CEO/President 2012 Letter to Shareholders

Dear Fellow Shareholders:
April 2013

Simply stated, Winthrop enjoyed an exceptionally strong performance in 2012 both from an investment and operational standpoint. The Company completed more than 30 discrete reportable transactions in which it invested more than $290 million and harvested more than $250 million from sales and refinancing. Occupancy at the Company’s consolidated properties improved from 74% at 2011 year end to 90% at 2012 year end. Finally, we ended the year with liquidity of $97 million, excluding $50 million of availability under the Company’s line of credit.

Our core investment thesis remains essentially unchanged as to asset classes, capital stack positioning and geographic markets. Where we have adapted is with respect to development opportunities. In the past, we avoided investing in new development. With our investment in Times Square as well as other investments under consideration, the Company is now willing to consider select development opportunities but only with exceptionally experienced and well capitalized partners who have a considerable cash investment of their own in the project and where there is an opportunity to realize exceptional returns. Apart from including select development opportunities, the principal change we project for our 2013 investments is an increase in recapitalization activity resulting from the rise in underlying asset valuation. Whereas in 2009 through 2012, equity investments were frequently created through the purchase of distressed debt and then followed by either restructuring the debt or foreclosing on the equity, now we believe more of this activity will occur by way of borrowers using our capital to rebalance the leverage on their assets. Importantly, Winthrop continues to be the “go to” source of capital for investments that are often perceived as very complicated or otherwise difficult to work through. As the chart below demonstrates aggregate assets owned and/or managed wholly or through joint ventures increased from $2.7 billion to approximately $3.2 billion in 2012. The importance of this chart is that a substantial portion of our investment opportunities is sourced from our existing asset base. The growth in this asset base provides the Company with significant future investment opportunities in which we have unique real time information.


Management’s second biggest challenge is and will continue to be sourcing appropriate risk adjusted opportunities for investment. We are concerned that cheap capital is underpricing risk requiring greater effort on our part. The low hanging fruit may no longer be available to us in the near term. On the other hand, a frothy market for stabilized assets does present an opportunity for the Company to harvest the value created in its assets. As many of the distressed investments we previously acquired have now been leased, we anticipate that asset sale activity will increase significantly in 2013. Our view is that when a property can no longer generate an internal rate of return going forward that suits our investment parameters, it should be sold. In any event, each year seems to bring new opportunities often with an unpredictable packaging. Moreover, a cycle fueled by cheap capital without real growth has been a recipe for disappointment for others and opportunity for the Company. That said, we continue to believe our most important asset is our cash and refuse to part with it unless we are appropriately paid for the risk, a price not based on the market cost of such risk but rather its true cost.

If sourcing investments is our second biggest challenge, our most significant concern is improving our stock price to better reflect the underlying value of our Company. Through Company roadshows, investor presentations, and earnings calls, management focused on keeping our existing and potential investor base informed of Winthrop’s uniqueness as the sole publicly traded REIT dedicated to opportunistic value investing. To assist in our efforts, we have added to our traditional reported REIT metrics both a detailed Net Asset Value analysis as well as an investment performance track record on all liquidated investment over the past five years. These commonly utilized opportunity fund metrics are of equal applicability to our Company and are now available for quarterly review by shareholders and analysts. We remain committed to taking all steps to improve investor awareness of the Company as we have in the past through direct accessibility to senior management and continuously improving our informational transparency.

Finally, it is time to acknowledge the hard work of our acquisitions, asset management and accounting divisions. John Alba, Peter Braverman, Jay Cramer and John Garilli have all had an important role in the complex, multi-faceted transactions in which the Company is involved, and we are grateful for their talent and commitment. All of us, together with our Board of Trustees, hope to see you at our annual Shareholders meeting on Wednesday, May 21, 2013 at 11:00 am in New York.

Michael L. Ashner
Chairman of the Board and
Chief Executive Officer
Carolyn B. Tiffany