THE BOOM STOPS HERE

ALL IS QUIET on the Landmarket Front; Dallas” hottest, highest-priced landboom ever has ended. For landplayers, the party is over. Real estate brokers, developers, and investors are brushing confetti from their hair.

Big-deal brokermen like Sherwood Blount and David Davidson have been forced into mandatory ennui. They must wonder: “Where have all the big deals gone?”

Players like Blount and Davidson historically ride landcycle trains uphill in booms, downhill in busts (slumps). On uphill runs they make big commissions matching land buyers with land sellers. Investors and developers play with dirt too: investors to hold and sell for profit, developers to bring pavement where cotton once grew. For landplayers, a boom means feeding raw land to an expanding, voracious Metroplex.

The boom that just ended began in late ’82. The land-cycle train blew its whistle and shot uphill, climbing for thirty months. Frenzied deal-making and lots of borrowed money drove land prices out the window. The market overheated and then…

In March ’85 George Roddy noticed the train was losing horsepower, going downhill. Roddy heads Dresco Inc., the real estate information service. By August everybody knew it. By November some people swore the train had derailed.

Usual casualties are “blind hogs,” the inexperienced investors and developers who board a boom train seeking the wealth of Cibola. Instead they find Hades and are thrown off broke. Experienced landplayers fare better. They’ve ridden the boom-bust cycles twice since 1970, some making headlines on the uphill swings. They’ve weathered those previous slumps-one in the early Eighties, and the worst one ever in the protracted mid-Seventies downturn that hurt so many people.

How bad is the Mid-Eighties Slump? What do well-known landplayers think? How do they cope, these master deal-makers like Davidson and Blount? Or James M. Brown, the quiet broker whose For Sale signs ring the Metroplex? What is developer Rick Strauss up to? Or T. Kirk May, the pharmacist’s son? Will land investor Fred Brodsky ski the slump away?

Sherwood E. Blount Jr., thirty-six, copes with the land lull like a coach during a timeout. The renowned Dallas landbroker and former SMU footballer, who often couches his observations in gridiron and baseball idioms, says his current strategy is to take ten yards of dirt at a time, but the changed land marketplace necessitates a “new game plan.” The new plan, says Blount, must cope with changes in institutional lending practices. After all, the Feds have forced the savings and loan associations and banks to change their game plan. Says Blount: “They changed jerseys on us, black to blue. It means we change jerseys too.”

In his offices on Dallas Parkway, where SMU game footballs line the shelves, Blount peppers near-perfect syntax with good ol’ country boy slang, Since leaving Hank Dickerson & Company in early 1976, Blount has brokered land deals totaling hundreds of millions of dollars, creating great personal wealth and the well-known Blount mystique.

“I’ve been very fortunate,” he says, “fortunate to have found an area that I enjoy to the point of love. I love my work; I love the way it changes. Guys can sit around and talk about hard times. Friend, we don’t know hard times in America. We don’t know what it’s like not to eat or be a street person. This is just a temporary abbreviation. Whether it’s six months or five years, we’re gonna work our way through it.”

Blount won’t guess how long the lull will last. “Ask George [Roddy],” he says. “Frankly, I’m not concerned. Real estate has always been based on supply and demand. Oversupply a market and it says ’Ho! Stop!’”

Blount predicts the lull will bring a “broker washout.” “’Go to a real estate meeting with 200 people,” he says. “Pass the hat and there’s 150 companies there. Sole proprietors. These guys will struggle in tough times, guys who’ve gone out on their own, no sponsorship, no place to come for ideas, no sounding boards. Next year they won’t be in business.”

Blount’s company operates with fourteen experienced brokers who have changed jerseys. “We haven’t been affected much because we’ve moved with the marketplace. We’re in areas where people are buying. Supply, good demand. I won’t tell where because I think we’re one of the few people smart enough to identify where. I won’t tell the competition.”

