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NorthStar Realty Finance Announces First Quarter 2012 Results

07:30 EDT Thursday, May 03, 2012

NEW YORK, May 3, 2012 /PRNewswire/ --

First Quarter 2012 Highlights

  • Increased first quarter 2012 dividend to $0.15 per common share.
  • AFFO per diluted share of $0.47.
  • Won the appeal on "WaMu" property, which reversed $46 million judgment.
  • Total capital raised to date of $267 million for our sponsored non-traded CRE REIT, including $31 million in April.

NorthStar Realty Finance Corp. (NYSE: NRF) today announced its results for the quarter ended March 31, 2012.

First Quarter 2012 Results

NorthStar reported adjusted funds from operations ("AFFO") for the first quarter 2012 of $0.47 per diluted share compared with $0.26 per diluted share for the first quarter 2011.  AFFO for the first quarter 2012 was $51.0 million compared to $21.4 million for the first quarter 2011.  Net loss to common stockholders for the first quarter 2012 was $(33.9) million, or $(0.33) per diluted share, compared to net loss of $(103.8) million, or $(1.33) per diluted share for the first quarter 2011.  First quarter 2012 net loss includes $(73.9) million of unrealized losses relating to non-cash fair value adjustments, compared to $(122.3) million of unrealized losses for the first quarter 2011.  These non-cash fair value losses are excluded from AFFO.  

At March 31, 2012, GAAP book value per share was $7.00.  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, "We are very pleased to have increased our dividend for the third consecutive quarter, which is a reflection of the continued growth in our cash flows.  Subsequent to quarter-end, we have invested an additional $89 million of equity in loan originations and opportunistic investments, including repurchases of our own CDO bonds and investments within our $7 billion portfolio. We are optimistic about the continued growth of our cash flows and we intend to regularly evaluate our dividend accordingly."

Investments and Fee Income

As of today, the principal proceeds NorthStar could receive from its owned CDO bonds is $706 million, of which $527 million was repurchased at an average price of 36% in the secondary market and has a weighted average original credit rating of AA-/Aa3.  This discount to par of $339 million represents potential imbedded cash flows that we may realize in future periods in addition to our capital invested in these bonds.  

NorthStar had approximately $7.0 billion of assets under management at March 31, 2012.

During the first quarter 2012, NorthStar received management fees from its consolidated CDOs of $3.9 million, which are eliminated on NorthStar's consolidated statement of operations.  In addition, during the first quarter 2012, NorthStar received $0.6 million of fees from our sponsored non-traded CRE REIT, NorthStar Real Estate Income Trust, Inc. ("NorthStar Income") and $0.1 million of special servicing fees.

For additional details regarding NorthStar's investments and fee income, please refer to the tables on the following pages and to the March 31, 2012 corporate presentation which will be posted on NorthStar's website, www.nrfc.com.

Liquidity, Financing and Capital Markets

As of March 31, 2012, unrestricted cash was $194 million and NorthStar's only unrestricted cash needs related to non-discretionary future funding obligations associated with existing loan commitments was $2 million.

On February 27, 2012, NorthStar completed the sale of 15 million shares of its common stock at a public offering price of $5.55 per share.  On March 2, 2012, the full over-allotment option of 2.25 million shares was exercised by the underwriters.  The net proceeds to NorthStar were $90 million.

On March 21, 2012, NorthStar issued an additional 1.6 million shares of its existing 8.25% Series B Preferred Stock at a public offering price of $22.92 per share (excluding accrued dividends) generating net proceeds of $35 million.

NorthStar Income raised $77 million in the first quarter 2012 and $267 million since inception, including $31 million in April 2012.  NorthStar Realty Securities, LLC, NorthStar's wholly-owned broker-dealer, had total signed selling agreements with broker-dealers covering more than 45,000 registered representatives as of March 31, 2012.  NorthStar expects to earn recurring, net fees approximately equal to three percentage points based on total capital raised for our sponsored non-traded REITs.

