Canadian real-estate firm bets big south of Austin

Heading north on Texas 21 from San Marcos, most drivers will see farmland, a few small houses and a gas station. But when Becky Collins makes that drive, she sees vast subdivisions called Camino Real, Caldwell Valley and the Cornerstone, each with their own shopping districts, schools and parks.

Collins is the Austin general manager for Walton Development and Management, a Canadian real-estate investment company that has quietly amassed about 12,000 acres of undeveloped land south of Austin.

The company and the investors it has recruited from around the world have made a big bet that the Texas 130 toll road will lead to a development explosion along the border of Hays and Caldwell counties, just beyond the booming Interstate 35 corridor towns of Buda, Kyle and San Marcos. It’s a distant vision that some analysts don’t believe will become reality for a decade or longer.

“It is certainly a long-term prospective in terms of development,” said Eldon Rude, principal at 360 Real Estate Analytics in Austin. “Only time will tell if those investments will pay off. It really all depends when the growth patterns in our region mature.”

That’s fine with Walton, which has an unconventional investment strategy that emphasizes market research and long-term planning. The company does not build subdivisions, but primes the land for development and waits for builders to make offers.

“Investors that invest in land understand that the major risk is time, so it will happen there when it happens,” said Rob Leinbach, Walton’s North America president. “Walton doesn’t control when the market is ready for investment. … We try to prepare the land for when the market arrives.”

Some of Walton’s Central Texas holdings, including the planned Gas Lamp District in San Marcos and two projects on the outskirts of Kyle, are closer to existing communities and could be ripe for development, Rude said. But other projects, like the enormous Caldwell Valley and Camino Real subdivisions planned near Niederwald and Uhland, may take more than a decade to get started.

The Walton way

Walton, which Collins said has 88,000 acres under management in the United States and Canada, researches markets for years before it enters them, looking for places on the fringes of growth rather than in the midst of it. Once it targets an area, Walton buys up as much cheap land as it can, slices it up into tracts and establishes corporate entities for each of them.

It sells the tracts to groups of investors recruited by Walton “capital raising offices” in places like Singapore, Hong Kong and New York. The company usually retains an ownership interest and establishes the property’s management structure, but each transaction is different, Leinbach said.

Development projects typically rely on bank loans or backing from “institutional” investors like pension and mutual funds, said Mark Sprague, a local real-estate analyst. Walton’s investor groups, however, include wealthy individuals as well.

“They’re a speculative group that raises its money from private investors,” said Sprague, state director for information capital at Independence Title Company. “Their process of raising money is certainly different from most developers.”

Once the properties have investors, Walton designs master plans, secures financing tools and zoning entitlements from local governments and may start building basic infrastructure, like roads and utilities. Then it waits for a developer or builder to come along and sells the property before a single home goes up.

Walton targeted land east of I-35, Collins said, in part because the area to the west is over the Edwards Aquifer recharge zone, where projects are often met with opposition from environmental advocates. Another big reason was the construction of the Texas 130 toll road, which heads south from Austin toward Lockhart and sports the nation’s highest posted speed limit at 85 mph.

“We really think that 130 in the long run is going to be an asset to this region, much like it has really developed up north in the Pflugerville, Round Rock area,” Collins said.

Texas 21 connects with 130 near Mustang Ridge and heads southwest to San Marcos. Many of the residents who commute to Austin from Walton’s planned developments will choose between taking Texas 21 to the toll road or taking smaller roads west to I-35.

Walton is donating right-of-way to local governments to improve east-west connections between the highways. Hays County recently accepted a 19-acre donation to realign FM 2001, which connects Niederwald to Buda. Collins said the company is also giving land to extend Yarrington Road, near San Marcos, and to improve FM 150, which goes through Kyle.

Walton, meanwhile, is still buying land.

“Always,” Collins said. “We love this area.”

Meeting the locals

For years, Walton has been building relationships with local officials, from whom it is now asking for approval on master plans, zoning changes and public financing tools. The company has been contributing to local charities and investing in the Greater San Marcos Partnership, the local chamber of commerce. It recently helped establish the Lockhart Education Foundation to aid the city’s school district.

Hays County Commissioner Will Conley, who chairs the partnership, said Walton representatives have been good “team players” and “smart strategic investors.”

Others are still feeling the company out.

Kyle Mayor Todd Webster said Walton recently presented the city with preliminary plans for two projects, Kyle Estates and Pecan Woods, and is asking for a Public Improvement District. That’s a financing tool in which jurisdictions issue bonds to help launch developments that future residents pay off over time.

Kyle officials had a “bad experience” with its first PID, the Bunton Creek Village, Webster said, and will be more cautious this time.

“They’ve been working the communities and charities, but they’re developers. They’re here to make money, and that’s OK,” Webster said. “Our job is to make sure we protect the community.”

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