NorthStar Realty Finance Announces Fourth Quarter And Full Year 2012 Results

 NorthStar Realty Finance Announces Fourth Quarter And Full Year 2012 Results

PR Newswire

NEW YORK, Feb. 14, 2013

NEW YORK, Feb. 14, 2013 /PRNewswire/ --

Fourth Quarter 2012 Highlights

  oIncreased fourth quarter 2012 cash dividend to $0.18 per common share,
    representing an 80% increase over the last six quarters.
  oAFFO per share of $0.73.
  oAnnounced $390 million investment in real estate private equity fund
    interests, including $115 million from our non-traded REIT.
  oAcquired $326 million manufactured housing portfolio.
  oTotal capital raised of $146 million in the fourth quarter for our
    non-traded REIT.

Full Year 2012 Highlights

  oAFFO per share of $1.71.
  oCommitted to $1.3 billion of investments, including $691 million in the
    fourth quarter.
  o$351 million CMBS transaction collateralized by CRE first mortgages
    originated by NorthStar and its non-traded REIT.
  oRaised $443 million of capital in our non-traded REIT, bringing total
    capital raised to $600 million at December 31, 2012.

NorthStar Realty Finance Corp. (NYSE: NRF) today announced its results for the
fourth quarter and full year ended December 31, 2012.

Fourth Quarter 2012 Results

NorthStar reported adjusted funds from operations ("AFFO") for the fourth
quarter 2012 of $0.73 per share compared with $0.44 per share for the fourth
quarter 2011. AFFO for the fourth quarter 2012 was $105.5 million compared to
$43.6 million for the fourth quarter 2011. Net loss to common stockholders
for the fourth quarter 2012 was $(27.6) million, or $(0.20) per diluted share,
compared to a net loss of $(82.7) million, or $(0.85) per diluted share for
the fourth quarter 2011. Fourth quarter 2012 net loss includes $(117.5)
million of non-cash fair value adjustments, including a $106.9 million
increase in the value of our CDO bonds, compared to $(115.5) million of
non-cash fair value adjustments for the fourth quarter 2011. These non-cash
fair value adjustments are excluded from AFFO.

Full Year 2012 Results

NorthStar reported AFFO for the full year 2012 of $1.71 per share compared
with $1.60 per share for the full year 2011. AFFO for the full year 2012 was
$224.2 million compared to $149.4 million for the full year 2011. Net loss to
common stockholders for the full year 2012 was $(288.6) million, or $(2.31)
per diluted share, compared to a net loss of $(263.0) million, or $(2.94) per
diluted share for the full year 2011. Full year 2012 net loss includes
$(469.3) million of non-cash fair value adjustments, including a $510.1
million increase in the value of our CDO bonds, compared to $(385.5) million
of non-cash fair value adjustments for the full year 2011. These non-cash
fair valueadjustments are excluded from AFFO. 

David T. Hamamoto, chairman and chief executive officer, commented "2012 was a
transformative year for NorthStar. We committed to $1.3 billion of highly
accretive and diverse investments across the commercial real estate landscape,
which allowed us to substantially increase our cash flow and increase our
dividend each quarter of 2012. The cash available for distribution that we
expect to earn in 2013 represents a sizable cushion to our current dividend
and we will continue to evaluate our distribution policy on a quarterly basis,
balancing distributions with retaining cash flow for accretive investments.
As we begin 2013, our pipeline of compelling investment opportunities has
never been stronger and we are very excited about our prospects for 2013."

Mr. Hamamoto continued, "Our asset management business gained significant
traction in 2012 and we expect this business to continue to grow as we enter
the market with additional vehicles in 2013. Based on our expectation of
capital raising for our non-traded REITs in 2013, we anticipate earning over
$40 million of net fees from our asset management business in 2013. Because
we are an internally managed REIT, our shareholders are the direct
beneficiaries of this long-term, highly valuable and growing fee stream."

