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1 CONFIDENTIAL PRESENTATION
1CONFIDENTIAL PRESENTATION
2
STATEMENT OF CONFIDENTIALITY AND DISCLAIMER:
This confidential presentation (“Confidential Presentation”) has been prepared by Carlton Advisory Services, Inc., an affiliate of The Carlton Group, Ltd. (together
“Carlton”), for distribution to a limited number of parties and does not purport to be all-inclusive or to contain all of the information that prospective sellers of loan or
property assets may need or desire. No representation is made by Carlton as to the accuracy or completeness of the information contained herein, and nothing
contained herein is, or shall be relied on, as a promise or representation as to the success of any sale or auction described herein. Although the information contained
herein is believed to be correct, Carlton and its principals, employees and affiliates disclaim any and all liability for representations and warranties, expressed or implied,
contained in, or for omissions from this Confidential Presentation or any other written or oral communication transmitted or made available to the recipient.
The opportunities described herein involve a high degree of risk. All recipients of this Confidential Presentation are encouraged to seek legal, tax, accounting, and other
professional advice prior to engaging Carlton. Carlton makes no recommendations regarding the appropriateness of particular sale or auction opportunity. You must
rely on your own judgment and that of your advisors regarding the merits of a particular sale or auction opportunity.
This Confidential Presentation has been prepared solely for informational purposes, and is not an offer to buy or sell or a solicitation of an offer to buy or sell any
security, product, service, or investment. The opinions expressed in this Confidential Presentation do not constitute investment advice and independent advice should
be sought where appropriate.
This Confidential Presentation is not directed at any person in any jurisdiction where for any reason the publication or availability of this Confidential Presentation is
prohibited. Those in respect of whom such prohibitions apply must not access this Confidential Presentation. Carlton does not represent that (i) any of the materials in
this Confidential Presentation; (ii) any investment services that may be deemed to be offered through this Confidential Presentation; or (iii) anything else in this
Confidential Presentation, are appropriate for use or permitted by local laws in all jurisdictions. Those who use this Confidential Presentation do so of their own
initiative, and are responsible for compliance with applicable local laws or regulations; legal advice should be sought in cases of doubt. Those who access this
Confidential Presentation may not necessarily be able to deal directly with all or any Carlton entities. None of the materials or investment services at or referred to in this
Confidential Presentation are available to persons residing in any jurisdiction where this would be contrary to local law or regulation.
Information in this Confidential Presentation contains statements that may constitute, and from time-to-time our management may make, “forward-looking statements”
within the meaning of the safe harbor provisions of The Securities Act of 1933. Any such statements must be read in the context of the offering materials pursuant to
which any securities may be offered or sold in the United States. These forward-looking statements are not historical facts but instead represent only our belief regarding
future events, many of which, by their nature, are inherently uncertain and outside our control. Important factors that could cause actual results to differ from those in
specific forward looking statements include, without limitation, economic and market conditions, political events and investor sentiments, liquidity of secondary
markets, level and volatility of interest rates, currency exchange rates, security valuations, competitive conditions and size, and the number and timing of transactions.
Neither Carlton nor any of its officers, members, employees, agents or contractors shall be liable, in negligence or otherwise, for any loss, damage or liability suffered or
sustained by anyone relying upon or acting on any information relayed, published or made available by or on behalf of Carlton.
Confidentiality and Disclaimer
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Why Carlton is the Best Loan Sale Advisor to Maximize Your Recovery
The Global Leader in Real Estate and Secondary Market Loan Sales Since 1991
Over $50 Billion in Closed Transactions
Over $20 Billion of Distressed Real Estate and Debt Offered Since 2007
Carlton Overview
Clients
Profit by Our Success In Selling Large Real Estate and Whole Loan, B-Note and Mezzanine Positions
Negotiated Loan Sales
Large Loan Program
Carlton Loan Exchange - Multi-Asset Small Balance Loan Sales
The CEX Loan MLS Sales Process
Large Loan and Small Balance Commercial Valuations
Representative Commercial Loan Sale Transactions
Execution Team
4
Why Carlton is the Best Loan Sale
Advisor to Maximize Your Recovery
5
Long Term Experience and Results
We have been in the loan sale and distressed real estate disposition business since 1991, having closed over $50 billion in
transactions (including over $20 billion in loans and real estate offered since the credit dislocation began in 2007).
Our management team has over 300 years of combined valuation, underwriting, structuring, trading, and investment experience.
Loan Sale Platform
We maintain a database of over 100,000 domestic and international investors.
We possess a matching technology which pairs investors with preferred asset classes. We also often provide financing and can
partner local investors with institutional capital sources.
We are experts in commercial & residential loan trading and have evolved marketing and trading strategies, which have been
perfected over the last 20 years.
We possess a highly sophisticated structured finance & investment banking practice which has substantial experience in drafting and
reviewing loan & securitization documentation.
High level of expertise monetizing whole loans which fall out of CMBS, REMIC, CDO and ABS trusts
Immediate access to qualified bidders.
We create a competitive and transparent atmosphere.
Why Carlton is the Best Loan Sale Advisor to
Maximize Your Recovery
Structured Finance/Securitization and Valuation Expertise
Carlton’s team of senior investment bankers have significant experience in analyzing all aspects of commercial and residential loan
documents and intercreditor arrangements. The quality of the loan documentation is a big factor in an investor’s decision on how
much to pay for a loan. Our ability to dig through and advise our clients on difficult legal and transactional structures allows our
clients to evaluate and maximize the best potential pricing for a loan asset.
