Land Investment Advantages
Land equity is an attractive asset class in that it provides substantial diversification in a multi-asset portfolio. Developers know that, where towns and cities grow outward, absorbing undeveloped land, and therefore, it is preferable—and more profitable—to buy land prior before planning applications are submitted, since planning approval generally increases land value significantly. There is no assurance that the growth or the governmental approval should be actualized.
How Land Value Increases
The two key and closely linked factors that drive property values up are population growth and economic growth. Population growth is primarily affected by births and deaths, but migration into or out of an area is also a major factor. People go where greater opportunities exist, so vibrant regions where jobs are plentiful exert a powerful pull. And economic growth—the ability to produce goods and services at a pace that brings about a rise in standards of living—drives development in a virtuous circle.
TSI performs on the ground research and analysis to acquire the best prospective properties in locations where land suitable for development is scarce and demand is high. Following acquisition, we syndicate more than 95 percent of the property, apportioning it into units. (TSI typically retains up to 5 percent of every property, so we have a vested interest in seeing our property and investment succeed.) During this period we also undertake various studies and engineering analyses to develop a business case or draft plan for rezoning the land. After the draft plan is approved and if the land is sold, proceeds from the exit are distributed to investors.