Exhibit 99.1
NORTHSTAR REALTY FINANCE
ANNOUNCES SECOND QUARTER 2011 RESULTS
Second Quarter 2011 Highlights
· AFFO per diluted share of $0.61.
· $191 million of unrestricted cash and $102 million of availability in CDOs at June 30, 2011.
· Declared second quarter 2011 cash dividend of $0.10 per common share.
· Repurchased $86 million par amount of NorthStar CDO bonds for $31 million, average 64% discount to par.
NEW YORK, NY, August 4, 2011 - NorthStar Realty Finance Corp. (NYSE: NRF) today announced its results for the quarter ended June 30, 2011.
Second Quarter 2011 Results
NorthStar reported adjusted funds from operations (“AFFO”) for the second quarter 2011 of $0.61 per diluted share compared with $0.41 per diluted share for the second quarter 2010.
Net loss to common stockholders for the second quarter 2011 was $(52.0) million, or $(0.60) per diluted share, compared to net income of $32.0 million, or $0.42 per diluted share for the second quarter 2010. Second quarter 2011 net loss includes $(104.2) million of unrealized losses relating to non-cash fair value adjustments, compared to a net gain of $10.2 million for the second quarter 2010. These non-cash fair value gains and losses are excluded from AFFO. Realized gains totaled $36.8 million for the second quarter 2011, compared with $81.5 million for the second quarter 2010.
At June 30, 2011, GAAP book value per diluted share was $9.26. For a reconciliation of net income (loss) to AFFO and GAAP book value per diluted share, please refer to the tables on the following pages.
David T. Hamamoto, chairman and chief executive officer, commented, “Since the beginning of 2011, NorthStar has raised $232 million of corporate capital, which has enabled us to pursue a variety of opportunistic investments that we believe will provide accretive risk adjusted returns. Through June 30th, we have invested approximately $150 million and subsequent to June 30th, we have closed and/or are working on an incremental $250 million of new investments (including availability in CDOs) which we expect will generate excess cash flow to NorthStar, including having signed a contract to acquire a CRE CDO from CapLease.”
Investments and Fee Income
During the second quarter 2011, NorthStar invested $70 million of unrestricted cash as follows:
· $31 million to repurchase $86 million par amount of its CDO bonds with an average original credit rating of A/A2, representing a 64% average discount to par. As of June 30, 2011, NorthStar owned a total of $495 million of its own CDO bonds, which are eliminated on its consolidated balance sheet.
· $11 million unrestricted cash and $15 million of restricted cash to acquire the “B-piece” in a $2.1 billion new issue CMBS transaction. In addition, NorthStar was approved as special servicer for the CMBS transaction.
· $13 million to retire corporate debt, including $9 million par amount of 7.25% exchangeable notes and $4 million par amount of 11.5% exchangeable notes.
· $15 million for a new mezzanine loan origination at a 15% fixed rate, secured by a portfolio of six Class-A office buildings located in the suburbs of Philadelphia, PA.
NorthStar had approximately $7.3 billion of assets under management at June 30, 2011.
During the second quarter 2011, NorthStar received management fees from its consolidated CDOs of $4.4 million and special servicing fees of $0.8 million. These fees are eliminated on NorthStar’s consolidated statement of operations. In addition, during the second quarter 2011, NorthStar received $0.2 million of advisor fees from NorthStar’s sponsored non-listed REIT.
In July, NorthStar received a $14 million equity distribution from the CapitalSource CDO (“CSE CDO”), including $7 million that was held in an escrow account pending resolution of certain assets.
For additional details regarding our investments and fee income, please refer to the tables on the following pages.
Liquidity, Financing and Capital Markets
Total liquidity at June 30, 2011 included $191 million of unrestricted cash and $102 million of available cash for re-investment in NorthStar’s CDOs. At June 30, 2011, NorthStar’s only unrestricted cash needs related to non-discretionary future funding obligations associated with existing loan commitments were approximately $4 million.
On May 17, 2011, NorthStar completed the sale of 17.25 million shares of its common stock at a price of $4.25 per share, which includes the full over-allotment option exercised by the underwriters of the offering. The net proceeds to NorthStar were approximately $69 million.
NorthStar Real Estate Income Trust (“NSREIT”), a non-listed REIT sponsored by NorthStar, raised $18 million in the second quarter 2011. NSREIT has raised $27 million in 2011 and $57 million since inception through June 30, 2011. NRF Capital Markets LLC, NorthStar’s wholly-owned broker-dealer subsidiary, executed selling agreements covering more than 30,000 registered representatives during the second quarter 2011, bringing our total signed selling agreements with broker-dealers to more than 40,000 registered representatives.
NorthStar’s only near-term corporate obligations relate to its exchangeable senior notes, of which $23 million principal amount of 7.25% notes are payable in June 2012 at the holders’ option and $47 million of 11.5% notes (net of $10 million held in an escrow account) are due in June 2013.