In addition, Carlton has advised many regional banks, pension funds, and other portfolio lenders in structuring and valuing highly
complex financing arrangements which are held on such institution’s balance sheets.
Ability to leverage the investment banking relationships of Carlton Advisory Services, Inc. to arrange financing on your note sales.
This results in improved pricing as buyers are able to use leverage to achieve their minimum returns.
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The Carlton Group consists of 3 strategic divisions:
Clientele
Money Center Banks
Regional & Community Banks
Hedge Funds
REITS’s
CDO and CLO Issuers
Money Managers and Family Offices
Global Private Equity Funds
Pension Funds
Domestic and Overseas High Net Worth Families and Individuals
International Financial Institutions
Skill Set
Significant expertise in structuring complex capital market transactions, valuation of debt and equity, financial modeling and
underwriting acquisitions and financing of all real estate property types. Approximately $50 billion of completed transactions.
Equity & Debt
Placement
Carlton Advisory
Services, Inc.
The Carlton Group, Ltd.
(“Carlton”)
Merchant Banking
Carlton Strategic
Ventures
Loan & REO
Trading Platform
Carlton Exchange
(“CEX”)
The Leader in Secondary Market Sales Since 1991
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One of the United States’ Oldest and Most Successful Loan Sale Advisors
Advising Institutional Clients Since 1991
Over $20 Billion of Loan and REO Offerings Since 2007
Database of Over 100,000 in the Market Investors
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Carlton Clients
* Partial List of Carlton Clients
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Profit by Our Success
In Selling Large Whole Loan, B-Note and Mezzanine Positions
In Business Since 1991, We Possess Evolved Trading Techniques Which
Have Been Perfected Over the Last 20 Years
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Negotiated Loan Sales
(sample listing)
UPB Primary Collateral Type Collateral Locations Comments
$40,000,000 Hospitality Portfolio 11 Southern StatesSold mezzanine note secured by hotel
portfolio
$35,000,000 Hotel Property Chicago, ILSold performing B-Note secured by
high-end boutique hotel
$40,000,000 Office Portfolio NYC Metro AreaSold performing B-Note secured by
suburban office portfolio
$75,000,000 Office Portfolio Southern CaliforniaSold mezzanine position in $1.5
billion performing Cabi loan
$24,600,000 Hotel Property Portland, ORSold performing first mortgage and
arranged financing for buyer
$32,000,000 Hotel Property Seattle, WA Sold performing first mortgage
$100,000,000Luxury Manhattan
CondominiumNew York, NY
B-Note secured by a luxury
condominium in Manhattan
$150,000,000Industrial Whole Loan &
B-Note PortfolioSoutheastern U.S.
Financing for the acquisition of a
large industrial loan portfolio
$300,000,000 Hospitality Portfolio U.S. and CanadaSold various mezzanine positions in
the ESH hospitality portfolio
$16,000,000 Hotel Property Northeastern U.S.Sold first mortgage secured by 500
room hotel
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UPB
(or REO Value) Primary Collateral Type Collateral Locations Comments
$91,000,000
Nonperforming CRE and Land
Loans California
Most assets traded despite 35-day
timeline
$170,000,000
Nonperforming CRE and Land
Loans California and Nevada
Most assets sold for over 70% of
UPB
$1,100,000,000 CRE: Hotel, MF, Office &
RetailNationwide
Strong pricing despite
deteriorating market
$200,000,000
Performing Residential 1-4
Family California In Negotiation
$700,000,000 Hospitality Portfolio Numerous States
High level of recovery achieved
despite unfavorable market
conditions
$265,000,000
Nonperforming CRE and Land
Loans CA, NV, FL, MS, LA 4th sale from seller;
$91,000,000 Nonperforming CRE and Land
LoansCalifornia
Most assets traded despite 35-day
timeline
Loan & REO Asset Sales
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UPB
(or REO Value) Primary Collateral Type Collateral Locations Comments
$49,000,000
Performing "Hard Money"
CRE Loans East Coast US
Strong pricing from other Hard
Money lenders and niche buyers
$118,000,000 Auto: Deficiencies and
NonperformingNationwide
All sold despite weak
documentation
$67,000,000 CRE and Land Loans + REO Southeast US Almost 70% of assets sold
$88,000,000
Nonperforming CRE and Land
Loans Southeast US
2nd Sale w/ client; Over 60% of the
assets traded
$58,000,000
Bank Branch / Retail REO
Portfolio Numerous States Assets traded in numerous states
$147,000,000 Performing and Sub-
Performing HE Term LoansNationwide Sold 100% of the portfolio
Loan & REO Asset Sales
$136,000,000 Performing Residential Jumbo
LoansNJ & Northeast US
All loans sold at
strong pricing
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Small Balance, Multi-Asset Loan Sales Through CEX MLS
For individual sales, where maximizing recovery is paramount, we find that the
most effective way to do that is by reaching out to local and regional investors
through our rolling CEX Loan MLS Bid Process (www.carltonexchange.com).
The Carlton Exchange combines all of the advantages of a conventional listing, which
generates higher prices, with the urgency and certainty that only an accelerated auction
event provides. Certain features of the CEX process are as follows:
New CEX Loan MLS Small Loan Balance Hybrid Auction Process - For
individual sales, where maximizing recovery is paramount, we find that the most
effective sales tool is to reach out to local and regional investors through our rolling
CEX Loan MLS Bid Process (www.carltonexchange.com).This is Carlton’s new
proprietary conventional loan trading system, which has resulted in over one billion
dollars in circled and closed asset sales in 2010 alone.
