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
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