NorthStar Realty Finance Corp. Q2 2010 Earnings Call Transcript

| About: Colony NorthStar, (CLNS)

NorthStar Realty Finance Corp. (NRF) Q2 2010 Earnings Call August 5, 2010 10:00 AM ET


Al Tylis - COO and General Counsel

David Hamamoto - Chairman and CEO

Andy Richardson - CFO

Dan Gilbert - CIO


Jim Shanahan - Wells Fargo

Gabe Poggi - FBR Capital Markets

Joshua Barber - Stifel Nicolaus

Steve DeLaney - JMP Securities


Welcome to the NorthStar Realty Finance second quarter 2010 results conference call. (Operator Instructions) This conference is being recorded today, Thursday August 5, 2010.

I would now like to turn the conference over to Al Tylis, Chief Operating Officer and General Counsel for NorthStar Realty Finance.

Al Tylis

Morning and welcome to the NorthStar Realty Finance Corp second quarter 2010 quarterly conference call. At this time all parties have been placed on a listen-only mode. The floor will be open for questions following the presentation. Thank you very much and welcome to our conference call. Before the call begins, I'd like to remind, everyone, that certain statements made in the course of this call are not based on historical information and may constitute forward-looking statements.

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.

I refer you to the company's filings made with the SEC for more detailed discussion the risks and factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. The company undertakes no duty to update any forward-looking statements that may be made in the course of this call.

Additionally, certain non-GAAP financial measures will be discussed on this conference call. Our presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with generally accepted accounting principles.

Reconciliations of these non-GAAP financial measures to the most comparable measures prepared in accordance with generally accepted accounting principles can be accessed through our filings with the SEC at

With that, I'm now going to turn the call over to our Chairman and Chief Executive Officer, David Hamamoto.

David Hamamoto

Thanks, Al, and thank you, everyone, for joining us this morning. In addition to Al, I am joined today by Andy Richardson, our CFO; and Dan Gilbert, our CIO. They'll briefly discuss our views on the pro real estate environment, then provide an overview of NorthStar's accomplishments since the first quarter.

Market original optimum entering 2010, which carried through much of next quarter was covered in the second quarter by the European sovereign debt prices, as well as U.S. economic data suggesting growth has been much more sluggish than expected. These events have resulted in significant amounts of capital remaining on the sideline.

Consistent with our view and comments during last quarter's conference call, we expect interest rate to remain low and business and employment growth remains slow through the remainder of this year. Even though investors have been cautious, liquidity and commercial real estate continue to steadily improve and is much better than a year ago, including some CMBS securitization.

Industry transaction volumes are still low relative to the historical levels and debt capital remains scarce except for the highest quality assets. However, we have received multiple bids for loans, when we captured the market. And have been able to generate liquidity through loan sale, when we believe the cash generated can be invested accretively when compared to the discount realized on sale.

Consistent with this strategy, during the second quarter we sold three loans having an aggregate outstanding principal balance of $93 million for $73 million strengthen in the right side of our balance sheet by repaying $304 million of recourse bank debt maturing in 2012.

Wells Fargo accepted $208 million cash and a $35 million principal participation interest in the mezzanine loan secured by retail properties in Germany. We've had a long relationship with Wells Fargo, and we and Wells believe that eliminating this legacy recourse debt with us, provides NorthStar with significantly expanded financial flexibility and a good runway to capitalize on opportunities, and in unique to our platform as the economy emerges from this deep recession.

To that end, Wells also received $2 million 10-year warrant struck at $7.60 and agreed to work with us to provide a new credit facility of up to $200 million with limited recourse guaranteed. Entire repayment transaction generated in net $58 million gain during the second quarter.

Embedded environment remains challenging, but we continue to make progress in dealing with problem assets. Non-performing loans or NPL fell to two loans totaling $50 million at the end of the second quarter; down from $84 million at the end of the first quarter, and $99 million at the end of 2009. NPLs now represent less than 3% of total loans at June 30.

Our second quarter credit loss provision was higher than in prior period, with 15% or $8 million of that amount is attributable to completed loan sales which did not necessarily indicate there is a credit issue.

On a non-traded REIT front, we have been raising and investing capital in our Reg. D REIT. A registered non-traded REIT for which we are seeking to raise $1 billion NorthStar real estate income trust, was recently declared affective by the SEC and should begin raising capital in the fourth quarter.

