A project to extract oil from underneath Carlsbad is moving beyond the acquisition of the needed mineral rights as a timeline for drilling to begin is being developed.
Artesia-based Santo Petroleum was approved by the City Council in August 2017, to go door to door throughout the city and approach residents to offer five-year leases of their mineral rights.
Santo President Hanson Yates said the company obtained about 3,000 leases in the last year, covering the “vast majority” of the planned leasing area.
“Santo is well down the path of its planned lease acquisition activity,” Yates said. “We are nearing the end of the lease acquisition phase of the project. If landowners have been contacted by a Santo representative about a lease, now is the time to finalize that process.”
When signing a lease, owners were offered a signing bonus up front, and a percentage of the subsequent revenue, should the wells prove productive.
Yates did not specify how much was offered in the initial bonuses, but that it varies based on the location and tract size.
“Santo has not published a specific timeline for drilling development due to the complexity of readying such a large number of leases and tracts to drill,” Yates said. “However, we are making good progress toward that goal.”
The two biggest leases were with the City of Carlsbad and Carlsbad Municipal Schools.
“Our company has developed a good working relationship with the Carlsbad government, and we believe the city is taking a thoughtful, forward-thinking yet cautious approach to the growth it is experiencing from oil and gas activity in the Delaware Basin,” Yates said.
A challenge, he said, was identify the mineral rights owners who are often different from surface owners.
“We have found that the vast majority of mineral rights to city tracts are not owned by the surface owner,” Yates said. “However, many of the mineral owners reside in Carlsbad.”
The city leased about 175 acres, and was paid about $824,000, said Carlsbad City Administrator Mike Hernandez.
Carlsbad Municipal Schools received about $148,000 for 149 acres, said Superintendent Dr. Greg Rodriguez.
The project will contribute, Yates said, to an “overall stronger economy” for the people of Carlsbad.
The company plans to drill wells up to two miles deep outside Carlsbad city limits, he said, and then drill horizontally up to two miles into Carlsbad to access potential crude.
Hernandez said the wells will be much deeper than the city’s water table, and the project will have little effect on activities on the surface.
Carlsbad’s ground water supply is about 300 to 500 feet deep, he said, sitting much higher than the wells.
“We’ve had our experts prove to us that it is safe,” he said. “There’s no worries. It’s so deep, and so far beneath our water table. There’s no concern.”
The only concerns, Hernandez said, came from residents who were approached by Santo personnel and worried the offer may have been a scam. He said he’s fielded “a few dozen” of such calls.
“We get calls once in a while,” Hernandez said. “Most people, once they understand it’s a legitimate company, they seem good with it. When residents are approached, they wonder if it is real. Once I reassure them, they sign off.”
The project is just another sign that the oil and gas industry in the Permian Basin is booming, Hernandez said, to the benefit of Carlsbad and the surrounding region.
He said the royalties will help fund many city projects.
“It just fits in with everything that’s going here,” Hernandez said. “The royalties will be a huge benefit in the long term. They said it could pump millions into the city. (Santo) is investing a lot of time and money. I would assume they’re pretty confident.”
Rodriguez was not as confident that CMS will see a large return from the royalties.
He said the main reason he signed the deal was to get the upfront bonus.
That money means more can be spent on school supplies and other needs of the students, Rodriguez said.
“The royalty is anything substantial,” he said. “It’s a small amount. We’re not anticipating anything quick. It could take them years to start producing.”
But Rodriguez was certain that the project will cause no disturbance to any district-owned structures on the surface.
He said similar deals were enacted at rural school districts in West Texas, to no detriment.
“We knew there was no impact to the surface ground,” he said. “We know there are small school districts that have done this.”
He wasn’t certain about how the project will impact the city, but happy with the initial bonus.
“We don’t have an opinion about how a private company uses its profits, but this was a no-brainer,” Rodriguez said. “Anytime we can maximize resources for our district, we will do that. That way we can help our students and instructors.
