Devon Zuegel

And I have a long, long list of these towns. And Las Catalinas, the one I mentioned in Costa Rica, and started to realize that, no, when people build this way, they actually do make more money. It does take longer, though. So I think the next natural question was, why aren't more of these being built if this is a good business? And. I think it's a mixture of things.

And I have a long, long list of these towns. And Las Catalinas, the one I mentioned in Costa Rica, and started to realize that, no, when people build this way, they actually do make more money. It does take longer, though. So I think the next natural question was, why aren't more of these being built if this is a good business? And. I think it's a mixture of things.

I think one key factor is because it takes longer, it often doesn't fit into the fund length for a traditional real estate fund. Often traditional real estate funds need to return capital in five to seven years. And these projects tend to take 10, 15, maybe 20 years to return the capital. And so just the fund length is a mismatch.

I think one key factor is because it takes longer, it often doesn't fit into the fund length for a traditional real estate fund. Often traditional real estate funds need to return capital in five to seven years. And these projects tend to take 10, 15, maybe 20 years to return the capital. And so just the fund length is a mismatch.

And so when I did really intensive research to be like, for the ones that do exist, how did they get funded? And many of them ended up being things like one wealthy family who just decided to go all in on this project. And they ended up making huge returns, including on an IRR basis, by the way. So I'm not just saying equity multiple.

And so when I did really intensive research to be like, for the ones that do exist, how did they get funded? And many of them ended up being things like one wealthy family who just decided to go all in on this project. And they ended up making huge returns, including on an IRR basis, by the way. So I'm not just saying equity multiple.

They ended up making huge returns, but it was 15 years later, which is just a long time for a fund. Or there's another one where in the Florida panhandle of all places, there's a lumber company called St. Joe, and they own a huge amount of the land in the Florida panhandle. And they have long looking time horizons.

They ended up making huge returns, but it was 15 years later, which is just a long time for a fund. Or there's another one where in the Florida panhandle of all places, there's a lumber company called St. Joe, and they own a huge amount of the land in the Florida panhandle. And they have long looking time horizons.

So they decided to turn some of their former lumber lands into building these communities. Basically, what I realize is when patient capital comes in, they can and do make a huge amount of money, but your traditional real estate funds don't fit that timeline. So that's one reason that there aren't more of these.

So they decided to turn some of their former lumber lands into building these communities. Basically, what I realize is when patient capital comes in, they can and do make a huge amount of money, but your traditional real estate funds don't fit that timeline. So that's one reason that there aren't more of these.

I think another reason from a financial perspective is related to what we were talking about before with comps and all the other forces that cause real estate to be quite conservative. Because a lot of real estate is done with debt, including at the infrastructure level and earlier on, There's a lot of pressure to not try something new.

I think another reason from a financial perspective is related to what we were talking about before with comps and all the other forces that cause real estate to be quite conservative. Because a lot of real estate is done with debt, including at the infrastructure level and earlier on, There's a lot of pressure to not try something new.

Even if it sounds like a good idea, it's like, you know what, if you try something new and it wins, we the lenders don't really get benefit from that upside. But we do have to bear the downside. I can't blame them. Like if I was a lender, I would say exactly the same thing. Much of real estate development does assume that you're going to take on debt.

Even if it sounds like a good idea, it's like, you know what, if you try something new and it wins, we the lenders don't really get benefit from that upside. But we do have to bear the downside. I can't blame them. Like if I was a lender, I would say exactly the same thing. Much of real estate development does assume that you're going to take on debt.

And it's just in the water and part of the culture of how people do projects. I think it also means that when you're doing something, if you're not going to take on debt, you will hurt your returns. And so what you're doing better be sufficiently innovative that it makes up for the last leverage.

And it's just in the water and part of the culture of how people do projects. I think it also means that when you're doing something, if you're not going to take on debt, you will hurt your returns. And so what you're doing better be sufficiently innovative that it makes up for the last leverage.

And if you make something really incredible like a Chautauqua, then I think you can jump over that hurdle. But if you're only innovating on one or two things, then you're going to end up falling flat. And you do lose out on... the leverage without the benefit of much higher property values.

And if you make something really incredible like a Chautauqua, then I think you can jump over that hurdle. But if you're only innovating on one or two things, then you're going to end up falling flat. And you do lose out on... the leverage without the benefit of much higher property values.

So I think there's a bit of a chasm basically between more conventional development, which has debt and is more conservative versus taking a really big swing and saying, we're going to do things like really differently. The second one is a little discouraging because it means that there's a lot of players in the ecosystem who don't want to act on this.

So I think there's a bit of a chasm basically between more conventional development, which has debt and is more conservative versus taking a really big swing and saying, we're going to do things like really differently. The second one is a little discouraging because it means that there's a lot of players in the ecosystem who don't want to act on this.