8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 10, 2012

NorthStar Realty Finance Corp.

(Exact name of registrant as specified in its charter)

Maryland (State or other jurisdiction
of incorporation) 001-32330 (Commission File
Number) 11-3707493 (I.R.S. Employer
Identification No.)

399 Park Avenue, 18th Floor, New York, NY	10022
(Address of principal executive offices)	(Zip Code)

(212) 547-2600

(Registrant’s telephone number, including area code)

N/A

(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):

oWritten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

oSoliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

oPre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

oPre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 1.01Entry into a Material Definitive Agreement.

On December 10, 2012, NorthStar Realty Finance Corp. (“NorthStar”) entered into a subscription agreement (the “Subscription Agreement”) pursuant to which, among other things, a subsidiary of NorthStar agreed to subscribe for Class A limited partnership interests (the “Class A Interests”) in a newly formed limited partnership (the “Partnership”).  The Partnership is expected to own limited partnership interests in up to 51 real estate private equity funds (the “Fund Interests”) managed by top institutional quality sponsors with an aggregate reported net asset value of approximately $765 million (the “NAV”) at June 30, 2012 (the “Valuation Date”).  NorthStar assigned a portion of its rights and obligations under the Subscription Agreement to a subsidiary of NorthStar Real Estate Income Trust, Inc., NorthStar’s sponsored non-traded REIT (“NorthStar Income” and, together with NorthStar, the “NorthStar Entities”).

The current owner of the Fund Interests (the “Class B Partner”), which is a financial services organization with over $100 billion in assets under management, agreed to contribute in one or more closings the Fund Interests to the Partnership pursuant to a contribution agreement in exchange for all of the Class B partnership interests (“Class B Interests”) in the Partnership, and the NorthStar Entities agreed to contribute to the Partnership cash in the amount of $390 million (if all of the Fund Interests are contributed and subject to certain adjustments for capital contributed by, and capital returned to, the Class B Partner following the Valuation Date) (the “NorthStar Contributions”) in exchange for all of the Class A Interests.  The Class B Partner will still retain capital in the Partnership of $375 million based on the NAV as of the Valuation Date (if all of the Fund Interests are contributed).  Furthermore, the NorthStar Entities have the option to purchase an additional fund interest with a NAV of approximately $54 million at the Valuation Date on the same terms and conditions as the Fund Interests.  The Class A Interests will provide the NorthStar Entities with priority returns as described in more detail below.

The NorthStar Entities are expected to fund the NorthStar Contributions with cash on hand with NorthStar funding $275 million and NorthStar Income funding $115 million (if all of the Fund Interests are contributed by the Class B Partner).  The NorthStar Entities have deposited an aggregate of $40 million of such amount with the Class B Partner in the same proportion as their expected NorthStar Contributions.  The deposit is generally non-refundable if the transactions contemplated by the Subscription Agreement are not consummated as a result of a default by the NorthStar Entities.

The transactions contemplated by the Subscription Agreement are expected to close as consents from the general partners of the Fund Interests are received, with an initial closing expected in January 2013 and subsequent closings occurring periodically thereafter (each, a “Closing”).  The outside date for any Closing is July 2, 2013 and each Closing is subject to customary closing conditions, including obtaining consents of the general partners of the funds.

In connection with the initial Closing, the NorthStar Entities and the Class B Partner will enter into an Amended and Restated Limited Partnership Agreement (the “Partnership Agreement”).  The Partnership Agreement will contain customary terms and conditions and will provide for distributions of all cash flow and return of capital on a priority basis to the NorthStar Entities as follows:  (i) first, 85% to the NorthStar Entities (pro rata based on their respective contributions in the Partnership) and 15% to the Class B Partner until the NorthStar Entities have received $585 million of distributions (a 1.5x multiple on all of their invested capital); (ii) second, 15% to the NorthStar Entities (pro rata based on their respective contributions in the Partnership) and 85% to the Class B Partner until the Class B Partner has received a return of its then remaining capital and (iii) third, 51% to the NorthStar Entities (pro rata based on their respective contributions in the Partnership) and 49% to the Class B Partner.

Further in connection with the initial Closing, NorthStar or one of its affiliates will become the general partner of the Partnership and, subject to the limitations set forth in the Partnership Agreement, will have the right to manage, control and conduct the affairs of the Partnership from and after the initial closing.

