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Colony Financial Announces Fourth Quarter and Full Year 2012 Financial Results



  Colony Financial Announces Fourth Quarter and Full Year 2012 Financial
  Results

Business Wire

LOS ANGELES -- March 6, 2013

Colony Financial, Inc. (NYSE: CLNY) (the “Company”) today announced financial
results for the fourth quarter and full year ended December 31, 2012.

Fourth Quarter 2012 Highlights

  * Core Earnings, a non-GAAP financial measure, of $18.0 million, or $0.41
    per basic and diluted share and net income attributable to common
    stockholders of $13.5 million, or $0.31 per basic and diluted share
  * During the quarter, the Company invested approximately $243 million,
    composed of $105 million additional equity into CSFR Operating
    Partnership, L.P. (“CSFR”), our single family home rental platform, $52
    million into two loan originations with a blended interest rate of 10% and
    $86 million into four separate transactions involving the discounted
    purchase of performing and non-performing first mortgage loans or loan
    portfolios at an average price of 61% of par
  * Raised net proceeds of approximately $221 million through the sale of 11.5
    million shares of the Company’s common stock to underwriters at a net
    price of $19.29 per share
  * Declared and paid a fourth quarter dividend of $0.35 per share of common
    stock, consistent with the third quarter, and a special dividend for 2012
    of $0.05 per common share
  * The plan of reorganization for the 103 property Hotel Portfolio was
    approved by a bankruptcy court accomplishing a number of matters,
    including a restructuring of the mortgage loan, a change in hotel
    management, a sale of a minority equity interest, and a re-flagging of the
    hotels with various nationally recognized brands
  * Subsequent to quarter end, the Company invested and agreed to invest
    approximately $481 million, composed of an additional $295 million into
    CSFR (for an aggregate investment and commitment of $550 million into
    CSFR), $23 million into a loan acquisition at a purchase price of 78% of
    par and $163 million into three new first mortgage originations that have
    a blended interest rate of approximately 9%
  * Subsequent to quarter end, the Company raised additional net proceeds of
    $232 million through the sale of 11.5 million shares of its common stock
    to underwriters at a net price of $20.20 per share

Fourth Quarter Operating Results

For the fourth quarter of 2012, equity in income of unconsolidated joint
ventures and interest income and other income from affiliates contributed
$21.5 million and $11.2 million, respectively, to total income of $32.7
million. Total expenses for the quarter were $11.4 million including
administrative expenses of $1.6 million. During the fourth quarter of 2012,
the Company reported net income attributable to common stockholders of $13.5
million, or $0.31 per basic and diluted share. Colony Financial’s Core
Earnings were $18.0 million, or $0.41 per basic and diluted share, for the
fourth quarter of 2012.

“2012 was a breakthrough year for Colony Financial,” said Richard Saltzman,
Colony Financial’s President and Chief Executive Officer. “The Company doubled
in size from an aggregate asset and equity capitalization standpoint since
year end 2011 and is now more than five times our size at IPO in September
2009. Simultaneously, our three primary investment strategies were operating
on all cylinders in terms of new acquisitions and ‘day 2’ asset management
successes. This most notably includes our recent foray into the acquisition of
single family houses for rent in select major US markets where we now own an
interest in approximately 7,000 homes. Finally, our pipeline of new potential
transactions is extremely robust, including some burgeoning European
opportunities, which bodes well for sustaining this trajectory in 2013 and
beyond.”

