Land · room 06 of 07
The exposure.
At the end of the chain an investor holds units in a vehicle whose assets are parcels of land held to a policy. The investor's position is the policy: what may enter, what may not, how it is valued, when it pays and how it leaves. Everything on the land door exists so that position can be tested before subscription and measured after.
What follows is the exposure as the investor reads it: the six questions a manager answers, the classes and how they rank, the valuation an investor can test, liquidity as told at subscription, the exit written at entry, and the conflicts the constitution names.
Land · seven rooms
01 · The six questions
What a manager answers before anyone subscribes
An investor asks six questions of a land platform, and a manager who cannot answer one has a platform with a gap in it.
The six are the exposure statement read from the other side of the table. Each has a short answer, and the document the answer lives in is named beside it.
A typology or two, in named markets, at a stated entitlement at entry, on one programme. The answer is the exposure statement in the constitution, not the list of seed parcels in the deck.
The seed parcels by state of access: under option, under conditional contract, contributed. The answer is the seed schedule, with each parcel's state and its consent position, and the ramp-up that governs the concentration limits until the second close.
By whom, on what basis, how often, and with what assumptions disclosed. The answer is the valuation provisions and the valuer's letter of appointment.
Under a waterfall, from realised value, in a stated order, with distributions in kind provided for. The answer is the waterfall in the constitution and the class I hold.
At the end of the term, by the exit the policy contemplates, or earlier by transfer to a permitted holder. The answer is the term, the exit policy and the transfer provisions, and the exit test the platform was run against.
The landowner who contributed, the developer beneath the platform, the manager's affiliates, and the relationships through which parcels reach the manager. The answer is the related-party provisions and the admission policy.
02 · Classes and ranking
Where I stand in the order
The class decides where a holder stands in the order of payment, and an investor reads the other classes before its own.
A land platform usually carries three positions: the cash class, the contribution class and the developer's promote beneath the platform. Each is ranked against the others on every parcel, and the ranking is in the constitution.
Every class receives its capital back before any class receives a share of gain, and the cash class's capital ranks ahead of the contribution class's on parcels the landowner did not contribute.
A stated rate, compounded as the constitution says, that each class receives before the manager's share is calculated. The rate is a fact in the document; this site states none.
The landowner cannot transfer or redeem during the programme on the parcel it contributed. An investor reads the lock-up against the term, and against the programme, before relying on it.
The developer's share sits in the joint venture under the platform, paid on realisation, and reduces the value that reaches the platform. An investor reads the joint venture waterfall because the platform's waterfall is calculated after it.
Any term given to one holder is disclosed to the others on request, and a term that ranks one holder ahead of its class is a new class, not a letter.
03 · A valuation I can test
The number and its assumptions
Land is valued on assumptions, and the investor reads the assumptions before the number.
Development land is valued residually: what the completed scheme would sell or let for, less the cost of building it, less the developer's margin, discounted for time and risk. Each input is an assumption the investor can test.
Whether the valuation assumes the consent the parcel has, the consent applied for, or the consent the programme needs. A valuation on a consent not yet granted is a forecast, and the report says so.
Density, use, phasing and completion, against the programme in the development agreement. A valuation on a richer programme than the developer has signed for is a number nobody is contracted to deliver.
Sales and lettings in the market, at the date, for the typology. Thin evidence is disclosed as thin.
Appointed under the constitution, rotated on a stated cycle, instructed by the manager with the investors' committee seeing the instruction, and paid by the platform.
Every valuation day, the report reconciles the movement in value to its causes: a consent, a programme change, market evidence, a disposal. Value that moved without a cause is a question for the committee.
04 · Liquidity, told at subscription
What I can and cannot do while it runs
A land platform is closed for its term, and the honest version says so on the first page.
An investor in land is paid by the sale of what the land became, on the programme's clock. The constitution sets out what the investor may do in the meantime, and it is short.
The programme plus the exit, with extensions on the committee's consent. The investor reads the programme on the seed parcels against the term, because a term that is shorter is a forced exit and one that is longer is patience the investor is pricing.
To a permitted holder under the tier, on the manager's consent, which may not be withheld except on stated grounds. The platform may keep a register of holders who wish to buy and sell, and may not make a market.
Commitments drawn as parcels are admitted, on notice, against a parcel file the committee has seen. A defaulting holder is diluted at a formula stated in the constitution.
From parcel-by-parcel disposals, under the waterfall, or retained for the next admission where the policy permits recycling within a stated period. The investor reads whether distributions are paid or recycled, and for how long.
05 · An exit written at entry
The route and its test
The exit is in the constitution before the first parcel enters, and the investor reads the test it was run against.
The platform room runs four exits against the chain. The investor reads the result: one page answering one question, whether the exit the policy contemplates can be executed by the parties who will have to execute it.
Parcel by parcel, the portfolio whole, admission to trading, or distribution in kind. The policy may keep two alive, and the investor reads which.
