ARC New York Recovery Reit Presentation


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ARC New York Recovery Reit Presentation

  1. 1. American Realty Capital<br />New York Recovery REIT, Inc.<br />The properties pictured herein are not owned by the program or any affiliate and are included solely as an illustration of New York City real estate.<br />THIS IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES DESCRIBED HEREIN. AN OFFERING IS MADE ONLY BY THE PROSPECTUS. THIS SALES AND ADVERTISING LITERATURE MUST BE READ IN CONJUNCTION WITH THE PROSPECTUS IN ORDER TO UNDERSTAND FULLY ALL OF THE IMPLICATIONS AND RISKS OF THE OFFERING OF SECURITIES TO WHICH IT RELATES. A COPY Of THE CURRENT PROSPECTUS MUST BE MADE AVAILABLE TO YOU IN CONNECTIONS WITH THIS OFFERING. American Realty Capital New York Recovery REIT, Inc. is subject to higher fees and charges than some traditional investments.<br />
  2. 2. NY Recovery REIT<br />Risk Factors<br />There are risks associated with an investment in American Realty Capital New York Recovery REIT, Inc. The following is a summary of these risks.A more detailed description of the associated risks is found in the prospectus.<br /><ul><li>We have a very limited operating history and have no established financing sources. This offering is a blind pool and you may not have the opportunity to evaluate investments prior to their purchase or prior to your investment in our common stock, which makes this investment more speculative.
  3. 3. No public market currently exists for shares of our common stock, nor may a public market ever exist and our shares are illiquid. There are limitations on ownership and transferability of our shares.
  4. 4. We are obligated to pay substantial fees to our advisor and its affiliates, including fees payable upon sale of properties, which may result in our advisor recommending riskier or more speculative investments. We are depending on our advisor to select investments and conduct our operations. Adverse changes in the financial condition of our advisor could adversely affect us.
  5. 5. If we, through our advisor, are unable to find suitable investments, we may not be able to achieve our objectives or pay distributions. If we are unable to raise substantial funds, we will be limited in the number and types of investments, our ability to diversify our investments will be limited.
  6. 6. Properties may be adversely affected by the current economic downturn, as well as economic cycles and risks inherent to the New York market. The offering may be subject to risks associated with the significant dislocations and liquidity disruptions currently occurring in the United States credit markets.
  7. 7. There are substantial conflicts among the interests of our investors, our interests and the interests of our advisor, sponsor, dealer manager and our respective affiliates regarding compensation, investment opportunities and management resources.
  8. 8. Our investment objectives and strategies may be changed without shareholder consent.
  9. 9. There are significant risks associated with maintaining a high level of leverage as permitted under our charter. If we incur substantial debt, it may hinder our ability to pay distributions to our shareholders or could decrease the value of your investment if income on, or the value of, the property securing the debt falls.
  10. 10. We may be unable to pay or maintain cash distributions or increase distributions over time. Our organizational documents permit us to pay distributions from unlimited amounts of any source. Such distributions could reduce the cash available to us and could constitute a return of capital to shareholders.
  11. 11. Our share repurchase program is subject to numerous restrictions, may be cancelled at anytime and should not be relied upon as a means of liquidity.
  12. 12. We may fail to qualify or continue to qualify to be treated as a REIT for tax purposes.
  13. 13. Our dealer manager has not conducted an independent review of this prospectus.
