LF Partners' Charles Frischer Requests That Newcastle Investment Initiate a $100M Share Repurchase Plan or Sell/Liquidate the Company

The following letter was sent to the CEO of Newcastle Investment today: Charles Frischer 4404 52(nd) Avenue NE Seattle, WA 98105 August 10, 2015 Mr. Wesley Edens Co-Chairman Fortress Investment Group 1345 Avenue of the Americas 46(th) Floor New York, NY 10105 Dear Mr. Edens: I recently filed a 13-D form on Newcastle Investment, disclosing myownership of 3,442,000 shares or 5.2% of the outstanding shares. I have beena long-term investor in the company and recently purchased additional sharesbecause they are trading at a significant discount to the net asset value ofthe company. Last week Newcastle reported great earnings. Newcastle has two major assets:a real estate loan portfolio, which has just over 12 months of duration, anda portfolio of golf assets. The corporate actions taken by management inboth buying back the company's golf debt at a 10% discount and collapsingtwo of its main CDO portfolios were terrific. Buying the golf debt back at adiscount created 25 cents per share of additional value, and collapsing theCDO portfolio further simplified the investment and removed considerablerisk. In the aftermath of a great earnings report, NCT shares were down 6.5% forthe week. At the current stock price of $4.60, the market clearly is notgiving the company credit for the value of the golf assets. Management has aresponsibility to the Newcastle shareholders to immediately address thissituation. Therefore, I request that management immediately initiate a $100 millionshare buyback, with a ceiling price of $5.00 per share. If the company isnot willing to implement this buyback, I request that it immediately begin asale/liquidation of Newcastle Investment with the expectation that proceedswill exceed $6.65 per share, a 45% premium to the current stock price.($6.65 is the midpoint of the sum of the parts valuation from page 7 of thesecond quarter 2015 investor supplement presentation.) There would also be alarge number of both private equity firms and other investment companies whowould love to take control of Newcastle at a $6.65 price. The market price of Newcastle is also depressed because it is being groupedin with other mortgage REITs. Investors are assuming the company will besubject to significant asset deterioration due to future interest-rate hikesby the Federal Reserve. Not only is it uncertain when the Fed will raiserates and by how much they will increase, but a real estate loan portfoliowith just over a 1-year duration should be sheltered from any unusualdeterioration in value. Newcastle is a mortgage REIT in name only. Thecompany owns a very short-term bond portfolio and a collection of golfassets with dramatically improving fundamentals. The current marketdisruptions are an opportunity that management must take advantage ofimmediately. Newcastle is basically a special-purpose acquisition entity selling at a 35%discount to net asset value. I am confident that Fortress, acting as managerof Newcastle, will be able to execute on an accretive acquisition when it isidentified. Another reason for the discount to net asset value is the fearthat Fortress will do an ill-advised acquisition. I am confidant thatFortress will identify an accretive acquisition and that the market willgive the stock a more appropriate and higher valuation once a deal isannounced and explained to shareholders and the analyst community. Fortress Investment Group, as the manager of Newcastle Investment, mighthave different motivations in regards to the capital it manages forNewcastle. The management of Fortress might be reticent about incurring a30% reduction in management fees if the share buyback proposed was fullyimplemented. However, a short-term reduction in management fees could laythe groundwork for much larger management fees from Newcastle in the future.The market capitalization for Newcastle Investment is approximately $300million. The medium-term goal for Fortress is to manage a capital base atNewcastle in the range of $1-2 billion. The buyback would dramaticallyincrease the net asset value per share and lay the groundwork for a muchlarger company. Buyback accretion Post-buyback @ Current $5 ChangeNet Asset Value of Newcastle $442 million $342 million -$100 millionOutstanding shares 66 million 46 million -20 millionPer-share NAV of Newcastle $6.65 $7.43 +11.7% Based on my simple example, the per-share net asset value increases by morethan 11.7% via a $100 million buyback. This is only the first step in theprocess. The corporate strategy for Fortress is to manage a much largerpermanent capital vehicle at Newcastle. The market would love this buybackprogram and would afford the company a higher per-share valuation. Therewould still be plenty of capital at Newcastle to effectuate the nextacquisition, whenever that may occur. The ability for Newcastle to do aneven larger secondary offering at that time will be much improved becauseFortress management will have proven itself to be willing to occasionallytake a short-term hit to profitability to drive long-term growth. The math is compelling and is in the long-term interest of Fortress. Byvirtue of this buyback, you will likely be able to sell shares to the publicat a level at least 10% higher than absent this program. The buyback programwould also provide great security to the already large and likely growingdividend. Assuming a $5.00 buyback price and the current 48-cent dividend,the company would be earning a risk-free 9.6% return on this $100 million.If the dividend is raised to 60 cents over the next 6 months, as manyanalysts believe it will be due to the strong results at the golf coursedivision, the risk-free return earned by buying back the shares at $5.00 is12%. These are very large risk-free returns that can be earned by buyingback company shares. The buyback is in the interest of both Newcastle and Fortress shareholders.A more basic argument could easily be made that the management of Newcastleshould do what is best for the company, without any consideration forFortress. The management of Newcastle has a fiduciary responsibility to itsshareholders, even if those actions are not in the interest of Fortress. Thecourse of action outlined here is in the interest of both parties andcreates a mutually beneficial outcome. If Fortress Investment Group, as the manager of Newcastle Investment, is notwilling to implement this large buyback, I request an immediatesale/liquidation of the company. I believe this sale/liquidation will resultin more than $6.65 per share. There are numerous buyers for the golf assets,including Club Corp, and the real estate loan portfolio can easily beliquidated as it matures over the next 12 to 18 months. There would also benumerous financial buyers interested in obtaining control of their ownpermanent capital vehicle at a minimum $6.65 per share. The shareholders ofNewcastle must be treated fairly. Please immediately address the issues raised in this letter with the Boardof Directors. In addition, please send me a current list of yourshareholders. Wes, your team at Fortress has done a very good job managing Newcastle overthe last 3-5 years. In the last 6 months, shareholders have not been excitedabout the stock price of both New Senior and Newcastle. A large buybackprogram at Newcastle would enable you to regain tremendous favor with yourinvestors. This is a smart move for both Newcastle and Fortressshareholders. Please take immediate action on this capital allocationstrategy. Sincerely, Charles Frischer View source version on businesswire.com:http://www.businesswire.com/news/home/20150810005579/en/ CONTACT: LF Partners Charles Frischer, 917-528-1465