- TerraCap Management Team

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2 Today there exist extreme dislocations and inefficiencies in the banking and real estate markets. At TerraCap we use our experience and relationships to access off-market transactions and participate in the inevitable upside opportunities. - TerraCap Management Team 2

3 TerraCap s History Lehman Brothers Sept Deleverging Begins Regulations Tighten TerraCap Solidifies Banking Relationships TerraCap Launches Fund Commercial Focus 12/2011 Four Acquisitions in Fund By end of Q Additional Acquisitions To Be Completed Q TerraCap Launches Fund - 12/2008 Fund Acquires 15 Properties (9 Banks + FDIC) Average: 23% of loan amount or past price Fund Oversubscribed Closed 12/2010 Final Acquisition FDIC 8/25/11 Fund Exits Begin 5/7/12 First 42% IRR Fund Average Returns Through 36% IRR 3

4 Overview $200 million distressed situation commercial real estate fund 10% compounding preferred return with 5-7 year liquidation strategy Fund formally opened December 2011 and now actively investing and raising capital Investments are made by Fund and also with direct real estate investors as joint ventures Investments combine low acquisition prices, below replacement costs, in areas of sustained growth and limited future supply Defensive measure for attracting and retaining tenants Distressed buyer and seller dynamics Management team has long track record of success Target returns are 24-26% gross IRR 4

5 Nature of Investments Mainstream commercial property types office, multifamily, retail, hospitality, industrial and land. Focus is distressed situations, typically bank sellers Investment targets will typically require highly active value add hands on management No major construction Investment targets $2m to $15m - below institutional funds but above most local investors 5

6 International Home Buying % of U.S. Pop. CA 12% AZ 2% CA 11% NY 4% TX 8% NY 6% FL 6% AZ 7% TX 7% FL 26% Percent of International Home Sales by State

7 Domestic Migration % of U.S. Pop. CA 12% NY -1.6M AZ 2% CA -1.7M TX 8% NY 6% FL 6% AZ +721k TX +964k FL +1.3M Domestic Migration by State:

8 Regional Focus Population growth drives demand for all types of commercial and residential property. US SC NC GA TX FL Naples Annual Population Growth CAGR 1.05% 1.45% 1.58% 1.87% 2.04% 2.55% Intrastate Migration 5.60% The South, in particular Florida, has significantly outpaced the national growth rate and is currently home to over 37% of the total U.S. population, and averages 55-58% of new housing starts. 8

9 Population Density Texas California Arizona Nevada Florida Increase , ,000 90,492 22, , Population Est. 25,674,681 37,691,912 6,482,505 2,723,322 19,057,542 Area in square miles 261, , , ,825 53,624 People per sq. mile

10 Projected Growth Rates by Region: Florida s population growth is expected to average 252,000 per year this decade. Florida Northeast West Central Southwest Southeast 13% 17% 13% 22% 20% 9% Source: University of Florida, Bureau of Economic and Business Research, Projections of Florida Population by County,

11 Case Shiller Home Price Appreciation & Retention P e a k D.C. New York Boston Miami San Francisco Peak / Tampa Dallas Phoenix Las Vegas

12 Case Shiller Rising Home Prices Naples, FL California Fort Myers, FL Phoenix, AZ

13 Opportunity Average commercial appraisals down 45% from the peak Average distressed liquidation appraisals down 50-60% Markets stabilizing on adjusted price and rents in Supply constrained and shrinking (lending limited) Strong defensive measures exist for TerraCap s investors when considering today s low basis versus replacement cost Legacy and new construction owners cannot compete on rent 13

14 Investment Concept Chart TerraCap s Opportunity Future Exit Price Stabilized Exit Price Entry Price 14

15 TerraCap Process 15

16 Off-Market Transaction Sourcing TerraCap s team has built longstanding trusted personal relationships with decision makers who have authority to sell assets off market. To date, TerraCap has completed acquisitions from 12 banks and the FDIC direct. These include: Banking Relationships Local Owner Relationships Fund Relationships Advisor Relationships Fallout from Public to Private Steve Hagenbuckle co-founded a successful Florida based bank and is active in the banking community with many asset managers TerraCap executive management has worked closely with local owners throughout their careers Robert Gray has worked with commercial real estate investment funds and in risk management for 25 years TerraCap executive management has built close, trusted relationships with advisors who influence and often directly control asset sales When sellers have failed auctions, they often turn to reliable and discreet, trusted buyers such as TerraCap 16

17 Value Creation & Risk Mitigation All TerraCap potential acquisitions are thoroughly researched and screened Due diligence encompasses detailed risk management and risk mitigation Thorough fact based analysis Acquisitions at low basis Limited use of leverage Alignment of interests Assets are managed in a highly active manner for maximum value creation 17