Fourth Quarter Activity

  * The Company increased its investment to $255 million (up from $150 million
    invested through the third quarter) in CSFR. At December 31, 2012, CSFR
    owned approximately 5,400 homes in six states and as of March 6, 2013,
    CSFR owned approximately 7,000 homes in seven states.
  * The Company invested $19 million in a joint venture with investment funds
    managed by an affiliate of the Company’s Manager (“Co-Investment Fund(s)”)
    that acquired a portfolio of 60 performing and non-performing first
    mortgage recourse loans at the purchase price of approximately 53% of the
    portfolio’s unpaid principal balance (“UPB”) of $69 million. Our share of
    this investment is 50%.
  * The Company invested $35 million in a joint venture with Co-Investment
    Funds that acquired a portfolio of first mortgage loans collateralized
    primarily by multifamily properties which are substantially concentrated
    in California and New York. The portfolio included 79 performing and
    non-performing loans with an aggregate UPB of approximately $95 million.
    The purchase price for the portfolio was approximately $69 million, or 73%
    of the portfolio’s UPB. The Company’s share of this investment is 50%.
  * The Company invested $16 million in a joint venture with Co-Investment
    Funds that acquired a sub-performing first mortgage loan secured by an
    office tower in Phoenix, Arizona. The purchase price for the loan was
    approximately $32 million, or 59% of its UPB of $54 million. Our share of
    this investment is 50%.
  * The Company invested $16 million in a joint venture with Co-Investment
    Funds that consummated a structured transaction with the FDIC. The joint
    venture acquired a 40% managing member equity interest in a newly formed
    limited liability company created to hold a portfolio of acquired loans,
    with the FDIC retaining the other 60% equity interest. The financing of
    the transaction included 50% leverage in the form of a $72 million
    zero-coupon note provided by the FDIC. The portfolio included 492
    performing and non-performing loans with an aggregate UPB of $289 million,
    consisting of substantially all first mortgage recourse commercial real
    estate and acquisition, development and construction loans. The portfolio
    was acquired at approximately 48% of the portfolio's UPB.
  * The Company committed $14 million to a joint venture with a Co-Investment
    Fund that originated a $28 million loan facility secured by a
    master-planned housing development located in Orange County, California.
    The loan bears interest at 10% per annum. The loan includes a 50% profit
    participation after the lenders and the equity sponsor have each attained
    a 14% annual return. Through December 31, 2012, the Company funded $8
    million to the joint venture. The Company’s share of this investment is
    50%.
  * During the quarter, Extended Stay Hotels Inc. (“Extended Stay”), the
    borrower on the $37.5 million junior mezzanine loan originated in October
    2010, fully paid off the outstanding loan through a refinancing. Extended
    Stay is a hotel chain owning properties across the United States and in
    Canada. The Company used the proceeds from the pay-off to reinvest in the
    two most junior mezzanine loan tranches of the new debt facility. The two
    new mezzanine loans bear interest at a blended 10.5% per annum through
    their maturity in December 2019 and are collateralized by equity interests
    in Extended Stay’s real estate portfolio, as well as the Extended Stay
    brands and other intangible assets.
  * By means of an initial fulcrum mezzanine loan purchase and subsequent
    January 2012 foreclosure, the Company and a Co-Investment fund currently
    own equity interests and a mezzanine loan interest in a portfolio of 103
    select service hotels (the “Hotel Portfolio”). Our cost basis in the
    portfolio is approximately $35,000 per key. In December, a plan of
    reorganization was approved by a bankruptcy court accomplishing a number
    of matters, including an extension of the mortgage loan which carries an
    interest rate of LIBOR plus 110 basis points, a change in hotel
    management, a sale of a minority equity interest to the new management
    company, and a re-flagging of the hotels with various nationally
    recognized brands. To date, the Company and the borrower entities have
    incurred approximately $10.7 million of various costs related to the
    foreclosure, bankruptcy and restructuring plans, of which, $8.4 million
    was recovered in a damages settlement. The Company’s share of the net
    costs post settlement was $0.8 million.
  * The Company and Co-Investment Funds achieved various other favorable asset
    management accomplishments including discounted payoffs, loan
    modifications and sales in our small balance loan portfolios, full
    repayment of the restructured William Lyon Homes secured loan, and
    resolved an office building asset located in Berlin in one of our German
    loan portfolios through a receivership sale.

