INVESTMENT PROGRAM
LandStar Realty Advisors focuses exclusively on investments in undeveloped land parcels with a projected maturity of three to five years and a target investment return of 25% per year or greater. Historically, the actual return to the investment group, net of all costs, has exceeded 25% per year for the last five years. LandStar’s mission statement is simply: To provide our investor clients with highly profitable real estate investments that maximize their investment return. The principals of the company have a combined 70 plus years in the land acquisition and development business and their business resumes are included in this package.
BASIC TRANSACTION STRUCTURE:
We form limited partnerships through which investment property(s) are acquired. The acquisitions are all cash purchases and are not subject to notes or mortgaged. Additionally, the acquisitions occur in areas where the General Partner and the Management Team are able to predict and create development. We focus on the western half of the Houston Metroplex where our knowledge, contacts and influence can be used to purchase and sell properties that meet our investor clients’ financial criteria.
The ownership entity is an investment company formed to acquire and pre-develop the properties, the investors capital contribution is inclusive of acquisition costs and working capital for pre-development. After the Investors capital contribution is returned, the Investors retain a 60% net profit interest in the project. The Management Team retains a 40% net profit interest in the project and is responsible for all pre-development activities, organizing all marketing efforts, providing quarterly progress reports, and providing partnership returns on an annual basis. All efforts are made to insure property expenses during the hold period do not exceed the initial working capital. If a “cash call” is necessary it is based on a percentage of ownership of the property (i.e., 40% would be the responsibility of the Management Team). The Return is distributed on a “paid for performance” basis as follows: the management team does not receive any money until after the investors get their capital contribution back. After that, the profits are split 60/40 with the investors receiving 60%. The Management Team targets for a 25% internal rate over 4 years, or in other words to double investors money in 4 years time.
Although the Management Team has developed both residential and commercial properties (see www.woodcreekreserve.com as an example) the preferred transaction is to pre-develop a property and sell to a developer/builder. After property acquisition, during the “hold period” the Management Team and its consultants take the necessary actions to bring the property to “development ready”, in order to maximize the sales price and accelerate the timing of a sale.
Investment Example(s)
Example 1: Katy West I-10 Holdings 1 and 2
The investment tract is a 400-acre parcel located in Waller County, Texas, south of Interstate 10 and within the boundaries of the highly acclaimed Katy Independent School District (KISD). This tract is one of the very few large tracts, south of IH-10, within KISD boundaries with onsite drainage outflow. This property is the assemblage of two smaller tracts comprising 260 acres and 140 acres respectively.
The market area for the property is characterized as a high-growth single-family detached housing market with development in large master planned communities and large scale subdivisions south of IH-10. Currently selling over 4000 new homes a year it leads all other market areas in the Greater Houston Area.
In 4th quarter of 2002 and 1st quarter 2003 an in-depth analysis of all the undeveloped land tracts south of IH-10 within KISD boundaries was performed to determine:
1. Number of acres sold,
2. Price per acre and,
3. Available Tracts (over 200 acres) that were being marketed.
Utilizing only transactions occurring within the last 18 months, it was determined
that 3,669 acres of land had sold for an average sales price of $15,787 per acre. These were all sales for single-family housing projects, no commercial sales were included in this calculation. In addition it was determined that there was approximately 3000 acres being marketed for sale with an average asking price of $15,944 per acre. Of these properties only about 1400 acres had drainage outfall onsite, limiting the true comparables to this property to about 1400 acres all being marketed at $15,000+ per acre.
The subject property was contracted at $5,000 per acre and the General Partner sold subscriptions for $2,200,000. The property(s) were purchased in the spring of 2003 for $2,000,000 with $200,000 in working capital that was put into pre-development (drainage study, MUD creation, land planning, appraisal, market study, wetlands study, environmental, survey, legal structure, aerial photograph and small management fee ($25,000 per year for 3 years) and taxes ($10,000 (3) years agriculture).
The property is closing 1 June, 2006, (with $250,000 hard earnest money and feasibility completed) for $25,000 per acre = $10,000,000.
INVESTMENT TRANSACTION DETAILS:
Using the actual amounts from this transaction an investor who put in $500,000:
Purchase Price: $2,000,000
Working Capital: $ 200,000
Total Investment: $2,200,000
Targeted Internal Rate of Return: 25% per year
Investor Contribution: $ 500,000
Sales Price for the Property: $10,000,000
Initial investment: - 2,200,000 (paid back in full before any split)
Profit: 7,800,000
Investors net profit (60%): 4,680,000
Investor percentage: $500,000/$2,200,000 = 23%
Investor return: $4,680,000 X .23 = $1,076,400 (this is a net number)
Internal rate of return: $500,000 + $1,076,400 = $1,576,400 = 3 times initial investment return over 3 years!
