With eight properties acquired by its first fund, half on an all-cash basis and the rest with only modest leverage, the Industrial Partners program is preparing to launch Fund II, in a market environment that favors the program's disciplined approach.

While some of Fund I's properties are without leverage, as they are stabilized they will be mortgaged and those financing proceeds can either be returned to investors or reinvested alongside Fund II.

"We continue to see worthwhile opportunities," says Anthony E. Malkin, who reviews and approves all Industrial Partners capital transactions. "The credit market turmoil is benefiting our disciplined and moderate leverage approach. We are staying focused, picking our spots, and making our bids."

Jonathan P. Garrity, who handles the day-to-day operations of the program, adds, "As disciplined investors who seek value-added situations and do not overload on debt, we expect to identify many favorable opportunities as additional quality properties come to market this year."

Industrial Partners II will be offered in late June, with a target to equal our first fund raise of $30 million, with which we acquired nearly 1.5 million square feet of well-situated warehouse and distribution properties in Ohio, Tennessee, North and South Carolina, Virginia and Pennsylvania. Three of the acquisitions are in port cities whose economies are growing on the strength of intensified global commerce, and the others are in traditional mid-western and mid-south distribution hub regions.

"We remain targeted on a turnaround strategy for warehouse/distribution centers because it has allowed us to buy, own, and operate property at a price advantage to new building and avoid any excessive price escalation that has characterized other types of commercial property in recent years," explains Mr. Malkin. "We saw that it was still possible to identify value-enhancement opportunities and buy them on sensible terms. As a result, our investors have a strong, diversified, low-leveraged portfolio with the financial flexibility to execute proactive asset-management strategies."

According to Mr. Garrity, "Our capital from the new fund will enable us to continue the program to date to pursue a broad range of opportunities wherever we find them," he says. "The focus will be on areas where long-term growth is anticipated, whether they are east or west of the Mississippi."

Mr. Garrity notes that corporations are consolidating facilities and disposing of surplus properties, many of which offer opportunity for more productive use.

"A well located, quality corporate facility that's no longer of use to its owner often can be adapted to serve the needs of multiple tenants in a thriving local economy," he explains. "So we look for buildings of substantial size that can be efficiently 'broken down' to accommodate local market demand. If we can cost-efficiently reconfigure and reposition the property, we have set the stage for long-term value creation."