Activities Subsequent to Fourth Quarter 2012

  * The Company increased its investment in CSFR to $375 million (up from $255
    million invested through the fourth quarter) and increased its commitment
    by $100 million to $550 million (up from a previously announced aggregate
    commitment of $450 million), on the same cost basis as all other
    commitments raised to date by CSFR. Inclusive of the Company’s aggregate
    commitment, CSFR has received aggregate commitments of approximately $2.2
    billion, of which an aggregate $1.1 billion has been called to date. Based
    on data as of March 6, 2013, the current occupancy of CSFR’s plus 180 day
    inventory is approximately 90%. Over the past few months, acquisition
    activity has outpaced leasing activity (for example, in the month of
    February 2013, CSFR acquired 790 homes and leased 390 homes) which has
    caused overall portfolio occupancy to recently trend downwards to 53%.
    While this trend may continue over the next few months, we believe it will
    ultimately reverse itself as renovation and leasing activity increases to
    absorb the new inventory and relative acquisition activity declines. The
    average cost (purchase price plus renovation costs) basis of CSFR’s owned
    inventory is approximately $130,000 and the net yield achieved on CSFR’s
    leased portfolio is in the range of 6% to 7%.
  * In January, the Company invested in a joint venture with a Co-Investment
    Fund and a strategic partner that funded a $41 million first mortgage loan
    secured by a 7 acre multifamily development parcel located in Florida. The
    loan bears an interest rate of 12%; of which 3.5% may be paid-in-kind,
    with a 1.5% origination fee and a 1% exit fee. The initial term of the
    loan is three years. The Company’s share of the investment was 49.5%, or
    $20 million.
  * In January, the Company invested in a joint venture with a Co-Investment
    Fund that originated a $22 million first mortgage loan secured by a
    waterfront development parcel located in Florida. The loan bears an
    interest rate of 14%; of which 4.5% may be paid-in-kind, with a 1%
    origination fee and a 1% exit fee. Additionally, upon certain conditions
    being achieved, the lender has the unilateral option to convert its
    position into subordinated development financing. The initial term of the
    loan is two years, plus two 6-month extensions. The Company’s share of the
    investment was 50%, or $11 million.
  * In February, the Company invested in a joint venture with Co-Investment
    Funds that acquired a performing $59 million senior mortgage loan secured
    by a retail asset in Florida. The loan was acquired for $46 million, or
    78% of the unpaid principal balance. The loan bears a 6.0% fixed interest
    rate with a 30-year amortization schedule and matures in May 2021. The
    current yield is approximately 9% based on purchase price. The Company’s
    share of this investment is 50%.
  * In February, the Company, through a joint venture with Co-Investment
    Funds, de-securitized the loans held in a CMBS trust, in which the joint
    venture acquired the most senior bond in February 2012 for $226 million,
    or 73% of par. Concurrent with the unwinding of the trust, the joint
    venture sold a 40% participation interest in each of the approximately 220
    multifamily first mortgage loans previously held in the CMBS trust to
    another financial institution. The Company’s share of the original
    purchase price was $25 million.

Full Year 2012 Operating Results

For the full year 2012, equity in income of unconsolidated joint ventures and
interest income and other income from affiliates contributed $68.7 million and
$38.4 million, respectively, to total income of $107.2 million. Total expenses
for the year were $36.6 million. Administrative expenses accounted for $6.3
million. During the full year 2012, the Company reported net income
attributable to common stockholders of $48.1 million, or $1.33 per basic share
and $1.32 per diluted share, compared to $1.47 per basic share and $1.46 per
diluted share for 2011. Core Earnings were $59.8 million, or $1.65 per basic
share and diluted share for 2012, compared to $1.50 per basic share and $1.49
per diluted share for 2011.

Common Stock Offerings

In December 2012, the Company completed a sale of 11,500,000 shares of its
common stock at a net price of $19.29 per share. The net offering proceeds,
after deducting underwriting discounts and commissions and offering costs
payable by the Company, were approximately $221 million. In January 2013, the
Company completed a sale of 11,500,000 shares of its common stock at a net
price of $20.20 per share. The net offering proceeds, after deducting
underwriting discounts and commissions and offering costs payable by the
Company, were approximately $232 million. The Company used a portion of the
net proceeds from both offerings to make an additional investment in CSFR and
a portion of the remaining proceeds to fund acquisitions of target assets.

