Exhibit 99.1
NorthStar Realty Finance Announces 2004 Fourth Quarter and
Year-End Results
- Updates 2005 Business Developments -
NEW YORK--(BUSINESS WIRE)--March 31, 2005--NorthStar Realty Finance Corp.
(NYSE: NRF):
Recent Highlights
-- Closed $165.6 million of investments in the fourth quarter 2004 (post
IPO), utilizing $43 million (or 27%) of the Company's net IPO
proceeds.
-- Through March 2005, deployed $137 million (or 85%) of the Company's
net IPO proceeds to complete the initial formation transactions and to
subsequently acquire a total of $203 million of subordinate real
estate debt and below investment grade CMBS investments, $240 million
of primarily investment grade CMBS, REIT debt and other real estate
securities for the Company's third CDO, and a $64 million net lease
asset.
-- Issued $361 million of match funded collateralized debt obligations in
March 2005 to finance up to $400 million of real estate securities.
-- Closed a $150 million credit facility with Deutsche Bank and thereby
increased borrowing capacity to $300 million.
NorthStar Realty Finance Corp. (NYSE: NRF) today announced its results for
the period from October 29, 2004, the date of the closing of its IPO and the
commencement of its operations, through December 31, 2004. It also announced its
2004 year-end results which include the results of its predecessor for the
period until the closing of its IPO.
David Hamamoto, President and Chief Executive Officer of the Company,
commented, "We have made significant progress in the short time we have been
operating as a public company. I am comfortable with the measured pace at which
we are executing our strategy of selectively investing in real estate
securities, subordinate real estate debt and net lease properties. I am also
pleased with our ability to employ securitization structures, such as our CDOs,
to match fund our assets and liabilities. The value of our team's collective
knowledge, experience and relationships is apparent in the investments we have
sourced and financing strategies we have employed to date. We will continue to
build on this solid foundation and stay focused on our objectives of generating
attractive risk-adjusted returns, predictable cash flows, and long-term value
for our shareholders."
2004 Results
The Company reported a net loss before minority interest of $3.1 million,
or a net loss per share of common stock of $0.12, for the period from October
29, 2004 through December 31, 2004. For this period, the Company earned revenues
of $7.6 million, $3.4 million of which represents interest income on the
short-term temporary investment of the net IPO proceeds. The Company's expenses
for this period totaled $11.2 million, including $3.9 million of interest
expense (of which $3.1 million related to the financing of the Company's
temporary investments) and $3.0 million of equity based compensation expense
resulting from the Company's application of SFAS 123. Of the equity based
compensation expense, $2.5 million consists of one-time charges for the buyout
of profits interests of certain employees of NorthStar Capital Investment Corp.
in connection with their contribution of their respective interests in the
businesses contributed to the Company upon the closing of the IPO. In addition,
approximately $0.5 million of formation and organization costs were expensed in
this period.
Funds from Operations (FFO) for this period were a loss of $2.7 million, or
$0.10 per share of common stock, and Adjusted Funds from Operations (AFFO) were
$0.2 million, or $0.01 per share of common stock. For a reconciliation of net
income (loss) to FFO and to AFFO, please refer to the tables following the
discussion of investment update below.
The results of operations for the period January 1, 2004 through October
28, 2004, the period October 29, 2004 through December 31, 2004 and the year
ended December 31, 2003 discussed below represent, in part, the results of the
Company's predecessor, a combination of certain controlling and non-controlling
interests in real estate-related entities that represent the initial portfolio
of assets contributed by certain subsidiaries of NorthStar Capital to the
Company on October 29, 2004 and, thereafter, the results of the Company.
Management does not believe that the results of operations of the Company's
predecessor are necessarily indicative of its results as a separate operating
entity subsequent to the closing of its IPO.
Investment Update
Through March 30, 2005, the Company has invested approximately $137 million
of the net IPO proceeds in its three business lines.
Real Estate Securities:
On March 10, 2005, the Company closed its third collateralized debt
offering, or N-Star Real Estate CDO III, and issued approximately $361 million
of CDO notes collateralized by approximately $400 million of primarily
investment grade real estate securities. The weighted average initial borrowing
rate on the $361 million of match-funded financing for the Company's portfolio
of real estate securities is LIBOR plus 0.41%. The portfolio has a weighted
average credit rating of BBB-. Following the closing of CDO III, the Company has
over $1.1 billion of real estate securities under management that are financed
through three CDOs.
Subordinate Real Estate Debt:
The Company has made 18 investments, totaling $203 million, in subordinate
real estate debt and non-investment grade CMBS, financed with approximately $132
million of proceeds drawn under the Company's credit facility with Deutsche
Bank. Eight of these 18 investments, or approximately $147 million, are
floating-rate subordinate debt investments that have a weighted average spread
of 5.10% over LIBOR and a weighted average loan-to-value of approximately 71%.
