Since its construction in 1940, Lake Greenwood has become a valuable asset of the local community as well as for the entire Upstate of South Carolina. This 11,400 acre lake, which is the main water source for Greenwood and much of Greenwood County, also serves as a hub for a number of recreational pursuits which have fostered significant population and economic growth in this region. History has revealed that both positive impacts and challenges result from increased levels of population and economic activity in a given area – and the Lake Greenwood community is no exception to this rule.

According to the Saluda-Reedy Watershed Consortium (SRWC), “a broad based coalition of universities, non-profit organizations, government agencies and private businesses which have conducted a wide range of research on Lake Greenwood and its watershed”, several obstacles concerning water quality must be overcome in order to ensure the future health of Lake Greenwood. The 745,600 acre Saluda-Reedy Watershed (SRW) and Lake Greenwood have a long history of dealing with unwanted effluents. For decades the Saluda River and the Reedy River carried away many types of wastes from growing industry and development in the Upstate. The implementation of regulations on unwanted industrial effluents such as the Clean Water Act of 1972 made a major impact on the current water quality of the SRW and Lake Greenwood. However, Lake Greenwood and the SRW currently face new health threats – the SRWC has identified sediment from upstream development, stormwater runoff, and phosphorus from wastewater discharges as the main causes that affect the cleanliness and levels of water in Lake Greenwood.

A study by the SRWC reports that 307 acres of Lake Greenwood has been lost to sedimentation in the upper part of the lake. If this process continues there is the potential for negative impacts such as the loss of waterfront land, harmful pollutants, and decreased boat and recreational access. Major algae bloom, which Lake Greenwood experienced in 1999, is another real threat…

“[w]hen an overload of phosphorus and nitrogen are introduced to the lake, algae growth can increase to an uncontrollable level. As the algae dies and sinks to the bottom, the decay process consumes a substantial amount of dissolved oxygen. A combination of low bottom-water oxygen levels and high surface water temperatures that often occur in the summer can leave many fish and other aquatic life with little or no suitable habitat.”

Land use along the shore of Lake Greenwood is another critical aspect of the water quality. Some lakeside development produces soil erosion, loss of shoreline vegetation, and toxic runoff which contribute to poor water quality.

This research makes a strong argument that the health of Lake Greenwood is in jeopardy. Growth and development in upstate South Carolina have once again reached a level that is causing detrimental impacts to Lake Greenwood. However, these findings also shed light on the implementation of proven methods that helped Lake Greenwood overcome water quality problems forty years ago. Although government regulations and policies like the ones implemented in the past are part of the solution, they are not the only effective measures to help improve the water quality. Conservation easements on properties within the Saluda-Reedy Watershed can have a major impact in the effort to improve Lake Greenwood’s water quality. These properties consist of those with Saluda & Reedy River frontage as well as lake front parcels and the preservation of land within this watershed will have a direct effect on reducing the amount of pollution that enters Lake Greenwood.

In addition to qualifying for conservation easements, large acreage tracts with significant frontage on Lake Greenwood are unique pieces of real estate with regards to the current real estate market. Unlike large timber and recreational tracts in this area, a strong demand for lake lots is in place resulting in stable values throughout the economic downturn. This market indicator reveals that undeveloped lake frontage has good investment potential from a lake lot development perspective. A savvy investor should recognize the enhanced investment potential of a large acreage tract with significant frontage on Lake Greenwood. A property with these features offers significant tax benefits through a conservation easement on designated areas as well as mitigation opportunities for sustainable lake lot development. In addition, the stark contrast of the current market for lake lots and large acreage recreational and timber tracts allows an investor to assess the value of a large acreage tract with significant lake frontage from two separate vantage points which is advantageous.

Lake Greenwood is a treasured resource of Upstate South Carolina and for the last seventy years this lake has contributed to the economic growth of the area while also facing water quality challenges. This constant struggle is a familiar story for waterways and wetlands across the southeast and the decision to sacrifice clean water for financial returns and vice versa is never easy. Fortunately, in some circumstances the two are not mutually exclusive. Sustainable development, if implemented properly, can facilitate the co-existence of clean water and financial returns given certain market trends and property location. These conditions currently apply to large acreage tracts with significant undeveloped lake frontage on Lake Greenwood resulting in a rare opportunity to assist in the protection of Lake Greenwood with a positive return on investment.

In 2011, states such as Georgia, Louisiana and Mississippi show sawtimber prices exceeding $30/ton, and Florida and Louisiana surpassing $11/ton for pine pulpwood.  Prices change annually across and between states in the 10-year forecast as local mills adjust to end-market demands.  The benefit to forecast users of this bottom-up approach was evident in 2010.  “In 2010, Forisk’s sawtimber forecast was within 4% of actual prices, and within 1% for key end-use markets such as paper and paperboard,” said Dr. Tim Sydor, Forisk’s Forest Economist.  “The key is understanding and updating the local, statespecific relationship – the elasticity – between wood demand and prices.”