Risk Management
At June 30, 2011, excluding the CSE CDO, NorthStar had two loans on non-performing status (“NPL”), representing $41 million in aggregate principal amount and a $2 million book value. This amount is unchanged from March 31, 2011. In addition, at June 30, 2011, the CSE CDO had one loan on NPL status, representing $1 million in principal amount. This compares to seven loans as of March 31, 2011, representing $158 million in aggregate principal amount and a $10 million book value. NorthStar categorizes a loan as non-performing if it is in maturity default and/or is past due 90 days on its contractual debt service payments.
During the second quarter 2011, NorthStar recorded $14 million of loan loss provisions relating to four loans, compared to $25 million of loan loss provisions related to eight loans recorded during the first quarter 2011. As of June 30, 2011, loan loss provisions totaled $182 million, or 7% of total loans, related to 20 loans with a book value of $280 million.
As of June 30, 2011, NorthStar’s net lease portfolio was 97% leased with a 6.4 year weighted average remaining lease term.
Stockholders’ Equity
At June 30, 2011, NorthStar had 100,223,066 total common shares and operating partnership units outstanding, and $29 million of non-controlling interest relating to its operating partnership. GAAP book value per diluted share was $9.26 at June 30, 2011. Exclusive of all unrealized fair value adjustments, loan loss provisions, and accumulated depreciation and amortization, adjusted book value at June 30, 2011 would be $7.35 per diluted share. For a calculation of adjusted book value per diluted share, please refer to the tables on the following pages.
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Common Dividend Announcement
On August 3, 2011, NorthStar announced that its Board of Directors declared a cash dividend of $0.10 per share of common stock, payable with respect to the quarter ended June 30, 2011. The dividend is expected to be paid on August 19, 2011 to shareholders of record as of the close of business on August 15, 2011. The Company’s common shares will begin trading ex-dividend on August 11, 2011.
Earnings Conference Call
NorthStar will hold a conference call to discuss second quarter 2011 financial results on Thursday August 4, 2011, at 10:00 a.m. Eastern time. Hosting the call will be David Hamamoto, chairman and chief executive officer; Albert Tylis, co-president and chief operating officer; Daniel Gilbert, co-president and chief investment officer; and Debra Hess, chief financial officer. The Company will post on its website, www.nrfc.com, a June 30, 2011 update to its corporate presentation.
The call will be webcast live over the Internet from NorthStar’s website, www.nrfc.com, and will be archived on the Company’s website. The call can also be accessed live over the phone by dialing 800-762-8795, or for international callers, by dialing 480-629-9724.
A replay of the call will be available one hour after the call through Thursday August 11, 2011 by dialing 800-406-7325 or 303-590-3030 for international callers, using pass code 4459199.
About NorthStar Realty Finance Corp.
NorthStar Realty Finance Corp. is a finance REIT that primarily originates, acquires and manages portfolios of commercial real estate debt, real estate securities and net lease properties. In addition, we engage in asset management and other activities related to real estate and real estate finance. For more information about NorthStar Realty Finance Corp., please visit www.nrfc.com.
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NorthStar Realty Finance Corp.
Consolidated Statements of Operations
($ in thousands, except share and per share data)
| | Three Months Ended June 30, | | Six Months Ended June 30, | |
| | 2011 | | 2010 | | 2011 | | 2010 | |
| | | | | | | | | |
Revenues and other income | | | | | | | | | |
Interest income | | $ | 110,790 | | $ | 60,721 | | $ | 208,430 | | $ | 118,296 | |
Rental and escalation income | | 25,956 | | 31,779 | | 58,883 | | 51,066 | |
Commission income | | 1,726 | | 372 | | 2,644 | | 372 | |
Other revenue | | 1,577 | | 956 | | 1,910 | | 3,150 | |
Total revenues | | 140,049 | | 93,828 | | 271,867 | | 172,884 | |
Expenses | | | | | | | | | |
Interest expense | | 34,206 | | 34,492 | | 67,626 | | 66,655 | |
Real estate properties — operating expenses | | 2,613 | | 10,686 | | 15,110 | | 12,287 | |
Asset management expenses | | 837 | | 505 | | 2,398 | | 1,667 | |
Commission expense | | 1,299 | | 278 | | 2,016 | | 278 | |
Provision for loan losses | | 14,200 | | 56,941 | | 38,700 | | 93,257 | |
Provision for loss on equity investment | | — | | — | | 4,482 | | — | |
