1 00:00:10,080 --> 00:00:14,160 Speaker 1: Hello, and welcome to another episode of the Odd Lots podcast. 2 00:00:14,280 --> 00:00:17,599 Speaker 1: I'm Joe Wisenthal and I'm Tracy Alloway. Tracy, you know, 3 00:00:17,640 --> 00:00:20,560 Speaker 1: we've talked a lot about the home builders, and uh, 4 00:00:20,680 --> 00:00:23,120 Speaker 1: you know, this is the factors that go into building 5 00:00:23,120 --> 00:00:26,920 Speaker 1: at home, the supply chain, prune, the effect of rates. 6 00:00:27,320 --> 00:00:30,319 Speaker 1: We've seen this big collapse in a single family home 7 00:00:30,360 --> 00:00:33,479 Speaker 1: construction over the last year since rate hikes. But there's 8 00:00:33,520 --> 00:00:37,919 Speaker 1: a pretty big component of housing that we that that 9 00:00:37,960 --> 00:00:39,800 Speaker 1: I don't think we really hate yet. Yeah, that's right. 10 00:00:39,800 --> 00:00:42,559 Speaker 1: We talk a lot about building the houses, but we 11 00:00:42,640 --> 00:00:46,839 Speaker 1: don't actually talk about securing the land that those houses 12 00:00:46,880 --> 00:00:49,120 Speaker 1: are going to be built on, right, And so like 13 00:00:49,200 --> 00:00:51,599 Speaker 1: this is also like a pretty big element. And if 14 00:00:51,640 --> 00:00:54,680 Speaker 1: you read the transcripts of some of the big publicly 15 00:00:55,120 --> 00:00:58,080 Speaker 1: traded home builders, a lot of the questions they have 16 00:00:58,200 --> 00:01:01,480 Speaker 1: to ask are like, well, what's your strategy with land 17 00:01:01,520 --> 00:01:05,039 Speaker 1: acquisition right now? Because you can't build if you don't 18 00:01:05,080 --> 00:01:07,680 Speaker 1: have more land. But on the other hand, like that's 19 00:01:07,680 --> 00:01:10,840 Speaker 1: a big capital cost, you're bringing that onto your balance sheet, etc. 20 00:01:11,400 --> 00:01:13,080 Speaker 1: I doubt they want to just have like tons of 21 00:01:13,160 --> 00:01:16,360 Speaker 1: land sitting around. So the question of like thinking about 22 00:01:16,360 --> 00:01:19,759 Speaker 1: acquiring land for housing is like a pretty big dimension 23 00:01:20,120 --> 00:01:22,720 Speaker 1: of like the adequate housing story totally. And it also 24 00:01:22,760 --> 00:01:26,080 Speaker 1: taps into a lot of other big picture questions like 25 00:01:26,560 --> 00:01:29,560 Speaker 1: what are the best markets to actually build in? Do 26 00:01:29,640 --> 00:01:33,840 Speaker 1: people take into account maybe climate change considerations places that 27 00:01:33,880 --> 00:01:35,679 Speaker 1: are popular now, you know, you think of some of 28 00:01:35,680 --> 00:01:38,720 Speaker 1: the Sun Belt states, Artha's going to be viable markets 29 00:01:38,760 --> 00:01:42,080 Speaker 1: in the future. Yeah, all kinds of questions like that. 30 00:01:42,240 --> 00:01:45,280 Speaker 1: So I want to like talk about the land decision 31 00:01:45,360 --> 00:01:47,480 Speaker 1: because you know, again, you know, we talked about the 32 00:01:47,520 --> 00:01:50,000 Speaker 1: rate hikes. So one of the things that we've seen 33 00:01:50,040 --> 00:01:53,000 Speaker 1: with the rate hikes is that actual like physical building 34 00:01:53,000 --> 00:01:55,040 Speaker 1: and supply it seems to be pretty sensitive and we've 35 00:01:55,040 --> 00:01:59,400 Speaker 1: seen this to drop in the amount of new homes built. 36 00:01:59,520 --> 00:02:02,880 Speaker 1: But I don't know anything about like how sensitive land 37 00:02:02,920 --> 00:02:06,360 Speaker 1: decisions are to rate hikes and how fast that they 38 00:02:06,400 --> 00:02:09,840 Speaker 1: can respond and how fast new land could be acquired, 39 00:02:09,840 --> 00:02:12,080 Speaker 1: because that seems like a pretty big process. Well, the 40 00:02:12,120 --> 00:02:14,040 Speaker 1: other thing I would say is this is just an 41 00:02:14,080 --> 00:02:17,320 Speaker 1: interesting business, the business of securing land that you then 42 00:02:17,400 --> 00:02:20,520 Speaker 1: sell on to home builders for development. And I was 43 00:02:20,680 --> 00:02:23,639 Speaker 1: not aware that this was a business model that existed. 44 00:02:23,720 --> 00:02:26,880 Speaker 1: I kind of assumed that the developers themselves would go 45 00:02:26,919 --> 00:02:28,680 Speaker 1: out and buy the land and then just build it 46 00:02:28,720 --> 00:02:31,200 Speaker 1: and do everything themselves. But that is not the case. 47 00:02:32,040 --> 00:02:34,760 Speaker 1: That is apparently not the case. I didn't even think 48 00:02:34,760 --> 00:02:36,400 Speaker 1: about it that way. I just, oh, there's plenty of 49 00:02:36,480 --> 00:02:38,880 Speaker 1: land out there, you just put up a home. I 50 00:02:38,919 --> 00:02:41,160 Speaker 1: didn't quite figure out. No, there's all these permits and 51 00:02:41,480 --> 00:02:43,720 Speaker 1: regulatory red tape that you have to change to the 52 00:02:43,800 --> 00:02:46,560 Speaker 1: land itself. Okay, Well, we are going to be speaking 53 00:02:46,560 --> 00:02:50,799 Speaker 1: to someone on the land specific side of the question 54 00:02:51,320 --> 00:02:53,400 Speaker 1: in studio with us. We're going to be speaking with 55 00:02:53,520 --> 00:02:57,320 Speaker 1: Chase Emerson. He is the co CEO of Emerson Holdings, 56 00:02:57,320 --> 00:03:01,720 Speaker 1: a boutique land investment group and broke based in Arizona, which, 57 00:03:01,760 --> 00:03:04,040 Speaker 1: as we know, is one of the hottest I guess 58 00:03:04,480 --> 00:03:08,120 Speaker 1: in many ways multiple one of the hottest real estate 59 00:03:08,200 --> 00:03:11,880 Speaker 1: markets in the country about the business of land. So, Chase, 60 00:03:11,960 --> 00:03:13,920 Speaker 1: thank you so much for coming on. Odd lots great 61 00:03:13,919 --> 00:03:16,160 Speaker 1: to be here. Thank you so much. So why don't 62 00:03:16,160 --> 00:03:19,400 Speaker 1: you just a big picture what does Emerson Holdings? Why 63 00:03:19,440 --> 00:03:20,960 Speaker 1: don't you just sort of give us the top line 64 00:03:21,040 --> 00:03:24,480 Speaker 1: view of like where you sit within the housing industry 65 00:03:24,880 --> 00:03:29,000 Speaker 1: big picture with our funds and with investor funds, we 66 00:03:29,120 --> 00:03:32,760 Speaker 1: buy land right on the edge of existing development. We 67 00:03:32,880 --> 00:03:37,320 Speaker 1: then master plan and design a community, obtain all of 68 00:03:37,360 --> 00:03:41,240 Speaker 1: the engineering approvals and permits, and then sell to top 69 00:03:41,240 --> 00:03:45,600 Speaker 1: twenty five national home builders. So my big question, and 70 00:03:45,680 --> 00:03:47,960 Speaker 1: I alluded to it in the intro, but why does 71 00:03:48,000 --> 00:03:52,120 Speaker 1: this business model exist? Like why doesn't a big institutional 72 00:03:52,440 --> 00:03:55,240 Speaker 1: housing developer just buy the land themselves and then build 73 00:03:55,280 --> 00:03:58,760 Speaker 1: on it. It's a really difficult industry for institutional investors. 74 00:03:58,800 --> 00:04:02,200 Speaker 1: So much of it depends on local knowledge and relationships. 75 00:04:02,560 --> 00:04:06,320 Speaker 1: And so while many many institutions have tried buying land 76 00:04:06,360 --> 00:04:10,080 Speaker 1: and having land funds, for example, few have had success 77 00:04:10,120 --> 00:04:13,600 Speaker 1: at that. Looking at the home builders also, home builders 78 00:04:13,840 --> 00:04:17,320 Speaker 1: have typically started to just buy land that has all 79 00:04:17,360 --> 00:04:21,200 Speaker 1: of the final approvals in place, so randomly. This is 80 00:04:21,240 --> 00:04:25,040 Speaker 1: something I was talking about with farmers in rural Connecticut 81 00:04:25,080 --> 00:04:27,040 Speaker 1: about a week ago, which is how do you go 82 00:04:27,080 --> 00:04:29,840 Speaker 1: about identifying land that's for sale? And there are all 83 00:04:29,839 --> 00:04:32,360 Speaker 1: these secret ways that they were telling me about, like 84 00:04:32,440 --> 00:04:35,799 Speaker 1: looking up on local hunting registries to see who owns 85 00:04:35,839 --> 00:04:38,640 Speaker 1: the land, because you can contact people and say can 86 00:04:38,680 --> 00:04:40,880 Speaker 1: I hunt on your land? And so that's a way 87 00:04:40,880 --> 00:04:43,159 Speaker 1: of getting in touch with people. So when you say 88 00:04:43,279 --> 00:04:46,159 Speaker 1: you need local knowledge for the market. Is that the 89 00:04:46,240 --> 00:04:49,120 Speaker 1: kind of thing that you're thinking of. Yeah, exactly, when 90 00:04:49,120 --> 00:04:52,320 Speaker 1: someone goes to sell, oftentimes they'll look at who a 91 00:04:52,400 --> 00:04:56,640 