The ForiskFORECAST: Pine Sawtimber and Pine Pulpwood predicts annual pine sawtimber and pulpwood stumpage prices across the US South and by state through 2020, and forecasts the production of lumber and paper and paperboard, as well as the demand for wood from emerging bioenergy markets.  For more information, visit www.foriskstore.com and click “Stumpage Price Forecasts.”

Last Thursday, I attended the LandThink Summit 2010 along with a few of my colleagues from AlaLandCo and land industry professionals from all over the country.  The goal of the Summit was to bring together professionals from different aspects of the land industry.  There were land brokers, investors, land lenders, foresters, consultants, surveyors, and other professionals there.  We had a number of speakers on topics ranging from financing land purchases to real estate trends to timber prices.  It was a great opportunity and a great success.  My hats off to the folks at LandThink for organizing and hosting the event.

The keynote speaker was former Florida State University coach Bobby Bowden.  He presented a great motivational message on some of the aspects of successful leadership.  If you ever have the opportunity to hear Coach Bowden speak, take advantage.

LandThink is a great resource for information about land-related issues.  It is a platform with contributors from many aspects of the land industry.  I, along with Jonathan Goode contribute there regularly.  The founder of LANDFLIP.com, (which is one of the most successful Internet land listing sites) Ryan Folk, started LandThink.com as a way to provide information to a public that is eager to learn about land.  The readership has grown tremendously and the information available there has as well.  I encourage anyone interested in land to subscribe to LandThink.

There was a great deal of valuable information presented during the Summit and some of it will be made available.  As it becomes available, I will be directing you to some of it.  There was a great deal of insight into the market that should be interesting to all.

Everybody that I know wants an answer to that question.  Nobody that I know has a firm grasp on anything that can totally predict it.  There are simply too many variables for that to be a “known.”  But, that does not stop us from giving it a go.  Those of us that consider ourselves land professionals like to think we can predict the market.  I’ve got a feeling that those people we dispense our knowledge upon look at it with slightly more doubt than the prognostications they hear from their local meteorologist during the evening news. However, as professionals do, we push onward.

Beginning in the Spring of this year, LandThink.com conducted an online survey of buyers and sellers of land.  Among the questions posed to the respondents was, “Where do the you think we are in the current land real estate market?”.  The answer from the 860+ respondents was a collective, “I have no idea.”  Just over 21% of those polled think we are currently at the bottom.  Almost 17% thought that the bottom has already passed.  43% think we will find the bottom within the next year, and 18% said that we were not within site of the bottom.  I think this is very similar to the collective of what I hear from customers day in, day out.  It’s not uncommon for me to spend 15 minutes on the phone with someone that is completely convinced we are headed for a deep, deep depression.  I think some of this is gamesmanship in trying to get a better deal though.  I also spend a great deal of time talking with those that think the worst is behind us and are thinking of dipping their toes back in the water of real estate investment.  Ironically, uncertainty about the market keeps driving the uncertainty of the market.  It makes one think that knowing for certain the market is still headed down might somehow give us a better map out of the entire mess.  Indeed, I know another land broker that, about a year ago, told me, “I’m ready for the market to go ahead and fall off the cliff.  Then we can sort it out.”  I’m not so Gung-Ho on his notion, but I can almost see the logic.

Yesterday, at the LandThink Summit, Mr. Barry Gittleman of John Wieland Homes and Neighborhoods, dissected the Atlanta metro area residential market to us.  Using data from the MLS there and in-house sources he presented the numbers in such a fashion that would lead you to believe that the low point in that market is in sight, but not past, and that Spring 2011 should see some improvement…however slight.  In that the land market has tended to lag behind the residential markets and has been infinitely less volatile, I think that it is logical to conclude that those land markets that are so heavily influenced by those living in the Atlanta area are going to continue to be remarkably flat.  Once there is significant improvement in the residential market there, look for the land market to improve marginally within a few months.  I would imagine this to be true for the influence on land prices around any major metropolitan area.  Indeed out West, where some of the first severe corrections occurred in the residential market, and have since began a rebound, you can see an uptick in the land market as well.

Specific to my area here in East Central Alabama, we have a great deal of influence from Atlanta and Birmingham.  Birmingham did not quite reach the highs that Atlanta did during the boom and has not seen the same kind of lows that Atlanta is now suffering.  That has served to temper the market here in rural East Central Alabama in comparison to what it would have been had Atlanta been our only metro-area influence.

