Nepc Private Markets Investment Due Diligence Report
Penwood Select Industrial Partners VII
Non-Core Real Estate
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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.
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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
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