NorthStar Realty Finance Announces Third Quarter 2012 Results

        NorthStar Realty Finance Announces Third Quarter 2012 Results

Third Quarter 2012 Highlights

- Increased third quarter 2012 cash dividend to $0.17 per common share,
representing a 70% increase over the last five quarters.

- AFFO per diluted share of $0.28.

- $351 million CMBS transaction collateralized by CRE first mortgages
originated by NorthStar and its sponsored non-traded CRE REIT priced in
October 2012.

- Investments of $646 million in 2012, including $196 million since the end of
the second quarter 2012.

- Total capital raised to date of $504 million for our sponsored non-traded
CRE REIT, including $51 million raised in October 2012.

PR Newswire

NEW YORK, Nov. 2, 2012

NEW YORK, Nov. 2, 2012 /PRNewswire/ -- NorthStar Realty Finance Corp. (NYSE:
NRF) today announced its results for the quarter ended September 30, 2012.

Third Quarter 2012 Results

NorthStar reported adjusted funds from operations ("AFFO") for the third
quarter 2012 of $0.28 per diluted share compared with $0.29 per diluted share
for the third quarter 2011. AFFO for the third quarter 2012 was $39.5 million
compared to $29.3 million for the third quarter 2011. Net loss to common
stockholders for the third quarter 2012 was $(149.6) million, or $(1.11) per
diluted share, compared to a net loss of $(24.6) million, or $(0.26) per
diluted share for the third quarter 2011. Third quarter 2012 net loss
includes $(183.5) million of non-cash fair value adjustments, which includes a
$193.7 million increase in the value of our CDO bonds, compared to $(43.5)
million of non-cash fair value adjustments for the third quarter 2011. These
non-cash fair value losses are excluded from AFFO. 

David T. Hamamoto, chairman and chief executive officer, commented "We are
extremely pleased with the execution of our recently announced CMBS
transaction, which will provide us with attractively-priced, permanent
financing on a non-recourse and non-mark-to-market basis, and demonstrates the
strength and sophistication of our platform. The proceeds from this CMBS
transaction will be used to retire borrowings on our credit facilities, which
will provide us additional capacity to take advantage of our loan origination
pipeline."

Mr. Hamamoto continued, "We expect the strong demand for this type of
transaction will allow us to further access the securitization market as it
continues to expand and improve. This increased flexibility in funding sources
for our originated loans, combined with the opportunistic investments we
continue to see and the continued growth of our non-traded REIT platform,
position us well to further execute on our business strategy and continue to
generate strong cash flows to NorthStar."

Investments

Since the second quarter 2012, NorthStar invested $29 million of equity in
three commercial real estate loans with a $56 million aggregate principal
balance. During 2012, NorthStar invested $94 million of equity in 10
commercial real estate loans with a $227 million aggregate principal balance
and expects a weighted average return on this invested equity of 18%, which
reflects NorthStar's recently priced CMBS transaction.

The principal proceeds NorthStar could receive from CDO bonds acquired since
the second quarter 2012 is $78 million, which were purchased for $40 million.
The principal proceeds NorthStar could receive from CDO bonds acquired during
2012 is $326 million, which were purchased for $159 million and have an
expected yield-to-maturity of over 20%. The CDO bonds acquired during 2012 had
a weighted average original credit rating of AA-/Aa3. As of today, the
principal proceeds NorthStar could receive from its owned CDO bonds is $805
million, of which $655 million was repurchased at an average price of 37% in
the secondary market and has a weighted average original credit rating of
A+/A1. The discount to par of $416 million represents potential imbedded cash
flows that we may realize in future periods in addition to our capital
invested in these bonds. 

Since the end of the second quarter 2012, NorthStar invested $62 million of
equity in other opportunistic CRE investments. During 2012, NorthStar has
invested $89 million of equity in other opportunistic CRE investments expected
to generate a weighted average return on equity in excess of 16%.

NorthStar had approximately $7.1 billion of assets under management at
September 30, 2012.

For additional details regarding NorthStar's investments, please refer to the
tables on the following pages and to the corporate presentation which is
posted on NorthStar's website, www.nrfc.com.

