San Antonio Business Journal - July 26, 2006
by Tricia Lynn Silva

Just when some may have been thinking that things couldn’t get any better in the local residential real estate market, a new report shows that housing starts are continuing at a healthy clip.

According to the second-quarter 2006 report by Metrostudy, a total of 5,367 single-family home-construction starts were recorded between the months of April and June. This figure marks a 29.4 percent increase from the number of housing starts recorded during the second quarter of 2005.

For the 12 months ending June 30, 2006, the Metrostudy report shows that 18,598 homes commenced construction. This is a 26.2 percent increase from new home starts from the previous 12-month period.

Metrostudy is a leading provider of housing information.

Local homebuyers also purchased a total of 4,482 new single-family homes during the second quarter of this year — a 24.5 percent jump from the number of new homes purchased during the same three months of 2005, according the report.

Over the last 12 months, sales were completed on 15,743 new units — an 18.9 increase from the number of home-purchase closings recorded during the previous 12-month period, the Metrostudy report shows.

“For the San Antonio housing industry, the second quarter of 2006 was the strongest on record in nearly every category … ,” says Randall Allsup, manager of the local division of Metrostudy.

The news in San Antonio is much brighter than the forecasts being posted in other areas of the country — namely the housing markets in California, Arizona, Nevada, Florida, Northern Virginia and Atlanta.

“Those markets are being affected by a combination of affordability problems caused by rapid price increases, recent increases in mortgage interest rates, investors dumping speculative inventory, and buyer fear caused by much talk of a housing bubble,” Metrostudy President Mike Inselmann says.

Nationally, housing construction is expected to slow by 5 percent to 6 percent over the remainder of this year, and going into 2007 — despite strong fundamentals such as job growth and the economy. Negative headlines in the media also could be having a big impact on demand, Metrostudy notes.

“Given the performance of the economy, metropolitan areas whose supply-demand balance has not been distorted by local development restrictions or disruptive investor activity should behave normally,” Inselmann says. “Metropolitan areas experiencing job growth will experience in-migration and household growth and will likely see demand for housing remain steady in the coming year.”

Charlotte Business Journal - 8:02 AM EDT Thursday
by J. Lee Howard
Senior Staff Writer

Merrifield Partners is drawing plans for a $15 million, 75,000-square-foot office-condominium building in South End.

The three-story project, dubbed 1927 South Tryon, will feature more than 100 parking spaces in a two-level deck. The 2-acre site is a former Hughes Supply Inc. plumbing warehouse.

Charlotte-based Merrifield plans to buy the Tryon Street site by Aug. 1 from a limited liability company headed by Ralph Falls of Pace Commercial. The prospective sales price was not disclosed. The property is valued for tax purposes at almost $1.1 million.

The project is an investment of Crosland Inc., with Merrifield, an affiliate company, acting as developer.

Merrifield plans to sell space in the building for $195 per square foot. The project is being designed to accommodate businesses measuring 2,500 square feet or larger.

Mark Newell, a Merrifield partner, says his target market includes architects, engineers and designers. For several years, South End has attracted a range of office operations and design firms.

Plus, the local market for businesses wanting to buy space appears to have grown deeper than for companies seeking to lease, Newell says. The opportunities to buy Class-A space are rare, he says.

The project also stands to benefit from being surrounded by South End’s shops, dining options and general commercial activity, Newell adds.

The project will be within walking distance of the light-rail line the Charlotte Area Transit System is building from uptown to Pineville.

Falls’ company acquired the property about a year ago from Hughes. His idea was to convert the 30,000-square-foot Hughes building into office condos. But he was later approached by Merrifield representatives, who were interested in pursuing a much larger project. So he and his partners agreed to sell.

The project is the latest in a series of office developments in the burgeoning South End district. Recent announcements include Abbott Professional Town Homes, a live-work project of MECA Properties. That 16-unit, $6.5 million development, which is under construction, will offer space starting at about $380,000 for 1,800 square feet.

And later this month, the city is expected to receive proposals from as many as five development teams for a mixed-use project in the Scaleybark Station area. Crosland is among those showing interest.

The 8.5-acre, city-owned site is on South Boulevard at Clanton Road, adjacent to 10 acres owned by CATS.