“We made the decision in providing the best resources for our students.”
By: Adrian C. Hedden (ABQ Journal)
Click here to view source article.
Archives for July 2018
Which Alternative Property Sectors Hold the Most Promise for Investors?
In a Q&A with NREI, Marc Halle, head of global real estate securities at PGIM Real Estate, offers his outlook on the manufactured housing, self-storage and industrial sectors.
In the first quarter of 2018, the manufactured housing, self-storage and industrial sectors were the stars of the REIT show, as real estate investment firm PGIM Real Estate noted in a market review.
And one of PGIM Real Estate’s REIT experts believes those stars will continue to shine for a while—and thinks manufactured housing is especially attractive for long-term investors.
In a Q&A with NREI, Marc Halle, head of global real estate securities at Madison, N.J.-based PGIM Real Estate, which has close to $70 billion in assets under management, offers his outlook on the manufactured housing, self-storage and industrial sectors. (PGIM announced last week that Halle will retire and pass his responsibilities over to portfolio manager Rick Romano).
This Q&A has been edited for length, style and clarity.
NREI: What’s behind the strong performance of the manufactured housing sector, and what do you think will happen with manufactured housing REITs going forward?
Marc Halle: It’s a really great sector and has been in the public markets for 20-plus years. Over the past few years, it’s really become more institutionally acceptable. These are just cash cows that tend to be recession-resilient; they’ve got bond-like income with good growth. It’s not been institutionally acceptable for many years because of the lack of a “sexy” factor. You didn’t want to put a manufactured home community on the cover of your investor report.
It’s difficult to build manufactured home communities, it’s difficult to create competition, it’s one of the biggest NIMBY sectors, and it’s an industry with very limited supply and good demand. These are no longer the mobile home parks of a TV sitcom. These are professionally run communities where the landlords develop the land, they put in the utilities, the tenants bring the homes in and they pay rent, and they pay rent on time with very low unpaid receivables.
Think of this like the self-storage sector 10 years ago. The self-storage sector was not an institutionally acceptable sector for many of the same reasons. Now, it is absolutely front and center in an institution’s portfolio. Manufactured home communities are moving in the same vein.
NREI: Like manufactured housing, self-storage is a NIMBY sector. What’s your assessment of the self-storage sector?
Marc Halle: Storage has evolved in terms of the type of product that’s out there. It’s become a much more retail product. It’s no longer the “German shepherd,” as we used to call it, where it’s in some industrial lot with a chain-link fence and two dogs running around. They’re now in more retail locations; the properties are much more consumer-friendly and access-friendly. And it’s easier to build a self-storage facility, in that it requires a lot less capital than a manufactured home community, so the barrier to entry in manufactured homes is much higher than self-storage.
But in the self-storage sector, you really have to be careful of the supply dynamic because some markets tend to get overbuilt quickly. Having said that, you’re looking at excellent same-store growth and at stocks that are very fairly valued in the market.
What’s been really amazing in the self-storage business has been the success of your units used to be based on the placement you had in the Yellow Pages. Now, the success of your unit is based on technology. When you look at a company like Extra Space, they spend $30 million a year on technology. When you Google “self-storage,” if you’re in their market, they want to be the first return on your Google search. What’s happened in the self-storage sector is the technology advantage of the large public operators has really distanced them from the private operators in terms of occupancy and net operating income growth. Technology has really made a huge impact on that business and made it much more of an institutional investment from a return-on-cost perspective.
NREI: How are you feeling about the industrial sector?
Marc Halle: The public markets are manic-depressive. We overdo it on the way up, and we overdo it on the way down. Industrial has a great runway for where we are today due to the insatiable demand for short-term delivery of goods. For every sq. ft. of retail that goes dark, you see 2 or 3 sq. ft. of industrial that goes light. So it’s a trade-off between the two.