Timberland and timber markets were also discussed heavily at the LandThink Summit.  Unlike some of our other discussions, the general thoughts on timber markets were more positive and had less uncertainty.  This leads to a more predictable timberland market.  One of the most notable pieces of information that I gleaned from the discussion yesterday was that paper companies were back into the land market…as buyers.  This definitely signals that there has been enough of a price correction on timberland properties to make the managers and economists with those companies think owning land for growing trees might be profitable again.  Private investors should take note of this.  With the more specific management a private investor can provide on a property, he should be able to squeeze out a profit, even when the institutional investors cannot.  This represents opportunity.

The timber markets are being strengthened from the bottom.  The more uses there are for a particular commodity, the more demand there should be for it.  Biomass and biofuels are beginning to put a bottom-certain in the pulp markets.  While both biomass and biofuels can use forest refuse in production, it may be more cost effective to use pulp as an input that is currently easier to transport and more consistent.  In the future I see both pulp and forest waste being substituted for one another in these production processes.  This gives the timberland owner the opportunity to extract some value from forest waste that has traditionally gone unused and has even been a net cost to the owner due to clean-up.  This, in turn, helps the value of timberland.  There were several other ideas presented that indicated a favorable outlook in the timber markets.  I will leave that to someone more qualified than I to present.

The general notion that I took from the discussions was favorable for timberland investments.  The low cost of money right now figures heavily into this.  For private investors, the Farm Credit lending cooperatives are offering fairly good financing terms and ultra-low rates on good timberland properties.  They are also in tune with the production cycle of timberland and are willing to work with those cycles in your repayment plans.

So, here we go.  The answer to the million dollar question.  Maybe.  Timberland is a buy.  If you have some holding power, transitional lands (land that is moving from one use to another due to market forces)  purchased at current markets will look like great investments in 5-10 years.  If you are someone looking to buy 40-100 acres in the country that you will use for a retirement homesite or getaway place, and have the funds for a 20% down payment, I think now is a good time to make that investment.  I do not foresee a significant drop in prices on the horizon.  I see the general market staying flat for a couple years…but not interest rates.  Fortunes are made by those who buy low and sell high.  Today represents an opportunity to buy low with cheap funds.  Can you buy lower tomorrow?  Maybe…but not alot.  Will you be able to borrow money tomorrow as cheaply as today?  Not likely.   If you have been waiting for someone to tell you it’s time…It’s time.

In a year from now, you will know if you can look back at me as someone who is “Land Smart” or not!  Until then, it’s just an educated guess.  Just like the weatherman.

September 30, 2010 was a landmark day for those in the rural land business. Over 250 land professionals gathered in Atlanta to discuss the current rural land market at the first-ever LandThink Summit.

Industry experts shared insights on a variety of land-related topics ranging from the opportunity to purchase deeply-discounted developed lots in metropolitan areas to evaluating potential timberland acquisitions of 15,000+ acres.

One of the main questions on the minds of the attendees and a topic addressed by most presenters was whether the rural real estate market and the American economy in general, have reached the bottom of the economic downturn. Ryan Folk, founder & CEO of LandThink.com and LANDFLIP.com, presented the results of the LandThink Land Market Survey which polled over 860 land professionals and land buyers as to their thoughts about the land market and the state of the economy. The general consensus from the experts and those responding to the survey is “we are not certain we are at the bottom”. Even given the uncertainty of the American economy, one thing all experts agreed upon is that land is generally a stable investment and there are currently opportunities to make money by purchasing the right property.

In addition to the informative presentations, conference participants enjoyed great food and spent time rubbing elbows with land professionals from 15 states. During breaks and lunch, brokers and agents were working hard for their clients trying to match buyers with properties. Throughout the Summit several items and a trip were auctioned to raise money for St. Jude’s Hospital.

The highlight of the day was the presentation by legendary football coach Bobby Bowden. Coach shared some inspirational thoughts about what it takes to be successful in life and in business. He masterfully related football stories and illuminated the important principles “his boys” learned and how those same lessons are applicable off the field.

Most participants believe the event was a wise investment and there is a buzz of enthusiasm about what the LandThink team has in store for us next year. A big thanks goes out to all of the sponsors, presenters, and participants that came together to make the Landthink Summit 2010 a huge success.

Stay tuned for more post Summit highlights over the coming days and weeks.

As a real estate broker in Georgia, I’ve sold land all over the state. And everywhere I go these days, I always seem to get asked the same question, “How’s the land market?” That is the hardest question to answer for a broker who sells investment property. Do you say the market is not doing well and prices are declining, which will probably result in losing a sell? Or do you tell them land seems to be stable and will likely not take the same dive that the residential market took? The only way I can answer this question is to break rural land into three categories: timberland, recreational property, and farmland. After reading my opinions on each, you the buyer, can make your own decisions.

