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Home My WebLink About2010 07 28 Regular 600 U.S. Real Estate Investmetn Fund, LLC PresentationDate: July 28, 2010 The following presentation was provided to the Board of Trustees on July 28, 2010 by U.S. Real Estate Investment Fund, LLC. Firm Overview 1270 Soldiers Field Road • Boston • Massachusetts • 02135 -1003 Tel: 617.782.2600 Fax 617.782.9442 www..intercontinental.net The Firm's History 1960s Established in 1959 with a primary focus on general contracting and engineering Founder Petros A. Palandjian undertook large -scale public -bid construction projects that ranged from road construction, airports and hotels to churches, libraries and elderly and college housing projects. 1970s Evolved from a large -scale construction company to a regional real estate development firm with the competitive advantage of superior in -house construction capability. In this era, Intercontinental solidified its position as one of the region's premier construction companies, while embarking on an investment program that focused on complex development and value -added real estate opportunities. 1980s Vertically integrated into asset management, construction management, property management, finance, brokerage and consulting services. On its foundation of construction and development expertise, Intercontinental undertook projects for its own portfolio and for third party investors. Applied value -added skills to a diverse range of property types; office, residential, hotel and resort, industrial, leisure /entertainment, retail and mixed -use properties. 1990s- Present Intercontinental's core business is private equity real estate investment management and advisory services. • SEC Registered Investment Adviser • Developed, built, managed and owned more than $6 billion of commercial real estate • Offices in Boston, Chicago and Los Angeles • Qualified Professional Asset Manager (QPAM) • 100% Union Execution • $2.1 Billion in Assets Under Management 1270 Soldiers Field Road - Boston - Massachusetts - 02135 -1003 Tel: 617.782.2600 Fax 617.782.9442 www..intercontinental.net Executive Conm Peter Palandjian Chairman & CEO Investment Committee Member Peter Palandjian oversees Intercontinental's affiliated operating companies, with primary responsibility for Investment Strategy and Institutional Relationships. '\Ir. Palandjian earned his B. A. from Harvard College and his i\IBA from the Harvard Business School. Pau1J. Nasser Chief Financial Oflrcer & Chief Operating Officer Investment Committee Member Paul j Nasser manages the firms resources across investment and operating disciplines. As CFO and COO, he oversees Accounting, Finance, Investor Relations, Performance Reporting, Marketing, Human Resources and Administration. 1r. Nasser received his B.A. in Urban Planning from the University of Rhode Island and his i\1B A, from Suffolk University. Thomas Taranto Director of Acquisitions, Asset and Portfolio Management Investment Committee Member Tom Taranto manages and directs all aspects of Intercontinental's acquisitions, asset and portfolio management business. He also directs Intercontinental's disposition program and oversees the property management division. 1r. Taranto received his B.S. in Business Management from Bentley College. 