SRT's Special Committee Comprised of Independent Directors Again Gives Special Deal to Glenborough

IRVINE, Calif., July 23, 2013 /PRNewswire/ -- Thompson National Properties, LLC ("TNP") announced that on July 23, 2013, TNP sent the following letter to the Board of Directors of TNP Strategic Retail Trust, Inc.:

July 23, 2013

Board of Directors – TNP Strategic Retail Trust, Inc.

Dear Sirs:

We believe the July 17th press release by TNP Strategic Retail Trust, Inc. (the "Company" or "SRT") is a disingenuous attempt to deflect the blame for the disastrous consequences of the Special Committee's decisions.   In our view, Glenborough's recent equity investment in the Company provides yet another unfortunate example of the Special Committee's questionable decision making.

We believe that the Special Committee, not Thompson National Properties, LLC ("TNP"), is responsible for the Company's current cash woes.  First, as you are well aware, the Special Committee controlled all decisions relating to the Company's cash management during the past nine months.   The Special Committee sidelined TNP from the cash management process by, among other things, separating the Company's accounting team from TNP in November 2012 and terminating TNP's authority with respect to the Company's bank accounts in December 2012.

Second, the Special Committee rejected multiple solutions offered by TNP that we believe would have significantly alleviated the Company's cash problems, and averted the need to enter into a deal with Glenborough that takes significant value out of the pockets of SRT shareholders and the premature disposition of two Company properties at fire sale prices.  In early December 2012, TNP presented for the Special Committee's approval a $2.75M unsecured line of credit as well as financing options to refinance up to three properties secured by the Key Bank line of credit.  In our view, the new line of credit and the proceeds from the refinancing  would have paid down a significant portion of Key Bank line of credit and avoided the defaults with Key Bank and Torchlight.  Our proposed refinancing would have also decreased the Company's annual interest expense.  However, the Special Committee rejected our recommendations without putting forth any comprehensive alternative.

Third, the runaway expenses incurred by, or under the supervision of, the Special Committee has only exacerbated the Company's cash problems.  In fact, the 1^st quarter of 2013 expenses for G&A were up over 150% or more than $950,000 from the 1^st quarter of 2012.  The increase in G&A costs is attributable to audit fees, legal, professional fees and independent director fees.  In particular, we are very concerned about the trend in fees for the members of the Special Committee.  The special director fees were $181,862 in 2011 and were $366,198 in 2012.  True to form, the fees for the Special Committee members in 2013 are trending to almost double the fees paid in 2012.

Accordingly, the blame of the Company's unrestricted cash falling below $4 million and the Company short term cash crunch falls squarely at the feet of the Special Committee.

Moreover, we do not believe that the Company's cash problems justify the Special Committee unilaterally approving a sweetheart deal with Glenborough.   As a concerned shareholder, we would like to understand whether other potential equity investors were solicited (TNP was not contacted with this opportunity) or if the Special Committee obtained a fairness opinion from an independent, non-conflicted advisor.

We are alarmed to find that Glenborough's purchase price for its 12% interest in SRT Holdings was based on the net acquisition cost of the five properties held by SRT Holdings and not the market value of those properties.  We believe that the acquisition cost of those properties is significantly below the current market value of the properties.  The five properties were originally acquired for a total price of $57.4M.  Adjusting for the sale of two pads at Craig Promenade ($3.2M), one pad sale at San Jacinto ($1.2M) and one pad at Willow Run ($1.05M), the estimated net acquisition price for the five properties is approximately $52.5M.  Based on the value of the properties used for the November 2012 NAV, which was approved by the Board (as adjusted for the 2013 sale of one pad at Willow Run and the current estimated sales price of the Craig Promenade property), we estimate that the market value of the five properties exceeds the net acquisition cost for the five assets by $3.9M.

We estimate that this equates to an immediate transfer of value of more than $468,000 from the shareholders of the Company to Glenborough for their 12% interest.  Moreover, in most cases the occupancy and the NOI on the properties are higher today than when originally acquired.   By not basing the purchase price on the market value of the properties, Glenborough was able to invest in SRT Holdings at a significant discount.

Beyond the bad economics of the transaction, the terms of Glenborough's equity investment also entrenches Glenborough.  Under the terms of the investment, Glenborough effectively cannot be removed from managing those five properties unless the Company buys out Glenborough.  Because the buyout price is based on the then current market value of the properties, this is a poison pill that makes Glenborough's termination unnecessarily costly.  If Glenborough was terminated today, we believe it would receive a windfall of approximately $468,000 in addition to a preferred return of 7% on its equity investment.

Moreover, under the terms of the transaction, Glenborough has already started to earn advisory fees.  Glenborough is entitled to receive acquisition, financing coordination, disposition and monthly asset management fees for those five properties.  We hope that at a minimum the Company has terminated Glenborough's consulting agreement; otherwise Glenborough is being paid very handsomely twice.  When the shareholders invested in the Company, they did so based on TNP's management of the Company and our vision.  Accordingly, we find especially alarming the Special Committee's actions to entrench Glenborough as SRT's advisor without seeking shareholder approval.

We encourage the Special Committee to take responsibility for its unilateral and ill-considered decision to take control of the management of the Company and its actions instead of trying to lay the blame at TNP.  The Special Committee should instead focus on fulfilling its fiduciary duties for the benefit of all shareholders.

Sincerely,

Thompson National Properties, LLC

By: /s/ Anthony W. Thompson
Chief Executive Officer

About TNP 
TNP is a real estate advisory company, specializing in acquisitions for high net worth investors and their joint venture partners, along with 3rd party property management, asset management and receivership advisory services.

Headquartered in Irvine, California, TNP was founded in April 2008 and has three regional offices. As of July 22, 2013, TNP manages a portfolio of 106 commercial properties, in 24 states, totaling approximately 11.02 million square feet, on behalf of over 6,000 investor/owners/lenders with an overall purchase value of $1.2 billion. For more information regarding TNP, please visit www.tnpre.com.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy securities. 

SOURCE Thompson National Properties, LLC