Speaker 1: large landowner is in the area, or a broker will 92 00:04:56,680 --> 00:04:59,200 Speaker 1: have a lead on who may be interested in selling, 93 00:04:59,640 --> 00:05:01,640 Speaker 1: and want to be the first person that they call 94 00:05:01,720 --> 00:05:05,000 Speaker 1: with that opportunity. Talk to us a little bit more 95 00:05:05,160 --> 00:05:08,960 Speaker 1: about the perspective of the home builders themselves, and like, 96 00:05:09,320 --> 00:05:11,880 Speaker 1: I guess my question is, like what business you know? 97 00:05:11,920 --> 00:05:14,719 Speaker 1: I guess modern capitalism is all about finding like the 98 00:05:14,800 --> 00:05:18,200 Speaker 1: specific business that you're in and then outsourcing as many 99 00:05:18,240 --> 00:05:20,960 Speaker 1: sort of like peripheral businesses to third parties. And so 100 00:05:21,040 --> 00:05:25,200 Speaker 1: in their view, land acquisition land development is not the 101 00:05:25,200 --> 00:05:27,919 Speaker 1: business that they're in. Obtaining permits from the local authorities 102 00:05:28,080 --> 00:05:30,839 Speaker 1: is not the business that they're in. Talk to us 103 00:05:30,839 --> 00:05:33,560 Speaker 1: a little bit more about like that relationship and what 104 00:05:34,839 --> 00:05:37,599 Speaker 1: service you provide. Yeah, there's been an evolution in the 105 00:05:37,600 --> 00:05:41,600 Speaker 1: way that homebuilders buy land. Before the Great Financial Crisis, 106 00:05:42,000 --> 00:05:45,760 Speaker 1: builders would go on the periphery and purchase large tracts 107 00:05:45,800 --> 00:05:49,960 Speaker 1: of land, often without the approvals in place, and many 108 00:05:49,960 --> 00:05:53,360 Speaker 1: of them got burned. For example, we just purchased a 109 00:05:53,440 --> 00:05:56,240 Speaker 1: property that a home builder paid one hundred million dollars 110 00:05:56,279 --> 00:06:00,479 Speaker 1: for sent tax homes before the downturn. We purchased it 111 00:06:00,520 --> 00:06:02,640 Speaker 1: for just over ten million, just to give you a 112 00:06:02,720 --> 00:06:05,680 Speaker 1: fi for some of the mistakes that the builders had made. 113 00:06:06,000 --> 00:06:09,920 Speaker 1: But today builders are just trying to buy land that 114 00:06:10,000 --> 00:06:12,960 Speaker 1: has all Just to be clear, this was one hundred 115 00:06:12,960 --> 00:06:15,320 Speaker 1: million dollar land track purchase that was made in what 116 00:06:15,400 --> 00:06:17,839 Speaker 1: two thousand and seven, two thousand and six, two thousand 117 00:06:17,839 --> 00:06:19,919 Speaker 1: and six, and today, after all of this and the 118 00:06:19,960 --> 00:06:22,200 Speaker 1: housing recovery and anything, you were able to get it 119 00:06:22,240 --> 00:06:25,640 Speaker 1: for ten millions. Yes, exactly, So that really Man two 120 00:06:25,880 --> 00:06:30,159 Speaker 1: six was crazy. So you know you mentioned the permits 121 00:06:30,200 --> 00:06:33,760 Speaker 1: and regulation. Walk us through what does the process actually 122 00:06:33,839 --> 00:06:38,120 Speaker 1: look like. Say you identify you know it's currently farmland, 123 00:06:38,480 --> 00:06:41,480 Speaker 1: it's being used to grow alfalfa, and you buy it. 124 00:06:41,720 --> 00:06:43,520 Speaker 1: How do you go through the next steps and what 125 00:06:43,560 --> 00:06:45,960 Speaker 1: do those steps look like? How long does it take? Yeah? 126 00:06:46,040 --> 00:06:49,080 Speaker 1: So the first step is rezoning. So oftentimes there'll be 127 00:06:49,120 --> 00:06:51,720 Speaker 1: a holding category for the land. It may have one 128 00:06:51,760 --> 00:06:55,000 Speaker 1: acre zoning and so typically it's up zoning it for 129 00:06:55,120 --> 00:06:58,440 Speaker 1: more density. So the first step is rezoning. The next 130 00:06:58,480 --> 00:07:01,479 Speaker 1: step is what's called preliminary plat and that is the 131 00:07:01,560 --> 00:07:06,679 Speaker 1: early engineering rough engineering for roads, for infrastructure, A PLAT 132 00:07:06,800 --> 00:07:09,440 Speaker 1: is a document that gets recorded on the land showing 133 00:07:09,520 --> 00:07:13,120 Speaker 1: lots and infrastructure, and then the final step is the 134 00:07:13,160 --> 00:07:18,120 Speaker 1: final engineering, which is called final plat. And how long 135 00:07:18,200 --> 00:07:20,800 Speaker 1: is this whole process? So the reasoning process can take 136 00:07:21,000 --> 00:07:24,120 Speaker 1: twelve to eighteen months. If it's political, it can take longer. 137 00:07:25,400 --> 00:07:28,680 Speaker 1: The prelimary platting and final plotting process can also take 138 00:07:29,080 --> 00:07:31,680 Speaker 1: eighteen to twenty four months, So there's a long lead 139 00:07:31,720 --> 00:07:35,320 Speaker 1: time before land can be converted from agricultural land to 140 00:07:36,120 --> 00:07:39,120 Speaker 1: land that has final approvals. So it sounds like you 141 00:07:39,200 --> 00:07:42,040 Speaker 1: do some of the urban planning almost for a lot 142 00:07:42,120 --> 00:07:44,840 Speaker 1: of these developments, like you decide where the roads are 143 00:07:44,880 --> 00:07:48,800 Speaker 1: going to be and the basic look of the development. Correct. Yeah, 144 00:07:48,840 --> 00:07:54,920 Speaker 1: depending upon the municipality. Sometimes you're even setting exact park details, amenities. 145 00:07:55,920 --> 00:08:00,200 Speaker 1: You're definitely saying lot sizes, community design, and that it's 146 00:08:00,280 --> 00:08:02,920 Speaker 1: very early in the process. Why don't the homebuilders want 147 00:08:02,920 --> 00:08:05,080 Speaker 1: to be in that because you'd think that's something like, well, 148 00:08:05,080 --> 00:08:08,000 Speaker 1: what is the design of our community that we're building, 149 00:08:08,240 --> 00:08:11,680 Speaker 1: what's it going to look like, what kind of amenities, parks, etc. Intuitively, 150 00:08:11,720 --> 00:08:13,080 Speaker 1: I would think that would be the kind of thing 151 00:08:13,280 --> 00:08:16,000 Speaker 1: homebuilders would want. Like you work closely with them, do 152 00:08:16,080 --> 00:08:18,640 Speaker 1: they tell you generally the sort of trends that are 153 00:08:18,720 --> 00:08:20,920 Speaker 1: like going on in that direction. Yeah, we have close 154 00:08:20,960 --> 00:08:23,400 Speaker 1: relationships with the homebuilders and get their feedback early in 155 00:08:23,440 --> 00:08:27,720 Speaker 1: the process with preferred builder buyers, but we maintained control 156 00:08:27,720 --> 00:08:31,160 Speaker 1: of that process. Typically, sometimes the homebuilder will enter into 157 00:08:31,240 --> 00:08:33,560 Speaker 1: escrow with the land seller and then they will control 158 00:08:33,640 --> 00:08:36,000 Speaker 1: that process. So I want to go back, you know, 159 00:08:36,360 --> 00:08:39,000 Speaker 1: I'm still like blown away that there is a piece 160 00:08:39,000 --> 00:08:41,120 Speaker 1: of land that sold for one hundred million in two 161 00:08:41,120 --> 00:08:44,000 Speaker 1: thousand and six that's still just worth still sold for 162 00:08:44,080 --> 00:08:47,080 Speaker 1: ten millions. Talk to you know. Obviously, one of the 163 00:08:47,120 --> 00:08:52,240 Speaker 1: biggest themes of this podcast is scars from downturns and 164 00:08:52,280 --> 00:08:55,079 Speaker 1: how they affect behavior for years and years and years. 165 00:08:55,400 --> 00:08:57,560 Speaker 1: So if you have these homebuilders that in two thousand 166 00:08:57,559 --> 00:09:00,800 Speaker 1: and six spent egregious amounts of land that they were 167 00:09:00,880 --> 00:09:04,520 Speaker 1: underwater on for fifteen years maybe forever, talk to us 168 00:09:04,559 --> 00:09:07,840 Speaker 1: a little bit more about like how that informs still 169 00:09:08,000 --> 00:09:13,120 Speaker 1: today or up until recently, home builder decisions about land purchases. Yeah, 170 00:09:13,160 --> 00:09:15,679 Speaker 1: it really has impacted the home builder's outlook on how 171 00:09:15,760 --> 00:09:18,920 Speaker 1: much supply they should keep at any given time, and 172 00:09:19,080 --> 00:09:21,959 Speaker 1: I think that we're setting up for a shortage of 173 00:09:22,000 --> 00:09:28,880 Speaker 1: developable lots given their narrower outlook. For example, Meritage Homes 174 00:09:28,920 --> 00:09:31,400 Speaker 1: said that they have four and a half years of supply, 175 00:09:31,920 --> 00:09:35,160 Speaker 1: but that's based on current levels of demand, and so 176 00:09:35,360 --> 00:09:39,480 Speaker 1: if home sales increase, that supply drops from four and 177 00:09:39,480 --> 00:09:59,600 Speaker 1: a half years to perhaps three years. You know, you 