Currently, NorthStar's only near-term unsecured corporate debt obligations relate to its exchangeable senior notes, of which $20 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 March 31, 2012, NorthStar had two loans on non-performing status ("NPL"), representing $39 million in aggregate principal amount and a $29 million carrying value, excluding the Hancock tower loan which we expect to be restructured shortly.  This compares to four loans representing $51 million in aggregate principal amount and a $2 million carrying value at December 31, 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 first quarter 2012, NorthStar recorded $6.8 million of provision for loan losses relating to four loans, compared to $4.9 million of provision for loan losses related to three loans recorded during the fourth quarter 2011.  As of March 31, 2012, loan loss reserves totaled $166 million, or 7% of total loans, related to 19 loans with a carrying value of $253 million.

As of March 31, 2012, NorthStar's core net lease portfolio was 94% leased with a 6.2 year weighted average remaining lease term.  As of March 31, 2012, 100% of NorthStar's net lease healthcare portfolio was leased to third-party operators with weighted average lease coverage of 1.4x and a 7.6 year weighted average remaining lease term.

Stockholders' Equity

At March 31, 2012, NorthStar had 119,682,487 total common shares and operating partnership units outstanding and $28 million of non-controlling interests relating to its operating partnership.  GAAP book value per share was $7.00 at March 31, 2012.  Exclusive of certain unrealized adjustments, loan loss reserves and accumulated depreciation and amortization, adjusted book value at March 31, 2012 would be $7.08 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 NorthStar's sponsored, non-traded REIT vehicle and our CDO management fees.  For a reconciliation of adjusted book value per share to GAAP book value per share, please refer to the tables on the following pages.

Common Dividend Announcement

On May 2, 2012, NorthStar announced that its Board of Directors declared a cash dividend of $0.15 per share of common stock, payable with respect to the quarter ended March 31, 2012.  The dividend is expected to be paid on May 18, 2012 to shareholders of record as of the close of business on May 14, 2012. The Company's common shares will begin trading ex-dividend on May 10, 2012.

Earnings Conference Call

NorthStar will hold a conference call to discuss first quarter 2012 financial results on May 3, 2012, 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 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 877-941-0843, or for international callers, by dialing 480-629-9770.

A replay of the call will be available one hour after the call through Thursday, May 10, 2012 by dialing 800-406-7325 or, for international callers, 303-590-3030, using pass code 4532081.

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 March 31,

2012

2011

Revenues

Interest income

$ 80,712

$ 97,640

Rental and escalation income

28,433

32,927

Commission income

7,399

918

Other revenue

725

333

     Total revenues

117,269

131,818

Expenses

Interest expense

35,298

33,420

Real estate properties ? operating expenses

4,686

12,497

Asset management expenses

1,497

2,171

Commission expense

5,649

717

Other costs, net

192

-

Provision for loan losses

6,840

24,500

Provision for loss on equity investment

-

4,482

General and administrative

Salaries and equity-based compensation (1)

14,130

12,741

Auditing and professional fees

1,782

2,419

Other general and administrative

5,149

3,672

     Total general and administrative

21,061

18,832

Depreciation and amortization

12,306

8,082

     Total expenses

87,529

104,701

Income (loss) from operations

29,740

27,117

Equity in earnings (losses) of unconsolidated ventures

(501)

(2,228)

Other income (loss)

20,258

10,138

Unrealized gain (loss) on investments and other

(95,406)

(152,218)

Realized gain (loss) on investments and other

15,352

10,734

Income (loss) from continuing operations

(30,557)

(106,457)

Income (loss) from discontinued operations

-

409

Gain (loss) on sale from discontinued operations

-

5,031

Net income (loss)

(30,557)

(101,017)

     Less: net (income) loss allocated to non-controlling interests

1,963

5,464

Preferred stock dividends

(5,323)

(5,231)

Contingently redeemable non-controlling interest accretion

-

(3,009)

Net income (loss) attributable to NorthStar Realty Finance Corp. common stockholders

$ (33,917)

$ (103,793)

Net income (loss) per share from continuing operations (basic/diluted)

$ (0.33)

$ (1.40)

Income (loss) per share from discontinued operations (basic/diluted)

-

0.01

Gain per share on sale of discontinued operations (basic/diluted)

-

0.06

Net income (loss) per common share attributable to NorthStar Realty Finance Corp. common stockholders (basic/diluted)

$ (0.33)

$ (1.33)

Weighted average number of shares of common stock:

     Basic

102,247,118

78,196,016

     Diluted

107,393,827

82,534,563

Dividends declared per share of common stock

$ 0.15

$ 0.10

(1) The three months ended March 31, 2012 and 2011 include $2.3 million and $2.0 million, respectively, of equity?based compensation expense.