1270 Soldiers Field Road • Boston • Massachusetts • 02135 -1003 Tel: 617.782.2600 Fax 617.782.9442 www..intercontinental.net Key Professionals Devin Sullivan Director, Institutional Services Devin is responsible for developing and servicing Intercontinental's client and consultant relationships with a primary focus on the Public Fund sector. B.A. in Government from Hamilton College. Joanna Keller Assistant Director Institutional Services Joanna is responsible for developing and servicing Intercontinental's client and consultant relationships with aprimary focus on the West Coast B.A. in Communication from New York University. Judy Chien Fund Controller Judy Chien is the Controller for Intercontinental's U.S. Real Estate Investment Fund, LLC. She produces financial statements for fund reporting oversees external audit services, and implements and maintains proper internal controls. BB A in Accounting from University of Georgia. Thomas N litchell Senior Officer Institutional Services Thomas Mitchell is responsible for consultant relations and client service and is Intercontinental's main contact for the investment consultant community. B.A. in Communication from Purdue University. Series 7 and 66 securities licenses with FINRA. David Carella Director of Finance Dave Carellais responsible for producing financial statements for fund reporting computing real estate investment fund returns, maintaining development budgets, preparing year -end work papers for third party audits and tax returns. B.S. in Accounting from Bridgewater State College. Christopher Boehm Director of Researcb C.,' Chi f Co )Vliance Officer Christopher responsible for financial analysis, research and due diligence and Intercontinental's compliance with the Investment Advisers Act of 1940 and all related SEC regulations. B.A. from Northwestern University and an MBA in Real Estate and Entrepreneurship from Indiana University. 1270 Soldiers Field Road • Boston • Massachusetts • 02135 -1003 Tel: 617.782.2600 Fax 617.782.9442 www..intercontinental.net Funds Sununary 1996 ■ Enhanced Core investment strategy ■ Closed -end commingled fund ■ 28 Investors ■ Total Equity: $10 million ■ Total Capitalization: $50 million ■ Union Labor ■ Five (5) portfolio investments 1998 ■ Value —Added investment strategy ■ Closed -end commingled fund ■ 28 Investors ■ Total Equity: $80 million ■ $10 million side - by- side investment ■ Total Capitalization: $250 million ■ Union Labor ■ Five (5) portfolio investments 2000 ■ Enhanced Core investment strategy ■ Closed -end commingled fund ■ 74 Investors ■ Structure: Real Estate Operating Company (REOC) investment in full compliance with ERIS A, ■ Total equity: $348.1 million ■ Total capitalization: $1.0 billion ■ Union labor ■ Twenty -seven (27) portfolio investments ■ Comprised of 65 total assets ■ Ten (10) year term ■ Value —Added investment strategy ■ Closed -end commingled fund ■ 39 Investors ■ Total equity: —$200 million ■ $500 + /- million in total capitalization ■ New England mandate • Union labor ■ Six (6) portfolio investments to date ■ Seven (7) year term 1270 Soldiers Field Road • Boston • Massachusetts • 02135 -1003 2002 Tel: 617.782.2600 Fax 617.782.9442 www..intercontinental.net 5 Institutional Clients martiai uSt> ALN- Lithographic Industry (NY) ■ City of Anrn Arbor Employees' (NT ■ Barnstable Comity Ret. Sys. (MA) ■ Beltia Corporation (C.R) ■ Boston Plasterers & Cement iMasonns Local • #534 (MA) City of Boynton Beach Firefighters (FL) Bricklayer & Trowel Trades hnfl (DC) Brockton