CEX Loan MLS is an auction hybrid loan sale process, which we use for small
balance commercial loan and REO assets, which are listed on Carlton’s proprietary
password-protected loan trading website, on a First-Come-First-Serve BID NOW
(which means that investors can immediately make bids after conducting preliminary
due diligence and completing our bidder qualification process).
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The CEX Loan MLS Process/ Strategy
The CEX Loan MLS is a seller-advantaged process, which connotes a “positive psychology,” and allows you to offer assets in a
“conventional listing” manner and immediately accept or counter a bid as you deem appropriate. Unlike auctions, which typically
signal a distressed or “fire sale” connotation, CEX will help you get the best price through a competitive process that encourages
urgency and emotional bidding to drive prices higher. Moreover, local buyers who are familiar with the asset will bid quickly and
aggressively in order to capture the asset and avoid competition. The CEX Loan MLS process is confidential and only the client and
CEX will see the bids.
How CEX MLS Works
Assets are loaded onto the site in a summary form with all of the
due diligence available by signing a confidentiality agreement.
Bidders will be able to view the assets, conduct preliminary due
diligence and then submit a bid through a confidential, password
protected process.
You will then either accept, counter or reject such bid.
Once a bidder provides an acceptable bid, we’ll shake hands, circle
the asset and give the bidder approximately one week to finalize his
due diligence and sign a hard deal (while we continue to market the
assets to other bidders).
The main focus and objective of the CEX MLS is to get as many
local and regional and qualified investors to bid on assets either
individually or in “bidder-selected pools”. This process is better
served to realize “retail pricing” than the typical large wholesale
discounts, which are afforded to institutional buyers who look to
buy residential assets on a bulk basis.
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Other Benefits of the CEX Loan MLS Process
“Event Atmosphere” to Create Urgency and Generate Retail Pricing - CEX will orchestrate a multi-dimensional marketing and
public relations campaign that will create an “Event Atmosphere” focusing all potential individual retail buyers and local brokers on
the subject assets. This dynamic program will increase velocity, absorption and pricing. Our program is designed to provide “retail
pricing” with significantly improved velocity and provide sellers with a clear advantage over any other inventory being sold in the
respective markets.
Furthermore, during the marketing period, bidders will be given limited, but sufficient access (only for REO assets) during the
designated inspection times which will add to the excitement and urgency to motivate investors to act and bid on assets which they
desire.
Streamlined, Transparent, Easy to Use Due Diligence– Our proprietary loan and REO sale platform allows buyers to view
hundreds of assets and due diligence files (such as tax, plot size, improvements, and all other typical information) with ease by using
our intuitive search features, “matching and sorting technology” and customizable profile pages. In short, all appropriate information
is loaded into one central location so bidders are afforded tremendous efficiency in diligencing assets.
Local Participating Broker Involvement- In order to maximize absorption and pricing and to bring as many potential buyers into
the bidding process as possible, CEX encourages a participating broker involvement so that you will see every potential bid from as
many qualified investors as possible.
Local Showing Broker Presence - CEX utilizes “licensed local showing brokers” for REO assets. Showing brokers will staff at
least two open houses per week during a six-week buyer inspection period. Our showing brokers also access local investors who
typically pay the most for assets.
Seller Confidentiality / No Market Saturation - Furthermore, because this is a confidential process, sellers will also have the
