NorthStar Realty Finance Announces Fourth Quarter And Full Year 2013 Results

NEW YORK, Feb. 27, 2014 /PRNewswire/ --

Fourth Quarter 2013 Highlights

  • Cash available for distribution ("CAD") of $0.29 per share.
  • Increased fourth quarter 2013 cash dividend to $0.25 per common share, representing a 19% increase over the prior quarter and 150% over the last ten quarters.
  • Announced plan to spin-off NorthStar's asset management business into a separate publicly-traded company, NorthStar Asset Management Group Inc. 
  • Funded $799 million of investments in the fourth quarter 2013, representing $481 million of invested equity.

Full Year 2013 Highlights

  • Cash available for distribution ("CAD") of $1.06 per share.
  • Funded $3.6 billion of investments, representing $1.9 billion of invested equity.
  • Total capital raised to date of $1.4 billion in our non-traded REIT business.

NorthStar Realty Finance Corp. (NYSE: NRF) today announced its results for the fourth quarter and full year ended December 31, 2013.

Fourth Quarter 2013 Results

NorthStar reported cash available for distribution ("CAD") for the fourth quarter 2013 of $74.3 million, or $0.29 per share. Net loss to common stockholders for the fourth quarter 2013 was $(10.4) million, or $(0.04) per diluted share, compared with a net loss to common stockholders of $(27.6) million, or $(0.20) per diluted share for the fourth quarter 2012.

On December 31, 2013, NorthStar deconsolidated the Capital Source CDO ("CSE CDO").  Net loss to common stockholders for the fourth quarter 2013 included a $(45.6) million loss as a result of the deconsolidation of the CSE CDO, which was predominately due to the reversal of the unrealized gains on the CSE CDO liability that were recorded in prior periods as a result of the election of the fair value option.  This loss is not included in CAD and adjusted funds from operations.

Full Year 2013 Results

NorthStar reported CAD for the full year 2013 of $233.6 million, or $1.06 per share. Net loss to common stockholders for the full year 2013 was $(137.5) million, or $(0.65) per diluted share, compared with a net loss to common stockholders of $(288.6) million, or $(2.31) per diluted share for the full year 2012.  Net loss to common stockholders for the full year 2013 included a $(299.8) million loss as a result of the deconsolidation of the CRE debt CDOs.  This loss is not included in CAD and adjusted funds from operations.

For more information and a reconciliation of CAD to net income (loss) to common stockholders, please refer to the tables on the following pages.

David T. Hamamoto, chairman and chief executive officer, commented "2013 was truly a transformational year for NorthStar.  The $3.6 billion of diversified investments completed during 2013 across various commercial real estate asset classes emphasizes the strength of our broad and scalable commercial real estate platform. Our current investment pipeline remains robust and we are pleased to announce that we have entered into a term sheet and are in the process of executing an agreement to acquire a $1.05 billion healthcare real estate portfolio comprised of over 8,500 beds across diversified assisted living and skilled nursing facilities, which would  bring our owned real estate portfolio to $4 billion. Our partnership with Jay Flaherty is already adding value and his relationships in the industry were instrumental in landing this negotiated transaction."

Mr. Hamamoto continued, "We are extremely excited by the variety of opportunities available for NorthStar and will continue focusing on creating shareholder value such as the recently announced spin-off of our asset management business into an independent publicly-traded company, NorthStar Asset Management Group Inc., or NSAM. We believe that NSAM, with its unique asset base and one of-a-kind structure, is extremely well positioned for powerful growth as we continue to drive value at NorthStar, grow our non-traded REIT business and diversify NSAM's fee streams through opportunities such as the RXR investment and the partnership with Jay Flaherty. The spin-off of NSAM remains on track to be completed in the second quarter of 2014."

Investments

Real Estate

During the fourth quarter 2013, NorthStar acquired a $345 million portfolio of manufactured housing communities, which was financed with three separate, non-recourse mortgages in the aggregate amount of $248 million at a weighted average fixed interest rate of 4.92%.  NorthStar expects to earn an initial current yield of approximately 12% on its $89 million of invested equity. 

Opportunistic Investments

During the fourth quarter 2013, NorthStar invested $337 million in RXR Realty ("RXR"), a leading real estate operating and investment management company focused on the New York Tri-State area.  This investment includes a combination of corporate debt, preferred equity and an approximate 30% equity interest in RXR. NorthStar expects to earn an initial current yield of approximately 11% on its $337 million of invested equity. As part of the announced spin-off, the asset management fee income related to NorthStar's equity interest in RXR will be effectively transferred to NSAM through an increase in base management fees equal to the greater of $10 million per annum or the portion of distributable cash flow from NorthStar's equity interest related to the asset management business of RXR.  In addition, NorthStar expects to co-sponsor a multi-billion dollar non-traded REIT with RXR focused on commercial real estate in the New York Tri-State area.

During the fourth quarter 2013, NorthStar invested $40 million to acquire eight limited partnership interests in real estate private equity funds with an initial aggregate reported net asset value of $80 million as of June 30, 2013. NorthStar expects to earn an initial current yield of approximately 18% on its invested equity.  For additional details regarding this transaction, please refer to the tables on the following pages.

Real Estate Loans

Subsequent to the fourth quarter 2013, NorthStar originated two commercial real estate loans with a $104 million aggregate principal amount and expects to generate a weighted average initial current yield on its invested equity of approximately 14%.

CDO Bonds

The principal proceeds NorthStar could receive from N-Star CDO bonds acquired during the fourth quarter 2013 is $37 million, which were purchased for $14 million and had a weighted average original credit rating of BBB+/Baa1.  During full year 2013, NorthStar received total proceeds of approximately $162 million from the sales and paydowns of N-Star CDO bonds, including the May 2013 N-Star CDO II liquidation. The principal proceeds NorthStar could receive from N-Star CDO bonds acquired subsequent to the fourth quarter 2013 is $10 million, which were purchased for $7 million and had a weighted average original credit rating of A+/A1.

