The I-45 Land Corridor
Buying the wholesale price of bigness and selling the retail price of smallness — a diligence-driven, no-development land-banking strategy along the 240 miles of interstate that connect America's #4 and #5 metros, offered in three disciplined tranches.
Sections 01–03 are the thesis and the market. Sections 04–07 are the technicals — survey, plat, dirt, title — the operating craft that creates the value. Sections 08–09 are the honest numbers and the capital stack. Sections 10–13 are the offer: the three tranches, the risk register, the execution machine, and the legal disclosures. Every dollar figure is a 2026 estimate to be ground-truthed against live county comps before any commitment.
01 The Thesis #
We are not developers. We are arbitrageurs of lot-size liquidity.
Large tracts trade at a per-acre discount because the buyer pool is thin and capital-heavy — few people can write a $1M check for 270 raw acres. Small tracts of 10–40 acres trade at a per-acre premium because the buyer pool is deep and emotional: exurban homesteaders, weekend-ranch buyers, 1031 parkers, hunters. The spread between those two prices is the entire business. Diligence and the legal split are simply the tools that unlock the premium.
Critically, we stop at the line where real estate risk lives. We do not install roads, sewer, drainage, or finished lots. We buy raw, run the diligence stack, draw the split lines, add cosmetic value, and resell. That is our model in one breath — capture the wholesale-to-retail spread and stop short of the horizontal development where real estate risk lives. The thesis is to industrialize that motion along a single, legible, fast-growing interstate corridor.
Why this corridor, why now
The gross spread is genuinely 2.0–3.5× per acre. The net equity multiple, after a complete cost stack (interest, ag-rollback, a realistic 24–30 month hold, disposition), is roughly 1.4–1.5× in a good deal and ~1.1× in a normal-bad one. This report is built on the corrected numbers, not the marketing ones. Believing the corrected numbers is what keeps the fund solvent.
02 The Corridor #
Read south to north. The ends are hot and largely priced out. The middle is the strategy. All $/acre figures are estimates drawn from public aggregators and verified news; listing medians overstate raw value because the listing pool is dominated by already-split, survey-ready tracts — which is precisely the arbitrage we monetize.
| Sub-region (S→N) | Counties | Parent $/ac [EST] | Child tract $/ac [EST] | Gross spread | Verdict |
|---|---|---|---|---|---|
| Exurban Houston | Montgomery (Conroe) | $14k–$22k | $25k–$45k+ | 1.6–2.5× | Hot — edge play only |
| Near-exurban | Walker (Huntsville) | $7k–$12k | $14k–$25k | 1.8–2.5× | Good entry county |
| Rural core | Madison, Leon, Freestone | $3.5k–$6.5k | $8k–$16k | 2.0–3.5× | Core sweet spot |
| Rural-to-exurban N | Navarro (Corsicana) | $5k–$9k | $11k–$22k | 2.0–3.0× | Widest spread now (Riot) |
| Exurban Dallas | Ellis (Ennis/Waxahachie) | $14k–$28k | $28k–$60k+ | 1.6–2.5× | Hot — deep, fast pool |
The underwriting rule: the spread, not the absolute price, is the deal — but absorption matters as much as multiple. A $4k→$12k Leon deal (3.0×) can beat a $20k→$40k Ellis deal (2.0×) on multiple, yet the Ellis deal may absorb faster (deeper buyer pool) and win on IRR. We model both, and we let absorption set the tract count.
County notes
Walker · Huntsville · New Waverly
SHSU (~21k students) + the Texas Dept. of Criminal Justice HQ give recession-resistant payroll; first genuinely rural-priced town north of the Houston gravity well; Sam Houston National Forest recreation adjacency. The first place the spread opens up — and home to our live OSADA deal, a 675-acre, 2,160-lot master-planned community on SH-150 (a develop-the-land play distinct from the fund), modeled in full in the Addendum.
Madison & Leon · the cheapest basis
Pure rural/recreational, I-45 frontage, strong whitetail reputation. Leon offers the lowest basis on the corridor and the widest percentage spread on recreational splits — with absorption (not price) as the risk. Leon comps are the thinnest-sourced; verify directly.
Freestone · amenity upside
Richland-Chambers and Navarro Mills lake proximity; the northern half catches Corsicana spillover — rising demand without (yet) Navarro pricing.