Investments

During the fourth quarter, NorthStar committed $390 million to subscribe for
Class A limited partnership interests in one or more newly formed limited
partnerships (collectively, the "Partnership"). The Partnership will acquire
limited partnership interests in approximately 50 real estate private equity
funds managed by top institutional-quality sponsors. This investment is
expected to be funded with $275 million from NorthStar and $115 million from
NorthStar's sponsored non-traded REIT, NorthStar Real Estate Income Trust,
Inc. ("NorthStar Income I"). NorthStar expects the first closing of this
investment in February 2013, at which time the full amount of the investment
would be funded. The Partnership is entitled to all distributions of capital
after June 30, 2012 from the private equity funds underlying this investment
irrespective of when this investment may close. The closing of each fund is
subject to customary closing conditions.

During the fourth quarter, NorthStar acquired a $326 million portfolio of 36
manufactured housing communities containing 6,296 pad rental sites and 604
manufactured homes located across those sites. NorthStar financed the
transaction with a $237 million non-recourse, 10-year mortgage with an
interest rate of 4.38%. NorthStar expects to earn an initial current yield of
15% on its $81 million of equity in this investment. 

During the fourth quarter, NorthStar invested $15 million of equity in two
commercial real estate loans with a $38 million aggregate principal balance.
During 2012, NorthStar invested $109 million of equity in 12 commercial real
estate loans with a $265 million aggregate principal balance and expects to
earn a weighted average return on this invested equity of 18%, including $8
million of facility financing that closed subsequent to year end.

The principal proceeds NorthStar could receive from CDO bonds acquired during
the fourth quarter is $40 million, which were purchased for $26 million with a
weighted average original credit rating of AA/Aa2. The principal proceeds
NorthStar could receive from CDO bonds acquired during 2012 is $326 million,
which were purchased for $159 million with a weighted average original credit
rating of AA-/Aa3 and have an expected yield-to-maturity of over 20%.

As of December 31, 2012, the principal proceeds NorthStar could receive from
its owned CDO bonds is $708 million, of which $558 million was repurchased at
an average price of 32% in the secondary market and has a weighted average
original credit rating of A+/A1. The discount to par of $379 million
represents potential imbedded cash flows that we may realize in future periods
in addition to our capital invested in these bonds. 

NorthStar had approximately $7.4 billion of assets under management at
December 31, 2012.

For additional details regarding NorthStar's investments, please refer to the
tables on the following pages and to the corporate presentation which will be
posted on NorthStar's website, www.nrfc.com, following close of business on
February 15, 2013.

Asset Management Business

During the fourth quarter 2012, NorthStar received management fees from its
consolidated CDOs of $3.3 million, which are eliminated on NorthStar's
consolidated statement of operations. In addition, during the fourth quarter
2012, NorthStar received $3.2 million of fees from NorthStar Income I.

NorthStar Income I raised $146 million in the fourth quarter 2012 and $600
million of total capital as of December 31, 2012, through NorthStar Realty
Securities, LLC, NorthStar's wholly-owned broker-dealer. NorthStar Realty
Securities, LLC currently has total signed selling agreements with
broker-dealers covering more than 65,000 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. NorthStar Healthcare Income, Inc. began signing selling agreements and
subsequent to the fourth quarter broke escrow and anticipates raising capital
shortly.

During the fourth quarter, we, through our wholly-owned subsidiary, originated
four loans on behalf of NorthStar Income I with a $167 million aggregate
principal balance. In 2012, we originated 15 loans on behalf of NorthStar
Income I with a $475 million aggregate principal balance.

Liquidity, Financing and Capital Markets Highlights

Unrestricted cash as of December 31, 2012 totaled approximately $445 million.
Unrestricted cash after the $275 million commitment to the Partnership (net of
$40 million deposited in connection with the Partnership prior to December 31,
2012) would be $210 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.

In December 2012, NorthStar sold 28.75 million shares of its common stock at a
public offering price of $6.40 per share, generating net proceeds of $177
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.

