2014

NorthStar Realty Finance Announces First Quarter 2013 Results

NEW YORK, May 3, 2013 /PRNewswire/ --  

First Quarter 2013 Highlights

  • Cash available for distribution ("CAD") of $0.21 per share.
  • Increased first quarter 2013 cash dividend to $0.19 per common share, representing a 90% increase over the last seven quarters.
  • $1.6 billion of investments closed in 2013, including $677 million of invested equity.
  • Total capital raised to date of $887 million in our non-traded REIT, including $287 million raised since year end and $108 million raised in April.

NorthStar Realty Finance Corp. (NYSE: NRF) today announced its results for the first quarter ended March 31, 2013.

First Quarter 2013 Results

NorthStar reported cash available for distribution ("CAD") for the first quarter 2013 of $38.6 million, or $0.21 per share. For the first quarter 2013, NorthStar reported net cash provided by operating activities of $42.7 million.  For more information and a reconciliation of CAD to net cash provided by operating activities, please refer to the tables on the following pages.

Net income to common stockholders for the first quarter 2013 was $36.6 million, or $0.20 per diluted share, compared to a net loss of $(33.9) million, or $(0.33) per diluted share for the first quarter 2012.  First quarter 2013 net income includes $30.3 million of non-cash fair value adjustments, compared to $(73.9) million of non-cash fair value adjustments for the first quarter 2012.  These non-cash fair value adjustments are excluded from CAD and adjusted funds from operations.

David T. Hamamoto, chairman and chief executive officer, commented, "NorthStar has had an active beginning to 2013 and as a result we were able to announce a seventh consecutive quarterly increase to our common stock dividend.  This quarter we also introduced a new operating metric that we believe provides investors an important indicator of our operating performance and a metric that we strongly consider in evaluating our distribution policy, which we intend to continue doing on a quarterly basis. While our CAD of $0.21 per share for the first quarter was comfortably in excess of our current dividend, we deployed a substantial amount of capital at accretive levels in the second half of the first quarter and at the beginning of the second quarter, which we expect will translate into higher CAD per share in the coming quarters."

Investments

Real Estate

Year to date, NorthStar made $1.1 billion of equity investments in real estate, including the acquisition of an $865 million portfolio of manufactured housing communities which was financed with eight separate 10-year, non-recourse mortgages in the aggregate amount of $640 million at a weighted average fixed interest rate of 4.02%. NorthStar expects to earn an initial current yield of approximately 14% on its $215 million of invested equity.  Additionally, NorthStar acquired seven multifamily properties comprising approximately 2,600 units for an aggregate purchase price of $212 million, which was financed with seven separate 10-year, non-recourse mortgages in the aggregate amount of $156 million at a weighted average fixed interest rate of 3.91%.  NorthStar expects to earn a weighted average initial current yield of 14% on its $54 million of invested equity.

CRE Loans

Year to date, NorthStar originated four commercial real estate loans with $204 million aggregate principal amount, including a $166 million loan in connection with the financing of the Milford Plaza hotel.  NorthStar expects to earn a weighted average initial current yield of approximately 13% on its $119 million of invested equity in these loans with potential upside through NorthStar's 35% ownership interest in the Milford Plaza hotel and the retail component of the hotel, pro-rata with NorthStar Real Estate Income Trust, Inc. ("NorthStar Income").

Opportunistic Investments

NorthStar completed the closing of the acquisitions of 45 limited partnership interests in real estate private equity funds.  On February 15, 2013, NorthStar funded a total of $282 million in connection with the initial closing of this transaction, which reflects its proportionate purchase price for all of the limited partnership interests (the "Funds").  The aggregate reported net asset value of the Funds was $789 million at June 30, 2012. NorthStar is entitled to $41 million of distributions from the Funds since June 30, 2012 through March 31, 2013 and in the first quarter recorded $8 million of income and $33 million of return of capital. For additional details regarding this transaction, please refer to the tables on the following pages.

The principal proceeds NorthStar could receive from CDO bonds acquired year to date is $13 million, which were purchased for $7 million. As of May 3, 2013, the principal proceeds NorthStar could receive from its owned CDO bonds is $709 million, of which $559 million was repurchased at an average price of 32% in the secondary market and has a weighted average original credit rating of A/A2.  The discount to par of $383 million represents potential imbedded cash flows that we may realize in future periods in addition to our capital invested in these bonds. 

NorthStar had approximately $8.7 billion of assets under management as of March 31, 2013, adjusted for the $865 million manufactured housing portfolio acquired on April 5, 2013.

For additional details regarding NorthStar's investments, please refer to the tables on the following pages and to the corporate presentation which will be posted on NorthStar's website, www.nrfc.com.  

Asset Management Business

During the first quarter 2013, NorthStar earned $4.5 million of fees from its management of NorthStar Income.  In addition, during the first quarter 2013, NorthStar received management and other fees from its consolidated CDOs of $4.5 million, which are eliminated on NorthStar's consolidated statement of operations.

NorthStar Income raised $887 million of total capital through April 30, 2013, including $287 million year to date and $108 million in April, through NorthStar Realty Securities, LLC, NorthStar's wholly-owned broker-dealer. NorthStar Realty Securities, LLC currently has total signed selling agreements, on behalf of NorthStar Income, with broker-dealers covering more than 74,000 registered representatives.  NorthStar expects to earn annual net fees approximately equal to three percentage points based on total capital raised for each of our current non-traded REITs.

In 2013, we, through our wholly-owned subsidiary, made an aggregate of $336 million of investments on behalf of NorthStar Income.

Liquidity, Financing and Capital Markets Highlights

As of May 1, 2013, unrestricted cash was approximately $284 million.

