Proposal: Upgrade Alpine Meadow (AM) and Locus Amoenus (LA) from 20,000 Land Impact Units (LI) to 30,000 LI regions and change pricing on Alpine Meadow, Locus Amoenus, Friedsee and Monastery.
I propose that CDS upgrade our two 20k LI, or “prims”, regions (AM and LA) to full 30k LI regions, at a monthly cost of USD $30 additional each. Every parcel on those regions would have 50% more prims available to the owner. We would set parcel prices in both AM and LA to 4 L$ per LI (a very slight increase), and decrease the LI price for our two homestead regions, Friedsee (FS) and Monastery (MO), to 6 L$ per LI (a considerable decrease). Colonia Nova (CN) and Neufreistadt (NFS) would remain unchanged at 5 L$ per LI. This proposal is "gross margin neutral" at current occupancy levels, meaning that it would generate neither more nor less than current profit.
Summary:
At the most recent LUC meeting (23 June), I suggested that we, the Citizens of CDS, consider upgrading our two 20,000 Land Impact regions (Alpine Meadow and Locus Amoenus) to full 30k LI regions. I offered to do some financial analysis on this proposition and to present a proposal.
Thanks to the recent price reduction by Linden Lab for full regions (both 20k and 30k), combined with a very modest price adjustment for the proposed upgraded regions, CDS would be able to offer an exceptional value for AM and LA on a cost per LI basis. CDS is also able to significantly reduce the cost per LI, and therefore parcel prices, for the two homestead regions Friedsee and Monastery.
This change would maintain exactly the same amount of positive gross margin (monthly parcel tier revenue minus monthly LL region cost) as our current system, improve the value proposition of our regions by reducing the cost per LI, and position CDS for further growth.
Method:
To perform my analysis, I conducted a survey using a region scanning tool to determine "leasable" land (all land not owned by the Land Verwaltung group) and "occupied" land (leasable land not owned by Rudeen). I used About Land information to find the "Region Bonus Factor" to calculate each region's LI per square meter, and I examined current parcels for sale to calculate the price in L$ per LI.
The month of May was used for survey data because this is the last full month under LL's previous region pricing scheme. Proposed scenarios compare this baseline, using May's occupancy levels, to LL's July pricing. This allows us to see the total financial picture of the month of May under the previous model, compared to the total financial picture under the proposed model using July's new pricing.
Lastly, I studied the impact on actual parcel prices for a sample 1024 square meter plot. Parcel prices are directly proportional within a region; a 512 sqm parcel would cost one half as much as a 1024 sqm parcel, and a 2048 parcel would cost twice as much.
Results:
At May's occupancy levels across all six regions, using May's Linden Lab region pricing, and current L$ per LI prices, the expected gross margin is USD $111.02.
At May's occupancy levels, using July's LL region prices (including upgraded 30k AM and LA), with proposed L$ per LI prices, the expected gross margin is USD $110.45.
The price of a 1024 parcel in AM and LA would increase by only 9% while gaining 50% more LI.
The price of land in MO would be reduced by 30% to be nearly identical to the price of a square meter of land in AM and LA. Parcel prices in FS would also be reduced by 14%.
Analysis:
Upgrading AM and LA to 30k LI enables these regions to offer an outstanding value of nearly one LI per square meter at an exceptional price point of only 4 L$ per LI. While the L$ per LI price of land in AM and LA would be discounted by 28%, the actual revenues would increase by 9%. Current parcel prices would increase by only 9% for a 50% increase in LI, approximately one US dollar per month for a 1024 parcel. After the region upgrades, AM would have over 11k LI remaining for sale, and LA would have over 8k LI available to be sold. Each additional LI sold in these regions, at a rate of 4 L$ per LI, would directly contribute to the positive gross margin of CDS.
The AM and LA revenue increase fully pays for the additional monthly cost of a 30k region and helps to subsidize the cost of reducing parcel prices in FS and MO. This revenue increase, combined with the reduction in LL full region monthly tier, allows CDS to also reduce the parcel prices in both FS and MO, making them more attractive. FS will continue to offer large parcels with comparatively few LI at a more competitive price point. MO can offer LI per square meter on par with a 20k double-prim region, at similar pricing. Although the monthly revenues from FS and MO become more negative at current occupancy levels, the reduction in LL tier pricing combined with an increase in AM and LA revenue, offsets this cost. At full occupancy, FS and MO would approach break-even.
Conclusion:
LL's recent pricing changes present CDS with an opportunity. Rather than use the tier savings simply as a safety net to grow our already substantial emergency reserves, I propose that we reinvest in our regions by increasing the LI of our 20k regions and reducing the parcel prices in the homestead regions which add beauty and value to the CDS estate but are not price competitive on their own. These adjustments can benefit all Citizens and further enhance the value and marketability of land in CDS.
This proposal is gross margin neutral at current occupancy levels, with no change in cash after parcel revenues minus LL expenses. I would expect that the enhanced value of our regions will be attractive to both current and prospective Citizens, increasing occupancy rates, number of Citizens, and gross margin.