Land

Economic Development Organizations Foster Land Deals

A few CCIMs are finding opportunities to broker land deals by working with quasi-governmental entities responsible for promoting job creation in their communities.

Just ask James Mascaro, CCIM, eastern region development director of DP Partners in Harrisburg, Pa. Mascaro’s firm worked with the Philadelphia Industrial Development Corp. to assemble and acquire a 30-acre site in Philadelphia. In May, DP Partners and its contractors completed development of a 255,000-square-foot corporate headquarters and distribution center on the site for Penn Jersey Paper Co.

Penn Jersey distributes paper, chemicals, and other products to the food services industry. The PIDC wanted to keep Penn Jersey’s 200-plus jobs in Philadelphia as part of its mission to preserve and grow the employment base.

“They assembled the land from a number of small parcels and enabled us to purchase it from them, and then we worked through the entitlements and approvals,” Mascaro says. “The PIDC was a great help to us and we were both able to win. They now have 30 acres on the tax roll that had sat underutilized; now it is going to generate jobs and economic development.”

The PIDC put the infill site together over the course of several years, but acquired specific tracts to fill out the site after Mascaro’s company proposed a build-to-suit for its client in early 2010. Unlike private-sector investors, economic development corporations and similar organizations needn’t worry about paying property taxes during a multi-year holding period.

On the West Coast, Scott J. Fraser, CCIM, has carved out a niche business by representing port districts in the state of Washington. A senior vice president in the Portland office of Kidder Mathews, Fraser is the exclusive representative for two such districts.

Port districts are active buyers right now. Last summer, the Port of Ridgefield acquired 30 acres in its district where planners hope to promote office development. This year, a large office user is considering a portion of the site for a build-to-suit office, Fraser says.

At a time when weak economic growth has most investors shying away from land acquisitions, port authorities and other quasi-governmental entities have some of the best opportunities they will get to pick up tracts for future sale or development, Fraser says.

“Those public agencies that have economic development as their mission, and have the resources to do it, should be taking advantage of the favorable market conditions,” Fraser contends. “Their investments, in good markets and bad, have to be in their districts. It’s not like they can find a better deal across the state.”

In fact, public agencies are among the only active buyers in Fraser’s markets. He chalks that up to a level of risk tolerance that is rare today in the private sector.

“Land investment is the riskiest of all the investments I’ve come across because it is so long-term and so illiquid,” Fraser says. “Simply dropping the price of land doesn’t assure an owner of a sale. Whoever acquires the land will have carrying costs, including property taxes. And they run the risk that somebody might contaminate the property, not only reducing the value but adding potential remediation liability.”

Well-stocked with what Fraser calls “patient money,” economic development entities can buy with cash and forgo a return on their investment for as long as it takes to put a tract to use. “They have a source of capital, and they don’t have the carrying cost of property taxes that other investors have.”

To learn more about the land investment market, read "Dirt, Cheap," the cover story in the July/August 2011 issue of CIRE.

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