DEFM14A 1 hcr2defm14a.htm DEFM14A HCR2 DEFM 14A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No.    )
Filed by the Registrant þ
Filed by a Party other than the Registrant ¨
Check the appropriate box:
¨    Preliminary Proxy Statement
¨    Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ    Definitive Proxy Statement
¨    Definitive Additional Materials
¨    Soliciting Material Pursuant to §240.14a-12
 
GRIFFIN-AMERICAN HEALTHCARE REIT II, INC.
(Name of the Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):
þ    No fee required.
¨    Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1)
Title of each class of securities to which transaction applies:
________________________________________________________________________________________
(2)
Aggregate number of securities to which transaction applies:
________________________________________________________________________________________
(3)
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
________________________________________________________________________________________
(4)
Proposed maximum aggregate value of transaction:
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(5)
Total fee paid:
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¨    Fee paid previously with preliminary materials.
¨
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
(1)
Amount Previously Paid:
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(2)
Form, Schedule or Registration Statement No.:
________________________________________________________________________________________
(3)
Filing Party:
________________________________________________________________________________________
(4)
Date Filed:
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JOINT PROXY STATEMENT/PROSPECTUS
To the Stockholders of NorthStar Realty Finance Corp. and the Stockholders of Griffin-American Healthcare REIT II, Inc.:
NorthStar Realty Finance Corp. (“NorthStar”), NRF Healthcare Subsidiary, LLC (“Merger Sub”), NRF OP Healthcare Subsidiary, LLC (“Partnership Merger Sub”), Griffin-American Healthcare REIT II, Inc. (“Griffin-American”) and Griffin-American Healthcare REIT II Holdings, LP (“Griffin-American Operating Partnership”) have entered into an Agreement and Plan of Merger dated as of August 5, 2014, as it may be amended from time to time (the “merger agreement”), and which is attached as Annex A to this joint proxy statement/prospectus and incorporated herein by reference. Pursuant to the merger agreement, Griffin-American will merge with and into Merger Sub, with Merger Sub as the surviving entity (the “parent merger”), and Partnership Merger Sub will merge with and into Griffin-American Operating Partnership, with Griffin-American Operating Partnership as the surviving entity (the “partnership merger” and together with the parent merger, the “merger”). The merger agreement was unanimously approved by the board of directors of each of NorthStar and Griffin-American.
If the merger is completed pursuant to the merger agreement, at the effective time of the parent merger, each share of Griffin-American common stock issued and outstanding immediately prior to the effective time will be automatically converted into the right to receive: (i) a number of shares of NorthStar common stock equal to the quotient (the “exchange ratio”) determined by dividing $3.75 by the ten day volume weighted average price of NorthStar common stock on the closing of the second to last trading day prior to the effective time of the parent merger (the “ten day VWAP”); and (ii) $7.75 in cash, without interest (collectively the “merger consideration”); provided, that if the ten day VWAP is less than $16.00, the exchange ratio will be 0.2344, and if the ten day VWAP is greater than $20.17, the exchange ratio will be 0.1859. In addition, at the effective time of the partnership merger, which will be immediately after the effective time of the parent merger, each partnership unit of Griffin-American Operating Partnership issued and outstanding immediately prior to the effective time of the partnership merger held by a limited partner of Griffin-American Operating Partnership will also be automatically converted into the right to receive the merger consideration. No fractional shares will be issued in the merger, and cash will be paid in lieu thereof. Shares of NorthStar’s common stock are currently traded on the New York Stock Exchange (the “NYSE”) under the symbol “NRF.” NorthStar will apply to have the shares of NorthStar common stock to be issued in the merger also listed on the NYSE upon the consummation of the merger. We anticipate that upon the consummation of the merger, the shares of NorthStar common stock issued in the merger will trade on the NYSE under the symbol “NRF.”
In connection with the proposed merger, NorthStar and Griffin-American will each hold a special meeting of their respective stockholders. The presence in person or by proxy of NorthStar common stockholders entitled to cast a majority of all the votes entitled to be cast at the NorthStar special meeting on any matter will constitute a quorum at the NorthStar special meeting. At NorthStar’s special meeting, NorthStar common stockholders will be asked to consider and vote on: (i) a proposal to approve the issuance of shares of NorthStar common stock to Griffin-American common stockholders and Griffin-American Operating Partnership limited partners (together, the “Griffin-American Holders”) pursuant to the merger agreement; and (ii) a proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the issuance of shares of NorthStar common stock to Griffin-American Holders pursuant to the merger agreement. At Griffin-American’s special meeting, Griffin-American common stockholders will be asked to consider and vote on: (i) a proposal to approve the parent merger and the other transactions contemplated by the merger agreement; and (ii) a proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the parent merger and the other transactions contemplated by the merger agreement.
The record date for determining the stockholders entitled to receive notice of, and to vote at, the NorthStar special meeting is the close of business on October 14, 2014 and the record date for determining the stockholders entitled to receive notice of, and to vote at, the Griffin-American special meeting is the close of business on October 14, 2014. The merger cannot be completed unless: (i) NorthStar common stockholders approve the issuance of shares of NorthStar common stock to Griffin-American Holders pursuant to the merger agreement by the affirmative vote of the holders of a majority of the votes cast on such proposal; and (ii) Griffin-American common stockholders approve the parent merger and the other transactions contemplated by the merger agreement by the affirmative vote of the holders of shares of Griffin-American common stock entitled to cast a majority of all the votes entitled to be cast on such proposal.
NorthStar’s board of directors (the “NorthStar Board”) has unanimously: (i) determined that each of the merger agreement and the merger is advisable for, fair to and in the best interests of NorthStar and its stockholders; (ii) approved the merger agreement, the merger and the other transactions contemplated by the merger agreement; and (iii) recommended that the NorthStar stockholders approve the issuance of shares of NorthStar common stock to Griffin-American Holders pursuant to the merger agreement. The NorthStar Board unanimously recommends that NorthStar common stockholders vote FOR the proposal to approve the issuance of shares of NorthStar common stock to Griffin-American Holders pursuant to the merger agreement and FOR the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the issuance of shares of NorthStar common stock to Griffin-American Holders pursuant to the merger agreement.
A special committee (the “Special Committee”) consisting of all of the independent directors of the Griffin-American board of directors (the “Griffin-American Board”), has unanimously: (i) determined that the parent merger and the other transactions contemplated by the merger agreement are advisable and in the best interest of Griffin-American; and (ii) recommended the approval of the merger agreement, the parent merger and the other transactions contemplated by the merger agreement by the Griffin-American Board. The Griffin-American Board, following the recommendation of the Special Committee, has unanimously (i) approved the merger agreement and the transactions contemplated thereby and authorized the execution and delivery of the merger agreement and (ii) determined and declared that the parent merger and the other transactions contemplated by the merger agreement are advisable, fair to and in the best interest of Griffin-American and directed that the parent merger and the other transactions contemplated by the merger agreement be submitted for consideration at a meeting of Griffin-American’s common stockholders. The Griffin-American Board unanimously recommends that Griffin-American common stockholders vote FOR the proposal to approve the parent merger and the other transactions contemplated by the merger agreement and FOR the proposal to adjourn the Griffin-American special meeting, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the parent merger and the other transactions contemplated by the merger agreement.
This joint proxy statement/prospectus contains important information about NorthStar, Griffin-American, the merger and the merger agreement. This document is also a prospectus for the shares of NorthStar common stock that will be issued to Griffin-American Holders pursuant to the merger agreement.
We encourage you to read this joint proxy statement/prospectus carefully before voting, including the section entitled “Risk Factors” beginning on page 42.



Your vote is important. Whether or not you plan to attend NorthStar’s special meeting or Griffin-American’s special meeting, as applicable, please authorize a proxy to vote your shares as promptly as possible. To authorize a proxy, complete, sign, date and mail your proxy card in the pre-addressed postage-paid envelope provided or authorize your proxy by one of the other methods specified in this joint proxy statement/prospectus or the accompanying notices. Authorizing a proxy will ensure that your vote is counted at the applicable special meeting if you do not attend in person. If your shares of common stock are held in “street name” by your broker or other nominee, only your broker or other nominee can vote your shares and the vote cannot be cast unless you provide instructions to your broker or other nominee on how to vote or you obtain a legal proxy from your broker or other nominee. You should follow the directions provided by your broker or other nominee regarding how to instruct your broker or other nominee to vote your shares. You may revoke your proxy at any time before it is voted. Please review this joint proxy statement/prospectus for more complete information regarding the merger and NorthStar’s special meeting and Griffin-American’s special meeting, as applicable.
Sincerely,
David T. Hamamoto
Jeffrey T. Hanson
Chairman and Chief Executive Officer
Chief Executive Officer and Chairman
NorthStar Realty Finance Corp.
Griffin-American Healthcare REIT II, Inc.
Neither the Securities and Exchange Commission (the “SEC”) nor any state securities regulatory authority has approved or disapproved of the merger or the securities to be issued under this joint proxy statement/prospectus or has passed upon the adequacy or accuracy of the disclosure in this joint proxy statement/prospectus. Any representation to the contrary is a criminal offense.
This joint proxy statement/prospectus is dated October 29, 2014 and is first being mailed to NorthStar and Griffin-American common stockholders on or about October 29, 2014.





NorthStar Realty Finance Corp.
399 Park Avenue, 18th Floor
New York, New York 10022
(212) 547-2600
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 28, 2014
To the Stockholders of NorthStar Realty Finance Corp.:
A special meeting of the stockholders of NorthStar Realty Finance Corp., a Maryland corporation (“NorthStar”), will be held at the Omni Berkshire Place, Sutton Room, located at 21 East 52nd Street, New York, New York 10022, on November 28, 2014, commencing at 10:00 a.m., local time, for the following purposes:
1.
to consider and vote on a proposal to approve the issuance of shares of NorthStar common stock to the stockholders of Griffin-American Healthcare REIT II, Inc., a Maryland corporation (“Griffin-American”), and to the limited partners of Griffin-American Healthcare REIT II Holdings, LP, a Delaware limited partnership (“Griffin-American Operating Partnership”), pursuant to the Agreement and Plan of Merger, dated as of August 5, 2014, as it may be amended from time to time (the “merger agreement”), by and among NorthStar, NRF Healthcare Subsidiary, LLC, a Delaware limited liability company and direct wholly owned subsidiary of NorthStar (“Merger Sub”), NRF OP Healthcare Subsidiary, LLC, a Delaware limited liability company and direct wholly owned subsidiary of Merger Sub (“Partnership Merger Sub”), Griffin-American and Griffin-American Operating Partnership (a copy of the merger agreement is attached as Annex A to the joint proxy statement/prospectus accompanying this notice); and
2.
to consider and vote on a proposal to adjourn the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the issuance of shares of NorthStar common stock to Griffin-American common stockholders and Griffin-American Operating Partnership limited partners (together, the “Griffin-American Holders”) pursuant to the merger agreement.
We will not transact any other business at the special meeting. The NorthStar board of directors (the “NorthStar Board”) has fixed the close of business on October 14, 2014 as the record date for determination of NorthStar common stockholders entitled to receive notice of, and to vote at, NorthStar’s special meeting and any postponements or adjournments of the special meeting. Only holders of record of NorthStar common stock at the close of business on the record date are entitled to receive notice of, and to vote at, the NorthStar special meeting. The presence in person or by proxy of NorthStar common stockholders entitled to cast a majority of all the votes entitled to be cast at the NorthStar special meeting on any matter will constitute a quorum at the NorthStar special meeting.
Approval of the proposal to approve the issuance of shares of NorthStar common stock to Griffin-American Holders pursuant to the merger agreement requires the affirmative vote of the holders of a majority of the votes cast on such proposal.
Approval of the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the issuance of shares of NorthStar common stock to Griffin-American Holders pursuant to the merger agreement requires the affirmative vote of the holders of a majority of the votes cast on such proposal.
The NorthStar Board has unanimously: (i) determined that each of the merger agreement and the merger is advisable for, fair to and in the best interests of NorthStar and its stockholders; (ii) approved the merger agreement, the merger and the other transactions contemplated by the merger agreement; and (iii) recommended that the NorthStar common stockholders approve the issuance of shares of NorthStar common stock to Griffin-American Holders pursuant to the merger agreement. The NorthStar Board unanimously recommends that NorthStar common stockholders vote FOR the proposal to approve the issuance of shares of NorthStar common stock to Griffin-American Holders pursuant to the merger agreement and FOR the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the issuance of shares of NorthStar common stock to Griffin-American Holders pursuant to the merger agreement.



YOUR VOTE IS IMPORTANT
Whether or not you plan to attend the special meeting, please authorize a proxy to vote your shares as promptly as possible. To authorize a proxy, complete, sign, date and mail your proxy card in the pre-addressed postage-paid envelope provided or, if the option is available to you, call the toll free telephone number listed on your proxy card or use the Internet as described in the instructions on the enclosed proxy card to authorize your proxy. Authorizing a proxy will assure that your vote is counted at the special meeting if you do not attend in person. If your shares of NorthStar common stock are held in “street name” by your broker or other nominee, only your broker or other nominee can vote your shares of NorthStar common stock and the vote cannot be cast unless you provide instructions to your broker or other nominee on how to vote or obtain a legal proxy from your broker or other nominee. You should follow the directions provided by your broker or other nominee regarding how to instruct your broker or other nominee to vote your shares of NorthStar common stock. You may revoke your proxy at any time before it is voted. Please review the joint proxy statement/prospectus accompanying this notice for more complete information regarding the merger and NorthStar’s special meeting.
By Order of the Board of Directors of
NorthStar Realty Finance Corp.
New York, New York
October 29, 2014
Ronald J. Lieberman
Executive Vice President, General Counsel & Secretary




Griffin-American Healthcare REIT II, Inc.
18191 Von Karman Avenue, Suite 300,
Irvine, California 92612
(949) 270-9200
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 28, 2014
To the Stockholders of Griffin-American Healthcare REIT II, Inc.:
A special meeting of the stockholders of Griffin-American Healthcare REIT II, Inc., a Maryland corporation (“Griffin-American”), will be held at the Island Hotel Newport Beach, located at 690 Newport Center Drive, Newport Beach, California 92660, on November 28, 2014, commencing at 10:00 a.m., local time, for the following purposes:
1.
to consider and vote upon a proposal to approve the merger of Griffin-American with and into NRF Healthcare Subsidiary, LLC, a Delaware limited liability company (“Merger Sub”) and a direct wholly owned subsidiary of NorthStar Realty Finance Corp., a Maryland corporation (“NorthStar”), with Merger Sub as the surviving entity (the “parent merger”) pursuant to the Agreement and Plan of Merger dated as of August 5, 2014, as it may be amended from time to time (the “merger agreement”), by and among NorthStar, Merger Sub, NRF OP Healthcare Subsidiary, LLC, a Delaware limited liability company (“Partnership Merger Sub”) and direct wholly owned subsidiary of Merger Sub, Griffin-American and Griffin-American Healthcare REIT II Holdings, LP, a Delaware limited partnership (“Griffin-American Operating Partnership”) (a copy of the merger agreement is attached as Annex A to the joint proxy statement/prospectus accompanying this notice), and the other transactions contemplated by the merger agreement; and
2.
to consider and vote on a proposal to adjourn the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the parent merger and the other transactions contemplated by the merger agreement.
We will not transact any other business at the special meeting. The Griffin-American board of directors (the “Griffin-American Board”) has fixed the close of business on October 14, 2014 as the record date for determination of Griffin-American common stockholders entitled to receive notice of, and to vote at, Griffin-American’s special meeting and any postponements or adjournments of the special meeting. Only holders of record of Griffin-American common stock at the close of business on the record date are entitled to receive notice of, and to vote at, Griffin-American’s special meeting.
Approval of the proposal to approve the parent merger and the other transactions contemplated by the merger agreement requires the affirmative vote of the holders of shares of Griffin-American common stock entitled to cast a majority of all the votes entitled to be cast on such proposal. If that vote is not obtained, the parent merger cannot be completed.
Approval of the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the parent merger and the other transactions contemplated by the merger agreement requires the affirmative vote of a majority of the votes cast on such proposal.
A special committee (the “Special Committee”) consisting of all of the independent directors of the Griffin-American Board has unanimously: (i) determined that the parent merger and the other transactions contemplated by the merger agreement are advisable and in the best interests of Griffin-American; and (ii) recommended the approval of the merger agreement, the parent merger and the other transactions contemplated by the merger agreement by the Griffin-American Board. The Griffin-American Board, following the recommendation of the Special Committee, has unanimously: (i) approved the merger agreement and the transactions contemplated thereby and authorized the execution and delivery of the merger agreement and (ii) determined and declared that the parent merger and the other transactions contemplated by the merger agreement are advisable, fair to and in the best interest of Griffin-American and directed that the parent merger and the other transactions contemplated by the merger agreement be submitted for consideration at a meeting of Griffin-American’s common stockholders. The Griffin-American Board unanimously recommends that Griffin-American common stockholders vote FOR the proposal to approve the parent merger and the other transactions contemplated by the merger agreement and FOR the proposal to adjourn the Griffin-American special meeting, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the parent merger and the other transactions contemplated by the merger agreement.



