Great American Industrial Fund I
Industrial Real Estate (Fund)
DWG Capital Partners is a dynamic, emerging manager in the industrial real estate space. Specializing in industrial sale-leaseback assets, DWGCP targets long-term tenants poised for credit enhancements through tenant PE rollups, signing long-term, 15-20-year net leases.
Investing Simplified - Deal Summary
(See Key Terms tab above for explanations of words in bold & italics )
* Disclaimer - An AltSpot executive has prior relationship with this fund and assisted in its creation*
The DWG Capital Partners Industrial Fund offers investors a way to invest in sale-leaseback industrial real estate. These investments are backed by long-term, absolute net leases, which means the tenants—not the property owner—are responsible for paying taxes, insurance, and maintenance. This setup makes income from these properties stable and predictable.
A sale-leaseback is a transaction that allows a business owner to sell their property while continuing to use it. Instead of owning the real estate, they lease it back from the new owner, which in this case would be DWG Capital Partners. This arrangement allows the business to access 100% of the equity in their real estate, which can be used for growth, expansion, new equipment, repairs, or paying down debt. In exchange, they take on a rent payment, but because they stay in the same building, there is no disruption to their operations.
DWG Capital Partners' thesis revolves around these core principles.
- Long term net leases: In this fund, tenants sign leases that last 15 to 20 years, reducing the risk of vacancy. While shorter-term leases offer opportunities to renegotiate rental rates for quicker upside, they also come with the risk that if the landlord and tenant cannot agree on terms, the tenant may leave. Industrial properties, especially single-tenant buildings, are difficult to re-lease because manufacturers require specialized spaces in strategic locations. Moving heavy machinery is expensive and time-consuming. If a building sits empty, investor distributions pause, capital calls can be issued in order to cover debt obligations, and the property’s value drops until a new tenant moves in. That process can take a year or more in a typical market, which creates risk of default on the loan. Long-term leases reduce this risk, keeping the building occupied and cash flow steady
- Assets with less institutional competition: DWG specializes in acquiring industrial properties valued between $3 million and $14 million, a market segment that is often overlooked by large institutional investors. Smaller deals like these do not generate enough acquisition fees or total returns to cover the overhead of big firms, making them less attractive to institutional buyers. However, smaller properties do come with some risks, particularly if the tenants are smaller businesses with lower revenue. To reduce this risk, DWG focuses on acquiring properties leased to businesses that are backed by private equity firms or generate at least $20 million in revenue. Tenants with private equity backing tend to be more stable since these firms actively work to improve the businesses they invest in, strengthening the resale value of the real estate.
- Onshoring and industrial demand: The current market cycle presents a unique opportunity, as industrial real estate demand is rising. More companies are choosing to manufacture in America instead of overseas, a trend known as onshoring. Businesses are learning from the supply chain disruptions caused by the COVID-19 pandemic, as well as rising labor costs, tariffs, and shipping expenses from China and India. These factors make it more cost-effective to produce goods domestically, driving higher demand for industrial real estate.
- Expanded CAP Rate Environment: Another key point in the DWGCP thesis is capitalizing on current market conditions. The Federal Reserve is expected to lower interest rates, which will likely drive up property values, creating additional margin (the economic principle of yield correlation). Industrial demand due to onshoring initiatives is at an all-time high. At the same time, interest rates have pushed property values down. CAP rates—a measure of real estate value—have increased by about 200 basis points as a result. However, as interest rates ease, CAP rates are expected to compress again, meaning properties bought today could rise significantly in value as the market shifts. This aligns with DWG Capital Partners' strategy of buying during a market downturn and selling when conditions improve.
DWG Capital Partners currently manages nearly $90 million in assets, most of which are in this specialized industrial sale-leaseback niche. In the past, DWG structured its deals as individual syndications, but it has now transitioned to a fund model. This shift allows the firm to move faster, purchasing more properties while diversifying risk for investors (which we at AltSpot feel is important for single tenant assets).
“The Great American Industrial Sale Leaseback Fund I” offers an opportunity to capitalize on the rapidly increasing demand one industrial assets utilizing a sophisticated niche strategy that is growing in popularity and valuable for the growth of American manufacturing businesses.
