NorthStar Realty Finance Announces Second Quarter 2010 Results
NEW YORK, Aug. 5 /PRNewswire-FirstCall/ --
Second Quarter Highlights
- Second quarter 2010 AFFO per share of $0.41.
- NorthStar has $120 million available liquidity at June 30, 2010 including $109 million of unrestricted cash.
- Second quarter 2010 cash dividend of $0.10 per common share.
- NorthStar repaid bank debt reducing senior corporate recourse debt by 68%.
- NorthStar Real Estate Income Trust Inc., a NorthStar sponsored unlisted REIT with a $1.1 billion targeted equity raise, was declared effective by SEC in July.
- NorthStar in July acquired from CapitalSource Inc. a $1.1 billion commercial real estate loan CDO.
NorthStar Realty Finance Corp. (NYSE: NRF) today announced its results for the quarter ended June 30, 2010.
Second Quarter 2010 Results
NorthStar reported adjusted funds from operations ("AFFO") for the second quarter 2010 of $0.41 per share compared with $0.26 per share for the second quarter 2009. AFFO for the second quarter 2010 was $33.8 million compared with $19.5 million for the second quarter 2009. Net income to common stockholders for the second quarter 2010 was $32.0 million, or $0.42 per share, compared to a net loss of $(4.3) million, or $(0.06) per share for the second quarter 2009. Realized gains totaled $81.5 million for the second quarter 2010, compared to $23.3 million for the second quarter 2009. Second quarter 2010 net income includes $10.2 million of unrealized gains relating to non-cash mark-to-market adjustments, compared to $(1.9) million of unrealized losses relating to non-cash mark-to-market adjustments for the second quarter 2009. The non-cash mark-to-market gains and losses are excluded from AFFO.
At June 30, 2010, diluted GAAP book value per common share was $15.73. For a reconciliation of net income to AFFO and calculations of return on average common book equity and diluted book value per common share, please refer to the tables on the following pages.
David T. Hamamoto, chairman and chief executive officer, commented, "The discounted payoff of our secured bank debt during the second quarter significantly reduced our recourse debt maturities by over $300 million and increased our book value by $58 million. The repayment increased NorthStar's financial flexibility and provides us greater opportunity to capitalize on investments uniquely available through our platform."
Mr. Hamamoto continued, "Our July acquisition of a $1.1 billion commercial real estate CDO from CapitalSource consisting primarily of first mortgage loans for total consideration of $7 million is a very attractive investment opportunity. NorthStar was able to access and close on this deal because of our broad investment platform and experience in managing commercial real estate loans and complicated CDO financing structures. The fees related to the CDO over the next few years should cover our acquisition cost, and the possibility of eventually restoring cash distributions to the equity notes by applying intensive credit management creates very attractive upside potential."
Investment Summary
During the second quarter 2010, NorthStar funded $5 million relating to prior period loan commitments and received $96 million of loan repayments, including $23 million related to partial loan payoffs and $73 million related to the sale of three loans having a $93 million aggregate unpaid principal balance, representing a 22% discount to par. NorthStar acquired, during the second quarter 2010, $32 million of securities having a par amount of $52 million and having an average BBB-/Baa3 credit rating and received $76 million of proceeds from sales of securities. In addition, NorthStar repurchased $36 million of its issued CDO bonds for $7 million, representing an 81% discount to par. NorthStar sold a leasehold interest comprised of retail space located in New York City for approximately $3.3 million and realized a gain on sale of approximately $2.5 million. No net lease properties were acquired during the second quarter 2010.
NorthStar had approximately $6.5 billion of assets under management at June 30, 2010 based on book value (exclusive of the related reserve amounts) of loans, par of securities, and purchase prices of owned real estate assets.
Financing and Liquidity
On June 30, 2010, NorthStar fully repaid the approximately $304 million outstanding balance of its recourse secured term loans with Wells Fargo for $208 million in cash. As part of the payoff, NorthStar granted Wells Fargo a $35 million participation interest in a Eurodollar –denominated mezzanine loan collateralized by a German retail portfolio and warrants to purchase two million shares of NorthStar's common stock at $7.60 per share, exercisable immediately through June 30, 2020. This discounted payoff generated a net $58 million gain during the second quarter. The payoff reduced 2012 corporate debt maturities to approximately $68 million from $372 million, and eliminated $75 million of total amortization payments due the lender in advance of the debt's maturity date. The weighted-average cost of NorthStar's on-balance sheet debt was 2.62% at June 30, 2010.
Total available liquidity at June 30, 2010 was approximately $120 million, including $109 million of unrestricted cash and cash equivalents, and $11 million of uninvested and available cash in NorthStar's CDO financings. At June 30, 2010 NorthStar's only unrestricted cash needs relating to non-discretionary future funding obligations associated with existing loan commitments totaled approximately $4 million.
Risk Management
At June 30, 2010, NorthStar had two loans on non-performing loan (NPL) status having a $50 million aggregate outstanding principal balance, representing 2.7% of total loan assets. During the second quarter 2010 no loans were added to NPL status, and three loans having outstanding principal balances totaling $35 million were removed from the list. Two of the loans having maturity defaults but fully covering their debt service had their maturities extended, and one loan having a $14 million outstanding principal balance was sold for its $9 million net book value. NorthStar designates a loan as non-performing at such time as the loan becomes 90 days delinquent on contractual debt service payments or the loan has a maturity default.
