News Release: NorthStar Realty Finance Announces Third Quarter 2016 Results

NorthStar Realty Finance Corp. (NYSE: NRF) (“NorthStar Realty”) today announced its results for the third quarter ended September 30, 2016.

Third Quarter 2016 Results

NorthStar Realty reported U.S. GAAP net (loss) to common stockholders for the third quarter 2016 of ($100.4) million, or ($0.56) per diluted share. NorthStar Realty reported CAD for the third quarter 2016 of $83.5 million, or $0.46 per share.

For more information and a reconciliation of CAD to net income (loss) to common stockholders, please refer to the tables on the following pages.

David T. Hamamoto, Chairman, commented, “We continue to make great progress on our proposed tri-party merger with NSAM and Colony Capital. We are working diligently toward its successful completion in January 2017 and on integration plans to achieve substantial merger synergies. More than ever, we are confident the combination of these great companies, as an internally managed REIT, will result in a world-class real estate and investment management platform.”

Jonathan A. Langer, Chief Executive Officer, commented, “In addition to our efforts in completing the tri-party merger, we have continued to remain focused on asset monetization opportunities. In particular, we are extremely pleased to partner with Taikang Insurance Group, one of China’s leading insurance companies, in our overall healthcare real estate portfolio. Taikang shares our vision regarding the long-term value proposition represented by investing in a diversified U.S. healthcare real estate portfolio and we look forward to a fruitful relationship with them. When also factoring in the liquidity from the medical office building portfolio sale, we have again dramatically enhanced an already attractive liquidity profile which provides for significant financial flexibility and future earnings potential. As powerful as this liquidity position is, our currently un-invested cash of over $1 billion has resulted in a significant drag on this quarter’s earnings. Additionally, while the majority of our owned real estate again exhibited solid performance in the third quarter, our hotels continued to be impacted by displacement of room revenue resulting from planned renovations and sluggish hospitality market conditions.”

Proposed Merger – Colony NorthStar, Inc. (“Colony NorthStar”)

On June 2, 2016, NorthStar Realty, NorthStar Asset Management Group Inc. and Colony Capital, Inc. entered into a definitive agreement to create a world-class, internally-managed, diversified real estate and investment management platform. For additional information regarding the proposed merger, please refer to the registration statement on Form S-4 filed by Colony NorthStar, Inc. with the Securities and Exchange Commission on July 29, 2016, as may be amended from time to time, and the investor presentation related to the proposed merger, which can be found on NorthStar Realty’s, NSAM’s and Colony Capital’s respective websites. The transaction is expected to close in January 2017, subject to customary closing conditions, including shareholder and regulatory approvals.

Portfolio Results and Performance Metrics

Below are portfolio results and performance metrics for the third quarter 2016. Same-store results are presented for direct real estate properties that NorthStar Realty owned during the full quarter ended September 30, 2015 and full quarter ended September 30, 2016. For private equity fund investments and financial investments such as loans, securities and CDO equity, information presented represents third quarter 2016 results compared to second quarter 2016 results. For more information and a reconciliation of net operating income (“NOI”) to property and other related revenues net of property operating expenses, please refer to the tables on the following pages.

Healthcare Real Estate

• For the third quarter 2016, combined healthcare portfolio NOI was $91.6 million.
• For portfolios owned during the full quarters ended September 30, 2015 and 2016, combined healthcare portfolio NOI was $91.6 million for the third quarter 2016 and excluding foreign currency exchange rate fluctuations related to properties located in the United Kingdom, NOI would have been $93.0 million, compared to combined healthcare portfolio NOI of $90.1 million for the third quarter 2015.

Medical Office Buildings

• For the third quarter 2016, NOI was $25.8 million, remaining lease term was 6.6 years and occupancy was 89.4%.
• For portfolios owned during the full quarters ended September 30, 2015 and 2016, NOI was $25.8 million, remaining lease term was 6.6 years and occupancy was 89.4% for the third quarter 2016, compared to NOI of $25.6 million, remaining lease term of 6.7 years and occupancy of 91.0% for the third quarter 2015.

Senior Housing – Operating

• For the third quarter 2016, NOI was $18.0 million and occupancy was 88.4%.
• For portfolios owned during the full quarters ended September 30, 2015 and 2016 and adjusted to include NOI from a portfolio which transitioned from triple net lease to operating during 2015, NOI was $18.0 million and occupancy was 88.4% for the third quarter 2016, compared to NOI of $16.9 million and occupancy of 88.7% for the third quarter 2015.

Senior Housing – Triple Net Lease

• For the third quarter 2016, NOI was $14.1 million, remaining lease term was 11.9 years and lease (EBITDAR) coverage was 1.7x.
• For portfolios owned during the full quarters ended September 30, 2015 and 2016 and adjusted to exclude NOI from a portfolio which transitioned from triple net lease to operating during 2015, NOI was $14.1 million and excluding foreign currency exchange rate fluctuations related to properties located in the United Kingdom NOI, would have been $15.5 million, remaining lease term was 11.9 years and lease (EBITDAR) coverage was 1.7x for the third quarter 2016, compared to NOI of $14.9 million, remaining lease term of 11.4 years and lease (EBITDAR) coverage was 1.5x for the third quarter 2015.

