NEW YORK, Aug. 4, 2016 /PRNewswire/ --
Second Quarter 2016 Highlights
- U.S. GAAP net (loss) to common stockholders of ($115.6) million, or ($0.64) per diluted share and cash available for
distribution ("CAD") of $102.8
million, or $0.56 per
share
- Second quarter dividend of $0.40 per share
- Announced a tri-party merger with NSAM and Colony Capital,
Inc. to create a world-class diversified real estate and investment
management platform with $58 billion
of AUM
- $2.0 billion of completed
asset monetizations which generated $1.0
billion of liquidity over the last three quarters
- Additional $2.5 billion of
asset sales under contract expected to generate $0.9 billion of liquidity
- Assets for sale with executed term sheets would generate
$0.5 billion of additional
liquidity
NorthStar Realty Finance Corp. (NYSE: NRF) ("NorthStar Realty")
today announced its results for the second quarter ended
June 30, 2016.
Second Quarter 2016 Results
NorthStar Realty reported U.S. GAAP net (loss) to common
stockholders for the second quarter 2016 of ($115.6) million, or ($0.64) per diluted share. NorthStar Realty
reported CAD for the second quarter 2016 of $102.8 million, or $0.56 per share. Second quarter 2016 CAD includes the impact of foregone CAD of
approximately $9.6 million, or
$0.05 per share, relating to real
estate private equity funds which NorthStar Realty entered into
agreements to sell as of March 31,
2016 (discussed further below).
For more information and a reconciliation of CAD to net income
(loss) to common stockholders, please refer to the tables on the
following pages.
David T. Hamamoto, Chairman,
commented, "We are pleased that NRF could be a party to the merger
with NSAM and Colony, which will create a world-class diversified
real estate and investment management platform. Following the
merger, NRF's shareholders can realize the full benefits of the
substantial asset monetizations and the resulting attractive
financial profile of the combined company as an internally managed
REIT."
Jonathan A. Langer, Chief
Executive Officer, commented, "Our second quarter results were
in-line with expectations driven by consistent operating
performance across the majority of our real estate business
lines. Our hotels have experienced increased pressure in
performance which is primarily related to displacement of room
revenue resulting from planned renovations and generally sluggish
industry conditions. In addition to advanced planning efforts
relating to the tri-party merger, we continue to focus on asset
monetization opportunities and are extremely pleased with our
progress to date."
Proposed Merger - Colony NorthStar, Inc. ("Colony
NorthStar")
On June 2, 2016, NorthStar Realty,
NSAM and Colony Capital, Inc. entered into a definitive agreement
to create a world-class, internally-managed, diversified real
estate and investment management platform. For additional
information regarding the proposed merger, please refer to the
registration statement on Form S-4 filed by Colony NorthStar, Inc.
with the Securities and Exchange Commission on July 29, 2016 and the investor presentation
related to the proposed merger, which can be found on NorthStar
Realty's, NSAM's and Colony Capital's websites.
Portfolio Results and Performance Metrics
Below are portfolio results and performance metrics for the
second quarter 2016. Same-store results are presented for direct
real estate properties that NorthStar Realty owned during the full
quarter ended June 30, 2015 and full
quarter ended June 30, 2016. For
private equity fund investments and financial investments such as
loans, securities and CDO equity, information presented represents
second quarter 2016 results compared to first quarter 2016 results.
For more information and a reconciliation of net operating income
("NOI") to property and other related revenues net of property
operating expenses, please refer to the tables on the following
pages.
Healthcare Real Estate
- For the second quarter 2016, combined healthcare portfolio NOI
was $94.5 million.
- For portfolios owned during the full quarters ended
June 30, 2015 and 2016, combined
healthcare portfolio NOI was $94.2
million for the second quarter 2016, compared to combined
healthcare portfolio NOI of $91.0
million for the second quarter 2015.
Medical Office Buildings
- For the second quarter 2016, NOI was $25.7 million, remaining lease term was 6.5 years
and occupancy was 89.7%.
- For portfolios owned during the full quarters ended
June 30, 2015 and 2016, NOI was
$25.4 million, remaining lease term
was 6.5 years and occupancy was 89.7% for the second quarter 2016,
compared to NOI of $25.2 million,
remaining lease term of 6.8 years and occupancy of 91.0% for the
second quarter 2015.
Senior Housing – Operating
- For the second quarter 2016, NOI was $20.5 million and occupancy was 89.0%.
- For portfolios owned during the full quarters ended
June 30, 2015 and 2016 and adjusted
to include NOI from a portfolio which transitioned from triple net
lease to operating during 2015, NOI was $20.5 million and occupancy was 89.0% for the
second quarter 2016, compared to NOI of $18.8 million and occupancy of 89.3% for the
second quarter 2015.
Senior Housing – Triple Net Lease
- For the second quarter 2016, NOI was $14.8 million, remaining lease term was 12.1
years and lease (EBITDAR) coverage was 1.6x.
- For portfolios owned during the full quarters ended
June 30, 2015 and 2016 and adjusted
to exclude NOI from a portfolio which transitioned from triple net
lease to operating during 2015, NOI was $14.8 million, remaining lease term was 12.1
years and lease (EBITDAR) coverage was 1.6x for the second quarter
2016, compared to NOI of $14.5
million, remaining lease term of 11.7 years and lease
(EBITDAR) coverage was 1.4x for the second quarter 2015.
Skilled Nursing Facilities
- For the second quarter 2016, NOI was $28.5 million, remaining lease term was 8.2 years
and lease (EBITDAR) coverage was 1.5x.
- For portfolios owned during the full quarters ended
June 30, 2015 and 2016, NOI was
$28.5 million, remaining lease term
was 8.2 years and lease (EBITDAR) coverage was 1.5x for the second
quarter 2016, compared to NOI of $27.8
million, remaining lease term of 9.2 years and lease
(EBITDAR) coverage was 1.4x for the second quarter 2015.
