Beck Street Capital Proposes Strategic Restructuring of Realty Finance Corporation and Comments on JAC Proposal

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 [email protected], 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