That project will likely set the tone for future South End developments along the transit corridor, says real estate consultant Frank Warren, president of Warren & Associates.

The 1927 South Tryon development will be unusual for South End, he says, given that it will be new space, rather than a rehab like those that are common in the area.

But it could be typical of what’s to come, he adds, citing the Scaleybark Station project.

Mass transit is going to have a major impact on that corridor, significantly boosting its worth as an office location, Warren says.

A general contractor has not been selected for 1927 South Tryon. The building is being designed by Robert Johnson Architects Inc.

The Business Journal of Phoenix - 2:40 PM MST Thursday
by Diane Arthur
The Business Journal

The Valley housing market slowed in April, registering the lowest sales total for that month in six years, the Arizona Real Estate Center announced Thursday.

The resale market slowed last month to 5,980 sales, a decrease from the 7,264 sales for March 2006 and well below last April’s 8,735 sales.

The report found that April 2006 was the weakest April since 2000, when only 4,870 resales were recorded.

“Historically, April is a slow month as it represents a lull from the end of the holidays and the beginning of the summer recording months,” Jay Butler, director of the Arizona Real Estate Center at Arizona State University’s Polytechnic campus, told the Phoenix Business Journal Thursday.

So far in 2006, there have been 23,960 recorded sales, while the 2005 year-to-date total stood at 36,060 sales at this point in 2005.

Butler said the Valley resale market is returning to a more normal pace, following several years of unprecedented growth.

“And some slowing is good for the market, except for individuals trying to sell their homes right now — they would not agree,” said Butler.

As for resale home prices they continue to rise in most parts of the Valley. In fact, the median home price jumped from $194,000 in January 2005 to $260,000 in December 2005. However, since the record of $263,000 was set in September, the growth rate had been disappearing with the median price being up slightly in April to $264,900 from $263,000 in March and last year’s $221,000.

Butler added that some infill areas of Phoenix and Tempe are noticing an uptick in home resales, as rising gas prices bring buyers back into areas closer to where they work.

Here is a breakdown of April 2006 resales and median home prices, and their corresponding 2005 numbers:

* In Phoenix, resales fell from 2,490 sales to 1,890 sales, while the median sales price increased to $220,000 from last year’s $174,000.
* The Scottsdale resale home market declined from 695 to 460 recorded sales, the median sales price jumped from $475,000 a year ago to $593,000, although it was $595,000 in March 2006.
* The Mesa resale housing market declined from 1,070 to 660 sales, while the median price increased from $195,250 a year ago to $245,900.
* Glendale decreased from 580 to 490 sales, but the median sales price increased from $200,000 to $250,000.
* Peoria’s resale market fell from 365 sales to 250 sales, while the median price moved from $236,000 to $275,500.
* The Sun City resale market fell from 160 to 100 sales, the median sales price increased to $186,700 from $178,500. Resale activity in Sun City West also fell from 90 to 70 sales, but the median sales price increased from $208,700 to $250,000.
* Gilbert’s resale market fell from 475 to 310 sales, but the median sales price increased from $270,000 to $339,000.
* Chandler’s resale market slowed from 595 to 405 recorded sales, while the median sales price increased from $253,340 to $295,000.
* The Tempe resale market decreased from 200 to 160 sales, with the median sales price increasing to $275,000 from $222,000.
* The Avondale resale market fell from 220 to 140 sales with the median price moving from $217,450 to $260,000.
* El Mirage resales decreased from 160 to 90 sales, while the median home price went from $174,900 to $219,900.
* Goodyear declined from 200 to 100 sales, while the median price increased from $230,500 to $298,200.
* The Surprise resale market decreased from 395 sales to 230 sales, with the median price increasing from $220,000 a year ago to $250,000.

The Arizona Real Estate Center is associated with East College at Arizona State University’s Polytechnic campus. The center collects and analyzes data concerning real estate in the greater Phoenix metropolitan area.

Web Posted: 04/24/2006 12:00 AM CDT

Aïssatou Sidimé
Express-News Business Writer

For 10 years Bruce Cook left home while his wife slept to go to a high-stress job. He returned home after she had left for her waitress job. They rarely saw each other.