Hospitals
- For the second quarter 2016, NOI was $5.0 million, remaining lease term was 12.4 years
and lease (EBITDAR) coverage was 3.3x, compared to NOI of
$4.7 million, remaining lease term of
13.4 years and lease (EBITDAR) coverage was 3.3x for the second
quarter 2015.
Hotels
- For the second quarter 2016, EBITDA was $83.1 million, RevPAR was $102.1, WA occupancy was 79.2% and EBITDA margin
was 37.4%.
- For portfolios owned during the full quarters ended
June 30, 2015 and 2016, EBITDA was
$76.5 million, RevPAR was
$101.7, WA occupancy was 78.8% and
EBITDA margin was 37.9% for the second quarter 2016, compared to
EBITDA of $77.1 million, RevPAR of
$101.5, WA occupancy of 78.9% and
EBITDA margin of 38.3% for the second quarter 2015.
- For portfolios owned during the full quarters ended
June 30, 2015 and 2016 and excluding
hotels which were under renovation during the second quarter 2016,
EBITDA was $62.2 million, RevPAR was
$104.4, WA occupancy was 80.4% and
EBITDA margin was 38.9% for the second quarter 2016, compared to
EBITDA of $59.4 million, RevPAR of
$101.0, WA occupancy of 78.4% and
EBITDA margin of 38.5% for the second quarter 2015.
Manufactured Housing Communities
- For the second quarter 2016, NOI was $33.0 million, WA monthly rent was $498.8 and economic occupancy was 85.4%.
- For portfolios owned during the full quarters ended
June 30, 2015 and 2016, NOI was
$30.6 million, WA monthly rent was
$505.7 and economic occupancy was
85.9% for second quarter 2016, compared to NOI of $28.7 million, WA monthly rent of $487.2 and economic occupancy of 85.4% for the
second quarter 2015.
Net Lease Real Estate
- For the second quarter 2016, NOI was $13.5 million, remaining lease term was 9.2 years
and occupancy was 98.2%.
- For portfolios owned during the full quarters ended
June 30, 2015 and 2016, NOI was
$13.5 million, remaining lease term
was 9.2 years and occupancy was 98.2% for the second quarter 2016,
compared to NOI of $14.2 million,
remaining lease term of 9.7 years and occupancy of 99.1% for the
second quarter 2015.
Multifamily Real Estate
- For the second quarter 2016, NOI was $6.5 million, occupancy was 95.5%, WA monthly
rent was $861.6 and NOI margin was
55.0%.
- For portfolios owned during the full quarters ended
June 30, 2015 and 2016, NOI was
$4.8 million, occupancy was 95.1%, WA
monthly rent was $825.3 and NOI
margin was 53.0% for the second quarter 2016, compared to NOI of
$4.3 million, occupancy of 94.0%, WA
monthly rent of $798.6 and NOI margin
of 53.0% for the second quarter 2015
- Excluding the 6 multifamily properties NorthStar Realty has
definitive agreements to sell, NOI was $1.7
million for the second quarter 2016.
Multi-tenant Office Real Estate
- For portfolios owned during the full quarters ended
June 30, 2015 and 2016, NOI was
$3.2 million, remaining lease term
was 2.5 years, occupancy was 86.2% and NOI margin was 60.2% for the
second quarter 2016, compared to NOI of $3.0
million, remaining lease term of 3.3 years, occupancy of
89.6% and NOI margin of 58.9% for the second quarter 2015.
Interest in Private Equity Funds
- For the second quarter 2016, aggregate gross distributions were
$50.7 million, of which $23.7 million was income earned and aggregate
contributions totaled $1.6 million.
As of June 30, 2016, aggregate
portfolio net carrying value was $512.9
million with a yield of 14.2%. Second quarter 2016 results
and carrying value as of June 30,
2016 exclude the real estate private equity funds which
NorthStar Realty entered into an agreement to sell as of
March 31, 2016. For the first quarter
2016, aggregate gross distributions were $82.9 million, of which $37.6 million was income and aggregate
contributions totaled $1.0 million.
As of March 31, 2016, aggregate
portfolio net carrying value was $825.3
million with a yield of 14.7%.
Balance Sheet Loans
- For the second quarter 2016, aggregate portfolio income was
$11.3 million. During the second
quarter 2016, asset sales and repayments totaled $116.0 million net of $25.2 million of financing. As of June 30, 2016, aggregate portfolio carrying value
was $205.2 million with a yield on
equity of 9.8%. For the first quarter 2016, aggregate portfolio
income was $13.0 million. During the
first quarter 2016, asset sales and repayments totaled $191.5 million net of $46.9 million of financing. As of March 31, 2016, aggregate portfolio carrying
value was $319.7 million, net of
$25.2 million of financing, with a
yield on equity of 9.9%, excluding loans with a net carrying value
of $116.0 million which repaid or
sold in April 2016.
N-Star CDO Bonds and Other Securities
- For the second quarter 2016, aggregate portfolio income earned
was $16.9 million, which includes
$5.9 million related to repurchased
CDO bonds that are eliminated in consolidation. As of June 30, 2016, the principal amount of the
portfolio, excluding repurchased CDO bonds that are eliminated in
consolidation, was $434.5 million
with an amortized cost of $213.9
million and a yield of 20.7%. As of June 30, 2016, the principal amount of
repurchased CDO bonds that are eliminated in consolidation was
$139.7 million. For the first quarter
2016, aggregate portfolio income earned was $16.0 million, which includes $5.2 million related to repurchased CDO bonds
that are eliminated in consolidation. As of March 31, 2016, the principal amount of the
portfolio, excluding repurchased CDO bonds that are eliminated in
consolidation, was $430.6 million
with an amortized cost of $212.4
million and a yield of 19.1%. As of March 31, 2016, the principal amount of
repurchased CDO bonds that are eliminated in consolidation was
$139.7 million.
CDO Equity and Other Income
- For the second quarter 2016, aggregate CDO equity distributions
and other income was $13.9 million.
For the first quarter 2016, aggregate CDO equity distributions and
other income was $25.5 million.
