Opportunities in the Market

ID3 Partners believe that today’s weak macroeconomic conditions, which have resulted from high levels of leverage, will continue to create opportunistic investments for the Venture. As short term construction loans and mortgage debt matures, borrowers will seek liquidity through asset sales or refinancing. For the near term, exploiting these capital-constrained investments offers opportunities to achieve significant returns. Nevertheless, the Principals position has been and will continue to be selective and cautious.

Our aim is to find specific situations in which a motivated seller will provide us with the opportunity to buy below market prices and close quickly. Typical reasons for the seller to be so motivated include: vacancy in the building due to an overbuilt market, merchant builders that are over leveraged and notes coming due in the near future. These situations present ID3 with unique opportunities to invest profitably in a bear market.

The Venture intends to pursue a flexible investment strategy designed to capitalize on the most compelling opportunities available at that point in time. While the Venture will consider industrial opportunities of all kinds, ID3 Partners believes opportunities for the Venture are most likely to fit the following categories over the foreseeable future: (i) ground up new construction; (ii) existing building acquisitions; (iii) distressed properties; (iv) distribution and logistics focused warehouse buildings; and (v) rail served properties.

Existing Building Acquisitions
The Venture will pursue the purchase of single tenant or multi tenant distribution warehouse buildings with value-added opportunity. Acquisition opportunities may involve medium- to high-quality individual assets in targeted markets and with strong fundamentals. High vacancy buildings will be the primary target on existing opportunity acquisitions.

Distressed Properties
The Venture intends to acquire all types of distressed industrial projects. With the tightening credit crisis, many existing projects are expected to see some financial distress in the form of cost overrides, payment defaults and maturity defaults. It is expected that numerous projects underwritten on yesterday’s standards will see some form of distress which provides opportunities for new capital to come in and take over. It is also expected that developers with near term loan expirations will be seeking to exit their investments at a discount, providing a new operator with a great opportunity.

Distribution and Logistics Buildings
The Venture intends to focus on acquiring and developing distribution and logistics type buildings. The growing demand for these types of buildings, specifically in the targeted markets, is where ID3 Partners believed the strongest demand is going to be in the coming years.

Rail Service
The rising cost of fuel will continue to have a significant impact on the transportation costs of major corporations moving products across the country. As companies seek out new facilities and locations, the proximity to Class One rail lines has dramatically increased in importance. The Venture believes there is a significant opportunity to develop and acquire properties served by rail lines and intends on focusing a portion of the Venture’s investments on such properties.

New Construction
ID3 Partners intends to pursue new construction projects in very special situations where a discounted opportunity exists. The ideal site will have a combination of the following: (i) prior completed phases; (ii) ability to develop buildings in phases; (iii) existing surrounding infrastructure improvements; (iv) low land acquisition costs; (v) extra land for additional truck storage; (vi) in proximity to major rail lines or intermodal facilities; and (vii) strong submarket fundamentals. ID3’s historical track record of delivering buildings on time and under budget will provide the Venture a competitive advantage when underwriting and acquiring development sites.

Targeted Markets
The Venture intends to focus on selected target markets where opportunities are quickly becoming apparent. The primary focus of the Venture will be to target the following markets: (i) Dallas/Fort Worth; (ii) Phoenix; (iii) Denver; (iv) Atlanta; and (v) Houston. When companies look for strategic distribution locations, they are increasingly focused on key requirements including: (i) proximity to population hubs; (ii) dynamic labor market demands; (iii) Inbound and Outbound transportation services i.e. intermodal facilities; (iv) availability of vacant land and friendly zoning requirements; and (v) friendly local governments with economic incentive packages. The targeted markets have a majority if not all of the above mentioned requirements, and therefore are positioned to have numerous opportunities in the coming future.