After wife Elaine Krugman suffered a shoulder injury that ended her waitress career, they decided to retire from full-time work.

“As you get older you realize that you either spent time well or you didn’t,” said Cook, 56, a former records administrator for San Diego Gas & Electric Co. “You can’t get it back. Time to me is very important.”

To capitalize on the booming California housing market and reduce their expenses, Cook and Krugman sold their primary house in San Diego and bought a house with cash in San Antonio. They moved here in 2004.

Cook became a consultant compiling real estate data part time for his previous employer. Now he spends much of his time attending glass-fusing classes and traveling with Krugman, a part-time craft instructor on cruise ships.

“More time with my wife gave my life a deeper meaning,” he said.

“It also brought his blood pressure way down,” said Krugman, 44, who also works as a consultant scanning documents part time for Cook’s former employer.

But 20 months later, the couple wonders whether their savings could continue to support their lifestyle if Bruce’s one-year consulting contract wasn’t renewed.

Krugman also would like to travel more, about 10 to 12 weeks a year, which would cost roughly $12,000.

“To double our travel would put us outside what I think we can do with the budget,” Cook said.

The couple have investments and cash totaling roughly $935,000.

They will earn about $70,000 before taxes from consulting and their investments. Their annual expenses are roughly $48,000.

The couple are careful to stay out of debt: They carry no credit card balances. They paid off car notes and the mortgage on a condo they still own in San Diego.

The condo, valued at about $275,000, is now rented out. But they are considering selling it and investing the profits to generate more income.

However, Cook is unsure how to remain properly diversified to minimize risk.

“The condo is earning just 3 percent after expenses, which I think is unacceptable, but I’m a little hesitant to put everything in the stock market,” he said.

The decision is more complicated because neither one has disability insurance to provide income if he or she can’t work even part time. Cook has long-term care insurance and a family medical plan through his former employer, but the benefits will terminate when he turns 65.

They want a solution that lets them continue enjoying life and each other at their own pace.

“I’ve been very proud that we don’t owe anyone, and it’s important to stay that way,” Krugman said. “But financial worries add stress to our lives and it’s important to remain stress-free.”

A new $15 million apartment community is about to be unveiled on San Antonio’s Southeast Side.

The NRP Group LLC, a national real estate development, construction and property management firm based in Cleveland, will open its newest community, Costa Cadiz Apartment Homes next week.

The 172-unit complex is located at 2819 South W.W. White Road in Southeast San Antonio — an area, NRP Assistant Vice President Debra Guerrero says, is in need of new development.

“The W.W. White corridor has been slowly deteriorating,” Guerrero says. “We feel like this $15 million investment will spur new investment.”

NRP Group officials demolished two dilapidated homes to make way for the apartments — which will have a mix of market rate, affordable and Section 8 housing.

Costa Cadiz was built through a public-private partnership. The city of San Antonio contributed $350,000 in housing funds from the U.S. Department of Housing and Urban Development in support of the project.

Local residents will also have access to social services through NRP Group’s partnership with the American AGAPE Foundation. AGAPE — which is the Greek word for love — will offer case management services, advocacy, health screenings, a computer lab, a scholarship program and an after-school homework program.

In San Antonio, NRP Group also owns Costa Biscaya and Costa Dorada apartment communities. Three more projects are being planned for San Antonio.

Besides its headquarters in Cleveland, NRP Group also has offices in Corpus Christi, Houston and Irving, Texas.

L.A. Lorek
Express-News Business Writer

San Antonio has landed its first new company of the year.

Harris Connect selected San Antonio for a new customer call center that will employ more than 250 people. The privately held company, based in Chesapeake, Va., provides directories, data research and Internet services for educational institutions and other organizations.

“To start, we are hiring 250 staff members, but we left more room for growth and we hope to be able to grow it,” said Susan L. D’Agostino, Harris Connect’s senior vice president of administration.

Harris Connect has leased 33,000 square feet of space in the Chisholm Building at 4400 N.W. Loop 410 and will invest about $1.5 million in the new center, which is to begin operating in May. The company publishes more than 600 print and CD-ROM directories annually.

