Investment

Recent months have seen a great deal of uncertainty about the future in most financial markets. Stocks, bonds, currencies, commodities.... everything has been volatile. Real estate is different than other assets of course, in that you can't observe the price day to day. Furthermore, raw land is very different from housing or commercial real estate. The boom/bust cycles in housing and commercial real estate are largely due to cycles of overbuilding and shortage. When housing demand is high, or speculative fever sets in, prices can rise rapidly. This encourages more construction, more subdivisions, more spec houses. This in turn leads to oversupply, and then falling prices (as is now being experienced).

The rural raw land market is not totally immune from conditions in markets in other kinds of real estate, but it is driven by different factors. Demand for land results not just from people wanting to live on it, or from speculation, but also from natural resources - farming, forestry, ranching - and increasingly the potential for energy production. Wind, solar, wood, biofuel and the need for carbon credits are all land-intensive activities that look to be more important in the future than in the past. This is important for the demand side, but what's striking about land is that the supply side cannot respond. Except for a few very rare cases (adding landfill at great expense to major cities), land cannot be created. Unlike paper assets, housing, and even metals... the supply cannot rise to meet demand. Prices have to adjust.

For these reasons, we are bullish on the long-term investment prospects for rural land. We are especially bullish on very large tracts, because their supply is not fixed, but actually declining. Once a tract of land is split up, it becomes very hard to put back together ever again. In the short run, there is a profit to be made in splitting up a large tract into smaller tracts (if one can deal with some of the hassles involved), because per-acre prices tend to be higher for smaller tracts. As a result, larger tracts are often split up. This leaves the buyer who wants a large acreage all to themselves having less and less to choose from as the years go by. In some areas, larger tracts have begun to cost more per-acre than smaller tracts. We think this trend will continue over time as well.

So if we are so bullish, why do we want to sell you our land? Simply, to buy more. We deal with land day in day out, and have developed specialized skills in sourcing these kinds of properties. By selling to you, we have more capital to put to work in new transactions where we can add the most value.