UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 25, 2005 (March 21, 2005)
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NORTHSTAR REALTY FINANCE CORP.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 001-32330 11-3707493
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(STATE OR OTHER (COMMISSION (IRS EMPLOYER
JURISDICTION OF FILE NUMBER) IDENTIFICATION NO.)
INCORPORATION)
527 MADISON AVENUE, 16TH FLOOR, NEW YORK 10022
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(212) 319-8801
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(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
NORTHSTAR REALTY FINANCE CORP.
CURRENT REPORT ON FORM 8-K
ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN
OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT.
On March 21, 2005, NRFC DB Holdings, LLC, one of our subsidiaries, amended
and restated the $150 million master repurchase agreement (the "Amended
Facility") that it originally entered into with Deutsche Bank AG, Cayman Islands
Branch on December 21, 2004 (the "Original Facility"). The purpose of the
restatement of the Original Facility is to allow NRFC DB Holdings, LLC to borrow
up to $300 million in order to finance the acquisition of primarily subordinate
real estate debt and other real estate loans and securities. The additional
capacity and flexibility under the terms of the Amended Facility will allow for
the accumulation of sufficient collateral for a contemplated collateralized debt
obligation offering for which a lead manager has been engaged (the "Subordinate
Real Estate Debt CDO") and to continue to finance other investments not intended
to be included in the Subordinate Real Estate Debt CDO.
If and when the Subordinate Real Estate Debt CDO closes, the availability
under the Amended Facility will be reduced to $150 million. In the event the
Subordinate Real Estate Debt CDO closing does not occur prior to September 17,
2005, the availability under the Amended Facility will remain at $300 million
and certain economic terms of the Amended Facility will be adjusted as described
below.
Under the terms of the Original Facility, NRFC DB Holdings was able to
finance the acquisition of mortgage loans secured by first liens on commercial
or multifamily properties, junior participation interests in mortgage loans
secured by first or second liens on commercial or multifamily properties,
mezzanine loans secured by a pledge of the entire ownership interest in a
commercial or multifamily property, B- or higher rated commercial mortgage
backed securities and BB- or higher rated real estate CDOs or debt securities
issued by a real estate investment trust. NRFC DB Holdings may finance the
above-described loans and securities under the Amended Facility, except that the
real estate CDOs financed must be rated BB or higher. In addition, NRFC DB
Holdings may finance syndicated bank loans under the Amended Facility.
From March 21, 2005 until the earlier of the closing of the Subordinate
Real Estate Debt CDO and September 17, 2005 (the "CDO Ramp-up Period"), amounts
advanced under the Amended Facility in order to finance the acquisition of
assets to be included in the Subordinate Real Estate Debt CDO ("CDO Assets")
bear interest at one-month LIBOR plus a spread of 1.00% and amounts advanced for
all other assets bear interest at one-month LIBOR plus a spread which ranges
from 0.75% to 2.25%. After the CDO Ramp-up Period, all amounts advanced under
the Amended Facility will bear interest at a rate of one-month LIBOR plus the
spread which ranges from 0.75% to 2.25%.
During both the CDO Ramp-up Period and after the CDO Ramp-up Period, assets
in the Amended Facility will be financed at advance rates ranging from 40% to
92.5% of the value of the assets as applicable to the asset category. In
addition, during the CDO Ramp-up Period, NRFC DB Holdings will have the option
to fix the advance rate on any CDO Assets at a specific predetermined level,
subject to certain conditions.
We agreed to guaranty amounts borrowed by NRFC DB Holdings under the
Original Facility up to a maximum of $20 million and this guaranty remains in
place under the Amended Facility. The covenants under the guaranty require us to
remain at a certain minimum tangible net worth, a certain minimum debt service
coverage ratio, a certain range of ratios of recourse indebtedness to net worth
and certain minimum amounts of cash or marketable securities based on our ratio
of recourse indebtedness to net worth.
The Amended Facility has an initial three-year term, which may be extended
for one additional year if NRFC DB Holdings is not in default and pays an
extension fee of 0.25% of the aggregate outstanding amount under the Amended
Facility. If NRFC DB Holdings extends the term of the Amended Facility, it will
be required to retire 25% of the aggregate outstanding amount each quarter
during the remaining year of the term.
The debt that may be outstanding under the Amended Facility is subject to a
number of terms, conditions and restrictions including, without limitation, the
maintenance of certain margin percentages on amounts outstanding under the
Amended Facility. If the market value of an asset securing the outstanding debt
declines, cash flow due NRFC DB Holdings may be suspended and if market value
continues to decline, NRFC DB Holdings may be required to satisfy a margin call
by paying cash or providing additional collateral. Failure to meet any margin
call could result in an event of default which would enable Deutsche Bank AG to
exercise various rights and remedies including acceleration of the maturity date
of the debt outstanding under the Amended Facility and the sale of the assets in
the Amended Facility.
As of March 24, 2005, NRFC DB Holdings has borrowed approximately
$132 million under this Amended Facility in order to finance the acquisition of
approximately $198 million of subordinate real estate debt, CMBS and CDO
securities. This amount bears interest at a
rate equal to one-month LIBOR plus 1.00% per annum, which resets on a monthly
basis.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: March 25, 2005 NORTHSTAR REALTY FINANCE CORP.
By: /s/ Mark E. Chertok
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Name: Mark E. Chertok
Title: Chief Financial Officer