  14. 14. We may be deemed to be an investment company under the Investment Company Act and thus subject to regulation under the Investment Company Act.</li></li></ul><li>NY Recovery REIT<br />“There is no better time to consider an investment in New York City real estate than now. Our City, the most vibrant and durable financial capital on the globe, is supply-constrained, having seen no net additions to office and retail space inventory in the last 18 years. At the same time, prices and rents for high quality commercial real estate have fallen as much as 50% since Fall 2007. A confluence of factors in the economy and the capital markets has disproportionately impacted New York City and created a “perfect storm” for the investor who seeks to buy real estate assets at fair value, with strong improving current returns and the opportunity for value increases as markets continue to stabilize. Our New York Recovery REIT gives the individual investor a direct, “bricks and mortar opportunity” to participate in this recovery.”<br />— Nicholas S. Schorsch, Chairman & CEO<br />
  15. 15. NY Recovery REIT<br />Acquisition Environment<br />The “Perfect Storm” in Commercial Real Estate<br />v Property owners under pressure<br /><ul><li>Rising vacancy rates
  16. 16. Falling rents
  17. 17. Rising cap rates
  18. 18. Too much debt
  19. 19. Upcoming debt maturities</li></ul>v Lenders under pressure<br /><ul><li>Falling property valuations
  20. 20. Increased borrower defaults
  21. 21. Regulatory intervention
  22. 22. Looming debt maturities</li></ul>v Over $1.4 trillion of commercial real estate debt scheduled to mature in 2009-2013<br /><ul><li>Debt maturities will be a catalyst for buying opportunities</li></ul>“Crisis Creates Opportunity”<br />
  23. 23. NY Recovery REIT<br />Acquisition Environment<br />v The current acquisition environment has similarities to the early 1990s following the aftermath of the S&L crisis.<br /><ul><li>Many individual investors missed out on the commercial real estate buying opportunities of the early ‘90s.</li></ul>v We believe New York Recovery REIT provides an opportunity for individual investors to participate in this real estate cycle<br /><ul><li>Professional management
  24. 24. Public company reporting
  25. 25. No legacy assets*
  26. 26. Buying quality real estate in a supply constrained market
  27. 27. Buy low and sell high strategy </li></ul>*Unlike many other real estate companies, management will not be distracted by and shareholders will not be burdened with past acquisitions.<br />
  28. 28. NY Recovery REIT<br />Focus on New York City<br />v As an island, Manhattan is a supply constrained real estate market.<br /><ul><li>Total office supply in Manhattan has actually declined over the last 18 years
  29. 29. Very limited land for new development in Manhattan</li></ul>v New York City, the “financial capital of the world.”<br /><ul><li>If it were a country, it would have the 17th largest GDP in the world.
  30. 30. Durable office market has weathered economic downturns, market calamities, and terrorist attacks, each time not simply recovering but becoming stronger
  31. 31. Demand for office space has persistently grown along with rents over the long term</li></ul>The properties pictured herein are not owned by the program or any affiliate and are included solely as an illustration of New York City real estate.<br />
  32. 32. NY Recovery REIT<br />Focus on New York City<br />v New York City contains over 400 million square feet of office space<br /><ul><li>More than Chicago, Boston, Los Angeles, San Francisco, Philadelphia, Dallas, Atlanta, and Denver combined
  33. 33. Over 200 million square feet just in Midtown Manhattan (approximately a 3 square mile area)</li></ul>400 million square feet<br />360 million square feet<br />Source: Cushman & Wakefield Research <br />Data refer to the central business district<br />
  34. 34. NY Recovery REIT<br />Focus on New York City<br />Competitive Advantages From Focused Strategy<br />Midtown<br />* Based on the long term historic experience of the management team, and Michael Happel specifically, there is over 20 years of specific experience in analyzing the New York real estate market.<br />
  35. 35. NY Recovery REIT<br />Investment Strategy<br />v Acquire New York City real estate<br /><ul><li>Institutional quality office and retail properties in Manhattan
  36. 36. 80% occupancy or greater
  37. 37. Conservative financing strategy (Target: 40-50% LTV)*</li></ul>v Capitalize on cyclical buying opportunity<br /><ul><li>Buy from distressed owners or lenders
  38. 38. Acquire quality real estate at significant discount to replacement cost, at or below current market rents
