#1NE PC MAY 2023 NEPC PRIVATE MARKETS INVESTMENT DUE DILIGENCE REPORT Penwood Real Estate Investment Management Penwood Select Industrial Partners VII OXO#2Penwood Select Industrial Partners VII Non-Core Real Estate TABLE OF CONTENTS Cover Page......... Executive Summary. Fund Characteristics ....... Firm Description........ Fund Investment Strategy... Fund Economics ....... ‒‒‒‒‒‒‒‒‒‒‒‒‒ Disclaimers and Disclosures....... Appendix: ESG Integration Evaluation........ Appendix: Manager Track Record........... NE PC 2 3 4 6 7 8 9 10 .Error! Bookmark not defined. CONFIDENTIAL INFORMATION - FOR NEPC CLIENT USE ONLY 1#3Penwood Select Industrial Partners VII Non-Core Real Estate COVER PAGE Firm Name Fund Name Diverse-Owned/ Diverse-Led Manager ESG Rating Target Size/Max Size Amount Raised Prior Fund Raise Minimum Investment Target Final Close Date Target Fund Return Management Fee & Carry NE PC Penwood Real Estate Investment Management Penwood Select Industrial Partners VII No $500 million $250 million as of May 2023 $381 million $25 million though the General Partner may accept a lower amount at its discretion Q3 2023 10% -12% net IRR 1.45x net MOIC Management fee of 1.50% and carried interest of 15% over an 8% preferred return to the investors CONFIDENTIAL INFORMATION - FOR NEPC CLIENT USE ONLY | 2#4Penwood Select Industrial Partners VII Non-Core Real Estate EXECUTIVE SUMMARY Penwood Real Estate Investment Management ("Penwood," the "Manager," or the "Firm") is a commercial real estate investment manager that invests in value-add industrial properties in select gateway markets of the United States. The Firm will aim to add value through acquisition, management, rehabilitation, and/or development of properties. Penwood is currently raising capital for Penwood Select Industrial Partners VII (the "Fund" or "Fund VII"), the Firm's seventh value-add industrial fund. The Fund is a continuation strategy of Penwood's predecessor funds, which began in 2005. The Manager seeks to leverage its local expertise and operating partner relationships to gain access to industrial investments in supply-constrained and high barrier-to-entry markets with strong demand. Historically, the Manager has invested in Southern California, New Jersey, Pennsylvania, and Las Vegas. Penwood aims to put in place tailored capital structures which provides downside protection while the Fund conducts its value creation process. The Fund's representative deals have included value-add strategies such as re-leasing, repositioning, redevelopment, and ground-up development. Through strong property-level fundamentals and demand drivers, the Manager believes that there is significant value growth potential in the Fund's targeted markets. The industrial market has seen an inflow of capital due to tailwinds led by the increase in e-commerce and the need for improved supply chain logistics. These market dynamics have created an opportunity throughout the United States, specifically in dominant seaports. These high barrier to entry markets remain well leased with investment grade tenants with strong rental growth and appreciation upside. Penwood Select Industrial Partners VII is targeting a fundraise of $500 million. The Fund is targeting a net IRR of 10% to 12% and a net multiple of 1.45x. Positives: NIE PC CONFIDENTIAL INFORMATION - FOR NEPC CLIENT USE ONLY 3#5Penwood Select Industrial Partners VII Non-Core Real Estate ■ ■ Market Fundamentals: Penwood's focus on industrial real estate properties is backed by strong macro tailwinds within the sector. Amplified by disruptions brought on by the COVID-19 pandemic, the demand for industrial properties has increased due to e-commerce and supply chain related fundamentals. These fundamentals are especially present in United States markets that are gateways for international, domestic, regional, and local distribution. This increase in demand has been met by limited new supply, which has created a favorable investment environment. NEPC believes that these tailwinds will persist and will benefit industrial investors like Penwood. ■ Operating Partners & Sourcing Capabilities: Penwood's target markets carry a high barrier to entry which results in the need for local, on the ground expertise. Due to Penwood's tenured presence in its markets, the Firm has established a group of operating partners that is known as the "Penwood Select Industrial Group" (PSIG). This premier group of developers provides the Fund access to preferential deal flow of off market opportunities. Additionally, the ability to privately negotiate deals allows for favorable structuring and pricing. NEPC believes that Penwood's reputation with its trusted partners gives the Fund an advantage when assessing deal flow. Negatives: Track Record & Consistency: Penwood has raised institutional funds since 2005 and is led by a senior team with 25+ years of real estate experience. Penwood has effectively invested in only industrial real estate since inception. This focused expertise