178 00:09:59,640 --> 00:10:03,840 Speaker 1: mentioned in political tension, and I have to ask nimbiism 179 00:10:04,080 --> 00:10:07,360 Speaker 1: must be a big part of your business, I would expect, 180 00:10:07,640 --> 00:10:10,400 Speaker 1: like dealing with people who don't necessarily want to see 181 00:10:10,480 --> 00:10:15,440 Speaker 1: large scale residential developments next door. Absolutely. Yeah. Cities and 182 00:10:15,480 --> 00:10:19,280 Speaker 1: towns go through evolutions of being pro growth, and then 183 00:10:19,440 --> 00:10:23,359 Speaker 1: once a certain amount of residents live there, the mentality 184 00:10:23,400 --> 00:10:26,880 Speaker 1: can shift, and so sometimes you get city leadership that 185 00:10:26,920 --> 00:10:30,959 Speaker 1: will push for what's called executive housing or larger lots, 186 00:10:31,400 --> 00:10:34,880 Speaker 1: and that can really hurt housing affordability. Has there been 187 00:10:34,920 --> 00:10:38,160 Speaker 1: a change over time, as you mentioned Meritage, right now 188 00:10:38,240 --> 00:10:40,599 Speaker 1: they say, Okay, we have four and a half years 189 00:10:40,640 --> 00:10:43,960 Speaker 1: of spare capacity to build more homes at current demand 190 00:10:43,960 --> 00:10:46,120 Speaker 1: loals we don't know. Demand might go up, demand might 191 00:10:46,160 --> 00:10:51,440 Speaker 1: go down, etc. Do those trends change over time? And 192 00:10:51,880 --> 00:10:54,960 Speaker 1: do homebuilders generally have like targets? Do they try to 193 00:10:55,040 --> 00:10:57,120 Speaker 1: match each other? Do they all want to be within 194 00:10:57,280 --> 00:11:00,240 Speaker 1: some range? Is there a number that investors like to 195 00:11:00,360 --> 00:11:03,400 Speaker 1: hear that's optimal these days? Yeah, the home builders are 196 00:11:03,400 --> 00:11:07,240 Speaker 1: typically very conservative in their underwriting. They plan for two 197 00:11:07,280 --> 00:11:11,680 Speaker 1: to three homes per subdivision per month, and so if 198 00:11:11,760 --> 00:11:19,960 Speaker 1: you consider that builders need to plan for just two 199 00:11:19,960 --> 00:11:22,400 Speaker 1: to three months of housing, sometimes they can get be 200 00:11:22,400 --> 00:11:25,320 Speaker 1: caught flat footed. Sorry, could you explain that I didn't 201 00:11:25,400 --> 00:11:27,160 Speaker 1: quit get when you say they planning for two or 202 00:11:27,200 --> 00:11:30,160 Speaker 1: three months per subdivision? Can you? Sorry? I didn't quite 203 00:11:30,200 --> 00:11:32,679 Speaker 1: understand why that. Yeah, So two to three homes per 204 00:11:32,720 --> 00:11:36,000 Speaker 1: subdivision per month is typically what a builder will underwrite 205 00:11:36,240 --> 00:11:39,439 Speaker 1: a new land acquisition at, so they assume a certain 206 00:11:39,480 --> 00:11:43,559 Speaker 1: sales level. Okay, but if they only have a few 207 00:11:43,600 --> 00:11:47,120 Speaker 1: years of supply, they can often be caught without existing supply. 208 00:11:47,240 --> 00:11:49,880 Speaker 1: And then you have a land grab where builders try 209 00:11:49,920 --> 00:11:54,960 Speaker 1: to acquire new property and start competing again for land parcels, 210 00:11:54,960 --> 00:11:57,760 Speaker 1: and we're seeing that now in today's market. So, just 211 00:11:57,880 --> 00:12:02,680 Speaker 1: on that note, how do you yourself identify potential purchases? Like, 212 00:12:02,880 --> 00:12:05,880 Speaker 1: what are all the different factors that go into it? 213 00:12:05,880 --> 00:12:09,280 Speaker 1: I assume you're looking at the market overall, the exact 214 00:12:09,280 --> 00:12:12,800 Speaker 1: location of the plot, who you're able to sell it to, 215 00:12:13,240 --> 00:12:18,040 Speaker 1: and maybe the amount of liquidity or financing available for 216 00:12:18,080 --> 00:12:21,719 Speaker 1: those purchases. Yeah, first, all of our acquisitions are cash 217 00:12:21,760 --> 00:12:25,680 Speaker 1: and so, but the main thing we look for is water. 218 00:12:25,880 --> 00:12:28,760 Speaker 1: In Arizona, it's critical to have in a shured water supply. 219 00:12:29,360 --> 00:12:33,040 Speaker 1: And while eighteen percent of the land in Arizona is private, 220 00:12:33,440 --> 00:12:36,640 Speaker 1: only a small fraction of that actually has one hundred 221 00:12:36,679 --> 00:12:39,800 Speaker 1: year water supply. Talk to us more about that. So 222 00:12:40,960 --> 00:12:43,440 Speaker 1: if you want to get to go through all of 223 00:12:43,480 --> 00:12:47,040 Speaker 1: the permitting process, what do you have to demonstrate two 224 00:12:47,120 --> 00:12:53,199 Speaker 1: local authorities about water? So there's two different jurisdictions in Arizona. 225 00:12:53,240 --> 00:12:56,400 Speaker 1: There are areas that are known as certificate of as 226 00:12:56,400 --> 00:13:00,000 Speaker 1: shured water supply areas, and in these areas, each individual 227 00:13:00,040 --> 00:13:03,320 Speaker 1: usual developer has to demonstrate that they have one hundred 228 00:13:03,400 --> 00:13:07,360 Speaker 1: year or short water supply for their community. Other areas 229 00:13:07,400 --> 00:13:10,280 Speaker 1: have what's called a designated provider, and that might be 230 00:13:10,360 --> 00:13:13,280 Speaker 1: a city, it might be a private water company, and 231 00:13:13,480 --> 00:13:18,400 Speaker 1: that entity basically gives the landowner there one hundred year designation. 232 00:13:19,640 --> 00:13:24,840 Speaker 1: It's very interesting because it creates different incentives within those areas. So, 233 00:13:24,920 --> 00:13:30,640 Speaker 1: for example, a designated provider area, all demand counts towards 234 00:13:30,679 --> 00:13:35,520 Speaker 1: that allocation. So if it's industrial, if it's multifamily, there's 235 00:13:35,520 --> 00:13:38,360 Speaker 1: a fixed amount of water and everything counts towards that 236 00:13:38,760 --> 00:13:43,600 Speaker 1: total capacity. Within a certificate of a short water supply area, 237 00:13:43,960 --> 00:13:48,240 Speaker 1: only single family residential is counted. So it's a loophole 238 00:13:48,400 --> 00:13:54,040 Speaker 1: essentially where multifamily and industrial can take capacity without any 239 00:13:54,080 --> 00:13:59,240 Speaker 1: allocation for that. That's really interesting. So you mentioned how 240 00:13:59,280 --> 00:14:02,480 Speaker 1: that create sort of different incentives. Just give us a 241 00:14:02,520 --> 00:14:05,960 Speaker 1: little bit more color on what you mean. So, for example, 242 00:14:06,000 --> 00:14:10,000 Speaker 1: there's a city called Castagrande, which is just outside of Phoenix. 243 00:14:10,840 --> 00:14:13,280 Speaker 1: You might be familiar with Lucid Motors, one of the 244 00:14:13,360 --> 00:14:18,080 Speaker 1: large EV manufacturing companies. Casa grand is a certificate of 245 00:14:18,080 --> 00:14:23,080 Speaker 1: a short water supply area, and so it's very difficult. 246 00:14:23,120 --> 00:14:25,960 Speaker 1: Now castagrand is essentially out of water, so it's very 247 00:14:26,000 --> 00:14:28,840 Speaker 1: difficult to start a new subdivision in a place like 248 00:14:28,920 --> 00:14:33,760 Speaker 1: castagrand But you can start a multi family development and 249 00:14:33,880 --> 00:14:39,880 Speaker 1: oftentimes it will look just like a single family subdivision. Oh, 250 00:14:39,920 --> 00:14:43,400 Speaker 1: so you can have something called a multifamily that looks 251 00:14:43,480 --> 00:14:45,880 Speaker 1: like But if you say, but Here's what I don't get. Like, 252 00:14:45,920 --> 00:14:48,280 Speaker 1: if you say they're running out of water, are they 253 00:14:48,320 --> 00:14:50,080 Speaker 1: going to run out of water? Yeah, where's the water 254 00:14:50,200 --> 00:14:51,680 Speaker 1: coming from? It's like I get that, it's like a 255 00:14:51,720 --> 00:14:55,280 Speaker 1: regulatory loophole, but people still need to drink or more importantly, 256 00:14:55,720 --> 00:14:57,680 Speaker 1: and you know, I know there's a lot of semiconductor 257 00:14:58,000 --> 00:15:01,600 Speaker 1: factories being opened up, like Denis mc stronly water intensive 258 00:15:02,000 --> 00:15:05,080 Speaker 1: process to like wash the wafers in the cilicle. Yeah, 259 00:15:05,120 --> 00:15:08,440 Speaker 1: for the semiconductor industry, it is a it is a 260 00:15:08,480 --> 00:15:12,720 Speaker 1: ton of water. For example, Taiwan Semiconductors uses twenty thousand 261 00:15:12,760 --> 00:15:15,760 Speaker 1: acre feet of water per year and just to put 262 00:15:15,800 --> 00:15:22,120 Speaker 1: that into context, that is roughly eighty thousand new homes. Wow. 263 00:15:22,320 --> 00:15:25,240 Speaker 1: But it's a lot of water. But at the same time, 264 00:15:25,480 --> 00:15:28,320 Speaker 1: it's it's not a lot of water if you consider agriculture. 