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Thursday, February 17, 2011
Ken Craig of Walton Capital Management Inc.
Patrick J. Doherty, a Calgary native and distinguished member of the real estate industry, founded Walton International Group Inc., a privately owned family company in Calgary, Alberta in 1979. In 1972, Patrick founded Doherty Brothers Realty, a real estate agency headquartered in Calgary, with offices throughout southern Alberta dealing with the acquisition and management of real estate and specializing in the areas of commercial and residential property. Within three years, Doherty Brothers Realty grew to become the third-largest real estate firm in Southern Alberta, employing more than 150 agents. Sensing greater opportunity in large-scale commercial properties and investments, Patrick closed the residential division of Doherty Brothers Realty in 1979 and incorporated Quance Enterprises Ltd. to pursue these real estate opportunities.
In 1986, Patrick established Walton for the purpose of organizing investors to acquire and hold undeveloped land in and around Calgary and Edmonton. In 1995, Patrick amalgamated the entire group of companies into one full-service asset management company - Walton Development Asia Inc. This innovative corporation is known today as Walton International Group Inc.
Mr. Doherty's vision was to enable individual investors to participate in institutional-style investments in pre-development lands in the path of major urban growth. What began in 1986 with its first acquisition of a fourteen-acre parcel on the outskirts of Calgary has now grown into the Walton Group of Companies, with offices in seven countries with more than 70,000 investors. The Dohertys continue to operate a privately owned, family-based company with the same continuing values of integrity and professionalism.
At last week's luncheon Ken focused on sharing Walton's investment strategy and provided information about their projects in Edmonton and Phoenix as well as how you can diversify your portfolio.
Ken talked about Walton's investment strategy and how it engages four distinct areas to successfully guide their land-based investment process from the research and acquisition of land through to exiting (including the distribution of proceeds to investors). They hold an interest in the majority of projects they syndicate, thus aligning their interests with those of their investors.
Their investment strategy is called the Four Pillars of Strength and the areas it engages are:
I. Research & Acquisition - Walton takes two to four years to study a particular North American market. They conduct extensive environmental, physical and financial due diligence on the land. They consult with local experts within the community. Thousands of acres are researched and, ultimately, only a fraction meets their standards for acquisition.
Walton looks to confirm three conditions:
- Sustainable Growth Corridors - Areas in proximity to two or more major centres that have seen and are projected to see substantial population and employment growth;
- Strategic Land - Land strategically located within the sustainable growth corridors;
- Cost-Effective Development - Lands they feel are suited for economically viable and competitive development.
II. Investment Structuring for Syndication - Through their syndication model, Walton makes land-based real-estate investment accessible to qualified investors and purchasers. They syndicate land worldwide. Land-based investment structures are offered through dealers to qualified investors in Canada, the U.S. and Europe. In Canada, investment opportunities take two forms: Pre-Development Land (Growth) and Development Land (Cash Flow).
III. Planning & Development - Walton International Group's sister companies, Walton Development and Management L.P. and Walton Development & Management (USA), Inc. (WDM), take the land acquired through a concept planning and entitlement process to prepare it for what they feel is the most suitable use. The team at WDM has a collective experience of over 300 years in land planning, land development engineering, project management and finance. While land within urban or regional growth corridors may naturally appreciate, Walton looks to protect, preserve and realize the highest and best use of the land through the municipal planning and/or development approval processes. Due to the size and scale of the properties that they manage, they are often able to collaborate with local governments on the direction and type of development in a given area. Walton will plan and develop an entire community or neighbourhood in collaboration with these agencies with the aim of achieving the best development potential of these lands. An exit may occur at any of the planning stages, depending on when offers are received, and, if required, approved by their investors.
IV. Exit - While the holding period and exit strategy will be different for each project, Walton actively seeks out and works with regional, national and international purchasers for the land. Historically, Walton-managed properties have been sold to: Municipalities, Publicly traded real estate developers, Private developers, National and regional homebuilders and Institutional investor syndicates.
Ken also discussed the importance of diversifying your portfolio and how Walton Capital's investments can play a part in that. Many investors turn to balanced portfolios for diversification - either directly or indirectly through mutual funds. These portfolios typically have a mix of approximately 60% equities (stocks) and 40% fixed income (such as bonds). However, bond and stock markets have been correlated in recent times and did not offer true diversification whether held separately or within balanced portfolios.
Many investors look to land or real estate to diversify their investment portfolio. When alternative assets, such as real estate, are added to a portfolio in a meaningful way (meaning that the allocation is large enough to have a significant impact), the performance of the portfolio not only increases, but stabilizes as well. While stocks and bonds have their place in an investment portfolio, Walton believes that land-based real estate investments offer diversification opportunities because returns are driven by fundamental supply and demand economics with land absorption rates being based on population growth and builder demand rather than driven by equity markets. Investing in land, however, has traditionally only been accessible to large institutions and wealthy investors who can commit the sizeable investment dollars required to secure and develop the land.
Investors can share in the potential rewards of land-based investments through Walton's pre-development and development land products. To learn more about Walton Capital Management, their development projects or how you can diversify your portfolio visit their website. To find out about investment opportunities and if you qualify, contact Ken Craig by phone (613) 668-5184.
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