habitat has built more than 840 homes and served more than 2,800 Houstonians as Family Partners. It welcomes more than 5,000 volunteers each year to help out with home building, clerical work and retail.

Houston Habitat works to eliminate substandard housing by helping hard-working families purchase simple, decent homes in which to live. This is possible through corporate sponsors, individual donors and foundation grants that fund the majority of construction costs on each home. The Family Partners are approved and qualify for down payment assistance and a zero-interest mortgage carried by Houston Habitat for Humanity.

We are very excited about building this new home and the life-changing experience it will be for a local family.  We look forward making a big difference and sharing an update on this wonderful experience in the next Rockspring Report.

Posted by: In: Newsletter 05 Sep 2011 0 comments

By Michael Ross

Senior Vice President, Entitlements

Profitable investment in raw land real estate requires more skill and knowledge than many people expect.  Some investors believe in a “buy, hold and hope it appreciates” strategy.  However, the best yield on the investment is achieved through a proactive entitlement process, ensuring each property in a portfolio is brought to market at its highest and best use.  Through a series of articles, I will explain the basics of land asset management, the entitlement process and preparing a property for development in Texas.    This article will focus on identifying the governmental stakeholders in land rights, land usage and land development.

Constantly changing regulations require landowners to be ever vigilant regarding their property rights.  Federal, state and local laws regarding development guidelines, water rights, mineral rights and environmental issues are always being amended.  In fact, statutory law doesn’t even have to change for a property owner to suffer a tangible loss in property value, case law is constantly redefining property owner rights.

Landowners must know the applicable agencies that regulate the surface and subsurface uses of their property.  Federal, state and local agencies form a tangled web of regulation many landowners overlook as they are considering purchases.

The primary federal agencies that impact the landowner are the Environmental Protection Agency (EPA), U.S. Army Corps of Engineers (Corps) and U.S. Fish and Wildlife Service (FWS).   The EPA and Corps have jurisdiction over water pollution in the U.S., via the 1971 Clean Water Act.  These agencies control both direct and indirect sources of water pollution, which almost always requires permitting from one or both agencies if a property is developed.   The 1973 Endangered Species Act charged the FWS with endangered species habitat protection.  These three agencies constitute the core regulators of land use and development in the U.S.

State-level agencies include the Texas Commission on Environmental Quality (TCEQ), Texas Railroad Commission (RRC) and Texas General Land Office (GLO). They regulate pollution, water rights, mineral exploration, state development guidelines, state lands and many other issues that affect property owners.

Local governments add another layer of control over land use and development.  County agencies are responsible for regional mobility programs, construction guidelines, development guidelines and infrastructure guidelines for areas outside of corporate city limits.  Each city develops its own ordinances for land use, some going so far as to develop zoning ordinances, dictating specific land uses within the city.  Most cities have development guidelines that dovetail with their zoning ordinances which dictate how a subdivision may be developed.  The influence of many cities in Texas is felt well beyond the city limit signs.  Extraterritorial Jurisdiction (ETJ) allows a city to designate areas outside its corporate limits and exert control over development guidelines and in some cases, zoning.

Despite Texas’ reputation as a “development-friendly” state, navigating these agencies requires knowledge and experience. Now that the agency levels have been introduced, the next article will elaborate on how an investor can enhance land value through proper navigation of the ABCs.

Posted by: In: Industry Insights 18 Aug 2011 0 comments

(Houston Agent Magazine) – Magazine Covers Rockspring Capital CEO Jim McAlister’s Insights From Texas Land Event…

Rockspring Capital President and CEO Jim McAlister IV spoke at the Land Forecast Breakfast hosted by O’Connor & Associates, focusing on the overall land market trends of Texas. Will Condrey, of Cushman & Wakefield, also spoke at the event, covering the inner-loop land market of Houston and its trend towards multi-family developments.

The breakfast was part of an ongoing series of real estate forecast events hosted by O’Connor & Associates, where presenters share their thoughts on trends and outlooks for a variety of commercial land uses.