  39. 39. Joint venture with owners and institutions in need of capital</li></ul>* Up to 75% LTV is permitted<br />
  40. 40. NY Recovery REIT<br />Investment Strategy<br />v Maximize total returns to shareholders<br /><ul><li>Combination of current yield and appreciation</li></ul>v Realize significant potential increases in value as the markets recover<br /><ul><li>Lease up to stabilized levels
  41. 41. Rent growth consistent with historical mean
  42. 42. Cap rate compression consistent with historical averages</li></ul>v Create a liquidity event for shareholders<br /><ul><li>Targeted liquidity event within 3 to 5 years after the offering period</li></li></ul><li>NY Recovery REIT<br />No Net Additions to Supply in 18 Years<br />400.2 Million Sq.Ft.<br />392.3 Million Sq.Ft.<br />Manhattan Office Market — Existing Office Space<br />Source: Cushman & Wakefield Research, 2010 data through Second Quarter <br />
  43. 43. NY Recovery REIT<br />Long-Term Growth in Demand<br />NYC Employment Trends<br />Long-term Employment Growth<br />Sources: US Bureau of Labor Statistics, Cushman & Wakefield Research <br />
  44. 44. NY Recovery REIT<br />Long-Term Rental Rate Increases<br />Manhattan Office Market<br />Asking Rents<br />-25.6%<br />+84.6%<br />Dollar ($) per Square Foot<br />-22.5%<br />+93.9%<br />Long-Term Rent Growth<br />Source: Cushman & Wakefield Research, 2010 data through Second Quarter <br />
  45. 45. NY Recovery REIT<br />Vacancy Currently Above Long-Term Average<br />Manhattan Office MarketVacancy Rate<br />18.5%<br />11.6%<br />Average Vacancy: 6-8%<br />5.3%<br />3.5%<br />Source: Cushman & Wakefield Research <br />
  46. 46. NY Recovery REIT<br />Cap Rate Trends<br />Midtown Class A Cap RatesWeighted Overall Cap Rates<br />7.58%<br />Cap Rate Compression<br />Average Cap Rate: 5-6%<br />3.55%<br />Source: Cushman & Wakefield Research, 2010 data through Second Quarter<br />
  47. 47. NY Recovery REIT<br />Economic Recovery<br />Source: US Bureau of Labor Statistics<br />
  48. 48. NY Recovery REIT<br />Common Stock Offering Terms*<br />(1) During any 12-month period we will not repurchase in excess of 5% of the shares outstanding as of December 31st of the previous year. We will also limit the amount spent to repurchase shares in a given quarter to the amount of proceeds received from our distribution reinvestment plan in that same quarter. The board may amend, suspend or terminate the plan.<br />
  49. 49. NY Recovery REIT<br />Summary of Investment Considerations<br /><ul><li>Window of Opportunity
  50. 50. No Legacy Assets*
  51. 51. Low Correlation to Stock Market
  52. 52. Real Estate Has Historically Been Characterized as a Hedge Against Inflation
  53. 53. Professional Management
  54. 54. Focused Strategy
  55. 55. Differentiated Product
  56. 56. Supply Constrained Market</li></ul>*Unlike many other real estate companies, management will not be distracted by and shareholders will not be burdened with past acquisitions.<br />The properties pictured herein are not owned by the program or any affiliate and are included solely as an illustration of New York City real estate.<br />
  57. 57. American Realty Capital<br />New York Recovery REIT, Inc.<br />Realty Capital Securities, LLC │Three Copley Place, Ste. 3300 │Boston, MA 02116 │ 877-373-2522<br />American Realty Capital proprietary products are securities offered through Realty Capital Securities, LLC (Member FINRA/SIPC), an affiliate of American Realty Capital.<br />
  58. 58. NY Recovery REIT<br />Executive Management Team<br />Nicholas S. Schorsch, Chairman & Chief Executive Officer<br />Mr. Schorsch is also chief executive officer of American Realty Capital Trust, Inc., or ARCT. Prior to his current position with our company Mr. Schorsch founded and formerly served as President, CEO and Vice-Chairman of American Financial Realty Trust, or AFRT, since its inception as a REIT in September 2002 until August 2006. AFRT was a publicly traded REIT that invested exclusively in offices, operation centers, bank branches, and other operating real estate assets that are net leased to tenants in the financial service industry, such as banks and insurance companies. Through AFRT and its predecessor company, Mr. Schorsch executed in excess of 1,000 acquisitions, both in acquiring businesses and real estate property with transactional value of approximately $5 billion. In 2003, Mr. Schorsch received an Entrepreneur of the Year award from Ernst & Young.