Asset Divestitures
Commercial Real Estate
- During the second quarter 2016, NorthStar Realty sold four
multifamily properties for $126
million which resulted in NorthStar Realty receiving net
proceeds of approximately $33
million. NorthStar Realty generated an IRR of approximately
16.3% on its invested equity.
- NorthStar Realty has definitive agreements to sell six
multifamily properties for $181
million which will result in NorthStar Realty receiving net
proceeds of approximately $53
million. NorthStar Realty expects to generate an IRR of
approximately 17.2% on its invested equity. We expect these
transactions will close in the third quarter 2016; however, there
is no assurance these transactions will close on the terms
anticipated, if at all.
- NorthStar Realty has a definitive agreement to sell its
manufactured housing communities for $2.0
billion which will result in net proceeds of approximately
$615 million. NorthStar Realty
expects to generate an IRR of approximately 20.3% on its invested
equity. We expect this transaction to close in the first quarter
2017; however, there is no assurance this transaction will close on
the terms anticipated, if at all.
- NorthStar Realty executed a term sheet to sell a minority
interest in its healthcare real estate portfolio and executed a
term sheet to sell its interests in a net lease industrial real
estate portfolio. Together, these sales would generate net proceeds
of approximately $500 million for
NorthStar Realty. There is no assurance these transactions will
close on the terms anticipated, if at all.
- NorthStar Realty is evaluating the sale of a portion of its
medical office building portfolio through an advisor.
Commercial Real Estate Loans, Corporate Debt Investments and
Securities
- During the second quarter 2016, NorthStar Realty sold and
received repayment of certain commercial real estate loans which
resulted in NorthStar Realty receiving net proceeds of $116 million. NorthStar Realty generated an IRR
of approximately 11.0% on its invested equity.
- NorthStar Realty continues to evaluate additional sales and/or
accelerated repayments of its commercial real estate loans and
securities.
Real Estate Private Equity
- NorthStar Realty entered into an agreement, subject to
certain conditions, to sell its interests in 41 real estate private
equity funds. This transaction will result in NorthStar Realty
receiving net proceeds of $247
million and being relieved of approximately $44 million in future funding obligations.
NorthStar Realty anticipates to receive these proceeds in the
fourth quarter 2016; however, there is no assurance this
transaction will close on the terms anticipated, if at all.
- NorthStar Realty continues to evaluate additional sales of its
real estate private equity fund investments.
NorthStar Realty Total Assets
- Assets as of June 30, 2016
totaled approximately $19.7 billion
or pro forma for asset monetization initiatives as of August 2, 2016, assets are approximately
$17.4 billion.
- Approximately 90% of the $17.4
billion of total assets are comprised of direct and indirect
ownership interests in real estate.
Supplemental Disclosure
- Please refer to the supplemental presentation that was posted
on NorthStar Realty's website, www.nrfc.com, which provides
substantial additional details regarding NorthStar Realty's
investments.
Liquidity, Financing and Capital Markets
Highlights
Liquidity as of
August 2, 2016
|
|
|
|
$ in
millions
|
|
|
|
|
|
|
|
Unrestricted
cash
|
|
$
592
|
|
Undrawn corporate
revolving credit facility
|
|
250
|
|
Expected asset
monetizations (in-contract)(1)
|
|
915
|
|
|
|
|
|
Expected
liquidity
|
|
$
1,757
|
|
|
|
|
|
(1) Includes expected
asset monetization net proceeds: $53 million from multifamily
(remaining 6 properties), $615 million from manufactured housing
communities and $247 million from real estate PE fund interests.
Does not include potential proceeds from asset monetizations with
executed term sheets.
|
|
|
|
|
|
|
|
|
|
|
Common shares,
LTIPs and RSUs not subject to performance hurdles,
outstanding
|
|
Amounts in
millions
|
|
|
|
|
|
|
|
Weighted average
for Q2'16
|
|
183.1
|
|
|
|
|
|
Total outstanding
as of June 30, 2016
|
|
183.1
|
|
Exchangeable note
conversions subsequent to June 30, 2016
|
|
0.1
|
|
|
|
|
|
Total outstanding
as of August 2, 2016
|
|
183.2
|
|
|
|
|
|
Potential Additional
Shares
|
|
|
|
Common shares
underlying remaining exchangeable notes
|
|
1.2
|
|
Grand
total
|
|
184.4
|
|
Earnings Conference Call
NorthStar Realty will host a conference call to discuss second
quarter 2016 financial results on August 4,
2016, at 9:00 a.m. Eastern
time. Hosting the call will be Jonathan A. Langer, Chief Executive Officer and
Debra A. Hess, Chief Financial
Officer, as well as Executives of NorthStar Asset Management Group,
David T. Hamamoto, Executive
Chairman, Al Tylis, Chief Executive
Officer and Daniel R. Gilbert, Chief
Investment and Operating Officer.
The call will be webcast live over the Internet from NorthStar
Realty'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 888-690-2877, or for international callers, by
dialing 913-312-1444, and using passcode 8705496.
A replay of the call will be available two hours after the call
through August 10, 2016 by dialing
888-203-1112 or, for international callers, 719-457-0820, using
pass code 8705496.
About NorthStar Realty Finance Corp.
NorthStar Realty Finance Corp. is a diversified commercial real
estate company that is organized as a REIT and is managed by an
affiliate of NorthStar Asset Management Group Inc. (NYSE: NSAM), a
global asset management firm. For more information about NorthStar
Realty Finance Corp., please visit www.nrfc.com.