General and administrative | | | | | | | | | |
Salaries and equity-based compensation (1) | | 19,528 | | 12,313 | | 32,269 | | 28,845 | |
Auditing and professional fees | | 2,308 | | 1,947 | | 4,727 | | 4,104 | |
Other general and administrative | | 5,544 | | 5,516 | | 9,826 | | 9,592 | |
Total general and administrative | | 27,380 | | 19,776 | | 46,822 | | 42,541 | |
Depreciation and amortization | | 11,526 | | 7,728 | | 19,608 | | 15,513 | |
Total expenses | | 92,061 | | 130,406 | | 196,762 | | 232,198 | |
Income (loss) from operations | | 47,988 | | (36,578 | ) | 75,105 | | (59,314 | ) |
Equity in earnings (losses) of unconsolidated ventures | | (1,555 | ) | 4,866 | | (3,783 | ) | 6,215 | |
Unrealized gain (loss) on investments and other | | (130,607 | ) | (6,397 | ) | (282,825 | ) | (6,836 | ) |
Realized gain on investments and other | | 36,839 | | 81,538 | | 57,711 | | 82,971 | |
Income (loss) from continuing operations | | (47,335 | ) | 43,429 | | (153,792 | ) | 23,036 | |
Income (loss) from discontinued operations | | (1,047 | ) | (1,384 | ) | (638 | ) | (1,095 | ) |
Gain on sale from discontinued operations | | 9,416 | | 2,528 | | 14,447 | | 2,528 | |
Consolidated net income (loss) | | (38,966 | ) | 44,573 | | (139,983 | ) | 24,469 | |
Less: net income (loss) allocated to the non-controlling interests | | (5,813 | ) | (7,357 | ) | (349 | ) | (6,945 | ) |
Preferred stock dividends | | (5,231 | ) | (5,231 | ) | (10,463 | ) | (10,463 | ) |
Contingently redeemable non-controlling interest accretion | | (1,973 | ) | — | | (4,982 | ) | — | |
Net income (loss) attributable to NorthStar Realty Finance Corp. common stockholders | | $ | (51,983 | ) | $ | 31,985 | | $ | (155,777 | ) | $ | 7,061 | |
| | | | | | | | | |
Net income (loss) per share from continuing operations (basic/diluted) | | $ | (0.69 | ) | $ | 0.40 | | $ | (2.05 | ) | $ | 0.07 | |
Income (loss) per share from discontinued operations (basic/diluted) | | (0.01 | ) | (0.01 | ) | (0.01 | ) | (0.01 | ) |
Gain per share on sale of discontinued operations (basic/diluted) | | 0.10 | | 0.03 | | 0.17 | | 0.03 | |
Net income (loss) per common share attributable to NorthStar Realty Finance Corp. | | $ | (0.60 | ) | $ | 0.42 | | $ | (1.89 | ) | $ | 0.09 | |
Weighted average number of shares of common stock: | | | | | | | | | |
Basic | | 86,966,645 | | 76,407,339 | | 82,605,559 | | 76,579,403 | |
Diluted | | 91,233,904 | | 82,279,682 | | 86,908,265 | | 82,305,725 | |
Dividends declared per share of common stock | | $ | 0.10 | | $ | 0.10 | | $ | 0.20 | | $ | 0.20 | |
(1) The three months ended June 30, 2011 and 2010 include $2,613 and $4,181 of equity-based compensation expense, respectively. The six months ended June 30, 2011 and 2010 include $4,647 and $9,239 of equity-based compensation expense, respectively.
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NorthStar Realty Finance Corp.
Consolidated Balance Sheets
($ in thousands, except share data)
| | June 30, 2011
(Unaudited) | | December 31,
2010 | |
| | | | | |
Assets: | | | | | |
Cash and cash equivalents | | $ | 191,193 | | $ | 125,439 | |
Restricted cash (includes $270,789 and $263,314 from consolidated VIEs, respectively) | | 322,597 | | 309,384 | |
Operating real estate, net (includes $247,788 and $ - from consolidated VIEs, respectively) | | 1,032,668 | | 946,102 | |
Real estate securities, available for sale (includes $1,759,891 and $1,668,217 from consolidated VIEs, respectively) | | 1,815,168 | | 1,691,054 | |
Real estate debt investments, net (includes $1,633,607 and $1,659,882 from consolidated VIEs, respectively) | | 1,750,485 | | 1,826,239 | |
Real estate debt investments, held for sale (includes $34,479 and $18,661 from consolidated VIEs, respectively) | | 34,479 | | 18,662 | |
Investments in and advances to unconsolidated ventures (includes $59,469 and $66,959 from consolidated VIEs, respectively) | | 86,324 | | 94,412 | |
Receivables, net of allowance of $3,241 in 2011 and $2,642 in 2010 (includes net $22,183 and $26,337 from consolidated VIEs, respectively) | | 32,066 | | 32,329 | |
Receivables, related parties | | 6,302 | | 4,101 | |
Unbilled rents receivable (includes $448 and $ - from consolidated VIEs, respectively) | | 11,319 | | 10,404 | |
Derivative assets, at fair value (includes $31 and $42 from consolidated VIEs, respectively) | | 31 | | 59 | |
Deferred costs and intangible assets, net (includes $37,095 and $ - from consolidated VIEs, respectively) | | 88,175 | | 52,973 | |
Assets of properties held for sale (includes $5,166 and $13,141 from consolidated VIEs, respectively) | | 11,226 | | 5,101 | |