Whether or not you plan to attend the special meeting, please authorize a proxy to vote your shares as promptly as possible. To authorize a proxy, complete, sign, date and return your proxy card either via the facsimile number listed on the enclosed proxy card or in the pre-addressed postage-paid envelope provided or, if the option is available to you, call the toll free telephone number listed on your proxy card or use the Internet as described in the instructions on the enclosed proxy card to authorize your proxy. Authorizing a proxy will assure that your vote is counted at the special meeting if you do not attend in person. If your shares of Griffin-American common stock are held in “street name” by your broker or other nominee, only your broker or other nominee can vote your shares of Griffin-American common stock and the vote cannot be cast unless you provide instructions to your broker or other nominee on how to vote, or obtain a legal proxy from your broker or other nominee. You should follow the directions provided by your broker or other nominee regarding how to instruct your broker or other nominee to vote your shares of Griffin-American common stock. You may revoke your proxy at any time before it is voted. Please review the joint proxy statement/prospectus accompanying this notice for more complete information regarding the parent merger and Griffin-American’s special meeting.
By Order of the Board of Directors of
Griffin-American Healthcare REIT II, Inc.
Irvine, California
October 29, 2014
Cora Lo
Secretary





ADDITIONAL INFORMATION
This joint proxy statement/prospectus incorporates by reference important business and financial information about NorthStar from other documents filed with the SEC that are not included or delivered with this joint proxy statement/prospectus. See “Where You Can Find More Information; Incorporation by Reference” below.
Documents incorporated by reference are also available to NorthStar common stockholders and Griffin-American Holders without charge upon written or oral request. You can obtain any of these documents by requesting them in writing or by telephone from the appropriate company at the following addresses and telephone numbers.
NorthStar Realty Finance Corp.
Attention: Secretary
399 Park Avenue, 18th Floor
New York, New York 10022
(212) 547-2600
www.nrfc.com
 

Griffin-American Healthcare REIT II, Inc.
Attention: Secretary
18191 Von Karman Avenue, Suite 300,
Irvine, California 92612
(949) 270-9200
www.healthcarereit2.com


NorthStar common stockholders can also contact MacKenzie Partners, Inc., NorthStar’s proxy solicitor, and Griffin-American common stockholders can contact Boston Financial Data Services, Inc., Griffin-American’s proxy solicitor, at the following addresses and telephone numbers:
NorthStar:

MacKenzie Partners, Inc.
105 Madison Avenue
New York, NY 10016
(212) 929-5500
(800) 322-2885
 


Griffin-American:

Boston Financial Data Services, Inc.
Proxy Tabulator
P.O. Box 55909
Boston, MA 02205-5909
1-855-844-8650

(NorthStar common stockholders only)
 
(Griffin-American common stockholders only)

To receive timely delivery of the requested documents in advance of the applicable special meeting, you should make your request no later than November 20, 2014.
ABOUT THIS DOCUMENT
This joint proxy statement/prospectus, which forms part of a registration statement on Form S-4 filed by NorthStar with the SEC, constitutes a prospectus of NorthStar for purposes of the Securities Act of 1933, as amended (the “Securities Act”), with respect to the shares of NorthStar common stock to be issued to Griffin-American Holders in exchange for shares of Griffin-American common stock and partnership units of Griffin-American Operating Partnership held by its limited partners pursuant to the merger agreement. This joint proxy statement/prospectus also constitutes a proxy statement for each of NorthStar and Griffin-American for purposes of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In addition, it constitutes a notice of meeting with respect to the special meeting of NorthStar common stockholders and a notice of meeting with respect to the special meeting of Griffin-American common stockholders.
You should rely only on the information contained or incorporated by reference into this document. No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this document. This document is dated October 29, 2014. You should not assume that the information contained in this document is accurate as of any date other than that date. You should not assume that the information incorporated by reference into this document is accurate as of any date other than the date of such incorporated document. Neither our mailing of this document to NorthStar common stockholders or Griffin-American common stockholders nor the issuance by NorthStar of shares of its common stock to Griffin-American Holders pursuant to the merger agreement will create any implication to the contrary.
We use certain defined terms throughout this prospectus that have the following meanings:
We use the term “net lease” throughout this prospectus. Under a net lease, the tenant occupying the leased property (usually as a single tenant) does so in much the same manner as if the tenant were the owner of the property. There are various forms of net leases, most typically classified as “triple net” or “double net.” Triple net leases typically require the tenant to pay all costs associated with a property, including real estate taxes, insurance,



utilities and routine maintenance in addition to the base rent. Double net leases typically require the tenant to pay all the costs as triple net leases, but hold the landlord responsible for capital expenditures, including the repair or replacement of specific structural and/or bearing components of a property, such as the roof or structure of the building.
Accordingly, the owner receives the rent “net” of these expenses, rendering the cash flow associated with the lease predictable for the term of the lease. Under a net lease, the tenant generally agrees to lease the property for a significant term and agrees that it will have either no ability or only limited ability to terminate the lease or abate rent prior to the expiration of the term of the lease as a result of real estate driven events such as casualty, condemnation or failure by the landlord to fulfill its obligations under the lease.
We use the term “ten day VWAP” to mean the volume weighted average price of NorthStar common stock for a ten trading day period ending on the closing of the second to last trading day prior to the effective time of the parent merger, as reported by Bloomberg.
“NSAM” refers to NorthStar Asset Management Group Inc., a Delaware corporation and, together with its affiliates, NorthStar’s external advisor.
The “Management Agreement” refers to the Asset Management Agreement, dated as of June 30, 2014, by and between NorthStar and NSAM J-NRF LTD, a Jersey limited company and affiliate of NSAM.
This joint proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction in which or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction. Information contained in this joint proxy statement/prospectus regarding NorthStar has been provided by NorthStar and information contained in this joint proxy statement/prospectus regarding Griffin-American has been provided by Griffin-American.




TABLE OF CONTENTS
Index
Page
 
 













QUESTIONS AND ANSWERS
The following are some questions that NorthStar common stockholders and Griffin-American Holders may have regarding the proposals being considered at NorthStar’s special meeting and Griffin-American’s special meeting and brief answers to those questions. NorthStar and Griffin-American urge you to read carefully this entire joint proxy statement/prospectus, including the Annexes, and the other documents to which this joint proxy statement/prospectus refers or which it incorporates by reference because the information in this section does not provide all the information that might be important to you. Unless stated otherwise, all references in this joint proxy statement/prospectus to NorthStar are to NorthStar Realty Finance Corp., a Maryland corporation, and unless the context otherwise requires, include its subsidiaries; all references to Griffin-American are to Griffin-American Healthcare REIT II, Inc., a Maryland corporation, and unless the context otherwise requires, include its operating partnership and its other subsidiaries; all references to Griffin-American Operating Partnership are to Griffin-American Healthcare REIT II Holdings, LP, a Delaware limited partnership; all references to Merger Sub are to NRF Healthcare Subsidiary, LLC, a Delaware limited liability company and direct wholly owned subsidiary of NorthStar; all references to Partnership Merger Sub are to NRF OP Healthcare Subsidiary, LLC, a Delaware limited liability company and direct wholly owned subsidiary of Merger Sub; all references to the merger agreement are to the Agreement and Plan of Merger, dated as of August 5, 2014, by and among NorthStar, Merger Sub, Partnership Merger Sub, Griffin-American and Griffin-American Operating Partnership, as it may be amended from time to time, a copy of which is attached as Annex A to this joint proxy statement/prospectus and is incorporated herein by reference; all references to the parent merger are to the merger of Griffin-American with and into Merger Sub, all references to the partnership merger are to the merger of Partnership Merger Sub with and into Griffin-American Operating Partnership; all references to the Griffin-American Holders are to the Griffin-American common stockholders and the holders of limited partnership units of Griffin-American Operating Partnership; and all references to the merger are to both the parent merger and the partnership merger, pursuant to the terms of the merger agreement.
Q:
What is the proposed transaction?
A:
NorthStar and Griffin-American have entered into the merger agreement pursuant to which: (i) Griffin-American will merge with and into Merger Sub, with Merger Sub surviving the parent merger as a direct wholly owned subsidiary of NorthStar; and (ii) Partnership Merger Sub will merge with and into Griffin-American Operating Partnership, with Griffin-American Operating Partnership surviving the partnership merger.
Q:
What will Griffin-American common stockholders and Griffin-American Operating Partnership limited partners receive in the merger?
A:
At the effective time of the parent merger, each share of issued and outstanding Griffin-American common stock will be automatically converted into the right to receive: (i) a number of shares of NorthStar common stock equal to the quotient (the “exchange ratio”) determined by dividing $3.75 by the ten day VWAP; and (ii) $7.75 in cash, without interest (collectively, the “merger consideration”); provided, that if the ten day VWAP of NorthStar common stock at the effective time of the parent merger is less than $16.00, the exchange ratio will be 0.2344, and if the ten day VWAP of NorthStar common stock at the effective time of the parent merger is greater than $20.17, the exchange ratio will be 0.1859. In addition, at the effective time of the partnership merger, which will immediately follow the effective time of the parent merger, each partnership unit of Griffin-American Operating Partnership issued and outstanding immediately prior to the effective time of the partnership merger held by a limited partner of Griffin-American Operating Partnership (a “limited partnership unit”) will also be automatically converted into the right to receive the merger consideration. The merger consideration is net of any transaction fees or expenses to be paid in connection with the merger, including any fees to be paid to Griffin-American Healthcare REIT Advisor, LLC (the “Griffin-American Advisor”).
For example, if the NorthStar ten day VWAP is $17.73 (which was the closing price per share of NorthStar common stock on the New York Stock Exchange (the “NYSE”) on October 24, 2014), the exchange ratio will be .2115 shares of NorthStar common stock to be delivered for each share of Griffin-American common stock and each limited partnership unit of Griffin-American Operating Partnership, in addition to the $7.75 in cash to be paid for each Griffin-American share of common stock and each limited partnership unit of Griffin-American Operating Partnership. Accordingly, a holder of 100 shares of Griffin-American common stock or 100 limited partnership units of Griffin-American Operating Partnership would be entitled to receive 21 shares of NorthStar common stock, and cash consideration in lieu of a fraction of a share of NorthStar stock of $2.66, in addition to $775.00 for the cash component of the merger consideration. Because, in this example, the NorthStar ten day VWAP is between $16.00 and $20.17, the value of the stock consideration to be delivered to the Griffin-American Holder would be $3.75 (assuming the closing price per share of NorthStar common stock on the effective date of the merger also is $17.73). As noted above, if the ten day VWAP of NorthStar common stock is below $16.00, then the value of the stock consideration to be delivered for each share of Griffin-American common stock will be less than $3.75, and if the ten day VWAP of NorthStar common stock is above $20.17, the value of such stock consideration will be greater than $3.75. For further information see “The Merger Agreement-Consideration to be

1



Received in the Merger-Merger Consideration” below. No fractional shares will be issued in the merger, and cash will be paid in lieu thereof.
Examples of the potential effects of fluctuations in the ten day VWAP on the merger consideration are illustrated in the following table, based upon a range of hypothetical ten day VWAPs. The ten day VWAPs set forth in the following table have been included for illustrative purposes only. The ten day VWAP may be less than $16.00 or more than $20.17. We cannot assure you as to what the ten day VWAP will be or what the value of the NorthStar common stock to be issued in the merger will be at the effective time of the merger and the ten day VWAP at the effective time could be different than at the time of the special meetings.
Ten Day VWAP ($)
 
NorthStar Shares to be
Issued(1)
 
Cash Consideration to be Received ($)
 
Total Value of Consideration Per Share($)(2)
$
15.00

 
0.2344

 
$
7.75

 
$
11.27

$
16.00

 
0.2344

 
$
7.75

 
$
11.50

$
17.00

 
0.2206

 
$
7.75

 
$
11.50

$
18.00

 
0.2083

 
$
7.75

 
$
11.50

$
19.00

 
0.1974

 
$
7.75

 
$
11.50

$
20.00

 
0.1875

 
$
7.75

 
$
11.50

$
21.00

 
0.1859

 
$
7.75

 
$
11.65

_____________________
(1)
Represents shares of NorthStar common stock to be issued for every share of Griffin-American common stock and every limited partnership unit of Griffin-American Operating Partnership exchanged.
(2)
Represents the value of consideration per share of Griffin-American common stock and per limited partnership unit of Griffin-American Operating Partnership, which is the volume weighted average price per share of NorthStar common stock shown in the first column multiplied by the shares to be issued plus $7.75 in cash per Griffin-American share or Griffin-American Operating Partnership limited partnership unit. The calculation assumes that the price of NorthStar common stock at the effective time of the merger equals the ten day VWAP.
The following chart indicates the fluctuations in the closing stock prices of NorthStar common stock. All share prices in the table below are provided after giving effect to the one-for-two reverse stock split completed on June 30, 2014. Due to NorthStar’s internal reorganization and distribution of its asset management business to its stockholders in the form of shares of NSAM, a separate publicly traded company, each of which occurred on June 30, 2014, price ranges of NorthStar common stock on or prior to June 30, 2014 are not comparable to price ranges of NorthStar common stock after June 30, 2014.
 
 
High

 
Low

October 1-24, 2014
 
$18.01
 
$16.78
Month ended
 
High

 
Low

September 30, 2014
 
$
18.86

 
$
17.15

August 31, 2014
 
$
18.75

 
$
16.14

July 31, 2014
 
$
17.07

 
$
16.10

June 30, 2014
 
$
35.28

 
$
32.64

May 30, 2014
 
$
33.10

 
$
31.06

April 30, 2014
 
$
34.40

 
$
29.34

March 31, 2014
 
$
32.62

 
$
31.00

February 28, 2014
 
$
31.24

 
$
28.28

January 31, 2014
 
$
29.66

 
$
27.36

December 31, 2013
 
$
26.90

 
$
19.34

Q:
How will NorthStar fund the cash portion of the merger consideration?
A:
NorthStar intends to pay the cash portion of the merger consideration and expenses related to the merger using a combination of the following resources:
Committed borrowings in the amount of approximately $2.6 billion pursuant to a commitment letter with Citigroup Global Markets Inc., JPMorgan Chase Bank, N.A., Barclays Bank PLC and Column Financial, Inc. (the “U.S. Commitment Letter”);

2



Committed borrowings in the expected amount of approximately 248 million United Kingdom Pound Sterling, or GBP, (approximately $400 million U.S. Dollars, or USD) pursuant to a commitment letter with Column Financial, Inc. (the “U.K. Commitment Letter”; together with the U.S. Commitment Letter, the “Commitment Letters”);
Cash available on hand; and
$100,000,000 in cash from the sale to NorthStar Healthcare Income, Inc. (“NHI”) of a stake in the portfolio to be acquired.
NorthStar believes it will have sufficient cash proceeds to consummate the merger based on the sources described above. Citigroup Global Markets Inc., JPMorgan Chase Bank, N.A., Barclays Bank PLC and Column Financial, Inc. (collectively, the “U.S. Lenders”) have committed to provide an approximately $2.6 billion term loan facility (the “U.S. Loan”) on the terms and subject to the conditions set forth in the U.S. Commitment Letter and the amended and restated fee and flex letter, each dated October 20, 2014. Column Financial, Inc. (the “U.K. Lender”; together with the U.S. Lenders, the “Lenders”) has committed to provide a term loan facility expected to be in the amount of approximately 248 million GBP (approximately $400 million USD) (the “U.K. Loan”; together with the U.S. Loan, the “Loans”) on the terms and subject to the conditions set forth in the U.K. Commitment Letter dated October 20, 2014. The obligations of the Lenders to provide financing under the Commitment Letters are subject to certain conditions, including, without limitation: (i) the negotiation, execution and delivery of definitive loan documentation for the Loans consistent with the Commitment Letters and otherwise reasonably satisfactory to the Lenders; (ii) a condition that there has not been a material adverse effect with respect to Griffin-American; (iii) the consummation of the merger in accordance with the merger agreement (without giving effect to any amendments to the merger agreement or any waivers thereof that are materially adverse to the Lenders unless consented to) concurrently with the funding of the Loans; (iv) the payment of applicable costs, fees and expenses; and (v) the delivery of certain customary closing documents (including, among other things, opinions from legal counsel). The principal amount either of the Loans may be reduced if certain financial tests, such as a minimum net operating income, minimum debt service coverage ratio, minimum debt yield and maximum loan to value ratio (based on appraisals) are not satisfied. The Commitment Letters terminate on January 30, 2015.
For a more detailed discussion of the expected sources of financing for the merger, see “The Companies-Sources of Cash Consideration for the Merger”; “The Merger-Financing Related to the Merger”; and “Risk Factors-Risks Relating to the Merger-If NorthStar’s financing for the merger becomes unavailable, the merger may not be completed” below.
Q:
Why is NorthStar proposing the merger?
A:
Among other reasons, the NorthStar Board believes that the merger will benefit NorthStar, because it believes that the combined company creates a highly desirable healthcare portfolio with expected stable long-term cash flows. As a result of the merger, NorthStar expects to have an expanded ability to unlock asset and platform value through strategic transactions and have the potential to realize multiple expansion given the premium valuations afforded to diversified healthcare real estate investment trusts (“REITs”). The NorthStar Board also expects that the combined company will have enhanced dividend safety and growth potential and believes NorthStar will benefit from the expansion of tenant and operator relationships that are expected to result in embedded future acquisition and development opportunities. To review the reasons of the NorthStar Board for the merger in greater detail, see “The Merger-Recommendation of the NorthStar Board and Its Reasons for the Merger” below. Notwithstanding the foregoing, the merger poses risks to NorthStar and NorthStar may not realize the expected benefits of the merger. See “Risk Factors-Risks Relating to the Merger” below.
Q:
Why is Griffin-American proposing the merger?
A:
The board of directors of Griffin-American (the “Griffin-American Board”) is proposing the merger for various reasons, including that: the mix of cash and freely tradeable shares of NorthStar common stock to be received by the Griffin-American common stockholders allows the Griffin-American common stockholders to immediately realize fair value for their shares that is liquid and certain. To review the reasons of the Griffin-American Board for the merger in greater detail, see “The Merger-Recommendation of the Griffin-American Board and Its Reasons for the Merger.”
Q:
Why am I receiving this joint proxy statement/prospectus?
A:
The NorthStar Board and the Griffin-American Board are using this joint proxy statement/prospectus to solicit proxies of the common stockholders of each of NorthStar and Griffin-American in connection with the parent merger and the other transactions contemplated by the merger agreement. In addition, NorthStar is using this joint proxy statement/prospectus as a prospectus for Griffin-American Holders because NorthStar is offering shares of its common stock to be issued in exchange for shares of Griffin-American common stock and Griffin-American Operating Partnership limited partnership units.

