Good day everyone and welcome to the NorthStar Realty Finance Fourth Quarter 2015 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Al Tylis, CEO of NorthStar Asset Management. Please go ahead, sir.

Thank you very much. Welcome to NorthStar Realty's fourth quarter 2015 earnings conference call. Before the call begins, I would 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 a more detailed discussion of 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. Furthermore, certain non-GAAP financial measures will be discussed on this conference call. Our presentations of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. 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 www.sec.gov. With that, I will now turn the call over to NorthStar Realty's CEO, Jonathan Langer. Jonathan?

Thank you Al and welcome to NorthStar Realty's fourth quarter and year-end earnings conference call. Joining me on the call today in addition to Al are David Hamamoto, our Chairman; Dan Gilbert, our Chief Investment and Operating Officer; Debra Hess, our Chief Financial Officer; Ron Lieberman, our Executive Vice President and General Counsel; and Keith Feldman, our Managing Director of Capital Markets. Before discussing our ongoing efforts to position NorthStar Realty for the future and maximizing long term shareholder value, I'd like to take a minute to discuss the global environment. Recently the public financial markets have seen a spike in volatility as the results of global macroeconomic concerns, including a slowdown in China, weakness in commodity prices, particularly oil and rising geopolitical tensions. Many global central banks, including the Bank of Japan and the European Central Bank have embarked on further rate reductions and asset purchase programs to attempt to combat low inflation and help spur economic growth. Despite this the U.S. economy has continued to improve with moderate GDP growth and a steadily declining unemployment rate, while U.S. GDP growth slowed in the fourth quarter of 2015 a strong jobs report in December had some economists expecting growth to accelerate in future periods. Also in December the Federal Reserve rate and the Federal Funds rate marking the end of a seven-year period of zero level interest rates. However, given the global economic headwinds discussed uncertainty remains regarding the timing of the next Federal Reserve action. Turning to the U.S. real estate market, we believe that the U.S. commercial real estate market remains on largely solid footing with continued strong investor demand, healthy property fundamentals across most property types and generally moderate supply growth. NorthStar Realty's operating performance remains solid as evidenced by our fourth quarter 2015 operating results.…

Thank you, Jonathan and good morning everyone. In an effort to continue to provide further transparency into our assets and operating performance, we added additional disclosure to our press release and supplemental presentation. This includes year-over-year same-store NOI by subsector and many key statistics by segment including occupancy, lease term, RevPAR, ADR, among others. We will continue to enhance our disclosures and are evaluating other operating metrics that maybe useful for investors when evaluating the company predominantly as an equity REIT. Actually laid in today's press release for the fourth quarter we reported CAD of $118 million or $0.63 per share. CAD was down from the third quarter primarily as a result of a few items; one, seasonality in our hotel business. As discussed by Jonathan in our previous calls the first and fourth quarters are typically the slowest quarters for hotels due to seasonality with the second and third quarters being the strongest. This seasonality contributed $16 million [ph] or approximately $0.09 per share decline for the quarter. $10 million of foregone income from the PE fund that was sold as of September 30, 2015 representing approximately $0.05 per share. Another net $5 million of incremental expense from year end has another of $0.02 to $0.03 per share. Additionally, please note that the fourth quarter only included one month of NRE prior to the spinoff which was approximately $5 million of CAD or $0.02 to $0.03 per share. As of December 31, assets were approximately $15.2 billion pro forma for the approximately $2 billion of monetization we have spoken about. Including assets of deconsolidated CDOs and investments that NorthStar Realty prior to committed supplier. As Jonathan mentioned we modified our dividend payout policy to be more in line with other equity rates. The payout ratio of approximately 63% of CAD will provide shareholders with a highly attractive, persistent and durable dividend while freeing up capital to buy back stock and reduce our corporate recourse borrowings. With respect to financial liquidity, we have approximately $914 million of potential liquidity after taking into consideration our corporate credit facility and cash proceeds we will collect in accordance with the sales. As a reminder, the tables in our quarterly financial supplement provide additional details regarding our investments and the underlying real estate access. This supplemental has been and is available on our website at www.nrfc.com. This concludes our formal remarks for today. Operator, please open up the call for questions.

Thank you. [Operator Instructions] And our first question will come from Stephen Laws of Deutsche Bank.

Hi good morning. I appreciate the opportunity to ask questions. Al, can you talk about the process here kind of timing, I know you provided a little color with regards to the monetizations of some assets, expected sale, or cap rates that any interest you received looking similar to where you've got them marked or how do they compared to your cost basis?