In February 2013, NorthStar issued 34.5 million shares of its common stock at a public offering price of $8.39 per share and received net proceeds of $280 million.

In March 2013, NorthStar entered into a $200 million credit facility with Deutsche Bank AG, Cayman Island Branch which will be used to finance loan originations and has a term of five years, including extension options that are subject to satisfaction of customary conditions.

In April 2013, NorthStar issued 8 million shares of its new 8.5% Series D Preferred Stock at a par value of $25 per share and received net proceeds of $194 million.

Currently, NorthStar's only near-term unsecured corporate debt obligations relate to its exchangeable senior notes, of which $36 million principal amount of 11.5% notes are due in June 2013 and $13 million principal amount of 7.25% notes are payable in June 2014 at the holders' option. 

In April 2013, NorthStar sent a notice to the issuer of N-Star Real Estate CDO II (the "CDO II") exercising its option to redeem (the "Redemption") all of the outstanding bonds issued by CDO II.  NorthStar owns $71 million par amount of CDO II bonds that it repurchased in the open market at an aggregate purchase price of $36 million.  NorthStar expects that the proceeds from the Redemption will repay all or substantially all of NorthStar's repurchased CDO II bonds. If the Redemption is completed, NorthStar will deconsolidate N-Star Real Estate CDO II.  There is no assurance that the Redemption will be completed on the terms anticipated, if at all.

Portfolio Management

As of March 31, 2013, NorthStar did not have any loans on non-performing status ("NPL") compared to one loan with a $13 million aggregate principal amount and a $7 million carrying value at December 31, 2012.  NorthStar categorizes a loan as a NPL if it is in maturity default and/or is past due 90 days on its contractual debt service payments.

During the first quarter 2013, NorthStar recorded $2.3 million of net provision for loan losses, compared to $3.3 million of net provision for loan losses during the fourth quarter 2012.  As of March 31, 2013, loan loss reserves totaled $153 million, or 7% of total loans, related to 11 loans with a carrying value of $189 million.

As of March 31, 2013, NorthStar's net lease portfolio was 95% leased with a 5.5 year weighted average remaining lease term.  As of March 31, 2013, NorthStar's healthcare portfolio that was leased to third-party operators was 99% leased with a weighted average lease coverage of 1.24x and a 6.7 year weighted average remaining lease term.  As of March 31, 2013, NorthStar's manufactured housing communities portfolio, including the $865 million portfolio acquired on April 5, 2013, was 86% leased.  For additional details regarding NorthStar's manufactured housing communities portfolio, please refer to the tables on the following pages.

Stockholders' Equity

As of March 31, 2013, NorthStar had 208,583,630 total common shares and operating partnership units outstanding and $25 million of non-controlling interests relating to its operating partnership.  GAAP book value per share was $5.31 at March 31, 2013, which includes negative GAAP equity in certain of our non-recourse CDO financings due to non-cash fair value adjustments.  Adjusted book value at March 31, 2013 would be $6.78 per share, exclusive of certain unrealized and other adjustments, loan loss reserves and accumulated depreciation and amortization.  

The adjusted book value does not take into consideration any value related to the in-place and anticipated advisory fee income streams generated by NorthStar's sponsored, non-traded REIT vehicles and NorthStar's CDO management fees.  NorthStar expects over $40 million of net asset management fees in 2013.  For a reconciliation of adjusted book value per share to GAAP book value per share, please refer to the tables on the following pages.

Common Dividend Announcement

On May 1, 2013, NorthStar announced that its Board of Directors declared a cash dividend of $0.19 per share of common stock, payable with respect to the quarter ended March 31, 2013.  The dividend is expected to be paid on May 17, 2013 to shareholders of record as of the close of business on May 13, 2013. The Company's common shares will begin trading ex-dividend on May 9, 2013.

Earnings Conference Call

NorthStar will hold a conference call to discuss first quarter 2013 financial results on May 3, 2013, at 9:00 a.m. Eastern Time.  Hosting the call will be David Hamamoto, chairman and chief executive officer; Albert Tylis, president; Daniel Gilbert, chief investment and operating officer; and Debra Hess, chief financial officer. 

The call will be webcast live over the Internet from NorthStar's website, www.nrfc.com, and will be archived on the Company's website.  The call can also be accessed live over the phone by dialing 877-941-9205, or for international callers, by dialing 480-629-9645.

A replay of the call will be available one hour after the call through Friday, May 10, 2013 by dialing 800-406-7325 or, for international callers, 303-590-3030, using pass code 4615468.

About NorthStar Realty Finance Corp.

NorthStar Realty Finance Corp. is a diversified commercial real estate investment and asset management company that is organized as an internally managed REIT.  For more information about NorthStar Realty Finance Corp., please visit www.nrfc.com.

 

NorthStar Realty Finance Corp.



Consolidated Statements of Operations (Unaudited)





($ in thousands, except share and per share data)







Three Months Ended March 31,


2013


2012






Net interest income





Interest income


$                   70,335


$             80,816

Interest expense on debt and securities


11,397


13,734

Net interest income on debt and securities


58,938


67,082






Other revenues





Rental and escalation income


38,896


27,662

Commission income


16,940


7,399

Advisory and other fees - related party


4,508


517

Other revenue


544


104

    Total other revenues


60,888


35,682

Expenses





Other interest expense


26,250


21,130

Real estate properties – operating expenses


7,031


4,686

Asset management expenses


2,918


2,284

Commission expense


15,369


6,580

Transaction costs


3,753


2,233

Provision for loan losses, net


2,336


6,840

General and administrative





Salaries and equity-based compensation (1)