3



In order to complete the merger, NorthStar common stockholders must vote to approve the issuance of shares of NorthStar common stock to Griffin-American Holders pursuant to the merger agreement, and Griffin-American common stockholders must vote to approve the parent merger and the other transactions contemplated by the merger agreement.
NorthStar and Griffin-American will hold separate special meetings of their respective stockholders to obtain these approvals. This joint proxy statement/prospectus contains important information about the merger and the special meetings of the common stockholders of each of NorthStar and Griffin-American, and you should read it carefully. The enclosed voting materials allow you to vote your shares of NorthStar common stock and/or Griffin-American common stock, as applicable, without attending the applicable special meeting.
We encourage you to authorize your proxy as promptly as possible.
Q:
When and where is the special meeting of NorthStar common stockholders?
A:
NorthStar’s special meeting will be held at the Omni Berkshire Place, Sutton Room, located at 21 East 52nd Street, New York, New York 10022, on November 28, 2014, commencing at 10:00 a.m., local time.
Q:
When and where is the special meeting of Griffin-American common stockholders?
A:
Griffin-American’s special meeting will be held at the Island Hotel Newport Beach, located at 690 Newport Center Drive, Newport Beach, California 92660, on November 28, 2014, commencing at 10:00 a.m., local time.
Q:
Who can vote at the NorthStar special meeting?
A:
All NorthStar common stockholders of record as of the close of business on October 14, 2014, the record date for determining stockholders entitled to notice of and to vote at NorthStar’s special meeting, are entitled to receive notice of and to vote at NorthStar’s special meeting. As of the record date, there were 220,954,983 shares of NorthStar common stock outstanding and entitled to vote at the NorthStar special meeting, held by approximately 228 holders of record. Each share of NorthStar common stock is entitled to one vote on each proposal presented at NorthStar’s special meeting.
Q:
Who can vote at the Griffin-American special meeting?
A:
All Griffin-American common stockholders of record as of the close of business on October 14, 2014, the record date for determining stockholders entitled to notice of and to vote at Griffin-American’s special meeting, are entitled to receive notice of and to vote at Griffin-American’s special meeting. As of the record date, there were 293,399,469.342 shares of Griffin-American common stock issued and entitled to vote at the Griffin-American special meeting, held by approximately 65,134 holders of record. Each share of Griffin-American common stock is entitled to one vote on each proposal presented at Griffin-American’s special meeting. Limited partners of Griffin-American Operating Partnership are not entitled to a vote on the partnership merger.
Q:
What constitutes a quorum for purposes of the Griffin-American special meeting?
A:
Griffin-American’s bylaws provide that the presence in person or by proxy of stockholders entitled to cast 50% of all the votes entitled to be cast at the Griffin-American special meeting on any matters shall constitute a quorum. Abstentions are treated as being present at the Griffin-American special meeting for purposes of determining whether a quorum is present. If you hold your shares in street name and do not provide your broker or other nominee with instructions and your broker or other nominee does not submit a proxy card or otherwise does not vote because the broker or other nominee lacks discretionary authority to vote the shares, your shares will not be counted for purposes of determining a quorum and they will have the same effect as a vote against the merger proposal and will have no effect on the adjournment proposal.
Q:
What constitutes a quorum for purposes of the NorthStar special meeting?
A:
NorthStar’s bylaws provide that the presence in person or by proxy of stockholders entitled to cast a majority of all the votes entitled to be cast at the NorthStar special meeting on any matter shall constitute a quorum. Abstentions are treated as being present at the NorthStar special meeting for purposes of determining whether a quorum is present. If you hold your shares in street name and do not provide your broker or other nominee with instructions and your broker or other nominee does not submit a proxy card or otherwise does not vote because the broker or other nominee lacks discretionary authority to vote the shares, your shares will not be counted for purposes of determining a quorum.
Q:
What vote is required to approve the proposals at NorthStar’s special meeting and Griffin-American’s special meeting?
A:
Approval of the proposal of NorthStar to approve the issuance of shares of NorthStar common stock to Griffin-American Holders pursuant to the merger agreement requires the affirmative vote of the holders of a majority of the votes cast on

4



such proposal. Approval of the proposal of NorthStar to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the issuance of shares of NorthStar common stock pursuant to the merger agreement requires the affirmative vote of the holders of a majority of the votes cast on such proposal.
Approval of the proposal of Griffin-American to approve the parent merger and the other transactions contemplated by the merger agreement requires the affirmative vote of the holders of shares of Griffin-American common stock entitled to cast a majority of all the votes entitled to be cast on such proposal. Approval of the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the parent merger and the other transactions contemplated by the merger agreement requires the affirmative vote of a majority of the votes cast on such proposal.
Your vote is important. We encourage you to authorize your proxy as promptly as possible.
Q:
If my shares of NorthStar common stock are held in “street name” by my broker or other nominee, will my broker or other nominee vote my shares of NorthStar common stock for me? What happens if I abstain or my broker does not vote my shares?
A:
Unless you instruct your broker or other nominee how to vote your shares of NorthStar common stock held in street name, your shares will NOT be voted. If you hold your shares in a stock brokerage account or if your shares are held by a bank or other nominee (that is, in street name), you must provide your broker or other nominee with instructions on how to vote your shares. Please follow the voting instructions provided by your broker or other nominee on the enclosed voting instruction card. You should also be aware that you may not vote shares of NorthStar common stock held in street name by returning a proxy card directly to NorthStar or by voting in person at NorthStar’s special meeting unless you provide a “legal proxy,” which you must obtain from your broker or other nominee.
If you are a NorthStar common stockholder, abstentions will be counted in determining the presence of a quorum. Abstentions will have the same effect as votes AGAINST the proposal to approve the issuance of shares of NorthStar common stock to Griffin-American Holders pursuant to the merger agreement. Abstentions will have no effect on the proposal to adjourn the special meeting, if necessary or appropriate to solicit additional proxies in favor of the proposal to approve the issuance of shares of NorthStar common stock to Griffin-American Holders pursuant to the merger agreement. Failures to vote, which include failures to provide instructions to your broker or other nominee if your shares are held in “street name,” will not be counted in determining the presence of a quorum and will have no effect on either the proposal to approve the issuance of shares of NorthStar common stock to Griffin-American Holders pursuant to the merger agreement or the proposal to adjourn the special meeting, if necessary or appropriate to solicit additional proxies in favor of the proposal to approve the issuance of the shares of NorthStar common stock to Griffin-American Holders.
Q:
If my shares of Griffin-American common stock are held in “street name” by my broker or other nominee, will my broker or other nominee vote my shares of Griffin-American common stock for me? What happens if I do not vote for a proposal?
A:
Unless you instruct your broker or other nominee how to vote your shares of Griffin-American common stock held in street name, your shares will NOT be voted. If you hold your shares in a stock brokerage account or if your shares are held by a bank or other nominee (that is, in street name), you must provide your broker or other nominee with instructions on how to vote your shares. Please follow the voting instructions provided by your broker or other nominee on the enclosed voting instruction card. You should also be aware that you may not vote shares of Griffin-American common stock held in street name by returning a proxy card directly to Griffin-American or by voting in person at Griffin-American’s special meetings unless you provide a “legal proxy,” which you must obtain from your broker or other nominee.
If you are a Griffin-American common stockholder, abstentions will be counted in determining the presence of a quorum. Abstentions will have the same effect as votes AGAINST the proposal to approve the parent merger and the other transactions contemplated by the merger agreement. Abstentions will have no effect on the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the parent merger and the other transactions contemplated by the merger agreement. Failures to vote, which include failures to provide instructions to your broker or other nominee if your shares are held in “street name,” will not be counted in determining the presence of a quorum. Failures to vote will have the same effect as votes AGAINST the proposal to approve the parent merger and the other transactions contemplated by the merger agreement. Failures to vote will have no effect on the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the parent merger and the other transactions contemplated by the merger agreement.
Q:
When is the proposed transaction expected to close?

5



A:
The merger agreement provides that the parent merger will be consummated on the second business day following the date on which the last of the conditions in the merger agreement have been satisfied or waived, provided that NorthStar has the right to delay the closing of the parent merger until the earlier of thirty days after the Griffin-American special meeting of its stockholders or January 20, 2015 if certain regulatory consents are not obtained. For further information, see “The Merger Agreement-Regulatory Approvals in Connection with the Merger” below. The parties currently expect the merger to close during the fourth quarter of 2014, assuming that all of the conditions in the merger agreement are satisfied or waived. See “Risk Factors-Risks Relating to the Merger-Completion of the parent merger is subject to many conditions and if these conditions are not satisfied or waived, the merger will not be completed, which could result in the requirement that NorthStar or Griffin-American pay certain termination fees or, in certain circumstances, damages to the other party.”
Q:
What are the anticipated U.S. federal income tax consequences to me of the proposed parent merger?
A:
The receipt of the merger consideration for each share of Griffin-American common stock pursuant to the merger agreement will be a taxable transaction for U.S. federal income tax purposes. Generally for U.S. federal income tax purposes, Griffin-American common stockholders will recognize gain or loss as a result of the parent merger measured by the difference, if any, between the merger consideration per share and the adjusted tax basis in that share. In addition, under certain circumstances, NorthStar may be required to withhold a portion of the merger consideration under applicable tax laws and NorthStar intends to withhold a portion of the merger consideration paid to non-U.S. common stockholders to the extent required under the Foreign Investment in Real Property Tax Act (“FIRPTA”). Tax matters can be complicated and the tax consequences of the parent merger to Griffin-American common stockholders will depend on their particular tax situations. We encourage Griffin-American common stockholders to consult their tax advisor regarding the tax consequences of the parent merger to them.
For further discussion of the material U.S. federal income tax consequences of the parent merger, see “Material U.S. Federal Income Tax Consequences-Material U.S. Federal Income Tax Consequences Related to Parent Merger.”
Q:
Where will my shares of NorthStar common stock be publicly traded?
A:
Shares of NorthStar’s common stock are currently traded on the NYSE under the symbol “NRF.” NorthStar will apply to have the shares of NorthStar common stock to be issued in the merger also listed on the NYSE upon the consummation of the merger. We anticipate that upon the consummation of the merger, the shares of NorthStar common stock issued in the merger will trade on the NYSE under the symbol “NRF.”
Q:
Are Griffin-American common stockholders entitled to appraisal rights?
A:
No. Griffin-American common stockholders are not entitled to exercise appraisal rights in connection with the merger. See “No Appraisal Rights” below.
Q:
How does the NorthStar Board recommend that NorthStar common stockholders vote?
A:
The NorthStar Board has unanimously: (i) determined that each of the merger agreement and the merger, is advisable for, fair to and in the best interests of NorthStar and its stockholders; (ii) approved the merger agreement, the merger and the other transactions contemplated by the merger agreement; and (iii) recommended that the NorthStar common stockholders approve the issuance of shares of NorthStar common stock to Griffin-American Holders pursuant to the merger agreement.
The NorthStar Board unanimously recommends that NorthStar common stockholders vote FOR the proposal to approve the issuance of shares of NorthStar common stock to Griffin-American Holders pursuant to the merger agreement and FOR the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the issuance of shares of NorthStar common stock to Griffin-American Holders pursuant to the merger agreement. For a more complete description of the recommendation of NorthStar Board, see “The Merger-Recommendation of the NorthStar Board and Its Reasons for the Merger” below.
Q:
How does the Griffin-American Board recommend that Griffin-American common stockholders vote?
A:
The Griffin-American Board, following the recommendation of its special committee consisting of all of the independent directors of Griffin-American (the “Special Committee”), has unanimously: (i) approved the merger agreement and the transactions contemplated thereby and authorized the execution and delivery of the merger agreement and (ii) determined and declared that the parent merger and the other transactions contemplated by the merger agreement are advisable, fair to and in the best interest of Griffin-American and directed that the parent merger and the other transactions contemplated by the merger agreement be submitted for consideration at a meeting of Griffin-American’s common stockholders.
The Griffin-American Board unanimously recommends that Griffin-American common stockholders vote FOR the proposal to approve the parent merger and the other transactions contemplated by the merger agreement and FOR

6



the proposal to adjourn the Griffin-American special meeting, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the parent merger and the other transactions contemplated by the merger agreement. For a more complete description of the recommendation of the Griffin-American Board, see “The Merger-Recommendation of the Griffin-American Board and Its Reasons for the Merger” below.
Q:
Do any of NorthStar’s executive officers or directors have interests in the merger that may differ from those of NorthStar common stockholders?
A:
Some of NorthStar’s directors and its executive officers have interests in the merger that are different from, or in addition to, their interests as NorthStar common stockholders. The NorthStar Board was aware of and considered these interests, among other matters, in evaluating the merger agreement and the merger, and in recommending that NorthStar common stockholders vote FOR the proposal to approve the merger and the other transactions contemplated by the merger agreement. For a description of these interests, refer to the section entitled “The Merger-Interests of NorthStar’s Directors and Executive Officers in the Merger” below.
Q:
Do any of Griffin-American’s executive officers or directors have interests in the merger that may differ from those of Griffin-American common stockholders?
A:
Some of Griffin-American’s directors and executive officers have interests in the merger that are different from, or in addition to, the interests of Griffin-American common stockholders generally. The Special Committee was aware of and considered these interests, among other matters, in evaluating the merger agreement and the parent merger, and in recommending that the Griffin-American Board recommend that the Griffin-American common stockholders vote FOR the proposal to approve the parent merger and the other transactions contemplated by the merger agreement. For a description of these interests, refer to the section entitled “The Merger-Interests of Griffin-American’s Directors and Executive Officers in the Merger” below.
Q:
How will NorthStar common stockholders be affected by the merger and share issuance?
A:
After the consummation of the merger, each NorthStar stockholder will continue to own the shares of NorthStar common stock that the stockholder held immediately prior to the merger. As a result of the merger, each NorthStar stockholder will own shares in a significantly larger company with more assets. However, because NorthStar will be issuing new shares of NorthStar common stock to Griffin-American Holders in the merger, each outstanding share of NorthStar common stock immediately prior to the merger will represent a smaller percentage of the aggregate number of shares of NorthStar common stock outstanding after the consummation of the merger.
Q:
What do I need to do now?
A:
After you have carefully read this joint proxy statement/prospectus, please respond by completing, signing and dating your proxy card or voting instruction card and returning it in the enclosed pre-addressed postage-paid envelope or, if available, by authorizing your proxy by one of the other methods specified in your proxy card or voting instruction card as promptly as possible so that your shares of NorthStar common stock or Griffin-American common stock will be represented and voted at NorthStar’s special meeting or Griffin-American’s special meeting, as applicable.
Please refer to your proxy card or voting instruction card forwarded by your broker or other nominee to see which voting options are available to you.
The method by which you authorize a proxy will in no way limit your right to vote at NorthStar’s special meeting or Griffin-American’s special meeting if you later decide to attend the meeting in person. However, if your shares of NorthStar common stock and/or Griffin-American common stock, as applicable, are held in the name of a broker or other nominee, you must obtain a “legal proxy,” executed in your favor, from your broker or other nominee, to be able to vote in person at NorthStar’s special meeting or Griffin-American’s special meeting. Obtaining a legal proxy may take several days.
Q:
Do I need to do anything with my stock certificates now?
A:
No. You should not submit your stock certificates at this time. After the parent merger is completed, if you hold shares representing Griffin-American common stock, the exchange agent for NorthStar will send you a letter of transmittal and instructions for exchanging your shares of Griffin-American common stock for the merger consideration. If you are a NorthStar stockholder, you do not need to do anything with your stock certificate before or after the merger.
If you hold shares of Griffin-American common stock in book-entry form, you are not required to take any action with your book-entry shares. After the parent merger is completed, the exchange agent for NorthStar will also send you a letter