Investment Portfolio

NorthStar's assets under management, including assets of deconsolidated CDOs, totaled approximately $10.6 billion as of December 31, 2013.

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

NorthStar Asset Management Group Inc. (NSAM)

On December 10, 2013, NorthStar announced that its board of directors unanimously approved a plan to spin-off its asset management business into a separate publicly-traded company in the form of a tax-free distribution. NSAM will: (i) manage NorthStar through a new management contract pursuant to the terms described below; (ii) manage NorthStar's sponsored non-traded REITs; (iii) own NorthStar's captive broker-dealer, NorthStar Realty Securities, LLC, and (iv) own NorthStar's special servicing business. The spin-off is expected to be completed in the second quarter of 2014.

(I)         NorthStar Management Contract Details:

Annual Base Management Fee through February 26, 2014:

($ in millions)


Annual Amount




Initial base fee


$                     100

1.5% of common equity issued subsequent to December 10, 2013


10

1.5% of common equity issued from conversions of exchangeable notes subsequent to December 10, 2013


6

RXR Realty (minimum annual amount)


10

Total Annual Initial Base Management Fee


$                    126

        Plus, after February 26, 2014:

(a)     1.5% per annum of the sum of:

  • cumulative net proceeds of all future common and preferred equity issued by NorthStar;
  • equity issued in exchange or conversion of exchangeable notes based on the stock price at the time of issuance;
  • any other issuances of common equity, preferred equity or other forms of equity, including but not limited to units in an operating partnership; and
  • cumulative CAD in excess of cumulative distributions paid on common stock or equity awards beginning the first full calendar quarter after completion of the spin-off.

(b)     the portion of distributable cash flow from the NorthStar's equity interest related to the asset management business of RXR Realty in excess of the $10 million minimum annual amount.

Incentive Fee:

NSAM is entitled to an incentive fee, calculated and payable quarterly in arrears in cash, equal to:

  • the product of (a) 15% and (b) CAD before such incentive fee, divided by the weighted average shares outstanding for the calendar quarter, when such amount is in excess of $0.195 per share but less than $0.225 per share; plus
  • the product of (a) 25% and (b) CAD before such incentive fee, divided by the weighted average shares outstanding for the calendar quarter, when such amount is equal to or in excess of $0.225 per share;
  • multiplied by the weighted average shares outstanding for the calendar quarter.

In addition, NSAM will earn incentive fees from NorthStar's healthcare investments in connection with the long-term partnership with James F. Flaherty III, the former Chairman and Chief Executive Officer of HCP, Inc., that was announced on January 22, 2014.  

Additional NorthStar Management Contract Details:

  • 20-year initial term of management agreement that is only terminable for "cause."
  • If NorthStar were to spin-off additional businesses in the future, the management agreement is expected to provide that such businesses would be managed by NSAM consistent with the terms of the management agreement and that annual base management fees and incentive fees would be proportionately allocated.
  • The incentive fee will be appropriately adjusted from time to time to take into consideration the effect of any stock split, reverse stock split or stock dividend, including the 1-for-2 reverse stock split of NorthStar common stock that NorthStar expects to effect in connection with and immediately prior to the consummation of the spin-off.

 

(II)       Non-traded REIT Contract Details:


NorthStar


NorthStar


NorthStar


Income


Healthcare


Income II

Offering Amount

$1.1 billion


 

$1.1 billion


$1.65 billion







Asset Management and Other Fees:






Asset Management Fees

1.25% of Gross Assets


1.00% of Gross Assets


1.25% of Gross Assets







Acquisition Fees

1.00% of Investments


1.00% of Investments
 (2.25% for Real Estate Properties)


1.00% of Investments







Disposition Fees

1.00% of Sales Price


1.00% of Sales Price
 (2.00% for Real Estate Properties)


1.00% of Sales Price







Incentive Fee

15% of net cash flows after an 8% return


15% of net cash flows after a 6.75% return


15% of net cash flows after a 7% return













Expense Reimbursement:







Operating costs

Greater of 2.0% of its average invested assets or 25.0% of its net income (net of 1.25% asset management fee)


Greater of 2.0% of its average invested assets or 25.0% of its net income (net of 1.00% asset management fee)


Greater of 2.0% of its average invested assets or 25.0% of its net income (net of 1.25% asset management fee)

Non-traded REITs

During 2013, NorthStar made an aggregate of approximately $1.3 billion of investments on behalf of NorthStar's sponsored non-traded REITs.  NorthStar raised $683 million in 2013, including $126 million during the fourth quarter 2013.

NorthStar Realty Securities, LLC currently has total signed selling agreements, on behalf of NorthStar Healthcare Income, Inc. ("NorthStar Healthcare"), with broker-dealers covering more than 87,000 registered representatives and on behalf of NorthStar Real Estate Income II, Inc. ("NorthStar Income II"), with broker-dealers covering more than 86,000 registered representatives.  NSAM 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. 

During the fourth quarter 2013, NorthStar earned $9.6 million of fees from its management of its sponsored non-traded REITs.  In addition, during the fourth quarter 2013, NorthStar received collateral management and other fees from its CDOs of $2.7 million.  

Liquidity, Financing and Capital Markets Highlights

As of February 25, 2014, unrestricted cash was approximately $546 million.

In December 2013, NorthStar issued 57.5 million shares of its common stock, including the over-allotment option shares, at a public offering price of $11.65 per share and received net proceeds of $649 million.

In December 2013, NorthStar issued 11.5 million shares of its common stock in connection with the exchange of $68 million principal amount of 8.875% notes.

Subsequent to the fourth quarter 2013, NorthStar issued 1.6 million shares of common stock in connection with the exchange of $10 million principal amount of 8.875% notes and 14.1 million shares of common stock in connection with the exchange of $137 million principal amount of 5.375% notes.