has resulted in strong performance on both an absolute and relative basis. The Manager has delivered this outperformance to a consistent group of investors and has been thoughtful about expanding discretionary capital. Concentration Risk: Penwood's investment strategy is opportunistic in nature with a focus on industrial assets in specific markets. The success of the strategy is inherent in Penwood's ability to continue to successfully operate in these markets. Additionally, industrial real estate markets are experiencing significant momentum due to an increase in investors in the sector. Any pull back in industrial real estate fundamentals could affect Penwood's returns. That being said, NEPC believes in Penwood's ability to remain in its markets and has a favorable view of the industrial real estate sector. Team Size & Location: Penwood has a total of 17 employees, inclusive of investment professionals and other supporting professionals (e.g., accounting and legal). This is a relatively small team size given the targeted 20 to 30 investments in the Fund. In addition, the team is headquartered in Connecticut and does not have a local office in the Fund's target markets. We believe that both of these factors are somewhat mitigated by the operating partner relationships Penwood has developed, as the Manager will be able to leverage the teams and local knowledge of these operating partners. Furthermore, the Fund size and strategy (including the specific target markets) are consistent with prior funds, and Penwood has demonstrated an ability to generate consistently attractive returns for investors. FUND CHARACTERISTICS NE PC CONFIDENTIAL INFORMATION - FOR NEPC CLIENT USE ONLY 4#6Penwood Select Industrial Partners VII Non-Core Real Estate Investment Period Fund Term Sponsor's Investment Assets Under Management Investment Focus Geographic Focus Projected # of Investments Deal Size Leverage Annual Management Fee Other Fees Organizational Costs Carried Interest Preferred Return Distribution Waterfall ERISA Fiduciary Fund Auditor Fund Legal Counsel Website NE PC Three years after the Final Closing Date 10 years 1.5% of capital commitments $599.8 million as of 12/31/2022 Value-Add Industrial Real Estate United States 20-30 $25 million in equity 55% N/A 8% I. Capped at $550k 15% II. ● III. ● 1.50% on committed capital during the investment period 1.50% on invested capital following the investment period Discounts may be possible based on size or other factors First, 100% to the Partners on a pari passu basis in proportion to the amounts of their respective Preferred Returns (as defined below), until the Partners have received a monthly compounded 8.0% annual internal rate of return ("IRR") on their total unreturned capital (such 8% amount, the "Preferred Return"); Next, 100% to the Partners on a pari passu basis in proportion to their capital contributions, until the Partners have received a return of their total capital contributed; Thereafter, 85% to the Partners on a pari passu basis in proportion to their capital contributions and 15% to the General Partner (such 15% amount, the "Incentive Allocation"); provided, however, that any Incentive Allocation accruing and distributable to the General Partner during the investment period will not be distributed to the General Partner until the termination of the investment period. ERISA investors are currently less than 25% of the Fund, though if that changes the Fund expects to qualify as a VCOC. In either case, the Fund welcomes investments by ERISA investors and does not expect its assets to constitute "plan assets" for purposes of ERISA. PwC DLA Piper https://penwoodre.com/ CONFIDENTIAL INFORMATION - FOR NEPC CLIENT USE ONLY 5#7Penwood Select Industrial Partners VII Non-Core Real Estate FIRM DESCRIPTION Firm Overview Penwood Real Estate Investment Management was founded in 2003 by John Hurley, Richard Chase, and Karen Nista. Penwood is owned and operated by six partners and has a total of 17 employees across the Firm. Penwood is headquartered in West Hartford, Connecticut with an additional office in Morristown, New Jersey. The Firm has approximately $599 million in assets under management and its sole business line is the management of its value- add industrial fund offerings. Team Overview The Fund's investment team and strategy is led by Chief Investment Officer, John Hurley, who is supported by 16 investment professionals ranging from Managing Director to Analyst across acquisitions and asset management. The team has grown modestly alongside the fund offerings since the Firm's inception. The Firm has also endured some turnover over the past few years but has been backfilled by professionals with significant real estate experience. The senior team at Penwood has remained intact since the Firm's inception and averages over 25 years in the sector. The Firm has a six-member investment committee, which comprises the following individuals: Name John Hurley Karen Nista Zack Flynn Christine