7



of transmittal and instructions for exchanging your book-entry shares of Griffin-American common stock for the merger consideration.
Q:
How will my proxy be voted?
A:
All shares of NorthStar common stock entitled to vote and represented by properly completed proxies received prior to NorthStar’s special meeting, and not revoked, will be voted at NorthStar’s special meeting as instructed on the proxies. If you are a stockholder of record and you properly sign, date and return a proxy card, but do not indicate how your shares of NorthStar common stock should be voted on a matter, the shares of NorthStar common stock represented by your proxy will be voted as the NorthStar Board recommends and therefore FOR the approval of the issuance of shares of NorthStar common stock to Griffin-American Holders pursuant to the merger agreement and FOR the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the issuance of shares of NorthStar common stock to Griffin-American Holders pursuant to the merger agreement. Failures to vote, which include failures to provide instructions to your broker or other nominee if your shares are held in “street name,” will not be counted in determining the presence of a quorum and will have no effect on either the proposal to approve the issuance of shares of NorthStar common stock to Griffin-American Holders pursuant to the merger agreement or the proposal to adjourn the special meeting, if necessary or appropriate to solicit additional proxies in favor of the proposal to approve the issuance of the shares of NorthStar common stock to Griffin-American Holders.
All shares of Griffin-American common stock entitled to vote and represented by properly completed proxies received prior to Griffin-American’s special meeting, and not revoked, will be voted at Griffin-American’s special meeting as instructed on the proxies. If you are a stockholder of record and you properly sign, date and return a proxy card, but do not indicate how your shares of Griffin-American common stock should be voted on a matter, the shares of Griffin-American common stock represented by your properly executed proxy will be voted as the Griffin-American Board recommends and therefore FOR the proposal to approve the parent merger and the other transactions contemplated by the merger agreement and FOR the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the parent merger and the other transactions contemplated by the merger agreement. Failures to vote, which include failures to provide instructions to your broker or other nominee if your shares are held in “street name,” will not be counted in determining the presence of a quorum. Failures to vote will have the same effect as a vote AGAINST the proposal to approve the parent merger and the other transactions contemplated by the merger agreement. Failures to vote will have no effect on the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the parent merger and the other transactions contemplated by the merger agreement.
Q:
Can I revoke my proxy or change my vote after I have delivered my proxy?
A:
Yes. You may revoke your proxy or change your vote at any time before your proxy is voted at NorthStar’s special meeting or Griffin-American’s special meeting, as applicable. If you are a holder of record, you can do this in any of the three following ways:
by sending a written notice to the Secretary of NorthStar or the Secretary of Griffin-American, as applicable, at the address set forth below, in time to be received before NorthStar’s special meeting or Griffin-American’s special meeting, as applicable, stating that you would like to revoke your proxy;
by completing, signing and dating another proxy card and returning it by mail in time to be received before NorthStar’s special meeting or Griffin-American’s special meeting, as applicable, or by authorizing a later dated proxy by the Internet or telephone in which case your later-authorized proxy will be recorded and your earlier proxy revoked; or
by attending NorthStar’s special meeting and/or Griffin-American’s special meeting, as applicable, and voting in person. Simply attending NorthStar’s special meeting or Griffin-American’s special meeting without voting will not revoke your proxy or change your vote.
If your shares of NorthStar common stock or Griffin-American common stock are held in an account at a broker or other nominee and you desire to change your vote or vote in person, you should contact your broker or other nominee for instructions on how to do so.
Q:
What should I do if I receive more than one set of voting materials for NorthStar’s special meeting and/or Griffin-American’s special meeting?
A:
You may receive more than one set of voting materials for NorthStar’s special meeting and/or Griffin-American’s special meeting, including multiple copies of this joint proxy statement/prospectus and multiple proxy cards or voting instruction

8



cards. For example, if you hold your shares of NorthStar common stock and/or Griffin-American common stock in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares of NorthStar common stock and/or Griffin-American common stock. If you are a holder of record and your shares of NorthStar common stock or Griffin-American common stock are registered in more than one name, you may receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive or, if available, please authorize your proxy by telephone, facsimile or over the Internet.
Q:
What happens if I am a stockholder of both NorthStar and Griffin-American?
A:
You will receive separate proxy cards for each of NorthStar and Griffin-American and you must complete, sign and date each proxy card and return each proxy card in the appropriate pre-addressed postage-paid envelope or, if available, by authorizing a proxy by one of the other methods specified in your proxy card or voting instruction card for each of NorthStar and Griffin-American.
Q:
Who can answer my questions?
A:
If you have any questions about the merger or how to authorize your proxy, or need additional copies of this joint proxy statement/prospectus, the enclosed proxy card or voting instructions, you should contact:
NorthStar Realty Finance Corp.
Attention: Secretary
399 Park Avenue, 18th Floor
New York, New York 10022
(212) 547-2600
www.nrfc.com
 

Griffin-American Healthcare REIT II, Inc.
Attention: Secretary
18191 Von Karman Avenue, Suite 300,
Irvine, California 92612
(949) 270-9200
www.healthcarereit2.com

You can also contact the proxy solicitors hired by NorthStar and Griffin-American as follows:
NorthStar:

MacKenzie Partners, Inc.
105 Madison Avenue
New York, NY 10016
(212) 929-5500
(800) 322-2885
 


Griffin-American:

Boston Financial Data Services, Inc.
Proxy Tabulator
P.O. Box 55909
Boston, MA 02205-5909
1-855-844-8650

NorthStar has engaged MacKenzie Partners, Inc. (“MacKenzie”) to assist in the solicitation of proxies for the NorthStar Special Meeting and NorthStar estimates it will pay MacKenzie a fee of up to approximately $20,000 for the services to be performed. NorthStar has also agreed to reimburse MacKenzie for reasonable out-of-pocket expenses and disbursements incurred in connection with the proxy solicitation and to indemnify MacKenzie against certain losses, costs and expenses. In addition to mailing the proxy solicitation material, NorthStar’s directors and executive officers may also solicit proxies in person, by telephone or by any other electronic means of communication deemed appropriate. No additional compensation will be paid to NorthStar’s directors and executive officers for such services.
Griffin-American has engaged Boston Financial Data Services, Inc. (“Boston Financial”) to assist in the solicitation of proxies for the Griffin-American Special Meeting and Griffin-American estimates it will pay Boston Financial a fee of approximately $124,000 for the services to be performed. Griffin-American has also agreed to reimburse Boston Financial for reasonable out-of-pocket expenses and disbursements incurred in connection with the proxy solicitation and to indemnify Boston Financial against certain losses, costs and expenses. In addition to mailing the proxy solicitation material, Griffin-American’s directors and executive officers and the representatives of the Griffin-American Advisor may also solicit proxies in person, by telephone or by any other electronic means of communication deemed appropriate. No additional compensation will be paid to Griffin-American’s directors and executive officers and the representatives of the Griffin-American Advisor for such services.
Q:
Will NorthStar and Griffin-American continue to pay distributions prior to the effective time of the parent merger?
A:
Yes. The merger agreement permits the Griffin-American Board to authorize and pay a regular daily dividend, payable monthly in accordance with past practice, for the period up to the closing date of the parent merger (including any portion of any month in which the closing of the merger occurs) at a rate not to exceed an annual rate of $0.68 per share of Griffin-American common stock. The merger agreement also permits the NorthStar Board to authorize and pay dividends:

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(i) at a rate not to exceed 100% of NorthStar’s cash available for distribution (“CAD”) in respect of NorthStar common stock; (ii) $0.54688 per share of the NorthStar Series A Preferred Stock; (iii) $0.51563 per share of NorthStar Series B Preferred Stock; (iv) $0.55469 per share of NorthStar Series C Preferred Stock; (v) $0.53125 per share of NorthStar Series D Preferred Stock; and (vi) $0.54688 per share of NorthStar Series E Preferred Stock.

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SUMMARY
The following summary highlights some of the information contained in this joint proxy statement/prospectus. This summary may not contain all of the information that is important to you. For a more complete description of the merger agreement, the merger and the other transactions contemplated by the merger agreement, NorthStar and Griffin-American encourage you to read carefully this entire joint proxy statement/prospectus, including the attached Annexes. NorthStar and Griffin-American encourage you to read the information incorporated by reference into this joint proxy statement/prospectus, which includes important business and financial information about NorthStar that has been filed with the SEC. You may obtain the information incorporated by reference into this joint proxy statement/prospectus without charge by following the instructions in the section entitled “Where You Can Find More Information; Incorporation by Reference” below.
The Companies
NorthStar Realty Finance Corp.
NorthStar is a diversified commercial real estate company. It invests in multiple asset classes across commercial real estate, or CRE, that it expects will generate attractive risk-adjusted returns and may take the form of acquiring real estate, originating or acquiring senior or subordinate loans, as well as pursuing opportunistic CRE investments, both in the United States and internationally. NorthStar seeks to generate stable cash flow for distribution to its stockholders through its diversified portfolio of CRE assets and in turn build long-term franchise value. Effective June 30, 2014, NorthStar operates a commercial real estate debt business but is otherwise externally managed and advised by an affiliate of NSAM. NorthStar is a Maryland corporation and completed its initial public offering in October 2004. NorthStar conducts its operations so as to continue to qualify as a real estate investment trust, or REIT, for federal income tax purposes.
NorthStar’s common stock is traded on the NYSE under the symbol “NRF.” Its principal executive office is located at 399 Park Avenue, 18th Floor, New York, New York 10022 and its phone number is (212) 547-2600.
Recent NorthStar Developments
On August 13, 2014, NorthStar issued an aggregate of 3,686,234 shares of its common stock upon exchange by certain holders of $33 million principal amount of NorthStar’s 5.375% Exchangeable Senior Notes due 2033.
Griffin-American Healthcare REIT II, Inc.
Griffin-American was formed as a Maryland corporation on January 7, 2009. Griffin-American invests in a diversified portfolio of real estate properties, focusing primarily on medical office buildings and healthcare-related facilities. Griffin-American has also strategically originated loans and may acquire secured loans and other real estate-related investments. Griffin-American also operates healthcare-related facilities utilizing the structure permitted by the REIT Investment Diversification and Empowerment Act of 2007, which is commonly referred to as a “RIDEA” structure. Griffin-American generally seeks investments that produce current income. Griffin-American qualified and elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”) beginning with its taxable year ended December 31, 2010.
Griffin-American was initially capitalized on February 4, 2009. Griffin-American commenced an initial public offering (“the initial offering”) of shares of Griffin-American common stock on August 24, 2009, which was terminated on February 14, 2013, and commenced a follow-on public offering (the “follow-on offering”) on February 14, 2013, which was terminated on October 30, 2013.
Griffin-American conducts substantially all of its operations through Griffin-American Operating Partnership. Effective January 7, 2012, Griffin-American became externally advised by Griffin-American Healthcare REIT Advisor, LLC (the “Griffin-American Advisor”), pursuant to the advisory agreement between Griffin-American and Griffin-American Advisor (the “Advisory Agreement”). The Griffin-American Advisor delegates advisory duties to Griffin-American Healthcare REIT Sub-Advisor, LLC (the “Griffin-American Sub-Advisor”) pursuant to a sub-advisory agreement with the Griffin-American Sub-Advisor. The Griffin-American Sub-Advisor is jointly owned by American Healthcare Investors LLC (“American Healthcare Investors”) and Griffin Capital Corporation (“Griffin Capital” and together with American Healthcare Investors, the “Griffin-American co-sponsors”).
Griffin-American currently operates through five reportable business segments - medical office buildings, hospitals, skilled nursing facilities, senior housing and senior housing-RIDEA. Its headquarters are located at 18191 Von Karman Avenue, Suite 300, Irvine, California 92612 and its telephone number is (949) 270-9200.

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The Combined Company
Following the closing of the merger, NorthStar will have approximately $10 billion of owned real estate, representing approximately 75% of its assets on a pro forma basis and NorthStar will continue to pursue a strategy of acquiring diversified commercial real estate investments that produce attractive risk adjusted returns. The following charts present the composition of NorthStar’s overall real estate portfolio by asset class and geographic diversification, based on cost, on a pro forma basis, giving effect to the merger:
NorthStar believes the merger will create a best in class healthcare real estate portfolio with substantial size, stability and diversification. On a pro forma basis, NorthStar’s portfolio of healthcare assets will be located throughout the United States and the United Kingdom and will be diversified by asset class as reflected in the chart below. In addition, the following table graph presents the lease maturities in NorthStar’s net lease and healthcare portfolio on a pro forma basis, after giving effect to the merger.
Healthcare Portfolio, by Property Type(1)
Lease Maturity, by NOI(2)
_________________________
(1) Based on net cash flow.
(2) Does not include leases in NorthStar’s multifamily and manufactured housing portfolios due to the short-term nature of such leases.
NorthStar further believes the merger will create a healthcare portfolio that produces a stable long-term cash flow stream and will enhance the safety and predictability of its dividend while maintaining opportunities for growth. The merger will expand NorthStar’s relationships with tenants and operators within the current Griffin-American network and, as has been its experience in the past, NorthStar expects these relationships to produce future acquisition and development opportunities. Finally, the merger expands NorthStar’s ability to unlock asset and enterprise value through strategic transactions that it may consider in the future.
Summary of Business
NorthStar’s primary businesses following the merger will be consistent with its primary businesses before the merger and are summarized as follows:
Real Estate - NorthStar’s real estate business concentrates on various types of investments in commercial real estate located throughout the United States that include healthcare, manufactured housing communities,

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hotel, net lease and multifamily properties. In addition, NorthStar’s real estate business includes PE Investments (as described further below) diversified by property type and geography.
Healthcare - NorthStar’s healthcare properties will constitute 58.2% of its owned real estate following the merger and are described in more detail above.
Manufactured Housing - NorthStar’s manufactured housing communities portfolio focuses on owning pad rental sites located throughout the United States.
Hotel - NorthStar’s hotel portfolio is a geographically diverse portfolio primarily comprised of extended stay hotels and premium branded select service hotels located primarily in major metropolitan markets with the majority affiliated with top hotel brands.
Net Lease - NorthStar’s net lease properties, outside of its healthcare portfolio, are primarily office, industrial and retail properties typically under net leases to corporate tenants.
Multifamily - NorthStar’s multifamily portfolio primarily focuses on owning properties located in suburban markets that are best suited to capture the formation of new households.
PE Investments - NorthStar’s real estate business also includes investments (directly or indirectly in joint ventures) owning limited partnership interests in real estate private equity funds (“PE Investments”) managed by institutional quality sponsors and diversified by property type and geography.
Commercial Real Estate Debt - NorthStar’s CRE debt business is focused on originating, structuring, acquiring and managing senior and subordinate debt investments secured primarily by commercial real estate and includes first mortgage loans, subordinate interests, mezzanine loans and preferred equity interests. NorthStar may from time to time take title to collateral in connection with a CRE debt investment as real estate owned (“REO”), which would be included in its CRE debt business.
Commercial Real Estate Securities - NorthStar’s CRE securities business is predominantly comprised of N-Star CDO bonds and N-Star CDO equity of its deconsolidated N-Star CDOs and includes other securities which are mostly conduit commercial mortgage-backed securities (“CMBS”), meaning each asset is a pool backed by a large number of commercial real estate loans. NorthStar also invests in opportunistic CRE securities such as an investment in a “B-piece” CMBS.
NorthStar has the ability to invest in a broad spectrum of commercial real estate assets and seeks to provide attractive risk-adjusted returns. Its ability to invest across the CRE market creates complementary and overlapping sources of investment opportunities based upon common reliance on real estate fundamentals and application of similar portfolio management skills to maximize value and to protect capital. Additionally, NorthStar may pursue opportunistic investments across all of its business lines including CRE equity and debt investments. Examples of opportunistic investments include PE Investments, strategic joint ventures and repurchasing its collateralized debt obligations (“CDO”) bonds at a discount to their principal amount.
NorthStar’s financing strategy focuses on match funding its assets and liabilities by having similar maturities and like-kind interest rate benchmarks (fixed or floating) to manage refinancing and interest rate risk. In terms of its CRE debt and securities investments and its real estate portfolio, NorthStar pursues a variety of financing arrangements such as securitization financing transactions, credit facilities, mortgage notes and other term borrowings. The amount of NorthStar’s borrowings depends upon the nature and credit quality of its assets, the structure of its financings and where possible, NorthStar seeks to limit its reliance on recourse borrowings. NorthStar’s real estate portfolio is predominantly financed with non-recourse, non-mark-to-market mortgage notes.
NorthStar believes that it maintains a competitive advantage through a combination of deep industry relationships and access to market leading CRE credit underwriting and capital markets expertise which enables it to manage credit risk across its business lines as well as to structure and finance its assets efficiently. NorthStar’s ability to invest across the spectrum of commercial real estate investments allows it to take advantage of complementary and overlapping sources of investment opportunities based on a common reliance on CRE fundamentals and application of similar underwriting and asset management skills as it seeks to maximize stockholder value and to protect its capital.
The Merger and the Merger Agreement
Subject to the terms and conditions of the merger agreement, on the closing date, Griffin-American will merge with and into Merger Sub, with Merger Sub surviving the parent merger as a direct wholly owned subsidiary of NorthStar, and

