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Land Rush

A young land investment company prospers by making it easier for developers and retailers to find ideal sites. Developers often spend months, even years looking for appropriate properties. One site looks good for a grocery store, but to get the 20 acres necessary for developing a surrounding strip center, the developer would have to buy an entire 50-acre tract.

Another 20-acre tract might fit the bill, but the due diligence investigation reveals an environmental problem that would raise the site-preparation costs to prohibitive levels.

Still another piece of land might be perfect for the grocery chain this developer works with, except that this particular grocery store already anchors a center a quarter-mile away.

Retail anchors and tenant representatives face the same set of problems as they search for appropriate sites.

On the selling side, conventional brokers know where the land is but can only guess at which developer, retailer or other user might want a particular site.

Dan Bruce, CEO of the 3-year old RealtiCorp Commercial Investment Fund of Greenville, S.C., says his company's land investment concept can solve these problems and make growth easier for developers, retailers, and other multi-site users such as office developers, hotels, daycare centers, apartment complexes, senior housing and healthcare companies.

"The conventional approach to land investment doesn't work anymore," Bruce says. "Our approach is to match property with a use or user, while making it easy to develop the property."

Finding land for retail voids RealtiCorp does not broker property in the traditional way, by listing it, pitching it, negotiating a deal that satisfies both seller and buyer, and earning a commission on the sale.

Instead, RealtiCorp researches markets, looking both for available raw land and for underserved and unserved voids in a given retail or other multi-user category. The company buys properties that meet the criteria of various multi-site users.

Then, as a property owner looking for a buyer, RealtiCorp will often handle predevelopment tasks usually handled by developers. The company's predevelopment capabilities include site engineering, environmental surveys, hazardous waste evaluations, and feasibility studies done in conjunction with local government authorities.

Not long ago, RealtiCorp came across an 11-acre tract in Plano, Texas. Research indicated that the surrounding communities lacked local access to retail drugstores, local strip center services, and banks. RealtiCorp bought the land, handled some necessary predevelopment work and sold the tract off in pieces.

"We sold the corner to a developer that worked with a national drugstore chain, sold the adjacent land to a local shopping center developer, sold an outpad to a restaurant chain, sold a back portion to a daycare business, and sold another piece to a bank," Bruce recalls. "This filled out the entire 11 acres. The important point is that none of these users would have bought the site on their own. It was too big. But it was a good site for each of the businesses."

In short, RealtiCorp buys land that multi-site users want and structures deals that make it easy for a user to come to terms.

Good data, speedy deals The RealtiCorp concept works because of highly sophisticated research built around a proprietary geographic information system (GIS). The system relies on conventional demographic data as well as data collected daily by a network of regional RealtiCorp offices located in Atlanta; Richmond, Va.; Charleston, S.C.; Houston; Orlando, Fla.; Birmingham, Ala.; and Charlotte, N.C.

With real people out in the field augmenting the company's advanced research systems with up-to-date information, deals can move at warp speed through the pipeline.

In January 1998, for example, Rick Appelquist, a Florida regional partner with RealtiCorp, came across a 7.9-acre tract in Lake Mary, Fla. "This was a surplus property owned by an auto dealership group with no need for it," Appelquist says. "It was a good corner with a signalized intersection surrounded by communities with excellent demographics."

Appelquist submitted the potential purchase to the RealtiCorp research group located in Greenville by way of a Lotus Notes memo sent over the company's intranet.

"Rick gave us all the information he had, including the point on the map, the size of the property and an aerial photo," says Tony D'Ambrosio, the company's director of research and GIS. "Rick is the expert in the field. He knew that this was a good site for a grocery store. The research job is to prove that and to find the grocer. We plotted the information he sent on a GIS map, looking at the surrounding neighborhood and submarkets. We defined the potential trade area for a grocery store at this site using our GIS capabilities."

All of this is more or less conventional research. What RealtiCorp adds to the ordinary research is up-to-date data on targeted users. In this case, D'Ambrosio's research pinpointed the locations of particular grocery stores within the trading area, along with grocery store revenues and household grocery expenditures. D'Ambrosio found that household grocery budgets exceeded grocery store revenues within the trading area. In other words, some people were traveling outside of the area to buy food, and there was a void or gap in the grocery store business.

"We also found that Publix did not have a store in the area, although Publix competitors were present," D'Ambrosio says.

The marketing department developed a package around the research and submitted a proposal to Publix, which responded quickly, referring the matter to Opus, an Orlando-based development company that works with Publix.

By February, only weeks after finding the property, RealtiCorp had satisfied itself that the property would find a multi-site user and put in a contract to buy. With the property under contract but not closed, Opus offered RealtiCorp a contract for the property.

"We knew it would take Opus until August to get all of their approvals," Appelquist says. "By May, however, we felt certain Opus would get the necessary approvals, and we closed our end of the deal. In August, Opus closed on its contract with us."

In other words, RealtiCorp bought the land and resold it in just four months. Such speed, of course, carries some risks. "We will take on some of the risk of owning a property before the final permits and leases are in place," Appelquist says. "We can do that because our research group investigates everything about the property and its potential."

Accurate research makes those kinds of risks acceptable. According to D'Ambrosio, the company could not make these kinds of decisions by relying solely on traditional data providers such as the Census, which is often dated.

"We do purchase Census and demographic data from commercial sources, but we also track our clients' distribution patterns," he says. "People in our local offices report this information to us. This is important. Suppose you purchase a commercial file with every grocery store in Virginia. That file will lack complete information, (which renders) it almost useless in making an informed decision about where a grocery store might go. There may well be a new grocery store that just went up across the street and is not recorded in the commercial data.

"Our system is set up so that our local partners check the accuracy of data and collect new data," D'Ambrosio continues. "If a brand-new shopping center is going up right now in Orlando, it won't show up in any commercial database. But it will be in our database because our regional people will have told us about it."

High-tech, high-touch In the land investment business, what determines the value of a tract is its potential use. For example, a 60-acre tract of land across from the Citadel Mall in Charleston, S.C., was once home to low-end apartments. But RealtiCorp entered the scene with grander visions for the property.

With research suggesting a wide range of uses -- including hotels, restaurants and a specialty retail center -- RealtiCorp set out to predevelop the property to make it more attractive to potential buyers. The company has improved the infrastructure with new roads and has carried out some demolition work.

As this work went forward, the marketing department attracted a contract offer from Keith Corp., a Charlotte, N.C., specialty retail center developer interested in a particular 100,000 sq. ft. strip of the property. Completing the transaction depends on finding an anchor.

Research indicates that the property would support a variety of big-box specialty retailers including a grocery store, an office supply store or an electronics store. Retailers in each of these categories have expressed preliminary interest in the site.

Meanwhile, RealtiCorp is marketing other slices of the tract to hotels and restaurants.

Dan Bruce founded RealtiCorp just three years ago, with the idea of testing his 30 years of experience in land investment in the world of modern land development.

"Our business is helping to make it easier for our clients to do business, by making it possible for them to buy only the land they need," he says. "We do that by combining high-tech research with high-touch personal knowledge and insight."

The approach, which Bruce says has yet to be copied by others, is working. The company's current deal pipeline lists about 120 properties with a potential market value of nearly $240 million. Those properties lie mostly in the southeastern region of the country, but Bruce believes the concept has national potential.

"We plan to open several more branches during 1999," he reports. "The next two offices will open in Denver and Phoenix, and we plan to have national coverage within five years."

If RealtiCorp continues to grow, other land investment companies may adopt the company's concept, making it easier for developers and retailers to find and buy appropriate sites. Wouldn't that be a welcome development.

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