Northstar Realty Finance Corp. : NorthStar Realty Finance Announces Third Quarter 2011 Results
11/03/2011 | 06:35am
NEW YORK, Nov. 3, 2011 /PRNewswire/ --
Third Quarter 2011 Highlights
-- Declared third quarter 2011 dividend of $0.125 per common share, 25%
increase over prior quarter.
-- AFFO per diluted share of $0.29.
-- $116 million of unrestricted cash at September 30, 2011.
-- Acquired $240 million CRE CDO.
-- Non-listed REIT surpasses $100 million of capital raised to-date.
NorthStar Realty Finance Corp. (NYSE: NRF) today announced its results for the quarter ended September 30, 2011.
Third Quarter 2011 Results
NorthStar reported adjusted funds from operations ("AFFO") for the third quarter 2011 of $0.29 per diluted share compared with $0.15 per diluted share for the third quarter 2010.
Net loss to common stockholders for the third quarter 2011 was $(24.6) million, or $(0.26) per diluted share, compared to net loss of $(144.1) million, or $(1.87) per diluted share for the third quarter 2010. Third quarter 2011 net loss includes $(43.5) million of unrealized losses relating to non-cash fair value adjustments, compared to $(169.4) million of unrealized losses for the third quarter 2010. These non-cash fair value gains and losses are excluded from AFFO. Realized gains totaled $13.7 million for the third quarter 2011, compared with $26.8 million for the third quarter 2010.
At September 30, 2011, GAAP book value per share was $8.88. For a reconciliation of net income (loss) to AFFO and GAAP book value per share, please refer to the tables on the following pages.
David T. Hamamoto, chairman and chief executive officer, commented, "Over the past few quarters, we have deployed a substantial amount of capital in accretive and opportunistic investments, in addition to recycling our CDO cash into higher yielding investments. As a result, NorthStar is pleased to have increased its quarterly common dividend by 25%, while at the same time retaining excess cash flow to pursue new investment opportunities with attractive risk-adjusted returns."
Mr. Hamamoto continued, "Surpassing the critical $100 million benchmark for capital raised to-date in our current non-listed REIT offering is a clear sign of NorthStar's viability in that market and we have high expectations for the future. The significant number of selling agreements with best in class broker-dealers and their registered representatives we added during the past several quarters is translating into increased capital raising velocity. We expect these positive trends to continue, resulting in an increasing stream of fee income and cash flow to NorthStar."
Investments and Fee Income
NorthStar's investments highlights for the third quarter 2011:
-- Repurchased $63 million par amount of its CDO bonds. As of September 30,
2011, NorthStar owned a total of $556 million of its own CDO bonds, of
which $377 million were re-purchased at an average price of 32% of par
and had a weighted average original credit rating of AA-/Aa3. This
discount to par of $256 million represents potential imbedded gains that
we can realize in future periods.
-- Acquired the collateral management rights, equity notes and $14 million
of principal of originally-investment grade bonds of a $240 million
commercial real estate CDO from CapLease Inc. The investment was funded
with $12 million of unrestricted cash and $11 million of CDO cash. The
collateral consists of 61 investment grade credit tenant leases (72%),
corporate credit notes (7%) and CMBS (21%) having a total weighted
average coupon of 6.5% and a weighted average life of approximately 8
years. The equity notes and collateral management fees are currently
expected to generate an initial approximate 25% annualized cash yield on
the $12 million unrestricted cash investment.
-- Voluntarily repaid in full the $100 million preferred membership
interest in NRF Healthcare which had a 10.5% distribution rate and an
option to convert into common equity of our healthcare net lease
portfolio.
NorthStar had approximately $7.3 billion of assets under management at September 30, 2011.
During the third quarter 2011, NorthStar earned management fees from its consolidated CDOs of $4.4 million and special servicing fees of $0.1 million. These fees are eliminated on NorthStar's consolidated statement of operations. In addition, during the third quarter 2011, NorthStar received $0.2 million of advisory fees from NorthStar's sponsored non-listed REIT.
