MEMORANDUM. All Partners: BPG Investment Partnership IX, L.P. RE: Capital Call Due: August 12, 2015 DATE: July 28, 2015

Transcription

1 MEMORANDUM TO: FROM: All Partners: BPG Investment Partnership IX, L.P. Joe Nahas RE: Capital Call Due: August 12, 2015 DATE: July 28, 2015 The following is a capital call for the acquisition by BPG Investment Partnership IX, L.P. of Bay Colony located in Wayne, PA (Philadelphia MSA), and as detailed below, anticipated incremental equity as budgeted on previously called investments, offset by the Fund s recent Line of Credit overcall. Property Total Equity Bay Colony $16,240,500 Minneapolis Multifamily Portfolio follow-on (See 4/4/2014 capital call detail) 1,666,866 Raleigh Multifamily Portfolio follow-on (See 4/4/2014 capital call detail) 510,250 Central Florida Multifamily Portfolio follow-on (See 8/8/2014 capital call detail) 1,447,500 University Office Park follow-on (See 6/3/2014 capital call detail) 3,389,182 Line of Credit Collateral offset (See 5/15/2015 capital call detail) (9,454,000) $13,800,298 Consistent with previous calls, this capital call has three sections: The Transmittal Memorandum The memo provides the total amount of equity for each investment in the call along with a list of Fund IX partners and the individual equity amounts they are responsible for funding. Wiring Instructions Detailed wiring instructions can be found on page three of the call. Each Fund IX partner s equity amount is required to be funded in fifteen calendar days. The deadline for funding this capital call is Wednesday, August 12, Investment Summary The summary includes a description of the investment, details about the investment opportunity and the downside risks. Also included are the sources and uses of funds, return objectives and the exit strategy. The summary also includes photos of the asset and a regional map detailing the location of the asset relative to the surrounding area and major highways. The investment to be funded with this call will not cause the Partnership to fail to be substantially in compliance with the Investment Criteria pursuant to Section 2.5 of the Partnership Agreement. PLEASE BE ADVISED THAT THE FUND S INVESTMENT PERIOD ENDS ON AUGUST 8, IN ACCORDANCE WITH ARTICLE III PARAGRAPH 3.1 A(2), THE GENERAL PARTNER IS PROVIDING THIS NOTICE THAT THE FUND HAS A NUMBER OF PROSPECTIVE INVESTMENTS UNDER AGREEMENT OF SALE OR LETTER OF INTENT AS DETAILED ON THE SCHEDULE BELOW. THE FUND WILL MAKE CAPITAL CALLS AFTER THE END OF THE INVESTMENT PERIOD, FOR ONE OR MORE OF THESE PROSPECTIVE INVESTMENTS. BPG Investment Partnership IX, L.P. Notice of Prospective Investments in Accordance with article III paragraph 3.1A(2) Investment Location Size Equity Status Raintree Scottsdale, AZ 345,000 sq. ft. $ 14,500,000 Under Agreement Johns Hopkins Rockville, MD 116,000 sq. ft. 7,500,000 Under Agreement Hill House Philadelphia, PA 188 Units 13,000,000 Under Agreement Metro West Naperville, IL 205,000 sq. ft. 10,800,000 Under Agreement Colony Woods Birmingham, AL 414 Units 16,100,000 Letter of Intent

2 On behalf of my colleagues, we appreciate having you as a partner in Fund IX and look forward to working with you. If you have any questions please feel free to contact me at (215) Sincerely, EQUUS CAPITAL PARTNERS, LTD. Joseph G. Nahas, Jr., CRE Senior Vice President Institutional Marketing and Investor Relations EQUUS CAPITAL PARTNERS, LTD Centre Square West, 1500 Market Street, Philadelphia, PA Phone: (215) Fax: (215) jnahas@equuspartners.com Web:

