Summit Capital, LLC www.sc-im.net Copyright © Summit Capital 2010. Confidential. Proprietary. For internal use only. Experience Matters In An Uncertain Environment 2 Copyright © Summit Capital 2010. Confidential. Proprietary. For internal use only. The Summit Capital Team Principals Kevin McTavish, Subash Kolluru and Roger Greene have worked together for 20 years Value Add & Distressed Debt Investment Expertise Extensive ‘in the trenches’ experience acquiring and resolving challenging real estate assets, non-performing loans and bankruptcy assets Decades of third party relationships translate into access to the best local experts Extensive operating expertise including asset management, loan servicing, construction & development, leasing and sales Investment Management Expertise Significant institutional real estate fund experience - C level executives and Principals at Lone Star Opportunity Fund, Colony Capital, Robert M. Bass Realty, Brazos Asset Management and American Real Estate Group Distinguished Track Record Invested over $3 Billion with Brazos Asset Management/Lone Star Opportunity Fund, Colony Capital, American Real Estate Group and RMB Realty Decade long strategic relationship with Westport Capital Partners & Oaktree Capital 3 Copyright © Summit Capital 2010. Confidential. Proprietary. For internal use only. Summit – Westport Capital Partners Organizational Depth Summit & Westport have collaborated for 10 years to facilitate origination, underwriting, asset management, loan servicing, accounting, tax, compliance and reporting functions. This relationship creates organizational efficiencies and eliminates the pursuit of deals consummated to support existing infrastructure. Westport was founded in 2005 by the management team responsible for building Oaktree Capital’s Real Estate Group beginning in 1995. Westport currently manages $1.2 billion with 24 people located in Wilton, CT and Los Angeles, CA . Westport was awarded 2010 Real Asset Money Manager of the Year by Foundation & Endowment Money Management. History Russel Bernard, Managing Principal of Westport and Kevin McTavish have a long working relationship dating back to establishing Tokyo offices for Oaktree and Colony Capital in the late 1990’s. At Oaktree, Mr. Bernard invested approximately $100 million in various Summit opportunities. Our conservative approach focuses on programmatic, fundamental underwriting and management to minimize or eliminate investment risk. All investments capitalized entirely with equity – eliminating default or foreclosure risk. Each investment produced returns with equity multiples of 1.3 to 2.5 and IRR’s as high as 30%. No losses on any investments. 4 Copyright © Summit Capital 2010. Confidential. Proprietary. For internal use only. Value Add Through Expertise Summit engages recognized experts to search for unique opportunities 5 Copyright © Summit Capital 2010. Confidential. Proprietary. For internal use only. Sources of Opportunity Summit maintains relationships with a variety of sources that provide access to compelling opportunities 6 Copyright © Summit Capital 2010. Confidential. Proprietary. For internal use only. Navigate Tough Terrain With Time Tested Processes 7 Copyright © Summit Capital 2010. Confidential. Proprietary. For internal use only. Risk Mitigation Systematically Eliminate Risk To Insure Preservation of Investor Capital Sparing and Judicious Use of Leverage Thorough Asset Underwriting Establish Goals and Track Progress Systematically Democratize Decision Making Process Engage ‘Best in Class’ Expertise for Due Diligence & Operations Alignment of Interests – Inclusive from Ownership through Operations Leverage NOT Utilized to Stretch for Minimum Hurdle Rates Accountability & Responsibility Clearly Defined Formalize Risk Management Process 8 Copyright © Summit Capital 2010. Confidential. Proprietary. For internal use only. Asset Management Each Stage in the Process Reduces Investment Risk Pool or Single Asset Acquisition NonPerforming Loans and Real Estate Loan Restructure/Modification Discounted Payoff Performing Loans Foreclosure/ Bankruptcy Real Estate Owned (REO) Split Equity/Debt Sell REO or Loans Sell REO Equity Whole Loan Sales Securitization Transactions 9 Copyright © Summit Capital 2010. Confidential. Proprietary. For internal use only. Acquisition & Management Established & Proven Processes Acquisition Identification Underwriting – Cash Flow, Replacement Cost, Obsolescence, Loan Terms, Borrower History Acquisition – Bid Strategy, Pricing Asset Management – Establish Goals & Business Plan, Reporting Resolution, Restructuring or Disposition Market Dynamics Investor Goals Achieved Summit 10 Copyright © Summit Capital 2010. Confidential. Proprietary. For internal use only. Disciplined Underwriting Stage 2 - Due Diligence Stage 2 - Detail Asset Underwriting & Financial Modeling 1. 