The remaining investments, or approximately $55.3 million, consist of nine CMBS
investments with investment ratings ranging from BB+ to B+ and the BB rated
Class D notes issued in CDO III. The Company is exploring the use of a CDO
structure to provide longer-term financing for its portfolio of subordinate debt
investments.
Net Lease Properties:
The Company acquired a portfolio of three office properties, which are net
leased to an A-rated bank through June 2015, for $63.5 million. The three
properties collectively have approximately 257,000 square feet of rental space
in Chatsworth, California. This acquisition was financed with $44 million of non
recourse first mortgage debt and $13 million of A-rated fully-amortizing
mezzanine financing, which was funded by the Company's warehouse provider for
inclusion in the collateral pool backing CDO III.
Capital Structure
The Company issued 21,160,750 shares of common stock in its IPO and raised
net proceeds of approximately $169.1 million. As of March 30, 2005, the Company
had 21,249,736 shares of common stock outstanding.
As of December 31, 2004, the Company had total assets of $1.1 billion, of
which $827 million represented temporary investments in "AAA" or "AA" CMBS
financed pursuant to repurchase arrangements and $48 million of which
represented available cash and cash equivalents. As of December 31, 2004, the
Company had approximately $868 million of debt outstanding, including $790
million of borrowings to finance the Company's temporary investments and $78
million of mortgage and other debt.
Dividends
The Company expects to declare a dividend for the first quarter of 2005 on
or before April 22nd which will be paid in the second quarter of 2005. No
dividend was declared for the fourth quarter of 2004.
Earnings Conference Call
NorthStar Realty Finance Corp. will hold a conference call to discuss
fourth quarter 2004 financial results today at 5:00 P.M. EST. The call can be
accessed live over the phone by dialing 1-800-811-7286 or for international
callers by dialing 1-913-981-4902.
A replay of the call will be available one hour after the call and can be
accessed by dialing 1-888-203-1112 or 1-719-457-0820 for international callers;
the password is 7551847. The replay will be available from March 31, 2005,
through April 14, 2005 and will be archived on the Company's website.
A simultaneous webcast of the conference call may be accessed by logging
onto the Company's website at www.nrfc.com under the Investor Relations section.
About NorthStar Realty Finance Corp.
NorthStar Realty Finance Corp. is an internally-managed REIT that makes
fixed income, structured finance and net lease investments in commercial real
estate assets. NorthStar Realty's business consists of three core business
lines: subordinate real estate debt, real estate securities and net lease
properties. For more information about NorthStar Realty Finance Corp, please
visit www.nrfc.com.
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 are specified in the Company's Annual Report on Form
10-K for the year ended December 31, 2004. 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.
Consolidated and Combined Statements of Operations (unaudited)
NorthStar Realty NorthStar Realty
Finance Finance Corp.
Corp. Predecessor
----------------------------------
October 29, January 1,
2004 to 2004 to December
December 31, October 28, 31,
----------------------------------
2004 2004 2003
----------------------------------
Revenues:
Rental and escalation income $2,158,000
Advisory and management fee income 703,000 $2,622,000 $1,090,000
Interest income 4,720,000 1,859,000 502,000
----------------------------------
Total revenues 7,581,000 4,481,000 1,592,000
Expenses:
Real estate properties - operating
expenses 974,000 - -
Interest expense 3,922,000 285,000 -
General and administrative:
Direct expenses 2,413,000 1,134,000 1,492,000
Allocated expenses - 4,303,000 3,496,000
Equity based compensation 2,991,000 - -
Formation and organization costs 517,000 - -
----------------------------------
Total general and
administrative 5,921,000 5,437,000 4,998,000
Depreciation expense 411,000 - -
----------------------------------
Total expenses 11,228,000 5,722,000 4,988,000
----------------------------------
Loss from operations (3,647,000)(1,241,000)(3,396,000)
Equity in earnings of
unconsolidated/uncombined ventures 83,000 1,520,000 2,048,000
Unrealized and realized gain on
investments and other 493,000 915,000 3,085,000
Income (loss) before minority ----------------------------------
interests (3,071,000) 1,194,000 1,737,000
----------------------------------
Minority interest 632,000 - -
----------------------------------
Net income (loss) $(2,439,000)$1,194,000 $1,737,000
==================================
Net Loss per Share of Common Stock
Basic $(0.12)
Weighted average number of shares of common stock outstanding
Basic 20,868,865
FFO Per Share of Common Stock $(0.10)
AFFO per Share of Common Stock $0.01
Consolidated and Combined Balance Sheets (unaudited)
NorthStar
Realty
NorthStar Finance
Realty Finance Corp.
