Exhibit 99.1
NorthStar Realty Finance Announces 2005 Second Quarter Results;
Net Income Increases To $0.47 Per Share,
Including Gain On Sale; Generates $0.13 AFFO Per Share
NEW YORK--(BUSINESS WIRE)--Aug. 11, 2005--NorthStar Realty Finance
Corp. (NYSE: NRF):
Second Quarter Highlights
-- Sold 729 Seventh Avenue for $0.41 per share gain, driving
increase in book value to $7.17 per share
-- Closed $428 million of new investments
-- Increased assets under management to approximately $2.0
billion
-- Issued two private placements totaling $65 million of trust
preferred securities
-- Declared second quarter dividend of $0.15 per common share
NorthStar Realty Finance Corp. (NYSE: NRF) today announced its
results for the quarter ended June 30, 2005. The Company generated
revenues of $14.9 million for the second quarter of 2005. Net income
for the second quarter was $9.8 million, or $0.47 per share, including
an $8.6 million gain on the sale of an asset (729 Seventh Avenue, New
York), or $0.41 per share, reflected as discontinued operations (net
of minority interest). Net income from continuing operations was $1.2
million, or $0.06 per share. Adjusted Funds from Operations (AFFO)
were $3.3 million, or $0.13 per share, compared to $0.11 in AFFO per
share for the first quarter of 2005. For a reconciliation of net
income to AFFO, please refer to the tables on the following pages.
The Company's quarter-over-quarter revenues, after deducting
interest income on cash and short-term investments, increased
approximately 53% from $8.1 million to $12.4 million. General and
administrative expenses decreased by $0.6 million quarter-over-quarter
from $3.8 million to $3.2 million, or approximately (16%), exclusive
of equity based compensation charges.
David Hamamoto, President and Chief Executive Officer, commented,
"We are pleased to have achieved three of our primary objectives
during the quarter: first, we significantly increased our book value
through a strategic asset sale; second, our capital was deployed in
investments consistent with our pre-G&A targeted return on equity of
15%; and, finally, we completed our first subordinate real estate debt
CDO financing which enabled us to end the quarter with 97% of our
financed assets match funded with asset backed non-recourse debt."
Mr. Hamamoto continued, "The increase to our book value was
largely driven by a $0.41 per share gain from the sale of 729 Seventh
Avenue. We are currently marketing our other Times Square property,
located at 1552 Broadway, and anticipate that, upon completion of a
sale of this asset, our aggregate increase to book value from these
two asset sales will be approximately $1.10 per share. Of course, we
can offer no assurance that the 1552 transaction will close at any
specific price. Our investment program continues to achieve our return
hurdles while maintaining a relatively defensive posture as to credit
quality. At quarter end, our real estate securities portfolio had a
weighted average credit rating of BBB- and our subordinate debt real
estate portfolio had an average last dollar loan-to-value ratio of 71%
with a weighted average yield on these investments of LIBOR plus
4.68%. The two net lease investments following our IPO are backed by
investment grade tenants with AAA and A ratings. Our focus on credit
is also coupled with a defensive financing strategy. We expect to
primarily utilize securitization vehicles, such as our CDOs, to
provide the Company with longer term, low cost, non-recourse funding
that substantially mitigates risk associated with future interest rate
volatility."
Mr. Hamamoto added, "We are very satisfied with the rates of
return we are achieving on invested capital. Our second quarter
results do not reflect the investment of approximately $63 million of
the fresh capital raised through previously announced trust preferred
offerings. In addition, we also had $72 million of cash proceeds
raised through the issuance of CDO IV securities in mid-June that will
be devoted to investment in additional subordinate real estate loans
in CDO IV. We expect this additional capital to be fully deployed over
the third quarter."
Investment Activities
The Company closed on $428 million of new investments during the
second quarter, bringing its total assets under management to
approximately $2.0 billion.
With regard to the real estate securities business, the Company
closed on $238 million of primarily investment grade CMBS securities
funded through its warehouse facility for CDO V. For the third
quarter, through August 9, 2005, an additional $104 million in real
estate securities have been acquired in the CDO V warehouse, bringing
the total collateral pool to $342 million.
During the second quarter, the Company deployed $63 million of
equity and accumulated $170 million of subordinate loan participations
and other collateral that were ultimately financed in CDO IV. For the
third quarter, through August 9, 2005, the Company has invested an
additional $88 million in subordinate debt investments, of which $53
million represents the investment of the restricted cash proceeds
funded through the CDO IV issuance.
No net lease investments were made during the second quarter. In
August 2005, the Company closed on a $22 million acquisition of an
118,000 square foot office building located in Salt Lake City, Utah.
The property is 100% leased to the U.S. Government's General Services
Administration under a lease that expires in April 2012. The Property
is financed with a 5.16% fixed rate, seven year non-recourse first
mortgage loan of $17 million.
