NEW YORK, Nov. 14, 2005 (PRIMEZONE) -- NorthStar Realty Finance Corp. (NYSE:NRF) today announced modifications to its previously issued results for the quarter ended September 30, 2005, as a result of an adjustment to a non-cash, unrealized loss. The Company revised Adjusted Funds from Operations (AFFO) from $7,858,000 in the third quarter of 2005, or $0.29 per share, to $7,621,000, or $0.28 per share. Net income for the third quarter of 2005 was revised from $4,804,000, or $0.23 per share, to $4,616,000, or $0.22 per share. For a reconciliation of net income to AFFO, please refer to the tables on the following pages.
As the Company previously communicated, its third quarter results, which now exclude $0.04 per share of certain realized and unrealized gains rather than the previously reported $0.05 per share of certain realized and unrealized gains, reflect the investment of approximately $250 million on a weighted average basis during the third quarter.
About NorthStar Realty Finance Corp.
NorthStar Realty Finance Corp. is an internally managed REIT that makes investments in commercial real estate debt, real estate securities and net lease properties. For more information about NorthStar Realty Finance Corp., please visit www.nrfc.com
NorthStar Realty Finance Corp.
and NorthStar Realty Finance Corp. Predecessor
Condensed Consolidated and Combined Statements of Operations
(unaudited)
NorthStar Realty Finance Corp. Predecessor
Condensed Consolidated and Combined Statements of Operations
Co. Pred.(1) Co. Pred.(1)
Three Months Ended Nine Months Ended
September 30, September 30
---------------------- ----------------------
2005 2004 2005 2004
---------- ---------- ---------- ---------
Revenues and other
income:
Rent and escalation
income $2,983,000 $ -- $7,857,000 $ --
Advisory and management
fee income 21,000 57,000 92,000 165,000
Advisory and management
fee income - related
parties 1,162,000 952,000 3,233,000 2,134,000
Interest income
- debt securities 11,657,000 22,000 26,770,000 22,000
Interest income
- debt securities
- related party 1,824,000 906,000 5,128,000 1,469,000
Other revenue 2,000 -- 7,000 --
---------- ---------- ---------- ---------
Total revenues 17,649,000 1,937,000 43,087,000 3,790,000
Expenses:
Real estate properties
- operating expenses 586,000 -- 1,722,000 --
Interest expense 8,812,000 201,000 21,126,000 201,000
Management fees
- related party 24,000 -- 67,000 --
General &
Administrative:
Direct:
Salaries and other
compensation 1,395,000 238,000 3,934,000 838,000
Shared Services
- related party 344,000 -- 1,030,000 --
Equity based
compensation 740,000 -- 2,499,000 --
Insurance 257,000 -- 687,000 --
Accounting and
auditing fees 133,000 -- 1,362,000 --
Other general and
administrative 735,000 46,000 2,665,000 147,000
Allocated:
Salaries and other
compensation -- 1,520,000 -- 2,764,000
Insurance -- 90,000 -- 285,000
Other general and
administrative -- 323,000 -- 845,000
---------- ---------- ---------- ---------
Total general and
administrative 3,604,000 2,217,000 12,177,000 4,879,000
Depreciation and
amortization 1,080,000 -- 2,833,000 --
---------- ---------- ---------- ---------
Total expenses 14,106,000 2,418,000 37,925,000 5,080,000
Income (loss) from
operations 3,543,000 (481,000) 5,162,000 1,290,000)
---------- ---------- ---------- ---------
Equity in earnings of
unconsolidated/uncombined
ventures 61,000 487,000 167,000 1,351,000
---------- ---------- ---------- ---------
Unrealized gain (loss)
on investments and
other 414,000 (292,000) 963,000 425,000
Realized gain (loss)
on investments and
other 1,661,000 636,000 2,162,000 636,000
---------- ---------- ---------- ---------
Income (loss) before
minority interests
and discontinued
operations 5,679,000 350,000 8,454,000 1,122,000
---------- ---------- ---------- ---------