Contributory (MA) BCIP Associates II (MA) ■ Carpenters of Illinois (IL) Catholic Foreignn Mission Society (NY) Chicago District Comnsel of Laborers (IL) Construction Industry Laborers (KS) • Deerfield Beach Fire (FL) ■ City of Detroit Police & Fire (NH) ■ Essex Regional Ret. Sys. (MA) • City of Flint Employees (MI) ■ Flint Phunbinng & Piping Industry (NT • City of Fort Worth Employees (IN ■ City of Garden City Employees M ■ Hanpshire County Ret. Sys. (NIA) • Haverhill Ret. Sys. (MA) ■ City of Hialeah Police Officers (FL) ■ Hollywood Firefighters (FL) City of Holyoke Contributory (MA) Hospital and Healthcare Employees (PA) Howard University (DC) IBEW Local #25 (NY) IBEW Local #99 (RI) IBEW Local #103 (MA) IFEBP (WI) 8 District Electrical (CO) Indian River State College (FL) hater -Local GCIU (OH) Iron Workers' Mid - America (IL) ■ Iron Workers of New England (yL-�) • Iron Workers St. Loins District Counsel (MO) ■ 1. U.0.E. Eastern Pennsylvania and Delaware ■ Laborers Local #1289 (NY) ■ Lowell Ret. Sys. (MA) ■ 1\lacomb Comity Employees (1 11) ■ Mass. Bay Transportation Authority (MA) ■ Massachusetts Laborers (MA) ■ The 1\ leijer Foundation M • 11\Iiddlesex Ret. Sys. (NLA) ■ IVEnneapolis Retail Meat Cutters & Food • Handlers (NIN) ■ Miramar Police Officers (FL) Town of Natick Contributory (MA) National Elevator Industry (PA) NECA -IBEW (IL) New England Carpenters (MA) City of New Haven Police & Fire (CT) New Jersey Carpenters (Nn New Orleans Firefighters (LA) New York Carpenters (NY) Norfolk County Ret. Sys. (NL,) Northern New England Benefit Trust (NH) Oakland Comity Ennyloyees (CA) . Onnalna Construction Industry (NE) • Oregon Sheet Metal Workers (OR) • Outstate Nfnchigan Trowel Trades (NT • Painters Local #35 (VIA) • Pipefntters Local #537 (MA) • Phunbens Local #12 (NIA) • Phunbers & Pipefitters Local #138 (NY) • Plymouth County Ret. Sys. (NIA) • Plymouth Contributory Ret. Sys. (NL,) • PRIT Core Realty Holdings (kM) • Public School Teachers of Qnicago (IL) Roofers mud Waterproofers Local #33 (UA) San Antonio Police & Fire ("fX) Sheet Metal Workers Local #17 (MA) So. Nev. Ciilinnary Workers & Bartenders (NV) Sovereign Bancorp (MA) St. Lucie County Fire (FL) St. Lucie County General (FL) City of Sterling Heights Police & Fire (MI) City of Tal ntou Contributory (NIA) City of Taylor Police & Fire (NII) TDT Capital, Inc (MA) Chicago Area LB of T. (IL) N.E. Teamsters & Trucking Industry (MA) Teansters Local #237 (NY) Teamsters Local #653 (MA) Teansters Local #705 (IL) Teansters Local #710 (IL) Teansters Local #805 (NY) Transit Emloyees (DC) United Brotherhood of Carpenters (DC) Utility Board of the City of Key West (FL) Wachovia Investors, hnc. (CA) Walthan Contributory Ret. Brd. (MA) Waterford Township Police & Fire (NII) Watertown Ret. Sys. (MA) West Virginia Laborers (VV\V West Pahn Beach Police (FL) City of Westland Police & Fire (N Weymouth Ret. Brd. (MA) Wichita Falls Firemen (fX) Wob,Lmi Ret. Sys. (MA) City of Westland Police & Fire (1VIl) City of Worcester Ret. Sys. (NL,) Worcester Regional Contributory (MA) 1270 Soldiers Field Road • Boston • Massachusetts • 02135 -1003 Tel: 617.782.2600 Fax 617.782.9442 www..intercontinental.net 6 Advisory Board ■ William W. Bain, Jr. is the founder of Bain & Company, a world -wide consulting firm; the extraordinarily successful Bain Capital, a venture capital firm; and Bain, Willard Companies, a private equity firm. ■ Warren A. Henderson