IPA Announces A New Perception of Direct Investment Programs.

Direct Investments Begin to Show Their "Second Dimension" As Fed Rate Hikes Enhance Returns from Fixed Income Alternatives

WASHINGTON -- Publicly registered direct investment programs (non-traded real estate investment trusts, partnerships and limited liability companies) garnered approximately $2.9 billion of investment through June. At the current pace, investment this year will total in excess of $6 billion, making 2006 the fourth consecutive year of $6 billion plus money flows to the industry. The industry reached these milestones despite increasing competition from fixed income securities following a record string of interest rate hikes by the Federal Reserve,

"The industry has been challenged by the perception that its products are solely fixed income alternates," said Jack Hollander, Chairman of the IPA. "And while investment is down from the record level of $7.6 billion set in 2003, the continuing strong capital flows indicate that the investing public and financial advisors are recognizing the second dimension of this vehicle - growth."

The various classes of direct investment programs available today offer investors a way to participate in the ownership of tangible assets (such as real estate, oil and gas, and equipment leasing) that tend to respond to fundamental economic factors differently and sometimes more favorably than stocks and bonds. Following the stock market sell off of 2001 and the interest rate reductions implemented by the Federal Reserve to spur economic activity, interest in direct investments surged because of perceived stability of pricing and because many direct investments offered investors significantly better current yields than were available from traditional fixed income securities. But the Fed's concerns shifted to inflation control during the past two years, prompting increases in the federal funds rate totaling approximately 400 basis points since 2003, and corresponding increases in yields available from money market and other short-term fixed income alternatives.

"The short-term appeal of this investment class during the past few years has been the current yield premium", explains Keith D. Allaire, Managing Director of Robert A. Stanger & Co., the Shrewsbury, N.J.-based investment banking firm that specializes in the direct investment securities markets. "But their longer term function is asset allocation - to provide income, growth and diversification in a portfolio of exchange traded securities."

The Second Dimension of DPPs

Non-traded direct investment programs are essentially like startup businesses when their securities are issued, with a business plan that typically calls for investing in assets during an acquisition period, holding and managing the assets for several years, and then selling the assets or listing the securities on an exchange. Thus, most of the post-2001 generation of DPPs have not completed their investment cycle.

However, the ability of direct investments to provide growth as well as income is beginning to be evidenced. For example, in the real estate asset sector, successful complete or partial asset liquidations, mergers or listings by non-traded REITs sponsored by such major organizations as Inland, CNL and Wells have caused observers to take notice and have demonstrated the ability of this securities class to provide growth.

Oil and gas programs that provide different benefits than real estate investments have seen significant growth that corresponds to increases in the distributions to their investors during the past several years. "Investors have certainly benefited from the higher natural gas prices and despite a recent cooling off of the commodities market long term natural gas pricing remains very attractive," said Mr. Hollander.

"The performance of these real estate and oil and gas investments underscores the constructive role of asset ownership in a portfolio of traded securities," said Mr. Allaire, "and also evidences a classic attribute of asset-based investing - inflation protection through the growth of value of the assets."

Real Estate Remains Leading Investment Choice

According to Robert A. Stanger & Co., non-traded real estate investment trusts (REITs) continue to attract the most capital, raising approximately $2.5 billion during the first six months of 2006. Non-traded REITs account for over 90% of total direct investment in each of the last three years. Non-traded limited partnerships and limited liability companies that invest in such assets as real estate, mortgage loans, oil and gas, and equipment leases are attracting investment at a half-billion annual pace.

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Rising oil prices, continuing uncertainty concerning supplies from the Middle East, and a recognition of the need for more domestic energy independence have enhanced capital flows to direct investments in oil and gas. First-half 2006 sales of oil and gas programs totaled $138 million, compared with $110 million during the same period one year ago, and $79 million for the comparable period of 2004.

A higher interest rate environment has also benefited equipment leasing programs. Through 2006's second quarter, new investment in equipment leasing programs totaled $133 million, compared with $112 million and $70 million during the comparable period in 2005 and 2004, respectively.

The industry's largest fundraisers so far in 2006 are all real estate sponsors. Inland Real Estate Investment Corp. ($499 million) leads fundraising, followed by Wells Capital ($423 million), Hines Advisors LP ($299 million), CNL Investment Company ($282 million), and Behringer Harvard Funds ($266 million).

Oil & gas fundraising is led by Atlas Resources, Inc. ($116 million) and REEF Oil & Gas Partners LLC ($22 million). ICON Capital Corporation ($92 million) and LEAF Asset Management, Inc. ($22 million) are fundraising leaders among equipment leasing programs.

These sponsor fundraising totals represent investor capital contributed to publicly registered direct investment programs and exclude the private placement marketplace. Such private placements, which are designed for higher net worth investors, are offered in all the asset classes of public programs - i.e. real estate, oil and gas, and equipment leasing, among others. These private programs are experiencing not only strong, but also rapidly increasing, capital flows, with a number of programs attracting in excess of $100 million of private capital.

Notes to Editors:

Robert A. Stanger & Co., Inc. founded in 1978, is an investment banking firm specializing in direct participation program securities. The Company is regularly involved in real estate mergers and acquisitions, debt and equity financings, real estate appraisals and securities valuations. Stanger & Co., Inc. is also the publisher of The Stanger Report, a newsletter focused on the direct participation program industry. Website: www.rastanger.com.

The Investment Program Association (IPA), organized in 1985, is the national trade association representing the interests of investors in non-traded direct investment programs, including non-traded real estate investment trusts, limited liability companies and partnerships. Members include most of the major program sponsors offering investment opportunities in real estate, energy and equipment leasing. The IPA represents a forum for the direct investment industry's leaders to address common concerns, discuss industry issues and work together to better serve investors. With headquarters in Washington, D.C., the Association also is the leading advocate for the industry on regulatory and legislative issues. For more information, please visit www.ipa-dc.org