Asset Management Business

During the third quarter 2012, NorthStar received management fees from its
consolidated CDOs of $3.5 million, which are eliminated on NorthStar's
consolidated statement of operations. In addition, during the third quarter
2012, NorthStar received $1.5 million of fees from our sponsored non-traded
CRE REIT, NorthStar Real Estate Income Trust, Inc. ("NorthStar Income").

NorthStar Income raised $127 million in the third quarter 2012 and $504
million since inception, including $51 million in October 2012, through
NorthStar Realty Securities, LLC, NorthStar's wholly-owned broker-dealer.
NorthStar Realty Securities, LLC has total signed selling agreements with
broker-dealers covering more than 61,000 registered representatives.
NorthStar expects to earn annual net fees approximately equal to three
percentage points based on total capital raised for our sponsored non-traded
REITs.

Since the second quarter 2012, NorthStar Income originated two loans with a
$51 million aggregate principal balance. During 2012, NorthStar Income
originated 11 loans with a $308 million aggregate principal balance.

Liquidity, Financing and Capital Markets Highlights

Unrestricted cash as of September 30, 2012 totaled approximately $252 million.

In July 2012, NorthStar sold 3.2 mllion shares of its existing 8.25% Series B
Preferred Stock at a public offering price of $22.95, generating net proceeds
excluding accrued dividends of $70 million.

During the third quarter 2012, NorthStar sold 1.5 million shares of its
existing 8.75% Series A Preferred Stock and 8.25% Series B Preferred Stock
through an "at-the-market" preferred stock offering program for net proceeds
of $33 million.

In October 2012, NorthStar sold 5.0 million shares of its 8.875% Series C
Preferred Stock at a par value of $25 per share, generating net proceeds of
$121 million.

Currently, NorthStar's only near-term unsecured corporate debt obligations
relate to its exchangeable senior notes, of which $36 million principal amount
of 11.5% notes are due in June 2013 and $13 million principal amount of 7.25%
notes are payable in June 2014 at the holders' option.

On October 26, 2012, NorthStar priced a $351 million CMBS transaction
collateralized by CRE first mortgages originated by NorthStar and NorthStar
Income. A total of $228 million of investment grade bonds will be issued,
representing an advance rate of approximately 65%, and the bonds will have a
weighted average coupon of L+1.63%. NorthStar expects to generate a yield of
approximately 20% on its invested equity in the CMBS transaction, inclusive of
fees and estimated transaction expenses, assuming all of the underlying loans
are repaid at their initial maturity.

Risk Management

At September 30, 2012, NorthStar had three loans on non-performing status
("NPL"), which had a $25 million aggregate principal amount and a $4 million
carrying value. This compares to two loans which had a $15 million aggregate
principal amount and a $4 million carrying value at June 30, 2012. NorthStar
categorizes a loan as non-performing if it is in maturity default and/or is
past due 90 days on its contractual debt service payments.

During the third quarter 2012, NorthStar recorded $6.4 million of provision
for loan losses relating to two loans, compared to $6.5 million of provision
for loan losses related to two loans recorded during the second quarter 2012.
As of September 30, 2012, loan loss reserves totaled $169 million, or 7% of
total loans, related to 15 loans with a carrying value of $231million.

As of September 30, 2012, NorthStar's core net lease portfolio was 96% leased
with a 5.9 year weighted average remaining lease term. As of September 30,
2012, 100% of NorthStar's net lease healthcare portfolio was leased to
third-party operators with weighted average lease coverage of 1.3x and a 7.2
year weighted average remaining lease term.

Stockholders' Equity

At September 30, 2012, NorthStar had 141,076,880 total common shares and
operating partnership units outstanding and $20 million of non-controlling
interests relating to its operating partnership. GAAP book value per share
was $4.88 at September 30, 2012, which includes negative GAAP equity in
certain of our non-recourse CDO financings due to non-cash fair value
adjustments. Adjusted book value at September 30, 2012 would be $7.10 per
share, exclusive of certain unrealized and other adjustments, loan loss
reserves and accumulated depreciation and amortization. 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 vehicles and NorthStar's 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 November 1, 2012, NorthStar announced that its Board of Directors declared
a cash dividend of $0.17 per share of common stock, payable with respect to
the quarter ended September 30, 2012. The dividend is expected to be paid on
November 16, 2012 to shareholders of record as of the close of business on
November 12, 2012. The Company's common shares will begin trading ex-dividend
on November 7, 2012.

