Shark Tank. NAIOP. Do not distribute or reproduce without permission. Please silence all cell phones. This session is being recorded.

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1 Shark Tank NAIOP. Do not distribute or reproduce without permission. Please silence all cell phones. This session is being recorded.

2 Deal #1 Wilkes-Barre, PA NAIOP. Do not distribute or reproduce without permission. Please silence all cell phones. This session is being recorded.

3 The Opportunity: Transaction Summary Acquire 175 Acres Approved for 3 Buildings totaling 2.22 MM SF Land is Fully Approved; No Entitlement or Environmental Risk Develop Exit Start Construction on 1.27 MM SF Speculative W/D Building Building Expandable to 1.63 MM SF Sell Spec Building Upon Stabilization ti Sell Additional Land Parcels During Hold Period Total Equity Request: $22,877, Month Investment Duration NAIOP. Do not distribute or reproduce without permission. 3

4 Project Description: Site Plan/Specs Total Bldg Size: 1,663,200 SF Spec Build: 1,270,080 SF Clear Height: 36 Bldg Depth: 630 Trailer Pkg: 383 spaces Car Pkg: 394 spaces Column Spacing: 56 x 51 KOZ approved; no real estate t taxes for 10 years NAIOP. Do not distribute or reproduce without permission. 4

5 Project Description: Location Aerial NAIOP. Do not distribute or reproduce without permission. 5

6 Market Overview: Drive Time Proximity NAIOP. Do not distribute or reproduce without permission. 6

7 Market Overview: Available Sites 1.2+ mm SF Bethlehem 1.7 mm SF Blakeslee 1.5 mm SF Tobyhanna 1.6 mm SF Pittston 1.5 mm SF Shippensburg 1.4 mm SF Greencastle 1.4 mm SF NAIOP. Do not distribute or reproduce without permission. 7

8 Market Overview: Existing Tenants in Market NEPA Deals 700,000 SF+ Lowe s Big Lots TJ Maxx Diapers.com Wal-Mart J&J Sears Amazon.com Michael s Kimberly Clark 1,500,000 SF 1,400,000 SF 1,300,000 SF 1,280,000 SF 1,200,000 SF 1,061,941 SF 1,026,000 SF 750,000 SF 750,000 SF 744,000 SF NAIOP. Do not distribute or reproduce without permission. 8

9 Financial Analysis: Budget & Returns Development Budget Land 12,827, Hard Cost 39,737, Soft Cost 7,898, Financing/Interest i t Carry 2,929, Contingency 5% 1,970, Total Cost Budget 65,364, Returns NOI (after 3% Vacancy/Structural) 4.12 Yield on Cost 8.0% Total Project Profit $20,796,307 Levered IRR 28.6% Cash Return Multiple 1.9x NAIOP. Do not distribute or reproduce without permission. 9

10 Financial Analysis: Underwriting Assumptions Lease Up $4.25 Rent Rate; 2.25% annual increases 1 Tenant 18 Months to Stabilize $2/SF TI Allowance 10 year Lease Term Financing/Exit 65% LTC Construction 3.5% 6.25% Exit Cap 3.0% Vacancy/Structural Reserve $66/SF Exit Price Remaining land parcels sold for $3mm NAIOP. Do not distribute or reproduce without permission. 10

11 Financial Analysis: Rental Rate Sensitivity Avg. Net Rental Rate Change Levered IRR Deal Levered Profit Deal $ % 18.8% $12,729,181 $4.04-5% 23.9% $16,762,744 $4.25 Base Assumption 28.6% $20,796,307 $ % 33.0% $24,829, $ % 37.4% $29,055,507 NAIOP. Do not distribute or reproduce without permission. 11

12 Financial Analysis: Best/Worse Case Scenarios BASE CASE 1,279,000 SF Lease signed 1/10 Yr 1: $2.00 Yr 2: $2.64 Yr 3: $3.50 Yr 4: $3.75 Yrs 5-8: $.10 increases Assumed 7/16 Yr 1: $ % annual increases 1,061,941 SF Lease signed 7/07 Yrs 1-4: $4.37 Yrs 5-7: $4.81 NAIOP. Do not distribute or reproduce without permission. 12

13 Risk/Reward Upside Potential Faster Lease up Building Expansion Construction Cost Savings due to KOZ Development of future parcels Strong credit/long term lease will lower exit cap Risks Longer Lease Up Lower Lease Rate Cap Rate increases over the next 36 months NAIOP. Do not distribute or reproduce without permission. 13

14 Proposed Deal Structure 95/5 Equity Split 8% Preferred Return 4% Development Fee Promote Structure: 70/30 to 13% 55/45 thereafter 65% LTC Construction Financing: TCC provides Completion Guarantee Equity Partner provides Recourse Guarantee NAIOP. Do not distribute or reproduce without permission. 14

15 Deal #2 Mason Creek Distribution Center Houston, Texas NAIOP. Do not distribute or reproduce without permission. Please silence all cell phones. This session is being recorded.

