We identified a major capital inefficiency in traditional capital structures and delivered an innovative solution addressing how residential real estate is owned.
The solution was to separate the land from the buildings and recognize that the land is a distinct and separate asset capable of separate ownership and subject to different economic characteristics.
Separation is necessary as land typically returns lower return on equity than the building. While building owners may target 15% ROE, land typically only generates 5% ROE, bringing down the net ROE on development projects.
This new approach unlocks higher cash-on-cash returns, higher IRR and higher multiples by eliminating the need for land equity.