MLV & Co Sees Asset Manager Split as Uneven for Northstar Realty Finance Corp.

In a report published Wednesday, MLV & Co analyst Richard Eckert reiterated a Buy rating and $24.00 price target on Northstar Realty Finance Corp. NRF. In the report, MLV & Co noted, “On Monday, NRF spun its asset manager, NorthStar Asset Management NSAM and, at the same time, effected a 1-for-2 reverse split. Market participants appear to have simply concluded NRF had divided evenly in two. Both NRF and NSAM started trading Tuesday at around $17.50, but NRF fell by nearly $0.60 while NSAM improved by over $1.50. Although we recognize the earnings power of the asset manager, we do not believe the value of the assets of the REIT are well understood. Our sum-of-parts analysis values the property and mortgage assets of the latter at $24.00 (Exhibit 1) post-split. We have made these changes to our estimate of fair value: 1) we have cut the estimated number shares in half; 2) our external management discount expands to 15% from 10%; and 3) our calculations are rounded down to the nearest 50 cents instead of rounding up/down to the nearest nickel. In other words, we feel the $24.00 estimate of fair value is conservative. Even if we use conventional measures of value, like dividend yield, NRF seems inexpensive (Exhibit 2 & 3). Thus, regardless of how one weighs the value of NRF, we perceive it to be a compelling bargain at current prices.” Northstar Realty Finance Corp. closed on Tuesday at $16.80.