3 BPG Investment Partnership IX, L.P. Summary of Capital Call Due August 12, 2015 General Partner: Bergen GP Nine, Limited Partnership $ 10,479 $ 1,074 $ 330 $ 933 $ 2,182 $ (6,098) $ 8,900 Limited Partners: PA State Employees' Retirement System 1,309, ,425 41, , ,323 (762,419) 1,112,930 West Virginia Investment Management Board 1,571, ,310 49, , ,986 (914,903) 1,335,514 United Food and Commercial Workers International Union-Industry Fund 1,047, ,540 32,919 93, ,658 (609,935) 890,343 United Food and Commercial Workers Union and Employers Midwest Pension Fund 523,887 53,770 16,460 46, ,328 (304,968) 445,171 Laborers' Pension Fund 523,887 53,770 16,460 46, ,328 (304,968) 445,171 Danvers Contributory Retirement System 52,389 5,377 1,646 4,669 10,933 (30,497) 44,517 The First Hospital Foundation 52,389 5,377 1,646 4,669 10,933 (30,497) 44,517 JP 130,972 13,442 4,115 11,673 27,331 (76,242) 111,291 PNC 1 628,665 64,524 19,752 56, ,194 (365,961) 534,206 PNC 2 73,344 7,528 2,304 6,537 15,307 (42,695) 62,325 PNC 3 57,628 5,915 1,811 5,136 12,026 (33,546) 48,970 PNC 4 15,717 1, ,401 3,280 (9,149) 13,356 PNC 5 26,194 2, ,335 5,467 (15,248) 22,259 PNC 6 52,389 5,377 1,646 4,669 10,933 (30,497) 44,517 PNC 7 261,944 26,885 8,230 23,347 54,665 (152,484) 222,587 PNC 8 52,389 5,377 1,646 4,669 10,933 (30,497) 44,517 PNC 9 261,944 26,885 8,230 23,347 54,665 (152,484) 222,587 PNC ,777 10,754 3,292 9,339 21,865 (60,994) 89,033 PNC ,777 10,754 3,292 9,339 21,865 (60,994) 89,033 DHCP 1 65,486 6,721 2,057 5,837 13,665 (38,121) 55,645 DHCP 2 26,194 2, ,335 5,467 (15,248) 22,259 DHCP 3 52,389 5,377 1,646 4,669 10,933 (30,497) 44,517 DHCP 4 26,194 2, ,335 5,467 (15,248) 22,259 KK 13,097 1, ,167 2,733 (7,624) 11,128 PM 7, ,639 (4,575) 6,676 TEG 1 52,389 5,377 1,646 4,669 10,933 (30,497) 44,517 TEG 2 52,389 5,377 1,646 4,669 10,933 (30,497) 44,517 TEG 3 18,336 1, ,634 3,825 (10,674) 15,579 TEG 4 20,955 2, ,868 4,373 (12,199) 17,806 TEG 5 10,478 1, ,187 (6,099) 8,904 TEG 6 15,717 1, ,401 3,280 (9,149) 13,356 TEG 7 15,717 1, ,401 3,280 (9,149) 13,356 TEG 8 73,344 7,528 2,304 6,537 15,307 (42,695) 62,325 TEG 9 52,389 5,377 1,646 4,669 10,933 (30,497) 44,517 TEG 10 13,097 1, ,167 2,733 (7,624) 11,128 Bucks County Employee Retirement System & Trust 576,276 59,147 18,106 51, ,261 (335,465) 489,688 TK 52,389 5,377 1,646 4,669 10,933 (30,497) 44,517 JW 117,875 12,098 3,703 10,506 24,599 (68,618) 100,163 Montana Board of Investments 1,571, ,310 49, , ,986 (914,903) 1,335,514 Publisher 104,777 10,754 3,292 9,339 21,865 (60,994) 89,033 GB&SB 14,407 1, ,284 3,006 (8,387) 12,242 CR 5, ,093 (3,050) 4,452 Pepperdine University 157,166 16,131 4,938 14,008 32,800 (91,490) 133,553 Insulators Local No 23 Pension Fund 78,583 8,065 2,469 7,004 16,399 (45,745) 66,775 Fire & Police Employees' Retirement System of City of Baltimore 1,309, ,425 41, , ,323 (762,419) 1,112,930 Rowan University Foundation, Inc. 104,777 10,754 3,292 9,339 21,865 (60,994) 89,033 Creighton University 314,332 32,262 9,876 28,016 65,597 (182,981) 267,102 Real Estate Alternatives Portfolio 4 HR, LLC 419,110 43,016 13,168 37,355 87,463 (243,974) 356,138 PFM 1 278,970 28,632 8,765 24,864 58,218 (162,395) 237,054 PFM 2 142,759 14,652 4,485 12,724 29,793 (83,104) 121,309 PFM 3 104,777 10,754 3,292 9,339 21,865 (60,994) 89,033 PFM 4 37,982 3,898 1,193 3,385 7,925 (22,110) 32,273 Wilkes Barre City Aggregate Pension Trust Fund 153,237 15,728 4,814 13,658 31,979 (89,203) 130,213 Exeter Township Police Pension Plan 20,955 2, ,868 4,373 (12,199) 17,806 Community College of Philadelphia Foundation 17,026 1, ,518 3,553 (9,911) 14,469 U.S. Bank N. A. as Trustee FBO City of Roseville Post-Employment Benefits Program Trust 95,609 9,813 3,004 8,522 19,953 (55,657) 81,244 U.S. Bank N. A. as Trustee FBO San Bernardino Municipal Water Department OPEB Trust 26,194 2, ,335 5,467 (15,248) 22,259 U.S. Bank N. A. as Custodian FBO The City of Santa Rosa Post Retirement Medical Benefits - Fire Fighting Plan Trust 14,407 1, ,284 3,006 (8,387) 12,242 Bristol Township Police Pension Plan 91,680 9,410 2,880 8,171 19,133 (53,369) 77,905 SPT 3, (2,287) 3,338 Central Pension Fund of the International Union of Operating Engineers and Participating Employers 1,571, ,310 49, , ,986 (914,903) 1,335,514 Baylor College of Medicine 785,831 80,655 24,690 70, ,992 (457,452) 667,756 JB&DB 20,955 2, ,868 4,373 (12,199) 17,806 Mather Foundation 314,332 32,262 9,876 28,016 65,597 (182,981) 267,102 Management Partnerships & Affiliates: Executive Partners - IP IX, L.P. 273,469 28,068 8,592 24,374 57,068 (159,193) 232,378 Executive Partners - IP IX Two, L.P. 81,464 8,361 2,559 7,261 17,001 (47,422) 69,224 Promote Ownership: Bergen GP Nine, Limited Partnership Bay Colony Minneapolis Multifamily Portfolio Raleigh Multifamily Portfolio Central Florida Multifamily Portfolio University Office Park Line of Credit Collateral Total Capital Call Due August 12, 2015 $ 16,240,500 $ 1,666,866 $ 510,250 $ 1,447,500 $ 3,389,182 $ (9,454,000) $ 13,800,298