ability to monitor pricing and control the amount of absorption that occurs in any one market, so as not to either saturate or depress
pricing in a respective geographic area.
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Other Benefits of the CEX Loan MLS Process
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Sample Commercial Loan Valuations
Note Information Index Assumptions
Subject Note Balance $45,886,842 CY 2010E CY 2011E CY 2012E CY 2013E CY 2014E CY 2015E CY 2016E
Last $ Exposure of Subject Note 1,007,686,000 1M LIBOR 0.350% 0.850% 1.350% 1.850% 2.350% 2.850% 3.350%
Position B-Note
Borrower N/A Capital Stack Information
Number of Hotels 7 Note Cummulative Exposure
Total Keys 6,127 Note Position Spread Balance Balance Per Key Position Holder
Note Origination Date 12/28/2006 A1 0.832% $849,268,657 $849,268,657 $138,611 N/A
Note Maturity Date 7/9/2011 A2 0.830% 112,530,501 961,799,158 156,977 N/A
Remaining Term 15 mths. B1 1.100% 45,886,842 1,007,686,000 164,466 N/A
Mezz A 1.400% 210,000,000 1,217,686,000 198,741 N/A
Amortization Interest Only Mezz B 2.380% 130,000,000 1,347,686,000 219,959 N/A
Mezz C 3.150% 100,000,000 1,447,686,000 236,280 N/A
Index / Current Rate 1M LIBOR 0.230% Mezz D 4.000% 130,000,000 1,577,686,000 257,497 N/A
Spread 1.100% Mezz E 5.300% 130,000,000 1,707,686,000 278,715 N/A
Current Interest Rate 1.330% Total Debt 1.744% $1,707,686,000 $1,707,686,000 $278,715
Hotel Operating Assumptions & Financials
Time Period CY 2007A CY 2008A Sep. 2009 LTM CY 2010E CY 2011E CY 2012E CY 2013E CY 2014E CY 2015E CY 2016E
Rooms Available 1,907,477 1,775,932 1,835,157 2,236,355 2,236,355 2,236,355 2,236,355 2,236,355 2,236,355 2,236,355
Rooms Sold 1,543,878 1,428,210 1,371,185
Occupancy 80.9% 80.4% 74.7% 75.0% 78.0% 80.0%
ADR $224.21 $224.18 $202.93 $210.00 $220.00 $230.00
RevPAR $181.47 $180.29 $151.63 $157.50 $171.60 $184.00 $189.52 $195.21 $201.06 $207.09
RevPAR Growth (0.7%) (15.9%) 3.9% 9.0% 7.2% 3.0% 3.0% 3.0% 3.0%
Room Revenue (% of Gross Revenue) 68.5% 69.1% 68.0% 69.0% 69.0% 69.0% 69.0% 69.0% 69.0% 69.0%
Departmental Expenses (% of Gross Revenue) 43.0% 43.4% 48.4% 45.0% 45.0% 45.0% 45.0% 45.0% 45.0% 45.0%
Undistributed Operating (% of Gross Revenue) 18.8% 20.5% 21.4% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0%
Fixed Expenses (Annual Growth) 4.0% 0.9% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5%
Management Fee (% of Gross Revenue) 1.8% 2.2% 1.2% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
Franchis Fee (% of Gross Revenue) - - - - - - - - - -
FF&E Reserve (% of Gross Revenue) - - - 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
Room Revenue $346,151,361 $320,182,027 $278,258,274 $352,225,913 $383,758,518 $411,489,320 $423,834,000 $436,549,020 $449,645,490 $463,134,855
Other Revenue 159,047,354 143,326,013 130,945,070 158,246,424 172,413,247 184,872,013 190,418,174 196,130,719 202,014,641 208,075,080
Gross Revenue $505,198,715 $463,508,040 $409,203,344 $510,472,337 $556,171,765 $596,361,333 $614,252,173 $632,679,739 $651,660,131 $671,209,935
Departmental Expenses $217,460,498 $201,229,708 $198,214,445 $229,712,552 $250,277,294 $268,362,600 $276,413,478 $284,705,882 $293,247,059 $302,044,471
Undistributed Operating Expenses 94,736,033 95,112,296 87,527,314 102,094,467 111,234,353 119,272,267 122,850,435 126,535,948 130,332,026 134,241,987
Gross Profit $193,002,184 $167,166,036 $123,461,585 $178,665,318 $194,660,118 $208,726,467 $214,988,261 $221,437,908 $228,081,046 $234,923,477
Fixed Expenses $31,864,617 $33,143,500 $33,456,647 $34,293,063 $35,150,390 $36,029,149 $36,929,878 $37,853,125 $38,799,453 $39,769,440
Management Fee 9,262,500 10,000,000 4,829,068 15,314,170 16,685,153 17,890,840 18,427,565 18,980,392 19,549,804 20,136,298
Franchis Fee - - - - - - - - - -
FF&E Reserve - - - 20,418,893 22,246,871 23,854,453 24,570,087 25,307,190 26,066,405 26,848,397
Net Operating Income (NOI) $151,875,067 $124,022,536 $85,175,870 $108,639,191 $120,577,705 $130,952,024 $135,060,730 $139,297,202 $143,665,383 $148,169,342
NOI Growth (18.3%) (31.3%) 27.5% 11.0% 8.6% 3.1% 3.1% 3.1% 3.1%
