Antelope Valley News Release - July 1, 2003

LAWA Hires Marketing Exec for Air Service
Los Angeles World Airports has hired Mark Thorpe as director of air service marketing for LAWA's three commercial airports: LAX, Ontario, and Palmdale. Thorpe's primary job will be to balance international and domestic service at LAX, increase service at Ontario, and resume commercial service at Palmdale. LAWA officials say that Thorpe has significant aviation and marketing experience. Thorpe has helped airports in Atlanta and Philadelphia with their air service marketing and also helped UPS in it's successful bid to gain access to China. Thorpe will also be responsible to monitor and interpret complex FAA regulations and monitor federal laws, which includes bi-lateral treaties between the US and foreign countries. LAWA's long-term goal is to regionalize passenger and air cargo service, meaning they want to disperse air traffic around the county to relieve congestion, both in the air and on the ground.

Watch-n-Wager at New Fairgrounds in Lancaster to Open
The Watch-n-Wager, located at the new Fairgrounds on Ave H, just west of the Fwy. 14, will open Wednesday, July 16th. Called The Turf Club, the opening will be "soft", with a grand opening ceremony held on July 23rd, which is also opening day at Del Mar Racetrack. The facility will be 18,000 sq feet. The facility has over 100 screens/TV monitors for satellite wagering at horse tracks around the country. This year's annual Fair, held around Labor Day, for one last time, will be at the old Fairgrounds on Ave I and Division Street. The new facility will have individual seats with personal screens and Internet hookup capabilities. There will also be a large restaurant, a bar area, and a smoking patio.

Housing Market:

This month I am going to address the subject of market value. There are two basic types of market values, i.e. types of land, in the AV: investor properties and developer properties. Developer properties are parcels that a residential, industrial, or commercial user will buy to build out. Developer parcels have all of the necessary requirements to be developed: access, utilities, the desired size, etc. Investor parcels will lack many or all of these features, and thus cannot be economically developed.

The market value of an investor parcel is determined by only one thing- the price an investor is willing to pay to tie up his money. Developer parcels, because they can be turned into a finished product and resold or creates an income stream (i.e. a business), are worth more to a developer than to an investor. End users add value to a property by building it out. For this reason, developer type properties will sell for higher prices than investor parcels. Presently, this is why land values on developer residential parcels have sky rocketed over the past year- homebuilders are here in force bidding against each other. This explanation leads us into why many land listings never sell: many are investor parcels that have developer prices, meaning they are over priced in relation to the properties utility.

An investor should never pay a developer price for their land. A good land investment strategy is to find a "developer parcel", or a parcel that is almost a "developer parcel", that is "investor priced". If one can do that, one has a much better chance of re-selling their land for a profit.

Supply closed out June at 1,755, down 1.4% from the previous month of May (1,780). This is the lowest level since March of 2002. At that time though, supply was rising, now it is falling. Strong demand is now beginning to draw down supply. This is a process that will be slow and gradual, and will not move in a straight line. Over the ensuing months though, I do expect to see the supply number work it's way lower. Buying pressure is beginning to over take supply.

Rising land sales, falling supply, and rising prices; sounds like a good definition of a bull market to me. Not every area of the AV is experiencing rising prices. Based on volume, I am calling April of 2002 as the beginning of this bull market in land. If you are interested in getting into this market, the sooner you call me the better. Not that I will rush you into our market, but the sooner I know your buying criteria, the better. As this market ages, it will get harder and harder to find good values. When I talk to homebuilders, they tell me they see no evidence of their sales slowing down. Residential agents tell me that resale supply is tight, which obviously favors home sellers. The housing market cannot slow down until supply begins to exceed demand. Based on current conditions, we are nowhere near that point.

As a by-product of the strong growth in the AV, the Lake Los Angeles area, due to a 16% increase in enrollment last year, is getting a new elementary school. Saddleback Elementary School will be built on 10 acres at the cross streets of 150th St East & Ave N-12. Construction is expected to begin in Jan of 2004, with completion slated for June of 2005

Saying, "Times demand that we change", Los Angeles Mayor James Hahn has put forth a $9B proposal to improve security and efficiency at LAX. The plan also includes revamping gates to accommodate larger jets, reducing the overall number of gates, reconfiguring runways, and limiting the number of travelers to 79M per year. One of the over all goals of the plan, is to spread out air traffic among other smaller airports. "Other smaller airports" is a direct reference to Ontario and Palmdale, also owned by Los Angles World Airports.

LAWA has a joint agreement with the Air Force to allow 50 operations per day at the existing Palmdale Regional Air Terminal. Palmdale last had commercial air service in April of 1998. LAWA has already spent $1M rehabbing the terminal and has hired a marketing firm to recruit one or more airlines. Mayor Hahn fears that failure to modernize will result in LAX losing its status as an international gateway. Hahn has the support of Jack Kyser, chief economist of LA County Economic Development Corp.

