High-Yield Northstar Realty Finance C-Suite Moves To Unlock Shareholder Value

On August 5, Northstar Realty Finance

announced that long-time CEO David Hamamoto would be stepping down, to take on the newly created role of Executive Chairman at external manager Northstar Asset Management Group

. Hamamoto will continue to serve as Chairman of the Northstar Realty Finance board of trustees. Veteran NRF President Al Tylis will also assume the role of Chief Executive Officer of NSAM and become a member of both NSAM and NRF's Board of Directors. On August 11, Jonathan A. Langer will take over as the new CEO of Northstar Realty, reporting to both Hamamoto and Tylis. Langer is a former Managing Director and Partner at Goldman Sachs, the Wall Street firm where Hamamoto had also been previously employed. Tale Of The Tape - A Fairly Muted Reaction As of this writing both Northstar stocks are trading in a narrow range, near their previous close.

Northstar Asset management will also be the external manager of the previously announced NRF Northstar Realty Europe (NRE) REIT spin-out. Mahbod Nia was recently appointed as CEO of NRE by the board. Hamamoto and Tylis will remain focused on both NRF and NRE according to the announcement. Dan Gilbert will remain in his long-time role as Northstar's Chief Investment and Operating Officer.

During the past 52-weeks, NRF shares have traded in a range of $14.78 - $18.90 per share, and are down ~16.5 percent so far this year.

The NRF board announced its regularly quarterly dividend distribution of $0.40 per share on August 4, which represents a forward annual yield of ~10 percent at the current share price. According to the news release, incoming CEO Langer "…will concentrate on using his extensive industry knowledge and relationships to maximize shareholder value at NRF." Langer said, "NorthStar Realty has built an incredibly talented and seasoned executive team and the underlying strengths of its operating strategies and diversified commercial real estate portfolio are clear. NorthStar has a long¬standing track record of success and I look forward to working closely with David, Al, Dan and the entire organization to deliver long¬-term, attractive results for our shareholders." Northstar Realty Finance - Big Picture Northstar is a diverse REIT, and according to the website "…core business activities include acquiring commercial real estate properties, such as manufactured housing, healthcare, office and retail net lease and multifamily; originating, structuring and acquiring commercial real estate debt; and making opportunistic investments such as real estate limited partnership interests." During the previous decade, Northstar has a history of outperformance vs commercial mortgage REITs, the S&P 500, and the MSCI U.S. REIT Index (RMZ).

During that time period, Northstar Realty Finance has also evolved from a commercial mREIT to a highly diversified equity REIT, which is now included as part of the RMZ. However, the chart above shows that Mr. Market prefers the simpler story of REIT sector "pure-plays," and awards them a higher price to AFFO multiple. Investor Takeaway One strategy to unlock NRF shareholder value would be to announce additional REIT sector spin-outs of business segments that possess large enough scale and balance sheets to compete successfully with their sector peers. The NSAM management team has previously discussed this as a possible strategy, with NSAM being the external manager of these newly created pure-play REITs. Additionally, NSAM is also a sponsor of non-traded REITs which may have contributed to the recent underperformance of its shares, given the recent scrutiny and proposed changes in disclosure surrounding the sale of non-traded REIT shares. Notably, NRF shareholders are being paid a handsome 10 percent yield while they wait to see how management intends to unlock the value contained in its diverse portfolio of real estate assets.