<br />William M. Kahane, President & Treasurer<br />Mr. Kahane serves as President and Chief Operating Officer of American Realty Capital. Mr. Kahane began his career as a real estate lawyer practicing in both the public and private sectors. From 1981-1992, he worked at Morgan Stanley & Co. (NYSE:MS) where he specialized in real estate, becoming a Managing Director. From 1997 until 2005, Mr. Kahane served on the Board of Directors of Catellus Development Corp., an NYSE growth oriented real estate development company. Catellus was acquired at a substantial premium to its stock price in 2005 by Prologis, an S&P 500 industrial real estate company. In April 2003, prior to American Financial Realty Trust’s IPO, Mr. Kahane joined AFR’s Board of Directors and served as chairman of the Finance Committee. He played an instrumental role in AFR’s public offering and working closely with the CEO, Nicholas Schorsch, personally overseeing and reviewing all acquisitions. Mr. Kahane was a trustee of American Financial Realty Trust (NYSE: AFR) from 2003 to 2006. Mr. Kahane serves as a member of the Investment Committee of Aetos Capital Asia Advisors. ACA is an opportunistic investment fund, focused on investments in real estate and related assets primarily in Japan and China. ACA Funds I and II raised approximately $3 billion of equity capital.<br />
  59. 59. NY Recovery REIT<br />Executive Management Team<br />Michael A. Happel, Executive Vice President & Chief Investment Officer<br />Mr. Happel has over 20 years of experience investing in real estate including acquisitions of office, retail, multifamily, industrial, and hotel properties as well as acquisitions of real estate companies and real estate debt. From 1988-2002, he worked at Morgan Stanley & Co., specializing in real estate and becoming co-head of acquisitions for the Morgan Stanley Real Estate Funds, or MSREF, in 1994. While at MSREF, he was involved in acquiring over $10 billion of real estate and related assets in MSREF I and MSREF II. As stated in a report prepared by Wurts & Associates for the Fresno County Employees’ Retirement Association for the period ending September 30, 2008, MSREF I generated approximately a 48% gross IRR for investors and MSREF II generated approximately a 27% gross IRR for investors. In 2002, Mr. Happel left Morgan Stanley & Co. to join Westbrook Partners, a large real estate private equity firm with over $5 billion of real estate assets under management at the time. In 2004, he joined Atticus Capital, a multi-billion dollar hedge fund, as the head of real estate with responsibility for investing primarily in REITs and other publicly traded real estate securities.<br />Peter M. Budko,Executive Vice President & Chief Operating Officer<br />Mr. Budko, is also executive vice president and chief investment officer of ARCT. Mr. Budko founded and formerly served as Managing Director and Group Head of the Structured Asset Finance Group, a division of Wachovia Capital Markets, LLC from 1997-2006. The Structured Asset Finance Group structures and invests in real estate that is net leased to corporate tenants. While at Wachovia, Mr. Budko acquired over $5 billion of net leased real estate assets. From 1987-1997, Mr. Budko worked in the Corporate Real Estate Finance Group at NationsBank Capital Market (predecessor to Bank of America Securities), becoming head of the group in 1990.<br />
  60. 60. NY Recovery REIT<br />Executive Management Team<br />Brian S. Block, Executive Vice President & Chief Financial Officer<br />Mr. Block is Chief Financial Officer of American Realty Capital (“ARC”) and is responsible for the accounting, finance and reporting functions. Mr. Block has extensive experience in SEC reporting requirements as well as REIT tax compliance matters. He has been instrumental in developing ARC’s infrastructure and positioning the organization for growth. Mr. Block also serves as Senior Vice President and Chief Financial Officer of American Realty Capital Trust, a non-traded REIT for which ARC serves as the advisor. Mr. Block began his career in public accounting at Ernst & Young and Arthur Andersen from 1994 to 2000. Subsequently, Mr. Block was the Chief Financial Officer of a venture capital-backed technology company for several years prior to joining American Financial Realty Trust in 2002. While at American Financial Realty Trust, Mr. Block served as Chief Accounting Officer from 2003 to 2007 and oversaw the financial, administrative and reporting functions of the organization. Mr. Block earned a Bachelor of Science from Albright College and an MBA from LaSalle University. He is a certified public accountant and is a member of the AICPA and PICPA. Mr. Block serves on the REIT Committee of the Investment Program Association.<br />Michael Weil, Executive Vice President & Secretary<br />Mr. Weil, is also Executive Vice President and Secretary of ARCT. He was formerly the Senior Vice President of Sales and Leasing for AFRT and its predecessor company, where he was responsible for the disposition and leasing activity for a 33 million square foot portfolio. Under the direction of Mr. Weil, his department was the sole contributor in the increase of occupancy and portfolio revenue through the sales of over 200 properties and the leasing of over 2.2 million square feet, averaging 325,000 square feet of newly executed leases per quarter. After working at AFR, from October 2006 to May 2007, Mr. Weil was managing director of Milestone Partners Limited and prior to joining AFR, from July 1987 to April 2004, Mr. Weil was president of Plymouth Pump & Systems Co.<br />