Earnings Conference Call

NorthStar will hold a conference call to discuss third quarter 2012 financial
results on November 2, 2012, at 2:00 p.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 800-762-8779, or for
international callers, by dialing 480-629-9771.

A replay of the call will be available one hour after the call through Friday,
November 9, 2012 by dialing 800-406-7325  or, for international callers,
303-590-3030, using pass code 4570570.

About NorthStar Realty Finance Corp.

NorthStar Realty Finance Corp. is a diversified commercial real estate
investment and asset management company that is organized as a REIT. For more
information about NorthStar Realty Finance Corp., please visit www.nrfc.com.



NorthStar Realty Finance Corp.
Consolidated Statements of Operations
($ in thousands, except share and per share data)


                          Three Months Ended          Nine Months Ended
                          September 30,               September 30,
                          2012           2011         2012         2011
Net interest income
Interest income           $         $       $        $    
                            82,558    100,682      243,367     310,484
Interest expense on       12,304         10,715       38,569       32,244
debt and securities
 Net interest
income on debt and        70,254         89,967       204,798      278,240
securities
Other revenues
Rental and                29,960         26,996       87,619       85,879
escalation income
Commission income         12,213         3,131        28,291       5,775
Advisory and other        1,507          130          4,766        425
fees
Other revenue             366            86           1,996        329
 Total other           44,046         30,343       122,672      92,408
revenues
Expenses
Other interest            23,618         29,160       67,316       75,257
expense
Real estate
properties –              5,145          3,539        14,834       18,649
operating expenses
Asset management          751            1,302        2,552        4,531
expenses
Commission expense        11,070         2,698        25,538       5,117
Other costs, net          -              -            392          -
Provision for loan        6,360          9,340        19,737       48,040
losses
Provision for loss
on equity                 -              -            -            4,482
investment
General and
administrative
Salaries and
equity-based              13,691         11,386       41,764       43,252
compensation ^(1)
Other general and         6,170          7,426        18,671       21,148
administrative
 Total general         19,861         18,812       60,435       64,400
and administrative
Depreciation and          11,735         12,762       36,718       32,370
amortization
 Total expenses        78,540         77,613       227,522      252,846
Income (loss) from        35,760         42,697       99,948       117,802
operations
Equity in earnings
(losses) of               421            (604)        (416)        (4,387)
unconsolidated
ventures
Other income (loss)       -              (11,826)     20,258       (1,688)
Unrealized gain
(loss) on                 (202,019)      (68,446)     (413,073)    (351,271)
investments and
other
Realized gain
(loss) on                 15,221         14,364       35,768       61,937
investments and
other
Gain from                 -              81           -            81
acquisitions
Income (loss) from
continuing                (150,617)      (23,734)     (257,515)    (177,526)
operations
Income (loss) from
discontinued              (23)           (16)         (88)         (654)
operations
Gain (loss) on sale
from discontinued         29             2,881        314          17,328
operations
Net income (loss)         (150,611)      (20,869)     (257,289)    (160,852)
 Less: net
(income) loss
allocated to              7,704          1,743        13,911       1,393
non-controlling
interests
Preferred stock           (6,671)        (5,231)      (17,629)     (15,694)
dividends
Contingently
redeemable                -              (196)        -            (5,178)
non-controlling
interest accretion
Net income (loss)
attributable to           $         $       $        $   
NorthStar Realty          (149,578)     (24,553)     (261,007)    (180,331)
Finance Corp.
common stockholders
Net income (loss)
per share from            $         $       $       $    
continuing                              (0.29)     (2.17)    
operations                (1.11)                                  (2.26)
(basic/diluted)
Income (loss) per
share from
discontinued              -              (0.01)       -            (0.01)
operations
(basic/diluted)
Gain per share on
sale of
discontinued              -              0.04         -            0.21
operations
(basic/diluted)
Net income (loss)
per common share
attributable to           $         $       $       $    
NorthStar Realty                        (0.26)     (2.17)    
Finance Corp.             (1.11)                                  (2.06)
common stockholders
(basic/diluted)
Weighted average
number of shares of
common stock:
 Basic                 134,272,289    95,957,333   120,491,186  87,105,058
 Diluted               140,609,372    100,229,735  126,445,659  91,397,552
Dividends declared        $         $       $       $    
per share of common                    0.125      0.48      0.325
stock                     0.17
(1) The three months ended September 30, 2012 and 2011 include $2.9 million
and $2.2 million, respectively, of equity‑based compensation expense. The nine
months ended September 30, 2012 and 2011 include $10.0 million and $6.9
million, respectively, of equity‑based compensation expense.