 

NorthStar Realty Finance Corp.

Consolidated Balance Sheets

($ in thousands, except share data)

March 31, 2012

December 31,

(Unaudited)

2011

Assets

    VIE Financing Structures

     Restricted cash

$ 284,478

$ 261,295

     Operating real estate, net

316,360

313,227

     Real estate securities, available for sale

1,319,297

1,358,282

     Real estate debt investments, net

1,597,915

1,631,856

     Investments in and advances to unconsolidated ventures

59,930

60,352

     Receivables, net of allowance of $1,237 in 2012 and $1,179 in 2011

22,306

22,530

     Derivative assets, at fair value

25

61

     Deferred costs and intangible assets, net

44,833

47,499

     Assets of properties held for sale

897

3,198

     Other assets

23,752

23,135

3,669,793

3,721,435

     Non-VIE Financing Structures

     Cash and cash equivalents

193,940

144,508

     Restricted cash

36,851

37,069

     Operating real estate, net

777,483

776,222

     Real estate securities, available for sale

157,644

115,023

     Real estate debt investments, net

88,316

78,726

     Investments in and advances to unconsolidated ventures

33,865

33,205

     Receivables

13,330

8,958

     Receivables, related parties

5,370

5,979

     Unbilled rent receivable

12,406

11,891

     Derivative assets, at fair value

4,828

5,674

     Deferred costs and intangible assets, net

48,189

50,885

     Other assets

10,980

16,862

1,383,202

1,285,002

Total assets

$ 5,052,995

$ 5,006,437

Liabilities

     VIE Financing Structures

     CDO bonds payable

$ 2,266,914

$ 2,273,907

     Mortgage notes payable

228,525

228,525

     Secured term loan

14,682

14,682

     Accounts payable and accrued expenses

15,423

15,754

     Escrow deposits payable

73,383

52,660

     Derivative liabilities, at fair value

211,987

226,481

     Other liabilities

49,534

55,007

2,860,448

2,867,016

     Non-VIE Financing Structures

     Mortgage notes payable

557,064

554,732

     Credit facility

69,825

64,259

     Exchangeable senior notes

216,546

215,853

     Junior subordinated notes, at fair value

176,928

157,168

     Accounts payable and accrued expenses

26,300

50,868

     Escrow deposits payable

157

196

     Derivative liabilities, at fair value

-

8,193

     Other liabilities

33,932

48,538

1,080,752

1,099,807

Total liabilities

3,941,200

3,966,823

Commitments and contingencies

Equity

NorthStar Realty Finance Corp. Stockholders' Equity

Preferred stock, 8.75% Series A, $0.01 par value, $60,000 liquidation preference as of March 31, 2012

and December 31, 2011

57,867

57,867

Preferred stock, 8.25% Series B, $0.01 par value, $230,000 and $190,000 liquidation preference as of

March 31, 2012 and December 31, 2011, respectively

218,703

183,505

Common stock, $0.01 par value, 500,000,000 shares authorized, 113,357,448 and 96,044,383 shares

issued and outstanding at March 31, 2012 and December 31, 2011, respectively

1,133

960

Additional paid-in capital

897,827

809,826

Retained earnings (accumulated deficit)

(57,542)

(8,626)

Accumulated other comprehensive income (loss)

(32,287)

(36,160)

Total NorthStar Realty Finance Corp. stockholders' equity

1,085,701

1,007,372

Non-controlling interests

26,094

32,242

Total equity

1,111,795

1,039,614

Total liabilities and equity

$ 5,052,995

$ 5,006,437

 

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 the applicable Securities and Exchange Commission, or 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 March 31,

2012

2011

Funds from Operations:

Income (loss) from continuing operations

$ (30,557)

$ (106,457)

Non-controlling interests(1)

260

(128)

Net income (loss) before non-controlling interest in Operating Partnership

(30,297)

(106,585)

Adjustments:

Preferred stock dividends

(5,323)

(5,231)

Depreciation and amortization

10,920

8,082

Funds from discontinued operations

-

1,074

Real estate depreciation and amortization, unconsolidated ventures

207

232

Funds from Operations

(24,493)

(102,428)

Adjusted Funds from Operations:

Funds from Operations

(24,493)

(102,428)