Current Pay: target 8% avg current pay over the life of the fund, with year one stabilization target current pay of 7%,
Preferential Return: 8% cumulative non compounding
Waterfall split: 80/20
Waterfall Hurdle: 17% IRR to a 50/50
Payment Style: Monthly
This means that on target you will receive a 7% distiuion on invested capital at the end of year 1, these distributions will be paid out monthly increasing over time to an average of 8% over the 5-7 year life of the fund. The preferential return is 8% cumulative, non-compounding whichmeans that investors are entitled to receive 8% of their invested amount each year before any additional profits are split. If the full 8% isn’t paid in a given year, ( in the early years of the fund) the unpaid portion carries over (“cumulates”) to future years. However, it’s non-compounding, so it doesn’t earn interest on the unpaid balance. At exit, investors will be first paid any outstanding preferential return to 8%, then all excess capital will be split 80/20 to LP/GP, until LP return achieves a 17% IRR. After a 17% IRR all excess capital will be split 50/50.
Fund: A fund is a pool of money from multiple investors used to buy multiple properties, giving investors diversification and flexibility.A syndication is when investors pool money for one specific property, meaning returns depend only on that single deal.A fund spreads risk across several properties, while a syndication focuses on just one.
Equity: equity is the difference between what a property is worth and what is still owed on it. In this case the equity is the amount of money left after all debts are paid off.
Capital Call: A capital call in a real estate deal is when the investment manager asks investors for more money after the initial investment. This usually happens if extra funds are needed for things like property improvements, or unexpected costs that arise due to issues in the deal.
Default: When the borrower ( the fund in this case) is unable to pay the mortgage payment thus the bank forecloses on the loan and takes possession of the property.
Institutional Investor: is a large financial entity, like a pension fund, insurance company, real estate investment trust (REIT), or very large PE firm.
Revenue: Gross total sales figure of a business.
CAP Rate: Cap rate (Capitalization Rate) is the rate of return on a real estate investment, calculated by dividing net operating income (NOI) by the property’s price. It helps investors measure risk and value—higher cap rates mean higher risk and return, lower cap rates mean lower risk and return.
Fund Structure for Risk Mitigation – Moving to a fund structure helps reduce risk in single-tenant assets by diversifying across multiple properties.
Strong Market Tailwinds – Industrial real estate is expected to be one of the best-performing asset classes over the next 10-15 years.
Manager’s Personal Guarantee – Fund manager Judd Dunning personally guarantees all assets, pledging his own assets to secure loans. This ensures he is fully committed to the success of each deal.
Institutional Radar Strategy – Investing in assets that are overlooked by institutions, particularly in growing logistics markets, creates strong value opportunities.
Private Equity (PE) Tenant Advantage – Targeting tenants that are recently PE-backed or prime for a PE roll-up enhances stability and long-term value.
Sale-Leaseback Value Creation – Combining sale-leasebacks with strategic acquisitions can lead to 20%+ IRRswhile maintaining strong day-one cash flow.
Rare Cash Flow & Upside Combination – The fund is structured to generate strong immediate cash flow ( 6-8%) while still offering 2X upside potential, a rare combination in real estate investing.
Market Timing Advantage – Current debt rates present a unique buying opportunity before cap rates compress, allowing for significant future appreciation.
Tenant Credit Risk – The sale-leaseback strategy is highly sophisticated and requires a deep understanding of the underlying tenant’s business. If a tenant has a weak credit profile or lacks a solid growth strategy, they may struggle, increasing default risk.
High CAP Rate Trade-Off – Some of the higher CAP rate assets in the fund are in tertiary markets or have smaller credit tenants. While this enhances upside potential, it also increases risk.
Limited Track Record – DWGCP has only one full exit. While they have case studies demonstrating asset enhancement during their hold periods, we would like to see their thesis proven out over multiple cycles.
Single-Tenant Risk Exposure – The biggest inherent risk in single-tenant net lease assets is that if the tenant fails, especially in a larger asset, it can significantly impact returns.
Mitigation Strategies Exist, But Risk Remains – DWGCP has experience in deal restructuring and risk mitigation, and fund diversification helps spread risk. However, if multiple tenants default at once, it could have a catastrophic impact, a risk that is less pronounced in multi-tenant properties.
Re-Tenanting Challenges – Tertiary market assets and industrial facilities in general can be difficult to re-lease, potentially leading to prolonged vacancies if a tenant vacates.
This fund is best suited for investors who believe in the industrial onshoring movement and support the growth of American businesses. It appeals to those seeking strong day-one cash flow through dividends while also targeting significant returns over a 3-7 year period.
Ideal investors are comfortable with a more sophisticated strategy that balances higher cash flow with strong upside potential. While the approach is designed to mitigate risk through long-term leases, credit-backed tenants, and market timing, investors should have a measured risk tolerance, understanding that all investments carry inherent uncertainties.