Real Estate Investment Criteria

PURPOSE

The purpose of the updated investment criteria is to enable Persis Corporation ("Persis") to direct and guide investment opportunities and allow for increased diversification while continuing to focus on capital preservation, stable income, maintaining a relatively low risk portfolio, and successful completion of transactions in compliance with the constraints of 1031 exchange regulations.

DIVERSIFICATION

Persis wishes to diversify its real estate holdings geographically and by tenant base.

• Geography: Persis will target assets in stable markets with steady growth prospects. Markets that have historically experienced large fluctuations in supply and demand as well as markets prone to natural disasters are unlikely to be suitable for investment. Markets that enjoy diverse economies with a wide range of employment opportunities are preferable. Persis prefers that investments of the Portfolio should be located in "primary" markets. A primary market is defined as follows:
  • A primary market for retail properties is defined as a metropolitan statistical area ("MSA") as defined by the U.S. Census Bureau with a population greater than 1 million people.
• Property Type: Persis wishes to invest in commercial real estate developed for retail uses.
• Single Tenant Qualifications: Persis prefers single-tenant properties over multi-tenant properties. Properties that are occupied by a single tenant must be of high quality construction and in good current physical condition. Preference is given to relatively new properties. It is preferred that single-tenanted properties of the portfolio have the following characteristics:
  • Staggering of single tenant lease expirations within the portfolio to avoid multiple expirations in any given fiscal year is preferred.
  • Persis has a long-term investment horizon and prefers longer term lease agreements. " Leases with scheduled rental rate increases are preferred.
  • Tenants should have "investment grade" credit (BBB- or better) if publicly rated.
  • Tenants without a public credit rating must provide evidence of strong financial standing, the capacity to withstand major economic downturns in their industry, and a verifiable track record of performance.
  • The above characteristics shall be considered in the context of other positive or negative attributes of the property including redevelopment potential and/or other extraordinary considerations.

LOCATION ATTRIBUTES

Persis is interested in properties in stable markets with steady growth prospects. Persis prefers to own properties in primary market areas. Assets shall be located in areas that offer rent growth potential and favorable demographics. Consideration shall also be given to any proposed developments and projects under development and the potential positive or negative impact on the property under consideration. The following attributes are applicable to various prope1ty types:

• Retail In-fill locations with high visibility from major transportation routes. Above average household income and dense or growing population base within 3 to 5 mile radius. High traffic counts and convenient street access.

PHYSICAL CHARACTERISTICS

Persis wishes to own high quality properties that will retain value and require limited capital improvements. Assets shall be of high quality construction and offer modern design attributes consistent with tenant demands. The magnitude of a tenant's investment in the Property shall be given consideration. All properties shall be free of environmental issues and risks that would be identified in a standard Phase I environmental site assessment which complies with all ASTM requirements or has been issued a "No Further Action" letter by the appropriate regulatory agency, if any such issues have been identified in the past.

DEAL SIZE

The size of acquisition transactions will depend upon the capital available for tax-deferred reinvestment as well as the existing investments of the Portfolio. Typically assets of more than $15 million will not be targeted for acquisition. Average targeted deal size is $5 million to $15 million and subject to adjustment if needed.

LEVERAGE

New investments should use the minimum amount of debt necessary to successfully complete any given transaction. Persis is averse to high leverage, which is consistent with Persis's low risk tolerance.

TAX ISSUES

Persis is a Sub S Corporation. Tax considerations play an important role in the investment process. Persis would prefer to utilize 1031 Exchange transactions to invest on a tax deferred basis due to low basis assets. Successful implementation of tax deferred transactions is key to the development of the Portfolio.