Navarro · the catalyst
Riot's 858-acre, $400M campus is real and is the corridor's widest spread today. But the halo radius is unmapped and you are already competing with sophisticated buyers near the campus. Underwrite every Navarro deal to stand alone without the halo — a catalyst premium paid into your basis is the classic way land speculators lose money.
03 The Model #
The arbitrage can be written as one identity. Per-acre resale value R(a) rises as tract size a falls:
R(a) = R_ref × (a / a_ref)^(-&beta)
where &beta = the size-discount elasticity (steeper = bigger small-tract premium)
a_ref = a reference tract size with a known closed comp
Gross spread = blended child $/ac ÷ parent $/ac
Net profit = Σ(tract sale) − acquisition − FULL cost stack − dispositionThe premium lives at the small end of the curve (10–20 ac moves fastest at the highest $/ac). You cannot simultaneously cut large 25-acre tracts, claim the fat small-tract premium, keep absorption fast, and stay in the cheap no-plat lane. Pick two. The discipline of this model is choosing a tract count the micro-market can actually absorb — often 4–6 tracts, not 10–15.
The buy box
- Size: floor ~80 ac (fixed costs must amortize); sweet spot 100–300 ac; ceiling ~400 ac for a single raise.
- Frontage: public road frontage on the parent such that every child tract gets legal deeded access without us building a road (shared easements, yes; new roads, no).
- Jurisdiction: unincorporated county, outside city ETJ — Ch. 232, not a municipal code.
- Flood: no floodway in the buildable core; minimal FEMA Zone A/AE (isolate it into one discounted "creek tract").
- Soils: OSSF/septic-suitable on every tract (this is the item that most often kills or re-prices a deal).
- Use: currently ag/timber 1-d-1 (low carry, but mind the rollback — §07).
Hard NO: a split that needs a new public road, a landlocked interior tract, heavy floodplain, active surface mineral operations with no waiver, a Phase I environmental concern, or a seller who wants full retail per-acre for the whole parent (no spread = no deal, only hope).
04 Surveying and the Split #
The survey is the workstream that physically creates the tracts. No survey, no split, no product.
A Texas Registered Professional Land Surveyor (RPLS) owns this. The boundary survey ties to the title commitment, plots every easement, confirms each proposed tract has frontage and access, and produces the new metes-and-bounds descriptions (or a plat) that the county will record. A county will not record a legal description that fails to close mathematically or that violates frontage minimums.
| Survey product | When to use it | Cost [EST] | Time |
|---|---|---|---|
| Category 1A Land Title Survey (TSPS standard) | The workhorse. Standard TX boundary survey that title companies accept to delete the survey exception. | $8k–$20k+ (200–300 ac) | 2–6 wk |
| ALTA/NSPS Land Title Survey | Only if an LP, lender, or institutional buyer demands it. Adds Table A items. | +30–60% over 1A | 3–8 wk |
| Topographic survey | For drainage / floodplain / OSSF planning. | $1.5k–$8k | 1–4 wk |
| Split plat / metes-and-bounds exhibits | The legal instrument that creates each child tract. | $2k–$10k+ | 3–8 wk + county review |
Kill on boundary gaps, overlaps, fence-line-vs-deed conflicts, or easements that — once plotted — defeat the split geometry. Proceed when every proposed tract closes, has legal frontage and access, and is easement-clear enough to sell. Draw the split lines around the buildable, percable, frontage-having envelope — never around equal acreage.
05 Platting and Entitlement #
Whether you can split without triggering county subdivision platting is the difference between this model working and becoming the development you are avoiding. Read this section twice.
The statutory frame is Texas Local Government Code Chapter 232, which governs subdivision in unincorporated areas. Near cities, a municipal ETJ and Ch. 212 can pull you into city platting — full engineering, drainage studies, fees.
The safe lane
Split into tracts that (a) each front an existing public road, (b) require no new roads, drainage, or utility infrastructure, and (c) meet the county's minimum lot size and OSSF/water minimums. Done this way, the split is often handled by metes-and-bounds conveyance or an administrative minor plat — not a full engineered subdivision plat.