During the second quarter 2010, NorthStar recorded $57 million of credit loss provisions relating to eight loans. The second quarter 2010 credit loss provision includes $8 million relating to a $40 million first mortgage hotel loan that was sold during quarter. In addition, NorthStar sold two loans for net proceeds approximately equal to their $41 million aggregate net book value during the second quarter. During the second quarter 2010, NorthStar also foreclosed on an $18 million first mortgage loan backed by office collateral located in Philadelphia, PA and recorded an impairment on operating real estate relating to the foreclosed asset of approximately $1 million. NorthStar had recorded credit loss provisions of approximately $9 million in prior quarters related to the loan. As of June 30, 2010, loan loss reserves totaled $136 million, or 7.3% of total loans, related to 11 loans having an aggregate $346 million book value (exclusive of the related reserve).
NorthStar's securities portfolio had two upgrade actions for $14 million and 761 downgrades representing $0.7 billion of securities during the second quarter 2010. NorthStar reports all current rating actions issued by each agency independently of actions issued during prior quarters. As of June 30, 2010 the average credit rating of NorthStar's real estate securities was BB-/Ba3, with approximately 58% having a vintage prior to 2006 based on the face value of the securities. During the second quarter 2010, S&P downgraded several classes of notes issued by N-Star II, IV, and VI, three of NorthStar's CDO financings. In addition, S&P and Moody's downgraded several classes of notes issued by N-Star IX, one of NorthStar's CDO financings that are primarily backed by real estate securities. Rating agency actions associated with NorthStar's issued CDO financings have no impact on the payment terms of such debt.
As of June 30, 2010, NorthStar's net lease portfolio was 89% leased and net lease assets have a 7.1-year weighted average remaining lease term. For more information regarding the core net lease assets (exclusive of healthcare net leased real estate), please refer to the tables on the following pages.
During the second quarter 2010 NorthStar acquired for $1 million the remaining 51% interest held by our former partner in a previously non-consolidated taxable REIT subsidiary which is the lessee of 34 senior housing properties owned by NorthStar. NorthStar now owns 100% of the subsidiary and consolidates the operations of these properties. The consolidation increased second quarter 2010 revenues and operating expenses by approximately $13 million and $10 million respectively, and decreased equity in earnings of unconsolidated ventures by approximately $3 million.
Andrew C. Richardson, chief financial officer and treasurer, commented, "In July the $1.1 billion registration statement for our registered non-traded REIT, NorthStar Real Estate Investment Trust. Inc. was declared effective by the SEC and we expect to begin raising capital in this NorthStar-advised REIT by the fourth quarter 2010. In the meantime, we continue to raise equity capital via a Reg. D offering in a separate advised REIT and believe that our capital raising in the non-traded REIT market will coincide with the availability of exceptional investment opportunities caused by the deep economic slump."
Stockholder's Equity and Dividends
At June 30, 2010, NorthStar had 82,353,071 total common shares and operating partnership units outstanding, and $73 million of non-controlling interest relating to its operating partnership. Book value per diluted common share was $15.73 at June 30, 2010. Exclusive of all unrealized mark-to-market adjustments, credit loss reserves, impairment charges on real estate owned, and accumulated depreciation and amortization, book value at June 30, 2010 would be $7.60 per diluted common share. For a calculation of book value per diluted common share, please refer to the table on the following pages.
On July 20, 2010, NorthStar announced that its Board of Directors declared a dividend of $0.10 per share of common stock, payable with respect to the quarter ended June 30, 2010. The dividend will be paid on August 16, 2010 to shareholders of record as of the close of business on August 6, 2010.
Subsequent Events
On July 8, 2010, NorthStar purchased from CapitalSource Inc. for approximately $7 million collateral management and special servicing rights, and the below investment grade notes of an approximately $1.1 billion collateralized debt obligation (CDO) consisting primarily of first mortgage loans on commercial real estate. This CDO had approximately $104 million cash available for investment at the acquisition date and was failing its overcollateralization coverage test. At closing, the CDO had 58 loans with a $1.1 billion total outstanding principal balance and 11 of the loans having an aggregate $164 million principal balance were non-performing. Approximately 99% of the loans are first mortgages, and the weighted average stated coupon, based on 0.29% LIBOR, was approximately 4.90%. The CDO has $1.0 billion of issued and outstanding notes having a weighted-average yield of 1.54%.
Earnings Conference Call
NorthStar will hold a conference call to discuss second quarter 2010 financial results on Thursday August 5, 2010, at 10:00 AM Eastern time. Hosting the call will be David Hamamoto, chairman, president and chief executive officer, and Andrew Richardson, chief financial officer and treasurer. The Company will post on its website, www.nrfc.com, a June 30, 2010 update to its corporate presentation.
The call will be webcast live over the Internet from NorthStar's website, www.nrfc.com, and will be archived on the Company's website. The call can also be accessed live over the phone by dialing 877-941-0843 or for international callers, by dialing 480-629-9643.
A replay of the call will be available one hour after the call through Thursday August 12, 2010 by dialing 800-406-7325 or 303-590-3030 for international callers, using pass code 4330777.
About NorthStar Realty Finance Corp.
