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  DURING THE QUARTER, MEPT EXECUTED A FORWARD COMMITMENT OF $120 MILLION TO PURCHASE, UPON COMPLETION IN 2011, ONE FRANKLIN-LE MERIDIEN,
a planned 250-room, four-star hotel property in Boston. The hotel will be part of a 1.4 million square foot, mixed-use development that will incorporate the former historic Filenes Basement clothing store into space for retail, hotel, residential, and office.


IN SEPTEMBER, MEPT PURCHASED AN ADDITIONAL OWNERSHIP INTEREST IN ARBORETUM LAKES WEST FOR $1.7 MILLION.
The purchase of the outstanding 5 percent interest brings the total MEPT ownership to 100 percent. Arboretum Lakes West is a Class A, 190,361 square foot, mid-rise suburban office building located in Chicago.


Procter & Gamble Co.
Procter & Gamble Co. - maker of Tide laundry detergent, Charmin bathroom tissue and Crest toothpaste - leased 1.2 million square feet of space at Gateway Commerce Center in Edwardsville. P&G has moved into nearly 580,000 square feet at the Gateway Commerce Center's Westway III building at 3101 Westway Drive under the $17 million deal.

Symantec Expands in Downtown San Francisco
Firm Takes Additional 17,000 SF at 303 2nd Street Symantec leased 16,966 square feet on the fifth and eighth floors for six years at 303 2nd St. in San Francisco, where it already occupies 38,734 square feet.

Ozburn-Hessey Expands Operations in Dallas
Ozburn-Hessey Logistics signed a 15-month lease for an additional 148,000 square feet at the Pinnacle Park I building at 3700 Pinnacle Point Drive in Dallas, TX. The firm moved into this new space on July 1.

 

Benchmark Comparisons

There are three industry benchmarks that MEPT uses to measure Fund-level performance and property-level performance: Russell/Mellon Equal Weighted Universe of Commingled Open-End Real Estate Funds; NCREIF Property Index; and NCREIF Open-End Index. Out of the three, the Russell/Mellon Equal Weighted Universe of Commingled Open-end Real Estate Funds offers the most appropriate benchmark for evaluating performance.



The Russell/Mellon Equal Weighted Universe of Commingled Open-End Real Estate Funds is comprised of fund level performance from approximately 15 open-end real estate funds with a total combined market value of over $30 billion. The Russell/Mellon Universe is a composite of fund level performance for open-end real estate fund contributors. As a result, the Russell Universe factors in the impact of variations between funds in regard to cash levels, assets under development, leverage, and management fees. Additionally, the Universe is made up of only open-end funds that like MEPT generally value their properties each quarter and account for changes in market conditions and activity at in the property value. So, the Russell/Mellon Universe offers an appropriate benchmark for evaluating, on a quarter by quarter performance basis, portfolios of properties that are valued at similar frequencies (and at the same point in time). The Russell/Universe cannot be analyzed beyond the Fund-level performance, so property type or geographic region return comparisons are not available. Since open-end funds in the Russell Universe have different strategies, the funds may perform well at different times in the real estate/economic cycle. It, therefore, makes sense to look at long term comparisons of the Russell/Universe because the performance of the varying fund strategies can be tested throughout all stages of the real estate cycle.

Another commonly used real estate benchmark, the NCREIF Property Index (NPI), is composed of approximately 4,000 institutional grade, operating properties valued at over $136 billion, and designed to measure return characteristics of core properties on an unleveraged basis. The return data for the NPI can be analyzed by sector and region, as well as subsectors and sub-regions. The return data is also available on a historic basis and can be used for complex analysis. Since the NPI is derived from property level performance, it does not measure the effect of cash, leverage or management fees on returns, nor does it take into consideration differences in property valuation frequency in the Index. When benchmarked against MEPT's property level returns (operating real estate only), the NPI does provide an apples to apples, or real estate to real estate, comparison of performance.

NCREIF has developed a sub-index, the NCREIF Open-End Index (OPI), comprised of only those properties in the NPI owned by open-end funds. MEPT is monitoring the new index, but believes that the sub-index may offer an even more applicable benchmark than the NPI to measure the performance of MEPT's real estate, since it would allow the comparison of properties that are more frequently valued than those in the NPI. The most relevant comparison would be the performance of MEPT's operating real estate portfolio to the performance of the OPI. Furthermore, NCREIF has recently released an open-end Fund level index which we are closely monitoring.

MEPT's long-term returns have consistently outpaced the benchmarks. A dollar invested in MEPT in 1982 at the Fund's inception has significantly outgrown that same investment in the NCREIF Property Index, NCREIF Open-End Index, or Russell/Mellon Equal Weighted Universe of Commingled Open-End Real Estate Funds.

 

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