Market Scenarios

The Standard Program is the primary preconstruction real estate product offered by &O. The Standard Program requires that each buyer of a unit in a project be responsible for the resale/closing of his, her or its unit and the related resale commissions. In return, the &O buyer is entitled to all of the accompanying price increases and profits based on the resale of the condominium. The Standard Program has a baseline return of 69.5%, which is based on a flat market, with no price appreciation during the construction process. The chart to the right outlines how the Standard Program returns can expand in both declining and appreciating markets.

In the example, a buyer executes an agreement with a developer to purchase a condominium for $1,000,000. The contract includes the following terms: 10% down payment; a price that is 15% below the developer’s first day price to the public; assignability; and a protected closing. The pricing margin described above creates a contractual return, or gross yield, in the example of at least $150,000 in either an appreciating, declining or flat market.

The profitability matrix shown above is not guaranteed and is for purposes of demonstration only. Each project contains its own level of risk, including rising construction costs, developer failure, local or federal governmental related delay and bankruptcy. Accordingly, it cannot be assumed that participants will enjoy returns, if any, comparable to those indicated above. During the time a purchase contract is valid, distributions may be limited to the interest earned on the deposits held in escrow. In general, however, there can be no assurance that the developer will have cash to distribute, that any returns will be achieved, or that the participant’s deposits will be returned.