Mr. Hamamoto commented, "In addition to increasing our book value,
the sale of 729 Seventh Avenue has the added benefit of producing a
substantial gain that can be accretively reinvested in assets such as
the GSA property in Salt Lake City."
Financing Activities
During the second quarter, the Company completed two private
placements totaling $65 million of trust preferred securities that
mature in 30 years, which are backed by unsecured junior subordinated
notes issued by the Company's operating partnership. The net proceeds
from the trust preferred issues totaled approximately $63 million.
Interest on the trust preferred securities is fixed at a weighted
average rate of 7.99% for ten years, after which the rate will float
and reset quarterly at LIBOR plus 3.25%. The securities are callable
at par at the Company's option five years following the date of
issuance.
In May 2005, the Company also entered into a $400 million
warehouse facility with a major financial institution under which
collateral will be acquired and financed for the Company's next
proposed investment grade securities CDO - CDO V.
In June 2005, the Company closed it first subordinate real estate
debt CDO - CDO IV. The Company issued $300 million of investment grade
CDO bonds that have an average life of eight years and bear interest
at LIBOR plus a weighted average yield, including costs, of 0.84%. The
CDO bonds are collateralized by a $400 million portfolio of
subordinate real estate debt, CMBS and, for the duration of the
ramp-up period, cash.
In July 2005, the Company also entered into a new $150 million
credit facility, with an initial term of three years, which the
Company expects to utilize in acquiring subordinate real estate
investments and other qualifying income producing real estate loan
assets and securities at funding costs ranging from LIBOR plus 0.20%
to LIBOR plus 3.00%.
Dividends
The Company declared a cash dividend of $0.15 per share of common
stock, payable with respect to the quarter ended June 30, 2005. The
dividend is expected to be paid on August 15, 2005 to shareholders of
record as of the close of business on August 8, 2005.
For the quarter ended June 30, 2005, the Company had 26,766,315
weighted average diluted shares outstanding.
Earnings Conference Call
NorthStar Realty Finance Corp. will hold a conference call to
discuss second quarter 2005 financial results today, August 11, 2005,
at 5:00 PM Eastern time. Hosting the call will be David Hamamoto,
President and Chief Executive Officer, and Mark Chertok, Chief
Financial Officer and Treasurer.
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. The call will also be archived on the Company's
website for at least one year. The call can also be accessed live over
the phone by dialing (800) 811-8830 or for international callers by
dialing (913) 981-4904.
A replay of the call will be available one hour after the call and
can be accessed by dialing (888) 203-1112 or (719) 457-0820 for
international callers. The replay will be available from August 11,
2005, through August 25, 2005. The password for the replay will be
6324715.
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 NorthStar Realty Finance Corp.
Predecessor
Condensed Consolidated and Combined Statements of Operations
(unaudited)
The The The The
Company Predecessor Company Predecessor
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2005 2004 2005 2004
-------- --------- ----------- ----------
Revenues and other income:
Rent and escalation
income $3,323,000 $ - $ 6,431,000 $ -
Advisory and management
fee income 20,000 53,000 71,000 108,000
Advisory and management
fee income- related
parties 1,128,000 584,000 2,071,000 1,182,000
Interest income-debt
securities 10,451,000 308,000 18,423,000 563,000
Other revenue 5,000 - 5,000 -
---------- --------- ----------- ---------
Total revenues 14,927,000 945,000 27,001,000 1,853,000
Expenses:
Real estate properties-
operating expenses 743,000 - 1,473,000 -
Interest expense 6,979,000 - 12,946,000 -
Management fees- related
party 61,000 - 118,000 -
General & Administrative: - -
Direct: - - - -
Salaries and other
compensation 1,278,000 298,000 2,539,000 600,000
Shared Services-related
party 344,000 - 686,000 -
Equity based compensation 959,000 - 1,759,000 -
Insurance 217,000 - 430,000 -
Accounting and auditing
fees 290,000 - 1,316,000 -
Other general and
administrative 1,033,000 54,000 2,011,000 101,000
Allocated: - -
Salaries and other
compensation - 625,000 - 1,244,000
Insurance - 97,000 - 195,000
Other general and
administrative - 213,000 - 522,000
---------- --------- ----------- ---------
Total general and
administrative 4,121,000 1,287,000 8,741,000 2,662,000
Depreciation and
amortization 1,046,000 - 1,984,000 -
---------- --------- ----------- ---------
Total expenses 12,950,000 1,287,000 25,262,000 2,662,000
---------- --------- ----------- ---------
Income (loss) from
operations 1,977,000 (342,000) 1,739,000 (809,000)
Equity in earnings of
unconsolidated/uncombined
ventures 60,000 492,000 106,000 864,000
Unrealized gain (loss) on
investments and other (498,000) (333,000) 549,000 717,000
Realized gain (loss) on
investments and other (86,000) - 501,000 -
---------- --------- ----------- ---------
Income (loss) before
minority interests and
discontinued operations 1,453,000 (183,000) 2,895,000 772,000
Minority interest (300,000) - (597,000) -
---------- --------- ----------- ---------
Net income (loss) from
continuing operations 1,153,000 (183,000) 2,298,000 772,000
Income (loss) from
discontinued operations,
net of minority interest 40,000 - (50,000) -
Gain on sale of
discontinued operations,
net of minority interest 8,630,000 - 8,630,000 -
---------- --------- ----------- ---------
Net income (loss) $9,823,000 $(183,000) $10,878,000 $ 772,000
========== ========= =========== =========
Earnings per share
Net income (loss) from
continuing operations
before discontinued
operations $ 0.06 $ 0.11
Income (loss) from
discontinued operations - -
Gain on sale of
discontinued operations 0.41 0.41
---------- -----------
Net income available to
common shareholders $ 0.47 $ 0.52
========== ===========
Weighted average number
of shares of common
stock outstanding
Basic 21,250,240 21,250,240
========== ===========
Diluted 26,766,315 26,766,315
========== ===========
1) The results of operations for the six and three ended June 30, 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.