18,330


13,199

Other general and administrative


5,026


3,953

    Total general and administrative


23,356


17,152

Depreciation and amortization


15,074


12,215

    Total expenses


96,087


73,120

Income (loss) from operations


23,739


29,644

Equity in earnings (losses) of unconsolidated ventures


8,313


(501)

Other income (loss)


-


20,258

Unrealized gain (loss) on investments and other


13,585


(95,406)

Realized gain (loss) on investments and other


4,082


15,352

Income (loss) from continuing operations


49,719


(30,653)

Income (loss) from discontinued operations


(23)


96

Net income (loss)


49,696


(30,557)

    Less: net (income) loss allocated to non-controlling interests


(1,733)


1,963

Preferred stock dividends


(11,341)


(5,323)

Net income (loss) attributable to NorthStar Realty Finance Corp. common stockholders


$                   36,622


$           (33,917)






Earnings (loss) per share:





Income (loss) per share from continuing operations (basic)


$                       0.21


$               (0.33)

Income (loss) per share from discontinued operations (basic)


-


-

Basic


$                       0.21


$               (0.33)

Diluted 


$                       0.20


$               (0.33)






Weighted average number of shares:





Basic


176,675,176


102,247,118

Diluted 


188,213,000


107,393,827

Dividends declared per share of common stock


$                       0.19


$                 0.15


(1) The three months ended March 31, 2013 and 2012 include $6.0 million and $2.3 million, respectively, of equity‑based compensation expense.

 

 

NorthStar Realty Finance Corp.





Consolidated Balance Sheets





($ in thousands, except share data)







March 31, 2013


December 31,



(Unaudited)


2012






Assets





Cash and cash equivalents


$                 393,709


$                 444,927

Restricted cash


222,861


360,075

Operating real estate, net


1,527,228


1,401,658

Real estate securities, available for sale


1,151,217


1,124,668

Real estate debt investments, net


1,792,653


1,832,231

Investments in and advances to unconsolidated ventures ($268,329 at fair value as of March 31, 2013)


379,111


111,025

Receivables, net of allowance of $1,889 as of March 31, 2013 and $1,526 as of December 31, 2012


57,121


28,413

Receivables, related parties


12,307


23,706

Unbilled rent receivable, net of allowance of $328 as of March 31, 2013


16,996


16,129

Derivative assets, at fair value


12,420


6,229

Deferred costs and intangible assets, net


93,686


97,700

Assets of properties held for sale


1,595


1,595

Other assets


77,525


65,422

Total assets(1)


$              5,738,429


$              5,513,778






Liabilities





CDO bonds payable 


$              1,950,787


$              2,112,441

Mortgage notes payable


1,114,890


1,015,670

CMBS bonds payable


98,053


98,005

Secured term loan


14,623


14,664

Credit facilities


55,505


61,088

Exchangeable senior notes


290,831


291,031

Junior subordinated notes, at fair value


206,794


197,173

Accounts payable and accrued expenses


56,199


45,895

Escrow deposits payable


88,062


90,032

Derivative liabilities, at fair value


155,080


170,840

Other liabilities


84,845


86,075

Total liabilities(2)


4,115,669


4,182,914






Commitments and contingencies 





Equity





NorthStar Realty Finance Corp. Stockholders' Equity





Preferred stock, $536,640 aggregate liquidation preference as of March 31, 2013 and





December 31, 2012, respectively


504,018


504,018

Common stock, $0.01 par value, 500,000,000 shares authorized, 198,263,269 and 163,607,259





shares issued and outstanding as of March 31, 2013 and December 31, 2012, respectively    


1,982


1,636

Additional paid-in capital


1,476,158


1,195,131

Retained earnings (accumulated deficit)


(375,730)


(376,685)

Accumulated other comprehensive income (loss)


(18,883)


(22,179)

     Total NorthStar Realty Finance Corp. stockholders' equity


1,587,545


1,301,921

Non-controlling interests


35,215


28,943

Total equity


1,622,760


1,330,864

Total liabilities and equity


$              5,738,429


$              5,513,778

_____________________________





(1) Assets of consolidated VIEs included in the total assets above:





Restricted cash


$                 179,777


$                 320,815

Operating real estate, net


437,706


342,461

Real estate securities, available for sale


1,033,975


1,015,972

Real estate debt investments, net 


1,428,536


1,478,503

Investments in and advances to unconsolidated ventures


59,646


59,939

Receivables, net of allowance 


16,424


16,609

Unbilled rent receivable


2,702


2,125

Deferred costs and intangible assets, net


35,871


37,753

Assets of properties held for sale 


1,595


1,595

Other assets 


6,986


12,689

Total assets of consolidated VIEs


$              3,203,218


$              3,288,461






     (2) Liabilities of consolidated VIEs included in the total liabilities above:





CDO bonds payable 


$              1,950,787


$              2,112,441

Mortgage notes payable


290,483


228,446

Secured term loan


14,623


14,664

Accounts payable and accrued expenses 


13,368


13,626

Escrow deposits payable 


66,021


67,406

Derivative liabilities, at fair value 


155,080


170,840

Other liabilities 


24,057


25,144

Total liabilities of consolidated VIEs


$              2,514,419


$              2,632,567

 

NorthStar Realty Finance Corp.




