Introduction Sealy Strategic Equity Partners, L.P. (SSEP) Fund - - PowerPoint PPT Presentation

Introduction

Sealy Strategic Equity Partners LP, or “SSEP,” is a commercial real estate fund that invests in industrial warehouses and distribution centers in selected markets in the South and Southeast.

• Sealy Strategic Equity Partners LP, or “SSEP,” is a commercial real estate fund

that invests in industrial warehouses and distribution centers in selected markets in the South and Southeast.

• SSEP provides exposure to a portfolio of industrial warehouse properties,

selected by a family-run business with 70 years of experience.

• Strategy: purchase existing properties at or below replacement cost to

capture additional gains from value appreciation.

• Sealy & Company as manager has a proven track record in all market cycles:

59 industrial transactions since 1990, delivering a 24-plus percent average IRR.

• Commerce Street Capital has raised $64 million for SSEP in two engagements,

with 188 new LP investors, and is now engaged to raise another $50 million.

• SSEP, LP’s portfolio now includes 279 buildings in 10 states, with an estimated

value of $725 million – compared to 226 buildings and $420 million just 15 months ago, at December 2015.

Sealy Strategic Equity Partners, L.P. (SSEP) Fund

 The SSEP Fund has relatively low leverage for a real estate fund, capped at 70% by SSEP’s bank agreement. The firm intends to keep it below 65% in practice. At 1Q-2017, SSEP had about 58% leverage.  Cash distributions are typically paid quarterly, currently at a 5.75% pretax annual rate. Depending on your tax bracket, the tax-equivalent yield may be in the 9% range.  SSEP’s exit strategy is: Full or partial disposition of the portfolio in the 2020 to 2021 time frame for investors who want to redeem their

• units. At exit, the sharing arrangement is: an 80/20 split after an

investor has received an 8% IRR on net investment proceeds.  For investors seeking liquidity, there is an annual redemption option, subject to certain conditions.

SSEP, LP: Significant Aspects

Sealy Strategic Equity Partners, L.P. (SSEP)

A Sealy & Company sponsored investment

The property depicted on this page is owned by SSEP. This presentation is intended to be educational in nature and is neither an offer or solicitation to purchase any security. Sealy Strategic Equity Partners, L.P. (SSEP), an offering made under Rule 506 of Regulation D, is only sold through a private placement memorandum (PPM) provided to an accredited investor with a preexisting relationship with their financial advisor or the

• sponsor. There are substantial risks associated with this investment, which are disclosed in the PPM. These risks should be

considered and discussed with a knowledgeable and trusted financial advisor before making any investment.

Sealy Strategic Equity Partners, L.P.

This is neither an offer to sell nor a solicitation of an offer to buy the units in the offering. An investment in the offering may be made through the Private Placement Memorandum (PPM). RISK FACTORS An investment in the Company's units is illiquid and involves significant risks and therefore is suitable only for those persons who understand those risks and the consequences of their investment and who are able to bear the risk of loss of their entire

• investment. See the "Risk Factors" section beginning on page 40 of the PPM for a

discussion of the material risks that should be considered before an investment in the units is made. Additionally, there is no guarantee that the strategy will be successful. Distributions are not guaranteed and may constitute a return of capital.

• Reg. D Offering / For Accredited Investors Only.

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Sealy Strategic Equity Partners, L.P.

ADDITIONAL RISK DISCLOSURES This investment contains substantial risks, including:

• The use of leverage which requires a substantial portion of the investment’s cash flow

to service;

• Variable interest rates which can increase the servicing costs for the leverage used;
• The potential for vacancy in the properties owned in excess of projections;
• Competition with affiliated entities for properties to add to SSEP and the attention of

senior management;

• Certain expenses are advanced by the partnership for reimbursement by the General

Partner;

• There is no assurances of profitability by SSEP.

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The Sponsor – Sealy & Company The Sector – Industrial Distribution The Strategy – SSEP

Why This Investment?

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Sealy & Company The Sponsor

SSEP – WillowBrook

Property depicted on this page is owned by SSEP.

Sealy & Company

Sealy Mission

Mitigate investment risk and enhance investment returns. A real estate investment and operating company focused

• n industrial distribution and logistics properties.

