WASHINGTON, D.C. 20549
Date of report (Date of earliest event reported):
November 20, 2012
NorthStar Real Estate Income Trust, Inc.
(Exact Name of Registrant as Specified in Charter)
399 Park Avenue, 18th Floor, New York, New York 10022
(Address of Principal Executive Offices) (Zip Code)
Registrants telephone number, including area code: (212) 547-2600
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 8.01. Other Events.
On November 20, 2012, NorthStar Real Estate Income Trust, Inc. (NorthStar Income) closed a CMBS financing transaction collateralized by $351 million of directly originated commercial real estate loans (CRE Loans) by NorthStar Income and its sponsor NorthStar Realty Finance Corp. (NRF) that is being used to finance its contributed CRE Loans on a permanent, non-mark to market and non-recourse basis. NorthStar Income, through its subsidiaries, contributed nine CRE Loans with a $199 million aggregate principal balance to the CMBS financing transaction and NRF, through its subsidiaries, contributed five CRE Loans with a $152 million aggregate principal balance to the CMBS financing transaction. This transaction involved the issuance and sale of a total of $228 million of investment-grade bonds, representing an advance rate of 65% and a weighted average coupon of LIBOR plus 1.63%. Affiliates of NorthStar Income and NRF retained all of the below investment-grade bonds with an affiliate of NorthStar Income retaining $70 million of a total of $124 million, representing its equity interest in the CRE Loans it contributed to the CMBS financing transaction. The net proceeds received by NorthStar Income from this CMBS financing transaction were used to repay $118 million of borrowings that had originally financed the contributed CRE Loans on its various credit facilities. The bonds issued in the CMBS financing transaction were sold in private placement transactions exempt from registration under the Securities Act of 1933, as amended.
In connection with the CMBS financing transaction, subsidiaries of NorthStar Income made certain customary representations, warranties and covenants. If there is a breach of those representations and warranties or a defect in the documentation of any of the contributed assets, which breach or defect materially and adversely affects the value of the subject contributed asset, the value of the related mortgaged property or the interests of the trustee therein, then a subsidiary of NorthStar Income, NorthStar Real Estate Income Trust Operating Partnership, LP, will be required to either cure the breach, repurchase the affected contributed asset from the issuing entity, replace the affected contributed asset with another asset or make a loss of value payment, as the case may be. In connection with this transaction, since NorthStar Income and NRF both contributed assets into a single securitization, NorthStar Income entered into a partnership agreement with NRF that provides that both parties will receive the economic benefit and bear the economic risk associated with the assets each contributed into the securitization. In both cases, a portion of NorthStar Incomes and NRFs respective retained interests will be subordinate to interests of the senior bondholders. In the unlikely event that NorthStar Income or NRF suffers a complete loss of a portion of its respective retained interests, any additional losses would be borne by the remaining retained interests held by NorthStar Income or NRF, as the case may be, prior to the senior bondholders. NorthStar Income will maintain effective control of its retained interest in the contributed assets. The partnership agreement provides to the maximum extent that NorthStar Income will realize the economic benefits of the securitization associated with its contributed assets, and that NRF will realize the economic benefits of the securitization associated with its contributed assets, with any differentials in cash flows being appropriately allocated between NorthStar Income and NRF.
Certain items in this Current Report on Form 8-K may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which can be identified by words like will, expects, look forward and similar expressions. These statements are based on managements 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; NorthStar Income can give no assurance that its expectations will be attained. Forward-looking statements are necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying any forward-looking statements will not materialize or will vary significantly from actual results.
Variations of assumptions and results may be material. Factors that could cause actual results to differ materially from NorthStar Incomes expectations include, but are not limited to, whether the underlying CRE Loans are repaid at their initial maturity, whether a NorthStar Income subsidiary may become subject to obligations associated with breaches of representations and warranties or a defect in the documentation of any of the contributed assets, which breach or defect, if any, materially and adversely affects the value of the subject contributed asset, the value of the related mortgaged property or the interests of the trustee therein and whether and to what extent NorthStar Income will bear losses related to NRFs contributed assets. Such forward-looking statements speak only as of the date of this Current Report on Form 8-K. NorthStar Income expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.