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 September 30, 2011 included $116 million of unrestricted cash and $19 million of available cash for re-investment in NorthStar's CDOs. At September 30, 2011, NorthStar's only unrestricted cash needs related to non-discretionary future funding obligations associated with existing loan commitments were approximately $4 million.
NorthStar Real Estate Income Trust ("NSREIT"), a non-listed REIT sponsored by NorthStar, raised $32 million in the third quarter 2011, representing an 81% increase compared to the prior quarter. NSREIT has raised $59 million in 2011 and $88 million since inception through September 30, 2011. NRF Capital Markets, LLC, NorthStar's wholly-owned broker-dealer subsidiary, had total signed selling agreements with broker-dealers covering more than 40,000 registered representatives as of September 30, 2011. NorthStar expects to earn recurring, net fees approximately equal to three percentage points based on total capital raised for each of our sponsored, non-listed REITs.
Currently, NorthStar's only near-term corporate debt obligations relate to its exchangeable senior notes, of which $22 million principal amount of 7.25% notes are payable in June 2012 at the holders' option and $36 million of 11.5% notes are due in June 2013.
Risk Management
At September 30, 2011, NorthStar had three loans on non-performing status ("NPL"), representing $41 million in aggregate principal amount and a $2 million book value. This amount is unchanged from June 30, 2011. 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 third quarter 2011, NorthStar recorded $9 million of loan loss provisions relating to three loans, compared to $14 million of loan loss provisions related to four loans recorded during the second quarter 2011. As of September 30, 2011, loan loss provisions totaled $191 million, or 7% of total loans, related to 22 loans with a book value of $286 million.
As of September 30, 2011, NorthStar's core net lease portfolio was 94% leased with a 6.7 year weighted average remaining lease term. As of September 30, 2011, 100% of our net lease healthcare portfolio was leased to third-party operators with weighted average lease coverage of 1.4x and a 7.9 year weighted average remaining lease term.
Stockholders' Equity
At September 30, 2011, NorthStar had 100,237,463 total common shares and operating partnership units outstanding and $30 million of non-controlling interests relating to its operating partnership. GAAP book value per share was $8.88 at September 30, 2011. Exclusive of all unrealized adjustments, loan loss provisions, and accumulated depreciation and amortization, adjusted book value at September 30, 2011 would be $7.41 per share. The adjusted book value does not take into consideration any value related to the in-place and anticipated advisory fee income streams generated by our sponsored, non-listed REIT vehicles and our CDO management fees. For a calculation of adjusted book value per share, please refer to the tables on the following pages.
Common Dividend Announcement
On November 2, 2011, NorthStar announced that its Board of Directors declared a cash dividend of $0.125 per share of common stock, payable with respect to the quarter ended September 30, 2011. The dividend is expected to be paid on November 18, 2011 to shareholders of record as of the close of business on November 14, 2011. The Company's common shares will begin trading ex-dividend on November 10, 2011.
Earnings Conference Call
NorthStar will hold a conference call to discuss third quarter 2011 financial results on Thursday November 3, 2011, at 10:00 a.m. Eastern time. Hosting the call will be David Hamamoto, chairman and chief executive officer; Albert Tylis, co-president and chief operating officer; Daniel Gilbert, co-president and chief investment officer; and Debra Hess, chief financial officer. The Company will post on its website, www.nrfc.com, a September 30, 2011 update to its corporate presentation.
The call will be webcast live over the Internet from NorthStar's website, www.nrfc.com, and will be archived on the Company's website. The call can also be accessed live over the phone by dialing 877-941-8631, or for international callers, by dialing 480-629-9867.
A replay of the call will be available one hour after the call through Thursday November 10, 2011 by dialing 800-406-7325 or 303-590-3030 for international callers, using pass code 4480879.
About NorthStar Realty Finance Corp.
NorthStar Realty Finance Corp. is a finance REIT that originates, acquires and manages portfolios of commercial real estate debt, commercial real estate securities and net lease properties. In addition, NorthStar engages in asset management and other activities related to real estate and real estate finance. For more information about NorthStar Realty Finance Corp., please visit www.nrfc.com.