265 00:15:29,000 --> 00:15:33,040 Speaker 1: So agriculture is in Arizona, there's a lot of cotton production, 266 00:15:33,120 --> 00:15:37,640 Speaker 1: for example, and five thousand acres of cotton production is 267 00:15:37,680 --> 00:15:44,080 Speaker 1: equivalent to all of Taiwan semiconductors water capacity. So from 268 00:15:44,080 --> 00:15:48,320 Speaker 1: a sort of like GDP value add my guess is 269 00:15:49,320 --> 00:15:52,440 Speaker 1: maybe let's have less cotton productions right in Arizona and 270 00:15:52,560 --> 00:15:57,760 Speaker 1: more chips exactly. You know, you mentioned that water rights 271 00:15:57,760 --> 00:16:01,560 Speaker 1: are top of mind for you and selecting real estate 272 00:16:02,040 --> 00:16:06,160 Speaker 1: and locations. Has that changed over the years. Has it 273 00:16:06,200 --> 00:16:09,280 Speaker 1: become more difficult to source water to the extent that 274 00:16:09,400 --> 00:16:12,120 Speaker 1: you know, maybe ten or twenty years ago, this wasn't 275 00:16:12,840 --> 00:16:16,680 Speaker 1: as pressing an issue. It's become very difficult to secure water. 276 00:16:16,840 --> 00:16:19,800 Speaker 1: You have to really look at who stands in line 277 00:16:19,840 --> 00:16:22,240 Speaker 1: to get the water and what your legal rights are. 278 00:16:22,480 --> 00:16:24,120 Speaker 1: And that's the very first thing that we look at 279 00:16:24,160 --> 00:16:26,600 Speaker 1: when buying land. And this has been going on in 280 00:16:26,680 --> 00:16:30,240 Speaker 1: Arizona since the very beginning, right, I mean, like, I mean, 281 00:16:30,240 --> 00:16:32,240 Speaker 1: it's the desert. The entire West is like there's no 282 00:16:32,320 --> 00:16:35,920 Speaker 1: water there. So talk to us just like generally about 283 00:16:35,920 --> 00:16:38,560 Speaker 1: like where's that water coming from? Is it piped in 284 00:16:38,640 --> 00:16:42,760 Speaker 1: from elsewhere? Is underground aquifers that are depleting, etc. And 285 00:16:42,960 --> 00:16:44,920 Speaker 1: I mean this is like the history of the American 286 00:16:45,000 --> 00:16:47,640 Speaker 1: West is like fights over this. Yeah. So Arizona has 287 00:16:47,680 --> 00:16:50,760 Speaker 1: two main sources of water. The first is the Central 288 00:16:50,800 --> 00:16:54,320 Speaker 1: Arizona Project, which takes water from the Colorado River. The 289 00:16:54,400 --> 00:16:58,160 Speaker 1: second is we have abundant groundwater. Depending upon which part 290 00:16:58,160 --> 00:17:02,120 Speaker 1: of the Phoenix area you're in, there's more abundant water 291 00:17:02,200 --> 00:17:06,920 Speaker 1: than others, and so that with the Colorado River, we're 292 00:17:07,000 --> 00:17:11,960 Speaker 1: dependent upon allocation from the Colorado River basin states and 293 00:17:12,119 --> 00:17:15,919 Speaker 1: that is more at risk of being cut back, whereas 294 00:17:15,960 --> 00:17:21,480 Speaker 1: with groundwater, it's very abundant and their ancient deposits of groundwater. 295 00:17:22,080 --> 00:17:24,919 Speaker 1: I read an article recently that and I know, like 296 00:17:24,960 --> 00:17:28,040 Speaker 1: all of these states that sort of depend on Colorado 297 00:17:28,240 --> 00:17:34,520 Speaker 1: water or Colorado Colorado River water always like these like negotiations, 298 00:17:34,520 --> 00:17:37,440 Speaker 1: and I have to imagine that like developers in Arizona 299 00:17:37,480 --> 00:17:39,800 Speaker 1: want to see more allocated to Arizona, and developers in 300 00:17:39,880 --> 00:17:42,760 Speaker 1: Nevada wantest be more developed, you know, New Mexico, etc. 301 00:17:43,240 --> 00:17:45,200 Speaker 1: Can you talk a little bit like is there tension 302 00:17:45,400 --> 00:17:47,400 Speaker 1: between the states and how it affects you and how 303 00:17:47,400 --> 00:17:50,520 Speaker 1: it affects your thinking in terms of like who is 304 00:17:50,560 --> 00:17:53,080 Speaker 1: going to get these allocations? And more importantly, you know, 305 00:17:53,080 --> 00:17:55,040 Speaker 1: if I know that the Southwest is like in a 306 00:17:55,080 --> 00:17:58,720 Speaker 1: two decade drought, and this is like what if there 307 00:17:58,760 --> 00:18:00,840 Speaker 1: are cutbacks or if there are say, look, look we 308 00:18:00,920 --> 00:18:03,080 Speaker 1: really need to conserve what is that going to do 309 00:18:03,400 --> 00:18:07,240 Speaker 1: to the ability for these like rapidly growing population states 310 00:18:07,440 --> 00:18:09,560 Speaker 1: to keep growing at the pace that they are. Yeah, 311 00:18:09,600 --> 00:18:13,000 Speaker 1: we still have plenty of water for growth, but much 312 00:18:13,000 --> 00:18:15,760 Speaker 1: of the land in Arizona is not going to be 313 00:18:15,760 --> 00:18:18,119 Speaker 1: developable with water. So that's the first thing that we 314 00:18:18,160 --> 00:18:22,879 Speaker 1: look at. We think that areas that have groundwater versus 315 00:18:22,920 --> 00:18:25,720 Speaker 1: called river water are going to become more and more valuable. 316 00:18:26,240 --> 00:18:29,480 Speaker 1: For example, the city of Maricopa is the eighth fastest 317 00:18:29,520 --> 00:18:32,399 Speaker 1: growing city in the US right now, and that water 318 00:18:32,600 --> 00:18:39,360 Speaker 1: is entirely from groundwater, and not only it's also replenished, 319 00:18:39,440 --> 00:18:41,480 Speaker 1: which is a key thing. So that oh I thought 320 00:18:41,480 --> 00:18:43,480 Speaker 1: it was just going to empty one day. Yeah. So 321 00:18:43,880 --> 00:18:49,400 Speaker 1: basically there's affluent produced by subdivisions, by employment, and this 322 00:18:49,440 --> 00:18:53,520 Speaker 1: affluent is often recharged back into the aquifer or used 323 00:18:53,560 --> 00:18:58,160 Speaker 1: for irrigation. Maricopas where they have that big Rio Verde 324 00:18:58,280 --> 00:19:01,720 Speaker 1: controversy at the moment, right, Yes, rio Verde Foothills is 325 00:19:01,800 --> 00:19:04,280 Speaker 1: just outside of the city of Scottsdale. What is that 326 00:19:04,320 --> 00:19:06,120 Speaker 1: I don't know about this country. This is where it's 327 00:19:06,160 --> 00:19:09,880 Speaker 1: two communities basically fighting over water rights. So rio Verde 328 00:19:09,880 --> 00:19:12,360 Speaker 1: Foothills is an area just outside of the city of Scottsdale, 329 00:19:12,480 --> 00:19:17,200 Speaker 1: and residents have drilled wells, built homes and others who 330 00:19:17,200 --> 00:19:20,119 Speaker 1: were unable to hit groundwater by drilling a well, have 331 00:19:20,280 --> 00:19:23,760 Speaker 1: relied on hauled water, and so basically a truck will 332 00:19:23,840 --> 00:19:27,639 Speaker 1: fill up water from the City of Scottsdale, drive it 333 00:19:27,680 --> 00:19:30,440 Speaker 1: out to these homes and fill up their tank, whether 334 00:19:30,440 --> 00:19:32,480 Speaker 1: it's once every couple weeks or once a moe. It 335 00:19:32,520 --> 00:19:35,919 Speaker 1: sounds insanely costly, but the City of Scottsdale is now 336 00:19:36,320 --> 00:19:39,600 Speaker 1: turning off the tap for those residents. Yeah, so everyone 337 00:19:39,680 --> 00:19:41,640 Speaker 1: is either going to have to drill a private well 338 00:19:41,800 --> 00:19:44,960 Speaker 1: or find water from elsewhere. I mean, people are talking 339 00:19:45,000 --> 00:19:47,879 Speaker 1: about this as the start of the water wars or 340 00:19:47,960 --> 00:19:51,720 Speaker 1: a sort of instance of a preview of the water 341 00:19:51,840 --> 00:19:56,240 Speaker 1: wars to come. I guess a big picture existential question. 342 00:19:56,400 --> 00:20:01,760 Speaker 1: But you develop land exclusively in Arizona, is that business 343 00:20:01,760 --> 00:20:05,400 Speaker 1: model going to be viable, you know, forty years from now? Yeah, 344 00:20:05,400 --> 00:20:07,439 Speaker 1: I think it will be. If you look at the 345 00:20:07,560 --> 00:20:10,960 Speaker 1: water use in Arizona today, seventy two percent is used 346 00:20:10,960 --> 00:20:14,240 Speaker 1: by agriculture, and so when you convert agricultural use to 347 00:20:14,280 --> 00:20:17,679 Speaker 1: residential use, you actually create a lot of savings in 348 00:20:17,760 --> 00:20:21,280 Speaker 1: terms of net water use. So basically like and there 349 00:20:21,480 --> 00:20:23,720 Speaker 1: was I think there's like, isn't one of like the 350 00:20:23,880 --> 00:20:27,040 Speaker 1: huge ELFLFA farms, like it's owned by Saudi Arabia, which 351 00:20:27,080 --> 00:20:30,800 Speaker 1: is their prerogative to like by land, etc. But there 352 00:20:30,840 --> 00:20:33,879 Speaker 1: are like it does seem like building more home Like 353 00:20:34,000 --> 00:20:36,480 Speaker 1: you could probably grow a felfa somewhere else, right, Yeah, 354 00:20:36,560 --> 00:20:40,639 Speaker 1: we're we're leasing roughly ten thousand acres to the Saudi government. 