Timberland
By timberland, I am referring to land with planted pine or hardwood stands of timber that are purchased for the sole purpose of harvesting timber. Timberland is usually purchased by putting a value on the dirt and then adding the value of the timber to come up with a purchase price. In Georgia, we saw timberland investors paying as high as $1,200 per acre for dirt as recent as 2007. Today’s market is very different. It seems the only buyers for timberland are TIMOs (Timber Investment Management Organization) or pension funds. These investors are looking to pay no more than $500 to $700 per acre for dirt, which is a substantial decrease in value from the height of the market in 2006. One could make the argument that these types of buyers are only bottom feeding and using their cash position to take advantage of the market. My argument is if the TIMOs and pension funds are the only ones in the market that are looking to by large tracts of timberland for investment, then the price they are willing to pay is the market.

So what do I tell my clients about timberland? The timberland market has not only been hurt by the collapse of the construction industry, but it has also been hit hard by other countries importing quality lumber into the U.S. The timber market will eventually come back. And even though it seems like the industry is in the tank and there is no cure in the near future, timber prices won’t stay depressed forever. I do caution my clients on what they should be willing to pay for dirt, as I think we’ll see a rebound in timber long before we see dirt on the rise again. If you’re interested in buying timberland, just look at its history. Timberland seems to have its ups and downs, but more times than not it has turned out to be a good investment for diversifying your portfolio – assuming you have staying power.

Recreational Property
Recreational property is property which is purchased for the use of hunting, fishing, riding, or some other type of enjoyment. Perhaps the hardest hit market in the land industry today, this type of property became very popular during the real estate boom. Most people lost site of the investment aspect of land and began to pay anywhere from $3,500 to as much as $6,000 per acre for quality hunting and recreational tracts. Most of the people who purchased them will make the argument that the properties were improved; therefore, they can justify the price they paid. With the turn in the economy, many buyers now think these properties were over improved. What’s the use of having a 10,000 sqft lodge for a family who just wants to hunt, and how much is it going to cost to keep the place up? These are questions buyers are now asking themselves.

What do I tell buyers that call me looking for recreational property? My advice is to make sure the property you are buying is something that you will be happy with for a minimum of 10 years, and be very careful on how much of a premium you are willing to pay for improvements that do not produce income. Buyers also have to accept the fact that there is a good chance they will see comparable properties sell for less than what they paid as the industry works through finding the new value of recreational property.

Farmland
The third and final category is farmland. Irrigated farmland has declined some in value, but not as much as timberland and recreational land. This is due to high commodity prices, the income that farmland generates for its owners. Will commodity prices hold? Who knows. Will the current administration do away with farm subsidies? These are major factors in determining the value of farmland.

Farmland could turn out to be a great investment for those who have purchased it based on a percentage of income vs. purchase price. Though farmland has its risks and the returns are usually only around 4% to 6%, it has proven to be a safe bet for those who are looking for yearly income and a hard asset that will not disappear like some stocks have over the past few years. Farmland will probably continue to decrease slightly in price, but if you find property you like, are happy with the income it produces, and you want to buy land, then farmland seems to be as safe as any other investment in this mess of an economy.

When buying land in today’s market, the best advice that I can offer is to use common sense and some basic math, and have long term staying power. The days of flipping land are gone for awhile. Feel good about what you are doing. No one will know when we are at the bottom until the bottom is six months to a year behind us. Invest wisely and do your due diligence before you buy.

The following statistics are based on our company-wide properties that are currently under contract. In an effort to paint a realistic picture of the state-wide market while not disclosing all of our sales information, I can say these figures are based on more than 20 pending transactions.

The average asking price on tracts over 15 acres that we currently have under contract is $2147 per acre. (Geographically these tracts spread from Auburn west to the Mississippi line.)

The average asking price on tracts smaller than 15 acres currently under contract is $6761 per acre. (These tracts are all located from Montgomery east toward the Georgia line.)

Average property size currently under contract: 80.01 acres.

Percentage of tracts pending that are over 200 acres: 13.1%

My Interpretation

1. Smaller mini-farms are still selling at considerably higher prices per acre than large tracts.

2. Large tracts in excess of 200 acres are selling much more slowly than smaller properties.

3. The sweet spot for rural land is currently 40 to 100 acres, with the average selling price state-wide around $1500 to $2500 per acre depending on the location. We typically see lower prices on the west side of the state and higher prices closer to Auburn and the Atlanta market. The prices seem to be remaining higher on properties near Birmingham and close to Huntsville.

I firmly believe that properties that are priced well in the current market can sell quickly.