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Sample B-Note Valuation
Debt Service & Debt Service Coverage
Time Period CY 2010E CY 2011E CY 2012E CY 2013E CY 2014E CY 2015E CY 2016E
Implied Debt Service
A1 $10,039,205 $14,285,548 $18,531,891 $22,778,235 $27,024,578 $31,270,921 $35,517,264
A2 1,327,860 1,890,512 2,453,165 3,015,817 3,578,470 4,141,122 4,703,775
B1 665,359 894,793 1,124,228 1,353,662 1,583,096 1,812,530 2,041,964
Mezz A 3,675,000 4,725,000 5,775,000 6,825,000 7,875,000 8,925,000 9,975,000
Mezz B 3,549,000 4,199,000 4,849,000 5,499,000 6,149,000 6,799,000 7,449,000
Mezz C 3,500,000 4,000,000 4,500,000 5,000,000 5,500,000 6,000,000 6,500,000
Mezz D 5,655,000 6,305,000 6,955,000 7,605,000 8,255,000 8,905,000 9,555,000
Mezz E 7,345,000 7,995,000 8,645,000 9,295,000 9,945,000 10,595,000 11,245,000
Total Debt Service $35,756,424 $44,294,854 $52,833,284 $61,371,714 $69,910,144 $78,448,574 $86,987,004
Implied Debt Service Coverage
A1 10.82 x 8.44 x 7.07 x 5.93 x 5.15 x 4.59 x 4.17 x
A2 9.56 x 7.45 x 6.24 x 5.24 x 4.55 x 4.06 x 3.68 x
B1 9.03 x 7.06 x 5.92 x 4.98 x 4.33 x 3.86 x 3.51 x
Mezz A 6.92 x 5.53 x 4.70 x 3.98 x 3.48 x 3.11 x 2.84 x
Mezz B 5.64 x 4.64 x 4.00 x 3.42 x 3.01 x 2.71 x 2.48 x
Mezz C 4.77 x 4.02 x 3.52 x 3.04 x 2.69 x 2.44 x 2.24 x
Mezz D 3.82 x 3.32 x 2.96 x 2.59 x 2.32 x 2.12 x 1.96 x
Mezz E 3.04 x 2.72 x 2.48 x 2.20 x 1.99 x 1.83 x 1.70 x
Total Debt Service Coverage 3.04 x 2.72 x 2.48 x 2.20 x 1.99 x 1.83 x 1.70 x
NOI Debt Yield
A1 12.79% 7.10% 7.71% 7.95% 8.20% 8.46% 8.72%
A2 11.30% 4.35% 4.72% 4.87% 5.02% 5.18% 5.34%
B1 10.78% 3.15% 3.42% 3.53% 3.64% 3.75% 3.87%
Mezz A 8.92% 2.29% 2.49% 2.57% 2.65% 2.73% 2.82%
Mezz B 8.06% 1.79% 1.95% 2.01% 2.07% 2.13% 2.20%
Mezz C 7.50% 1.46% 1.58% 1.63% 1.68% 1.73% 1.79%
Mezz D 6.89% 1.21% 1.31% 1.35% 1.39% 1.44% 1.48%
Mezz E 6.36% 1.02% 1.11% 1.14% 1.18% 1.21% 1.25%
Total Debt Service Coverage 6.36% 1.02% 1.11% 1.14% 1.18% 1.21% 1.25%
Cash Flow Available for Debt Service
A1 $10,039,205 $14,285,548 $18,531,891 $22,778,235 $27,024,578 $31,270,921 $35,517,264
A2 1,327,860 1,890,512 2,453,165 3,015,817 3,578,470 4,141,122 4,703,775
B1 665,359 894,793 1,124,228 1,353,662 1,583,096 1,812,530 2,041,964
Mezz A 3,675,000 4,725,000 5,775,000 6,825,000 7,875,000 8,925,000 9,975,000
Mezz B 3,549,000 4,199,000 4,849,000 5,499,000 6,149,000 6,799,000 7,449,000
Mezz C 3,500,000 4,000,000 4,500,000 5,000,000 5,500,000 6,000,000 6,500,000
Mezz D 5,655,000 6,305,000 6,955,000 7,605,000 8,255,000 8,905,000 9,555,000
Mezz E 7,345,000 7,995,000 8,645,000 9,295,000 9,945,000 10,595,000 11,245,000
Cash After Debt Service $72,882,767 $76,282,851 $78,118,740 $73,689,016 $69,387,058 $65,216,809 $61,182,338
19
Sample B-Note Valuation
5-Year Net Present Value (NPV) Analysis
Asset Value Calculation NPV Calculation
CY 2014E NOI $139,297,202 Discount Rate (for NPV) 10.00%
Cap Rate 8.50%
Gross Asset Value (GAV) at Maturity $1,638,790,607 Net Present Value (NPV) $1,477,837,620
GAV Per Key at Maturity 267,470 NPV Per Key 241,201
Subject Loan Implied LTV 68.2%
Selling Costs 1.50% (24,581,859)
Net Asset Value (NAV) at Maturity $1,614,208,748
NAV Per Key at Maturity 263,458
Time Period CY 2010E CY 2011E CY 2012E CY 2013E CY 2014E
NOI $108,639,191 $120,577,705 $130,952,024 $135,060,730 $139,297,202
Net Asset Value (NAV) 1,614,208,748
Net Cash Flow (NCF) $108,639,191 $120,577,705 $130,952,024 $135,060,730 $1,753,505,950
Refinancing Analysis
Refinancing NOI $120,577,705
Cap Rate 8.50%
Refinancing Value $1,418,561,229 Refinancing Debt
Refinancing Value Per Key 231,526 Refinancing Amount Debt Debt Service
Debt Position LTV Proceeds Per Key Constant Service Coverage
Total Refinancing Proceeds $1,014,271,279 Senior Financing 60.0% $851,136,738 $138,916 10.000% $85,113,674 1.42 x
Last $ Exposure of Subject Note 1,007,686,000 Mezzanine Financing 71.5% 163,134,541 165,541 15.000% 24,470,181 1.10 x
Additional Equity Required to Repay Subject Note - Total / Weighted Average 71.5% $1,014,271,279 $165,541 10.804% $109,583,855 1.10 x
20
Sample B-Note Valuation
Subject Note Pricing Analysis
Asset Value Calculation Debt Repayment Schedule Note Proceeds Note Proceeds
Balance Pre Repay. Repayment Post Repay.
