Canadian carpetbaggers target Statham

But it’s all a mirage — Walton really doesn’t plan to develop that property.

No matter what the firm says or how many fancy, colorful designs it trots out to public officials, the company’s business model is not to develop property. Walton owns a lot of land in the U.S. and it has never developed any of it into projects. In fact, the president of Walton told a group of Asian investors, “We don’t stick a shovel in the ground.”

That’s because Walton’s real business plan is to resell the property to Asian investors and then sometime in the future, hopefully flip that land to another owner at a higher price. This is called “land banking.” The land may someday be developed, but not by Walton.

Walton’s business model is to buy up large tracts of undeveloped, raw land in a growth area. It cuts up that land investment into small ownership “units” of around $10,000 each and then resells those units to Asian and other overseas investors. The firm tells those investors that the land will be rezoned and become worth a lot of money in 4-6 years. At that time, Walton tells investors, it will resell the land to another owner and the investors will make a lot of money.

But there are several issues with how Walton is doing this:

1. Walton is misleading local public officials about its real intentions. Last year, the Barrow County government gave Walton a rezoning and special use permit for a large mixed-use development along Hwy. 316 near the Barrow Crossing retail development. The county gave the company 24 months to start building the “Barrow Landing” project, yet nothing has been done. Why would Walton spend money to develop the property after it’s already been sold at a profit of about $15 million? Likewise, Walton is misleading Statham officials about its real intentions in the town. The firm doesn’t really plan to develop the property it is seeking to rezone and annex into Statham. That property already has been marketed and resold. Nor does the firm plan to develop the land it owns in Jackson County in South Jackson. All of its maps and diagrams and pretty pictures are just “concept plans” designed for show to mislead naïve local government officials who are desperate for development.

2. The firm is tying up — perhaps for a long time — some potentially valuable land that another firm might actually want to develop. In the Statham land deal, Walton paid around $10,000 per acre on average and marketed it as “Wolf Ridge” and “Koi Ridge” for between $55,000-$65,000 per acre to Asian investors. That’s how Walton makes its money up front. The problem is that it will likely take many, many years for that property to gain enough value to generate a profit for those investors. They only make their money if they can sell the land for more than $55,000-$65,000 per acre, and it is those investors, who by a majority vote, decide when to sell the land for future development. Though it makes no promises in the fine print of its sales brochures, Walton leads investors to believe they will reap their own profits within 4-6 years. But in the current economic environment, it could be many years before a future developer is willing to buy the raw land in Statham for more than what the Asian investors already have paid. In the meantime, that land will sit idle and undeveloped.

3. The county tax digest will not benefit from the higher prices Walton has sold the property for. The Statham land is valued on the tax books at only around $5,000 per acre, and that won’t increase until one of two things happens: Either adjacent properties start selling at higher prices, or the land is developed. In the meantime, all that land banking deal doesn’t help Barrow County.

Walton representatives clearly represent themselves to local officials as a development company, leading them to believe the firm intends to build out large master developments.

But that’s simply not Walton’s business plan. Walton has never developed any land it owns in the U.S. The company’s own sales materials — which are readily available on the Internet — and local real estate records show the firm already has resold most of the property it owns in Barrow and Jackson counties in land syndication deals. But Walton has made no mention of its foreign investors to local officials. Likewise, it doesn’t mention to its investors anything about developing the properties it markets. If Walton really intends to develop those properties, don’t you think they’d tell that to the investors who are putting millions of dollars in them?

Walton exploits communities like Barrow, which are in difficult economic times. And it plays on unsuspecting officials’ dreams for an economic savior. Many local officials in both Barrow and Jackson counties have done no independent research on Walton’s business model and they don’t ask questions. They believe what Walton representatives and its consultants tell them at face value without verification.

That kind of practice is what gives the entire real estate and development community a bad name. And it makes local officials look like country-bumpkins being manipulated by city slickers.

While Walton’s land banking violates no laws, its business model is really nothing more than a 21st century version of carpetbagging. Some things never change.

Mike Buffington is co-publisher of the Barrow Journal. He can be reached at mike@mainstreetnews.com.