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Partnership Merger Sub will merge with and into Griffin-American Operating Partnership, with Griffin-American Operating Partnership surviving the partnership merger. NorthStar has agreed to sell, upon the closing of the merger, an indirect equity interest in Griffin-American to NHI, a public non-traded REIT that is managed by an affiliate of NSAM. The stake to be acquired by NHI will be purchased from NorthStar for $100,000,000 (including a pro rata portion of transaction costs), which is expected to represent approximately 8.3% of the total equity interest in Griffin-American. NorthStar and NHI will hold the equity of Griffin-American in a general partnership on a pari passu basis. NorthStar will exercise day-to-day control over the management of the general partnership.
At the effective time of the parent merger, each share of Griffin-American common stock issued and outstanding immediately prior to the effective time of the parent merger will be automatically converted into the right to receive: (i) a number of shares of NorthStar common stock equal to the quotient determined by dividing $3.75 by the ten day VWAP of NorthStar common stock at the effective time of the parent merger (the “exchange ratio”); and (ii) $7.75 in cash, without interest (collectively, the “merger consideration”); provided, that if the ten day VWAP of NorthStar common stock at the effective time of the parent merger is less than $16.00, the exchange ratio will be 0.2344, and if the ten day VWAP of NorthStar common stock at the effective time of the parent merger is greater than $20.17, the exchange ratio will be 0.1859. In addition, at the effective time of the partnership merger, which will immediately follow the effective time of the parent merger, each limited partnership unit of Griffin-American Operating Partnership issued and outstanding immediately prior to the effective time of the partnership merger will also be automatically converted into the right to receive the merger consideration. No fractional shares of NorthStar common stock will be issued, and cash will be paid in lieu thereof.
A copy of the merger agreement is attached as Annex A to this joint proxy statement/prospectus and is incorporated herein by reference. NorthStar and Griffin-American encourage you to carefully read the merger agreement in its entirety because it is the principal document governing the merger.
Financing Related to the Merger
The merger is not conditioned upon NorthStar having received any financing at or prior to the closing date. In connection with the merger and the transactions contemplated by the merger agreement, NorthStar has entered into the Commitment Letters with the Lenders, pursuant to which the Lenders have committed to provide the Loans on the terms and subject to the conditions set forth in the Commitment Letters. The obligations of the Lenders to provide financing under each Commitment Letter are subject to certain conditions, including, without limitation: (i) the negotiation, execution and delivery of definitive loan documentation for the Loans consistent with such Commitment Letter and otherwise reasonably satisfactory to the Lenders; (ii) a condition that there has not been a material adverse effect with respect to Griffin-American; (iii) the consummation of the merger in accordance with the merger agreement (without giving effect to any amendments to the merger agreement or any waivers thereof that are materially adverse to the Lenders unless consented to) concurrently with the funding of the Loan; (iv) the payment of applicable costs, fees and expenses; and (v) the delivery of certain customary closing documents (including, among other things, opinions from legal counsel). The aggregate principal amount of either Loan may be reduced if certain financial tests, such as a minimum net operating income, minimum debt service coverage ratio, minimum debt yield and maximum loan to value ratio (based on appraisals) are not satisfied.
The Commitment Letters terminate on January 30, 2015.
For more information regarding the financing related to the merger, see “The Merger Agreement-Financing Related to the Merger.”
Recommendation of the NorthStar Board
The NorthStar Board has unanimously: (i) determined that each of the merger agreement and the merger is advisable for, fair to and in the best interests of NorthStar and its stockholders; (ii) approved the merger agreement, the merger and the other transactions contemplated by the merger agreement; and (iii) recommended that the NorthStar common stockholders approve the issuance of shares of NorthStar common stock to Griffin-American Holders pursuant to the merger agreement.
The NorthStar Board unanimously recommends that NorthStar common stockholders vote FOR the proposal to approve the issuance of shares of NorthStar common stock to Griffin-American Holders pursuant to the merger agreement and FOR the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the issuance of shares of NorthStar common stock to Griffin-American Holders partners pursuant to the merger agreement.

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Recommendation of the Griffin-American Board
The Special Committee has unanimously: (i) determined that the parent merger and the other transactions contemplated by the merger agreement are advisable and in the best interests of Griffin-American; and (ii) recommended the approval of the merger agreement, the parent merger and the other transactions contemplated by the merger agreement by the Griffin-American Board. The Griffin-American Board, following the recommendation of the Special Committee, has unanimously: (i) approved the merger agreement and the transactions contemplated thereby and authorized the execution and delivery of the merger agreement and (ii) determined and declared that the parent merger and the other transactions contemplated by the merger agreement are advisable, fair to and in the best interest of Griffin-American and directed that the parent merger and the other transactions contemplated by the merger agreement be submitted for consideration at a meeting of Griffin-American’s common stockholders.
The Griffin-American Board unanimously recommends that Griffin-American common stockholders vote FOR the proposal to approve the parent merger and the other transactions contemplated by the merger agreement and FOR the proposal to adjourn the Griffin-American special meeting, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the parent merger and the other transactions contemplated by the merger agreement.
Summary of Risk Factors Related to the Merger
You should consider carefully all the risk factors together with all of the other information included in this joint proxy statement/prospectus before deciding how to vote. The risks related to the merger and the related transactions are described under the caption “Risk Factors-Risks Relating to the Merger” below. The principal risks relating to the merger include the following:
Completion of the merger is subject to a number of conditions and if these conditions are not satisfied or waived, the merger will not be completed, which could result in the requirement that NorthStar or Griffin-American pay certain termination fees or, in certain circumstances, damages to the other party.
The pendency of the merger could adversely affect the business and operations of NorthStar and Griffin-American.
NorthStar and Griffin-American common stockholders’ ownership will be diluted by the merger.
If NorthStar’s financing for the merger becomes unavailable, the merger may not be completed.
The merger agreement contains provisions that could discourage a potential competing acquirer of Griffin-American or could result in any competing proposal being at a lower price than it might otherwise be.
If the merger is approved, the date on which Griffin-American common stockholders will receive the merger consideration is uncertain.
Stockholders Entitled to Vote; Vote Required
NorthStar
Holders of shares of NorthStar common stock at the close of business on October 14, 2014, or NorthStar’s record date, are entitled to notice of, and to vote at, NorthStar’s special meeting. On NorthStar’s record date, there were 220,954,983 shares of NorthStar common stock outstanding and entitled to vote at NorthStar’s special meeting, held by approximately 228 holders of record. Each share of NorthStar common stock is entitled to one vote on each proposal to be voted on at NorthStar’s special meeting.
At NorthStar’s special meeting, the presence in person or by proxy of stockholders entitled to cast a majority of all the votes entitled to be cast at such meeting shall constitute a quorum. Abstentions will be counted in determining whether a quorum is present at NorthStar’s special meeting. Failures to vote, which include failure to provide instructions to your broker or other nominee if your shares are held in “street name,” will not be counted in determining whether a quorum is present.
Approval of the proposal to approve the issuance of shares of NorthStar common stock to Griffin-American Holders pursuant to the merger agreement requires the affirmative vote of holders of a majority of the votes cast on such proposal. Approval of the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the issuance of shares of NorthStar common stock to Griffin-American Holders pursuant to the merger agreement also requires the affirmative vote of the holders of a majority of the votes cast on such proposal.

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See “The NorthStar Special Meeting-Abstentions and Failures to Vote” for a description of the effect of abstentions and failures to vote with respect to the above proposals.
Your vote is very important. You are encouraged to authorize your proxy to vote your shares as promptly as possible. If you are a stockholder of record and you properly sign, date and return a proxy card, but do not indicate how your shares of NorthStar common stock should be voted on a matter, the shares of NorthStar common stock represented by your proxy will be voted as the NorthStar Board recommends and therefore FOR the approval of the issuance of shares of NorthStar common stock to Griffin-American Holders pursuant to the merger agreement, and FOR the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the issuance of shares of NorthStar common stock to Griffin-American Holders pursuant to the merger agreement. If you are a “street name” holder and you do not provide voting instructions to your broker or other nominee, your shares of NorthStar common stock will NOT be voted at the meeting, will not be counted towards the presence of a quorum and will have no effect on either the proposal to issue shares of NorthStar common stock to Griffin-American Holders pursuant to the merger agreement or the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the issuance of shares of NorthStar common stock to Griffin-American Holders pursuant to the merger agreement.
Griffin-American
Griffin-American common stockholders who owned shares of Griffin-American common stock at the close of business on October 14, 2014, or Griffin-American’s record date, are entitled to notice of, and to vote at, Griffin-American’s special meeting. On Griffin-American’s record date, there were 293,399,469.342 shares of Griffin-American common stock issued and entitled to vote at Griffin-American’s special meeting, held by approximately 65,134 holders of record.
At Griffin-American’s special meeting, the presence in person or by proxy of stockholders entitled to cast 50% of all the votes entitled to be cast at the meeting on any matter constitutes a quorum. Abstentions will be counted in determining whether a quorum is present at Griffin-American’s special meeting. Failures to vote, which include failures to provide instructions to your broker or other nominee if your shares are held in “street name,” will not be counted in determining whether a quorum is present at Griffin-American’s special meeting.
Approval of the proposal of Griffin-American to approve the parent merger and the other transactions contemplated by the merger agreement requires the affirmative vote of the holders of shares of Griffin-American common stock entitled to cast a majority of all the votes entitled to be cast on such proposal. The approval of the proposal to adjourn Griffin-American’s special meeting, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the parent merger and the other transactions contemplated by the merger agreement requires the affirmative vote of a majority of the votes cast on such proposal.
See “The Griffin-American Special Meeting-Abstentions and Failures to Vote” below for a description of the effect of abstentions and failures to vote with respect to the above proposals.
Your vote is very important. You are encouraged to authorize your proxy to vote your shares as promptly as possible. If you are a stockholder of record and you properly sign, date and return a proxy card, but do not indicate how your shares of Griffin-American common stock should be voted on a matter, the shares of Griffin-American common stock represented by your properly executed proxy will be voted as the Griffin-American Board recommends and therefore FOR the proposal to approve the parent merger and the other transactions contemplated by the merger agreement and FOR the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the parent merger and the other transactions contemplated by the merger agreement. If you are a “street name” holder and you do not provide voting instructions to your broker or other nominee, your shares of Griffin-American common stock will NOT be voted at the meeting, will not be counted towards the presence of a quorum, will have the same effect as a vote AGAINST the proposal to approve the parent merger and the other transactions contemplated by the merger agreement and will have no effect on the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the parent merger and the other transactions contemplated by the merger agreement.
Opinion of NorthStar’s Financial Advisor
On August 4, 2014, at a meeting of the NorthStar Board held to evaluate the proposed parent merger, UBS Securities LLC (“UBS”) delivered to the NorthStar Board an oral opinion, which opinion was confirmed by delivery of a written opinion, dated August 5, 2014, to the effect that, as of that date and based on and subject to various assumptions made, matters considered and limitations described in its opinion, the consideration to be paid by NorthStar in the merger was fair, from a financial point of view, to NorthStar.

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The full text of UBS’ opinion describes the assumptions made, procedures followed, matters considered and limitations on the review undertaken by UBS. UBS’ opinion is attached as Annex B to this joint proxy statement/prospectus and is incorporated herein by reference. Holders of NorthStar common stock are encouraged to read UBS’ opinion carefully in its entirety. UBS’ opinion was provided for the benefit of the NorthStar Board (in its capacity as such) in connection with, and for the purpose of, its evaluation of the consideration to be paid by NorthStar in the merger, and does not address any other aspect of the merger or any related transaction. UBS’ opinion does not address the relative merits of the merger or any related transaction as compared to other business strategies or transactions that might be available to NorthStar or NorthStar’s underlying business decision to effect the merger or any related transaction. UBS’ opinion does not constitute a recommendation to any stockholder as to how such stockholder should vote or act with respect to the merger or any related transaction.
See “The Merger-Opinion of NorthStar’s Financial Advisor.”
Opinions of Griffin-American’s Special Committees Financial Advisors
Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated (“BofA Merrill Lynch”)
In connection with the merger, BofA Merrill Lynch, one of Griffin-American’s financial advisors, delivered to the Special Committee a written opinion, dated August 5, 2014, as to the fairness, from a financial point of view and as of the date of the opinion, of the merger consideration to be received by holders of Griffin-American common stock (other than NorthStar, Merger Sub, Partnership Merger Sub, the Griffin-American Advisor and their respective affiliates). The full text of the written opinion, dated August 5, 2014, of BofA Merrill Lynch, which describes, among other things, the assumptions made, procedures followed, factors considered and limitations on the review undertaken, is attached as Annex D to this joint proxy statement/prospectus and is incorporated by reference herein in its entirety. BofA Merrill Lynch provided its opinion to the Special Committee (in its capacity as such) for the benefit and use of the Special Committee in connection with and for purposes of its evaluation of the merger consideration from a financial point of view. BofA Merrill Lynch’s opinion does not address any other aspect of the merger and no opinion or view was expressed as to the relative merits of the merger in comparison to other strategies or transactions that might be available to Griffin-American or in which Griffin-American might engage or as to the underlying business decision of Griffin-American to proceed with or effect the merger. BofA Merrill Lynch’s opinion does not address any other aspect of the merger and does not constitute a recommendation to any stockholder as to how to vote or act in connection with the proposed merger or any related matter.
See “The Merger-Opinions of Griffin-American’s Special Committee’s Financial Advisors-Opinion of BofA Merrill Lynch.”
Opinion of Robert A. Stanger & Co., Inc. (“Stanger”)
In connection with the merger, Stanger, one of Griffin-American’s financial advisors, delivered to the Special Committee a written opinion, dated August 5, 2014, as to the fairness, from a financial point of view that as of the date of such opinion and based upon and subject to the qualifications, limitations and assumptions stated in the opinion, of the merger consideration to be received by holders of Griffin-American common stock pursuant to the merger agreement. The full text of Stanger's written opinion, which sets forth, among other things, the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken, is attached to this joint proxy statement/prospectus as Annex C and is incorporated by reference herein in its entirety. Stanger’s opinion was provided for the benefit of the Special Committee for its information and use in connection with the evaluation of the merger consideration from a financial point of view and did not address any other terms, aspects or implications of the merger or any related transactions.
See “The Merger-Opinions of Griffin-American’s Special Committee’s Financial Advisors-Opinion of Stanger.”
Stock Ownership of Directors and Executive Officers of NorthStar
At the close of business on October 24, 2014, the directors and executive officers of NorthStar and their affiliates held and were entitled to vote 3,119,795 shares of NorthStar common stock, collectively representing approximately 1.41% of the shares of NorthStar common stock outstanding and entitled to vote on that date. The directors and executive officers of NorthStar have each indicated that they expect to vote FOR the proposal to approve the issuance of NorthStar common stock to Griffin-American Holders pursuant to the merger agreement and FOR the proposal to adjourn the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the issuance of shares of NorthStar common stock to Griffin-American Holders pursuant to the merger agreement.

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Stock Ownership of Directors and Executive Officers of Griffin-American
At the close of business on October 24, 2014, the directors and the executive officers of Griffin-American and their affiliates held 1,237,037 shares of Griffin-American common stock (including restricted shares of common stock of Griffin-American), collectively representing less than 1% of the shares of Griffin-American common stock issued and entitled to vote on that date. On October 14, 2014, Griffin-American’s record date, there were 293,399,469.342 shares of Griffin-American common stock issued and entitled to vote at Griffin-American’s special meeting, held by approximately 65,134 holders of record.
Interests of NorthStar’s Directors and Executive Officers in the Merger
In considering the recommendation of the NorthStar Board to approve the issuance of shares of NorthStar common stock to Griffin-American Holders pursuant to the merger agreement, NorthStar common stockholders should be aware that executive officers and directors of NorthStar have certain interests in the merger that may be different from, or in addition to, the interests of NorthStar common stockholders generally. These interests relate to NorthStar's external manager, NSAM. On June 30, 2014, NorthStar spun off its asset management business into a newly-formed publicly traded company, NSAM. Some of the directors and all of the executive officers of NSAM are also directors and executive officers of NorthStar, each with certain ownership interests in both companies. As a result of the spin-off, an affiliate of NSAM provides asset management and other services to NorthStar pursuant to a long-term asset management agreement (the “Management Agreement”). The Management Agreement provides for NorthStar to pay to NSAM certain base and incentive fees that will likely increase as a result of the merger, including a base management fee equal to 1.5% per annum of the sum of cumulative net proceeds of all equity issued by NorthStar after December 10, 2013. Increases in these fees would increase the value of NSAM’s directors’ and executive officers’ ownership interests in NSAM.
These interests may create potential conflicts of interest. The NorthStar Board was aware of those interests and considered them, among other matters, in reaching its decision to approve the merger agreement and the transaction contemplated by the merger agreement.
Interests of Griffin-American’s Directors and Executive Officers in the Merger
In considering the recommendation of the Griffin-American Board to approve the parent merger and the other transactions contemplated by the merger agreement, Griffin-American common stockholders should be aware that Griffin-American’s directors and executive officers have certain interests in the parent merger that may be different from, or in addition to, the interests of Griffin-American common stockholders generally. These interests may create potential conflicts of interest. The Griffin-American Board was aware of those interests and considered them, among other matters, in reaching its decision to approve the parent merger and the other transactions contemplated by the merger agreement. These interests include the following:
Under Griffin-American Operating Partnership’s Amended and Restated Limited Partnership Agreement (the “Griffin-American Operating Partnership Agreement”), the Griffin-American Advisor will be entitled to a subordinated distribution from Griffin-American Operating Partnership, or the Merger Termination Amount, upon the termination or non-renewal of the Advisory Agreement with the Griffin-American Advisor in connection with the merger. Under a sub-advisory agreement between the Griffin-American Advisor and the Griffin-American Sub-Advisor, the Griffin-American Advisor has agreed to the payment of the Merger Termination Amount to the Griffin-American Sub-Advisor, which is jointly owned by the Griffin-American co-sponsors. Certain of Griffin-American’s executive officers and directors are officers and directors of, and own interests in, American Healthcare Investors. The amount of the Merger Termination Amount is estimated to be approximately $43,730,632 based on a calculation as of October 13, 2014.
In connection with the merger, all outstanding shares of restricted common stock of Griffin-American under its 2009 incentive plan, whether or not vested, will become immediately vested and canceled in exchange for the right to receive, for each share of restricted stock so canceled, an amount equal to the merger consideration. As of October 24, 2014, 149,040 shares of Griffin-American restricted common stock were held by Griffin-American’s independent directors.
Under the merger agreement, subject to certain exceptions, NorthStar has agreed to, among other things, honor and fulfill following the closing of the merger (i) the indemnification provisions contained in Griffin-American’s corporate governance documents in effect as of the date of the merger agreement and (ii) all existing indemnification agreements of Griffin-American, to the individuals covered by such corporate governance documents or indemnification agreements, or the covered persons, arising out of or relating to actions or omissions in their capacity as such