DreamWorks Productions, a movie studio headed by Steven Spielberg, has a construction crew of 100, building a set inside of site 9, Plant 42. Site 9 is located near 30th St East and Ave P, and is the site abandoned by SR Technics. DreamWorks has leased it for the shooting of a romantic comedy called "Terminal", which will star Tom Hanks and Catherine Zeta-Jones. The crew is building a huge airport terminal inside site 9. Actual filming is scheduled to begin on Sept 30th. As many as 600 "extras" per day may be needed for the shoot. The film should be released in 2004.

The Southern Cal Assoc of Govts is asking city officials of Victorville, Palmdale, and Lancaster if they are willing to grant more residential density in exchange for more roads, parks, and school and water money from the state. SCAG is looking for places where Cal can grow. Palmdale's general plan, which includes 103 sq miles, can accommodate 58,000 more homes, for a total population of 450,000, when completely built out. Lancaster's general plan includes 94 sq miles, and could take on 58,500 more homes, with a total population of 490,000, at full build out. SCAG says this is far short of the 600,000 new homes that So Cal will need by the year 2030. To accept such growth, Palmdale and Lancaster would have to change their general plans. Between now and Jan 2006, SCAG will be holding public meetings to gauge public opinion on this issue. Comment: With 3,400 sq miles in the Antelope Valley, both cities could annex more acreage as needed. East Palmdale has 1,000's of industrial acres that could be rezoned to residential. Lancaster could reduce the number of acres in the Fox Field Specific Plan area, which right how approaches 6,000 acres.

Defense News: Ronald Reagan, who as President, authorized the building of 4 "Nimitz class" aircraft carriers, has now had one named after him. The USS Ronald Reagan was commissioned (put into service) at the Norfolk, Va. shipyard on July 12th in a ceremony attended by 20,000. The ceremony was covered by the Fox News Channel. The USS Ronald Reagan is 20 stories tall and can go 20 years until it needs refueling. It will carry a crew of 6,000, 80 planes and have a life expectancy of 50 years. The flight deck of the USS Ronald Reagan is 4.5 acres. A plane landing at 150 mph will come to a stand still within 400 feet.

As President, Reagan strongly believed that "maritime superiority" was a must, and that, "We must always be prepared, so that we will always be free". Reagan believed in "peace through strength", and with 90% of the world's population living within 200 miles of the ocean, the USS Ronald Reagan would help achieve that goal with the 11 other Nimitz class carriers. The USS Reagan will take 5 weeks to make its way to San Diego, from where it will be based. Currently, the USS Ronald Reagan is the only ship named after a living President. That may change, as the last of the Nimitz class carriers, now under construction, will be named the USS George Herbert Walker Bush. George Bush senior, as an 18/19 year old, flew 46 missions off of US carriers in WWII. He was shot down twice; once being pulled out of the ocean by a US submarine.

As we walked out of the gift shop together, I took him over to meet my wife, who was waiting for me. My wife was amazed to meet someone from Iraq so soon after Saddam's removal. It costs a small fortune to travel globally, especially in terms of Iraqi wages. The man told us he was here with 12 other Iraqi's competing in an archery tournament. He then pointed to a group of men standing nearby. I remarked to the man, "George Bush must be very popular in your country." The man said, "Oh yes!" The man then said, by traveling in the US and seeing how Americans live (their standard of living), "We want the same thing." I told him that all Americans were pulling for them to make it. He was very grateful and happy. We then parted. You will never convince me, WMD or not, that we did not do the right thing in removing Saddam's regime. This incident did not shape my opinion on this issue it only reinforced it. Most of us were very fortunate to be born into freedom. We were born into freedom because previous generations were willing to pay the price to maintain that freedom and pass it on to us. Who knows what terror or future disaster has been avoided by the removal of Saddam.

Here is an example of what I m talking about. This story was relayed to me by a Coldwell Banker agent. A 1500 sq ft home in east Palmdale, that she had listed, received 9 offers. The home sold for $5,000 over full price. One would have to think, that, as new homes are sold into the resale market, at some point in time, supply will exceed demand and this market will rest or pull back. But when will that be? Right now, with the power this housing market exhibits, we are not there, nor likely to be, for months, perhaps years.

When new homes are built, the supply will hit the market in phases. The timing of new housing projects is all different, so future supply will hit the market at different times. This is good because it gives the market a chance to absorb new supply before more new supply hits the market. For now, this market is strong and will be so for the foreseeable future. Nation wide, the housing picture is about the same, as new home sales rose in June by a record number.

Brokers and agents in the Rosamond market, say that they are getting play from both the Palmdale-Lancaster and Bakersfield markets. Homebuyers in the Rosamond market are coming from both areas. Although the Rosamond market does lack the wide range of home choices, home prices are considerably lower, and with that, property taxes are lower too. More choice is on the way for the Rosamond market. The McRae Co. is preparing to build 250 homes on Rosamond Blvd, near 40th St West. Moreland Consulting, a Bakersfield engineering firm, say they have half a dozen projects they are mapping for the Rosamond area.

