HomeMy WebLinkAbout2010 07 28 Other Portfolio File And Strategy Provided By CornerstoneDate: July 28, 2010
The following document was provided to the Board
of Trustees at the July 28, 2010 Special Meeting.
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Cornerstone
Patriot
Fund
2010
Portfolio Profile
& Strategy
Lm CORNERSTONE
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Table of Contents
Portfolio Overview ............................. ............................... 1-5
Market Outlook ................................ ............................... 6 -8
Apartments
Lakes of Schaumburg .........................
Chicago ..................................... 9
Promenade Oaks ............................
Minneapolis .................................. 10
Regatta Apartments ..........................
Philadelphia ..... .............................11
TheRidge .......... .........................Boston
....... .............................12
Hotel
Hamilton Crowne Plaza ..................... Washington DC ................................. 13
Industrial
Bellegrave Industrial .......................... Riverside ...... .............................14
Crossroads Distribution Center & Land ............ Atlanta ....... .............................15
Pureland VI ................................ Philadelphia .................................. 16
San Fernando Business Park A, B, C, D, & E ....... Los Angeles ..... .............................17
Townsend Distribution Center ................... Portland .................................... 18
Office
The Atrium ...... .........................Orange County ................................. 19
BayhillI & II .. ............................San Francisco .................................. 20
Chevy Chase Plaza ........................ Washington DC .... .............................21
Colonnade II ............................. Raleigh-Durham ................................. 22
Spear Street Terrace ......................... San Francisco .................................. 23
Waterway Tower .............................. Dallas ..................................... 24
Retail
Bridgeside Shopping Center ....................
Oakland ....................................
25
Promenade at Town Center ....................
Los Angeles ..... .............................26
RedTop Plaza ...............................
Chicago ....................................
27
Renaissance Creek ...........................
Sacramento ..... .............................28
South Lakes Village ........................
Washington DC .... .............................29
University Park ...............................
Denver ....... .............................30
Other
General Road Business Park .................... Riverside ...... .............................31
CORNERSTONE PATRIOT FUND
Fund Overview 2010 Strategy
• Core, open -end commingled fund with a research -driven
strategy Major Revenue Growth Initiatives
• Structured as a private REIT /operating partnership ■ Focus on tenant retention
• Objective: Long -term 5% real rate of return (gross of fees) ♦ Early renewal of tenants
and to exceed the NCREIF Fund Index - Open -End Diver- ♦ Improve timing of apartment lease maturities
sified Core Equity (NFI -ODCE) ■ Focus on solid credit for commercial tenants
■ Diversified by property type and geography ■ Maintain/enhance property advertising
■ Value -added component ■ Increase frequency of tenant contact
■ Quarterly cash flow distributions, contributions and re- ■ Lease -up of three value -added properties
demptions
Note: Diversification ranges are continually evaluated in light of current
market conditions and subject to change
Cornerstone Real Estate Advisers LLC
Expense Management
2009 Highlights
■ Maintain strong focus on property operating costs
Total Assets
$960.5
million
♦ Emphasis on appropriate expense levels
Net Assets
$732.4
million
♦ Continued emphasis on Cornerstone's Green Initiative
Number of Investments
27
■ Continue to protest property tax valuation assessments
Number of Markets
16
♦ Potential savings due to overall market decline
Core Leased (excluding Hotel)
94%
Overall leased (including Hotel)
84%
Diversification
Cash -to -Total Assets'
7.8%
■ Increase Northeast
Leverage Ratio (debt/total assets)
19.8%
■ No additional California properties
Exit Queue
$0
■ No additional Washington DC properties
■ Consider Florida east coast, as market warrants
'Excludes restricted and cash reserved for payment obligations
■ Selected growth markets
Financial Objectives
■ Continually evaluate weightings in light of current market
conditions and pricing
2009
2009
2010
Objective
Actual
Objective
Income Return (gross)
5.3%
5.4%
6.1%
Cash /Leverage
Cash Yield (assumes 11% fee)
4.0%
4.1%
4.5%
■ Reduce cash balances through acquisitions over course of
Same Store NOI Growth -3.8%
-6.4%
-5,7%
year
NOI Return (Property)
6.1%
6.1%
7.4%
■ No financing maturities in 2010
■ Access $125 million line, if needed
Fund Guidelines
Acquisitions /Dispositions
NFI-
Target Actual
Target
ODCE
Fund
■ One property has been identified for sale, depending on
12/31/09 12/31/09
12/31/10
12/31/09
Guidelines
market conditions
Property Type
♦ Lakes of Schaumburg — Chicago Apartments
Apartments 20 -25% 19.5%
30-35%
18.8%
20-40%
Office 35 -40% 31.5%
30-35%
37.0%
25-45%
■ $150 million available for acquisition, excluding new
deposits and sales
Retail 17 -23% 25.2%
20-25%
20.2%
15-35%
Hotel 6 -9% 10.0%
5-10%
2.8%
0-15%
■ Prospects of additional sales and acquisitions dependent
Industrial 10 -15% 13.2%
10-15%
18.9%
10-25%
upon capital markets
Land /Other <1% 0.7%
<1%
2.3%
N/A
Leverage 20% 19.8%
20%
33.5%
30% max.
Value -Add 4% 4.0%
6%
20% max.
Note: Diversification ranges are continually evaluated in light of current
market conditions and subject to change
Cornerstone Real Estate Advisers LLC
2010 PORTFOLIO PROFILE & STRATEGY
Patriot Fund Metropolitan Area Diversification (GMV, 12/31/09)
Minneapolis 3.8%
Chicago 6.4%
oston 6.3%
Portland 1.8 %�
Sacramento 6.1 %
San Francisco 13.9 ° /
Denver 2.7 %,*
Oakland 3.2%
Los Angeles 14.1%
Riverside 0.5
Orange County 7.3%
Geographic Diversification (GMV, 12/31/09)
Northeast
14.2%
Pacific
46.9%
East North Central
6.4%
Mounta i n
2 7% West North Central
Southwest 3.8%
2.2% Southeast
2.0%
Property Size (GMV, 12/31/09)
<$10 million
2.6%
$75 - $100 million $10 - $20 million
19.3% 14.3%
$50 - $75 million
33.6%
P hiladelphia 7.9%
Washington 20.3%
\ Raleigh 1.5%
Atlanta 2.0%
Dallas 2.2%
Property Type Diversification (GMV, 12/31/09)
Mideast
21.8%
F
2
Property Lifecycle (GMV, 12/31/09)
Pre - Development Lease -Up
0.7% 3.3%
;20 - $50 million
30.3%
ents
YO
Hotel
10%
lustrial
3.2%
ting
�/0
Cornerstone Real Estate Advisers LLC
31.5% Land
0.7%
CORNERSTONE PATRIOT FUND
NOI Comparison 2009 - 2010 (Same Property Basis - in Millions)
$70
$60 0 2009 Plan ❑ 2009 ■ 2010 Plan
$50
$40
$30
$20
$10
$0
Apartments Hotel Industrial Office Retail Total
NOI Growth (Before Interest Expense)
2010 Portfolio Income Objective (in Millions)
NOI (Fund Level)
$56.4
Non - Operating Expenses
(0.3)
Forecasted
Actual
Forecasted
$45.7
% Change
% Change
% Change
% Change
% Change
% Change
in NOI
in NOI
in NOI
in NOI
in NOI
in NOI
2005 -2006
2006 -2007
2007 -2008
2008 -2009
2008 -2009
2009 -2010
Same Store"
Apartments
5.73%
7.57%
2.91%
1.39%
-3.55%
2.53%
Hotel
3.35%
21.44%
2.11%
-7.42%
- 16.34%
-5.38%
Industrial
9.30%
2.57%
-0.39%
9.63%
7.88%
0.39%
Office
-2.70%
12.04%
7.39%
-6.36%
-4.73%
- 15.80%
Retail
14.98%
-2.95%
6.91%
-4.15%
-7.42%
-1.08%
Total Same Store
5.02%
7.98%
4.98%
-3.97%
-6.39%
-5.72%
'' fnVES(n1En(S wit /I Ju11
year oJexperienceJ0r
indicated (inie JranIes
2010 Portfolio Income Objective (in Millions)
NOI (Fund Level)
$56.4
Non - Operating Expenses
(0.3)
Debt Service
(10.4)
Net Investment Income
$45.7
Beginning NAV (12/31/09 Projected value)
$732.4
Implied Income Return - on Beginning NAV
6.1%
3 Cornerstone Real Estate Advisers LLC
Occupancy by Property Type (as of 12/31/09)
100%
80%
60%
40%
20%
0%
2010 PORTFOLIO PROFILE & STRATEGY
Total Occupancy at Year -End
10070
90%
85%
80%
70%
60% 1 1 1 1 1 1 1 1 1 i i
2004 2005 2006 2007 2008 2009
* Effective 111109 the hotel was reclassified as "core," prior period
occupancy was re- stated to be comparable
Expirations by Property (Commercial Properties - Office, Industrial, Retail)
Property Type
92%
68%
81%
79%
92%
2014
Office
1,248,132
9%
Apartments Hotel Industrial
28%
Office Retail
2010 PORTFOLIO PROFILE & STRATEGY
Total Occupancy at Year -End
10070
90%
85%
80%
70%
60% 1 1 1 1 1 1 1 1 1 i i
2004 2005 2006 2007 2008 2009
* Effective 111109 the hotel was reclassified as "core," prior period
occupancy was re- stated to be comparable
Expirations by Property (Commercial Properties - Office, Industrial, Retail)
Property Type
NRA
2010
2011
2012
2013
2014
Office
1,248,132
9%
6%
28%
6%
9%
Retail
816,146
2%
3%
17%
7%
5%
Industrial
1,908,516
7%
2%
14%
34%
10%
Total Commercial
3,972,794
6%
4%
19%
20%
9%
Debt Summary (as of 12/31/09)
■ Core Portfolio* ❑ Total Portfolio
92%92% 93% 92%
91 %91%
Cornerstone Real Estate Advisers LLC 4
Principal Balance
Property Name
(in millions)
Rate
Maturity Date
Chevy Chase Plaza
$35.0
5.44%
Feb -16
Promenade at Town Center
$34.4
7.20%
Jul -12
Regatta Apartments
$35.0
4.72%
Jan -1 1
The Ridge
$45.0
5.78%
Mar -17
PurelandVI
$14.2
6.02%
Aug -18
Renaissance Creek ( z )
$26.0
LIBOR +210bps
Nov -11
Portfolio Level c3
$0.0
LIBOR +55bps
Jul -11
Total (4)
$189.6
5.58%
«> Purchase price reduced to adjust for higher than market
rate debt
(2) Call options every five years beginning 1112011 through
1112031. Rate changes 1112010 LIBOR +225
(3) $125 million line of credit with
one, one -year extensions, unused fee of 8bp
(4) Total rate is a weighted average of fixed rate debt
■ Core Portfolio* ❑ Total Portfolio
92%92% 93% 92%
91 %91%
Cornerstone Real Estate Advisers LLC 4
CORNERSTONE PATRIOT FUND
Investment Summary
Investment Name
MSA
Type
GMV
% of Total GMV
Occupancy
Lakes of Schuamburg
Chicago, IL
Apartments
$35.2
4.3%
88.5%
Promenade Oaks
Minneapolis, MN
Apartments
$31.5
3.8%
91.0%
Regatta Apartments
Philadelphia, PA
Apartments
$42.1
5.1%
95.4%
The Ridge
Boston, MA
Apartments
$51.8
6.3%
94.7%
Hamilton Crowne Plaza
Washington, DC
Hotel
$82.3
10.0%
67.8%
Spear Street Terrace
San Francisco, CA
Office
$76.7
9.3%
97.1%
The Atrium
Orange County, CA
Office
$60.1
7.3%
67.2%
Chevy Chase Plaza
Washington, DC
Office
$54.6
6.6%
99.7%
Waterway Tower
Dallas -Ft Worth, TX
Office
$18.1
2.2%
80.5%
Bayhill
San Francisco, CA
Office
$38.4
4.7%
100.0%
Colonnade II
Raleigh- Durham, NC
Office
$12.1
1.5%
9.1%
Crossroads Distribution Center
Atlanta, GA
Industrial
$14.9
1.8%
95.7%
Pureland VI
Philadelphia, PA
Industrial
$23.2
2.8%
100.0%
Townsend Distribution Center '
Portland, OR
Industrial
$14.8
1.8%
10.7%
San Fernando Business Center A
Los Angeles, CA
Industrial
$12.7
1.5%
100.0%
San Fernando Business Center B
Los Angeles, CA
Industrial
$6.8
0.8%
100.0%
San Fernando Business Center C
Los Angeles, CA
Industrial
$14.0
1.7%
100.0%
San Fernando Business Center D
Los Angeles, CA
Industrial
$14.0
1.7%
100.0%
San Fernando Business Center E
Los Angeles, CA
Industrial
$8.8
1.1%
100.0%
General Road Business Park '
Riverside, CA
Land
$4.0
0.5%
N/A
Crossroads Land 0)
Atlanta, GA
Land
$1.5
0.2%
N/A
Red Top Plaza
Chicago, IL
Retail
$17.8
2.2%
83.6%
South Lakes Village
Washington, DC
Retail
$30.8
3.7%
96.2%
Renaissance Creek
Sacramento, CA
Retail
$50.7
6.1%
90.0%
Bridgeside Shopping Center
Oakland, CA
Retail
$26.3
3.2%
91.6%
University Park
Denver, CO
Retail
$22.4
2.7%
97.5%
Promenade at Town Center
Los Angeles, CA
Retail
$60.0
7.3%
97.3%
Total /Weighted Average
$825.4
100.0%
84.0%
Forward Commitments
Investment Name MSA Type Acquisition Price Timing
Bellegrave Riverside, CA Industrial -Dev $50.9 1 Q201 0
<u Value- addC61 investment
(2) A reserve for write -clown totaling $24.9 million was Cohen in 2009
5 Cornerstone Real Estate Advisers LLC
2010 PORTFOLIO PROFILE & STRATEGY
US Economic and Real Estate Market Outlook as of January 18, 2010
Economy and Employment
The US economy enters the new year clearly on the path to
recovery with broad gains across most leading indicators. Initial
unemployment claims continue to trend down and average
workweek hours are registering slight gains, a prerequisite to
new hiring. Manufacturers orders, equity markets, and Treasury
spreads are all exhibiting positive trends, as is consumer
sentiment, though progress has been inconsistent. Public sector
stimulus will drive economic growth through thefirst half of 2010,
but both housing and manufacturing are finally exhibiting broad
positive trends which should help spur a sustainable expansion
by m i d -2010.