NorthStar Realty Finance Corp.
Consolidated Statements of Operations
($ in thousands, except share and per
share data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- ------------------
2011 2010 2011 2010
---- ---- ---- ----
Revenues
and other
income
Interest income $99,504 $88,791 $307,934 $207,087
Rental and
escalation income 26,996 31,912 85,879 82,980
Commission income 3,131 1,861 5,775 2,233
Other revenue 1,389 1,854 3,299 5,004
----- ----- ----- -----
Total revenues 131,020 124,418 402,887 297,304
Expenses
Interest expense 39,875 29,558 107,501 96,213
Real estate
properties -
operating
expenses 3,427 12,374 18,537 24,661
Asset management
expenses 1,279 1,931 4,508 4,251
Commission expense 2,322 1,399 4,338 1,677
Provision for loan
losses 9,340 42,877 48,040 136,134
Provision for loss
on equity
investment - - 4,482 -
General
and
administrative
Salaries and
equity-based
compensation (1) 11,762 11,863 44,031 40,708
Auditing and
professional fees 1,782 2,051 6,509 6,156
Other general and
administrative 5,399 3,814 14,394 12,752
----- ----- ------ ------
Total general and
administrative 18,943 17,728 64,934 59,616
Depreciation and
amortization 12,762 7,980 32,370 23,493
------ ----- ------ ------
Total expenses 87,948 113,847 284,710 346,045
Income (loss) from
operations 43,072 10,571 118,177 (48,741)
Equity in earnings
(losses) of
unconsolidated
ventures (604) (60) (4,387) 6,155
Other income
(loss) (11,826) - (1,688) -
Unrealized gain
(loss) on
investments and
other (68,446) (199,572) (351,271) (206,408)
Realized gain
(loss) on
investments and
other 13,712 26,795 61,285 109,766
Gain from
acquisitions 81 15,363 81 15,363
--- ------ --- ------
Income (loss) from
continuing
operations (24,011) (146,903) (177,803) (123,865)
Income (loss) from
discontinued
operations (391) 55 (1,029) (1,042)
Gain on sale from
discontinued
operations 3,533 - 17,980 2,528
----- --- ------ -----
Consolidated net
income (loss) (20,869) (146,848) (160,852) (122,379)
Less: net income
(loss) allocated
to non-
controlling
interests 1,743 7,963 1,393 1,018
Preferred stock
dividends (5,231) (5,231) (15,694) (15,694)
Contingently
redeemable non-
controlling
interest
accretion (196) - (5,178) -
Net income (loss)
attributable to
NorthStar Realty
Finance Corp.
common
stockholders $(24,553) $(144,116) $(180,331) $(137,055)
======== ========= ========= =========
Net income (loss)
per share from
continuing
operations
(basic/diluted) $(0.29) $(1.87) $(2.26) $(1.82)
Income (loss) per
share from
discontinued
operations
(basic/diluted) (0.01) - (0.01) (0.01)
Gain per share on
sale of
discontinued
operations
(basic/diluted) 0.04 - 0.21 0.03
Net income (loss)
per common share
attributable to
NorthStar Realty
Finance Corp.
common
stockholders
(basic/diluted) $(0.26) $(1.87) $(2.06) $(1.80)
====== ====== ====== ======
Weighted
average
number of
shares of
common
stock:
Basic 95,957,333 77,139,868 87,105,058 76,211,705
========== ========== ========== ==========
Diluted 100,229,735 82,364,109 91,397,552 82,287,543
=========== ========== ========== ==========
Dividends declared
per share of
common stock $0.125 $0.10 $0.325 $0.30
====== ===== ====== =====
(1) The three months ended September 30,
2011 and 2010 include $2,204 and $3,894
of equity-based compensation expense,
respectively. The nine months ended
September 30, 2011 and 2010 include
$6,851 and $13,133 of equity-based
compensation expense.
NorthStar Realty Finance Corp.
