UNITED STATES - Real estate managers are investing in land as a new specialist investment strategy.
Starwood Capital Group Global has created a new company called Starwood Land Ventures and JP Morgan Asset Management is doing initial research on the possibility of raising capital for a land commingled fund.
Both managers believe now is a good time to be investing in land as, on the residential side, there are large homebuilders with too much land on the books given the slowdown in the single-family markets.
Similarly, on the commercial side, there is no major development boom happening so land could be bought now and held until construction picks up again in the future, according to Rick Kleeman is a senior managing director for Starwood Capital.
"We expect there are many homebuilders that would like to get some land off their books until the residential market picks up again. This could lead to some very interesting investment opportunities as this part of the real estate market is now capital starved."
Starwood Land Ventures is a joint venture with Starwood Capital and John Peshkin, the former North American chief exexutive of UK homebuilder Taylor Woodrow plc and is expected to invest several hundred million dollars in residential land going forward through a new commingled fund, Starwood Global Opportunity Fund VIII.
The company believes it will be most active on the two coasts in the United States, namely Northern and Southern California, Florida, the metropolitan area of Washington DC, the Northeast and Pacific Northwest as Kleeman suggests "these areas are going to be producing solid jobs growth for the future".
Starwood Land will also provide debt and equity financing and recapitalization solutions to homebuilding and land development companies.
JP Morgan, meanwhile, is also looking at starting its own commingled fund for investing in land with a total equity raising of $100m-$200m (€71.6m-€143.2m), albeit no timetable has been established at this stage.
Its investment strategy is expected to be the purchase of land for a combination of residential and mixed-use projects.