Portfolio Management

At December 31, 2012, NorthStar had one loan on non-performing status ("NPL"),
which had a $13 million aggregate principal amount and a $7 million carrying
value. This compares to three loans with a $25 million aggregate principal
amount and a $4 million carrying value at September 30, 2012. NorthStar
categorizes a loan as a NPL if it is in maturity default and/or is past due 90
days on its contractual debt service payments.

During the fourth quarter 2012, NorthStar recorded $3.3 million of net
provision for loan losses, compared to $6.4 million of net provision for loan
losses during the third quarter 2012. As of December 31, 2012, loan loss
reserves totaled $157 million, or 7% of total loans, related to 13 loans with
a carrying value of $223million.

As of December 31, 2012, NorthStar's net lease portfolio was 94% leased with a
5.7 year weighted average remaining lease term. As of December 31, 2012,
NorthStar's healthcare portfolio that was leased to third-party operators was
100% leased with weighted average lease coverage of 1.3x and a 6.9 year
weighted average remaining lease term. As of December 31, 2012, NorthStar's
manufactured housing portfolio was 86% leased.

Stockholders' Equity

At December 31, 2012, NorthStar had 169,835,986 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 $4.82 at December 31, 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 December 31, 2012 would be $6.75 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. NorthStar expects over $40 million ofnet asset management fees in
2013. 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 February 13, 2013, NorthStar announced that its Board of Directors declared
a cash dividend of $0.18 per share of common stock, payable with respect to
the quarter ended December 31, 2012. The dividend is expected to be paid on
March 1, 2013 to shareholders of record as of the close of business on
February 25, 2013. The Company's common shares will begin trading ex-dividend
on February 21, 2013.

Earnings Conference Call

NorthStar will hold a conference call to discuss fourth quarter 2012 financial
results on February 14, 2013, at 10:00 a.m. Eastern time. Hosting the call
will be David Hamamoto, chairman and chief executive officer; Albert Tylis,
president; Daniel Gilbert, chief investment and operating officer; and Debra
Hess, chief financial officer.

The call will be webcast live over the Internet from NorthStar's website,
www.nrfc.com, and will be archived on the Company's website. The call can
also be accessed live over the phone by dialing 877-941-8609, or for
international callers, by dialing 480-629-9771.

A replay of the call will be available one hour after the call through
Thursday, February 21, 2013 by dialing 800-406-7325  or, for international
callers, 303-590-3030, using pass code 4590712.

About NorthStar Realty Finance Corp.

