NEW YORK, Nov. 9, 2016 /PRNewswire/ -- NorthStar Real Estate Income II, Inc. (NorthStar Income II) announced that it priced a $284.2 million non-recourse, match-term, non-mark-to-market financing transaction in the form of a commercial mortgage-backed securitization (CMBS), NorthStar 2016-1, at a weighted average cost of funds of LIBOR + 2.07% and an advance rate of 68% ($193 million of investment grade bonds issued and sold). The transaction is collateralized by a pool of 10 commercial real estate mortgage loans, all but one of which was directly originated by NorthStar Income II and three senior participations originated by NorthStar Real Estate Income Trust, Inc. (NorthStar Income). NorthStar Income II contributed approximately $254.7 million of collateral to the transaction, and NorthStar Income contributed approximately $29.5 million of collateral to the transaction. The transaction closed on November 9, 2016.
Both NorthStar Income II and NorthStar Income are public, non-traded real estate investment trusts sponsored by NorthStar Asset Management Group Inc. (NorthStar, NYSE: NSAM) that together own over $3.6 billion of commercial real estate (CRE) debt and CRE-related investments.
"This is an extremely efficient transaction for NorthStar Income II and not only provides us with non-recourse, match-term, non-mark-to-market financing for our debt investments, but also allows us to recycle borrowing capacity on our credit facilities," commented Daniel R. Gilbert, chief executive officer and president. "NorthStar has been a market leader in securitization financing transactions, having executed over $2.9 billion in similar debt financings across its managed companies since 2004, and we continue to utilize these structures with a goal of benefiting our shareholders."
An affiliate of NorthStar Income II will retain the non-investment grade securities and equity interests in the transaction equal to $90.3 million in the aggregate, and an affiliate of NorthStar Income will retain approximately $15.0 million of junior participations in the collateral it contributed. NorthStar Income II expects to earn a gross yield of approximately 12% on its invested equity. Net proceeds from the transaction will be used by NorthStar Income II to, among other things, repay certain credit facilities, which will generally create new availability under those facilities to finance and enhance the returns of future mortgage loan investments.
The securities are being offered inside the United States to persons who are both (1) (a) "qualified institutional buyers" as defined in Rule 144A under the Securities Act of 1933, as amended (the Securities Act), or (b) solely with respect to securities issued in definitive form, institutional "accredited investors" as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act, and (2) "qualified purchasers" as defined in Section 2(a)(51) of the Investment Company Act of 1940, as amended. The securities are also being offered outside the United States to non-U.S. persons in reliance on Regulation S under the Securities Act. The securities have not been registered under the Securities Act or any state or foreign securities laws and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and applicable state laws. This announcement shall not constitute an offer to sell or the solicitation of an offer to buy the securities.
As of June 30, 2016, adjusted for acquisitions and commitment to purchase and sell through August 10, 2016, NorthStar Income II's $1.8 billion portfolio consists of 17 senior mortgage loans, four subordinate interest investments, one mezzanine loan, 24 real estate operating portfolios, three portfolios of real estate private equity funds and eight commercial mortgage-backed securities investments.
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