Blount switches to baseball argot: “We’ve got a different mentality. We’ll make singles and doubles to insulate us.. .The “big deal’ guys won’t do this. A lot of guys won’t do this. We’ll probably sell more single-family land in lots to volume builders this year than any broker in business. We’ll try to win the batting crown by getting on base. Suddenly we’ve done 150 to 175 deals for S200) million. We’re gonna hit home runs too, say a 500-acre tract for $14 to $15 million. We’ll be here every day, out there busting our backsides, talking, prospecting people, trying to find the market. There’s not a whole lot I can do to change Washington doctrines.

“It’s been good for the last ten years,” says Blount. “Real good. People say ’Didn’t we have a recession in 1981-82?’ I say, if we did I didn’t know it.’”

FOR DAVID DAVIDSON, forty-one, a green money tree grew and will grow again on Dallas’ sprawling North Forty. The heavy-laden tree has also showered millions upon him, making him wealthy. It has made him the stuff of real estate legend, a legend that sometimes gets in his way. Example: legend holds that Davidson initiated the 1977 Canadian Land Rush to Dallas. Fact, according to Davidson: the Canadians were already here when he sold 2.400 acres in West Piano to some Calgary folks for $27 million, in its day a huge transaction. Fact: Davidson then sold many more land tracts in North Dallas, Piano, Addison, Carrollton, and Richardson, to Canadians and Americans.

To some brokers, many of whom go bust, Davidson is the legendary Easy-Deal, Easy-Money Man. Didn’t he resell that West Piano tract in 1983 for $125 million, at that time the area’s largest documented land transaction? Fact: he did. But according to Davidson, it was anything but easy.

But again they ask: hasn’t Davidson resold the same tracts time and time again? Didn’t he help assemble Valley Ranch?. . .Think of the commissions! Doesn’t Davidson own a Porsche, a Jaguar, a red 1955 T-Bird. and his own Dallas Parkway office building? Hasn’t he sent a car and driver to LeMans? How does he do it?

“Like a grunt,” says a reflective Davidson. Grunt, def: the ultimate Army weapon, ground-pounding combat rifleman, sweat, bleed, take territory foot by foot, grunting. Davidson is saying there ain’t no easy deal. “If there were I wouldn’t have wrinkles and white hairs. Nobody has ever handed me a silver platter on a deal.”

The decorated Vietnam combat officer, today “Mr. Realist,” is concerned. “I’ve never seen a flatter market.” says Davidson. “They brought too much money to the marketplace. They [the S & Ls] caused prices to jump. People overbuilt everywhere.” Now, says Davidson, the S & Ls won’t or can’t fund new deals.

Davidson expects land prices to go down for the first time in fourteen years. There will be foreclosures. Some land brokerage firms will be hurt, some developers and architects. “There’s really no way of knowing who’ll come out of it. who won’t. The few lucky ones got out last year.”

Like Blount, Davidson refuses to guess how long this slump will last. “Some S & Ls will take a bath. A couple of the state’s largest weren’t involved. They’re fortunate. They’ll be buying land off those on their knees. They were smart or lucky, who knows? We’ll see more land foreclosures this year than ever before,” says Davidson. “I’m sure of that.”

He’s optimistic, but he was pessimistic at Christmas, when he thought the foreclosure flood would take too long to dry up. He feared that the market would be flat except for “user” deals, churches, gas stations, small businesses, some residential.

Dallas will recover quickly and head on down the road, says Davidson, who’s weathered the slumps before. In the meantime he’ll be seeing as many of the following as possible, eyeball to eyeball: bank and S & L officers, foreign money sources, local guys. He’ll hit it hard with no goof-off time, looking at land in Flower Mound, Lewisville, Coppell, and out by the airport. “When it turns around like it has the last couple times, I’ll be a couple steps ahead of everybody else,”

Land, like stocks, oil, and gold, doesn’t go up forever, says Davidson. It must level off sometime. Any commodity does. “In the early Seventies I went nine months without making a deal, sold my house, stood out in the driveway crying, holding a baby, getting a divorce. I thought it was all over. I found out it wasn’t.”