4 BPG INVESTMENT PARTNERSHIP IX, L.P. CAPITAL CALL ACCOUNT WIRING INSTRUCTIONS ************************************************ Bank: Bank of America, N.A. New York, NY ABA Number: Account Name: BPG Investment Partnership IX, L.P. Account Number: Reference: { Please reference your investor name or alias }

5 Bay Colony Wayne, PA Transaction Description: The $37,500,000 ($151.64/SF) fee simple acquisition of an 88% leased, 247,294 square foot four building Class B office park in Wayne, PA (Greater Philadelphia MSA). Bay Colony is being funded through a combination of $22,500,000 of mortgage debt with Santander Bank and the investment by BPG Investment Partnership IX, L.P. ( Fund IX ) of $16,240,500 of total equity. The mortgage lender will provide $11,400,000 of additional loan proceeds to fund projected lease up and base building costs. Seller: The seller is Brandywine Realty Trust ( BDN ), a publicly traded REIT based in Radnor, Pennsylvania. BDN is actively divesting assets that are deemed non-core to its existing portfolio. Specifically, BDN has publicly announced its strategy of focusing on capital deployment in urban properties in Philadelphia, Washington, DC, and Austin, TX. Property Description: Bay Colony was built between 1984 and The office park is comprised of 21.4 acres of land. The park is currently considered Class B in quality but is located in a Class A location near the confluence of I-76, US Route 202, The Pennsylvania Turnpike and US Route 422 approximately 20 miles northwest of center city Philadelphia. Additionally, the properties are located 1.5 miles from The King of Prussia Mall (2 nd largest mall in the U.S.) and less than 1 mile from the King of Prussia Town Center, which is currently under construction. Three of the Bay Colony buildings are constructed of a brick curtain wall with aluminum-framed ribbon fenestration with roof edge pre-cast concrete elements. The fourth building is constructed of a brick curtain wall with aluminum-framed ribbon fenestration with painted metal elements. Surface parking is provided at a 3.84 per 1,000 square foot ratio. According to Jones Lang LaSalle, as of 2Q 2015 The Greater Philadelphia office market is made up of million square feet with a direct vacancy rate of 13.2%. Vacancy in the combined 52.1 million square foot Philadelphia Suburban (PA) submarket stood at 15.5%. The King of Prussia/Wayne submarket is the largest suburban market in the region and has a 15.1% vacancy rate. Class A office space in this submarket consists of approximately 5.3 million square feet and has an 11.2% direct vacancy rate as of 2Q