Both of these REITs are being distributed and marketed by our wholly owned broker dealer NRF capital market. As we've discussed in the past, we believe this market provides steady stable long-term equity capital, which complements our investment strategy and time horizon.

NorthStar is the advisor to these entities and expects to generate per annum management fees, approximately equal to two percentage point of equity under management. We believe this initiative could add significant franchise value to NRF that this growth is assets under management.

After the end of the second quarter, we closed on the acquisition of the equity note and management of $1.1 billion commercial real estate loan CDO, originated by CapitalSource in 2006. CapitalSource had a desire to remove the assets and non-recourse liability of this CDO from its balance sheet, while placing the CDO with a reputable manager, experienced in managing these types of assets. Andy will review this deal in more detail. We believe this transaction provides an attractive economic opportunity for NorthStar.

The equity notes are currently not cash flowing, but we do receive senior and other fees. Our investment fees and management fees should overtime more than cover our purchase price and additional cost of managing the deal. But the opportunity to use our broad platform and expertise in managing commercial real estate credit in CDO financing structures could potentially allow cash flow to be distributed to our notes.

This deal is a great example of an off-market opportunity, where NorthStar was well positioned to use its broad platform and experience to make a very compelling investment. CapitalSource retains participation interest in several of the loans; they're part of the CDO we purchased.

As the originator and original collateral manager has some continuing exposure to the deal, and wanted to purchaser with a solid reputation and extensive experience in managing commercial real estate loans and complicated financing structure. They also wanted someone who could efficiently underwrite and close on a transaction on the original negotiated term.

We're continuing to seek other such off-market investments where we can leverage NorthStar's platform and expertise to create potentially outstanding return opportunities for our shareholders.

In June we received unexpected news related to the litigation surrounding California properties formally leased to Washington Mutual Bank. JPMorgan repudiated the leases held by the FDIC when it seized WaMu Bank. We handed the keys to the property and to the securitization trust holding the $44 million first mortgage. Special servicer subsequently sued NorthStar's net leased subsidiary, claiming the lease termination triggered recourse liability under the securitized mortgage.

We believe their legal argument had little merit and filed for summary judgment in California. Unfortunately the Judge has indicated that she intends to rule in favor of the trust. We strongly disagree with the ruling, believe that we have significant points in our favor and intend to file a motion to vacate the judgment and enter a judgment for us or alternatively, vacate the judgment and set the matter for trial. We would also vigorously pursue an appeal of the judgment if our motion is unsuccessful.

The appeal process timing is difficult to predict but could take a year or more. We believe our case is strong, and the judgment should be overturned, and we are pursuing all avenues available to us to resolve this matter favorably.

In summary, we believe the markets are improving but more slowly than many had hoped. And the proactive credit, balance sheet, liquidity management continue to be priorities for independent finance companies like NorthStar.

We have high expectations for our non-traded redistribution platform and expect that this area will be a significant growth business. We also continue to seek opportunities to leverage our commercial real estate investment platform, capitalize on opportunities such as the CapitalSource acquisition which provides limited economic downside, yet very attractive upside potential.

With that I'll turn the call over to Andy, who'll review the results for the second quarter.

Andy Richardson

Thanks, David. For the second quarter, our GAAP net income inclusive of FAS 159 adjustments was $32 million or $0.42 per share. AFFO for the second quarter was $34 million or $0.41 per share. We invested approximately $6 million of equity capital and received approximately $96 million of net loan sale and repayments proceeds during the second quarter.

At the beginning of the second quarter, we acquired $4 million cash. The remaining 51% interest held by our former partner and the lessee of our largest healthcare net lease portfolio comprised of 34 senior housing properties. NorthStar is now both the lessor and the lessee of this portfolio through a taxable re-subsidiary and therefore is required to consolidate the operations of these assets.

In prior periods we did not consolidate because we owned the minority 49%stake in the lessee and recorded our portion of its income as equity in earnings of unconsolidated joint ventures. While the purchase resulted in approximately $200,000 of additional AFFO for the second quarter, the consolidation also resulted in a growth of income statement revenues and expenses.

The acquisition and consolidation cost, rental income and real estate property operating cost for the second quarter to increase by $13 million and $10 million respectively; and equity and earnings decreased by approximately $3 million.

Second quarter net interest income, which is interest, rental and advisory fee revenues left interest expense, loss interest expense, property operating cost and asset management fees to $27.2 million compared to $24.7 million in the first quarter of 2010. The increase was principally caused by the consolidation of our healthcare taxable REIT subsidiary and re-classification of property income.