A PHOTO ON T. Kirk May Jr.’s office wall shows a bum with a bottle counseling businessmen. “Bad times are like a big bottle of bad wine,” reads the caption. “It only feels better after you’ve finished it.”

“I’m not worried,” says May, an MBA in finance and real estate. “Good projects do well in any market.” May, twenty-nine, is a broker/developer said to be a big Dallas landplayer, especially around Sherman, his home town. “Not true,” he says. “That’s because we did one of Grayson County’s largest (developable) land deals last May. We bought eighty-five acres at highways 120 and new 75 for a hotel, shopping center, S & L, and apartments.” May says the deal got big press in Sherman and Denison, creating his “landplayer” image.

“Blount, David Davidson, those guys know ten times what 1 know about the overall land market. Dollarwise. they’ve done a heck of a lot more than I. I’m lower keyed. I’m probably more knowledgeable in my area; in theirs they’d probably blow my socks off.”

May’s area includes well-financed sites in Denton, Sherman, and Dcnison. “These cities are secondary markets dynamic enough on their own to support our developments,” says May, meaning his shopping centers, high-tech office parks, apartments, and office buildings. Similar sites in Dallas would cost four times more.

May offices in a remodeled three-story Victorian home (circa 1875) across Maple Avenue from The Crescent. He and his partners own the place. Next door sits the former Old Warsaw Restaurant. May and partners own it, too. They’ll soon raze Old Warsaw and begin an office building in June.

May doesn’t like doom and gloom newspaper articles, which he says are caused by a few poorly planned land deals. “Those guys look at stats, surveys, numbers. They don’t expound.” May cringes at headlines like “Dallas Office Market Most Overbuilt In U.S.,” which he says ignore Dallas’ absorption rate. “It’s not overly healthy, but it isn’t a Houston.” He sees a turnaround by the year’s end. “Land foreclosures will happen.” he says, “but there are a lot of deep pockets out there.

“We’re not out to be the biggest in Dallas; we don’t act like it. We’re just doing our business. Somebody may pass us by, but in ten years, we’ll still be here.”



LANDBROKER JAMES M. Brown analyzes things as if his head houses a computer: facts in, creative real estate approaches out. Brown’s computer saved him in the mid-Seventies landplay crunch. Now it’s kicking out remedies for the current crisis, telling him where the money and the market are going.

Eighty percent of Brown’s brokerage business is speculative, pre-development raw land, or land nearing development. His For Sale signs occupy peripheral tracts edging cities and towns. He’s the type of broker that land crunches bite hardest. Or is he?

Well, says Brown, forty-seven, graduate of Highland Park High and SMU, there’s a lot of money out there waiting for the market to bottom. It’s cash money, foreigners, wealthy Dallasites, syndicators with unprecedented amounts of money from the securities industry; i.e., those looking for tax breaks and vulture funds, if you will.

Says Brown: “They believe the crunch is short-lived, shallow.” He agrees. “They remember the mid-Seventies slump, when land prices dipped. If they contract 25 percent, we’ll have a buying wave. They are waiting. They will buy.” Brown’s gnawing concern is the Metroplex’s job growth stats. “Job growth fuels the whole cycle,” he says. “It’s slackened.”

There’s a safety net for brokers, says Brown. “Instead of sitting here and maybe going broke, [they should] be in other cities making money, doing business as usual in brokerage and development.” They should go to Nashville, Atlanta, Tucson, Phoenix, and Tampa, as he’s doing.



“PLAIN-WATER FISH,” says Richard C. “Rick” Strauss, “not salt-water.” He’s describing his office aquarium. His wife thinks he’s Type A and makes him keep fish to calm down. “She and our three daughters had our male dog neutered,” says Strauss, hinting that he’s been threatened.

