Exhibit 99.1
NorthStar Realty Finance Announces 2005 First Quarter Results
NEW YORK--(BUSINESS WIRE)--May 12, 2005--NorthStar Realty Finance Corp.
(NYSE: NRF):
- Reports Adjusted Funds from Operations of $3.0 million, or $0.11 per
share -
Recent Highlights
-- Reports net income of $1.1 million, or $0.05 per share
-- Closed $342 million of new investments during the first quarter
-- Deployed $137 million of the Company's net IPO proceeds through March
2005
-- Invested the remaining $32 million of IPO proceeds in April 2005
-- Completed a private placement of $40 million of trust preferred
securities in April 2005
-- Declared first quarter dividend of $0.15 per common share
NorthStar Realty Finance Corp. (NYSE: NRF) today announced its results for
the quarter ended March 31, 2005. The Company generated revenues of $12.8
million for the first quarter of 2005. Net income for the first quarter was $1.1
million, or $0.05 per share. Adjusted Funds from Operations (AFFO) were $3.0
million, or $0.11 per share. For a reconciliation of net income to Funds from
Operations (FFO) and AFFO, please refer to the tables below.
Revenues for the period consisted of $3.8 million of rental income, $4.0
million of interest earned on the Company's portfolio of subordinate debt and
real estate securities investments, $1.0 million of advisory and management fees
and $4.0 million of interest income on short-term temporary investments. The
Company's expenses for the first quarter totaled $13.1 million, including $6.5
million of interest expense ($3.6 million related to the financing of the
Company's temporary investment portfolio), $0.8 million of property level
operating expenses, $0.8 million of equity based compensation expense, $1.0
million of depreciation expense and $4.0 million of general and administrative
expense.
Total general and administrative expenses (excluding equity based
compensation charges) were $4.0 million. The Company's higher than expected
administrative costs in the first quarter were primarily attributable to $1.1
million of audit and accounting fees for the period. The Company does not
believe that these charges are indicative of the annualized level of audit and
accounting expense.
David Hamamoto, President and Chief Executive Officer, commented, "I am
pleased that we have met our stated objective of fully investing our net IPO
proceeds within the initial six months following NorthStar Realty's IPO. I
believe the overall credit characteristics and diversity of our portfolio,
combined with the largely match-funded financing we have secured at historically
tight spreads, demonstrate our ability to produce attractive risk adjusted
returns while employing a relatively defensive investment strategy."
Recent Events
In March 2005, as previously announced, the Company closed its third
investment grade collateralized debt offering. The issuer, N-Star Real Estate
CDO III (CDO III), 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-.
Through April 2005, the Company's subordinate debt business has acquired
$316 million of subordinate loans ($251 million), CDO debt ($16 million) and
commercial mortgage-backed securities (CMBS) ($49 million) financed under its
credit facility. The Company anticipates that it will finance these investments
on a long-term, match funded basis through a proposed $400 million subordinate
CDO issuance (CDO IV) in the second quarter.
On May 4, 2005, the Company entered into a warehouse arrangement with a
financial institution. This facility will fund the acquisition of investment
grade securities to be financed through a proposed CDO issuance (CDO V). Under
the warehouse agreement, the financial institution has agreed to purchase up to
$400 million of CMBS and a portfolio of other predominantly investment grade
real estate debt securities under NorthStar's direction as part of the
collateral pool for the Company's proposed CDO V.
The Company also completed a private placement of $40 million of trust
preferred securities with a 30 year term in April 2005. The Company expects to
deploy the net proceeds across its three lines of business. The securities bear
a fixed 8.15% interest rate for the first ten years, ending March 30, 2015,
after which the interest rate floats at a three month LIBOR plus 3.25%. The
aggregate amount can be redeemed at par commencing on March 30, 2010.