A new Jack-in-the-Box is being built in Rosamond, at 25th St West & Rosamond Blvd. It will be a prototype restaurant, including a CITGO gas station, and should be open by the end of September.

From June 2002 to June of this year, median home prices have risen in Rosamond 18.6%. In the same period, west Palmdale home prices were up 11.8%, and east Palmdale up 17.3%. West Lancaster home prices were up 13.2%; with east side Lancaster up 28%. East side home prices, which lagged badly when this housing boom kicked off, are now catching up.

For those that have the primary motivation to increase the balance in their cash accounts, I have this word of advice. Do not fall in love with your land. The investors that I know, that are successful in this business, are always looking for selling opportunities as well. Do not be afraid when you sell your land that someone else might do better with it. Do not try and squeeze every last dollar out of each and every parcel. Some parcels are special, and should be held. I am not against land banking, but it must be done intelligently. Most parcels should be sold when the opportunity arises.

Selling opportunities, sometimes, can come up much faster than the seller anticipates. Example: those that bought land in 1988 had a great selling opportunity only one year later. As it turned out, 1989 was the best selling opportunity out of the next 13 +years! I can’t tell you how many times over the past 10 yrs I heard investors tell me they didn't sell because they didn't need the money. Do not worry about what to do with the proceeds if you sell. We can always figure that out later. If you have to, you can put the proceeds in a bond fund or a CD while waiting for another opportunity. If you are a cash seller, we can do a 1031 exchange into another piece of land, and defer paying the taxes. There will be other deals that present themselves. Some will be better than what you previously sold; some may not. One thing that 20 + years in real estate has taught me, is that, there will always be another deal.

Being a seller as well as a buyer is actually a conservative and defensive strategy, and forces a discipline upon oneself (not get over invested). For most of us, the original purpose of land investing, or investing in anything, is to make money. Try and remember that. After all, it's only dirt.

Demand: July (87) land sales pulled back a bit. It was the first month below 100 land sales since February of this year. Last month I expressed a concern, that on a short-term basis, the market could begin to show signs of "exhaustion" at any time, as buyers back off from some of the higher prices they are being asked to pay. We could be in the early stages of that exhaustion and could begin consolidating the year's gains. Certain segments of the market need some time to get used to the new higher prices. Consolidation or not, 2003 is shaping up to be a great year.

Year to date, January thru July, shows land sales are up 91% in 2003 vs the same period in 2002. A consolidation is nothing more than the markets way of taking a rest, digesting previous strong market activity. They are a normal part of market behavior, and good, in that, consolidations have a way of extending market cycles. Eighty-seven land sales in one month, is still a very good activity.

You may recall that James Hahn, mayor of Los Angeles, has proposed a $9B upgrade to LAX. Sheldon Plotkin, a member of the Transportation Task Group for the Southern California Federation of Scientists, has suggested, that for $2B, LAX and Palmdale Regional could be linked by a high speed rail line. The train's speed would be 180 mph and get passengers to and from LAX and Palmdale in about 30 minutes. Plotkin says this would make LAX-Palmdale one transportation hub, transferring passengers from gate to gate, at either facility. An interim plan to get this going, would be a fly-away bus system located near the AV Fwy. 14, with the 45 mile rail system eventually replacing the bus system.

The widening of the Ave S corridor is about to begin. Ave S, from the Fwy 14 to 20th St East, will be widened to four lanes. The improvements will bring turn lanes, traffic lights, streetlights, sidewalks, bus benches, bike paths, drainage, and landscaping to Ave S. Once begun, the improvements will take 18-20 months.

Sonora Investments is building a 16,000 sq ft commercial center on 10th St West, between Ave L and Ave M. The center's first tenant will be Sun Country Bank, moving there from their existing site further north on 10th St West. The center, in general, will provides offices and store sites.

Nationally, July housing starts (released on Aug 19th), were the strongest since April of 1986. Again, on a national level, July new home sales were at a record high. However, this reflects closings in July where homeowners already had their interest rate locked, so it does not reflect how home buying behavior may have been affected by the rising mortgage rates of July and August. July new home sales were down -2.9%, but were still very strong as they were at the second highest level on record. Yes, mortgage rates have risen, but the housing market is nonetheless, acting healthy.

Pacific Communities, with their gated Renaissance tract, near 50th St West & Ave N, reports that sales are two phases ahead of construction. This leaves only 15 or so lots left for the last two phases. PC has also told me that they are planning another gated tract along Ave N, from 35th St West to 40th W. That one is still in the mapping stage.

Demand: August (110) land sales came roaring back from July's pull back (87). Last month I anticipated that the land market could be moving into a consolidation phase, but with August sales moving back over 100, that consolidation could be happening above 100, instead of below 100. Five out of the last six months have had land sales of over 100. Call it whatever you want, but land sales are very strong, and probably will remain so for the foreseeable future.