Book Value

The Company’s GAAP book value per common share was $18.30 on December 31,
2012, compared to GAAP book value of $18.13 per common share on September 30,
2012. As of December 31, 2012, the Company had 53,091,623 shares of common
stock outstanding and as of March 6, 2013, the Company had 64,591,623 shares
of common stock outstanding.

Fair Value

If the Company accounted for all of its financial assets and liabilities at
fair value, the net fair value of the Company’s financial assets and
liabilities at December 31, 2012 would have been $56.1 million in excess of
the net carrying value of the Company’s financial assets and liabilities as of
the same date.

Common and Preferred Stock Dividends

The Company's Board of Directors declared a regular way quarterly dividend of
$0.35 per common share for the fourth quarter of 2012. The dividend was paid
on January 15, 2013, to stockholders of record on December 27, 2012.

In addition, the Company’s Board of Directors declared a special dividend for
2012 of $0.05 per common share in order to distribute the balance of the
Company’s estimated taxable income for 2012. The special dividend was paid on
January 15, 2013 to stockholders of record on December 27, 2012.

In addition, the Company's Board of Directors declared a cash dividend of
$0.53125 per share on the Company's 8.50% Series A Cumulative Perpetual
Preferred Stock with liquidation preference of $25 per share for the quarterly
period ending January 15, 2013. The dividend was paid on January 15, 2013, to
stockholders of record on December 31, 2012.

Core Earnings

Core Earnings, a non-GAAP financial measure, is used to compute incentive fees
payable to the Company’s manager and the Company believes it is a useful
measure for investors to better understand the Company’s recurring earnings
from its core business. For these purposes, “Core Earnings” mean the net
income (loss), computed in accordance with GAAP, excluding (i) non-cash equity
compensation expense, (ii) the expenses incurred in connection with the
formation of the Company and the Initial Public Offering, including the
initial and additional underwriting discounts and commissions, (iii) the
incentive fee, (iv) real estate depreciation and amortization, (v) any
unrealized gains or losses from mark to market valuation changes (other than
permanent impairment) that are included in net income, (vi) one-time events
pursuant to changes in GAAP and (vii) non-cash items which in the judgment of
management should not be included in Core Earnings. For clauses (vi) and
(vii), such exclusions shall only be applied after discussions between the
Manager and the Independent Directors and approval by a majority of the
Independent Directors.

Conference Call

Colony Financial, Inc. will conduct a conference call to discuss the results
on Thursday, March 7, 2013, at 7:00 a.m. PT / 10:00 a.m. ET. To participate in
the event by telephone, please dial (877) 407-0784 ten minutes prior to the
start time (to allow time for registration) and use conference ID 408775.
International callers should dial (201) 689-8560 and enter the same conference
ID number. For those unable to participate during the live broadcast, a replay
will be available beginning March 7, 2013 at 10:00 a.m. PT / 1:00 p.m. ET,
through March 21, 2013, at 8:59 p.m. PT / 11:59 p.m. ET. To access the replay,
dial (877) 870-5176 (U.S.), and use passcode 408775. International callers
should dial (858) 384-5517 and enter the same conference ID number. The call
will also be broadcast live over the Internet and can be accessed on the
Investor Relations section of the Company’s Web site at
www.colonyfinancial.com. A replay of the call will also be available for 90
days on the Company’s Web site.

About Colony Financial, Inc.

Colony Financial, Inc. is a real estate investment and finance company that is
focused on acquiring, originating and managing a diversified portfolio of
opportunistic real estate-related debt and equity investments at attractive
risk-adjusted returns. Our investment portfolio and target assets are
primarily composed of interests in: (i) secondary loans acquired at a discount
to par; (ii) new originations; and (iii) equity in single family homes to be
held for investment and rented to tenants. Secondary debt purchases may
include performing, sub-performing or non-performing loans (including
loan-to-own strategies). Colony Financial has elected to be taxed as a real
estate investment trust, or REIT, for U.S. federal income tax purposes. Colony
Financial is a component of the Russell 2000® and the Russell 3000® indices.
For more information, visit www.colonyfinancial.com.