McAlister, whose firm focuses on investment opportunities in the robust “Texas Triangle” region of Houston, San Antonio, Austin and Dallas-Fort Worth, informed attendees about the state of the land market in Houston, discussing factors such as: creating value and demand for the city’s land; how long and short-term trends are impacting the land market; and, how these factors are affecting the larger real estate market.

“Houston, much like the state of Texas, has a relatively healthy real estate market by any measure right now when compared to the rest of the country,” McAlister said, who attributed Houston’s strong market to “population growth and job creation, as well as favorable land supply and demand metrics.”

McAlister joined Rockspring Capital in 1993 and is responsible for overseeing the company and its investment activities. “What’s important for those of us in the industry to understand is how these unique factors are impacting the market in order to make the most of this opportunity,” McAlister said.

To view the Houston Agent Magazine story, click here.

Posted by: In: Industry Insights 18 Aug 2011 0 comments

(Real Estate BisNow, by Catie Brubaker) – Rockspring Capital’s Jim McAlister talks with BisNow’s Catie Brubaker…

Rockspring Capital’s Jim McAlister and Cushman & Wakefield’s Will Condrey graciously mugged for our camera yesterday morning before speaking at O’Conner & Associates’ land forecast. Will outlined a bunch of recent Inner Loop land sales, some with prices at pre-recessionary levels. Take Frost Bank’s purchase of the former Bike Barn site on Kirby. It paid $135/SF in October 2010 for one acre of dirt. At the other end of the spectrum: the former Houston Ballet site on West Gray, a 2.14-acre lot went under contract in ’09 for $90/SF, but the deal fell through, and the site was foreclosed. That same potential buyer snagged the site from the bank for $56/SF last year. But these sales are in the vast minority: Most land owners in Texas are not distressed and know demand is strong so they’re keeping pricing high.

We noticed most of the deals Will mentioned closed in October 2010—Jim (who shared this photo of him hunting with his best friend Champ) tells us that’s about when banks started lending for land acquisitions again. Class-A multifamily infill development is rampant, but land is being snapped up for numerous uses (well, numerous land uses). Jim says Houston was at the cusp of a massive wave of redevelopment when the recession hit, and he’s seeing the smartest of those deals return. Many of the infill sites being purchased have buildings on them that aren’t the highest and best use. After these are all bought and redeveloped, he believes the land sales will expand to the quiet suburban markets.

Jim tells us we need a lot more single-family residential growth to spur development in other areas. Today, single-family lot sales are only happening as extensions of master-planned communities or in ready-to-develop small tracts in proven areas. Houston’s positioned better than most in this regard: We lead the nation in annual new home closings and have the third-lowest new home inventory (about six months) and vacant lot inventory (about 47 months, a fairly normal amount). Jim says lot delivery and absorption have dropped well below population growth and need to catch up.

To view the Bisnow story, click here.

Posted by: In: Rockspring News 08 Aug 2011 0 comments

Rockspring Capital President and CEO Jim McAlister IV will speak at the upcoming Land Forecast Breakfast hosted by O’Connor & Associates on Wednesday, August 17.

Privately-Owned, Houston-Based Real Estate Investment Firm

President and CEO to Discuss Local Land Market Trends

McAlister, whose firm focuses on investment opportunities in the robust “Texas Triangle” region of Houston, San Antonio, Austin and Dallas – Fort Worth, will inform attendees about the state of the land market in Houston. He will discuss factors creating value and demand for the city’s land, how long and short-term trends are impacting the land market and how these factors are affecting the larger real estate market.

“Houston, much like the state of Texas, has a relatively healthy real estate market by any measure right now when compared to the rest of the country because of population growth and job creation as well as favorable land supply and demand metrics,” said McAlister, who joined Rockspring Capital in 1993 and today is responsible for overseeing the company and its investment activities. “What’s important for those of us in the industry to understand is how these unique factors are impacting the market in order to make the most of this opportunity.”