NorthStar Realty Finance Corp.
Consolidated Balance Sheets
($ in thousands, except share data)
                                             September 30, 2012  December 31,
                                             (Unaudited)         2011
Assets
 VIE Financing Structures
 Restricted cash                            $           $     
                                             243,731             261,295
 Operating real estate, net                340,164             313,227
 Real estate securities, available for      1,125,875           1,358,282
sale
 Real estate debt investments, net         1,513,131           1,631,856
 Investments in and advances to
unconsolidated                               62,831              62,938

ventures
 Receivables, net of allowance of $1,158
in 2012 and                                 18,575              22,530

 $1,179 in 2011
 Derivative assets, at fair value           -                   61
 Deferred costs and intangible assets,      40,120              47,499
net
 Assets of properties held for sale         1,595               3,198
 Other assets                               14,063              20,549
                                             3,360,085           3,721,435
 Non-VIE Financing Structures
 Cash and cash equivalents                  252,427             144,508
 Restricted cash                            24,996              37,069
 Operating real estate, net                 768,129             776,222
 Real estate securities, available for      128,065             115,023
sale
 Real estate debt investments, net          316,917             78,726
 Investments in and advances to
unconsolidated                               51,239              33,205

ventures
 Receivables                                15,808              8,958
 Receivables, related parties               8,561               5,979
 Unbilled rent receivable                   13,459              11,891
 Derivative assets, at fair value           9,425               5,674
 Deferred costs and intangible assets, net  48,095              50,885
 Other assets                               14,554              16,862
                                             1,651,675           1,285,002
Total assets                                $             $    
                                             5,011,760          5,006,437
Liabilities
 VIE Financing Structures
 CDO bonds payable                          $             $    
                                             2,104,782          2,273,907
 Mortgage notes payable                     228,446             228,525
 Secured term loan                          14,682              14,682
 Accounts payable and accrued expenses      15,123              15,754
 Escrow deposits payable                    75,917              52,660
 Derivative liabilities, at fair value      188,412             226,481
 Other liabilities                          25,540              55,007
                                             2,652,902           2,867,016
 Non-VIE Financing Structures
 Mortgage notes payable                     552,661             554,732
 Credit facilities                          150,146             64,259
 Exchangeable senior notes                  290,256             215,853
 Junior subordinated notes, at fair value   182,100             157,168
 Accounts payable and accrued expenses      46,375              50,868
Escrow deposits payable                    14,973              196
 Derivative liabilities, at fair value      -                   8,193
 Other liabilities                          53,693              48,538
                                             1,290,204           1,099,807
Total liabilities                            3,943,106           3,966,823
Commitments and contingencies
Equity
NorthStar Realty Finance Corp. Stockholders'
Equity
Preferred stock, 8.75% Series A, $0.01 par
value,

$61,675 and $60,000 liquidation
preference as of                             59,453              57,867

September 30, 2012 and December 31, 2011,

respectively
Preferred stock, 8.25% Series B, $0.01 par
value,

$349,975 and $190,000 liquidation
preference as of                             323,769             183,505