355 00:20:40,720 --> 00:20:42,600 Speaker 1: Even we should have done it. We should have had 356 00:20:42,600 --> 00:20:46,199 Speaker 1: an ELFFLFA farmer in Arizona as the other get We 357 00:20:46,200 --> 00:20:48,679 Speaker 1: should have had two parts and it's like no a 358 00:20:48,800 --> 00:20:52,240 Speaker 1: debate what should Arizona's water be used for? Like housing 359 00:20:52,280 --> 00:20:56,080 Speaker 1: development or elf cell phone? I would have liked that. Well, 360 00:20:56,080 --> 00:20:57,960 Speaker 1: why don't we talk a little bit about what you're 361 00:20:58,080 --> 00:21:00,560 Speaker 1: seeing now? And Joe kind of alluded to it in 362 00:21:00,600 --> 00:21:03,119 Speaker 1: the intro, But we have seen a lot of the 363 00:21:03,119 --> 00:21:07,080 Speaker 1: home builders affected by higher interest rates. Is that something 364 00:21:07,119 --> 00:21:09,760 Speaker 1: that you are feeling on your own business model or 365 00:21:09,840 --> 00:21:12,240 Speaker 1: does it not matter so much because people are still 366 00:21:12,240 --> 00:21:15,119 Speaker 1: buying up land for future development. So stepping back to 367 00:21:15,200 --> 00:21:17,639 Speaker 1: when interest rates went up back in June and July, 368 00:21:18,440 --> 00:21:21,600 Speaker 1: pretty much all of the home builders either extended escrows 369 00:21:21,680 --> 00:21:25,760 Speaker 1: on land transactions or canceled escrows, and so they stopped 370 00:21:25,800 --> 00:21:29,600 Speaker 1: their land buying entirely. They also often stopped their land 371 00:21:29,640 --> 00:21:34,400 Speaker 1: development spending, so parcels they had purchased, they stopped finishing 372 00:21:34,440 --> 00:21:37,399 Speaker 1: some of those lots. We are just starting to see 373 00:21:37,680 --> 00:21:43,240 Speaker 1: builders approved feasibility on deals and move to closing. So 374 00:21:44,160 --> 00:21:48,679 Speaker 1: this is based on strong sales in January. Right, so 375 00:21:48,800 --> 00:21:52,280 Speaker 1: housing is picking up. Did you yourself lose? Did you 376 00:21:52,280 --> 00:21:55,000 Speaker 1: yourself have buyers walk away? At some point in twenty 377 00:21:55,080 --> 00:21:58,840 Speaker 1: twenty two, we had several buyers walk away. Most of 378 00:21:58,880 --> 00:22:02,600 Speaker 1: them asked for extension and we said no, because we 379 00:22:02,640 --> 00:22:06,520 Speaker 1: know that land is in tight supply. Is that just 380 00:22:06,560 --> 00:22:09,040 Speaker 1: a function? I mean, how are they making the decision 381 00:22:09,160 --> 00:22:13,440 Speaker 1: to walk away from these properties? Do you notice any patterns? Yeah? 382 00:22:13,640 --> 00:22:17,320 Speaker 1: I think it's a knee jerk reaction, and there's a 383 00:22:17,359 --> 00:22:22,240 Speaker 1: difference of opinion between the local land acquisition teams and 384 00:22:22,560 --> 00:22:26,800 Speaker 1: their corporate view of the market. The local teams recognize 385 00:22:26,880 --> 00:22:29,040 Speaker 1: the land is in short supply and that they're going 386 00:22:29,119 --> 00:22:32,159 Speaker 1: to have to start buying land again, whereas corporate is 387 00:22:32,200 --> 00:22:37,440 Speaker 1: often issuing decisions to shut down land spend altogether. Right. Yeah, 388 00:22:37,000 --> 00:22:39,439 Speaker 1: I was in a little bit of a prep. I 389 00:22:39,560 --> 00:22:43,160 Speaker 1: was reading the recent earnings call from Poulty Homes Group 390 00:22:43,440 --> 00:22:45,560 Speaker 1: as one does, as one does, And they said in 391 00:22:45,600 --> 00:22:47,800 Speaker 1: the fourth quarter, we walked away from twenty one thousand 392 00:22:47,880 --> 00:22:51,880 Speaker 1: auction plots and associated nine hundred million in future land 393 00:22:51,960 --> 00:22:54,840 Speaker 1: acquisition spend. And as a result of these actions, will 394 00:22:54,880 --> 00:22:57,320 Speaker 1: occurred a pretext charge of thirty one million for the 395 00:22:57,400 --> 00:22:59,840 Speaker 1: right off. So they post when they make entering these 396 00:23:00,000 --> 00:23:01,480 Speaker 1: deals with you, they post some sort of escrow. If 397 00:23:01,520 --> 00:23:04,359 Speaker 1: they walk away, they lose it, correct, correct, is part 398 00:23:04,400 --> 00:23:08,960 Speaker 1: of your business? I mean, like that's obviously not great 399 00:23:09,119 --> 00:23:11,400 Speaker 1: for you, but is like part of like why there's 400 00:23:11,440 --> 00:23:17,120 Speaker 1: a business margin opportunities essentially like warehousing this risk, so 401 00:23:17,160 --> 00:23:19,920 Speaker 1: to speak. So it's like, okay, like in twenty twenty two, 402 00:23:20,160 --> 00:23:22,080 Speaker 1: you take a hit from these homebuilders that want to 403 00:23:22,080 --> 00:23:24,800 Speaker 1: walk away, and it's like, okay, they can do that 404 00:23:24,840 --> 00:23:27,000 Speaker 1: because they put some escrow. But then they're really going 405 00:23:27,080 --> 00:23:29,359 Speaker 1: to pay up in twenty twenty three and pay a 406 00:23:29,440 --> 00:23:32,399 Speaker 1: premium in the ideas that over time you sort of 407 00:23:32,440 --> 00:23:35,440 Speaker 1: like make more by warehousing this risk. You make more 408 00:23:35,440 --> 00:23:37,000 Speaker 1: in the good years when they're like, oh, we need 409 00:23:37,000 --> 00:23:39,280 Speaker 1: more land suddenly, that's exactly right. A lot of homebuilders 410 00:23:39,280 --> 00:23:41,879 Speaker 1: were looking for big price reductions based on the drop 411 00:23:41,920 --> 00:23:44,920 Speaker 1: in demand and land sellers just aren't giving the price 412 00:23:44,960 --> 00:23:48,560 Speaker 1: reductions because they know that demand will return. There's not 413 00:23:48,640 --> 00:23:50,639 Speaker 1: more land to build on and the builders will have 414 00:23:50,680 --> 00:23:53,440 Speaker 1: to pay if they want to keep home building. Well, 415 00:23:53,520 --> 00:23:56,560 Speaker 1: just on that note, I mean, you mentioned the pickup 416 00:23:56,600 --> 00:24:00,520 Speaker 1: that we've seen in housing activity in the SHANU and 417 00:24:00,600 --> 00:24:04,879 Speaker 1: I think that's surprising some people who thought that after 418 00:24:04,960 --> 00:24:07,520 Speaker 1: interest rates went up to I think eight percent in 419 00:24:07,840 --> 00:24:12,520 Speaker 1: late last year, did they had eight app okay, seven 420 00:24:12,640 --> 00:24:15,880 Speaker 1: or eight percent higher than they happen for many, many years, 421 00:24:15,880 --> 00:24:19,640 Speaker 1: that that would at least knock the market for more 422 00:24:19,680 --> 00:24:22,920 Speaker 1: than a few months. Talk to us about how you're 423 00:24:23,040 --> 00:24:26,160 Speaker 1: viewing that portion of the housing market at the moment, 424 00:24:26,160 --> 00:24:29,160 Speaker 1: what accounts for the rebound and the strong activity. Yeah, 425 00:24:29,200 --> 00:24:32,080 Speaker 1: I think builders were surprised by the strong activity in January. 426 00:24:32,119 --> 00:24:35,720 Speaker 1: We've heard several of the top builders actually exceeded their 427 00:24:35,800 --> 00:24:40,919 Speaker 1: January sales from the prior year. And so builders have 428 00:24:41,040 --> 00:24:44,080 Speaker 1: dropped pricing in the range of fifteen percent for entry 429 00:24:44,160 --> 00:24:47,359 Speaker 1: level homes. But you have to consider they had thirty 430 00:24:47,359 --> 00:24:51,679 Speaker 1: five percent gross margins at the peak, and now that 431 00:24:51,800 --> 00:24:55,280 Speaker 1: might be in the lower the mid twenties, but it's 432 00:24:55,320 --> 00:24:57,800 Speaker 1: still a healthy margin. I mean, I know you're not 433 00:24:57,880 --> 00:24:59,520 Speaker 1: a builder, but since you talk to them, maybe you 434 00:24:59,520 --> 00:25:03,040 Speaker 1: can anch It is your impression that their supply chain 435 00:25:03,160 --> 00:25:07,439 Speaker 1: issues setting aside land, lumber, windows, garage doors. We did 436 00:25:07,680 --> 00:25:09,680 Speaker 1: you know there are a million stories. Have they eased? 437 00:25:10,280 --> 00:25:13,080 Speaker 1: They have? I think builders have seen roughly fifteen thousand 438 00:25:13,080 --> 00:25:16,439 Speaker 1: dollars in cost reductions for entry level new homes, and 439 00:25:16,440 --> 00:25:19,800 Speaker 1: so that's helped their margins as well. What's the catalyst 440 00:25:19,880 --> 00:25:22,719 Speaker 1: for another leg up in the housing market in your opinion? 