Yes, so look overall we look at all the monetizations that we completed. We feel like the ultimate result is in line with our NAV expectations. There is definitely some puts and takes throughout as you might expect, but on an overall basis we're definitely pleased with where we ended up and it is consistent with our reviewed NAV going into that.

Yes and Stephen I think the assets that we current have that are in process or at hired advisors we're seeing in the private market is very much consistent with the cap rates that we use to our NAV which as you know the Green Street cap rates.

Right and on the recombination potential can you maybe talk about expected timing? I know the NSAM call is here in about half an hour, but NSAM hired an advisor a number of weeks ago and that review was hopefully a shorter process and now it looks like it is obviously looking has an advisor to look at tips or combinations, is this something that should play out in a matter of weeks or months or kind of what is the expected timing of how this process is potentially going to go?

Stephen, we are not going to be in a position to discuss this much more than what you’ve seen in our public announcements, but I think the focus is to run an efficient process from the standpoint of NSAM and NRF has hired its advisor and has its special committee and our board members that are not overlapping with NSAM and will focus on the interest of NRF and doing that as well in an efficient manner.

Thanks, fair enough. Debra, on the CAD, two or three things cited for the sequential change whether it was the NRF Europe for one month or some non-recurring tax issues, hotel seasonality, as we think about Q1 CAD versus Q4, what material asset sales or what significant changes should we think about that may happen on a sequential basis in Q1?

Stephen, I highlighted what some of the larger items were, they got you from Q3 to Q4. At this point we are not really giving a sense of what the kind of go forward CAD will be as a result of some of the monetizations as we have announced.

Okay, I will do that as best we can with what you've announced. And lastly, on the stock buyback you have got a plan to repurchase plan in place to avoid any restricted or blackout periods whether that be quarter end or something significant maybe with an asset sale that’s not public that would possibly prevent you guys you from repurchasing stock without a say, 10b5 in place?

Yes, Stephen we’re cognizant of all those issues and looking at a variety of ways to execute our buyback strategy.

Okay, well certainly seems an attractive uses of proceeds and we want to see you guys continue to buy back stock, so thanks for the chance to ask questions.

Thanks.

And our next question will come from Dan Altscher of FBR.

Hey, good morning everybody, thanks. I guess when we think of kind of a order priority kind of going forward on the liquidity front, Jonathan you mentioned debt and actually buybacks, can you maybe just prioritize one over the other what happens first what happens second or are they kind of just all simultaneous right now?

Yes, I not sure we prioritize one over the other. Obviously our stocks remain this cheap buying back our stock remains at the top of the list. At the same time, we are very cognizant of the desire and we should all be focused on trying to take risk out of the business and so we’re going to try and find the right balance between the two.

Yes, and I think the nice thing too Dan is the substantial amount of monetizations we’ve achieved in such a short period of time in addition to the number of initiatives that are in process, I think is hopefully going to provide us an opportunity to really make a dent in both, in terms of aggressively buying back our stock and as well as really taking the risk out of our business which certainly in this environment is something we think should be highly valued by the market.

Yes, and Stephen [ph] I would go further than that and just say in terms of the accomplishments we have made on the liquidity front its really taking out any risk in the business. And I think a lot of this early move to really demonstrate to the market that we are in a very strong financial position. And notwithstanding that, as we’ve shown we are actively out there looking at ways to realize the NAV that’s inherent in the private bid today. But I think being in the position that we're in enables us really to make sure that if we do transact on a sale or joint venture is at a price that we really like. And so obviously, in terms of how this thing develops over the next year a lot of it is going to be a function of our judgments about capital redeployment and how we should execute. But we are in a position now that is very strong and I think that as we’ve demonstrated since we went public in 2004, we are going to be able to make the right call and figure out how to maximize value for NRF shareholders.

So, I mean, I guess with that in mind, and look no one has a gun to your head to do either of these it seems like, but you probably want to do them in substance and in size, but given the current liquidity and given the monetizations that you’ve talked about so far, I guess more probably required to do both, paydown all the remaining recourse debt and to do the $500 million to complete the remaining $380 or is there some other capital that going back from loans repayments and then like that naturally you can just do it and then both are in place right now with what is kind of coming back or what is already there?

