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NorthStar Realty Finance Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 4, 2012 05:25PM
NorthStar Realty Finance Corp. (NRF) filed Quarterly Report for the period ended 2012-03-31.
Highlight of Business Operations:For the three months ended March 31, 2012, the Company sold land in Aventura, Florida for total sale proceeds of $5.1 million, resulting in a gain of $2.0 million. In addition, for the three months ended March 31, 2012, the Company sold eight timeshare units for total sales proceeds of $3.4 million, including seller financing of $0.1 million, resulting in a realized gain of $3.0 million. The Company also recorded $2.1 million of prior gains no longer deferred related to timeshare units.
In February 2006, the Company, through a joint venture with an institutional investor, CS Federal Drive, LLC ("CS/Federal"), acquired a portfolio of three adjacent class A office/flex buildings located in Colorado Springs, Colorado for $54.3 million. The joint venture financed the transaction with two non-recourse, mortgage notes totaling $38.0 million and the remainder in cash. The borrowings mature on February 11, 2016 and bear fixed interest rates of 5.51% and 5.46%, respectively. The Company contributed $8.4 million for a 50% interest in the joint venture and incurred $0.3 million in costs related to its acquisition, which are capitalized to the investment. These costs are amortized over the useful lives of the assets held by the joint venture. As of March 31, 2012 and December 31, 2011, the Company had an investment in CS/Federal of $5.6 million and $5.7 million, respectively. For the three months ended March 31, 2012 and 2011, the Company recognized equity in earnings of $0.2 million and $0.1 million, respectively.
As of March 31, 2012, the Company owns 2.2% of the common stock in NorthStar Real Estate Income Trust, Inc. ("NorthStar Income"), a CRE debt-oriented REIT sponsored by the Company, with a commitment to purchase up to $10 million of shares of NorthStar Income's common stock during the period through July 12, 2013, in the event that its distributions to stockholders exceed its modified funds from operations (as defined in accordance with the current practice guidelines issued by the Investment Program Association). In connection with this commitment, the Company has purchased 117,055 shares for $1.1 million for the three months ended March 31, 2012 resulting in aggregate 370,257 shares acquired for $3.3 million since inception. As of March 31, 2012 and December 31, 2011, the Company had an investment in NorthStar Income of $5.0 million and $4.0 million, respectively. For the three months ended March 31, 2012 and 2011, the Company recognized immaterial amounts in equity in earnings.
Concentrations of credit risk arise when a number of borrowers, tenants, operators or issuers related to the Company's investments are engaged in similar business activities or located in the same geographic location to be similarly affected by changes in economic conditions. The Company monitors its portfolio to identify potential concentrations of credit risks. The Company has no one borrower, tenant or operator that generates 10% or more of its total revenue. However, two operators in the Company's healthcare net lease portfolio generate 12% and 21% of the Company's rental and escalation income for the three months ended March 31, 2012, respectively, which represents 5% and 3% of total revenue, respectively. The Company believes the remainder of its net lease portfolio is reasonably well diversified and does not contain any unusual concentration of credit risks.
(1)Includes $3.9 million and $4.9 million of management fees related to the Company's CDO financing transactions for the three months ended March 31, 2012 and 2011, respectively, that are eliminated in consolidation. These amounts are recorded as expense in the real estate debt and real estate securities segments and recorded as revenue in the asset management/other segment.
Stocks Discussed: NRF,