Shared Appreciation on Land and Commercial Properties

Overview

This structure allows landowners to partially monetize their property without selling the entire asset and without incurring monthly interest payments. Instead, owners receive upfront capital while retaining control and participation in future gains.

For investors, this model offers attractive appreciation participation while maintaining downside protection through fixed-income leverage, priority repayment rights, and conservative entry valuations.

Executive Summary

Shared appreciation financing offers a transformative capital solution for land and commercial property owners, unlocking the value of appreciated real estate without requiring owners to sell or incur monthly debt service. By incorporating structured leverage, this model enhances investor returns while maintaining conservative protections for capital providers. Property owners gain access to capital with flexible terms and retain operational control and future upside.

The Market Opportunity

Across the United States, over $3 trillion in rural land and $20 trillion in commercial real estate is held by private owners—much of it illiquid. Many landowners are 'land rich, cash poor,' unable to access capital without selling or refinancing. Meanwhile, traditional financing options have tightened due to rising interest rates and stricter lending standards. This has created a massive opportunity to unlock value through non-recourse, appreciation-linked capital. If just 0.1% of this market were tapped through shared appreciation models, the opportunity exceeds $23 billion.

Structure Overview

A $100 million investment fund is structured using internal leverage:

• $70 million senior debt with a fixed 8% annual compounded return

• $30 million common equity exposed to residual profits

• The fund receives 50% of the total appreciation of the real estate over a 10-year period

• A required liquidity event (sale or refinance) at maturity ensures repayment

Risk Mitigation

• Senior debt is protected by a first claim on proceeds, earning fixed 8% compounded annually

• Legal instruments include deeds of trust, rights of first refusal, and exit enforcement clauses

(1) Return on Investment: Minimum Interest or Shared Appreciation

The Investor shall be entitled to receive, upon the occurrence of a cash-out event or sale of the property, the greater of: (a) fifty percent (50%) of the actual appraised appreciation in the fair market value of the entire property from the date of this Agreement to the date of disposition or appraisal, or (b) an amount equal to four percent (4%) per annum compounded annually on the original investment amount, calculated from the date of investment through the date of payment.

(2) Right of First Refusal

The Investor shall have a right of first refusal to acquire the entire property at any time during the term of this Agreement. In the event that the Owner receives a bona fide offer from a third party to purchase the property, the Owner must provide written notice to the Investor detailing the material terms of such offer. The Investor shall have thirty (30) days from receipt of such notice to elect to purchase the property on terms no less favorable than those offered by the third party.

(3) Investor Option to Require Refinancing and Cash-Out

At any time after the third anniversary of this Agreement, and provided that market conditions permit, the Investor may, by written notice to the Owner, require the Owner to refinance the property for the purpose of providing sufficient funds to satisfy the Investor’s entitlement under this Agreement, including the applicable return as set forth herein. The Owner agrees to use commercially reasonable efforts to obtain such refinancing and to complete the cash-out transaction within ninety (90) days of receiving such notice.

(4) Maintenance, Compliance, and Inspection Rights

The Owner agrees to maintain the property in substantially the same condition as exists as of the date of this Agreement, reasonable wear and tear excepted. The Owner shall remain current on all real estate taxes, assessments, mortgage payments, insurance premiums, utility charges, and any other financial or legal obligations associated with the property. The Owner further agrees to promptly notify the Investor in writing of any material change in the condition of the property, financial status, or legal obligations affecting the property.

The Investor shall have the right, upon reasonable notice and during normal business hours, to inspect the premises and to examine and copy any and all books, records, statements, and accounts related to the property.

Failure by the Owner to comply with the obligations set forth in this Section shall constitute a material breach of this Agreement. Upon such breach, and after providing Owner with ten (10) days written notice and opportunity to cure, the Investor shall be entitled to pursue all available remedies, including but not limited to, the right to foreclose on the Investor’s interest in the property or compel a sale of the property.

(5) Foreclosure and Recovery Rights

In the event of a default by Owner under this Agreement or the related Deed of Trust, Investor shall have the right to initiate foreclosure proceedings pursuant to the terms of the Deed of Trust and applicable state law. Upon such default and the completion of a foreclosure sale, Investor shall be entitled to retain proceeds from the sale of the Property in an amount equal to:

(a) the original principal investment provided by Investor,

(b) accrued interest at a minimum rate of four percent (4%) per annum, compounded annually, from the date of funding through the date of repayment or foreclosure sale, and

(c) all reasonable costs and expenses incurred by Investor in connection with the foreclosure process, including but not limited to legal fees, trustee fees, title charges, and administrative expenses.

Any remaining proceeds from the foreclosure sale, after satisfying the amounts due to Investor as set forth above, shall be remitted to Owner or other parties entitled thereto under applicable law.

Illustrative 10-Year Financials

• Initial Property Value: $1,000,000,000

• Total Appreciation (4% CAGR): $480,244,284.92

• Fund’s 50% Share: $240,122,142.46

• Senior Debt Repaid (8%): $151,124,749.81

• Residual to Equity Holders: $158,997,392.65

• Projected Equity IRR: 20.43%

Benefits Summary

For Capital Providers (Investors):

• Senior debt receives predictable, secured 8% compounded returns• Equity investors benefit from enhanced IRR through internal leverage

• Asset-backed security with minimal operational risk exposure

• Full return realized at defined exit point, not reliant on cash flow

For Property Owners (Sellers):

• Receive liquidity without monthly payments or forced sale

• Maintain full operational control and upside on 50% of appreciation

• Avoid refinancing hurdles and retain family or legacy land holdings

• Benefit from partnership with institutional-grade capital and long-term alignment

Conclusion

This structure unlocks a powerful alignment between institutional capital and long-term real estate holders. It transforms illiquid equity into productive capital while preserving ownership, control, and optionality.

With trillions in untapped value and no dominant provider in the commercial shared appreciation market, this model offers durable, scalable, and high-return deployment potential across economic cycles.