Other assets (includes $28,002 and $14,277 from consolidated VIEs, respectively) | | 48,583 | | 35,732 | |
Total assets | | $ | 5,430,616 | | $ | 5,151,991 | |
| | | | | |
Liabilities: | | | | | |
CDO bonds payable, at fair value (includes $2,463,416 and $2,258,805 from consolidated VIEs, respectively) | | $ | 2,463,416 | | $ | 2,258,805 | |
Mortgage notes payable (includes $212,000 and $ - from consolidated VIEs, respectively) | | 887,619 | | 803,114 | |
Exchangeable senior notes | | 237,938 | | 126,889 | |
Junior subordinated notes, at fair value | | 206,950 | | 191,250 | |
Secured term loans | | 14,682 | | 36,881 | |
Accounts payable and accrued expenses (includes $18,977 and $15,668 from consolidated VIEs, respectively) | | 55,692 | | 49,851 | |
Escrow deposits payable (includes $49,121 and $60,163 from consolidated VIEs, respectively) | | 49,247 | | 60,711 | |
Derivative liabilities, at fair value (includes $185,385 and $190,993 from consolidated VIEs, respectively) | | 191,240 | | 220,689 | |
Liabilities of properties held for sale (includes $208 and $99 from consolidated VIEs, respectively) | | 208 | | 99 | |
Other liabilities (includes $30,558 and $8,654 from consolidated VIEs, respectively) | | 49,543 | | 31,189 | |
Total liabilities | | 4,156,535 | | 3,779,478 | |
| | | | | |
Contingently redeemable non-controlling interest | | 99,804 | | 94,822 | |
| | | | | |
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, 2011 and December 31, 2010 | | 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, 2011 and December 31, 2010 | | 183,505 | | 183,505 | |
Common stock, $0.01 par value, 500,000,000 shares authorized, 95,949,693 and 78,104,753 shares issued and outstanding at June 30, 2011 and December 31, 2010, respectively | | 960 | | 781 | |
Additional paid-in capital | | 809,694 | | 723,102 | |
Retained earnings | | 120,208 | | 293,382 | |
Accumulated other comprehensive loss | | (32,559 | ) | (36,119 | ) |
Total NorthStar Realty Finance Corp. Stockholders’ Equity | | 1,139,675 | | 1,222,518 | |
Non-controlling interest | | 34,602 | | 55,173 | |
Total equity | | 1,174,277 | | 1,277,691 | |
Total liabilities and stockholders’ equity | | $ | 5,430,616 | | $ | 5,151,991 | |
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| | Three Months Ended June 30, | | Six Months Ended June 30, | |
| | 2011 | | 2010 | | 2011 | | 2010 | |
Funds from Operations: | | | | | | | | | |
Income (loss) from continuing operations | | $ | (47,335 | ) | $ | 43,429 | | $ | (153,792 | ) | $ | 23,036 | |
Non-controlling interest | | (8,267 | ) | (4,965 | ) | (8,395 | ) | (6,927 | ) |
Consolidated net income (loss) before non-controlling interest in operating partnership | | (55,602 | ) | 38,464 | | (162,187 | ) | 16,109 | |
| | | | | | | | | |
Adjustments: | | | | | | | | | |
Preferred stock dividends | | (5,231 | ) | (5,231 | ) | (10,463 | ) | (10,463 | ) |
Depreciation and amortization | | 11,526 | | 7,728 | | 19,608 | | 15,513 | |
Funds from discontinued operations | | (909 | ) | (749 | ) | 154 | | 287 | |
Real estate depreciation and amortization, unconsolidated ventures | | 207 | | 237 | | 439 | | 474 | |
Funds from Operations | | (50,009 | ) | 40,449 | | (152,449 | ) | 21,920 | |
| | | | | | | | | |
Adjusted Funds from Operations: | | | | | | | | | |
Funds from Operations | | (50,009 | ) | 40,449 | | (152,449 | ) | 21,920 | |
Straight-line rental income, net | | (1,009 | ) | (361 | ) | (1,232 | ) | (907 | ) |
Straight-line rental income and fair value lease revenue, unconsolidated ventures | | (31 | ) | (19 | ) | (52 | ) | (45 | ) |
Amortization of above/below market leases | | (170 | ) | (214 | ) | (384 | ) | (478 | ) |
Amortization of equity-based compensation | | 2,613 | | 4,181 | | 4,647 | | 9,239 | |
Unrealized (gain) loss from fair value adjustments | | 104,176 | | (12,926 | ) | 226,464 | | (33,777 | ) |
Unrealized loss from fair value adjustments, unconsolidated ventures | | — | | 2,731 | | — | | 3,357 | |
Adjusted Funds from Operations | | $ | 55,570 | | $ | 33,841 | | $ | 76,994 | | $ | (691 | ) |
| | | | | | | | | |
FFO per share of common stock | | $ | (0.55 | ) | $ | 0.49 | | $ | (1.75 | ) | $ | 0.27 | |
AFFO per share of common stock | | $ | 0.61 | | $ | 0.41 | | $ | 0.89 | | $ | 0.00 | |
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: Funds From Operations and Adjusted Funds From Operations. 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 estate-related depreciation and amortization, and after adjustments for unconsolidated/uncombined partnerships and joint ventures. FFO, as defined by NAREIT, is a computation made by analysts and investors to measure a real estate company’s cash flow generated by operations.