2. 3. 4. 5. 6. Asset and Loan Document Review (loan agreements, rent rolls, legal, title, leases, environmental, credit reports, BOV, comparables, engineering) Portfolio/Pool/Asset Analytics Projected Portfolio/Pool/Loan Economics Identify and Underwrite Key Assets & Borrowers Review Transaction Purchase & Sale Documents Roll Up 11 Copyright © Summit Capital 2010. Confidential. Proprietary. For internal use only. Select Investment Results 12 Copyright © Summit Capital 2010. Confidential. Proprietary. For internal use only. Hospitality Loan Portfolio Opportunity Loan portfolio of 21 Non-Performing loans in 14 different states $32 million Outstanding Principal Balance Resolution Summit performing loan & special servicing, accounting and reporting functions in addition to asset management Westport & Summit working together to resolve the portfolio Aggressive collection efforts result in 2/3 of loans back to performing status Collections at 11% annualized Six loans resold to a bank as performing loans within 8 months of purchase - returned approximately 40% of investor equity Days Inn Graceland, Memphis, TN 13 Copyright © Summit Capital 2010. Confidential. Proprietary. For internal use only. Brazos Partners, L.P. Lone Star Opportunity Fund, L.P. Opportunity Founding Member of Brazos Partners, (now known as Lone Star Opportunity Fund) Brazos formed to purchase and liquidate the ‘bad bank’ assets of American Savings Bank which had been purchased from the RTC Initial portfolio - $2.7 billion OPB, 1,293 assets and 10 property types located in 32 states Resolution Aggressive portfolio management results in a $150 million profit, 423.2% IRR and 6.5 x Equity Multiple 14 Copyright © Summit Capital 2010. Confidential. Proprietary. For internal use only. 12404 Park Central Drive Opportunity REIT pressured to liquidate vacant 239,000 sf, Class A office building Insufficient Parking, Vacant Building Deal Source – Crescent RE & Cushman Wakefield Initial Asking Price - $25 million Dallas BOMA office building of the year Purchase - $9.5 million, ($40 psf & 20% of replacement cost) Resolution Reconfigure building for multi-tenant occupancy, add 100 parking spaces Improve efficiency & decrease expenses 11.7% current yield on all-in-costs $2.5 million current annual income Current Value - $30 million Equity Multiple – 2.09 x 15 Copyright © Summit Capital 2010. Confidential. Proprietary. For internal use only. Princeton Windrows Opportunity Meditrust (NYSE:MT) defaults on 294 unit senior housing residential project on land purchased from Princeton University Pending $5 million construction lawsuit 98 sold at $360,000/unit prior to default Sourced - Bank of America Initial asking price - $45 million Purchase price - $23 million (under 50% of original cost) Resolution Established relationship with existing homeowners and settle lawsuit Created new marketing plan, 2/3 of residences now sold Total sales estimated $70 – 75 million Equity Multiple 2.0 - 2.5 x 16 Copyright © Summit Capital 2010. Confidential. Proprietary. For internal use only. 1616 Woodall Rodgers Opportunity Public utility company consolidates offices and sells non-essential real estate 265,000 SF Class A office building purchased in advance of dramatic Dallas Arts District growth, $10 million park built next to building Deal sourced by establishing relationship with utility company facilities manager Initial asking price- $42 million Purchase Price - $7.5 million (14.5% of costs) Resolution Bought prior to rapid growth of Arts District which transforms the location Sold building as corporate headquarters for $10 million Equity Multiple – 1.5 x 17 Copyright © Summit Capital 2010. Confidential. Proprietary. For internal use only. Hyatt Dulles Hotel Opportunity Hotel available due to partnership dissolution Privately negotiated off market transaction 317 keys located at entrance to Dulles airport Purchase Price - $51 million (50% of replacement costs) Seller financing at 80% LTV at 5.0% interest Purchase at 10.0% Cap Rate TTM Resolution Sold to Major Hotel REIT for $72.5 million ($230,000 / key & 7.5% cap rate) Equity Multiple – 2.0 x 18 Copyright © Summit Capital 2010. Confidential. Proprietary. For internal use only. Wilshire Enterprises Opportunity Wilshire Enterprises (AMEX:WOC) is controlled by a prominent family Shares trading at 20% of underlying value of real estate ($9 – 10 per share) Sourced through personal relationship within the industry Purchase 5% of shares outstanding