Consolidated Statements of Cash Flows (Unaudited)




($ in thousands, except share data)







Three Months Ended March 31, 


2013


2012

Cash flows from operating activities:




Net income (loss) 

$                  49,696


$              (30,557)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:




Equity in (earnings) loss of unconsolidated ventures 

(8,313)


501

Depreciation and amortization 

15,074


12,306

Amortization of premium/discount on investments

(13,054)


(19,957)

Interest accretion on investments

(321)


(337)

Amortization of deferred financing costs 

1,404


860

Amortization of equity-based compensation 

6,018


2,329

Unrealized (gain) loss on investments and other 

(30,339)


73,862

Realized gain (loss) on investments and other  / other income

(4,082)


(15,610)

Reversal of accrued loss contingency and other costs

-


(22,041)

Distributions from unconsolidated ventures 

8,471


252

Amortization of capitalized above/below market leases 

(398)


(284)

Unbilled rent receivable

(898)


(686)

Provision for loan losses, net

2,336


6,840

Allowance for uncollectable accounts 

744


118

Other

73


-

Discount and loan fees received 

2,629


888

Changes in assets and liabilities:




Restricted cash 

3,979


(3,002)

Receivables 

(2,597)


(5,340)

Other assets 

2,646


9,982

Receivables, related parties

(396)


2,489

Accounts payable and accrued expenses 

10,297


(23,792)

Other liabilities 

(295)


(216)

Net cash provided by (used in) operating activities 

42,674


(11,395)

Cash flows from investing activities:




Acquisitions of operating real estate, net 

(117,184)


(7,650)

Improvements of operating real estate

(2,772)


(399)

Deferred costs and intangible assets

(136)


(267)

Net proceeds from disposition of operating real estate 

-


5,068

Acquisitions of real estate securities, available for sale

-


(54,871)

Proceeds from sales of real estate securities, available for sale

20,114


100,562

Repayments on real estate securities, available for sale

67,927


29,840

Originations/acquisitions of real estate debt investments 

(11,757)


(47,781)

Repayments on real estate debt investments

20,530


63,120

Proceeds from sales of real estate debt investments 

-


5,343

Change in restricted cash

(3,239)


(4,958)

Other assets 

(26,570)


3,302

Investment in and advances to unconsolidated ventures 

(264,844)


(1,165)

Distributions from unconsolidated ventures 

9,987


169

Net cash provided by (used in) investing activities 

(307,944)


90,313

Cash flows from financing activities:




Purchase of derivative instruments

(9,560)


-

Settlement of derivative instruments

-


(8,163)

Borrowings from mortgage notes

101,756


4,500

Repayments of mortgage notes

(2,536)


(2,168)

Borrowings under credit facilities

8,060


9,607

Repayments of credit facilities

(13,643)


(4,041)

Proceeds from CDO bond reissuance

-


7,558

Proceeds from CDO bonds 

-


10,000

Repayments of CDO bonds

(230,454)


(141,295)

Repurchases of CDO bonds

(6,543)


(7,450)

Repayments of secured term loans

(41)


-

Payment of deferred financing costs 

(1,833)


(88)

Change in restricted cash

137,089


5,713

Repurchases and repayment of exchangeable senior notes 

(1,000)


-

Net proceeds from preferred stock offering 

-


35,198

Net proceeds from common stock offering

280,364


90,312

Proceeds from dividend reinvestment and stock purchase plan

58


43

Dividends (common and preferred) 

(47,008)


(20,322)

Contributions from non-controlling interests

1,423


-

Distributions / repayments to non-controlling interests

(2,080)


(8,890)

Net cash provided by (used in) financing activities 

214,052


(29,486)

Net increase (decrease) in cash and cash equivalents 

(51,218)


49,432

Cash and cash equivalents—beginning of period 

444,927


144,508

Cash and cash equivalents—end of period 

$                393,709


$             193,940

 

Non-GAAP Financial Measures

Included in this press release are certain "non-GAAP financial measures," which are measures of NorthStar's historical or future financial performance that are different from measures calculated and presented in accordance with accounting principles generally accepted in the United States, or GAAP, within the meaning of the applicable Securities and Exchange Commission, or SEC, rules.  These include: Cash Available for Distribution, Funds From Operations and Adjusted Funds From Operations.   NorthStar believes these terms can be useful measures of its performance, which are further defined below.

Cash Available for Distribution ("CAD")

CAD is a non-GAAP financial measure. NorthStar calculates CAD by adjusting net cash provided by (used in) operating activities to deduct preferred stock dividends; to reflect actual distributions received related to income earned in joint ventures; to reflect timing differences related to certain G&A expenses and corporate borrowing payments; to reflect timing differences related to non-capitalized transaction costs that are amortized over the life of the investment for purposes of CAD; to include amortization of discounts related to repurchased CDO bonds, investments owned outside CDOs and similar income items; and to exclude one-time events pursuant to changes in GAAP and certain other non-recurring items.

NorthStar believes that CAD provides investors and management with a meaningful indicator of the operating performance of the Company. NorthStar management also uses CAD, among other measures, to evaluate profitability and the Board of Directors considers CAD in determining NorthStar's quarterly cash dividends.  CAD may fluctuate from period to period based upon a variety of factors, including, but not limited to, the timing and amount of investments, repayments and asset sales, capital raised, use of leverage, changes in the expected yield of investments and the overall conditions in commercial real estate and the economy generally.

CAD should not be considered as an alternative to net income (determined in accordance with GAAP) or as an indication of our cash from operating activities (determined in accordance with GAAP) or a measure of our liquidity or profitability.  In addition, our methodology for calculating CAD may differ from the methodologies used by other comparable companies, including other REITs, when calculating the same or similar supplemental financial measures and may not be comparable with these companies.   