Housing markets are stabilizing, supported by low mortgage
rates, record housing affordability, and the first -time home buyer
tax credit. Home sales volume is up substantially across all regions
of the country, existing home sales are up over 40% from last
year and are at the strongest pace in almost three years. Home
prices appear to be bottoming, though an expected increase in
foreclosures in coming months will test these levels. Case - Shiller
data through the third quarter 2009 indicates that home prices
are increasing at an annualized 7.7% pace, still about 30% below
peak levels.
Manufacturers are reporting increasing orders and are ramping
up production (especially the tech sector) to replenish thin
inventories and accommodate overseas demand for US goods.
Industrial production has increased for six consecutive months,
trade flows are once again increasing, and manufacturers'surveys
are largely positive across the country for the first time in years
(the Richmond Fed regional survey being the loan exception).
The recovery is tenuous however, with both GDP growth and
employment having yet to post strong gains characteristic
of a sustainable economic recovery. This is underscored by
a downward revision to third quarter GDP from 2.8% to 2.2%
annualized real growth rate.The revision reflects weaker business
investment, consumer spending and inventories than initially
Monthly Job Losses Have Slowed
400
200
0
-200
-400
-600
-800
2007 2008
Source: Bureau of Labor Statistics
2009 2010
Another "Jobless" Recovery
y 6
o` 4
s
3 2
0
0
N 2
3 -4
C
C -6
-8
■ GDP Employment
i
T Forecast
i
i
2007 2008 2009 2010 2011
Source: Cornerstone, Economy.com
reported. Employment markets remain weakeven asjob losses are
easing. December's (preliminary) initial jobs estimate of - 85,000
follows a slight 4,000 job gain in November. Average monthly
job losses have fallen from almost 700,000 in the first quarter to
less than 70,000 in the fourth quarter, with service sector jobs
beginning to post growth. Census Bureau plans to hire about
one million temporary workers through the second quarter will
boost and distort the jobs reports over the next few months, but
underlying trends do support positive momentum. Progress
will be painfully slow though and labor markets will remain
slack through 2010. Unemployment will remain a challenge.
The current headline 10% unemployment rate held steady in
December, with the broader U -6 unemployment rate over 17 %,
indicating that over 15 million workers are now unemployed (or
underemployed). Consumer sentiment has stabilized but has yet
to improve significantly, weighed down by the weak labor market
and stressed household finances.
Real Estate Capital Markets
While value declines continued in the fourth quarter there is
increasing evidencethat prices are approaching a cyclical bottom.
The broad -based Moody's /REAL monthly repeat sales price index
fell another 1.5% in October, a much slower pace of decline
following September's -3.9 %. Through October, the index is
down 36.48% year - over -year and 43.7% since peaking in October
2007. The more narrowly focused Transaction Based Index (TBI),
produced by the MITCenterfor Real Estate and derived from sales
of properties from the NCREIF index, suggests that institutional
property prices may have hit bottom in the second quarter, as the
index moved up 4% in 3Q09. Fourth quarter NCREIF data has yet
to be released but the NPI has exhibited a slower rate of decline
recently with the third quarter's -4.9% appreciation return and
-26.7% change in values over the past year. We anticipate another
two quarters of increasingly slower value write -downs as softer
property market fundamentals impact property incomes and
impact underwriting assumptions.
Cornerstone Real Estate Advisers LLC 6
CORNERSTONE PATRIOT FUND
Transactions markets remain slow but show some encouraging
signs of increasing activity, with stabilized core property offerings
attracting plenty of investor interest. As noted previously, the
steep pricing discounts many were expecting to unfold over
the course of the past year appear more unlikely with significant
pent -up demand for quality assets in top tier markets (and even
in second tier markets). Real Capital Analytics data for November
showed a seasonal slowdown to just $3 billion, 27% off the same
month last year, but preliminary reports suggest a rebound in
December with the market poised for markedly higher sales
activity in 2010.
The new issue commercial mortgage- backed securities (CMBS)
market also showed encouraging, early signs of life in the fourth
quarter as three new issue CMBS deals came to market and for
the most part were well received by bond investors. All three
deals were simple, transparent, carefully and conservatively rated,
single borrower - single loan deals. In all three cases, a relatively
low LTV loan, cross collateralized by multiple properties, was
carved into a small number oftranches, with the notable absence
of a "B- piece" in any of the deals so far. The lowest rated tranche in
the first deal was rated A, while the second two CMBS issues both
had BBB- tranches; investors oversubscribed to the AAA tranches
and needed to be induced with higher than anticipated yields to
buy the BBB- bonds. The LTVs were all in the 50% range.
Office
Reflecting the slower pace of job losses nationally, office vacancy
rose 20 basis points to 16.3% in the fourth quarter reaching its
highest level since mid -2004. Nationally, downtown vacancy
rose 30 basis points to 12.5 %, and suburban vacancy was up 20
basis points to 18.4%. Office vacancy is forecast to continue rising
at a slow rate over the next eighteen months before peaking near
19% in mid -2011, with little support for rent growth until 2012.
Notably, preliminary data for this most recent quarter shows
slightly positive net absorption after three consecutive quarters
of negative absorption, with relatively strong absorption in
Washington DC as well as downtown Chicago, Charlotte, and
Seattle. ManyTexas office markets are projecting occupancy gains
2009 Quarterly Absorption Trends Show Some
Moderation in Demand Weakness
(1st quarter through 4th quarter progression)
1.0%
0.5%
0.0%
-0.5%
-1.0%
-1.5%
Dallas Orange Raleigh San Washington
County Francisco DC
Source: CBRE Econometric Adcisors
this year, with the nation's largest markets (New York, Washington
DC, Chicago and Los Angeles) following in 2011. Office markets
in Florida, Atlanta and most Midwest markets are forecast to lag
the national recovery.
As monthly job losses diminish through 2010 rising office
vacancy will increasingly be driven by new supply, especially in
a few downtown submarkets where large office tower projects
are completed through 2010. These late -cycle CBD projects
delivered over 16 million square feet of new space in 2009 with
another 25 million square feet still under construction, the most
active markets being New York, Washington DC, Seattle, Charlotte
and Miami. Relatively weak pre - leasing activity in New York and
Miami could keep their downtown vacancies elevated for some
time,whilethe other ma rkets'more vi bra nt em pl oyment forecasts
suggests a faster office market recovery. Each of the Patriot Fund
office markets are expected to reach peak vacancy rates this year,
ahead of the national trend, and begin improving in 2011.
Apartments
2010 will be a transitional year for the apartment market with
overall occupancy stabilizing in concert with the labor market late
in the year, followed by some support for slight gains in effective
rents in the coastal barrier markets if the single family home
market stabilizes as forecast. Slower job losses and deep rent
discounts appear to be shoring up occupancies in many markets.
Preliminary fourth quarter data from CBRE Econometric Advisers
indicates US apartment market occupancy held steady again at
92.6 %, a hopeful sign that overall vacancy may be approaching
a peak. This broad national occupancy rate however masks
local trends. The 60 markets surveyed by CBRE /EA were almost
evenly split between gains and losses for the quarter. Several
California markets with lowvacancy (sub 5 %) reported improving
conditions, including San Diego and all three Bay Area metros.
With the supply pipeline closing, these are well positioned to burn
off concessions once the labor market stabilizes in late 2010. In
contrast, Los Angeles, Boston, Philadelphia and Washington DC
all reported increased vacancy, consistent with the typical year-
end trend. Among Patriot Fund markets, occupancy slipped in
each during the quarter ranging from -0.3% in Boston to -1.8%
in Philadelphia. Elsewhere, most of the major Florida markets
(excluding Tampa), as well as Atlanta, Nashville and Memphis
report improved occupancies though vacancy remains high in
the 6% to 10% range, and with a lagging employment growth
forecast these markets could remain challenged for some
time. Texas markets suffered in the quarter as supply remained
overactive.
Industrial
Demand for industrial space remained frozen at year -end and
total availability jumped another 40 basis points to 13.9% in the
fourth quarter to a record high. Market conditions may soon
begin thawing however, with improved prospects for global
trade and a nascent recovery in manufacturing, supporting our
view that vacancy may be approaching its cyclical peak earlier
than many forecasts suggest, though the sluggish nature of this
Cornerstone Real Estate Advisers LLC
2010 PORTFOLIO PROFILE & STRATEGY
recovery indicates vacancy will likely continue rising for a few
more quarters. As with the apartment and hotel sectors, regional
recover patterns are beginning to emerge. Improving trade flows,
particularly with Asia, and tech manufacturing expansion will
likely improve demand drivers in West Coast industrial markets
this year. Fourth quarter data hints at this trend, with most
California ports posting steady or declining availability rates. The
California manufacturers' survey indicates both production and
neworders up sharplytowardsyear -end, and the industrial supply
pipeline is completely closed with virtually no new space under
construction. Among the nation's other large industrial markets,
Atlanta, Chicago, Dallas, and North New Jersey, all reported slight
increases in availability at year -end.
Retail
The retail sectorwas hit hard early in the recession, and December
sales data suggests consumers spending has bottomed. Total
retail sales were up 2.3% (ex-gasoline and autos) year- over -year in
December, the largest annual gain in over two years, with positive
trends through most retail sectors. Holiday sales managed to
finish 2009 slightly above expectations, recognizing we were in
the midst of a crisis in confidence and collapsing retail sales just
one year ago. The University of Michigan and Conference Board
consumer confidence surveys both point to stable consumer
sentiment over the third and fourth quarters, though weak labor
markets, tighter credit market conditions and falling home values
will continue to challenge consumers through most of 2010.
Expectations are for moderate 3% growth in retail sales through
this year.
CBRE /EA estimates the year -end neighborhood and community
shopping center vacancy rate increased 20 basis points to
12.5% at year -end. Relatively tighter market conditions prevail
in the Bay Area, Los Angeles and greater New York metro area
where average vacancy remains near or below 10 %. Midwest
auto manufacturing centers in Ohio and Michigan reported the
highest vacancies ranging from 16 %to 19 %. Among Patriot Fund
markets, the preliminary fourth quarter data shows retail vacancy
in Los Angeles and Washington DC both increased 20 basis
points to 8.1% and 9.9% respectively. Softness was also evident
Hotel Performance and GDP Growth Go Hand -in -Hand
15
T
C
M
10
3
O
5
In
a E
0
� M
CL
5
a>-
D `
GDP Growth (Right)
10
GDP Forecast
Occupancy Change (Left)
V
-15
0
in Oakland where vacancy was up 80 basis points to 9.7 %, and
Chicago increased 30 basis points to 13.7 %. Improving over the
quarter were Sacramento (down 40 basis points but remains high
at 14.2 %) and Denver (down 20 basis points to 12.9 %).
Hotels
November data from Smith Travel Research shows easing year -
over -year declines in occupancy and room rates, suggest hotel
demand will bottom in early 2010.Overall year- to- dateoccupancy
for the first eleven months of 2009 was 56.1 %, down from 61.7%
last year. Room rates averaged $97.77, down 9.1% overall. As
has been the case through the current downturn, rate declines
are sharpest in the full- service segments, down almost 17% in
Luxury and 12% in Upper Upscale chains, and occupancy in each
remains near65% but is down 7% to 10 %. As seen in September's
preliminary data, demand will likely begin to stabilize along with
GDP growth by mid -year but room rates will remain soft in most
markets at least into 2011. Weekly performance data from Smith
Travel through December suggests increasing demand in a few
markets which, if sustained into the new year, would represent
evidence of firming market conditions.
