How Disney was built using “straw” persons
In the wonderful classic movie called “The Wizard of OZ,” there is a scarecrow, which is a man made from straw. His greatest wish is to have a brain, so he “could think thoughts than never have been thunk before.”
Sometimes real estate investing makes use of “straw” persons. It may sound like a spy movie to think about these things, like an operation by James Bond 007 to defeat an archenemy. Nevertheless, the function of a “straw” person is valid and useful when trying to acquire land for a huge development.
Here is a real life example:
Disney World
Frommer’s reports on what happened when suddenly there was a lot of interest in “farmland” in central Florida. Much of this land was adjacent. Much of it was useless swampland. In the decade before 1964, the Walt Disney Company began secretly buying land to assemble a huge tract for the development of Disney World.
The Walt Disney Company used 200 to 300 straw persons to make the land acquisition. Most of the straw persons were native Floridians and landowners or somehow involved in real estate.
At first, the activities caused no suspicion. In fact, the people buying and then reselling the land for a handsome immediate profit of 10% to an “unknown” buyer were happy to participate. Everything happened on a “hush hush” basis with transactions completed in secret.
Size Matters
In order to create such a massive development, the size of the tract of land needed was enormous. Even with all the secrecy, people started to catch on to what was happening. Tracts of land in a certain area received premium prices. A purchase of 5,000 acres happened and then a purchase of 20,000 acres occurred.
After enough of the land acquisitions happened, it became apparent to everyone that something important was going on. Then, on November 15, 1965, Walt Disney made the public announcement of the plans for Disney World.
Land Speculation Gone Wild
The publicly announced plans to build the world’s greatest theme park, bigger and better than Disneyland, near Orlando Florida made the land prices soar near the project site. The worst kind of useless swampland suddenly sold for millions.
Good for Business
The massive Disney World project eventually costs $400 million to construct. Prior to Disney staking its claim in the area, Orlando was not a very happening place. Afterwards, is a different story.
Here is a list of developments that happened after Disney World:
• 1973 – Seaworld
• 1982 – Epcot (another Disney attraction)
• 1989 – Disney Hollywood Studios (formerly Disney-MGM Studios)
• 1990 – Universal Studios Florida
• 1998 – Animal Kingdom (another Disney attraction)
• 1998 – Universal CityWalk
• 1999 – Universal’s Island of Adventure
• 1999 – Portofino Bay Hotel
• 2000 – Discovery Cove (another SeaWorld attraction)
• 2001 – Hard Rock Hotel
• 2002 – Royal Pacific Resort
• 2009 – Legoland
Orlando has seen its ups and down in terms of the number of tourists visiting each year. Business was off during the hard years of 2006 to 2009 due to the worldwide economic crisis. Nevertheless, business has rebounded now to levels that are equal or better than the years before the economic meltdown.
Conclusion
Without the “straw’ buyers, working in secret on behalf of Disney, it would not have been possible to assemble enough land for the development. This is a specialty area of real estate, yet it has some merits.
Mere interest in land from a major buyer causes the price of the land to rise. It can even be the worst kind of land that previously had no use for anything. This is why major developments use “straw” buyers and why “straw” buyers make a great deal for themselves as well.
References
History of Walt Disney World
http://www.frommers.com/destinations/walt-disney-world/683469
Walt Disney World History
http://www.wdwmagic.com/walt-disney-world-history.htm