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

Portfolio Management

As of December 31, 2013, NorthStar did not have any loans on non-performing status ("NPL").  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.  

As of December 31, 2013, NorthStar's portfolio of manufactured housing communities was 87% occupied.  As of December 31, 2013, NorthStar's net lease portfolio was 97% leased with a 4.8 year weighted average remaining lease term.  As of December 31, 2013, NorthStar's healthcare portfolio that was leased to third-party operators was 100% leased with weighted average lease coverage of 1.1x and a 6.7 year weighted average remaining lease term.  For additional details regarding NorthStar's real estate portfolio, please refer to the tables on the following pages.

Stockholders' Equity

As of December 31, 2013, NorthStar had 318,024,346 total common shares and LTIP units outstanding and $12 million of non-controlling interest related to its operating partnership.  GAAP book value per share was $6.20 as of December 31, 2013.  Adjusted book value at December 31, 2013 would be $7.20 per share, which (i) adds back accumulated depreciation and amortization on owned real estate; (ii) takes into account the expected recovery value of our N-Star CDO bonds and (iii) subtracts net unrealized gain (loss) of assets and liabilities of consolidated CDOs.  GAAP book value (with respect to deconsolidated CDOs) and adjusted book value (with respect to all CDOs) reflect the fair value of the N-Star CDO equity interests discounted at 18-20% and assumes no recovery of $177 million of previously recorded loan loss reserves. The spin-off of the asset management business is not expected to have any impact to adjusted book value, other than with respect to any initial cash contributed to NSAM.

Book value and adjusted book value do not take into consideration any value related to the following:

  • Potential upside in NorthStar's limited partnership interests in real estate private equity funds;
  • Potential appreciation above the original cost basis of our existing $3 billion real estate portfolio; or 
  • The value of NSAM, NorthStar's asset management business that will be spun-off as a separate publicly-traded company.

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 February 26, 2014, NorthStar announced that its Board of Directors declared a cash dividend of $0.25 per share of common stock, payable with respect to the quarter ended December 31, 2013.  The dividend is expected to be paid on March 14, 2014 to shareholders of record as of the close of business on March 10, 2014. The Company's common shares will begin trading ex-dividend on March 6, 2014.

Earnings Conference Call

NorthStar will hold a conference call to discuss fourth quarter and full year 2013 financial results on February 27, 2014, at 10:00 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 877-941-0843, or for international callers, by dialing 480-629-9866.

A replay of the call will be available one hour after the call through Thursday, March 6, 2014 by dialing 800-406-7325 or, for international callers, 303-590-3030, using pass code 4666318.

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. NorthStar recently announced a plan to spin-off its asset management business into a separate public company. 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

Years Ended



December 31,

December 31,


2013


2012


2013


2012











Net interest income









Interest income

$         85,365


$    142,686


$      303,989


$    386,053


Interest expense on debt and securities

5,035


11,988


38,152


50,557


Net interest income on debt and securities

80,330


130,698


265,837


335,496











Other revenues









Rental and escalation income

61,354


30,303


235,492


112,496


Selling commissions and dealer manager fees, related parties

11,358


14,094


62,572


42,385


Asset management and other fees, related parties

10,190


3,150


27,301


7,916


Other revenue

2,060


276


5,420


2,272


Total other revenues

84,962


47,823


330,785


165,069


Expenses









Other interest expense

39,114


23,668


140,507


89,536


Real estate properties – operating expenses

23,072


4,930


73,668


18,679


Commission expense

10,821


12,968


57,325


38,506


Other expenses

844


2,818


4,703


6,648


Transaction costs

1,663


2,179


12,464


2,571


Provision for (reversal of) loan losses, net

-


3,300


(8,786)


23,037


General and administrative









Salaries and equity-based compensation (1)

12,137


20,549


64,726


62,313


Other general and administrative

5,801


2,754


22,511


19,370


Total general and administrative

17,938


23,303


87,237


81,683


Depreciation and amortization

23,662


12,058


93,470


47,499


Total expenses

117,114


85,224


460,588


308,159


Income (loss) from operations

48,178


93,297


136,034


192,406


Equity in earnings (losses) of unconsolidated ventures

31,032


504


85,477


88


Other income (loss)

38


-


38


20,258


Unrealized gain (loss) on investments and other

(6,464)


(135,204)


(34,977)


(548,277)


Realized gain (loss) on investments and other

(13,935)


24,717


33,676


60,485


Gain (loss) from deconsolidation of N-Star CDOs

(45,596)


-


(299,802)


-


Income (loss) from continuing operations

13,253


(16,686)


(79,554)


(275,040)


Income (loss) from discontinued operations

(8,564)


(881)


(8,356)


(128)


Gain on sale from discontinued operations

-


1,765


-


2,079


Net income (loss)

4,689


(15,802)


(87,910)


(273,089)


Net (income) loss attributable to non-controlling interests

480


(2,384)


5,973


11,527


Preferred stock dividends

(15,591)


(9,396)


(55,516)


(27,025)


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

$       (10,422)


$     (27,582)


$    (137,453)


$   (288,587)











Earnings (loss) per share:









Income (loss) per share from continuing operations

$           (0.01)


$         (0.20)


$          (0.61)


$         (2.32)


Income (loss) per share from discontinued operations

(0.03)


(0.01)


(0.04)


(0.00)


Gain per share on sale of discontinued operations

-


0.01


-


0.01


Basic

$           (0.04)


$         (0.20)


$          (0.65)


$         (2.31)


Diluted

$           (0.04)


$         (0.20)


$          (0.65)


$         (2.31)











Weighted average number of shares:









Basic

248,627,713


139,218,177


211,815,520


125,198,517


Diluted

257,857,030


145,455,938


220,978,335


131,224,199











Dividends declared per share of common stock

$             0.25


$          0.18


$            0.85


$          0.66


(1)

The three months ended December 31, 2013 and 2012 include $3.3 million and $2.8 million, respectively, of equity‑based compensation expense. The year ended December 31, 2013 and 2012 include $17.0 million and $12.8 million of equity-based compensation expense, respectively.  

