Residential Land
Development
Build for Sale | Build For Rent
Residential housing in the United States is experiencing a material, structural shortage in the millions of units / year. AEG targets land purchase opportunities in the Carolinas whereby we lock up land and determine the feasibility of its development. Development suitability depends on various qualitative factors such as environmental suitability, entitlement risk, topography, area demographics, and nearby supply. These factors serve as the inputs in our quantitative analysis. We quantify the full cost to develop, the strength of absorption/demand for the end product, and we determine if our projected profit margin justifies closing on the land and executing on the development. AEG leans on its experienced engineering partners to determine the feasibility of development opportunities as efficiently as possible. In doing so, we can quickly sort and vet opportunities. Our team will either develop lots (pads), construct homes, or develop rental products subject to our comparative financial analysis. We will never pursue development opportunities that do not provide us with a strong margin for error to account for value declines. Every single one of our deals has a built in contingency and > 25% gross project margin. Once market valuations fall near the replacement cost to develop new assets, we will shift our focus to new acquisitions. Sometimes, that means looking far ahead and offloading deals prior to full development. If values are trending downward and challenge our required minimum margins, we will move out of our positions.
Acquisitions
Asset Class Agnostic
Real Estate investing is all about location, math, and time. We are opportunistic in nature, and we do not limit ourselves to a single asset class. Structuring deals with multiple exit strategies ensures that we will not lose our original capital, even if things don't go as planned.
As certain asset classes become over-saturated, others become more favorable acquisition opportunities. Just as development opportunities only make sense when investors pay us much more than the cost to develop a new product, acquisition opportunities only make sense when we can buy at significant discounts to reconstruct the same asset with today's construction costs.
01.
Industrial
02.
Apartments
03.
Mobile Homes
04.
Retail
05.
RV Parks
DEVELOPMENT SCOPE - THE PROCESS
EQUITY
Source Deal
/ Initiate DD
LAND LOAN / EQUITY
Due Diligence
Entitlements / Approvals
Close on
Land
CONSTRUCTION LOAN & EQUITY
Horizontal Construction
Vertical Construction
PERMANENT LOAN / EQUITY
Sale / Permanent Loan
Source land and put it under contract after a preliminary financial and feasability review.
Engage engineers and architects to draw up the land. Perform feasibility studies and environmental tests. Collect bids for construction. Create site plan / platt map.
Work with relevant jurisidctions at the county and city levels, such as county/ neighborhood planning commissions, zoning review boards, and architectural review boards. Obtain approval for development.
Secure relevant permits and close on the land.
Complete horizontal construction such as grading, road and lot infrastructure, and utilities.
Complete vertical construction with GC and subcontractors.
Once the assets are built, either sell and return capital or refinance into permanent debt once the project is stabilized.
Differentiators
Investing Across the Capital Stack and Risk Spectrum
Common Equity
Last position to earn returns, first position to lose capital, unlimited upside return potential, limited to no control rights
Last Payment
First Loss
Preferred Equity
Mezzanine Debt
Includes preferred equity and mezzanine debt. Second to earn returns, second position to lose, capped total returns, limited control and default remedy rights
Last Loss
First position to earn interest and receive original capital back, last to lose, total control and default remedy rights
Senior Debt
First Payment
We provide credit (debt) offerings as well as equity offerings to service investors who have different risk tolerances and goals for their capital. Everybody has unique financial and lifestyle circumstances, and we cater to those needs through our various opportunities.
During uncertain times, it often makes sense to invest lower in the capital stack to protect the downside risk of your investment. Debt investments are fundamentally more secure because in the event of borrower default, assets can be foreclosed on and resold. First position, senior loans are secured by mortgages or deeds of trust on property. Typically, values would have to fall greater than 25%+ for a debt investment to risk losing any original capital. Even then so, sponsors holding mortgages on property can hold & improve the assets until the market improves, preventing any need to 'firesale' the property for below-market value.
The correlation between the value of an asset and its underlying debt is strikingly low, protecting investors from value fluctuations in market downturns. During stable times, it can make most sense to invest in equity in search of high returns. Although equity takes the most risk, deal structure can significantly help reduce common equity's exposure to potential losses.
Return
Risk
Core
Core Plus
Value-Add
Development / Opportunistic
Deal Type
​
Core
​
Core Plus
​
Value-Add
​
Development / Opportunistic
Investor Appetite
​
REITS, PE, LifeCos, Pensions, Endowments
​
REITS, PE, LifeCos, Pensions, Endowments
​
REITS, PE, Syndicators
​
REITS, PE, Private Developers
Levered IRR Targets
​
6-9%
​
9-13%
​
13-18%
​
​18%-25%+