  61. 61. NY Recovery REIT<br />Independent Board of Directors<br />Leslie D. Michelson is currently a director of Landmark Imaging, a diagnostic imaging and treatment company. He is also Vice Chairman and director of ALS-TDI. Mr. Michelson is director of, and served as chairman and chief executive officer for, Private Health Management, a retainer-based primary care medical practice management company. He also served as vice chairman and chief executive officer of the Prostate Cancer Foundation. Mr. Michelson served on the board of directors of Catellus Development Corp., a publicly traded national mixed-use and retail developer. From April 2001 to April 2002, he was an investor in, and served as an director of, a portfolio of entrepreneurial healthcare, technology and real estate companies. From March 2000 to August 2001, he served as chief executive officer and as a director of Acurian, Inc., an Internet company that accelerates clinical trials for new prescription drugs. From 1999 to March 2000, Mr. Michelson served as an adviser of Saybrook Capital, LLC, an investment bank specializing in the real estate and health care industries. From June 1998 to February 1999, he served as chairman and co-chief executive officer of Protocare, Inc., a manager of clinical trials for the pharmaceutical industry and disease management firm. From 1988 to 1998, he served as chairman and chief executive officer of Value Health Sciences, Inc., an applied health services research firm he co-founded. Mr. Michelson has also served as director of Nastech Pharmaceutical Company Inc. from 2004 to 2008, of Highlands Acquisition Company from 2007 to 2009, and of G&L Realty Corp. from 1995 to 2001.<br /> <br />William G. Stanley is the founder and managing member of Stanley Laman Securities, LLC, a FINRA member broker-dealer, since 2004, and the founder and president of The Stanley-Laman Group, Ltd (SLG), a registered investment advisor for high net worth clients since 1997. Mr. Stanley serves on the Advisory Board of Highland Capital’s, High Cap Group. SLG represents some of the wealthiest families in the world and has recently expanded its planning practice to international client matters which are managed using proprietary trading and security selection techniques along with a global economic research. Mr. Stanley has earned designations as a Chartered Financial Consultant, Chartered Life Underwriter, and received his Masters Degree in Financial Services from the American College in 1997. Mr. Stanley served as an auditor for General Electric Capital from 1977 to 1979 and as a registered representative for Capital Analysts, Inc. of Radnor, Pennsylvania, a national investment advisory firm that specialized in sophisticated planning for high net worth individuals from 1979 to 1991.<br />
  62. 62. NY Recovery REIT<br />Independent Board of Directors<br /> Robert H. Burns is a hotel industry veteran with an international reputation. He currently serves as chairman of Barings’ Chrysalis Emerging Markets Fund and as a director of Barings’ Asia Pacific Fund. Mr. Burns founded and built the luxurious Regent International Hotels brand, which he sold in 1992. From 1970 to 1992, Mr. Burns served as chairman and chief executive officer of Regent International Hotels, where he was personally involved in all strategic and major operating decisions. In this connection, Mr. Burns and his team of professionals performed site selection, obtained land use and zoning approvals, performed all property due diligence, financed each project by raising both equity and arranging debt, oversaw planning, design and construction of each hotel property, and managed each asset. Mr. Burns has over forty (40) years as a manager and principal acquiring, financing, developing and operating properties. Mr. Burns opened the first Regent hotel in Honolulu, Hawaii, in 1970. From 1970 to 1979, the company opened and managed a number of prominent hotels, but gained truly international recognition in 1980 with the opening of The Regent Hong Kong. Mr. Burns developed over 18 major hotel projects including the Four Seasons Hotel in New York City, the Beverly Wilshire Hotel in Beverly Hills, the Four Seasons Hotel in Milan, Italy, and the Four Seasons Hotel in Bali, Indonesia.<br />