Washington DC continues to rank among the strongest of STR's
"Top 25" markets with 66.6% year -to -date occupancy through
November, the only "Top 25" market to post an occupancy gain,
and the fourth highest year -to -date occupancy behind only New
York (76.9 %), San Francisco (72.7 %), and Oahu (73.3 %). Of the
major markets, occupancy declines through November averaged
-6.1 %, and are steepest in Houston (- 11.7 %) and Detroit (- 11.2 %).
Following the anticipated national economic recovery, overall
hotel demand is forecast to stabilize in mid -2010 led by recovery
in international "gateway" markets, with overall RevPAR forecast
to decline 2% to 5% for the year.
Summary
Looking forward, the recovery is taking hold but remains at risk
through the first half of 2010. Global growth and the weak dollar
are helping support foreign trade and overseas demand for US
manufactured goods, while public spending drives domestic
growth. Financial markets are stabilizing but
banks are reluctant to begin lending again, and
- 10 consumers will remain cautious until job growth
regains momentum late in the year. Consequently,
commercial real estate markets face challenging
5 fundamentals, mounting financial stress
(particularly leveraged owners with refinancing
requirements), and further value declines early in
0 the year. However with supply growth essentially
shut down, moderate job growth in 2011 should
-5 tighten occupancies and provide support for
some rent growth in the higher- occupancy barrier
markets.
-10
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
Source: Smith Travel Global, Economycom, Cornerstone
Michael Gately, Managing Director
Cornerstone Research
Cornerstone Real Estate Advisers LLC
CORNERSTONE PATRIOT FUND
Description
The Lakes of Schaumburg is a garden -style apartment complex
containing twenty seven, two- and three -story buildings. The
buildings are composed of brick veneer and wood siding
exteriors with large atrium windows and cedar balconies with
attractive grid -like lattice detail. Property amenities include
two clubhouses, two outdoor heated pools, two fitness centers
and a biking/jogging trail. The property is situated on a 29.95 -
acre site, with surface parking for 985 vehicles (2.3 spaces/
unit). Units were recently upgraded with new oak cabinets and
countertops.
Location
The property is located within the Village of Schaumburg, IL
and offers a premium location close to all major highways
including IL Route 53,1-355,1-290 and I -90 (toll)
■ O'Hare International Airport is located nine miles east and
downtown Chicago is 26 miles northeast
Investment Strategy
The Lakes represents a core asset located in a mature, barrier
submarket of northwest suburban Chicago (Schaumburg/
Hoffman Estates). The property is in good condition and
should produce stable cash flow returns, however, has minimal
upside potential. The property is targeted for sale to improve the
portfolio asset base.
Average Physical Occupancy
100%
90%
80%
70%
60%
88% 89% 89% 89%
87%
Jk i
4Q08 1Q09 2Q09 3Q09 4Q09
Property Type
Size
Acquisition Date
Acquisition Cost
YE Market Value
2010 NOI Target/
Leverage
Year Built
Apartments
428 Units
July 1, 2004
$38,300,000 ($90,000 /unit)
$35,200,000 ($82,243/unit)
Yield $2,713,765 / 7.7%
None
1987 and 1988
2010 Key Objectives
• Achieve average physical occupancy of 91%
• Maintain property in sale -ready condition with a targeted
sale in the second half of 2010
Market Highlights
Job losses are moderating for Chicago's large, slow growth
economy. 2010 will bring with it a modest improvement in
the employment situation although the metro is likely to see
another year of net average job loss. Unemployment is currently
more than a percentage point above the national average and
not expected to subside until 2011. The credit crisis has been
particularly hard on the local banking and commercial real estate
industries. In 2009, home price declines outpaced the national
average, a sign that stabilization in the Chicago housing market
could lag the national average.
Chicago apartment occupancy has begun to creep upwards after
six quarters of decline. Falling house prices, tax subsidies and
low mortgage rates have enticed some would -be renters into
home ownership, but the weak labor market remains a detriment
to apartment demand. The multifamily supply pipeline is
rapidly closing with completions falling more than 80% from
2008 levels. The apartment market should improve steadily
through next year given the outlook for slowing job losses and
less supply growth. The Schaumburg submarket, however, faces
additional challenges as locally -based Motorola continues with
corporate restructuring.
Cornerstone Real Estate Advisers LLC
2010 PORTFOLIO PROFILE & STRATEGY
Promenade Oaks is a 282 -unit garden -style apartment property
that includes both flats and townhouses and has an average unit
size of 1,210 sf. The project is located on a 30 -acre woodland
site and has 563 parking spaces (2.0 spaces /unit) that include
29 garages, 421 underground spaces with direct access from
units and 113 surface lot spaces. Unique to the submarket is
the plaza level garden courtyards. Property amenities include a
professional fitness center, outdoor pool and newly renovated
clubhouse. The grounds include six ponds with walking paths,
picnic areas and playground.
Location
• Located in Eagan, Minnesota, south of and equidistant to
both Minneapolis and St. Paul
• Easy access to local expressways (I -494, I -35E)
• Located in walking distance to commuter bus stop
Investment Strategy
Promenade Oaks is a core apartment complex that is well -
located with easy access to Minneapolis, St. Paul and the airport.
The strategy is to increase economic occupancy by reducing
concessions and increasing occupancy.
Average Physical Occupancy
100%
90%
80%
70%
60%
90% 90% 91% 91%
87%
4Q08 1Q09 2Q09 3Q09 4Q09
Cornerstone Real Estate Advisers LLC
Acquisition Date
Acquisition Cost
YE Market Value
$43,425,000 ($154,000 /unit)
$31,500,000 ($111,702/unit)
2010 NOI Target/Yield $2,226,364 / 7.1 %
• Continue focus on increasing traffic and improving
occupancy levels
• Improve effective rents by reducing concessions
• Complete waterproofing of the plazas and monitor for
effectiveness
Market Highlights
The sharp economic contraction that followed the 2008 global
financial crisis has eased for the Minneapolis -St. Paul metro
economy with most employment sectors stabilizing, notably
finance, business services and manufacturing; however, net job
losses will continue through the first half of 2010, pushing the
relatively low metro unemployment up another 20 to 30 basis
points. Still, unemployment will remain well below the national
average. With global export demand, consumer spending and
financial markets coming off of cyclical (and record) lows, the
city is as well - positioned for a solid economic recovery as any in
the Midwestern Plains states.
A milder recession locally has translated to better - than - average
performance for the Minneapolis apartment market. Though it
has softened over the past year, occupancy still ranks above the
national average. The trajectory of occupancy and rents should
turn by the middle of 2010 as net positive employment growth
returns. While the Dakota County submarket historically has
posted lower occupancy and rents, submarket performance
should track with the broader Minneapolis market. Townhouse
construction remains active in outlying communities within
the submarket, although no competitive supply is underway
in Eagan. Excess inventory of for -sale single - family homes will
weigh on market performance through the near -term.
10
Description 2010 Key Objectives
CORNERSTONE PATRIOT FUND
Description
Regatta Apartments is a garden -style property that consists of
fifteen, three-story buildings and two, two-story buildings. There
are also six townhouse clusters, with fourteen units offering a
finished basement, unique to the submarket. The project is
located on a 30.85 -acre site and is constructed of wood framing
over concrete slab -on -grade foundations, with surface parking
available for 584 cars (1.73 spaces /unit). The exterior consists of
a combination of stone and vinyl siding, with architectural grade
shingles and metal roofing. Key amenities include controlled
access buildings and nine -foot ceilings, gas fireplaces in select
units, a 6,000 sf clubhouse and leasing center, outdoor pool and
sundeck, and business and fitness centers.
Location
Easily accessible to regional transport network including
1-476,1-276,1-76, Route 202 and the Germantown Pike
• Located twenty miles northwest of downtown Philadelphia
• Philadelphia International Airport is approximately nineteen
miles to the southeast
Investment Strategy
Regatta Apartments is a core property located in a Northeast
barrier market. The strategy is to increase effective rents through
a combination of rent increases and concession reductions.
Average Physical Occupancy
100%
90%
80%
70%
60%
94% 96% 93 /o 0 95%
92%
4Q08 1Q09 2Q09 3Q09 4Q09
Property Type
Size
Acquisition Date
Acquisition Cost
YE Market Value
2010 NOI Target/
Leverage
Year Built
Apartments
338 Units
February 10, 2005
$58,000,000 ($172,000 /unit)
$42,100,000 ($124,556/unit)
Yield $2,989,229 / 7.1 %
$35,000,000, 4.7 %, maturity: 01/11
2004
2010 Key Objectives
• Achieve an average occupancy of 93.5% and net effective
rents of $1,325 per unit
• Track the competition closely to help manage both the
occupancy and concession levels
• Control operating expenses and achieve savings where
possible
Market Highlights
Philadelphia's economy is approaching a bottom and is expected
to resume modest growth in 2010. The local recession has been
mild compared to the rest of the nation, a 3.2% loss in peak
employment for the metro versus a 5.2% loss for the nation thus
far. The metro economy is mature, stable and slow - growing.
By virtue of those characteristics, it outperformed as the nation
fell into the recession, but will likely lag the nation — or more
optimistically, perform on par with the nation — through the
recovery.
The apartment market continues to maintain a higher occupancy
than the US average, although it has declined by more than 2%
from its recent peak. An improvement in occupancy could begin
as early as the first quarter of 2010. The Norristown submarket
experienced a sharp drop in occupancy and rents over the
past year brought on largely by recent construction in adjacent
submarkets. With the supply pipeline for the market and the
submarket closed, apartment performance should recover, albeit
at a slow pace given the modest job growth forecast.
Cornerstone Real Estate Advisers LLC
2010 PORTFOLIO PROFILE & STRATEGY
Description
The Ridge is a garden -style apartment complex that consists of
seven, three- and four -story buildings and a clubhouse. The
property contains 66 -units that are designated as affordable,
available to residents earning up to 80% of the MSAs median
income. The Ridge is located on a 22.6 -acre site and is
constructed of wood framing over concrete slab -on -grade
foundations. The exterior consists of a combination of brick
and vinyl siding. Ample parking is available with spaces for 452
cars (1.71 spaces /unit), including 42 attached and 35 detached
garages. Key amenities include a clubhouse with a fitness center,
business center and a resort -style outdoor swimming pool.
Location
- Centrally located between I- 95/Route 128 loop, Route 2 and
the Massachusetts Turnpike
• Located approximately nine miles west of Boston
• Route 128 west office submarket, one of Boston's larger
suburban submarkets
Investment Strategy
The Ridge is a Class -A core apartment property located in an
in -close barrier - market Boston suburb. The long -term strategy
for this property is to capture a solid income return with a
potential for rent appreciation.
Average Physical Occupancy
100% 96% 97%
93% 95%
91%
90%
80%
70%
60%
4Q08 1Q09 2Q09 3Q09 4Q09
Acquisition Date
Acquisition Cost
February 28, 2006
2010 NOI Target /Yield$3,533,416 /6.8%
2010 Key Objectives
$45,000,000, 5.8 %, maturity: 03/17
• Achieve average annual occupancy of 96%
• Improve net effective rents on renewals
• Effectively manage operating expenses
Market Highlights
Both the Boston economy and apartment market appear to be
stabilizing, setting the stage for a recovery in the second half
of 2010. Occupancy and effective rents in the third quarter
both edged up from mid -year. These are encouraging signs,
though they were helped by seasonal factors. New supply
remains a near -term challenge to apartment occupancy and
rents, but construction activity is set to drop significantly in
2010 and occupancy should remain well above the national
average, making Boston one of the better positioned markets for
recovery.
The recession in Boston has been milder than that the national
trend. Total employment on a seasonally adjusted basis has held
steady for several months. The hard hit professional/business
services sector has stabilized and job losses in the financial sector
have slowed significantly; however, the public sector is stepping
up layoffs and the ongoing contraction in consumer spending
will continue to weigh on the economy. Boston is forecast to see
further job losses into the first half of 2010, but the pace should
remain milder than that in the nation. Initial job growth in late
2010 and 2011 in Boston is expected to be subdued due to this
market's exposure to the financial sector and state budget woes,
which pose some downside risks.
Cornerstone Real Estate Advisers LLC 12
CORNERSTONE PATRIOT FUND
r '
a A f
f l
. rr. M.
Description
Hamilton Crowne Plaza is a fourteen -story full - service business
class hotel, originally designed and built in 1922 as The Hamilton
hotel. It traded as The Hamilton until the mid- 1960's when it
was converted to an office building. The property was restored
to a hotel in 1995. The hotel has excellent access and visibility
and overlooks Franklin Square Park on the south side. The
property is held in a lessee /lessor structure. Amenities include
a full - service restaurant, lounge, Starbucks, a health club and
8,000 sf of flexible meeting space, with an additional 12,000 sf
available at the adjacent Almas Temple.
Location
• Corner of 14th and K streets, in the heart of downtown
Washington DC
• 14th and K are significant arteries in DC, home to major law
firms, national associations and government buildings
• Six blocks from White House, four blocks from Conven-
tion Center and four miles from Ronald Reagan Washington
National Airport
• Within walking distance to major tourist attractions and one
block from the Metro
Investment Strategy
The Hamilton Crowne Plaza is a core asset well located in the
East End CBD submarket of Washington DC, convenient to
both corporate and leisure demand generators.