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Sealy Footprint

• Founded in 1946
• 4th generation family company

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Figures as of 03/21/17

Proven Investment Sponsor

• Proven investment strategy
• Proven track record in all market cycles
• 59 full cycle industrial transactions since 1990
• Delivering average 24.73% IRR since 1990

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Figures as of 03/01/17

Sponsor Value

• Full-service operating platform
• Access to pipeline of investment opportunities
• Dedicated team of professionals
• Valuable corporate infrastructure
• Robust systems

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Sealy Strengths

• Execution capacity
• Sponsor co-investment
• Scalability of operations and investment
• Investor relationships
• 50+ years

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Sponsor Impact

• Solutions that create lasting value for our

investors, our properties, and our communities

• Our sustainability measures
• conserve resources and help the environment
• save money
• create healthier work places
• increase the portfolio’s value

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Sealy Relationships

Logos and trade names are the property of the respective companies and are not the property of SSEP.

Financial Partnerships Tenants

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Industrial Real Estate

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SSEP – Hayden

Property depicted on this page is owned by SSEP.

Why Industrial?

• Broad appeal
• Tenants and investors
• Triple net leases
• Limits financial risk
• Expands banking opportunities
• Enhances investor confidence
• Limited obsolescence
• Lower capital additions risk
• Long-term functionality

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Industrial – Limited Obsolescence

Built 1960s Built 2014 Built 1990s

Sealy 1720 Hayden Orgill Distribution Center SSEP – Sealy OKC I-35

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Properties depicted on this page are owned by SSEP and are representative of the types of investments SSEP intends to make.

Industrial – Supply & Demand

• Demand is UP
• Demand has out-paced supply for

26 consecutive quarters

• Supply hasn’t kept UP
• Construction since 2008 not

addressing the demand for facilities under 250,000 SF

Source: CBRE Marketview Snapshot US Industrial & Logistics, Q4 2016

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Industrial – Rental Rates

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Source: CBRE US Forecast and Capital Markets Marketview Q4 2016

Sealy Strategic Equity Partners, L.P. (SSEP)

SSEP – El Paso

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Property depicted on this page is owned by SSEP.

SSEP – Mission Statement Value investing focused on stable, growing cash flow and equity appreciation through a diversified industrial real estate portfolio.

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Fund Objectives

• Purchase stabilized and near-stabilized assets
• Off-market/soft-marketed $5 to $25 million
• Purchase properties below replacement cost
• Diversified portfolio by location:
• 65% in primary markets
• 35% in proven secondary markets
• Targeted total return of 15%

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SSEP cannot provide any assurance that it will achieve its stated objectives.

Investment Benefits

• Alignment of interests
• Established, growing, and performing portfolio
• Equity liquidity feature
• Return on appreciation recognized annually
• Enterprise financing

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SSEP cannot provide any assurance that it will achieve its stated objectives.

Enterprise Financing

• Available to top level owner/operators
• Portfolio covenants versus real estate financing
• Lower cost of capital, more flexible terms
• Close transactions efficiently
• Opportunistic and accretive dispositions

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2016 Acquisitions Summary

Past performance is not a guarantee of future results.

23 # Transaction ID Closing Date SSEP/ JV Market Seller Broker/ Company Size (SF) Occupancy at Acquisition Year Built

3,838,775 89.9% 1990 SSEP Meridan, MS John Schweitzer Off Market 99,600 100.0% 1973 One Meridian LLC Off Market 466,670 96.0% 2011 2008 100.0% Crow Holdings 1982 1981 86.6% NW Houston LLC Off Market 783,189 85.7% Oaktree CBRE 163,797 Eastgroup CBRE 232,307 100.0% 1985 Houston 1 NW Point 2/12/16 SSEP Houston 3 Meridian Dist. Center 4/19/16 4 Sealy Frederick Rd 5/17/16 SSEP El Paso 2 Carter Distribution 4/12/16 SSEP D/FW TOTALS/AVERAGES 1,478,207 6 NW Houston 9/1/16 SSEP 65.0% 2001 5 Dallas Light Industrial 8/26/16 SSEP Dallas Prologis CBRE Off Market 615,005 7 121 Corporate Drive 11/29/16 SSEP Dallas

Property Summaries

# Transaction ID Acq./Contr. Amount $/SF Debt Equity Going-In Cap Rate Stabilized Cap Rate 5 Yr. Average Operating Cash-on-Cash Yield (Leveraged) Net Levered IRR

