Profile: NorthStar Realty Finance Corp (NRF)
3 Dec 2013
NorthStar Realty Finance Corp. is an internally managed real estate finance company. It originates, acquires and manages portfolios of commercial real estate debt, commercial real estate securities and net lease properties. In addition, the Company engages in asset management and other activities related to real estate and real estate finance. The Company is focused on building its asset management business by raising and managing capital on a fee basis from alternate sources, such as the non-listed real estate investment trust sector, which it refers to as its Sponsored REITs. As of December 31, 2011, the Company was raising capital for NorthStar Real Estate Income Trust, Inc. (NSREIT), its commercial real estate (CRE) debt-oriented Sponsored REIT. In addition, it has a healthcare debt and equity investment focused product in registration, NorthStar Senior Care Trust, Inc. (Senior Care). In April 2013, it announced the closing of acquisition of manufactured housing portfolio comprised of 71 communities containing approximately 17,000 pad rental sites located throughout five states (primarily in Florida and Salt Lake City, Utah).
Commercial Real Estate Debt
The Company’s CRE debt business is focused on originating, structuring, acquiring and managing senior and subordinate debt investments secured primarily by commercial and multifamily properties, including first mortgage loans, subordinate mortgage interests, mezzanine loans, credit tenant loans and other loans, including preferred equity interests in borrowers who own such properties. The collateral underlying its CRE debt investments consists primarily of income-producing real estate assets, properties that require some capital investment. It directly underwrote and originated approximately 77% of its CRE debt investments (excluding its CRE debt investments in the CSE RE 2006-A collateralized debt obligations (CSE CDO), and CapLease 2005-1 CDO (CapLease CDO)). As of December 31, 2011, 37.9% of the Company’s assets under management were invested in CRE debt. As of December 31, 2011, its CRE debt portfolio consisted of 162 investments.
Commercial Real Estate Securities
The Company’s CRE securities business is focused on investing in and managing a range of CRE securities, including commercial mortgage backed securities (CMBS), unsecured real estate investment trust (REIT) debt and CDO notes backed primarily by CRE securities and debt. CMBS are commercial mortgages pooled in a trust and are principally secured by real property or interests therein having a multifamily or commercial use and located in the United States. Underlying property types include regional malls, neighborhood shopping centers, office buildings, industrial or warehouse properties, hotels, multifamily, self-storage and healthcare facilities. Substantially all of its unsecured REIT debt consists of non-amortizing senior unsecured notes issued by equity REITs. REITs own a variety of property types with a large number of companies focused on the office, retail, multifamily, industrial, healthcare and hotel sectors. It may also invest in junior unsecured debt or preferred equity of REITs.
CDO notes are collateralized by a combination of CMBS and unsecured REIT debt and may also include CRE first mortgage loans, subordinate mortgage interests and other asset-backed securities as part of their underlying collateral. These assets are held within a special-purpose vehicle that issues rated securities and equity in private securities offerings. As of December 31, 2011, 46.1% of its assets under management were invested in a portfolio of CRE securities. Its CRE securities portfolio consisted of 693 investments.
Net Lease Properties
The Company’s net lease property includes investment primarily in office, industrial, retail and healthcare-related properties across the United States that are net leased to corporate tenants and healthcare operators. As of December 31, 2011, 5.8% of its total assets under management were invested in its core net lease properties, consisting of a portfolio of office, retail and industrial facilities totaling 3.2 million square feet. As of December 31, 2011, the Company’s core net lease properties had a weighted average remaining lease term of 6.4 years and were 94% leased.
As of December 31, 2011, 7.9% of its assets under management were invested in its healthcare net lease properties, with a focus on the senior housing sector which includes assisted living, skilled nursing and independent living facilities. The Company’s portfolio was comprised of 42 assisted living facilities (ALF), 31 skilled nursing facilities (SNF), three life science buildings (LSB), five independent living facilities (ILF) and one medical office building (MOB). As of December 31, 2011, 100% of its net lease healthcare portfolio was leased to third-party operators with weighted average lease coverage of 1.4x and a 7.7 year weighted average remaining lease term.
Asset Management and Other
The Company’s asset management and other activities are focused on managing CDO financing transactions on a fee basis; sponsoring and advising on a fee basis, its Sponsored REITs, and acting as special servicer for its owned (and third-party owned) CMBS. It manages 11 CDOs, nine of which were sponsored by the Company, or the N-Star CDOs. In addition, the Company has acquired the equity interests of two CDOs that have been integrated into its platform, the CSE CDO and the CapLease CDO. Five of the CDOs are primarily collateralized by CRE debt and six are primarily collateralized by CRE securities.
In connection with its Sponsored REIT, the Company manages the day-to-day affairs, including identifying, originating, acquiring and managing investments on its behalf, and it earns advisory and other fees for these services, which vary based on the amount of assets under management, investment activity and investment performance. In addition, NorthStar Realty Securities, LLC (NorthStar Realty Securities), its wholly owned broker-dealer subsidiary, distributes equity for its Sponsored REITs. The Company own over 600 CMBS investments.
NorthStar Realty Finance Corp
399 Park Avenue
NEW YORK NY 10022