Example 2: Katy-Hockley/290 Holdings Fund
The investment tract is a 444-acre parcel located in Waller County, Texas, south of Highway 290 and north of Interstate 10 on Katy-Hockley Road at Jack Road and within the boundaries of the Waller Independent School District. This tract is one of the very few large tracts, north of IH-10, with access to drainage outflow. This property was due west and adjacent to the 11,000 acre General Growth Properties project known as “The Bridgelands”.
The market area for the property is characterized as a high-growth single-family detached housing market with development into large master planned communities and
large scale subdivisions south of Highway 290
In 2nd quarter 2005 an in depth analysis of all the undeveloped land north of IH-10 in close proximity to The Bridgelands was performed to determine:
1. Number of acres sold,
2. Price per acre, and
3. Current tracts (over 200 acres) that were being marketed.
Utilizing only transactions occurring within the last 18 months, it was determined that land had sold for an average sales price of $10,000 per acre. These were all sales for single-family housing projects; no commercial sales were included in this calculation.
(Example 2: continued)
The Subject Property was contracted for $2,220,000 and the General Partner sold subscriptions for $2,220,000. The property was purchased in May of 2005 for $2,220,000 with working capital included that was to be put into pre-development (drainage study, MUD creation, land planning, appraisal, market study, wetlands study, environmental, survey, legal structure, aerial photograph and small management fee ($25,000 per year for 3 years) and taxes ($10,000 (3) years agriculture).
The property sold approximately 45 days after acquisition for $10,000 per acre/$4,440,000.
INVESTMENT TRANSACTION DETAILS:
Using the actual amounts from this transaction an investor who put in $500,000:
Purchase Price: $2,220,000
Total Investment: $2,220,000
Targeted Internal Rate of Return: 25% per year
Investor Contribution: $ 500,000
Sales Price of the Property: $ 4,440,000
Initial investment: - 2,220,000
Profit: 2,220,000
Investors net profit (60%): 1,320,000
Investor percentage: $500,000/$2,220,000 = 22.5%
Investor return: $1,320,000 X .225 = $297,000
Internal rate of return: $500,0000 + $297,000 (less closing costs) = $750,000 or a
500% IRR ($250,000 net profit/45 days)
The Management Team strives for a 25% internal rate over 4 years by value enhancing the properties which the team have identified and purchased under market value. Typically the team receives offers during the feasibility and closing of a property that are greater than our purchase price, yet not significant enough to satisfy investor criteria. In this case the 500% return on investment in 45 days was consistent with the investment group expectations and sold shortly after purchase.
Future Investment Opportunity
Northwest Katy Land Holdings
A 1520 acre land asset on Houston’s West Side
Subject Property
The investment tract(s) are multiple parcels totaling 1520 acres located north of IH10, within the boundaries of Katy Independent School District (KISD) in Harris County, Texas. This property is in close proximity to major master planned community developments and bordering on three (3) major thoroughfares.
Potential
The location:
- North of IH 10 in Katy ISD (the fastest growing large (over 45,000 students) district in the State of Texas)
- frontage on three distinct traffic thoroughfares (both North/South and East/West)
- near General Growth Properties (The largest Real Estate Investment Trust (REIT)) 11,000 acre project “The Bridgelands”,
- near Newland Communities (One of the largest developers in the U. S.) 3000 acre Cinco Ranch addition,
- near Trendmaker Homes (a division of Weyerhaeuser, a Fortune 500 company) 3000 acre project “Stern Ranch” and,
- within an area without zoning restrictions, this location is ideally situated for immediate and future development.
Property Summary
Size: Approximately 1520 acres
Location: 5 miles north of Interstate Highway 10, 5 miles south of Highway 290 and 3.5 miles west of Proposed Grand Parkway (Hwy. 99) on F.M. 529 and Katy-Hockley Road.
Utilities: Multiple Municipal Utility Districts (MUD) to be formed
Pre-Development: Land Plan to be created
Surface use acquired
A MUD creation report including:
Engineering study
Market Study
Drainage Study
(Investment Opportunity continued)
Property Taxes: Agricultural exemption
Structures: No existing structures, except farming operations outbuildings
Minerals Surface control only. Drill sites (approximately 5+/- acres each)
will be designated with mineral owner.
Feasible Use: Mixed use development with single family residential and a tremendous commercial play.
Transaction Summary
Purchase 1520 acres for $12,160,000.