NorthStar Realty Finance Corp. is a finance REIT that primarily originates and invests in commercial real estate debt, real estate securities and net lease properties. For more information about NorthStar Realty Finance Corp., please visit www.nrfc.com.
NorthStar Realty Finance Corp. |
|||||||||
Consolidated Statements of Operations |
|||||||||
($ in thousands, except per share amounts) |
|||||||||
Three Months Ended |
Six Months Ended |
||||||||
2010 |
2009 |
2010 |
2009 |
||||||
(unaudited) |
(unaudited) |
(unaudited) |
(unaudited) |
||||||
Revenues and other income: |
|||||||||
Interest income |
$60,721 |
$35,749 |
$118,296 |
$72,530 |
|||||
Interest income – related parties |
300 |
4,443 |
921 |
8,950 |
|||||
Rental and escalation income |
33,884 |
21,928 |
55,257 |
46,689 |
|||||
Advisory and management fee income – related parties |
464 |
1,808 |
982 |
3,499 |
|||||
Commission income |
372 |
- |
372 |
- |
|||||
Other revenue |
192 |
177 |
1,247 |
345 |
|||||
Total revenues |
95,933 |
64,105 |
177,075 |
132,013 |
|||||
Expenses: |
|||||||||
Interest expense |
35,727 |
30,899 |
67,712 |
63,997 |
|||||
Real estate properties – operating expenses |
10,765 |
2,711 |
12,366 |
4,761 |
|||||
Asset management fees – related parties |
16 |
840 |
466 |
1,677 |
|||||
Commission expense |
278 |
- |
278 |
- |
|||||
Impairment on operating real estate |
1,180 |
- |
1,180 |
- |
|||||
Provision for loan losses |
56,941 |
17,000 |
93,257 |
38,462 |
|||||
General and administrative: |
|||||||||
Salaries and equity-based compensation (1) |
12,313 |
11,235 |
28,845 |
22,845 |
|||||
Auditing and professional fees |
2,523 |
2,264 |
5,463 |
4,518 |
|||||
Other general and administrative |
5,924 |
3,461 |
9,936 |
7,027 |
|||||
Total general and administrative |
20,760 |
16,960 |
44,244 |
34,390 |
|||||
Depreciation and amortization |
8,351 |
16,779 |
16,760 |
30,990 |
|||||
Total expenses |
134,018 |
85,189 |
236,263 |
174,277 |
|||||
(Loss) from operations |
(38,085) |
(21,084) |
(59,188) |
(42,264) |
|||||
Equity in earnings/(loss) of unconsolidated ventures |
4,866 |
159 |
6,215 |
(4,259) |
|||||
Unrealized (loss)/gain on investments and other |
(6,397) |
(616) |
(8,240) |
90,045 |
|||||
Realized gain on investments and other |
81,538 |
23,283 |
82,971 |
60,196 |
|||||
Income from continuing operations |
41,922 |
1,742 |
21,758 |
103,718 |
|||||
Income from discontinued operations |
123 |
727 |
183 |
1,482 |
|||||
Gain on sale from discontinued operations |
2,528 |
- |
2,528 |
- |
|||||
Consolidated net income |
44,573 |
2,469 |
24,469 |
105,200 |
|||||
Less: net income attributable to the non-controlling interests |
(7,357) |
(1,490) |
(6,945) |
(14,355) |
|||||
Preferred stock dividends |
(5,231) |
(5,231) |
(10,463) |
(10,463) |
|||||
Net income/(loss) attributable to NorthStar Realty Finance Corp. common stockholders |
$31,985 |
($4,252) |
$7,061 |
$80,382 |
|||||
Net income/(loss) per common share attributable to NorthStar Realty Finance Corp. common stockholders (basic/diluted) |
$0.42 |
($0.06) |
$0.09 |
$1.22 |
|||||
Weighted average number of shares of common stock: |
|||||||||
Basic |
76,407,339 |
67,353,541 |
76,579,403 |
65,964,065 |
|||||
Diluted |
82,279,682 |
75,049,690 |
82,305,725 |
73,660,271 |
|||||
(1) The three months ended June 30, 2010 and 2009 include $4,181 and $5,320 respectively, of equity-based compensation expense. |
|||||||||
NorthStar Realty Finance Corp. |
|||||
Consolidated Balance Sheets |
June 30, |
December 31, |
|||
($ in thousands) |
2010 |
2009 |
|||
(unaudited) |
|||||
ASSETS: |
|||||
Cash and cash equivalents |
$109,081 |
$138,928 |
|||
Restricted cash (includes $127,642 and $74,453 from consolidated VIEs, respectively) |
175,313 |
129,180 |
|||
Operating real estate – net (includes $8,000 and $- from consolidated VIEs, respectively) |
960,340 |
978,902 |
|||
Available for sale securities, at fair value (includes $1,265,078 and $283,184 from consolidated VIEs, respectively) |
1,317,564 |
336,220 |
|||
Real estate debt investments, net (includes $1,513,928 and $1,356,038 from consolidated VIEs, respectively) |
1,692,282 |
1,936,482 |
|||
Real estate debt investments, held-for-sale |
- |
611 |
|||
Investments in and advances to unconsolidated ventures |
25,739 |
38,299 |
|||
Receivables, net of allowance of $117 in 2010 and $1,349 in 2009 (includes net $18,102 and $7,421 from consolidated VIEs, respectively) |
23,880 |
17,912 |
|||
Unbilled rents receivable |
9,506 |
10,206 |
|||
Derivative instruments, at fair value (includes $35 and $- from consolidated VIEs, respectively) |
35 |
- |
|||
Deferred costs and intangible assets, net |
52,619 |
57,551 |