The breakfast, which is part of an ongoing series of real estate forecast events hosted by O’Connor & Associates where presenters share their thoughts on trends and outlooks for a variety of commercial land uses, will be from 7:30 a.m. to 9:00 a.m. at the Courtyard on St. James (1885 St. James Place near the Galleria).

For more information and to register, click here.

About Rockspring Capital

Based in Houston, Rockspring Capital is a second-generation privately-owned land investment firm founded in 1973 whose strategy is to acquire opportunistic land parcels and residential lots in high growth areas.  Rockspring Capital acquires with all cash in markets within the “Texas Triangle” – Houston, Austin, San Antonio and Dallas/Ft. Worth.  The company is now raising capital for its seventh investment fund – Opportunity Land Fund No. 7, L.P. For more information about the company, visit www.rockspring.com.

About O’Connor & Associates

O’Connor & Associates is a real estate service company in operation since 1974. O’Connor & Associates is the largest independent real estate research and support services firm in the Southwest, conducting business nationwide. O’Connor employs over 200 people in four key areas of real estate services. For more information about the company, visit www.poconnor.com.

Posted by: In: Industry Insights 12 May 2011 0 comments

Forbes Magazine recently released its annual list of Best Cities for Jobs, with Texas cities topping the lists for best big, mid-size and small cities for jobs.

Forbes Magazine writes:
“…No place displayed more vibrancy than Texas. The Lone Star State dominated the three size categories, with the No. 1 mid-sized city, El Paso (No. 3 overall, up 22 places from last year) and No. 1 large metropolitan area, Austin (No. 6 overall), joining Killeen-Temple-Fort Hood (the No. 1 small city) atop their respective lists.
“Texas also produced three other of the top 10 smallest regions, including energy-dominated No. 4 Midland, which gained 41 places overall, and No. 10 Odessa, whose economy jumped a remarkable 57 places. It also added two other mid-size cities to its belt: No. 2 Corpus Christi and No. 4 McAllen-Edinburgh-Mission.
“Whatever they are drinking in Texas, other states may want to imbibe. California-which boasted zero regions in the top 150-is a prime example. Indeed, a group of California officials, led by Lt. Gov. Gavin Newsom, recently trekked to the Lone Star State to learn possible lessons about what drives job creation.”
Texas cities were ranked in Forbes’ lists of Best Cities for Jobs as follows:
Big cities: #1 Austin-Round Rock-San Marcos, #3 Houston-Sugar Land-Baytown, #4 San Antonio-New Braunfels, #5 Dallas-Plano-Irving
Mid-size cities: #1 El Paso, #2 Corpus Christi, #4 McAllen-Edinburg-Mission
Small cities: #1 Kileen-Temple-Ft. Hood, #3 Bryan-College Station, #4 Midland, #8 Odessa
Posted by: In: Industry Insights 28 Mar 2011 0 comments

(CNN Money, by Shawn Tully) – Forget stocks. Don’t bet on gold. After four years of plunging home prices, the most attractive asset class in America is housing.

