PREFERRED FREEZER CASE STUDY

Fremont Realty Capital's equity investment in non-traditional sector fuels Preferred Freezer's growth

The Preferred Freezer transaction illustrates how Fremont Realty Capital identified -- and capitalized on -- the unique real estate sector of public refrigerated warehousing at a time of cyclical undersupply.  Fremont Realty Capital focused on the fast growing frozen seafood subsector by investing with one of the best operator/developers in the business to provide state of the art public refrigerated warehousing to importers of frozen seafood.  The investment capitalized on the secular shift of the expanding demand for seafood. The investment funded the development of strategically located, state of the art facilities in high barriers to entry markets across the United States making Preferred Freezer the dominant provider to middle market customers in the frozen seafood segment. The funded developments took Preferred Freezer from the twelfth to the sixth largest public refrigerated warehouse company in the country with 64 million cubic feet of capacity.

In early 2002, Fremont Realty Capital’s analysis of the cold storage industry in the U.S. indicated strong customer demand for modern cold storage facilities.  This prompted us to research opportunities in the cold storage industry and, ultimately, identify Preferred Freezer as one of the leading developers, owners and operators of public refrigerated warehouses, and the leader specializing in the storage of frozen specialty seafood – a niche that had seen significant increases in annual shipping volume.  We made a significant equity investment in Preferred Freezer to continue its development of cold storage facilities in select domestic markets.  The investment was made at a time when the cold storage industry was struggling to obtain capital for modern assets.

During Fremont Realty Capital’s investment period, Preferred Freezer acquired, developed and opened for operation six additional cold storage facilities, constructing among the most modern, efficient warehouse facilities in the public refrigerated warehouse industry, most of them purpose-built to Preferred Freezer’s exacting state-of-the-art design and technical standards.  The facilities offered their customers a quality of product and a level of service efficiency that was superior to that of most of its competitors.

During our investment, Preferred Freezer achieved the significant development growth goals ahead of schedule, reaching stabilized operating performance across the portfolio.  Preferred Freezer’s total warehouse capacity more than doubled during our investment period and it became the sixth largest public refrigerated warehouse provider in the nation.

In 2005, Fremont Realty Capital sold its interest in Preferred Freezer in a two-step process, structured to obtain the highest price for its investment. Our investment in Preferred Freezer exemplifies the Firm’s ability to leverage its experience and research capabilities to recognize and invest ahead of trends.  By taking advantage of this underappreciated sector and partnering with a leading operator in the cold storage industry, Fremont Realty Capital realized a return exceeding its original pro forma projections.