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NorthStar Realty Finance's CEO Discusses Q2 2012 Results - Earnings Call Transcript

We remain disciplined in managing our balance sheet and continue to maintain a healthy liquidity position, especially relative to our near-term corporate debt maturity. For the last several quarters, we’ve highlighted that given the significant volume of commercial real estate loans maturing over the next several years and the limited liquidity available to commercial real estate owners relative to historic norm, there is a compelling investment environment for lenders to have access to capital and an established commercial real estate loan origination platform with a strong track record

Towards this end, since the beginning of 2012, we have directly originated 18 loans with a principle balance of $451 million including $265 million on behalf of our non-traded REIT, NorthStar Real Estate Income Trust or NorthStar Income. Originations year-to-date were primarily first mortgages and the loans originated for NRF balance sheet are expected to generate a 17% return on invested equity.

Looking at our lines of credit for financing the loans that we originate, as of today we are almost fully drawn on our $200 million of credit facilities with Wells Fargo for financing mortgage loans at NorthStar and NorthStar Income. Furthermore, we have recently closed three additional credit facilities, two of which are for NorthStar Income with a combined initial size of $90 million and a third facility for NorthStar’s balance sheet with an initial size of $40 million, but with expectations for near term increases and availability.

In addition to financing our loan originations with long-term bank credit facilities, the three facilities that we just closed have terms of five, six and six years respectively includes the debt extension option. We have had preliminary conversations, rating agencies and banks about returning to the securitization market to finance these loans.

As we have indicated previously, we believe that some form of securitization should become available to commercial real estate finance companies like ours that have proven track records, deep investment organizations and a willingness to retain risks associated with loans that we directly originate.

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