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



NorthStar Realty
Finance Corp.
Consolidated
Statements of           Three Months Ended           Years Ended
Operations
($ in thousands,
except share and per    December 31,                  December 31,
share data)
                        2012           2011           2012          2011
                        (Unaudited)    (Unaudited)    (Unaudited)
Net interest income
Interest income         $           $            $           $ 
                        142,686        90,570        386,053      401,201
Interest expense on     11,988         13,036         50,557        45,280
debt and securities
Net interest income
on debt and             130,698        77,534         335,496       355,921
securities
Other revenues
Rental and escalation   31,308         26,818         116,614       112,697
income
Commission income       14,094         6,249          42,385        12,024
Advisory and other      3,150          1,277          7,916         959
fees - related party
Other revenue           276            -              2,272         925
 Total other         48,828         34,344         169,187       126,605
revenues
Expenses
Other interest          24,154         21,683         91,470        96,940
expense
Real estate
properties –            4,896          3,912          18,545        22,611
operating expenses
Asset management        2,884          1,438          6,714         8,824
expenses
Commission expense      12,968         5,647          38,506        10,764
Other costs, net        2,179          -              2,571         -
Impairment on           966            -              966           -
operating real estate
Provision for loan      3,300          4,940          23,037        52,980
losses, net
Provision for loss on   -              -              -             4,482
equity investment
General and
administrative
Salaries and
equity-based            20,549         22,931         62,313        66,183
compensation ^(1)
Other general and       2,845          6,096          19,787        24,882
administrative
 Total general and   23,394         29,027         82,100        91,065
administrative
Depreciation and        12,392         11,888         48,836        44,258
amortization
 Total expenses      87,133         78,535         312,745       331,924
Income (loss) from      92,393         33,343         191,938       150,602
operations
Equity in earnings
(losses) of             504            1,649          88            (2,738)
unconsolidated
ventures
Other income (loss)     -              5,850          20,258        4,162
Unrealized gain
(loss) on investments   (135,204)      (138,633)      (548,277)     (489,904)
and other
Realized gain (loss)
on investments and      24,717         16,845         60,485        78,782
other
Gain from               -              8              -             89
acquisitions
Income (loss) from      (17,590)       (80,938)       (275,508)     (259,007)
continuing operations
Income (loss) from
discontinued            24             (606)          340           (717)
operations
Gain (loss) on sale
from discontinued       1,765          (130)          2,079         17,198
operations
Net income (loss)       (15,801)       (81,674)       (273,089)     (242,526)
 Less: net
(income) loss
allocated to            (2,384)        4,222          11,527        5,615
non-controlling
interests
Preferred stock         (9,396)        (5,231)        (27,025)      (20,925)
dividends
Contingently
redeemable              -              -              -             (5,178)
non-controlling
interest accretion
Net income (loss)
attributable to         $           $            $            $ 
NorthStar Realty        (27,581)       (82,683)       (288,587)    (263,014)
Finance Corp. common
stockholders
Net income (loss) per
share from continuing   $         $          $         $    
operations              (0.21)         (0.85)         (2.32)       (3.12)
(basic/diluted)
Income (loss) per
share from
discontinued            -              -              -             (0.01)
operations
(basic/diluted)
Gain per share on
sale of discontinued    0.01           -              0.01          0.19
operations
(basic/diluted)
Net income (loss) per
common share
attributable to         $         $          $         $    
NorthStar Realty        (0.20)         (0.85)         (2.31)       (2.94)
Finance Corp. common
stockholders
(basic/diluted)
Weighted average
number of shares of
common stock:
Basic                   139,218,177    96,006,344     125,198,517   89,348,670
Diluted                 145,455,938    100,244,453    131,224,199   93,627,456
(1) The three months ended December 31, 2012 and 2011 include $2.8 million and
$4.8 million, respectively, of equity‑based compensation expense. The twelve
months ended December 31, 2012 and 2011 include $12.8 million and $11.7
million, respectively, of equity‑based compensation expense.