“We started with more than 60 locations throughout the U.S., and San Antonio made the short list,” D’Agostino said. “It was really our meetings we had with the local economic development council and some business leaders that really sold us on the caliber of the labor there.”

Harris Connect was not looking to open a second location in Texas until Partners National Real Estate, a Dallas consulting firm, added San Antonio to the evaluation process strictly to provide data for comparison with other cities, said Mario Hernandez, president of the San Antonio Economic Development Foundation.

“It’s very rewarding to win out in a process where we weren’t even on the long list of cities,” Hernandez said. “Especially since another city was offering a hefty incentive package and we were not able to offer incentives.”

Harris Connect, with 1,000 employees nationwide, didn’t put incentives first on its list of expansion factors, Hernandez said.

The company instead chose San Antonio for its quality labor force, favorable business climate, reasonable real estate costs and south-central location, D’Agostino said. The company will set up a temporary recruiting center to open in early April in the Fannin Building at 4100 Piedras Drive E.

Harris Connect is talking with the Texas Workforce Commission about helping the company with some of its recruiting and training needs, D’Agostino said.

The company also has an office in Austin with about 300 employees, and the short distance there was another factor in San Antonio’s favor, D’Agostino said.

“We’ve been in Austin for more than 10 years,” she said. “We’ve found that labor market to be very, very successful for us.”

San Antonio actually competed for Harris Connect’s Austin expansion several years ago, Hernandez said. In that case, San Antonio made the short list.

Fortune declares real estate market hottest in the U.S.
By JOHN W. GONZALEZ
Copyright 2006 Houston Chronicle San Antonio Bureau

SAN ANTONIO - To find their dream home, Michigan transplants Matt and Christine Ausmus prowled the Internet, marched through model homes and eventually settled on a spacious new house in the oak-covered hills at the city’s northern edge.

Moving into one of the nation’s most affordable real estate markets, they were able to get all the house they needed after Matt Ausmus took his new job at the Toyota truck plant in August.

“We definitely got our money’s worth. We love our home. We are glad that we made the decision that we made,” Christine Ausmus said.

For her, there’s “no comparison” between their previous home in rural Adrian, Mich., and their new home, she said.

“For what we got for the money up there, it was very, very tiny,” she said. The home site here is smaller, but the house “works very, very well” for her family, she said.

Satisfied home buyers like the Ausmuses have thrust San Antonio into the national spotlight of the housing industry. Last month, Fortune magazine proclaimed the Alamo City the nation’s “hottest” residential real estate market for 2006, with a projected appreciation rate of 8.3 percent. That follows a three-year stretch in which home values increased more than 20 percent.

Housing specialists embrace the magazine’s optimism, citing several positive indicators: relentless population and job growth, relatively low mortgage rates and an adequate supply of medium-priced homes.

“The secret is out about San Antonio,” said local housing analyst Jack Inselmann of Metrostudy, a firm that tracks new home development in Texas and several other states. “We’re not that little old podunk town anymore.”

The nation’s home builders have taken notice, he said. Five years ago, only 10 builders produced 80 percent of the homes.

“Now it’s 30 builders who dominate the scene,” Inselmann said.

In all, 16,340 houses were started in 2005, up from 12,838 in 2004, he said. By year’s end there could be 18,000 starts, he added.

“It’s going to be another solid year, and I think the market will grow because we’ve got so much going on on the economic side,” Inselmann said. “San Antonio is to me the best housing market in the state.”

Growth among major employers provides part of the spark. The nation’s eighth-largest city is home to AT&T (formerly SBC), Valero Refining, Clear Channel Communications, the under-construction Toyota Tundra plant, insurer USAA and three military installations.

The city recently lured a call center for Washington Mutual and other financial institutions, promising several thousand new jobs. And under the military realignment process, the city stands to gain thousands of new residents as medical training is consolidated here. Meanwhile, the area’s nonmilitary health care industry continues its expansion, rivaling the long-important tourism factor.

Stage has been set
The strong housing market is the direct result of those economic powerhouses, said former mayor and federal housing secretary Henry Cisneros, now a home developer.

“This is fundamentally a new ballgame for San Antonio. The last decade has been one of consolidation, which is setting the platform for very substantial growth. This has been one of the steadiest markets in the country, and I think steady is about to become accelerated,” Cisneros said.