is the founder and CEO of Mosaic, a global equity investment advisory firm. Mr. Henderson is a former principal and head of Public Fund Services at State Street Global Advisors. ■ Thomas R O'Neill, III is the Chairman of O'Neill & Associates, a large government relations and public affairs firm. Mr. O'Neill is the former Lieutenant Governor of Massachusetts and a member of the Board of Trustees of Boston College. ■ Ira Stepanian is the former chairman and chief executive officer of Bank of Boston Corporation and its principal subsidiary, the First National Bank of Boston, as well as a member of the Board of Trustees of Tufts University, The Museum of Science and The Massachusetts General Hospital. ■ Joseph Nolan is a Senior Vice President for NSTAR Mr. Nolan serves on the boards of directors of the New England Council and the Massachusetts State Archives Commission. He also serves on the board of overseers at Children's Hospital and is also active in the communications and government relations committees of the Edison Electric Institute and the American Gas Association. Peter Aylward is the founder of Strategic Property Advisers, Inc., an independent, registered investment advisory firm that provides real estate asset management services and financial investment advisory services to institutional clients (including 16 Taft - Hartley and Union related plans). Paul Donahue is a Senior Vice President for CB Richard Ellis, leading the Multifamily Capital Markets team in Boston. Including his prior roles as managing director at Holiday Fenoglio Fowler and The Berkshire Group, Mr. Donahue has over 20 years of experience selling financing and buying multifamily properties in every major market throughout the country. 1270 Soldiers Field Road • Boston • Massachusetts • 02135 -1003 Tel: 617.782.2600 Fax 617.782.9442 www..intercontinental.net U.S. Real Estate Investment Fund, LLC (US REIF) 1270 Soldiers Field Road • Boston • Massachusetts • 02135 -1003 Tel: 617.782.2600 Fax 617.782.9442 www..intercontinental.net US REIF: Fund Summary Structure: • Delaware, limited liability company ■ Open -ended commingled investment vehicle ■ Multi- disciplinary investment strategy targeting an average annual Strategy: cash yield of 6 -8% and a total return of 10% ■ Foundation of "yield driven" property assets ■ Portfolio will be diversified geographically ■ North America — all major U.S. markets ■ All property types (office, multi - family, industrial, retail, etc.) Key Criteria: - Liquidity — redemption available on a quarterly basis ■ Portfolio leverage target of 50% ■ 25% of Fund's assets appraised each quarter (independent appraisal by PWC) ■ Debt is marked to market (Derivative Advisors, LLC) ■ No lock -out period Current Status: - $595.7 million in capital commitments ■ 54 Institutional Investors ■ Investment by IREC employees ■ 28 Acquisitions to date ■ $66.8 million in undrawn commitments 1270 Soldiers Field Road • Boston • Massachusetts • 02135 -1003 Tel: 617.782.2600 Fax 617.782.9442 www..intercontinental.net US REIF: Debt Summary Top US REIF Lenders • Dells Fargo U. S Bang • Bang ofAmenca • Sovereign Bank • TD Bank • Cititiens Bank • Capital One • HSBC ■ 99% of all debt in U.S. REIF is fixed rate ■ Leverage as of 6/30/10: 68.0% Debt Maturity Schedule Year Total % Maturing 2010 2.36 %( 2011 24.84 %( 2012 21.26 %( (1) 100% of which has extension options. (2) 62% of which has extension