From his wide-rimmed cowboy hat to his roper boots, Mike Castleman fits moviedom’s image of the lanky Texas rancher. On a recent March evening, Castleman is feeding cattle biscuits to his two pet longhorn steers, Big Buddy and Little Buddy, on his 460-acre Bar Ten Creek Ranch in Dripping Springs, a hamlet outside Austin in the Texas Hill Country. The spread is a medley of meandering streams, craggy cliffs, and centuries-old oaks. But even in this pastoral setting, his mind keeps returning to a subject he knows as well as any expert around: the housing market. “I’m a dirt-road economist who sees what’s happening on the ground, and in 35 years I’ve never seen a shortage of new construction like the one I’m seeing today,” declares Castleman, 70, now offering a biscuit to his miniature donkey Thumper. “The talking heads who are down on real estate will hate to hear this, but America needs to build a lot more houses. And in most markets the price of new homes is fixin’ to rise, not fall.”
Castleman is in a unique position to know. As the founder and CEO of a company called Metrostudy, he’s spent more than three decades tracking real-time data on the country’s inventory of new homes. Each quarter he dispatches 500 inspectors to literally drive through 45,000 subdivisions from Baltimore to Sacramento. The inspectors examine 5 million finished lots, one at a time, and record whether they contain a house that’s under construction, one that’s finished and for sale, or a home that’s sold. Metrostudy covers 19 states, or around 65% of the U.S. housing market, including all the ones hardest hit by the crash: Florida, California, Arizona, and Nevada. The company’s client list includes virtually every major homebuilder and bank — from Pulte (PHM) and KB Home (KBH) to Bank of America (BAC) and Wells Fargo (WFC).
The key figures that Metrostudy collects, and that those clients prize, are the number of homes that are vacant and for sale in each city, and the number of months it takes to sell all of them. Together those figures measure inventory — the key metric in determining whether a market has a surplus or a shortage of new housing.
Today Castleman is witnessing an extraordinary reversal of the new-home glut that helped sink prices just a few years ago. In the 41 cities Metrostudy covers, a total of 78,000 houses are now either vacant and for sale, or under construction. That’s less than one-fourth of the 343,000 units in those two categories at the peak of the frenzy in mid-2006, and well below the level of a decade ago. “If we had anything like normal levels of buying, those houses would sell in 2½ months,” says Castleman. “We’d see an incredible shortage. And that’s where we’re heading.”
If all the noise you’re hearing about housing has you totally confused, join the crowd. One day you’ll read that owning a home has never been more affordable. The next day you’ll see news that housing starts have plunged to nearly their lowest level in half a century, as headlines announced in March. After four years of falling prices and surging foreclosures, it’s hard to know what to think. Even Robert Shiller and Karl Case can’t agree. The two economists, who together created the widely followed S&P/Case-Shiller Home Price indices, are right now offering sharply contrasting views of housing’s future. Shiller recently warned that the chances were high for a further double-digit drop in U.S. home prices. But in an interview with Fortune, Case took a far brighter view: “The lack of new home building is a huge help that a lot of people are ignoring,” says Case. “People think I’m crazy to be optimistic, but housing is looking like the little engine that could.”
To see where real estate is truly headed, it’s critical to keep your eye firmly on the fundamentals that, over time, always determine the course of prices and construction. During the last decade’s historic run-up in prices, Fortune repeatedly warned that things were moving too fast. In a cover story titled “Is the Housing Boom Over?,” this writer’s analysis found that the basic forces that govern the market — the cost of owning vs. renting and the level of new construction — were in bubble territory. Eventually reality set in, and prices plummeted. Our current view focuses on those same fundamentals — only now they’re pointing in the opposite direction.
So let’s state it simply and forcibly: Housing is back.
Two basic factors are laying the foundation for dramatic recovery in residential real estate. The first is the historic drop in new construction that so amazes Castleman. The second is a steep decline in prices, on the order of 30% nationwide since 2006, and as much as 55% in the hardest-hit markets. The story of this downturn has been an astonishing flight from the traditional American approach of buying new houses to an embrace of renting. But the new affordability will gradually lure Americans back to buying homes. And the return of the homeowner will start raising prices in many markets this year.
Of course, home prices are low and home construction is weak for a reason: incredibly low demand. For our scenario to play out, America will need a decent economy, with job creation and consumer confidence continuing to claw their way back to normal.
One big fear is that today’s tight credit standards will chill the market. But we’re really returning to the standards that prevailed before the craze, and those requirements didn’t stop prices and homebuilding from rising in a good economy. “The credit standards are now at about historical levels, excluding the bubble period,” says Mark Zandi, chief economist for Moody’s Analytics. “We saw prices rising with fundamentals in those periods, and it will happen again.”