NorthStar Realty
Finance Corp.
|
|
|
|
|
|
Consolidated
Statements of Operations
|
|
|
|
|
|
($ in thousands,
except per share and dividends data)
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
2016
(1)
|
|
2015
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and other
revenues
|
|
|
|
|
|
Rental and escalation
income
|
|
|
$
170,758
|
|
$
179,982
|
Hotel related
income
|
|
|
221,962
|
|
206,130
|
Resident fee
income
|
|
|
73,428
|
|
65,833
|
Other
revenue
|
|
|
4,269
|
|
3,736
|
Total property and
other revenues
|
|
|
470,417
|
|
455,681
|
Net interest
income
|
|
|
|
|
|
Interest
income
|
|
|
37,515
|
|
59,509
|
Interest expense on
debt and securities
|
|
|
1,535
|
|
1,979
|
Net interest income
on debt and securities
|
|
|
35,980
|
|
57,530
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
Management fee,
related party
|
|
|
46,656
|
|
51,744
|
Interest
expense—mortgage and corporate borrowings
|
|
|
117,945
|
|
120,175
|
Real estate
properties – operating expenses
|
|
|
233,532
|
|
222,824
|
Other
expenses
|
|
|
7,445
|
|
7,890
|
Transaction
costs
|
|
|
8,776
|
|
16,550
|
Provision for
(reversal of) loan losses, net
|
|
|
(1,160)
|
|
284
|
General and
administrative expenses
|
|
|
|
|
|
Compensation expense
(2)
|
|
|
7,483
|
|
9,384
|
Other general and
administrative expenses
|
|
|
4,139
|
|
4,864
|
Total general and
administrative expenses
|
|
|
11,622
|
|
14,248
|
Depreciation and
amortization
|
|
|
87,558
|
|
112,376
|
Total
expenses
|
|
|
512,374
|
|
546,091
|
Other income
(loss)
|
|
|
|
|
|
Unrealized gain
(loss) on investments and other
|
|
|
(106,923)
|
|
(14,708)
|
Realized gain (loss)
on investments and other
|
|
|
(13,084)
|
|
(607)
|
Income (loss)
before equity in earnings (losses) of unconsolidated ventures and
income tax benefit (expense)
|
|
|
(125,984)
|
|
(48,195)
|
Equity in earnings
(losses) of unconsolidated ventures
|
|
|
31,129
|
|
57,736
|
Income tax benefit
(expense)
|
|
|
(919)
|
|
(10,088)
|
Income (loss) from
continuing operations
|
|
|
(95,774)
|
|
(547)
|
Income (loss) from
discontinued operations
|
|
|
-
|
|
(83,795)
|
Net income
(loss)
|
|
|
(95,774)
|
|
(84,342)
|
Net (income) loss
attributable to non-controlling interests
|
|
|
1,277
|
|
7,900
|
Preferred stock
dividends
|
|
|
(21,060)
|
|
(21,060)
|
Net income (loss)
attributable to NorthStar Realty Finance Corp. common
stockholders
|
|
|
$
(115,557)
|
|
$
(97,502)
|
|
|
|
|
|
|
Earnings (loss)
per share: (3)
|
|
|
|
|
|
Income (loss) per
share from continuing operations
|
|
|
$
(0.64)
|
|
$
(0.08)
|
Income (loss) per
share from discontinued operations
|
|
|
-
|
|
(0.47)
|
Basic
|
|
|
$
(0.64)
|
|
$
(0.55)
|
Diluted
|
|
|
$
(0.64)
|
|
$
(0.55)
|
|
|
|
|
|
|
Weighted average
number of shares: (3)
|
|
|
|
|
|
Basic
|
|
|
179,722,415
|
|
176,492,950
|
Diluted
|
|
|
181,582,239
|
|
177,588,566
|
|
|
|
|
|
|
Dividends per
share of common stock (3)
|
|
|
$
0.40
|
|
$
0.80
|
(1)
|
The consolidated
financial statements for the three months ended June 30, 2016
represent the Company's results of operations following the NRE
Spin-off on October 31, 2015. The three months ended June 30,
2015 include a carve-out of revenues and expenses attributable to
NorthStar Europe recorded in discontinued operations.
|
(2)
|
The three months
ended June 30, 2016 and 2015 includes $5.6 million and $7.7 million
of equity-based compensation expense, respectively.
|
(3)
|
Adjusted for the
one-for-two reverse stock split completed on November 1,
2015.
|
NorthStar Realty
Finance Corp.
|
|
|
|
|
Consolidated
Balance Sheets
|
|
|
|
|
($ in thousands,
except per share data)
|
|
|
|
|
|
|
June
30,
|
|
December
31,
|
|
|
2016
(Unaudited)
|
|
2015
|
|
|
|
|
|
Assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
540,974
|
|
$
224,101
|
Restricted
cash
|
|
190,321
|
|
299,288
|
Operating real
estate, net
|
|
8,238,870
|
|
8,702,259
|
Real estate debt
investments, net
|
|
360,964
|
|
501,474
|
Real estate debt
investments, held for sale
|
|
-
|
|
224,677
|
Investments in
private equity funds, at fair value
|
|
838,863
|
|
1,101,650
|
Investments in
unconsolidated ventures
|
|
155,199
|
|
155,737
|
Real estate
securities, available for sale
|
|
545,463
|
|
702,110
|
Receivables,
net
|
|
62,790
|
|
66,197
|
Receivables, related
parties
|
|
1,455
|
|
2,850
|
Intangible assets,
net
|
|
423,409
|
|
527,277
|
Assets of properties
held for sale
|
|
2,270,190
|
|
2,742,635
|
Other
assets
|
|
278,852
|
|
154,146
|
Total
assets
|
|
$
13,907,350
|
|
$
15,404,401
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Mortgage and other
notes payable
|
|
$
6,927,095
|
|
$
7,164,576
|
Credit facilities and
term borrowings
|
|
419,259
|
|
654,060
|
CDO bonds payable, at
fair value
|
|
277,657
|
|
307,601
|
Exchangeable senior
notes
|
|
28,280
|
|
29,038
|
Junior subordinated
notes, at fair value
|
|
184,259
|
|
183,893
|
Accounts payable and
accrued expenses
|
|
141,831
|
|
170,120
|
Due to related
party
|
|
47,167
|
|
50,903
|
Derivative
liabilities, at fair value
|
|
289,160
|
|
103,293
|
Intangible
liabilities, net
|
|
136,906
|
|
149,642
|
Liabilities of
properties held for sale
|
|
1,740,594
|
|
2,209,689
|
Other
liabilities
|
|
129,080
|
|
165,856
|
Total
liabilities
|
|
10,321,288
|
|
11,188,671
|
|
|
|
|
|
Commitments and
contingencies
|
|
|
|
|
Equity
|
|
|
|
|
NorthStar Realty
Finance Corp. Stockholders' Equity
|
|
|
|
|
Preferred stock,
$986,640 aggregate liquidation preference as of June 30, 2016 and
December 31, 2015
|
939,118
|
|
939,118
|
Common stock, $0.01
par value, 500,000,000 shares authorized, 180,577,119 and
183,239,708
shares issued and outstanding as of June 30, 2016 and
December 31, 2015, respectively
|
1,806
|
|
1,832
|
Additional paid-in
capital
|
|
5,109,953
|
|
5,149,349
|
Retained earnings
(accumulated deficit)
|
|
(2,718,349)
|
|
(2,309,564)
|
Accumulated other
comprehensive income (loss)
|
|
(48,405)
|
|
18,485
|
Total NorthStar Realty
Finance Corp. stockholders' equity
|
|
3,284,123
|
|
3,799,220
|
Non-controlling
interests
|
|
301,939
|
|
416,510
|
Total
equity
|
|
3,586,062
|
|
4,215,730
|
Total liabilities
and equity
|
|
$
13,907,350
|
|
$
15,404,401
|
Non-GAAP Financial Measures
We use CAD and NOI, each a non-GAAP measure, to evaluate our
profitability.
