Infill Small Bay and Niche Industrial  Properties Acquisition

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Overview

• 1788 Holdings, LLC is seeking ~$80 million of debt and equity (could ultimately grow to $500 million) to acquire infill small bay and niche industrial properties in the Washington DC, Boston,  Miami and Philadelphia’s MSAs
• Planned exit as a sale of rolled-up portfolio after stabilization and potential repositioning
• Management expects cap rate compression from the sale of an aggregated portfolio
• 1788 Holdings is a Bethesda, MD-based boutique real estate company that develops and invests in office, residential, industrial and retail real estate

• • seasoned real estate professionals with significant  investment and asset management experience
  • lead principal directed office, industrial and retail real  estate investment in the US for Goldman, Sachs

Opportunity

Industrial assets in the targeted metropolitan areas have strong fundamentals:

• Increasing scarcity: The existing supply of small bay and niche industrial properties in infill locations within the focus areas is declining. These assets are typically located adjacent to residential and commercial  districts and are regularly being torn down in favor of the development of  other product types with a higher density (residential, office, hotel and  retail)
• Attractive pricing: They can be acquired at pricing which is below their

replacement cost as current rents do not support the cost of new  construction when the market value of the land is considered. As a result,  there has been little to no new competing product developed in the focus  areas in the last several real estate cycles

• Increasing demand at low capital costs: As the population of the focus areas continues to grow and densify, the demand for space at small bay industrial properties from both the businesses that occupy the space and the customers of those businesses is expected to increase. Capital costs associated with leasing these properties are exceptionally low relative to other commercial (office and retail) property types
• Very low vacancy rates: These assets have typically had very low historical vacancy rates (<5%)

Solution/Strategy

• Typical property size: 30-70,000 SF; 1,500 to 8,000 SF per bay
• Potential cap rate compression expected to be achieved via aggregating and selling a portfolio of infill small bay and niche industrial properties
• Targeted properties are generally 1) owned by individual investors, 2) have lower-credit lessees, and 3) tend to trade at initial cap rates of 6.5% to 8.0%
• Targeted properties are generally not widely marketed by their owners – too small for institutional brokers
• Many large institutional investors seek these assets, but cannot efficiently acquire them on a one-off basis
• On a portfolio basis, however, institutional investors have acquired this asset class at a material spread (lower cap rates) to one-off pricing given its supply/demand dynamics and  scarcity value

Brian K. Fields – Chief Operating Officer

Over 20 years of commercial real estate experience in various capacities including corporate director, CFO, auditor and financial  consultant. CFO of CarrAmerica Realty Corporation and its predecessors in Washington, DC, a NYSE traded real estate investment trust  that rapidly grew from $600 million in assets locally to over $4.5 billion in assets nationally. Participated in all strategic operating,  investment and finance decisions as a member of the six-person Management Investment Committee and five-person Operating  Committee, and as a director and officer of the company’s management and development subsidiaries.