To see why, let’s examine the remarkable shift in home affordability. A new study by Deutsche Bank measures affordability in two ways: first, the share of income Americans are paying to own a home. And second, the cost of owning vs. renting. On the first metric, the analysis finds that homeowners now pay just 9.8% of their income in after-tax mortgage, tax, and insurance payments. That’s down from 17.2% at the bubble’s peak in 2007, and by far the lowest number in the Deutsche Bank database, going back to 1999. The second measure, the cost of owning compared with renting, should also inspire potential buyers. In 28 out of 54 major markets, it’s now cheaper to pay a mortgage and other major costs than to rent the same house. What’s most compelling is that in all of the distressed markets, owning now wins by a wide margin — a stunning reversal from four years ago. It now costs 34% less than renting in Atlanta. In Miami the average rent is now $1,031 a month, vs. the $856 it costs to carry a ranch house or stucco cottage as an owner. (For more, see The top 10 cities for home buyers)
Not all markets will bounce back equally, of course. Housing resembles the weather: The exact conditions are different in every city. But in general the big U.S. markets fall into two different climate zones right now. We’ll call them the “nondistressed markets” and the “foreclosure markets.” A more detailed look shows why the forecast for both is favorable.
Nondistressed markets: Ready for launch
No cities went untouched by the collapse in prices over the past few years. But markets such as Northern Virginia, Indianapolis, Minneapolis, San Diego, the San Francisco suburbs, and virtually all of Texas held up reasonably well. In those areas prices spiked far less than in bubble cities — the foreclosure markets we’ll get to shortly — chiefly because they didn’t get nearly as many speculators who thought they could flip the homes or rent them to snowbirds.
The nondistressed markets will be able to get prices rising and construction growing far faster than the harder-hit areas for a simple reason: Although some of these markets are still suffering from foreclosures, they don’t need to work through the big overhang haunting a Las Vegas or a Phoenix. The number of new homes for sale or in the pipeline is extraordinarily low in nondistressed markets. San Diego is typical. It has just 921 freestanding homes for sale or under construction, compared with 4,425 in late 2005. The challenge for these cities is to generate enough demand to reduce inventories of existing, or resale, homes. In the entire country the resale supply stands at 3.5 million houses and condos. That’s a fairly high number, since it would take more than eight months to sell those properties; seven months or below is the threshold for a strong market.
But in the nondistressed cities, the existing home inventory is lower, closer to seven months on average. So a modest increase in demand will translate into strong gains in both prices and new construction. That should happen quickly, because most of those markets — including Silicon Valley, Northern Virginia, and Texas — are now showing good job growth.
Zandi of Moody’s Analytics expects that prices will rise three to four points faster than inflation for the next few years in virtually all of the nondistressed markets. His view is that prices will increase in line with rents, which are now growing briskly because apartments are in short supply. Those higher rents will encourage buyers to cross the street from an apartment to a home of their own.
In Northern Virginia, Chris Bratz, an engineer, and his wife, Amy DiElsi, a publicist, are planning to leave their rental apartment and become homeowners for the first time. The main reason? Buying has simply become a far better deal than renting. “The market got completely inflated, then it crashed, so prices are coming back to where they should be,” says Chris. As the couple have watched prices fall, they have also watched the rent on their apartment spiral upward, reaching $2,700 a month. They calculate that they should be able to purchase a townhouse for between $400,000 and $500,000 and pay less per month for a mortgage.
The nondistressed markets will also lead the way in construction. Zandi predicts that for the nation as a whole, single-family housing “starts” — measured when a builder pours a foundation for a new home — will rise from 470,000 in 2010 to as much as 700,000 this year. A large portion of that activity will happen in nondistressed markets where a tightening supply of resale houses will start making new homes look like a good deal. “Our main competition is from resales,” says Jeff Mezger, CEO of KB Home. “The prices of those homes have stayed so low, because of low demand, that it’s hampered the ability of builders to sell new houses.”
But many would-be buyers simply prefer a brand-new house. Eventually they’ll move from renters to buyers, and the trend will accelerate now that prices are no longer dropping. In Minneapolis, Yuan Qu and her husband, Xiang Chen, a researcher at the University of Minnesota, just moved from a two-bedroom rental to a new light-blue four-bedroom ranch with a chocolate-colored roof on a spacious corner lot. They paid $400,000, a bargain price compared with a few years ago. The couple, both in their early thirties, moved to Minnesota from China six years ago. “We wanted to buy a house, and we’ve been waiting and waiting and waiting,” says Qu. “The prices went down for so long, we finally thought they couldn’t keep falling.” For Qu the only choice was new construction. “We’re not very handy people,” she admits.
Foreclosure markets: The outlook is brightening