Yes, Dan look, like I said I think we can achieve nearly all of that through the existing cash that we have as well as capital that we have coming back. I mean we got a substantial amount of return on capital that comes in through our private equity funds, there are certainly more loans that will be coming in that we feel like we can monetize or get repaid. So and then there is just the excess cash flow above our dividend which is substantial and we really build very significant NAV by simply deploying a dollar of that excess cash flow into buying our stock. I mean it’s today that is - at current levels that is a trade where $1 dividend creates more than $2 of NAV. So I think there is a lot of leverage here that we could pull a number of which we have and certainly more that we can execute on the future.

Okay, it looks good. I do want to talk a little bit just to ask about the amendment to the credit facility. It looks like maybe the facility was amended maybe downward in size, can you just give us a little bit more color around that, your option, the bank’s option, how is that going to happen?

Yes I mean there is some unused fees associated with the facility and in trying to take our recourse debt down as opposed to up, we concluded we won’t use anyway near the of the total capacity, so we made a simple decision to reduce it and primarily to reduce those fees.

Okay. So I mean, it sounds like Jonathan you’re saying that it was your guided active effort to do it and that is kind of where it starts and ends?

Yes.

Yes and ultimately Dan we’re going to, that is something that we’re going to pay off and it certainly gives us more financial flexibility to execute on the initiatives that we want.

Okay. That’s good, maybe just this is just a quick clarification and I don’t see it anywhere in the supplement necessarily but and Jonathan you talked about a little bit in your healthcare remarks, but no HCR Medicare [ph], no nothing going on with Genesys and none exposure to any of those for anything?

Yes, I mean look we don’t have anywhere near the concentration in any of the operators like that, plus not of our operators as I mentioned are suffering from operational distress or an inability to make their lease payments, so we feel generally good across the board.

Okay. And I understand try to get an answer around the possible potential recombination, I guess I understand this is an independent advisor and customarily doing it, but how is the NRF side thinking about that potential from a recombination side from whether it’s a stock for stock or more a cash transaction, how you are you viewing that potential as an option?

I understand the question. I appreciate the desire to get clarity on that. I think at this point it is important that the process play out. The special committee works with its advisors and figure out what is in the best interest of NRF.

Okay, I get it. All right, thanks. I will drop back in the queue.

And our next question will come from Jade Rahmani of KBW.

Good morning and thanks for taking the questions. Regarding asset sales those that have been consummated to date including the ones that have not yet closed, will you be booking gains on those, should we expect gains to run through the income statement?

I don’t expect any substantial gains to come through. I think they are close to our carrying value.

Okay. In terms of quantifying the earnings impact, would you care to provide any color about how we should think about that, for example the PE investments are quite high yielding, that is one example, but overall earnings impact?

I mean I think Debra, you didn’t comment on this further, we can talk more offline, but obviously we talked through the earnings loose [ph] from the PE portfolio that we sold and Debra commented on that. I think outside that Debra, I’m not sure how much more color is provided.

We haven’t provided much more color.

And Jade, I think the other thing is the impact on earnings will be largely predicated on what we’re doing with that capital. Right? And so certainly buying back our stock at these levels is probably far in a way more accretive than the yield we are running on any of the assets we sold. Conversely paying down debt obviously has a different impact, but clearly from a risk profile also has a meaningful advantage. So it will depend on the timing and the allocation of that capital.

And are there any tax and other friction costs we should anticipate, any one-time charges or tax consequences?

No, in other words the business, the $933 million of cash is a true net number.

And in terms of that number and the liquidity figure you've provided I think the $338 million of additional proceeds to come through in over what timeframe will that happen?

Yes, I mean I think the bulk of that we expect to come into the next weeks if not a month and I think there may be some residual portion that is more of an April timeframe event. But it is all pretty near term.

In terms of real estate fundamentals, can you just comment on supply in your market and where in particular you see it as being a headwind? And on the CapEx side if you’re ratcheting up CapEx spend as a result to make your products that more competitive as some of the healthcare REITs have said?

You are talking about healthcare now or just generally?

I think here on the major fruit groups, but healthcare I guess as a starting point?