Forward-Looking Statements

This press release may contain forward-looking statements within the meaning
of the federal securities laws. Forward-looking statements relate to
expectations, beliefs, projections, future plans and strategies, anticipated
events or trends and similar expressions concerning matters that are not
historical facts. In some cases, you can identify forward-looking statements
by the use of forward-looking terminology such as "may," "will," "should,"
"expects," "intends," "plans," "anticipates," "believes," "estimates,"
"predicts," or "potential" or the negative of these words and phrases or
similar words or phrases which are predictions of or indicate future events or
trends and which do not relate solely to historical matters. Forward-looking
statements involve known and unknown risks, uncertainties, assumptions and
contingencies, many of which are beyond the Company's control, that may cause
actual results to differ significantly from those expressed in any
forward-looking statement. Statements regarding the following subjects, among
others, may be forward-looking: business and investment strategy; investment
portfolio; projected operating results; ability to obtain financing
arrangements; financing and advance rates for the Company's target assets;
general volatility of the markets in which the Company invests; expected
investments; expected co-investment allocations and related requirements;
interest rate mismatches between the Company's target assets and its
borrowings used to fund such investments; changes in interest rates and the
market value of the Company's target assets; changes in prepayment rates on
the Company's target assets; effects of hedging instruments on the Company's
target assets; rates of default or decreased recovery rates on the Company's
target assets; the degree to which the Company's hedging strategies may or may
not protect the Company from interest and foreign exchange rate volatility;
impact of changes in governmental regulations, tax law and rates, and similar
matters; the Company's ability to maintain its qualification as a REIT for
U.S. federal income tax purposes; the Company's ability to maintain its
exemption from registration under the 1940 Act; availability of investment
opportunities in mortgage-related and real estate-related investments and
other securities; availability of qualified personnel; the Company's
understanding of its competition; and market trends in the Company's industry,
interest rates, real estate values, the debt securities markets or the general
economy.

All forward-looking statements reflect the Company’s good faith beliefs,
assumptions and expectations, but they are not guarantees of future
performance. Furthermore, the Company disclaims any obligation to publicly
update or revise any forward-looking statement to reflect changes in
underlying assumptions or factors, of new information, data or methods, future
events or other changes. For a further discussion of these and other factors
that could cause the Company’s future results to differ materially from any
forward-looking statements, see the section entitled “Risk Factors” in the
Company’s Annual Report on Form 10-K for the year ended December 31, 2011
filed with the Securities and Exchange Commission on March 9, 2012, the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2012
filed with the SEC on May 8, 2012, the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 2012 filed with the SEC on August 9, 2012, the
Company’s Quarterly Report on Form 10-Q for the quarter ended September 30,
2012 filed with the SEC on November 9, 2012, and other risks described in
documents subsequently filed by the Company from time to time with the SEC.

COLONY FINANCIAL, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)
                                                
                                                 December 31,
                                                 2012              2011
ASSETS
Cash                                             $ 170,199         $ 3,872
Investments in unconsolidated joint ventures     877,081           443,500
Loans held for investment, net                   333,569           232,619
Beneficial interests in debt securities,         32,055            32,427
available-for-sale, at fair value
Other assets                                     22,663            15,101     
Total assets                                     $ 1,435,567       $ 727,519  
                                                                              
LIABILITIES AND EQUITY
Liabilities:
Line of credit                                   $ —               $ 69,000
Secured financing                                108,167           13,845
Accrued and other liabilities                    12,944            16,304
Due to affiliates                                4,984             3,788
Dividends payable                                26,442            11,092     
Total liabilities                                152,537           114,029    
Commitments and contingencies
                                                                    
