Hearthstone, the San-Rafael, Calif.–based institutional investor group, announced in mid-June it's created a new subsidiary. Landstone, a joint-venture entity, has been set up to manage a previously established $1 billion investment fund to finance raw, unentitled land for future residential development.

The firm has appointed Albert Praw as CEO of Landstone, according to Jeff Barcy, CEO of Hearthstone. Praw is former senior vice president of Los Angeles–based KB Home and a former president of KBH Land Co.

Joining Praw will be Charles Schetter, former senior vice president of business development at KB Home. A third executive is expected to be named to operate a second Landstone office in Florida.

Praw's experience will support the company's continuing efforts to look beyond the industry's typical two- to three-year planning cycle, according to Hearthstone chairman James Z. Pugash. Praw will lead efforts by Landstone to target, acquire, and entitle raw land, in partnership with builders and developers through Hearthstone's Path of Growth Fund.

Despite the apparent downturn in the market, an endeavor like this is probably well-timed, according to Margaret Whelan, senior analyst with UBS Securities, especially when seasoned land experts are running operations. “Albert and Charles are phenomenal operators with tons of experience. They have been through these market turns before. If you know the business well and know the opportunities, this is really the best time to be out there going after land.”

Praw predicts that the structure will allow builders to take advantage of some of the adjustments in land value and slower appreciation that is occurring in today's market environment. “Landstone's functions are akin to a futures market for raw land, creating a surge in value for investors after entitlements and approvals are procured for residential development,” says Barcy in a news release. He added that the company's goal is to obtain project approvals on the land within a two-to five-year timeframe.

Learn more about markets featured in this article: Los Angeles, CA.