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<DIV>All</DIV>
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<DIV>I sent the following to Ann Ferguson. I think you may find this interesting. This is my theory on Jemal's business strategy.</DIV>
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<DIV>Jemal has a certain amount of working capital he uses to rehab properties he's purchased. He puts that money where he gets the maximum return. If he has properties in Bethesda he can rent for $75/sq. ft. or properties in Riverdale Park he can rent for 25/sq. ft., where do you think he's going to put his money? He has his own work crews so his overhead, material, and rehab costs are pretty much the same in either place. The second thing I want to talk about is why he buys properties and lets them sit. The concept is similar to the one I outlined in the previous example. He has a certain about of capital he uses for purchasing property. He buys properties and pays for them in cash, which I think is what he he did in the Town Center. Rather than spending a large sum of money rehabing a property, he does some minimal work, if any, to satisfy the locals (aka us) and uses the money he saves to buy more properties again paying for them in cash. By doing so he accumulates a large number of properties that he owns outright so anytime he wants to rehab them, he can easily get a loan by signing the deed to the land over to the bank. His recurring expenses for these properties are minimal, essentially property taxes and insurance. In the meantime he uses his rehab liquidity as I outlined above on the properties with the highest yield. It's an interesting strategy and obviously quite profitable. I am sure he doesn't do this for the big purchases, but in our case I think this is his game plan.</DIV>
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<DIV>Based on Jemal's rehab strategy, I don't think Pete's project is going to have much of an effect on the Town Center. Even after Pete finishes his project, the rents/sq. ft. in Bethesda and many other parts of the DC metro area are still going to be much higher than in Riverdale Park so there's no financial incentive for Jemal to do anything. </DIV>
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<DIV>Don't get me wrong. I think Pete's project is a great idea. I just wish it was 3 stories tall.</DIV>
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<DIV>Bruce</DIV>
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