NOI at Note Maturity $120,577,705
Cap Rate 8.50% A1 $849,268,657 $1,397,282,811 $849,268,657 $548,014,155
Gross Asset Value (GAV) at Maturity $1,418,561,229 A2 112,530,501 548,014,155 112,530,501 435,483,653
GAV Per Key at Maturity 231,526 B1 45,886,842 435,483,653 45,886,842 389,596,811
Mezz A 210,000,000 389,596,811 210,000,000 179,596,811
Mezz B 130,000,000 179,596,811 130,000,000 49,596,811
Selling Costs 1.50% (21,278,418) Mezz C 100,000,000 49,596,811 49,596,811 -
Net Asset Value (NAV) at Maturity $1,397,282,811 Mezz D 130,000,000 - - -
NAV Per Key at Maturity 228,053 Mezz E 130,000,000 - - -
Period Ending 2/28/2010 12/31/2010 7/9/2011 - - - - -
Number of Months in Period - 10 6 - - - - -
Note Purchase Price $(31,262,000) - - - - - - -
Subject Note Debt Service Payment 554,466 447,397 - - - - -
Subject Note Repayment - 45,886,842 - - - - -
Total Cash Flow $(31,262,000) $554,466 $46,334,239 - - - - -
Investment IRR 34.96%
Investment Multiple 1.50 x
Nominal Profit $15,626,705
Note Purchase Price $31,262,000
Total Distributions 46,888,705
Subject Note Pricing Matrix
Note Purchase Price $28,135,800 $28,917,350 $29,698,900 $30,480,450 $31,262,000 $32,043,550 $32,825,100 $33,606,650 $34,388,200
Note Purchase Price / UPB 61.3% 63.0% 64.7% 66.4% 68.1% 69.8% 71.5% 73.2% 74.9%
Note Purchase Price Per Key $161,569 $161,697 $161,824 $161,952 $162,080 $162,207 $162,335 $162,462 $162,590
Premium / (Discount) to Midpoint Pricing (10.0%) (7.5%) (5.0%) (2.5%) 2.5% 5.0% 7.5% 10.0%
Investment IRR 45.90% 42.97% 40.18% 37.51% 34.96% 32.51% 30.17% 27.93% 25.77%
Investment Multiple 1.67 x 1.62 x 1.58 x 1.54 x 1.50 x 1.46 x 1.43 x 1.40 x 1.36 x
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Sample B-Note Valuation
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Sample Small Balance
Commercial Loan Valuation
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Sample Small Balance Commercial Loan Valuation
Pool A Pool B Pool C Pool D
Loan Information
Number of Loans 14 31 37 31
Original Appraisal 68,279,452 41,022,229 37,346,088 43,520,560
Original UPB 47,825,000 28,535,000 26,565,000 31,842,050
Current UPB 45,810,936 27,640,231 26,228,578 31,250,147
UPB (% of Total) 34.99% 21.11% 20.03% 23.87%
Average UPB 3,272,210 891,620 708,880 1,008,069
Base Case
Proposed Value
Most Recent Appraised Value 51,080,000 32,353,000 31,645,250 32,760,000
Estimated Property Value (1) 43,310,262 26,338,130 24,104,997 28,562,123
Discount to Most Recent Appraisal -15.21% -18.59% -23.83% -12.81%
Expenses
RE Broker Fee (1,299,308) (790,144) (723,150) (856,864)
Price % RE Broker Fee -3.00% -3.00% -3.00% -3.00%
Foreclosure Cost (3,725,095) (2,635,736) (2,638,576) (2,443,756)
Price % Foreclosure Cost -8.60% -10.01% -10.95% -8.56%
Servicing Cost (471,361) (346,975) (342,162) (348,015)
Price % Servicing Cost -1.09% -1.32% -1.42% -1.22%
Custodian Cost (326) (720) (862) (681)
Price % Custodian Cost 0.00% 0.00% 0.00% 0.00%
Due Diligence Cost (4,200) (9,300) (11,100) (9,300)
Price % Due Diligence Cost -0.01% -0.04% -0.05% -0.03%
Sale Price Variance (4,331,026) (2,633,813) (2,410,500) (2,856,212)
Price % Sale Price Variance -10.00% -10.00% -10.00% -10.00%
BPO HC - - - -
Target Yield Discount (10,016,152) (5,893,941) (5,378,809) (4,792,023)
Price % Target Yield Discount -23.13% -22.38% -22.31% -16.78%
Sum of Total Costs (19,847,468) (12,310,629) (11,505,158) (11,306,851)
Total Cost (%) -45.83% -46.74% -47.73% -39.59%
Purchase Amount 23,462,794 14,027,501 12,599,838 17,255,272
Price % of UPB 51.22% 50.75% 48.04% 55.22%
Equity Multiple 1.4x 1.4x 1.4x 1.3x
Average Months to Liquidation 23.93 23.67 23.93 17.39
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Representative Commercial
Loan Sale Transactions
$40 Million Junior Participation in $200 Million Senior Loan
Secured by 13 high-quality office properties in suburban businessdistrict outside New York City (1.4 million sq ft)
RexCorp, an institutional operator who has an excellent trackrecord of successfully executing office repositioning strategies,partnered with ABP, one of the largest pension funds in theworld, to purchase these buildings.
The borrowers plan to reposition the assets over a 12-15 monthperiod using $30 million ($22 per square foot) for capitalimprovements.
Borrower Equity In Deal: $76+ million.
Secured by 33 cross collateralized/cross defaulted Class A/Bproperties in southern California.
Cabi Developers, the borrower, is leading international real estatedevelopment company with a $1.7 billion net worth.
The borrower will spend $50 million in capital improvements($10.92 per square foot) to reposition the portfolio.
Borrower Equity In Deal: $165 Million plus personal guaranteesfor minimum $150 million principal pay downs in each of years 1and 2.
$75 Million Mezzanine Position in $1.51 Billion Secured Loan
Representative Transactions
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Secured by a Class A 125-key luxury boutique hotel in Seattle,WA.
Highly successful, high profile hotel borrower with renownedboutique manager/flag.
Borrower Equity In Deal: $8.2 million.
Secured by a Class A, 107-key luxury boutique hotel inPortland, Oregon.
Highly successful, high profile hotel borrower with renownedboutique manager/flag.
Borrower Equity In Deal: $6.6 million.
Secured by a portfolio of industrial properties and a corporateheadquarters.
Sold to a large public REIT.
$32 Million Floating Rate First Mortgage
$25 Million Floating Rate First Mortgage
Representative Transactions
$150 Million Industrial Whole Loan and B-Note Portfolio
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Secured by a Class A, 297-key, luxury, boutique hotel inChicago, IL .
The loan was originated in April 2007. In January 2008, thehotel was sold to Affinia Hotels, a highly respected, wellknown investor/operator, for $152.4 million or $513K perkey. The last dollar of our loan per key is $420K.
78% LTV based on $160 million sale price as of January2008.
