Beyond the Numbers: A Connection to the Land

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Author: Eric Gage

My background and experience has led me to specialize in a certain type of real estate, timberland properties, and more specifically, timberland investment properties. This type of real estate is very rewarding in that I get to deal mostly with numbers. How much is this property worth? What can I expect the timber to be worth? What is the site index? How old is the timber? For some properties I even develop a discounted cash flow so an investor can determine their rate of return on a certain property. I have been very successful selling timberland to and for investors. I guess I learned to speak their “language.” In order to be successful, I had to start with a forestry degree, but then keep educating myself so that I could be the “expert” in both rural land issues as well as timber investing.

I like selling to or for investors because there is very little emotion involved. Either the numbers work or they don’t. It is not uncommon for me to sell a property without leaving the office.

Recently though, I was reminded of how enjoyable it can be to work with someone who has a passion for the land. I have always experienced my greatest sense of spirituality while outdoors. For me, I feel most in touch with our maker while in the woods. God touches me in the sound of a small waterfall, or the wind rushing through a stand of trees, or the unique pattern of a frost on a young pine plantation. I came to be an avid bird watcher because of the amazing sounds and color palette God used to brighten our lives. Hunters I talk to love to brag about the big deer they got, but when asked why they hunt, you will usually hear about the spiritual effect on them from the still of the morning, or the sunrise they experienced, or the fellowship with friends and family.

The reminder came in the form of a recent client. This client is a businessman who runs a very successful company. He knows all about investing, and buying land is nothing new to him. So, we went out to look at a property early one morning. I had done my research and felt I had a good handle on what the property was worth and was ready to discuss the pros and cons of the land. The more we looked at the property the more visibly excited he became. When we got back to the truck, he said “OK lets get it.” I started to talk about comparable sales and how we should negotiate, when he cut me off. The buyer took me aside and explained that he had to own this property. That he felt the spiritual connection and that he would be perfectly happy to die on the property and be buried there, that this property represented more than an investment. He could already visualize the joy it would bring to himself, and more importantly, to his family. The next time I met with this client I was able to tell him the seller had accepted his offer and he would soon own the land. This very successful businessman, who has done hundreds of deals, gave me a hug. It might have been the cold wind blowing across our faces, but both our eyes were moist.

This experience reminded me that I am so lucky to have a career that allows me to feel a spiritual connection nearly every day. I am blessed to visit several properties a week, each unique and each with a feature that makes them special. Not everyone is so lucky. With some clients it may take a while and require them to see lots of properties, but when they feel the connection they are looking for, both of us know it. I never know what inspires this connection, sometimes an old Post Oak tree will do it, sometimes a rocky hill, or a running creek, but when a person finds a connection to some land, you can see the joy in their eyes.

Working for and with investors can be lucrative, but sometimes I forget the intangible benefits of working with other classes of buyers.   When I help somebody make a spiritual connection to the land, I become part of their family, and you can’t put a number on that.

East Texas’ Bountiful Forests

A Resource for an Innovative Building Product

 

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Author: Jeff Zwolinski

After having spent over 25 years in the forest products manufacturing business, I have been fortunate to have observed many technological advances in the conversion of raw materials from the forest, such as Sawlogs, Chip-N-Saw and Pulpwood, into the various building products the consumer has utilized in both home and commercial construction, as well as office supplies such as ink and various grades of paper.

Over the decades, the forests of East Texas have supplied the market with many varieties of these building materials and paper products. Most of them are very familiar to the consumer. Examples include Dimension Lumber, Plywood, Particleboard, as well as Oriented Strand Board, Paper products, and Containerboard, which is eventually converted into boxes. In addition, during the past ten to fifteen years, these forests have been supplying the raw material, such as pulpwood, to newly constructed facilities which in turn provide “biofuels” to markets pursuing alternative sources of energy.

A relatively new innovation, Cross-Laminated Timber, (CLT), which has been manufactured and utilized in Europe and Canada, is becoming an important product in the domestic building products market as well. It falls into the category of what is known in the industry as an engineered wood product, and is primarily used for roofs, walls and floors. According to the American Plywood Association (APA), “A CLT panel consists of several layers [3 to 7] of kiln dried lumber boards stacked in alternating directions, bonded with structural adhesives, and pressed to form a solid, straight, rectangular panel”. Additionally, the APA states that…”CLT panels are exceptionally stiff, strong, and stable, handling load transfer on all sides”. This makes it an excellent product for both structural and non-structural applications.

cross laminated timber photo source rethink wood

Specifically, CLT is used in home and commercial building foundations, roofs and walls, and is an attractive alternative to masonry, concrete and steel, while complementing the use of traditional panel products, such as Medium Density Fiberboard found in flooring and cabinets. CLT is being evaluated as a component in the process of making new and existing structures earthquake proof. It has been praised for being easy to assemble and beneficial for the environment because of its carbon storage capability and thus reduced carbon footprint compared to concrete and steel.

