By Dean Lampman
Dan Tomlin is one Dallas real estate executive who has survived two recessions, yet remains surrounded by the trappings of success. And he’s done so taking the seemingly atypical route of choosing to expand in markets deemed overbuilt markets such as Dallas, Houston, Atlanta, Washington, D.C., Phoenix, Ariz., and Los Angeles. Also, uncommon for someone as active in real estate circles as Tomlin is the low profile he’s maintained.
“You don’t hear a lot about him because he just quietly goes about his business and gets the job done,” said George Roddy, president of Dresco Inc., a Dallas-based real estate research firm.
Tomlin, 44, not only survived the recession of the 1970’s, which hit undeveloped land and apartments harder than other real estate commodities, but emerged the better for it, added Roddy.
“He came out of it very well and picked up a lot of experience by living through the problems,” Roddy observed. “Today, he’s one of the premier land investors in Dallas.”
Tomlin and his Tomlin Properties (Tomlin Investments) have earned such praise by reporting an average compound annual return of 47.9 percent on 80 land investments between 1975 and 1985, according to company figures. That’s roughly 10 percent higher than the comparable performance of Salomon Brothers’ Bond Index, the Standard & Poor’s 500 Stock Index and the Commingled Real Estate Equity Fund over the same period.
The company, which now manages more than $500 million worth of commercial property for investors worldwide, operates from 14,500 square feet of space it leases in a massive new building on Spring Valley Road in Addison. Their plush offices feature hand-carved woodwork with gold trim on the floors, walls and ceilings; deep red carpeting; crystal chandeliers; old English and European furnishings; and, Tomlin’s own collection of old Bibles and original Rembrandt biblical scenes.
There, Tomlin’s 39 employees use an array of sophisticated maps, more than 14,000 existing property files and several computers to assess properties in each market.
In the Dallas market, Tomlin competes with such land specialists as David Davidson and Joseph “Jody” Tallal Jr. in trying to acquire prime land surrounded by major real estate projects being built by leading developers such as Trammell Crow, Ross Perot and Robert Folsom.
Tallal and Tomlin agree that changes in federal tax laws could mean an end to investments in real estate tax shelters and renewed interest in land. Tallal, who claims to have generated a 65 percent annual rate of return on 46 tracts he acquired for investors between 1975 and 1985, believes the Tax Reform Act of 1986 is forcing many wealthy investors out of shelters and into income-producing land opportunities while construction slows and occupancies climb.
Tomlin admits the uncertainty created by Texas’ beleaguered savings and loan industry is one reason he opened new offices in other markets earlier this year.
He said the current real estate crisis differs from that of a decade ago in that the deregulation of the savings and loan industry gave buyers a chance to sign short-term loans instead of the more common five- to 10-year notes. Then, both sides were motivated by profit, with lenders seeing high interest rate charges and land buyers seeing the potential high returns available on speculation.
In Tomlin’s estimation, the mistake both sides made was in not thoroughly researching each investment. While investors typically buy land for 25 percent to 35 percent of what they think a developer will pay, investors ignored that formula during the boom, paying from 60 percent to 100 percent of what developers could afford.
Unfortunately, notes Tomlin, they bought land that couldn’t be developed for five to 10 years and suffered losses because of the high interest and carrying costs. Most of the land was foreclosed on by savings and loans, which in turn could not afford to dispose of it because of their own financial problems.
But Tomlin said he has seen recent evidence that financial institutions are starting to cut their losses by settling non-performing real estate loans and reassessing new real estate loans.
Moreover, the signs of an improving market are the same now as they were in the mid 1970’s – a slight increase in development starting with small, “infill” projects with a trend toward larger projects that have been on the drawing board for years.
“In late 1975, I could see that land prices were too low and it was time to buy again,” he said. “We hit the same point in June or July of this year.”
The key to successful land investing is to recognize such signals and act quickly and carefully, he said.
Roddy agrees. He said the market hit bottom in April – as witnessed by Dallas County’s record $1.2 billion in commercial foreclosures that month – and has been holding there for the last six months while occupancy levels creep up.
Commercial foreclosures have fallen to a scheduled level of $697.6 million in December. That trend, coupled with statistics on total sales – which bottomed at 144 in September 1986 and have ranged between 148 and 190 since February 1987 – proves the market is turning around, Roddy said.
“We’ve been in a (real estate) recession for the last two years, so prices are down and it’s a good time to stockpile land for the next wave of development,” said Roddy. “The smart investors who can put all of the pieces together and see into the future a ways will come out smelling like a rose.”
For awhile, though, Roddy said he believes land brokers may have a tough time finding developers and investors who are not so shaken by the recent real estate recession that they are afraid to try again. Another obstacle Roddy cited is the amount of land being held by banks and savings and loans institutions.
“The wild card is what they’re (the financial institutions) planning to do with all of their property,” he said. “It would have a disastrous effect on the land market if they all started unloading property at fire sale prices. But that question will be answered one way or the other within the next four to six months.”
Despite the sluggish market, Tomlin Properties never stopped buying real estate research and consistently paid its bills on time, said Roddy, who has worked with Tomlin for about 12 years.
Tomlin’s philosophy of staying a step ahead of his competitors by combining market experience with objective research may be one reason he avoided most of the problems that have plagued other land investors, Roddy said.
“It becomes a science if you have enough experience and use the right tools,” he said.
Tomlin earned a master’s degree in business administration from Southern Methodist University in 1967 and worked at a Coca-Cola bottling plant in Fort Worth and in marketing at Redman Industries Inc. in Tulsa, Okla., before entering the real estate business with Ken Good & Associates in 1970. When Good decided to change its focus from land investments to brokerage in late 1971, he left the firm and formed Tomlin Properties in March 1972.
Tomlin said the key to his success has been the application of his own 17 years of experience in the real estate business and the use of a consistent formula for land investments. As part of that formula, the company focuses on the primary growth corridor in each city, then finds the most important properties within those areas that offer the lowest risk and highest appreciation potential.
The formula takes into consideration such factors as the site’s proximity to major employment centers, shopping areas, transportation arteries and schools; zoning patterns; and, government attitudes toward growth and business. It also considers all utility lines, soil conditions, traffic patterns and the plans of nearby land owners and developers.
Only if those factors are favorable will Tomlin begin to discuss prices and terms. He said a low price alone is not enough to make a property suitable for investment.
“Sixty to 70 percent of what we do is based on those kinds of criteria and the rest is based on experience,” he said.
Tomlin said he is not currently negotiating any deals in Dallas, but is looking at several sites in the so-called Golden Corridor between the Dallas Parkway Tollway and Preston Road near State Highway 121 in far North Dallas.
The one problem with land in far North Dallas, he said, is that there are several individuals and families who for years have not been willing to sell large parcels that are ripe for development. Bum Bright, Henry Billings, and the Harrard, Harrington and Huffines families all own large tracts in the area, but are not sellers, he said.
A devout Christian, Tomlin is active in a number of church, civic and cultural affairs. His company tithes 10 percent of its gross revenues to local churches and charities.
Recently, Tomlin launched a private fundraising campaign to maintain the flower beds in front of Dallas’ City Hall and at city-owned sites throughout the area. For budgetary reasons, Dallas’ Parks and Recreation Department officials had said they would not be able to maintain many of the city’s flower beds.
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