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Industrial Fund III
The Strategic Industrial Fund III will represent both a continuation and evolution of our partner's successful approach to US-based industrial real estate investments. The driving focus will be on immediate cash flow and long-term net leases.
Investment Highlights
Our Partner seeks to efficiently deploy investor capital into net leased industrial real estate investments. Their focus is on current cash flowing assets, supported by a diversified portfolio of creditworthy middle market tenants on a belowreplacement cost basis. Utilizing our in-house credit team and development expertise, we seek to provide exceptional risk-adjusted returns.
KEY METRICS
14% - 16%
1.95x
6%-8%
PROJECTED NET IRR
MULTIPLE ON INVESTED CAPITAL (MOIC)
TARGET CASH-ON-CASH DURING HOLD
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Minimum investment: $50,000
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Tax Advantaged Direct and REIT Investment Options
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Quarterly Distributions
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6-Year Hold Horizon
Why Industrial? Why Now?
KEY DRIVERS FOR FUND III OPPORTUNITY
Stable Asset Class
Active Lending Environment
Securituzed Cash Flow Yields
Capture Value through Market Ineffeciencies
INDUSTRIAL DEMAND DRIVERS
Onshoring and reshoring manufacturing to the U.S. and Mexico is an ongoing structural change.
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The global supply chain disruption of 2020 revealed a clear need for domestic logistics and manufacturing, leading to significant public and private investment into this sector.
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2nd generation industrial real estate is priced below replacement costs, and space demand is outstripping constrained supply into the foreseeable future
IMMEDIATE BUYING OPPORTUNITIES
Onshoring and reshoring manufacturing to the U.S. and Mexico is an ongoing structural change.
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Acquisition cap rates remain higher than capital costs
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Opportunity to acquire quality assets at or below replacement costs with positive leverage and healthy yield spreads
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Fixed rate debt remains available at 150-200 bps below acquisition cap rates
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Our Partner
Our partner is a commercial real estate investment firm focused on single-tenant, net leased industrial properties throughout the United States. They specialize in sale-leaseback structured industrial acquisitions and value-add opportunities. The firm is led by seasoned principals with over 60 years of combined experience in complex commercial real estate acquisitions, operations, and development, consistently delivering strong results. The company is vertically integrated, offering services such as tenant credit advisory, construction and facilities management, asset management, capital markets, and full-service accounting.
$150M+
<0.2%
$1B+
18.1%
ASSETS UNDER MANAGEMENT
ANNUAL TENANT DEFAULT RATE
REALIZED INVESTMENT EXIT
REALIZED NET INVESTMENT IRR
Case Studies
Gamma Aerospace (2018)
Mansfield Texas
Tenant
Gamma Aerospace, founded in 1971, is an aerospace manufacturing facility located in Dallas-Fort Worth supplying Tier-1 firms including Boeing, Airbus, Lockheed, L-3 and Bell.
Acquisition
Gamma Aerospace was acquired by a private equity firm. The private equity firm and our partner executed a sale leaseback of real estate in Mansfield, TX, deploying proceeds into capital improvements at the site and operating company
Initial investment
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123,000 SF – Single Asset
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Original Capitalization: $5,900,000
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Expansion: $4,300,000
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Equity : $1,350,000
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Real Estate Debt: $8,850,000 (original and construction)
Cash on Cash
LP annual cash-on-cash began at 8%, increasing to 10% through annual rent escalations.
Value Add
After acquiring the real estate in a sale leaseback, our partner financed and constructed a 23,000 SF expansion of the manufacturing facility. Upon completion of construction, the lease was extended to a new 20-year term.
Exit + Returns (2022)
Exit: Gamma sold to large Fund after approximately 4 years. Returns: Investors achieved average annual returns of 18%, exceeding targeted returns of 16% by 200 basis points.
Lease
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15-year, absolute NNN lease with 2% annual rent increases
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23K SF expansion, fresh 20-year lease extension upon completion
Investment Risk Mitigation
Overall Tenant Credit
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Evaluate tenant’s long term financial profile
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Overall financial health
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Tenant access to capital
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Avoid highly vulnerable companies
Unit Profitability
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Review business unit-level financials for all target properties
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Profitable locations
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Mission-critical tenant operations
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Tenant investments into properties
Defensible Real Estate
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Real estate acquisition basis below replacement value
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Limit downside scenarios (bankruptcy, liquidation, lease rejection)
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Value Floor – Purchase near value of property if it becomes vacant
Projected Investment Lifecycle
1
Roll Up + Acquisition
Acquisition of Industrial Assets
2
Compounding + Management
Annual cash-flow
escalations
3
Active Lending Environment
Sale and return of
capital and profits
YEARS: 0 - 1
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$250M of equity invested
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$500M-$700M of leveraged assets
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Immediate distributions
YEARS: 1 - 5
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Escalating cash flow from leases
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Debt principal pay-down
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Value-add opportunities
YEARS: 5 - 6
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Exit of properties
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Individual or portfolio sales
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Manager discretion on market timing
Exit Strategies
FLEXIBLY PURSUING PROFITABLE EXITS
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