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NorthStar reported adjusted funds from operations ("AFFO") for the second quarter 2009 of $0.26 per share compared to $0.42 per share for the second quarter 2008. AFFO for the second quarter 2009 was $19.5 million, compared to $29.2 million for the second quarter 2008. Net loss to common stockholders for the second quarter 2009 was ($4.3) million, or ($0.06) per share, compared to a loss of ($25.1) million, or ($0.40) per share for second quarter 2008. Second quarter 2009 net loss includes ($1.9) million of unrealized losses relating to mark-to-market adjustments, compared to ($42.1) million of unrealized losses in the second quarter 2008. The non-cash mark-to-market income is excluded from AFFO.
At June 30, 2009, diluted GAAP book value per common share was $17.74. For the quarter ended June 30, 2009, NorthStar generated a 9.1% return on average common book equity, excluding general and administrative expenses, and 5.8% inclusive of these corporate costs. For a reconciliation of net income to AFFO and calculations of return on average common book equity and diluted book value per common share, please refer to the tables on the following pages.
David T. Hamamoto, chairman and chief executive officer, commented, "NorthStar continues to navigate these very difficult market conditions by focusing intensively on liquidity and credit risk management. This quarter we made significant progress on reducing our non-discretionary future funding obligations, which should result in approximately $80 million of unrestricted cash savings for NorthStar over the next 12 to 18 months. Credit conditions are getting more challenging across the sector, but we believe our focus on strong investment structures, disciplined underwriting and diversification, combined with our experienced risk management team should enable NorthStar to continue to outperform other market participants."
Mr. Hamamoto continued, "Looking forward, we still believe there will be exceptional investment opportunities arising from this economic and financial crisis. Our strategy, announced last quarter, is to raise and manage fresh equity capital in the non-listed REIT market. We are committed to penetrating this market as the leading investor in commercial real estate debt and fixed income securities."
Investment Summary
During the second quarter 2009, NorthStar repurchased $22 million face amount of its 7.25% exchangeable notes for approximately $9 million cash at a 56% average discount to par. NorthStar also sold to an unaffiliated party, at par, three loans totaling $39 million. Concurrent with the sale of the loans, NorthStar provided to the buyer a new loan collateralized by the sold loans and a $5 million guarantee on an unrelated property. During the second quarter 2009, NorthStar received $40 million of loan repayments, of which $16 million represented partial repayments and $24 million related to a discounted repayment on a $28 million first mortgage loan well in advance of its final maturity date. NorthStar also invested in $50 million of securities, and received $49 million of proceeds from securities sales. No net lease properties were acquired during the second quarter 2009.
NorthStar had approximately $6.6 billion of assets under management at June 30, 2009.
Financing
Total available liquidity at June 30, 2009 was approximately $263 million, including $106 million of unrestricted cash and cash equivalents, and $157 million of uninvested and available cash in NorthStar's secured term financings. At June 30, 2009, NorthStar had $415 million outstanding under its secured term and revolving credit facilities and the average cost of NorthStar's on-balance sheet debt was 3.34%. NorthStar intends to fully repay the approximately $12 million outstanding balance on its credit facility with JP Morgan on its August 8, 2009 maturity date. As of July 31, 2009, NorthStar has repurchased a total of $104 million face of its 7.25% exchangeable notes for approximately $45 million cash, and $18 million face of its 11.50% exchangeable notes for approximately $10 million cash. During the second quarter, NorthStar reduced future funding commitments on real estate loans by $116 million.
Risk Management
As of June 30, 2009, NorthStar had four non-performing loans ("NPLs"), as previously announced, with aggregate outstanding principal balances totaling $73 million. NorthStar designates a loan as non-performing at such time as the loan becomes 90 days delinquent on contractual debt service payments or the loan has a maturity default. NorthStar recorded $17 million of credit loss provisions relating to eight loans during the second quarter 2009, increasing total credit loss reserves to $50 million on 13 loans at June 30, 2009. During the second quarter, NorthStar had a $4 million charge-off related to the discounted payoff on the $28 million first mortgage bearing a LIBOR + 4.5% interest rate and having a February 2012 final maturity date. NorthStar agreed to take the discounted payoff nearly 32 months in advance of the loan's final maturity date.