Consolidated Balance Sheets
($ in thousands, except share data)
September December
30, 2011 31,
(Unaudited) 2010
----------- ----
Assets
VIE Financing Structures
------------------------
Restricted cash $259,563 $263,314
Operating real
estate, net 246,015 8,040
Real estate
securities,
available for
sale 1,501,605 1,687,793
Real estate debt
investments, net 1,730,467 1,672,664
Real estate debt
investments, held
for sale 21,274 18,661
Investments in and
advances to
unconsolidated
ventures 63,956 72,536
Receivables, net
of allowance of
$1,198 in 2011
and $824 in 2010 23,300 26,419
Derivative assets,
at fair value 8 42
Deferred costs and
intangible
assets, net 35,170 150
Assets of
properties held
for sale 6,610 5,101
Other assets 19,207 14,275
3,907,175 3,768,995
--------- ---------
Non-VIE Financing
Structures
-----------------
Cash and cash
equivalents 115,821 125,439
Restricted cash 49,989 46,070
Operating real
estate, net 781,319 938,062
Real estate
securities,
available for
sale 45,296 3,261
Real estate debt
investments, net 107,701 153,576
Investments in and
advances to
unconsolidated
ventures 22,109 21,876
Receivables, net
of allowance of
$614 in 2011 and
$1,818 in 2010 9,100 5,910
Receivables,
related parties 8,793 4,101
Unbilled rents
receivable 11,241 10,404
Derivative assets,
at fair value 7,320 17
Deferred costs and
intangible
assets, net 49,268 52,823
Assets of
properties held
for sale 9,122 -
Other assets 18,047 21,457
------ ------
1,235,126 1,382,996
Total assets $5,142,301 $5,151,991
========== ==========
Liabilities
VIE Financing Structures
------------------------
CDO bonds payable $2,394,643 $2,258,805
Mortgage notes
payable 212,000 -
Secured term loan 14,682 14,682
Accounts payable
and accrued
expenses 16,565 15,691
Escrow deposits
payable 53,425 60,163
Derivative
liabilities, at
fair value 243,572 190,993
Liabilities of
properties held
for sale 30 99
Other liabilities 30,302 8,654
2,965,219 2,549,087
--------- ---------
Non-VIE Financing
Structures
-----------------
Mortgage notes
payable 556,786 803,114
Secured term loan - 22,199
Exchangeable
senior notes 238,685 126,889
Junior
subordinated
notes, at fair
value 151,265 191,250
Accounts payable
and accrued
expenses 40,568 34,160
Escrow deposits
payable 1,291 548
Derivative
liabilities, at
fair value 8,381 29,696
Other liabilities 44,649 22,535
1,041,625 1,230,391
--------- ---------
Total liabilities 4,006,844 3,779,478
--------- ---------
Contingently
redeemable non-
controlling
interest - 94,822
Equity
NorthStar Realty Finance
Corp. Stockholders' Equity
Preferred stock,
8.75% Series A,
$0.01 par value,
$25 liquidation
preference per
share, 57,867 57,867
2,400,000 shares issued and
outstanding at September
30, 2011 and December 31,
2010
Preferred stock,
8.25% Series B,
$0.01 par value,
$25 liquidation
preference per
share, 183,505 183,505
7,600,000 shares issued and
outstanding at September
30, 2011 and December 31,
2010
Common stock,
$0.01 par value,
500,000,000
shares
authorized,
95,974,012 and
78,104,753 960 781
shares issued and
outstanding at September
30, 2011 and December 31,
2010, respectively
Additional paid-
in capital 809,885 723,102
Retained earnings 86,058 293,382
Accumulated other
comprehensive
loss (36,362) (36,119)
------- -------
Total NorthStar
Realty Finance
Corp.
Stockholders'
Equity 1,101,913 1,222,518
Non-controlling
interests 33,544 55,173
------ ------
Total equity 1,135,457 1,277,691
Total liabilities
and stockholders'
equity $5,142,301 $5,151,991
========== ==========
Non-GAAP Financial Measures
Included in this press release are certain "non-GAAP financial measures," which are measures of NorthStar's historical or future financial performance that are different from measures calculated and presented in accordance with accounting principles generally accepted in the United States, or U.S. GAAP, within the meaning of applicable SEC rules. These include: Funds From Operations and Adjusted Funds From Operations. NorthStar believes these terms can be useful measures of its performance, which are further defined following the table below.
