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A Perspective on South Florida Real Estate Opportunities Solutions RE, LLC

A Perspective on South Florida Real Estate Opportunities Solutions RE, LLC. A Perspective on South Florida Real Estate Opportunities Executive Summary. Why Invest in South Florida Real Estate? Sustained population growth over the past 20+ years

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A Perspective on South Florida Real Estate Opportunities Solutions RE, LLC

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  1. A Perspective on South Florida Real Estate OpportunitiesSolutions RE, LLC

  2. A Perspective on South Florida Real Estate OpportunitiesExecutive Summary • Why Invest in South Florida Real Estate? • Sustained population growth over the past 20+ years • 270,000 new residents since 2000 in Miami-Dade & Broward Counties • Strong international migration to South Florida, especially from Latin America • Growth expected to continue at same pace over the next ten years plus • Greater Miami has over 150 ethnicities and more than 80 languages are spoken • Strong tourism industry that draws visitors from around the world • More than 35,000,000 visitors in 2008 by air and sea • 19.8% increase in tourism since 2002 • Miami is the busiest seaport in the world for cruise passengers • Subtropical, average daily temperature is76 degrees with year round sunshine

  3. A Perspective on South Florida Real Estate OpportunitiesExecutive Summary • Strong economic growth over past decade • Miami-Dade led the state in job growth over the past ten years • Large employment in real estate, finance, legal, tourism and retail in South Florida • No state income tax and low sales tax rates • Miami-Dade is the 10th largest recipient of direct foreign investment • South Florida is an international market • South Florida accounts for the largest share of foreign home buyers in Florida • Latin Americans make up the largest share of foreign buyers • 60% of foreign buyers pay cash for real estate • Real Estate Prices in South Florida • Prices peaked in December 2006 • By December 2008, prices have fallen by 41.25%

  4. A Perspective on South Florida Real Estate OpportunitiesExecutive Summary • Summary of Inventory in the Market • In the thirty year period ended 2002, 11,517 condos were built in Miami • Between 2003 and 2008, 43,408 have been built or are under construction • Of the 43,408, those that have not closed and are available to buy total 17,597 • Brickell leads all neighborhoods with 8,786 built and there remains 4,689 of these units available • Based on absorption rates, this is likely a 4-5 year supply • Neighborhoods • Brickell • Strong professional workforce in legal, management and finance • Average household income is $72,152 • Established neighborhood with corresponding infrastructure in place

  5. A Perspective on South Florida Real Estate OpportunitiesExecutive Summary • Miami Beach • Major employers in real estate, tourism, retail and finance • Average household income is $102,426 • Popular tourism destination for travelers from around the world • Sunny Isles • Primarily a residential community, with some employment in tourism, retail and real estate • Average household income of $91,377 • Many new developments are popular with seasonal residents from Canada and Russia • Aventura • Major employers are retail, banking, real estate and management • Average household income is $109,241 • Home to the largest shopping mall in Miami-Dade County

  6. A Perspective on South Florida Real Estate OpportunitiesExecutive Summary • Purchase Strategies • Note purchase directly from lender • Foreclose on property and assume control • Potentially the most cost-effective way to obtain property • Foreclosure may be contested and thereby costly and time consuming • Short sale of the note • Lender reduces note and property is purchase directly through developer • Buyer obtains property at closing • Developers and lenders may not cooperate • Direct purchase from developer • Buyer controls property at closing • Buyer can choose which units to buy • Discounts tend to be smaller as developer still controls pricing

  7. A Perspective on South Florida Real Estate OpportunitiesExecutive Summary • Direct from bank (REO) • Buyer assumes control of property at closing • All property issues have generally been addressed • Most properties are being sold prior to foreclosure so options may be limited • Exit Strategies • Buy & Hold • Rent units for period of time • Usually produces consistent cash flow over time • Acquisition prices are not attractive to developers or banks

  8. A Perspective on South Florida Real Estate OpportunitiesExecutive Summary • Buy, Flip & Finance • Purchase units at wholesale price and then immediate resale them and hold paper for buyers • Opportunity to exploit different in wholesale and retail pricing • Market remains challenging for many properties and competition is intense • Hybrid Model • Buy, flip some units with (or w/o) financing and rent the remaining units with a lower cost basis • A portion of investment cash returned quickly • Sales remain challenging within the overall market