To the extent the Fund Interests have future capital commitments, the NorthStar Entities will fund such capital commitments on a pro rata basis in the same proportion as their initial contributions into the Partnership and those amounts will have the same priority of distribution as described above.  The maximum amount of future capital commitments underlying all of the Fund Interests is approximately $176 million, although the NorthStar Entities expect that the actual amount of capital commitments that are called will be substantially less than the maximum amount.

The transaction is subject to customary closing conditions, including obtaining third-party consents that are outside of the control of the NorthStar Entities.

Safe-Harbor Statement

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 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; NorthStar 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’s expectations include, but are not limited to, those described in the documents NorthStar has filed with the United States Securities and Exchange Commission as well as the possibility that (1) the NAV as of June 30, 2012 does not necessarily reflect the fair value of the Fund Interests on such date and the current fair value could be materially different, (2) the actual amount of future capital commitments underlying all of the Fund Interests that will be called and funded by the NorthStar Entities could vary materially from NorthStar’s expectations, (3) the transaction may not close at the time or on the terms anticipated, if at all, (4) the NorthStar Entities may be unable to satisfy the various conditions to closing of the transaction, including obtaining consents outside of their control, and certain general partners of the Funds may exercise rights of first refusal to purchase Fund Interests, consequently the size of the transaction could vary significantly from NorthStar’s expectations and (5) because, among other matters, the sponsors of the private equity funds, rather than the NorthStar Entities, will control the investments in those funds,the NorthStar Entities could lose some or all of their investment.  Such forward-looking statements speak only as of the date of this Current Report on Form 8-K.  NorthStar 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.

ITEM 7.01Regulation FD Disclosure.

NorthStar Realty Finance Corp. (“NorthStar”) has furnished information as Exhibit 99.1 related to the transactions described in Item 1.01 of this Current Report on Form 8-K.

The information in Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.1 furnished pursuant to Item 9.01 shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities under that Section.  Furthermore, the information in Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.1 furnished pursuant to Item 9.01, shall not be deemed to be incorporated by reference into the filings of NorthStar under the Securities Act of 1934, as amended.

ITEM 9.01Financial Statements and Exhibits.

(d)Exhibits.

The following exhibit is furnished as part of this Current Report on Form 8-K:

Exhibit Number	Description
99.1	Corporate Presentation Materials.

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SIGNATURES

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.

		NorthStar Realty Finance Corp.
		(Registrant)
Date: December11, 2012	By:	/s/ Ronald J. Lieberman
		Ronald J. Lieberman
		Executive Vice President, General Counsel and Assistant Secretary

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EX-99.1

Exhibit 99.1

Real Estate Private Equity Fund Investment December 2012 ©2012 NorthStar Realty Finance Corp.

1 Safe Harbor This presentation contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about future results, projected yields, rates of return and performance, projected cash and profits earned from investments, expected and weighted average return on equity, market and industry trends, investment opportunities, business conditions and other matters, including, among other things: the scalability of our investment platform; the size and timing of offerings or capital raises and actual management fee income derived from, our two non-traded REITs; the ability to opportunistically participate in commercial real estate refinancings; the projected returns on, and cash earned from, investments funded by drawings from our credit facilities and securities offerings; whether the Company’s real estate private equity fund investment closes on the terms anticipated, if at all, and the timing of any such closing as well as whether the underlying funds perform as anticipated including the ability to generate positive IRRs. Factors that could cause actual results to differ materially from NorthStar's expectations include, but are not limited to, those described in the documents NorthStar has filed with the United States Securities and Exchange Commission as well as the possibility that (1) the NAV as of June 30, 2012 does not necessarily reflect the fair value of the Fund Interests on such date and the current fair value could be materially different, (2) the actual amount of future capital commitments underlying all of the Fund Interests that will be called and funded by the NorthStar Entities could vary materially from NorthStar’s expectations, (3) the transaction may not close at the time or on the terms anticipated, if at all, (4) the NorthStar Entities may be unable to satisfy the various conditions to closing of the transaction, including obtaining consents outside of their control, and certain general partners of the Funds may exercise rights of first refusal to purchase Fund Interests, consequently the size of the transaction could vary significantly from NorthStar’s expectations and (5) because, among other matters, the sponsors of the private equity funds, rather than the NorthStar Entities, will control the investments in those funds, the NorthStar Entities could lose some or all of their investment. Forward-looking statements concern future circumstances and results and other statements that are not historical facts and are sometimes identified by the words “may,” “will,” “should,” “potential,” “intend,” “expect,” “seek,” “anticipate,” “estimate,” “believe,” “could,” “project,” “predict,” “continue” or other similar words or expressions. The forward-looking statements involve a number of significant risks and uncertainties. A number of factors, including those factors set forth under the section entitled “Risk Factors” in the Annual Report on Form 10-K for the year ended December 31, 2011 of NorthStar Realty Finance Corp. (the “Company”), could cause the Company’s actual results, performance, achievements or industry results to be materially different from any future results, performance and achievements expressed or implied by these forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the Securities and Exchange Commission filings of the Company. The Company does not guarantee that the assumptions underlying such forward-looking statements are free from errors. The Company undertakes no obligation to publicly update any information whether as a result of new information, future events, or otherwise, except as may be required by applicable securities laws. This presentation is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any securities of the Company.

