Equity Partner — How the money is made

Inventory buys partitions the EP holds and resells. The loan book advances against partitions other holders pledge. The flywheel in section 3 is neither — it is extra borrowing secured by inventory and funded by the facility.

This is a standing bid at issuance, and it is guaranteed. The EP contracts to take up to 35% of every new listing at 4.50%, on demand. That guarantee is what gets a property onto the platform.

It is deliberately not indexed to anything outside the venue. The level that moves a frozen owner is a fact about that owner, not a spread over the cost of money — index it and at a 5.00% ten-year you post 5.00%, and the owner who transacts at 4.50% and declines at 5.00% is simply not served. It would also import the volatility the venue exists to escape. A fixed anchor is what lets the book around it be a real market.

The EP’s protection is bounded exposure, not a bounded price: a maximum per year, a defined term, and a dislocation clause that fires only on a several-hundred-basis-point move — not a quarterly reset. A price that can move is an option the EP holds; a quantity that cannot be exceeded is a risk it has sized. Only the second is a commitment a seller can rely on. That guarantee is what gets a property onto the platform. An owner can list knowing part of it is already sold, which is the one thing no other venue has been able to promise. Nobody else is offering 4.50% in year one; that is precisely why it has to be contracted rather than hoped for.

It does not extend to the secondary, and it must not. Price and yield are reciprocal, so a standing 4.50% bid on partitions already trading at 11% is a price 2.4x the market — anyone could buy at the book and hit it for an instant 100%, without limit, at the EP’s expense. The subsidy buys a listing; it does not subsidise a flip. Once property is on the platform the EP competes for it at the market like everyone else.

What is not guaranteed is the fill. Down the road someone bids 4.25% and takes the trade instead — and that is the point, not a problem. The EP’s bid stays posted at 4.50% and simply stops being hit. The obligation retires by ceasing to be exercised, with no renegotiation and no calendar, and at that moment the EP is a long-term holder and a lender rather than a subsidy.

The share is the ceiling on that guarantee, and the EP can always take less. What it buys is not yield, it is a guaranteed claim on scarce supply — the one thing capital cannot manufacture in a frozen market.

Both sliders are shares of the same listing and they add up. Pool 1 at 35% plus Pool 2 at 55% is 90% of the listing, and this slider cannot be pushed past what Pool 1 has left. What you do not take is the float — it is what the secondary book trades, what the loan book lends against, and what gives other holders skin in the game.

Whatever the rest of the listing has to pay to clear. Early on this runs wide because the property has no record and nobody is competing for it. This is where the money is — and unlike Pool 1 there is no ceiling, you simply compete for it.

Advance rate is warehouse language, not mortgage language. It is the share of pledged collateral a facility lender will fund — the borrowing-base percentage, the same number a repo book or an asset-based line runs on. It is deliberately not called LTV, because there is no appraised value here: the collateral is partitions with an observed market price, and that is the whole point of the venue.

There are two lenders here and only one of them is you. On the platform you are the lender, so a loan against your own partitions is a round trip — you pay yourself, and it nets to nothing. But a round trip moves no money. The cash that actually buys the next tranche comes from your facility: an outside institution lending against the same partitions, setting its own advance rate. That haircut is theirs, not yours, and it is the only thing that gives the flywheel a limit.

It is also why a turn costs the facility rate rather than the rate you would charge yourself, and why it is accretive whenever Pool 2 yields more than your facility rate. Fund it from cash you already hold and there is no multiplier at all — you are moving your own money between pockets.

↑ Use the drop-downs on the right to jump straight to a figure — the sliders are only there for sweeping between them.

Buying power is not the same as supply. You cannot deploy into listings that do not exist, and in year one there are very few. But once a property is minted it is on the platform forever, so the float accumulates — and you can always buy from it. The cornerstone does not run on the float — that bid is a mint-only commitment, because a guaranteed 4.50% on partitions already trading at market would be an open invitation to buy at the book and flip straight into it. On the float the EP is an ordinary buyer paying the seasoned yield, and it takes the same open-market share it takes anywhere else.

Which makes this slider a price control, not a volume control. Once your money is what runs out, more supply does not let you buy more — it only changes what you buy, and the two sources are priced differently.

Since the cornerstone became mint-only, the float is usually the cheaper buy. A new listing costs you the blend of a 4.50% slice and an open-market slice; the float costs you the market and nothing else. At a 35% cornerstone that is the difference between paying 9.39% and paying 11.00% — 161 bps in the float’s favour, and more float raises your blend rather than lowering it. The subsidy is the price of getting property onto the platform, and you only pay it once per building.

What a new listing gives you that the float never will is access. The cornerstone is a contractual right to a share of every mint. On the float you have no such right and compete for it like anyone else — which is why the mints still matter even when they cost more.

You bought at the blended entry yield. You sell at whatever the seasoned book pays. Because yield and price are reciprocal, every point the book trades tighter than you bought is a gain, and it compounds against the price rather than the yield.

This is a share of the market, not a share of your portfolio. 15% of a $357M book is $53.55M — that is the most you can sell in a year, whatever you happen to own. It has nothing to do with how big your position is.

Turning faster is not free. Every sale crosses a spread and pays a fee, and you can only sell what the book will absorb without you moving the price against yourself. A dealer who is most of the volume is not getting the posted price.

A thin book does not stop you buying — it stops you selling. Whatever the book will not take stays on your balance sheet earning the blended cap rate. That is the hold, and it is what the hold period below is really choosing: you set the hold you want, the book decides the hold you get.

How long the money is out before it comes back to you. The loans are interest-only, so nothing amortises — this is the balloon, or the call, whichever lands first. It exists because the fee is one-time cash at closing and every other figure here is an annual rate: 200 bps received once, across three years, is 67 bps a year. A shorter life therefore raises the annual yield, because the same fee is earned faster — which assumes you re-lend the capital and charge a new fee when it returns. If it comes back and sits idle, this overstates you.

Any holder can pledge partitions across any number of buildings and draw a single blanket loan, repaid by intercepting their distribution before it reaches them. The lendable base is the float you do not own. In any one year the two businesses compete for the same partitions — but across years they do not. Every point of a listing you hand back becomes collateral you can lend against, so the taper in section 2 is what builds this book.

The concession is the premium a fresh listing pays over the seasoned book — new-issue language, the same discount a bond pays to get placed. Your Pool 2 buys at the mint yield while the book trades tighter; that gap is your margin, and this is how many basis points of it close each year. It models the platform succeeding: once the venue is credible, buyers compete for new listings and stop demanding a discount. The seasoned float converges too, and neither can tighten past the book.

Maintain, not hold — this has nothing to do with the hold period in section 5. It is your hurdle: the gain per turn you intend to keep hitting. Section 5 runs forward from your settings to the gain you get; this runs backwards from the gain you require to the cornerstone yield you would have to accept to still get it. It is net of the cost per sale, so it is the same figure section 5 quotes.

Raising Pool 1 means accepting less subsidy on the cornerstone slice — which is exactly what a maturing market allows, because the listing needs less help to clear. When the required Pool 1 yield reaches Pool 2, the subsidy is gone and so is the role.