NorthStar calculates AFFO by subtracting from or adding to FFO:
· normalized recurring expenditures that are capitalized by NorthStar and then amortized, but which are necessary to maintain NorthStar’s properties and revenue stream, e.g., leasing commissions and tenant improvement allowances;
· an adjustment to reverse the effects of the straight-lining of rents and fair value lease revenue;
· the amortization or accrual of various deferred costs including intangible assets and equity-based compensation;
· an adjustment to reverse the effects of acquisition gains or losses; and
· an adjustment to reverse the effects of non-cash unrealized gains (losses).
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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.
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.
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Assets Under Management at June 30, 2011 (1)
($ in thousands)
| | Amount | | % | |
Investment-grade CRE securities | | $ | 839,336 | | 11.5 | % |
Non-investment grade CRE securities | | 2,513,298 | | 34.5 | % |
Total CRE Securities | | 3,352,634 | | 46.0 | % |
| | | | | |
First mortgages loans (2) | | 1,955,509 | | 26.9 | % |
Mezzanine and subordinate loans (3) | | 1,009,346 | | 13.9 | % |
Total CRE Debt | | 2,964,855 | | 40.8 | % |
| | | | | |
Investment-grade net lease | | 161,845 | | 2.2 | % |
Non-investment grade net lease | | 801,852 | | 11.0 | % |
Total Net Lease | | 963,697 | | 13.2 | % |
| | | | | |
Total | | $ | 7,281,186 | | 100.0 | % |
(1) Based on principal amount of CRE debt, CRE securities and equity investments and the purchase price of operating real estate.
(2) Includes $242 million of junior participations in first mortgage loans.
(3) Includes $475 million related to equity investments, joint ventures and operating real estate.
Balance Sheet Holdings of NorthStar CDO Bonds (1)
at June 30, 2011
($ in thousands)
| | Current Face Amount | |
| | Original Investment
Grade Bonds | | Original Below
Investment Grade
Bonds | | Total CDO Bonds | |
| | | | | | | |
N-Star I | | $ | 9,000 | | $ | 14,000 | | $ | 23,000 | |
N-Star II | | 0 | | 15,106 | | 15,106 | |
N-Star III | | 16,855 | | 0 | | 16,855 | |
N-Star IV | | 9,750 | | 0 | | 9,750 | |
N-Star V | | 8,751 | | 0 | | 8,751 | |
N-Star VI | | 26,925 | | 13,950 | | 40,875 | |
N-Star VII | | 15,600 | | 16,200 | | 31,800 | |
N-Star VIII | | 65,550 | | 59,400 | | 124,950 | |
N-Star IX | | 75,980 | | 13,040 | | 89,020 | |
CSE CDO | | 86,930 | | 47,450 | | 134,380 | |
| | | | | | | |
Total | | $ | 315,341 | | $ | 179,146 | | $ | 494,487 | |
| | | | | | | | | | |
WA original credit rating | | | A+/A1 | | | BB/ Ba2 | | | | |
(1) Unencumbered CDO bonds are owned by NorthStar. These CDO bonds are eliminated with the liability of the respective CDO issuer on NorthStar’s consolidated financial statements. Therefore, the acquisition of these CDO bonds results in a reduction of debt and associated interest expense, as opposed to an additional asset and associated interest income.
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Management Fees From NorthStar CDO Financings at June 30, 2011
($ in thousands)
| | Fee - Based | | Annual Management Fee % | |
| | Assets | | Senior | | Subordinate | | Total | |
N-Star I (1) | | $ | 204,014 | | 0.15 | % | 0.20 | % | 0.35 | % |
N-Star II (1) | | 210,345 | | 0.15 | % | 0.20 | % | 0.35 | % |
N-Star III | | 386,448 | | 0.15 | % | 0.20 | % | 0.35 | % |
N-Star IV | | 445,664 | | 0.15 | % | 0.20 | % | 0.35 | % |
N-Star V (1) | | 496,911 | | 0.15 | % | 0.20 | % | 0.35 | % |
N-Star VI | | 498,893 | | 0.15 | % | 0.25 | % | 0.40 | % |
N-Star VII | | 588,046 | | 0.15 | % | 0.20 | % | 0.35 | % |
N-Star VIII | | 964,370 | | 0.15 | % | 0.25 | % | 0.40 | % |
N-Star IX | | 765,190 | | 0.15 | % | 0.25 | % | 0.40 | % |
CSE CDO (2) | | 1,120,716 | | 0.15 | % | 0.25 | % | 0.40 | % |
| | | | | | | | | |
Total | | $ | 5,680,597 | | | | | | | |
(1) Subordinate management fees not received for the second quarter.