Skilled Nursing Facilities

• For the third quarter 2016, NOI was $28.7 million, remaining lease term was 8.0 years and lease (EBITDAR) coverage was 1.5x.
• For portfolios owned during the full quarters ended September 30, 2015 and 2016, NOI was $28.7 million, remaining lease term was 8.0 years and lease (EBITDAR) coverage was 1.5x for the third quarter 2016, compared to NOI of $27.8 million, remaining lease term of 9.0 years and lease (EBITDAR) coverage was 1.4x for the third quarter 2015.

Hospitals

• For the third quarter 2016, NOI was $5.0 million, remaining lease term was 12.2 years and lease (EBITDAR) coverage was 3.5x, compared to NOI of $4.9 million, remaining lease term of 13.2 years and lease (EBITDAR) coverage was 2.6x for the third quarter 2015.

Hotels

• For the third quarter 2016, EBITDA was $80.1 million, RevPAR was $100.7, WA occupancy was 78.0% and EBITDA margin was 36.3%.
• For portfolios owned during the full quarters ended September 30, 2015 and 2016, EBITDA was $78.4 million, RevPAR was $101.1, WA occupancy was 77.7% and EBITDA margin was 37.0% for the third quarter 2016, compared to EBITDA of $82.7 million, RevPAR of $102.7, WA occupancy of 79.7% and EBITDA margin of 38.0% for the third quarter 2015.
• For portfolios owned during the full quarters ended September 30, 2015 and 2016 and excluding hotels which were under renovation during the third quarter 2016, EBITDA was $69.6 million, RevPAR was $102.4, WA occupancy was 78.8% and EBITDA margin was 37.2% for the third quarter 2016, compared to EBITDA of $71.5 million, RevPAR of $102.2, WA occupancy of 79.6% and EBITDA margin of 38.1% for the third quarter 2015.

Manufactured Housing Communities

• For the third quarter 2016, NOI was $32.5 million, WA monthly rent was $500.3 and economic occupancy was 85.2%.
• For portfolios owned during the full quarters ended September 30, 2015 and 2016, NOI was $30.1 million, WA monthly rent was $507.0 and economic occupancy was 85.7% for third quarter 2016, compared to NOI of $25.6 million, WA monthly rent of $488.4 and economic occupancy of 85.3% for the third quarter 2015.

Net Lease Real Estate

• For the third quarter 2016, NOI was $11.2 million, remaining lease term was 5.2 years and occupancy was 93.0%.
• For portfolios owned during the full quarters ended September 30, 2015 and 2016, NOI was $5.7 million, remaining lease term was 5.2 years and occupancy was 93.0% for the third quarter 2016, compared to NOI of $6.1 million, remaining lease term of 4.7 years and occupancy of 96.4% for the third quarter 2015.
• Excluding rent concessions provided to two tenants that renewed their leases during 2016, third quarter 2016 NOI would have been $6.4 million for portfolios owned during the full quarters ended September 30, 2015 and 2016.

Multifamily Real Estate

• For the third quarter 2016, NOI was $4.4 million, occupancy was 94.3%, WA monthly rent was $830.5 and NOI margin was 52.7%.
• For portfolios owned during the full quarters ended September 30, 2015 and 2016, NOI was $4.4 million, occupancy was 94.5%, WA monthly rent was $826.0 and NOI margin was 53.0% for the third quarter 2016, compared to NOI of $4.1 million, occupancy of 92.0%, WA monthly rent of $792.2 and NOI margin of 50.8% for the third quarter 2015.
• Excluding the 5 multifamily properties NorthStar Realty has definitive agreements to sell as of September 30, 2016, NOI was $1.6 million for the third quarter 2016.

Multi-tenant Office Real Estate

• For the third quarter 2016, NOI was $2.9 million, remaining lease term was 2.4 years, occupancy was 85.1% and NOI margin was 55.0%, compared to NOI of $2.8 million, remaining lease term of 3.1 years, occupancy of 88.9% and NOI margin of 54.2% for the third quarter 2015.

Interest in Private Equity Funds

• For the third quarter 2016, aggregate gross distributions were $53.7 million, of which $18.0 million was income earned and aggregate contributions totaled $1.4 million. As of September 30, 2016, aggregate portfolio net carrying value was $481.7 million with a yield of 12.3%. For the second quarter 2016, aggregate gross distributions were $50.7 million, of which $23.7 million was income earned and aggregate contributions totaled $1.6 million. As of June 30, 2016, aggregate portfolio net carrying value was $512.9 million with a yield of 14.2%.