The hotel has a solid operating history and the Washington DC
hotel market is arguably one of the strongest in the nation. With
high barriers -to- entry, additional supply is likely to be limited.
In addition, owner- oriented franchise agreements allow an
unencumbered disposition strategy.
The investment strategy is to take advantage of the hotel's strong
annual cash flow, while over time benefiting from room rate and
occupancy increases, while focusing on expense management.
Property Type
Size
Acquisition Date
Acquisition Cost
YE Market Value
2010 N01 Target/
Leverage
Year Built
Hotel
318 rooms
July 1, 2004
$59,000,000 ($186,000 /room)
$82,300,000 ($258,805/room)
Yield $5,642,886/6.8% (before reserves)
None
1922 (major update 2001)
2010 Key Objectives
• Attain a $4.8 million NOI and increase RevPAR penetration
index to 95% versus the competitive STR set
• Increase catering revenues through both corporate group
and social markets
■ Leverage new "face- lift" of 14K Restaurant to enhance the
already strong $3.2 million revenue
■ Continue the appeal process for Hamilton Crowne Plaza's
assessed value
Market Highlights
The Washington DC economy continues to experience a mild
recession with total employment down 1.2 %, and unemployment
up from 3.9% to 6.2 %, over the past year. Both job market
readings remain far better than the national averages, due to
continued strong federal government hiring. We forecast that
the metro area job market will stabilize ahead of the nation, and
begin to see some growth, albeit slow, in 2010. A healthy labor
market recovery in line with the nation is expected for 2011.
One of the top performing hotel markets in the nation,
Washington DC has seen year -to -date occupancy, ADR and
RevPAR fall by less than half of the Top 25 market average. With
trailing occupancy down by less than 4% compared to close to
10% for national average, the DC market is expected to be one
of the first where operators can begin pushing rates. The market
is well - positioned for recovery, but an active supply pipeline
remains a significant challenge. Within the District itself, new
supply has been predominantly extended stay product.
2009 Average Physical Occupancy
100%
90%
80%
70%
64%
60%
4Q08
82%
1Q09 2Q09 3Q09 4Q09
13 Cornerstone Real Estate Advisers LLC
201 PORTFOLIO PROFILE & STRATEGY
Description
YE Market Value I'�
2010 NOI Target /Yield
Leverage
Year Built
(" Valued but not included in 20�
2010 Key Objectives
$26,000,000 ($51 /sf)
($514,337) / -2.0%
None
2010
)9 year -end assets pending acquisition
A development joint venture with Birtcher Development
Company for an 18 building industrial park totaling 505,100 sf.
The buildings range from approximately 7,000 to 48,000 sf.
Location
■ Near the intersection of Bellegrave Avenue and Van Buren
Boulevard
• Within 1.5 miles of the Van Buren Boulevard access to High-
way 60 and approximately 2.5 miles east of Interstate 15
• Seven Miles southeast of Ontario Airport
Investment Strategy
Bellegrave is near completion with minimal pre - leasing. The
near -term strategy is to complete the initial lease -up of the
project. Upon stabilization, the long -term strategy is to maintain
strong occupancy and grow income value.
• Acquire property in first quarter
• Aggressively lease available space
• Evaluate all expenses for potential swings
Market Highlights
Riverside warehouse market fundamentals remain challenged
in the near -term but are expected to strengthen as the national
recovery gains momentum over the next two years due to its
proximity to the supply- constrained Los Angeles/Long Beach
warehouse markets. For now, supply growth is slowing
though excess space will continue to outpace falling demand.
Cornerstone Research forecasts that the market will soften further
through 2011. Recovery in the Riverside warehouse market is
dependent on the return of consumer demand nationally.
The subject property is located in the Riverside submarket, the
largest in the metro area with 113 million square feet. As is
the case throughout Riverside County, the submarket supply
pipeline has outpaced demand in the past few years. Submarket
availability in the third quarter was 19.2 %, up sharply from single
digit levels that had been the norm for much of the previous
fifteen years. New construction in the submarket has finally
slowed to historically low levels and will remain low through
our forecast period.
Cornerstone Real Estate Advisers LLC 14
Acquisition Date 1Q 2010
Acquisition Cost $50,900,000
CORNERSTONE PATRIOT FUND
Description
Crossroads Distribution Center is a two - building
industrial project situated on a 19.14 -acre site, including
approximately 10 acres of vacant land. The buildings
are constructed of architectural tilt -up concrete, have an
energy efficient R14 -roof system, and can accommodate
16,000 - 117,000 sf tenants. The property contains 388
surface parking spaces. Building 100 has 250 foot bay
depths, 30 -foot clear height, 47 docks and two grade
level doors. Building 200 has 200 foot bay depths,
24 -foot clear height, and 44 docks.
Location
Easily accessible via Peachtree Industrial Boulevard,
Route 141, Route 120, I -85, I -285 and I -985
■ Hartsfield- Atlanta International Airport is twenty -seven
miles southwest and Dekalb- Peachtree Airport is ten miles
southwest
Investment Strategy
Crossroads Warehouse is a well - constructed asset in a solid in-
fill location. A large tenant (91,221 sf) vacated on 12/31/09,
and upcoming vacancies in 2010 necessitate stabilization of the
rent roll. A value enhancement strategy also exists in which an
additional building may be built on the remaining 10 acres or a
build -to -suit may be evaluated.
Leasing
100%
90%
80%
70%
60%
I�
100% 100% 100% 100%
Size
Acquisition Date
Acquisition Cost
YE Market Value
2010 NOI Target/
Leverage
Year Built
322,780 sf /10.1 acres
July 1, 2004
$12,500,000 ($39 sf) /$6,200,000
$14,850,000 ($46/sf)/$1,500,000
Yield $806,503 / 5.4% (Industrial)
None
2001
2010 Key Objectives
• Focus on renewal of two leases expiring in 2010
• Concentrate marketing efforts on leasing the existing and
future vacancies
■ Continue to market the remaining 10 acres for anew building
or build -to -suit opportunity
Market Highlights
The Atlanta metro economy remains in the midst of a deep and
pervasive recession. Unemployment exceeds the national rate
though the pace of job losses appears to be easing. Atlanta has
lost nearly 8% of payroll employment from its peak compared to
5.2% for the nation. All sectors of the metro economy have been
impacted, and Atlanta's recovery is forecast to lag the nation.
Construction, finance and manufacturing, some of the earliest
and most severely impacted sectors, are just beginning to show
signs of stabilization.
Rising unemployment and tight household credit conditions
have led to a contraction in consumption, and demand for
Atlanta industrial space has been sharply impacted as a result.
2009 net absorption has fallen by 17 million square feet, the
most severe decline on record. Industrial fundamentals are not
expected to improve until 2011. The Northeast I -85 corridor
submarket has in recent years outperformed the market, and
with the submarket supply pipeline essentially closed the
submarket should continue to outperform as the recovery gains
traction.
Cornerstone Real Estate Advisers LLC
nUPUILY IYPU 111UU3u1auL.a11u
4Q08 1Q09 2Q09 3Q09 4Q09
2010 PORTFOLIO PROFILE & STRATEGY
Description
Pureland VI is a single tenant industrial warehouse /distribution
building situated on 77.3 acres in the Pureland Industrial
Complex in Bridgeport, NJ (Philadelphia MSA). The building
is constructed of metal seamed panels with masonry block
lower section. The building, built in 1991, features 25 -foot
clear heights, 50 dock high trailer positions and two ground
level truck doors. Pureland VI accommodates 246 vehicles
(0.4/1,000) with parking for 91 trailers.
Location
Excellent access to New York City, Northern New Jersey,
Philadelphia and Baltimore/Washington markets
■ 12 miles Southeast of Philadelphia
■ Near I -295 Exit to interchange
Investment Strategy
Pureland VI is a strong core asset 100% leased to a credit tenant
until mid -2013. The property is located in a mature warehouse
market with excellent access to regional highway systems and
major markets. Included with this investment is the possible
opportunity to enhance returns with a 172,000 sf expansion.
Leasing
100%
90%
80%
70%
60%
100% 100% 100% 100% 100%
4Q08 1Q09 2Q09 3Q09 4Q09
Property Type
Size
Acquisition Date
Acquisition Cost
YE Market Value
2010 NOI Target/
Leverage
Year Built
Industrial
597,232 sf
September 30, 2008
$28,550,000 ($48 /sf)
$23,200,000 ($39 /sf)
Yield $2,351,956 / 10.1 %
$14,165,725, 6.0 %, maturity: 08/18
1991
2010 Key Objectives
• Complete preliminary work needed for a possible future
expansion
• Continue dialogue with tenant regarding a possible
expansion and lease extension
• Track the tenant's financial stability, currently A2 -rated by
Moody's
Market Highlights
The Philadelphia industrial market continued to deteriorate
at a fast pace through the third quarter 2009, though negative
net absorption moderated over the past two quarters. The
overall recession is relatively mild in Philadelphia, but dismal
performance of the construction, manufacturing and retail
sectors does not bode well for industrial space demand.
Cornerstone Research forecasts that the market will continue
to struggle into the first half of the 2010 and begin to stabilize
later in the year with the local economy. Initial market recovery
in 2011 is expected to be slow.
The greater Philadelphia economy, including Camden, NJ and
Wilmington, DE, is suffering a broad -based recession, led by
double digit decline in construction jobs. Manufacturing has
suffered a structural decline in the area and the pace of contraction
quickened to above 6% year- over -year. Total employment is
forecast to stabilize around mid 2010. Employment recovery is
forecast to be sluggish in 2011 before gaining traction in 2012.
Cornerstone Real Estate Advisers LLC 16
CORNERSTONE PATRIOT FUND
Description
San Fernando Business Center is a five - property industrial
investment totaling 590,570 sf on 28.1 acres of land in San
Fernando, CA. The concrete tilt -up industrial buildings on seven
separate parcels, were completed in 1989. The buildings range
from 71,000 to 147,000 sf. There are 1,085 parking spaces for
a parking ratio of 1.8 spaces per 1,000 sf. The project contains
47 dock -high loading doors and 94 dock loading positions with
ability to install monument signage.
Location
■ The property is located at the corner of 8th Street and Arroyo
Street
• Convenient access to the I -210, SR -118, I -5 and I -405
Freeways
• Located in the East San Fernando Valley industrial submar-
ket of Los Angeles
Investment Strategy
San Fernando Business Center is a core asset located in an infill
industrial location, in a stable market, within the confluence of
four major freeways. The property is in good physical condition
and is currently valued below replacement cost and 100% leased.
This high quality asset should deliver above average returns over
the next several years.
Leasing
100%
90%
80%
70%
60%
93% 93% 88% 88% 100%
Property Type
Size
Acquisition Date
Acquisition Cost
YE Market Value
2010 N01 Target/
Leverage
Year Built
Industrial
590,570 sf
August 22, 2008
$69,000,000 ($117/sf)
$56,200,000 ($95 /sf)
Yield $4,293,259 / 7.6%
None
1989
2010 Key Objectives
• Continue to establish good working relationships with
tenants
• Address deferred maintenance issues as necessary
Market Highlights
Los Angeles is the second largest warehouse market in the
nation, with demand driven by trade flows through the ports
of Los Angeles and Long Beach. Availability in the market
spiked 330 basis points to 9.6% over the past four quarters,
but Los Angeles remains among the tightest industrial markets
by merit of relatively high barriers to new supply with new
supply growing less than 1% annually in recent years despite
tight market conditions. New construction is at its lowest
level since the 1990's. We forecast this market will continue
to soften through next year, but remain strong relative to the
nation. Recovery in the warehouse market towards the latter
half of 2010 is dependent on the return of consumer demand
nationally.
Cornerstone Research forecasts the Northeast Valley, which
is part of the San Fernando Valley group of submarkets, will
continue to outperform the Los Angeles market. Vacancy in the
Northeast Valley is currently 7.2 %.
17 Cornerstone Real Estate Advisers LLC
4Q08 1Q09 2Q09 3Q09 4Q09
2010 PORTFOLIO PROFILE & STRATEGY
Description
Townsend Distribution Center consists of three LEED gold -
certified industrial warehouse buildings totaling 397,934 sf
that were constructed in 2008. The buildings are located on
two near - adjacent sites within the Townsend Business Park in
Fairview, Oregon. The property has an above - market parking
ratio of 0.83 per 1,000 sf.
Location
■ Less than one mile from Interstate 84
• Approximately 16 miles east of Downtown Portland
• Approximately 12 miles east of Portland International
Airport
Investment Strategy
Townsend Distribution Center was completed in summer 2008
with no pre - leasing. The near -term strategy is to complete the
initial lease -up of the project. Upon stabilization, the long -term
strategy is to maintain the buildings in excellent condition,
sustain strong occupancy, and grow income and value.