Straight-line rental income, net

(670)

(223)

Straight-line rental income/expense and fair value lease revenue, unconsolidated ventures

234

(21)

Amortization of above/below market leases

(258)

(214)

Amortization of equity-based compensation

2,329

2,034

Unrealized (gain) loss from fair value adjustments

73,863

122,288

Adjusted Funds from Operations

$ 51,005

$ 21,436

FFO per share of common stock

$ (0.23)

$ (1.24)

AFFO per share of common stock

$ 0.47

$ 0.26

(1) Amount excludes non-controlling limited partner interests in NorthStar's 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 (loss) (computed in accordance with U.S. GAAP), excluding gains (losses) from sales of depreciable properties, the cumulative effect of changes in accounting principles, real estate?related depreciation and amortization, impairment charges on depreciable property owned directly or indirectly and after adjustments for unconsolidated ventures.    FFO, as defined by NAREIT, is a computation made by analysts and investors to measure a real estate company's cash flow generated by operations.

NorthStar calculates AFFO by subtracting from or adding to FFO:

  • normalized recurring expenditures that are capitalized by NorthStar and then amortized, but which are necessary to maintain NorthStar's properties and revenue stream, e.g., leasing commissions and tenant improvement allowances;
  • an adjustment to reverse the effects of the straight?lining of rental income or expense 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 March 31, 2012(1)

($ in thousands)

Amount

%

CRE Debt

     First mortgage loans

$ 1,547,292

22.2%

     Mezzanine loans

472,504

6.8%

     Credit tenant and term loans

199,406

2.9%

     Subordinate mortgage interests

130,782

1.9%

     Other (2)

296,344

4.2%

Total CRE debt

2,646,328

38.0%

CRE Securities

     CMBS

2,637,500

37.8%

     Third-party CDO notes

299,212

4.3%

     Other securities

188,613

2.7%

Total CRE securities

3,125,325

44.8%

Net Lease

     Core net lease

404,427

5.8%

     Healthcare net lease

559,057

8.0%

Total net lease

963,484

13.8%

Subtotal NorthStar

6,735,137

96.6%

Sponsored REIT

     NorthStar Income (3)

246,654

3.4%

Grand total

$ 6,981,791

100.0%

(1) Based on principal amount of CRE debt and security investments and the cost basis of net lease properties.

Any real estate owned (either directly or through a joint venture) as a result of foreclosure reflects the principal amount

of the loan at time of foreclosure.

(2) Primarily related to real estate owned (either directly or through a joint venture) as a result of foreclosure.

(3) Based on consolidated total assets.

 

Balance Sheet Holdings of NorthStar CDO Bonds (1)

At May 3, 2012

($ in thousands)

Principal

Based on original credit rating:

Amount (2)

AAA

$ 206,040

AA through BBB

320,864

Below investment grade

179,040

Total

$ 705,944

Weighted average original credit rating of original IG rated CDO bonds

AA- / Aa3

Weighted average purchase price of original IG rated CDO bonds

36%

(1) Unencumbered CDO bonds are owned by NorthStar. The majority of CDO bonds are eliminated

with the liability of the respective CDO transaction on NorthStar's consolidated financial statements.

(2) Represents the maximum amount of principal proceeds that could be received.

 

N-Star CDOs primarily backed by CRE Debt

($ in thousands)

N-Star IV

N-Star VI

N-Star VIII

CSE

CapLease

Issue/Acquisition Date

Jun-05

Mar-06

Dec-06

Jul-10

Aug-11

Total

Balance sheet as of March 31, 2012 (1)

Assets, principal amount (2)

$ 390,074

$ 484,539

$ 985,273

$ 1,085,052

$ 172,419

$ 3,117,357

CDO bonds, principal amount (3)

263,427

364,349

731,863

1,010,286

153,150

2,523,075

Net assets

$ 126,647

$ 120,190

$ 253,410

$ 74,766

$ 19,269

$ 594,282

CDO quarterly cash distributions and coverage tests(4)

Equity notes and retained original below investment grade bonds

$ 1,630

$ 312

$ 4,617

$ 8,980

$ 694

$ 16,233

Collateral management fees

323

490

982

547

91

2,433

Interest coverage cushion (1)

2,186

544

3,834

9,382

405

Overcollateralization cushion (shortfall)(1)

52,275

55,816

139,341

69,745

8,607

At offering

19,808

17,412

42,193

(151,595)

(5)

5,987

(1)  Based on remittance report issued on date nearest to March 31, 2012.