at $2.00 – 3.00 per share As a small cap company, Wilshire ‘flew under Resolution the radar’ for years. Over a 20 year period Summit & Oaktree Capital offer to purchase WOC became the depository for nonperforming real estate loans transferred by Wilshire. Meetings with CEO and other the family controlled bank. SEC filings were executives unproductive. Company inadequate to determine company’s true responds by hiring an investment banker value. We were not successful to take and adopting a poison pill control of the company but profited from As other investors accumulate stock, recognizing pricing disparity of the common Summit & Oaktree liquidate their holdings shares and the underlying value of the real estate assets. at $6.00 - $7.00 per share Equity Multiple of 1.4 x and IRR = 19.7% 19 Copyright © Summit Capital 2010. Confidential. Proprietary. For internal use only. iStar Financial Opportunity iStar Financial (NYSE:SFI) paying 8% dividend – 300 bp above US Treasuries and discount to liquidation value Purchased $10 million of equity on open market Company paying high dividend rate and owning high interest rate assets in a declining interest rate environment Resolution Sold shares for $20 million Equity Multiple = 2.0 x IRR = 30% As a direct competitor to iStar in many situations, we were in a unique position to understand the composition of the company’s portfolio and true valuation. We recognized the discount between the market price and underlying value of the assets. We bought in at a discount and liquidated when incremental value was no longer achievable. 20 Copyright © Summit Capital 2010. Confidential. Proprietary. For internal use only. Results Driven Management Team 21 Copyright © Summit Capital 2010. Confidential. Proprietary. For internal use only. Principals (years working together) RMB Realty / Keystone, Inc. Kevin McTavish Westport Capital Partners – Operating Partner Institutional Real Estate, Inc. – Board Member Colony Capital – Principal; Investment & Mgmt Committee Colony Advisors - Chief Operating Officer Brazos Fund (now Lone Star Opportunity Fund) - Founder MBA Wharton School of Business, University of Pennsylvania BS US Naval Academy – Superintendant’s List Roger Greene (20 years) Marquette Advisors Lone Star Opportunity Fund – General Council, Principal JD Harvard Law School – Cum Laude BA Harvard College - Magna Cum Laude, Phi Beta Kappa Cerina Chou (20 years) Controller – Orbis Real Estate, LLC Senior Financial Analyst – Hudson Advisors, LLC Accounting Department Supervisor – American S & L MBA Lamar University BA Feng Chia University, Taiwan – Business Admin 22 Copyright © Summit Capital 2010. Confidential. Proprietary. For internal use only. Specific Expertise RMB Realty / Keystone, Inc. Drew McCarney (15 years) Quorum Hotels – Principal & EVP Development Amfac Hotels - Director Human Resource Planning Hyatt Hotels - Director of Industrial Relations BA Bellarmine University Amit Kaluskar (4 years) Forest City Enterprises – Senior Development Associate Prescott Realty Group - Senior Analyst BA Southern Methodist University – Economics Mathew Noack Prescott Realty Group – Director Retail Group Direct Development – VP Acquisitions & Development Orix Capital Markets – Acquisitions & Distressed Assets University of Texas at Arlington – MS Real Estate Finance University of Texas at Austin – BA Liberal Arts Alice Wang Ericsson Inc. – Business Analyst Institute for Economic Development - Research Assistant Boston University – Master in Economic Policy Huazhong Univ of Science & Tech (China) - BS Economics 23 Copyright © Summit Capital 2010. Confidential. Proprietary. For internal use only. Summit Capital Offices Dallas, Texas 2805 North Dallas Parkway, Ste 325 Plano, TX 75093 972.265.1890 Office 214.662.4578 Mobile 972.265.7598 Fax [email protected] Irvine, CA 15707 Rockfield Blvd., Ste. 200 Irvine, CA 92618 949.242.0344 Office 949.439.3613 Mobile 949.713.3310 Fax [email protected] Web Site www.sc-im.net All corporate trademarks and/or images represented or used herein are the property of their respective owners and usage herein is solely for the purpose of illustrating business concepts independent of those businesses. Summit Capital LLC makes no representations regarding the businesses referenced herein nor makes any claims of ownership regarding any trademarks found herein other than for Summit Capital’s proprietary trademark. All other subject matter found herein, not subject to external trademark is copy written and the property of Summit Capital LLC. This document is solely for demonstration purposes. 24 Copyright © Summit Capital 2010. Confidential. Proprietary. For internal use only.