INCOME FUND OVERVIEW

Investment Grade Income Fund(s) are designed to provide high yield, inflation-protected total returns and deliver the stable, predictable income, and security benefits of a fixed income strategy and the capital appreciation and total return benefits of an equity investment.

The net lease funds sponsored by Investment Grade Income Property, LP invest in business essential health care real estate, and nondiscretionary income-focused retail properties leased to single corporate tenants on a long term basis where the tenant pays for all the operating costs of the property.

The assets comprising the net lease funds are 100% leased to a single tenant at the time of acquisition. The corporate tenant typically carries an investment-grade credit rating and guarantees the rent payable under the lease. The properties are critical to the operations of the underlying tenant and typically serve as the corporation’s regional distribution facility or warehouse, corporate headquarters, or significant retail outlet facility.

The net lease Investment Grade Income Fund(s) are typically structured as limited liability companies (LLC’s) or Limited Partnerships ( LP’s ). As a result of the net lease structure, the long term lease commitment and invest grade credit rating of the tenants, the cash flow from the investments in the net leased Investment Grade Income Fund is predictable and secured by the guarantee of the tenant.

In addition to acquiring properties directly, the Fund may also co-invest in joint ventures with institutional investors and high net worth individuals to acquire properties. This will allow the Fund to invest in larger properties without reducing the Fund’s diversification. In any such joint venture, the Fund’s interest will be pari-passu with the co-investor, and the Manager will have primary responsibility for managing the property. The co-investor will typically have certain controls with respect to the sale of the property and other significant decisions.

FUND CHARACTERISTICS

Leases that are long-term rental obligations. Our net lease investments are generally long-term leases, often 12 to 15 years, with contractual rent increases, creating the foundation for stable, growing cash flow in the form of rent escalations.

Investment Grade Tenants. The cornerstone of Investment Grade Income Fund(s) investment strategy is a commitment to investment grade quality tenants. High credit quality minimizes cash flow risk and provides maximum liquidity at exit.

Corporate guarantees from tenants backing the lease obligations. Performance of the long-term rental obligations is guaranteed by the corporate tenant, significantly reducing the risk of a tenant vacancy and or any associated re-tenanting costs.

Properties that are significant to the operations of the corporate tenants. Our real estate assets are operationally essential to the corporate tenant’s business model and often include significant tenant investment in infrastructure improvements.

A portfolio of assets diversified over Health Care Real Estate and Non-Discretionary Income focussed Retail sectors. Investment Grade Income Fund(s) net lease funds invest across multiple real estate sectors, primarily focused on healthcare real estate and retail properties focused on tenant business models around non-discretionary income, to capitalize on the benefits of each sector and provide additional risk displacement through diversification.

Allocation to Real Estate by Different Investor Types

For pension funds and other institutional size investors, real estate is a critical component of maximizing returns and diversifying portfolios. In addition, real estate is relatively stable and has a low correlation to the stock market. You only have to look at the wild gyrations in stock markets in the beginning of 2016 to appreciate this key benefit. These considerations also hold true for individuals whose time horizon may not be as long as a pension fund. North American High Net Worth investors allocate 24% of their investment portfolios to real estate, according to Knight Frank’s 2015 Wealth Report. Globally, the allocation to real estate is even higher, at 32%.

Value of $100 Invested in Core Real Estate, Stocks, and REITs

Of course, the right allocation depends on an individual’s specific situation. Most real estate investments are not very liquid and require an investment horizon of 5 years or longer. Let’s address some specific issues related to allocation.

1. Where does real estate fit into the portfolio?

The old rule of thumb is that 100 minus your age equals the percentage of your assets that should be invested in stocks, and the remainder should be invested in bonds. More sophisticated approaches modify this based on an individual’s risk tolerance and life circumstances. The underlying principle is that stocks constitute the long-term portion of the portfolio because they have higher returns than bonds, but they are more volatile. Real estate may be less volatile than stocks, but it is also less liquid. Therefore, it should be part of the long-term component of the portfolio.

2. How liquid is real estate?

This depends on the form of the investment. The most liquid real estate investments, such as REIT stocks, are typically highly correlated to the stock market. It can be argued that traded REITs are really a component of your stock allocation, not of your real estate allocation. Real estate funds have varying levels of liquidity, depending on their structure. Some are completely locked up for the term of the fund while others allow redemptions, subject to certain limits. These redemption features can be helpful when you need liquidity due to personal circumstances, but they are unlikely to help you if everyone is heading for the exits at the same time. The best approach is to assume that money invested in a fund will not be available until the fund is liquidated, generally in 5 to 10 years.

3. What about current income?

The current income provides partial liquidity. Investments in stabilized operating properties can throw off attractive current returns. Opportunistic investments generate their returns from capital appreciation, so they generally don’t generate much current income.

4. Does my personal property count towards my real estate allocation?

Your primary residence should not be included because it is not disposable. You may realize a nice capital gain when you sell it, but you will need to reinvest this gain in a new home to maintain the same standard of living. A vacation home is trickier to evaluate. If it is an important part of your family’s lifestyle, you should treat it as a primary residence. If it doubles as an investment property and you don’t have much emotional attachment to it, then it can legitimately count as part of your investment portfolio.

5. So, how much should I allocate to real estate?

This is where a good advisor can really add value. The right range could be anywhere from 5% to 30% of the investment portfolio. Picking the right point in that range requires a good understanding of the individual’s personal circumstances, risk tolerance, and need for liquidity.

6. What is the various forms of real estate investment?

Pros	Cons
Listed REITS	High liquidity and low transaction costs	Volatility and correlation to stock market
Non-Traded REITs	Low volatility	Very high fees and poor historical performance, limited liquidity
Direct Ownership	Control over asset and no management fees	Requires lots of time, expertise, and capital; limited diversification and liquidity
Real Estate Crowdfunding	Efficient format and ability to select individual deals	Non-institutional deals and sponsors, limited diversification and liquidity
Real Estate Funds	Professional management and diversification, institutional quality properties	Historically difficult for individuals to access, limited liquidity

Summary of Proposed Funds:

Investment Grade Income Fund I $5M-$ 10M Raise: 100% Equity

Investment Grade Income Fund II 10-$25M $25M Raise:$30-$75M Portfolio Value ( 25%-35% Equity / 65%-75% Debt )

A minimum of 80% of the Portfolio will be Investment Grade Tenants, with maximum of 20% Non-Investment Grade Tenants

Investment Grade Income Fund Partners Fund:

PLEASE INQUIRE Investment Grade Income Property, LP Legal & Securities Advisor works with Family Offices, Institutions, and Fund Managers on custom fund structures and joint ventures.

FUND PORTFOLIO TENANTS & PROPERTIES

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