NorthStar Realty Finance Corp.
Consolidated Balance Sheets
($ in thousands, except share data)
                                                    December 31,
                                                    2012          2011
                                                    (Unaudited)
Assets
Cash and cash equivalents                           $  444,927  $  144,508
Restricted cash                                     360,075       298,364
Operating real estate, net                          1,401,658     1,089,449
Real estate securities, available for sale          1,124,668     1,473,305
Real estate debt investments, net                   1,832,231     1,710,582
Investments in and advances to unconsolidated       111,025       96,143
ventures
Receivables, net of allowance of $1,526 in 2012     28,413        31,488
and $1,179 in 2011
Receivables, related parties                        23,706        5,979
Unbilled rent receivable                            16,129        11,891
Derivative assets, at fair value                    6,229         5,735
Deferred costs and intangible assets, net           97,700        98,384
Assets of properties held for sale                  1,595         3,198
Other assets                                        65,422        37,411
Total assets^(1)                                    $ 5,513,778   $ 5,006,437
Liabilities
CDO bonds payable                                  $ 2,112,441   $ 2,273,907
Mortgage notes payable                              1,015,670     783,257
CMBS bonds payable                                  98,005        -
Secured term loan                                   14,664        14,682
Credit facilities                                   61,088        64,259
Exchangeable senior notes                           291,031       215,853
Junior subordinated notes, at fair value            197,173       157,168
Accounts payable and accrued expenses               45,895        66,622
Escrow deposits payable                             90,032        52,856
Derivative liabilities, at fair value               170,840       234,674
Other liabilities                                   86,075        103,545
Total liabilities^(2)                               4,182,914     3,966,823
Commitments and contingencies
Equity
NorthStar Realty Finance Corp. Stockholders'
Equity
Preferred stock, $536,640 and $250,000 aggregate
liquidation preference as of
December 31, 2012 and 2011, respectively            504,018       241,372
Common stock, $0.01 par value, 500,000,000 shares
authorized, 163,607,259 and
96,044,383 shares issued and outstanding as of      1,636         960
December 31, 2012 and 2011, respectively
Additional paid-in capital                          1,195,131     809,826
Retained earnings (accumulated deficit)             (376,685)     (8,626)
Accumulated other comprehensive income (loss)       (22,179)      (36,160)
 Total NorthStar Realty Finance Corp.           1,301,921     1,007,372
stockholders' equity
Non-controlling interests                           28,943        32,242
Total equity                                        1,330,864     1,039,614
Total liabilities and equity                        $ 5,513,778   $ 5,006,437
^(1) Assets of consolidated VIEs included in the
total assets above:
Restricted cash                                     $  320,815  $  261,295
Operating real estate, net                          342,461       313,227
Real estate securities, available for sale          1,015,972     1,358,282
Real estate debt investments, net                  1,478,503     1,631,856
Investments in and advances to unconsolidated       59,939        62,938
ventures
Receivables, net of allowance                      16,609        22,530
Derivative assets, at fair value                   -             61
Deferred costs and intangible assets, net           37,753        47,499
Assets of properties held for sale                 1,595         3,198
Other assets                                       14,814        20,549
Total assets of consolidated VIEs                   $ 3,288,461   $ 3,721,435
^(2) Liabilities of consolidated VIEs included in
the total liabilities above:
CDO bonds payable                                  $ 2,112,441   $ 2,273,907
Mortgage notes payable                              228,446       228,525
Secured term loan                                   14,664        14,682
Accounts payable and accrued expenses              13,626        15,754
Escrow deposits payable                            67,406        52,660
Derivative liabilities, at fair value              170,840       226,481
Other liabilities                                  25,144        55,007
Total liabilities of consolidated VIEs              $ 2,632,567   $ 2,867,016



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)                            Three Months Ended   Year Ended
($ in thousands, except per
share data)
                                  December 31,          December 31,
                                  2012       2011       2012         2011
Funds from operations:
Income (loss) from continuing     $       $        $           $ 
operations                       (17,590)   (80,938)   (275,508)   (259,007)
Non-controlling interests^(1)     (3,620)    572        (2,435)      (7,165)
Net income (loss) before
non-controlling interest in       (21,210)   (80,366)   (277,943)    (266,172)
Operating Partnership
Adjustments:
Preferred stock dividends         (9,396)    (5,231)    (27,025)     (20,925)
Impairment on operating real      966        -          966          -
estate
Depreciation and amortization     16,133     8,786      48,440       41,156
Funds from discontinued           115        (96)       711          74
operations
Real estate depreciation and
amortization, unconsolidated      205        207        826          853
ventures

Funds from Operations             (13,187)   (76,700)   (254,025)    (245,014)
Adjusted funds from operations:
Funds from operations             (13,187)   (76,700)   (254,025)    (245,014)
Straight-line rental income, net  (1,230)    (852)      (3,336)      (2,762)
Straight-line rental
income/expense and amortization   216        1,014      918          930
of above/below market leases,
unconsolidated ventures
Amortization of above/below       (533)      (235)      (1,398)      (891)
market leases
Amortization of equity-based      2,768      4,831      12,817       11,682
compensation
Unrealized (gain) loss from fair  117,458    115,512    469,270      385,513
value adjustments
Gain from acquisitions            -          (8)        -            (89)
Adjusted Funds from Operations    $       $        $          $ 
                                  105,492    43,562    224,246     149,369
FFO per share of common stock     $      $      $        $    
                                   (0.09)   (0.76)     (1.94)      (2.62)
AFFO per share of common stock    $      $      $       $    
^(2)                                0.73   0.44      1.71        1.60
(1) Amount excludes non-controlling limited partner interest in NorthStar's
operating partnership.
(2) AFFO per share does not take into account any potential dilution from
certain restricted stock units, exchangeable notes or warrants.