Funds from
Operations (FFO)
and Adjusted
Funds from
Operations
(AFFO) ($ in
thousands,
except share and
per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- ------------------
2011 2010 2011 2010
---- ---- ---- ----
Funds from
Operations:
Income
(loss)
from
continuing
operations $(24,011) $(146,903) $(177,803) $(123,865)
Non-
controlling
interests(1) 658 (1,853) (7,737) (8,780)
--- ------ ------ ------
Consolidated
net
income
(loss)
before
non-
controlling
interest
in
operating
partnership (23,353) (148,756) (185,540) (132,645)
Adjustments:
------------
Preferred
stock
dividends (5,231) (5,231) (15,694) (15,694)
Depreciation
and
amortization 12,762 7,980 32,370 23,493
Funds
from
discontinued
operations (391) 709 (237) 984
Real
estate
depreciation
and
amortization,
unconsolidated
ventures 207 237 646 711
--- --- --- ---
Funds
from
Operations (16,006) (145,061) (168,455) (123,151)
------- -------- -------- --------
Adjusted Funds
from Operations:
Funds
from
Operations (16,006) (145,061) (168,455) (123,151)
Straight-
line
rental
income,
net (678) (341) (1,910) (1,248)
Straight-
line
rental
income
and fair
value
lease
revenue,
unconsolidated
ventures (32) (18) (84) (63)
Amortization
of
above/
below
market
leases (272) (213) (656) (691)
Amortization
of
equity-
based
compensation 2,204 3,894 6,851 13,133
Unrealized
(gain)
loss
from
fair
value
adjustments 43,537 169,431 270,001 135,654
Unrealized
loss
from
fair
value
adjustments,
unconsolidated
ventures - - - 3,357
Gain from
acquisitions (81) (15,363) (81) (15,363)
Adjusted
Funds
from
Operations $28,672 $12,329 $105,666 $11,628
======= ======= ======== =======
FFO per
share of
common
stock $(0.16) $(1.76) $(1.84) $(1.50)
AFFO per
share of
common
stock $0.29 $0.15 $1.16 $0.14
(1) Amount excludes non-controlling limited
partner interests in our operating
partnership.
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 estaterelated 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 straightlining 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).
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.
Assets Under Management at September 30, 2011
(1)
($ in thousands)
Amount %
------ ---
Investment-grade CRE securities $720,458 9.9%
Non-investment grade CRE
securities 2,576,245 35.3%
--------- ----
Total CRE Securities 3,296,703 45.2%
First mortgages loans (2) 1,860,957 25.5%
Mezzanine and subordinate loans
(3) 1,020,058 14.0%
Credit tenant leases 144,617 2.0%
------- ---
Total CRE Debt 3,025,632 41.5%
Investment-grade net lease 161,845 2.2%
Non-investment grade net lease 808,338 11.1%
------- ----
Total Net Lease 970,183 13.3%
Total $7,292,518 100.0%
========== =====
(1) Based on principal amount of CRE debt, CRE
securities and equity investments and the purchase
price of operating real estate.
(2) Includes $204 million of junior participations in
first mortgage loans.
(3) Includes $513 million related to equity
investments, joint ventures and operating real
estate.
