Category 3 – Hawthorne Capital

What if land values fall? (2 of 2)

– Landowners aren’t usually forced to move and sell when a major life event takes place during a down market, as is often seen with single-family housing. – Land values don’t tend to inflate and then deflate due to the addition and subsequent removal of easy financing as we saw with housing leading […]

What if land values fall? (1 of 2)

We tend to own each parcel of land for just a few months, so there typically isn’t much time for us to benefit from rising values or be hurt by falling values. Land values for the Texas Gulf Coast region fell by 13.5% following the Great Recession (source), so they can and do […]

What impact is inflation having? (2 of 2)

Positive: Over time, inflation leads to higher wages and higher profits in nominal dollars. Hawthorne Interests (HI) collects monthly payments from those who bought ranchettes on owner financing. These payment amounts don’t change, thus making them more affordable in comparison with our borrowers’ higher wages and/or profits over time. This helps HI keep its […]

What impact is inflation having? (1 of 2)

Inflation has been impacting individuals, companies and governments in various ways, often negative, but sometimes positive… especially for Uncle Sam. Below are some of the ways it’s impacting the business and/or fund that you invest in: Negative: Inflation has increased our costs. We’re spending more on people and equipment. We’re also spending more […]

How might a recession affect the business or fund? (3 of 3)

A recession could empty the pockets of some prospective buyers and simply give other buyers cold feet. Due to the fund’s structure, our ability to provide investor returns is largely independent of how quickly we’re selling land or whether we’re selling for top dollar. In a slowing economy, there is reduced demand across […]

How might a recession affect the business or fund? (2 of 3)

We are very pleased with how well the notes that HI owns are performing. Should we experience a prolonged recession with large job losses, some of the borrowers on those notes will be affected. That would likely increase the default rate. Although HI is to make monthly payments to the fund each month, regardless […]

How might a recession affect the business or fund? (1 of 3)

A little background: We entered into what’s known as the COVID-19 recession in early 2020. It was one of the deepest recessions in U.S. history, with 14.7% peak unemployment and a 19.2% drop in GDP. By comparison, the Great Recession resulted in only 10% and 5.1% respectively. (Further reading) For about two […]

What if demand for rural land decreases?

While broad demand for rural land has ebbed and flowed over the years, our target “blue collar plus” buyers have displayed a relatively constant interest in purchasing our ranchettes. We have seen high demand in the following markets: 1) before the COVID-19 recession, 2) during that recession, 3) during the subsequent boom, and […]

What impact are higher interest rates having?

Higher interest rates have been top of mind of late, so it’s worth addressing their impact on the land business. A little background: We do not borrow from banks for these land deals, so they are not in a position to increase rates on loans we do not have and do not […]