Investors attracted to discounts on distressed subdivsion lots

        It’s an axiom that developer-investors in most situations shy away from bare land that offers little cash flow potential, especially if there is debt to carry and the future potential is highly speculative.

            But the equation will often change when the price is right. And the Bend area’s inventory of bulk land, much of it with infrastructure in place, at deeply discounted prices is attracting patient buyers with views of a more distant market horizon.

            The Bend situation in a way reflects a national trend that emerged before home and land prices began to fall locally. Some large publicly-held national builders started selling land inventory to streamline their balance sheets, while securing options that would enable them to ramp up construction when the market began to recover. (Doesn’t it has to rebound some time?)

            Around Central Oregon many over-extended developers and builders haven’t enjoyed the choices available to better-capitalized national companies. They have been either forced to dispose of lots and land at substantial losses or move aside as lenders took over. In turn, lenders have begun cleaning up their distressed properties in bulk sales, prompting the analogy of flushing out the system.

            Subdivision lots that at one time were selling in the upper $100,000s and into the $200,000s have either sold or been listed in the $20,000 to $40,000 range, with many priced for even less. 

            Among the more visible investors stepping into the Bend market in the recent months was California Republican Congressman Gary Miller and associates.  Starting in 2009 Miller’s Group, acting as Long Term Bend Investors LLC, had assembled 390 lots in Bend and Redmond at a price of about $6 million.

            Another California investor reportedly bought 174 lots in two subdivisions for nearly $3 million.  A good chunk of the properties were sold by the lender, Sterling Bank of Spokane which  has been aggressively selling properties it took over from builders throughout the Bend area.

            A company controlled by the development partner in one of Bend’s most successful west side neighborhoods, Northwest Crossing, purchased a 74 lot subdivision in north Bend for $1.9 million.

In late 2009 a Salem investor purchased an 80-plus lot Sisters subdivision for $2.4 million after the developer had given it back to the lender which had held notes totaling more than $9 million on the property. The bank had initially listed the stalled project, envisioned as a showpiece neighborhood, at $6 million before reducing the price several times.

In January of  2011 there were more than 280 bank-owned lots in four subdivisions listed for sale on the Central Oregon MLS at average prices in each location ranging from under $13,000 to $83,000. Bulk prices the four subdivisions were from $750,000 to $3,258,000. 

However, these are only a sampling of lots, bank-owned or others, that were on the market in early 2011 as owners continued to face pressure from their lenders and the obstacles presented by lax market demand.

Contact me at rleehicks@rleehicks.com for more information on potential investment land ready to build throughout Central Oregon.