441 00:25:22,840 --> 00:25:25,480 Speaker 1: Is it simply interest rates starting to fall back or 442 00:25:25,560 --> 00:25:27,760 Speaker 1: mortgage rates starting to fall back. I think there's a 443 00:25:27,840 --> 00:25:31,520 Speaker 1: structural shortage of lots in the Phoenix market and in 444 00:25:31,600 --> 00:25:35,520 Speaker 1: many other markets. John Burns Consulting came out with the 445 00:25:35,640 --> 00:25:39,440 Speaker 1: report that said Phoenix is the fourth most undersupplied housing 446 00:25:39,480 --> 00:25:44,280 Speaker 1: market and we only have twenty thousand finished lots available, 447 00:25:45,080 --> 00:25:49,040 Speaker 1: which is compared to about twenty five thousand permits for 448 00:25:49,119 --> 00:25:52,760 Speaker 1: new homes in a year. I want to go back 449 00:25:52,760 --> 00:25:57,600 Speaker 1: to to one short question. Did you slow down or 450 00:25:57,680 --> 00:26:00,600 Speaker 1: put a pause on the pursuit of new land for 451 00:26:00,680 --> 00:26:04,320 Speaker 1: your business? We did, and we buy through cycles. We 452 00:26:04,400 --> 00:26:08,040 Speaker 1: focus on making good buys and we did find some 453 00:26:08,080 --> 00:26:11,640 Speaker 1: opportunities where sellers were impatient and didn't want to wait 454 00:26:11,640 --> 00:26:14,600 Speaker 1: for the recovery. And so, for example, that one hundred 455 00:26:14,600 --> 00:26:17,239 Speaker 1: million dollars transaction that dropped to ten million was an 456 00:26:17,240 --> 00:26:20,080 Speaker 1: institutional seller that just wanted to get out. And then 457 00:26:20,119 --> 00:26:23,439 Speaker 1: can you describe a little bit further your financing. I mean, 458 00:26:23,440 --> 00:26:24,879 Speaker 1: I think you said you bought them in cash, but 459 00:26:24,960 --> 00:26:27,280 Speaker 1: do you borrow like can you describe a little bit 460 00:26:27,280 --> 00:26:30,360 Speaker 1: about like the sort of ye your financial arrangements. Yeah, 461 00:26:30,359 --> 00:26:32,960 Speaker 1: we use our internal capital, plus we have a close 462 00:26:33,040 --> 00:26:36,840 Speaker 1: network of investors, okay, And but by buying for cash, 463 00:26:36,880 --> 00:26:39,040 Speaker 1: we can be patient and wait for the market to return. 464 00:26:39,400 --> 00:26:42,560 Speaker 1: Is that unusual in this business to purchase through cash 465 00:26:42,600 --> 00:26:44,840 Speaker 1: only or is that sort of the norm. Since the 466 00:26:44,880 --> 00:26:48,120 Speaker 1: Great Financial Crisis, it's been very difficult to get debt 467 00:26:48,119 --> 00:26:52,200 Speaker 1: financing for land, and it also can put pressure on ownership. 468 00:26:52,320 --> 00:26:55,160 Speaker 1: So we find that buying cash gives us the most flexibility. 469 00:26:55,960 --> 00:26:58,840 Speaker 1: And just on that note, but this type of business 470 00:26:58,960 --> 00:27:03,240 Speaker 1: land acquisition, I know you mentioned local knowledge and expertise earlier, 471 00:27:03,320 --> 00:27:08,080 Speaker 1: but how do you compete against other land purchasers. Is 472 00:27:08,119 --> 00:27:10,920 Speaker 1: it through you know, making sure that you're very good 473 00:27:10,920 --> 00:27:15,080 Speaker 1: at acquiring all the needed permits expeditiously. Is it simply 474 00:27:15,119 --> 00:27:18,360 Speaker 1: offering you know, good value to a developer and competing 475 00:27:18,359 --> 00:27:21,520 Speaker 1: on price. Yeah. I think there's a few components to that. 476 00:27:21,880 --> 00:27:26,360 Speaker 1: The first is competing on buys, So through relationships with landowners, 477 00:27:26,520 --> 00:27:29,040 Speaker 1: with brokers, you try to be the person to get 478 00:27:29,080 --> 00:27:32,000 Speaker 1: the first phone call when an opportunity comes up. The 479 00:27:32,080 --> 00:27:35,600 Speaker 1: second is on your community design. You try to design 480 00:27:35,640 --> 00:27:39,840 Speaker 1: as closely as possible to what builders will want often two, three, 481 00:27:40,000 --> 00:27:45,159 Speaker 1: four years out. And the third is by being easy 482 00:27:45,200 --> 00:27:49,000 Speaker 1: to work with. Since we're talking about how like everything 483 00:27:49,080 --> 00:27:53,639 Speaker 1: in modern economy is like outsource and everyone specializes. Do 484 00:27:53,720 --> 00:27:57,240 Speaker 1: you yourself as a company go through the permitting process 485 00:27:57,359 --> 00:28:00,240 Speaker 1: or there are other companies whose specialty is helping the 486 00:28:00,280 --> 00:28:03,680 Speaker 1: land developers walk through all that process. There's a big 487 00:28:03,800 --> 00:28:06,959 Speaker 1: land development industry that that that we use. So we 488 00:28:07,040 --> 00:28:10,240 Speaker 1: have teams of attorneys who are focused on water law, 489 00:28:10,320 --> 00:28:15,360 Speaker 1: for example, attorneys focused on rezoning. We have engineers who 490 00:28:15,359 --> 00:28:18,800 Speaker 1: are special specialists in floodplain So there's these are out 491 00:28:19,960 --> 00:28:24,199 Speaker 1: so the so the homebuilders they have an outside company 492 00:28:24,240 --> 00:28:27,960 Speaker 1: deal with land acquisition. The land acquisition companies I have 493 00:28:28,119 --> 00:28:31,680 Speaker 1: outside parties deal with like, uh, the whole water law, 494 00:28:31,960 --> 00:28:35,040 Speaker 1: the homebuilders have land acquisition teams that are internal. Yeah, 495 00:28:35,040 --> 00:28:39,120 Speaker 1: but they also rely on water law experts and engineers 496 00:28:39,360 --> 00:28:41,560 Speaker 1: and oftentimes are the same people that we are using 497 00:28:41,920 --> 00:28:46,200 Speaker 1: on the turning land into land that can build a house. 498 00:28:46,520 --> 00:28:50,640 Speaker 1: Whose responsibility and who does that like paving the roads, 499 00:28:51,240 --> 00:28:55,400 Speaker 1: um actually putting in the pipe so that water rights 500 00:28:55,440 --> 00:28:58,520 Speaker 1: can be turned into drinking usable water. Where does that 501 00:28:58,680 --> 00:29:01,360 Speaker 1: happen in the process, And does that happen before or 502 00:29:01,440 --> 00:29:05,800 Speaker 1: after it's sold to the home builder. So going back, 503 00:29:05,840 --> 00:29:08,880 Speaker 1: but before the financial crisis, builders would buy land and 504 00:29:08,960 --> 00:29:12,400 Speaker 1: take it from raw land all the way through the improvements. 505 00:29:13,280 --> 00:29:16,280 Speaker 1: Just after the financial crisis, builders were still very risk averse, 506 00:29:16,440 --> 00:29:20,000 Speaker 1: and so they would typically just purchase finished lots, which 507 00:29:20,040 --> 00:29:23,640 Speaker 1: means all of the water, sewer and roads complete. Now 508 00:29:23,680 --> 00:29:27,520 Speaker 1: we're starting to see builders close at final approvals and 509 00:29:27,640 --> 00:29:31,480 Speaker 1: sometimes do those improvements themselves, or sometimes they'll share that 510 00:29:31,560 --> 00:29:51,920 Speaker 1: risk with the land seller. You know, we mentioned a 511 00:29:52,000 --> 00:29:55,320 Speaker 1: number of times that parts of Arizona have seen a 512 00:29:55,360 --> 00:29:58,960 Speaker 1: big boom since the pandemic. Everyone moving to the sun 513 00:29:59,000 --> 00:30:02,200 Speaker 1: Belt states. Everyone wants to enjoy you know, lower taxes, 514 00:30:02,320 --> 00:30:05,800 Speaker 1: warmer weather and all that. Yes, yes, we all want that. 515 00:30:07,000 --> 00:30:10,040 Speaker 1: Do you see that continuing, like or do you see 516 00:30:10,400 --> 00:30:14,800 Speaker 1: that some of the pandemic era migration is starting to 517 00:30:14,800 --> 00:30:18,000 Speaker 1: tail off. We see it continuing for a few reasons. 