With recently reported U.S. housing starts markedly higher in September, above one million for the sixth month in a row and beating the estimates of 1.15 million by analysts at Reuters handedly, U.S. Economic Outlook data forecasting 16 percent growth through Q4 2016 appears well within reason. In the country’s biggest home construction markets down south, housing starts hit their highest level since late 2007, with groundbreakings in the west following suit. According to a recent Bloomberg Business interview with Stan Humphries, Chief Economist for online real estate database giant Zillow, we are seeing a consistent cyclical progression towards more lending to home buyers, with more lending occurring under the 640 mark, and some banks now even going well below the 20 percent down payment requirement, even on non-FHA mortgages.
This view of the housing market in the U.S. is roundly confirmed by the recent Mortgage Bankers Association study, which sees demand rising to over 1.6 million units a year within a decade, as household formation becomes driven by significant demographic changes linked to net international migration, which should account for nearly 14 million new households on its own. Baby Boomers will also continue to play a major role, accounting for nearly 13 million more households of age 60 and over in 2024 than there are today. Some of the strongest housing growth the country has ever seen is set to take place in the coming decade according to the MBA study, and that’s what makes a well-positioned real estate investment outfit like ROI Land Investments (OTCQB: ROII) really stand out, with its focus on acquiring greenfield acreage in choice regional markets. This is acreage that is unencumbered by zoning restrictions and is therefore wide open to being developed intelligently, and in a cost-effective manner.
ROII’s approach to the market is dynamic, yet simple – with infrastructural build outs of the high quality housing units being sourced to trusted local construction companies, and the company handling the acquisition, permitting, as well as sale of units. The company has posted a banner year so far in 2015 too, starting with early successes in Kitimat, British Columbia. The Kitimat project is a 93-unit, 170,000 square foot ROI infrastructure and land agreement near the site of LNG Canada’s liquefied natural gas project, which has an estimated potential peak workforce of 7,500 people. LNG Canada is a major JV operation comprised of Royal Dutch Shell’s (NYSE: RDS.A) Canadian affiliate, and affiliates of PetroChina (NYSE: PTR), Mitsubishi (TYO: 8058), and Korea Gas (KRX: 036460). This development shows signs of a very profitable future for the company in Canada and especially in British Columbia’s burgeoning LNG regions.
With 35 of the units at the Kitimat project (a mixture of apartments and townhouses) earmarked specifically for LNG Canada plant staff, the future does indeed look bright for ROII as Canada’s energy sector continues to provide substantial impetus for new housing construction. This latest addition to the company’s portfolio of projects in Canada adds nicely to a growing list of brilliantly chosen targets. We’re talking about targets such as the company’s 1.971 million sq. ft. development of the only low density project in the booming city of Beauport, Quebec, as well as another project located in British Columbia, where demand from regional LNG infrastructure activity has created substantial demand for apartments and townhouses, particularly in the area around Terrace.
Similar underlying energy sector-related economic factors have led to ROII’s latest project here in the U.S., with a binding agreement just recently signed for a 250-acre residential development project 40 miles north of Houston, in Montgomery County, near Conroe. The Dallas/Ft. Worth and Houston areas have added nearly 400,000 new energy and tech sector jobs combined over the last two years according to the latest edition of bedrock industry outlook, Emerging Trends in Real Estate, published by PricewaterhouseCoopers. Conroe is also the only city in the Houston area with a population over 50,000 to make the U.S. Census’ top 15 list of fastest growing cities, and Conroe saw just over 5 percent population growth between 2013 and 2014. Montgomery County is also a key regional transportation hub, with a superb school district that has new middle and high schools opening in the next few years as well as a higher household income on average in Conroe than the greater Houston area, which paints a very bullish portrait for this latest acquisition target.
National Association of Home Builders (NAHB) Chief Economist, David Crowe, pointed out some more positive indicators of the underlying health and trends of the U.S. housing industry, as part of the NAHB’s Fall Construction Forecast Webinar. Crowe indicated that total U.S. employment at well above the 2008 peak, at 142 million, and home equity having nearly doubled since 2011, to around $12.5 trillion, are both very encouraging signs. Crowe also noted that one of the only big concerns, was a majority of builders reporting that the cost and availability of labor continues to be a significant problem.
This is not the case for a well-respected local construction company up in Evans, Colorado known as Baessler Homes though, with whom ROII entered into a binding agreement back in July, to sell Baessler around a third of the company’s massive 237-acre development project outside Denver. The rapid growth of Colorado’s economy, which has outpaced the national average for the last two years and which is underscored by population growth that has made Colorado the third fastest growing state in the country over the past five years, are a big green light for ROII. The Evans acquisition also includes some 1,168 shares of water to service the 1,200 lots, an extremely valuable additional element of the deal in this case, and the company intends to do a mix of single and multifamily housing units at the project. There is even a new school being built adjacent to this sizeable property. Evans is right near Greely, the metropolitan area which posted the largest year-over-year employment growth in the state this May, at 5.1 percent. The University of Colorado’s Leeds School of Business sees job growth within the state continuing to accelerate throughout 2015 across all major employment sectors (except information).
An MOU signed with Dubai-based PNC Investments in July has also set ROII up for its first excursion into Middle East real estate markets, via a 300-apartment project in the heart of the city, at a $4 billion mixed-use development. Just three miles from the world’s tallest building, the internationally famous Burj Khalifa mall, ROII’s Dubai project is a stunning example of management’s due diligence and nose for well-timed plays. Even when the project is halfway around the world, ROII can smell choice demographics and regional growth factors. But this is no surprise considering the corporate culture at ROI Land Investments, where founders Cliche and Treminio have worked very hard to foster a passionate pursuit of land development excellence. Excellence that is informed by senior management’s decades of hands-on industry experience, as well as their networks of tightly-knit relationships stretching across the sector. The company’s footing in the construction, land acquisition and real estate development worlds is rivaled only by its adroitness in the world of finance, with several members of senior management having a long track record of success, such as VP of IR, Martin Scholz, who was a qualified financial consultant at Deutsche Bank for 20 years, and a regional director of the mobile sales force.
Co-founder and VP of strategic planning for ROII, Antonio Treminio, in particular, has more than two decades of experience under his belt in the financial markets, and his specialty has been driving corporate financing initiatives for private and public companies. Such experienced management is one major reason why the company has been so successful obtaining the financing to continue its aggressive development schedule, raising $9 million since May to power through a robust, diversified portfolio of early-stage developments, which represent a real underserved niche in the real estate market.
Little wonder then that equity research contributor for Thomson First Call, Capital IQ, FactSet, and Zack’s, small and microcap-focused independent equity research/corporate access firm, SeeThruEquity, recently initiated coverage of ROII in September with a 12-month price target of $4.52. SeeThruEquity has ROII pegged as a high-powered, equity-based conduit for taking advantage of significant potential rewards that have opened up through ongoing changes in the underlying dynamics of the residential housing market.
To take a closer look, visit http://www.roilandinvestments.com