|||
Assets of properties held for sale |
4,134 |
- |
|||
Other assets (includes $3,092 and $2,888 from consolidated VIEs, respectively) |
26,363 |
25,273 |
|||
Total assets |
$4,396,856 |
$3,669,564 |
|||
LIABILITIES: |
|||||
Mortgage notes and loans payable |
794,709 |
795,915 |
|||
Exchangeable senior notes |
126,426 |
125,992 |
|||
Bonds payable, at fair value (includes $1,339,750 and $584,615 from consolidated VIEs, respectively) |
1,339,750 |
584,615 |
|||
Secured term loans |
60,304 |
368,865 |
|||
Liability to subsidiary trusts issuing preferred securities, at fair value |
145,863 |
167,035 |
|||
Obligations under capital leases |
74 |
3,527 |
|||
Accounts payable and accrued expenses (includes $5,795 and $1,631 from consolidated VIEs, respectively) |
30,771 |
30,071 |
|||
Escrow deposits payable (includes $48,265 and $28,608 from consolidated VIEs, respectively) |
49,126 |
39,461 |
|||
Derivative liability, at fair value (includes $148,143 and $46,187 from consolidated VIEs, respectively) |
180,510 |
67,044 |
|||
Liabilities of properties held for sale |
1,971 |
- |
|||
Other liabilities (includes $360 and $358 from consolidated VIEs, respectively) |
26,257 |
28,399 |
|||
Total liabilities |
2,755,761 |
2,210,924 |
|||
EQUITY: |
|||||
NorthStar Realty Finance Corp. Stockholders’ Equity: |
|||||
8.75% Series A preferred stock, $0.01 par value, $25 liquidation preference per share, 2,400,000 shares issued and outstanding at June 30, 2010 and December 31, 2009, respectively |
57,867 |
57,867 |
|||
8.25% Series B preferred stock, $0.01 par value, $25 liquidation preference per share, 7,600,000 shares issued and outstanding at June 30, 2010 and December 31, 2009, respectively |
183,505 |
183,505 |
|||
Common stock, $0.01 par value, 500,000,000 shares authorized, 77,118,834 and 74,882,600 shares issued and outstanding at June 30, 2010 and December 31, 2009, respectively |
771 |
749 |
|||
Additional paid-in capital |
698,735 |
662,805 |
|||
Retained earnings |
574,857 |
460,915 |
|||
Accumulated other comprehensive loss |
(51,783) |
(92,670) |
|||
Total NorthStar Realty Finance Corp. Stockholders’ Equity |
1,463,952 |
1,273,171 |
|||
Non-controlling interest |
177,143 |
185,469 |
|||
Total equity |
1,641,095 |
1,458,640 |
|||
Total liabilities and stockholders’ equity |
$4,396,856 |
$3,669,564 |
|||
Three Months Ended |
Six Months Ended |
||||||||
June 30, |
June 30, |
||||||||
2010 |
2009 |
2010 |
2009 |
||||||
Funds from Operations: |
|||||||||
Income from continuing operations |
$41,922 |
$1,742 |
$21,758 |
$103,718 |
|||||
Non-controlling interest in joint ventures |
(4,965) |
(1,976) |
(6,927) |
(4,440) |
|||||
Consolidated net income/(loss) before non-controlling interest |
|||||||||
in operating partnership |
36,957 |
(234) |
14,831 |
99,278 |
|||||
Adjustments: |
|||||||||
Preferred stock dividends |
(5,231) |
(5,231) |
(10,463) |
(10,463) |
|||||
Depreciation and amortization |
8,351 |
16,779 |
16,760 |
30,990 |
|||||
Funds from discontinued operations |
135 |
1,330 |
318 |
2,688 |
|||||
Real estate depreciation and amortization – |
|||||||||
unconsolidated ventures |
237 |
247 |
474 |
494 |
|||||
Funds from Operations |
40,449 |
12,891 |
$21,920 |
$122,987 |
|||||
Adjusted Funds from Operations: |
|||||||||
Funds from Operations |
$40,449 |
$12,891 |
$21,920 |
$122,987 |
|||||
Straight-line rental income, net |
(361) |
(699) |
(907) |
(1,171) |
|||||
Straight-line rental income, discontinued operations |
|||||||||
Straight-line rental income and fair value lease revenue, unconsolidated ventures |
(19) |
(25) |
(45) |
(57) |
|||||
Amortization of equity-based compensation |
4,181 |
5,320 |
9,239 |
10,464 |
|||||
Amortization of above/below market leases |
(214) |
163 |
(478) |
(162) |
|||||
Unrealized (gains)/losses from mark-to-market |
|||||||||
adjustments |
(12,926) |
(3,847) |
(33,777) |
(98,410) |
|||||
Unrealized (gains)/losses from mark-to-market |
|||||||||
adjustments, unconsolidated ventures |
2,731 |
5,728 |
3,357 |
8,493 |
|||||
Adjusted Funds from Operations |
$33,841 |
$19,531 |
($691) |
$42,144 |
|||||
FFO per share of common stock |
$0.49 |
$0.17 |
$0.27 |
$1.67 |
|||||
AFFO per share of common stock |
$0.41 |
$0.26 |
($0.01) |
$0.57 |
|||||
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 U.S. GAAP, within the meaning of applicable SEC rules. These include: (i) Funds From Operations; (ii) Adjusted Funds From Operations; (iii) Return on Average Common Book Equity; and (iv) Return on Average Common Book Equity by business line. The following discussion defines these terms, which NorthStar believes can be useful measures of its performance.