60% 40% $9,536,597 $6,331,727 63% 37% $21,600,000 $12,897,991 61% 39% $8,100,000 $5,118,878 64% 36% $1,674,904 $947,201 63% 37% $40,000,000 $23,488,233 65% 35% $31,707,906 $17,073,489 50% 50% $10,750,524.55 $10,618,039 $199,845,490 $52.06 $123,369,932 $76,475,559 6.48% 8.05% 16.09% 17.70% 7.82% 18.56% 18.73% 8.39% 21.14% 16.42% $48,781,395 $62.29 6.92% TOTALS/AVERAGES 1 NW Point 2 Carter Distribution 5 Dallas Light Industrial 6 NW Houston 6 121 Corporate Drive $21,368,564 $130.46 4.76% 6.86% $63,488,233 $42.95 18.62% 15.09% 17.44% $34,497,991 $56.09 6.20% 6.74% 8.40% 13.66% 11.69% 5.94% $15,868,324 $68.31 11.95% 6.97% 22.07% 23.06% 4 Sealy Frederick Rd $2,622,105 $26.33 9.42% 9.42% 13.50% 15.88% 3 Meridian Dist. Center $13,218,878 $28.33 9.90% 9.90%

2016 Acquisitions Summary

Past performance is not a guarantee of future results.

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Investment Summaries

Case Study

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Trade Street Distribution Center

Lexington, KY

• 380,000 square feet
• Institutional quality asset
• Targeted secondary market
• Soft-marketed asset
• 51% below replacement cost
• 100% occupied by Amazon.com
• Critical use property for Amazon
• Excellent infill location

Property depicted on this page is owned by SSEP.

SSEP - Established Portfolio

*The financial information is calculated in accordance with the funds debt

• covenants. Figures as of 03/21/17.

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$725+ Million Total Asset Value $302+ Million Total Equity Value 60% - 65.0% Targeted Leverage 15.2 Million Square Feet 279 Buildings 10 States 17 Markets 555± Tenants 92.7%± Occupancy

SSEP - Portfolio Markets

As of 03/21/17

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HOUSTON JACKSONVILLE NEW ORLEANS SHREVEPORT BROWNSVILLE INDIANAPOLIS NASHVILLE CHARLOTTE ATLANTA DALLAS AUSTIN PHOENIX SAN ANTONIO MIAMI ORLANDO TAMPA SAVANNAH

• ST. LOUIS

OKLAHOMA CITY MEMPHIS Existing Markets

Target Markets

TALLAHASSEE LEXINGTON MERIDIAN EL PASO BATON ROUGE KANSAS CITY

Portfolio Strategy

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• Portfolio aggregation to provides flexible exit options

Portfolio By Design

SSEP - Exit Strategy

• Harvest selected properties annually
• Disposition of investment tranches
• Portfolio sale
• Public company formation
• Target Buyers
• Traded/non-traded REITs
• Pension funds
• Capital aggregators
• Market competitors

SSEP provides no guarantee or assurance that it will be able to execute the exit strategy successfully.

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SSEP By The Numbers (2012-2016)

24% 15%

Distribution Rate Unit Value Appreciation

485%

Total Equity Value

378%

Portfolio Square Footage

377%

Total Asset value

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Past performance is not a guarantee of future results. Figures based upon 12/31/2016 portfolio statistics.

Portfolio Growth By Square Feet

As of July 2015

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Past performance is not a guarantee of future results.

Fund Growth By Total Asset

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Past performance is not a guarantee of future results.

100 200 300 400 500 600 700 800 Q4 2012 Q4 2013 Q4 2014 Q4 2015 Q4 2016

Total Asset Value in $$ Millions

Total Debt Total Equity

Q4 2012 Q4 2014 Q4 2013 Q4 2015 $133 MM $182 MM $243 MM $403 MM 03/21/17 $635 MM $725 MM Q4 2016

Unit Value Appreciation History

As of July 2015

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Past performance is not a guarantee of future results.

Target Fund Size $700 million to $1 billion Sponsor Co-Investment $12.4 million to date Anticipated Fund Term Target 2020± (capital event or sale) Minimum Investment $250,000 Investor Suitability Accredited investors

SSEP – Summary of Fund Terms

SSEP cannot provide any assurance that it will achieve its stated objectives.

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Current Distribution

Current annual distribution rate of 5.75% paid quarterly with anticipated increase over time. Mark to Market Unit value is marked to market annually. 5.75% distribution rate is paid on then current investment unit value.

Liquidity Feature

(Subject to annual limitations, see PPM) For units acquired after June 16, 2014 ▪ Months 1-18 units redeemed at 95% of then current unit value. ▪ After 18th month after investor purchase, units redeemed at current unit value. Units redeemed on best efforts basis.

Sponsor’s Carried Interest

20% of proceeds above an 8% IRR

SSEP – Summary of Fund Terms

The distributions are not guaranteed and may constitute a return of capital.

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Real Estate Strategies Delivered

www.Sealynet.com

Sealy Buckeye

Property depicted on this page was developed by the sponsor and is not owned by SSEP, but is representative of the types of investments SSEP intends to make.