$60 million ($202,000 per key) renovation was completed in2006.
Borrower Equity In Deal: $35 million
Secured by 42 extended stay hotels (5,600 keys).
JER Partners, the borrower is a multi-billion institutional realestate investment fund borrower.
$80 million of junior subordinate debt.
Secured by a high profile luxury Manhattan condominium.
Acquired by an institutional fund.
42 Extended Stay HotelsState Rooms Total Rooms
Georgia 1,098 19.6%
Colorado 296 5.3%
Texas 1,380 24.6%
Nevada 304 5.4%
Alabama 134 2.4%
Tennessee 273 4.9%
North Carolina 683 12.2%
Florida 550 9.8%
Mississippi 244 4.4%
Louisiana 394 7.0%
Virginia 244 4.4%
Total 5,600 100%
$40 Million Mezzanine Position in $320 Million Loan
$35 Million B-Note in $125 Million First Mortgage
Representative Transactions
$100 Million B-Note Secured by a Luxury Manhattan Condominium
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Secured by 3-star full service, upscale Radisson hotel located inPittsburgh, PA.
The borrower, an affiliate of Apollo, is one of the largest andmost successful real estate investment funds in the world,having invested in over $30 billion in transactions in the last 15years.
Since 2001, the borrower has spent $9.6 million ($20,645 perkey) on extensive renovations.
Secured by the equity position in a 76,000-key hotel portfolio
Lightstone, the borrower, is one of the largest private ownersof real estate in the country.
Geographic diversification in 44 states and Canada
Borrower’s equity at risk: $630 million.
Borrower is pursuing several initiatives to increase cash flowincluding brand integration, national marketing and yieldmanagement initiatives. The portfolio’s RevPAR penetrationof 66% relative to the leading extended stay franchise indicatesthat the portfolio is underperforming its competitive set andstands to benefit from new management initiatives.
$16 Million Floating Rate First Mortgage
$255 Million Mezzanine Positions in $7.4 Billion Loan664 hotels diversified geographically throughout the US and Canada
with a presence in the country’s top metropolitan markets
Representative Transactions
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Execution Team
Carlton Group Management Team
Howard L. Michaels, Chairman – Mr. Michaels is Owner and Chairman of the Carlton Group. Since 1990, Mr. Michaels has been
instrumental in the marketing, sale and financing of over $50 billion of commercial and residential assets through the Carlton Group and
its related entities. In addition to his responsibilities as Chairman, Mr. Michaels directs Carlton’s loan sales and debt and equity placement
activities. In this capacity, he has established a reputation as one of the nation’s foremost dealmakers, and has arranged capital for such
notable transactions as The General Motors Building, Manhattan House, 666 Fifth Avenue, and the Starrett-Lehigh Building in New York,
among numerous others. He is a graduate of American University with a BS in Business Administration.
Michael J. Campbell, Partner – Mr. Campbell has over 15 years of commercial real estate experience. Since joining Carlton in 1998, he
has been integrally involved in the structuring and procuring of equity and debt capital for over $40 billion of real estate projects around
the world as well as a senior member of Carlton’s principal business. Prior to joining Carlton, Michael spent five years at various
Prudential real estate groups including PRG, PCG and PMCC. He has extensive experience in all facets of real estate investments
including: complex equity and debt capital structuring, business origination & development, loan/REO auctions and underwriting for all
property classes. Michael has a degree in Financial Engineering from James Madison University and a master’s in Real Estate Finance and
Investments from New York University.
Dax Scharfstein, Managing Director and General Counsel – Mr. Scharfstein has over 10 years experience in the real estate finance
industry, primarily in the structuring and closing of commercial and residential mortgage loans and mezzanine loans. Mr. Scharfstein’s
previous positions include Associate Director of Structured Finance for Bear Stearns Commercial Mortgage, Inc., where he was directly
involved in the structuring of over $10 billion of commercial and residential loans in 2007. Prior to Bear Sterns, Mr. Scharfstein spent 6
years as a Senior Associate at the law firm of Schulte Roth & Zabel LLP, one of the nation’s premier legal advisors of commercial and
residential real estate. While at Schulte, Mr. Scharfstein was responsible for leading all aspects of major real estate transactions including
the drafting and negotiation of loan documentation, purchase and sale agreements, and joint-venture agreements. Mr. Scharfstein received
a J.D. from Hofstra University School of Law, and a B.A. from Brandeis University, where he graduated Cum Laude.
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Joseph Korbar, Managing Director & Co-Head of Loan Sale Group – New York Office – Mr. Korbar is a Managing Director of
the Carlton Group. Mr. Korbar is a residential loan and capital markets expert having held senior positions for JP Morgan Chase,
Mortgage It and Deutsche Bank over a 20 year period. At Deutsche Bank, Mr. Korbar was a Senior Banker in the RMBS Fixed
Income Division where he was responsible for pricing and new product development for a $25 billion per year book of investments.
In addition, Mr. Korbar managed risk, hedged positions and determined best execution strategies for the portfolio. Prior to Deutsche
Bank, Mr. Korbar worked at JP Morgan Chase as a Senior Vice President in the Finance Division. Mr. Korbar has a B.S. in Finance
from Seton Hall University.
John S. Ward, Managing Director – Mr. Ward is a senior finance professional who runs Carlton’s senior debt platform. He has
over 20 years experience in commercial real estate with the last 12 having been spent as an institutional lender on Wall Street. He was
most recently a senior director at Barclays Capital where he was the top fixed and floating rate debt and mezzanine originator during
his four years at the firm placing over $3 billion.