Strauss is the hard-driving land developer who heads RCS Investments. At forty, he promises to age into a near perfect twin of his well-known father. Democratic power broker Robert Strauss. He’s personable, fast-moving, truthful, exact, and close to the vest. Since age twenty-one, he’s put together a nationwide real estate empire of 12,000 to 13,000 garden apartment units; luxury condominiums like The Claridge and The Savoy in Dallas; numerous office buildings and parks. He’s developed mixed-use properties, among them West Piano’s Preston Meadow. That’s the 2,400-acre tract David Davidson brokered to the Canadians in 1977, then resold in 1983 to Strauss’ Really Development Corp. (Strauss is no longer associated with the company.)

Strauss developed Preston Meadow. Now he’s turned to “our major thrust,” developing the heavily residential 6,250-acre mixed-use Flying M ranch near McKinney, budgeted for $350 million. Flying M’s purchase price was $133 million, to date the Metroplex’s largest land deal. Strauss bought the ranch in a joint venture with Gibraltar Savings Association from Gulf Broadcast Company, outflanking a well-publicized bid by H. Ross Perot.

Strauss thinks the land slump will last two years or more, considering it “’positive” for the Flying M because it slows demand. He’s already moving dirt for its golf courses. “We’ll start our first homes in fourteen months.” he says, “it’ll be three to four years before any industrial or office-type development.”

Strauss thinks that’s good timing for bringing those properties on line. “We’re the next logical jump in North Dallas development,” he says, citing Flying M’s acreage-priced land and its proximity to affordable utilities.

Strauss recommends patience in coping with the slump and sees no quick cure for the present lull. He preaches restraint in jumping at some upcoming “excellent buys” that may not be excellent. “We’ve got to be careful in determining where the bottom is,” he says. Strauss believes that strong in-migration, a broad-based economy, and good absorption rates separate Dallas from Houston and other cities.

“We just built too damn many shopping centers, too damn many buildings. We’ll work ourselves out of it.”



FRED BRODSKY, forty-five, is the picture of serenity, a landplayer ensconced in an ivory tower off Central Expressway. He’s calm, like his Oriental paintings, safe from demand notices, reeling S & Ls, and Bum Bright’s circling Vulture One fund. He is a land investor backed by international wealth; his is the insouciance born of big money’s patient clout.

A former New Yorker and longtime administrative-finance manager of Trammell Crow’s international operations, Brodsky started his company in 1977, the year David Davidson discovered Canada. Brodsky’s International Investment Advisors is general partner with eight “offshore families,” mom-and-poppers from Australia, India. England. Belgium, Pakistan, and Kenya.

Brodsky has clear investment parameters: one family per deal, down payment with hard equity bucks, owner totes note. No banks and few S & Ls. Hold dirt two or three years, rezone residential, build streets, sewers, etc., and wait patiently for market to catch up with his price. It works. Brodsky’s done a quarter billion in business since 1979.

Brodsky thinks it’s up to the U.S. economy-to finance, to agriculture, oil-and to the tax bill’s final form, whether the land slump reverses itself in early or late ’87 or in ’88. The Feds are already imputing interest; that’ll fetter the S & Ls in coping with distressed properties. There are questions on corporate and second home interest deductions, what Brodsky calls “fundamental historical benefits” of real estate investment. Also, there’s depreciation and investment tax credit-i.e., the Feds are in the driver’s seat.

He believes movement will continue northward, mainly because of EDS’ 2,600-acre project in West Piano and the action around McKinney. “We’ve been very successful as land investors south of I-20 and 635, all the way to Waxahachie.” Oak Lawn excites him; there’s a backfill coming closer to inner-city Dallas. “We’re fortunate, having several deals in the title company now,” says Brodsky. “This year we’ll work to sell mature properties on good profit margins. We’re cautious on purchases, conserving our resources. We might buy in fourth quarter ’86 or in ’87, when better values become available.”

Brodsky believes banks and S & Ls will hold their land prices until the market catches up. “They can’t afford book losses. Land values are not going to be substantially discounted.”

Brodsky waits; he’s patient. “It’s going to happen again; I’m optimistic. This is the year to ski or relax a little bit. ’87 through “89 are going to be very, very good years.”