(2) Includes advancing agent fees received during the second quarter 2011.
NorthStar CDO Financings Cash Distributions and Coverage Test Summary
($ in thousands)
| | | | | | Quarterly | | | | | |
| | | | Cash Distributions (1) | | Interest Coverage | | Overcollateralization | |
| | Primary | | Quarter Ended | | Cushion (2) | | Cushion (2) | |
| | Collateral | | June 30, | | June 30, | | June 30, | | At | |
| | Type | | 2011 | | 2011 | | 2011 | | Offering | |
| | | | | | | | | | | |
N-Star I | | CRE Securities | | $ | — | | $ | (516 | ) | $ | (11,396 | ) | $ | 8,687 | |
N-Star II | | CRE Securities | | — | | 223 | | (1,763 | ) | 10,944 | |
N-Star III | | CRE Securities | | 2,115 | | 1,847 | | 13,003 | | 13,610 | |
N-Star IV | | CRE Debt | | 2,604 | | 2,045 | | 65,034 | | 19,808 | |
N-Star V | | CRE Securities | | — | | 860 | | (19,689 | ) | 12,940 | |
N-Star VI | | CRE Debt | | 530 | | 845 | | 54,197 | | 17,412 | |
N-Star VII | | CRE Securities | | 1,722 | | 1,724 | | 19,130 | | 13,966 | |
N-Star VIII | | CRE Debt | | 3,414 | | 4,608 | | 118,094 | | 42,193 | |
N-Star IX | | CRE Securities | | 1,790 | | 1,927 | | 39,998 | | 24,516 | |
CSE CDO | | CRE Debt | | — | (3) | 4,012 | | 49,376 | | (151,595 | )(4) |
| | | | | | | | | | | | | | | |
Table shows cash distributions to the retained income notes. Interest coverage and overcollateralization coverage to the most constrained class.
(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, 2011.
(3) In July, NorthStar received a cash distribution totaling $14 million, including a $7 million accrued distribution.
(4) Based on trustee report as of June 24, 2010 which was closest to the date of acquisition.
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NorthStar CDO Investment Activity Summary
($ in thousands)
| | Second Quarter
2011 | |
CRE Debt | | | |
Purchases / new fundings | | $ | 107,518 | |
Future Fundings | | 4,665 | |
Repayments / Sales | | 165,293 | |
| | | |
CRE Securities | | | |
Purchases, principal amount | | $ | 106,070 | |
Purchases, cost | | 68,652 | |
Purchases WA credit rating | | BB-/ Ba3 | |
Sales, principal amount | | 55,796 | |
Sales, cost | | 56,072 | |
Credit Ratings Distribution of Real Estate Securities Under Management
($ in thousands)
| | Amount | | % | |
AAA | | $ | 130,996 | | 3.9 | % |
AA | | 48,017 | | 1.5 | % |
A | | 238,505 | | 7.1 | % |
BBB | | 421,819 | | 12.6 | % |
BB | | 526,335 | | 15.7 | % |
B | | 406,015 | | 12.1 | % |
CCC | | 603,030 | | 18.0 | % |
CC | | 279,602 | | 8.3 | % |
C | | 326,420 | | 9.7 | % |
Below C | | 323,656 | | 9.7 | % |
NR | | 48,239 | | 1.4 | % |
Total (average of B /B2) | | $ | 3,352,634 | | 100.0 | % |
CMBS Vintages Under Management
($ in thousands)
| | Amount | | % | | Cumulative | |
1997 | | $ | 34,408 | | 1.2 | % | 1.2 | % |
1998 | | 55,402 | | 1.9 | % | 3.1 | % |
1999 | | 21,374 | | 0.8 | % | 3.9 | % |
2000 | | 94,791 | | 3.3 | % | 7.2 | % |
2001 | | 75,539 | | 2.7 | % | 9.9 | % |
2002 | | 71,764 | | 2.5 | % | 12.4 | % |
2003 | | 117,714 | | 4.1 | % | 16.5 | % |
2004 | | 315,500 | | 11.1 | % | 27.6 | % |
2005 | | 501,076 | | 17.6 | % | 45.2 | % |
2006 | | 823,895 | | 29.0 | % | 74.2 | % |
2007 | | 560,306 | | 19.7 | % | 93.9 | % |
2008 | | 38,046 | | 1.3 | % | 95.2 | % |
2009 | | 54,075 | | 1.9 | % | 97.1 | % |
2010 | | 2,300 | | 0.1 | % | 97.2 | % |
2011 | | 76,046 | | 2.8 | % | 100.0 | % |
| | | | | | | |
Total | | $ | 2,842,236 | | 100.0 | % | | |
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GAAP Book Value Rollforward
($ in thousands, except per share data)
| | Amount | | Per Diluted Share | |
Common book value at March 31, 2011, per diluted share | | $ | 918,739 | | $ | 11.11 | |
| | | | | |
