Land Investors Brace for Slowdown
Hillwood, Other Developers Are Selling Huge Tracts
KRIS HUDSON
Updated Feb. 25, 2014 7:20 p.m. ET
H. Ross Perot Jr., right, and his father at the groundbreaking of the Harvest project near Fort Worth. Hillwood Development
Texas developer H. Ross Perot Jr. and a few other big land investors are taking some chips off the table, betting that the swift increase in prices on residential land in recent years will abate in 2014.
Many economists predict home prices this year will increase by roughly half of their percentage gain in 2013, when they rose by an average of 11.3%, according to the S&P/Case-Shiller national index of home prices. The direction of home prices heavily influences what home builders will pay for land.
“Unless home prices go higher, I don’t see land [prices] going much higher,” says Mr. Perot, whose Hillwood Development Co. owns 9,400 residential acres in seven states. His father founded Electronic Data Systems and was a presidential candidate in 1992 and 1996. “Land’s about as expensive as it can be.”
Hillwood sold 13 residential tracts totaling 4,300 acres in the past year for $125 million, nearly double the amount it had invested in them. Hillwood also bought two tracts last year totaling 1,800 acres, but 2013 was the first year in the past 10 that Hillwood was a net land seller.
It is unusual for Hillwood to sell huge tracts of raw land. Typically, the company develops tracts into dozens or hundreds of home lots—with electricity, roads and other infrastructure—and sells them piecemeal to multiple home builders.
Another Texas land investor, Stratford Land Co., intends to complete sales of at least $400 million of land early this year after selling $100 million of land last year and $150 million in 2012. To sell, Stratford looks to double the money it spent on the land. It still holds about $1 billion of assets. Read more of this post
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