Cash Available for Distribution
We believe that CAD provides investors and management with a
meaningful indicator of operating performance. We also
believe that CAD is useful because it adjusts for a variety of
items that are consistent with presenting a measure of operating
performance (such as transaction costs, N-Star CDO equity
interests, depreciation and amortization, equity-based
compensation, realized gain (loss) on investments, provision for
loan losses, asset impairment, non-recurring bad debt expense and
certain interest income and expense items). We adjust for
transaction costs because these costs are not a meaningful
indicator of our operating performance. For instance, these
transaction costs include costs such as professional fees
associated with new investments or restructuring of investments,
which are expenses related to specific transactions. We
adjust for N-Star CDO equity interests to represent the net
economic interest generated from the N-Star CDO equity interests.
This adjustment is a component of our ongoing return on such
investments, and therefore, is adjusted in CAD as it provides
investors and management with a meaningful indicator of our
operating performance. Furthermore, CAD adjusts N-Star CDO bond
discounts to record such investments on an effective yield basis
over the expected weighted average life of the investment.
N-Star CDO bond discounts relates to repurchased CDO bonds of
consolidated CDO financing transactions at a discount to par.
These CDO bonds typically have a low interest rate and the majority
of the return is generated from repurchasing the CDO bonds at a
discount to expected recovery value. Because the return
generated through the accretion of the discount is a meaningful
contributor to our operating performance, such accretion is
adjusted in CAD. The computation for the accretion of the
discount under U.S. GAAP and CAD is the same. However, for
CDO financing transactions that are consolidated under U.S. GAAP,
the CDO bonds are not presented as an investment but rather are
eliminated in our consolidated financial statements. In
addition, we adjust for distributions and adjustments to joint
venture partners, which represent the net return generated from our
investments allocated to our non-controlling interests. For
our owned hotels, our CAD calculation does not make an adjustment
for furniture, fixtures and equipment (FF&E) reserves. CAD may
fluctuate from period to period based upon a variety of factors,
including, but not limited to, the timing and amount of
investments, repayments and asset sales, capital raised, use of
leverage, changes in the expected yield of investments and the
overall conditions in commercial real estate and the economy
generally. Management also believes that quarterly
distributions are principally based on operating performance and
our board of directors includes CAD as one of several metrics it
reviews to determine quarterly distributions to stockholders.
We calculate CAD by subtracting from or adding to net income
(loss) attributable to common stockholders, non-controlling
interests and the following items: depreciation and amortization
items including straight-line rental income or expense,
amortization of above/below market leases, amortization of deferred
financing costs, amortization of discount on financings and other
and equity-based compensation; net economic interest generated from
N-Star CDO equity interests; accretion of consolidated N-Star CDO
bond discounts; net interest income in consolidated N-Star CDOs;
unrealized gain (loss) from the change in fair value; realized gain
(loss) on investments and other, excluding accelerated amortization
related to sales of CDO bonds or other investments; provision for
loan losses, net; impairment on depreciable property; non-recurring
bad debt expense; acquisition gains or losses; distributions and
adjustments related to joint venture partners; transaction costs;
foreign currency gains (losses); impairment on goodwill and other
intangible assets; and one-time events pursuant to changes in U.S.
GAAP and certain other non-recurring items.
CAD should not be considered as an alternative to net income
(loss) attributable to common stockholders, determined in
accordance with U.S. GAAP, as an indicator of operating
performance. In addition, our methodology for calculating CAD
involves subjective judgment and discretion and may differ from the
methodologies used by other comparable companies, including other
REITs, when calculating the same or similar supplemental financial
measures and may not be comparable with these companies.
