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A metal triangle once used to call everyone to dinner on the Ohio farm where Randy Thibaut grew up hangs in his conference room.
Just in case you missed the meaning, a sign above the triangle reads: Poverty sucks.
Thibaut's grandfather acquired the 2,000-acre farm in Ohio at distressed prices and made more money selling it later than he did farming it. It's a lesson that rubbed off on the younger Thibaut, who is now chief executive officer of Land Solutions, a Fort Myers-based company that has been putting land deals together here for years.
Thibaut and Ron Inge, the company's chief operating officer, did bank “workouts” in the 1990s and helped national builders buy land during the residential boom in the early to mid 2000s. They're now repositioning their company to help sellers, banks and other lenders work through the land bust.
“No question the values are less today,” says Thibaut. Depending on the location, residential-land prices have fallen between 30% and 90% from their peaks.
Together, Thibaut and Inge have decades of knowledge of Lee County and its surroundings.
Besides knowing who's who, they've developed an expertise at obtaining and maintaining entitlements and permits on land that will prove valuable when the economy recovers.
But when that will be is anyone's guess, they say. “There's no magic crystal ball on the time,” Thibaut says. But one thing's certain: “It's not going to be in 2009.” We might get a clearer picture in 2010, he says.
Among the signs of a rebound that Thibaut will be looking for: an increase in new-home permits, new construction by national homebuilders and a drop in vacancies for commercial space. None of these signs is positive now, of course.
For now, Thibaut and Inge are working with distressed sellers and banks looking to unload unproductive real estate from their balance sheets. Lenders were scrambling to figure out how much real estate they were going to have to take back in 2008 and were busy creating “special assets” divisions to dispose of it. Now, in 2009, shareholders and regulators will be pressuring banks to sell the real estate they've acquired through foreclosure or other means.
Banks will form holding companies to manage their bad assets and the government may step in like they did following the savings and loan crisis that gave birth to the Resolution Trust Corp. “I think we'll see a hybrid RTC,” Thibaut predicts.
As for buyers, Thibaut and Inge say large investment funds were formed in the last two years to buy distressed land. There have been a few deals for residential land recently, most notably for tax reasons at the end of the year.
Thibaut says most of the recent residential-land deals have been priced at 50% discounts from the peak. Because of the uncertain time horizon for exits, investors are demanding prices that will help them realize double-digit percentage returns over the next three to five years.
Still, the number of deals is tempered by the lack of credit. “You're looking at cash or joint ventures,” Thibaut says. “Most of them are opportunistic buyers,” he adds, using the code word for bottom fishers.
Both men say investors are looking at land because alternatives such as stocks have been less appealing. “The alternatives are not as tangible,” Thibaut says.
Although Thibaut and Inge have focused more heavily on residential land, opportunities in commercial land will follow as that sector becomes distressed too. Commercial real estate follows the residential market by a year or two.
There is another silver lining to the downturn: a smaller anti-growth crowd. As more people feel the impact of the real estate downturn, they'll be more sympathetic to developers and builders. “This is a good time to be proactive to help new buyers,” Inge says.
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