Request a written determination under §232.0015 (the "is a plat required?" letter) during the option period, before earnest money goes hard. A free letter that says "no plat required" is the single most valuable piece of paper in the deal. Its absence is the kill signal. Do not rely on the “four-lot” folklore — in many counties that is a complexity threshold, not a plat exemption, and a 10-lot split is squarely in plat territory. Beware aggregation: serial four-lot splits of the same parent can be treated as one subdivision.
| Corridor zone | Platting posture | Implication |
|---|---|---|
| South end (Montgomery, S. Walker) | Higher scrutiny; MUDs; city ETJ near Conroe/Huntsville | Edge plays only; expect plat friction |
| Rural middle (Walker–Navarro) | Light county rules; pure unincorporated parcels common | Where the low-friction split thesis is strongest |
| North end (Ellis near Ennis/Waxahachie) | DFW growth shadow; ETJ pressure | Prefer pure-county parcels; consider SB 2038 ETJ release |
Kill criterion: if the only viable split requires a new road or an engineered subdivision plat with drainage — you have left the model. Re-scope or walk.
06 Engineering the Dirt #
Add value without crossing into development. The moment you build roads, drainage, or utility mains to serve lots, you are subdividing — and you have bought the exact risk this model exists to avoid.
The septic reality (OSSF) — the make-or-break rural workstream
With no central sewer, every resulting tract must demonstrate it can host an On-Site Sewage Facility under TCEQ Chapter 285 (administered by the county). Heavy clay soils — common corridor-wide, and Houston Black clay dominates the north end around Ellis/Navarro — fail conventional percolation and force aerobic treatment units with larger areas, raising the buyer's build cost and shrinking the minimum sellable tract. Without public water, the OSSF minimum lot size is often ~1 acre or more. A per-tract site evaluation by a registered sanitarian ($300–$800/site) is a hard gate before earnest money goes hard.
Floodplain & access
Pull the FEMA FIRM. Zone A/AE is a special flood hazard area (insurance, elevation, buildability hit); floodway is essentially unbuildable — carve it out of the value. Each tract needs a culvert/driveway permit ($200–$1,500 each) onto an accepted public road; frontage on a state highway pulls in a TxDOT access permit.
The line: light dirt work vs. development
A sanity check on our diligence budget: ~$20k of survey + environmental + light improvement on a 200–300 ac buy is consistent with a Cat 1A survey + split exhibits ($10–18k), a Phase I ($3–4k), a couple of OSSF evals, and one entrance/clearing pass. Keep total diligence + dirt in the $25k–$45k band — and front-load the kill-criteria items before spending a dollar on cosmetics.
07 Title, Mineral & Environmental #
In this corridor the severed mineral estate is the norm, not the exception — and the mineral estate is dominant over the surface. It is the single biggest sleeper risk to a split-and-resell model.
Mineral & surface
Standard title commitments except minerals from coverage rather than analyzing them, so do not rely on the title company alone. Order a 40–60 year mineral/surface runsheet and opinion from an O&G title attorney or landman ($1.5k–$6k+), and pull RRC records. In Freestone/Leon/Navarro (legacy Cotton Valley/Woodbine plays) an active lease means a lessee with surface-use rights that can blow up a residential resale narrative. A recorded surface-use waiver from the mineral owner materially raises resale value; budget legal time for it.
Environmental
A Phase I ESA (ASTM E1527-21, $2.5k–$5k) is standard for LP/lender protection and the CERCLA innocent-landowner defense. Oilfield legacy contamination is real here — orphaned wells, tank batteries, brine scars — and a recognized environmental condition triggers a Phase II ($10k–$50k+). Trinity River bottomlands put wetlands and floodplain across the corridor; non-jurisdictional post-Sackett does not mean no buildability problem.
Ag valuation & the rollback tax
Most corridor acreage carries 1-d-1 open-space ag valuation. When ag use ends, the appraisal district claws back the tax difference for the prior 3 years plus ~5% interest (Tax Code §23.55, post-HB 1743). Splitting and selling to non-ag buyers who stop ag use triggers rollback on those tracts, and your own splits print the high market comps the CAD will use. Reserve $50k–$95k, not $40k; keep a recorded grazing/hay lease running through the hold; and shift rollback contractually to use-changing buyers.
The four hard gates (before earnest money goes hard)
- Access: insurable, recorded legal access to every tract.
- Mineral/surface: resolved or waivable; no active surface ops without a waiver.
- OSSF + water: every tract passes septic feasibility and has a water path.
- Split path: the county confirms the low-friction (no-plat / minor-plat) lane in writing.
Miss any one → renegotiate or walk. Spend cheap kill-money first: a free desk-diligence pass (RRC, FEMA FIRM, USFWS IPaC, CAD ag status, a county subdivision phone call) kills many deals for $0.
