Lot Option Financing

Lot Option Financing

What is Lot Option Financing?

Lot Option Financing provides Homebuilders an attractive off balance sheet structure creating a liquidity option while simultaneously providing investors with minimal real estate, construction, development, or entitlement risk with a short term Project horizon.

Why does this opportunity exist?

The dislocation in the capital markets has generated high levels of demand for financing solutions / products successfully placed by APEX principals over the past two decades.

We are also in an attractive point in the real estate cycle: (i) New single family homes sales over the next 10 years will trend toward their pre-recession peaks; (ii) Resale inventories are approaching equilibrium; and (iii) Mortgage rates are historically low and housing affordability is high.

Homebuilders face the challenges of minimizing lot inventories, while the forward supply of finished lots is dwindling to levels that threaten production volume targets of the public builders.

Why do builders like this?

Builders find lot financing as an accretive option to them for various reasons: (i) incremental capital, (ii) control of land, (iii) balance sheet flexibility , and (iv) financially attractive.

  1. Incremental Capital: growth capital above what builders could access, preserves capital for other uses, long term partnership with sophisticated capital source.
  2. Control of Lots: gain control of lot supply with less upfront capital investment, control community and project development, current lot inventory insufficient, desire to be more sive in current environment.
  3. Balance Sheet Flexibility: builders continue to be capital constrained, shareholder pressure to delever, access off-balance sheet non recourse financing, aids in cash flow management.
  4. Financially Attractive: IRR accretive at project level, maximizes equity and enables Homebuilders to open more communities.