Leasing
100%
80%
60%
40%
20%
11%
0% 0% 0% 0% 0%
4Q08 1Q09 2Q09 3Q09 4Q09
Property Type
Size
Acquisition Date
Acquisition Cost
YE Market Value
2010 NOI Target/
Leverage
Year Built
Industrial
397,934 sf
August 13, 2008
$24,400,000 ($61 /sf)
$14,800,000 ($37 /sf)
Yield $(385,653) / -2.6%
None
2008
2010 Key Objectives
• Aggressively lease available space
• Finalize lease -terms with two prospective tenants to occupy
approximately 70,000 sf
• Achieve effective gross revenue of $305,000
Market Highlights
Availability increased 310 basis points from prior year levels
in the Portland warehouse market, due to decreased import
and export activity, and weak consumer demand; however
this market remains one of the tightest in the nation, and we
forecast it will continue to outperform the nation due to its
strong transportation sector, supported by the Port of Portland,
rails, and highway system. The long -term economic outlook
for Portland remains positive due the area's tech sector and its
favorable migration trends.
Over the past few years, warehouse development has been
concentrated in the subject's Northeast submarket. Submarket
inventory increased 16% over the past two years, and large spec
space has been slow to lease. Currently, one project is under
construction in the submarket: a 415,000 square feet FedEx
distribution center.
Cornerstone Real Estate Advisers LLC 18
CORNERSTONE PATRIOT FUND
Description
The Atrium consists of two, ten -story office buildings connected
by an enclosed atrium. The steel- framed twin -tower structure
has one level below grade and is accompanied by a five -level
parking garage, with parking for 1,036 vehicles and surface
parking for 153 vehicles. The project is located on a 6.23 -
acre site and features a green slate exterior. The asset is one
of the premier buildings in the submarket, with a four -star
restaurant (Bistango) and other retail and banking amenities.
Several tenants have private exterior terraces overlooking the
courtyard.
Location
r+ Less than one mile south of I -405 (San Diego Freeway) and
one mile north of Route 73
• Within Orange County's desirable Airport Area submarket
• Less than one -half mile east of John Wayne /Orange
County Airport
Investment Strategy
The Atrium is a class A office building located in Orange County,
which has recently experienced softness due to the mortgage
crisis and the recession. The strategy for this asset is to stabilize
the rent roll and position the property to take advantage of the
expected recovery.
Leasing
100%
90%
80%
70%
60%
19
Property Type
Size
Acquisition Date
Acquisition Cost
YE Market Value
2010 NOI Target/
Leverage
Year Built
Office
291,612 sf
July 1, 2004
$68,100,000 ($236/sf)
$60,100,000 ($206 /sf)
Yield $1,477,771 / 2.5%
None
1986
2010 Key Objectives
• Aggressively market available space
• Keep open communications with existing tenants
• Evaluate all expenses for savings
Market Highlights
The recession began early in Orange County, reflecting the
local concentration of residential mortgage and housing related
employers, and by many measures has been worse in California.
Local employment is expected to stabilize in early 2010 and slow
job growth will return in the second half of next year. Job losses
in financial services, which have declined 30 %, have leveled
off. More recently, weakness is evident in the leisure/hospitality
and manufacturing sectors. While the job market struggles,
Orange County's demographic trends remain favorable over the
longer -term with population and households expected to grow
1% annually over the next five years, matching the national
average.
Office demand began weakening in late 2006 as the national
housing market collapsed. This office market is still among
the weakest in the nation, and vacancy is near 20 %, a level not
seen here since 1992. The supply pipeline, which has been
very active in the past few years, has effectively shut down.
Cornerstone Research forecasts the market will stabilize along
with employment in 2010, with rent growth returning in 2012.
The Airport Complex Submarket is the largest in Orange County
with 12.8 million square feet and ranks among the weakest.
Vacancy was 22.2% in the third quarter, and sublease space has
become a significant factor pushing the overall availability rate
near 30 %.
Cornerstone Real Estate Advisers LLC
4Q08 1Q09 2Q09 3Q09 4Q09
2010 PORTFOLIO PROFILE & STRATEGY
1 -
_ W E-
T
_ -. 71
Property Type
Size
Acquisition Date
Acquisition Cost
YE Market Value
2010 NOI Target/
Leverage
Year Built
Office
189,884 sf
October 1, 2007
$68,500,000 ($361/sf)
$38,400,000 ($210 /sf)
Yield $5,359,296 / 14.0%
None
1978
Description
Bayhill I & II is a two building office complex located in San
Bruno, California in a park -like setting. Bayhill I is six stories
and totals 92,300 sf. Bayhill II is three stories plus basement
and totals 97,584 sf. The two office buildings are concrete
frame construction with an exposed concrete finish. Both
buildings have updated lobbies with marble floors, recessed
lighting and modern contemporary finishes and furniture.
Bayhill I & Bayhill II have an average floor plate size of
16,000 sf and 26,000 sf, respectively. The property has 614
surface parking spaces (3.2 spaces /1,000 sf).
Location
- Ten minutes from San Francisco International Airport and
20 minutes from downtown San Francisco
• Easy access from interstates 280, 380 and 101
• Walking distance to a variety of restaurants and shops
Investment Strategy
Bayhill I & II is a core asset situated within a historically stable
market. The property is in good physical condition and is
currently valued below replacement cost. The property is 100%
leased to the Gap at above market rents through June 2012. The
property is a strong cash flow performer for the Fund.
Leasing
100%
90%
80%
70%
60%
2010 Key Objectives
• Continue to maintain a strong relationship with the Gap
• Monitor Gap Financials, currently BB+ by Standard &
Poor's
• Continue to establish relationships with the Gap's
subtenants, to target viable candidates for direct leases upon
the expiration of the Gap lease
• Continue phased implementation of multi -year plan to address
deferred maintenance issues identified at acquisition
Market Highlights
Although the San Francisco office market has deteriorated in the
current recession, it remains one of the tightest in the nation,
and the strongest market in California, despite having to deal
with 2.4 million square feet of new office space delivered in
2008 (a 2.8% increase in stock, the highest level since 2002).
Cornerstone Research forecasts San Francisco will be an early
recovery market, with office vacancy stabilizing in 2010 and
rent growth following in 2011, due to both improving leasing
fundamentals and limited new supply. The finance sector, which
began shedding jobs in 2007, appears to have stabilized already,
though the professional/business services sector should do so
until 2010.
San Bruno/Millbrae is a small submarket with one million
square feet, all built prior to 1990. Vacancy in the submarket
is currently 16 %, below the 18.5% vacancy rate in the total San
Francisco Peninsula group of submarkets. While vacancy can be
volatile given the small size of the submarket, and topped 30%
in the last recession, the combination of stabilizing demand
fundamentals and no new construction suggest that a surge in
vacancy is unlikely.
Cornerstone Real Estate Advisers LLC 20
4Q08 IQ09 2Q09 3Q09 4Q09
CORNERSTONE PATRIOT FUND
�A■>j� 141
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Description
Chevy Chase Plaza is an eight -story office building constructed
of steel and poured -in -place concrete with a granite and
architectural precast concrete exterior with tinted glass spandrels.
The building is situated on a 0.60 -acre site and has three levels
of underground parking (1.5 spaces /1,000 sf) and street -level
retail. The property is located in the prestigious Chevy Chase
shopping area and is connected to the Metro and area shopping
via an underground tunnel.
Location
• Located five miles northeast of the Washington DC CBD
• Within two blocks of Chevy Chase Metro stop
• Twenty minutes northwest of Ronald Reagan Washington
National Airport
Investment Strategy
Chevy Chase Plaza is a core investment located in a prime
location in the Washington DC submarket. The building's
occupancy has remained steady at close to 100% since its 2004
acquisition. The current strategy is to maintain the high quality
of the asset.
Leasing
100%
90%
80%
70%
60%
21
Property Type
Size
Acquisition Date
Acquisition Cost
YE Market Value
2010 NOI Target/
Leverage
Year Built
Office
171,206 sf
July 1, 2004
$53,800,000 ($314/sf)
$54,600,000 ($325/sf)
Yield$4,095,888 / 7.5%
$35,000,000, 5.4 %, maturity: 02/16
1989
2010 Key Objectives
• The property is operationally stable and there are no major
capital or tenant - related events projected for 2010
• Continue to focus on increasing the operational efficiency of
the building in 2010
Market Highlights
The Washington DC office market saw negative net absorption
drop sharply over the past two quarters, raising hope that
space demand is stabilizing. New supply, however, is active
and continues to push vacancy steadily up. This will remain
a significant challenge to the market through 2010, especially
in the District. Vacancy is likely to rise well into 2010 as the
pipeline clears out the last block of speculative new supply in
this cycle; however, the market should maintain vacancy well -
below the national average and lead the nation in recovery.
The Washington DC economy continues to experience a mild
recession with total employment down 1.2% over the past year
and unemployment up from 3.9% a year ago to 6.2 %. Both
these job market readings remain far better than the national
averages, thanks to continued strong federal government hiring.
Cornerstone Research forecasts that the metro area job market
will begin to see some growth, albeit slow, in 2010, ahead of the
nation. A healthy labor market recovery in line with the nation
is expected for 2011.
Cornerstone Real Estate Advisers LLC
4Q08 1Q09 2Q09 3Q09 4Q09
2010 PORTFOLIO PROFILE & STRATEGY
1
Description
Colonnade II is a five - story, Class A office building containing
a total of approximately 127,000 net rentable sf. The building
mirrors an existing adjacent building and features an attractive,
decorative facade of concrete and glass. There is a surface
parking ratio of 3.5 per 1,000 sf. The two -story atrium contains
high -speed elevators, patterned granite floors and high -end
interior finishes.
Location
• The property is located on Six Forks Road, a primary artery
linking the Northern suburbs with downtown Raleigh
• Located one -half mile from the I -540 loop
Investment Strategy
Colonnade II was acquired as a forward commitment
development joint venture investment with the developer. The
strategy is to complete the lease -up and hold for a moderate -
term.
Leasing
100%
75%
50%
25%
0%
4Q08 1Q09 2Q09 3Q09 4Q09
Property Type
Size
Acquisition Date
Acquisition Cost
YE Market Value
2010 NOI Target/
Leverage
Year Built
Office
126,926 sf
May 22, 2008
$17,165,088 ($135/sf)
$12,075,000 ($95 /sf)
Yield $(233,548) / -1.9%
None
2008
2010 Key Objectives
• Aggressively lease available space
• Finalize 16,000 sf lease currently under negotiation
• Effectively manage operating expenses during lease -up
period
Market Highlights
Raleigh's economy stabilized in the second quarter of 2009,
ahead of the nation. The metro area's government, education
and health care sectors even added jobs through the recession.
The business services and technology sectors showed signs
of rebounding in the last quarter of 2009. These encouraging
developments help pave the way for stronger payroll gains by
the middle of 2010, positioning Raleigh as one of the job growth
leaders among major markets. An oversupply of commercial
and residential real estate and ongoing restructuring among the
area's major employers will weigh on the metro economy in the
near -term.
The Raleigh office market is holding up much better that it did
in the aftermath of the 2001 recession and "tech wreck" when
market vacancy skyrocketed to over 25 %. This time, vacancy
should peak close to 16% before falling again, a testament to
the degree to which the market has diversified and matured
since the previous cycle; however, recently delivered and
underway development, especially in the Six Forks and the
Research Triangle submarkets, has created a near -term supply
and demand imbalance.
Cornerstone Real Estate Advisers LLC 22
0%
9%
9%
9%
9%
4Q08 1Q09 2Q09 3Q09 4Q09
Property Type
Size
Acquisition Date
Acquisition Cost
YE Market Value
2010 NOI Target/
Leverage
Year Built
Office
126,926 sf
May 22, 2008
$17,165,088 ($135/sf)
$12,075,000 ($95 /sf)
Yield $(233,548) / -1.9%
None
2008
2010 Key Objectives
• Aggressively lease available space
• Finalize 16,000 sf lease currently under negotiation
• Effectively manage operating expenses during lease -up
period
Market Highlights
Raleigh's economy stabilized in the second quarter of 2009,
ahead of the nation. The metro area's government, education
and health care sectors even added jobs through the recession.
The business services and technology sectors showed signs
of rebounding in the last quarter of 2009. These encouraging
developments help pave the way for stronger payroll gains by
the middle of 2010, positioning Raleigh as one of the job growth
leaders among major markets. An oversupply of commercial
and residential real estate and ongoing restructuring among the
area's major employers will weigh on the metro economy in the
near -term.
The Raleigh office market is holding up much better that it did
in the aftermath of the 2001 recession and "tech wreck" when
market vacancy skyrocketed to over 25 %. This time, vacancy
should peak close to 16% before falling again, a testament to
the degree to which the market has diversified and matured
since the previous cycle; however, recently delivered and
underway development, especially in the Six Forks and the
Research Triangle submarkets, has created a near -term supply
and demand imbalance.
Cornerstone Real Estate Advisers LLC 22
CORNERSTONE PATRIOT FUND
11
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Description
Spear Street Terrace is an 18 -story office building located in
downtown San Francisco. Building floor plates range from
14,000 sf to 16,500 sf, many with exceptional bay views. The
building construction is steel frame with pre -cast concrete faced
with red -gold brick panels with a landscaped courtyard, and
private landscaped terraces on the 6th and 18th floors. The
building is situated on a 0.50 -acre site and contains underground
parking for 76 vehicles and surface parking for 25 vehicles
(0.4 spaces /1,000 sf). Ground floor retail includes Starbucks.