San Antonio Board of Realtors Chairman Barbara Tarin said even with strong demand and rising prices, area homes are still a good value for typical buyers as well as outside investors.

“San Antonio did far better than Austin, Dallas-Fort Worth and Houston when it comes to median price appreciation over the last three years,” she said.

“San Antonio had — and this is unbelievable — a three-year appreciation of 22 percent. Austin had only 6 percent; Dallas-Fort Worth 11 percent, and Houston 8 percent,” Tarin said.

Steady increases
“We’ve had steady increases over the last five years, so that’s different from a lot of the other markets — and that is attributable to our affordability. In San Antonio in 2005, the median price was $134,000, so that makes us very attractive,” Tarin said.

One healthy consequence, she said, is “there’s little overstretching in San Antonio. People are not having to go to these unique types of loans to be able to purchase a house.” And while much of the building has been north of town, the entire city benefits from the sizzling housing market, Tarin said.

“For the first time since we’ve been monitoring MLS statistics, every one of the Board of Realtors’ map areas — 31 of them — had an increase in the number of sales or an increase in the average sale prices when you compared 2004 and 2005,” Tarin said.

Existing single-family home sales reached 22,000 last year, up from 19,000 in 2004, she said, with the most popular price bracket being from $100,000 to $140,000. The Board of Realtors counts in its survey of existing homes mostly used homes, but some new as well.

Another strong year
A significant number of buyers are out-of-state residents seeking second homes and investment properties, Tarin said.

“We have a lot of investors from some of the higher-priced markets, like California and Florida, coming into Texas because the returns here on investments are a lot higher,” she said.

Many of the investment homes become rentals, creating a huge glut in that market, said Misty Wood of Keller Williams Realty.

“Normally we run 200-300 homes on the market for rent at a time. We’re at 900 right now, which is a lot, and it’s because of the investors,” Wood said.

Still, Wood said homeownership retains strong appeal. She said the city’s healthy job picture, as reflected by the arrival of the Toyota plant, should produce another strong year for the local housing sector.

“I don’t see it slowing down just yet. We have a long way to go before it slows down,” she said.

“Our projection for this year is actually an 8 to 10 percent increase over last year,” Wood said, adding, “I can remember years ago when the average appreciation on a home was approximately 1.5 percent a year.”

Homes go fast
Wood assisted the Ausmus family, related to Houston Astros catcher Brad Ausmus, in acquiring the new home. She said the area’s supply of moderately priced homes is tight but adequate.

“We actually do have a larger supply than demand in the $300,000 range and up. That’s still a relatively slow market. The fast market is in that $115,000 to $150,000 range. I put a home on the market last week and had two full-price contracts by the next day,” she said.

That seller then had a choice: an offer with a $16,000 down payment or one with $25,000 down, Wood said.

“They took the $25,000,” she said. “I’ve even had some cases where they’re offering above the asking price. That’s absolutely unheard-of in San Antonio until recently.”

Wood said the Ausmuses, like many others brought to the city by the Toyota plant, made neighborhood schools a major factor in their selection.

“I’m finding that when they come in, they’re still wanting to go to the hot school districts. They’re opting to make the drive from the north side as opposed to locating in the south side,” she said.

“These executives, they’re watching where they put their dollar. If they see the trend and the growth all going north, they’ll want to put their money in the north,” Wood said.

A 35-year veteran of the business, Wood said 2005 was a banner year.

“I had the best year I’ve ever had in real estate last year, and I’m looking for an even better year this year,” she said.

In addition to assisting the Ausmus family, Wood helped David Flattmann and his family as they sought a place to rebuild their lives after Hurricane Katrina. The former Louisiana residents landed in suburban Schertz, where Flattmann’s father lives.

“We lost everything to the flood,” Flattmann said, including their home and business.

After staying with his father a couple of months, they found a six-year-old home and moved in recently. The closing took place four months to the day after Katrina wiped them out.

San Antonio Business Journal - 12:04 PM CST Monday

Prospective homebuyers are finding themselves in an environment where interest rates are rising, home values are going up and the government continues to rack up massive deficits.