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 or loss (computed in accordance with GAAP), excluding gains or losses from sales of depreciable properties, the cumulative effect of changes in accounting principles, real estaterelated depreciation and amortization, and after adjustments for unconsolidated/uncombined partnerships and joint ventures. AFFO, 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 the straightlining of rents and fair value lease revenue;
- the amortization or accrual of various deferred costs including intangible assets and equity-based compensation; 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 U.S. 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.
Return on Average Common Book Equity
NorthStar calculates return on average common book equity ("ROE") on a consolidated basis and for each of NorthStar's major business lines. NorthStar believes that ROE provides investors and management with a good indication of the performance of the Company and its business lines because it provides the best approximation of cash returns on common equity invested. Management also uses ROE, among other factors, to evaluate profitability and efficiency of equity capital employed, and as a guide in determining where to allocate capital within its business. ROEs may fluctuate from quarter to quarter based upon a variety of factors, including the timing and amount of investment fundings, repayments and asset sales, capital raised and leverage used, and the yield on investments funded.
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.
Return on Average Common Book Equity (including and excluding G&A) |
||||||
($ in thousands) |
||||||
Three Months |
||||||
Ended |
||||||
June 30, 2010 |
Annualized (2) |
|||||
Adjusted Funds from Operations (AFFO) |
$33,841 |
$135,364 |
(A) |
|||
Plus: General & administrative expenses |
20,760 |
|||||
Less: Equity-based compensation included in G&A |
4,181 |
|||||
AFFO, excluding G&A |
50,420 |
201,680 |
(B) |
|||
Average Common Book Equity & Operating Partnership Non-Controlling Interest (1) |
$1,280,959 |
(C) |
||||
Return on Average Common Book Equity (including G&A) |
10.6% |
(A)/(C) |
||||
Return on Average Common Book Equity (excluding G&A) |
15.7% |
(B)/(C) |
||||
(1) Average Common Book Equity & Operating Partnership Non-Controlling Interest computed using beginning and ending of period |
||||||
(2) Annualized numbers are calculated by taking the current quarter amounts and multiplying by four. |
||||||
Return on Average Common Book Equity by Business Segment (Pre-G&A) |
||||||||||||||
Including and Excluding Mark-to-Market Adjustments, Credit Loss Reserves, Impairment Charges, and Accumulated Depreciation |
||||||||||||||
($ in thousands) |
||||||||||||||
Lending |
Securities |
Healthcare Net Lease |
Core Net Lease |
Corporate / Other (1) |
Total |
|||||||||
AFFO, Pre-G&A |
$10,812 |
$28,975 |
$2,786 |
$1,574 |
$6,273 |
$50,420 |
||||||||
Annualized (A) |
43,248 |
115,900 |
11,144 |
6,296 |
25,092 |
201,680 |
||||||||
Average common book equity and operating |
||||||||||||||
partnership non-controlling interest (B) (2) |
$764,058 |
$285,858 |
$27,229 |
$44,972 |
$158,842 |
$1,280,959 |
||||||||
Allocated cumulative mark-to-market adjustments for assets, liabilities and interest rate swaps |
(436,093) |
(208,644) |
(38,144) |
(43,028) |
(37,020) |
(762,929) |
||||||||
Accumulated depreciation and amortization |
- |
- |
60,271 |
63,144 |
- |
123,415 |
||||||||
Average common book equity and operating partnership |
$327,965 |
$77,214 |
$49,356 |
$65,088 |
$121,822 |
$641,445 |
||||||||
ROE, Net (A/B) |
5.7% |
40.5% |
40.9% |
14.0% |
15.8% |
15.7% |
||||||||
ROE, Gross (A/C) |
13.2% |
150.1% |
22.6% |
9.7% |
20.6% |
31.4% |
||||||||
(1) Corporate / other average common book equity and operating partnership non-controlling interest includes $109 million of unrestricted cash. |
||||||||||||||
(2) Average common book equity & operating partnership non-controlling interest computed using beginning and ending |
||||||||||||||
Management Fees From NorthStar CDO Financings at June 30, 2010 |
||||||||||
($ in thousands) |
||||||||||
Annualized |
||||||||||
Fee - Based |
Annual Management Fee % |
Management Fee |
||||||||
Assets |
Senior |
Subordinate |
Total |
Revenue |
||||||
N-Star I (1) |
$270,347 |
