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NorthStar Shines a Little Light on Pending Multi-Billion Dollar NYC Deal

New Non-Traded Investment REIT Focused on NYC Property Market in the Works
December 4, 2013
As year-end 2013 fast approaches, firms and investors are busy prepping to close out their acquisition and disposition pipelines. One deal in particluar has attracted outsize interest as it involves a doozy of a major New York properties deal being lined up by NorthStar Realty Finance Corp., a $10 billion New York-based diversified commercial, real estate and asset management company.

Northstar has plans to spend millions investing in an undisclosed New York-based private real estate company.

"A company that I would imagine most of you in this room, you and many in the audience will be familiar with, especially if they have owned equity REITs in the past,” Albert Tylis, co-president and COO of NorthStar, told a roomful of attendees at this week’s FBR Capital Markets & Co.’s Fall Investor Conference.

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The transaction has not closed, but Tylis said it is moving in that direction and “we certainly assume it will,” he added. The initial investment closing is expected to occur in two weeks or so.

Tylis added that it will be both a debt and equity investment - a little more on the debt side but with a substantial equity component.

Tylis said NorthStar would be buying an undisclosed percentage of the company. It then plans to fold that ownership into a new several billion dollar, non-traded REIT focused on the New York City market early next year.

“This business is both an owner of real estate but as much as that, it’s a manager of funds that own real estate, and this group has a great track record, both publicly and privately they have had great success raising institutional capital in their private funds,” Tylis said.

“I think there is an opportunity to grow the asset management through this, it’s a way to get good exposure to Class A real estate in New York City, which given our cost of capital isn’t always something that’s available and we couple that with the ability to do multiple billions of dollars in the non-traded REIT space of this group, I think there’s sort of a great strategic fit there that we like.”

In addition to forming a new non-traded REIT, NorthStar said it expects to raise an additional $800 million to $1 billion of capital next year for two vehicles that it is currently marketing. It would also start a couple of more.

Tylis said the company has the capacity to be raising funds for “as many as four [funds] at any given time, and I certainly hope by next year that’s what we are doing.”

“Next year I think there is significant amount of business in this private equity space, I think there will be a lot of sellers out there,” he said.

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