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
December 31, 2012 ^(1)
($ in thousands)
                                  Amount                            %
CRE Debt
First mortgage loans              $      1,578,872            21.3%
Mezzanine loans                   440,941                           6.0%
Credit tenant and term loans      230,178                           3.1%
Subordinate mortgage interests    121,473                           1.6%
Other ^(2)                        336,893                           4.6%
Total CRE debt                    2,708,357                         36.6%
Real Estate
Net lease                         401,286                           5.4%
Healthcare                        572,370                           7.7%
Other real estate ^(3)            326,028                           4.4%
Total real estate                 1,299,684                         17.5%
Asset Management
NorthStar Income I ^(4)           854,516                           11.5%
CRE Securities
CMBS                             2,207,067                         29.9%
Third-party CDO notes            197,103                           2.7%
Other securities                  134,905                           1.8%
Total CRE securities              2,539,075                         34.4%
Grand total                       $      7,401,632            100.0%
(1) Based on principal amount of CRE debt and security investments and the
cost basis of our real estate.
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) Relates to an investment in manufactured housing communities including
$284 million of pad rental sites, $13 million ofmanufactured homes and $29
million of intangible and other assets.
(4) Based on consolidated total
assets.



Investments
2012
($ in millions)
NorthStar Balance Sheet      Assets        Invested        Expected ROE
Investments                                Equity         ^(1)
Opportunistic CRE            $         $    362    17%+
investments ^(2)             362
Opportunistic CDO bond       326           159             20%+
repurchases
Real estate portfolio        332           84              15%+
CRE loans                    265           109             18%           ^(3)
Total / weighted             $   1,285   $    714     18%+
average
Originated loans in          $    
2012 - NorthStar            475
non-traded REIT
Total Loans                 $    740
(1) Management provides no assurances that the weighted average life or cash
flows of investments will be consistent withmanagement'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) Includes $275 million investment in real estate private equity fund
interests which is expected to close in February 2013.
(3) Reflects $8 million of credit
facility financing obtained in January
2013.



Balance Sheet Holdings of NorthStar CDO Bonds ^(1)
At December 31, 2012
($ in thousands)
                                                       Principal
Based on original credit rating:                       Amount ^(2)
AAA                                                    $       129,005
AA through BBB                                         386,917
Below investment grade                                 191,790
Total                                                  $      707,712
Weighted average original credit rating of             A+ / A1
repurchased CDO bonds
Weighted average purchase price of repurchased CDO     32%
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. There is no assurance
 NorthStar will receive the maximum amount of
principal proceeds.