The true disaster areas for housing since the bubble burst have been Sunbelt cities such as Las Vegas, Phoenix, and Miami — places that boasted great job and population growth in the mid-2000s, only to suffer a housing crash that swamped them with empty homes and condos and crushed their economies. But people always want to live in those sunny locales, and their job markets are starting to recover, albeit slowly. In foreclosure markets the inventory problem is far greater because it includes not just traditional resale homes but millions of distressed properties. Fortunately those houses are now such a screaming deal that investors, including lots of mom-and-pop buyers, are purchasing them at a rapid pace. To be sure, some foreclosure markets won’t rebound for years because they’re both vastly overbuilt and far from big job centers; a prime example is California’s Inland Empire, a real estate disaster zone 80 miles east of Los Angeles.
But the outlook is brightening for Phoenix, Las Vegas, Miami, and parts of Northern California. A big positive is the tiny supply of new homes entering the market. Phoenix, for example, has a total of just 8,100 new homes that are either for sale or under construction, down from 53,000 in mid-2006. The big test in these cities is absorbing the steady stream of distressed properties. The foreclosures put downward pressure on the market far out of proportion to their numbers because of markdown pricing. “We had levels of inventory even higher than this in 1990 and 1991,” says MIT economist William Wheaton. “But they were traditional listings, not foreclosures, so they didn’t create the big discounts you get with foreclosures.”
Wheaton reckons that we’ll see a flow of around 1 million foreclosures a year, at a fairly even pace, from now through 2013. That figure is frequently cited as evidence that the market is doomed for years in most foreclosure markets. Not so. The reason is that the vast bulk of those units, probably over 600,000, according to Gleb Nechayev, an economist with real estate firm CB Richard Ellis (CBG), are being converted to rentals either by investors or their current owners. Those properties are finding plenty of renters, since the rental market is still extremely strong across the country. Remember, the millions who lost their homes to foreclosure still need somewhere to live.
A typical investor is Alex Barbalat, a Russian immigrant who’s purchased seven homes east of San Francisco in the towns of Bay Point, Antioch, and Pittsburg. His average purchase price is around $100,000 for homes that once sold for between $300,000 and $500,000. But he has no trouble finding renters, since his tenants can commute to jobs in San Francisco on the BART transit system. Barbalat is pocketing rental yields on the prices he paid of around 12%, and he’s in no hurry to sell. “I’m holding them until prices drastically rise,” he says.
Investment funds are also entering the game. Dotan Y. Melech looks for bargains in Las Vegas for UnitedAMS, a firm he co-founded that manages apartments and other real estate investments. The firm has raised more than $20 million from outside investors to purchase distressed properties. So far, Melech has bought around 300 houses and plans to purchase another 200 this year. He has no trouble renting the houses he buys, since, he estimates, occupancy rates in Las Vegas are touching 95%. The “cap rate,” or return on investment after all expenses, is between 8% and 10% — twice the rate on 10-year Treasuries. Melech rents to people who lost their homes but are reliable renters. “A lot of people can’t be buyers because their credit got hurt,” he says.
Even with investors jumping in, buying activity in foreclosure markets hasn’t yet increased enough to bring inventories down. It will soon. Zandi thinks prices will fall a couple of percentage points lower in the distressed markets in the short run. “But that will be overshooting,” he says. “It’s like an elastic band. If prices do drop this year, they will need to bounce back because they’ll be far too low compared with rents and replacement cost.” Renters will come off the sidelines to purchase homes in the years ahead, precisely the opposite trend of the past few years.
Consider the example of Michael Dynda, a retired Air Force avionics technician who now works for a government contractor in Las Vegas. Dynda, 49, is a first-time buyer who put off purchasing for years, in part because prices were falling so rapidly in Las Vegas, with no bottom in sight. But last year the combination of bargain prices and low mortgage rates became too good to resist. He ended up purchasing a 2,300-square-foot stucco home for $240,000, or about half what it would have fetched in 2007. Dynda got a 4.38% home loan, and pays the same amount on his mortgage as on the rent on the house he left to become a homeowner. “The timing was about as good as it could get,” says Dynda.
Back on the ranch, Mike Castleman is lounging in his creek-front mansion, built from “a hundred tons of fine central Texas limestone.” As he shows off his collection of custom-made guitars, including one crafted to resemble the skin of a rattlesnake, the homespun housing guru once again returns to his favorite topic.
Castleman claims that this recovery will look like all the others: It will bring a severe shortage of housing. He invokes the livestock business to explain. “It takes three years between the time a bull mates with a cow and when you get a calf ready for market,” he says. “That’s how it is in housing too. We’ll get a big surge in demand and the drywall companies will take a long time to ramp up, and it will take years to get new lots approved. Buyers will show up looking for a house in a subdivision, and all the houses will be sold. The builders will tell them it will take six months to deliver a house.” But those folks, says Castleman, will be set on buying a place. “And they’ll want it so bad they’ll bid the prices up!” In other words: Beat the crowd.
Posted by: In: Rockspring News 10 Jan 2011 0 comments