0.15% |
0.20% |
0.35% |
$946 |
|||||
N-Star II (1) |
278,078 |
0.15% |
0.20% |
0.35% |
973 |
|||||
N-Star III (1) |
417,008 |
0.15% |
0.20% |
0.35% |
1,460 |
|||||
N-Star IV |
455,500 |
0.15% |
0.20% |
0.35% |
1,594 |
|||||
N-Star V (1) |
584,271 |
0.15% |
0.20% |
0.35% |
2,045 |
|||||
N-Star VI |
485,049 |
0.15% |
0.25% |
0.40% |
1,940 |
|||||
N-Star VII |
646,181 |
0.15% |
0.20% |
0.35% |
2,262 |
|||||
N-Star VIII |
985,464 |
0.15% |
0.25% |
0.40% |
3,942 |
|||||
N-Star IX (2) |
787,512 |
0.15% |
0.25% |
0.40% |
3,150 |
|||||
Total |
$4,909,410 |
$18,312 |
||||||||
(1) As of January 1, 2010 the CDOs are consolidated and NorthStar has elected the fair value option for the |
||||||||||
(2) As of June 30, 2010, N-Star IX is owned by the NorthStar Real Estate Securities Opportunity Fund. NorthStar |
||||||||||
NorthStar CDO Financings Cash Distributions and Coverage Test Summary |
|||||||||||
($ in thousands) |
|||||||||||
Quarterly |
|||||||||||
Cash Distributions (1) |
Interest Coverage |
Overcollateralization |
|||||||||
Primary |
Quarter Ended |
Cushion (2) |
Cushion |
||||||||
Collateral |
June 30, |
June 30, |
June 30, |
At |
|||||||
Type |
2010 |
2010 |
2010 |
Offering |
|||||||
N-Star I (3) |
CMBS |
$314 |
$129 |
$4,377 |
$8,687 |
||||||
N-Star II |
CMBS |
20 |
137 |
82 |
10,944 |
||||||
N-Star III |
CMBS |
2,123 |
1,644 |
34,430 |
13,610 |
||||||
N-Star IV |
Loans |
2,006 |
2,828 |
91,339 |
19,808 |
||||||
N-Star V |
CMBS |
1,636 |
2,374 |
40,232 |
12,940 |
||||||
N-Star VI |
Loans |
708 |
3,684 |
49,496 |
17,412 |
||||||
N-Star VII |
CMBS |
2,200 |
1,513 |
29,300 |
13,966 |
||||||
N-Star VIII |
Loans |
3,659 |
5,803 |
130,421 |
42,193 |
||||||
N-Star IX (4) |
CMBS |
1,776 |
1,538 |
64,589 |
24,516 |
||||||
Table shows cash distributions to the retained income notes. Interest coverage and overcollateralization coverage to the |
|||||||||||
(1) Cash distributions are exclusive of senior management fees which are not subject to the coverage tests. |
|||||||||||
(2) Quarterly interest cushion and overcollateralization cushions from remittance report issued on date nearest to June 30, |
|||||||||||
(3) N-Star I equity cash flow represent NorthStar's 83% ownership percentage. |
|||||||||||
(4) As of June 30, 2010, NorthStar indirectly owns approximately 31% of N-Star IX income notes through its interest in the |
|||||||||||
CMBS Vintages Under Management |
|||||||
($ in thousands) |
|||||||
$ |
% |
Cumulative |
|||||
1996 |
$133 |
0.0% |
0.0% |
||||
1997 |
40,811 |
2.0% |
2.0% |
||||
1998 |
85,711 |
4.1% |
6.1% |
||||
1999 |
30,456 |
1.6% |
7.7% |
||||
2000 |
115,610 |
5.5% |
13.2% |
||||
2001 |
88,826 |
4.2% |
17.4% |
||||
2002 |
67,717 |
3.2% |
20.6% |
||||
2003 |
121,018 |
5.8% |
26.4% |
||||
2004 |
283,310 |
13.6% |
40.0% |
||||
2005 |
374,570 |
17.8% |
57.8% |
||||
2006 |
465,946 |
22.3% |
80.1% |
||||
2007 |
256,633 |
12.3% |
92.4% |
||||
2008 |
90,540 |
4.3% |
96.7% |
||||
2009 |
69,076 |
3.3% |
100.0% |
||||
Total |
$2,090,357 |
100.0% |
|||||
Securities Fund |
673,320 |
||||||
Total CMBS |
$2,763,677 |
||||||
Credit Ratings Distribution of Securities Under Management |
||||
($ in thousands) |
||||
$ |
% |
|||
AAA |
$90,336 |
3.6% |
||
AA |
42,247 |
1.7% |
||
A |
210,477 |
8.3% |
||
BBB |
717,759 |
28.4% |
||
BB |
474,084 |
18.9% |
||
B |
429,441 |
17.0% |
||
CCC |
213,104 |
8.4% |
||
CC |
154,386 |
6.1% |
||
C |
115,889 |
4.6% |
||
Below C |
76,879 |
3.0% |
||
Total |
$2,524,602 |
100.0% |
||
Securities Fund |
806,587 |
|||
Total Securities |
$3,331,189 |
|||
Assets Under Management at June 30, 2010 |
||||
($ in thousands) |
||||
$ |
% |
|||
Investment grade securities |
$1,222,181 |
19.0% |
||
First mortgage (1) |
1,026,183 |
15.9% |
||
Investment grade net lease (2) |
161,845 |
2.5% |
||
Non-investment grade securities |
2,109,008 |
32.7% |
||
Mezzanine and other subordinate loans (3) |
957,208 |
14.8% |
||
Non-investment grade net lease (2) |
976,660 |
15.1% |
||
Total |
$6,453,085 |
100.0% |
||
(1) Includes $241 million of junior participations in first mortgages. |
||||
(2) Net lease amounts prior to accumulated depreciation and impact of purchase price allocations. |
||||
(3) Includes $40 million of equity investments primarily related to real estate loans, equity |
||||
Second Quarter Funded Securities Investment Statistics |
||||