Reconciliation of Cash Available for Distribution



(Amounts in thousands except per share data)





Three Months Ended



March 31, 2013




Net cash provided by operating activities 


$                       42,674







Preferred stock dividends 


(11,341)

Adjustment for joint ventures


(153)

Timing differences related to G&A and corporate borrowings


(4,905)

Timing differences related to non-capitalized transaction costs


928

Amortization of discounts and other (1)


11,375




CAD


$                     38,578




CAD per share (2)


$                         0.21


(1)

Realized discounts related to repurchased CDO bonds totaled $53 million in 2012 and are currently expected to be approximately $60 million in

2013. For CAD, realized discounts on CDO bonds are assumed to equal annual amortization of total expected cash discount over a 5.7 year

weighted average remaining life as of January 1, 2013.

(2)

CAD per share does not take into account any potential dilution from exchangeable notes, warrants or restricted stock units that are subject to

performance metrics that are not currently achieved.

 

Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO)

Management believes that funds from operations, or FFO, and adjusted funds from operations, or AFFO, each of which are non-GAAP measures, are additional appropriate measures of the operating performance of a REIT and NorthStar in particular. We compute FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts (NAREIT), as net income (loss) (computed in accordance with GAAP), excluding gains (losses) from sales of depreciable properties, the cumulative effect of changes in accounting principles, real estate‑related depreciation and amortization, impairment charges on depreciable property owned directly or indirectly and after adjustments for unconsolidated ventures.    FFO, as defined by NAREIT, is a computation made by analysts and investors to measure a real estate company's cash flow generated by operations.

NorthStar calculates AFFO by subtracting from or adding to FFO:

  • normalized recurring expenditures that are capitalized by NorthStar and then amortized, but which are necessary to maintain NorthStar's properties and revenue stream, e.g., leasing commissions and tenant improvement allowances;
  • an adjustment to reverse the effects of transaction costs;
  • an adjustment to reverse the effects of the straight‑lining of rental income or expense and fair value lease revenue;
  • the amortization or accrual of various deferred costs including intangible assets and equity-based compensation;
  • an adjustment to reverse the effects of acquisition gains or losses; and
  • an adjustment to reverse the effects of non-cash unrealized gains (losses).

NorthStar's calculation of AFFO differs from the methodology used for calculating AFFO by certain other REITs and, accordingly, our AFFO may not be comparable to AFFO reported by other REITs.

Neither FFO nor AFFO is equivalent to net income or cash generated from operating activities determined in accordance with GAAP.  Furthermore, FFO and AFFO do not represent amounts available for management's discretionary use because of needed capital replacement or expansion, debt service obligations or other commitments or uncertainties.  Neither FFO nor AFFO should be considered as an alternative to net income as an indicator of NorthStar's operating performance or as an alternative to cash flow from operating activities as a measure of NorthStar's liquidity.

NorthStar urges investors to carefully review the GAAP financial information included as part of the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and quarterly earnings releases.

Funds  from Operations (FFO) and Adjusted Funds from Operations (AFFO) ($ in thousands, except per share data)







Three Months Ended March 31,



2013


2012

Funds from operations:





Income (loss) from continuing operations 


$                   49,719


$           (30,653)

Non-controlling interests(1)


-


260

Net income (loss) before non-controlling interest in Operating Partnership


49,719


(30,393)






Adjustments:





Preferred stock dividends


(11,341)


(5,323)

Depreciation and amortization


14,375


10,829

Funds from discontinued operations


(23)


187

Real estate depreciation and amortization, unconsolidated ventures                                     


197


207

Funds from operations


52,927


(24,493)






Adjusted funds from operations:





Funds from operations


52,927


(24,493)

Transaction costs


3,753


2,233

Straight-line rental income, net


(859)


(670)

Straight-line rental income/expense and amortization of above/below market leases, unconsolidated ventures


229


234

Amortization of deferred financing costs


1,404


860

Amortization of above/below market leases


(398)


(258)

Amortization of equity-based compensation


6,018


2,329

Unrealized (gain) loss from fair value adjustments


(30,339)


73,862

Adjusted funds from operations


$                   32,735


$             54,097






FFO per share of common stock (2)


$                       0.29


$               (0.23)

AFFO per share of common stock(2)


$                       0.18


$                 0.50

(1)

Amount excludes non-controlling limited partner interest in NorthStar's operating partnership.

(2)

FFO and AFFO per share does not take into account any potential dilution from exchangeable notes, warrants or restricted stock units that are subject to performance

metrics that are not currently achieved.

 

Assets Under Management at March 31, 2013(1)




($ in thousands)





  Amount(2)


%





CRE Debt




First mortgage loans

$            1,562,006


18.0%

Mezzanine loans

413,720


4.8%

Credit tenant and term loans

227,334


2.6%

Subordinate mortgage interests

120,536


1.4%

Other(3)

374,548


4.3%

Total CRE debt

2,698,144


31.1%





Real Estate




Net lease

401,286


4.6%

Healthcare

573,852


6.6%

Manufactured housing communities

1,191,353


13.7%

Private equity fund interests

268,329


3.1%

Multifamily

54,172


0.6%

Total real estate

2,488,992


28.6%





Asset Management




NorthStar Income(4)

1,069,240


12.3%





CRE Securities(5)




CMBS 

2,090,644


24.1%

Third-party CDO notes 

190,779


2.2%

Other securities

145,397


1.7%

Total CRE securities

2,426,820


28.0%





Grand total

$            8,683,196


100.0%





(1) Includes $865 million of manufactured housing communities purchased in April 2013.

(2) Based on principal amount of CRE debt and security investments and the cost basis of our real estate. 

      Any real estate owned (either directly or through a joint venture) as a result of taking title to a property through foreclosure, 

      deed in lieu or otherwise ("taking title to a property") reflects the principal amount of the loan at time of foreclosure. 

(3) Primarily related to real estate owned (either directly or through a joint venture) as a result of taking title to a property. 

(4) Based on consolidated total assets.