N-Star CDOs
primarily backed
by CRE Debt
($ in thousands)
N-Star N-Star N-Star
IV VI VIII CSE CapLease
Issue Date Jun-05 Mar-06 Dec-06 Mar-05 Dec-06 Total
---------- ------ ------ ------ ------ ------ -----
Balance sheet as
of September 30,
2011
---------------------
Assets,
principal
amount
(1) $439,073 $498,350 $946,899 $1,089,559 $244,908 $3,218,789
CDO bonds,
principal
amount
(2) 284,279 336,850 577,700 900,981 225,085 2,324,895
------- ------- ------- ------- ------- ---------
Net assets $154,794 $161,500 $369,199 $188,578 $19,823 $893,894
Principal amount
of
Original
below IG
rated CDO
bonds $- $13,950 $59,400 $47,450 $- $120,800
Original
IG rated
CDO bonds 9,750 26,925 77,000 85,929 - 199,604
----- ------ ------ ------ --- -------
Total CDO
bonds $9,750 $40,875 $136,400 $133,379 $- $320,404
Weighted average
original credit
rating of
original IG
rated CDO bonds A+/A1
Weighted average
purchase price
of original IG
rated CDO bonds 30%
CDO quarterly
cash
distributions
and coverage
tests (3)
--------------
Equity
distributions $2,563 $138 $2,782 $14,039 $475 (4) $19,997
Collateral
management
fees 341 496 983 542 121 (4) 2,483
Interest
coverage
cushion
(5) $3,646 $531 $6,082 $5,878 $53
Overcollateralization
cushion
(5) $69,568 $54,366 $118,623 $42,266 $5,987
At
offering 19,808 17,412 42,193 (151,595) (6) 5,987 (7)
(1) Includes investments in N-Star issued CDO bonds that are
eliminated in consolidation.
(2) Includes N-Star issued CDO bonds that are eliminated in
consolidation.
(3) Interest coverage and overcollateralization coverage to the most
constrained class.
(4) Represents first distributions received, which was in October 2011.
(5) Quarterly interest coverage and overcollateralization cushions from
remittance report issued on date nearest to September 30, 2011.
(6) Based on trustee report as of June 24, 2010, closest to the date of
acquisition.
(7) Based on trustee report as of August 31, 2011, closest to the date
of acquisition.
N-Star CDOs
primarily backed
by CRE
Securities
($ in thousands)
N-Star N-Star N-Star N-Star N-Star N-Star
I II III V VII IX
Issue Date Aug-03 Jul-04 Mar-05 Sep-05 Jun-06 Feb-07 Total
---------- ------ ------ ------ ------ ------ ------ -----
Balance sheet as
of September 30,
2011
---------------------
Assets,
principal
amount
(1) $223,506 $215,306 $418,174 $555,388 $733,469 $1,042,713 $3,188,556
CDO bonds,
principal
amount
(2) 184,147 177,094 318,678 364,772 428,088 682,980 2,155,759
------- ------- ------- ------- ------- ------- ---------
Net assets $39,359 $38,212 $99,496 $190,616 $305,381 $359,733 $1,032,797
Principal amount
of
Original
below IG
rated CDO
bonds $14,000 $15,492 $- $- $16,200 $13,040 $58,732
Original
IG rated
CDO bonds 9,000 3,512 16,855 26,129 45,726 75,980 177,202
----- ----- ------ ------ ------ ------ -------
Total CDO
bonds $23,000 $19,004 $16,855 $26,129 $61,926 $89,020 $235,934
Weighted average
original credit
rating of
original IG
rated CDO bonds AA-/Aa3
Weighted average
purchase price
of original IG
rated CDO bonds 34%
CDO quarterly
cash
distributions
and coverage
tests (3)
--------------
Equity
distributions $- $- $1,677 $- $1,001 $1,407 $4,085
Collateral
management
fees 78 76 344 181 508 774 1,961
Interest
coverage
cushion
(4) $(576) $(270) $2,047 $685 $870 $3,790
Overcollateralization
cushion
(4) $(20,420) $(17,331) $9,141 (5) $(29,573) $14,866 $48,192
At
offering 8,687 10,944 13,610 12,940 13,966 24,516
(1) Includes investments in N-Star issued CDO bonds that are eliminated in
consolidation.
(2) Includes N-Star issued CDO bonds that are eliminated in consolidation.
(3) Interest coverage and overcollateralization coverage to the most
constrained class.
(4) Quarterly interest coverage and overcollateralization cushions from
remittance report issued on date nearest to September 30, 2011.
(5) Amount represents estimated overcollateralization cushion as of October 17,
2011.