Some economists are predicting a national housing market crash, while housing industry officials in San Antonio content the fundamentals in the local market remain solid.

In an online Business Pulse survey conducted by the San Antonio Business Journal on the fate of the local housing market, a majority of readers agree that housing inventory has not outpaced demand and that home values are still reasonable.

Around 70 percent of local readers say San Antonio’s housing market is not overheated and thus not prone to any bursting of a so-called local housing market bubble.

Another 22 percent of readers say the San Antonio market is headed for a housing market crash, while 6 percent were undecided.

According to various housing reports, San Antonio home prices and sales are on the rise as new buyers continue to move into this growing market.

Web Posted: 12/02/2005 12:00 AM CST

San Antonio Express-News

Average U.S. home prices jumped a strong 12.02 percent from the third quarter of 2004 to the same period this year, but increases in San Antonio and Texas lagged far behind, federal regulators reported Thursday.

Texas, perennially one of the slowest states in house appreciation, ranked 46th in the report and well below the national average with a 5.32 percent appreciation rate for the 12-month period. San Antonio’s housing market performed better than most of the state, with a 7.27 percent annual growth.

The figures released by the Office of Federal Housing Enterprise Oversight, the agency that oversees the big mortgage- finance companies Fannie Mae and Freddie Mac, were the latest sign of a gradual cooling of the red-hot housing market.

The previous quarter’s 13.4 percent gain was the biggest in 25 years. And the Commerce Department reported Tuesday that sales of new homes jumped to an all-time high in October, in what could be a final spurt from a housing market that is expected to slow after five record-breaking years.

Rates of increase in home prices in the third quarter “were extremely strong, although some deceleration can be seen in a number of the faster-appreciating markets,” Patrick Lawler, chief economist for the federal housing office, said in a statement issued with the report. “Price momentum in the Pacific and New England states, in particular, has pulled back.”

In Texas, San Antonio was ranked behind only El Paso, the best-performing metropolitan statistical area in the state. The Alamo City ranked as the 149th metropolitan statistical area in the nation.

The report ranked only the country’s largest urban areas, and several South Texas housing markets performed better than San Antonio. Victoria showed a 10.53 percent appreciation rate, Corpus Christi was 8.47 percent and Brownsville-Harlingen was 7.67 percent.

The report also noted that the gulf states could see significant price increases over the next several quarters by an influx of people displaced by Hurricane Katrina.

Refinanced properties, the federal housing office emphasized, helped push up the national appreciation rate. While the overall average was 12.02 percent, a purchase-only index showed a rise of 10.95 percent.

Industry analysts expect refinanced properties will be less of a factor in the coming quarters. The Mortgage Bankers Association notes that refinancings were a 60 percent share of mortgage originations in the first quarter of 2004, but that fell steadily to a 44 percent share in the third quarter of 2005. The share of mortgage originations that will be from refinances are forecast to be in the 33 percent to 37 percent range through 2006, the Mortgage Bankers Association said.

Looking at the national average, house prices grew far more rapidly over the last year than prices of other goods and services included in the Consumer Price Index — 12 percent versus 4.5 percent.

The federal report, based on data from Fannie Mae and Freddie Mac on repeat sales and refinancings of single-family homes, also found that:

Growth in home prices in Arizona continues to accelerate, with a one-year rate of increase of 30 percent — the largest of any state by a wide margin.

Florida took the No. 2 spot, with a one-year rate of increase of 25 percent. Eleven of the 20 priciest metropolitan areas for homes nationwide are in the state.

Nevada’s one-year appreciation rate dropped by more than 10 percentage points, from 28.6 percent to 17.6 percent. For the first time since the fourth quarter of 2003, the top 20 metropolitan areas do not include any Nevada cities.

The Commerce Department report for October said that while the median, or midpoint, price of a new home rose to $231,300, that was up just 0.9 percent from the median price in October 2004 and far below the double-digit annual price gains that sellers had been enjoying.

Web Posted: 11/11/2005 12:00 AM CST

Adolfo Pesquera
Express-News Business Writer

When the Texas General Land Office announced this year that income from real estate investment was up 2,844 percent, the jump looked more dramatic than the cash value would indicate.