Condensed Consolidated Balance Sheets
June 30, December 31,
2005 2004
------------ --------------
(unaudited)
Assets:
Cash and cash equivalents $ 36,888,000 $ 47,733,000
Restricted cash 78,110,000 2,713,000
Debt securities held for trading 212,498,000 826,611,000
Operating real estate-net 88,181,000 43,544,000
Debt securities available for
sale 121,813,000 37,692,000
CDO deposit and warehouse
agreements 12,660,000 2,988,000
Collateral held by broker 14,605,000 24,831,000
Subordinate real estate debt
investments 302,880,000 70,841,000
Investments in and advances to
uncombined ventures 4,241,000 5,363,000
Deferred costs and intangible
assets, net 16,180,000 4,233,000
Other assets 9,136,000 11,801,000
------------ --------------
Total assets $897,192,000 $1,078,350,000
============ ==============
Liabilities and Stockholders'
Equity:
Mortgage notes and loans payable $ 71,577,000 $ 40,557,000
Liability to subsidiary trusts
issuing preferred securities 67,020,000 -
Credit facility 21,884,000 27,821,000
Repurchase obligations 218,912,000 800,418,000
CDO bonds payable 300,000,000 -
Securities sold, not yet
purchased 13,081,000 24,114,000
Obligations under capital leases 3,338,000 3,303,000
Accounts payable and accrued
expenses 7,590,000 5,603,000
Due to affiliates 148,000 250,000
Other liabilities 1,765,000 528,000
------------ --------------
Total liabilities 705,315,000 902,594,000
Minority interest 36,948,000 32,447,000
Commitments and contingencies - -
Stockholders' equity 154,929,000 143,309,000
------------ --------------
Total stockholders' equity 154,929,000 143,309,000
------------ --------------
Total liabilities and
stockholders' equity $897,192,000 $1,078,350,000
============ ==============
NorthStar Realty Finance Corp. and NorthStar Realty Finance Corp.
Predecessor
Reconciliation of Net income to Funds from Operations and Adjusted
Funds from Operations
The following is a reconciliation of net income to FFO and AFFO and
illustrates the difference in this measure of operating performance
The The The The
Company Predecessor Company Predecessor
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2005 2004 2005 2004
---------- --------- ----------- ----------
Funds from Operations :
Income (loss) before
minority interests $1,453,000 $(183,000)$ 2,895,000 $ 772,000
Adjustments:
Depreciation and
amortization 1,046,000 1,984,000
Real estate depreciation
and amortization -
unconsolidated ventures 486,000 972,000
---------- --------- ----------- ----------
Funds from Operations
(FFO) $2,499,000 $ 303,000 $ 4,879,000 $1,744,000
---------- --------- ----------- ----------
Adjusted Funds from
Operations :
Funds from Operations
(FFO) $2,499,000 $ 303,000 $ 4,879,000 $1,744,000
Straightline rental
income, net (113,000) (144,000) (212,000) (279,000)
Amortization of deferred
compensation 959,000 1,759,000
---------- --------- ----------- ----------
Adjusted funds from
operations (AFFO) $3,345,000 $ 159,000 $ 6,426,000 $1,465,000
========== ========= =========== ==========
FFO Per Share of Common
Stock $ 0.09 $ 0.18
========== ===========
AFFO per Share of Common
Stock $ 0.13 $ 0.24
========== ===========
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 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, 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) 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 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 our operating performance
or as an alternative to cash flow from operating activities as a
measure of our liquidity.
The Company 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.
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
Brad Cohen, 800-684-8879