MEPT's investment strategy is to acquire top-quality, income-producing assets through development, rehabilitation, or purchase and repositioning of undervalued assets. Key tenets of the strategy include:
MEPT invests in institutional grade office buildings, warehouses, flex/R&D facilities, retail centers, apartments, and hotels. The resulting "core" institutional quality equity investment portfolio produces strong and stable current income. MEPT underwriting criteria place special emphasis on income because a steady income stream reduces portfolio volatility and risk.
MEPT makes primarily equity investments in newly constructed, rehabilitated,
or under-valued projects. However, the Fund occasionally underwrites participating
and convertible mortgages on a forward commitment basis. During the 25 years
that MEPT has been in operation, MEPT has built strong relationships with major
real estate developers, leasing firms and property managers both nationally
and in the markets where the Fund is active. This ensures that MEPT has access
to first-rate investment opportunities through all phases of a real estate cycle.
Investing in new construction enables MEPT to exercise significant control in the development process, capitalizing on its managers' considerable experience. In addition, newly built properties often remain in demand with credit tenants seeking up-to-date space, allowing MEPT to provide solid returns through all phases of the real estate cycle and offer secondary benefits of economic activity and jobs in its investment markets.
Focusing on core property types, the Fund has targeted stable geographic markets with attractive long-term demand and supply characteristics. MEPT's managers seek infill sites that naturally provide barriers to competition. Reliance on traditional property types and stable markets is an important element of the portfolio's income return and low risk characteristics.
MEPT typically makes 100% equity investments (unleveraged). Although there is
no limit on the amount of leverage that the Fund is allowed to use, currently,
less than 8% of the Fund's investments are in the form of leveraged equity.
However, MEPT's Policy Board has affirmed the option to utilize leverage up
to 20% of the Fund's net asset value. During certain periods when leverage is
favorable, the Fund will consider utilizing debt in both new development and
acquisition of existing properties.
MEPT has three fundamental objectives that drives its current cash-management
policies. First, MEPT must meet the forward commitment obligations generated
by new construction properties in the investment pipeline. Second, MEPT must
maintain sufficient cash to honor withdrawal requests from its investors. Per
section 5.2 of MEPT's Declaration of Trust, the Fund is required, under Comptroller
of the Currency, to honor withdrawal requests within one year of written notice
of withdrawal. Throughout its 25-year history, MEPT has honored every withdrawal
request on the quarterly valuation date immediately after its receipt. MEPT
has never had a withdrawal queue. The participating plan must provide written
notice of their intention to withdraw funds prior to the last business day of
the quarter. There is no charge to exit the Fund. Third, MEPT is pursuing a
target cash position of 5 percent. MEPT has a $300 million line of credit which
was put in place in 2002 to ensure that MEPT continues to provide liquidity
as it works to reduce its cash position.
Coordinating the implementation and integration of asset management functions into the acquisition, disposition and portfolio management process has contributed to overall Fund performance. Asset managers steward properties throughout their lifecycle and ensure that the property is managed in line with MEPT objectives, expectations and policies. Asset management includes: hiring and overseeing property managers, leasing agents, and all other service providers; initiating and guiding capital improvement projects; creating and assuring execution of annual business plans and budgets; orchestrating the appraisal and valuation processes; managing property accounting and reporting; and, establishing and maintaining procedures to assure tenant satisfaction.
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