  9. Presentation Summary • An Introduction to Solutions RE & Majestic Properties • A Brief History of Majestic • The Team • An Introduction to The South Florida Market • Population & Growth Statistics • Tourism • Business & Economics • International Buyers

  10. Presentation Summary • The Real Estate Market in South Florida • History of Pricing • Inventory Summary • Absorption Rates • End User Profiles • Purchase Strategies • Note Purchase Directly from Lender • Short Sale of the Property • Direct Developer Sale • Direct from Bank (REO)

  11. Presentation Summary • Exit Strategies • Buy & Hold (Rental Properties) • Buy, Flip & Finance • Hybrid Model • Solutions RE Services • Consultation – Identify Appropriate Targets, Purchase & Exit Strategies • Financial Modeling, Comparable Market Reports & End-user Profiles • Design/Build of Designer Ready Units • Leasing Programs (Short-term and Long-term) • Lease-to-Own Programs • Sales Programs • Property Management • Recap & Questions

  12. Presentation Summary • Solutions RE Services • Consultation – Identify Appropriate Targets, Purchase & Exit Strategies • Financial Modeling, Comparable Market Reports & End-user Profiles • Design/Build of Designer Ready Units • Leasing Programs (Short-term and Long-term) • Lease-to-Own Programs • Sales Programs • Property Management • Recap & Questions

  13. An Introduction to Solutions RE, LLC & Majestic PropertiesA Brief History of Majestic Properties • Established 1995 • Full service real estate organization • Sales in excess of $5B • Leader in the preconstruction sales market • More than 30 preconstruction projects sold with over 4,000 total units • 200+ Agents with more than a dozen languages spoken • Four offices in Florida – Miami Beach, Miami, Tampa & Hollywood • Global network of buyers & sellers • Majestic named America’s fastest growing, independently owned, full service real estate company by Inc. 500 Magazine in 2006

  14. An Introduction to Solutions RE, LLC & Majestic PropertiesA Brief History of Majestic Properties • Pre-construction sales expertise • Maximizing FAR & land planning • Conceptualization • Space planning • Design and finish selection • Branding • Building quality sales teams • Sales center design & launch events • Marketing plans & implementation • Contract administration and closing plans • Urban planning

  15. An Introduction to Solutions RE, LLC & Majestic PropertiesA Brief History of Majestic Properties Partial List of Projects Sold In South Florida • Ten Museum Park (200 units) • Midtown I, II & III (1,014) • Canyon Ranch (433) • Artecity (202) • Paramount Bay (346) • Marquis (306) • Nirvana (347) • The Tides Hollywood (954) • Regent Park (253) • Caribbean Miami Beach (103) • Soleil (200) • Cynergi (100) • South of Fifth (29) • Ios (45) • Cite (436)

  16. An Introduction to Solutions RE, LLC & Majestic PropertiesSolutions RE, LLC Team Jeff Morr, Founder and CEO • 24 years of real estate experience, launched Majestic Properties in 1995 • Experience in conceptualization, design, space planning, urban planning, branding, marketing, sales, developer and customer relationship management • Marketing/Advertising – Florida State and FIU Richard Wood, Chief Financial Officer • Over 20 years financial experience • Big Four Experience (PwC) • BS in Finance - Indiana University • MBA from the New York Institute of Technology.

  17. An Introduction to Solutions RE, LLC & Majestic PropertiesSolutions RE, LLC Team Ken Nagid, Director of Operations • Experience in the high tech industry • Experience in real estate sales, leasing and property management fields • BSC in Electronic Engineering and Business Administration – Tel Aviv University Ann Nortmann • Experience in Banking Administration • Real Estate Agent-Associate with specialization in residential condominium sales, commercial and bulk condominium sales - top producer • BS Business Management – Ryerson University Mika Mattingly • Experience in television and film production • Real Estate Associate with specialization in commercial and bulk condominium sales – top producer

