American Financial Realty Trust
American Financial Realty Trust — Annual Investor Conference 2007
34 slides from American Financial Realty Trust's conference presentation, Dec 3, 2007
Slide 1: Adapting to Changing Markets Annual Investor Conference
Adapting to Changing Markets Annual Investor Conference December 3, 2007 Gramercy Capital Corp.
Slide 2: Safe Harbor
Safe Harbor This presentation contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included in this presentation a
Slide 3: Additional Information and Where to Find It
Additional Information and Where to Find It This presentation does not constitute an offer of any securities for sale. The Company has filed with the SEC a Registration Statement on Form S-4, which includes a joint proxy statement/prospectus of the Company and AFR and other relevant materials in con
Slide 4: Today's Speakers
Today’s Speakers Marc Holliday Chief Executive Officer Bob Foley Chief Financial Officer Hugh Hall Chief Operating Officer
Slide 5: Strategic Rationale
Strategic Rationale Combine existing platforms of Gramercy and AFR to create integrated commercial real estate finance and operating company Create a new growth platform for Gramercy Provide Gramercy with scale and diversity Transform Gramercy from specialty finance company to $7 billion diversified
Slide 6: Synergistic Relationship
Synergistic Relationship Synergies Transaction Sourcing Market Knowledge Corporate Infrastructure Co-Sourced Investments Real Estate Judgment Network of Relationships Capital Resources 25 Mezz 50% Participation w/ SLG River Terrace 50 Mezz 50% Participation w/ SLG 100 Church Street 72 Fee Interest 2
Slide 7: Integrated Business Platform
Integrated Business Platform Real Estate Securities Group (“RESG”) Joe Romano Marc Holliday Chief Executive Officer Capital Markets/ Syndications/ CDO Management Shawn Townsend Jeffrey Baevsky Andrew Levine Compliance Officer/ Corp. Secretary Greg Hughes Chief Credit Officer Bob Foley Chief Financia
Slide 8: Bob Foley, Chief Financial Officer
Bob Foley Chief Financial Officer
Slide 9: Total Return: IPO – November 30, 2007
Total Return: IPO – November 30, 2007 -50.5% RAIT Investment Trust 9. -37.1% Newcastle Inv. Corp. 8. -4.1% Anthracite Capital Inc. 7. -1.9% iStar Financial Inc. 6. 9.9% Capital Lease 5. 35.0% NorthStar Realty 3. 22.5% Arbor Realty Trust 4. 62.5% Capital Trust 2. 96.2% Gramercy Capital Corp 1. Sector
Slide 10: Market Differentiation: Flight to Quality
Market Differentiation Flight to Quality Results as of November 30, 2007; Data provided by SNL Financial 11.9% 14.5% 15.7% 15.7% 21.3% 22.1% 10.6% 9.1% 10.4% Capital Lease Capital Trust Gramercy Capital iStar Financial Arbor Realty Trust NorthStar Realty Anthracite Capital Inc. RAIT Investment Trust
Slide 11: Substantial Growth
$2.00 Substantial Growth *Management Estimates 4Q07* 3Q07 2Q07 1Q07 4Q06 3Q06 2Q06 1Q06 4Q05 3Q05 2Q05 1Q05 4Q04 $0.5 $0.6 $0.8 $1.4 $1.5 $1.8 $2.0 $2.5 $2.8 $2.8 $3.3 $4.2 $4.4 Total Assets (in Billions) $0.51 $0.51 $0.50 $0.475 $0.45 $0.35 $0.22 $0.15 $0.56 $0.56 $0.63 $0.63 $0.63 Dividends Per Sh
Slide 12: Building Capital Strength
Building Capital Strength Bought Overnight at $26.25 per share gross Common Equity $126.7 September 2007 $1,516.7 Total PIPE with Morgan Stanley at $26.25 per share gross Common Equity $100.0 November 2007 Term Financing for RESG portfolio Gramercy CDO 2007-1 $1,100.0 August 2007 Upsized to $175 mm
Slide 13: Diverse Capital Base
Diverse Capital Base 0.0 1.0 2.0 3.0 4.0 5.0 ($ Billions) FY 2005 FY 2006 FY 2007 Common Equity Trust Preferred Securities Perpetual Preferred Equity CDO Mortgage Debt Lines - Secured Lines - Unsecured
Slide 14: Building Liquidity
Building Liquidity Source: SEC Filings, Company Records, Management Estimates. $- $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 $1,100 $1,200 $1,300 1Q07 2Q07 3Q07 4Q07(est.) (in Millions) Lines - Unsecured Lines - Secured CDO Cash
Slide 15: Composition of FFO
Composition of FFO (1) Midpoint of Management guidance ($0.04) Reduction in dollar volume of taxable income for FY07 in TRS. ($0.07) Tax Provision ($0.45) Sharply improved efficiencies, benefits of scale; operating leverage of SLG infrastructure. ($0.46) MG&A ($1.24) Growth of investment portfolio;
Slide 16: AFR – Merger Summary
AFR – Merger Summary 7.10 - 7.25% Approximate Going-in Cap Rate Other Transaction Items 7.75 - 8.25% Approximate Implied Cap Rate on Core Portfolio (2) Anticipated Closing March 2008 Timing Consideration per AFR Share $5.50 Cash (per share) 0.12096 GKK Common Stock (shares of GKK per AFR share) $3.5
Slide 17: Combined Asset Base
Combined Asset Base Gramercy 3Q07 Gramercy Q3 2007 Pro Forma Source: SEC filings Increase Total Assets by Roughly 75% Mezzanine Loans 15% Real Estate Securities 21% Credit Net Lease Commercial Real Estate 6% Subordinate Mortgages 6% Whole Loans 52% Subordinate Mortgages 3% Whole Loans 28% Credit Net