The state had done little in real estate before: Oil and gas earnings were more than $302 million in 2004, compared with $48 million for real estate. But the four-digit percentage jump was just a taste of things to come.

Over several years, the state of Texas promises to have a significant role in land development, even though state law severely restricts the land office from development.
In Bexar County, two major deals were done this year involving state revenue of more than $30 million. That was not quite a 10th of the more than $300 million the land office will be trying to plunk into property deals each year.

With the expansion of its real estate operations, the land office is bringing in experienced brokers and finding lucrative deals statewide. The agency buys land that is likely to appreciate quickly because it is in the path of high-end development, but it also buys income-producing properties.

In June, the land office put itself in position to profit from the upscale housing boom by purchasing a 2,316-acre Hill Country site, Rancho Sierra, for almost $27 million. Rancho Sierra is 14 miles west of Fair Oaks Ranch and the Dominion.

At 1,892 feet, Rancho Sierra is billed as the highest elevation in Bexar County. The marketing plan would allow 380 to 700 custom houses in a low-density setting; most of the land would be a natural conservation area.

Land office spokesman Jim Suydam said the agency has “more money than we can responsibly spend. A good chunk of it goes back into the Permanent School Fund uninvested in land.”

The land office also puts money into bonds, stocks and other securities. But it was criticized in years past for a lack of diversified investments. That led to the 2001 passage of a law that lets oil and gas royalties go into land deals on behalf of the Permanent School Fund.

The state university systems for decades have been supported through oil and gas royalty earnings. But the volatility of Wall Street and the state’s declining oil and gas reserves sensitized the Legislature to the need for a different long-term investment strategy.

“We can’t rely on oil and gas forever,” land office Commissioner Jerry Patterson said during the announcement of a recent land deal near Houston. “We’re taking steps now, even as oil and gas prices are high, to find new ways to earn money for Texas schoolchildren.”

Despite a $300 million-a-year piggy bank, the land office should not have a significant impact on the real estate markets, said Steve Raub, executive vice president at Investment Realty Co.

“Land activity in Texas is very high,” said Raub, a specialist in raw land, office and retail properties. “$300 million is not a drop in the bucket, but when you spread it across the state of Texas it’s not a big deal.”

Raub also noted that the land office is restricted to purchasing properties at or below the appraised value, “so they’re not bidding up the market or being aggressive against other investors.”

The office is also very limited in its ability to improve land. It can do some things, such as provide storm drainage, but for the most part its strategy on raw land purchases is to hold it long term and sell to developers.

The land office may be relatively new to the real estate investor scene, but the Texas market is often seeing new investors, such as pension funds and real estate investment trusts, with just as much clout, Raub said.

In recent years, the land office has expanded its real estate division. The agency started by disposing of state-owned lands that were not income-producing, such as agricultural properties adjacent to state prisons.

“The way the Texas Department of Criminal Justice used to work, they would produce their own commodities for the prisons,” Suydam said. “Each prison has its own farm system.”

The prison system was allowed to centralize its agricultural land in one place and sell off the excess.

“There’s a lot of prison units,” Suydam said. “We’re making beaucoup money.”

The Rancho Sierra purchase was the largest in Bexar County this year, but as an upscale residential deal its economic impact is small compared with others.

Earlier this year, the land office approached First American Commercial Property Group, which brokered the sale of a 175-acre parcel on Red Bird Ranch just across Potranco Road from Texas Research Park in western Bexar County.

In marketing the site, First American had hired architecture firm 3D/I to design a master plan for a retail center. Its most likely use remains some type of major retail development, but Chelsea Kane at First American said the land office is also looking to buy land within the research park.

Suydam said no plans have been made for the property, but the land office will probably do something that would complement the research park’s mission.

The land office isn’t keeping its eyes exclusively on outlying land or undeveloped property. It owns a block of San Antonio riverfront property at Durango Boulevard. And in Baytown, the land office announced its biggest deal yet, the $100 million purchase in August of a 4 million-square-foot bulk storage facility.

Commissioner Jerry Patterson said the acquisition would earn the school fund $338 million over 30 years, and “as a fringe benefit” it would provide 1,900 jobs and $66 million in annual payroll.