Numerous restaurants, shops and service retail are located
within 1 -2 blocks.
Location
• Easy access to local freeways and the Bay Bridge
• BART, trans -bay ferries, local and regional bus services are all
within walking distance
• Within close proximity to both San Francisco and Oakland
International airports
Investment Strategy
With its spectacular bay views and South Financial District
location, Spear Street Terrace is an exceptional asset with the
potential for long -term growth. The property is in excellent
physical condition and is currently valued below replacement
cost. This high quality asset should be well - positioned coming
out of the recession.
Leasing
100%
90%
80%
70%
60%
4Q08
,;
Property Type
Size
Acquisition Date
Acquisition Cost
YE Market Value
2010 NOI Target/
Leverage
Year Built
Office
246,563 sf
July 1, 2004
$69,700,000 ($283/sfJ
$76,700,000 ($311 /sfJ
Yield $5,268,178 / 6.9%
None
1985
2010 Key Objectives
■ Aggressively market available space for lease and negotiate
lease renewals to maximize revenue
• Achieve rental rates of $33 to $40 psf depending on floor
location and views from specific suites
• Continue cost control focus; reduce operating expenses 0.8%
from 2009 actuals
Market Highlights
Although the San Francisco office market has deteriorated in the
current recession, it remains one of the tightest in the nation,
and the strongest market in California, despite having to deal
with 2.4 million square feet of new office space delivered in
2008 (a 2.8% increase in stock, the highest level since 2002).
Cornerstone Research forecasts San Francisco will be an early
recovery market, with office vacancy stabilizing in 2010 and
rent growth following in 2011, due to both improving leasing
fundamentals and limited new supply. The finance sector, which
began shedding jobs in 2007, appears to have stabilized already,
though the professional/business services sector should do so
until 2010.
The Financial District, the largest submarket with 26 million
square feet, historically outperforms the market. This submarket
has one project currently under construction: 1 Kearney Street.
This 112,410 square foot project is scheduled to deliver in early
2010 with no leasing completed to date.
Cornerstone Real Estate Advisers LLC
2010 PORTFOLIO PROFILE & STRATEGY
Property Type
Size
Acquisition Date
Acquisition Cost
YE Market Value
2010 NOI Target/
Leverage
Year Built
Office
221,941 sf
February 14, 2007
$27,480,000 ($124/sf)
$18,100,000 ($82 /sf)
Yield $1,495,584 / 8.3%
None
1983
Description
Waterway Tower is a 13 -story office building located in Irving,
TX (Las Colinas). The exterior is clad in brick and blue -green
monolithic glass and rises in an asymmetrical series of eight
corners and curves. The building is finished with Travertine
floors and cherry wood accent bands inserted into textured walls.
The property is situated on a 3.9 -acre site and has an attached
4 -story parking deck with 833 spaces (3.78 spaces /1,000 sf).
The building contains a full service deli and on -site management
and security station.
Location
r Located 1/4 mile east of the intersection of Wingren Road
and Las Colinas Blvd in the Urban Center submarket
■ 11 miles east of the Dallas CBD, in close proximity to DFW
International Airport (7 miles), easy access to Hwy 114, LBJ
Freeway (Hwy 635), and the Tollway
Investment Strategy
The investment strategy for Waterway Tower is to increase
occupancy to enhance value. The property is valued well below
replacement cost, with potential upside once market conditions
improve.
Leasing
100%
90%
80%
70%
60%
2010 Key Objectives
• Aggressively market all available space
• Negotiate early renewals to maximize revenues
• Continue to focus on expense savings
Market Highlights
The Dallas metro economy, like its Texas counterparts, has
performed relatively well through the recession. Job losses have
been less severe, with Dallas' total employment down 2% from
peak levels compared to a loss of 5.2% for the nation. The metro
area's jobs situation is now stabilizing, and Dallas is expected
to exit from the recession ahead of the US. Given Dallas' size
and linkages to the national economy, its near -term recovery is
however subject to many of the challenges facing the broader
national economy
Dallas' long -run equilibrium office vacancy characteristically
runs high, averaging 22% over the past twenty years compared
to 14% for the nation. As market fundamentals began to improve
following the 2001 recession, landlords were able to grow rents
even as vacancy fell from 27% to 23 %. Following the current
recession, vacancy is expected to peak closer to 23 %, paving the
way for an early market recovery even though the vacancy will
still remain high relative to the nation. While the Las Colinas
submarket is not expected to outperform the market, Class
A submarket vacancy is expected to remain below the metro
average.
Cornerstone Real Estate Advisers LLC 24
4Q08 1Q09 2Q09 3Q09 4Q09
CORNERSTONE PATRIOT FUND
Description
Bridgeside Shopping Center is a neighborhood shopping center
anchored by a Nob Hill Foods (an upscale Raley's supermarket).
The center also contains 38,962 sf of additional shop space and
7,179 sf of office space. Bridgeside has 422 surface parking
spaces for a parking ratio of 4 spaces /1,000 sf.
Total 70,717 67.3%
Location
• Located in Alameda, an affluent Oakland suburb
• Located along a primary "going- home" thoroughfare
Investment Strategy
Bridgeside Shopping Center is a grocery- anchored shopping
center in an infill location within the San Francisco Bay Area.
The investment strategy is to provide a stabilized income return
for the portfolio with the opportunity for future rent growth
through shop space renewals.
Leasing
100%
90% 91 /o
0 92% 92% 92%
90%
80% F1
70%
60%
4Q08 1Q09 2Q09 3Q09 4Q09
Property Type
Size
Acquisition Date
Acquisition Cost
YE Market Value
2010 NOI Target/
Leverage
Year Built
Retail
105,118 sf
May 14, 2007
$40,500,000 ($385/sf)
$26,300,000 ($250 /sf)
Yield $2,023,306 / 7.7%
None
2007
2010 Key Objectives
• Execute three new leases totalling 4,586 sf, and achieve a
96% occupancy by December 2010
• Monitor tenant financial status and maintain tenant relation-
ships to maximize occupancy
Market Highlights
The Oakland retail market will remain challenged through next
year as the metro area struggles to regain prior employment and
consumer - spending levels. Oakland's employment recovery
is forecast to lag the nation's. The March 2010 closing of the
NUMMI plant in Fremont, a joint venture between GM and
Toyota, will add an additional 4,600 workers to the unemployed
ranks in the region. Total employment losses in Oakland have
been in line with the national decline.
The median household income in Alameda is $70,292, which
is high relative to the national average, but below average for
the San Francisco /Oakland metro area. Costar reports four
neighborhood centers in Alameda totaling 366,963 square feet
are currently 9.6% vacant, up from 6.7% last year. Long -term
economic growth in Alameda could be fueled by the proposed
Alameda Landing, a mixed -use master - planned development on
the US Navy's former Fleet Industrial Supply Center site.
Demographic Profile
Bridgeside Trade Area
Square
%of
Expiration
Major Tenants
Feet
NRA
Date
Nob Hill Foods (Raley's)
58,977
56.1%
6/26/2027
Pet Food Express
6,379
6.1%
2/28/2017
United States (Recruiting Center)
5,361
5.1%
1/8/2014
Total 70,717 67.3%
Location
• Located in Alameda, an affluent Oakland suburb
• Located along a primary "going- home" thoroughfare
Investment Strategy
Bridgeside Shopping Center is a grocery- anchored shopping
center in an infill location within the San Francisco Bay Area.
The investment strategy is to provide a stabilized income return
for the portfolio with the opportunity for future rent growth
through shop space renewals.
Leasing
100%
90% 91 /o
0 92% 92% 92%
90%
80% F1
70%
60%
4Q08 1Q09 2Q09 3Q09 4Q09
Property Type
Size
Acquisition Date
Acquisition Cost
YE Market Value
2010 NOI Target/
Leverage
Year Built
Retail
105,118 sf
May 14, 2007
$40,500,000 ($385/sf)
$26,300,000 ($250 /sf)
Yield $2,023,306 / 7.7%
None
2007
2010 Key Objectives
• Execute three new leases totalling 4,586 sf, and achieve a
96% occupancy by December 2010
• Monitor tenant financial status and maintain tenant relation-
ships to maximize occupancy
Market Highlights
The Oakland retail market will remain challenged through next
year as the metro area struggles to regain prior employment and
consumer - spending levels. Oakland's employment recovery
is forecast to lag the nation's. The March 2010 closing of the
NUMMI plant in Fremont, a joint venture between GM and
Toyota, will add an additional 4,600 workers to the unemployed
ranks in the region. Total employment losses in Oakland have
been in line with the national decline.
The median household income in Alameda is $70,292, which
is high relative to the national average, but below average for
the San Francisco /Oakland metro area. Costar reports four
neighborhood centers in Alameda totaling 366,963 square feet
are currently 9.6% vacant, up from 6.7% last year. Long -term
economic growth in Alameda could be fueled by the proposed
Alameda Landing, a mixed -use master - planned development on
the US Navy's former Fleet Industrial Supply Center site.
Demographic Profile
Bridgeside Trade Area
1 Mile
3 Mile
5 Mile
Median Household Income
$55,489
$48,195
$48,798
Median HH Income Forecast Growth
1.8%
1.8%
1.8%
Population
24,157
254,818
453,508
Population Forecast Growth
0.5%
0.4%
0.4%
�; Cornerstone Real Estate Advisers LLC
2010 PORTFOLIO PROFILE & STRATEGY
Description
Promenade at Town Center is a community retail center anchored
by Pavilions (upscale Safeway supermarket). Secondary anchors
are HomeGoods and Tilly's. In addition to a variety of shops,
restaurants include an Elephant Bar and Olive Garden.
Total 88,518 48.7%
Location
Located at the most prominent retail intersection in Valencia,
across from the regional mall in an affluent master - planned
community
• Directly adjacent to over 1,000 apartment units
• Easily accessible via I -5 and Magic Mountain Parkway
Investment Strategy
Promenade at Town Center is a well - located, high - quality retail
center in an affluent master - planned community. The property
provides secure income from anchor tenancy along with
potential rental income increases from the in -line shops, with
minimal lease expirations until 2012. The long -term strategy
is to continue to maintain the property in first class condition
while sustaining full occupancy and strong credit tenancy.
Leasing 98% 98% 98% 9700 97%
100%
90%
80%
70%
60%
4Q08 1Q09 2Q09 3Q09 4Q09
Acquisition Date
Acquisition Cost
YE Market Value
December 9, 2004
$66,600,000 ($367/sf)
$60,000,000 ($330 /sf)
2010 NOI Target/Yield$4,347,009 / 7.2%
2010 Key Objectives
$34,421,771 / 7.2 %, maturity: 07112
■ Achieve average occupancy of 97% or better
■ Execute three new leases totaling 5,250 sf and one
1,247 sf renewal
* Maximize effective gross revenue and net operating income
Market Highlights
Cornerstone Research forecasts the Los Angeles retail market
will continue to soften through next year, until employment
begins to recover and consumer confidence returns in this
hard -hit economy. Employment will stabilize in Los Angeles in
latter 2010, though job losses will continue in the near -term in
all sectors, especially construction, finance, and trade. Major
employers in Valencia include Six Flags (currently in bankruptcy)
and Princess Cruises.
Demographics are favorable in Valencia, and our long -term
outlook remains positive for this retail market. However, in the
near -term, retail vacancy will continue to climb. Costar reports
eight community centers in Valencia are currently 17% vacant.
Vacancy spiked this year with the delivery in 2008 of Gateway
Promenade. This 128,770 square foot property delivered vacant,
and is currently 15% occupied. There are no new retail projects
currently under construction in Valencia.
Demographic Profile
Promenade atTown Center Trade Area 1 Mile 3 Mile 5 Mile
Median Household Income
Square
%of
Expiration
Major Tenants
Feet
NRA
Date
Pavilions (Safeway)
54,000
29.7%
2/12/2027
HomeGoods (TJX)
24,518
13.5%
2/29/2012
Tilly's
10,000
5.5%
6/30/2012
Total 88,518 48.7%
Location
Located at the most prominent retail intersection in Valencia,
across from the regional mall in an affluent master - planned
community
• Directly adjacent to over 1,000 apartment units
• Easily accessible via I -5 and Magic Mountain Parkway
Investment Strategy
Promenade at Town Center is a well - located, high - quality retail
center in an affluent master - planned community. The property
provides secure income from anchor tenancy along with
potential rental income increases from the in -line shops, with
minimal lease expirations until 2012. The long -term strategy
is to continue to maintain the property in first class condition
while sustaining full occupancy and strong credit tenancy.