Net income to common shareholders and non-controlling interest, excluding non-cash fair value adjustments included in net income | | 49,739 | | 0.60 | |
| | | | | |
Fair value adjustments included in net income: | | | | | |
CDO bonds payable | | (22,691 | ) | (0.27 | ) |
Trust preferred debt | | 13,053 | | 0.16 | |
Securities and investments held at fair value | | (80,713 | ) | (0.98 | ) |
Derivatives | | (13,825 | ) | (0.17 | ) |
| | | | | |
Amortization of other comprehensive income for derivatives | | 1,873 | | 0.02 | |
| | | | | |
Common dividends (1) | | (8,289 | ) | (0.10 | ) |
| | | | | |
Equity component of exchangeable senior notes repurchased | | (285 | ) | 0.00 | |
| | | | | |
Accretion (dilution) from additional shares issued during quarter (2) | | 70,164 | | (1.11 | ) |
Total net increases/(decreases) | | 9,026 | | (1.85 | ) |
| | | | | |
Common book value at June 30, 2011, per diluted share (3) | | $ | 927,765 | | $ | 9.26 | |
(1) Excludes dividends paid on shares raised in common stock offering completed in May 2011.
(2) Includes $69 million of net proceeds from common stock offering completed in May 2011, net of common dividends associated with these shares paid during the quarter. Additional amounts relate to amortization of LTIP shares and issuance of common shares from the Dividend Reinvestment and Stock Purchase Plan.
(3) Cumulative net fair value adjustments total a positive $514.0 million ($5.13 per diluted share), credit loss reserves total a negative $181.8 million ($1.82 per diluted share) and accumulated depreciation and amortization total a negative $140.2 million ($1.40 per diluted share) as of June 30, 2011. Excluding all fair value adjustments, loan loss provisions, and accumulated depreciation and amortization would result in a $7.35 adjusted book value per diluted share at June 30, 2011.
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NRFC NNN Holdings, LLC Portfolio Summary
($ 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 - Sbarro, Inc. (3) (4) | | One property in New York, NY | | 7,500 | | 1.5 | | $ | 3,246 | | $ | — | | $ | 3,246 | |
Nov-2007 | | Alliance Data Systems Corp. | | Columbus, OH | | 199,112 | | 6.4 | | 33,826 | | 23,084 | | 10,742 | |
Mar-2007 | | Citigroup, Inc. | | Fort Mill, SC/Charlotte | | 165,000 | | 9.3 | | 34,303 | | 30,022 | | 4,281 | |
Jun-2007 | | Landis Logistics / East Penn | | Reading, PA | | 609,000 | | 6.5 | | 28,473 | | 18,507 | | 9,966 | |
Jun-2006 | | Covance, Inc. | | Indianapolis, IN | | 333,600 | | 14.5 | | 34,519 | | 27,604 | | 6,915 | |
Feb-2007 | | Credence Systems Corp. | | Milpitas, CA/San Jose | | 178,213 | | 5.7 | | 30,144 | | 21,392 | | 8,752 | |
Sep-2006 | | Dick’s Sporting Goods, Inc. / PetSmart, Inc. (4) | | 9 properties | | 467,971 | | 4.4-13.2 | | 64,503 | | 47,244 | | 17,259 | |
Sep-2005 | | Electronic Data Systems Corp. | | 2 in MI / 1 in CA / 1 in PA | | 387,842 | | 4.3 | | 62,718 | | 45,819 | | 16,899 | |
Aug-2005 | | GSA - U.S. Department of Agriculture | | Salt Lake City, UT | | 117,553 | | 0.8 | | 22,424 | | 14,844 | | 7,580 | |
Jul-2006 | | Northrop Grumman Space & Mission Systems Corp | . | Aurora, CO/Denver | | 183,529 | | 4.0 | | 43,625 | | 33,059 | (5) | 10,566 | |
Mar-2006 | | Party City Corp. (Amscan) / Lerner Enterprises, Inc. | | Rockaway, NJ/ Northern NJ | | 121,038 | | 3.9-6.1 | | 21,955 | | 16,760 | | 5,195 | |
Feb-2006 | | Quantum Corporation (6) | | Colorado Springs, CO | | 406,207 | | 1.4-9.7 | | 27,635 | | 17,745 | | 9,890 | |
| | | | | | | | | | | | | | | |
Total NRFC NNN Holdings, LLC Portfolio | | | | 3,176,565 | | 6.9 | | $ | 407,371 | | $ | 296,080 | | $ | 111,291 | |
(1) Remaining lease terms as of June 30, 2011. Total represents weighted average based on acquisition cost.