 September 30, 2012 and December 31, 2011,

respectively
Common stock, $0.01 par value, 500,000,000
shares

 authorized, 134,837,497 and 96,044,383
shares                                       1,348               960

issued and outstanding at September 30,
2012 and

December 31, 2011, respectively
Additional paid-in capital                   1,018,610           809,826
Retained earnings (accumulated deficit)      (326,183)           (8,626)
Accumulated other comprehensive income       (24,563)            (36,160)
(loss)
 Total NorthStar Realty Finance Corp.
stockholders'                                1,052,434           1,007,372

 equity
Non-controlling interests                    16,220              32,242
Total equity                                 1,068,654           1,039,614
Total liabilities and equity                 $             $    
                                             5,011,760          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    Nine Months Ended
                                     September 30,         September 30,
                                     2012        2011      2012       2011
Funds from operations:
Income (loss) from                   $       $      $      $   
continuing operations                                  (257,515)  (177,526)
                                     (150,617)  (23,734)
Non-controlling                      645         658       1,185      (7,737)
interests^(1)
Net income (loss) before
non-controlling interest in          (149,972)   (23,076)  (256,330)  (185,263)
Operating Partnership
Adjustments:
Preferred stock dividends            (6,671)     (5,231)   (17,629)   (15,694)
Depreciation and                     10,423      12,762    32,581     32,370
amortization
Funds from discontinued              (23)        (16)      (82)       138
operations
Real estate depreciation and
amortization, unconsolidated         207         207       621        646
ventures
Funds from operations                (146,036)   (15,354)  (240,839)  (167,803)
Adjusted funds from
operations:
Funds from operations                (146,036)   (15,354)  (240,839)  (167,803)
Straight-line rental income,         (749)       (678)     (2,106)    (1,910)
net
Straight-line rental income/expense
and fair value lease revenue,        237         (32)      702        (84)
unconsolidated ventures
Amortization of above/below          (347)       (272)     (865)      (656)
market leases
Amortization of equity-based         2,891       2,204     10,049     6,851
compensation
Unrealized (gain) loss from          183,467     43,537    351,812    270,001
fair value adjustments
Gain from acquisitions               -           (81)      -          (81)
Adjusted funds from                  $       $      $      $    
operations                                            118,753  106,318
                                     39,463     29,324
FFO per share of common              $       $      $      $    
stock                                                       
                                     (1.04)     (0.15)   (1.90)     (1.84)
AFFO per share of common             $       $      $      $    
stock                                                      
                                     0.28        0.29    0.94       1.16
(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:

  onormalized 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;
  oan adjustment to reverse the effects of the straight‑lining of rental
    income or expense and fair value lease revenue;
  othe amortization or accrual of various deferred costs including intangible
    assets and equity-based compensation;
  oan adjustment to reverse the effects of acquisition gains or losses; and
  oan 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 U.S. GAAP financial
information included as part of the Company's Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q and quarterly earnings releases.

Assets Under Management at
September 30, 2012 ^(1)
($ in thousands)
                                 Amount                            %
CRE Debt
 First mortgage loans           $      1,644,207            23.2%
 Mezzanine loans                442,850                           6.2%
 Credit tenant and term loans   232,491                           3.3%
 Subordinate mortgage interests 131,062                           1.8%
 Other ^(2)                     324,012                           4.6%
Total CRE debt                   2,774,622                         39.1%
CRE Securities
 CMBS                          2,373,496                         33.4%
 Third-party CDO notes         225,959                           3.2%
 Other securities               148,905                           2.1%
Total CRE securities             2,748,360                         38.7%
Net Lease
 Core net lease                 404,532                           5.7%
 Healthcare net lease           562,476                           7.9%
Total net lease                 967,008                           13.6%
Subtotal NorthStar               6,489,990                         91.4%
Sponsored REIT
 NorthStar Income ^(3)          607,971                           8.6%
Grand total                      $      7,097,961            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 taking title to a property through
foreclosure, deed in lieu or otherwise ("taking title to a property") 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 taking title to a property.
(3) Based on consolidated total
assets.