18 Targeted Dispositions Each asset will be sold strategically to balance maximizing price with minimizing market risk. Disposition strategies will include: Core and REIT Buyers TerraCap improves underperforming property and will sell highest quality properties at stabilization to core funds and REITs Local Stabilized Buyers As the market recovers, local buyers will realize economies of scale and expand their ownership in local markets Fund Aggregation Exits TerraCap buys below institutional acquisition size limits and will sell combined portfolios to large funds 18

19 TerraCap Holding #1 Acquired August 9 th, 2012 Coconut Office Center Walden Center Dr., Bonita Springs, FL Collateral Type Gross Leasable Area Time Owned Office 11K Square Feet 3 Months Acquisition Occupancy 0% Current Occupancy 64% July 15, 2012 Previous Cost of Land $850K (2003) October 5, 2012 Previous Basis TerraCap s Price Est. Replacement Cost Implied 8% Cap 100% Occ. Implied Equity 100% Occ. $2.2M ($200 PSF) $840K ($76 PSF) $2.75M ($250 PSF) $1.6M ($145 PSF) 1.9

20 TerraCap Holding #2 Hancock Office 3443 Hancock Bridge Parkway, North Fort Myers, FL Collateral Type Office Gross Leasable Area 10,000 Number of Floors 1 TerraCap s Acquisition Price $435,000 ($43.50 psf) Current Occupancy 30% Current Gross Income $43,200 Closing in December 2012 History Previous Bank Debt $1,953,079 Est. Replacement Cost $1,500,000 20

21 TerraCap Holding #3 Closing in November 2012 Coral Cove Apartments Four Mile Cove, Cape Coral, FL Collateral Type Condos/Apartments Number of Units 196 Time Under Contract 4 Months Pre-Contract Occupancy 85% Current Occupancy 94% Previous Purchase Price $19.6M (2005) TerraCap s Price Est. Replacement Cost $8.13M ($41.5K/unit) $22M ($112K/unit) Implied $85k/unit $16.66M Implied Equity Multiplier 2.05 Living Room 21

22 TerraCap Holding #4 Acquired August 6 th, 2012 Westlinks Corporate Park Commerce Lakes Drive, Fort Myers, FL Collateral Type Property Size Gross Leasable Area Time Owned Acquisition Occupancy 55% Current Occupancy Gross Revenue Increase TerraCap s Price Est. Replacement Cost Implied 8% Cap and 95% Occ. Implied Equity 95% 2.09 Light Industrial/Flex 21.5 Acres (7 Buildings) 230K Square Feet 3 Months 78% (+4% Pending) $369k/yr. $7.2M ($31 PSF) $15.5M ($67 PSF) $15M ($65 PSF)

23 TerraCap Holding #5 Acquired October 29 th, 2012 Hampton Inn & Suites Summerlin Square Dr., Fort Myers Beach, FL Collateral Type Hotel Size 120 Rooms Time Owned 2 weeks Gross Revenue Increase $369k/yr. Previous Purchase Price $10.4M ($86.6K/room) TerraCap s Price $4.35M ($36K/room) Est. Renovation Costs $1.2M ($10k/room) 2011 Current TerraCap s Total Costs Est. Replacement Cost $5.55M ($46k/room) $14.4M ($120K/room) Annual Occupancy 46.5% 57.1% Est. Stabilized Value $10M ($83K/room) RevPAR $45/room $47/room Implied Equity Multiplier 1.8

24 TerraCap Holding #6 Bonita Springs Hospitality Trails Edge Blvd., Bonita Springs, FL Collateral Type Hotel Property Size 3.09 Acres Number of Rooms 87 TerraCap s Price $2,852,000 Per Room Price $32,781 Acquired on March 30, 2012 LaQuinta conversion in process Opening December 2012 Debt History Land $1,080,000 (1997) Original Principal Balance $4,067,200 (6/2006) Gross Leasable Area 66,720 Square Feet Estimated Replacement Cost $8,006,400 ($120 psf) Price Per Square Foot $ % of Replacement Costs 24

25 TerraCap Holding #7 Jones Loop Land Assemblage Jones Loop Rd., Punta Gorda, FL Collateral Type Entitled Land Property Size (Acres) Future Use Mixed Use Retail/Office 1.2 million sf Residental 500 units Hotel 150 keys Previous Price Paid $45,627,000 ($6.11 PSF) TerraCap s Contract Price $11,750,000 PSF $1.57 Acquired on March 22, 2012 Previous Buyer s Costs (2006) TerraCap s Costs (2012) Purchase Price $45,627,000 $11,750,000 DOT Impact Fees* $42,000,000 $5,720,000 Annual Taxes** $450,000 $43,000 4 Year Total Costs $89,427,000 $17,642,000 Difference $71,785,000 *End developer s fees payable at time of trip generation **Agricultural tax exemption now in place 25

