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Portfolio Development Project

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The Portfolio Development Project would be the initial project through which the Foundation CIC would be established and would likely be initiated as a group activity from among more capable members of the LUF working with support of the Foundation Community Network.

Breaking Into Real Estate Edit

A CIC is essentially a real estate investment venture. It makes money by taking (or making) raw property and developing it into functional communities by constructing their infrastructure and various buildings and facilities then profiting on both the income from leasing this ‘finished’ space to various users but also on the increase in property value its improvements create as exploited either by sale of property or by the ‘leveraging’ of property it would otherwise sell by financing its developments with money from other investors/lenders and then taking a margin on its increased value in periodic refinance. The key difference with the CIC is that it also has a mechanism to distribute its ownership of its property among its community residents by selling CIC stock which carries with it use rights to available property while also serving as a dividend-generating investment to raise capital. But to get into this activity the Foundation CIC needs property and it’s unlikely to be able to initially obtain enough of it to support a whole community project except by the unlikely prospect of an outright donation of some vast parcel by a government or philanthropist. It will therefore be necessary to build a portfolio from small investment properties used only for their profit until enough of them have been acquired that they can collectively be cashed-in for acquiring community-scale parcels or can generate enough continual income to support the investment in the construction capability for marine platforms that will allow it to manufacture its own property. Hence the need for a Portfolio Development Project.

This project would likely begin with a circle of LUF members who choose to pool their credit on the investment of build-to-rent projects whose profit is based primarily on refinancing of the property on a periodic basis, the difference in principals between old and new loans based on increased property value being that tax-free profit. (there is additional profit potential in rents/leases, of course, but initially this approach would likely employ a rent-to-break-even strategy since insuring occupancy is more important than profiting on rent in this strategy) This profit would be voluntarily rolled (whole or in part depending on whether the circle of founders choose to have some personal profit from this venture) into the development of additional projects. This is a standard real estate investment technique common to most real estate investment firms and would allow the project to simultaneously build a portfolio of properties, a pool of cash, and steadily escalating credit.

Alternatively, the founding team could also choose to pool investment on a venture focused on other activities which seeks simply to roll part of its profits into a Foundation trust fund which is put in other financial instruments until it has grown very large. This tactic could also be used to pool donations from the collective membership, membership dues, and the like. However, this approach is not likely to build an investment portfolio as quickly as the former approach –though there’s no particular reason why both these strategies might not be combined.

Once the Foundation portfolio has reached sufficient scale to invest in a community project it would formally and legally found its CIC structure and trade in at least some significant part of this portfolio on the purchase of a large piece of land or construction of a significant sized marine platform suitable for an Aquarius seed community. The members of the Portfolio Development Team may, at this point, also adopt executive positions in the CIC according to their skills and interests, or they may simply recruit an executive staff for it in the manner of traditional venture capitalists. The team would then have the option of fully divesting from the CIC and setting it loose to carry on alone or may choose to retain some interest in it in the form of CIC stock which, of course, would give them the option of personal residence and future private commercial use in the communities it develops.

The newly created Foundation CIC would then begin the process of development, constructing facilities that would alternately be used for leased space commercial and industrial activities and resident ‘purchase’ through CIC stock purchase. This nascent Foundation CIC would likely continue to pursue the same purely for-profit portfolio activities (this does not, however, mean the CIC itself must be a for-profit corporation) in conjunction with its TMP-specific community development for some time, since the community development may not initially be as profitable since such properties must achieve significant scale, population, and notoriety and may need periodic cash influxes during unstable periods of early growth.

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References
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