 

NorthStar Realty Finance Corp.





Consolidated Balance Sheets





($ in thousands, except share data)







December 31,


December 31,



2013


2012






Assets





Cash and cash equivalents


$                 635,990


$                 444,927

Restricted cash


166,487


360,075

Operating real estate, net


2,369,505


1,390,546

Real estate debt investments, net


1,031,078


1,832,231

Investments in private equity funds, at fair value


586,018


-

Investments in and advances to unconsolidated ventures


142,340


111,025

Real estate securities, available for sale


1,052,320


1,124,668

Receivables, net of allowance of $1,151 as of December 31, 2013 and $1,526 as of December 31, 2012


59,895


28,413

Receivables, related parties


25,262


23,706

Unbilled rent receivable, net of allowance of $307 as of December 31, 2013


15,006


16,129

Derivative assets, at fair value


3,469


6,229

Deferred costs and intangible assets, net


96,886


97,700

Assets of properties held for sale


30,063


-

Other assets


145,731


78,129

Total assets(1)


$              6,360,050


$              5,513,778






Liabilities





Mortgage and other notes payable


$              2,113,334


$              1,015,670

CDO bonds payable


384,183


2,112,441

Securitization bonds payable


82,340


98,005

Credit facilities


70,038


61,088

Secured term loan


-


14,664

Exchangeable senior notes


490,973


291,031

Junior subordinated notes, at fair value


201,203


197,173

Accounts payable and accrued expenses


74,547


45,895

Escrow deposits payable


90,929


90,032

Derivative liabilities, at fair value


52,204


170,840

Liabilities of properties held for sale


28,962


-

Other liabilities


73,874


86,075

Total liabilities(2)


3,662,587


4,182,914






Commitments and contingencies





Equity





NorthStar Realty Finance Corp. Stockholders' Equity





Preferred stock, $736,640 and $536,640 aggregate liquidation preference as of December 31, 2013 and





December 31, 2012, respectively


697,352


504,018

Common stock, $0.01 par value, 500,000,000 shares authorized, 308,806,828 and 163,607,259





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


3,088


1,636

Additional paid-in capital


2,647,906


1,195,131

Retained earnings (accumulated deficit)


(685,936)


(376,685)

Accumulated other comprehensive income (loss)


(4,334)


(22,179)

     Total NorthStar Realty Finance Corp. stockholders' equity


2,658,076


1,301,921

Non-controlling interests


39,387


28,943

Total equity


2,697,463


1,330,864

Total liabilities and equity


$              6,360,050


$              5,513,778






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





Restricted cash


$                   24,411


$                 320,815

Operating real estate, net


4,945


344,056

Real estate debt investments, net


44,298


1,478,503

Investments in and advances to unconsolidated ventures


-


59,939

Real estate securities, available for sale


644,015


1,015,972

Receivables, net of allowance


4,476


16,609

Unbilled rent receivable


-


2,125

Deferred costs and intangible assets, net


-


37,753

Other assets


269


12,689

Total assets of consolidated VIEs


$                 722,415


$              3,288,461






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





Mortgage and other notes payable


$                             -


$                 228,446

CDO bonds payable


384,183


2,112,441

Secured term loan


-


14,664

Accounts payable and accrued expenses


2,686


13,626

Escrow deposits payable


22


67,406

Derivative liabilities, at fair value


52,204


170,840

Other liabilities


2,971


25,144

Total liabilities of consolidated VIEs


$                 442,066


$              2,632,567











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 ("CAD"), Funds From Operations ("FFO") and Adjusted Funds From Operations ("AFFO").   NorthStar believes these metrics can be useful measures of its performance which are further defined below.

Cash Available for Distribution (CAD)
CAD is a non-GAAP financial measure. We believe that CAD provides investors and management with a meaningful indicator of operating performance. Management also uses CAD, among other measures, to evaluate profitability and our board of directors considers CAD in determining our quarterly cash dividends. We also believe that CAD is useful because it adjusts for a variety of non-cash items (such as depreciation and amortization, equity-based compensation, realized gain (loss) on investments, provision for (reversal of) loan losses and non-cash interest income and expense items). Furthermore, CAD adjusts N-Star CDO bond discounts to record such investments on an effective yield basis over the expected weighted average life of the investment.  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.

We calculate CAD by subtracting from or adding to net income (loss) attributable to common stockholders, non-controlling interest attributable to the Operating Partnership and the following items: depreciation and amortization items including depreciation and amortization, straight-line rental income or expense, amortization of above/below market leases, amortization of deferred financing costs, amortization of discount on financings and other, and equity-based compensation; cash flow related to N-Star CDO equity interests; accretion of unconsolidated N-Star CDO bond discounts; non-cash net interest income in consolidated N-Star CDOs; unrealized gain (loss) from the change in fair value; realized gain (loss) on investments and other; provision for (reversal of) loan losses; impairment on depreciable property; acquisition gains or losses; distributions to joint venture partners; transaction costs; and one-time events pursuant to changes in U.S. GAAP and certain other non-recurring items.  For example, CAD has been adjusted to exclude non-recurring gain (loss) from deconsolidation of certain N-Star CDOs.  These items, if applicable, include any adjustments for unconsolidated ventures.

CAD should not be considered as an alternative to net income (loss), determined in accordance with U.S. GAAP, as an indicator of operating performance.  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.