2 Interests acquired LP interests in 51 real estate private equity funds, managed by top institutional quality sponsors (the “Funds”) Structure Joint venture (“JV”) with NorthStar(1) having a priority return NAV of Funds Approximately $765 million(2) Purchase Price of Fund Interests Approximately $390 million Distributions NorthStar receives 85% of all cash distributions from the Funds until NorthStar has received a 1.5x multiple on its invested capital -Distributions thereafter go 15% to NorthStar and 85% to seller until seller has received a return of its then remaining invested capital -Distributions thereafter go 51% to NorthStar and 49% to seller Funding $275 million: NRF - available cash $115 million: NRF’s non-traded REIT - available cash Acquisition – Overview (1) “NorthStar” includes NorthStar Realty Finance Corp. (“NRF”) and NorthStar Real Estate Income Trust, Inc., NRF’s sponsored non-traded REIT (2) As reported by Funds at 6/30/12

3 Represents IRR beginning from June 30, 2012 NAV ($765 million) and does not include potential capital calls from the Funds and returns on such capital. This chart is hypothetical and illustrative only. Actual returns and profits, if any, could be materially different and consolidated fund IRRs could be negative Assumes five year weighted average life and nine year total life of the investment Based upon 141 million shares and operating partnership units outstanding as of September 30, 2012 Acquisition – The Opportunity Considerable opportunity for long-term capital appreciation, dividend growth and diversification Potential Return Matrix on $275 million NRF Investment(1) Consolidated Fund IRRs from 6-30-12 NAVs(2) 0% 5% 10% 15% 20% Resulting NRF IRR 10% 14% 19% 25% 31% Resulting NRF Profit ($ in millions) $146 $166 $223 $295 $366 Resulting NRF Profit ($ per share)(3) $1.03 $1.18 $1.58 $2.09 $2.59 Priority returns and structure will enhance long-term IRR and resulting profits Represents ownership interest in high quality real estate private equity funds (1) (2) (3)

4 Acquisition – Structural Enhancement $765 $689 = 1.5x on NorthStar invested capital $0 NAV ($mm) 10% A 10% decline in current NAV ($76 million) and zero income earned from the Funds would result in NorthStar receiving a 1.5x multiple on its invested capital (1) Does not include potential capital calls from the Funds, including related impacts from changes in NAV and income earned from the Funds. Current Fund NAVs are predominantly at significant discounts to the cost basis of the underlying assets (1)

5 Acquisition – Downside Protection $765 $459 = 100% return of NorthStar invested capital $0 NAV ($mm) 40% Structured JV provides substantial downside protection for NorthStar A 40% decline in current NAV ($306 million) and zero income earned from the Funds would still allow NorthStar to recover 100% of invested capital (1) Does not include potential capital calls from the Funds, including related impacts from changes in NAV and income earned from the Funds. (1)

6 NRF Overview Investments through December 7, 2012 and pro forma for NRF’s full investment in the Real Estate PE Fund Investment. Equity invested based on cost. Total capital raised through November 30, 2012 since inception NRF is a diversified commercial real estate investment and asset management company NRF has deployed capital into CRE investment opportunities seeking to provide the most attractive risk adjusted returns NRF Invested Equity 2012 Year-to-Date(1) Additional fee stream from $550 million(2) of capital raised in non-traded REITs without substantial invested capital CRE Loans $104mm Other Commercial Real Estate Investments $604mm (1) (2)