The Dikeman family of Long Beach, Calif, this week will move into a new $55,000 home that sits smack on top of an oil well. Their house—and 400 others around it—is on an oilfield owned by the Christiana Oil Corp. So valuable has the surface of the aging field become that Christiana has closed and cemented over its producing wells. It has converted the tidal slough on which they stood into a posh residential marina called Huntington Harbour, which sits on the Pacific Ocean south of Los Angeles. Like more and more U.S. companies, it has discovered that land can pay a prettier profit than almost any other investment.
With record sums of cash in their coffers, even the staidest corporations are discovering the attractions of real estate development, the traditional province of the speculative entrepreneur. Railroads have long held huge chunks of the U.S. landscape and companies everywhere own land for plants and offices, but the companies now moving into real estate are involved in land and construction ventures that go well beyond the scope of their primary business. “The major fortunes in America have been made in land,” says Morton A. Sterling, president of Sunset International Petroleum Corp. “There’s no reason why corporations can’t participate.”
Skiing & Taxes. Basically, the formula is the one on which John Jacob Astor rode to riches more than a cen tury ago as the No. 1 landlord of Manhattan: buy land in the path of population expansion and profit from its development or sale at soaring prices. Accordingly, most of today’s corporate involvement lies in the West or South west. In Southern California, nine industrial companies are building or planning projects embracing 319 sq. mi. Since land is the world’s only major commodity in fixed supply, while population constantly rises, investment in land is, in the long run, the nearest to a sure thing. Owners also benefit from low assessments and taxes on raw land, which make it cheap to hold off the market while its value rises, and have other advantages under federal tax law.
The range of realty ventures is kaleidoscopic. Weyerhaeuser, the timber giant, is converting its forest holdings in five states into summer homes, lakefront recreation centers and even such ski resorts as Crystal Village, 76 miles from Seattle. Goodyear Tire & Rubber recently set aside $5,000,000 to speed the transformation of 14,000 acres of its property near Phoenix into Litchfield Park, which it hopes will become a satellite city of 90,000 people by 1985. Great Lakes Carbon Corp. is busy with six projects, ranging from a Houston industrial park to a resort and retirement center in Portugal. Hearst Corp. plans to turn part of the late William Randolph Hearst’s San Simeon ranch into a residential complex. Castle & Cooke, the Hawaiian food combine, is finishing off a 15-story medical building in Los Angeles, has major investments in California residential projects, and is planning a “Rockefeller Center of the Pacific” for downtown Honolulu.
Landlord to 9,000. All three big aluminum producers are deep in real estate. Having invested $41 million in ten projects in six cities, Aluminum Co. of America is not only landlord to 9,000 Manhattan families, but also owns additional housing in Philadelphia, Pittsburgh, Indianapolis, Los Angeles and San Francisco. Kaiser Industries and Kai ser Aluminum are part owners of a $20 million, 135-sq.-mi. site for a new city near San Diego. Reynolds Metals has completed 1,588 units of renewal housing in Cincinnati, Philadelphia, Kansas City, Richmond and Washington, D.C., has $397 million worth under way or planned in six cities, including an apartment-motel-office complex with General Electric in Louisville.
Among cash-rich oil companies, realty investment has become a major sideline. In partnership with Contractor Del Webb, Houston’s Humble Oil is erecting a satellite city next to the NASA Manned Spacecraft Center (for which Humble cannily donated the land). Gulf Oil guaranteed a $20 million bank loan to the developer of the new town of Reston, outside Washington, in exchange for gas-station sites, and made a similar deal with another builder near San Francisco. Union Oil owns a 45% interest in a firm planning a big community in Simi Valley near Los Angeles.
Returns from such deals can be sizable. Sunset Petroleum, which is building huge new towns near Sacramento, Los Angeles, San Francisco and San Diego, got 73% of its $27.7 million revenue from realty last year. Land development and brokerage accounted for 14% of its $25 million gross for the venerable West Coast lumber firm of Pope & Talbot. Puget Sound Power & Light Co. realized 10% of its net income from such realty operations as an industrial park, 515 acres for homes, a hotel and a shopping center.
Only for the Rich. All the activity is giving realty development a new look. Amid the longest urban land boom in U.S. history, the price of land around the fringes of growing cities has risen anywhere from 100% to 2,000% in the past ten years. With freeways opening up exurban spaces, land development is not only spreading farther from downtown but growing in scale. The old-style developer, rich in imagination but thinly financed, can scarcely afford to participate today, at least not without wealthy partners. As long as the tax rules make real estate an enticing way to cash in on the population boom, more and more well-heeled corporations are likely to take the plunge.
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