518 00:30:18,200 --> 00:30:21,920 Speaker 1: The first is this reshoring trend that you spoke to, 519 00:30:22,040 --> 00:30:25,920 Speaker 1: I think on your recent podcasts with Steve Eisman. So 520 00:30:25,920 --> 00:30:29,880 Speaker 1: we're definitely seeing reshoring in the Phoenix market. Major manufacturing 521 00:30:29,920 --> 00:30:33,560 Speaker 1: companies are coming to Phoenix. We created more than eighty 522 00:30:33,560 --> 00:30:36,680 Speaker 1: thousand jobs in the prior year, and so there's a 523 00:30:36,760 --> 00:30:42,520 Speaker 1: robust employment market. It's not just speculation driven. I do 524 00:30:42,600 --> 00:30:44,880 Speaker 1: think we're going to have to do like a elfelfa 525 00:30:45,080 --> 00:30:48,320 Speaker 1: Like I feel like everyone's like just chips and houses 526 00:30:48,400 --> 00:30:50,680 Speaker 1: and evs and all. That's great, But we'll get all 527 00:30:50,720 --> 00:30:55,640 Speaker 1: the water stakeholders of Arizona together, room the Saudi cattle 528 00:30:55,720 --> 00:30:58,960 Speaker 1: companies that need elfalfa to feed our college like they have, 529 00:30:59,280 --> 00:31:01,800 Speaker 1: you know, Like who's gonna replace that? I don't know 530 00:31:01,920 --> 00:31:05,720 Speaker 1: if it's a if it's totally obvious. So is there 531 00:31:05,920 --> 00:31:09,760 Speaker 1: are there any other sort of like interesting dynamics that 532 00:31:09,800 --> 00:31:12,480 Speaker 1: we've missed so far, like things that you're thinking about 533 00:31:12,560 --> 00:31:16,920 Speaker 1: right now? Yeah. I think the big thing is unexpected 534 00:31:17,760 --> 00:31:22,920 Speaker 1: demand increases or drops coupled with a delayed supply response 535 00:31:22,960 --> 00:31:26,440 Speaker 1: for these finished lots is really setting up for a 536 00:31:26,560 --> 00:31:30,000 Speaker 1: structural shortage of lots, right. So, actually, this is the 537 00:31:30,080 --> 00:31:33,000 Speaker 1: question that I wanted to delve further into, which is 538 00:31:33,160 --> 00:31:35,760 Speaker 1: we talk all the time again about scars from the 539 00:31:35,800 --> 00:31:38,360 Speaker 1: Great Financial Crisis, particularly as they relate to housing and 540 00:31:38,400 --> 00:31:40,400 Speaker 1: then all the other inputs, But then we hit this 541 00:31:40,520 --> 00:31:43,080 Speaker 1: shock like twenty twenty two is the fastest rate hike 542 00:31:43,160 --> 00:31:47,400 Speaker 1: cycle in like decades, probably caught a lot of people 543 00:31:47,440 --> 00:31:49,960 Speaker 1: by surprise. Is weird because it's at a time of 544 00:31:50,000 --> 00:31:53,000 Speaker 1: like low unemployment a lot of demand for housing. Talk 545 00:31:53,040 --> 00:31:55,560 Speaker 1: about the sort of like knock on effects that we'll 546 00:31:55,560 --> 00:31:59,680 Speaker 1: see just from the rate shock of twenty twenty two. So, 547 00:32:00,120 --> 00:32:03,360 Speaker 1: stepping back first to COVID, you had builders kind of 548 00:32:03,680 --> 00:32:07,320 Speaker 1: hit the brakes on development and then they got flat 549 00:32:07,360 --> 00:32:11,960 Speaker 1: footed when demand returned with a vengeance. And then next 550 00:32:12,280 --> 00:32:16,600 Speaker 1: we have this increase in race which has led the 551 00:32:16,600 --> 00:32:19,840 Speaker 1: builders to pause yet again. And so we're really setting 552 00:32:19,920 --> 00:32:23,120 Speaker 1: up for the builders to be in a position where 553 00:32:22,680 --> 00:32:26,480 Speaker 1: their lead time on finishing landing lots is going to 554 00:32:26,480 --> 00:32:28,880 Speaker 1: be so tight that they're not going to be able 555 00:32:28,920 --> 00:32:31,960 Speaker 1: to meet coming demand if and when rates return to 556 00:32:32,080 --> 00:32:36,080 Speaker 1: more normal levels. So we've had a bunch of episodes 557 00:32:36,240 --> 00:32:39,680 Speaker 1: by now about the hangovers left by these sort of 558 00:32:39,760 --> 00:32:44,600 Speaker 1: extreme cycles. Yeah, what in your view when it comes 559 00:32:44,640 --> 00:32:48,200 Speaker 1: to the real estate market, would help to smooth out 560 00:32:48,320 --> 00:32:52,320 Speaker 1: some of that volatility or to change developers' behavior in 561 00:32:52,360 --> 00:32:54,560 Speaker 1: the sense that maybe they feel like they don't have 562 00:32:54,640 --> 00:32:58,320 Speaker 1: to hit the brakes so hard on construction, or you know, 563 00:32:58,760 --> 00:33:01,000 Speaker 1: they don't have to wait so long to start new projects. 564 00:33:01,320 --> 00:33:04,920 Speaker 1: I think the growing importance of water in the Arizona 565 00:33:04,960 --> 00:33:09,480 Speaker 1: market particularly is leading builders to take larger positions where 566 00:33:09,520 --> 00:33:12,720 Speaker 1: they know that they have water. Oh interesting, and so 567 00:33:13,360 --> 00:33:16,240 Speaker 1: I think that is driving builders to get away from 568 00:33:16,280 --> 00:33:21,600 Speaker 1: this just in time mindset. And so especially the private 569 00:33:21,640 --> 00:33:25,600 Speaker 1: builders have taken the lead on this and acquiring larger 570 00:33:25,600 --> 00:33:28,520 Speaker 1: parcels with maybe four or five, six or seven years 571 00:33:28,560 --> 00:33:31,800 Speaker 1: of supply, whereas some of the public builders have been 572 00:33:31,800 --> 00:33:34,640 Speaker 1: focused on just two or three years. This is such 573 00:33:34,640 --> 00:33:38,080 Speaker 1: an interesting dynamic that public private that we probably like. 574 00:33:38,320 --> 00:33:40,600 Speaker 1: And I think you see something in oil too, where 575 00:33:40,640 --> 00:33:43,080 Speaker 1: it's like in the last you know, when the oil 576 00:33:43,080 --> 00:33:45,960 Speaker 1: prices boomed in twenty twenty one. In parts of twenty 577 00:33:46,040 --> 00:33:49,600 Speaker 1: twenty two, you had this sort of like quarterly obsessed. 578 00:33:49,640 --> 00:33:52,840 Speaker 1: Public companies are like, oh, you know, we're maintaining capital discipline. 579 00:33:52,880 --> 00:33:55,240 Speaker 1: I think a lot of the new production in oil 580 00:33:55,280 --> 00:33:58,200 Speaker 1: actually came from private companies that didn't feel those constraints. 581 00:33:58,400 --> 00:34:01,600 Speaker 1: So it's interesting to hear a similar dynamic pop up 582 00:34:01,600 --> 00:34:04,480 Speaker 1: on the builder side. Yeah, they're definitely more aggressive in 583 00:34:04,560 --> 00:34:06,840 Speaker 1: the landmarkts some of the public. Some of the public 584 00:34:06,880 --> 00:34:09,840 Speaker 1: builders just will not close on property unless all the 585 00:34:09,840 --> 00:34:14,320 Speaker 1: final approvals are in place, whereas a private builder sometimes 586 00:34:14,400 --> 00:34:17,280 Speaker 1: is able to close even without the zoning in place. 587 00:34:18,360 --> 00:34:21,000 Speaker 1: So that gives them an advantage because they're able to 588 00:34:21,040 --> 00:34:24,120 Speaker 1: acquire the land for a more attractive price. I ought 589 00:34:24,120 --> 00:34:26,680 Speaker 1: to say, though, when you talk about water supply for 590 00:34:26,760 --> 00:34:30,240 Speaker 1: five or seven years, that still doesn't seem that long 591 00:34:30,560 --> 00:34:34,000 Speaker 1: to me. What happens after those five or seven years, Well, 592 00:34:34,040 --> 00:34:36,480 Speaker 1: to be clear, these properties have one hundred year assured 593 00:34:36,560 --> 00:34:40,799 Speaker 1: water supply builders are buying, so Arizona actually has some 594 00:34:40,840 --> 00:34:45,400 Speaker 1: of the most conservative groundwater management laws in the whole country. 595 00:34:45,600 --> 00:34:48,399 Speaker 1: We have one hundred year planning window, and so these 596 00:34:48,440 --> 00:34:51,960 Speaker 1: properties have an assured supply for decades to actually, can 597 00:34:52,040 --> 00:34:55,520 Speaker 1: you clarify that point about how so you mentioned that 598 00:34:55,680 --> 00:34:58,480 Speaker 1: industrial uses they can get away with certain things. What's 599 00:34:58,760 --> 00:35:02,840 Speaker 1: the difference in multifamily development. I think you said multifamily 600 00:35:03,040 --> 00:35:07,120 Speaker 1: is characterized more like industrial, So what is that resulting 601 00:35:07,200 --> 00:35:10,160 Speaker 1: in terms of what gets constructed? So a big boom 602 00:35:10,160 --> 00:35:12,800 Speaker 1: in the Phoenix market has been the build for rent product, 603 00:35:13,000 --> 00:35:16,319 Speaker 1: which is so these are single family homes. These are 604 00:35:16,360 --> 00:35:19,840 Speaker 1: single family homes with small yards, and they build roughly 605 00:35:19,920 --> 00:35:22,680 Speaker 1: twelve units per the acre, so you have much greater 606 00:35:22,760 --> 00:35:25,879 Speaker 1: density than maybe single family at three or four units 607 00:35:25,920 --> 00:35:28,799 Speaker 1: to the acre. And the loophole is they're able to 608 00:35:28,920 --> 00:35:32,080 Speaker 1: lease these for three hundred and sixty four days a year. 609 00:35:32,600 --> 00:35:35,640 Speaker 1: And so if it's three hundred and sixty five days 610 00:35:35,680 --> 00:35:37,640 Speaker 1: a year more, you have to get one hundred year 611 00:35:37,680 --> 00:35:40,360 Speaker 1: short water supply. Oh and if you have three hundred 612 00:35:40,400 --> 00:35:42,799 Speaker 1: and sixty four, then what what are your album? If 613 00:35:42,800 --> 00:35:44,400 Speaker 1: you have three and sixty four, you do not have 