Land banking: A solution for cash-strapped developers.
The Kalikow Group acquires vacant land on behalf of builders/developers and simultaneously enters into sales/option agreements with these companies for sale of the land at set prices, with specific scheduled future closing dates. The concept is an attractive financing and financial reporting alternative for national and regional builders, many of whom are publicly traded on national exchanges.
The financial benefits are of paramount importance to these public companies. Land banking enables a builder/developer to control its future land requirements and keep inventory in the pipeline without taxing its own lines of credit or negatively impacting balance sheets.
To date the Kalikow Group's new land banking division has closed on several major parcels totaling nearly $10 million on behalf of major nationally recognized residential and commercial developers.
Land banking arrangements such as these benefits both sides, as developers and public companies are able to expand their capital sources and we are able to forge a relationship with major firms that have been expanding rapidly in the past few years. This symbiotic relationship should supply Kalikow with the opportunity for additional investment opportunities in the future. Deals such as this also extend Kalikow Development's ability to provide off-balance-sheet financing to publicly traded companies trying to expand their capital sources during a time when the public equity markets for REITs has softened.
In 1999, Kalikow Development closed two residential land sale transactions is East Orlando, Fla. With Centex Corporation, one of the largest single-family home-builders in the U.S., and Morrison Homes, a subsidiary of George Wimpley PLC, a British-based, publicly-held company that is another of the country's largest home builders.
After completing the infrastructure for Morrison Homes, lolt take-downs have begun and are continuing on a quarterly basis. At completion, sales to Morrison will be in excess of $4.14 million on 133 lots. At the 240-acre Centex project, which has yielded 629 building lots plus commercial space, the first closing is scheduled for July, with a gross sell-out equal to $5.7 million.
Also in 1999, a joint venture with Shurgard, one nation's largest self-storage REITs, extended Kalikow's ability to provide off-balance-sheet financing to the REIT market, where it can be especially helpful in furthering these public corporation's goal of maintaining a diversified capital base and the emphasis on growth through the development of high quality assets.
As interest rates continue to climb, available land for development dwindles and sources of financing continue to dry-up in the latter half of 2000 and beyond, the concepts of land banking and off-balance-sheet financing will continue to become a more attractive and viable option for commercial and residential developers and publicly-traded companies. Being captive to the capital markets for equity negatively impacts the public companies when real estate is out of favor. Real estate is never out of favor for Kalikow.
Headquartered in Westbury, N.Y., the Kalikow Group invests in and develops commercial and residential real estate projects around the country. With three generations of real estate development experience, Kalikow is an opportunistic investor, specializing in situations that require strong guidance and instinctual talent. In the past several years, the company has developed several major shopping centers and numerous other projects, including Waterford Lakes, a prime mixed-use development site on the east side of Orlando, Fla.
Edward Kalikow, President of the Kalikow Group.
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|Title Annotation:||Centex, Morrison Homes, Shurgard; Kalikow Group's real estate ventures with|
|Publication:||Real Estate Weekly|
|Article Type:||Brief Article|
|Date:||Jun 28, 2000|
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