Case 1 | Shares Distribution
Investor 1 and Investor 5 fail to payments after paying only the land purchase. SDG and other investors are not interested in buying out Investor 1 and investor 5. Other investor complete the project by increasing their contributions.
Investor 1 and Investor 5’s shares are calculated by two methods:
• Investment Ratio Model: (Initial Investment ÷ Total Investment Needed) x 100. In that case Investor 1’s shares would decrease to 4,5% ((45.000 ÷ 1.000.000) x 100) and investor 5’s shares to %6.
• Issued and Outstanding Shares Model: Investors’ shares are not determined by their contributions according to the investment needed. Outstanding shares are allocated to each investors with respect to their initial investments. Each share has a nominal value of USD 1.000 and investors receive Issued shares for all contributions they make until the end of the project.
• In that case Investor 1 receives 45 outstanding shares and no issued shares as he can’t make any payment during the permit and construction process. At the end of the project total outstanding & Issued shares are equal to 100. Therefore investor 1 is entitled to 4,5% of the property.
• Project: House
• Land: 8.000 sqf
• House: 3.000 sqf
• Location: Studio City, Los Angeles, CA
• Land Cost: USD 300.000
• Permits &Construction Cost: USD 700.000
• Total Cost: USD 1.000.000
• Price Range for new Houses in the Area: USD 2.000.000 - 2.800.000
• Investors: 6 Investors