08 Unit Economics #
One honest deal, modeled two ways. "Bear" here is not catastrophe — it is what happens when two or three ordinary things go slightly wrong at once, which is the modal outcome in thin rural land markets.
Take a representative rural-core deal: a 250-acre Leon/Freestone parent, bought at ~$4,500/ac, split into mid-size recreational tracts. We hold the revenue structure and correct only the cost, timing, and absorption to realistic values — including the two lines optimistic pro formas quietly omit: interest carry and full ag-rollback.
| Line | Honest Base | Bear |
|---|---|---|
| Parent (250 ac) | $1,125,000 | $1,125,000 |
| Blended realized $/ac | $9,800 | $8,400 |
| Gross revenue (after acreage loss) | $2,254,000 | $1,890,000 |
| Survey + recorded plat (10 tracts) | $75,000 | $90,000 |
| Phase I + perc + title/mineral + legal | $35,000 | $45,000 |
| Light dirt work | $40,000 | $50,000 |
| Property tax + ag rollback | $65,000 | $95,000 |
| Insurance + marketing | $44,000 | $64,000 |
| Interest carry (often omitted!) | $55,000 | $120,000 |
| Disposition @ ~6% | $135,240 | $113,400 |
| Net profit (all-in) | $718,520 | $186,200 |
| Equity multiple on cost | 1.47× | 1.11× |
| Realistic hold to last tract | ~26 mo | ~34 mo |
| Approx. deal IRR (streamed exit) | ~22–26% | ~5–8% |
After an 8% preferred return, a 20% promote, and sponsor fees, the LP nets roughly ~1.4× / ~16–19% net IRR in the base case and ~1.05–1.10× / low-single-digit IRR in the bear. The single most important correction versus a typical pitch: re-run every IRR on a 24–30 month hold with interest in the stack. Hold time, not spread, dominates the return.
What de-risks a single deal
- Pre-sell ≥2 tracts before closing so the first two or three closings cover break-even and the back half is upside. Putting a tract under contract before we even close is the template we build every deal around.
- Cut fewer tracts — only what the micro-market absorbs in ≤12 months — keeping you in the cheap no-plat lane and a sane hold.
- Price the "dog" tract (worst access / wettest) as a discount from day one; never let deal profit ride on the last one or two clearing at full ask.
09 The Capital Stack #
Each deal runs through a single-purpose Texas LLC — clean per-deal accounting and liability isolation, never commingled. Three parties, three distinct relationships:
Sponsor HoldCo (you) ── fees + promote
│ Manager + GP member
┌──────────▼───────────┐
│ Deal LLC (TX SPE) │ owns the dirt, holds title
└──────────┬───────────┘
┌────────────┼─────────────┬───────────────┐
GP / Manager Operating LP Class A (optional)
(sponsor) Partner members co-GP on loan
(local exec) (the money)The operating partner who "brings the deal" is handled at the GP level — a Sponsor+Operator GP JV splits the promote (e.g., 60/40) plus a flat operating fee — so the LP-facing waterfall stays identical deal to deal and investors can compare opportunities.
The waterfall
Tier 1 RETURN OF CAPITAL 100% to LPs until contributed capital is returned
Tier 2 PREFERRED RETURN 8%/yr to LPs
Tier 3 PROMOTE / "THE SPLIT" 80% LP / 20% GP (optional flip to 70/30 above a hurdle)Debt: why the partial-release clause is everything
Banks dislike raw land (no income, illiquid, 50–65% LTV, recourse). The realistic stack is seller financing on the buy (10–30% down, ~6–9%, common on TX rural acreage) plus LP equity, with hard money only to close fast. Whatever the source, the deal lives or dies on a partial-release clause: contractual machinery to convey an individual split tract free of the blanket lien by paying an agreed release price (set above pro-rata so the lender stays over-collateralized). Negotiate release pricing at acquisition, in writing — without it you cannot deliver clear title on tract sales.
Owner-financing the exit tracts — the value-add lever
Selling tracts with owner financing (deed of trust + note, Texas's fast non-judicial foreclosure) widens the buyer pool, lifts the headline price, and creates a performing 8–10% note. Two flags: keep sales structured as raw / non-owner-occupied to stay clear of the Dodd-Frank/SAFE Act consumer-mortgage regime, and get a CPA on dealer-status / installment-sale (§453) treatment — a buy-split-flip operation can look like inventory and lose capital-gains rates.