The weighted average first and last dollar loan-to-value ratios of NorthStar's real estate loans were 26.7% and 81.0%, respectively, at June 30, 2009. NorthStar generally uses original loan-to-cost statistics in its reported loan-to-value ratios, except when there are asset-specific events which would indicate revaluation of the collateral is necessary, such as for loans where a credit loss reserve is deemed appropriate and for non-performing loans.
NorthStar's NPLs at June 30, 2009 consist of a first mortgage with an outstanding balance of $21 million secured by a condo/hotel development site in New York City, a first mortgage with an outstanding balance of $14 million secured by a seven-unit condominium/multi-family development site in New York City, a junior participation in a first mortgage with an outstanding balance of $29 million secured by a master planned community located in Orlando, Florida, and a mezzanine loan with an outstanding balance of $9 million secured by a multi-family development site located in Washington, DC. Three of the NPLs have maturity defaults and NorthStar has reserves totaling $15 million for these assets, the fourth is 90 days delinquent in debt service payments and has reserves fully covering its $9 million balance.
NorthStar's securities portfolio had 64 downgrades representing $345 million of securities during the second quarter 2009. NorthStar reports all current rating actions issued by each agency independently of actions issued during prior quarters. The average credit rating of NorthStar's real estate securities was BB+/Ba1, which was the same as the prior quarter. During the second quarter 2009, S&P downgraded several classes of notes issued by five NorthStar commercial real estate term financings primarily backed by commercial real estate securities, N-Star I, II, III, VII, and IX. During the second quarter, Moody's downgraded several classes of notes issued by N-Star IV, and Fitch downgraded several classes of notes issued by N-Star V, two NorthStar commercial real estate term financings. Rating agency actions associated with NorthStar's issued secured term debt notes have no impact on the payment terms of such debt.
NorthStar's net lease portfolio was 92% leased and net lease assets have an 8.3 year weighted average remaining lease term as of June 30, 2009. During the quarter, NorthStar completed two lease renewals totaling approximately 201,439 square feet of rentable space for Lockheed Martin, a sub-tenant in a joint venture property located in Colorado, and Cincom Systems, Inc. located in Ohio. For more information regarding the core net lease assets, please refer to the tables on the following pages.
Andrew C. Richardson, chief financial officer and treasurer, stated, "This quarter we continue to make significant progress in bolstering liquidity by reducing future funding obligations as well as seeking asset monetization opportunities through which we can generate liquidity and manage credit by accommodating discounted payoffs. We will be selective in taking discounts, and only when we believe there is an economic and/or credit benefit from doing so."
Mr. Richardson continued, "NorthStar remains in compliance with all of its overcollateralization and interest coverage tests in its CDO financings as of June 30, 2009, and we have seen compelling investment opportunities that are enabling us to aggressively manage our CDOs in anticipation of future downgrade actions, especially from Standard and Poor's, who has put most of its rated CMBS universe on watch for downgrade. Downgrade actions can negatively impact overcollateralization tests, even if the related security is performing according to its contractual terms."
Stockholder's Equity and Dividends
At June 30, 2009, NorthStar had 76,067,306 total shares and operating partnership units outstanding, and $107.9 million of minority interest relating to its operating partnership. During the second quarter 2009, NorthStar sold approximately 1.2 million common shares at a weighted average net price of $3.08 per share. Book value per diluted common share was $17.74 at June 30, 2009. Exclusive of all unrealized mark-to-market adjustments and accumulated depreciation, book value at June 30, 2009 would be $7.89 per diluted common share. For a calculation of book value per diluted common share, please refer to the table on the following pages.
On July 21, 2009, NorthStar announced that it's Board of Directors declared a dividend of $0.10 per share of common stock, payable with respect to the quarter ended June 30, 2009. The dividend is expected to be paid on August 14, 2009 to shareholders of record as of the close of business on August 4, 2009.