26 TerraCap Holding #8 Punta Gorda Reserve Burnt Store Rd., Punta Gorda, FL Collateral Type Property Size Land Use Entitled Land 98 Acres (487 units) Planned Residential Dev. Acquired on February 24, 2012 TerraCap s Price $1,300,000 Included Prepaid Impact Fees $385,000 Interest Rate 5.00% Contract History Previous Sales Contract $16,000,000 (12/2005) Forfeited Deposit $1,500,000 26

27 TerraCap Holding #9 Palms of Estero 9401 Block Lane, Estero, FL Collateral Type Entitled Land Property Size 10 Acres (32 units) Land Use Single Family Residential Previous Price Paid $3,000,000 (06/2007) TerraCap s Price $1,400,000 Seller Financing Non-recourse Interest Rate 5.00% Acquired on February 24, 2012 Area Surroundings Estero Community Park Adjacent Estero High School 0.4 Miles Miromar Outlets 2.2 Miles Coconut Point Mall 2.6 Miles 27

28 TerraCap Pipeline #1 Class A Office Portfolio Collateral Type Class A Office Gross Leasable Area 489,223 Number of Buildings 18 Mortgage Balance $69,721,314 ($142 psf) Est. Replacement Cost $90,000,000 TerraCap s Anticipated Price $35,000,000 28

29 TerraCap Pipeline #2 Bernwood Office Collateral Type Gross Leasable Area Class A/B Office 65,000 SF Number of Buildings 9 Estimated Replacement TerraCap s Anticipated Price $7,800,000 ($120 psf) $3,800,000 ($59 psf) 29

30 TerraCap Pipeline #3 Bernwood Design Center Collateral Type Gross Leasable Area Retail 66,000 SF Number of Buildings 3 Estimated Replacement TerraCap s Anticipated Price $7,900,000 ($120 psf) $4,100,000 ($62 psf) 30

31 Thousands Central Florida - Orlando Rental Rates $30.00 $25.00 $20.00 $ Office Construction Starts & Deliveries Deliveries Under Construction $10.00 All Classes Total Office Statistics $5.00 Rentable SF Overall Vacancy YTD Net Absorption (SF) Under Construction (SF) Quoted Rates $ CBD 10,830, % 207,081 0 $20.95 Suburban 91,851, % 730, ,410 $18.10 Class A Office Class B Office Retail Industrial Total 102,682, % 937, ,410 $18.35 Source: CoStar data through Q

32 Thousands Tampa St. Petersburg Rental Rates $ Office Construction Starts & Deliveries 4000 $ $20.00 $ Deliveries Under Construction $10.00 All Classes Total Office Statistics $5.00 Rentable SF Overall Vacancy YTD Net Absorption (SF) Under Construction (SF) Quoted Rates $ Class A Office Class B Office Retail Industrial CBD 9,617, % 22,968 0 $21.35 Suburban Total 132,905, ,523, % 8, ,830 $ % 31, ,830 $18.45 Source: CoStar data through Q

33 Thousands Southeast, FL - Miami Rental Rates $45.00 $ ,000 5,000 4,000 Office Construction Starts & Deliveries $35.00 $30.00 $25.00 $20.00 $ ,000 2,000 1, Deliveries Under Construction All Classes Total Office Statistics $10.00 $5.00 $ Class A Office Class B Office Retail Industrial Rentable SF Overall Vacancy YTD Net Absorption (SF) Under Construction (SF) Quoted Rates CBD 18,264, % 253,060 0 $34.52 Suburban 81,323, % 510, ,723 $26.07 Total 99,588, % 763, ,723 $28.55 Source: CoStar data through Q

34 Thousands Southwest, FL Naples/Fort Myers Rental Rates $30.00 $25.00 $20.00 $ ,800 1,600 1,400 1,200 1, Office Construction Starts & Deliveries Deliveries Under Construction $10.00 All Classes Total Office Statistics $5.00 Rentable SF Overall Vacancy YTD Net Absorption (SF) Under Construction (SF) Quoted Rates $ Class A Office Class B Office Retail Industrial Charlotte 3,971, % 35,822 4,585 $13.90 Collier 8,948, % 113,378 38,151 $21.27 Lee 18,801, % 364,580 6,632 $14.77 Total 31,621, % 513,780 49,368 $16.70 Source: CoStar data through Q

35 TerraCap II Summary Research driven organization Off market transactions Focused on demand growth markets Lack of recent and future new construction Local and national relationships Defensive basis below replacement cost 35

36 Key Personnel Name Title Role Industry Experience Steve Hagenbuckle* Founder & Principal Managing Principal 17 years Robert Gray* Principal Managing Principal 25 years Douglas Ray, CPA* CFO & Principal Chief Financial Officer 30 years Michael Davis* Principal Managing Director 7 years Stephen Good Director of Asset Management Director of Asset Management 7 years Susana Paul, CPA Controller Investor Relations 9 years Alexis Crespo Principal Planner Land Planning 7 years *Investment Committee Member 36

