NEW YORK, Oct. 28 /PRNewswire/ -- Beck Street Capital, a
private New York City-based real
estate investment firm, has issued a proposal for the restructuring
of Realty Finance Corporation (Pink Sheets: RTYFZ) and comments
below on the JAC Proposal.
Regarding the Beck Street Capital Proposal
Today, Beck Street Capital delivered a proposal for the
restructuring of Realty Finance Corporation (the "Company") to its
Board of Directors. The primary points of the Beck Street
Capital proposal include an immediate cash distribution of Realty
Finance Corporation's remaining cash balances to the stockholders,
estimated at $0.07 per share; or, for
those stockholders desiring to immediately tender their shares and
exit the stock, the implementation of a stock buyback at a price of
$0.14 per share for up to 50% of the
shares outstanding. Beck Street Capital will commit to invest
the capital required to complete the stock buyback.
Additional terms include the commencement of a rights
offering to all Company stockholders as soon as is practicable
following the close of the proposed transaction including a
commitment by Beck Street Capital to invest up to $5.0 million and the adoption of a strategic
growth plan. The Company will once again become a reporting
company under the Securities and Exchange Act of 1934.
Regarding the JAC Investment Corp. Proposal
On October 26, 2010, after the
close of trading, the Board of Directors of Realty Finance
Corporation announced that they had entered into a non-binding term
sheet for JAC Investment Corp. to tender for all of the Company's
shares for a purchase price of $0.11
per share. It is Beck Street Capital's view that this
proposal fails to adequately maximize value to the stockholders
that would result from any other alternative facing the Company,
including the Beck Street Capital proposal, an orderly liquidation,
or a bankruptcy. According to Realty Finance Corporation's
most recent disclosed financial statements, issued on May 24, 2010, it had approximately $3.8 million of unrestricted cash as of
December 31, 2009. After
reductions in this cash balance for the costs associated with the
early termination of its lease, and insurance costs resulting from
its shareholder litigation, the Company has indicated it had
approximately $3.0 million, or
$0.10 per share, in cash as of
May 24, 2010. The JAC proposal
seems to suggest that the Company's cash balances have been further
reduced to $2.2 million, or
$0.07 per share.
In addition, Realty Finance Corporation retains management of
CDO 1, and earns fees associated with this management contract.
There is currently an active market for these management
contracts. We estimate that a multiple of 7.5 times would be
applied to such revenue streams. Such value should be disclosed
before any tender is commenced. Additionally, many believe
that a public shell itself has value, which should be considered
before any tender is commenced.
Further, as of May 24, 2010,
Realty Finance Corporation owned interests in six joint ventures,
and two land loans, which the Company indicated in its May 24, 2010, press release had no value.
Given the continued recovery in real estate values, it is
possible that with prudent management these assets could provide
additional value to stockholders. Beck Street Capital's
proposal offers its operating expertise to the Company under very
fair terms.
Regarding Threats of Bankruptcy
In both of Realty Finance Corporation's May 24, 2010 earnings release, as well as its
statement issued on October 20, 2010,
the management team of Realty Finance has indicated that the threat
of bankruptcy exists owing to a multitude of issues facing the
Company. Conflicting with the threat of bankruptcy is Realty
Finance Corporation's statement in its press release of
May 24th that states, "The Company
has no recourse debt obligations". Realty Finance has no
recourse corporate liabilities, and has sufficient cash flow from
its CDO management contract to cover corporate operating costs,
assuming a prudent cost structure.
If Realty Finance Corporation's Board of Directors and its
stockholders reject the proposal put forth by Beck Street Capital
for a strategic realignment of the Company, we strongly recommend
then the best course of action is an orderly liquidation of the
Company, outside of the bankruptcy process, that should result in
net proceeds substantially in excess of the tender offer that the
Company has proposed.
If both an insufficient number of stockholders tender their
shares to JAC Investment Corp. to consummate its transaction, and
Realty Finance Corporation rejects Beck Street Capital's proposal
and instead puts the Company into bankruptcy, then Beck Street
Capital will put itself forward to the bankruptcy court as trustee
in order to ensure that maximum proceeds are recovered for the
benefit of our fellow stockholders.
Beck Street Capital's 9.4% Ownership Stake
Since October 18, 2010, the date
of Beck Street Capital's announcement of its ownership position in
Realty Finance Corporation, many RTYFZ stockholders have contacted
Beck Street Capital with various questions, many of which are
addressed in the restructuring proposal issued today. Other
questions that have been received are addressed below:
1. "I am concerned that I have not seen a filing of a 13D or
even a 13G when running a search in public records. Is there
a reason I cannot locate this?"
Realty Finance Corporation is now a non-filing company under SEC
regulations. This non-filing status applies equally to the
Company and to its stockholders. Because of this non-filing
status, you will not find any schedule 13D or 13G information
regarding the ownership interests of Beck Street Capital.
2. "Is Beck Street truly interested in a long term investment as
you say?"
As Beck Street Capital's proposal indicates, Beck Street Capital
is interested in Realty Finance because of the platform opportunity
for growth that it represents. It is Beck Street's intention
to once again convert Realty Finance Corporation into an active,
but prudent, investor in urban real estate assets. Beck
Street's view that the stock is trading below its liquidation value
is an added benefit.
3. "How can one be sure that you have not sold your shares
already subsequent to the release of your press release,
considering this is a pink sheet stock now? You would have
stood to make a great profit already if my calculations of basis
are accurate."
Beck Street Capital, including all of its affiliates, has not
sold any of the stock that it has purchased in Realty Finance Corp.
Beck Street Capital continues to welcome direct feedback from
RTYFZ stockholders and asks each stockholder to contact us by email
at realtyfinance@beckstreetcapital.com, by phone at 212-337-3173,
ext 224, or by fax at 212-337-3174 to communicate contact
information, shares held and your views on our goals.
Kevin Comer, Senior Managing
Director of Beck Street Capital, today released the following
statement: "While we are pleased that another firm has expressed
interest in Realty Finance Corporation and recognizes, as we do,
the undervalued nature of the Company, we have a great many
concerns regarding the proposed transaction, including first and
foremost its extremely low valuation of the Company, but also
including meaningful concerns regarding the ability of Realty
Finance Corporation to consummate a transaction with the same
principals that had proposed and failed to execute a transaction
when they were representing Stoneleigh Partners Acquisition Corp.
We are open to any transaction that delivers an appropriate
value for the stockholders, including an outright sale but at a
much higher price. However, it is our strong belief that at
present our own proposal more meaningfully enriches stockholders
and affords them the best chance at not only a much higher current
valuation, but also the opportunity for a much more significant
recovery of their original investments, and potential growth of
that investment."
As previously announced on October 18,
2010, Beck Street Capital holds 2,910,812 shares in Realty
Finance Corporation, representing an approximate 9.4% ownership
stake.
About Beck Street Capital
Beck Street Capital is a private real estate investment firm
headquartered in New York City.
Formed in 2000, Beck Street Capital invests in high value-added,
mixed-use investment properties in dense urban locations with high
barriers to entry. Beck Street invests in a number of asset
classes, including office, residential and retail, and has
successfully completed value creation strategies that include
retail repositioning, residential condominium conversion, and asset
redevelopment. For more about Beck Street, visit
www.beckstreetcapital.com.
SOURCE Beck Street Capital
Copyright . 28 PR Newswire