(2)  Includes investments in N-Star issued CDO bonds that are eliminated in consolidation.

(3)  Includes all outstanding CDO bonds payable to third parties and all CDO bonds owned by NorthStar.

(4)  Interest coverage and overcollateralization coverage to the most constrained class.

(5)  Based on trustee report as of June 24, 2010, closest to the date of acquisition.

 

N-Star CDOs primarily backed by CRE Securities

($ in thousands)

N-Star I

N-Star II

N-Star III

N-Star V

N-Star VII

N-Star IX

Issue/Acquisition Date

Aug-03

Jul-04

Mar-05

Sep-05

Jun-06

Feb-07

Total

Balance sheet as of March 31, 2012 (1)

Assets, principal amount(2)

$ 208,036

$ 199,522

$ 391,054

$ 473,995

$ 593,766

$ 1,033,367

$ 2,899,740

CDO bonds, principal amount (3)

194,294

184,571

302,093

349,219

412,561

748,020

2,190,758

Net assets

$ 13,742

$ 14,950

$ 88,961

$ 124,776

$ 181,205

$ 285,347

$ 708,982

CDO quarterly cash distributions and coverage tests(4)

Equity notes and retained original below investment grade bonds

$ -

$ -

$ 1,292

$ -

$ -

$ 1,778

$ 3,070

Collateral management fees

72

64

255

117

168

751

1,427

Interest coverage cushion (shortfall) (1)

(276)

(445)

1,845

(1,941)

(1,137)

1,323

Overcollateralization cushion (shortfall)(1)

(16,761)

(26,889)

(7,787)

(71,451)

(50,101)

24,401

At offering

8,687

10,944

13,610

12,940

13,966

24,516

(1)  Based on remittance report issued on date nearest to March 31, 2012.

(2)  Includes investments in N-Star issued CDO bonds that are eliminated in consolidation.

(3)  Includes all outstanding CDO bonds payable to third parties and all CDO bonds owned by NorthStar.

(4)  Interest coverage and overcollateralization coverage to the most constrained class.

 

CMBS Vintages Under Management

($ in thousands)

Principal Amount

%

Cumulative

1997

$ 40,104

1.5%

1.5%

1998

37,082

1.4%

2.9%

1999

20,701

0.8%

3.7%

2000

78,631

3.0%

6.7%

2001

73,557

2.8%

9.5%

2002

57,876

2.2%

11.7%

2003

106,359

4.0%

15.7%

2004

291,454

11.0%

26.7%

2005

444,590

16.9%

43.6%

2006

721,897

27.4%

71.0%

2007

494,694

18.8%

89.8%

2008

105,267

4.0%

93.8%

2009

46,179

1.7%

95.5%

2010

3,808

0.1%

95.6%

2011

112,801

4.3%

99.9%

2012

2,500

0.1%

100.0%

Total

$ 2,637,500

100.0%

 

Credit Rating Distribution of Real Estate Securities Under Management

($ in thousands)

Principal Amount

%

AAA

$143,332

4.6%

AA

94,460

3.0%

A

128,542

4.1%

BBB

234,101

7.5%

BB

408,348

13.1%

B

487,186

15.6%

CCC

637,870

20.4%

CC

162,641

5.2%

C

269,358

8.6%

Below C

506,289

16.2%

NR

53,198

1.7%

Total (B- / B3)

$ 3,125,325

100.0%

 

GAAP Book Value Rollforward

($ in thousands, except per share data)

Amount

Per Share

Common book value at December 31, 2011, per share

$ 795,712

$7.94

Net income to common shareholders and non-controlling interest, excluding non-cash

     fair value adjustments included in net income (loss)

38,244

0.38

Fair value adjustments included in net income (loss):

     CDO bonds payable

(123,137)

(1.23)

     Trust preferred debt

(19,760)

(0.20)

     Securities and investments held at fair value

54,577

0.55

     Derivatives

14,456

0.14

Change in other comprehensive income

4,068

0.04

Common dividends

(13,829)

(0.14)

Accretion (dilution) from additional shares issued during quarter (1)

86,883

(0.48)

Total net increases/(decreases)

41,502

(0.94)

Common book value at March 31, 2012, per share (2)(3)

$ 837,214

$7.00

(1)  Includes $90 million of net proceeds from common stock offering completed in February 2012, net of common dividends associated with these shares paid during the quarter. Additional amounts relate to amortization of LTIPs and issuance of common shares from Dividend Reinvestment Plan.

