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Colony Financial Announces Second Quarter 2012 Financial Results

Core Earnings

Core Earnings, a non-GAAP financial measure, is used to compute incentive fees payable to the Company’s manager and the Company believes it is a useful measure for investors to better understand the Company’s recurring earnings from its core business. For these purposes, “Core Earnings” mean the net income (loss), computed in accordance with GAAP, excluding (i) non-cash equity compensation expense, (ii) the expenses incurred in connection with the formation of the Company and the Initial Public Offering, including the initial and additional underwriting discounts and commissions, (iii) the incentive fee, (iv) real estate depreciation and amortization, (v) any unrealized gains or losses from mark to market valuation changes (other than permanent impairment) that are included in net income, (vi) one-time events pursuant to changes in GAAP and (vii) non-cash items which in the judgment of management should not be included in Core Earnings. For clauses (vi) and (vii), such exclusions shall only be applied after discussions between the Manager and the Independent Directors and approval by a majority of the Independent Directors.

     

(1)

   

The internal rate of return represents the effective compounded rate of return earned over the life of the investment based on the actual net cash flows (after any debt service) of each respective underlying investment after accounting for all investment-level transaction costs and expenses. The internal rate of return for WLH residential land investment assumes that the portion received in stock was realized as cash on the date of sale. The Company currently holds its share of the WLH stock position.

(2)

The equity multiple represents (1) the actual aggregate net cash flows (after any debt service) of each respective underlying investment after accounting for all investment-level transaction costs and expenses divided by (2) the cost basis of such investment, net of any acquisition financings. The equity multiple for WLH residential land investment assumes that the portion received in stock was realized as cash on the date of sale. The Company currently holds its share of the WLH stock position.

(3)

The expected internal rate of return represents the effective compounded rate of return expected to be earned over the life of the investment taking into account the terms of the existing financing and the expected cash flows of the investment based on management’s assumptions, which the Company believes are reasonable. There can be no assurance that the ultimate realized internal rate of return will equal the expected internal rate of return. See “Risk Factors” in the reports filed by the Company with the Securities and Exchange Commission for a discussion of some of the risks related to our investments that could adversely impact the expected levered internal rate of return.

 

Conference Call

Colony Financial will conduct a conference call to discuss the second quarter results on Friday, August 3, 2012, at 6:00 a.m. PT / 9:00 a.m. ET. To participate in the event by telephone, please dial 877-941-2068 ten minutes prior to the start time (to allow time for registration) and use conference ID 4549989. International callers should dial 480-629-9712 and enter the same conference ID number. For those unable to participate during the live broadcast, a replay will be available beginning August 3, 2012, at 9:00 a.m. PT / 12:00 p.m. ET, through August 17, 2012, at 8:59 p.m. PT / 11:59 p.m. ET. To access the replay, dial 877-870-5176 (U.S.), and use passcode 4549989. International callers should dial 858-384-5517 and enter the same conference ID number. The call will also be broadcast live over the Internet and can be accessed on the Investor Relations section of the Company’s Web site at www.colonyfinancial.com. To listen to the live webcast, please visit the site at least 15 minutes prior to the start of the call in order to register, download and install any necessary audio software. A replay of the call will also be available for 90 days on the Company’s Web site.

About Colony Financial, Inc.

Colony Financial, Inc. is a real estate investment and finance company that is focused on acquiring, originating and managing a diversified portfolio of opportunistic real estate-related debt and equity investments at attractive risk-adjusted returns. Our investment portfolio and target assets are primarily composed of interests in: (i) secondary loans acquired at a discount to par; (ii) new loan originations; and (iii) equity in single family homes to be held for investment and rented to tenants. Secondary debt purchases may include performing, sub-performing or non-performing loans (including loan-to-own strategies). Colony Financial has elected to be taxed as a real estate investment trust, or REIT, for U.S. federal income tax purposes. Colony Financial is a component of the Russell 2000® and the Russell 3000® indices. For more information, visit  www.colonyfinancial.com.

Forward-Looking Statements

This press release may contain forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and contingencies, many of which are beyond the Company’s control, that may cause actual results to differ significantly from those expressed in any forward-looking statement. Statements regarding the following subjects, among others, may be forward-looking: business and investment strategy; investment portfolio; projected operating results; ability to obtain financing arrangements; financing and advance rates for the Company’s target assets; general volatility of the markets in which the Company invests; expected investments; expected co-investment allocations and related requirements; interest rate mismatches between the Company’s target assets and its borrowings used to fund such investments; changes in interest rates and the market value of the Company’s target assets; changes in prepayment rates on the Company’s target assets; effects of hedging instruments on the Company’s target assets; rates of default or decreased recovery rates on the Company’s target assets; the degree to which the Company’s hedging strategies may or may not protect the Company from interest and foreign exchange rate volatility; impact of changes in governmental regulations, tax law and rates, and similar matters; the Company’s ability to maintain its qualification as a REIT for U.S. federal income tax purposes; the Company’s ability to maintain its exemption from registration under the 1940 Act; availability of investment opportunities in mortgage-related and real estate-related investments and other securities; availability of qualified personnel; the Company’s understanding of its competition; and market trends in the Company’s industry, interest rates, real estate values, the debt securities markets or the general economy.

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