The following table presents a reconciliation of CAD to net income (loss) attributable to common stockholders for the three months and year ended December 31, 2013 (dollars in thousands):

Reconciliation of Cash Available for Distribution





(Amount in thousands except per share data)







Three Months Ended


Year Ended



December 31, 2013


December 31, 2013











Net income (loss) attributable to common stockholders


$                        (10,422)


$                  (137,453)

Non-controlling interest attributable to the Operating Partnership


(387)


(5,571)

(Gain) loss from deconsolidation of N-Star CDOs


45,596


299,802

Subtotal


34,787


156,778






Adjustments:





Depreciation and amortization items(1)


34,355


139,017

N-Star CDO bond discounts(2)


6,536


43,501

Non-cash net interest income in consolidated N-Star CDOs


(24,201)


(68,345)

Unrealized (gain) loss from fair value adjustments


(2,217)


(17,757)

Realized (gain) loss on investments(3)


13,935


(33,676)

Provision for (reversal of) loan losses


-


(8,786)

Non-cash items in discontinued operations(4)


8,963


9,983

Distributions to joint venture partners


(648)


(1,454)

Other (5)


2,777


14,318






CAD


$                          74,287


$                    233,579






CAD per share (6)


$                              0.29


$                          1.06

(1)

The three months ended December 31, 2013 includes depreciation and amortization of $24.7 million including $1.1 million related to unconsolidated ventures, straight-line rental income of $(0.7) million, amortization of above/below market leases of $(0.3) million, amortization of deferred financing costs of $2.5 million, amortization of discount on financings and other of $4.8 million and amortization of equity based compensation of $3.3 million. The year ended December 31, 2013 includes depreciation and amortization of $96.4 million including $2.9 million related to unconsolidated ventures, straight-line rental income of $(2.3) million, amortization of above/below market leases of $(1.6) million, amortization of deferred financing costs of $7.4 million, amortization of discount on financings and other of $22.2 million and amortization of equity- based compensation of $17.0 million.

(2)

For CAD, realized discounts on CDO bonds are accreted on an effective yield basis based on expected maturity. For CDOs that were deconsolidated, CDO bond accretion is included in net income attributable to common stockholders beginning the first reporting period after deconsolidation.   

(3)

The three months and year ended December 31, 2013 include $10.9 million of non-cash loss from extinguishment of debt.

(4)

The three months ended December 31, 2013 includes depreciation and amortization of $0.4 million and impairment on real estate of $8.6 million. The year ended December 31, 2013 includes depreciation and amortization of $1.4 million and impairment on real estate of $8.6 million.  

(5)

The three months ended December 31, 2013 includes transaction costs in connection with real estate related acquisitions of $1.6 million and $1.2 million of cash flow related to N-Star CDO equity interests. The year ended December 31, 2013 includes transaction costs in connection with real estate related acquisitions of $13.1 million including $0.7 million related to unconsolidated ventures and $1.2 million of cash flow related to N-Star CDO equity interests.  

(6)

CAD per share does not take into account any potential dilution from our exchangeable notes or warrants outstanding or restricted stock units subject to performance metrics not currently achieved.

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

Management believes that FFO and AFFO, each of which is a non-GAAP financial measure, 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 property, the cumulative effect of changes in accounting principles, real estate‑related depreciation and amortization, impairment on depreciable property owned directly or indirectly and after adjustments for unconsolidated ventures.    

NorthStar calculates AFFO by subtracting from or adding to FFO:

  • transaction costs;
  • straight‑line rental income or expense and fair value lease revenue;
  • amortization of deferred costs including intangible assets and equity-based compensation;
  • acquisition gains or losses; and
  • 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 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 (loss) as an indicator of NorthStar's operating performance.

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)

(Amount in thousands except per share data)



Three Months Ended

Years Ended


December 31,

December 31,


2013


2012


2013


2012

Funds from operations:








Income (loss) from continuing operations

$         13,253


$     (16,686)


$      (79,554)


$   (275,040)

Non-controlling interests(1)

93


(3,620)


402


(2,435)

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

13,346


(20,306)


(79,152)


(277,475)









Adjustments:








Preferred stock dividends

(15,591)


(9,396)


(55,516)


(27,025)

Depreciation and amortization(2)

23,978


16,004


92,853


47,929

Funds from discontinued operations

399


511


1,627


2,546

Funds from operations

22,132


(13,187)


(40,188)


(254,025)









Adjusted funds from operations:








Funds from operations

22,132


(13,187)


(40,188)


(254,025)

Transaction costs(3)

1,663


2,179


13,155


2,571

Straight-line rental income, net(4)

(737)


(1,014)


(2,337)


(2,292)

Amortization of deferred financing costs

2,463


1,332


7,393


3,528

Amortization of above/below market leases(5)

(265)


(533)


(1,564)


(1,524)

Amortization of equity-based compensation

3,346


2,768


16,961


12,817

Unrealized (gain) loss from fair value adjustments(6)

8,677


117,458


(6,863)


469,270

(Gain) loss from deconsolidation of N-Star CDOs

45,596


-


299,802


-

Adjusted funds from operations

$         82,875


$    109,003


$      286,359


$    230,345









FFO per share of common stock(7)

$             0.09


$         (0.09)


$          (0.18)


$         (1.94)

AFFO per share of common stock(7)

$             0.32


$          0.75


$            1.30


$          1.76









 

(1)

Amount excludes amounts attributable to non-controlling limited partner interest in NorthStar's Operating Partnership.

(2)

The three months ended December 31, 2013 and 2012 includes $1.1 million and $0.2 million, respectively, of depreciation and amortization expense of unconsolidated ventures.  The years ended December 31, 2013 and 2012 include $2.9 million and $0.8 million, respectively, of depreciation and amortization expense of unconsolidated ventures.

(3)

The year ended December 31, 2013 includes $0.7 million of transaction costs related to unconsolidated ventures.

(4)

The three months ended December 31, 2012 includes $0.2 million related to straight-line rent expense from unconsolidated joint ventures. The years ended December 31, 2013 and 2012 include $0.5 million and $1.0 million, respectively, of straight-line rent expense from unconsolidated ventures.