18



occurring at or prior to the completion of the merger. NorthStar has further agreed to provide, subject to certain exceptions, additional indemnification and insurance coverage to the covered persons as set forth in the merger agreement.
On October 10, 2014, American Healthcare Investors entered into a transition services agreement with NorthStar and NSAM, pursuant to which American Healthcare Investors agreed to provide certain transitional services (including, among other things, property management services) to NorthStar following the closing of the merger on the terms and conditions set forth in such transition services agreement.
These interests are discussed in more detail in the section entitled “The Merger-Interests of Griffin-American’s Directors and Executive Officers in the Merger” below. The Griffin-American Board was aware of the different or additional interests described herein and considered these interests along with other matters in approving the parent merger and the other transactions contemplated by the merger agreement.
Listing of Shares of NorthStar Common Stock
Approval of the listing on the NYSE of the shares of NorthStar common stock to be issued to Griffin-American Holders pursuant to the merger agreement is a condition to each party’s obligation to complete the merger, subject only to official notice of issuance. If the merger is completed, shares of Griffin-American common stock will be deregistered under the Exchange Act.
No Stockholder Appraisal Rights in the Merger
Neither NorthStar common stockholders nor Griffin-American common stockholders are entitled to exercise appraisal rights in connection with the merger. See “No Appraisal Rights” below.
Conditions to Completion of the Merger
A number of conditions must be satisfied or waived, where legally permissible, before the merger can be consummated. These include, among others:
the approval by NorthStar’s stockholders of the issuance of shares of NorthStar common stock to Griffin-American Holders pursuant to the merger agreement;
the approval by Griffin-American’s stockholders of the parent merger and the other transactions contemplated by the merger agreement;
the absence of an injunction or law prohibiting the merger;
the effectiveness of the registration statement on Form S-4, of which this joint proxy statement/prospectus is a part;
the approval for listing on the NYSE of the shares of NorthStar common stock to be issued to Griffin-American Holders pursuant to the merger agreement, subject to official notice of issuance;
the accuracy of all representations and warranties made by the parties in the merger agreement and performance by the parties of their obligations under the merger agreement (subject in each case to certain materiality standards);
the absence of any material adverse effect with respect to any party; and
the receipt of a legal opinion from NorthStar’s and Griffin-American’s respective legal counsel regarding such party’s qualification as a REIT.
Neither NorthStar nor Griffin-American can give any assurance as to when or if all of the conditions to the consummation of the merger will be satisfied or waived or that the merger will occur.
For more information regarding the conditions to the consummation of the merger and a complete list of such conditions, see “The Merger Agreement-Conditions to Completion of the Merger” and “Risk Factors-Risks Relating to the Merger-Completion of the merger is subject to many conditions and if these conditions are not satisfied or waived, the merger will not be completed, which could result in the requirement that NorthStar or Griffin-American pay certain termination fees or, in certain circumstances, damages to the other party.”

19



Regulatory Approvals in Connection with the Merger
The merger may implicate certain regulatory requirements of municipal, state and federal, domestic or foreign, governmental agencies and authorities, including those relating to the offer and sale of securities. Additionally, the merger may require certain regulatory approvals with respect to the licensing of certain facilities. NorthStar and Griffin-American are currently working to evaluate and comply in all material respects with these requirements, as appropriate, and do not currently anticipate that they will hinder, delay or restrict completion of the merger. It is possible, however, that one or more of the regulatory approvals required to complete the merger will not be obtained on a timely basis or at all. In addition, it is possible that any of the governmental entities with which filings are made may seek regulatory concessions as conditions for granting approval of the merger. Under the merger agreement, NorthStar and Griffin-American have each agreed to use its reasonable best efforts to take all actions necessary, proper or advisable to complete the merger and the other transactions contemplated by the merger agreement.
No Solicitation and Change in Recommendation
Under the merger agreement, Griffin-American has agreed not to, and to cause its subsidiaries not to, directly or indirectly: (i) solicit, initiate or knowingly facilitate or assist any inquiry or the making of any proposal or offer that constitutes, or would reasonably be expected to lead to, a competing acquisition proposal; (ii) engage in, continue or otherwise participate in discussions or negotiations regarding, or furnish to any other person information in connection with, or for the purpose of facilitating or assisting, any proposal or offer that constitutes, or would reasonably be expected to lead to, a competing acquisition proposal; (iii) enter into any contract (including any letter of intent or agreement in principle) with respect to a competing acquisition proposal; or (iv) grant any waiver, amendment or release under any standstill or confidentiality agreement or any takeover statute.
However, prior to the approval of the parent merger and the other transactions contemplated by the merger agreement by Griffin-American common stockholders, Griffin-American may, under certain specified circumstances, engage in discussions or negotiations with and provide non-public information regarding itself to a third party making an unsolicited, written competing acquisition proposal. Under the merger agreement, Griffin-American is required to notify NorthStar promptly if it receives any competing acquisition proposal or inquiry or any request for non-public information in connection with a competing acquisition proposal.
Before the approval of the parent merger and the other transactions contemplated by the merger agreement by Griffin-American common stockholders, the Griffin-American Board may, under certain specified circumstances, withdraw its recommendation of the parent merger and terminate the merger agreement to enter into an alternative acquisition proposal with respect to a competing acquisition proposal that is superior to the parent merger if the Griffin-American Board determines in good faith, after consultation with independent financial advisors and outside legal counsel, that failure to take such action would be inconsistent with the directors’ duties under applicable law.
For more information regarding the limitations on Griffin-American and the Griffin-American Board to consider other proposals, see “The Merger Agreement-Covenants and Agreements-Non-Solicitation.”
Termination
Griffin-American and NorthStar may mutually agree to terminate the merger agreement before completing the merger, even after approval of the Griffin-American common stockholders or approval of NorthStar common stockholders.
In addition, either Griffin-American or NorthStar may decide to terminate the merger agreement if:
the merger is not consummated by January 30, 2015 (so long as the terminating party is not at fault);
there is a final, non-appealable order or injunction prohibiting the merger;
the Griffin-American common stockholders fail to approve the parent merger and the other transactions contemplated by the merger agreement; or
the NorthStar common stockholders fail to approve the issuance of shares of NorthStar common stock to Griffin-American Holders in connection with the merger.
Griffin-American may also decide to terminate the merger agreement if:
NorthStar has breached in any material respect any of its representations, warranties, covenants or agreements in the merger agreement that would, or would reasonably be expected to, result in a failure of

20



Griffin-American’s conditions to consummation of the merger and NorthStar does not cure such breach within a specified period;
all the mutual conditions and NorthStar’s conditions to closing the merger have been satisfied or waived and the merger has not been completed within two business days of delivery of written notice by Griffin-American that it is ready to complete the merger; or
Griffin-American enters into an alternative acquisition agreement with respect to a superior proposal or the Griffin-American Board has made an adverse recommendation change.
NorthStar may terminate the merger agreement if:
Griffin-American has breached in any material respect any of its representations, warranties, covenants or agreements in the merger agreement that would, or would reasonably be expected to, result in a failure of NorthStar’s conditions to consummation of the merger and Griffin-American does not cure such breach within a specified period; or
the Griffin-American Board has made an adverse recommendation change.
For more information regarding the rights of Griffin-American and NorthStar to terminate the merger agreement, see “The Merger Agreement-Termination of the Merger Agreement.”
Break-up Fees and Expenses
Generally, all fees and expenses incurred in connection with the merger and the transactions contemplated by the merger agreement will be paid by the party incurring those expenses. Additionally, the merger agreement provides for the payment of a break-up fee by Griffin-American of $102.0 million in certain circumstances; the merger agreement also provides that NorthStar may be obligated to pay a reverse break-up fee of $153.0 million or $35.0 million in certain other circumstances.
For more information regarding break-up fees, see “The Merger Agreement-Termination of the Merger Agreement- Termination Payment; Break Up Fees.”
Material U.S. Federal Income Tax Consequences of the Merger
The receipt of the applicable merger consideration for each share of Griffin-American common stock pursuant to the parent merger will be a taxable transaction for U.S. federal income tax purposes. Generally for U.S. federal income tax purposes, Griffin-American common stockholders will recognize gain or loss as a result of the parent merger measured by the difference, if any, between the merger consideration per share and the adjusted tax basis in that share. In addition, under certain circumstances, NorthStar may be required to withhold a portion of the merger consideration under applicable tax laws and NorthStar intends to withhold a portion of the merger consideration paid to non-U.S. common stockholders to the extent required under FIRPTA. Tax matters can be complicated, and the tax consequences of the parent merger to Griffin-American common stockholders will depend on their particular tax situations. Griffin-American common stockholders are encouraged to consult their tax advisor regarding the tax consequences of the parent merger to them.
For further discussion of the material U.S. federal income tax consequences of the parent merger, see “Material U.S. Federal Income Tax Consequences-Material U.S. Federal Income Tax Consequences Related to the Parent Merger” below.
Accounting Treatment of the Merger
In accordance with U.S. generally accepted accounting principles (“U.S. GAAP” or “GAAP”), NorthStar will account for the merger using the purchase method of accounting for a business combination with NorthStar treated as the acquirer of Griffin-American. Under such accounting, the assets acquired and liabilities assumed will be recorded as of the acquisition date at their respective fair value and added to those of NorthStar. Any excess of purchase price over the fair value will be recorded as goodwill.
Comparison of Rights of NorthStar Common Stockholders and Griffin-American Common Stockholders
At the effective time of the merger, Griffin-American Holders will receive shares of NorthStar common stock as part of their merger consideration and will become stockholders of NorthStar. Accordingly, their rights will be governed by NorthStar’s charter and bylaws and the laws of the State of Maryland. NorthStar’s charter and bylaws contain provisions that are different from Griffin-American’s charter and bylaws in various ways.

21



For a summary of certain differences between the rights of NorthStar common stockholders and the rights of Griffin-American common stockholders, see “Comparison of Rights of NorthStar Common Stockholders and Griffin-American Common Stockholders” below.
Selected Historical Financial Information of NorthStar
The following selected historical financial information for each of the years during the five-year period ended December 31, 2013 and the selected balance sheet data as of December 31, 2013, 2012, 2011, 2010 and 2009 have been derived from NorthStar’s audited consolidated financial statements contained in its Annual Report on Form 10-K filed with the SEC on February 28, 2014, which have been adjusted for discontinued operations and have been incorporated by reference into this joint proxy statement/prospectus. The selected historical financial information as of and for the six months ended June 30, 2014 has been derived from NorthStar’s unaudited condensed consolidated financial statements contained in NorthStar Realty's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2014 which has been incorporated into this joint proxy statement/prospectus. Interim results for the six months ended and as of June 30, 2014 are not necessarily indicative of, and are not projections for, the results to be expected for the fiscal year ending December 31, 2014.
Five Year Comparison - NorthStar
June 30, 2014
 
 
Six Months Ended
 
Years Ended December 31,
 
 
June 30, 2014
 
2013
 
2012
 
2011
 
2010
 
2009
Operating Data:
 
(Unaudited)
 
(Dollars in thousands)
Net interest income on debt and securities
 
$
148,157

 
$
265,837

 
$
335,496

 
$
355,921

 
$
273,727

 
$
126,342

    Total other revenues
 
190,266

 
240,847

 
114,308

 
109,402

 
115,974

 
92,073

    Total expenses
 
302,278

 
368,655

 
240,076

 
289,887

 
391,708

 
279,629

Income (loss) from operations
 
36,145

 
138,029

 
209,728

 
175,436

 
(2,007
)
 
(61,214
)
Income (loss) from continuing operations
 
(176,883
)
 
(77,559
)
 
(257,718
)
 
(234,173
)
 
(376,944
)
 
(144,253
)
Income (loss) from discontinued operations (1)
 
(6,711
)
 
(10,351
)
 
(17,450
)
 
(25,551
)
 
(15,144
)
 
(6,122
)
Net income (loss)
 
(183,594
)
 
(87,910
)
 
(273,089
)
 
(242,526
)
 
(389,560
)
 
(136,576
)
Net income (loss) attributable to NorthStar Realty Finance Corp.
 
$
(208,527
)
 
$
(137,453
)
 
$
(288,587
)
 
$
(263,014
)
 
$
(395,466
)
 
$
(151,208
)
Income (loss) per share from continuing operations (2)
 
$
(1.21
)
 
$
(1.2
)
 
$
(4.36
)
 
$
(5.67
)
 
$
(9.99
)
 
$
(4.53
)
Income (loss) per share from discontinued operations (1) (2)
 
$
(0.04
)
 
$
(0.1
)
 
$
(0.28
)
 
$
(0.57
)
 
$
(0.40
)
 
$
(0.18
)
Dividends per share of common stock (2)
 
$
1.00

 
$
1.70

 
$
1.32

 
$
0.92

 
$
0.80

 
$
0.80

                                                    
(1)
Primarily represents income (loss) from the operations of NorthStar Realty Finance Corp.’s asset management business which was spun-off on June 30, 2014.
(2)
Adjusted for the one-for-two reverse split completed on June 30, 2014.

22



 
 
June 30,
 
December 31,
 
 
2014
 
2013
 
2012
 
2011
 
2010
 
2009
Balance Sheet Data:
 
(Unaudited)
 
(Dollars in thousands)
Cash and cash equivalents
 
$
452,149

 
$
635,990

 
$
444,927

 
$
144,508

 
$
125,439

 
$
138,928

Operating real estate, net
 
4,276,135

 
2,369,505

 
1,390,546

 
1,089,449

 
938,062

 
978,902

Real estate debt investments, net
 
1,236,221

 
1,031,078

 
1,832,231

 
1,710,582

 
1,821,764

 
1,936,482

Investments in private equity funds, at fair value
 
550,141

 
586,018

 

 

 

 

Investments in unconsolidated ventures
 
208,434

 
142,340

 
111,025

 
96,143

 
99,992

 
38,299

Real estate securities, available for sale
 
956,628

 
1,052,320

 
1,124,668

 
1,473,305

 
1,691,054

 
336,220

Total assets
 
8,368,846

 
6,360,050

 
5,513,778

 
5,006,437

 
5,151,991

 
3,669,564

Total borrowings
 
5,044,120

 
3,342,071

 
3,790,072

 
3,509,126

 
3,416,939

 
2,042,222

Total liabilities
 
5,411,620

 
3,662,587

 
4,182,914

 
3,966,823

 
3,779,478

 
2,210,924

Preferred stock
 
939,166

 
697,352

 
504,018

 
241,372

 
241,372

 
241,372

Total equity
 
2,957,226

 
2,697,463

 
1,330,864

 
1,039,614

 
1,277,691

 
1,363,818

Selected Historical Financial Information of Griffin-American
The following selected historical financial information as of December 31, 2013 and 2012 and for the years ended December 31, 2013, 2012 and 2011 is derived from Griffin-American’s audited consolidated financial statements included in this joint proxy statement/prospectus. The selected historical financial information as of December 31, 2011, 2010 and 2009, and for the year ended December 31, 2010 and for the period from January 7, 2009, or Griffin-American’s date of inception, through December 31, 2009 is derived from Griffin-American’s audited consolidated financial statements which are not included in this joint proxy statement/prospectus. The selected historical financial information as of June 30, 2014 and for the six months ended June 30, 2014 is derived from Griffin-American’s unaudited consolidated financial statements included in this joint proxy statement/prospectus.
The following selected historical financial information should be read with Griffin-American’s “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Griffin-American’s consolidated financial statements and the notes thereto, included in this joint proxy statement/prospectus. Griffin-American’s historical results are not necessarily indicative of results for any future period. Griffin-American had limited results of operations for the period from Griffin-American’s date of inception through December 31, 2009 and for the year ended December 31, 2010, and therefore, Griffin-American’s results of operations for the years ended December 31, 2013, 2012, 2011 and 2010 and for the period from Griffin-American’s date of inception through December 31, 2009 are not comparable.
The following tables present summarized consolidated financial information, including balance sheet information, statement of operations information, and statement of cash flows information, derived from Griffin-American’s consolidated financial statements:
 
 
 
December 31,
 
June 30, 2014
 
2013
 
2012
 
2011
 
2010
 
2009
Balance Sheet:
 
 
 
 
 
 
 
 
 
 
 
Total assets
$
3,047,243,000

 
$
2,928,726,000

 
$
1,454,629,000

 
$
499,152,000

 
$
203,996,000

 
$
13,809,000

Mortgage loans payable, net
$
320,643,000

 
$
329,476,000

 
$
291,052,000

 
$
80,466,000

 
$
58,331,000

 
$

Lines of credit
$
217,300,000

 
$
68,000,000

 
$
200,000,000

 
$

 
$
11,800,000

 
$

Stockholders' equity
$
2,343,346,000

 
$
2,383,025,000

 
$
860,307,000

 
$
397,357,000

 
$
125,240,000

 
$
13,283,000



23



 
Six Months Ended
 
Years Ended December 31,
 
Period from January 7, 2009 (Date of Inception) through
December 31,
 
June 30, 2014
 
2013
 
2012
 
2011
 
2010
 
2009
Statement of Operations:
 
 
 
