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Home My WebLink About2008 09 17 Document Given By Kevin SmithDate: September 17, 2008 THE FOLLOWING DOCUMENT WAS GIVEN TO THE BOARD MEMBERS BY KEVIN SMITH BEFORE THE MEETING. Untitled Document Kevin Smith Page 1 of 2 From: Stanley lezman [Illamas@americanreal.com] Sent: Wednesday, September 17, 2008 5:10 PM To: Kevin Smith Subject: American Realty Advisors -Update on Recent Market Events fo our Clients and their advisors: ~s a result of the recent events in the capital markets, many of our clients have asked us to detail the exposure, if any, that American and its client portfolios might have to the companies involved. American Realty Advisors has always taken a conservative risk-averse approach to real estate investment management with a focus >n the return of our clients' capital as well as earning a return on that capital. We take every step available to underwrite and nanage all investments carefully and diligently to uncover and resolve any problems that could potentially arise to affect the >erformance of our client portfolios. 'ou can be assured that American and its portfolios have not suffered any direct adverse impact related to the past week's lisruptions in the financial markets. Specifically: • American remains aprivately-held company with a strong balance sheet and no company debt whatsoever. We are the strongest that we have been in our firm's 20 year history. • American has never invested in subprime, Alt-A or other risky debt instruments. • American has never invested in CMBS or other public mortgage securities, and we have no exposure to complex financial debt structures such as credit default swaps or other financial derivatives. • Our portfolios have no exposure to any securities of Fannie Mae, Freddie Mac, Lehman Brothers, Bear Stearns, Washington Mutual or Merrill Lynch. • We do not have any leases at any properties with the above organizations. Firmwide, our lease exposure to the financial services industry is less than 7%. • Certain subsidiaries of AIG do provide much of the property and general liability coverage in the blanket program that insures our client assets. Although we have been assured that these subsidiaries remain solvent and creditworthy, we are monitoring the situation closely in order to have a better understanding of the impact on these subsidiaries, if any, of changes in the parent firm's financial capacity and the action taken by the Federal government yesterday. So far, although the AM Best rating of the company has been lowered, it remains at an acceptable level (in fact, as high or higher than many alternative carriers). Obviously, this situation is unprecedented and we have been following it since it began to unfold last week. In addition, we have begun to identify alternative coverage, if in fact it becomes clear that any of these AIG subsidiaries might be unable to meet their financial obligations. • There are no negative issues arising at any individual property in any of our portfolios as a result of the past week's events in the financial markets. ~he market impact on commercial real estate arising from the recent events is still unfolding. We expect that the continuing uncertainty in financial markets will serve to delay any recovery until buyers and sellers become confident that there is a return to yore regular market dynamics. As a result, we believe that real estate values will continue to be affected. We remain convinced, owever, that a prudent, patient and carefully focused investment strategy of underwriting fundamentally strong private institutional uality real estate located in proven markets nationwide will continue to provide benefits to a diversified portfolio in the years to ome. ,merican is committed to keeping you informed of any events impacting our portfolios as the economy navigates through these ifficult times. Please let us know if you have any questions or would like to discuss this with us in more depth. Thank you again for our confidence in American as part of your investment management team. )/17/2008 Untitled Document sincerely, i }}T' t~"~" Manley L. Iezman president and Chief Executive Officer AMERICAN RERL.TY ALaV15E:]R5 Corporate Headquarters 801 N. Brand Blvd., Suite 800 Glendale, CA 91203 (818)545-1152 www.americanreal.com Page 2 of 2 ~~ GLENDALE ~ ATLANTA ~ CHICAGO i SANTA FE i CINCINNATI i ORLANDO ~~ If you no longer wish to receive these updates, unsubscribe here l~ 17~2~~g