We’re over-stored, generally, throughout the country. We’ve got too much square footage. We do like retail—we just have too much of it. Retail has got to rationalize itself. On the other hand, people are still shopping, but they’re buying through a different medium, so you want to have that omni-channel distribution. Every retailer has adopted the philosophy and the understanding that they can’t be one or the other.
On the industrial side, there’s some very good companies—they’ve got the logistics, they’ve got the placement, they’ve got the good assets. But their pricing is not cheap, and their pricing today is reflective of very strong future growth. At some point, that growth dissipates. Is it in two years, three years? I can’t tell you. Right now, they’re priced somewhat to perfection in terms of that increase in industrial demand for distribution. I do think that given the growth of rents and certainly demand for that market, the prices today are justified for those stocks. But be careful—at some point, this demand levels out.
NREI: Will that leveling out be a soft landing or a bust?
Marc Halle: With real estate, there’s always the threat of boom-and-bust. But the banks have been very stringent in lending capital for speculative development. You hate to say it’s different this time, but banks really have been the regulator of new development, and while development has gone on, it’s not gone on indiscriminately. Look for a soft landing on this.
By: John Egan (National RE Investor)
Click here to view source article.
And one of PGIM Real Estate’s REIT experts believes those stars will continue to shine for a while—and thinks manufactured housing is especially attractive for long-term investors.
In a Q&A with NREI, Marc Halle, head of global real estate securities at Madison, N.J.-based PGIM Real Estate, which has close to $70 billion in assets under management, offers his outlook on the manufactured housing, self-storage and industrial sectors. (PGIM announced last week that Halle will retire and pass his responsibilities over to portfolio manager Rick Romano).
This Q&A has been edited for length, style and clarity.
NREI: What’s behind the strong performance of the manufactured housing sector, and what do you think will happen with manufactured housing REITs going forward?
Marc Halle: It’s a really great sector and has been in the public markets for 20-plus years. Over the past few years, it’s really become more institutionally acceptable. These are just cash cows that tend to be recession-resilient; they’ve got bond-like income with good growth. It’s not been institutionally acceptable for many years because of the lack of a “sexy” factor. You didn’t want to put a manufactured home community on the cover of your investor report.
It’s difficult to build manufactured home communities, it’s difficult to create competition, it’s one of the biggest NIMBY sectors, and it’s an industry with very limited supply and good demand. These are no longer the mobile home parks of a TV sitcom. These are professionally run communities where the landlords develop the land, they put in the utilities, the tenants bring the homes in and they pay rent, and they pay rent on time with very low unpaid receivables.
Think of this like the self-storage sector 10 years ago. The self-storage sector was not an institutionally acceptable sector for many of the same reasons. Now, it is absolutely front and center in an institution’s portfolio. Manufactured home communities are moving in the same vein.
NREI: Like manufactured housing, self-storage is a NIMBY sector. What’s your assessment of the self-storage sector?
Marc Halle: Storage has evolved in terms of the type of product that’s out there. It’s become a much more retail product. It’s no longer the “German shepherd,” as we used to call it, where it’s in some industrial lot with a chain-link fence and two dogs running around. They’re now in more retail locations; the properties are much more consumer-friendly and access-friendly. And it’s easier to build a self-storage facility, in that it requires a lot less capital than a manufactured home community, so the barrier to entry in manufactured homes is much higher than self-storage.
But in the self-storage sector, you really have to be careful of the supply dynamic because some markets tend to get overbuilt quickly. Having said that, you’re looking at excellent same-store growth and at stocks that are very fairly valued in the market.
What’s been really amazing in the self-storage business has been the success of your units used to be based on the placement you had in the Yellow Pages. Now, the success of your unit is based on technology. When you look at a company like Extra Space, they spend $30 million a year on technology. When you Google “self-storage,” if you’re in their market, they want to be the first return on your Google search. What’s happened in the self-storage sector is the technology advantage of the large public operators has really distanced them from the private operators in terms of occupancy and net operating income growth. Technology has really made a huge impact on that business and made it much more of an institutional investment from a return-on-cost perspective.