37 Robert Gray Prior to joining TerraCap as a managing principal, Mr. Gray spent 25 years in commercial real estate with Cantor Fitzgerald, Morgan Stanley, JP Morgan and Citicorp. Mr. Gray invested in TerraCap I, and subsequently decided to join our team to provide us with institutional real estate experience. Prior to joining TerraCap, Mr. Gray was with Cantor Fitzgerald & Co in the role of Senior Managing Director and Global Head of Merchant Banking. His role encompassed establishing, capitalizing and acquiring commercial real estate investing and operating companies globally. Prior to joining Cantor Fitzgerald, Mr. Gray was a Managing Director at Morgan Stanley Real Estate Investing, a $60 billion real estate investment business. As the head of real estate capital markets for the real estate private equity investing business for the Americas, Mr. Gray ran a team responsible for sourcing and executing the capital structure for substantially all real estate investments in the United States, Canada, Mexico and Brazil. Mr. Gray also was responsible as Chief Investment Officer for the Morgan Stanley Mezzanine Partners Fund, a $1.5 billion global debt fund raised in the autumn of Previously, Mr. Gray served from 2002 to 2007 in the capacity of head of Real Estate Capital Markets for real estate investing throughout Europe. Mr. Gray was a voting member of the investment committee which required unanimous consent for investment approval. Prior to joining Morgan Stanley, Mr. Gray worked for seven years at JP Morgan. He helped develop JP Morgan s Commercial Real Estate Lending and Securitization Program in the United States, and eventually Tokyo and London. Mr. Gray was a voting member of the Global Credit and Capital Allocation Committee, and his vote was required for substantially all investment decisions. Mr. Gray had personal signature authority of $150 million. Mr. Gray graduated from Columbia Business School with an MBA in finance and from Lehigh University with a Bachelor of Science in engineering. 37

38 Stephen Hagenbuckle Steve Hagenbuckle is the founder and president of TerraCap Management Corp a Florida real estate investment research firm and deep value real estate private equity fund manager. TerraCap Partners Funds acquire commercial and residential properties as well as heavily discounted bank loans with exceptional underlying collateral. TerraCap holdings include multi-family, office, hotel, retail, industrial and development sites. TerraCap Management Corp has offices in New York and in Southwest Florida. Steve Hagenbuckle is a regular guest on CNBC, Bloomberg TV and Fox where he discusses real estate market trends and opportunities along with US banking. He has been interviewed by and quoted in the Wall Street Journal, Forbes, Market Watch, Reuters and the Associated Press. He has lectured at University of Colorado and the University of Florida at the graduate and undergraduate levels. Mr. Hagenbuckle is a Florida native who grew up in the Naples, FL area. He is a graduate of the College of Business from the University of Florida. In the 1990 s and early 2000 s, he co founded and/or sold multiple technology companies to both public and private entities. These companies include Techware Consulting, Orus Information Services, Collegiate Images and GiantBank.com/Landmark Bank, N.A. He has been a successful developer, builder and investor in Southwest Florida real estate since 1996 and, having managed many successful real estate partnerships, has achieved attractive returns for investors. He has been a board member for 10 years and is a founding shareholder in Landmark Bank N.A. and Giantbank.com. Mr. Hagenbuckle is also a licensed Florida Real Estate Broker and a member of the National Association of Realtors (NAR). 38

39 Robert Gray, Managing Principal 30 Rockefeller Plaza, 26th Floor New York, NY (cell) TerraCap Management Corp Stephen Hagenbuckle, Managing Principal Walden Center Dr., Suite 300 Bonita Springs, FL (cell) 39

40 Disclaimer This presentation is for discussion purposes only. It may include forward-looking statements (related to the Fund s plans, beliefs, goals), which involve certain risks and uncertainties discussed in the Private Placement Memorandum that could cause actual results to differ materially from the forward-looking statements. The Fund undertakes no obligation to revise or publicly release any revisions to such forward-looking statements. This presentation does not constitute an offer or solicitation in any jurisdiction to any person or entity. A potential investor considering an investment should read the Confidential Private Placement Memorandum for purposes of making an investment decision which contains a more complete description. Investing in limited partnerships involves substantial risk of investment loss because many limited partnerships engage in leveraging and other speculative investment practices. Limited Partnerships are not subject to the same regulatory requirements as mutual funds and are not required to provide periodic pricing or valuation information to investors. Limited Partnerships can be highly illiquid. Limited Partnerships may have complex tax structures and there may be delays in distributing important tax information. Limited Partnerships typically charge high fees. Past performance is no indication of future results. Investors assume responsibility for performance of all due diligence. Investors are advised to review the Private Placement Memorandum and consult their own advisors regarding an investment in the Fund.