  18. An Introduction to the South Florida Market Population & Growth Statistics Miami-Dade County, Florida • 2000 Population – 2,253,362 • 2007 Population – 2,387,170 • Increase of 5.9% (133,808 increase) Broward County, Florida (Fort Lauderdale) • 2000 Population – 1,623,018 • 2007 Population - 1,759,591 • Increase of 6.5% (136,573 increase) • Overall Population Growth in Miami-Dade MSA of more than 270,000 persons since 2000 • Miami- Dade County’s Population is Approximately 50% Foreign-born • Median Income is $41,237 (2006) Source: US Census Bureau, Miami-Dade County & Beacon Council (www.census.gov; www.miamidade.gov; www.beaconcouncil.com)

  19. An Introduction to the South Florida Market Population & Growth Statistics

  20. An Introduction to the South Florida MarketTourism(add pie chart from where tourist come from) Miami-Dade Tourism 2008 • Visitors by Air – 17,041,650 (+12.87% 2008 vs. 2002) • Visitors via Port – 3,807,865 (+10.5% 2008 vs. 2002) Broward Tourism 2008 • Visitors by Air – 11,298,519 (+32.62% 2008 vs. 2002) • Visitors via Port – 2,179,206 (+16.3% 2008 vs. 2002) • 19.8% Increase in Overnight Visitors 2008 vs. 2002 • Miami is a gateway city for Latin American Visitors • Miami-Dade Seaport is the busiest seaport in the world for cruise passengers • Miami-Dade County Lead the State in Hotel Occupancy (76.9%) and Room Rates ($190.47) Source: Synovate Research; Greater Miami Convention & Visitors Bureau (www.synovate.com; www.miamiandbeaches.com)

  21. An Introduction to the South Florida MarketBusiness & Economics Economic Facts • Miami-Dade Metro area has lead the state in new job creation over the past five years. • Overall Florida job growth was 21.2% from 2000-2006 • Miami-Dade (6.8%) has one of the lowest unemployment rates in Florida (8.6%) as of January, 2009 • 10th Largest Recipient of direct foreign investment. • Several companies have their Latin American HQ offices in Miami, including UPS, FedEx, Discover Channel, HP, American Express, Avaya, IBM, HBO & Exxon • Florida has no state income tax and the sales tax rate is relatively benign (5.5%) • Other Notables: • More than 500 multinational corporations have offices in Miami-Dade County • 61 foreign consulate offices are located in Miami-Dade County • 25 foreign trade offices are located in Miami-Dade County • 40 bi-national chambers of commerce operate in Miami-Dade County Source: Beacon Council; Miami-Dade Government, State of Florida (www.beaconcouncil.com; www.miami-dade.gov)

  22. An Introduction to the South Florida MarketBusiness & Economics – Major Employers • TOP PRIVATE EMPLOYERSEMPLOYEES • Publix Super Markets  11,000 • Baptist Health South Florida  10,826 • University of Miami  9,874   • American Airlines  9,000   • Precision Response Corporation  6,000   • AT&T  5,500   • Winn-Dixie Stores  4,833   • Florida Power & Light Company  3,900   • Carnival Cruise Lines  3,500   • Macy's Florida  3,368   • Mount Sinai Medical Center  3,264   • Miami Children's Hospital  2,600   • Mercy Hospital  2,412   • Wachovia, N.A.  2,229   • Cordis (a Johnson & Johnson Company)  2,100   • Royal Caribbean/Celebrity Cruises  2,000   • Assurant Solutions  1,800   • TOP PUBLIC EMPLOYERS • Miami-Dade County Public Schools  50,000   • Miami-Dade County  32,000   • Federal Government  20,400   • Florida State Government  17,000   • Jackson Health System  10,500 •  Miami-Dade College  6,500   • City of Miami  4,034   • Florida International University  3,132   • V A Medical Center  2,300   • City of Miami Beach  1,979   • City of Hialeah  1,800   • U.S. Coast Guard  1,220   • U.S. Southern Command  1,200   • City of Coral Gables  895   • City of North Miami Beach  738 

  23. An Introduction to the South Florida MarketPast, Present & Future Outlook Though population and job growth have slowed, they are forecasted to increase again beginning in 2010, further spurring future demand for housing Source: The 2009 Fund Real Estate Forecast – Miami-Dade County (www.thefund.com)