Capital Structure
As of March 31, 2005, the Company had total assets of $727 million, of
which $286 million was debt securities held for trading, $108 million was debt
securities available for sale, $147 million was subordinate real estate debt
investments, $103 million was operating real estate and $41 million was held in
cash. Total liabilities of $546 million included: $97 million of mortgages and
loans payable, a $132 million credit facility and $293 million of repurchase
obligations. As of March 31, 2005, the Company had 26,760,770 weighted average
diluted shares outstanding.
Mr. Hamamoto further noted, "We continue to see attractive investment
opportunities in all three of our operating businesses. With the recently
completed private placement of $40 million of trust preferred securities and
increased credit line, along with additional financing options available, our
balance sheet is well positioned to capitalize on the substantial pipeline of
potential investments we have under review."
Dividends
The Company declared a first quarter dividend of $0.15 per share on April
21, 2005 to shareholders of record as of May 2, 2005, to be paid May 16, 2005.
Earnings Conference Call
NorthStar Realty Finance Corp. will hold a conference call to discuss first
quarter 2005 financial results today at 5:00 P.M. Eastern Time. The call can be
accessed live over the phone by dialing 1-800-819-9193 or, for international
callers 1-913-981-4911.
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 9334045. The replay will be available from May 12, 2005, through
May 26, 2005 and will be archived on the Company's website. The password will
continue to be 9334045.
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.
NorthStar Realty Finance Corp. and Subsidiaries and
NorthStar Realty Finance Corp. Predecessor
Condensed Consolidated and Condensed Combined Statements of Operations
(unaudited)
The The
Company Predecessor
Three Months Ended
March 31, March 31,
2005 2004(1)
Revenues and other income:
Rental and escalation income $3,856,000
Advisory and management fee income 51,000 $55,000
Advisory and management fee income - related
parties 943,000 598,000
Interest income 7,972,000 255,000
----------- ------------
Total revenues 12,822,000 908,000
Expenses:
Real estate properties - operating expenses 736,000 -
Interest expense 6,489,000 -
Management fee - related party 85,000 -
General & Administrative:
Direct:
Salaries and other compensation 1,261,000 302,000
Shared services - related party 342,000 -
Equity based compensation 800,000 -
Insurance 213,000 -
Accounting and auditing fees 1,093,000 -
Other general and administrative 1,132,000 47,000
Allocated:
Salaries and other compensation - 619,000
Insurance - 98,000
Other general and administrative - 309,000
----------- ------------
Total general and administrative 4,841,000 1,375,000
Depreciation and amortization 1,022,000
----------- ------------
Total expenses 13,173,000 1,375,000
Loss from operations (351,000) (467,000)
----------- ------------
Equity in earnings of
unconsolidated/uncombined ventures 46,000 372,000
Unrealized gain on investments and other 1,047,000 1,050,000
Realized gain on investments and other 587,000 -
----------- ------------
Income before minority interest 1,329,000 955,000
Minority interest (274,000) -
----------- ------------
Net income $1,055,000 $955,000
=========== ============
Net income per share of common stock:
Basic and diluted $0.05
===========
Weighted average number of shares outstanding
at March 31, 2005:
===========
Basic 21,249,736
===========
Diluted 26,760,770
===========
(1) The results of operations for the three months ended March 31,
2004 represent 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 to the Company by certain subsidiaries of NorthStar
Capital Investment Corp. on October 29, 2004. Management does not
believe that the results of operations of the Company's predecessor
are indicative of its results as a separate operating entity
subsequent to the closing of its IPO.