Earnings Conference Call
NorthStar will hold a conference call to discuss second quarter 2009 financial results on Friday July 31, 2009, at 11:00 AM Eastern time. Hosting the call will be David Hamamoto, chairman, president and chief executive officer, and Andrew Richardson, chief financial officer and treasurer. The Company will post on its website, www.nrfc.com, a June 30, 2009 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 877-941-1469, or for international callers, by dialing 480-629-9676.
A replay of the call will be available one hour after the call through Friday August 7, 2009 by dialing 800-406-7325 or 303-590-3030 for international callers, using pass code 4117554.
About NorthStar Realty Finance Corp.
NorthStar Realty Finance Corp. is a finance REIT that primarily originates and invests in commercial 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.
Consolidated Statements of Operations
(Amounts in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2009 2008 2009 2008
---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (unaudited)
Revenues and other income:
Interest income $35,749 $49,885 $72,533 $113,590
Interest income -
related parties 4,443 3,582 8,950 7,343
Rental and escalation
income 24,401 29,020 51,649 57,977
Advisory and management
fee income -related
parties 1,808 6,546 3,499 8,876
Other revenue 178 3,983 346 4,959
--- ----- --- -----
Total revenues 66,579 93,016 136,977 192,745
Expenses:
Interest expense 31,921 46,522 66,033 101,980
Real estate
properties -
operating expenses 2,806 2,037 4,933 4,085
Asset management
fees -related
parties 854 933 1,707 3,039
Provision for
loan losses 17,000 2,500 38,462 3,250
General and
administrative:
Salaries and
equity based
compensation (1) 11,235 9,925 22,845 21,655
Auditing and
professional fees 2,274 1,234 4,537 3,675
Other general and
administrative 3,464 3,532 7,046 7,415
----- ----- ----- -----
Total general and
administrative 16,973 14,691 34,428 32,745
Depreciation and
amortization 17,382 9,977 32,196 19,915
------ ----- ------ ------
Total expenses 86,936 76,660 177,759 165,014
Income (loss)
from operations (20,357) 16,356 (40,782) 27,731
Equity in earnings/
(loss) of
unconsolidated
ventures 159 (5,440) (4,259) (5,618)
Unrealized (loss)gain on
investments and other (616) (41,257) 90,045 169,688
Realized gain on
investments and other 23,283 7,074 60,196 7,084
------ ----- ------ -----
Consolidated net
income (loss) 2,469 (23,267) 105,200 198,885
Net income (loss)
attributable to the
non-controlling
interests (1,490) 3,439 (14,355) (19,677)
Preferred stock
dividends (5,231) (5,231) (10,463) (10,462)
------ ------ ------- -------
Net income (loss)
attributable to
NorthStar Realty
Finance Corp. common
stockholders ($4,252) ($25,059) $80,382 $168,746
======= ======== ======= ========
Net income (loss)
attributable
to NorthStar
Realty Finance
Corp. common
stockholders
(basic/diluted) ($0.06) ($0.40) $1.22 $2.69
====== ====== ===== =====
Weighted average number
of shares of
common stock:
Basic 67,353,541 62,708,688 65,964,065 62,662,208
Diluted 75,049,690 70,192,538 73,660,271 69,799,329
(1) The three months ended June 30, 2009 and 2008 include $5,320 and
$5,966 of equity based compensation expense, respectively. The six
months ended June 30, 2009 and 2008 include $10,465 and $12,957 of
equity based compensation expense, respectively.
NorthStar Realty Finance Corp.