  24. An Introduction to the South Florida MarketAn International Market • Florida is the top destination for foreign home buyers in the US • Miami – Fort Lauderdale accounts for the largest share of foreign home buyers in Florida (21%) • 60% of foreign buyers pay cash for their property purchases • 81% of foreign buyers purchase for use as a vacation home • 12% buy for rental income purposes • 46% of buyers in Miami-Fort Lauderdale or from Latin America Source: National Association of Realtors “2008 International Home Buyers in Florida” (www.realtor.org)

  25. The Real Estate Market in South FloridaA History of Pricing in Miami MSA • Miami-Dade median housing prices peaked in December 2006 • 12/31/2006 = $398,641 • By December 31, 2008, prices had fallen 41.25% • 12/31/2008 = $234,200 Year-over-year percentage (%) change in pricing for homes in Miami-Dade MSA area Source: S&P/Case-Schiller Index (www2.standardand poors.com)

  26. The Real Estate Market in South FloridaSummary of Inventory & Pricing • Between 1963 and 2002, there were 11,517 total condominiums built in Miami. • Between 2002 to present 43,408 have been built or are currently under construction. • Of the 43,408 units, 25,552 have closed and 17,597 remain available • Population and tourism growth along with strong vacation home interest fueled the boom, along with lax lending standards and weak local building regulations. • Inventory by Neighborhood (note, this denotes projects completed and closed since January 2003) Neighborhood Total Closed Available • Brickell 8,786 4,097 4,689 • Downtown 6,021 2,839 3,182 • River /West Downtown 4,526 2,560 1,767 • Biscayne/Midtown 5,097 2,837 2,260 • Little Havana/Miami 541 121 420 • Miami Beach 5,037 3,030 2,007 • Sunny Isles/Aventura 5,189 3,811 1,378 • Bal Harbor/North Bay Village 1,093 856 235 • Coconut Grove/Coral Gables 2,757 1,779 890 Totals 43,408 25,522 17,597

  27. The Real Estate Market in South FloridaSummary of Inventory Available by Neighborhood – Miami-Dade County (East)

  28. The Real Estate Market in South FloridaSummary of Inventory Available by Neighborhood vs. Total Built Since 2003

  29. The Real Estate Market in South FloridaCondo Absorption Rates – Miami-Dade County • - New condo closings peaked at 20,100 in • 2005. • - Sales fell 54% in 2008 • While sales are projected to continue to be • slower in the coming four years, new condo • projects starts are expected to be very few, • thereby allowing absorption of remaining units • and thereby further reduce supply. Source: Attorney’s Title Insurance Fund 2009 Real Estate Forecast (www.thefund.com)

  30. The Real Estate Market in South FloridaInventory Summary – Availability - Aventura, FL

  31. The Real Estate Market in South FloridaInventory Summary – Availability Brickell Neighborhood

  32. The Real Estate Market in South FloridaInventory Summary – Availability Coconut Grove/Coral Gables Neighborhood

  33. The Real Estate Market in South FloridaInventory Summary – Availability Miami Beach

  34. The Real Estate Market in South FloridaInventory Summary – Availability Downtown Miami

  35. The Real Estate Market in South FloridaInventory Summary – Availability Midtown Miami

  36. The Real Estate Market in South FloridaInventory Summary – Availability Miami River/West Downtown

  37. The Real Estate Market in South FloridaInventory Summary – Availability Sunny Isles/North Bay Village/Bal Harbour

  38. The Real Estate Market in South FloridaInventory Summary – Availability Little Havana/Greater Miami

  39. The Real Estate Market in South FloridaProfile: Brickell , Downtown & Biscayne Neighborhood • Population is 161,563 (3 mile radius) • Median Age is 42 • Population is 51% male / 49% female • Population is 45% Hispanic, 26% Mixed Race and 21% White • Brickell is a major financial center for all of Latin America • Major Employers are in Business Management, Finance, Computer, Architectural, Legal, Healthcare or other service fields • Total Housing Units 65,058 (3 mile radius) • Average Household Income was $72,152 (3 mile radius) • Brickell has been an established live/work area for decades with the corresponding infrastructure for shopping, retail, restaurants and other quality of life enhancements • Downtown and lower Biscayne have seen immense development in the past five years. • Carnival Center for the Performing Arts, American Airlines Arena, Bayfront Park and many other amenities dot the landscape in this densely developed area Sources: Beacon Council, Miami-Dade Government, City of Miami & Loopnet.com (www.beaconcouncil.com, www.miami-dade.gov, www.miamigov.com) Biscayne Corridor Downtown Brickell

