How to buy low and sell high in northern Michigan

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How to Buy Low and Sell High in Northern Michigan

By

Doug Houseworth, President

Emmet Association of Realtors

It is the goal of every real estate investor to “buy low and sell high”. The best strategy in achieving this goal is to find the path of progress and buy in front of it. These days, with all of the gloom and doom in the media about the value of our falling dollar, recession, home foreclosures, bankruptcy, and our jobs going overseas, it’s hard to look up and see the path of progress. Now is the time to look up.

Any hunter will tell you that when the big birds circle, they see something to sustain them on the ground. In this Northern region of Michigan’s Lower Peninsula, known as “The Tip Of The Mitt”, there are indeed some rather large birds circling about. For the purposes of this paper, our field of view and discussion will be from Traverse City over to Alpena and north to Mackinaw City. There are a number of good reasons that many communities in this region are on the cusp of some remarkable changes starting this year. You can read more specific details in the links (double click on the icon) and attachments provided about events starting now and for the next several years. I do not see a disconnect between this area of Michigan and the rest of the state. Michigan is headed for great things[pic] I do believe this area of the state is ahead of the curve, and what we are about to experience is a forecast for Michigan in general.

Before we get into the current and planned development in this area of Michigan, I would like to highlight the unique features of this area, and the reason we are in “the path of progress”:

• First and foremost, Michigan is surrounded by the world’s largest supply of fresh water. This feature alone will drive much of the future development in Michigan and Northern Michigan in particular. At the “Tip Of The Mitt”, not only do we have coastal frontage on Lake Michigan and Lake Huron, but we have many of the largest inland lakes, some of which happen to be connected by navigable rivers. The Inland Waterway is world class for its boating and water sports opportunities. [pic] Boaters using this waterway have the unique ability to go anywhere in the world. These lakes and rivers connect to Lake Huron, and from there, the rest of the world is accessible. In a world beset by changing weather patterns and increasing water shortages, the future value of waterfront properties in this region cannot be overlooked. At every level, water will play a role in industry, transportation, agriculture, recreation, and real estate development. Surrounded by fresh water seas, Michigan has 38 deep water commercial ports. [pic] For a global perspective on the importance of water see this presentation by Maude Barlow author of Blue Gold. [pic] After seeing this video clip, you will have a better understanding of why we here in northern Michigan are in the path of progress.

• The relative safety from natural or man-made disasters is a feature of this area. For this reason it is starting to attract attention as a desirable place to live and invest. On a FEMA map of Presidential Disaster Declarations [pic] one can see that in most of the northern counties in Michigan, there are no declarations, and in the three or four showing anything at all, they have the lowest activity rate on the index of reported disasters. This is one of the few areas in the world without earthquakes, hurricanes, mudslides, volcanoes, tsunamis, and in most counties, no tornadoes. There are few places in the world that are safer, more beautiful, or have better rates on their home owners insurance.

• The natural resources in this region are attracting new development. There are vast areas of public lands that are heavily forested [pic] . These are often referred to as “green coast” areas. There are also areas of natural gas and oil reserves found in what is known as the Antrim Formation [pic] . Certain agricultural products such as Cherries, apples, potatoes, alfalfa, and grapes for fine wines, are also an attraction. The potential for renewable resources for bio-fuel, biopolymers and development of oil and gas reserves are but some of the magnets bringing new activity to northern Michigan.

• Often referred to as the “Gold Coast” on Lake Michigan, the northwest portion of the Tip Of the mitt has long been a tourist destination with numerous golf courses, ski resorts, fine restaurants and unparalleled boating opportunities. The northeast portion on Lake Huron is known as the “Sunrise Side”. Here there are larger areas of undeveloped, forested lands and numerous lakes and streams. These offer sportsman many fishing and hunting opportunities. Within this document are several links that illustrate the attractiveness of this area of Michigan as a tourist destination, and desirable place to live.