The following table presents a reconciliation of CAD to net
income (loss) attributable to common stockholders for the three
months ended June 30, 2016 (dollars
in thousands):
Reconciliation of
Cash Available for Distribution
|
|
|
(Amount in
thousands except per share data)
|
|
|
|
|
Three Months
Ended
|
|
|
June 30,
2016
|
|
|
|
Net income (loss)
attributable to common stockholders
|
|
$
(115,557)
|
Non-controlling
interests
|
|
(1,277)
|
|
|
|
Adjustments:
|
|
|
Depreciation and
amortization items (1)
|
|
102,704
|
N-Star CDO bond
discounts (2)
|
|
5,914
|
Non-cash net interest
income in consolidated N-Star CDOs
|
|
(7,726)
|
Unrealized (gain)
loss from fair value adjustments / Provision for (reversal of) loan
losses, net
|
|
103,353
|
Realized (gain) loss
on investments (3)
|
|
12,695
|
Distributions /
adjustments to joint venture partners
|
|
(10,408)
|
Transaction costs and
other (4)
|
|
13,096
|
|
|
|
CAD
|
|
$
102,794
|
|
|
|
CAD per
share(5)
|
|
$
0.56
|
(1)
|
Represents an
adjustment to exclude depreciation and amortization of $87.8
million (including $0.2 million related to unconsolidated
ventures), straight-line rental income of $(7.3) million,
amortization of above/below market leases of $2.2 million,
amortization of deferred financing costs of $14.0 million,
amortization of discount on financings and other of $0.4 million
and amortization of equity-based compensation of $5.6
million.
|
(2)
|
For CAD, discounts
expected to be realized on N-Star CDO bonds for consolidated CDOs
are accreted on an effective yield basis based on expected
maturity. For deconsolidated N-Star CDOs, N-Star CDO bond
accretion is already included in net income attributable to common
stockholders.
|
(3)
|
Represents an
adjustment to exclude a $10.4 million net gain related to the sale
of real estate investments, a $(16.1) million loss related to the
foreclosure of real estate, $(5.5) million non-cash loss related to
securities in our consolidated CDOs, $(1.1) million loss related to
the sale of manufactured homes and includes a $(0.4) million loss
related to the sale of REO.
|
(4)
|
Represents an
adjustment to exclude $8.8 million of transaction costs and include
$4.2 million related to N-Star CDO equity interests.
|
(5)
|
CAD per share does
not take into account any potential dilution from our outstanding
exchangeable notes or restricted stock units subject to performance
metrics not currently achieved.
|
Net Operating Income (NOI)
We believe NOI is a useful metric of the operating performance
of our real estate portfolio in the aggregate. Portfolio
results and performance metrics represent 100% for all consolidated
investments and represent our ownership percentage for
unconsolidated joint ventures. Net operating income
represents total property and related revenues, adjusted for: (i)
amortization of above/below market rent; (ii) straight line rent;
(iii) other items such as adjustments related to joint ventures and
non-recurring bad debt expense; and (iv) less property operating
expenses. However, the usefulness of NOI is limited because
it excludes general and administrative costs, interest expense,
transaction costs, depreciation and amortization expense, realized
gains (losses) from the sale of properties and other items under
U.S. GAAP and capital expenditures and leasing costs necessary to
maintain the operating performance of properties, all of which may
be significant economic costs. NOI may fail to capture
significant trends in these components of U.S. GAAP net income
(loss) which further limits its usefulness.
NOI should not be considered as an alternative to net income
(loss), determined in accordance with U.S. GAAP, as an indicator of
operating performance. In addition, our methodology for
calculating NOI involves subjective judgment and discretion and may
differ from the methodologies used by other comparable companies,
including other REITs, when calculating the same or similar
supplemental financial measures and may not be comparable with
these companies.
The following table presents a reconciliation of NOI to property
and other related revenues less property operating expenses for our
property types in our real estate segment for the three months
ended June 30, 2016 (dollars in
thousands):
|
Total
|
|
Healthcare
(6)
|
|
Hotel
|
|
Manufactured
Housing (7)
|
|
Net
Lease
|
|
Multifamily
(7)
|
|
Multi-tenant
Office
|
Property and Other
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental and escalation
income
|
$
170,758
|
|
$
88,754
|
|
$
-
|
|
$
49,023
|
|
$
17,630
|
|
$
9,806
|
|
$
5,545
|
Hotel related
income
|
221,962
|
|
-
|
|
221,962
|
|
-
|
|
-
|
|
-
|
|
-
|
Resident fee
income
|
73,428
|
|
73,428
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Other revenue
(1)
|
2,176
|
|
264
|
|
-
|
|
1,234
|
|
-
|
|
521
|
|
157
|
Total property and
other revenues
|
468,324
|
|
162,446
|
|
221,962
|
|
50,257
|
|
17,630
|
|
10,327
|
|
5,702
|
Real estate
properties - operating expenses
|
233,532
|
|
66,141
|
|
138,849
|
|
18,759
|
|
3,061
|
|
4,524
|
|
2,198
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
(2)
|
3,076
|
|
1,515
|
|
11
|
|
1,549
|
|
1
|
|
-
|
|
-
|
Equity in earnings
(3)
|
196
|
|
-
|
|
-
|
|
-
|
|
(76)
|
|
272
|
|
-
|
Amortization and
other items (4)
|
(4,113)
|
|
(3,271)
|
|
(12)
|
|
-
|
|
(949)
|
|
399
|
|
(280)
|
NOI(5)(8)
|
$
233,951
|
|
$
94,549
|
|
$
83,112
|
|
$
33,047
|
|
$
13,545
|
|
$
6,474
|
|
$
3,224
|
(1)
|
Certain other revenue
earned is not included as part of NOI, including collateral
management fees for administrative services in our N-Star CDOs,
that are not part of our real estate segment.
|
(2)
|
Primarily represents
interest income earned from notes receivable on manufactured homes
and loans in our healthcare portfolio.
|
(3)
|
Includes an
adjustment related to our interest in an unconsolidated joint
venture in a net lease and multifamily property.
|
(4)
|
Primarily includes
amortization of straight-line rental income, amortization of
above/below market leases and non-recurring bad debt.
|
(5)
|
We consider NOI for
hotels to be a proxy for earnings before interest, tax,
depreciation and amortization (EBITDA).