Condensed Consolidated Balance Sheets June 30, December 31,
(Amounts in thousands) 2009 2008
---- ----
(unaudited)
ASSETS:
Cash and cash equivalents $105,548 $134,039
Restricted cash 156,296 163,157
Operating real estate - net 1,112,434 1,127,000
Available for sale securities, at fair value 221,996 221,143
Real estate debt investments, net 2,008,856 1,976,864
Real estate debt investments, held-for-sale - 70,606
Investments in and advances to
unconsolidated ventures 55,536 101,507
Receivables, net of allowance of
$0 in 2009 and 2008 19,749 24,806
Unbilled rents receivable 9,160 7,993
Derivative instrument, at fair value 4,410 9,318
Deferred costs and intangible assets, net 62,772 79,633
Other assets 56,424 27,660
------ ------
Total assets $3,813,181 $3,943,726
========== ==========
LIABILITIES:
Mortgage notes and loans payable 906,697 910,620
Exchangeable senior notes 153,859 233,273
Bonds payable, at fair value 397,756 468,638
Credit facilities 12,182 44,881
Secured term loans 402,989 403,907
Liability to subsidiary trusts issuing
preferred securities, at fair value 95,747 69,617
Obligations under capital leases 3,541 3,555
Accounts payable and accrued expenses 19,117 27,478
Escrow deposits payable 41,928 46,353
Derivative liability, at fair value 58,310 87,220
Other liabilities 30,235 34,424
------ ------
Total liabilities 2,122,361 2,329,966
EQUITY:
NorthStar Realty Finance Corp.
Stockholders' Equity:
8.75% Series A preferred stock, $0.01
par value, $25 liquidation
preference per share, 2,400,000
shares issued and outstanding at
June 30, 2009 and December 31, 2008,
respectively 57,867 57,867
8.25% Series B preferred stock, $0.01
par value, $25 liquidation
preference per share, 7,600,000
shares issued and outstanding at
June 30, 2009 and December 31, 2008,
respectively 183,505 183,505
Common stock, $0.01 par value,
500,000,000 shares authorized,
68,371,213 and 62,906,693 shares
issued and outstanding at June 30,
2009 and December 31, 2008,
respectively 684 634
Additional paid-in capital 636,054 620,028
Treasury stock, 0 and 475,051
shares held at June 30, 2009 and
December 31, 2008, respectively - (1,384)
Retained earnings 706,812 648,860
Accumulated other comprehensive loss (102,361) (94,343)
-------- -------
Total NorthStar Realty Finance
Corp. Stockholders' Equity 1,482,561 1,415,167
Non-controlling interest 208,259 198,593
------- -------
Total equity 1,690,820 1,613,760
--------- ---------
Total liabilities and stockholders'
equity $3,813,181 $3,943,726
========== ==========
Three Months Ended Six Months Ended
June 30, June 30,
-------------- --------------
2009 2008 2009 2008
---- ---- ---- ----
Funds from Operations:
Consolidated net income (loss) $2,469 ($23,267) $105,200 $198,885
Non-controlling interest
in joint ventures (1,976) 448 (4,440) 203
------ --- ------ ---
Consolidated net income (loss)
before non-controlling
interest in operating
partnership
493 (22,819) 100,760 199,088
Adjustments:
Preferred stock dividends (5,231) (5,231) (10,463) (10,462)
Depreciation and amortization 17,382 9,977 32,196 19,915
Real estate depreciation
and amortization -
unconsolidated ventures 247 247 494 494
--- --- --- ---
Funds from Operations $12,891 ($17,826) $122,987 $209,035
------- -------- -------- --------
Adjusted Funds from Operations:
Funds from Operations $12,891 ($17,826) $122,987 $209,035
Straight-line rental
income, net (699) (716) (1,171) (1,473)
Straight-line rental income
and fair value lease revenue
(SFAS 141 adjustment),
unconsolidated ventures (25) (39) (57) (85)
Amortization of equity-
based compensation 5,320 5,966 10,464 12,957
Fair value lease revenue
(SFAS 141 adjustment) 163 (305) (162) (611)
Unrealized (gains)/losses
from mark-to-market adjustments (3,847) 36,833 (98,410) (176,595)
Unrealized losses from
mark-to-market adjustments,
unconsolidated ventures 5,728 5,292 8,493 9,647
----- ----- ----- -----
Adjusted Funds from Operations $19,531 $29,205 $42,144 $52,875
======= ======= ======= =======
FFO per share of Common Stock $0.17 ($0.25) $1.67 $2.99
AFFO per share of Common Stock $0.26 $0.42 $0.57 $0.76
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: (i) Funds From Operations; (ii) Adjusted Funds From Operations; (iii) Return on Average Common Book Equity; and (iv) Return on Average Common Book Equity by business line. The following discussion defines these terms, which NorthStar believes can be useful measures of its performance.