($ in thousands) |
||||
Amount |
||||
CMBS |
$28,265 |
|||
REIT Debt |
2,429 |
|||
CDO Debt |
1,280 |
|||
Total Securities |
$31,974 |
|||
(1) Par amount was $52 million. |
||||
Book Value Rollforward |
|||||
($ in thousands, except per share data) |
|||||
$ |
Per Share |
||||
Common book value at March 31, 2010 (diluted) |
$1,266,358 |
$15.40 |
|||
Net income to common shareholders and non-controlling interest, excluding non-cash |
|||||
mark-to-market items included in net income |
24,181 |
0.29 |
|||
Mark-to-market adjustments included in net income: |
|||||
Securities fund |
(2,731) |
(0.03) |
|||
CDO notes |
(86,579) |
(1.05) |
|||
Trust preferred debt |
44,982 |
0.55 |
|||
Securities and investments held at market value |
86,433 |
1.05 |
|||
Swaps and other hedges |
(31,910) |
(0.39) |
|||
Mark-to-market adjustments in other comprehensive income and |
|||||
non-controlling interest: |
|||||
Effective hedges |
(1,182) |
(0.01) |
|||
Available-for-sale securities |
(94) |
(0.00) |
|||
Common dividends |
(8,223) |
(0.10) |
|||
Accretion/(dilution) from additional shares issued during quarter (1) |
4,324 |
0.02 |
|||
Total net increases/(decreases) |
29,201 |
0.33 |
|||
Common book value at June 30, 2010 (diluted) (2) |
$1,295,559 |
$15.73 |
|||
(1) Primarily relates to amortization of LTIP shares and issuance of common shares from DRIP and DSPP. |
|||||
(2) Cumulative net mark-to-market adjustments total a positive $948.9 million ($11.52 per diluted share), credit loss reserves and impairment |
|||||
NRFC NNN Holdings, LLC Portfolio Summary |
||||||||||||
($ in thousands) |
||||||||||||
Years |
Acquisition |
|||||||||||
Date |
Square |
Net |
Acquisition |
Existing |
Cost less |
|||||||
Acquired |
Tenant or Guarantor of Tenant |
Location/MSA |
Feet |
Lease (1) |
Cost (2) |
Debt |
Debt |
|||||
Oct-2004 |
ALGM Portfolio - Various (3) (4) |
Two properties in New York, NY |
25,165 |
1.0-6.0 |
$7,710 |
(5) |
$0 |
$7,710 |
||||
Nov-2007 |
Alliance Data Systems Corp. |
Columbus, OH |
199,112 |
7.4 |
33,826 |
23,377 |
10,449 |
|||||
Mar-2007 |
Citigroup, Inc. |
Fort Mill, SC/Charlotte |
165,000 |
10.3 |
34,303 |
30,314 |
3,989 |
|||||
Jun-2007 |
Landis Logistics (6) |
Reading, PA |
609,000 |
6.5 |
28,473 |
18,776 |
9,697 |
|||||
Jun-2006 |
Covance, Inc. |
Indianapolis, IN |
333,600 |
15.5 |
34,519 |
27,966 |
6,553 |
|||||
Feb-2007 |
Credence Systems Corp. |
Milpitas, CA/San Jose |
178,213 |
6.7 |
30,144 |
21,875 |
8,269 |
|||||
Sep-2006 |
Dick's Sporting Goods, Inc. / PetSmart, Inc. (4) |
9 properties |
467,971 |
5.6-14.2 |
64,503 |
48,119 |
16,384 |
|||||
Sep-2005 |
Electronic Data Systems Corp. |
2 in MI / 1 in CA / 1 in PA |
387,842 |
5.3 |
62,718 |
46,599 |
16,118 |
|||||
Dec-2005 |
Cincom Systems, Inc. (7) |
Springdale, OH/Cincinnati |
486,963 |
11.5 |
69,341 |
52,491 |
16,850 |
|||||
Aug-2005 |
GSA - U.S. Department of Agriculture |
Salt Lake City, UT |
117,553 |
1.8 |
22,424 |
15,267 |
7,157 |
|||||
Jul-2006 |
Northrop Grumman Space & Mission Systems Corp. (8) |
Aurora, CO/Denver |
183,529 |
5.0 |
43,625 |
33,742 |
9,883 |
|||||
Mar-2006 |
Party City Corp. (Amscan) / Lerner Enterprises, Inc. |
Rockaway, NJ/ Northern NJ |
121,038 |
4.9-7.1 |
21,955 |
17,002 |
4,953 |
|||||
Feb-2006 |
Quantum Corporation (9) |
Colorado Springs, CO |
406,207 |
0.7-10.7 |
27,635 |
18,042 |
9,593 |
|||||
Total NRFC NNN Holdings, LLC Portfolio |
3,681,193 |
7.3 |
$481,176 |
$353,570 |
$127,606 |
|||||||
(1) Remaining lease terms as of June 30, 2010. Total represents weighted average based on acquisition cost. |
||||||||||||
(2) Acquisition cost does not include purchase price allocations. |
||||||||||||
(3) On May 18, 2010, a 10,800 square foot property in the portfolio sold for $3.3 million, and the proceeds are being held for use in acquiring a suitable replacement property. In addition, an |
||||||||||||
(4) The two ALGM portfolio properties, and six of ten Dick's Sporting Goods, Inc. / PetSmart, Inc. properties are ground lease interests. |
||||||||||||
(5) The two ALGM properties were owned by NorthStar's predecessor prior to NorthStar's initial public offering. The value in acquisition cost column reflects the undepreciated book value |
||||||||||||
(6) Landis Logistics commenced a seven year lease on January 5, 2010 for 105,000 square feet. |
||||||||||||
