1. 1 Opportunity Partners Fund II, LP “Current opportunity for value creation in the distressed Twin Cities real estate market”
2. 2 Opportunity Partners Fund II, LP Opportunity Opportunity Partners Fund II, LP Strategy Expertise
3. 3 Opportunity Partners Fund II, LP Opportunity Opportunity Partners Fund II, LP Strategy Expertise
4. 4 US Economy Today Stock market has rebounded some, but remains volatile Unemployment elevated Home foreclosures remain high Home prices remain depressed Commercial real estate values weak Financing for real estate (especially commercial) difficult
8. 8 2009 Holders of Commercial Mortgage Loans 4% 28% 42% 10% 9% 7% Source: Mortgage Bankers Association
9. 9 CMBS Issuance 2000-2010 * As of 07/23/2010 Source: Mortgage Bankers Association
10. CRE Loans at US Banks 10 Gross Loans ($ in millions) Source: Federal Reserve
11. 11 Opportunity As real estate has historically been a very leveraged asset class, this lack of credit is greatly impacting real estate values The combination of the challenging economy and credit market turmoil is creating huge and continuing downward pressure on real estate values (all types) History suggests that this distressed market will provide many opportunities to make excellent buys on real estate
12. 12 Opportunity Partners Fund II, LP Opportunity Strategy Opportunity Partners Fund II, LP Expertise
14. 14 Strategy Make opportunistic buys of real estate and real estate related assets Focus on assets in which our group has particular knowledge and/or expertise Attention to downside protection Remain patient – majority of value created on the buy
15. Bank Failures, 1970-2010 15 Annual U.S. Bank Failures S&L Crisis: 2,935 Bank Failures 2010: *Current -110 Est. - 172 2009: 140 Banks * As of 08/20/2010 Source: FDIC
16. 16 Bank Failures, 1970-2010 Annual U.S. Bank Failures – Total Assets 2008: $372B 1989: $164B S&L Crisis: $924B Total Assets Source: FDIC
17. Banks 17 Total Number of Problem FDIC-Insured Institutions, with Assets ($M) Source: FDIC Quarterly Banking Profile
22. 22 Strategy Much of real estate we intend to buy is owned by (or mortgaged to) regional and community banks We will utilize Strong bank relationships Proprietary bank research Government bank programs – loss sharing agreements
23. 23 Strategy - Example Skyscape Minneapolis, MN Investment ~$11.6MM 72 units purchased 50% below 2006 development cost 55% below 2007 prices Expecting a 25% unlevered return (net profit of ~$7 million)
24. 24 Strategy - Example Skyscape Minneapolis, MN Patience – 2 year pursuit Relationships – negotiated deal Downside protection – 50% below replacement cost Area of expertise
25. 25 Strategy Asset Types Residential real estate Commercial real estate Land assets Performing and non-performing loans secured by the above Purchase Formats Negotiated Auction
26. 26 Strategy Assets acquired to be aggressively managed during hold period (2-4 years) Assets sold as markets allow
27. 27 Opportunity Partners Fund II, LP Opportunity Opportunity Partners Fund II, LP Strategy Expertise
30. 30 General Partner More than 100 years collectively of real estate experience Bank ownership and management Impressive track record with Fund I Proven ability to remain patient Proven ability to close deals
31. 31 Fund I Investments Skyscape Minneapolis, MN Investment ~$11.6MM 72 units purchased 50% below 2006 development cost 55% below 2007 prices Expecting a 25% unlevered return Summercrest Brooklyn Park, MN Investment ~$2.3MM 18 units purchased 25% below 2004 development cost 45% below 2007 prices Expecting a 15% levered return
32. Fund I Investments Residential 1st mortgage land loan Bloomington, MN Investment ~$1.25MM Performing < 50% LTV at today’s values Expecting a 19% unlevered return SFH Foreclosure Portfolio Minneapolis, MN Investment ~$750k Buy and fix-up for ~$80k average Sell at ~$120k average Expecting a 30% unlevered return 32
33. 33 Fund I Returns Overall, Fund I expects to deliver a 16% IRR to limited partners Consistent with original expectation With limited downside risk In spite of very limited leverage
34. 34 Fund I Experience Fund II investors will benefit from Fund I experience Proven investment methodology Established relationships Market research Market credibility Deal pipeline
35. 35 Opportunity Partners Fund II, LP Opportunity Opportunity Partners Fund II, LP Strategy Expertise
44. Allocation Example Assume: $1,000,000 purchase Sell in (1) year for $1,250,000 Profit is $250,000 Distribution: $1,000,000 to LPs (return of capital) $100,000 to LPs (preferred return) $25,000 to GP (“catch up”) $62,500 to LPs/GP in 80/20 ratio $62,500 to LPs/GP in 70/30 ratio Profit to LPs: $193,750 Profit to GP: $56,250 38
45. 39 Summary …To purchase at historic lows… Huge opportunity now exists… …Using our deep relationships, experience and proven track record to select the best opportunities! Opportunity Strategy Expertise