Minority interest (1,171,000) -- (1,743,000) --
---------- ---------- ---------- ---------
Net income (loss)
from continuing
operations 4,508,000 350,000 6,711,000 1,122,000
Income (loss) from dis-
continued operations,
net of minority
interest 108,000 -- 153,000 --
Gain on sale of dis-
continued operations,
net of minority
interest -- -- 8,630,000 --
---------- ---------- ---------- ----------
Net income (loss) $4,616,000 $ 350,000 $15,494,000 $1,122,000
========== ========== =========== ==========
Earnings per share:
Net income (loss) from
continuing operations
before discontinued
operations $ 0.21 $ 0.32
Income (loss) from
discontinued
operations 0.01 0.01
Gain on sale of dis-
continued operations -- 0.41
---------- ------------
Net income available
to common
shareholders $ 0.22 $ 0.74
========== ==========
Weighted average number
of shares of common
stock outstanding
Basic 21,264,930 21,255,190
========== ==========
Diluted 26,790,161 26,774,300
========== ==========
(1) The results of operations for the nine and three ended
September 30, 2004 represent the results of the Company's
predecessor, a combination of certain controlling and
non-controlling interests in real estate-related entities that
represent the initial portfolio of assets contributed to the
Company by certain subsidiaries of NorthStar Capital Investment
Corp. on October 29, 2004. Management does not believe that the
results of operations of the Company's predecessor are indicative
of its results as a separate operating entity subsequent to the
closing of its IPO.
NorthStar Realty Finance Corp.
Condensed Consolidated Balance Sheets
September 30, December 31,
2005 2004
-------------- --------------
Assets:
Cash and cash equivalents $ 20,524,000 $ 47,733,000
Restricted cash 10,250,000 2,713,000
Debt securities held for trading 33,022,000 826,611,000
Operating real estate -net 138,504,000 43,544,000
Debt securities available for sale 179,933,000 37,692,000
CDO deposit and warehouse agreements 2,500,000 2,988,000
Collateral held by broker 26,878,000 24,831,000
Subordinate real estate debt
investments 524,716,000 70,841,000
Investment in common securities 2,020,000 --
Investments in and advances
to uncombined ventures 2,212,000 5,363,000
Deferred costs and intangible assets,
net 31,470,000 4,233,000
Assets held for sale 21,040,000 --
Other assets 8,856,000 11,801,000
-------------- --------------
Total assets $1,001,925,000 $1,078,350,000
============== ==============
Liabilities:
Mortgage notes and loans payable $ 137,400,000 $ 40,557,000
Liability to subsidiary trusts
issuing preferred securities 67,020,000 --
Credit facility 204,804,000 27,821,000
Repurchase obligations 58,302,000 800,418,000
CDO Bonds payable 300,000,000 --
Securities sold, not yet purchased 24,790,000 24,114,000
Obligations under capital leases 3,356,000 3,303,000
Accounts payable and accrued expenses 7,029,000 5,603,000
Due to affiliates 70,000 250,000
Other liabilities 2,637,000 528,000
-------------- --------------
Total liabilities 805,408,000 902,594,000
-------------- --------------
Minority interest 38,461,000 32,447,000
Commitments and contingencies -- --
Stockholders' equity 158,056,000 143,309,000
-------------- --------------
Total stockholder' equity 158,056,000 143,309,000
-------------- --------------
Total liabilities and
stockholders' equity $1,001,925,000 $1,078,350,000
============== ==============
NorthStar Realty Finance Corp.
and NorthStar Realty Finance Corp. Predecessor
Reconciliation of Net income to Funds from Operations
and Adjusted Funds from Operations
The following is a reconciliation of net income to FFO and AFFO and
illustrates the difference in this measure of operating performance
-------------------------------------------------------------------
Co. Pred. Co. Pred.