Leasing 98% 98% 98% 9700 97%
100%
90%
80%
70%
60%
4Q08 1Q09 2Q09 3Q09 4Q09
Acquisition Date
Acquisition Cost
YE Market Value
December 9, 2004
$66,600,000 ($367/sf)
$60,000,000 ($330 /sf)
2010 NOI Target/Yield$4,347,009 / 7.2%
2010 Key Objectives
$34,421,771 / 7.2 %, maturity: 07112
■ Achieve average occupancy of 97% or better
■ Execute three new leases totaling 5,250 sf and one
1,247 sf renewal
* Maximize effective gross revenue and net operating income
Market Highlights
Cornerstone Research forecasts the Los Angeles retail market
will continue to soften through next year, until employment
begins to recover and consumer confidence returns in this
hard -hit economy. Employment will stabilize in Los Angeles in
latter 2010, though job losses will continue in the near -term in
all sectors, especially construction, finance, and trade. Major
employers in Valencia include Six Flags (currently in bankruptcy)
and Princess Cruises.
Demographics are favorable in Valencia, and our long -term
outlook remains positive for this retail market. However, in the
near -term, retail vacancy will continue to climb. Costar reports
eight community centers in Valencia are currently 17% vacant.
Vacancy spiked this year with the delivery in 2008 of Gateway
Promenade. This 128,770 square foot property delivered vacant,
and is currently 15% occupied. There are no new retail projects
currently under construction in Valencia.
Demographic Profile
Promenade atTown Center Trade Area 1 Mile 3 Mile 5 Mile
Median Household Income
$93,116
$80,992
$80,950
Median HH Income Forecast Growth
1.6%
1.9%
2.0%
Population
10,139
89,795
188,909
Population Forecast Growth
1.2%
1.7%
2.5%
Cornerstone Real Estate Advisers LLC 26
CORNERSTONE PATRIOT FUND
l =%
s
E
Description
Red Top Plaza is a 151,840 sf grocery- anchored shopping center.
The property has parking for 699 cars (4.6 spaces /1,000 sf) and
is situated on 17.9 acres. The center is anchored by the grocery
store jewel/Osco.
Location
Property is located approximately 30 miles northwest of
downtown Chicago
■ Located on the east side of Milwaukee Avenue, approximately
two miles north of Townline Road (IL Hwy. 60)
Investment Strategy
Red Top Plaza is a well - located core, grocery- anchored, retail
property in the northwest suburbs of Chicago. The property
is in a strong retail area (five million square feet). The current
strategy is to maintain existing tenants and add new tenants
through an aggressive leasing and marketing program to position
the property for sale as capital markets improve.
Leasing
100%
90%
80%
70%
60%
85% 86% 85% 84% 84%
FW
4Q08 1Q09 2Q09 3Q09 4Q09
Property Type
Size
Acquisition Date
Acquisition Cost
YE Market Value
2010 NOI Target/
Leverage
Year Built
Retail
151,840 sf
July 1, 2004
$24,400,000 ($161/sf)
$17,800,000 ($117/sf)
Yield $1,578,428 / 8.9%
None
1981
2010 Key Objectives
• The primary objective for 2010 will be to enhance tenancy
through aggressive leasing
• Continue to monitor tenants financial status and increase
tenant relationships
• Continue to focus on cost efficiency and maintaining market
positive CAM expenses
Market Highlights
Chicago's economy has struggled through the recession, posting
substantial declines in home values, employment, retail sales
and manufacturing activity. The contraction in some sectors has
been marginally worse than the corresponding national average.
Chicago has lost 6% of peak employment versus 5% for the
nation. This mature, slow - growing metro economy is expected
to lag the nation as the city emerges from recession. At the end of
2009, financial services and professional business services were
still posting j ob losses, but the pace had moderated. Employment
should stabilize in the late second half of 2010, and the increase
in payrolls will be slow into the first half of 2011.
Retail consultancy Melaniphy & Associates estimates that
through the third quarter of 2009, retail sales had fallen by nearly
11% from the same period in 2008 with double -digit declines in
furniture & electronics and apparel. Reflecting the sharp drop in
consumer spending, retail vacancy is rising and expected to peak
in the second half of 2010 while market rents should stabilize by
early 2011. The diminished retail construction pipeline will give
space metrics the chance to improve over the year.
Demographic Profile
Red Top Plaza Trade Area
Square
%of
Expiration
Major Tenants
Feet
NRA
Date
Jewel /Osco
66,844
44.0%
11/30/2020
Tuesday Morning
7,595
5.0%
7/15/2012
ReMaxSuburban
6,400
4.2%
7/31/2013
Total 80,839
53.2%
Location
Property is located approximately 30 miles northwest of
downtown Chicago
■ Located on the east side of Milwaukee Avenue, approximately
two miles north of Townline Road (IL Hwy. 60)
Investment Strategy
Red Top Plaza is a well - located core, grocery- anchored, retail
property in the northwest suburbs of Chicago. The property
is in a strong retail area (five million square feet). The current
strategy is to maintain existing tenants and add new tenants
through an aggressive leasing and marketing program to position
the property for sale as capital markets improve.
Leasing
100%
90%
80%
70%
60%
85% 86% 85% 84% 84%
FW
4Q08 1Q09 2Q09 3Q09 4Q09
Property Type
Size
Acquisition Date
Acquisition Cost
YE Market Value
2010 NOI Target/
Leverage
Year Built
Retail
151,840 sf
July 1, 2004
$24,400,000 ($161/sf)
$17,800,000 ($117/sf)
Yield $1,578,428 / 8.9%
None
1981
2010 Key Objectives
• The primary objective for 2010 will be to enhance tenancy
through aggressive leasing
• Continue to monitor tenants financial status and increase
tenant relationships
• Continue to focus on cost efficiency and maintaining market
positive CAM expenses
Market Highlights
Chicago's economy has struggled through the recession, posting
substantial declines in home values, employment, retail sales
and manufacturing activity. The contraction in some sectors has
been marginally worse than the corresponding national average.
Chicago has lost 6% of peak employment versus 5% for the
nation. This mature, slow - growing metro economy is expected
to lag the nation as the city emerges from recession. At the end of
2009, financial services and professional business services were
still posting j ob losses, but the pace had moderated. Employment
should stabilize in the late second half of 2010, and the increase
in payrolls will be slow into the first half of 2011.
Retail consultancy Melaniphy & Associates estimates that
through the third quarter of 2009, retail sales had fallen by nearly
11% from the same period in 2008 with double -digit declines in
furniture & electronics and apparel. Reflecting the sharp drop in
consumer spending, retail vacancy is rising and expected to peak
in the second half of 2010 while market rents should stabilize by
early 2011. The diminished retail construction pipeline will give
space metrics the chance to improve over the year.
Demographic Profile
Red Top Plaza Trade Area
1 Mile
3 Mile
5 Mile
Median Household Income
$80,569
$87,431
$81,066
Median HH Income Forecast Growth
1.3%
1.3%
1.4%
Population
6,870
43,405
114,893
Population Forecast Growth
0.1%
1.1%
1.0%
27 Cornerstone Real Estate Advisers LLC
2010 PORTFOLIO PROFILE & STRATEGY
Description
Renaissance Creek is a community shopping center with anchor
tenants including Safeway, HomeGoods and Staples. Situated
on a 21.4 -acre site in Roseville, California; the center contains
surface parking for 885 vehicles (4.9 spaces /1,000 so. A unique
feature of Renaissance Creek is a natural protected wetland area,
separating the center into two distinct areas.
Location
Total 107,727 60.1%
• Easily accessible to I -80, via Douglas Boulevard
• Sixteen miles NE of Sacramento
■ The center has two access points on Sierra College Blvd. and
one access point on Douglas Blvd
Investment Strategy
Renaissance Creek is a core, high - quality, well- anchored
shopping center in one of the more affluent trade areas in the
Sacramento MSA. The long -term strategy is to maintain its
first class condition, address minimal shop rollover and season
existing tenant base. Sales are expected to increase over the
long -term, leading to increased rents and value.
Leasina
100%
90%
80%
70%
60%
98% 98% 98% y /%o 9/%
4Q08 1Q09 2Q09 3Q09 4Q09
Cornerstone Real Estate Advisers LLC
Property Type
Size
Acquisition Date
Acquisition Cost
YE Market Value
2010 NOI Target/
Leverage
Year Built
Retail
179,425 sf
July 1, 2004
$58,720,000 ($327/sf)
$50,700,000 ($283/sf)
Yield $3,311,555 / 6.5%
$25,995,000
2002
2010 Key Objectives
• Maximize occupancy and rent through aggressive leasing of
available space
• Evaluate and monitor expenses for additional potential
savings
• Monitor tenant financial status and increase tenant
relationships
Market Highlights
The Sacramento retail sector will remain weak through 2010 as
the metro area struggles with above - average unemployment and
a high mortgage foreclosure rate. Sacramento is expected to lag
the US through economic recovery, and the state's fiscal crisis
will negatively influence the area's important government sector.
Total employment declined 4.3% over the past twelve months,
with losses in all sectors except education and health services,
which has posted relatively healthy gains. Government job cuts
have been minor thus far, but the state - mandated three unpaid
furlough days per month equals about a 15% cut in pay for state
workers and future jobs cuts are an ongoing risk.
Roseville is a regional retail center, and is the home to Westfield
Galleria at Roseville (a one million square foot super - regional
mall) and the Roseville Auto Mall (16 dealers). Other local
employers include Kaiser and Hewlett- Packard. Costar reports
fourteen community centers in Roseville are 15% available.
There are no retail projects currently under construction in the
city.
Demographic Profile
Renaissance CreekTrade Area
Square
%of
Expiration
Major Tenants
Feet
NRA
Date
Safeway
60,227
33.6%
7/31/2027
HomeGoods
27,500
15.3%
5/31/2016
Staples
20,000
11.2%
9/23/2015
Location
Total 107,727 60.1%
• Easily accessible to I -80, via Douglas Boulevard
• Sixteen miles NE of Sacramento
■ The center has two access points on Sierra College Blvd. and
one access point on Douglas Blvd
Investment Strategy
Renaissance Creek is a core, high - quality, well- anchored
shopping center in one of the more affluent trade areas in the
Sacramento MSA. The long -term strategy is to maintain its
first class condition, address minimal shop rollover and season
existing tenant base. Sales are expected to increase over the
long -term, leading to increased rents and value.
Leasina
100%
90%
80%
70%
60%
98% 98% 98% y /%o 9/%
4Q08 1Q09 2Q09 3Q09 4Q09
Cornerstone Real Estate Advisers LLC
Property Type
Size
Acquisition Date
Acquisition Cost
YE Market Value
2010 NOI Target/
Leverage
Year Built
Retail
179,425 sf
July 1, 2004
$58,720,000 ($327/sf)
$50,700,000 ($283/sf)
Yield $3,311,555 / 6.5%
$25,995,000
2002
2010 Key Objectives
• Maximize occupancy and rent through aggressive leasing of
available space
• Evaluate and monitor expenses for additional potential
savings
• Monitor tenant financial status and increase tenant
relationships
Market Highlights
The Sacramento retail sector will remain weak through 2010 as
the metro area struggles with above - average unemployment and
a high mortgage foreclosure rate. Sacramento is expected to lag
the US through economic recovery, and the state's fiscal crisis
will negatively influence the area's important government sector.
Total employment declined 4.3% over the past twelve months,
with losses in all sectors except education and health services,
which has posted relatively healthy gains. Government job cuts
have been minor thus far, but the state - mandated three unpaid
furlough days per month equals about a 15% cut in pay for state
workers and future jobs cuts are an ongoing risk.
Roseville is a regional retail center, and is the home to Westfield
Galleria at Roseville (a one million square foot super - regional
mall) and the Roseville Auto Mall (16 dealers). Other local
employers include Kaiser and Hewlett- Packard. Costar reports
fourteen community centers in Roseville are 15% available.
There are no retail projects currently under construction in the
city.
Demographic Profile
Renaissance CreekTrade Area
1 Mile
3 Mile
5 Mile
Median Household Income
$50,612
$52,912
$58,104
Median HH Income Forecast Growth
2.0%
1.6%
1.7%
Population
13,398
135,896
332,595
Population Forecast Growth
0.2%
0.6%
1.4%
* Rate is 30 -day LIBOR plus 210 basis points. In November 2010, rate
changes to 30 -day LIBOR plus 225 basis points. Loan is callable every
five years beginning November 2011 until November 2031.
28
CORNERSTONE PATRIOT FUND
Description
South Lakes Village is a neighborhood retail center, anchored
by Safeway. A renovation was completed in 2004 -2005 which
included new cedar shake roof, new lighting, expanded parking
lot and the expansion and renovation of Safeway. The center is
situated on a 10.56 -acre site.
Total 65,243 59.6%
Location
r The center is located at the intersection of Sunrise Valley
Drive and South Lakes Drive in Reston, Virginia
■ Approximately 18 miles from downtown Washington DC
Investment Strategy
South Lakes Village is a well - located core asset in a market with
strong fundamentals. The anchor tenants, both grocery and
drug stores, have significant lease terms remaining providing a
stable cash flow with the potential to increase income and value
as other leases roll.
Leasing
100%
90%
80%
70%
60%
Property Type
Size
Acquisition Date
Acquisition Cost
YE Market Value
2010 NOI Target/
Leverage
Year Built
Retail
100,527 sf
July 1, 2004
$27,000,000 ($247/sf)
$30,800,000 ($281/sf)
Yield $2,434,108 / 7.9%
None
1983
2010 Key Objectives
• Aggressively lease available space
• Work with existing tenants to maintain occupancy and
monitor financial status
■ Maximize net operating income through pursuing
opportunities to enhance revenues as well as reduce
operating expenses.