 

(2)  Common book value calculated as total stockholder's equity of $1.1 billion and non-controlling interest in the operating partnership of $28 million less preferred stock of $277 million.

 

(3)  Cumulative net unrealized adjustments total a positive $330 million ($2.76 per share), loan loss reserves total a negative $166 million ($1.39 per share) and accumulated depreciation and amortization total a negative $174 million ($1.45 per share) as of March 31, 2012. Excluding certain unrealized adjustments, loan loss reserves and accumulated depreciation and amortization would result in a $7.08 adjusted book value per share at March 31, 2012. GAAP book value per share and adjusted book value per share calculations do not take into account any potential dilution from certain RSUs, exchangeable notes or warrants.

 

NRFC NNN Holdings, LLC Portfolio Summary

($ in thousands)

Remaining

Cost basis

Date

Square

Lease

Cost

Existing

less

Acquired

Tenant or Guarantor of Tenant

Location/MSA

Feet

Term (1)

Basis (2)

Debt

Debt

Oct-2004

ALGM Portfolio - Sbarro, Inc.(3)

One property in New York, NY

7,500

0.8

$ 3,290

$ -

$ 3,290

Nov-2007

Alliance Data Systems Corp.

Columbus, OH

199,112

5.7

33,829

22,857

10,972

Mar-2007

Citigroup, Inc.

Fort Mill, SC/Charlotte

165,000

8.6

34,303

29,778

4,525

Jun-2006

Covance, Inc.

Indianapolis, IN

333,600

13.8

34,519

27,318

7,201

Feb-2007

Credence Systems Corp.

Milpitas, CA/San Jose

178,213

4.9

30,144

21,011

9,133

Sep-2006

Dick's Sporting Goods, Inc. / PetSmart, Inc.(3)

9 properties

467,971

3.8 - 12.4

64,503

46,552

17,951

Sep-2005

Electronic Data Systems Corp.

2 in MI / 1 in CA / 1 in PA

387,842

3.5

62,718

45,207

17,511

Aug-2005

GSA - U.S. Department of Agriculture

Salt Lake City, UT

117,553

0.1

22,851

14,513

8,338

Jun-2007

Landis Logistics / East Penn

Reading, PA

609,000

5.8

26,014

18,295

7,719

Jul-2006

Northrop Grumman Space & Mission Systems Corp.

Aurora, CO/Denver

183,529

3.2

42,400

32,187

(4)

10,213

Mar-2006

Party City Corp. (Amscan) / Lerner Enterprises, Inc.

Rockaway, NJ/ Northern NJ

121,038

3.2 - 5.3

22,221

16,569

5,652

Feb-2006

Quantum Corporation (5)

Colorado Springs, CO

406,207

0.7 - 8.9

27,635

17,514

10,121

Total NRFC NNN Holdings, LLC Portfolio

3,176,565

6.2

$ 404,427

$ 291,801

$ 112,626

(1)  Remaining lease term as of March 31, 2012. Total represents weighted average based on cost basis.

(2)  Cost basis includes capitalized expenditures since acquisition.

(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 $32.1 million first mortgage with a third party and a $0.1 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 March 31, 2012

Primary Tenant

Tenant or Guarantor of Tenant

Base Rent

NOI

Debt Service

NOI Less Debt Service

Market Cap (1)

Actual Credit Rating

ALGM Portfolio - Sbarro, Inc.

$ 160

$ 159

$ -

$ 159

N/A

not rated

Alliance Data Systems Corp.

582

572

(455)

117

6,175

not rated

Citigroup, Inc.

538

529

(511)

18

99,223

A- / A3

Covance, Inc.

638

629

(517)

112

2,782

not rated

Credence Systems Corp.

692

683

(447)

236

312

not rated

Dick's Sporting Goods, Inc. / PetSmart, Inc.

1,321

1,256

(973)

283

4,994

not rated

(2)

Electronic Data Systems Corp.