|
(6)
|
The following table
presents NOI by asset class within our healthcare property
type for the three months ended June 30, 2016 (dollars in
thousands):
|
|
Total
|
|
Medical Office
Buildings
|
|
Senior Housing
- Operating
|
|
Senior Housing
- Triple Net Lease
|
|
Skilled
Nursing
Facilities
|
|
Hospitals
|
Property and Other
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
Rental and escalation
income
|
$
88,754
|
|
$
39,085
|
|
$
-
|
|
$
14,795
|
|
$
28,760
|
|
$
6,114
|
Resident fee
income
|
73,428
|
|
-
|
|
67,893
|
|
-
|
|
5,535
|
|
-
|
Other
revenue
|
264
|
|
263
|
|
-
|
|
-
|
|
-
|
|
1
|
Total property and
other revenues
|
162,446
|
|
39,348
|
|
67,893
|
|
14,795
|
|
34,295
|
|
6,115
|
Real estate
properties - operating expenses
|
66,141
|
|
12,193
|
|
47,615
|
|
256
|
|
5,440
|
|
637
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
1,515
|
|
7
|
|
1
|
|
1,129
|
|
76
|
|
302
|
Amortization and
other items
|
(3,271)
|
|
(1,463)
|
|
234
|
|
(845)
|
|
(412)
|
|
(785)
|
NOI
|
$
94,549
|
|
$
25,699
|
|
$
20,513
|
|
$
14,823
|
|
$
28,519
|
|
$
4,995
|
(7)
|
During 2016, we
entered into definitive agreements to sell certain of our real
estate portfolios, including ten multifamily properties of which
four properties were sold as of June 30, 2016 and our manufactured
housing portfolio.
|
(8)
|
The following table
presents a reconciliation of NOI of our real estate segment to net
income (loss) for the three months ended June 30, 2016 (dollars in
thousands):
|
NOI
|
|
$
233,951
|
Adjustments:
|
|
|
Straight-line rental
revenue and amortization of
|
|
|
above/below-market leases
|
|
5,259
|
Interest expense -
mortgage and corporate borrowings
|
|
(107,703)
|
Other
expenses
|
|
(6,420)
|
Depreciation and
amortization
|
|
(87,369)
|
Unrealized gain
(loss) on investments and other
|
|
(18,850)
|
Realized gain (loss)
on investments and other
|
|
(5,966)
|
Equity in earnings
(losses) of unconsolidated ventures
|
|
30,988
|
Income tax benefit
(expense)
|
|
(735)
|
Other
items
|
|
(1,126)
|
Net income (loss)
- Real estate segment
|
|
$
42,029
|
Remaining Segments
(i)
|
|
(137,803)
|
Net income
(loss)
|
|
$
(95,774)
|
|
(i)
Represents the net income (loss) of our remaining segments to
reconcile to total net income (loss).
|
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, and
Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements relate to expectations, beliefs,
projections, future plans and strategies, anticipated events or
trends and similar expressions concerning matters that are not
historical facts. In some cases, you can identify forward-looking
statements by the use of forward-looking terminology such as "may,"
"will," "should," "expects," "intends," "plans," "anticipates,"
"believes," "estimates," "predicts," or "potential" or the negative
of these words and phrases or similar words or phrases which are
predictions of or indicate future events or trends and which do not
relate solely to historical matters. Forward-looking statements
involve known and unknown risks, uncertainties, assumptions and
contingencies, many of which are beyond our control, and may cause
actual results to differ significantly from those expressed in any
forward-looking statement. Among others, the following
uncertainties and other factors could cause actual results to
differ from those set forth in the forward looking statements: the
failure to receive, on a timely basis or otherwise, the required
approvals by NSAM, Colony and NRF stockholders, governmental or
regulatory agencies and third parties for the merger; the risk that
a condition to closing of the merger may not be satisfied; each
company's ability to consummate the merger; operating costs and
business disruption may be greater than expected; the ability of
each company to retain its senior executives and maintain
relationships with business partners pending consummation of the
merger; the ability to realize substantial efficiencies and
synergies as well as anticipated strategic and financial benefits;
the impact of legislative, regulatory and competitive changes; the
impact of integration efforts; whether our monetization initiatives
under contract or any additional monetization initiatives will be
consummated, at highly attractive valuations or otherwise, and the
incremental liquidity received from any such initiative; whether
our monetization initiatives will achieve the substantial
anticipated benefits in full or at all, including anticipated IRRs,
financial flexibility, opportunity and earnings power, additional
liquidity, reduced leverage and an attractive financial profile,
either before or after the merger as an internally managed REIT;
the durability and long-term growth prospects of our business; our
ability to execute our business strategy; the resulting effects of
becoming an externally managed company, including the payment of
substantial fees to our manager, an affiliate of NSAM, the
allocation of investments by our manager among us and NSAM's other
managed companies, and various conflicts of interest in our
relationship with NSAM, including in transactions between us and
other companies managed by NSAM; the performance of our real estate
portfolio generally, including the ability to maintain consistent
operating performance; the underperformance of our hotel business
and whether its sluggish conditions will improve, if at all; the
timing and completion of hotel renovations and the impact on hotel
operating performance; our ability to maintain dividend payments,
at current levels, or at all; the diversification of our portfolio,
including the equity and debt mix; the amount and timing of stock
repurchases pursuant to our stock repurchase program or an
additional stock repurchase program, if any; volatility, disruption
or uncertainty in the financial markets; our liquidity and
financial flexibility, including the timing and amount of
deployments of capital we retain from our dividend policy and net
proceeds we receive from asset sales; the timing and amount of
borrowings under our revolving credit facility and facility
agreement; our ability to comply with the required affirmative and
negative covenants, including the financial covenants; whether we
will continue to diligently execute our business strategies in a
disciplined manner; the impact of changes to our cost of capital,
including our ability to make accretive investments; NSAM's ability
to source and consummate attractive investment opportunities on our
behalf, both domestically and internationally; whether we will
realize any potential upside in our limited partnership interests
in real estate private equity funds or any appreciation above our
original cost basis of our real estate portfolio; our ability to
accelerate repayments of loans originated by us; the NOI and
overall performance of our investments relative to our expectations
and the impact on our actual return on invested equity, as well as
the cash generated from these investments and available for
distribution; our ability to generate attractive risk-adjusted
total returns; whether we will produce higher cash available for
distribution (CAD) per share in the coming quarters, or ever; 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, as well as on the tenants/operators of our real property
that we own; our ability to realize the value of the bonds we have
purchased and retained in our CDO financing transactions and other
securitized financing transactions and our ability to complete
securitized financing transactions on terms that are acceptable to
us, or at all; our ability to meet various coverage tests with
respect to our CDOs; the size and timing of offerings or capital
raises; the ability to opportunistically participate in commercial
real estate refinancings; any failure in our due diligence to
identify all relevant facts in our underwriting process or
otherwise; seasonality in our portfolio; credit rating downgrades;
tenant/operator or borrower defaults or bankruptcy; adverse
economic conditions and the impact on the commercial real estate
industry; our use of leverage; our ability to obtain mortgage
financing on our real estate portfolio; the effect of economic
conditions on the valuations of our investments; illiquidity of
properties in our portfolio; our ability to manage our costs in
line with our expectations and the impact on our CAD; 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; our ability to comply
with domestic and international laws or regulations governing
various aspects of our business; regulatory requirements with
respect to our business and the related cost of compliance; changes
in laws or regulations governing various aspects of our business;
changes in our board and management composition; competition for
qualified personnel, including our ability to retain key personnel;
the loss of our exemption from the definition of "investment
company" under the Investment Company Act of 1940, as amended;
failure to maintain effective internal controls; compliance with
the rules governing real estate investment trusts; and the factors
described in Item 1A. of our Annual Report on Form 10-K for the
fiscal year ended December 31, 2015,
under the heading "Risk Factors". There can be no assurance that
the merger will in fact be consummated.