(5)

Includes immaterial amounts of amortization of above/below market leases of unconsolidated ventures.

(6)

The three months and year ended December 31, 2013 include $10.9 million of non-cash loss from extinguishment of debt.

(7)

FFO and AFFO per share does not take into account any potential dilution from our exchangeable notes or warrants outstanding or restricted stock units subject to performance metrics not yet achieved.

 


NorthStar Assets Under Management, Including Assets of Deconsolidated CDOs, as of December 31, 2013

($ in thousands)


  Amount(1)(2)


%





Real Estate




Manufactured housing communities

$                   1,487,530


14.0%

Private equity fund investments

873,968


8.2%

Healthcare

578,344


5.4%

Net lease

401,361


3.8%

Multifamily

367,040


3.5%

RXR Equity Interest

84,134


0.8%

Total real estate

3,792,377


35.7%





CRE Debt




First mortgage loans

441,750


4.2%

Mezzanine loans

109,215


1.0%

Subordinate interests (3)

246,652


2.3%

Term loans (3)

230,343


2.2%

Subtotal

1,027,960


9.7%

CRE Debt of N-Star CDOs

57,320


0.5%

Other(4)

44,674


0.4%

Total CRE debt

1,129,954


10.6%





Asset Management(5)




NorthStar Income

1,831,104


17.2%

NorthStar Healthcare

115,839


1.1%

NorthStar Income II

25,326


0.2%

Total asset management

1,972,269


18.5%





CRE Securities




N-Star CDO bonds

481,386


4.5%

N-Star CDO equity

158,274


1.5%

CMBS and other securities

98,650


1.0%

Assets of CRE securities CDOs

1,352,416


12.7%

Total CRE securities

2,090,726


19.7%

Subtotal

8,985,326


84.5%

Assets Underlying Deconsolidated CRE Debt CDOs(6)

1,647,318


15.5%

Grand total

$                 10,632,644


100.0%









(1) Includes assets of deconsolidated collateralized debt obligations, or CDOs, referred to as N-Star CDOs.

(2) Based on cost for real estate investments which includes net purchase price allocation related to net intangibles and other assets

       and liabilities, fair value for our investments in joint ventures owning limited partnership interests in real estate private equity

       funds, or PE Investments, and includes the deferred purchase price for PE Investment II, principal amount for our CRE debt

       and securities investments and fair value for N-Star CDO equity.




(3) The RXR Investment includes $150 million of corporate debt and $25 million revolver reported in term loans and $100 million

      preferred equity reported in subordinate interests.




(4) Primarily relates to certain CRE debt investments accounted for as joint ventures.



(5) Based on consolidated total assets.




(6) Based on the respective remittance report issued on date nearest to December 31, 2013.  This amount excludes $640 million of

      aggregate N-Star CDO equity and N-Star CDO bonds included in CRE securities.








2013 Investments









($ in millions)


















NorthStar Balance Sheet Investments


Assets


Invested Equity


Expected Current Yield(1)












Opportunistic


$      1,438


$       1,069


18%



Real estate portfolio


1,646


420


14%



CRE loans


473


418


13%












Total / weighted average


$     3,557


$      1,907


16%







































Investments  - NorthStar non-traded REITs


$      1,262


$          824














Total Investments


$     4,819


$      2,731














(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)



As of December 31, 2013



($ in thousands)








Principal

Based on original credit rating:


Amount (2)




AAA


$                71,212

AA through BBB


376,212

Below investment grade


160,590

Total


$            608,014




Weighted average original credit rating of repurchased CDO bonds


A / A2

Weighted average purchase price of repurchased CDO bonds


33%







(1) Unencumbered N-Star CDO bonds are owned by NorthStar. $127 million of these N-Star CDO bonds and

      the corresponding liability of the respective CDO are eliminated 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 Investments (1)








($ in millions)


















PE Investment I


PE Investment II


PE Investment III










Number of funds


49


24


8


Number of general partners


26


15


4


Initial NAV


$                  802


$                  916


$                    80


Closing NAV as a percentage of net cost (2)


66.2%


73.5%


119.0%


Reported NAV growth (3)


15.0%


8.6%


3.4%


Underlying assets, at cost


$              26,400


$              26,200


$                3,600


Implied leverage (4)


50.6%


34.3%


48.1%


Expected remaining future capital contributions (5)


$                    17


$                    26


$                      2










(1)  Based on financial data reported by the underlying funds as of September 30, 2013, except as otherwise noted.




(2) Net cost represents total funded capital less distributions received.  For PE Investment I, excludes any distributions in excess of contributions for








       funds, which represented 4% of reported NAV.








(3)  The reported NAV growth for PE Investment I and II is measured from the agreed upon reported NAV at date of acquisition, or Initial NAV.








       The reported NAV growth for PE Investment III is annualized based on one quarter of reported income from the Initial NAV.








(4)  Represents implied leverage for funds with investment-level financing, calculated as debt divided by assets at fair value.



(5)  Represents the amount of expected future capital contributions to funds as of December 31, 2013.




























Three months ended December 31, 2013


PE Investment I


PE Investment II


PE Investment III (1)


Our Proportionate Share of PE Investments
















Income


$                    16


$                    14


$                      -


Return of capital


39


76


9


Total distributions (2)


55


90


9










Contributions


2


7


-


Net


$                    53


$                    83


$                      9










(1)  PE Investment III closed on December 31, 2013, and as a result, received no income for the quarter ended December 31, 2013.








(2)  Net of an aggregate $3 million reserve for taxes in PE Investments I and II.






























Period ended December 31, 2013 (1)


PE Investment I


PE Investment II


PE Investment III (2)


Our Proportionate Share of PE Investments
















Income


$                    54


$                    29


$                      -


Return of capital


77


76


9


Total distributions (3)


131


105


9










Contributions


21


12


-


Net


$                  110


$                    93


$                      9










(1)  Represents activity from the respective initial closing date through December 31, 2013. The initial closing date of PE Investment I was February 15,


       2013, PE Investment II was July 3, 2013 and PE Investment III was December 31, 2013.