1,508

1,498

(824)

674

13,900

not rated

GSA - U.S. Department of Agriculture

579

451

(302)

149

N/A

implied AAA

Landis Logistics / East Penn

312

75

(332)

(3)

(257)

N/A

(4)

not rated

Northrop Grumman Space & Mission Systems Corp.

846

846

(835)

11

14,847

BBB+/Baa1

Party City Corp. (Amscan) / Lerner Enterprises, Inc.

468

468

(303)

165

362

(5)

B/B2

(6)

Quantum Corporation (50%)

619

617

(326)

291

562

B/B2

Total

$ 8,263

$ 7,783

$ (5,825)

$ 1,958

(1) Based on information from Bloomberg at close of market on March 31, 2012 and presented in millions.

(2) Dick's Sporting Goods, Inc. is not rated by the major credit rating agencies. PetSmart, Inc. is rated BB+ by S&P.

(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) Represents purchase price by Amscan Holdings, Inc. (controlled by Berkshire Partners and Weston Presidio) for Party City in December 2005. No other recent data is available.

(6) The Party City Corp. lease is guaranteed by Amscan Holdings, Inc. which has a B/B2 credit rating by S&P and Moody's, respectively.

 

Safe Harbor Statement

This press release contains certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, or Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or Exchange Act. Forward-looking statements are generally identifiable by use of forward-looking terminology such as "may," "will," "should," "potential," "intend," "expect," "seek," "anticipate," "estimate," "believe," "could," "project," "predict," "continue," "future" or other similar words or expressions. Forward-looking statements are not guarantees of performance and are based on certain assumptions, discuss future expectations, describe plans and strategies, contain projections of results of operations or of financial condition or state other forward-looking information. Such statements include, but are not limited to, those relating to the operating performance of our investments, our financing needs, the effects of our current strategies, loan and securities activities, our ability to manage our collateralized debt obligations, or CDOs, and our ability to raise capital. Our ability to predict results or the actual effect of plans or strategies is inherently uncertain, particularly given the economic environment. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements and you should not unduly rely on these statements. These forward-looking statements involve risks, uncertainties and other factors that may cause our actual results in future periods to differ materially from those forward looking statements. These factors include, but are not limited to: adverse economic conditions and the impact on the commercial real estate finance industry; access to debt and equity capital and our liquidity; our use of leverage; our ability to meet various coverage tests with respect to our CDOs; our ability to obtain mortgage financing on our net lease properties; the affect of economic conditions on the valuations of our investments; the impact of economic conditions on the borrowers of the commercial real estate debt we originate and the commercial mortgage loans underlying the commercial mortgage backed securities in which we invest; any failure in our due diligence to identify all relevant facts in our underwriting process or otherwise; credit rating downgrades; tenant or borrower defaults or bankruptcy; illiquidity of properties in our portfolio; environmental compliance costs and liabilities; effect of regulatory actions, litigation and contractual claims against us and our affiliates, including the potential settlement and litigation of such claims; competition for investment opportunities; regulatory requirements with respect to our business and the related cost of compliance; the impact of any conflicts arising from our asset management business; the ability to raise capital for the non-listed real estate investment trusts, or REITs, we sponsor; changes in laws or regulations governing various aspects of our business; the loss of our exemption from the definition of "investment company" under the Investment Company Act of 1940, as amended; competition for qualified personnel and our ability to retain key personnel; the effectiveness of our risk management systems; failure to maintain effective internal controls; whether the decision issued by the Court of Appeal of the State of California, Second Appellate District, in our favor associated with litigation involving net lease investments formerly leased to Washington Mutual Bank stands and is no longer subject to further appeal; compliance with the rules governing REITs; and the factors described in Item 1A. of our Annual Report on Form 10-K for the fiscal year ended December 31, 2011 under the heading "Risk Factors."

The foregoing list of factors is not exhaustive. All forward-looking statements included in this press release are based upon information available to us on the date hereof and we are under no duty to update any of the forward-looking statements after the date of this report to conform these statements to actual results.

Factors that could have a material adverse effect on our operations and future prospects are set forth in "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011 beginning on page 18. The factors set forth in the Risk Factors section could cause our actual results to differ significantly from those contained in any forward-looking statement contained in this press release.

 

SOURCE NorthStar Realty Finance Corp.

For further information: Investor Relations: Joe Calabrese, +1-212-827-3772




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