V ALYRIAN C APITAL – A N I NTRODUCTION V ALYRIAN C APITAL 23 J ANUARY 2017
Valyrian Real Estate Partners: Strategic Summary Introduction to Valyrian and Investment Philosophy ▪ Valyrian Real Estate Partners is an opportunistic, multi-strategy private equity real estate firm headquartered in New York ▪ Valyrian takes a thematic, systemic and catalyst-driven approach to investing, seeking to compete on the basis of intellectual capital by targeting complex, bespoke financing opportunities that require creativity and flexibility ▪ Valyrian’s EB-5 Partners strategy is designed to work in concert with the high yield debt origination strategy and designed to provide foreign investors with access to a portfolio of major New York City development projects sponsored by leading developers ▪ The firm is also working with developers on a variety of EB-5 solutions, including multiple NYC EB-5 advisory mandates Valyrian Real Estate Partners I, L.P. Opportunity Set Investment Thesis and Outlook Value-Add / Development ▪ U.S. commercial real estate remains strong and the U.S. Real sector has been well-insulated from broader global ▪ Acquire under- financial market weakness Estate is managed or under- Up to Well Up to ▪ Significant capital has also been raised targeting capitalized assets 35% Insulated more distressed opportunities that has yet to be 50% ▪ Redevelopment or deployed, helping mitigate downside risk new development ▪ High yield debt and value-add strategies provide a projects Up to margin of safety, as they do not depend on further 75% price appreciation Margin of High Yield Debt Safety ▪ The moderate growth, low global interest rate ▪ Financing for transitional environment is especially supportive of high yield debt and other bespoke financing opportunities assets or construction Opportunistic projects ▪ High yield debt offers a high level of current ▪ Recapitalize over-levered ▪ Target opportunities income with limited interest rate risk, given the High short-term and/or floating-rate nature of the debt assets with limited competition Current ▪ ▪ Distressed assets, Additional accrued interest and equity conversion Income options on select projects, unique to Valyrian’s restructurings and strategy, provide additional upside borrower workouts V ALYRIAN C APITAL P ROPRIETARY & C ONFIDENTIAL Pg. 1
Valyrian’s Core Investment Philosophies Valyrian competes entirely on the basis of our Intellectual Capital, which is heavily influenced by our Investment Framework & Philosophy EVERGREEN STRATEGIES A broad investment mandate coupled with specialized capabilities allows the Fund to move in and out of sectors in search of best relative & absolute value, rather than limiting ourselves to a programmatic approach in a narrowly defined investment sector. This mandate facilitates the flexibility to move across the capital structure & adapt to the opportunities that are available in varying market environments and cycles MARKET DISTRESS & DISLOCATIONS Valyrian's strategy is broadly focused on the opportunities that have resulted from the unprecedented deleveraging of the capital markets and corresponding distress & dislocation in the real estate markets The misperception SYNTHESIS OF COMPLEX SITUATIONS among many Valyrian is value-oriented and often pursues contrarian opportunities, targeting investors that sectors where cash flows are being undervalued as a result of complexity, complexity always mismanagement, financial distress, capital markets dislocation equals risk creates or structural changes to the way assets are an opening for the owned and operated few investors Valyrian targets complex willing and able to transactions or those with INEFFICIENCY assess the true information asymmetry under intrinsic values and the belief that these Market inefficiencies offer opportunities to profit actual risks of the opportunities lead to market from discrepancies between price & intrinsic assets coming into inefficiency and superior risk- value. More illiquid, less transparent & the market today adjusted returns because less observed markets offer the fewer investors are able to greatest inefficiencies to exploit participate in these situations or to price them appropriately Ability to capture these opportunities by identifying (i) ABILITY the mispricings, (ii) the misunderstandings that create TO them, and (iii) the catalyst(s) that cause them to collapse MONETIZE and re-price V ALYRIAN C APITAL P ROPRIETARY & C ONFIDENTIAL Pg. 2
Valyrian Real Estate Partners Fund Structure Valyrian’s fund structure was designed to allow investors the flexibility to customize their individual investment strategy, while optimizing for the unique needs of foreign investors Investors Valyrian Real Estate Valyrian Capital LLC Foreign Investors US Taxable Investors Partners I GP, LLC (“GP”) (“Sponsor”) Investment Advisory Feeders Valyrian Real Estate Valyrian Real Estate Management Fee Carried Interest Partners I, LP (Cayman) Partners I (US), LP GP Capital Valyrian Co-Investment Co-Investors Partnership I, LP (Delaware) Master Fund Valyrian Real Estate Partners I, LP (Delaware) (“Master Fund”) Single Strategy Investment Vehicles Offer Investors Greater Flexibility ▪ The single strategy “Sub - Funds” co -invest along side the Master Fund ▪ Investors have the option to invest directly in a strategy-specific Sub-Fund Provides flexibility to design and customize investments to the desired risk and return profile Strategies Valyrian RE Value-Add Valyrian Tactical Opportunities Valyrian RE Debt Strategies I Partners I Partners I DC REIT / Property Distressed Distressed High Yield Loan I Lev Blocker LLC I Debt LLC Loan I Entities below the Sub-Funds DC REIT / Property Real estate loans are exempt REO LLC are not currently established Lev Blocker LLC II from FIRPTA, and thus do not Property require the use of a REIT or Foreclosed loans will be sold to LLC III corporate blocker the REO LLC V ALYRIAN C APITAL P ROPRIETARY & C ONFIDENTIAL Pg. 3
Investment Environment Pg. 4
Understanding the Real Estate Cycle is Key for Success The best portfolio results are achieved in real estate private equity by consistently avoiding mistakes, rather than winning big on a few trades. Investors need to be cautious of overpaying for perceived safety Real Estate has Historically Provided Strong Returns. However, Investors Need to be Wary of Missteps 1992-2007: Total Return 2009-2014: Total Return 25 25 11.2% Annualized 12.1% Annualized 1984-1990: Total Return 390.7% Cumulative 77.3% Cumulative 7.8% Annualized 20 20 57.2% Cumulative Real Estate Total Return (%) 15 15 Market Liquidity Index 10 10 5 5 0 0 -5 1990-1992: Total Return -5 -4.9 % Annualized -9.6% Cumulative -10 -10 -15 -15 2007-2009: Total Return -20 -11.8% Annualized -20 -22.2% Cumulative -25 -25 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Total Return Market Liquidity Capital markets oscillate between greed and fear. Savvy investors can achieve superior results by understanding how those forces shape markets and exploiting the resulting opportunities V ALYRIAN C APITAL P ROPRIETARY & C ONFIDENTIAL Pg. 5
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