options. Weighted Average Cost of Debt 5.8% Weighted Average Cost of Fixcd -Rate Debt 5.8% Weighted Average Cost of Floating -Rate Debt 3.7% 1270 Soldiers Field Road • Boston • Massachusetts • 02135 -1003 Tel: 617.782.2600 Fax 617.782.9442 www..intercontinental.net 10 US REIF: Portfolio Research Lease Expiration Schedule Year Total % Expiring (so 2010 8.7 0 /o( 1 ) 2011 15.3% 2012 14.4% (1) Represents remaining calendar year Note: Multi family, Assisted Long, Hotel, and Operating Center assets are not included in the above figures Weighted Average Portfolio Occupancy Property ype Office Retail Industrial Multi - Family % Occupied 84.0% 90.5% 90.9% 89.3% Senior Living 85.0% Total 86.9% Note: The abovepercentages are weighted by market zalue. 1270 Soldiers Field Road • Boston • Massachusetts • 02135 -1003 Tel: 617.782.2600 Fax 617.782.9442 www..intercontinental.net 11 US REIF: Investment Process INTERCONTINENTAL DYNAMIC INVESTMENT PROCESS maximize ($) value og Harvest Asset Do Optimize Performance Acquire Asset o6 Investment Committee Approval os Create Detailed Investment Memo 04 Negotiate Purchase c3 Perform Due Diligence 02 Review Fit with Investment Strategy of Identify Opportunity process 1270 Soldiers Field Road • Boston • Massachusetts • 02135 -1003 Tel: 617.782.2600 Fax 617.782.9442 www..intercontinental.net 12 US REIF Fund Performance US REIF Levered US REIF Un- Levered NCREIF ODCE Income 7.68% 6.88% 6.58% Appreciation - 12.09% -5.24% - 23.33% Total -5.18% 1.37% - 18.01% US REIF Levered US REIF Un- Levered NCREIF ODCE Income 1.55% 1.55% 1.70% Appreciation 0.26% 0.85% -0.95% Total 1.81% 2.40% 0.75% US REIF Levered US REIF Un- Levered NCREIF ODCE Income 1.33% 1.51% 1.61% Appreciation - 14.17% -5.51% -5.07% Total - 12.84% -4.00% -3.48% 3 US REIF Levered US REIF Un- Levered NCREIF ODCE Income 1.97% 1.73% 1.58% Appreciation 0.62% -0.16% -8.86% Total 2.59% 1.57% -7.32% US REIF Levered US REIF Un- Levered NCREIF ODCE Income 2.63% 1.93% 1.53% Appreciation 1.54% -0.41% - 10.53% Total 4.17% 1.52% -9.03% US REIF returizr are lever gedgrarr off Thr -d-td that invert t of the type de Iry -11_ the an & taZ>ratz lefall°„ -v� th f arrr. � - ac ror,.r 1270 Soldiers Field Road • Boston • Massachusetts • 02135 -1003 Tel: 617.782.2600 Fax 617.782.9442 www..intercontinental.net 13 US REIF: Portfolio Diversification Market Value by Property Type Housing 2% Market Value by Region 1270 Soldiers Field Road • Boston • Massachusetts • 02135 -1003 Tel: 617.782.2600 Fax 617.782.9442 www..intercontinental.net Silicon Valley Industrial_ Portfolio l Silicon Valley, CA, �1 GON IDAHO b' 325 North Old Woodward BimmngJtatti, MI Riverview at Upper Landing Oak Pazk City St. Paul, MN Oak Park IL Central Plaza Cambridge, MA International Pill age Bloomington, MN One Lane Centre Park Place WYOMING Palatine, IL t Cordia Senior Residence -- Westmont, IL Lake Forest Village Lake Forest, CA '« Louis Joliet Pointe J O�RAID Joliet, IL Golden Town Center Golden CO I Parkway Shopping Center I� Bloomington, IL Santa Barbara Portfolio NEWMEXICO Santa Barbara, CA ■ Tucson Tech & Industrial Parker Ranch Center Tucson, AZ Waimea, HI Northbrook, IL Locke Drive Tech Center Marlborough, MA East Village Place E. L.ongtteadow, MA Westport Plaza St. Louis, MO Northpoint Centre Aus* TX Blue Bell Place Blue Bell, PA Rose Tree Place Media, PA NESS.. ALABAMA Lakeside Commons Atlanta, GA Somerset Court ' Waltham, MA Marine