Dear Partners:

Reflections on the First Half of 2022

It has been an unusual, challenging and, yet, very profitable start to 2022 for us. As Lone Watie says in the movie “The Outlaw Josey Wales” – we have “endeavored to persevere.”

The general economy started the year strong with record stock market highs and accommodative, low interest rates. However, there were some headwinds for new industrial development projects – low cap rates, high construction costs, and delays caused by supply chain shortages.

We took advantage of the low cap rate market conditions and became sellers instead of buyers. So far in 2022, we have closed on eight building sales totaling $118mm in sales; $41mm in income; and $58mm in cash distributions.

Then the war in Ukraine and inflation/recession concerns sent the stock market into bear territory and caused interest rates to increase sooner and faster than anybody predicted with future increases on the horizon. The chart below shows the increase in current interest rates from one year ago.

The rising interest rates added to the aforementioned headwinds we are facing in finding new development projects that fit our business model.

In response to the higher interest rates, we are starting to see cap rates slowly rising up to a level where we can be competitive again. We are seeing a recent increase in deal flow and issued letters of intent activity. We want to get a few more projects under contract soon to go along with the few, smaller projects we have already closed on this year. Then we can get our first LLC offering of 2022 out in the next couple months. We are also still projecting doing a second LLC offering before the end of the year.

We appreciate your continuing support and trust in us. We always strive to be good stewards of your investments.

If you have any questions or need any additional information, please let us know.

Sincerely-

Mike Mumm

CFO