The following plan outlines a systematic and profitable program for investing in commercial real estate. We believe this plan, with readily accessible capital and a disciplined process for acquiring and developing commercial real estate will yield higher income and capital appreciation than risk adjusted alternatives in the stock market. This plan is designed for investors seeking the investment returns of direct ownership in real estate without the inconveniences.

Investment Mission Statement

Our mission is to purchase, develop or redevelop, in a conservative manner,  multi-tenant industrial properties in the Atlanta area that provide a greater return than institutionally owned industrial properties.

INVESTMENT TIME LINE

This investment plan seeks to purchase or develop forty to fifty million dollars in diversified industrial real estate. This investment will require equity of ten to twelve million dollars over a period of ten to twelve years beginning in the year 2000.

GEOGRAPHIC AREA OF CONCENTRATION

The investment plan will be focused geographically within a 75 mile radius of downtown Atlanta. When factors such as access to transportation, employment and population growth, and cost of living are considered, we believe metropolitan Atlanta offers the best opportunity to achieve above average yields for industrial real estate investment.  Smaller second tier cities, such as, Charlotte, Nashville and Greenville will also be considered on a selective basis.

TARGET RETURNS

The target capitalization rates (net operating income divided by the purchase price) for the investment properties will exceed institutional returns by 200-250 basis points. Additionally, our investment plan will focus on properties with a leveraged Internal Rate of Return of 15-18% and a return on equity of 12-14%.

Our portfolio's returns are based on a seven to ten year projected holding period with a defined exit strategy.  Its AIP's focus to work beneath the larger more aggressive investors to uncover the properties whose yield can significantly outperform institutional assets. 

COMPETITION

The competition for existing class "B" industrial properties will primarily be other entrepreneurial investors.  Properties of this nature require local ownership and management to effectively develop their full potential. Few, if any, entrepreneurial investors have the competitive advantage of the brokerage relationship of this plan's general partners. The management and leasing of existing class "B" property is at times tedious creating additional barriers of entry for competition.  REITS, Pension Fund Advisors and Insurance Companies almost exclusively focus on core class "A" projects.  The institutional flight to quality has made purchases of core class "A" properties too competitive and therefore less attractive from an investment point of view.

INVESTMENT PROPERTY TYPE

The distinction between core class "A" industrial and class "B" industrial properties is somewhat subjective. However, there are certain defining characteristics accepted by the real estate industry.  The age of the property, location, ceiling height, depth of truck courts, and building materials are the main defining characteristics.  Our intention is to buy properties that are class "B" properties that function well within their market.  We would avoid properties with functional problems that restrict their marketability and usefulness.  Properties must be sprinkled and without environmental issues.  The property may be older but must not have structural problems and must be either brick and block or masonry in construction.  The property may have shorter truck courts and lower ceilings but will be located where city vans are utilized and racking systems require only 18-20 foot ceiling clearance.  The fund also currently believes there are upside value added opportunities in redeveloping currently vacant single tenant properties and redeveloping them into multi-tenant facilities which allows AIP to leverage the risk associated with single tenancy occupancy.

DEVELOPMENT PROPERTY TYPE

Similar to the investment property type, the primary focus for AIP's development strategy is the middle market, multi-tenant industrial building.  The individual buildings are 50,000 to 75,000 square feet in size and constructed of brick and block.  The physical dimensions of the buildings are designed to benefit the moderate size user of 10,000 to 20,000 square feet of space.  Land is acquired in 15 to 25 acre parcels allowing for a phased development of 175,000 to 250,000 total square feet in a controlled park environment.  AIP seeks to be a fast follower in the development cycle by monitoring the leading indicators of the real estate cycle for the upturn in the industrial real estate market. 

LEVERAGE vs. ADDITIONAL EQUITY

One of the guiding principles of our investment plan is to avoid the need for additional equity in an already funded property.  Reasonable leverage, cash flow reserves for standard repairs, and a focus on multi-tenant properties will be utilized to mitigate a property's need for additional equity funding.

Initial equity investments in new development or redevelopment projects will include a minimum of six to nine months interest carry until the project begins to produce revenues.

Balancing between leveraged returns and cash shortfalls will require debt to value ranges of approximately 70% to 75%.  Our focus on multi-tenant properties reduces an assets' downside risk during tenant lease expiration rollover or capital improvements thereby allowing the property to cover its debt service without additional cash calls to investors.

EQUITY RETURN STRATEGY

Once a critical mass is reached of approximately 1.3 to 1.5 million square feet of industrial properties, there will be an opportunity to refinance the assets.  The exit strategy for the investment partnership is to complete a rollup and refinance of all the projects once critical mass is achieved.  The strategy provides for a return of initial equity, as well as profits in a tax efficient manner while continuing to maintain ownership in the real estate assets.