16 Tom McNearney, CIO Development is in our DNA! Transwestern Development Statistics NAIOP. Do not distribute or reproduce without permission. 16

17 Mason Creek Distribution Center Energy Corridor. Houston, TX. 384,900 SF. Shallow Bay, Infill Industrial Development NAIOP. Do not distribute or reproduce without permission. 17

18 Why Houston? NAIOP. Do not distribute or reproduce without permission. 18

19 Why Houston? NAIOP. Do not distribute or reproduce without permission. 19

20 Houston Metro Industrial Submarket Map NAIOP. Do not distribute or reproduce without permission. 20

21 2Q12 Market Data Houston Overall Houston Overall MY Total RBA 541,768, ,838, ,856, ,031, ,962, ,098, Absorption 4,084,000 (2) 6,305,000 4,328,000 3,855,000 8,307,000 12,471,000 Vacancy 4.5% 4.7% 5.6% 6.0% 5.7% 5.1% Deliveries (1) 3,102,774 (2) 1,948,520 2,839,122 7,959,195 14,191,686 10,796,974 (1) Deliveries sourced from CoStar, all else from Delta Associates (2) Annualized figures based on MY2012 data Demand Tightening - 4.5% Vacancy Lowest vacancy in the past 10 years Supply Restricted - Anticipated 2012 deliveries of 3.10 million sf represent only 40% of the 10-yr average (7.69 million sf average annual deliveries) and 0.6% of total inventory Strengthening Absorption million sf, up 6% from 2009 lows, still shy of 10-yr average (5.90 million sf average annual absorption) with new supply insufficient to maintain current, already low vacancy levels NAIOP. Do not distribute or reproduce without permission. 21

22 Location - Macro - Houston Site NAIOP. Do not distribute or reproduce without permission. 22

23 Transportation I-10 (Katy Freeway) 1. Expanded I-10 at Beltway 8 looking eastward 2. I-10 prior to expansion NAIOP. Do not distribute or reproduce without permission. 23

24 Strategy Provide an institutional quality multi-tenant office warehouse development Houston s predominate path of growth. Keys to the business plan include: Compelling growth patterns in the west Houston I-10 corridor are driving demand for industrial space resulting in market dynamics where current supply is insufficient to satisfy demand. Positive tenant momentum in the expanding western industrial submarket with recent announcements of companies like DynaDrill, Goya Foods, Newpark Drilling Fluids and Welltec. West Houston I-10 corridor is home to major distribution centers including Rooms To Go (1.3MSF), Academy (1.5MSF), and Igloo (1MSF). Park Ten industrial market inclusive of over 2.4MSF of product performing above 95% occupancy despite consisting primarily of older product. Limited industrial land availability in west Houston creating a natural barrier to competitive projects. Close proximity and excellent access to I-10 and convenient access to the Grand Parkway which will be greater Houston s s third loop road. Flexible development plan that can easily accommodate a wide variety of users in the submarket. Situated within a 110 acre master planned commercial park with design covenants, economic momentum, and restrictions ensuring that the subject will be the only industrial product within the development. NAIOP. Do not distribute or reproduce without permission. 24

25 2Q12 Submarket Data Northwest / Southwest Far Submarket Submarket Data MY Total RBA 75,262,974, 69,067,775, 67,699,262, 50,459,743, 48,439,204, 46,301,289, Total Net Absorption 1,168,000 (3) 1,391,000 1,805, ,000 2,009, ,000 Wavg. Vacancy (1) 3.9% 3.8% 5.0% 7.0% 4.9% 6.9% Total Deliveries (2) 764,274 (3) 873,225 1,977,947 3,085,746 3,988,060 3,135,112 (1) Vacancy represents wavg. blend of both the Northwest Far and Southwest Far submarkets according to Delta Associates (2) Deliveries sourced from CoStar, all else from Delta Associates (3) Annualized figures based on MY2012 data Demand Tightening - 3.9% wavg. vacancy Supply Restricted - Anticipated 2012 deliveries of 764,000 sf represent only 32% of the 10-yr average (2.37 million sf average annual deliveries) Strong Absorption million sf, 10% higher than 10-yr average (1.06 million sf average annual absorption) NAIOP. Do not distribute or reproduce without permission. 25

26 Location - Micro - Submarket NAIOP. Do not distribute or reproduce without permission. 26

27 Surrounding Master Plan NAIOP. Do not distribute or reproduce without permission. 27

28 Site Plan The proposed Transwestern development will total 384,900 sf across five buildings with the following product mix: BLDG1: 45,000sf 24 clear 150 Rear load BLDG2: 64,350sf 24 clear 110 Rear load BLDG3: 121,500sf 28 clear 270 Cross dock BLDG4: 79,950sf 24 clear 150 Front load BLDG5: 74,100sf 28 clear 130 Front load NAIOP. Do not distribute or reproduce without permission. 28