Lumber Nantucket, MA 400 Capital Boulevard Rocky Hill, CT k Rockland Place Wilmington, DE Virginia Crosst & Conference Center Glen Allen, VA 4700 Falls Rzlei� NC Capitol Center Columbia, SC Independence Corporate Park Greenville, SC INTERCONTINENTAL RE Al. ]IS FATE CORPORATION US REIF: Portfoli Highlights 0 Park Place, Palatine, IL 400 Capital Boulezavrd, Rock Hill, CT Golden To" Center, Golden, CO 1270 Soldiers Field Road • Boston • Massachusetts • 02135 -1003 Tel: 617.782.2600 Fax 617.782.9442 www..intercontinental.net 16 Type: Retail Size: 230,000 sf Closed: January 30, 2007 Purchase Price: $24,000,000 Type: Class A Office Size: 103,124 sf Closed: April 2, 2007 Purchase Price: $15,450,000 Type: Retail Size: 237,734 sf Closed: June 21, 2007 Purchase Price: $32,600,000 Type: Retail Size: 117,882 sf Closed: June 28, 2007 Purchase Price: $19,450,000 US REIF: Portfolio Ffighhghts One Tane Center, Northbrook, TL 281 Somevrset Court, Ilaltham, MA Pavkwj Shopping Center, Bloomington, TL 1270 Soldiers Field Road • Boston • Massachusetts • 02135 -1003 Tel: 617.782.2600 Fax 617.782.9442 www..intercontinental.net 17 Type: Office Size: 80,811 sf Closed: August 15, 2007 Purchase Price: $15,000,000 Type: Office Size: 67,743 sf Closed: August 16, 2007 Purchase Price: $13,575,000 Type: Office Size: 173,831 sf Closed: September 13, 2007 Purchase Price: $33,000,000 Type: Retail Size: 213,060 sf Closed: September 13, 2007 Purchase Price: $24,000,000 US REIF: Portfoli Highlights Parker Ranch Center, Tlaimea, HI 1270 Soldiers Field Road • Boston • Massachusetts • 02135 -1003 Tel: 617.782.2600 Fax 617.782.9442 www..intercontinental.net 18 Type: Office / Retail Size: 698,698 sf Closed: November 6, 2007 Purchase Price: $86,000,000 Type: Office / Retail Size: 102,533 sf Closed: December 19, 2007 Purchase Price: $38,160,000 Type: Office Size: 151,126 sf Closed: January 8, 2008 Purchase Price: $31,700,000 Type: Retail Size: 146,719 sf Closed: December 20, 2007 Purchase Price: $47,500,000 US REIF: Portfolio Highlights Locke Dive Tech Center; Mavlbovough, MA T- akesi& Commons, Manta , GA Uivginia Crossings Hotel & 1270 Soldiers Field Road • Boston • Massachusetts • 02135 -1003 Tel: 617.782.2600 Fax 617.782.9442 www..intercontinental.net 19 Type: Office Size: 514,730 sf Closed: February 21, 2008 Purchase Price: $103,000,000 Type: Office /Flex Size: 295,700 sf Closed: February 1, 2008 Purchase Price: $29,100,000 Type: Apartments Size: 353 Units Closed: August 7, 2008 Purchase Price: $30,750,000 Type: Hotel Size: 183 rooms Closed: May 6, 2008 Purchase Price: $2000,000 US REIF: Portfoli Highlights I � Manne Lumber Company, Nantucket, AL4 Lake Forrest Village , Lemke Forest, CA Tel: 617.782.2600 Fax 617.782.9442 www..intercontinental.net Bay North SeniorTinlig Portfolio, Closed: IL: Alay 19, 2008; DE, MA, PA: August 26, 2008 Purchase Price: $114,500,000 1270 Soldiers Field Road • Boston • Massachusetts • 02135 -1003 20 Type: Office Size: 460,000 sf Closed: September 5, 2008 Purchase Price: $54,500,000 Type: Diversified Retail Closed: August 22, 2008 Purchase Price: $43,000,000 Type: Senior Living Size: 500 units Type: Retail Size: 119,549 sf Closed: October 20, 2008 Purchase Price: $38,600,000 US REIF: Portfolio Ffighhghts Ce ntral P .Za , Cambridge, M A Tucson Technolp u- Industual Por#oliq A� m4i I I A Type: Office Size: 166,458 sf Closed: October 30, 2008 Purchase Price: $31,000,000 Silicon Valley