General and administrative expenses for the second quarter excluding non-cash stock based compensation totaled approximately $17 million, approximately $2 million higher than the first quarter of 2010 exclusive of a $3.5 million one time charge in the first quarter. The increase was mostly related to one time charge of $750,000 to the CapitalSource CDO acquisition and $550,000 of other transaction cost.

Realized gain totaled a net $82 million for the second quarter compared to $1 million in the first quarter of 2010. Despite increasing risk premiums in the overall equity and credit markets during second quarter, CMBS spreads remained fairly steady.

As always, we cannot predict the amount, if any, and timing of realized gains that maybe generated from our portfolio in future period. This type of income will be dependent on many factors including several factors outside of our control such as market price spread and general market condition.

For the second quarter, NorthStar has booked value decrease by approximately $29 million for March 31, 2010. In general, we are seeing the impact of tighter credit spreads and our fair value adjustments resulting in higher aggregate values for our assets and liabilities compared to prior period.

Cash book value as of June 30 was $15.73 per common share. The earnings release contains a detailed reconciliation between our first and second quarter 2010 book values. In all unrealized mark-to-market adjustment, non-cash credit loss reserve and impairment charges and accumulated appreciation REIT excluded, book value would be $7.60 per share on June 30.

During the second quarter, we invested approximately $6 million of equity capital consisting of $4 million relating to open market purchases of our issued CDO note having an aggregate $29 million par amount, and $2 million relating to pre-existing future funding commitments. The $96 million of proceeds received from loan repayments and sales consisted of $73 million from loan sales and $23 million from partial loan repayment.

The three second quarter loan sales were completed at an average overall 22% discount to par. In June 30, we had two NPLs totaling $50 million of base and having an $11 million book value net of loan loss reserves down from five loans totaling $84 million at March 31.

For the second quarter, we completed modifications and extensions for two loans totaling $20 million which were NPLs at the end of the first quarter, both of these loans fully covered their debt service, but the borrowers continued to have difficulty refinancing in this environment. We also completed the sale of a $14 million non-performing first mortgage that had been adequately reserved for in prior period so there was no second quarter P&L impact from the sale.

Second quarter loan loss provisions totaled $57 million and approximately $8 million of the charge relates to our first mortgage loan sale. And the remaining $49 million of the second quarter provision relates to seven loans. Loan loss reserves totaled $136 million as of June 30th or approximately 7.3% of our loan portfolio.

In addition, we recorded $1 million impairment when operating real estate, relating to an REO asset as a result of a second quarter portfolio foreclosure of an $18 million first mortgage loan, backed office collateral located in Philadelphia.

NorthStar had recorded reserves of $9 million related to this loan in prior quarters. Construction and land back loans which market-wide have experienced the most stressed over the past few years represent approximately 3.7% of our balance sheet asset at the end of June.

We are continuing to forecast challenging credit conditions as macro economic and employment growth have been anemic. These statistics indicate the commercial real estate fundamentals will generally remain weak in 2011. Furthermore, obtaining dead capital at reasonable terms continues to be a challenge to most of our borrowers.

NorthStar's credit provisioning and reserve levels are based on the best available or information available to us. However, uncertain economic and real estate conditions make it difficult to forecast when credit conditioning should meaningfully improve. We are continuing to work through a number of assets whose outcomes are difficult to predict.

Our $3 billion managed commercial real estate securities portfolio had approximately $650 million of downgrade action during the second quarter, again reflecting the ongoing difficult real estate environment, weighted average rating of our real estate securities portfolio BB CA3 at June 30, down from BB BA2 of March 31.

Rating actions are not necessarily indicative of current economic performance. And a vast majority of our managed CMBS securities are current and paying according to their contractual term. At June 30, our nine managed CDO financings were in compliance with the related interest in collateral coverage debt.

The table contained in the supplemental information section of the earnings release shows the status of the CDO coverage debt. If we were to fail any of these tests, cash flow from the respected financing will be temporarily diverted from NorthStar to repay senior debt until the sales cap was back in compliance.

Credit ratings downgrade of the CMBS collateral backing our security CDOs negatively impact those (inaudible) if downgrades reach certain level, even if the security is fully performing. And typically a CDO can have a maximum amount CCC rated security before OC deteriorates. Preserving cash flow has consistently been a priority in managing our CDO financing. We have in the past been able to invest in discount securities to create OC cushion.