Balance Sheet Loans

• For the third quarter 2016, aggregate portfolio income was $4.9 million. During the third quarter 2016, asset sales and repayments totaled $2.8 million. As of September 30, 2016, aggregate portfolio carrying value was $199.3 million with a yield on equity of 9.4%. For the second quarter 2016, aggregate portfolio income was $11.3 million. During the second quarter 2016, asset sales and repayments totaled $116.0 million net of $25.2 million of financing. As of June 30, 2016, aggregate portfolio carrying value was $205.2 million with a yield on equity of 9.8%.

N-Star CDO Bonds and Other Securities

• For the third quarter 2016, aggregate portfolio income earned was $15.6 million, which includes $3.5 million related to repurchased CDO bonds that are eliminated in consolidation. As of September 30, 2016, the principal amount of the portfolio, excluding repurchased CDO bonds that are eliminated in consolidation, was $430.1 million with an amortized cost of $221.0 million and a yield of 20.7%. As of September 30, 2016, the principal amount of repurchased CDO bonds that are eliminated in consolidation was $139.8 million. For the second quarter 2016, aggregate portfolio income earned was $16.9 million, which includes $5.9 million related to repurchased CDO bonds that are eliminated in consolidation. As of June 30, 2016, the principal amount of the portfolio, excluding repurchased CDO bonds that are eliminated in consolidation, was $434.5 million with an amortized cost of $213.9 million and a yield of 20.7%. As of June 30, 2016, the principal amount of repurchased CDO bonds that are eliminated in consolidation was $139.7 million.

CDO Equity and Other Income

• For the third quarter 2016, aggregate CDO equity distributions and other income was $16.8 million. For the second quarter 2016, aggregate CDO equity distributions and other income was $13.9 million.

Asset Divestitures

Commercial Real Estate

Completed third quarter 2016 and fourth quarter to date 2016

• During the third quarter 2016, NorthStar Realty sold its interests in a $405 million net lease industrial real estate portfolio which resulted in NorthStar Realty receiving net proceeds of approximately $170 million. NorthStar Realty generated an IRR of approximately 13.8% on its invested equity.
• During the third quarter 2016, NorthStar Realty sold one multifamily property for $23 million which resulted in NorthStar Realty receiving net proceeds of approximately $8 million. NorthStar Realty generated an IRR of approximately 21.4% on its invested equity.
• Subsequent to the third quarter 2016, NorthStar Realty sold five multifamily properties for $158 million which resulted in NorthStar Realty receiving net proceeds of approximately $43 million. NorthStar Realty generated an IRR of approximately 14.3% on its invested equity.

Under Contract

• NorthStar Realty has entered into a definitive agreement to sell its manufactured housing communities for $2.0 billion which will result in net proceeds of approximately $615 million. NorthStar Realty expects to generate an IRR of approximately 20.3% on its invested equity. We expect this transaction to close in the first quarter 2017; however, there is no assurance this transaction will close on the terms anticipated, if at all.
• NorthStar Realty has entered into a definitive agreement to sell a subset of its MOB portfolio for $838 million, at an approximate 5.6% cap rate, which will result in net proceeds of approximately $115 million. We expect this transaction to close in the fourth quarter 2016; however, there is no assurance this transaction will close on the terms anticipated, if at all.
• NorthStar Realty has entered into a definitive agreement, subject to certain regulatory and financing approvals, to sell a joint venture interest in its healthcare real estate portfolio for approximately $1.0 billion, at a total valuation of $6.1 billion and representing an approximate 6.1% cap rate, which will result in net proceeds of approximately $340 million. We expect this transaction to close in the first quarter 2017; however, there is no assurance this transaction will close on the terms anticipated, if at all.

Real Estate Private Equity

• During the third quarter 2016, NorthStar Realty sold its interests in 41 real estate private equity funds for $239 million of net proceeds, of which NorthStar Realty has received $34 million and will receive the remaining net proceeds in the fourth quarter 2016. The sale relieved NorthStar Realty of $45 million in future funding obligations.

NorthStar Realty Total Assets

• Assets as of September 30, 2016 totaled approximately $18.9 billion or pro forma for asset monetization initiatives as of November 4, 2016, assets are approximately $16.1 billion.
• Approximately 90% of the $16.1 billion of total assets are comprised of direct and indirect ownership interests in real estate.

Supplemental Disclosure

• Please refer to the supplemental presentation that was posted on NorthStar Realty’s website, www.nrfc.com, which provides substantial additional details regarding NorthStar Realty’s investments.

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NorthStar Asset Management Group Inc.
Megan Gavigan / Emily Deissler / Hayley Cook
Sard Verbinnen & Co.
(212) 687-8080

Colony Capital, Inc.
Owen Blicksilver
Owen Blicksilver PR, Inc.
(516) 742-5950
or
Lasse Glassen
Addo Communications, Inc.
(310) 829-5400
lglassen@aaddoir.com

NorthStar Realty Finance Corp.
Joe Calabrese
Investor Relations
(212) 827-3772