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NorthStar Realty Invests $340 Mill. in RXR Realty

Deal Will Help Seed New Asset Management REIT
December 27, 2013
NorthStar Realty Finance Corp. closed on a strategic $340 million investment in RXR Realty, a leading real estate operating and investment management company focused on the New York City Tri-State area.

The investment includes a combination of corporate debt, preferred equity and common stock in RXR which provides NorthStar with a 30% ownership interest in RXR.

RXR was formed in 2007 by the former management team of Reckson Associates Realty Corp. ("Reckson") after it sold Reckson to SL Green Realty in January 2007 for $6.5 billion.

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Since its formation RXR has raised more than $3 billion of institutional capital and accumulated interests in $6.5 billion of assets comprised of 108 operating properties and approximately 20 million square feet.

RXR began reinvesting in the Manhattan market in 2009 and has been one of the most prolific investors assembling a portfolio of trophy assets that include 75 Rockefeller Plaza, 237 Park Ave., 340 Madison Ave., 450 Lexington Ave.,, 620 Avenue of the Americas, The Starrett Lehigh Building and 1330 Avenue of the Americas.

“Given RXR management's track record in both the public and private markets, its high quality real estate portfolio and its growing asset management business, they are a perfect fit for NorthStar, both in terms of further diversifying NorthStar's asset base with trophy properties in New York City, and growing NorthStar's asset management business,” said David Hamamoto, chairman and CEO of NorthStar.

"In connection with the recently announced planned spin-off of NorthStar Asset Management, we will be evaluating alternatives for including NorthStar's portion of RXR's asset management business as part of the assets that NorthStar Asset Management will receive in the spin-off,” Hamamoto said.

NorthStar Realty previously approved a plan to spin-off its asset management business into a separate publicly traded (NorthStar Asset Management Corp.), which is expected to be listed on the New York Stock Exchange.

“This transaction with RXR is the first of many opportunities that we hope to execute on as we begin to scale our asset management business,” Hamamoto said.

As part of the investment, NorthStar and RXR intend to immediately begin working together on raising capital through NorthStar's distribution network to complement the activities of RXR's current investment vehicles and future funds.

NorthStar Asset Management will be entitled to 50% of the asset management fees from any capital raised through its distribution network and will be entitled to additional asset management fees through its proportionate ownership interest in RXR.

NorthStar Realty Finance Corp. had previously commenced an underwritten public offering of common stock expecting to raise more than $580 million. The company intends to use those net proceeds to fund the RXR investment.

It also closed on $345 million of an $400 million manufactured housing portfolio comprised of 16 communities containing 5,900 pad rental sites primarily in Denver, CO; and Austin and Dallas, TX. Inclusive of this portfolio, since 2012 NorthStar has accumulated an approximately $1.6 billion manufactured housing portfolio comprised of 123 communities containing over 29,000 pad rental sites.

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