Yes, so look on healthcare like a lot of the other healthcare companies out there we focus on NIC provided data and NIC provides pretty good data on the top 99 MSAs in the country in terms of supply and new construction. And so we’ve done, we’ve done the analysis where you map and you create radiuses, five pharma radiuses around your assets and you isolate how much new supply is happening within those radiuses. When we get that analysis we come up with about 3.4% to 3.5% impact as a percentage of the total healthcare NOI that is impacted in those 99 MSAs. And so from a healthcare perspective, we feel like we are generally in line with our competitors and we feel generally pretty good, occupancies which we trended up quarter-over-quarter were certainly in the certain markets there is puts and takes so it is not going to be completely immune to some of these trends, but we feel generally in a good position there. From a capital expenditure perspective in healthcare, well you know we go through pretty normal capital expenditure cycles. We are not showing anything special to try and act in the defensive measures against supply. In hotels, I touched some of this a little bit in the remarks, we tend to not be in these higher ADR markets that are attracting most of the capital for new supply. So supply is generally moderate in our suburban markets in first our selectors portfolios. Also the brands that we have, the Marriott and Hilton flags provide us some protection. You basically get areas of protection when you have these flags. They can't put another similar flag near you because we have the best distribution systems. It also provides some defensive measures as well. And then hotels obviously we are spending $150 million. It was sort of forced expenditure, sort of enforced by the brands, but from our perspective it is going to put us in a much stronger position once they are complete as I described during the remarks.

And how much of that has been previously reserved for?

All of it, the way these deals work you have to funnel that money in the cash flow upfront. So we actually have, I am not sure how much is left, it is probably about half of that let’s say that $150 million that is sitting in the bank that is not part of our liquidity that we talked about. That's restricted cash and it can only be used for that one purpose.

So I guess to get to some kind of AFFO proxy what additional assumption would you make, would you suggest we make for maintenance CapEx?

Hey, so I have taken a look at what might be considered maintenance CapEx based on our budget for 2016 and substantially all of that is going to be non-recurring or revenue enhancing. I would say the number just based on kind of where we sit today and that includes everything including some of the assets that we may sell such as [indiscernible] is looking at maybe $10 million which is not going to be that material of a number when you look at it on a per quarter basis.

$10 million per quarter in terms of maintenance CapEx?

No, no, no in the aggregate, maybe you can call it and just to be a little conservative maybe, oh I’m sorry, yeah I’ll just clarify. This excludes hotels. Right? Because Jade, as we've discussed before, hotels are not, hotel REITs do not report any sort of maintenance or recurring CapEx as part of its metrics, but if take out hotel and look at everything else I think that number is call it, $10 million maybe a little bit more across all of the other asset classes for the entire year including those assets that we could potentially sell like the MH [ph].

Okay and on the hotel side is there anything beyond the $150 million that you guys have already reserved for?

No, I don’t expect anything really that much beyond what we have reserved for. There might be a little bit, but not that much. But you know, but you know Jade, you know that right, every year there is a percentage that comes out of your revenues for FF&E reserve.

Yes.

Okay so I’m ignoring, I’m putting aside the FF&E reserve. I’m talking more about the CapEx.

Okay, thanks for taking my questions.

Our next question will come from Matthew Howlett of UBS.

Thanks for taking my question. Just on the minority interest on the health care, could that be a highest 49% or can you guess sort of what percentage you looking to sell?

Yes, we are looking at something substantial Matt, so certainly as much as 49%.

Okay. Now, a question I want to ask, what do you guys plan on doing also what is the strategy a year from now if you get above book and then in internalize, but before that, I mean we look at the see you pay off your recourse leverage, you just have the nonrecourse noise yet, I mean how high periodically they start those below book, where are you comfortable with taking leverage or if are you just keeping buying back stock the market is going to give you discount, where do you feel that you could go with that? I mean how do you, maybe just kind of tell us again how you'll look at that mortgage debt most of it is 5 plus your term debt?

Sure Matt, look we have always we have had lots of conversations over the years around leverage and I think our view has always been the market over simplifies it and when we have your nonrecourse, non cross collateralized diversified mortgages, the general outcomes of those from the standpoint of a borrower are very much positive over the years. And what we have always been focused on is what is the risk to the enterprise? What’s our recourse debt? And even today our recourse debt stands at a mid single digit percentage of assets which is far below most equity REITs and with the intention of taking that number nearly to zero. And so we feel very comfortable from the standpoint of how we operate our business and just from a risk standpoint that having zero or little recourse debt and only having compartmentalize nonrecourse mortgages is a great risk profile for our business going forward.

Go ahead.

You know, I think I have mentioned this coverage levels inherent at with the secured debt is very strong across all the platforms and getting stronger as NOI grows.

Got you. And just with all the volatility in the CMBS market I think maybe some people are looking, maybe looking as far as five, six plus years, but you feel comfortable that that market will stabilize and then you can deal with that down the road if you have good performing properties. Is that sort of how we should look at it?