NREI: How are you feeling about the industrial sector?
Marc Halle: The public markets are manic-depressive. We overdo it on the way up, and we overdo it on the way down. Industrial has a great runway for where we are today due to the insatiable demand for short-term delivery of goods. For every sq. ft. of retail that goes dark, you see 2 or 3 sq. ft. of industrial that goes light. So it’s a trade-off between the two.
We’re over-stored, generally, throughout the country. We’ve got too much square footage. We do like retail—we just have too much of it. Retail has got to rationalize itself. On the other hand, people are still shopping, but they’re buying through a different medium, so you want to have that omni-channel distribution. Every retailer has adopted the philosophy and the understanding that they can’t be one or the other.
On the industrial side, there’s some very good companies—they’ve got the logistics, they’ve got the placement, they’ve got the good assets. But their pricing is not cheap, and their pricing today is reflective of very strong future growth. At some point, that growth dissipates. Is it in two years, three years? I can’t tell you. Right now, they’re priced somewhat to perfection in terms of that increase in industrial demand for distribution. I do think that given the growth of rents and certainly demand for that market, the prices today are justified for those stocks. But be careful—at some point, this demand levels out.
NREI: Will that leveling out be a soft landing or a bust?
Marc Halle: With real estate, there’s always the threat of boom-and-bust. But the banks have been very stringent in lending capital for speculative development. You hate to say it’s different this time, but banks really have been the regulator of new development, and while development has gone on, it’s not gone on indiscriminately. Look for a soft landing on this.
By: John Egan (National RE Investor)
Click here to view source article.
How New Mexico Ranks as a Place to Start a Business
The odds for startups to succeed are rough. A fifth don’t survive past their first year in business, and almost half don’t make it to five years in business, according to U.S. Bureau of Labor Statistics data.
New Mexico is neither the worst or best state to start a business. WalletHub ranked New Mexico No. 29 on 2018’s Best and Worst States to Start a Business.
WalletHub compared the 50 states based on:
- Business environment
- Access to resources
- Business costs
Each category was evaluated using 25 metrics. Each metric was graded on a 100-point scale. Then, each state’s weighted average across all metrics was determined to calculate overall score and rank each state.
New Mexico scored a 43 in “business environment,” 18 in “access to resources” and 19 in the “business costs” category. New Mexico’s overall score totaled 48.79.
Our neighboring states ranked among the top 10. View the accompanying slideshow to see the top 10 best states to start a business, according to WalletHub.
Top 10 Best States to Start A Business
The top 10 best states to start a business according to 2018’s Best & Worst States to Start a Business by WalletHub. All 50 states were compared based on: 1) Business environment, 2) Access to resources and 3) Business costs.
New Mexico was No. 48 among states with lowest average growth in small businesses. However, we ranked third among states with highest availability of human capital. Alaska and West Virginia tied for first.
Earlier this year WalletHub ranked New Mexico last at No. 51 on 2018’s Best and Worst States for Millennials.
Albuquerque and New Mexico have been pushing hard to grow their technology and startup scene, establishing a $1 million marketing campaign for the city. The most notable move made to establish the Duke City as an entrepreneurial hub is the massive Innovate ABQ project, using seven acres near Downtown with an estimated total price tag as high as $150 million. Innovate ABQ is a public-private partnership among UNM, the city of Albuquerque, Central New Mexico Community College, Bernalillo County and Nusenda Credit Union, Business First reported.
By: Maria Gomez (ABQ Business First)
Click here to view source article.
June 2018 Commercial Market Trends
View a New Mexico Market Trends Summary Report, which includes June 2018 Commercial Market Trends. This report includes the total number of listings, asking lease rates, asking sales prices, days on the market and total square feet available.
Disclaimer: All statistics have been gathered from user-loaded listings and user-reported transactions. We have not verified accuracy and make no guarantees. By using the information, the user acknowledges that the data may contain errors or other nonconformities. Brokers should diligently and independently verify the specifics of the information you are using.