Raising passive LP money to fund a deal you manage is selling securities (the Howey test). There is no "it's just real estate" exemption. Given social-media sourcing, default to Reg D Rule 506(c) with real third-party accreditation verification (not a checkbox), file Form D within 15 days, make blue-sky notice filings in every investor's state (incl. the Texas State Securities Board), and never pay unlicensed finders per dollar raised. Securities counsel and a real-estate CPA are fixed costs of doing business, not optional.
10 The Tranches #
The headline return is roughly the same at every size. What grows with capital is certainty. More simultaneous small deals means no single absorption stall can sink the fund — the law of large numbers turns a volatile single-deal multiple into a smooth compounder, and a note book turns capital into current yield.
| Tranche I — Pilot | Tranche II — Scale | Tranche III — Portfolio | |
|---|---|---|---|
| Commitment | $5,000,000 | $15,000,000 | $25,000,000 |
| Concurrent deals | ~3 | ~8–10 | ~15–16 |
| Deals over fund life | 4–6 | 15–20 | 25–35 |
| Gross asset value controlled* | ~$6–7M | ~$22–26M | ~$35–40M |
| Geography | Core trough (Walker–Freestone) | Full corridor, S→N | Full corridor + Navarro halo |
| Diversification | Concentrated | Moderate | High (variance-smoothing) |
| Target net MOIC to LP (base) | ~1.35–1.45× | ~1.40–1.50× | ~1.40–1.50× |
| Target net IRR to LP (base) | ~15–20% | ~17–21% | ~18–22% |
| Note / current-yield sleeve | Seeded | Meaningful (8–10% paper) | Structured income sleeve |
| Structure | 506(b) or 506(c), per-deal SPEs | 506(c), programmatic SPEs | 506(c), optional evergreen/recycle |
| Leverage posture | Light seller financing | Seller financing + partial release | Prudent (≤50%) + light land lines |
| Primary risk | Concentration (one stall hurts) | Execution bandwidth | Capital deployment pace |
| Best for | Conviction LPs, proof of model | Diversified growth LPs | Institutional / income-oriented LPs |
*GAV controlled exceeds committed equity where seller financing extends reach. All targets are base-case estimates net of fees and promote, pending live comps; not a promise of return.
What each tranche actually funds
These tranches are designed to be taken in sequence. Tranche I's deliverable is not just profit — it is the track record, comp database, and partner bench that make Tranches II and III underwritable at lower variance. An LP entering at Tranche I underwrites our team and our thesis; an LP entering at III underwrites a proven, diversified machine.
A full development like OSADA (~$192M cost) is ~8× the entire $25M tranche and a different risk class — horizontal development, not buy-and-split. It cannot be a fund position; it needs its own institutional vehicle and a development partner. We treat the diversified split-fund and standalone development deals as two distinct products.
11 Risk & the Five Killers #
Every one of the five most likely ways to turn a projected $500k deal into a loss is catchable for under ~$7,000, almost all inside a refundable option period. The risk is not the cost of diligence — it is the discipline to spend kill-money before commitment money.
| Killer | Why it's fatal | The cheap catch |
|---|---|---|
| 1. Absorption stalls | Thin markets are just slow — and you made it slower by dumping 10 of your own tracts in. Hold balloons to 30+ mo; carry + interest eat the profit. | $0–$500: count closed small-tract sales in that county/size band last 12 mo. If <8–10 closed, you cannot sell 10 tracts in 18 mo. Underwrite to observed clearance. |
| 2. Forced plat | County deems the split a subdivision → engineered roads/drainage → you've become a developer. | $0, ~20 days: file the §232.0015 determination + pull current county subdivision regs during the option. |
| 3. Mineral surface ops | Severed minerals with an active lessee holding broad surface rights make tracts unsellable as homesites. | $1.5k–$6k: O&G runsheet + mineral opinion (not the title co.) + a free RRC map check. |
| 4. Ag-rollback surprise | A $50k–$95k clawback (3 yr + interest) against a $700k profit, triggered by buyers' use change. | $0–$2k: call the CAD for method/term/rate in writing; compute on post-split market value; record a grazing lease. |
| 5. Perc failure / no water | An unbuildable tract is an unsellable tract. | $300–$800/site: per-tract OSSF site eval as a hard gate, cross-checked against free NRCS soil maps + a WSC will-serve inquiry. |
Top portfolio-level risks
This is a legitimate small-cap land business with a genuine edge — legal-split competence, sourcing, and compliant capital — returning mid-teens to low-20s net IRR, not 44%. It works when you buy at a real wholesale discount, pre-sell two tracts before close, cut a tract count the market can absorb in ≤12 months, clear all four gates inside a refundable option, and lever lightly. Walk when the only viable split needs a road, when fewer than ~8–10 comparable tracts closed county-wide last year, when the seller wants near-retail for the whole parent, or when the deal only pencils with leverage and an 18-month hold and full-ask pricing all at once.