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
December 31, 2012
^(1)
Assets, principal      $        $        $       $           $             $ 
amount                 359,529  459,309  938,171  993,252        165,619       2,915,880
CDO bonds, principal   239,103   357,573   718,867   920,631        146,241        2,382,415
amount ^(2)
Net assets            $        $        $       $          $            $   
                       120,426  101,736  219,304  72,621         19,378        533,465
CDO quarterly cash
distributions and
coverage tests^(3)
Equity notes and
retained original      $      $      $      $          $          $    
below investment       1,747      773    4,553   8,412         684          16,169
grade bonds
Collateral management  283       469       984       378            85             2,199
fees
Interest coverage      1,861     944       3,102     7,680          412
cushion ^(1)
Overcollateralization
cushion (shortfall)    48,552    57,931    131,339   74,211         9,009
^(1)
At           19,808    17,412    42,193    (151,595) ^(4) 5,987     ^(5)
offering
(1)               Based on remittance report issued on date
                  nearest to December 31, 2012.
                  Includes all outstanding CDO bonds payable
(2)               to third parties and all CDO bonds owned by
                  NorthStar.
(3)               Interest coverage and overcollateralization
                  coverage to the most constrained class.
                  Based on trustee report as of June
(4)               24, 2010, closest to the date of
                  acquisition.
                  Based on trustee report as of
(5)               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
December 31, 2012
^(1)
Assets, principal      $        $        $        $       $       $         $ 
amount                 133,795  164,320  242,790  366,016  342,338  1,036,652  2,285,911
CDO bonds, principal   131,048   153,332   160,316   300,889  284,391  737,697    1,767,673
amount ^(2)
Net assets            $      $       $       $      $      $        $   
                       2,747    10,988   82,474   65,127   57,947   298,955   518,238
CDO quarterly cash
distributions and
coverage tests^(3)
Equity notes and       $      $      $      $     $   
retained original                                  $      $    
below investment       -        -        -         -        -        3,170      3,170
grade bonds
Collateral management  53        56        74        $     $     $      1,115
fees                                                   75    69    788
Interest coverage
cushion (shortfall)    NEG       737       NEG       NEG      NEG      2,572
^(1)
Overcollateralization
cushion                NEG       NEG       NEG       NEG      NEG      18,749
(shortfall)^(1)

