Investment Options with Comparable Yields

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(No Transcript)
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Table of Contents
Target Investors, Sponsors Distributors
Conclusion
Investment Options with Comparable Yields

• 
  ( )
• Investment Options with Comparable Yields
• Target Investors, Sponsors and Distributors
• Conclusion

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(
) and the Structured Product
Target Investors, Sponsors Distributors
Conclusion
Investment Options with Comparable Yields

• is as a joint venture between Beekman
  Capital Partners, LLC (BCP) and
• BCP is part of the Beekman family of companies
  (www.beekmancompanies.com) and is a real estate
  investment banking firm founded by Anne Corbin
• is in the business of
  acquiring and managing high quality, income
  producing commercial real estate
• is managed, on a day-to-day basis, by Ms.
  Corbin
• was founded on two primary principles
• High quality, private commercial real estate
  ownership is an exceptional investment tool for
  increasing returns and reducing risk in an
  investment portfolio and,
• Real estate sponsors have a need for a conduit
  which provides low cost, long-term, equity and
  which obviates the time and cost associated with
  forming a private REIT

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(
) and the Structured Product
Target Investors, Sponsors Distributors
Conclusion
Investment Options with Comparable Yields

• The key elements of the Structured
  Product include

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Business Concept
Target Investors, Sponsors Distributors
Conclusion
Investment Options with Comparable Yields

• ( ) is
  a specialty investment banking platform providing
  underwriting and distribution capabilities to
  commercial real estate owner/operators seeking to
  offer high quality commercial real estate
  investments to the Accredited Investor market
• For commercial real estate owner/operators,
  barriers to entry impede the efficient
  distribution of high quality real estate
  investment products to Accredited Investors
• For high net worth investors, institutional
  quality commercial real estate is assuming a
  greater role in all prudent asset allocation
  models
• Structured Product provides investors with
  access to high quality commercial real estate and
  an alignment of interests between sponsors and
  investors, which provides sponsors with more
  flexibility in a cost efficient structure
• 
  functions as a conduit to low cost, long-term,
  equity capital

Sponsor
Accredited Investor(LP Interest)

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Investment Options with Comparable Yields to
Private Commercial Real Estate
Target Investors, Sponsors Distributors
Conclusion
Investment Options with Comparable Yields

• Risk Profile Yield
• High Yield / Junk Bonds High 9.0
• Five Year CD Low 5.0
• CMBS High 8.5
• Public REITs Moderate 4.8-7.4
• REIT Mutual Funds Low 3.2-5.1
• Private REITs High 4.5-7.1
• Closed-End Real Estate Funds Low 6.1-9.3
• Public REIT Preferreds High 6.1-8.9
• Structured Product Low 7.0-10.0

Double-B rated, 10-year, fixed rate
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Target Investors, Sponsors Distributors
Conclusion
Investment Options with Comparable Yields

• 21-year history of real estate investing
• 25 equity syndications, raising over 2.3 billion
• In excess of 36,000 current investors
• Acquisitions totaling over 5.5 billion
• Focus on high quality commercial real estate
  assets with annual cumulative preferred returns
  to investors ranging from 7.0 to 9.4
• Experienced investor in a variety of property
  types Office Retail Industrial Hotel and,
  Land
• Disciplined disposition strategies
• Total annual returns for liquidated funds have
  ranged from 8.6 to 12.7
• Largest syndicator of U.S. real estate
  investments to German investors
• Sponsor for products

JAMESTOWN Track Record (since inception)
Total properties acquired 48 Total capital
invested 5.5 billion Wtd avg preferred
return
7.54 Wtd avg annual total return on realized
funds 10.46
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Sample Economic Structure The Waterfall

• Investment grade leverage (60-65)
• Equity component 100 cumulative preferred
  equity from limited partners
• Preferred annual yield to LPs of 7-10
• Subordinate GP carried interest
• Liquidity reserve established for tenant rollover
  and payment of the preferred return
• Seven- to 10-year projected hold period

Property Level Net Operating Income- Debt
service (principal and interest)- 1 Asset
Management Fee- Preferred Return to LPs-
Liquidity Reserve- Carried Interest to Sponsor
Total Net Disposition Proceeds- Return of LPs
capital- Catch up Preferred Return to LPs-
Catch up Carried Interest to GP
remaining excess cash flow split 60/40 (LP/GP)
remaining excess proceeds (including liquidity
reserve) split 60/40 (LP/GP)
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Target Investor Market The Accredited Investor
Conclusion
Investment Options with Comparable Yields
Target Investors, Sponsors Distributors