29 Project Summary Land Price $3.25 / land sf ($4,262,675) Project Budget $24.540,000 ($63.75 psf) Project Timing Project Start: November 2012 Construction: 10 Months Delivery: September 2013 Lease-Up: 18 Months Stabilization: March 2015 Exit: July 2005 (5 months hold) Product 384,900 NSF 45,000 sf rear load 150 deep, 24 clear, full dock 64,350 sf rear load 110 deep, 24 clear, full dock 121,950 sf cross-dock 270 deep, 28 clear, full dock 79,950 sf front load 130 deep, 24 clear, full dock 94,100 sf front load 130 deep, 28 clear, full dock Breakeven/Risk Analysis Breakeven occupancy 47.0% Breakeven leasing 180,689 sf Equity BE rental rate $4.45 Equity BE cap rate 9.15% Equity BE occupancy 71% NAIOP. Do not distribute or reproduce without permission. 29

30 Development Budget & Yield on Cost Development Budget $NRSF Land 4,450, Hard Cost 16,670, Soft Cost 2,130, Financing/Interest Carry 690, Contingency 600, Total Cost Budget $24,540,000, $63.75 Operating Budget Net Operating Income* $2,150,000 $5.59 Development Yield 8.75% *Net Leases; 5% vacancy allowance NAIOP. Do not distribute or reproduce without permission. 30

31 Mason Creek Distribution Center Houston, Texas Development Highlights Concept: 385,000 SF of infill industrial in one of Houston s s most dynamic growth corridors made possible by significant highway construction enhancing traffic flow and accessibility. Total Cost Duration: $24,540,000 / $63.75 PSF 36 Months Fixit Cap Rate: 6.75% Yield Cost: 8.75% Return Unleveraged IRR: 16.1%, Levered IRR 22.9% Hurdles: Exit Cap Rate: 6.75% Entitlements: t No Zoning Required! Permits: Leverage: Break-even Occupancy: Drive-through 55% LTC 47% NAIOP. Do not distribute or reproduce without permission. 31

32 Proposed Deal Structure 55% Leverage 90/10 Equity Split 9% Preferred Return 4% Development Fee Promote Structure: o 70/30 to 15% o 60/40 thereafter 55% LTC Construction ti Financing: i o Completion Guarantee & carve-outs o No Repayment Guarantee Estimated returns for partner o 20% IRR o 1.65 EM NAIOP. Do not distribute or reproduce without permission. 32

33 Deal #3 OMP Fontana Distribution Center Fontana, CA NAIOP. Do not distribute or reproduce without permission. Please silence all cell phones. This session is being recorded.

34 Transaction Summary Total Capitalization: $ MM Strategy: Acquire Acres; develop 454,000 SF; Sell upon stabilization Return Hurdles: Unlevered IRR: 21.4%. Levered IRR 30.8% Entitlements: MND/Planning Commission Approval Post Closing. Environmental: VOC s in soil. Vapors barrier beneath office improvement. Deed Restriction: Commercial/Industrial use. NAIOP. Do not distribute or reproduce without permission. 34

35 Market Summary IEW IEE Total Base: 247 MSF 164 MSF 411 MSF Vacancy: 5.7% 6.8% 6.2% Availability: 9.9% 12.7% 11% IQ Net 2 MSF 13MSF MSF 3.4 Absorp: New Const. 1.4 MSF 6.3 MSF 7.7 MSF NAIOP. Do not distribute or reproduce without permission. 35

36 Budget & Returns Development Budget Land: 11,350,400, $25.00 Soft Costs: 4,426,500 $8.00 Hard Costs: 10,325,500 $22.75 Tenant Improvement: 1,362,000 $3.00 Financing: 908,000 $2.00 Total Project Costs: $23,375,000 $62.75 Returns NNN Rents: $4.32 Return on Costs: 6.91 % Un Levered IRR: 21.4% Levered IRR: 30.8% Equity Multiple: 1.74x NAIOP. Do not distribute or reproduce without permission. 36

37 Financial Analysis Entitlements/Construction 14 Months Lease Up $4.32 NNN rents $3/SF T. I. Allowance 8% Commission 5 Year lease Financing/Exit 60% LTC Non-recourse construction 4.25% 5.5% Exit Cap $79/SF Exit Price NAIOP. Do not distribute or reproduce without permission. 37

38 NAIOP. Do not distribute or reproduce without permission. 38

39 Project Description Land: Acres Truck Courts: 200 Building: 454,000 SF DH Doors: 56 Coverage: 55% Trailer Parking: 87 Stalls Clr Height: 32 Sprinkler : ESFR Dimensions: 400 x 1108 NAIOP. Do not distribute or reproduce without permission. 39

40 NAIOP. Do not distribute or reproduce without permission. 40

41 Risk/Reward Upside Potential Faster Lease up Sell to user CAP Rate Compression Aggregate with portfolio Risks Location Longer Lease Up Environmental History Closing without P.C. Approval NAIOP. Do not distribute or reproduce without permission. 41

42 Proposed Capital Structure Co-invest: 95% Preferred Return: 8 ½% Promote: 75/25 to a 13% IRR (50/50 thereafter) 4% Development Fee Cost Overruns: Parri Passu 60% LTC Construction Financing - Completion Guarantee: OMP - Recourse Guarantee: Equity Partner NAIOP. Do not distribute or reproduce without permission. 42