There is much more that could be said about the Northern Lower Peninsula of Michigan and why it is in the path of progress. What follows is a synopsis of proposed and approved development projects, as well as economic summaries and forecasts for communities known as part of the resort industry. There are thousands of new jobs projected, and thousands more needed for construction of the many new developments in nearly all sectors. There is little said in the research about economic multipliers. But generally speaking, for every job created, there are spin-off jobs to supply the needs of the new workers. In my view, the positive impact of these developments is understated and underreported. This area of Michigan is potentially headed for a sharp economic upturn. Real estate investors need to act now while prices are low.

Some of the proposed projects presented below may or may not happen, subject to environmental, financial or governmental approval. The important thing to remember is why so many large and diverse proposals (the big birds are circling) are attracted to this region. In my view, if some of these developments fail to materialize, others will soon follow. The communities listed below are only the ones experiencing what I call flash point development. There are many other communities especially on the northwest side of this region that have made slow but steady growth or been able to hold their own in these hard times.

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Proposed and Approved Developments

Grayling: Some 2,000 jobs are projected as a result of the Axiom Entertainment Theme park development, known as Main Street America near Grayling. The size of this development will require the acquisition of much state land, and it is reported that good documentation of Axiom’s ability to be capitalized is being required. After talking with Gaila Gillaland of Crawford County Economic Development Partnership (DDEDP), it would appear that things are looking pretty good. The number of construction jobs and jobs created from support of the new workers is unclear. Why Grayling? According to Gaila, it’s pretty simple.

The availability of 1,800 acres of state land for the project, a ready and able work force, and last but not least, I-75 takes fun seekers directly to the Theme park. [pic][pic] [pic] [pic]

Gaylord: According to Jeff Ratcliffe of the Economic Alliance for Otsego County, “New employment from projects completed, underway or announced in 2007 (Culvers, Meijers, and the Georgia-Pacific redevelopment) are estimated at just over 600 jobs”. [pic] These do not include construction jobs; spin off jobs, or potential jobs from the proposed biofuel plant now on hold due to some technical concerns. Producing biofuel from saw dust and wood chips is a relatively new technology and the proposed plant in Gaylord is reported to be the largest yet .[pic] The presence of vast areas of renewable resources surrounding Gaylord is no doubt what drives the development of a new wood pellet producing plant, saw mill and the proposed biofuel plant. [pic]

Alpena: Out of the ashes of the former Thunder Bay Manufacturing facility, a tool and dye company for the automotive industry comes ATI Casting Inc. They will be casting for the wind turbine industry and project 150 employees. The Air Force National Guard Combat Readiness Training Center is earmarked for significant federal funding for additional training programs for military, homeland security and civilian organizations. Important investments in the health care sector are happening with the federal government announcing the approval of funding for a Veteran’s Affairs Hospital. They currently are pursing a location in Alpena. There already has been growth in the health care sector with the affiliation between the University of Michigan and the Alpena Regional Medical Center (ARMC). State of the art cancer care and research is now available in Alpena. The total number of new jobs, construction jobs and spin-off jobs is unclear. Also, the considerable investment in Alpena is not clear. See report by Lee Shirey of Target Alpena .[pic] [pic]

Rogers City: The resources in this area of Presque Isle County have attracted a proposed billion dollar jump start in the form of the Wolverine Power Cooperative [pic] slated to start in 2009. The presence of a deep water commercial port for the receiving and handling of waterborne solids, plus the fact that Rogers City offers ideal conditions for a wind farm, [pic]the path of progress is headed for Rogers City. There are 1,000 (+/-) construction jobs projected to start in 2009. Upon completion of the high tech, clean, coal fired power plant and wind generators, there will be about 100 well paid full time jobs ranging in income from $40,000 to $100,000. Annually, this adds about $6 million to the local economy. Subject to an air quality permit from the DEQ, the steadily declining economy and population of Rogers City will have a much different profile in the near future. Will it happen? A resolution of support was unanimously approved by the Presque Isle County Board of Commissioners at their December 27, 2007 meeting. Township and Rogers City Boards have also given their stamp of approval. The fact that Michigan is a net importer of power dependent on other states, paves the way for support from the Michigan Public Service Commission (MPSC) [pic] [pic]

Pellston: One of the more interesting flash points in northern Michigan is the proposal by Sovereign Deed, LLC. [pic] Perhaps this could best be described as a private FEMA for those who chose to purchase emergency disaster relief. Call it signs of the times, but as the best location for an emerging new industry, Pellston has been selected for a $79 million center that would help people across the nation needing emergency response. The plan calls for an estimated 671+/- full time jobs in the region. These include both direct and indirect jobs, according to a study for the Northwest Council of Governments. Having 700 acres around the airport to develop emergency response capability, plus being able to operate from a disaster free zone, helped Pellston in the selection process.