Year to date we generally have seen appreciation in our securities portfolio. Some securities now trading near far or premiums are. As we noted last quarter, we may seek to monetize gains and or sell securities even if such transactions may temporarily cause some of our CDO cash flows to be used for amortization.

As we believe such transactions create the best long term value. This is especially true for the three security CDOs in which we no longer have reinvestment rights or for which we received minimal cash flow.

In July, CDO 2 for which we received minimal cash flow during the second quarter and which has no reinvestment rights failed its OC test. We do not expect to receive further equity distributions from the CDO into the foreseeable future although we currently expect the return of capital from CDO 2 due to the high quality of the asset underlined in the CDO.

Turning to the right side of balance sheet, the Wells Fargo debt payoff reduced our outstanding scene of recourse in debt and is approximately 70%. NorthStar recorded in net $58 million gain from the discounted payoff of the debt. The payoff also eliminated $30 million of required annual amortization payment until its original fourth quarter 2012 maturity date and any liquidity risk of associated with future default on the approximately $450 million of loan assets previously securing the debt.

Elimination of this recourse bank debt greatly strengthened the right side of our balance sheet by eliminating a major debt maturity in two and a half years. Validated assets totaled $4.4 billion at June 30, down from $4.5 million at March 31. Consolidated leverage based on the outstanding principle balance of our debt rather than mark to market adjustments for the 82% percent at June 30.

NorthStar had approximately $120 million of total liquidity at June 30 comprised of $109 million of unrestricted cash and $11 million of un-invested cash in our CDO term financing. We currently have approximately $4 million of non-discretionary future unrestricted cash needs relating to our loan.

Before we conclude our prepared statements for the day, I'd also like to briefly discuss the July 8 acquisition of $1.1 billion commercial real estate CDO from capital source. We acquired all of the originally rated non-investment grade class notes and the CDOs equity and collateral management special servicing rights for $7 million of cash and expect $1 million of transaction cost.

At closing, the deal included 58 loans having an outstanding principle balance totaling $1.1 billion, approximately $104 million of cash available for investment financed by approximately $1 billion of outstanding CDO notes.

Approximately 99% of the collateral consists of first mortgage loans and at closing approximately 16% of the loan had monetary default who are non-performing. At closing, the CDO is failing at OC test by approximately $150 million and there are currently no distributions to equity. However, we do receive per annum senior management and other fees estimated to be approximately $2 million to $3 million based on closing balances.

The second quarter of this year, cash flow from the asset of approximately $13.5 million and debt service cost were approximately $4 million. If the CDO was able to make a distribution to the equity based on the second quarter statement, the annualized cash available for distribution to the note we purchased after payment of senior management fees will be approximately $36 million.

On the accounting front, we will consolidate the assets and liabilities of the CDO at their respected fair values as of the acquisition date. We expect that these will be at significant discounts to base amounts.

We're refining the valuations of and purchase price allocations for the consolidated assets. And a bank is providing market values for the liability. The acquired liabilities had an approximate $450 million market value of closing; so from an accounting standpoint that value would imply the assets and management rights required an aggregate 56% discount to face.

We'll have more detail for our third quarter's earnings call after we've completed our purchase accounting for the acquired assets and liabilities. This concludes our prepared remarks for the day. Now let's open up the call for questions, operator.

Question and Answer Session


(Operator Instructions) The first question comes from the line of Jim Shanahan with Wells Fargo.

Jim Shanahan - Wells Fargo

Regarding the judgment you're referring to for the former Washington Mutual properties, if it doesn't go your way can you remind me what the penalty or the cost of that settlement would be for NorthStar?

Al Tylis

Hey Jim its Al. There is an appeal that we're currently processing with the existing judge and if that's not successful there's then a separate appeal with an Appellate Court in California. And again, worst case, if that's not successful the current judgment amount is $42 million and we're also as part of the appeal not only challenging the validity of the judgment but also the amount.

So I would say $42 million plus fees would be worst case. And then obviously we think as we've stated the case does not have merit so we hope for a better outcome than that.

Jim Shanahan - Wells Fargo

Okay. Yes $42 million is what I recall there. And question for Andy related to this commercial real estate CDO acquisition, obviously a lot of cash flow here, the $36 million then is traps to pay down senior notes or is it traps to reduce the $150 million OC failure? How does that work exactly?