 
 
 
 
 
 
 
 
Total revenues
$
185,378,000

 
$
204,403,000

 
$
100,728,000

 
$
40,457,000

 
$
8,682,000

 
$

Net income (loss)
$
9,589,000

 
$
9,065,000

 
$
(63,244,000
)
 
$
(5,774,000
)
 
$
(7,423,000
)
 
$
(282,000
)
Net income (loss) attributable to controlling interest
$
9,579,000

 
$
9,051,000

 
$
(63,247,000
)
 
$
(5,776,000
)
 
$
(7,424,000
)
 
$
(281,000
)
Net income (loss) per common share attributable to controlling interest — basic and diluted(1)
$
0.03

 
$
0.05

 
$
(0.85
)
 
$
(0.19
)
 
$
(0.99
)
 
$
(1.51
)
Statement of Cash Flows:
 
 
 
 
 
 
 
 
 
 
 
Net cash provided by (used in) operating activities
$
78,590,000

 
$
42,748,000

 
$
23,462,000

 
$
9,264,000

 
$
(2,881,000
)
 
$
(40,000
)
Net cash used in investing activities
$
(149,873,000
)
 
$
(1,437,605,000
)
 
$
(730,304,000
)
 
$
(223,689,000
)
 
$
(186,342,000
)
 

Net cash provided by financing activities
$
64,380,000

 
$
1,337,919,000

 
$
756,843,000

 
$
253,089,000

 
$
181,468,000

 
$
13,813,000

Other:
 
 
 
 
 
 
 
 
 
 
 
Distributions declared
$
98,654,000

 
$
135,900,000

 
$
49,346,000

 
$
20,037,000

 
$
4,866,000

 
$

Distributions declared per share
$
0.34

 
$
0.68

 
$
0.66

 
$
0.65

 
$
0.66

 
$

Funds from operations(2)
$
77,441,000

 
$
85,154,000

 
$
(24,851,000
)
 
$
9,040,000

 
$
(3,837,000
)
 
$
(281,000
)
Modified funds from operations(2)
$
79,099,000

 
$
109,266,000

 
$
44,987,000

 
$
17,577,000

 
$
2,909,000

 
$
(263,000
)
Normalized modified funds from operations(2)
$
79,099,000

 
$
109,266,000

 
$
49,219,000

 
$
17,577,000

 
$
2,909,000

 
$
(263,000
)
Net operating income(3)
$
119,075,000

 
$
161,016,000

 
$
79,597,000

 
$
32,127,000

 
$
6,481,000

 
$

                                        
(1)
Net income (loss) per common share is based upon the weighted average number of shares of Griffin-American common stock outstanding. Distributions by Griffin-American of its current and accumulated earnings and profits for federal income tax purposes are taxable to stockholders as ordinary income. Distributions in excess of these earnings and profits generally are treated as a non-taxable reduction of the stockholders’ basis in the shares of Griffin-American common stock to the extent thereof (a return of capital for tax purposes) and, thereafter, as taxable gain. These distributions in excess of earnings and profits will have the effect of deferring taxation of the distributions until the sale of the stockholders’ common stock.
(2)
Funds from Operations, Modified Funds from Operations and Normalized Modified Funds from Operations:
Due to certain unique operating characteristics of real estate companies, the National Association of Real Estate Investment Trusts, or NAREIT, an industry trade group, has promulgated a measure known as funds from operations, or FFO, which Griffin-American believes to be an appropriate supplemental measure to reflect the operating performance of a REIT. The use of FFO is recommended by the REIT industry as a supplemental performance measure. FFO is not equivalent to Griffin-American's net income (loss) as determined under GAAP.
Griffin-American defines FFO, a non-GAAP measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as revised in February 2004, or the White

24



Paper. The White Paper defines FFO as net income (loss) computed in accordance with GAAP, excluding gains or losses from sales of property and asset impairment writedowns, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO. Griffin-American’s FFO calculation complies with NAREIT’s policy described above.
The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time, which is the case if such assets are not adequately maintained or repaired and renovated as required by relevant circumstances and/or as requested or required by lessees for operational purposes in order to maintain the value disclosed. Griffin-American believes that, since real estate values historically rise and fall with market conditions, including inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using historical accounting for depreciation may be less informative. In addition, Griffin-American believes it is appropriate to disregard impairment charges, as this is a fair value adjustment that is largely based on market fluctuations and assessments regarding general market conditions which can change over time. An asset will only be evaluated for impairment if certain impairment indications exist, and if the carrying, or book value, exceeds the total estimated undiscounted future cash flows (including net rental and lease revenues, net proceeds on the sale of the property, and any other ancillary cash flows at a property or group level under GAAP) from such asset an impairment charge would be recognized. Testing for impairment charges is a continuous process and is analyzed on a quarterly basis. Investors should note, however, that determinations of whether impairment charges have been incurred are based partly on anticipated operating performance, because estimated undiscounted future cash flows from a property, including estimated future net rental and lease revenues, net proceeds on the sale of the property, and certain other ancillary cash flows, are taken into account in determining whether an impairment charge has been incurred. While impairment charges are excluded from the calculation of FFO as described above, investors are cautioned that due to the fact that impairments are based on estimated future undiscounted cash flows and that Griffin-American intends to have a relatively limited term of operations, it could be difficult to recover any impairment charges through the eventual sale of the property.
Historical accounting for real estate involves the use of GAAP. Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in GAAP. Nevertheless, Griffin-American believes that the use of FFO, which excludes the impact of real estate related depreciation and amortization and impairments, provides a more complete understanding of its performance to investors and to its management, and when compared year over year, reflects the impact on Griffin-American’s operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income (loss).
However, FFO and modified funds from operations, or MFFO, as described below, should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income (loss) or in its applicability in evaluating Griffin-American’s operating performance. The method utilized to evaluate the value and performance of real estate under GAAP should be construed as a more relevant measure of operational performance and considered more prominently than the non-GAAP FFO and MFFO measures and the adjustments to GAAP in calculating FFO and MFFO.
Changes in the accounting and reporting rules under GAAP that were put into effect and other changes to GAAP accounting for real estate subsequent to the establishment of NAREIT’s definition of FFO have prompted an increase in cash-settled expenses, specifically acquisition fees and expenses, as items that are expensed as operating expenses under GAAP. Griffin-American believes these fees and expenses do not affect its overall long-term operating performance. Publicly registered, non-listed REITs typically have a significant amount of acquisition activity and are substantially more dynamic during their initial years of investment and operation. While other start up entities may also experience significant acquisition activity during their initial years, Griffin-American believes that publicly registered, non-listed REITs are unique in that they have a limited life with targeted exit strategies within a relatively limited time frame after the acquisition activity ceases. Griffin-American will use the proceeds raised in its offerings to acquire properties, and intends to begin the process of achieving a liquidity event (i.e., listing of Griffin-American shares of common stock on a national securities exchange, a merger or sale, the sale of all or substantially all of Griffin-American’s assets, or another similar transaction) within five years after the completion of its offering stage, which is generally comparable to other publicly registered, non-listed REITs. Thus, Griffin-American does not intend to continuously purchase assets and intends to have a limited life. Due to the above factors and other unique features of publicly

25



registered, non-listed REITs, the Investment Program Association, or the IPA, an industry trade group, has standardized a measure known as MFFO, which the IPA has recommended as a supplemental measure for publicly registered, non-listed REITs and which Griffin-American believes to be another appropriate supplemental measure to reflect the operating performance of a publicly registered, non-listed REIT having the characteristics described above. MFFO is not equivalent to Griffin-American’s net income (loss) as determined under GAAP, and MFFO may not be a useful measure of the impact of long-term operating performance on value if Griffin-American does not continue to operate with a limited life and targeted exit strategy, as currently intended. Griffin-American believes that, because MFFO excludes acquisition fees and expenses that affect its operations only in periods in which properties are acquired and that it considers more reflective of investing activities, as well as other non-operating items included in FFO, MFFO can provide, on a going forward basis, an indication of the sustainability (that is, the capacity to continue to be maintained) of Griffin-American’s operating performance after the period in which it is acquiring properties and once its portfolio is in place. By providing MFFO, Griffin-American believes it is presenting useful information that assists investors and analysts to better assess the sustainability of its operating performance after its offering stage has been completed and its properties have been acquired. Griffin-American also believes that MFFO is a recognized measure of sustainable operating performance by the publicly registered, non-listed REIT industry. Further, Griffin-American believes MFFO is useful in comparing the sustainability of its operating performance after its offering stage and acquisitions are completed with the sustainability of the operating performance of other real estate companies that are not as involved in acquisition activities. Investors are cautioned that MFFO should only be used to assess the sustainability of Griffin-American’s operating performance after its offering stage has been completed and properties have been acquired, as it excludes acquisition fees and expenses that have a negative effect on Griffin-American’s operating performance during the periods in which properties are acquired.
Griffin-American defines MFFO, a non-GAAP measure, consistent with the IPA’s Guideline 2010-01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs: Modified Funds from Operations, or the Practice Guideline, issued by the IPA in November 2010. The Practice Guideline defines MFFO as FFO further adjusted for the following items included in the determination of GAAP net income (loss): acquisition fees and expenses; amounts relating to deferred rent receivables and amortization of above and below market leases and liabilities (which are adjusted in order to reflect such payments from a GAAP accrual basis to closer to an expected to be received cash basis of disclosing the rent and lease payments); accretion of discounts and amortization of premiums on debt investments; mark-to-market adjustments included in net income (loss); gains or losses included in net income (loss) from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan; unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting; and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis. The accretion of discounts and amortization of premiums on debt investments, unrealized gains and losses on hedges, foreign exchange, derivatives or securities holdings, unrealized gains and losses resulting from consolidations, as well as other listed cash flow adjustments are adjustments made to net income (loss) in calculating cash flows from operations and, in some cases, reflect gains or losses which are unrealized and may not ultimately be realized. Griffin-American is responsible for managing interest rate, hedge and foreign exchange risk, and it does not rely on another party to manage such risk. Inasmuch as interest rate and foreign currency rate hedges are not a fundamental part of Griffin-American’s operations, Griffin-American believes it is appropriate to exclude such gains and losses in calculating MFFO, as such gains and losses are based on market fluctuations and may not be directly related or attributable to Griffin-American’s operations.
Griffin-American’s MFFO calculation complies with the IPA’s Practice Guideline described above. In calculating MFFO, Griffin-American excludes acquisition related expenses (which includes gains and losses on contingent consideration), amortization of above and below market leases, amortization of closing costs and origination fees, fair value adjustments of derivative financial instruments, gains or losses on foreign currency transactions, gains or losses from the extinguishment of debt, change in deferred rent receivables and the adjustments of such items related to noncontrolling interests. The other adjustments included in the IPA’s Practice Guideline are not applicable to Griffin-American for the six months ended June 30, 2014, for the years ended December 31, 2013, 2012, 2011, and 2010 and for the period from Griffin-American’s date of inception through December 31, 2009. Acquisition fees and expenses are paid in cash by Griffin-American, and Griffin-American has not set aside or put into escrow any specific amount of proceeds from its offerings to be used to fund acquisition fees and expenses. The purchase of real estate and real estate-related investments, and the corresponding expenses associated with that process, is a key operational feature of Griffin-American’s business

26



plan in order to generate operating revenues and cash flows to make distributions to its stockholders. However, Griffin-American does not intend to fund acquisition fees and expenses in the future from operating revenues and cash flows, nor from the sale of properties and subsequent re-deployment of capital and concurrent incurring of acquisition fees and expenses. Acquisition fees and expenses include payments to the Griffin-American Advisor Entities (defined below) or their affiliates and third parties. Such fees and expenses will not be reimbursed by the Griffin-American Advisor Entities or their affiliates and third parties, and therefore if there are no further proceeds from the sale of shares of Griffin-American's common stock to fund future acquisition fees and expenses, such fees and expenses will need to be paid from either additional debt, operational earnings or cash flows, net proceeds from the sale of properties, or from ancillary cash flows. Acquisition related expenses under GAAP are considered operating expenses and as expenses included in the determination of net income (loss) and income (loss) from continuing operations, both of which are performance measures under GAAP. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by Griffin-American, unless earnings from operations or net sales proceeds from the disposition of other properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to such property. In the future, Griffin-American may pay acquisition fees or reimburse acquisition expenses due to the Griffin-American Advisor Entities and their affiliates, or a portion thereof, with net proceeds from borrowed funds, operational earnings or cash flows, net proceeds from the sale of properties, or ancillary cash flows. As a result, the amount of proceeds available for investment and operations would be reduced, or Griffin-American may incur additional interest expense as a result of borrowed funds. Nevertheless, the Griffin-American Advisor Entities or their affiliates will not accrue any claim on Griffin-American assets if acquisition fees and expenses are not paid from the proceeds of the offerings.
Further, under GAAP, certain contemplated non-cash fair value and other non-cash adjustments are considered operating non-cash adjustments to net income (loss) in determining cash flows from operations. In addition, Griffin-American views fair value adjustments of derivatives and gains and losses from dispositions of assets as items which are unrealized and may not ultimately be realized or as items which are not reflective of on-going operations and are therefore typically adjusted for when assessing operating performance.
Griffin-American uses MFFO and the adjustments used to calculate it in order to evaluate its performance against other publicly registered, non-listed REITs which intend to have limited lives with short and defined acquisition periods and targeted exit strategies shortly thereafter. As noted above, MFFO may not be a useful measure of the impact of long-term operating performance if Griffin-American does not continue to operate in this manner. Griffin-American believes that its use of MFFO and the adjustments used to calculate it allow Griffin-American to present its performance in a manner that reflects certain characteristics that are unique to publicly registered, non-listed REITs, such as their limited life, limited and defined acquisition period and targeted exit strategy, and hence that the use of such measures may be useful to investors. For example, acquisition fees and expenses are intended to be funded from the proceeds of Griffin-American’s offerings and other financing sources and not from operations. By excluding expensed acquisition fees and expenses, the use of MFFO provides information consistent with management’s analysis of the operating performance of the properties. Additionally, fair value adjustments, which are based on the impact of current market fluctuations and underlying assessments of general market conditions, but can also result from operational factors such as rental and occupancy rates, may not be directly related or attributable to Griffin-American’s current operating performance. By excluding such charges that may reflect anticipated and unrealized gains or losses, Griffin-American believes MFFO provides useful supplemental information.
Presentation of this information is intended to provide useful information to investors as they compare the operating performance of different REITs, although it should be noted that not all REITs calculate FFO and MFFO the same way, so comparisons with other REITs may not be meaningful. Furthermore, FFO and MFFO are not necessarily indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income (loss) or income (loss) from continuing operations as an indication of Griffin-American’s performance, as an alternative to cash flows from operations, which is an indication of Griffin-American’s liquidity, or indicative of funds available to fund its cash needs including Griffin-American’s ability to make distributions to its stockholders. FFO and MFFO should be reviewed in conjunction with other measurements as an indication of Griffin-American’s performance. MFFO has limitations as a performance measure in offerings such as the offerings where the price of a share of common stock is a stated value and there is no net asset value determination during the offering stage and for a period thereafter. MFFO may be useful in assisting management and investors in assessing the sustainability of operating performance in future operating periods, and in particular, after the offering and acquisition stages are complete and net asset value is disclosed.

27



FFO and MFFO are not useful measures in evaluating net asset value because impairments are taken into account in determining net asset value but not in determining FFO and MFFO.
Neither the SEC, NAREIT nor any other regulatory body has passed judgment on the acceptability of the adjustments that Griffin-American uses to calculate FFO or MFFO. In the future, the SEC, NAREIT or another regulatory body may decide to standardize the allowable adjustments across the publicly registered, non-listed REIT industry and Griffin-American would have to adjust its calculation and characterization of FFO or MFFO.
In addition, Griffin-American is presenting normalized MFFO, or Normalized MFFO, to adjust MFFO for the costs associated with the purchase during the third quarter of 2012 from an unaffiliated third party of the rights to any subordinated distribution that may have been owed to Griffin-American’s former sponsor. Griffin-American believes that adjusting for the purchase of the subordinated distribution provides useful information because such payment may not be reflective of on-going operations. For a further discussion of the subordinated distribution purchase, see “Griffin-American Healthcare REIT II, Inc.-Griffin-American’s Management’s Discussion and Analysis-Results of Operations-Subordinated Distribution Purchase.”

