Thank you for this idea. Supply of land banks and of land developers shrank after the GFC. A land bank who also develops but doesn't build is a rare bird.
If their average lot life is 12 years, then how do they earn back their cash equity (or stepped-up land basis contribution) after only 3 years?
12 years isn’t average, that’s the time until the very last parcel is sold on a very large subdivision. More medium sized subdivisions would only take 6 years until the last parcel is sold. Enough parcels are sold by 36 months to be at breakeven on average.
Thank you for this idea. Supply of land banks and of land developers shrank after the GFC. A land bank who also develops but doesn't build is a rare bird.
If their average lot life is 12 years, then how do they earn back their cash equity (or stepped-up land basis contribution) after only 3 years?
12 years isn’t average, that’s the time until the very last parcel is sold on a very large subdivision. More medium sized subdivisions would only take 6 years until the last parcel is sold. Enough parcels are sold by 36 months to be at breakeven on average.
Sounds similar to $MRP no?