The world of investing is often portrayed as a binary choice between doing well and doing good. On one side, there are traditional investments designed to maximize financial returns, often with little regard for their broader impact. On the other, there are impact investments that prioritize social or environmental outcomes, sometimes at the expense of financial performance.
But what if there was a way to achieve both – to earn attractive returns while also supporting the growth of a critical sector of the U.S. economy? This is the opportunity presented by the PIR Equity Partners Program™ (EPP), an innovative investment model that allows accredited investors to participate in the potential upside of the industrial real estate market while helping to fuel the resurgence of U.S. manufacturing.
The Manufacturing Renaissance
To understand the potential of the EPP, it’s important to first understand the powerful forces that are reshaping the U.S. manufacturing landscape. After decades of offshoring and decline, the sector is experiencing a remarkable resurgence, driven by a combination of technological advances and shifting global economic trends.
The rapid development of advanced technologies like 3D printing, robotics, and artificial intelligence is transforming the way products are designed, produced, and distributed. These technologies are enabling manufacturers to create more complex and customized products, shorten production cycles, and reduce costs. At the same time, they are making it more feasible to produce goods closer to end markets, rather than relying on far-flung global supply chains.
This technological shift is dovetailing with a broader trend towards deglobalization and the unraveling of the post-World War II economic order. Rising wages in traditional low-cost countries, increasing transportation and logistics costs, and growing concerns about supply chain resilience are all driving a shift towards reshoring and nearshoring of manufacturing.
The COVID-19 pandemic has only accelerated these trends, exposing the risks of overreliance on overseas production and highlighting the importance of having robust domestic manufacturing capabilities. Governments and businesses around the world are now rethinking their manufacturing strategies with a renewed focus on localizing production and building more resilient supply chains.
The Ecosystem Effect
For the U.S., this manufacturing renaissance presents a tremendous opportunity. By bringing production back home and leveraging the power of advanced technologies, the country has the potential to create millions of new jobs, revitalize communities, and secure its position as a global leader in innovation and industry.
But this opportunity is not just about the big players – the giant corporations with household names. In fact, much of the growth in U.S. manufacturing is being driven by small and midsize enterprises (SMEs) – the specialized suppliers, contract manufacturers, and service providers that form the backbone of the industrial ecosystem.
As large manufacturers bring production back to the U.S. and invest in new technologies, they are relying on a network of these smaller, more agile firms to provide the components, sub-assemblies, and specialized services they need. This is creating a virtuous cycle of growth and investment as SMEs expand to meet the needs of their larger customers, creating new jobs and driving economic activity in the process.
The Real Estate Imperative
But for SMEs to thrive in this new manufacturing landscape, they need access to the right kind of real estate – small, flexible, well-located industrial spaces that can accommodate their unique needs and support their growth over time. This is where the EPP comes in.
Through the EPP, Phoenix Industrial Redevelopment (PIR) is acquiring and repositioning small bay multi-tenant industrial properties in strategic markets across the U.S. – the kind of properties that are ideally suited for the needs of small and midsize manufacturers. By focusing on properties in the 20,000 to 100,000 square foot range with workspaces of from 1,000 to 5,000 square feet, PIR is able to provide the kind of flexible spaces that can accommodate a wide range of industrial users.
PIR’s value-add approach involves making targeted improvements to these properties to enhance their functionality, efficiency, and appeal to tenants. This could include upgrading building systems, improving site layout and accessibility, and adding amenities like high-speed internet. The goal is to create modern, high-quality industrial spaces that can support the needs of today’s advanced manufacturers.
By aggregating these properties into a diversified portfolio, PIR is able to offer investors the potential for attractive risk-adjusted returns, with the added benefit of supporting the growth of a vital sector of the U.S. economy. And by using a combination of institutional debt and equity raised through the EPP, PIR is able to optimize the capital structure of each investment, enhancing potential returns for investors.
The Power of Passive Income
For EPP investors, the primary benefit is the potential to earn passive income through regular distributions of the cash flow generated by the underlying properties. As tenants pay rent and properties generate income, this cash flow is distributed to EPP investors on a yearly basis, providing a reliable stream of passive income.
The EPP is targeting a 12% net internal rate of return (IRR) for investors, with a 7% annual preferred return paid out of available cash flow. This means that investors are first in line to receive distributions until they have received a 7% annual return on their invested capital before any profits are distributed to PIR as the sponsor.
In addition to this preferred return, EPP investors also have the potential to earn additional profits through the appreciation of the underlying properties. As PIR executes its value-add strategy and properties increase in value, EPP investors participate in this upside through a preferred equity structure that aligns the interests of investors and sponsor.
The Impact Imperative
But the benefits of investing in the EPP go beyond just financial returns. By supporting the growth of U.S. manufacturing, EPP investors are also helping to create positive social and economic impacts in communities across the country.
Manufacturing has long been a key driver of middle-class job creation and economic prosperity in the U.S. The sector has historically provided high-paying jobs with good benefits, particularly for workers without advanced degrees. As manufacturing declined in recent decades, many communities were left behind, with devastating impacts on local economies and social fabrics.
The resurgence of U.S. manufacturing presents an opportunity to reverse these trends and create new pathways to prosperity for millions of Americans. By investing in the industrial real estate that supports this resurgence, EPP investors are playing a vital role in this process.
Every investment in a PIR property helps to create space for small and midsize manufacturers to grow and thrive. Every job created by these companies supports families and communities, generating economic activity and tax revenue that can be reinvested in local infrastructure and services. And every product made in a PIR building represents a contribution to the country’s manufacturing capabilities and economic resilience.
A Model for the Future
The PIR Equity Partners Program™ represents a new model for real estate investing – one that combines the potential for attractive financial returns with the opportunity to create positive social and economic impacts. By aligning the interests of investors and communities, the EPP is demonstrating that it is possible to do well by doing good.
As the U.S. manufacturing sector continues to evolve and grow, the demand for the kind of high-quality, flexible industrial space that PIR provides will only continue to increase. For investors looking to participate in this exciting and transformative opportunity, the EPP offers a unique way to gain exposure to the upside potential of the industrial real estate market while supporting the growth of a vital engine of the U.S. economy.
With its focus on value-add investing and its experienced management team, PIR is well-positioned to deliver on the promise of the EPP. For accredited investors seeking a passive income opportunity with the potential for solid returns and meaningful impact, the EPP is an investment worth considering.