(2)  PE Investment III closed on December 31, 2013, and as a result, received no income for the year ended December 31, 2013.








(3)  Net of an aggregate $6 million reserve for taxes in PE Investments I and II.








PE Investments by Underlying Investment Type (1)

As of September 30, 2013






Type

%

Office

19.6%

Multifamily

17.9%

Lodging

12.5%

Residential/Condo

8.2%

Cash

7.4%

Retail

6.8%

Land

5.8%

Debt

5.0%

Industrial

4.2%

Financial Services

4.0%

Other

3.8%

Healthcare

2.5%

Operating Companies

2.3%



Total

100.0%



(1)  Based on most recently available individual

      fund financial statements.


 

PE Investments by Underlying Geographic Location (1)

As of September 30, 2013






Region

%

West

21.2%

Primarily Various U.S.

19.9%

Northeast

11.8%

Southeast

10.0%

Midwest

9.3%

Europe

8.8%

Cash

7.4%

Mid-Atlantic

7.3%

Asia

4.3%



Total

100.0%



(1)  Based on most recently available individual

      fund financial statements.




 





Healthcare Real Estate by Property Type (1)








As of December 31, 2013 (2)


















Type (3)

%








ALF

58.0%








SNF

39.6%








ILF

2.1%








MOB

0.3%

















Total

100.0%

















(1) Based on cost basis.









(2) Includes a $1.05 billion healthcare real estate portfolio that NorthStar has entered into a term sheet to acquire.



(3) Assisted living facility (ALF), skilled nursing facility (SNF), independent living facility (ILF) and medical office building (MOB).




















Healthcare Real Estate by Geographic Location (1)







As of December 31, 2013 (2)


















Region

%








Midwest

40.1%








Southeast

29.6%








Northwest

12.2%








Southwest

9.9%








West

5.2%








Mid - Atlantic

3.0%

















Total

100.0%

















(1) Based on number of units for ALF/ILF property types and number of beds for SNF property types.




(2) Includes a $1.05 billion healthcare real estate portfolio that NorthStar has entered into a term sheet to acquire.











Healthcare Real Estate Portfolio




As of December 31, 2013 (1)




($ in millions)






Total Portfolio






Number of properties


167


Number of units/beds (2)


14,090






NOI (3)


$                     150


Cost basis


$                  1,628










(1) Includes a $1.05 billion healthcare real estate portfolio that NorthStar has entered into a term sheet to acquire.

(2) Represents number of units for ALF/ILF property types and number of beds for SNF property types.

(3) NOI represents trailing twelve month actual net operating income at the property level for properties that

     NorthStar owned as of December 31, 2013.  For the $1.05 billion portfolio that NorthStar has entered

     into a term sheet to acquire, NOI represents projected first year net operating income at the property level.


CDOs primarily backed by CRE Debt









($ in thousands)





















Deconsolidated CDOs





N-Star IV

N-Star VI

N-Star VIII

CapLease


CSE



Issue/Acquisition Date

Jun-05

Mar-06

Dec-06

Aug-11


Jul-10


Total

Balance sheet as of December 31, 2013 (1)









Assets, principal amount

$        308,047

$         398,661

$        904,270

$      152,392


$        758,187


$     2,521,557

CDO bonds, principal amount (2)

194,928

313,518

686,636

136,458


686,706


2,018,246

Net assets

$        113,119

$           85,143

$        217,634

$        15,934


$          71,481


$        503,311

CDO quarterly cash distributions and coverage tests (3)



















Equity notes and retained original below investment grade bonds

$            1,242

$             2,006

$            3,212

$             651


$            6,507


$          13,618

Collateral management and other fees

217

370

781

68


409


1,845











Interest coverage cushion (1)

1,070

2,246

3,529

397


6,115













Overcollateralization cushion (1)

57,673

40,542

121,183

9,415


84,767




 At offering

19,808

17,412

42,193

5,987

(4)

(151,595)

(5)






















(1)

Based on remittance report issued on date nearest to December 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 August 31, 2011, closest to the date of acquisition.







(5)

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



















CDOs primarily backed by CRE Securities







($ in thousands)










Consolidated CDOs





N-Star I

N-Star III

N-Star V

N-Star IX


Issue/Acquisition Date


Aug-03

Mar-05

Sep-05

Feb-07

Total

Balance sheet as of December 31, 2013 (1)







Assets, principal amount


$          63,881

$        185,410

$        274,100

$        970,098

$     1,493,489

CDO bonds, principal amount (2)


62,521

116,079

240,726

$        720,372

1,139,698

Net assets


$            1,360

$          69,331

$          33,374

$        249,726

$        353,791

















CDO quarterly cash distributions and coverage tests (3)















Equity notes and retained original below investment grade bonds


$                    -

$                    -

$                    -

$            2,637

$            2,637

Collateral management and other fees


$                 26

$                 45

$                 45

$               718

834









Interest coverage cushion (1)


NEG

NEG

NEG

3,116










Overcollateralization cushion (1)


NEG

NEG

NEG

16,629



At offering


8,687

13,610

12,940

24,516


















(1)

Based on remittance report issued on date nearest to December 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.













Reconciliation of Adjusted Book Value







($ in thousands, except per share data)
























Amount


Per Share











Common book value as of December 31, 2013, per share (1)(2)




$   1,973,113


$                     6.20











Depreciation and amortization





247,866


0.78

N-Star CDO bonds and equity (3)





68,230


0.22











Adjusted common book value as of December 31, 2013, per share (1)(2)




$   2,289,209


$                     7.20











(1)

GAAP book value and adjusted book value do not take into consideration any value related to the following:  (i)  potential upside in NorthStar's limited partnership interests in real estate private equity funds; or (ii) potential  appreciation above the original cost basis of our $3 billion real estate portfolio. GAAP book value (with respect to deconsolidated CDOs) and adjusted book value (with respect to all CDOs) reflect the fair value of the N-Star CDO equity discounted at 18-20% and assuming no recovery of $177 million of previously recorded loan loss reserves.