The foregoing list of factors is not exhaustive. Additional
information about these and other factors can be found in each of
the Company's, NSAM's and Colony's reports filed from time to time
with the United States Securities and Exchange Commission (the
"SEC"). 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 release 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, 2015. The factors set
forth in the Risk Factors section and otherwise described in our
filings with the SEC could cause our actual results to differ
significantly from those contained in any forward looking statement
contained in this press release.
Additional Information and Where to Find It
In connection with the proposed transaction, Colony NorthStar,
Inc. ("Colony NorthStar"), a Maryland subsidiary of NSAM that will be the
surviving parent company of the combined company, has filed with
the SEC a registration statement on Form S-4 that includes a joint
proxy statement of NSAM, Colony and NRF and that also constitutes a
prospectus of Colony NorthStar. The registration statement has not
yet become effective. Each of NSAM, Colony, NRF and Colony
NorthStar may also file other documents with the SEC regarding the
proposed transaction. This document is not a substitute for the
joint proxy statement/prospectus or registration statement or any
other document which NSAM, Colony, NRF or Colony NorthStar may file
with the SEC. INVESTORS AND SECURITY HOLDERS OF NSAM, COLONY AND
NRF ARE URGED TO READ THE REGISTRATION STATEMENT ON FORM S-4 FILED
BY COLONY NORTHSTAR ON JULY 29, 2016
THAT INCLUDES A JOINT PROXY STATEMENT/PROSPECTUS FROM EACH OF NSAM,
COLONY AND NRF, THE CURRENT REPORTS ON FORM 8-K FILED BY EACH OF
NSAM, COLONY AND NRF ON JUNE 3, 2016,
JUNE 7, 2016, JUNE 8, 2016 AND JULY 29,
2016 IN CONNECTION WITH THE MERGER AGREEMENT, AND ANY OTHER
RELEVANT DOCUMENTS THAT ARE FILED OR WILL BE FILED WITH THE SEC, AS
WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY
AND IN THEIR ENTIRETY BECAUSE THEY CONTAIN OR WILL CONTAIN
IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION AND RELATED
MATTERS. Investors and security holders may obtain free copies of
the registration statement and the joint proxy statement/prospectus
and other documents filed with the SEC by NSAM, Colony, NRF and
Colony NorthStar (when available) through the web site maintained
by the SEC at www.sec.gov or by contacting the investor relations
department of NSAM, Colony or NRF at the following:
Participants in the Solicitation
Each of NSAM, Colony and NRF and their respective directors and
executive officers may be deemed to be participants in the
solicitation of proxies from their respective shareholders in
connection with the proposed transaction. Information regarding
NSAM's directors and executive officers, including a description of
their direct interests, by security holdings or otherwise, is
contained in NSAM's Annual Report on Form 10-K for the year ended
December 31, 2015, as amended by its
Form 10-K/A filed with the SEC on April 29,
2016 and Current Reports on Form 8-K filed by NSAM with the
SEC on June 3, 2016, June 7, 2016, June 8,
2016 and July 29, 2016 in
connection with the proposed transaction. Information regarding
Colony's directors and executive officers, including a description
of their direct interests, by security holdings or otherwise, is
contained in Colony's Annual Report on Form 10-K for the year ended
December 31, 2015, its annual proxy
statement filed with the SEC on March 31,
2016 and Current Reports on Form 8-K filed by Colony with
the SEC on June 3, 2016, June 7, 2016, June 8,
2016 and July 29, 2016 in
connection with the proposed transaction. Information regarding
NRF's directors and executive officers, including a description of
their direct interests, by security holdings or otherwise, is
contained in NRF's Annual Report on Form 10-K for the year ended
December 31, 2015, as amended by its
Form 10-K/A filed with the SEC on April 28,
2016 and Current Reports on Form 8-K filed by NRF with the
SEC on June 3, 2016, June 7, 2016, June 8,
2016 and July 29, 2016 in
connection with the proposed transaction. A more complete
description is available in the registration statement on Form S-4
and the joint proxy statement/prospectus filed by Colony NorthStar
with the SEC on July 29, 2016. You
may obtain free copies of these documents as described in the
preceding paragraph.
No Offer or Solicitation
This press release is not intended to and shall not constitute
an offer to sell or the solicitation of an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote of approval, nor shall there be any sale of securities in
any jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. No offer of securities
shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as
amended.
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SOURCE NorthStar Realty Finance Corp.