NorthStar Realty Finance Corp. and Subsidiaries
Condensed Consolidated Balance Sheets
March 31, December 31,
2005 2004
------------- ---------------
(unaudited)
Assets:
Operating real estate - net $103,203,000 $43,544,000
Debt securities available for sale 108,200,000 37,692,000
Debt securities held for trading 286,381,000 826,611,000
CDO deposit and warehouse agreements - 2,988,000
Collateral held by broker 12,767,000 24,831,000
Subordinate real estate debt investments 147,361,000 70,841,000
Investments in and advances to
unconsolidated entities 2,224,000 5,363,000
Cash and cash equivalents 41,039,000 47,733,000
Restricted cash 3,161,000 2,713,000
Receivables, net of allowance 4,403,000 1,926,000
Unbilled rents receivable, net of
allowance 5,686,000 5,567,000
Due from affiliates 272,000 176,000
Deferred costs and intangible assets, net 10,087,000 4,233,000
Other assets 1,877,000 4,132,000
------------- ---------------
Total assets $726,661,000 $1,078,350,000
============= ===============
Liabilities and Stockholders' Equity:
Liabilities:
Mortgage notes and loans payable $97,170,000 $40,557,000
Credit facility 132,080,000 27,821,000
Repurchase obligations 292,902,000 800,418,000
Securities sold, not yet purchased 12,696,000 24,114,000
Obligations under capital leases 3,321,000 3,303,000
Accounts payable and accrued expenses 6,090,000 5,603,000
Due to affiliates 265,000 250,000
Other liabilities 1,412,000 528,000
------------- ---------------
Total liabilities 545,936,000 902,594,000
Minority interest 34,077,000 32,447,000
Commitments and contingencies
Stockholders' equity 146,648,000 143,309,000
------------- ---------------
Total stockholders' equity 146,648,000 143,309,000
------------- ---------------
Total liabilities and stockholders'
equity $726,661,000 $1,078,350,000
============= ===============
NorthStar Realty Finance Corp. and Subsidiaries
The following is a reconciliation of net income to FFO and AFFO:
March 31,
-----------
2005
-----------
Funds from Operations:
Net income $1,055,000
Minority interest 274,000
-----------
Income before minority interest 1,329,000
Adjustment:
Depreciation and amortization 1,022,000
Funds from Operations $2,351,000
===========
FFO per share - Diluted $0.09
===========
Adjusted Funds from Operations:
Funds from Operations $2,351,000
Straightline rental income, net (119,000)
Amortization of deferred compensation 800,000
-----------
Adjusted funds from operations $3,032,000
===========
AFFO per share - Diluted $0.11
===========
Weighted average number of shares at March 31, 2005 -
Diluted 26,760,770
===========
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
GAAP, within the meaning of applicable SEC rules. These include: (i) FFO, and
(ii) AFFO. The following discussion defines these terms, which the Company
believes can be useful measures of its performance.
Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO)
Management believes that FFO and AFFO, each of which are non-GAAP measures,
are additional appropriate measures of the operating performance of a REIT. 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. We
calculate AFFO by subtracting from (or adding) to FFO:
-- normalized recurring expenditures that are capitalized by us and then
amortized, but which are necessary to maintain our properties and
revenue stream, e.g., leasing commissions and tenant improvement
allowances;
-- an adjustment to reverse the effects of straight-lining of rents; and
-- the amortization or accrual of various deferred costs including
intangible assets and equity based compensation.
Our calculation of AFFO differs from the methodology used for calculating
AFFO by certain other REITs and, accordingly, may not be comparable to such
other REITs.
We believe that FFO and AFFO are additional appropriate measures of our
operating performance because they facilitate an understanding of our 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 industry standards
for measuring the operating performance of an equity REIT, we also believe that
FFO provides investors with an additional useful measure to compare our
financial performance to other REITs.
Neither FFO nor AFFO is equivalent to net income or cash generated from
operating activities determined in accordance with GAAP. Furthermore, FFO and
AFFO do not represent amounts available for management's discretionary use
because of needed capital replacement or expansion, debt service obligations or
other commitments or uncertainties. Neither FFO nor AFFO should be considered as
an alternative to net income as an indicator of our operating performance or as
an alternative to cash flow from operating activities as a measure of our
liquidity.
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 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.
CONTACT: NorthStar Realty Finance Corp.
Investor Relations
800-684-8879