PA gas rash - Posted by NH97

Posted by NH97 on September 12, 2011 at 08:11:18:

Hi Ray,
Appreciate your valuable insights and advice on
Marcellus investing! I have visited the area that I am
interested a few times since the beginning of this year
to get a sense on the gas boom. I have to admit the
excitement of this new economy upward is everywhere and
impacts everybody there. I was so ready to jump in.
Like you suggested, at this point I need to conduct a
more objective market analysis from online resources,
local government, local banking institutions. I would
love to exchange our findings later with you.

If you need a manpower for the analysis work, I would
love to help. Not meant to brag here, I used to be a
statistician/analyst for a big bank. My email address
is nicolehe97@yahoo.com.

Again, thanks for the great advice!!!

Best Wishes,

Nicole

PA gas rash - Posted by NH97

Posted by NH97 on September 08, 2011 at 09:25:52:

Hi Ray,

What you think about investing in commercial/apartment
buildings in Marcellus shale area? My biggest concern is the
sustainability of the gas rash boom. What an investor need to
watch out for when the local economy is drastically changing
due to a new industry emerging?

Thanks in advance!

Nicole

Re: PA gas rash - Posted by ray@lcorn

Posted by ray@lcorn on September 09, 2011 at 10:54:57:

Hi Nicole,

From everything I’ve read the gas boom in PA will be a build-up over time as the regulatory issues are settled around “fracking”, land/mineral leases, pipeline and rail construction, etc. My guess is that development will cluster around certain hub communities as the pattern of production and distribution network is established. I do think that over time this will be a sustained economic plus for the area.

That said, the first step of evaluating development opportunities is to identify the markets with the infrastructure (e.g. schools, workforce, industrial development, medical centers, etc.) necessary for long-term growth. Not every community will qualify.

I’m not familiar enough (yet) with the area to suggest specific areas. I’ve been engaged to do some research on the area by a private equity group, so over the next few months I will know more.

You can start with the same data collection that I do. I start with census data to identify population trends, income levels and forecast growth at the county level. I also use www.city-data.com to get a 30,000 foot view of specific communities, their governmental structure, school system quality, investment authorities, etc. Once I identify communities of interest I then turn to paid demographic data reports to drill down to ground level statistics.

What you want to avoid is committing to a project in a community that is TOO closely tied to the gas industry. For a healthy economy it takes a mix of the producers, distributors, suppliers and workforce. For example, a community with only one of those elements will likely experience a temporary boom that lasts only as long as it takes for the true centers of commerce to be established.

I will also be gathering data from energy and gas trade associations and the banking sector. Local community banks usually have a high level of local knowledge, and tapping into their expertise is essential.

Finally, keep in mind that is an old development axiom that the second or third developer in the market is the one that makes the most money. The first wave is often very speculative and has a high rate of failure. Better to be a bit late to market than too early. So watch the development community as they will go through the same steps I’ve outlined.

ray