In my view, what real estate investors need to focus on is the presence of the Pellston Regional Airport itself. If nothing else, this whole exercise with Sovereign Deed has been a validation and demonstration of the potential of such an important resource in this area. The airport is a first class facility and a positive statement about this region. If not now, there will be significant future development because of the Airport. [pic]

Cheboygan County: None of the above flash points are in Cheboygan county, and as you will see in the below report by Northern Lakes Economic Alliance, it is not one of the stronger counties listed in the report. I bring it to the real estate investor’s attention because of the unique amount of waterfront shoreline property it offers. There are about 33 +/- miles of Lake Huron shoreline, plus three inland lakes listed in the top 10 largest lakes in Michigan [pic] The environment in this county is pristine and clean. This of course has always been true. So what makes Cheboygan County a good place in which to invest? What is different about today and years past, is the fact that we are rapidly becoming a global society. Even without the world discovering this area of the Tip of the Mitt, Cheboygan county has shown strong waterfront pricing compared with other premium waterfront in this region. Most of the famed Inland Waterway is within Cheboygan County. This fact alone should cause investors to take note. [pic]

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Regional Economic Review 2008

By

Northern Lakes Economic Alliance

None of the economic flash points in the above communities are part of this report. Only Pellston falls within the four county region covered in this review. [pic] The proposed development by Sovereign Deed is not a factor. This report covers Antrim, Charlevoix, Cheboygan and Emmet counties. It is a retrospective view going back to 2001. These counties are remarkably diverse with a number of sectors showing the ability to not only survive, but grow through this period of economic slow down. It is an excellent and encouraging report. On page one of the EXECUTIVE SUMMARY we read:

“Regionally, our four counties experienced a total net gain of 1,684 jobs. For the first time in two years, personal per capita income increased, although slightly, in all four counties, as did the median household income. The annual wage per job in each county also increased slightly in 2007, after experiencing a decrease in this figure in 2006.”

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Petoskey Regional Chamber of Commerce Report

State of the Economy

By

Carlin Smith, Executive Director

Petoskey Regional Chamber of Commerce

This report [pic] not only reaffirms the information offered above by the Northern Economic Alliance, but association and board presidents of the various sectors offer their personal reports on the State of the Economy. This is a must read for the real estate investor in this region.

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2008 Economic Forecast

For the 5-County Region of Antrim, Benzie,

Grand Traverse, Kalkaska, and Leelanau Counties

By

Northwest Michigan Council of Governments

This report is an impressive 66 pages [pic] that starts with a global perspective. It is a positive view and includes the local economy in balance with the rest of the world. It does illustrate our relationship to the global economy. For the purposes of my intended reader, I will not labor your attention. Suffice it to say, this report is consistent with what was published by the Northern Lakes Economic Alliance, Regional Economic Review 2008. It is well worth reading.

In the northern region we are already attracting the kind of knowledge based industry that is identified as Michigan’s future. The health care sector, and development of our natural resources for bio-fuel from plant sources, as well as understanding and appreciating our water resources, will continue to make this part of the state a magnate for new development and growth.

In another report found on Traverse City’s Chamber of Commerce web site, it is best summed up as follows:

“While Traverse City cannot divorce itself from the reality of an imploding State-wide manufacturing base, it does have clear opportunities to not only weather the storm, but to successfully surf atop its crashing waves.” Pg. 13, Sustainable Traverse City: Build Out! Build In! Build Up! Jobs and Development for the 21st Century. [pic] [pic]

In my view, this statement can apply to all of northern Michigan and there is dramatic evidence all around us that this is starting to happen. In conclusion, if you buy now you can buy low. If you buy nearly anywhere in this northern region of Michigan, you will be in the path of progress.

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