Corp. Predecessor
---------------------------
December 31, December 31,
2004 2003
---------------------------
Assets:
Operating real estate - net $43,544,000 -
Debt securities available for sale 37,692,000 $9,187,000
Debt securities held for trading 826,611,000 -
CDO deposit and warehouse agreements 2,988,000 5,967,000
Collateral held by broker 24,831,000 -
Subordinate real estate debt investments 70,841,000 -
Cash and cash equivalents 47,733,000 1,013,000
Restricted cash 2,713,000 -
Investments in and advances to uncombined
ventures 5,363,000 15,537,000
Other assets 16,034,000 1,111,000
---------------------------
Total assets $1,078,350,000 $32,815,000
===========================
Liabilities:
Mortgage notes payable $40,557,000 $-
Credit facility 27,821,000 -
Repurchase obligations 800,418,000 -
Securities sold, not yet purchased 24,114,000 -
Obligations under capital leases 3,303,000 -
Accrued expenses and other liabilities 6,381,000 322,000
---------------------------
Total liabilities 902,594,000 322,000
Minority interest 32,447,000 -
Stockholders' and owners' equity 143,309,000 32,493,000
---------------------------
Total liabilities and stockholders' and
owners' equity $1,078,350,000 $32,815,000
===========================
Set forth below is a reconciliation of net income (loss) before
minority interests to our calculations of FFO and AFFO:
NorthStar Realty NorthStar Realty
Finance Finance Corp.
Corp. Predecessor
------------------------------------
October 29, January 1,
2004 to 2004 to December
December 31, October 28, 31,
----------------------------------
2004 2004 2003
----------------------------------
Funds from Operations :
Income (loss) before minority
interests $(3,071,000) $1,194,000 $1,737,000
Adjustments:
Depreciation and amortization 411,000
Real estate depreciation and
amortization - unconsolidated
ventures 1,608,000 2,204,000
----------------------------------
Funds from Operations (FFO) $(2,660,000) $2,802,000 $3,941,000
----------------------------------
Adjusted Funds from Operations :
Funds from Operations (FFO) $(2,660,000) $2,802,000 $3,941,000
Straightline rental income, net (90,000) (456,000) (654,000)
Amortization of deferred
compensation 2,903,000
----------------------------------
Adjusted funds from operations
(AFFO) $153,000 $2,346,000 $3,287,000
==================================
Non-GAAP Financial Measures
Included in this press release are certain "non-GAAP financial measures,"
which are measures of the Company's historical or future financial performance
that are different from measures calculated and presented in accordance with
generally accepted accounting principles, or GAAP, within the meaning of
applicable SEC rules. These include: (i) Funds From Operations, and (ii)
Adjusted Funds From Operations. The following discussion defines these terms,
which the Company believes can be useful measures of its performance.
Funds from Operations (FFO)
The Company's FFO is calculated in accordance with the standards
established by the National Association of Real Estate Investment Trusts
(NAREIT). The National Association of Real Estate Investment Trusts, or NAREIT,
defines Funds From Operations, or FFO, as net income (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 partnerships and joint ventures. FFO is presented on a per share
basis after making adjustments for the effects of dilutive securities. FFO does
not represent cash generated from operating activities in accordance with GAAP
and is not indicative of cash available to fund cash needs.
We believe that FFO is an additional appropriate measure of NorthStar
Realty's performance because it facilitates an understanding of the Company's
operating performance after adjustment for certain non-cash expenses, such as
real estate depreciation, which assumes that the value of real estate assets
diminishes predictably over time. Since FFO is generally recognized as an
industry standard for measuring the operating performance of an equity REIT, we
also believe that FFO provides investors with an additional useful measure to
compare the Company's financial performance to other REITs.
Adjusted Funds from Operations (AFFO)
AFFO is a computation often made by REIT industry analysts and investors to
measure a real estate company's cash flow generated from operations. We believe
that AFFO is helpful to investors as a measure of our liquidity position,
because along with cash flows generated from operating activities; this measure
provides investors with an understanding or our ability to pay dividends. In
addition, because this measure is commonly used in the REIT industry, our use of
AFFO may assist investors in comparing our liquidity position with that of other
REITs. The Company calculates AFFO by subtracting from or adding to FFO (i)
normalized recurring expenditures that are capitalized by the Company and then
amortized, but which are necessary to maintain its properties and revenue stream
(e.g., leasing commissions and tenant improvement allowances), (ii) an
adjustment to reverse the effects of straight-lining of rents and (iii) the
amortization or accrual of various deferred costs including intangible assets
and equity based compensation.
NorthStar Realty's calculation of AFFO may differ from the methodology for
calculating AFFO utilized by certain other REITs and, accordingly, may not be
comparable to such other REITs. AFFO. As such, AFFO should not be considered an
alternative to net income as measures of profitability, nor is it equivalent to
cash flow provided by operating activities determined in accordance with GAAP.
Further, 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.
CONTACT: Investor Relations
Brad Cohen, 800-684-8879