Trust News - 2010

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Second Quarter 2010:

DURING THE SECOND QUARTER, MEPT SOLD 303 SECOND STREET IN SAN FRANCISCO FOR GROSS PROCEEDS OF $237 MILLION. The two-tower, Class A, 732,000 square-foot office property located in San Francisco’s South Financial District was acquired by MEPT in 2005. Since purchasing the asset, MEPT worked diligently to market space in the building, leasing over 550,000 square feet over the last five years and achieving a 94 percent occupancy rate at the time of sale. Additionally, MEPT applied its Responsible Property Investing (RPI) principles and retrofitted the building with numerous energy-efficient features, earning 303 Second Street an ENERGY STAR label, LEED Gold–EBO&M certification and several BOMA of San Francisco Earth Awards. Given the limited potential for additional value creation from rent growth or new leases, 303 Second Street was targeted for sale. The sale of the property also allows MEPT to execute certain investment objectives and reduce its allocation to the office sector and the West region. After receiving a number of offers that exceeded the listed sale price, MEPT sold 303 Second Street to Kilroy Realty Corporation, a California-based REIT.

IN JUNE, DAVID KETO JOINED NEWTOWER TRUST COMPANY AS CHIEF OPERATING OFFICER. In his new role, Mr. Keto will work closely with NewTower’s President and CEO, Patrick Mayberry, in the general management of the bank, including business and operations management, organizational and human resource development, investment management, and external relations. Mr. Keto will also serve as a member of the Trust Real Estate Investment Committee. Mr. Keto has nearly thirty years of experience in real estate investment, finance, law, and economic development. Prior to joining NewTower, he was COO for the AFL-CIO Investment Trust Corporation (ITC), a financial services company providing marketing and other investment-related services for clients including the AFL-CIO Building Investment Trust. His prior experience also includes serving as Undersecretary in the Executive Office of Economic Affairs for Massachusetts, as Special Counsel at the Boston Redevelopment Authority and as a real estate attorney.

IN MAY, MEPT SOLD TWO OFFICE ASSETS, COLUMBIA CENTER I AND II, IN DETROIT FOR TOTAL GROSS PROCEEDS OF $59 MILLION. MEPT purchased Columbia Center I and an adjacent parcel of land in 1998. In 2000, MEPT completed construction of Columbia Center II, creating over 616,000 job hours in the local community. At the time of sale, Columbia Center I was 84 percent leased and Columbia Center II was 97 percent leased. While the two office assets, totaling 506,598 square feet, have maintained above-average occupancy, the decision was made to market the properties for sale due to depressed real estate market conditions in the Detroit area. Additionally, the sale provided an opportunity to further reduce the Fund’s allocation to the office sector and the Midwest region. The developer and minority partner of the project, Michigan-based Kirco Development Corporation, purchased the assets.

First Quarter 2010:

MIKE MCKEE JOINS KENNEDY ASSOCIATES AS CEO IN THE FIRST QUARTER OF 2010. Originally a Board of Managers’ independent director at Kennedy Associates, MEPT’s real estate advisor, Mike McKee joined Kennedy full-time as CEO. The addition of Mike McKee expands Kennedy’s executive team and allows the company to divide the role of CEO and President into two positions that were formerly both held by John Parker, a founding principal of Kennedy. Mike will oversee all operations of Kennedy with special emphasis on Strategic Planning and Business and Organizational Development. John will remain as President, focusing primarily on the firm’s real estate investment activities, including assisting with implementation of the MEPT investment strategy, as well as his responsibilities as Chairman of Kennedy’s Investment Committee.

IN FEBRUARY, MEPT SOLD BANDINI, AN INDUSTRIAL ASSET IN LOS ANGELES, FOR GROSS PROCEEDS OF $14.8 MILLION. Bandini, comprised of three, single-story, industrial buildings totaling 335,000 square feet, was originally purchased in 2003 as part of a 17-asset industrial portfolio and was 73 percent leased to three tenants. When acquired, the strategy for the portfolio was to sell each asset individually, maximizing the sale price MEPT could obtain. With substantial rollover expected in the near term, Bandini was sold to a local owner/user who utilized a Small Business Administration loan guarantee to finance the purchase.

DURING THE FIRST QUARTER, MEPT SOLD BEDFORD PARK BUSINESS CENTER IN CHICAGO FOR GROSS PROCEEDS OF $8.2 MILLION. MEPT built Bedford Park, a 296,000 square industrial building, in 2005. Bedford Park was targeted for sale because of persistent vacancy at the property and weakness in the surrounding submarket. Additionally, the sale provided an opportunity to reduce the Fund’s over-allocation to the Midwest region. The asset was purchased by a local owner/user, GRM, a provider of information management solutions.

MEPT EXITED AN INVESTMENT PARTNERSHIP IN CHARLOTTE, NC DURING THE QUARTER. MEPT assigned its interest in a Charlotte apartment portfolio of eight assets containing over 2,500 units to the joint venture partner for $5 million and a release from ongoing liability. MEPT purchased its interest in 2007 but the severe economic downturn, especially in the banking sector, caused low occupancies, declining market rates and nearterm capital requirements that exacerbated cash-flow shortfalls. The decision was made to exit the investment since these assets were experiencing significant distress as a result of the challenging conditions and a market recovery is not expected to occur for many years.