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. AFFO, 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 under SFAS 141;
-- the amortization or accrual of various deferred costs including
intangible assets and equity based compensation; 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.
Return on Average Common Book Equity
NorthStar calculates return on average common book equity ("ROE") on a consolidated basis and for each of NorthStar's major business lines. NorthStar believes that ROE provides investors and management with a good indication of the performance of the Company and its business lines because it provides the best approximation of cash returns on common equity invested. Management also uses ROE, among other factors, to evaluate profitability and efficiency of equity capital employed, and as a guide in determining where to allocate capital within its business. ROEs may fluctuate from quarter to quarter based upon a variety of factors, including the timing and amount of investment fundings, repayments and asset sales, capital raised and leverage used, and the yield on investments funded.
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.
Return on Average Common Book Equity (including and excluding G&A)
($ in thousands)
Three Months Ended
June 30, 2009 Annualized (2)
------------- --------------
Adjusted Funds from
Operations (AFFO) $19,531 $78,124 (A)
Plus: General & Administrative
Expenses 16,973
Less: Equity-Based
Compensation included in G&A 5,320
Less: Bad Debt Expense
included in G&A 531
---
AFFO, excluding G&A 30,653 122,612 (B)
Average Common Book Equity &
Operating Partnership
Non-Controlling Interest (1) $1,348,759 (C)
Return on Average
Common Book Equity
(including G&A) 5.8% (A)/(C)
Return on Average
Common Book Equity
(excluding G&A) 9.1% (B)/(C)
(1) Average Common Book Equity & Operating Partnership Non-Controlling
Interest computed using beginning and ending of period balances.
ROE will be impacted by the timing of new investment closings and
repayments during the quarter.
(2) Annualized numbers are calculated by taking the current quarter
amounts and multiplying by 4.
Return on Average Common Book Equity by Business Segment (Pre-G&A)
Including and Excluding Mark-to-Market Adjustments and Accumulated
Depreciation and Amortization
($ in thousands)
Healthcare Core
Net Net Corporate /
Lending Securities Lease Lease Other Total
------- ---------- ----- ----- ----- -----
AFFO, Pre-G&A ($10,775) $25,015 $2,208 $2,235 $11,970 $30,653
Annualized (A) (43,100) 100,060 8,832 8,940 47,880 122,612
Average Common
Book Equity and
Operating
Partnership
Non-Controlling
Interest (B)(1) 984,382 90,388 61,954 50,467 161,568 1,348,759
Allocated
Cumulative
Mark-To-Market
Adjustments
for Assets,
Liabilities
and Interest
Rate Swaps (704,065) (13,932) (44,704) (49,304) (31,752) (843,757)
Accumulated
Depreciation and
Amortization - - 43,722 58,082 - 101,804
--- --- ------ ------ --- -------
Average Common Book
Equity and
Operating
Partnership
Non-Controlling
Interest
Excluding
Mark-to-Market
Adjustments and
Accumulated
Depreciation and
Amortization
(C)(1) $280,317 $76,456 $60,972 $59,245 $129,816 $606,806
ROE, Net (A/B) NM 110.7% 14.3% 17.7% 29.6% 9.1%
ROE, Gross (A/C) NM 130.9% 14.5% 15.1% 36.9% 20.2%
(1) Average Common Book Equity & Operating Partnership Non-Controlling
Interest computed using beginning and ending of period balances.
ROE will be impacted by the timing of new investment closings and
repayments during the quarter.