Absolutely, and look the good thing is from our standpoint we have no need to access the CMBS market for a number of years.

Got you, okay and leads me to the followup, even if you do monetizing all of your assets, buying back stock, maybe even internalizing the manager a year from now with some of these sales, does NorthStar become sort of NorthStar of the old, you originate more senior loans or I mean, how do we look at what NorthStar becomes a year from now after you go through this process?

Yes, I think the, as I said earlier, I mean what NorthStar becomes a lot of it is going to be a function on what the market opportunities are and I think that what we've tried to do in the last couple of days is articulate sort of our near term strategy and give people confidence that we have a balance sheet and fundamentally strong real estate and we're going to figure out in this volatile capital markets environment how to maximize value for our shareholders. And so predicting exactly how the company will be positioned 12 months from now I think of is a of it is going to be a function of what the market opportunities are.

And still hotels, healthcare all that is still in the game and you still have a senior lending business that could pick up all that you'll just rotate where you see the opportunity or just sort of nothing has changed really, is that's how we look at it?

Yes, I think though, I mean we've also as part of this though tried to simplify our business and stick to certain food groups and be more transparent in terms of how we present so people can understand the data more clearly. So I think while there is clearly an affect of okay how we're going to make the most money on the capital that we have, I think we're also sensitive to some of the issues that exist in the public markets about transparency and simplicity and making sure people can understand the story. So everything is – it is an ongoing balancing act and know we feel like we're very well positioned to demonstrate our ability to create value for shareholders.

I appreciate that, I look at the discount just being to NAV being compelling, so I really commend you guys on the new strategy in place. Thanks a lot.

Thank you.

[Operator Instructions] Your next question will come from Mitch Germain of JMP Securities.

So, on the multifamily sale I know that you guy were looking at a portfolio. Was this just a function of breaking it up, was it able to maximize proceeds?

Yes, that was a more optimal way to approach it as opposed to going with one buyer.

Great, the hotel refresh, just what is the timing on when that process is going to take place?

Yes, so that was a two-year process generally speaking that at the end of this year 2016.

Okay, so it is ongoing as we speak, I got you. And then to jump in how should consider seasonality in that portfolio on a go forward basis?

The seasonality of this portfolio we're strongest in the second and third quarters and we are weakest in the first and fourth. That will happen in the fourth quarter in terms of result is very standard with respect to what has happened historically both for our business and for other businesses that have similar assets.

Got you, and then just I think just, I think Debra, you kind of alluded to it, but no special dividend implications from the sales in your mind?

Not at this time, no.

That's it from me, thanks.

Thanks Mitch.

And our next question will come from Jason Weaver of CRT Capital.

Hey, good morning. Thanks for taking my question. First the USA is very positive [indiscernible] announced yesterday so Jonathan we really appreciate your color on that. What can you tell me about how you are baking up the pace and use the proceeds as well as what your sort of minimal level of liquidity you want to maintain during the process?

I'm sorry, can you repeat the question Jason?

It was hard to hear you Jason.

Mainly about how are you thinking about the pace of using proceeds of the assets sales to repurchase shares and to paydown debt versus what sort of minimal levels of liquidity you would like to maintain doing that?

Yes, look, I mean we're going use the pace that we think is appropriate for the opportunities as we see them and from a liquidity perspective – we're going to remain maintain appropriate liquidity obviously at all times, but I don’t think we've come out and said this is a number. We're going to be moderate and conservative as we view that obviously.

Understood. So I was thinking about the – how you are thinking about the lending business with the elevated volatility in the CMBS and other commercial real estate lending markets, what are you seeing as far as opportunities out there and if it's in enhanced and also what your appetite is for what looked like an enhanced opportunity for your transitional lending product?

Hey Jason, it is Al. Look, clearly there are broad opportunities and we think more can come in the lending business, but clearly those are not thinks that any of us would be entertaining and our capital is going to be used for buying back our stock that is by far the best use as well as taking down leverage.

Fair enough. And finally, we've heard some investors that are confused or a little bit critical of their use of CAD for primary metric for a while now. Since you are moving in the direction in a lot of respect more to the operation of the trends are traditionally weak. Have you given any thought to also reporting an AFFO figure?

Yes, absolutely. We filed that and we're thinking about it and we continue to evaluate metrics every quarter as to how to enhance the reporting of our portfolio in our business.

Okay, thank you so much. Thank you for taking my questions.