  40. The Real Estate Market in South FloridaProfile - Miami Beach • Population is 63,904 (3 mile radius) • Median Age is 43 • Population is 54% male / 46% female • Population is 54% Hispanic, 40%, White and the remaining 14% are primarily of mixed-race • Three main areas: South Beach, Mid-Beach and North Beach • Major Employers are in Tourism, Retail, Real Estate, Legal and Banking • Total Housing Units: 47,548 (3 mile radius) • Average Household Income was $102,426 (2008) • World –renown vacation destination with year-round amenities • Three Golf Courses – two public and one private • More than 10 miles of public beaches along the Atlantic Ocean Source: US Census Bureau, www.city-data.com, City of Miami Beach (www.miamibeach.com) Miami Beach

  41. The Real Estate Market in South FloridaProfile - Sunny Isles • Population is 33,830 • Median Age is 46 • Population is 46% male / 54% female • Population is 59% White and 36% Hispanic • Significant Russian Population resides in Sunny Isles (known as Little Moscow) • Major Employers are Retail & Tourism • Total Housing Units: 25,412 • Average Household Income was $91,377 (2008) • Number of housing units increased more than 200% since 2000 and average prices have almost triples ($104,000 in 2000 vs. $292,247 in 2007) • Many of the new developments will provide vacation homes to seasonal residents • Sunny Isles has more than 3 miles of public beaches along the ocean • Short drive to Bal Harbour Shops and Aventura Mall Source: City of Sunny Isles, Miami-Dade County, www.city-data.com, www.citytowninfo.com; www.sibfl.com; www.miamidade.gov) Sunny Isles

  42. The Real Estate Market in South FloridaProfile - Aventura • Population is 25,267 • Median Age is 49 • Population is 46% male / 54% female • Population is 75% White, 21% Hispanic • Major Employers are Retail, Real Estate, Office Management and Banking • Total Housing Units: 20,020 • Average Household Income was $109,241 (2008) • Largest Retail Mall in Miami-Dade County is located in Aventura Source: www.city-data.com; , Miami Dade County (www.miamidade.gov; www.citytowninfo.com) Aventura

  43. The Real Estate Market in South FloridaPurchase Strategies - General Observations • Real Estate is usually all about location, so generally speaking better locations may present long-term opportunities as prices tend to fall less and recover more quickly. • Better locations tend to have a built-in demand for property so there tends to be a ready supply of renters and buyers over time. • Some neighborhoods are unique and cater to unique niches in the population, thereby insuring a steady supply of renters and buyers and providing support for pricing • Generally, the more units in a property available, the greater discount can be negotiated as sellers (banks or developers) are under greater pressure to liquidate al the inventory rather than just blocks of inventory. Also, once the developer sells some units in a block at a discount, they generally set the market price for a property for buyers in the not-to-distant future. • For buyers, the best case scenario is generally to purchase as much inventory as possible in any particular building. In most instances, seeking buildings with more than 50% (and as close to 100% as possible) is most effective and efficient as pricing reductions are greatest if the buyers purchases all the remaining inventory. Also, buyers then control the market for the property and can better manage inventory and pricing • Smaller units tend to have higher rents per sq ft and are often better values in terms of leasing.

  44. The Real Estate Market in South FloridaPurchase Strategies • Purchase Note Directly from Lender • Advantages • Buy note and assume role of lender • Notes normally already in default and foreclosure action may have been initiated by lender • Ability to foreclosure liens off property at foreclosure (with exception of tax some government liens (such as water and utility liens) • Ability to then negotiate with borrower from a position of strength • In most instances, this will be the most cost-effective strategy • Disadvantages • Foreclosure may be needed thereby involving uncertainty and legal fees • Borrower may file bankruptcy and potentially greatly slow the process of obtaining the asset • Banks have been reluctant sellers and can take extraordinary time to make decisions • Buyers may assume all warranty issues of developer if purchasing/assuming more than seven (7) units • If subcontractors remain unpaid, the may not honor standard warranties on their work