(7) As of March 15 , 2010, General Electric Co. vacated approximately 312,409 square feet of space. |
||||||||||||
(8) The Northrop Grumman Space & Mission Systems Corp. property is financed with a $32.8 first mortgage with a third party and a $0.9 million mezzanine loan held by a consolidated |
||||||||||||
Portfolio Cash Flow and Tenant Credit Profile |
||||||||||||||
($ in thousands) |
Three Months Ended June 30, 2010 |
Primary Tenant |
||||||||||||
NOI Less |
Actual |
|||||||||||||
Tenant or Guarantor of Tenant |
Base Rent |
NOI |
Debt Service |
Debt Service |
Market Cap (1) |
Credit Rating |
||||||||
ALGM Portfolio - Various |
$499 |
$305 |
- |
$305 |
mixed tenants |
|||||||||
Alliance Data Systems Corp. |
582 |
581 |
(455) |
126 |
$3,166 |
not rated |
||||||||
Citigroup, Inc. |
525 |
524 |
(501) |
22 |
108,948 |
A/A3 |
||||||||
Landis Logistics (2) |
67 |
(57) |
(333) |
(390) |
N/A |
(3) |
not rated |
|||||||
Covance, Inc. |
608 |
607 |
(518) |
90 |
3,354 |
not rated |
(4) |
|||||||
Credence Systems Corp. |
674 |
657 |
(447) |
210 |
441 |
not rated |
||||||||
Dick's Sporting Goods, Inc. / PetSmart, Inc. |
1,285 |
1,246 |
(974) |
271 |
2,939 |
not rated |
(5) |
|||||||
Electronic Data Systems Corp. |
1,371 |
1,341 |
(825) |
516 |
13,900 |
not rated |
(6) |
|||||||
Cincom Systems, Inc. (7) |
578 |
574 |
(862) |
(288) |
N/A |
(3) |
not rated |
|||||||
GSA - U.S. Department of Agriculture |
579 |
463 |
(303) |
160 |
N/A |
implied AAA |
||||||||
Northrop Grumman Space & Mission Systems Corp. |
814 |
814 |
(701) |
113 |
17,521 |
BBB+/Baa1 |
||||||||
Party City Corp. (Amscan) / Lerner Enterprises, Inc. |
439 |
439 |
(304) |
135 |
362 |
(8) |
B/B2 |
(9) |
||||||
Quantum Corporation (50%) |
624 |
622 |
(322) |
299 |
432 |
B-/B3 |
||||||||
Total |
$8,645 |
$8,116 |
(6,546) |
$1,570 |
||||||||||
(1) Based on information from Bloomberg at close of market on June 30, 2010. |
||||||||||||||
(2) Landis Logistics lease includes first four months full rent abatement and four additional months of half rent abatement in the first year of the lease. |
||||||||||||||
(3) Privately-held company, market capitalization information is not publicly disclosed. |
||||||||||||||
(4) Covance has a $1.4 billion net worth and no long-term debt according to its March 31, 2010 financial statements. |
||||||||||||||
(5) PetSmart, Inc. is rated BB by S&P. |
||||||||||||||
(6) In August 2008, Hewlett-Packard Co. purchased Electronic Data Systems for $13.9 billion. During the first quarter of 2010, ratings for EDS were withdrawn. |
||||||||||||||
(7) As of March 15 , 2010, General Electric Co. vacated approximately 312,409 square feet of space. GE's quarterly base rent had been $771,000. |
||||||||||||||
(8) In December 2005, Amscan Holdings, Inc. (controlled by Berkshire Partners and Weston Presidio) purchased Party City for $362 million. |
||||||||||||||
(9) 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
Certain items in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and beliefs and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements; NorthStar Realty can give no assurance that its expectations will be attained. Factors that could cause actual results to differ materially from NorthStar Realty's expectations include, but are not limited to changes in economic conditions generally and the real estate and bond markets specifically, legislative or regulatory changes (including changes to laws governing the taxation of REITs), availability of capital, interest rates and interest rate spreads, policies and rules applicable to REITs, the continued service of key management personnel, the effect of competition in the real estate finance industry, the costs associated with compliance and corporate governance, including the Sarbanes-Oxley Act and related regulations and requirements, and other risks detailed from time to time in NorthStar Realty's SEC reports. Factors that could cause actual results to differ materially from those in the forward-looking statements will be specified in the Company's Annual Report on Form 10-K for the year ended December 31, 2009. Such forward-looking statements speak only as of the date of this press release. NorthStar Realty expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.
SOURCE NorthStar Realty Finance Corp.
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