80 Broad Street in lower Manhattan

As in the other SC partnerships, the funds will be invested as short-term preferred equity and/or mezzanine debt, at attractive risk-adjusted current yields. Unlike our traditional direct investments in real estate, Strategic Capital investments do not seek by their design to provide long-term capital appreciation and increased returns from improved operations, and to date have made only passive investments in opportunities generated by other entrepreneurs.

Opportunistic Investing

Although it will be a blind pool, SC III already has executed a letter of intent to make a preferred-equity investment of $7.5 million to recapitalize 80 Broad Street, a 395,000-square foot office building in lower Manhattan's financial district that sits across from the world headquarters of Goldman Sachs. SC III's Sponsor intends to bring in a participating investor to reduce SC III's share of this investment and maintain diversification within the fund.

SC III will target overall investment returns in excess of 10% annually. The limited partners will receive a 9% priority return on the partnership's invested funds.

"The Strategic Capital program is opportunistic investing with carefully designed safeguards," says George S. Perry, senior vice president and director of investments of W&M Properties. "The SC program provides funding for qualified, experienced real estate owners in need of short-term capital above senior mortgage debt and below equity, for a variety of reasons. By maintaining discipline as we pursue and underwrite our investments, we are offering Wien & Malkin investors attractive, risk-adjusted returns."

The first two SC partnerships raised a total of approximately $36 million. The invested funds in the original SC partnership are producing to Class-A limited partners a quarterly distribution at the annualized rate of 13.12% (without accounting for any return of capital), which includes a basic 10% priority return plus partial return of capital.

SC II is producing for Class-A limited partners a quarterly distributionat the annualized rate of 10.21% (without accounting for any return of capital), including a basic 9% priority return plus partial return of capital.

Mr. Perry notes that capital sources for the market niche served by SC recently have increased. "With the additional competition, yields have decreased somewhat. We have decided not to increase our risk profile, but to move our pricing and priority returns down to a level that is still substantially higher than current returns available from other, comparable risk investments".