Andrew Richardson

It goes towards amortization of the note.

Jim Shanahan - Wells Fargo

Okay. Realistically then I mean if our forecast rate were through 2011, doesn't seem like that there would be any distributions from the CDO to your equity notes during that period, is that fair to assume?

Andy Richardson

It's really hard to tell Jim. I don't think that's necessarily a fair statement. There's a lot of moving parts within the CDO and we obviously bought it because we've got think this outside beyond just getting the management fees. But at this point it's just very hard and difficult to predict exactly when or if that cash flow distribution will come to us.

Jim Shanahan - Wells Fargo

Regarding this transaction I am somewhat uniquely positioned and then I cover both CapitalSource and NorthStar. Yet, I concluded that it was really favorable for both parties that there was some positives for CapitalSource to the extent they're trying to achieve expansion of their bank and this was kind of an issue for them, so that they can get rid of it, get it off the balance sheet. Yet for NorthStar, you can earn some management fees and potential long term upside. What are the other implications, like was there anything else, any other reason why CapitalSource might be compelled to sell this to you?

Andy Richardson

I think they're in the process of converting to a bank holding company. I think there's a lot of implication with respect to capital charges and other reason, that not having an asset backed secure tight structure in your balance sheet could benefit that. I can't speak specifically to their motivation, but most banks do not like to hold equity and securitized assets on their balance sheet.

Jim Shanahan - Wells Fargo

My question then is somewhat unique to this situation here for CapitalSource is there any other, rather many other financial companies that might also be looking to offload these types of non-recourse assets and liabilities?

Andy Richardson

We think that's a possibility, but we are certainly looking for those opportunities; we can't tell you that, there's going to be another opportunity next quarter. But I think, one of the interesting things about this and some others in this space are that, they may have access this market because it looks attractive, in '06, '07, and they mainly have one or two of these vehicles and there is definitely a knowledge base, that requires to really maximize the management of these investments. This matches the asset management exercise but the financing management exercise and so we might be certainly uniquely positioned to do that. So we are looking for more of these opportunities.


And our next comes from the line of Gabe Poggi with FBR Capital Markets.

Gabe Poggi - FBR Capital Markets

I got a few questions; one regards your triple net holdings with the recent search for lack of a better word in the credit markets. Have you guys received any interest on those assets, how those assets want to perform and then two, you guys I think in the past have been looking may be to monetize those assets, has there been any increased interest in those assets over the last several months.

Second question is all staying equal for the new opportunity fund, et cetera, what do you think are the best opportunities? Where do you think you get the most bang for you buck, best risk-reward going forward, where is the best place to be in the opportunity set. And then David, I know that CMBS 2.0 market with Goldman pricing a deal last night, your thoughts on what you think issuance may look like for the back half of the year? How progress, if you want to call progress, how things have moved along year to date?

Al Tylis

On the triple net, yes we are really haven't been marketing any of those assets. I think you are aware we sold a portfolio of our healthcare net lease on the office side. We have not been marketing any of those assets other than a small leasehold in New York City that we disclosed in the release that we sold for a $2.5 million gain.

As it relates to the private lease, and what we are looking for I think we are exploring or have invested in a combination of discounted CMBS bonds and are also looking at either direct origination of mortgages, or a purchasing existing mortgages at discount. I think the game plan is to create a portfolio of those assets in order to generate the yields that the retail investor is looking for.

I think in terms of the securitization market, as you've seen it's starting to develop, I think it's so pretty conservative from a credit perspective, but the fact that the originators of these securitizations and certain instances are making seven or eight points. I think suggest that there will be an increased amount of volume over time, because it is with back spread

Generally there is more activity in the market and financing will, start to become more prevalent. I think over the next six to twelve months we'll see a lot more of that securitization activity happen. And I think, as that market develops, the credit risks that investors are willing to take will get better and eventually you'll see levels that will enable a lot more of the existing loans to get repaid.

I don't have the credit stats on Goldman, but I think it was probably net yields in the low to mid-teens.


(Operator Instructions) And our next comes from the line of Joshua Barber with Stifel Nicolaus.

Joshua Barber - Stifel Nicolaus

Andy, I know that you touched a little bit upon the accounting impact to the CapitalSource CDO, wondering if there would be an immediate impact on the third quarter, from loss reserves either through purchase accounting or if you'll just do that on a as needed basis. And if you have any estimate of what the potential book value impact could be?