12 Execution & Governance #
The pipeline, stage by stage, with gates that spend cheap money before expensive money:
Source ─▶ Qualify ─▶ Underwrite ─▶ LOI/PSA ─▶ Option-period diligence
│ │ │ │ │ (4 hard gates)
│ │ │ │ ▼
│ │ │ │ Close (TX SPE, funded)
│ │ │ │ ▼
▼ ▼ ▼ ▼ Survey & split ─▶ Light dirt
CAD data motivation buy-box + §232.0015 ▼
+ DM + score comps + letter Pre-sale marketing ─▶ Tract
inbound sensitivity (Land.com, owner-fin) closings
▼
Investor reporting + notesSourcing the buy & the sell
Who owns what (RACI)
| Activity | Sponsor | Operating Partner | LP |
|---|---|---|---|
| Buy-box / strategy / underwriting | A/R | C | I |
| Local sourcing & execution | C | A/R | — |
| Capital raise / securities compliance | A/R | I | I (subscribe) |
| Diligence, §232.0015, vendors | A/R | R | I |
| Marketing / pricing / disposition | A | R | I |
| Reporting & distributions | A/R | I | I (receive) |
The LP is passive throughout — Consulted at subscription, Informed otherwise. That passivity is exactly why the interest is a security and must be papered as Reg D 506.
Cadence
- Weekly pipeline review — walk the CRM by stage; set next-action and date on every active record; flag stalled tracts and days-on-market.
- Per-deal diligence standup (2×/wk while in option) — four-gates progress, vendor SLAs, the §232.0015 letter, go/no-go before earnest hardens.
- Monthly investor update — per-deal P&L, distributions, absorption vs. plan, and all four return metrics (gross profit, MOIC, IRR on monthly cash flows, DPI / break-even tract count).
- Quarterly buy-box recalibration — re-pull comps, re-tune β per county, re-confirm subdivision thresholds.
A two-table CRM (Parcels/Deals + Tracts, plus a Buyer list) tracks every deal from Lead to Deal Closed-Out, with the four-gate status, §232.0015 letter flag, rollback exposure, and per-tract OSSF result as first-class fields.
13 Disclosures #
This document is a strategy and market thesis for discussion only. It is not an offer to sell or a solicitation to buy any security, nor legal, tax, or investment advice. Any securities offering will be made solely through a Private Placement Memorandum, subscription agreement, and the governing company agreement, to verified eligible investors under Regulation D.
- All dollar and percentage figures are 2026 estimates (flagged [EST] throughout) drawn from public aggregators and verified news. They must be replaced with live closed comps and county quotes before any LOI or commitment.
- Statutory thresholds vary by county and change. Ch. 232 minor/major-plat lot counts, the §232.0015 response window, OSSF minimum lot size, and ag-rollback terms (3-yr / ~5%) are hypotheses to confirm per parcel with counsel.
- Items requiring licensed professionals are flagged in the body: securities counsel (Reg D lane, Form D, blue-sky), a real-estate CPA (dealer-status / §453), an O&G attorney/landman (mineral opinion), and an RMLO if any owner-financed sale becomes consumer-residential.
- Past results do not guarantee future outcomes. Land is illiquid; capital may be impaired. Hold periods commonly exceed initial projections.
Key statutory anchors: LGC Ch. 232 (§§232.001, 232.0015, 232.003), Ch. 212 & Ch. 42 (ETJ), Tax Code Ch. 23 Subch. D + §23.55 (ag/rollback; HB 1743), 30 TAC Ch. 285 (OSSF), Water Code Ch. 36/49/54, SB 2038 (ETJ release), Reg D Rule 506, IRC §453.
14 OSADA — A Master-Planned Community #
The Joseph Adams Tract: 675 acres on SH-150 near New Waverly, planned as a 2,160-lot premium community. This is the develop-the-land play — a deliberate step beyond the fund's no-development thesis, and a different risk class entirely.