CMBS Vintages Under Management
($ in thousands)
Amount % Cumulative
------ --- ----------
1997 $36,336 1.3% 1.3%
1998 50,973 1.8% 3.1%
1999 32,393 1.2% 4.3%
2000 83,528 3.0% 7.3%
2001 86,105 3.1% 10.4%
2002 71,037 2.5% 12.9%
2003 117,690 4.2% 17.1%
2004 309,397 11.0% 28.1%
2005 480,585 17.1% 45.2%
2006 814,130 29.0% 74.2%
2007 549,868 19.6% 93.8%
2008 38,046 1.4% 95.2%
2009 54,075 1.9% 97.1%
2010 1,000 0.0% 97.1%
2011 79,045 2.9% 100.0%
Total $2,804,208 100.0%
========== =====
Credit Rating Distribution of Real
Estate Securities Under Management
($ in thousands)
Principal
Amount %
--------- ---
AAA $119,334 3.6%
AA 49,228 1.5%
A 186,192 5.6%
BBB 365,705 11.1%
BB 516,296 15.6%
B 425,786 12.9%
CCC 619,863 18.8%
CC 239,196 7.3%
C 260,127 7.9%
Below C 466,739 14.2%
NR 48,237 1.5%
Total (average of
B- /B3) $3,296,703 100.0%
========== =====
GAAP Book Value Rollforward
($ in thousands, except per share data)
Per
Amount Share
------ ------
Common book value at June 30,
2011, per share $927,765 $9.26
Net income to common shareholders and
non-controlling interest, excluding
non-cash
fair value adjustments included
in net income 17,899 0.18
Fair value adjustments included in net
income:
CDO bonds payable 162,271 1.62
Trust preferred debt 55,686 0.56
Securities and investments held
at fair value (200,776) (2.00)
Derivatives (60,718) (0.61)
Change in other comprehensive
income (3,972) (0.04)
Common dividends (10,022) (0.10)
Accretion (dilution) from
additional shares issued during
quarter (1) 2,215 0.01
----- ----
Total net increases/(decreases) (37,417) (0.38)
Common book value at September
30, 2011, per share (2)(3) $890,348 $8.88
======== =====
(1) Related to amortization of LTIP shares and
issuance of common shares from the Dividend
Reinvestment and Stock Purchase Plan.
(2) Common book value calculated as total
stockholder's equity of $1,102 million and non-
controlling interest in the operating partnership
of $30 million less preferred stock of $241
million.
(3) Cumulative net unrealized adjustments total a
positive $490 million ($4.89 per share), credit
loss provisions total a negative $191 million
($1.91 per share) and accumulated depreciation
and amortization total a negative $151 million
($1.51 per share) as of September 30, 2011.
Excluding all unrealized adjustments, loan loss
provisions and accumulated depreciation and
amortization would result in a $7.41 adjusted
book value per share at September 30, 2011.
NRFC NNN Holdings, LLC Portfolio Summary
($ in thousands)
Years Acquisition
Cost
Date Square Net Acquisition Existing less
Tenant or
Guarantor of Lease
Acquired Tenant Location/MSA Feet (1) Cost (2) Debt Debt
-------- ------------- ------------ ---- ----- -------- ---- ----
One property
Oct- ALGM Portfolio - in New York,
2004 Sbarro, Inc. (3) NY 7,500 1.3 $3,246 $- $3,246
Nov- Alliance Data
2007 Systems Corp. Columbus, OH 199,112 6.2 33,826 23,011 10,815
Fort Mill,
Mar- SC/
2007 Citigroup, Inc. Charlotte 165,000 9.1 34,303 29,945 4,358
Jun- Landis Logistics
2007 /East Penn Reading, PA 609,000 6.3 28,473 18,414 10,059
Jun- Indianapolis,
2006 Covance, Inc. IN 333,600 14.3 34,519 27,513 7,006
Feb- Credence Systems Milpitas, CA/
2007 Corp. San Jose 178,213 5.4 30,144 21,269 8,875
Dick's Sporting
Goods, Inc. /
Sep- PetSmart, Inc.