Andy Richardson

The book value impact will be minimal, because we are essentially taking a low purchase price of $7 million purchase price. And acquiring net asset, that's what that implies. And so those assets are effectively being fair values in mark-to-market. So the values at which we bring them on our balance sheet at will effectively reflect what we consider reserved adjusted levels. That's the way the purchase accounting will work. So any degradation of credit value after the acquisition would be reflected in additional credit loss provisioning, but certainly any recovery in excess of the value that attributable to those loans at acquisition would be income.

Joshua Barber - Stifel Nicolaus

On the Wells line, I know it was obviously a good deal for you guys. Just wondering what the Wells motivation was, you guys seem to have pretty good liquidity position today. Why would Wells consider walking away from something that has recourse to them, and then potentially you've been entering into a new non-recourse secured facility?

Andy Richardson

I think it was definitely a long-term process that I think ultimately, given the relationship that we had, they understood that getting rid of that recourse, over $300 million of recourse for us would be a very positive step for the company, and would enable for us to grow. And I think, we are willing to take a discount as a result of that, and part of it was that they felt that over time they could make it back through the expanded relationship with the new facility, but also with the warrant that we're granted as part of the transaction.

And so, I think overall, they view this as an ongoing relationship wherein notwithstanding the discount that over time this is going to be positive for them as well as for us.


(Operator Instructions) Our next question comes from the line of Steve DeLaney with JMP Securities.

Steve DeLaney - JMP Securities

Andy, I was wondering with your new registered non-traded REIT for $1 billion effort, could you review for us what the fee percentages and potential would be for NorthStar in managing that money as it's raised?

Andy Richardson

The fee structure has a couple of different types of fees in it, but generally speaking the advisor, which is NorthStar, will earn 1.25% annual management fee on assets under management. And then there are some additional fees, there's acquisition and disposition fees that are built into the structure as well. So when we look at our overall fees, the NorthStar on annual basis, making certain assumptions about acquisition and asset turnover pace, we believe it'll be around 2% of equity.

That's the way we think about it, and obviously that can change as turnover changes or and as other things change within the company.

Steve DeLaney - JMP Securities

So the base, 125, and that is on gross assets assuming you might use any leverage or is that on the actual equity rate?

Andy Richardson

That's on gross assets.

Steve DeLaney - JMP Securities

Gross assets, I thought that's what you said. And that's how you're getting to your 2% projected on equity.

Andy Richardson

Same plus acquisition and some leverage.

Steve DeLaney - JMP Securities

And getting back to the, sort of the healthcare triple net lease properties, I think Dave touched on this. Didn't you also have a filing at one point to do something with a segment of your triple net lease? I believe it was the healthcare specific properties, and if so is that still active and did the acquisition of the 51% interest from the former partner in July, is that sort of all tied into that project?

Andy Richardson

We do have a registration statement, an IPO statement in registration right now for the healthcare and net lease properties. Right now the market conditions aren't there that would allow us to go public. If you recall that as for as our asset management strategy, we file and externally advised healthcare company, and the market conditions aren't there today. But certainly when we started that process last year, gaining a 100% ownership in control of those assets was part of the deal that involved acquiring the 51% interest in the taxable REIT.

Steve DeLaney - JMP Securities

Got it, so it is somewhat connected, it's just the final ultimate goal is not feasible given current market conditions. I don't want to get down on the weeds, but in your GAAP book, you gave some nice reconciliation table that your GAAP book went up $0.33 to $15.73. But I was focused on this adjustable book, and that actually come down about $0.40. And did that just have to do with sort of the shifts in the different mark-to-market things that you were excluding?

Andy Richardson

No, because that excludes those adjustments. It came down quite late because we are not recognizing in that, but we sold a couple of CLO equity interest in our former middle market lending business this quarter. And so we effectively consider that business to be done and we rode off any kind of mark-to-market adjustment that we had that we hadn't realized before.


Thank you and there are no further questions in the queue. I'd like to turn the call back over to management for closing remarks.

Al Tylis

Thanks, everyone, for continuing support and we'll talk to you next quarter.


Ladies and gentlemen, this concludes the NorthStar Realty Finance second quarter 2010 result's conference call. If you'd like to listen to replay of today's conference, please dial 303-590-3030 or 800-406-7325 and enter the access code 4330777. Thank you for your participation. You may now disconnect.

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