The buy-and-split fund (Sections 01–13) deliberately stops before horizontal development — "that is where the risk lives, and we don't yet play there." OSADA crosses that line on purpose. It is a full master-planned community with roads, drainage, utilities and finished lots, financed in part by MUD reimbursement. It is ~8× the size of the largest fund tranche and belongs in its own institutional vehicle with a development partner — presented here as a live opportunity, evaluated honestly on its own terms.
OSADA — Polish for "settlement," honoring the area's late-1800s Polish immigrant heritage around New Waverly and Hawthorne — is positioned as a premium, rooted community, not a commodity subdivision. The investment case rests on three controllable levers the deck names directly: land basis, horizontal execution, and monetizing eligible public infrastructure through a MUD (Municipal Utility District). The brand, amenity (a signature treehouse park), and 80′ lot program exist to support premium pricing and faster builder absorption.
The deck economics (as presented)
| Line | Amount |
|---|---|
| Land (675 ac × ~$30k/ac) | $20.25M |
| Roads, detention & lot development | $129.46M |
| Engineering | $16.83M |
| Contingency | $25.89M |
| Minimum project cost | $192.44M |
| Lot revenue (2,160 × $148k) | $319.68M |
| MUD reimbursement estimate | $211.03M |
| Total gross revenue | $530.71M |
| Projected profit | $338.27M |
| ROI · IRR · duration | 175.8% · 29.3% · 72 mo |
The honest recut
The deck's "minimum cost" carries no selling cost, no property-tax carry, and no interest on ~$192M deployed over six years — and books the full MUD reimbursement as certain. Restoring those real costs and applying a prudent reimbursement haircut is what our model's Honest column does:
| Line | Deck | Honest |
|---|---|---|
| MUD reimbursement (after haircut) | $211.03M | $158.27M |
| Selling / commissions (4%) | — | ($12.79M) |
| Interest + financing carry (6-yr) | — | ($45.00M) |
| Property tax + G&A carry | — | ($8.00M) |
| Total project cost | $192.44M | $258.22M |
| Gross revenue | $530.71M | $477.95M |
| Projected profit | $338.27M | $219.74M |
| ROI | 175.8% | 85.1% |
| Revenue multiple on cost | 2.76× | 1.85× |
| Streamed IRR (our reconstruction)* | ~35% | ~23% |
*The deck states 29.3% IRR; our independent monthly cashflow lands ~35% on deck assumptions and ~23% on the honest recut. The gap is phasing and MUD timing — reconcile against the sponsor's draw schedule. Full model on the OSADA tab of the workbook (toggle Deck / Honest).
The three things that decide this deal
At $211M, the MUD reimbursement exceeds the entire $129M horizontal spend and is the difference between a 175.8% ROI and an ordinary one. Strip it out and profit falls from $338M to ~$127M on $192M of cost before carry. So the first questions are the deck's own: what exactly is eligible (water, sewer, drainage, detention — rarely roads), when does the district issue bonds and reimburse, and what is the haircut? A 12–24 month reimbursement slip alone reshapes the return.
2,160 premium 80′ lots is a large absorption ask. The 72-month schedule is credible only if builders are signed to real contracts with deposits and takedown schedules — not soft LOIs — and engaged early, before heavy engineering spend. Two-thirds of cost is horizontal; if lots don't get taken down on pace, carry compounds against a $192M base.
This is not a fund slot. At ~8× the largest tranche and in a different risk class, OSADA needs its own institutional vehicle, a proven horizontal-development partner, and bid-controlled execution (phasing, change orders, utility sequencing, reimbursement documentation). The buy-and-split fund and OSADA are two distinct products with two distinct investor bases.
Execution & diligence (per the deck)
A 72-month, five-phase roadmap: 0–6 confirm structure + MUD path + engineering scope · 6–18 entitlements, design, drainage/utility bids · 18–36 Phase 1 horizontal (entrance, spine roads, first lots) · 36–60 rolling builder takedowns · 60–72 closeout, final lots, and reimbursement/bond package.
The questions that must be answered before money moves: MUD — eligibility, timing, haircut; cost validation — roads/utilities/detention/lots backed by engineer estimates and current bids; absorption — can the market take 2,160 premium lots in the window; builder commitments — signed contracts with deposits, not LOIs; governance — who controls draws, change orders, reporting, and partner approvals. The deck's own next step is a sensitivity case — cost +10%, price −10%, reimbursement delay — which the model's Honest column and the workbook's input cells let you run directly.