  45. The Real Estate Market in South FloridaPurchase Strategies • Short Sale of the Note • Advantages • Purchase property through owner (borrower) via the bank agreeing to price less than total outstanding balance on the note • Buyer assumes the property at closing • Likely less costly (legal fees, opportunity costs, etc) than foreclosure • Ability to execute sales and leasing programs immediately • Disadvantages • Short sale does not eliminate liens from property • Must work directly with what can be very reluctant to non-cooperative sellers • Banks can delay the process for very long periods of time • Buyers may assume all warranty issues of developer if purchasing/assuming more than seven (7) units • Price may be somewhat higher than an outright purchase of the note • If subcontractors remain unpaid, the may not honor standard warranties on their work

  46. The Real Estate Market in South FloridaPurchase Strategies • Direct Purchase from Developer • Advantages • Buyer assumes property (units) at closing • Time to purchase is generally not as long as banks are generally not involved and do not delay the process • Can select units to purchase rather than buying all the inventory in a specific property • Generally, all subcontractors have been paid in full so they may honor warranties on their work • Disadvantages • Discounts tend to be smaller than with note purchases or short sales • Usually, a limited number of units are available as all others have generally closed • Buyer competes with all other unit owners in terms of sales and rentals • Buyers may assume all warranty issues of developer if purchasing/assuming more than seven (7) units

  47. The Real Estate Market in South FloridaPurchase Strategies • Direct from Bank (REO) • Advantages • Buyer assumes control of property at closing • Liens have generally been dismissed or otherwise addressed • Property has generally been maintained and, at times, leased • Disadvantages • Banks can be challenging to work with on pricing and closing terms • Competition can be strong as the banks generally entertain many suitors for properties • Buyers may assume all warranty issues of developer if purchasing/assuming more than seven (7) units • Currently, many properties are sold via Note Purchases or Note Short Sales and are therefore not being foreclosed upon by Lenders. As such, many properties are not reaching the REO stage before being purchased by investor(s).

  48. The Real Estate Market in South FloridaExit Strategies • Buy & Hold Strategy • Rental of Units for Period of Time • Cash Flow and Capitalization Rate will be determining factors • Strategy can be applied to intact buildings (no closed units) or to condo buildings that have closed units • Intact properties can be reconverted from condos to apartments to decrease operating costs, including taxes, insurance and management • Building can be reconverted and sold as individual condos or sold in its entirety as a multi-family property • Advantages • Consistent cash flow performance over time • Maximize expense savings when intact buildings converted from condo to apartment building • Ability to sell individual units or entire building when market improves • Disadvantages • Purchase prices tend to be low for lenders as many investors tend to under value the discount between wholesale and retail pricing • Overall returns may be affected if the rental market remains soft for a longer period of time than anticipated

  49. The Real Estate Market in South FloridaExit Strategies • Buy, Flip & Finance • Purchase of units at wholesale pricing and immediately placing them back on the market at retail price • Upon sale of a unit, the investor provides financing for a certain percentage of the sale price (50% to 80% LTV) • Investor holds debt for a period of time (2 to 5 years expected) in anticipation of normal credit market operations in the next 12 to 24 months • Some units that are more challenging to sell may be held back and leased for long-term sale Advantages • Opportunity to exploit price differential between wholesale and retail pricing structures • Investor is able to gain back portion of investment quickly and use funds for alternative investments • Any units that do not sell and are rented will have a lower cost basis and higher overall rental ROI because of the profits from unit sales will reduce the overall investment basis for these remaining units. Disadvantages • Sales made within 12 months of purchase will be taxed at higher rate than longer term capital gains • Units may be challenging to sell in the present market, even with financing provided • The overall return may be somewhat negatively affected by the amount and length of time paper is held by the investor

  50. The Real Estate Market in South FloridaExit Strategies • Hybrid Model • Rental of certain units and sale of other units • Often, this is the most effective exit strategy for many Miami condo projects with current availability • Many buildings have units that will not necessarily be appropriate to rent such as penthouses and particularly large floor plans that can often be sold for considerable profit above the wholesale price of the unit. Those same properties likely have many units in desirable locations that could be leased profitably • Advantages • If larger, more profitable units are sold quickly, profits can be taken our and exposure reduced to the overall property • Remaining cost basis for units would thereby be reduced and the rental model would work much more effectively • Disadvantages • Some properties in marginal neighborhoods would not fit this model • Financing by investor may be needed to liquidate some units which may restrain overall return over time

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