Three Months Ended Nine Months Ended
September 30, September 30
2005 2004 2005 2004
---------- ---------- ----------- -----------
Funds from Operations:
Income before minority
interests $5,679,000 $ 350,000 $ 8,454,000 $ 1,122,000
Adjustments:
Depreciation and
amortization 1,080,000 -- 2,833,000 --
Funds from dis-
continued
operations 136,000 -- 509,000 --
Real estate
depreciation
and amortization
- unconsolidated
ventures -- 489,000 -- 1,461,000
---------- ---------- ----------- -----------
Funds from Operations
(FFO) $6,895,000 $ 839,000 $11,796,000 $ 2,583,000
---------- ---------- ----------- -----------
Adjusted Funds from
Operations:
Funds from Operations
(FFO) $6,895,000 $ 839,000 $11,796,000 $ 2,583,000
Straightline rental
income, net (13,000) (233,000) (47,000) (715,000)
Straightline rental
income - discontinued
operations -- -- (290,000) --
Amortization of fair
market rental
adjustment (FAS 141) (1,000) -- (4,000) --
Amortization of
deferred
compensation 740,000 -- 2,499,000 --
---------- ---------- ----------- -----------
Adjusted funds from
operations (AFFO) $7,621,000 $ 606,000 $13,954,000 $ 1,868,000
========== ========== =========== ===========
FFO Per Share of
Common Stock $ 0.26 $ 0.44
========== ===========
AFFO per Share of
Common Stock $ 0.28 $ 0.52
========== ===========
Please note:
Co. = The Company
Pred. = The Predecessor
Non-GAAP Financial Measures
Included in this press release are certain "non-GAAP financial measures," which are measures of the Company'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 applicable SEC rules. These include: (i) Funds From Operations, and (ii) Adjusted Funds From Operations. The following discussion defines these terms, which the Company believes can be useful measures of its performance.
Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO)
Management believes that FFO and AFFO, each of which are non-GAAP measures, are additional appropriate measures of the operating performance of a REIT. We compute FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts (NAREIT), as net income or loss (computed in accordance with GAAP), excluding gains or losses from sales of depreciable properties, the cumulative effect of changes in accounting principles, real estate-related depreciation and amortization, and after adjustments for unconsolidated/uncombined partnerships and joint ventures. We calculate AFFO by subtracting from (or adding) to FFO:
-- normalized recurring expenditures that are capitalized by us and
then amortized, but which are necessary to maintain our properties
and revenue stream, e.g., leasing commissions and tenant
improvement allowances;
-- an adjustment to reverse the effects of straight-lining of rents
and fair value lease revenue under FAS 141; and
-- the amortization or accrual of various deferred costs including
intangible assets and equity based compensation.
Our calculation of AFFO differs from the methodology used for calculating AFFO by certain other REITs and, accordingly, may not be comparable to such other REITs.
We believe that FFO and AFFO are additional appropriate measures of our operating performance because they facilitate an understanding of our operating performance after adjustment for certain non-cash expenses, such as real estate depreciation, which assumes that the value of real estate assets diminishes predictably over time. Since FFO is generally recognized as industry standards for measuring the operating performance of an equity REIT, we also believe that FFO provides investors with an additional useful measure to compare our financial performance to 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 our operating performance or as an alternative to cash flow from operating activities as a measure of our liquidity.
The Company urges investors to carefully review the 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.
Safe Harbor Statement
Certain items in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and beliefs and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements; NorthStar Realty can give no assurance that its expectations will be attained. Factors that could cause actual results to differ materially from NorthStar Realty's expectations include, but are not limited to changes in economic conditions generally and the real estate and bond markets specifically, legislative or regulatory changes (including changes to laws governing the taxation of REITs), availability of capital, interest rates and interest rate spreads, policies and rules applicable to REITs, the continued service of key management personnel, the effect of competition in the real estate finance industry, the costs associated with compliance and corporate governance, including the Sarbanes-Oxley Act and related regulations and requirements, and other risks detailed from time to time in NorthStar Realty's SEC reports. Factors that could cause actual results to differ materially from those in the forward-looking statements are specified in the Company's Annual Report on Form 10-K for the year ended December 31, 2004. Such forward-looking statements speak only as of the date of this press release. NorthStar Realty expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.