(5) Includes $2.3 billion of CRE securities that serve as collateral in our CDO financing transactions.


 

Investments 









2013 Year to Date through May 3, 2013








($ in millions)


















NorthStar Balance Sheet Investments


Assets


Invested

Equity 


Expected

Current

Yield(1)












Opportunistic


$         295


$          289


22%



Real estate portfolio


1,077


269


14%



CRE loans


204


119


13%












Total / weighted average


$     1,576


$         677


17%







































Investments  - NorthStar non-traded REIT


$         336


$          244














Total Investments


$     1,912


$         921














(1) Management provides no assurances that the weighted average life or cash flows of investments will be consistent with 

management's expectations or that the CDO bonds, originated loans or other investments, will payoff at par, if at all.

Actual results could differ materially from those presented.  

           


 

 

Balance Sheet Holdings of NorthStar CDO Bonds (1)



At May 3, 2013



($ in thousands)








Principal

Based on original credit rating:


Amount (2)




AAA


$             114,112

AA through BBB


400,907

Below investment grade


194,043

Total


$           709,062




Weighted average original credit rating of repurchased CDO bonds


A / A2




Weighted average purchase price of repurchased CDO bonds


32%







(1) Unencumbered CDO bonds are owned by NorthStar. The majority of CDO bonds are eliminated with

      the corresponding liability of the respective CDO on NorthStar's consolidated financial statements. 




(2) Represents the maximum amount of principal proceeds that could be received.  There is no assurance

      NorthStar will receive the maximum amount of principal proceeds.



 

PE Fund JV Investment







($ in millions)














Total PE Fund JV



Our Proportionate Share of the PE Fund JV








Number of funds closed


45



Distributions earned through March 31, 2013:

Number of general partners of closed funds

24





Reported NAV at June 30, 2012


$       789



Income

$                8

Reported NAV as a percentage of net cost(1)

72%



Return of capital

33

Reported NAV growth(2)


7%



Total distributions

$              41

Underlying assets, at cost


$  30,800





Number of investments


 Approximately 900 



Contributions

$            (20)

Implied leverage(3)


51%



Net cash

$              21













Expected future capital contributions

$              33








(1)  Net cost represents total funded capital less distributions received, excluding any distributions in excess of contributions for funds

       representing 2% of reported NAV.







(2)  Amount represents reported NAV growth from June 30, 2012 through December 31, 2012 based on approximately two-thirds of the funds 


       that have reported results as of December 31, 2012.  Excludes one fund that was purchased at a different price than the other funds.

(3)  Represents implied leverage for funds with investment-level financing.




PE Funds by Underlying Investment Type (1)





As of June 30, 2012












Type





%

Lodging





17.8%

Office





11.9%

Residential/Condo





10.2%

Cash





9.3%

Multifamily





8.5%

Debt





8.3%

Land





7.8%

Healthcare





7.0%

Financial Services





5.3%

Operating Companies





4.8%

Retail





3.8%

Other





3.1%

Industrial





2.2%







Total





100.0%







(1)  Based on individual fund financial statements.





 

 

CDOs primarily backed by CRE Debt









($ in thousands)































N-Star IV

N-Star VI

N-Star VIII

CSE


CapLease 



Issue/Acquisition Date

Jun-05

Mar-06

Dec-06

Jul-10


Aug-11


Total 

Balance sheet as of March 31, 2013 (1)









Assets, principal amount

$        354,847

$        456,810

$        939,664

$        869,572


$      163,527


$     2,784,420

CDO bonds, principal amount (2)

232,756

355,074

710,206

798,088


144,078


2,240,202

Net assets 

$        122,091

$        101,736

$        229,458

$          71,484


$        19,449


$        544,218

CDO quarterly cash distributions and coverage tests(3)


















Equity notes and retained original below investment grade bonds

$            1,593

$               782

$            3,246

$            8,044


$             653


$          14,318

Collateral management and other fees

266

464

928

1,742


84


3,484










Interest coverage cushion (1)

1,545

899

4,198

5,388


387












Overcollateralization cushion(1)

52,485

58,535

135,336

79,203


9,206



          At offering 

19,808

17,412

42,193

(151,595)

(4)

5,987

(5)





















(1)

Based on remittance report issued on date nearest to March 31, 2013.







(2)

Includes all outstanding CDO bonds payable to third parties and all CDO bonds owned by NorthStar.





(3)

Interest coverage and overcollateralization coverage to the most constrained class.






(4)

Based on trustee report as of June 24, 2010, closest to the date of acquisition.






(5)

Based on trustee report as of August 31, 2011, closest to the date of acquisition.






 

CDOs primarily backed by CRE Securities









($ in thousands)






















N-Star I

N-Star II

N-Star III

N-Star V

N-Star VII

N-Star IX


Issue/Acquisition Date


Aug-03

Jul-04

Mar-05

Sep-05

Jun-06

Feb-07

Total 

Balance sheet as of March 31, 2013 (1)









Assets, principal amount


$        123,703

$        159,208

$        228,203

$        329,584

$        323,847

$     1,038,256

$     2,202,801

CDO bonds, principal amount (2)


121,621

147,165

147,608

259,935

272,228

734,544

1,683,101

Net assets 


$            2,082

$          12,043

$          80,595

$          69,649

$          51,619

$        303,712

$        519,700





















CDO quarterly cash distributions and coverage tests(3)



















Equity notes and retained original below investment grade bonds


$                    -

$                    -

$                    -

$                    -

$                    -

$            2,115

$            2,115

Collateral management fees


44

51

60

55

54

713

977











Interest coverage cushion (1)


NEG

1,082

NEG

NEG

NEG

2,757












Overcollateralization cushion(1)


NEG

NEG

NEG

NEG

NEG

54,764



At offering


8,687

10,944

13,610

12,940

13,966

24,516






















(1)

Based on remittance report issued on date nearest to March 31, 2013.