Management Fees From Secured Term Debt Financings at June 30, 2009
($ in thousands)
Annualized
Annual Management Fee % Management
Fee - Based ----------------------- Fee
Assets Senior Subordinate Total Revenue
------ ------ ----------- ----- -------
N-Star I $284,621 0.15% 0.20% 0.35% $996
N-Star II 300,412 0.15% 0.20% 0.35% 1,051
N-Star III 408,336 0.15% 0.20% 0.35% 1,429
N-Star IV 397,498 0.15% 0.20% 0.35% 1,391
N-Star V 545,118 0.15% 0.20% 0.35% 1,908
N-Star VI 454,768 0.15% 0.25% 0.40% 1,819
N-Star VII 657,175 0.15% 0.20% 0.35% 2,300
N-Star VIII 875,781 0.15% 0.25% 0.40% 3,503
N-Star IX(1) 879,444 0.15% 0.25% 0.40% 3,518
---------- -------
Total $4,803,153 $17,915
========== =======
(1) N-Star IX is owned by the NorthStar Real Estate Securities
Opportunity Fund. NorthStar directly receives 33% of the management
fees related to N-Star IX.
Term Debt Financing Cash Distributions and Coverage Test Summary
($ in thousands)
Cash
Distributions Quarterly
(1) Interest
-------------- Coverage Overcollateralization
Quarter Cushion (2) Cushion
Primary Ended ---------- ---------------------
Collateral June 30, June 30, June 30, At
Type 2009 2009 2009 Offering
---- ---- ---- ---- --------
N-Star I CMBS - $481 $6,235 $8,687
N-Star II CMBS 396 328 2,861 10,944
N-Star III CMBS 1,212 901 25,212 13,610
N-Star IV Loans 2,617 2,602 17,050 19,808
N-Star V CMBS 1,292 1,257 51,934 12,940
N-Star VI Loans 2,574 2,704 22,179 17,412
N-Star VII CMBS 1,801 2,752 97,915 13,966
N-Star VIII Loans 4,152 5,582 17,989 42,193
N-Star IX (3) CMBS 617 1,784 90,395 24,516
Cash distributions to the retained income notes.
Interest coverage and overcollateralization coverage to the most
constrained class.
(1) Cash distributions are exclusive of senior management fees which are
not subject to the coverage tests.
(2) Quarterly interest cushion and overcollateralization cushion from
remittance report issued on date nearest to June 30th.
(3) NorthStar indirectly owns approximately 49% of N-Star IX income notes
through its interest in the Securities Fund.
CMBS Vintages Under Management
($ in thousands)
$ % Cumulative
----- ----- ----------
1996 $616 0.1% 0.1%
1997 51,908 3.0% 3.1%
1998 100,106 5.8% 8.9%
1999 36,225 2.1% 11.0%
2000 137,062 7.9% 18.9%
2001 101,302 5.9% 24.8%
2002 70,032 4.1% 28.9%
2003 124,820 7.2% 36.1%
2004 222,199 12.9% 49.0%
2005 409,134 23.7% 72.7%
2006 269,923 15.6% 88.3%
2007 176,844 10.2% 98.5%
2008 26,480 1.5% 100.0%
------ ---
Total $1,726,651 100.0%
Securities Fund 640,790
-------
Total CMBS $2,367,441
==========
Credit Ratings Distribution of
Securities Under Management
($ in thousands)
$ %
----- -----
AAA $68,728 2.9%
AA 81,162 3.4%
A 272,159 11.6%
BBB 918,377 39.0%
BB 634,067 26.9%
B 167,282 7.1%
CCC 109,154 4.6%
CC 92,502 3.9%
C 13,692 0.6%
------ ---
Total $2,357,123 100.0%
Securities Fund 887,843
-------
Total Securities $3,244,966
==========
Assets Under Management at June 30, 2009
($ in thousands)
$ %
----- -----
Investment grade securities $1,597,403 24.1%
First mortgage (1) 1,390,273 21.0%
Non-investment grade securities 1,647,562 24.9%
Mezzanine and other subordinate loans (2) 748,892 11.3%
Non-investment grade net lease (3) 1,029,041 15.6%
Investment grade net lease (3) 206,223 3.1%
------- ---
Total $6,619,394 100.0%
========== =====
(1) Includes $233 million of junior participations in first mortgages.
(2) Includes $91 million of equity investments primarily related to
real estate and corporate loans.
(3) Net lease amounts prior to accumulated depreciation and impact
of statement of FAS No. 141.