Kubas Joe Koziol Rick Chase NE PC Title Chief Investment Officer Chief Operating Officer Head of Acquisitions Head of Asset Management Chief Financial Officer Sr Managing Director CONFIDENTIAL INFORMATION - FOR NEPC CLIENT USE ONLY 6#8Penwood Select Industrial Partners VII Non-Core Real Estate FUND INVESTMENT STRATEGY Investment Strategy Consistent with the Manager's prior funds, Penwood Select Industrial Partners VII will invest solely in industrial real estate properties in select markets across the United States. Penwood's market focus remains in Southern California, Las Vegas, New Jersey, and Pennsylvania. The Manager has experience investing in ground-up development projects, rehabilitation or value-add transactions, as well as acquiring income-producing assets, and anticipates that Fund VII will have a blend of these same strategies. The Manager seeks to source investments off-market through preferred deal flow access with local operating partners. Penwood will also acquire assets directly, without the use of a joint venture operating partner. The Fund aims to acquire properties at or below replacement costs and will create value through rehabilitation, re- leasing, redevelopment, and ground-up development. Additionally, Penwood seeks to manage incremental risk in all stages of the investment process. The Manager will assess risks such as zoning, entitlement, construction, and market risk in order to effectively execute the value creation process. Upon completion, the Fund will produce an attractive stabilized asset in a supply constrained environment. Target Investment Types Penwood plans to make approximately 20 to 30 investments in industrial real estate properties, with equity checks around $25 million. The Fund targets properties with total square footage between two hundred and three hundred thousand, which allows the Manager to have a larger selection of potential tenants. The Manager assesses building characteristics such as ceiling heights, column width, floor conditions, and power supply. The Fund will invest a majority of the capital in existing assets (including rehabilitation or renovation projects) but has the ability to invest up to 40% in ground-up development. No more than 10% of the Fund may be invested outside of the target markets (defined by the Manager as Southern California, Metro Las Vegas, and the region comprising New Jersey, port-centric New York, and Central and Eastern Pennsylvania), and no more than 15% of the Fund may be invested in the Las Vegas market. Use of Leverage The Fund has a fund level leverage target of 55%, measur loan to cost. Development and value-add projects will be levered up to 50% of cost, while income-producing assets will be levered up to 60% of stabilized value. Expected Fund Investor Base The Manager anticipates Fund VII to reflect a similar composition of institutional capital as the prior Funds, with the majority to come from public pension plan investors. NE PC CONFIDENTIAL INFORMATION - FOR NEPC CLIENT USE ONLY 7#9Penwood Select Industrial Partners VII Non-Core Real Estate FUND ECONOMICS Management Fee The management fee is 1.50% on committed capital during the investment period and 1.50% on invested capital thereafter. Management fee discounts may be possible based on commitment amount or other factors. Performance Fee Carried interest of 15% over an 8% preferred return with no GP catch-up. Carried interest with be calculated on the Fund level. Amounts available for distribution by the Partnership will be distributed in the following order of priority: First, 100% to the Partners on a pari passu basis in proportion to the amounts of their respective Preferred Returns (as defined below), until the Partners have received a monthly compounded 8.0% annual internal rate of return ("IRR") on their total unreturned capital (such 8% amount, the "Preferred Return"); I. II. III. Next, 100% to the Partners on a pari passu basis in proportion to their capital contributions, until the Partners have received a return of their total capital contributed; Thereafter, 85% to the Partners on a pari passu basis in proportion to their capital contributions and 15% to the General Partner (such 15% amount, the "Incentive Allocation"); provided, however, that any Incentive Allocation accruing and distributable to the General Partner during the investment period will not be distributed to the General Partner until the termination of the investment period. Other Fees and Expenses The Fund shall bear all Organizational Expenses incurred in the formation of the Fund, up to an amount not to exceed $550,000. The Fund will bear fees of placement agents, if any, subject to the Management Fee otherwise payable being reduced by a like amount. NE PC CONFIDENTIAL INFORMATION - FOR NEPC CLIENT USE ONLY 8#10Penwood Select Industrial Partners VII NON-CORE REAL ESTATE DISCLAIMERS AND DISCLOSURES ■ Past performance is no guarantee of future results. The opinions presented herein represent the good