Rockspring Capital announced today that it has acquired a second land parcel of 1.19 acres in the Texas Medical Center.

Rockspring Capital acquired the land on behalf of its seventh fund, Opportunity Land Fund No. 7, LP, on December 29, 2010.  The site is located at the intersection of Grand Boulevard and Alice St.  The buyer was represented by Davis Adams of McAlister Real Estate and the seller was represented by Sam Sheff of Grubb & Ellis.
“This recent acquisition of an in-fill site in Houston’s Medical Center is further validation of our investment strategy to acquire land sites quickly and opportunistically with all cash” said Jim McAlister IV, President and CEO of Rockspring Capital. “This site is one of the few remaining development sites in one of the fastest growing employment centers in Houston.  The seller sold to us because our deal was all cash and didn’t require the typical lengthy and onerous lender approvals” he continued.

Rockspring Capital is a second-generation land investment firm founded in 1973 whose strategy is to acquire opportunistic land parcels and residential lots in high growth areas.  Rockspring Capital acquires with all cash in markets within the “Texas Triangle” – Houston, Austin, San Antonio and Dallas/Ft. Worth.  The company is now raising capital for its seventh investment fund – Opportunity Land Fund No. 7, L.P., which is targeted at $100 million.

Posted by: In: Rockspring News 03 Jan 2011 0 comments

Rockspring Capital announced today that it has acquired a 3.65 acre land parcel in the Texas Medical Center.

Rockspring Capital acquired the land on behalf of its seventh fund, Opportunity Land Fund No. 7, LP, on December 29, 2010.  The site is located on Grand Boulevard in Houston and has an 85,000 SF industrial building partially leased and currently generating income. The site offers promising potential as a major redevelopment play for a medical-related company.  The buyer was represented by Davis Adams of McAlister Real Estate and the seller was represented by Sam Sheff of Grubb & Ellis.
“We continue to execute our investment strategy of acquiring opportunistic land sites quickly and with all cash” said Jim McAlister IV, President and CEO of Rockspring Capital. “This in-fill Medical Center site is one of the few remaining parcels available in one of Houston’s fastest-growing employment centers.  Our all-cash buying strategy is very attractive to sellers because we can close on time and without lender contingencies” he continued.
Rockspring Capital is a second-generation land investment firm founded in 1973 whose strategy is to acquire opportunistic land parcels and residential lots in high growth areas.  Rockspring Capital acquires with all cash in markets within the “Texas Triangle” – Houston, Austin, San Antonio and Dallas/Ft. Worth.  The company is now raising capital for its seventh investment fund – Opportunity Land Fund No. 7, L.P., which is targeted at $100 million.