614 00:35:44,440 --> 00:35:48,960 Speaker 1: to demonstrate. Why does loophole exist? Is that was that 615 00:35:49,000 --> 00:35:52,320 Speaker 1: created on purpose in order to encourage more housing density 616 00:35:52,480 --> 00:35:57,880 Speaker 1: or I think it stems from consumer protections and people 617 00:35:57,920 --> 00:36:01,640 Speaker 1: buying single family homes. The impetus of that law was 618 00:36:01,719 --> 00:36:05,719 Speaker 1: designed to protect the homeowner, whereas the owner of a 619 00:36:06,280 --> 00:36:09,600 Speaker 1: maybe one hundred and twenty two hundred unit multifamily development 620 00:36:09,680 --> 00:36:11,840 Speaker 1: is a bit more sophisticated. So three hundred and sixty 621 00:36:11,880 --> 00:36:13,800 Speaker 1: four you can renew your rent or do you do 622 00:36:13,800 --> 00:36:15,600 Speaker 1: you have to go sleep at a hotel one day? 623 00:36:16,080 --> 00:36:18,680 Speaker 1: You can renew your RuPay? Okay? So what are you 624 00:36:18,719 --> 00:36:21,319 Speaker 1: looking out for? You know, we talked a little bit 625 00:36:21,360 --> 00:36:23,919 Speaker 1: about how unusual this period of time is. We still 626 00:36:24,000 --> 00:36:27,960 Speaker 1: have the post pandemic hangover, but housing activity and maybe 627 00:36:28,000 --> 00:36:29,799 Speaker 1: picking up a little bit. But on the other hand, 628 00:36:29,840 --> 00:36:31,919 Speaker 1: the FED says that rates aren't going to come down 629 00:36:31,960 --> 00:36:36,080 Speaker 1: anytime soon. What are you looking out for this year? Like, 630 00:36:36,120 --> 00:36:39,440 Speaker 1: what's the big catalyst on the horizon. I'm looking for 631 00:36:39,480 --> 00:36:42,359 Speaker 1: mortgage rates to come down and for buyers to get 632 00:36:42,400 --> 00:36:45,719 Speaker 1: off the sidelines. I think part of the shock has 633 00:36:45,760 --> 00:36:50,440 Speaker 1: not just been affordability, It's also been psychological. I think 634 00:36:50,680 --> 00:36:54,719 Speaker 1: some buyers are fear of buying at the top and 635 00:36:54,960 --> 00:36:59,719 Speaker 1: now with rates coming down with pent up demand for 636 00:36:59,719 --> 00:37:02,359 Speaker 1: how that the builders are doing a similar thing as well. 637 00:37:02,400 --> 00:37:04,120 Speaker 1: They're kind of all looking at each other, when are 638 00:37:04,120 --> 00:37:05,719 Speaker 1: we going to get back into the market and start 639 00:37:05,719 --> 00:37:07,920 Speaker 1: buying land again? And I think home buyers are doing 640 00:37:07,960 --> 00:37:10,160 Speaker 1: just exactly the same thing. Do you think you know 641 00:37:10,480 --> 00:37:13,400 Speaker 1: you mentioned Okay, they like walked away from agreements to 642 00:37:13,440 --> 00:37:15,759 Speaker 1: buy land. Do you think they they do that, like 643 00:37:15,840 --> 00:37:18,480 Speaker 1: walk away from agreements to buy garage, doors and windows, 644 00:37:18,400 --> 00:37:21,760 Speaker 1: And we might actually see some constraints e merge because 645 00:37:21,760 --> 00:37:23,960 Speaker 1: of that twenty twenty two shock on the supply chain. 646 00:37:24,000 --> 00:37:27,759 Speaker 1: St that's interesting question. I know they have paused development 647 00:37:28,040 --> 00:37:32,080 Speaker 1: trying to wait for pricing to adjust downwards. But I 648 00:37:32,120 --> 00:37:35,319 Speaker 1: think that if all the buyers return at the same 649 00:37:35,360 --> 00:37:38,320 Speaker 1: time the home builder demand, that might cause another problem. 650 00:37:38,400 --> 00:37:42,040 Speaker 1: Maybe they've been stockpiling kitchen sinks. They might that's the 651 00:37:42,080 --> 00:37:45,520 Speaker 1: best case scenario. All right, do you have any kitchen 652 00:37:45,520 --> 00:37:48,560 Speaker 1: sinks in your in your in the basement of your 653 00:37:48,600 --> 00:37:50,880 Speaker 1: home tracing, I have but one kitchen sink. I do 654 00:37:50,920 --> 00:37:54,760 Speaker 1: have an extra coal stove though randomly. Oh quick question, 655 00:37:55,320 --> 00:38:00,400 Speaker 1: speaking of stoves, most of the homers that you built 656 00:38:00,400 --> 00:38:03,920 Speaker 1: an Arizona electric or gas ovens, mostly electric on the 657 00:38:04,000 --> 00:38:06,520 Speaker 1: high end gas stoves, gas stoves. That's what I mean. Okay, 658 00:38:06,600 --> 00:38:08,640 Speaker 1: this isn't a politics. I'm not going to get into 659 00:38:09,080 --> 00:38:12,799 Speaker 1: Only in the last month did did electric versus gas 660 00:38:12,800 --> 00:38:15,719 Speaker 1: oven or stoves become a political question? But I was 661 00:38:15,760 --> 00:38:19,160 Speaker 1: curious about that, all right, Chase Emerson, so great to 662 00:38:19,200 --> 00:38:22,160 Speaker 1: have you on the podcast. There's like, uh, totally new. 663 00:38:22,280 --> 00:38:23,879 Speaker 1: You know. The other thing that I'm glad you brought 664 00:38:23,920 --> 00:38:26,120 Speaker 1: it up on the whole build for rent market is 665 00:38:26,280 --> 00:38:28,480 Speaker 1: something we I think we talked about it the other day, 666 00:38:28,520 --> 00:38:32,520 Speaker 1: but this is yet another episode that has sprung forth, 667 00:38:32,600 --> 00:38:34,880 Speaker 1: like three other episodes that we need to do, including 668 00:38:34,920 --> 00:38:38,080 Speaker 1: one obviously up diving in even more on water rights 669 00:38:38,080 --> 00:38:40,480 Speaker 1: something absolutely all right, Chase, thank you so much. That's 670 00:38:40,520 --> 00:38:55,680 Speaker 1: so thank you for having me. You know, Tracy, there 671 00:38:55,680 --> 00:38:58,440 Speaker 1: are so many interesting things in that conversation. But I 672 00:38:58,480 --> 00:39:01,600 Speaker 1: also I am like just sort of like generally fascinated 673 00:39:02,120 --> 00:39:05,600 Speaker 1: by the degree to which like all companies want to 674 00:39:05,600 --> 00:39:10,160 Speaker 1: eliminate every single risk outside of like their one narrow expertise, 675 00:39:10,400 --> 00:39:12,440 Speaker 1: which I guess on some levels very obvious. We know 676 00:39:12,520 --> 00:39:15,480 Speaker 1: outsourcing and third party consultants is big, but like this 677 00:39:15,560 --> 00:39:17,400 Speaker 1: is like a very interesting example of it for me. 678 00:39:17,719 --> 00:39:21,879 Speaker 1: I guess it's the natural tendency towards specialization, right. But 679 00:39:22,400 --> 00:39:25,600 Speaker 1: it is strange that I had never considered that the 680 00:39:25,640 --> 00:39:29,400 Speaker 1: housing developers would not be buying the land themselves. I 681 00:39:29,440 --> 00:39:31,560 Speaker 1: always just assumed that was the way it worked. I'm 682 00:39:31,680 --> 00:39:34,759 Speaker 1: still blown away by that one step that there were 683 00:39:34,840 --> 00:39:36,960 Speaker 1: like tracts of land that we're selling for one hundred 684 00:39:36,960 --> 00:39:40,160 Speaker 1: million dollars fifteen years ago, or I guess there's longer 685 00:39:40,160 --> 00:39:44,400 Speaker 1: two thousand and six. I can't seventeen years ago whatever. 686 00:39:44,640 --> 00:39:47,920 Speaker 1: Maybe like I did not appreciate how crazy that bubble is. 687 00:39:48,120 --> 00:39:50,640 Speaker 1: That is a true bath on a financial asset. I 688 00:39:50,680 --> 00:39:54,960 Speaker 1: gotta say, not even a financial asset, actual land. Yeah, 689 00:39:55,000 --> 00:39:57,080 Speaker 1: all right, shall we leave it there. Let's leave it there. 690 00:39:57,320 --> 00:40:00,160 Speaker 1: This has been another episode of the ad Thoughts podcast. 691 00:40:00,200 --> 00:40:02,560 Speaker 1: I'm Tracy Alloway. You can follow me on Twitter at 692 00:40:02,560 --> 00:40:05,400 Speaker 1: Tracy Alloway, and I'm Joe Wisnthal. You can follow me 693 00:40:05,560 --> 00:40:08,560 Speaker 1: on Twitter at the Stalwart. Follow our guests Chase Emerson 694 00:40:08,680 --> 00:40:13,800 Speaker 1: on Twitter at as Land Investor, follow our producers Kermen 695 00:40:13,920 --> 00:40:17,920 Speaker 1: Rodriguez at Kermen Arman and Dash Bennett at Dashbot. And 696 00:40:18,000 --> 00:40:20,640 Speaker 1: for all Bloomberg podcasts, check them out under the handle 697 00:40:20,719 --> 00:40:24,440 Speaker 1: at podcasts. And for more odd Lots content, go to 698 00:40:24,440 --> 00:40:27,880 Speaker 1: Bloomberg dot com slash odd Lots, where we post transcripts 699 00:40:27,880 --> 00:40:30,120 Speaker 1: of the episodes. Tracy and I blog and we have 700 00:40:30,120 --> 00:40:32,560 Speaker 1: a newsletter that comes out every Friday. Go there Thanks 701 00:40:32,600 --> 00:40:35,439 Speaker 1: your email sign up Get It Near in box. Thanks 702 00:40:35,480 --> 00:40:35,960 Speaker 1: for listening.