 Investments
 2012 Year-to-Date through November 2, 2012
 ($ in millions)
 NorthStar Balance Sheet            Assets          Invested        Expected
 Investments                                        Equity         ROE ^(1)
 Repurchases of NorthStar CDO       $    326    $    159    20%+
 bonds
 CRE Loans                          227             94              18% (2)
 Opportunistic CRE                  93              89              16%+
 investments
 Total / weighted average           $    646     $    342     18%+
 Originated loans in 2012 -        $    308
 NorthStar non-traded REIT
 Total Loans                       $    535
 (1) Management provides no assurances that the weighted average life or cash
 flows of investments will be consistent with management's expectations or
 that the CDO bonds, originated loans or other investments, will payoff at
 par, if at all.
 Actual results could differ materially from
 those presented.
 (2) Reflects NorthStar's recently priced CMBS transaction.

 Balance Sheet Holdings of NorthStar CDO Bonds ^(1)
 At November 2, 2012
 ($ in thousands)
                                                        Principal
 Based on original credit rating:                       Amount ^(2)
 AAA                                                    $       178,279
 AA through BBB                                         434,792
 Below investment grade                                 191,790
 Total                                                  $       804,861
 Weighted average original credit rating of             A+ / A1
 repurchased CDO bonds
 Weighted average purchase price of repurchased CDO     37%
 bonds
 (1) Unencumbered CDO bonds are owned by NorthStar. The majority of CDO bonds
 are eliminated with
 the corresponding liability of the respective CDO on NorthStar's
 consolidated financial statements.
 (2) Represents the maximum amount of principal
 proceeds that could be received.



 CDOs primarily backed by CRE
 Debt
 ($ in thousands)
                        N-Star    N-Star    N-Star    CSE            CapLease
                        IV        VI        VIII
 Issue/Acquisition      Jun-05    Mar-06    Dec-06    Jul-10         Aug-11        Total
 Date
 Balance sheet as of
 September 30, 2012
 ^(1)
 Assets, principal      $        $        $       $             $            $ 
 amount                 381,411  469,276  965,278  1,021,838     167,893      3,005,696
 CDO bonds, principal   260,893   361,354   727,063   949,218        148,476       2,447,004
 amount ^(2)
 Net assets            $        $        $       $          $           $   
                        120,518  107,922  238,215  72,620         19,417       558,692
 CDO quarterly cash
 distributions and
 coverage tests ^(3)
 Equity notes and
 retained original      $      $      $      $          $         $    
 below investment       1,671      989    6,009   6,629         654         15,952
 grade bonds
 Collateral management  287       471       1,019     523            86            2,386
 fees
 Interest coverage      1,710     1,030     4,872     9,952          412
 cushion ^(1)
 Overcollateralization
 cushion (shortfall) ^  47,917    57,003    140,236   72,782         8,938
 (1)
       At offering    19,808    17,412    42,193    (151,595)  (4) 5,987     (5)
 (1) Based on remittance report issued on date
 nearest to September 30, 2012.
 (2) Includes all outstanding CDO bonds payable to
 third parties and all CDO bonds owned by NorthStar.
 (3) Interest coverage and overcollateralization
 coverage to the most constrained class.
 (4) Based on trustee report as of June 24, 2010,
 closest to the date of acquisition.
 (5) Based on trustee report as of August 31, 2011,
 closest to the date of acquisition.



CDOs primarily backed by CRE Securities
($ in thousands)
                       N-Star I  N-Star    N-Star    N-Star   N-Star   N-Star IX
                                 II        III       V        VII
Issue/Acquisition      Aug-03    Jul-04    Mar-05    Sep-05   Jun-06   Feb-07     Total
Date
Balance sheet as of
September 30, 2012
^(1)
Assets, principal      $        $        $        $       $       $         $ 
amount                 159,943  177,990  264,997  409,249  400,316  1,040,151  2,452,646
CDO bonds, principal   152,838   167,700   179,940   312,577  306,751  742,980    1,862,786
amount ^(2)
Net assets            $      $       $       $      $      $        $   
                       7,105    10,290   85,057   96,672   93,565   297,171   589,860
CDO quarterly cash
distributions and
coverage tests ^(3)
Equity notes and       $      $      $      $     $   
retained original                                  $      $    
below investment       -        -        -         -        -        2,568      2,568
grade bonds
Collateral management  60        62        88        91       82       776        1,159
fees
Interest coverage
cushion (shortfall)    NEG       1,043     429       NEG      NEG      2,972
^(1)
Overcollateralization
cushion (shortfall) ^  NEG       NEG       NEG       NEG      NEG      43,500
(1)
       At offering     8,687     10,944    13,610    12,940   13,966   24,516
(1) Based on remittance report
issued on date nearest to
September 30, 2012.
(2) Includes all outstanding CDO bonds payable to
third parties and all CDO bonds owned by NorthStar.
(3) Interest coverage and
overcollateralization coverage
to the most constrained class.