641 acre tract @ $ 4,400 per acre $ 2,820,400
570 acre tract @ $ 9,250 per acre $ 5,267,875
309 acre tract @ $10,000 per acre $ 3,090,000
Total 1520 acres @ $8,000 avg per acre $11,178,275
plus closing costs $ 150,000
Acquisition Costs (AC) $11,328,275
Pre-Development Working Capital (PDWC)
Land Planning: $ 75,000
Multiple MUD Creations: $150,000
WID/Master MUD: $ 50,000
Engineering: $200,000
Management (4 years) $600,000
Taxes/Miscellaneous: $ 56,725
Total: $1,131,725
$11,328,275 (AC) + $1,131,725 (PDWC) = $12,460,000.
Currently land prices in the area range from $16,000 to $35,000 per acre. Retaining 50 acres for commercial development and using a conservative $20,000 per acre sales price yielded the following proforma:
Approximately 1470 residential acres @ $20,000 per acre = $29,400,000 and
Approximately 50 commercial acres @ $3.00 psf = $ 6,534,000
Totals $35,934,000
Investor equity - 12,460,000
Gross Profit $23,474,000
Investors net profit (including closing costs) $12,539,568
(Investment Opportunity continued)
Using the above assumptions from this transaction an investor who put in $500,000:
Purchase Price: $11,328,275
PDWC: $ 1,131,725
Total Investment: $12,460,000
Internal Rate of Return: Targeted at 25% annually
Investor Contribution: $ 500,000
Property Sale Price: $35,934,000 (residential and commercial)
Initial investment: - 12,460,000
Closing costs (est. 8%) - 2,874,720
Profit: $20,899,280
Investors net profit (60%): $12,539,568
Investor percentage: $500,000/$12,160,000 = 4.0%
Investor return: $12,539,568 X .040 = $501,582
Internal rate of return: $500,000 + $501,582 = $1,001,582 (a 25% IRR)
Additional Investment benefits:
Long Term Capital Gains (for tax purposes)
Land based asset (for security)
No debt (100% equity based asset)
No cash calls for 1st Four (4) years
Investors Business Resumes:
J. Troy Maxwell
J. Troy Maxwell has been involved in property acquisitions in the immediate Katy area since 1994. In 1998 Mr. Maxwell founded I-10 Poorman Investments, Inc. in order to pursue development opportunities for residential, commercial, and recreational interests.
Mr. Maxwell brings land acquisition experience, speculative growth analysis, in-depth knowledge of the Greater West Houston / Katy Market, project coordination ability that has involved land-asset management, general and limited partnerships, equity placements, and infrastructure financing.
Mr. Maxwell assembled the original investor group that purchased the land that is now known as WoodCreek Reserve, a $250 million dollar development. Since this property’s acquisition in 1996-98, he has been responsible for all land management including hydraulic studies, land planning, environmental, property maintenance, ad valorem taxes, financing, engineering, grazing leases, surface control issues, street planning, utility availability, legal issues, drainage studies, City of Katy negotiations and development of WoodCreek Reserve.
In addition, Mr. Maxwell has acquired 11 properties that amass over 1,700-acres in the Katy Area since 1995, which have been sold, developed or held for investment proposes. These include the Poorman Tract (147 acres), the Cook Tract (248 acres), the Devon (140 acres), the Morgan (96 acres), the Lloyd (261 acres) the Spata Tract (35 acres), The James Tract (15 acres), the triangle (25 acres), the Texas A&M Tract (254 acres), the Van Reit tract (444 acres) and the KISD Tract (40 acres).
Mr. Maxwell is currently the developer of WoodCreek Reserve, a 500-acre residential and commercial high-end project in Katy, Texas. Homes are being built by Trendmaker Homes, Emerald Homes, and David Powers Homes, which start in the $250,000’s and escalate. Phase I is complete (125 lots) and sold out to builders with phase II recently completed adding another 161 lots. The project also has 30-acres of Interstate 10 frontage and is conveniently located next to Katy Mills Mall.
Mr. Maxwell also owns and developed Willow Lake Apartments (class A) in Katy. Phase One is 168 units (98% occupied) and phase two (97% occupied) is another 168 units bringing the total development to 336 units.
Mr. Maxwell has assembled and recently purchased 402-acres west of WoodCreek Reserve (in KISD) for future development into single-family housing and another 444-acres north of the City of Katy for future development purposes. Mr. Maxwell stays extremely active in current market conditions for his market area, which is defined by land in the west / northwest quadrant of Greater Houston and is confident that this market area will continue to develop faster than other sub-markets around Houston.