6 Opportunity: Satisfy Tenant Demand for Quality Office Space Bay Colony was developed as a Class A office park and had been recognized as a premier brand in Suburban Philadelphia. The asset has had a long record of institutional ownership. As the buildings aged, the necessary capital was not reinvested in order to maintain its Class A status. With the appropriate reinvestment in modernizing the lobbies, bathrooms, common areas, elevators, HVAC, and tenant spaces, the buildings should attract higher-credit tenants at a greater rental rate. Additionally, there is an opportunity to connect the two sides of the campus and create a central common area that will help to activate the entire property. This connection should alleviate existing ingress and egress issues. Amenity Rich Environment King of Prussia Town Center is a development that is underway less than 1 mile from Bay Colony. Currently, the highly regarded Wegman s supermarket chain anchors the development and has been successful in serving as both a regional grocery store as well as a lunch and dinner destination. The balance of the 230,000 square foot Town Center is now under construction with a target completion date of 3Q The Town Center will add additional restaurants, fitness, and shopping options to the employees of area office tenants. Three phases of residential development (3,000 units) and hotel (500 rooms) are also included in the King of Prussia Town Center. In 4Q 2015 LifeTime Fitness will begin construction of a 100,000± square foot facility diagonally across Swedesford Road from Bay Colony and provide another desirable amenity to the area. This high-end fitness club has been central to other prime retail developments across the country. Both the King of Prussia Town Center and the LifeTime Fitness development further the amenity-rich attractiveness of this submarket and places Bay Colony at a distinct advantage over other amenity-starved suburban submarkets. Competitive Position Vacancy in trophy office space in the King of Prussia/Wayne, Radnor, and Conshohocken submarkets is at a historical low point. The few options that exist have commanded rents in the low to mid $30 s per square foot. While several new developments in these markets have been discussed, no projects are currently under construction. Rents for any proposed new buildings will need to be in the low to mid $30 s per square foot. There is a strategic opportunity to modernize Bay Colony, activate the campus, benefit from the nearby new amenity offerings, and deliver space options to tenants at a 20-25% discount to trophy space in the market. Attractive Cost Basis Bay Colony is being purchased at an attractive price which is less than 60% of estimated replacement cost. Even upon completion of the planned repositioning, our basis will be well below replacement cost and enable us to charge rents that compare favorably with competing class A locations. Downside Risks: Volatility of the Rent Roll With the lease expirations of Hartford Steam Boiler (55,000 SF), SunGard (26,500 SF) and CSC Corporation (18,500 SF) within the first 18 months of ownership, there is tenant retention risk. These tenants are accustomed to lower rents. While we believe these tenants may renew based on our planned improvements, the superior access to major highways, and the proximity to amenities, this retention risk is nonetheless a factor. 2

7 Entitlement Risk The proposed vehicular and pedestrian connection between the two sides of the Bay Colony campus was approved by Tredyffrin Township in 2Q This connection will improve traffic flow on the site. The campus common area development will, however, require land development approval from the township. While senior township staff are receptive to the concept, risk remains in securing the necessary final entitlements. Repositioning Risk Although we have budgeted $11 million of investment in base building and tenant spaces, there remains a risk that not enough capital has been allocated to the improvements. Development of the capital budget has been based on other improvement efforts across the Equus portfolio and is deemed appropriate. Interest Rate Risk The investment is being acquired with floating rate non-recourse financing; therefore, the projected returns are subject to the risk of interest rate increases. We have mitigated this risk somewhat by modeling increases in LIBOR totaling 275 basis points over the next 5 years. Sources & Uses of Funds: Sources Fund IX Equity $16,240,500 Debt Initial 22,500,000 Debt Future 11,400,000 Total Sources of Funds $50,140,500 Uses Purchase Price $37,500,000 Closing Costs 187,500 Tenant Improvements 5,400,000 Base Building Improvements 6,000,000 Financing Fees and Other Costs 678,000 Transfer Taxes 375,000 Total Uses of Funds $50,140,500 Returns: Projected Investment Parameters: 9%± stabilized capitalization rate on all-in-cost Projected Investment Yields: (based on five-year holding period) 9%± average annual cash-on-cash return 12%± IRR to the Limited Partners 1.7± Equity Multiple Exit Strategy: The subject investment is a value-add opportunity in a core location. With the appropriate investment in base building, site improvements, and tenant spaces, the prominence of the Bay Colony brand should be restored, and the portfolio should again command interest from institutional investors. 3

8 Bay Colony Building Photos 4

9 Regional Map Local Map 5