Equity:
Stockholders’ equity:
Preferred stock, $0.01 par value, 8.5%
Series A Cumulative Redeemable Perpetual,
liquidation preference of $25 per share,         101               —
50,000,000 shares authorized, 10,080,000 and
no shares issued and outstanding,
respectively
Common stock, $0.01 par value, 450,000,000
shares authorized, 53,091,623 and 32,624,889     531               326
shares issued and outstanding, respectively
Additional paid-in capital                       1,222,682         599,470
(Distributions in excess of) retained            (5,167      )     5,510
earnings
Accumulated other comprehensive income           5,184             (2,330    )
(loss)
Total stockholders’ equity                       1,223,331         602,976
Noncontrolling interests                         59,699            10,514     
Total equity                                     1,283,030         613,490    
Total liabilities and equity                     $ 1,435,567       $ 727,519  
                                                                              

COLONY FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)
                                                    
                   Three Months Ended December       Year Ended December 31,
                   31,
                   2012             2011             2012             2011
                   (Unaudited)      (Unaudited)
Income
Equity in
income of          $  21,464        $  12,852        $  68,737        $  46,720
unconsolidated
joint ventures
Interest           10,752           5,898            36,445           16,775
income
Other income
from               458              431              1,973            1,974       
affiliates
Total income       32,674           19,181           107,155          65,469      
Expenses
Management         6,706            2,548            18,982           8,477
fees
Investment         690              929              2,977            2,793
expenses
Interest           2,375            1,359            8,248            3,011
expense
Administrative     1,597            1,334            6,346            5,780       
expenses
Total expenses     11,368           6,170            36,553           20,061      
Other gain         603              (702       )     (232       )     (853       )
(loss), net
Income before      21,909           12,309           70,370           44,555
income taxes
Income tax         764              938              2,165            1,191       
provision
Net income         21,145           11,371           68,205           43,364
Net income
attributable
to                 2,261            305              6,194            1,104       
noncontrolling
interests
Net income
attributable
to Colony          18,884           11,066           62,011           42,260
Financial,
Inc.
Preferred          5,355            —                13,915           —           
dividends
Net income
attributable       $  13,529        $  11,066        $  48,096        $  42,260   
to common
stockholders
Net income per
common share:
Basic              $  0.31          $  0.34          $  1.33          $  1.47     
Diluted            $  0.31          $  0.34          $  1.32          $  1.46     
Weighted
average number
of common
shares
outstanding:
Basic              43,969,100       32,684,100       35,925,600       28,732,200  
Diluted            43,969,100       32,684,100       35,943,200       28,993,700  
                                                                                  

COLONY FINANCIAL, INC.

CORE EARNINGS

(In thousands, except share and per share data)

(Unaudited)
                                                    
                  Three Months Ended December        Year Ended December 31,
                  31,
                  2012              2011             2012           2011
GAAP net
income
attributable      $   13,529        $  11,066        $  48,096      $  42,260
to common
stockholders
Adjustments
to GAAP net
income to
reconcile to
Core
Earnings:
Noncash
equity            2,870             19               6,133          116
compensation
expense
Incentive fee     —                 261              936            349
Depreciation      1,674             —                4,478          —
expense
Net
unrealized
(gain) loss       (36         )     510              119            518
on
derivatives
Core Earnings     $   18,037        $  11,856        $  59,762      $  43,243
Basic             $   0.41          $  0.36          $  1.65        $  1.50
Diluted           $   0.41          $  0.36          $  1.65        $  1.49
Basic
weighted
average           43,969,100        32,684,100       35,925,600     28,732,200
number of
common shares
outstanding
Diluted
weighted
average           43,969,100        32,684,100       35,943,200     28,993,700
number of
common shares
outstanding

Contact:

Investor Contact:
Colony Financial, Inc.
Darren Tangen, 310-552-7230
Chief Operating Officer and Chief Financial Officer
or
Addo Communications, Inc.
Lasse Glassen, 310-829-5400
lasseg@addocommunications.com
or
Media Contact:
Owen Blicksilver P.R., Inc.
Caroline Luz, 203-656-2829
caroline@blicksilverpr.com
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