So what does CLT mean for timberland owners in East Texas and for its forest products industry in general? There is a lot of interest from engineers, architects and builders in the use of CLT. Therefore, it has the potential to provide another viable market for landowners to supply their high-value renewable resources, such as Sawlogs, to lumber mills that in turn would have an opportunity to sell their products to prospective manufacturers of CLT!

(Photo Source: reTHINK WOOD)

Real Property

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Author: Eric Gage

One of the best and worst parts of being a land broker is that I would love to own nearly every property I go look at. East Texas is beautiful and each property has something unique about it. It might be a waterfall on a creek, or a view from a hilltop, or clear spring that pops out of a hillside. Each parcel of land is different and unique and our connection to those special spots is what drives people to the outdoors. Studies have shown that support for National Parks and National Forests is highest among city dwellers who may never see them. It is part of our human nature to want a connection to land and the outdoors.

There are many reasons people buy land. Some people are looking for an investment; some are looking for a place to escape, some to rekindle or find their connection to the outdoors. Most are a combination of these. As a broker, I hear a wide variety of different reasons people want to buy land, but most fall in the above categories, although people can be quite colorful in the way they express it. One retired couple wanted a place they could sit on their porch and drink coffee in the nude and not have to worry about their neighbors. Another couple, both stressed out NASA engineers, needed a place where they could “shoot stuff” as a way to blow off steam. In 1999, a number of land buyers were looking for a place to hunker down to survive Y2K (for those too young to remember, this was the concern that all the worlds computers would crash on January 1, 2000). Another buyer was looking for a place to hide from the future zombie apocalypse. My favorite and most common buyer is the person looking for a place to spend time with their family, away from the video games and modern distractions.

Is land a good investment? As many of us frequently hear from our older relatives in regard to land “they ain’t making no more.” With the population of Texas at an estimated 27 million (2015) and projected to grow to over 40 million by 2050 (Texas Demographic Center, population projections scenario data tool), the demand for land has got to go up. Many of our new residents are moving into Houston, Dallas, San Antonio or Austin. As they get settled, they start to look around and realize Texas is a big place of open spaces. Many of these new residents start to look for a piece of the state they can call their own. Also, much of our population is reaching retirement age, when people start to dream about a more relaxed pace of life. Rural areas, especially those with ready access to quality health care, are clearly benefitting from this trend.

I always advise my clients, when looking to buy a piece of land, plan your exit strategy. If you have to sell this land in 2 years, or 5 years or 10 years, how will you do it? Will there be a market for it? What can you do to the land to improve its market value? Some things to look for are road frontage, utilities (or ability to bring in utilities), surface water, and animal habitat. If you plan to finance your purchase, be aware, most lenders will require a 20% down payment to buy land. Interest rates vary from lender to lender, but are often a couple points higher than those you will see advertised for home loans. Go talk to a couple of lenders before you start looking at land so you know what you can expect. Next, make a list of your “must haves.” Some buyers must have a pond or lake; others must have electricity. The more “must haves” you list, the more per acre you should be prepared to pay. Finally, how far are you willing to travel? The best deals in land are often in the hardest places to drive to (think Newton and Sabine Counties in East Texas).

Land as an investment has a good track record of solid, steady returns. According to the Rural Land Price Data on the Real Estate Center at Texas A&M University’s web site, the average annual real growth in land prices over the period of 1996 to 2015 in East Texas is 4%. Compared to other investments, 4% annual return can look pretty low. So unless you can afford to buy large tracts of land as a portion of a larger portfolio, the return on your investment should not be the primary reason to buy land. However, you can’t ride a 4-wheeler around your stock portfolio. You can’t shoot a 10-point buck with your bonds investment. Your hedge fund won’t give you the satisfaction of connecting yourself and your family to the outdoors. An investment in land is measured by something more valuable than money in your pocket. Instead the return is time spent with family and friends, enjoying mother nature and her bounty together, or sometimes just sitting naked on your porch drinking coffee.