GAAP Book Value Rollforward
($ in thousands, except per share data)
                                                     Amount         Per Share
Common book value at June 30, 2012, per share        $         $6.13
                                                     856,672
Net income to common shareholders and
non-controlling

interest, excluding non-cash fair value             26,987         0.19
adjustments

included in net income (loss)
Fair value adjustments included in net income
(loss):
 CDO bonds payable                                 (193,721)      (1.39)
 Trust preferred debt                              (20,726)       (0.15)
 Securities                                       24,109         0.17
 Derivatives                                       6,871          0.05
Equity component of exchangeable senior notes        193            0.00
issued
Change in other comprehensive income                 1,743          0.01
Common dividends                                     (22,572)       (0.16)
Accretion (dilution) from additional shares issued   9,379          0.03
during quarter ^(1)
Total net increases/(decreases)                      (167,737)      (1.25)
Common book value at September 30, 2012, per         $         $4.88
share ^(2)(3)                                        688,935
Adjusted common book value at September 30,          $           $7.10
2012, per share ^(3)(4)                              1,002,104
(1) Includes amortization of LTIPs, issuance of common shares from Dividend
Reinvestment Plan and 1.25 million shares issued during the quarter in a
private offering.
(2) Common book value is calculated as total stockholder's equity of $1.1
billion and non-controlling interest in the operating partnership of $20
million less preferred stock of $383 million.
(3) U.S. GAAP book value per share and adjusted book value per share
calculations do 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 vehicles and NorthStar's CDO management fees and do
not take into account any potential dilution from certain restricted stock
units, exchangeable notes or warrants.
(4) Cumulative net unrealized and other adjustments total a positive $52
million ($0.37 per share), loan loss reserves total a negative $169 million
($1.20 per share) and accumulated depreciation and amortization total a
negative $196 million ($1.39 per share) as of September 30, 2012. Excluding
from GAAP book value these unrealized and other adjustments, loan loss
reserves and accumulated depreciation and amortization would result in a $7.10
adjusted book value per share at September 30, 2012.

 NRFC NNN Holdings, LLC Portfolio Summary
 ($ in thousands)
                                                Remaining                      Cost
                                                                               basis
 Date                                Square     Lease      Cost      Existing  less
          Tenant or                              Term    Basis
 Acquired Guarantor of Location/MSA  Feet       ^(1)       ^(2)      Debt      Debt
          Tenant
          ALGM         One property                                  $   
 Oct-2004 Portfolio -  in New York,  7,500      0.3        $              $   
          Sbarro, Inc. NY                                  3,246    -         3,246
          ^ (3)
          Alliance
 Nov-2007 Data Systems Columbus, OH  199,112    5.2        33,829    22,726    11,103
          Corp.
 Mar-2007 Citigroup,   Fort Mill,    165,000    8.1        34,303    29,614    4,689
          Inc.         SC/Charlotte
 Jun-2006 Covance,     Indianapolis, 333,600    13.3       34,519    27,126    7,393
          Inc.         IN
          Credence     Milpitas,
 Feb-2007 Systems      CA/San Jose   178,213    4.4        30,144    20,752    9,392
          Corp.
          Dick's
          Sporting                              3.3 -
 Sep-2006 Goods, Inc.  9 properties  467,971    11.9       64,503    46,081    18,422
          / PetSmart,
          Inc. ^ (3)
          Electronic   2 in MI / 1
 Sep-2005 Data Systems in CA / 1 in  387,842    3.0        62,718    44,793    17,925
          Corp.       PA
          GSA - U.S.
 Aug-2005 Department   Salt Lake     117,553    4.6        23,211    14,287    8,924
          of           City, UT
          Agriculture
          Landis
 Jun-2007 Logistics /  Reading, PA   609,000    3.6 - 5.3  26,223    18,148    8,075
          East Penn
          Northrop
          Grumman
 Jul-2006 Space &      Aurora,       183,529    2.7        42,400    31,830    10,570
          Mission      CO/Denver
          Systems
          Corp.
          Party City
          Corp.
 Mar-2006 (Amscan) /   Rockaway, NJ/ 121,038    2.7 - 4.8  22,221    16,442    5,779
          Lerner       Northern NJ
          Enterprises,
          Inc.
          Quantum      Colorado
 Feb-2006 Corporation  Springs, CO   406,207    0.2 - 8.4  27,215    17,356    9,859
          ^(4)
 Total NRFC NNN                                                      $       $ 
 Holdings, LLC                       3,176,565  5.9        $404,532  289,155  115,377
 Portfolio