(2)

Includes all outstanding CDO bonds payable to third parties and all CDO bonds owned by NorthStar.





(3)

Interest coverage and overcollateralization coverage to the most constrained class.







 

 

GAAP Book Value Rollforward







($ in thousands, except per share data)
























Amount


Per Share

Common book value at December 31, 2012, per share




$           817,817


$4.82











Net income to common shareholders before non-controlling interest in Operating Partnership,





    excluding non-cash fair value adjustments included in net income (loss)



8,016


0.05











Fair value adjustments included in net income (loss):







   CDO bonds payable






(72,284)


(0.43)

   Trust preferred debt






(9,621)


(0.06)

   Securities 






96,483


0.57

   Derivatives






15,761


0.09







Equity component of exchangeable senior notes







(27)


0.00











Change in other comprehensive income



3,452


0.02











Common dividends



(31,334)


(0.18)











Accretion (dilution) from additional shares issued during quarter (1)


280,230


0.43

Total net increases/(decreases)





290,676


0.49











Common book value at March 31, 2013, per share (2)(3)




$        1,108,493


$5.31











Adjusted common book value at March 31, 2013, per share (3)(4)




$        1,414,811


$6.78











2013 expected net asset management fees


 $        40,000+ 















(1)

Includes February common stock offering, amortization of LTIPs and issuance of common shares from Dividend Reinvestment Plan. 

(2)

Common book value is calculated as total stockholder's equity of $1.6 billion and non-controlling interest in the operating partnership of $25

million less preferred stock of $504 million. 

(3)

GAAP book value per share and adjusted book value per share calculations do not take into consideration any value related to the in-place

and anticipated advisory fee income streams generated by NorthStar's sponsored, non-traded REIT vehicles and NorthStar's CDO

management fees and do not take into account any potential dilution from exchangeable notes, warrants or restricted stock units that are

subject to performance metrics that are not currently achieved. 

(4)

Cumulative net unrealized and other adjustments total a positive $65 million ($0.31 per share), loan loss reserves total a negative $153

million ($0.74 per share) and accumulated depreciation and amortization total a negative $218 million ($1.04 per share) as of March 31, 2013. 

Excluding from GAAP book value these unrealized and other adjustments, loan loss reserves and accumulated depreciation and amortization

would result in adjusted book value of $6.78 per share at March 31, 2013. 



 

Manufactured Housing Communities Portfolio

As of March 31, 2013



($ in millions)





Total Portfolio(1)




Number of communities


107

Number of pad rental sites


23,136




First year projected NOI 


$                       79

Cost basis (2)


$                  1,152




NOI related to:



Pad rental sites


94%

Other 


6%




WA occupancy 


86%




(1) Includes manufactured housing communities portfolio acquired on April 5, 2013.

(2) Excludes pre-funded capital expenditures and our partner's subordinate capital. 

Manufactured Housing Communities Portfolio Net Operating Income by Location (1)

As of March 31, 2013












Type

%





Florida

26.2%





Utah (Salt Lake City)

25.5%





Colorado

19.1%





Kansas

8.4%





New York

8.3%





Wyoming

7.0%





Missouri

2.6%





Illinois

2.3%





Arkansas

0.6%











Total

100.0%











(1)  Includes manufactured housing communities portfolio acquired on April 5, 2013.  


       Based on first year projected NOI of pad rental sites.





 

 

NRFC NNN Holdings, LLC Portfolio Summary









($ in thousands)  
















Remaining






Cost basis

Date



Square


Lease


Cost


Existing


 less

Acquired

Tenant or Guarantor of Tenant

Location/MSA

Feet


   Term (1)


Basis (2)


Debt


Debt

























Nov-2007

Alliance Data Systems Corp.

Columbus, OH

199,112


4.7


$      33,829


$        22,554


$     11,275

Mar-2007

Citigroup, Inc.

Fort Mill, SC/Charlotte

165,000


7.6


34,303


29,433


4,870

Jun-2006

Covance, Inc.

Indianapolis, IN

333,600


12.8


34,519


26,914


7,605

Feb-2007

Credence Systems Corp. 

Milpitas, CA/San Jose

178,213


3.9


30,144


20,475


9,669

Sep-2006

Dick's Sporting Goods, Inc. / PetSmart, Inc.(3)

9 properties

467,971


2.8 - 11.4


64,503


45,573


18,930

Sep-2005

Electronic Data Systems Corp. 

2 in MI / 1 in CA / 1 in PA

387,842


2.5


62,718


44,349


18,369

Aug-2005

GSA - U.S. Department of Agriculture

Salt Lake City, UT

117,553


4.1


23,211


14,049


9,162

Jun-2007

Landis Logistics / East Penn

Reading, PA

609,000


3.1 - 4.8


26,223


17,998


8,225

Jul-2006

Northrop Grumman Space & Mission Systems Corp.

Aurora, CO/Denver

183,529


2.2


42,400


31,589


10,811

Mar-2006

Party City Corp. (Amscan) / Lerner Enterprises, Inc.

Rockaway, NJ/ Northern NJ

121,038


2.2 - 4.3


22,221


16,302


5,919

Feb-2006

Quantum Corporation (4)

Colorado Springs, CO

406,207


2.9 - 7.9


27,215


17,194


10,021













Total NRFC NNN Holdings, LLC Portfolio


3,169,065


5.5


$    401,286


$      286,430


$   114,856

(1)

Remaining lease term as of March 31, 2013.  Total represents weighted average based on cost basis. 

