The fund will investigate potential acquisition of properties in the eastern United States; it will not acquire any unimproved or undeveloped land, nor will it purchase any properties owned by our manager or their affiliates. 

Properties will identified through a variety of sources: traditional real estate brokers, internet listings and alternative sources, such as accountants, lawyers, bankers and so forth.  The investment committee, comprising three principals of the sponsor, meets weekly to review potential acquisitions.  The committee rates and analyzes each property based on a five-factor matrix.  Five major factors comprising the matrix are:

• Lease base term
• Tenant credit
• Rental rate vs. market rate
• Area Demographics
• Relative cap rate

In addition to these, the committee also considers intangible issues, including sub-market retail areas and management familiarity with the particular area or region.

After the properties have been reviewed and analyzed, they are presented weekly to the bid committee, which reviews the advantages and downside risks of the acquisition and determines a bid price and maximum price.  The properties then bid using the manager’s standard letter of intent.  The purchase and sale agreement will be negotiated using the manager’s personnel.

The fund’s strategy is to achieve balance by purchasing properties in primary and secondary markets.  A secondary market property can usually be purchased at a more favorable price; primary markets generally have better population growth rates. 

As part of the due diligence process, we will obtain independent appraisals of the fair market value for each property we acquire.  However, we will rely on our own analysis – and not necessarily appraisals – to determine whether we should acquire a particular property.  A third party will perform a phase-one environmental report or an environmental transaction screen on each property we purchase.  We will buy title insurance and a title review for each property, along with an updated or new survey.  Since much of the maintenance is the tenant’s responsibility, the review of the physical site assessment will be performed internally by the manager’s principals.  If there is a particular concern, we will use an independent third party.  Assuming that all of fund’s equity is sold, the manager anticipates the fund will acquire approximately 10 to 15 properties. 

Use of Debt

Given the stable nature of these properties, the fund will seek to use a significant amount of debt in the form of a first mortgage on each particular property or the portfolio in general.  The fund may acquire property for all cash, but in general, will use a combination of cash and debt financing to the level of 80% loan to purchase price.  The amount of debt incurred for any particular property will be determined at the sole discretion of the manager.  The overall weighted average debt for the portfolio is expected to be 70-75% loan-to-purchase price.  The fund reserves the right to leverage the entire portfolio up to 80% of the aggregate purchase price.  The fund may also borrow to refinance a particular property held in it’s portfolio.