Slide 18: Four Business Segments
Four Business Segments Note: Data as of 10/19/07. Includes Citizens joint venture. RSF Net Operating Income Dana Portfolio 12% Value Add Portfolio 15% Core Portfolio 59% Held for Sale 14% Dana Portfolio 19% Value Add Portfolio 4% Core Portfolio 75% Held for Sale 2%
Slide 19: Strong Tenant Base
Strong Tenant Base Approximately 75% of the base rental revenue from tenants rated “A” or better BofA and Wachovia represent approximately 61% of total NRSF and 51% of total rental revenues
Slide 20: Geographic Diversity
Geographic Diversity
Slide 21: AFR Transaction Timetable
AFR Transaction Timetable* Distribution of Proxy Statement Shareholder Votes Closing Asset Sales Recruitment Systems Integration * Estimated November 2007 December 2007 January 2008 February 2008 March 2008
Slide 22: Today's Speakers: Hugh Hall, Chief Operating Officer
Today’s Speakers Hugh Hall Chief Operating Officer
Slide 23: 2007 Scorecard
2007 Scorecard Objectives: Penetrate targeted markets using enlarged direct origination teams in NYC and LA Enhance asset management platform Selectively originate opportunistic debt and equity investments in correcting markets Optimize net lease portfolio Maintain credit discipline Establish funds
Slide 24: Additional 2007 Highlights
Additional 2007 Highlights Entered into Merger Agreement with AFR Raised $340 Million of Equity Issued $1.1 Billion CDO at +45 COF in July Launched RESG to Tap Correcting Market Enhanced Credit Facilities in June
Slide 25: 2007 Debt Market Overview
2007 Debt Market Overview CMBS, Derivative and CRE CDO Spreads Widened Dramatically Greatest spread widening in history of CMBS market CDO and bridge lending markets seized up in August CMBX market gyrating wildly CMBS/CDO Market $10-$20 billion inventory of conduit CMBS $40-$50 billion inventory of
Slide 26: AAA CMBS Spread Performance
AAA CMBS Spread Performance Source: Citigroup Research, Markit Group * On the Run CMBX spreads represents the then on the run CMBX index or CMBX06.2 from 1/5/07 – 4/13/07, CMBX 07.1 from 4/27/07 – 10/12/07 and CMBX 07.2 from 10/26/07 – 11/23/07 Historical AAA CMBS Trends (1/05/07 - 11/23/07) 0 10 20
Slide 27: BBB- CMBS Spread Performance
BBB- CMBS Spread Performance Source: Citigroup Research, Markit Group * On the Run CMBX spreads represents the then on the run CMBX index or CMBX06.2 from 1/5/07 – 4/13/07, CMBX 07.1 from 4/27/07 – 10/12/07 and CMBX 07.2 from 10/26/07 – 11/23/07 Historical BBB- CMBS Spreads (1/05/07 - 11/23/07) 0 20
Slide 28: 2007 Investment Activity
2007 Investment Activity $755.6 451 ($175.2) $400.3 $84.7 - $107.1 $57.8 $144.9 Q3 2007 $24.1 - - - Real Estate Securities Group 299 417 451 353 Average Spread $301.0 $225.4 $74.6 $380.9 Net Production $169.5 $420.2 $378.5 $144.3 Less: Repayments $15.1 $172.1 $66.9 $64.5 Less: Syndications $146.6 -
Slide 29: Gramercy's $3.5 Billion Portfolio
Gramercy’s $3.5 Billion Portfolio Property Type Geography Fixed vs. Floating Form of Investment All data as of September 30, 2007 Including real estate securities Including real estate securities Whole Loan 51% Subordinate 6% Corp. Whole Loans 4% Real Estate Securities 22% Mezzanine 16% Preferred Eq
Slide 30: Real Estate Securities Group
Real Estate Securities Group Launched in March 2007 with hiring of Joe Romano, former real estate securities portfolio manager for TIAA Experienced Four-Person Team Loan collateral underwriting Scenario/investment analysis Investment execution Investor coverage Surveillance Focus of GKK Funds Manage
Slide 31: CMBS Relative Value
CMBS Relative Value Source: Citigroup Research, UBS, Moody's, Gramercy 2.50% "A" CDR to Incur loss 17%-20% "A" Leveraged ROE 234 bps "A" CMBS Spread to Corporate 475 bps "BBB-" 2007 vs. 2004 580 bps AAA - BBB- Credit Curve CMBS Relative Value Snapshot $5B $250B Projected Total Credit Losses 1.50% 20
Slide 32: Types of Securities Investments
Types of Securities Investments Fixed Rate High-Grade CMBS (AA+ to A-) Pro: Attractive returns compared to historical spreads; potential trading gains in a recovering market Con: No matched term financing structures and increases credit losses GKK Strategy: Closed $663.7 MM GSMS 2007-GKK1 and $1.1 B
Slide 33: 2008 Goals & Objectives
2008 Goals & Objectives Close and Integrate the AFR Merger Use AFR Platform for Net Lease Investments with Financial Services Companies Raising Capital Identify Alternate Sources of Growth Capital Syndicate Low Margin Loans for Redeployment Acquire Discounted Secondary Market Paper Pursue High Margi
Slide 34: Q&A
Q&A Annual Investor Conference December 3, 2007 Gramercy Capital Corp.
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