2006 (3) 9 properties 467,971 4.3-12.9 64,503 47,022 17,481
2 in MI /1
Sep- Electronic Data in CA /1 in
2005 Systems Corp. PA 387,842 4.0 62,718 45,622 17,096
GSA -U.S.
Aug- Department of Salt Lake
2005 Agriculture City, UT 117,553 0.6 22,424 14,736 7,688
Northrop Grumman
Jul- Space & Mission Aurora, CO/
2006 Systems Corp. Denver 183,529 3.8 43,625 32,834 (4) 10,791
Party City Corp.
(Amscan) /
Lerner
Mar- Enterprises, Rockaway, NJ/
2006 Inc. Northern NJ 121,038 3.7-5.8 21,955 16,699 5,256
Feb- Quantum Colorado
2006 Corporation (5) Springs, CO 406,207 1.2-9.4 27,635 17,678 9,957
Total NRFC NNN
Holdings, LLC
Portfolio 3,176,565 6.7 $407,371 $294,743 $112,628
============== ========= === ======== ======== ========
(1) Remaining lease term as of September 30, 2011. Total represents
weighted average based on acquisition cost.
(2) Acquisition cost does not include purchase price
allocations.
(3) One ALGM property and six of ten Dick's Sporting Goods, Inc.
/PetSmart, Inc. properties are ground lease interests.
(4) Property is financed via a $32.3 million first mortgage with
a third party and a $0.5 million mezzanine loan held by a
consolidated NorthStar entity.
(5) Dollar amounts shown are 50% of total relating to NRFC NNN
Holding's, LLC subsidiary's 50% interest in a joint venture
with an institutional investor.
Portfolio Cash Flow and Tenant Credit Profile
($ in
thousands) Three Months Ended September 30, 2011 Primary Tenant
------------------------------------- --------------
NOI
Tenant or Less Market Actual
Guarantor Base Debt Debt Cap Credit
of Tenant Rent NOI Service Service (1) Rating
----- --- -------- -------- ------- -------
ALGM
Portfolio
-Sbarro,
Inc. $251 $251 $- $251 N/A (2) not rated
Alliance
Data
Systems
Corp. 582 581 (455) 126 4,720 not rated
Citigroup,
Inc. 538 537 (512) 25 74,891 A/A3
Landis
Logistics
/East
Penn 198 95 (356) (3) (261) N/A (4) not rated
Covance,
Inc. 638 638 (517) 121 3,605 not rated
Credence
Systems
Corp. 688 686 (447) 239 312 not rated
Dick's
Sporting
Goods,
Inc. /
PetSmart,
Inc. 1,321 1,295 (973) 322 4,453 not rated (5)
Electronic
Data
Systems
Corp. 1,508 1,506 (824) 682 13,900 not rated
GSA -U.S.
Department
of implied
Agriculture 579 446 (302) 144 N/A AAA
Northrop
Grumman
Space &
Mission
Systems
Corp. 846 846 (750) 96 19,278 BBB+/Baa1
Party City
Corp.
(Amscan)
/Lerner
Enterprises,
Inc. 459 459 (304) 155 362 (6) B/B2 (7)
Quantum
Corporation
(50%) 611 610 (319) 291 759 B/B2
Total $8,219 $7,950 $(5,759) $2,191
------ ------ ------- ------
(1) Based on information from Bloomberg at close of market on September
30, 2011.
(2) Sole tenant in leasehold interest, Sbarro, Inc. filed for bankruptcy
protection (Chapter 11) in April 2011 and they are expected to assume
our lease. No other recent data is available.
(3) Debt service is currently funded from a reserve account made up of
an early lease termination fee received from prior tenant, not
reflected in this schedule.
(4) Privately-held company, market capitalization information is not
publicly disclosed.
(5) Dick's Sporting Goods, Inc. is not rated by the major credit rating
agency's. PetSmart, Inc. is rated BB by S&P.
(6) 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.
(7) 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.
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 nonperforming loans, capital raising at & performance of NSREIT, ability to realize annualized cash yields, 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.
SOURCE NorthStar Realty Finance