(2) Acquisition cost does not include purchase price allocations.
(3) Proceeds from sales of $10 million are being held in escrow for use in acquiring a suitable replacement property.
(4) One ALGM property and six of ten Dick’s Sporting Goods, Inc. / PetSmart, Inc. properties are ground lease interests.
(5) Property is financed via a $32.4 million first mortgage with a third party and a $0.7 million mezzanine loan held by a consolidated NorthStar entity.
(6) Dollar amounts shown are 50% of total relating to NRFC NNN Holding’s, LLC subsidiary’s 50% interest in a joint venture with an institutional investor.
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Portfolio Cash Flow and Tenant Credit Profile
($ in thousands)
| | Three Months Ended June 30, 2011 | | Primary Tenant | |
Tenant or Guarantor of Tenant | | Base Rent | | NOI | | Debt Service | | NOI Less
Debt Service | | Market Cap (1) | | Actual Credit
Rating | |
| | | | | | | | | | | | | |
ALGM Portfolio - Sbarro, Inc. | | $ | 206 | | $ | 206 | | $ | — | | $ | 206 | | N/A | (2) | not rated | |
Alliance Data Systems Corp. | | 582 | | 581 | | (455 | ) | 126 | | 4,847 | | not rated | |
Citigroup, Inc. | | 538 | | 537 | | (507 | ) | 30 | | 113,537 | | A/A3 | |
Landis Logistics / East Penn | | 158 | | 22 | | (332 | ) | (310 | ) | N/A | (3) | not rated | |
Covance, Inc. | | 638 | | 637 | | (513 | ) | 124 | | 3,685 | | not rated | |
Credence Systems Corp. | | 688 | | 679 | | (443 | ) | 236 | | 312 | | not rated | |
Dick’s Sporting Goods, Inc. / PetSmart, Inc. | | 1,317 | | 1,277 | | (966 | ) | 311 | | 4,710 | | not rated(4) | |
Electronic Data Systems Corp. | | 1,508 | | 1,498 | | (817 | ) | 681 | | 13,900 | | not rated | |
GSA - U.S. Department of Agriculture | | 579 | | 454 | | (300 | ) | 154 | | N/A | | implied AAA | |
Northrop Grumman Space & Mission Systems Corp. | | 814 | | 814 | | (695 | ) | 119 | | 18,518 | | BBB+/Baa1 | |
Party City Corp. (Amscan) / Lerner Enterprises, Inc. | | 441 | | 441 | | (301 | ) | 140 | | 362 | (5) | B/B2(6) | |
Quantum Corporation (50%) | | 611 | | 609 | | (324 | ) | 285 | | 727 | | B/B2 | |
| | | | | | | | | | | | | |
Total | | $ | 8,080 | | $ | 7,755 | | $ | (5,653 | ) | $ | 2,102 | | | | | |
(1) Based on information from Bloomberg at close of market on June 30, 2011.
(2) Sole tenant in leasehold interest, Sbarro, Inc. filed for bankruptcy protection (Chapter 11) in April 2011, no other recent data is available.
(3) Privately-held company, market capitalization information is not publicly disclosed.
(4) Dick’s Sporting Goods, Inc. is not rated by the major credit rating agency’s. PetSmart, Inc. is rated BB by S&P.
(5) Represents purchase price by Amscan Holdings, Inc. (controlled by Berkshire Partners and Weston Presidio) for Party City in December 2005. No other recent data is available.
(6) 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.
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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, which can be identified by words like “anticipate,” “believe,” “plan,” “hope,” “goal,” “expect,” “future,” “intend,” “will,” “could” and “should,” and similar expressions. 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 can give no assurance that its expectations will be attained. Forward-looking statements are necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying any forward-looking statements will not materialize or will vary significantly from actual results. Variations of assumptions and results may be material. Factors that could cause actual results to differ materially from NorthStar’s expectations include, but are not limited to, changes in economic conditions generally and the real estate and bond markets specifically, availability of capital, ability to pursue available acquisitions and investment opportunities, possible impairments, ability to achieve targeted returns, increases in non-performing loans, ability to compete effectively for servicing and selling agreements, failure to make new investments as and when anticipated, generally accepted accounting principles and policies and rules applicable to REITs. Factors that could cause actual results to differ materially from those in the forward-looking statements are specified in the Company’s Annual Report on Form 10-K, as amended, for the year ended December 31, 2010. Such forward-looking statements speak only as of the date of this press release. NorthStar 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.
Contact:
Investor Relations
Joe Calabrese
(212) 827-3772
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