faith views of NEPC as of the date of this report and are subject to change at any time. ■ ■ ■ ■ Information used to prepare this report was obtained directly from the investment manager, and market index data was provided by other external sources. While NEPC has exercised reasonable professional care in preparing this report, we cannot guarantee the accuracy of all source information contained within. NEPC may provide background information on fund structures or the impact of taxes, but you should contact your legal counsel or tax professional for specific advice on such matters. This report may contain confidential or proprietary information and may not be copied or redistributed to any party not legally entitled to receive it. In addition, it is important that investors understand the following characteristics of non-traditional investment strategies including hedge funds, real estate, and private equity: 1. Performance can be volatile, and investors could lose all or a substantial portion of their investment 2. Leverage and other speculative practices may increase the risk of loss 3. Past performance may be revised due to the revaluation of investments 4. These investments can be illiquid, and investors may be subject to lockups or lengthy redemption terms 5. A secondary market may not be available for all funds, and any sales that occur may take place at a discount to value 6. These funds are not subject to the same regulatory requirements as registered investment vehicles 7. Managers may not be required to provide periodic pricing or valuation information to investors 8. These funds may have complex tax structures and delays in distributing important tax information 9. These funds often charge high fees 10. Investment agreements often give the manager authority to trade in securities, markets or currencies that are not within the manager's realm of expertise or contemplated investment strategy NE PC CONFIDENTIAL INFORMATION - FOR NEPC CLIENT USE ONLY 9#11Penwood Select Industrial Partners VII NON-CORE REAL ESTATE APPENDIX: ESG INTEGRATION EVALUATION Firm Fund Strategy Type Diverse-Owned Firm General Fund Information Penwood Real Estate Investment Management ("Penwood" or the "Firm") Penwood Select Industrial Partners VII ("Fund VII" or the "Fund" INE PC Non-Core Real Estate No ESG Rating ESG 3 ESG Ratings are on a scale of 1 through 5, with 1 indicating a best-in-class approach and 5 indicating no integration. Analyst Opinion Penwood has acknowledged the existence of ESG factors within real estate and the Firm has taken steps to integrate the assessment of these factors into its investment process. The Firm has had an established ESG policy and requires ESG analysis in all investment memos. The oversight from the Sustainability Committee and Risk Committee seem to provide sufficient oversight of the use of ESG policies and analysis. The Firm actively sets ESG related goals and achievements as they look to integrate further. Firm-Level Commitment Resources Engagement Policies Overview Integration Process Resources Evaluation Criteria and Commentary Firm-Level Penwood has an ESG policy that has been in place since 2019 and was recently revised in 2022. The purpose of the policy is to define the Firm's stance on ESG and provide guidelines to its employees to integrate ESG into decision making. Penwood issues an annual Sustainability Report which describes the Firm's ESG achievements from the prior year. The Firm currently is not a signatory of any ESG related organizations. The Firm does not have a dedicated ESG professional but does have a Sustainability Committee that establishes near- and long-term ESG initiatives and goals. Penwood has stated that it will sponsor any employee interesting in obtaining sustainability-related certifications. The Firm holds an annual company-wide sustainability policy review with each employee signing an acknowledgement statement. Penwood's ESG policy is also a tool to any partner of Penwood to show how the Firm integrates ESG in its decision- making process. Strategy-Level Penwood has identified that ESG factors have a role in decision making and can affect returns. The Firm incorporates these factors into their investment process and is overseen by the Firm's Risk Committee. Penwood requires that all investment committee memos include analysis of ESG factors and mitigation plans. The markets that Penwood operates in require certain building and environmental standards that must be adhered to. Penwood investment professionals have the ability to leverage the Sustainability Committee and Risk Committee when assessing ESG factors during investment due diligence. In addition to municipality environmental standards, Penwood utilizes the Department of Energy's Energy Asset Scoring system for all new acquisitions. This scoring system allows the Firm to track the standard of the building at entry and exit. CONFIDENTIAL INFORMATION - FOR NEPC CLIENT USE ONLY | 10#12www.NEPC.com | in @NEPC_LLC NE PC