Market Highlights
The Washington DC retail market softened over the past two
years with the economic recession and active new supply
pushing total vacancy up about 200 basis points and rents
down over 10% since 2007 per Costar; nevertheless, the market
remains relatively tight. Retail demand is expected to stabilize
in early 2010 and begin to improve in 2011. New supply,
however, remains active, putting pressure on vacancy and
rents in the near -term. Healthy market fundamentals should
return to the market in 2011 when economic recovery gains
traction and the supply pipeline slows down.
"Necessities" retail sales have held up nicely during this recession
and supermarket chains, in general, have performed well. The
subject property, a grocer- anchored neighborhood center in an
affluent trade area, should continue to benefit from these trends.
Additionally, the property will be helped by no near -term new
supply in the trade area.
Demographic Profile
South Lakes Village Trade Area
Square
%of
Expiration
Major Tenants
Feet
NRA
Date
Safeway
51,986
47.5%
1/31/2026
CVs
9,245
8.4%
2/28/2019
Lakeside Inn
4,012
3.7%
8/31/2014
Total 65,243 59.6%
Location
r The center is located at the intersection of Sunrise Valley
Drive and South Lakes Drive in Reston, Virginia
■ Approximately 18 miles from downtown Washington DC
Investment Strategy
South Lakes Village is a well - located core asset in a market with
strong fundamentals. The anchor tenants, both grocery and
drug stores, have significant lease terms remaining providing a
stable cash flow with the potential to increase income and value
as other leases roll.
Leasing
100%
90%
80%
70%
60%
Property Type
Size
Acquisition Date
Acquisition Cost
YE Market Value
2010 NOI Target/
Leverage
Year Built
Retail
100,527 sf
July 1, 2004
$27,000,000 ($247/sf)
$30,800,000 ($281/sf)
Yield $2,434,108 / 7.9%
None
1983
2010 Key Objectives
• Aggressively lease available space
• Work with existing tenants to maintain occupancy and
monitor financial status
■ Maximize net operating income through pursuing
opportunities to enhance revenues as well as reduce
operating expenses.
Market Highlights
The Washington DC retail market softened over the past two
years with the economic recession and active new supply
pushing total vacancy up about 200 basis points and rents
down over 10% since 2007 per Costar; nevertheless, the market
remains relatively tight. Retail demand is expected to stabilize
in early 2010 and begin to improve in 2011. New supply,
however, remains active, putting pressure on vacancy and
rents in the near -term. Healthy market fundamentals should
return to the market in 2011 when economic recovery gains
traction and the supply pipeline slows down.
"Necessities" retail sales have held up nicely during this recession
and supermarket chains, in general, have performed well. The
subject property, a grocer- anchored neighborhood center in an
affluent trade area, should continue to benefit from these trends.
Additionally, the property will be helped by no near -term new
supply in the trade area.
Demographic Profile
South Lakes Village Trade Area
1 Mile
3 Mile
5 Mile
Median Household Income
$73,195
$95,898
$105,804
Median HH Income Forecast Growth
1.5%
1.9%
1.9%
Population
11,165
88,575
202,702
Population Forecast Growth
2.2%
1.2%
1.3%
?9 Cornerstone Real Estate Advisers LLC
201 PORTFOLIO PROFILE & STRATEGY
e
a a.
� 8 i
Description
UV L im a
� I
II _
University Park is a neighborhood shopping center anchored by
a Whole Foods grocery store. The property includes a variety
of shops and restaurants, including a JP Morgan Chase Bank
branch. The center is situated on a 12.2 -acre site.
Total 47,900 54.2%
Location
Southeast corner of Colorado Boulevard and University
Boulevard
■ In the master - planned community of Highlands Ranch with
average household incomes exceeding $120,000
Investment Strategy
University Park is a Class A neighborhood retail center in an
affluent and growing master - planned suburb of Denver. The
investment is expected to generate a strong current yield with
potential for value appreciation due to anticipated growth in
shop rents.
Leasing
100%
90%
80%
70%
60%
95% I
93% 93% 93%
1 F1 F1
4Q08 1Q09 2Q09 3Q09 4Q09
Property Type
Size
Acquisition Date
Acquisition Cost
YE Market Value
2010 NOI Target/
Leverage
Year Built
Retail
88,559 sf
December 28, 2007
$28,100,000 ($318/sf)
$22,400,000 ($254/sf)
Yield$1,632,002 / 7.3%
None
2001
2010 Key Objectives
■ Maximize occupancy and rent through aggressive leasing
• Downsize and re- tenant liquor store space to enhance rental
and sales potential
• Evaluate all expenses for additional savings
Market Highlights
Denver's metro area job losses are stabilizing, but recovery has
yet to take hold. Denver maintains a highly- educated and skilled
workforce and favorable long -term demographic trends, but the
local economy continues to struggle as companies are reluctant
to hire. Unemployment is high by Denver's historical standards,
but is well below the national average. On a positive note, the
local housing market by several measures has stabilized and
is beginning to recover - an important precursor to sustained
growth in retail sales. As Denver emerges from recession, growth
will be slow initially, but should gain momentum in the second
half of 2010 led by the technology and energy sectors.
As consumers continue to cut back on luxury and discretionary
spending, grocery- anchored retail centers have outperformed
other retail subsectors through the recession. This trend is
expected to continue as weak labor markets and tight consumer
credit conditions persist through 2010. While retail vacancy has
risen over the past year, Denver's supply and demand outlook
appears balanced through 2011 as recovering employment
compliments modest retail construction.
Demographic Profile
University ParkTrade Area
Square
%of
Expiration
Tenant
Feet
NRA
Date
Whole Foods
36,000
40.7%
1/31/2022
Archiver's
6,500
7.4%
1/31/2013
Boston Market
5,400
6.1%
9/29/2017
Total 47,900 54.2%
Location
Southeast corner of Colorado Boulevard and University
Boulevard
■ In the master - planned community of Highlands Ranch with
average household incomes exceeding $120,000
Investment Strategy
University Park is a Class A neighborhood retail center in an
affluent and growing master - planned suburb of Denver. The
investment is expected to generate a strong current yield with
potential for value appreciation due to anticipated growth in
shop rents.
Leasing
100%
90%
80%
70%
60%
95% I
93% 93% 93%
1 F1 F1
4Q08 1Q09 2Q09 3Q09 4Q09
Property Type
Size
Acquisition Date
Acquisition Cost
YE Market Value
2010 NOI Target/
Leverage
Year Built
Retail
88,559 sf
December 28, 2007
$28,100,000 ($318/sf)
$22,400,000 ($254/sf)
Yield$1,632,002 / 7.3%
None
2001
2010 Key Objectives
■ Maximize occupancy and rent through aggressive leasing
• Downsize and re- tenant liquor store space to enhance rental
and sales potential
• Evaluate all expenses for additional savings
Market Highlights
Denver's metro area job losses are stabilizing, but recovery has
yet to take hold. Denver maintains a highly- educated and skilled
workforce and favorable long -term demographic trends, but the
local economy continues to struggle as companies are reluctant
to hire. Unemployment is high by Denver's historical standards,
but is well below the national average. On a positive note, the
local housing market by several measures has stabilized and
is beginning to recover - an important precursor to sustained
growth in retail sales. As Denver emerges from recession, growth
will be slow initially, but should gain momentum in the second
half of 2010 led by the technology and energy sectors.
As consumers continue to cut back on luxury and discretionary
spending, grocery- anchored retail centers have outperformed
other retail subsectors through the recession. This trend is
expected to continue as weak labor markets and tight consumer
credit conditions persist through 2010. While retail vacancy has
risen over the past year, Denver's supply and demand outlook
appears balanced through 2011 as recovering employment
compliments modest retail construction.
Demographic Profile
University ParkTrade Area
1 Mile
3 Mile
5 Mile
Median Household Income
$89,317
$93,984
$91,064
Median HH Income Forecast Growth
0.6%
1.0%
1.2%
Population
16,016
99,820
190,922
Population Forecast Growth
2.5%
1.5%
1.4%
Cornerstone Real Estate Advisers LLC 30
CORNERSTONE PATRIOT FUND
Description
A land investment joint venture with Birtcher Development
Company. The investment is in two sites, totaling 25.5 acres.
The land is targeted for a five - building industrial park totaling
353,926 sf. Four of five building plans are complete and
approved by the Riverside County Board of Supervisors.
Location
Centrally located between Interstate 15, Highway 91, and
Highway 60
■ Interstate 15, approximately 4 miles west of the site, runs
north past Ontario Airport and South to San Diego
■ Highway 91 and Highway 241 provide convenient access to
Orange County
Investment Strategy
The General Drive development project was put on hold due
to deteriorating market conditions. The property will be
continually evaluated for either development or sale of
undeveloped land.
Property Type
Industrial
Size
353,926 sf
Construction Start
N/A
Acquisition Cost
$7,617,335
YE Market Value
$4,000,000
Leverage
None
Expected Completion
N/A
♦_
Description
A land investment joint venture with Birtcher Development
Company. The investment is in two sites, totaling 25.5 acres.
The land is targeted for a five - building industrial park totaling
353,926 sf. Four of five building plans are complete and
approved by the Riverside County Board of Supervisors.
Location
Centrally located between Interstate 15, Highway 91, and
Highway 60
■ Interstate 15, approximately 4 miles west of the site, runs
north past Ontario Airport and South to San Diego
■ Highway 91 and Highway 241 provide convenient access to
Orange County
Investment Strategy
The General Drive development project was put on hold due
to deteriorating market conditions. The property will be
continually evaluated for either development or sale of
undeveloped land.
Property Type
Industrial
Size
353,926 sf
Construction Start
N/A
Acquisition Cost
$7,617,335
YE Market Value
$4,000,000
Leverage
None
Expected Completion
N/A
Market Highlights
Riverside warehouse market fundamentals remain challenged
in the near -term but are expected to strengthen as the national
recovery gains momentum over the next two years due to its
proximity to the supply- constrained Los Angeles/Long Beach
warehouse markets. For now, supply growth is slowing
though excess space will continue to outpace falling demand.
Cornerstone Research forecasts that the market will soften further
through 2011. Recovery in the Riverside warehouse market is
dependent on the return of consumer demand nationally.
The subject property is located in the Riverside submarket, the
largest in the metro area with 113 million square feet. As is
the case throughout Riverside County, the submarket supply
pipeline has outpaced demand in the past few years. Submarket
availability in the third quarter was 19.2 %, up sharply from single
digit levels that had been the norm for much of the previous
fifteen years. New construction in the submarket has finally
slowed to historically low levels and will remain low through
our forecast period.
31 Cornerstone Real Estate Advisers LLC
Cornerstone Patriot Fund
2010 Portfolio Profile and Strategy Disclaimer
The 2010 Portfolio Profile and Strategy includes forward - looking statements within the meaning of the Private Securities Litigation
Reform Act. All statements other than statements of historical facts included in this profile, including, without limitation, statements
regarding business strategy, budgets, projected costs and plans and objectives for future operations, are forward - looking statements.
In addition, forward - looking statements generally can be identified by the use of forward - looking terminology such as "may,"
"will," "expect," "intend," "estimate," "anticipate," "believe," or "continue" or the negative thereof or variations thereon or similar
terminology. Although it is believed that the expectations reflected in such forward - looking statements are reasonable, there can be
no assurance that such expectations will prove to be correct.
The information contained in this report may employ proprietary projections of expected returns, which are forward - looking"
statements. The relative relationships and forecasts contained herein are based upon proprietary research and were developed
through analysis of historical data and capital markets theory. These estimates have certain inherent limitations. References to
future returns or target returns are not promises or even estimates of actual returns that may be achieved. The forecasts contained
herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation. Actual results
could differ materially based on changes in international, national or local economic and demographic conditions; adverse changes
in financial conditions of buyers and sellers of properties; reductions or changes in sources of debt or equity financing, including
changes in interest rates; increases in real estate taxes and operating expenses, including energy prices; changes in law, regulations
and governmental policies, including environmental laws and governmental fiscal policies; changes in the relative popularity of
properties; risks due to dependence on cash flow; risks and operating problems arising out of the presence of certain construction
materials; natural and unnatural disasters; and uninsurable losses.
This 2010 Portfolio Profile and Strategy is for informational purposes only and does not constitute an offering of any kind. Any such
offering will be accompanied by an offering memorandum disclosing, among other things, the business, tax, ERISA, economic and
other considerations involving an investment in Cornerstone Patriot Fund LP.
Interests in the Cornerstone Patriot Fund are offered through Babson Capital Securities Inc Member FINRA.
For additional information on the
Cornerstone Patriot Fund
please contact:
Brian Murdy, Portfolio Manager
860.509.2279
bmurdy @cornerstoneadvisers.com
Denise Stake, Portfolio Manager
Assistant Portfolio Manager
860.509.2311
dstake @cornerstoneadvisers.com
Pamela McKoin, Vice President
Business Development
860.509.2230
pmckoin @cornerstoneadvisers,com
Cornerstone Real Estate Advisers LLC
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