                       8,687     10,944    13,610    12,940   13,966   24,516
At offering
(1) Based on remittance report issued on date
nearest to December 31, 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 September 30,                    $          $4.88
2012, per share                                       688,935
Net income to common shareholders before
non-controlling interest in Operating Partnership,
 excluding non-cash fair value
adjustments included in net income                    88,642          0.63
(loss)
Fair value adjustments included in
net income (loss):
 CDO bonds payable                                  (106,909)       (0.76)
 Trust preferred debt                               (15,073)        (0.11)
 Securities                                        (13,054)        (0.09)
 Derivatives                                        17,578          0.12
Change in other comprehensive income                  2,491           0.02
Common dividends                                      (23,981)        (0.17)
Accretion (dilution) from additional shares issued    179,188         0.30
during quarter ^(1)
Total net increases/(decreases)                       128,882         (0.06)
Common book value at December 31,                     $          $4.82
2012, per share ^(2)(3)                               817,817
Adjusted common book value at                         $   
December 31, 2012, per share                          1,145,605      $6.75
^(3)(4)
2013 expected net asset management     $
fees                                   40,000+
                     Includes December common stock offering, amortization of
(1)                  LTIPs and issuance of common shares from Dividend
                     Reinvestment Plan.
                     Common book value is calculated as total stockholder's
(2)                  equity of $1.3 billion and non-controlling interest in
                     the operating partnership of $20 million less preferred
                     stock of $504 million.
                     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
(3)                  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.
                     Cumulative net unrealized and other adjustments total a
(4)                  positive $33 million ($0.19 per share), loan loss
                     reserves total a negative $157 million ($0.92 per share)
                     and accumulated depreciation and amortization total a
                     negative $204 million ($1.20 per share) as of December
                     31, 2012. Excluding from GAAP book value these
                     unrealized and other adjustments, loan loss reserves and
                     accumulated depreciation and amortization would result in
                     adjusted book value of $6.75 per share at December 31,
                     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
         Alliance                                         $       $      $  
Nov-2007 Data Systems Columbus, OH  199,112    4.9        33,829   22,643   11,186
         Corp.
Mar-2007 Citigroup,   Fort Mill,    165,000    7.8        34,303    29,526    4,777
         Inc.         SC/Charlotte
Jun-2006 Covance,     Indianapolis, 333,600    13.0       34,519    27,023    7,496
         Inc.         IN
         Credence     Milpitas,
Feb-2007 Systems      CA/San Jose   178,213    4.2        30,144    20,616    9,528
         Corp.
         Dick's
         Sporting                              3.1 -
Sep-2006 Goods, Inc.  9 properties  467,971    11.7       64,503    45,823    18,680
         / PetSmart,
         Inc.^(3)
         Electronic   2 in MI / 1
Sep-2005 Data Systems in CA / 1 in  387,842    2.7        62,718    44,576    18,142
         Corp.       PA
         GSA - U.S.
Aug-2005 Department   Salt Lake     117,553    4.3        23,211    14,132    9,079
         of           City, UT
         Agriculture
         Landis
Jun-2007 Logistics /  Reading, PA   609,000    3.4 - 5.0  26,223    18,074    8,149
         East Penn
         Northrop
         Grumman
Jul-2006 Space &      Aurora,       183,529    2.5        42,400    31,713    10,687
         Mission      CO/Denver
         Systems
         Corp.
         Party City
         Corp.
Mar-2006 (Amscan) /   Rockaway, NJ/ 121,038    2.4 - 4.6  22,221    16,374    5,847
         Lerner       Northern NJ
         Enterprises,
         Inc.
         Quantum      Colorado
Feb-2006 Corporation  Springs, CO   406,207    0.2 - 8.2  27,215    17,281    9,934
         ^(4)
Total NRFC NNN                                            $        $       $ 
Holdings, LLC                       3,169,065  5.7        401,286  287,781  113,505
Portfolio
(1) Remaining lease term as of December 31, 2012. Total represents weighted average
based on cost basis.
(2) Cost basis includes capitalized expenditures since acquisition.
(3) 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           Three Months Ended December 31, 2012  Primary Tenant
thousands)
Tenant or       Base             Debt       NOI Less  Market    Actual
Guarantor of    Rent      NOI    Service    Debt      Cap ^(1)  Credit
Tenant                                      Service             Rating
Alliance Data   $      $    $      $   
Systems Corp.                (459)         7,488     not rated
                599        592             133
Citigroup,      538       532    (516)      16        120,791   A- / A
Inc.
Covance, Inc.   638       633    (522)      111       3,201     not rated
Credence        701       695    (450)      245       312       not rated
Systems Corp.
Dick's
Sporting        1,321     1,288  (990)      298       5,616     not rated ^(2)
Goods, Inc. /
PetSmart, Inc.
Electronic
Data Systems    1,508     1,499  (831)      668       13,900    not rated
Corp.
GSA - U.S.                                                      implied
Department of   648       424    (342)      82        N/A       AAA
Agriculture
Landis
Logistics /     409       343    (332)      11        N/A       not rated
East Penn
Northrop
Grumman Space   873       873    (622)      251       16,766    BBB+/Baa1
& Mission
Systems Corp.
Party City
Corp. (Amscan)
/ Lerner        468       459    (306)      153       362       B/B2      ^(3)
Enterprises,
Inc.
Quantum
Corporation    584       577    (321)      256       318       not rated
(50%)
                $      $    $       $   
Total           8,287         (5,691)    2,224
                          7,915
(1) Based on information from Bloomberg at close of market on December
31, 2012 and presented in millions.

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

(3) 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," "hypothetical," "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, the fees earned from our asset management
business, our financing needs, the anticipated funding of our investment in
the Partnership, the effects of our current strategies, loan and securities
activities, our ability to manage our collateralized debt obligations, or
CDOs, our ability to earn sufficient cash to cover our payout ratio and our
non-traded real estate investment trusts, or REITs', 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; our
ability to source and close on attractive investment opportunities;
performance of our investments relative 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 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 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/operator
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, and effectively implement the business plan of, the non-traded
REITs we sponsor or advise; the fee stream we will receive from our non-traded
REITs and the valuation thereof; 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;
whether NorthStar's investment in real estate private equity fund interests
closes on the terms anticipated, if at all; 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 and otherwise described in our filings
with United States Securities and Exchange Commission; 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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