(2)

GAAP book value per share and adjusted book value per share  do not take into account any potential dilution from our exchangeable notes or warrants outstanding or restricted stock units subject to performance metrics not currently achieved.

(3)

For deconsolidated CDOs, the fair value of N-Star CDO bonds was adjusted to reflect expected recovery value. For consolidated CDOs, NorthStar adjusted the GAAP book value (which includes net unrealized fair value gains on the CDO liabilities) to reflect the expected recovery of the CDO bonds and the fair value of the CDO equity at discount rates of 18-20%. Accordingly, we would not expect a change to adjusted book value if currently consolidated CDOs were deconsolidated as of December 31, 2013.


Manufactured Housing Communities Portfolio

As of December 31, 2013



($ in millions)





Total Portfolio




Number of communities


119

Number of pad rental sites


27,722




NOI(1)


$                                       100

Cost basis (2)


$1,488




NOI related to:



Pad rental sites


91%

Other


9%




WA occupancy


87%




(1) NOI is based on trailing twelve month actuals for communities owned by NorthStar

for the full year 2013 and annualized actual NOI from acquisition date through

December 31, 2013 for communities owned by NorthStar for less than twelve months.

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



















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


As of December 31, 2013


















State

%





Colorado

30.1%





Florida

20.6%





Utah (Salt Lake City)

18.8%





Texas

6.8%





New York

6.3%





Kansas

6.2%





Wyoming

5.8%





Missouri

2.2%





Illinois

1.9%





Michigan

0.8%





Arkansas

0.5%











Total

100.0%











(1) NOI is based on trailing twelve month actuals for communities owned by NorthStar

for the full year 2013 and annualized actual NOI from acquisition date through December 31, 2013

for communities owned by NorthStar for less than twelve months.    


 

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


3.9


$            33,829


$            22,300


$            11,529

Mar-2007

Citigroup, Inc.

Fort Mill, SC/Charlotte

165,000


6.8


34,303


29,164


5,139

Jun-2006

Covance, Inc.

Indianapolis, IN

333,600


12.0


34,519


26,601


7,918

Feb-2007

Credence Systems Corp.

Milpitas, CA/San Jose

178,213


3.2


30,144


20,056


10,088

Sep-2006

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

9 properties

467,971


2.1 - 10.7


64,503


44,805


19,698

Sep-2005

Electronic Data Systems Corp.

2 in MI / 1 in CA / 1 in PA

387,842


1.7


62,718


43,682


19,036

Aug-2005

GSA - U.S. Department of Agriculture

Salt Lake City, UT

117,553


3.3


23,257


13,688


9,569

Jun-2007

Kenco Logistic Services / East Penn Manufacturing Co.

Reading, PA

609,000


2.2 - 5.5


26,252


17,764


8,488

Jul-2006

Northrop Grumman Space & Mission Systems Corp.

Aurora, CO/Denver

183,529


1.5


42,400


31,232


11,168

Mar-2006

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

Rockaway, NJ/ Northern NJ

121,038


1.4 - 3.6


22,221


16,094


6,127

Feb-2006

Quantum Corporation (4)

Colorado Springs, CO

406,207


2.2 - 7.2


27,215


16,941


10,274













Total NRFC NNN Holdings, LLC Portfolio


3,169,065


4.8


$          401,361


$          282,327


$          119,034

























(1)

Remaining lease term as of December 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 December 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


$             628


$             (459)


$             169


12,582


not rated


Citigroup, Inc.


538


534


(516)


18


163,206


A- / A


Covance, Inc.


638


634


(522)


112


4,878


not rated


Credence Systems Corp. 


716


711


(450)


261


312


not rated


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


1,344


1,257


(981)


276


7,273


not rated

(2)

Electronic Data Systems Corp. 


1,546


1,540


(831)


709


13,900


not rated


GSA - U.S. Department of Agriculture


648


436


(304)


132


N/A


implied AAA


Kenco Logistic Services / East Penn Manufacturing Co.


384


380


(332)


48


N/A


not rated


Northrop Grumman Space & Mission Systems Corp.


887


887


(622)


265


25,263


BBB+/Baa2


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


468


468


(306)


162


362


B/B2

(3)

Quantum Corporation  (50%)


479


474


(329)


145


308


not rated
















Total


$        8,280


$         7,949


$        (5,652)


$         2,297


































(1)

Based on information from Bloomberg at close of market on December 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; the spin-off of our asset management business may not have the full or any strategic and financial benefits that we expect or such benefits may be delayed or may not materialize at all; our ability to enter into a long-term management contract with an affiliate of NSAM, as our manager, and the resulting effects of becoming an externally managed company, including the payment of substantial fees to our manager, the allocation of investments by our manager among us and the manager's other managed companies, and various conflicts of interest in our relationship with NSAM; our ability to enter into a definitive agreement and close on the term sheet to acquire the $1.05 billion healthcare real estate portfolio described in this press release on the terms contemplated or at all; our ability to realize the benefits of our strategic partnership with RXR, including our ability to achieve the expected yields on our invested equity, or at all; our ability to source and close on attractive investment opportunities; our ability to realize the benefits of our joint venture with Jay Flaherty, including the ability to source and consummate investment opportunities through the venture; our ability to maintain or increase our dividend; 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; our ability to grow our asset management business beyond existing non-traded REITs; whether we will realize any potential upside in our limited partnership interest in real estate private equity funds or any appreciation above our original cost basis of our real estate portfolio; 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 realize any potential upside in our limited partnership 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.



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