(2)

Cost basis includes capitalized expenditures since acquisition. 

(3)

Six of ten Dick's Sporting Goods, Inc. / PetSmart, Inc. properties are ground lease interests.

(4)

Dollar amounts shown are 50% of total relating to NRFC NNN Holding's, LLC subsidiary's 50% interest in a joint venture with an institutional investor.

 

 


Portfolio Cash Flow and Tenant Credit Profile














($ in thousands) 


Three Months Ended March 31, 2013


Primary Tenant

Tenant or Guarantor of Tenant


Base Rent


NOI


Debt Service


NOI Less Debt

Service


Market Cap (1)


Actual Credit

Rating






























Alliance Data Systems Corp.


$             632


$             624


$             (455)


$             169


8,302


not rated


Citigroup, Inc.


538


531


(510)


21


143,321


A- / A


Covance, Inc.


638


633


(517)


116


4,128


not rated


Credence Systems Corp. 


706


701


(447)


254


312


not rated


Dick's Sporting Goods, Inc. / PetSmart, Inc.


1,323


1,266


(964)


302


5,697


not rated

(2)

Electronic Data Systems Corp. 


1,508


1,499


(824)


675


13,900


not rated


GSA - U.S. Department of Agriculture


648


411


(264)


147


N/A


implied AAA


Landis Logistics / East Penn


313


256


(332)


(76)


N/A


not rated


Northrop Grumman Space & Mission Systems Corp.


887


886


(617)


269


17,313


BBB+/Baa2


Party City Corp. (Amscan) / Lerner Enterprises, Inc.


468


466


(303)


163


362


B/B2

(3)

Quantum Corporation  (50%)


491


484


(326)


158


330


not rated
















Total


$        8,152


$         7,757


$        (5,559)


$         2,198






(1)

Based on information from Bloomberg at close of market on March 31, 2013 and presented in millions.

(2)

Dick's Sporting Goods, Inc. is not rated by the major credit rating agencies.  PetSmart, Inc. is rated BB+ by S&P.

(3)

The Party City Corp. lease is guaranteed by Amscan Holdings, Inc. which has a B/B2 credit rating by S&P and Moody's, respectively.

 

Safe Harbor Statement

This press release contains certain "forward‑looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, or Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or Exchange Act. Forward‑looking statements are generally identifiable by use of forward‑looking terminology such as "may," "will," "should," "potential," "intend," "expect," "seek," "anticipate," "estimate," "believe," "could," "project," "predict," "hypothetical," "continue," "future" or other similar words or expressions. Forward‑looking statements are not guarantees of performance and are based on certain assumptions, discuss future expectations, describe plans and strategies, contain projections of results of operations or of financial condition or state other forward‑looking information. Such statements include, but are not limited to, adverse economic conditions and the impact on the commercial real estate industry; access to debt and equity capital and our liquidity; our use of leverage; our ability to meet various coverage tests with respect to our CDOs; our ability to obtain mortgage financing on our real estate portfolio; the affect of economic conditions on the valuations of our investments; our ability to source and close on attractive investment opportunities; our ability to grow our asset management business by raising capital for, and effectively implementing the business plans of, the companies we sponsor and advise in particular our sponsored companies; performance of our investments relative to our expectations and the impact on our actual return on invested equity, as well as the cash generated from these investments and available for distribution; whether we will produce higher CAD per share in the coming quarters, or ever; the impact of economic conditions on the borrowers of the commercial real estate debt we originate and acquire the commercial mortgage loans underlying the commercial mortgage backed securities in which we invest, as well as on the tenants/operators of our real property that we own; our ability to realize the value of the bonds we have purchased and retained in our CDO financing transactions and other securitized financing transactions and our ability to complete securitized financing transactions on terms that are acceptable to us, or at all; our ability to realize current and expected return over the life of our investments; any failure in our due diligence to identify all relevant facts in our underwriting process or otherwise; credit rating downgrades; tenant/operator or borrower defaults or bankruptcy; illiquidity of properties in our portfolio; our ability to manage our costs in line with our expectations and the impact on our cash available for distribution; environmental compliance costs and liabilities; effect of regulatory actions, litigation and contractual claims against us and our affiliates, including the potential settlement and litigation of such claims; competition for investment opportunities; our ability to close the remaining interests in private equity real estate funds described in this press release; regulatory requirements with respect to our business and the related cost of compliance; the impact of any conflicts arising from our asset management business; changes in laws or regulations governing various aspects of our business; the loss of our exemption from the definition of "investment company" under the Investment Company Act of 1940, as amended; competition for qualified personnel and our ability to retain key personnel; the effectiveness of our portfolio management systems; failure to maintain effective internal controls; compliance with the rules governing real estate investment trusts; and the factors described in Item 1A. of our Annual Report on Form 10-K for the fiscal year ended December 31, 2012 under the heading "Risk Factors."

The foregoing list of factors is not exhaustive. All forward‑looking statements included in this press release are based upon information available to us on the date hereof and we are under no duty to update any of the forward‑looking statements after the date of this report to conform these statements to actual results.

Factors that could have a material adverse effect on our operations and future prospects are set forth in "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012. The factors set forth in the Risk Factors section and otherwise described in our filings with United States Securities and Exchange Commission; could cause our actual results to differ significantly from those contained in any forward‑looking statement contained in this press release.

SOURCE NorthStar Realty Finance Corp.



RELATED LINKS
http://www.nrfc.com

Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

 

PR Newswire Membership

Fill out a PR Newswire membership form or contact us at (888) 776-0942.

Learn about PR Newswire services

Request more information about PR Newswire products and services or call us at (888) 776-0942.