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Falcon Financial Launched To Provide Financing For Automotive Dealerships

19 February 1998

Falcon Financial Launched To Provide Financing For Automotive Dealerships

             "Blue Sky" Valuations Allow for Increased Financing
              Long Term Fixed Rate Loans; No Personal Guarantees

    STAMFORD, Conn., Feb. 19 -- Falcon Financial, LLC, a newly
formed company, has been launched to provide innovative financing alternatives
for automotive dealers who need additional capital to fund expansion and
growth.
    Falcon also announced today that it has recently finalized an agreement
with SunAmerica Life Insurance Company, a subsidiary of SunAmerica Inc., that
provides Falcon with a $150 million credit facility for the origination of
franchise mortgage loans and sale/leaseback transactions to automotive
dealers.  The credit facility was arranged by SunAmerica Capital Services,
Inc. and Goldman, Sachs & Co.
    Falcon is a leading specialty finance company, providing long-term capital
to dealers of new cars and trucks.  The company specializes in financing
acquisitions, partner buy-outs and facility renovation, expansion and
improvements.  With offices on both the East Coast and West Coast, Falcon
makes capital available on a nationwide basis.
    With the exception of inventory financing arrangements, loans to
automotive dealers typically carry short-term, variable rates and are based
predominately on the appraised value of a dealer's land and buildings.  In
addition to exposing the dealers to the vagaries of interest rates, these
loans also require personal guarantees that dramatically increase an owner's
financial risk.
    By comparison, Falcon offers long-term, fixed-rate loans based on the
entire business value of a dealer's franchise, which includes its "blue sky"
or equity value, and the value of its real estate.  Falcon's loan model
dramatically increases the amount of capital a dealer can borrow and allows
the dealer to "lock in" a rate for as long as 15 years.  Moreover, Falcon does
not require dealers to sign personal guarantees.
    "Automotive dealerships are undergoing an era of unprecedented competition
and the need for capital is greater than ever before," said Vernon B.
Schwartz, Falcon's Chief Executive Officer.
    "Traditional loan models used to finance automotive dealerships are
antiquated and do not recognize the equity that has been built up over the
years, often generations.  Falcon's model gives dealers of new cars and trucks
the recognition and financial means they need and deserve to facilitate growth
through acquisition or through the improvement of existing facilities and
operations."
    The automotive dealer industry is currently undergoing a wave of mergers
in the wake of so-called mega-dealers acquiring franchises at premium prices
and a recent drive by the Big Three automakers to acquire and consolidate
dealerships.  As a result, dealerships wishing to stay independent are facing
heightened pressure to raise capital to grow and expand.
    Falcon also offers automotive dealers a program under which the company
will pay cash for a dealer's property.  Falcon will then lease the property
back to the dealer through a long-term lease at a fixed monthly rate,
typically 20 years plus renewal options.  Given that the return automotive
dealerships earn from selling and servicing cars is approximately double the
return they earn on their real estate, this is a more productive use of their
capital.
    Falcon's founders include Mr. Schwartz, who most recently served as the
Chief Executive of Soros Real Estate Advisors; David A. Karp, previously
Senior Vice President of Soros Real Estate Advisors; and Ronald Greenspan,
formerly the owner and operator of a multi-line automobile dealership in San
Francisco.
    The equity of Falcon is held by SunAmerica Inc., an affiliate of Goldman
Sachs Mortgage Company and members of Falcon's management team.

SOURCE  Falcon Financial, LLC