• The Accredited Investor market represents
  approximately 11 million households and 30
  trillion in aggregate net worth
• Sophisticated investor pool
• Capable of making 100,000 investments
• Significant increase in demand for Alternative
  Investments, including commercial real estate
• Focused more on return than liquidity
• More likely to be repeat investors

provides Accredited Investors access to an asset
class which (i) represents a more significant
role in current asset allocation models, and (ii)
increases returns and decreases risk in their
portfolios

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Target Sponsor Market Best in Class
Conclusion
Investment Options with Comparable Yields
Target Investors, Sponsors Distributors

• targets Best in Class commercial real
  estate owners and operators with long-term,
  successful track records in the acquisition,
  management and disposition of high quality
  portfolios of commercial real estate assets
• Private real estate companies
• Public and private REITs
• Core, Core-Plus, Value-Added and Opportunity
  Funds
• Insurance companies

enables top quality sponsors to recapitalize
equity investments, maintain an ownership
position and participate in future capital
appreciation
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Target Distribution Channels Accessing High
Quality Investors
Conclusion
Investment Options with Comparable Yields
Target Investors, Sponsors Distributors

• There are numerous platforms which provide
  Alternative Investment options to the Accredited
  Investor market
• Commercial Banks
• Private Banks
• Retail Brokerage Firms
• Trust Companies
• Asset Management firms
• Registered Investment Advisors/Certified
  Financial Planners
• Family Offices
• Hedge Funds
• Real Estate Funds of Funds

enables distribution sources to meet the
increasing demand by their clients for exposure
to high quality commercial real estate and in a
structure which is superior to existing options
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Conclusion
Investment Options with Comparable Yields
Target Investors, Sponsors Distributors
Conclusion

• ( )
  is a specialty investment banking platform
  providing underwriting and distribution
  capabilities to commercial real estate
  owner/operators seeking to offer high quality
  commercial real estate investments to the
  Accredited Investor market. Specifically, we
• Satisfy increasing investor demand for high
  quality real estate exposure
• Remove barriers to entry for sponsors wanting to
  access this source of capital
• Facilitate the overall process by
• Assembling the deal team (Legal, Accounting,
  etc.)
• Underwriting the properties
• Preparing the prospectus and all marketing
  materials
• Developing the roadshow and facilitating the
  distribution of the LP interests
• Establishing a database of the investors and
• Facilitating back office office requirements
• Providing ongoing Investor Relations with
  Distributors

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Addendum 1

• Benefits of Private Commercial Real Estate
  Ownership

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Benefits of Private Commercial Real Estate
Ownership

• Portfolio Risk Reduction and High Risk-Adjusted
  Returns
• Real estate investments increase portfolio
  returns and decrease overall risk
• Returns on real estate investments over time have
  been competitive with equities while much less
  volatile
• The pie charts below show the increased
  return/lowered risk dynamic that real estate has
  on a portfolio

Portfolio Diversification to Increase Return and
Reduce Risk
Average Annual Return 6.89 7.79 Standard
Deviation (Risk) 9.91 8.45
Sources National Council of Real Estate
Investment Fiduciaries (NCREIF) Property Index
Standard Poors (SP) 500 Lehman Brothers
Aggregate Government and Corporate Bond Index
30-Day US Treasury Notes. (1997-2002)
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Benefits of Private Commercial Real Estate
Ownership

• Low Volatility
• Compared to virtually all other asset classes,
  and notably public real estate (defined as
  publicly-traded REITs), private real estate
  returns are more stable

Public and Private Real Estate Total Returns(1)
(1) Private real estate includes investment
grade commercial properties acquired on behalf of
tax-exempt entities. Source NAREIT NCREIF
Prudential Real Estate Investors
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Benefits of Private Commercial Real Estate
Ownership

• Stable cash flow streams with minimal risk
• High quality properties typically have long-term
  leases with high credit quality tenants producing
  stable current returns
• Capital appreciation potential
• Total annual returns can exceed preferred annual
  distributions by a substantial margin when
  properties are sold at a profit
• Hedge against inflation
• There is a positive correlation between real
  estate returns and the rate of inflation
• Commercial real estate exposure thus provides a
  hedge against inflation and offsets the negative
  impact on other asset classes during rising
  inflation