Second Quarter Funded Securities Investment Statistics
($ in thousands)
Amount
Invested (1)
------------
CMBS (2) $45,955
REIT Debt 2,145
CDO Debt 2,289
-----
Total Securities $50,389
=======
(1) Par amount was $235 million.
(2) $43 million (94%) represented investment grade securities.
Book Value Rollforward
($ in thousands, except per share data)
$ Per Share
----- ---------
Common book value at March 31, 2009 (diluted) $1,348,440 $18.05
Net income to common shareholders and
non-controlling interest, excluding non-cash
mark to market items included in net income (2,858) (0.04)
Mark to market adjustments included in net income:
Securities fund (5,728) (0.08)
Secured debt liabilities 6,457 0.09
Trust preferred debt (28,026) (0.38)
Securities and Investments held at market
value under FAS159 14,912 0.20
Swaps and other hedges 10,505 0.14
Mark to market adjustments in other comprehensive
income and non-controlling interest:
Effective hedges 5,659 0.08
Available for sale securities (1,207) (0.02)
Equity component of exchangeable
senior notes repurchased (845) (0.01)
Common dividends (7,469) (0.10)
Accretion/(dilution) from additional
shares issued during quarter (1) 9,237 (0.19)
----- -----
Total net increases/(decreases) 637 (0.31)
Common book value at June 30, 2009 (diluted)(2) $1,349,077 $17.74
========== ======
(1) Relates to amortization of LTIP shares and issuance of common shares
from DRIP, DSPP, and EPP plan.
Per share dilution as a result of common shares issued.
(2) Cumulative net mark-to-market adjustments total a positive $857.6
million ($11.28 per diluted share) and accumulated real estate
depreciation and amortization total a negative $108.7 million ($1.43
per diluted share) as of June 30, 2009. Excluding all mark-to-market
adjustments and accumulated depreciation and amortization would result
in a $7.89 diluted book value per common share at June 30, 2009.
NRFC NNN Holdings, LLC Portfolio Summary
($ in thousands)
Acquis-
Tenant or Years ition
Date Guarantor Net Acquis- Cost
Acqu- of Square Lease ition Existing less
ired Tenant Location/MSA Feet (1) Cost (2) Debt Debt
---- ----------- ------------- ------ ---- ------- ------- -------
Oct- ALGM Three 35,965 2.0- $10,355 $0 $10,355
2004 Portfolio properties 8.0 (4)
- Various in New
(3) York, NY
Nov- Alliance Columbus, OH 199,112 8.4 33,826 23,651 10,175
2007 Data Systems
Corp.
Mar- Citigroup, Fort Mill, 165,000 11.3 34,303 30,564 3,739
2007 Inc. SC/Charlotte
Jun- Vacant Reading, PA 609,000 N/A 28,473 19,031 9,442
2007
Jun- Covance, Indianapolis, 333,600 16.5 34,519 28,307 6,212
2006 Inc. IN
Feb- Credence Milpitas, 178,213 7.7 30,144 22,329 7,815
2007 Systems CA/San Jose
Corp.
Sep- Dick's 9 properties 467,971 6.6- 64,503 48,938 15,565
2006 Sporting 15.2
Goods, Inc./
PetSmart,
Inc. (3)
Sep- Electronic 2 in MI / 387,842 6.3 62,718 47,338 15,380
2005 Data 1 in CA /
Systems 1 in PA
Corp.
Dec- General Springdale, 486,963 0.5- 69,341 52,772 16,569
2005 Electric Co. OH/Cincinnati 12.5
& Cincom
Systems, Inc.
(5)
Aug- GSA - U.S. Salt Lake 117,553 2.8 22,424 15,668 6,756
2005 Department City, UT
of
Agriculture
Jul- Northrop Aurora, 183,529 6.0 43,625 34,303 9,322
2006 Grumman CO/Denver
Space &
Mission
Systems Corp.
(6)
Mar- Party City Rockaway, 121,038 5.9- 21,955 17,230 4,725
2006 Corp. NJ/Northern 8.1
(Amscan) / NJ
Lerner
Enterprises,
Inc.