(1) Remaining lease term as of September 30, 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) Dollar amounts shown are 50% of total relating to NRFC NNN Holding's, LLC
subsidiary's 50% interest in a joint venture with an institutional investor.



 Portfolio Cash Flow and Tenant Credit
 Profile

 ($ in thousands)
                Three Months Ended September 30, 2012  Primary Tenant
 Tenant or                                    NOI      Market   Actual
 Guarantor of   Base    NOI     Debt          Less     Cap      Credit
 Tenant         Rent            Service       Debt     ^(1)     Rating
                                              Service
 ALGM           $     $     $          $   
 Portfolio -                 -         254  N/A    not rated
 Sbarro, Inc.   254     254
 Alliance Data  582     576     (426)         150      7,465    not rated
 Systems Corp.
 Citigroup,     538     532     (512)         20       101,845  A- / A
 Inc.
 Covance, Inc.  638     632     (517)         115      2,702    not rated
 Credence
 Systems        701     695     (447)         248      312      not rated
 Corp.
 Dick's
 Sporting
 Goods, Inc. /  1,321   1,301   (972)         329      6,204    not rated ^(2)
 PetSmart,
 Inc.
 Electronic
 Data Systems   1,508   1,495   (824)         671      13,900   not rated
 Corp.
 GSA - U.S.                                                     implied
 Department of  648     429     (302)         127      N/A      AAA
 Agriculture
 Landis
 Logistics /    406     396     (332)    ^(3) 64       N/A      not rated
 East Penn
 Northrop
 Grumman Space  846     846     (617)         229      17,038   BBB+/Baa1
 & Mission
 Systems Corp.
 Party City
 Corp.
 (Amscan) /     468     468     (303)         165      362      B/B2      ^(4)
 Lerner
 Enterprises,
 Inc.
 Quantum
 Corporation   626     621     (326)         295      397      not rated
 (50%)
 Total          $     $     $            $  
                8,536  8,245  (5,578)      2,667
(1) Based on information from Bloomberg at close of market on September 30,
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) A portion of 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) 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, Section27A
of the Securities Act of 1933, as amended, or Securities Act, and Section21E
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; performance of our
investments relating to our expectations and the impact on our actual return
on equity; ability to source and close on attractive investment opportunities;
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; our ability to
realize the value of the bonds we have purchased and retained in our CDOs and
other securitization vehicles; our ability to access the securitization
market; 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-traded 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; compliance with the rules governing
REITs; performance of our own investments relative to our expectations and the
impact on our actual return on equity; whether NorthStar's recently priced
CMBS transaction closes on the terms anticipated, if at all, and the timing of
any such closing as well as whether the underlying loans are repaid at their
initial maturity; and the factors described in Item1A. of our Annual Report
on Form10-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 Form10-K
for the fiscal year ended December 31, 2011 beginning on page18. 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.

Website: http://www.nrfc.com
Contact: Investor Relations, Joe Calabrese, +1-212-827-3772
 
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