history
btm

RESIDENTIAL INFILL LAND

The Recognized Leader in Phoenix Residential Infill Land Development

Introduction

Metropolitan Phoenix residential infill land offers investors diversification in a hard asset that is an integral component of the home building process in one of the nation’s most rapidly growing markets. For over 30 years, Phoenix’s premiere home builders have turned to the Empire Group of Companies for well-designed residential neighborhoods that optimize the new home consumers’ living experience. Empire’s value-added approach to infill residential land development is specifically designed to optimize returns not only for its homebuilder customers, but its underlying family of accredited investors as well.

Residential Infill Land Development: What is it?

land-img1When driving by a residential sub-division construction site, you may typically see the trucks, equipment, and employees of the homebuilder busily at work. What you may not realize is that in most cases, there are actually two developers involved in the project: both a “vertical” and “horizontal” developer.

The vertical developer is the actual homebuilder – turning concrete, bricks, copper and wood into a finished home. The horizontal developer, on the other hand, is an upstream partner in the process — a company that purchases the raw or unimproved land and turns it into a fully designed and approved project that can be purchased and built upon by the vertical homebuilder. Also known as a paper developer, the horizontal (or land) developer plays the roll of the creative visionary in the residential homebuilding process, applying as much art as science to the process.

“Infill” is a niche within the greater overall world of land development. As the name suggests, residential infill land developers purchase unimproved land (or improved land with obsolete structures on it) that is surrounded by or adjacent to pre-existing residential developments – essentially “filling in” these areas. Residential infill land development can be less risky than land developed in new or outlying areas for the following reasons:

  • Lower Cost

    land-img2As opposed to raw development on agricultural or forest land, where large, 100+ acre sites are purchased and whole new communities are developed in its place, infill land development does not require major infrastructure investments as most of the utilities (i.e. sewer, water, gas, electric, etc.) are located on the main road adjacent to the property.

  • Less Time

    Developing large, raw sites often requires the building of additional civic structures such as schools, firehouses, police stations, etc. to support such growth. Utility sub-stations and new arterial roads oftentimes need to be constructed as well. Due to the magnitude of such projects, the entitlement (or approval) process can take anywhere from 3-5 years. Infill land, on the other hand, is generally already zoned for its intended use and does not require these major investments, typically shortening the average approval process to 9-15 months.

  • Greater Predictability

    Because residential infill land developments tend to be surrounded by existing residential sub-divisions, the guess work of whether a potential homebuyer will want to live in the neighborhood and how much he/she is willing to pay is significantly reduced due to the availability of adjacent historical sale comparables.

  • Larger Target Market

    Large residential neighborhoods are typically built by the major U.S. homebuilders that have the scale and financial resources to tackle such projects. Infill projects, although also of interest to these larger homebuilders, is equally attractive to the smaller local and regional homebuilder that is seeking a handful of small projects per year and lacks the resources of their larger counterparts.

Market Opportunity – Why does Phoenix residential infill land development make sense today?

land-type

  • Demographic Trends

    land-img3The Phoenix metropolitan area has been, and is expected to continue to be, one of the fastest growing markets in the country– projected to grow from slightly over 4 million residents today to nearly 6.3 million by 2030. With this population growth comes the anticipation of increased demand for residential housing. Additionally, and contrary to Phoenix’ traditional growth model of ever-increasing suburban sprawl, demand for “walkable” infill housing has become increasingly popular. Infill homebuilding accounted for 15% of metro Phoenix’s new-home market in 2013, up approximately five-fold from what it was five years prior.

  • Reduced Competition

    Many of the established land developers in the Phoenix market either did not survive the ravages of the Great Recession, or were left financially hobbled by its after-effects. For those land developers fortunate enough to survive, they now find themselves in an environment of tighter bank lending standards and limited availability of credit, reducing their ability to compete for unimproved residential land to develop.

  • Empire Experience and Expertise

    As an established land developer in the Phoenix market with over 30 years of experience, deep financial resources, and a well-seasoned team of professionals, the Empire Group of Companies has become a go-to resource for home builders seeking high-quality, innovative, turn-key infill residential projects in the most desirable locations.

The Entitlement Process – Turning unimproved land into turnkey development projects for residential homebuilders

grpchn

Before: +/- 10 acre nurseryAfter: +/- 44 lot, entitled subdivision

We’ve all heard and used the term “subdivision” when talking about residential housing, but have you ever really thought about the meaning of the term? Well, “subdivision”, when used as a verb, is actually a legal term describing the turning of one parcel of property into many smaller parcels. But in order to subdivide a property, one must obtain approval from the local governing body that has jurisdiction over the property. This governing body will have ordinances in place that limit how and to what extent a property can be subdivided. The 9-15 month process of designing the subdivision, receiving its approval, and recording this approval with the county recorders office is referred to as “entitling” the property.

Typically, so long as a land developer designs his/her project within the bounds of the local ordinances, the local governing authority will not reject the project. Most city ordinances limit maximum density (i.e. how many homes per acre), and will cover such additional details as minimum building setback requirements, road dedication requirements, proof or provision of adequate sewer and water service, adequate lighting plans, and curbs, gutters and sidewalks. Once approved and recorded with the county, the fully entitled land, also known as “final plat”, is now a turnkey project that can be sold to a homebuilder for final construction.

road-map

Our Approach to Phoenix Infill Residential Land Development

Our infill land development funds, known as the Empire Residential Communities Funds, are structured with the intent of maximizing returns while minimizing risks, and always with an eye to preserving investor capital. In doing so, we are guided by the following tenets:

  • Active management

    As opposed to purchasing infill land, sitting on it, and hoping that it goes up in value over time, we take a value-added, hands-on approach to turning an un-entitled piece of land into a valuable residential development.

  • Short-term investing

    Over the long-term, all classes of real estate tend to be cyclical in nature. By focusing on an asset class and market niche with a relative short, 9-15 month entitlement process, we can limit the risk of time and market cycles.

  • No leverage

    By avoiding debt in our acquisitions, we own the underlying assets free and clear (what is referred to as a “Lien Free Equity Interest”) and thus eliminate the risk of foreclosure and enhance our ability to preserve investor capital while riding out any turns in the real estate cycle.

  • Infill focus

    By focusing on acquisitions within existing residential neighborhoods, we seek not only to take advantage of an overall trend towards “walkable”, closer-in communities, but also lower the costs of development and increase confidence in exit prices due to nearby comparables.

Summary

If you are an accredited investor seeking diversification and investment returns outside of the market, and want to do so by investing in a hard asset upon which substantial value can be added in a reasonable timeframe, then perhaps an investment in infill land development is right for you. Please consult with your financial advisor and request a prospectus to better understand the risks and potential upside of an investment in this exciting asset class.