Feb- Quantum Colorado 406,207 0.4- 27,635 18,328 9,307
2006 Corporation Springs, CO 11.7
(7)
Jan- Vacant (8) Chatsworth, 257,336 N/A 65,159 52,067 13,092
2005 CA/ Los Angeles
Total NRFC NNN Holdings,
LLC Portfolio 3,949,329 8.2 $548,980 $410,526 $138,454
======================== ========= === ======== ======== ========
(1) Remaining lease terms as of June 30, 2009. Total represents weighted
average based on acquisition cost.
(2) Acquisition cost does not include SFAS 141 "Business Combinations"
purchase price allocations.
(3) The three ALGM portfolio properties, and six of ten Dick's Sporting
Goods, Inc. / PetSmart, Inc. properties are ground lease interests.
(4) The three ALGM properties were owned by NorthStar's predecessor prior
to NorthStar's initial public offering. The value in acquisition cost
column reflects the undepreciated book value when the properties were
transferred to a subsidiary of NRFC NNN Holdings, LLC at the time of
NorthStar's initial public offering (10/29/04).
(5) On June 23, 2009 NorthStar and Cincom Systems, Inc. agreed to a lease
term extension to December 31, 2021.
(6) The Northrop Grumman Space & Mission Systems Corp. property is
financed with a $33.2 first mortgage with a third party and a $1.1
million mezzanine loan held by a consolidated NorthStar entity.
(7) Dollar amounts shown are 50% of total values, representing NRFC NNN
Holding's, LLC subsidiary's 50% interest in a joint venture with an
institutional investor.
(8) NorthStar is in discussions with the special servicer of the first
mortgage loan to transfer the properties to the mortgage holder.
Portfolio Cash Flow and Tenant Credit Profile
($ in thousands)
Three Months
Ended June 30, 2009 Primary Tenant
----------------------------- --------------------
NOI
Tenant or Less Market Actual
Guarantor of Base Debt Debt Cap Credit
Tenant Rent NOI Service Service (1) Rating
----------------------------- --------------------
ALGM Portfolio
- Various $560 $459 - $459 mixed tenants
Alliance Data
Systems Corp. 582 579 (455) 124 $2,434 not rated
Citigroup, Inc. 525 524 (501) 23 16,358 A/A3
Vacant - (264) (333) (597) N/A N/A
Covance, Inc. 608 607 (518) 89 3,141 not rated(2)
Credence
Systems Corp. 661 662 (447) 215 61 not rated
Dick's Sporting
Goods, Inc. /
PetSmart, Inc. 1,272 1,234 (974) 260 1,933 not rated(3)
Electronic Data
Systems Corp. 1,371 1,370 (825) 545 13,900 NR/A2
General Electric
Co. & Cincom
Systems, Inc. 1,298 1,263 (862) 401 124,110 AA+/Aa2(4)
GSA - U.S.
Department of
Agriculture 579 455 (303) 152 N/A implied AAA
Northrop Grumman
Space & Mission
Systems Corp. 776 777 (658) 119 14,831 NR/Baa1
Party City Corp.
(Amscan)/Lerner
Enterprises, Inc. 437 438 (304) 134 362 (5) B/B2(6)
Quantum Corporation
(50%) 605 603 (322) 281 174 B-/B3
Vacant - (74) - (74) N/A N/A
------ ------ ------ ------
Total $9,274 $8,633 (6,502) $2,131
====== ====== ====== ======
(1) Based on information from FactSet at close of market on June 30, 2009.
(2) Covance has a $1.0 billion net worth and no long-term debt.
(3) PetSmart, Inc. is rated BB.
(4) Cincom Systems, Inc. is not rated.
(5) In December 2005, Amscan Holdings, Inc. (controlled by Berkshire
Partners and Weston Presidio) purchased Party City for $362 million.
(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
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 will be specified in the Company's Annual Report on Form 10-K for the year ended December 31, 2008. 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.
SOURCE NorthStar Realty Finance Corp.
http://www.nrfc.com
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