No cross-guarantees between parcel companies where the route is parcel by parcel; a saleable holder where the route is the portfolio whole; a chain the exchange can read where the route is admission.
The lender on every parcel company, the state's registry on every transfer, the landowner on nothing once contributed, the developer on a disposal before completion. Each consent is named and its cost is stated.
The transfer charge in each state, the registration regime, the lender's prepayment terms, the developer's crystallised promote. Priced at entry, so the exit the investor reads is net of them.
06 · The conflicts, visible
Named in the constitution
A land platform has several related parties by design, and the investor reads how each is handled rather than whether each exists.
Four relationships are present on most land platforms. None is a defect. Each is a dealing the constitution names, approves by a stated route, and reports.
Contributed a parcel at an independent valuation, holds a separate class with a lock-up, and has no consent over the parcel. Every later dealing with it is approved by the investors' committee.
Appointed under a development agreement on terms benchmarked against an unrelated developer's, with its promote on realisation and its step-in triggers defined. Where affiliated to the manager, every agreement with it goes to the committee.
A parcel offered to this platform and to another the manager runs is allocated under a written policy the committee has seen.
Parcels may reach the manager through relationships the firm holds with the people who own land. The firm holds no stake in the platform, no place in the chain and no second appointment on the transaction; the admission policy says that a parcel arriving that way is admitted on its file and its valuation like any other, and the committee's minute records it.
07 · The binding constraints
Five, each attributed
Five constraints bind the investor's position. Each is created by one instrument and moved by one party.
The list the structure paper carries at this stage, with the party who can move each item named beside it.
Created by the fund regime. Moved by the regulator; an investor who fails the test holds through a vehicle that passes it, or not at all.
Created by the constitution. Moved by the register, by amendment, in front of every class.
Created by the constitution and the valuer's instruction. Moved by the manager under the constitution, with the committee seeing the change.
Created by the constitution. Moved by extension on the committee's consent, and by nothing else.
Created by the policy and the chain as built. Moved by neither after formation; the route the investor subscribed to is the route.
08 · Where it breaks
Failure points
Each of these was decided in the subscription documents and found on the first day it mattered.
Five failures particular to the investor's position on a land platform. None is cured by drafting after the event.
The investor subscribed on a presentation of seed parcels and the constitution carried a policy of land in general. It surfaces at the second admission, in a market the deck never mentioned.
The manager's share was calculated on valuation days and paid from capital calls. It surfaces at exit, as a share paid on value that was never realised.
The landowner's lock-up expired at three years on a five-year programme. It surfaces when the landowner sells its class to a holder who wants the parcel sold now.
The constitution permitted transfer to a permitted holder and the tier's holder cap was already reached. It surfaces when a holder must leave and the only permitted holders are the ones already in.
The developer was the manager's affiliate and the constitution disclosed it in a paragraph. It surfaces at exit, when the acquirer asks which committee approved each agreement and the answer is none.
09 · Where the work stops
The line
Your counsel signs the law. We design the structure that advice is set against, and stress-test it before the documents are drawn.
Three rows: what returns from this stage, what stays with the parties' own advisers, and who takes the decision.
The exposure as the register will read it: the six answers and the document each lives in, the classes and their ranking, the valuation provisions with the assumptions that must be disclosed, the liquidity position, the exit test result and the related-party provisions. Written for the manager, so that the subscription documents can be drafted to it.
The subscription documents and the constitution, which counsel drafts; the tier opinion; the valuation, which is the valuer's; every investor's own advice, which is its own; and the tax position of each holder, which sits with its own adviser.
The manager, on those opinions. Each investor decides for itself, on its own diligence, and subscribes to the platform, never to the firm.
The land door runs from the access through the portfolio, the platform and the developer to this room, and ends in five worked land structures. What follows there is the structure as it binds, read from the instruments.
None of this is advice, and none of it invites any investment or names any land. It is our reading of a structure, and your counsel signs the law.
Read with the structures family on economics, liquidity and co-investment, and the funds rooms for the two centres
Land · 14 minute readThe platformThe vehicle that holds a land portfolio: seven forms by centre and state, the tier and who may hold, classes and the waterfall, valuation and reporting, liquidity and financing, governance and related parties, and the exit written at entry.
Land · 12 minute readThe portfolioHow several parcels become one exposure an investor can hold: the exposure statement written before the first parcel enters, one company per parcel, the chain above it, land contributed for units, the sequence, the constraints and the failure points.
Land · 11 minute readLandLand reaches the firm through relationships with the people who own it, in several markets. The firm designs the platform the land can enter: the portfolio, the vehicle, the developer interface and the exposure an investor holds. Six rooms, for fund managers, developers and landowners.
What this room is attached to
- The platform it is held in Land · the platform
- The economics it is paid under Structures · carry and the waterfall
- Five structures, worked Land · worked land structures