Prior to this, Mr. Ward spent five years as a senior director at GE Capital where he was also the top originator for fixed and portfolio
debt placing more the $1 billion. Mr. Ward began his lending career with Bear Stearns underwriting and then transitioning to debt
originations. Prior to the lending side, Mr. Ward spent several years with CB Richard Ellis and Joseph J. Blake as a commercial real
estate appraiser. Mr. Ward started his real estate career in 1990 with a large commercial/residential developer in the Virginia/DC
Metro area. Mr. Ward received a BA from Virginia Polytechnic Institute and State University.
Jeremy Motz, Senior Vice President - Prior to joining Carlton, Jeremy was a Senior Vice President at Jefferies & Company, Inc., a
mid-market full service investment bank. At Jefferies, Mr. Motz founded and ran the Mortgage Loan Warehouse Finance division. He
was responsible for originating and selling over $1 billion in warehouse repo lines. Prior to Jefferies, Mr. Motz was a Senior Vice
President at Fimat USA, Inc., a subsidiary of Societe General Bank, one of the largest banks in France. At Fimat, he founded and ran
their warehouse finance business and closed and disposed of over $500 million in financing transactions. Mr. Motz also spent three
years as a commercial real estate workout specialist at The Dai-Ichi Kangyo Bank, a Japanese bank located in New York. Jeremy is a
graduate of Boston University.
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Robert Mudry, Managing Director – Mr. Mudry oversees the Carlton Merchant Banking/Equity Placement and Advisory Service
Groups. Mr. Mudry is a seasoned sales and marketing professional with over 30 years of business development, capital raising and
managerial skills. He has raised billions of dollars in capital from global sources for financial institutions including, prominent hedge
funds, private equity and family offices. He has also served as advisor and provided strategic direction and financing for several listed
public companies over the last decade. His prior experience includes senior executive positions in investment banking and corporate
finance when he was employed by Kidder Peabody, Drexel Burnham and Solomon Brothers. Mr. Mudry received both an MBA in
Finance and a BS in Management from New York University.
Philip A. Powers, Managing Director - Philip A Powers was most recently Senior Vice President and Manager of the Commercial
Real Estate (CRE) Lending Group at Security Pacific Bank in Los Angeles. Mr. Powers started the CRE Lending Group in 2004,
hiring over 20 professionals in the origination, processing, underwriting, closing and servicing areas. The CRE Lending Group closed
over $660MM of new originations and purchased loans, with average pre-tax net income of $10MM per year on $25MM of allocated
capital and $250MM of average assets. Before Security Pacific Bank Mr. Powers was VP-Manager of the Southern Region Retail
Lending division at Imperial Capital Bank. At Imperial Mr. Powers managed nine loan officers and was responsible for over $500MM
in originations of small balance commercial real estate loans.
Mr. Powers also started the Secondary Market Acquisition Group in 2000 and bought over $350MM of small balance commercial real
estate loans from 2000 to 2004. In 1995 Mr. Powers moved to Los Angeles from New York City to be Executive Vice President and
Region Manager for Koeppel Tener Real Estate, a national due diligence and appraisal firm. In New York City, Mr. Powers was VP-
Loan Syndications for Chemical Real Estate Finance, and before that was VP-Loan Originations for the New York Office of National
Bank of Canada. Mr. Powers started his real estate career at Marine Midland Bank in the Construction Lending Department. Mr.
Powers received his BA from Columbia College in New York City and his MBA with a concentration in Finance from New York
University’s Stern School.
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Justin R. Piasecki, Vice President - Justin R. Piasecki is a Vice President of Carlton Advisory Services and the Loan Sale Advisory
Group. His primary responsibilities will include originations of loan packages for sale and placement.Mr. Piasecki will draw upon his
contacts and background from over 5 years of Secondary Market experience. Over the past 2 years Mr. Piasecki has worked on over
$3b of Whole Loan Sales for many of the worlds Institutions, Regional Banks, Funds, and High Net Worth Individuals. Along with
Loan Sales, he has worked on raising over $1B in capital for public and private clients. Previous to Carlton Mr. Piasecki was at Zurich
Mortgage Capital, a national direct private equity lender where he served as the COO and Vice President, to assist him in his
endeavors at with the Loan Sale Advisory Group. At Zurich Mortgage Solutions, Mr. Piasecki handled operations for a company with
annual originations of over $300 million. His professional career began at Triple Crown Properties, a luxury home Developer and Real
Estate company in Palm Beach, FL where he was promoted to Vice President of Operations before joining United Appraisal
Network, and lead it to become the number two residential appraisal company in the United States. Mr. Piasecki is a graduate of
Rutgers University where he received a BS in Political Science and was a four year letter winner on men's basketball team.
Gabriel Weinart, Vice President - Mr. Weinert's is a finance, capital markets and distressed debt expert having worked at UBS, JP
Morgan and Emigrant Bank. He managed a $300 MM portfolio of high-yield joint venture private equity and mezzanine debt real
estate investments with a Lehman Brothers sponsored opportunity principal, and then subsequently managed a $500 MM portfolio of
construction, bridge, and mezzanine loans (involving several landmark resort properties) with Emigrant Realty Finance at a VP level.
Most recently, Mr. Weinert was a Principal at The Fulcrum Group where we was responsible for originating, underwriting, and
managing $100 MM of distressed real estate acquisitions. He received a B.B.A in finance and real estate from the University of
Michigan Ross School of Business and an M.B.A from The Anderson School of Management at UCLA.
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