Open questions — what we'd need answered before wiring
This is a single teaser document with no sponsor financials, engineering, or draw schedule behind it. The questions below are what turn it from a pitch into an underwritable deal — grouped by what each one protects. They are ours to send to whoever is offering the opportunity.
(1) Is a MUD created, and is the $211M reimbursement eligible, bondable, and on what schedule? (2) Does the engineered plan actually yield 2,160 net lots after the greenbelts, detention, civic and mixed-use land shown on the master plan? (3) Is the $129M horizontal cost backed by a current engineer's opinion and real bids? Everything else is secondary to these three.
Land, entitlements & net yield
- Is the tract owned, under contract, or optioned at the $20.25M (~$30k/ac) basis — and what are the contract terms, closing date, and any seller financing or rollback?
- Net-yield reality check: 2,160 lots on 675 gross acres is ~3.2 lots/acre — aggressive for an 80′ program once you subtract spine roads, greenbelt preserves, two detention ponds, the 10-acre civic campus, and the 25-acre mixed-use village the plan shows. An 80′ lot consumes ~0.30 acre with internal streets, so 2,160 lots is ~670 acres — nearly the whole tract. Does the engineered plan still yield 2,160 net lots, or is that a planning target? A 10–15% miss is $30–48M of lost lot revenue.
- Entitlement status: zoned/platted for this density, or pending? Inside the New Waverly / Huntsville ETJ, and which body approves the plat?
- Confirm SH-150 frontage, access points, and TxDOT permitting for the entrance and spine road.
- Title, mineral severance, pipeline easements, and FEMA floodplain (Trinity basin) — what share of the 675 acres is actually developable?
- Phase I environmental status and any recognized environmental conditions.
MUD reimbursement — the value engine
- Is a MUD already created for this tract, or must it be petitioned and approved? Creation timeline and approval risk?
- What is eligible for the $211M estimate? Reimbursement typically covers water, sewer, drainage and detention — not roads. How is $211M reconciled against $129M of "roads, detention & lot development," and is it nominal (principal + up to 30 years of bond interest) or present value?
- Bonding capacity: can the district actually issue ~$211M in bonds given assessed value at buildout? What AV is required, and when does that capacity exist?
- Timing: reimbursement usually flows only after substantial completion, occupancy, and AV growth — often years after the spend. What is the realistic schedule, and who carries the float until then?
- Haircut: what recovery rate is assumed? Eligible-cost percentages and bond discounts routinely take 10–30%.
- Who controls the MUD board and the timing of bond issuance?
Cost validation
- Is the $129.46M horizontal + $16.83M engineering backed by a dated engineer's opinion of probable cost and current contractor bids, or a planning estimate?
- $192.44M ÷ 2,160 = ~$89k cost per finished lot (incl. land). Does that reconcile with comparable MPC lot-development costs in the region?
- Is the ~13.5% contingency ($25.89M) adequate for a six-year horizontal program amid materials and labor inflation?
- What is excluded from the $192M — financing/interest, property taxes during the hold, marketing, G&A, bond issuance costs, developer fee?
Lot revenue & absorption
- What comps support the $148k average lot price for 80′ lots in this submarket — and is that the price to builders or to retail?
- Absorption: ~2,160 lots implies ~300–400 lots/year at peak. What is realistic submarket absorption, and how many homebuilders does that require?
- Are there signed builder takedown contracts with deposits, soft LOIs, or nothing yet? Takedown pace, price escalators, deposit at risk?
Sponsor, capital & governance
- Who is the sponsor/developer, and what MPCs of this scale — with MUD reimbursement actually secured — have they delivered?
- Total equity required, the full capital stack (equity / construction debt / land seller financing), and how $192M is financed over six years.
- Fee load & waterfall: acquisition, development-management, and promote; preferred return; when the sponsor is paid relative to LPs; GP co-invest.
- Downside protection: is there a completion guarantee, cost-overrun backstop, or recourse? What happens to LP returns if reimbursement slips 24 months or costs run 10% over?
- Governance: who controls draws, change orders, the budget, and major decisions — and what is the deal entity and securities posture (Reg D lane, investor rights, reporting)?
Until the MUD path, the net lot yield, and the horizontal cost are backed by documents rather than a teaser, this is an option on a development, not a development — size any commitment accordingly.