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Benefits of Private Commercial Real Estate
Ownership

• Returns are negatively correlated with stocks,
  bonds and public real estate
• Private commercial real estate exposure can
  stabilize portfolio returns and provide a higher
  probability of sustained positive returns over
  time
• The table below reflects asset class correlations
  between private real estate and the other primary
  asset classes

Asset Class Correlations Asset Class Correlations
Private Real Estate
Private Real Estate 1.000
SP 500 -0.027
Bonds -0.142
Public Real Estate -0.014
Russell 2000 -0.049
U.S. Inflation 0.349
Sources National Council of Real Estate
Investment Fiduciaries (NCREIF) Property Index
Standard Poors (SP) 500 Russell 2000 Lehman
Brothers Aggregate Gov't and Corp Bond Index
National Association of Real Estate Investment
Trusts (NAREIT) 30-Day US Treasury Notes
Consumer Price Index. (1979 2002)
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Addendum 2

• The Pros and Cons of Commercial Real Estate
  Investment Options

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The Pros and Cons of Commercial Real Estate
Investment Options

• Pros Cons Yield
• Public REITs
  4.8-7.4
• Private REITs 4.5-7.1
• REIT Mutual Funds 3.2-5.1

• Broad access to the commercial real estate asset
  class
• Liquid
• Public market scrutiny via the analyst community
• Management usually holds a significant equity
  stake in the company
• Relatively stable sector (within the broader
  stock market)
• Relatively high dividend yields (within the
  broader stock market)
• Adheres to public market reporting standards

• High volatility (vs. privately owned real estate
  vehicles)
• Returns negatively correlated to private real
  estate returns
• Subject to general equity market as well as
  underlying real estate fundamental fluctuations
• Relatively small sector vis-à-vis the entire
  equity market (ie 2), amplifying volatility as
  money flows into and out of the market
• Fees include 7 to the underwriter of an IPO plus
  additional costs associated with the listing
• Post investment, you confront the blind pool issue

• Access to the commercial real estate asset class
• Relatively high current cash yields
• Relatively low volatility
• Potential capital appreciation

• Large upfront fees/loads all-in cost for raising
  new funds can be four times what publicly traded
  REITs incur when making secondary offerings
• Poor alignment of interests between the sponsors
  and the investors
• Negative equity Sponsors not only have little
  to none of their own money invested in the
  vehicles but also reap enormous fees upfront
• Sponsor affiliates charge above-market ongoing
  fees
• Blind pools
• Illiquid
• Some have had to borrow to pay their annual
  dividend due to poor operating results
• Poor transparency post investment

• Liquid
• Highly diversified by number of properties
• Professionally and actively managed to maximize
  returns

• End-of-the-day NAV calculation limits intraday
  liquidity
• High-cost structure given daily redemptions and
  sales
• Tax and cost implications to the extent that
  portfolio trading activity is high

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The Pros and Cons of Commercial Real Estate
Investment Options

• Pros Cons Yield

• Liquid
• Highly diversified as to number of properties
• Use leverage to boost returns
• Professionally and actively managed to maximize
  returns

• Use of leverage amplifies risk
• Can trade at prices below NAV
• Tax and cost implications to the extent portfolio
  turnover is high

Closed-End Real Estate Funds
6.1-9.3

• High potential returns
• Diversification with respect to properties

• High risk
• Need to be at least an Accredited Investor and
  perhaps a Qualified Purchaser in order to invest
  directly
• High minimum investment threshold
• Illiquid

Real Estate Opportunity Funds
12-15

• Control
• No conflicts of interest between the Sponsor and
  the investor (ie one and the same)
• Full economic benefits accrue to the owner

• Tends to require a high level of time/involvement
• Might require recourse indebtedness
• If a high percentage of ones net worth, might
  prove financially disastrous
• Conflicts with property manager/asset manager

Direct Ownership (Core)
7-9

• Rated
• Publicly traded

• Relatively small market
• Relatively illiquid
• Post investment, you confront the blind pool
  issue
• Minimal upside potential

Public REIT Preferreds
6.1-8.9

• Best in Class owner/operators with long-term
  track records of success
• High quality properties
• Predetermined asset pools
• Stable annual cash distributions
• High risk-adjusted returns
• Alignment of interests between sponsors and
  investors
• Capital appreciation participation

• Less liquid than publicly-traded real estate
  options

Structured Product
7.0-10.0