28



The following is a reconciliation of net income (loss), which is the most directly comparable GAAP financial measure, to FFO, MFFO and Normalized MFFO for the six months ended June 30, 2014, for the years ended December 31, 2013, 2012, 2011 and 2010 and for the period from Griffin-American’s date of inception through December 31, 2009:
 
Six Months Ended
 
Years Ended December 31,
 
Period from January 7, 2009 (Date of Inception) through December 31,
 
June 30, 2014
 
2013
 
2012
 
2011
 
2010
 
2009
Net income (loss)
$
9,589,000

 
$
9,065,000

 
$
(63,244,000
)
 
$
(5,774,000
)
 
$
(7,423,000
)
 
$
(282,000
)
Add:
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization — consolidated properties
67,927,000

 
76,188,000

 
38,407,000

 
14,826,000

 
3,591,000

 

Less:
 
 
 
 
 
 
 
 
 
 
 
Net (income) loss attributable to noncontrolling interests
(10,000
)
 
(14,000
)
 
(3,000
)
 
(2,000
)
 
(1,000
)
 
1,000

Depreciation and amortization related to noncontrolling interests
(65,000
)
 
(85,000
)
 
(11,000
)
 
(10,000
)
 
(4,000
)
 

FFO
$
77,441,000

 
$
85,154,000

 
$
(24,851,000
)
 
$
9,040,000

 
$
(3,837,000
)
 
$
(281,000
)
Acquisition related expenses(1)
$
2,743,000

 
$
25,501,000

 
$
75,608,000

 
$
10,389,000

 
$
7,099,000

 
$
18,000

Amortization of above and below market leases(2)
864,000

 
1,910,000

 
1,283,000

 
298,000

 
79,000

 

Amortization of closing costs and origination fees(3)
78,000

 
107,000

 
15,000

 

 

 

(Gain) loss in fair value of derivative financial instruments(4)
(75,000
)
 
(344,000
)
 
(24,000
)
 
366,000

 
143,000

 

Foreign currency and derivative loss(4)(5)
9,904,000

 
11,312,000

 

 

 

 
 
Loss (gain) on extinguishment
of debt(6)
26,000

 
(127,000
)
 
35,000

 
44,000

 

 

Change in deferred rent receivables(7)
(11,880,000
)
 
(14,224,000
)
 
(7,081,000
)
 
(2,562,000
)
 
(576,000
)
 

Adjustments for noncontrolling interests(8)
(2,000
)
 
(23,000
)
 
2,000

 
2,000

 
1,000

 

MFFO
$
79,099,000

 
$
109,266,000

 
$
44,987,000

 
$
17,577,000

 
$
2,909,000

 
$
(263,000
)
Subordinated distribution purchase(9)

 

 
4,232,000

 

 

 

Normalized MFFO
$
79,099,000

 
$
109,266,000

 
$
49,219,000

 
$
17,577,000

 
$
2,909,000

 
$
(263,000
)
Weighted average common shares outstanding — basic and diluted
$
292,474,061

 
$
199,793,355

 
$
74,122,982

 
$
30,808,725

 
$
7,471,184

 
$
186,330

Net income (loss) per common share — basic and diluted
$
0.03

 
$
0.05

 
$
(0.85
)
 
$
(0.19
)
 
$
(0.99
)
 
$
(1.51
)
FFO per common share — basic and diluted
$
0.26

 
$
0.43

 
$
(0.34
)
 
$
0.29

 
$
(0.51
)
 
$
(1.51
)
MFFO per common share — basic and diluted
$
0.27

 
$
0.55

 
$
0.61

 
$
0.57

 
$
0.39

 
$
(1.41
)
Normalized MFFO per common share — basic and diluted
$
0.27

 
$
0.55

 
$
0.66

 
$
0.57

 
$
0.39

 
$
(1.41
)
                                        
(1)
In evaluating investments in real estate, Griffin-American differentiates the costs to acquire the investment from the operations derived from the investment. Such information would be comparable only for publicly registered, non-listed REITs that have completed their acquisition activity and have other similar operating characteristics. By excluding expensed acquisition related expenses, Griffin-American believes MFFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management’s analysis of the investing and operating performance of Griffin-American’s properties. Acquisition fees and expenses include payments to Grubb & Ellis Healthcare REIT II Advisor LLC (the “Griffin-American former advisor”), the Griffin-American Advisor Entities or their affiliates and third parties. Acquisition related expenses under GAAP are considered operating expenses and as expenses included in the determination of net income (loss) and income (loss) from continuing operations, both of which are performance measures under

29



GAAP. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by Griffin-American, unless earnings from operations or net sales proceeds from the disposition of other properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to such property.
(2)
Under GAAP, above and below market leases are assumed to diminish predictably in value over time and amortized, similar to depreciation and amortization of other real estate related assets that are excluded from FFO. However, because real estate values and market lease rates historically rise or fall with market conditions, including inflation, interest rates, the business cycle, unemployment and consumer spending, Griffin-American believes that by excluding charges relating to the amortization of above and below market leases, MFFO may provide useful supplemental information on the performance of the real estate.
(3)
Under GAAP, direct loan origination fees and costs are amortized over the term of the notes receivable as an adjustment to the yield on the notes receivable. This may result in income recognition that is different than the contractual cash flows under the notes receivable. By adjusting for the amortization of the closing costs and origination fees related to Griffin-American’s real estate notes receivable, MFFO may provide useful supplemental information on the realized economic impact of the notes receivable terms, providing insight on the expected contractual cash flows of such notes receivable, and aligns results with Griffin-American’s analysis of operating performance.
(4)
Under GAAP, Griffin-American is required to record its derivative financial instruments at fair value at each reporting period. Griffin-American believes that adjusting for the change in fair value of its derivative financial instruments is appropriate because such adjustments may not be reflective of on-going operations and reflect unrealized impacts on value based only on then current market conditions, although they may be based upon general market conditions. The need to reflect the change in fair value of Griffin-American’s derivative financial instruments is a continuous process and is analyzed on a quarterly basis in accordance with GAAP.
(5)
Griffin-American believes that adjusting for the change in foreign currency exchange rates provides useful information because such adjustments may not be reflective of on-going operations.
(6)
Griffin-American believes that adjusting for the gain or loss on extinguishment of debt provides useful information because such gain or loss on extinguishment of debt may not be reflective of on-going operations.
(7)
Under GAAP, rental revenue is recognized on a straight-line basis over the terms of the related lease (including rent holidays). This may result in income recognition that is significantly different than the underlying contract terms. By adjusting for the change in deferred rent receivables, excluding the impact of foreign currency translation adjustments, MFFO may provide useful supplemental information on the realized economic impact of lease terms, providing insight on the expected contractual cash flows of such lease terms, and aligns results with Griffin-American’s analysis of operating performance.
(8)
Includes all adjustments to eliminate the noncontrolling interests’ share of the adjustments described in Notes (1) - (7) to convert Griffin-American’s FFO to MFFO.
(9)
Griffin-American believes that adjusting for the purchase of the subordinated distribution provides useful information because such payment may not be reflective of on-going operations.
(3)
Net Operating Income:
Net operating income is a non-GAAP financial measure that is defined as net income (loss), computed in accordance with GAAP, generated from properties before general and administrative expenses, subordinated distribution purchase, acquisition related expenses, depreciation and amortization, interest expense, foreign currency and derivative loss, interest income and income tax benefit. Griffin-American believes that net operating income is useful for investors as it provides an accurate measure of the operating performance of Griffin-American’s operating assets because net operating income excludes certain items that are not associated with the management of the properties. Additionally, Griffin-American believes that net operating income is a widely accepted measure of comparative operating performance in the real estate community. However, Griffin-

30



American’s use of the term net operating income may not be comparable to that of other real estate companies as they may have different methodologies for computing this amount.
The following is a reconciliation of net income (loss), which is the most directly comparable GAAP financial measure, to net operating income for the six months ended June 30, 2014 and for the years ended December 31, 2013, 2012, 2011 and 2010 and for the period from Griffin-Americans date of inception through December 31, 2009:
 
Six Months Ended
 
Years Ended December 31,
 
Period from January 7, 2009 (Date of Inception) through December 31,
 
June 30, 2014
 
2013
 
2012
 
2011
 
2010
 
2009
Net income (loss)
$
9,589,000

 
$
9,065,000

 
$
(63,244,000
)
 
$
(5,774,000
)
 
$
(7,423,000
)
 
$
(282,000
)
General and administrative
19,890,000

 
22,519,000

 
11,067,000

 
5,992,000

 
1,670,000

 
268,000

Subordinated distribution purchase

 

 
4,232,000

 

 

 

Acquisition related expenses
2,743,000

 
25,501,000

 
75,608,000

 
10,389,000

 
7,099,000

 
18,000

Depreciation and amortization
67,927,000

 
76,188,000

 
38,407,000

 
14,826,000

 
3,591,000

 

Interest expense
10,463,000

 
17,765,000

 
13,542,000

 
6,711,000

 
1,559,000

 

Foreign currency and derivative loss
9,904,000

 
11,312,000

 

 

 

 

Interest income
(4,000
)
 
(329,000
)
 
(15,000
)
 
(17,000
)
 
(15,000
)
 
(4,000
)
Income tax benefit
(1,437,000
)
 
(1,005,000
)
 

 

 

 

Net operating income
$
119,075,000

 
$
161,016,000

 
$
79,597,000

 
$
32,127,000

 
$
6,481,000

 
$


31



    
NORTHSTAR REALTY FINANCE CORP.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated balance sheet as of June 30, 2014 is presented as if the merger occurred on June 30, 2014.  At the effective time of the merger, each share of Griffin-American common stock issued and outstanding immediately prior to the effective time of the parent merger will be automatically converted into the right to receive the merger consideration (as described above). In addition, at the effective time of the partnership merger, which will immediately follow the effective time of the parent merger, each limited partnership unit of Griffin-American Operating Partnership issued and outstanding immediately prior to the effective time of the partnership merger will also be automatically converted into the right to receive the merger consideration. No fractional shares of NorthStar common stock will be issued and cash will be paid in lieu thereof.
In connection with the merger, NorthStar entered into (a) the U.S. Commitment Letter pursuant to which the U.S. Lenders have committed to provide the U.S. Loan and (b) the U.K. Commitment Letter pursuant to which the U.K. Lender has committed to provide the U.K. Loan. Each of these commitments is subject to certain conditions, including, without limitation: (i) the negotiation, execution and delivery of definitive loan documentation for the applicable Loan consistent with the applicable Commitment Letter and otherwise reasonably satisfactory to the applicable Lenders; (ii) a condition that there has not been a material adverse effect with respect to Griffin-American; (iii) the consummation of the merger in accordance with the merger agreement (without giving effect to any amendments to the merger agreement or any waivers thereof that are materially adverse to the applicable Lenders unless consented to) concurrently with the funding of the applicable Loan; (iv) the payment of applicable costs, fees and expenses; and (v) the delivery of certain customary closing documents (including, among other things, opinions from legal counsel).  The principal amount of each Loan may be reduced if certain financial tests, such as a minimum net operating income, minimum debt yield, minimum debt service coverage ratio and maximum loan to value ratio (based on appraisals) are not satisfied.  The Commitment Letters terminate on January 30, 2015.  
In addition, in connection with the merger, NorthStar plans to repay the outstanding debt of Griffin-American contemporaneous with the closing of the merger.
The following unaudited pro forma condensed consolidated statements of operations for the six months ended June 30, 2014 and year ended December 31, 2013 are presented as if the following occurred on January 1, 2013: (i) NorthStar completed the merger; (ii) NorthStar completed the spin-off of NorthStar’s asset management business into a separate publicly-traded company, NSAM; (iii) NorthStar acquired a manufactured housing portfolio comprised of 71 communities containing approximately 17,000 pad rental sites (“MH2 Portfolio”) for an aggregate purchase price of $865 million; (iv) NorthStar acquired a $1.05 billion healthcare real estate portfolio comprised of over 8,500 beds across 38 senior housing and 42 skilled nursing facilities (“Formation Portfolio”); and (v) NorthStar acquired a $1.1 billion hotel portfolio in June 2014, consisting of 47 upscale extended stay hotels and premium branded select service hotels with approximately 6,100 rooms (“Innkeepers Portfolio”) (collectively, “the transactions”). The Innkeepers Portfolio was part of a 51 hotel portfolio initially owned by a joint venture between Cerberus Capital Management and Chatham Lodging Trust (“Chatham”), with 47 of the hotels being acquired through a joint venture between NorthStar and Chatham and the remaining four hotels being acquired by Chatham (“Silicon Valley Portfolio”).
The allocation of the assets acquired and liabilities assumed and issued in connection with the merger is reflected in these unaudited pro forma condensed consolidated financial statements and has been based upon preliminary estimates of the fair value of assets acquired and liabilities assumed. A final determination of the fair value of the acquired assets will be based on the valuation of the tangible and intangible assets and liabilities of Griffin-American that exist as of the date of completion of the acquisition, if the acquisition is completed. Consequently, amounts preliminarily allocated to tangible and intangible assets and liabilities could change significantly from those used in the pro forma condensed consolidated financial statements presented and could result in a material change in amortization of tangible and intangible assets and liabilities. The fair value is a preliminary estimate and may be adjusted within one year of the proposed acquisition in accordance with U.S. GAAP.
This unaudited pro forma condensed consolidated financial information should be read in connection with the historical consolidated financial statements and notes thereto included in NorthStar’s Annual Report on Form 10-K for year ended December 31, 2013, as amended, and NorthStar’s Quarterly Report on Form 10-Q for the six months ended June 30, 2014 and is not necessarily indicative of what the actual financial position or results of operations would have been had NorthStar completed the transactions as of the beginning of the period presented, nor is it necessarily indicative of future results.  In the opinion of NorthStar’s management, the pro forma condensed consolidated financial statements include all significant necessary adjustments that can be factually supported to reflect the effects of the transactions.

32



 
 
 
 
 
 
 
 
 
 
Pro Forma
 
 
 
Six Months Ended June 30, 2014 (1)
 
Pro Forma Adjustments (2)
 
Griffin-American Historical (3)
 
Merger Related Adjustments
 
Six Months Ended June 30, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income
 
 
 
 
 
 
 
 
 
 
 
Interest income
 
$
154,546

 
$

 
$
778

 
$

 
$
155,324

 
Interest expense on debt and securities
 
6,389

 

 

 

 
6,389

 
   Net interest income on debt and securities
 
148,157

 

 
778

 

 
148,935

 
 
 
 
 
 
 
 
 
 
 
 
 
Other revenues
 
 
 
 
 
 
 
 
 
 
 
Rental and escalation income
 
147,201

 
17,484

 
144,425

 
(11,606
)
(4) 
297,504

 
Resident fee and hotel income
 
37,586

 
132,132

 
40,175

 

 
209,893

 
Other revenue
 
5,479

 

 
4

 

 
5,483

 
    Total other revenues
 
190,266

 
149,616

 
184,604

 
(11,606
)
 
512,880

 
Expenses
 
 
 
 
 
 
 
 
 
 
 
Other interest expense
 
83,913

 
26,146

 
10,538

 
60,683

(5) 
181,280

 
Real estate properties – operating expenses
 
73,629

 
89,794

 
66,303

 
(156
)
(6) 
229,570

 
Asset management fee expense
 

 

 
11,373

 
60,727

(7) 
72,100

 
Other expenses
 
930

 

 

 

 
930

 
Transaction costs
 
39,760

 
(27,206
)
 
2,743

 

(8) 
15,297

 
Provision for loan losses, net
 
2,719

 

 

 

 
2,719

 
General and administrative expenses
 
 
 
 
 
 
 
 
 

 
Salaries and related expense
 
20,720

 

 

 

 
20,720

 
Equity-based compensation expense
 
11,784

 

 
293

 
(293
)
(9) 
11,784

 
Other general and administrative expenses
 
8,102

 
227

 
6,787

 
(6,787
)
(9) 
8,329

 
    Total general and administrative expenses
 
40,606

 
227

 
7,080

 
(7,080
)
 
40,833

 
Depreciation and amortization
 
60,721

 
28,224

 
67,927

 
(8,836
)
(10) 
148,036

 
    Total expenses
 
302,278

 
117,185

 
165,964

 
105,338

 
690,765

 
Income (loss) from operations
 
36,145

 
32,431

 
19,418

 
(116,944
)
 
(28,950
)
 
Equity in earnings (losses) of unconsolidated ventures
 
63,172

 

 

 

 
63,172

 
Unrealized gain (loss) on investments and other
 
(198,945
)
 
(1,729
)
 
(9,829
)
 
9,829

(11) 
(200,674
)
 
Realized gain (loss) on investments and other
 
(45,832
)
 

 

 

 
(45,832
)
 
Gain (loss) from deconsolidation of N-Star CDOs
 
(31,423
)
 

 

 

 
(31,423
)
 
Income (loss) from continuing operations
 
(176,883
)
 
30,702

 
9,589

 
(107,115
)
 
(243,707
)
 
Income (loss) from discontinued operations
 
(6,711
)
 

 

 

 
(6,711
)
 
Net income (loss)
 
(183,594
)
 
30,702

 
9,589

 
(107,115
)
 
(250,418
)
 
Net (income) loss attributable to non-controlling interests
 
6,248

 
(2,571
)
 
(10
)
 
1,748

(12) 
5,415

 
Preferred stock dividends
 
(31,181
)
 

 

 

 
(31,181
)
 
Net income (loss) attributable to NorthStar Realty Finance Corp. common stockholders
 
$
(208,527
)
 
$
28,131

 
$
9,579

 
$
(105,367
)
 
$
(276,184
)
 
Net income (loss) per common share attributable to NorthStar Realty Finance Corp. common stockholders (basic/diluted)
 
$
(1.25
)
 
 
 
 
 
 
 
$
(1.21
)
(13) 



33



 
 
 
 
 
 
 
 
 
 
 
 
Pro Forma
 
 
 
Year Ended December 31, 2013 (1)
 
NSAM (14)
 
Pro Forma Adjustments(2)
 
Griffin-American Historical (3)
 
Merger Related Adjustments
 
Year Ended December 31, 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income
 
$
303,989

 
$

 
$
171

 
$
535

 
$

 
$
304,695

 
Interest expense on debt and securities
 
38,152

 

 

 

 

 
38,152

 
Net interest income on debt and securities
 
265,837

 

 
171

 
535

 

 
266,543

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other revenues