Industrial PTIfoliq Independence Corporate Park, Gvreenzilk, SC 1270 Soldiers Field Road • Boston • Massachusetts • 02135 -1003 Tel: 617.782.2600 Fax 617.782.9442 www..intercontinental.net 21 Type: Industrial Size: 796,329 sf Closed: November 19, 2008 Purchase Price: $ 67,888,000 Type: Industrial Size: 606,027 sf Closed: November 10, 2008 Purchase Price: $48,000,000 Type: Office Size: 296,246 sf Closed: January 22, 2009 Purchase Price: $ 35,000,000 US REIF: Portfo Highlights Kivertien) at Up ev Lending, St. Paul, MN Oak Park City Apartments, Oak Park. IL P , F;t 1270 Soldiers Field Road • Boston • Massachusetts • 02135 -1003 Tel: 617.782.2600 Fax 617.782.9442 www..intercontinental.net 22 Size: 344 units Closed: March 18, 2009 Purchase Price: $43,500,000 Type: Apartments Size: 125 units Closed: December 17, 2009 Purchase Price: $20,000,000 US REIF: Santa Barbara Portfolio PrQVerjy Data Projected Returns Type: Apartments 5 Year Avg Leverage Cash Return: 6.9% Size: 151 units 10 Year Avg Leverage Cash Return: 8.1% Closed: :lay 17, 2010 IRR 10.4% Purchase Price: $42,500,000 1270 Soldiers Field Road • Boston • Massachusetts • 02135 -1003 Tel: 617.782.2600 Fax 617.782.9442 www..intercontinental.net 23 US REIF: Santa Barbara Portfolio Type: Apartments — Student Housing Size: 55 units Closed: May 17, 2010 Purchase Price: $15,025,000 Type: Apartments — Student Housing Size: 96 units Closed: Alay 17, 2010 Purchase Price: $27,475,000 1270 Soldiers Field Road • Boston • Massachusetts • 02135 -1003 Tel: 617.782.2600 Fax 617.782.9442 www..intercontinental.net 24 Coronado Apartments Breakpointe Apartments Professional Services &Fees ■ Legal Counsel • Mayer, Brown, Rowe & N1aw LLP (Chicago) • Wilmer Cutler Pickering Hale and Dorf, LLP (Boston, Washington D.C) • Bradley & Associates (Boston) ■ Valuation Manager • PricewaterhouseCoopers • All Fund Investments appraised every 12 months • Twenty -five percent of Fund's investments appraised each quarter • All new investments will be valued at cost plus capital expenditures prior to joining the valuation cycle ■ Fee Structure • Management Fee • 1.10% on investments up to $25 million • 1.00% on investments from $25 million up to $50 million • 0.85% in investments from $50 million up to $100 million • 0.75% on investments of $100 million and above • Annual management fee is paid on drawn capital only • Performance Fee • Members will receive a preferred return of 8% per annum, thereafter, 80% to the member and 20% to the manager • Performance fee shall be calculated and adjusted on an annual basis, subject to a reserve /clawback 1270 Soldiers Field Road • Boston • Massachusetts • 02135 -1003 Tel: 617.782.2600 Fax 617.782.9442 www..intercontinental.net 25 Appendix "Why Real Estate Now ?" 1270 Soldiers Field Road • Boston • Massachusetts • 02135 -1003 Tel: 617.782.2600 Fax 617.782.9442 www..intercontinental.net 26 Investing Opportunities Increasing with Distress • Increasing distress creating ■ REO and distressed increasing opportunities properties likely to continue • Relatively low amount of to increase over next several distressed properties which quarters, allowing for have become "Real Estate increasing investment Owned" or "REO" (owned opportunities by bank real estate groups) or resolved ALL CORE ♦ HOTEL DISTRESS VOLUME Source: Real Capital Analytics CUMULATIVE DISTRESS MONTHLY ADDITIONS TO DISTRESS $250 billion $25 billion 200 ■Resolved 20 ■ Restructured Lender REU ■Trouble 150 15 100 10 50 5 0 JFMAMJJASONDJFMAMJJASONDJFM 1 08 1 09 1 10 1270 Soldiers Field Road • Boston • Massachusetts • 02135 -1003 Tel: 617.782.2600 Fax 617.782.9442 www..intercontinental.net 27 0 JFMAMJJASONDJFMAMJJASONDJFM '08 1 09 '10 H istorical NCREIF Returns NCREIF PROPERTY INDEX TOTAL RETURN As of 3/31/10 20.5 20.1 16.9 '79 '80 '81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 YTD 1270 Soldiers Field Road • Boston • Massachusetts • 02135 -1003 Tel: 617.782.2600 Fax 617.782.9442 www..intercontinental.net 28 Returns — Appreciation Only NCREIF PROPERTY MEX COMPONENTRET URN— APPRECIATION ONLY As of 3/31/10 12.7 0 0 C) U N 1 -22.0 '79 '80 '81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '(110 YTD 1270 Soldiers Field Road • Boston • Massachusetts • 02135 -1003 Tel: 617.782.2600 Fax 617.782.9442 www..intercontinental.net 29 Histo of Capitalization Rates Fed easing following 9111 & Tech Bust combined with global equihj influx: 250 -300 bps reduction in can rates 10.00% 9.50% 9.00% 8.50% 8.00% 7.50% 8.2% longterfu average cap rate 7.00% 6.50% NCREIF Cap Rate —RCA Cap Rate 6.00% Housing Bust, Credit Crunch, 5.50% "Great" Recession: 260 bps rise in cap rates so far 5.00% M W 0) 0 h W W W O N N M'1 W W 0 h W W W O - - N M V 1 1 W 0 h h W W W W 00 W W 00 W W W 01 0) 01 01 01 W 01 01 01 01 01 01 01 O O O O O O O O O O O O O - -- - - - - N N N N N N N N N N N N N NCREIF Cap Rate is four quarter moving average of NCREIF transaction cap rates (equal weighted). Data through 3/31/10. Sources: NCREIF, RCA (Real Capital Analytics), Intercontinental 1270 Soldiers Field Road • Boston • Massachusetts • 02135 -1003 Tel: 617.782.2600 Fax 617.782.9442 www..intercontinental.net 30 Total Dollar Volume of Sales Transactions $140 $120 $100 y $80 0 M $60 $40 $20 $0 Source: Real Capital Analytics 1270 Soldiers Field Road • Boston • Massachusetts • 02135 -1003 Tel: 617.782.2600 Fax 617.782.9442 www..intercontinental.net 31 2001 2002 2003 2004 2006 2006 2007 2008 2009 2010 Credit Conditions Improving Net Percentage of Domestic Respondents Tightening Standards for Corn rnercialand Industrial Loans Percent n.. 100 ?(I 41 21'1 a -20 I. 1990 1992 1994 1996 1998 20CC 2002 2004 2006 20M 2010 Source: Federal Reserve ■ Tightening credit standards were a major contributor to lack of transaction volume throughout the recession. Continued easing is helping to stimulate transaction volume somewhat. 1270 Soldiers Field Road • Boston • Massachusetts • 02135 -1003 Tel: 617.782.2600 Fax 617.782.9442 www..intercontinental.net 32 Loan Refinancing Demand 400 350 a V m rA 350 200 , � 150 i 7 1- 0 2008 2010 ■ ■ M ■ 2013 2016 2017 2018 Source: Holliday Fenoglio Fowler ■ High transaction and loan volume preceding recession has created a tsunami of loan maturities coming due: $1.2 trillion over next four years ■ Distressed property sales likely to continue over this period, creating investment opportunities due to: ■ CMRSfiARai? • Sheer volume of refinancing demand relative to likely future origination volume • Property values lower than at origination • Tighter future underwriting standards vs. origination, e.g, lower loan to value, higher debt service coverage, greater amortization, etc. 1270 Soldiers Field Road • Boston • Massachusetts • 02135 -1003 Tel: 617.782.2600 Fax 617.782.9442 www..intercontinental.net ■ CN - Floating Rate ■ Inswim Rank{ihrifl 33 2011 2012 2018 2014