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http://clarkstreetvalue.blogspot.com/2018/11/northstar-realt...

Some reasonable thoughts here, and echoes my own.

Jim
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you really think the 3-6 month timeframe is on target, too, or just the general outcome?
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They've specified that if no deal is reached by April 30, 2019, they'll move ahead with the internalization. CLNY has made it concrete the pound of flesh they want from any separation, so a reasonable buyer could say "Here's NAV of $20.50 less the $70 mn fee." So I think the question a buyer would have is whether the assets are worth their marks or perhaps even more. It looks like high-quality property and they've done as well as or better than their marks in prior sales. And this is not a big swallow for anyone. I don't think it's too small to be public, but they need a price near NAV to do deals. I guess CLNY is not interested in owning it directly. Anyway, something is about to happen.

Jim
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Amazing, all the 'flirtation' with NRE may actually end!

I see the price has jumped to 16.36. At 20.50 NAV it's a 25% return. That's great for a 6 month (or less?) timeframe.


Attempting to factor in the Mgmt Fee Payoff:
SeekingAlpha shows a markecap of 815M. The 70M is about 8.6% of that. 8.6% of the $20.50 = $1.76 making an 'adjusted NAV offer' of $18.74 per share. At today's price of 16.36, that's $2.38/14.5% return. Still not too bad, if the scenario plays nice with the timeline.

Did this fast, hope it's close to right :-)


-srockaz
No NRE position
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This has either become a better opportunity, or a bigger uncertainty.
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Delayed....

https://seekingalpha.com/pr/17503855-northstar-realty-europe...

Amended and Restated Management Agreement

On April 23, 2019, NRE entered into Amendment No. 2 to the amended and restated management agreement (the “Amended and Restated Management Agreement”) dated November 9, 2017, with an affiliate of Colony Capital, Inc. (CLNY), extending the date used in the definition of Triggering Date (as defined in the Amended and Restated Management Agreement) from April 30, 2019 to June 30, 2019 to accommodate the ongoing strategic review process.
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I continue to own a few percent in NRE and am watching to see what happens here. Hopefully we see a resolution at a nice premium to today's price.

Jim
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What is downside, if the deal didn't go through?
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“a” deal. No one deal is on the table...?
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Kingran,

This is from the most recent
SEC 10Q filing, about page 19. NRE may sever the management agreement with Colony North Star which would presumably lead to share appreciation.


The Company entered into a management agreement with an affiliate of the Manager in November 2015 (the “Original Management Agreement”). On November 9, 2017, the Company entered into an amended and restated management agreement (the “Amended and Restated Management Agreement”) with an affiliate of the Manager, effective as of January 1, 2018. As asset manager, the Manager is responsible for the Company’s day-to-day operations, subject to supervision and management of the Company’s board of directors (the “Board”). Through its global network of subsidiaries and branch offices, the Manager performs services and engages in activities relating to, among other things, investments and financing, portfolio management and other administrative services, such as accounting and investor relations, to the Company and its subsidiaries. The Amended and Restated Management Agreement with the Manager provides for a base management fee, incentive fee and expense reimbursement.

On November 7, 2018, the Company entered into Amendment No. 1 (the “Amendment”) to the Amended and Restated Management Agreement with an affiliate of the Manager. The Amendment provides for the termination of the Amended and Restated Management Agreement (the date of such termination, the “Termination Date”) upon the earlier of (i) the closing of an NRE Change of Control (as defined in the Amended and Restated Management Agreement) and (ii) the completion of an internalization of the management of the Company within nine months of the later of (x) April 30, 2019, if on such date there is not in place a definitive agreement for an NRE Change of Control and (y) if on April 30, 2019 there is a definitive agreement for an NRE Change of Control, such date on which such agreement is terminated, if any, if no other definitive agreement for an NRE Change of Control is entered into within 30 days thereafter.

The Amendment provides that upon the Termination Date, the Company will be obligated to pay to the Manager a termination payment equal to (i) $70 million, minus (ii) the amount of any Incentive Fee (refer below) paid pursuant to the Amended and Restated Management Agreement. As of March 31, 2019, the termination fee is $64.6 million which is payable on the Termination Date. No Incentive Fee will be payable to the Manager for any period after the Termination Date.
On April 23, 2019, the Company entered into Amendment No. 2 (“Amendment No. 2”) to the Amended and Restated Management Agreement with an affiliate of the Manager, extending the date used in the definition of Triggering Date (as defined in the Amended and Restated Management Agreement) from April 30, 2019 to June 30, 2019 to accommodate the ongoing strategic review process.

In addition to Amendment No.2, on April 22, 2019, the Company entered into an Employee Transition Agreement with an affiliate of the Manager (the “Employee Transition Agreement”). Pursuant to the terms of the Employee Transition Agreement, the parties agreed that certain employees of the Manager would be available for hire by the Company or an acquirer of the Company from and after the termination of the Amended and Restated Management Agreement pursuant to Amendment No. 2. The Employee Transition Agreement also (i) eliminates the Company’s obligation to reimburse the Manager for 50% of the cash severance payments payable to Mahbod Nia, the Chief Executive Officer of the Company, if his employment is terminated in connection with an NRE Change of Control, and reduces such reimbursement obligation from 50% to 25% of the cash severance payments payable to Mr. Nia if such termination of employment is in connection with an Internalization and (ii) addresses a number of other topics including, minimum 2018 annual cash bonuses, continuing compensation and cash severance payable by the Manager or one of its affiliates to key personnel providing services to the Company, the structure and minimum amount of the 2018 annual equity compensation pool established by the Company under the Amended and Restated Management Agreement and the amendment of outstanding equity awards to address vesting upon an NRE Change of Control or termination of the Amended and Restated Management Agreement.
Term

The Amendment, as modified by Amendment No. 2, provides for the termination of the Amended and Restated Management Agreement upon the earlier of (i) the closing of an NRE Change of Control and (ii) the completion of an internalization of the management of the Company within nine months of the later of (x) June 30, 2019, if on such date there is not in place a definitive agreement for an NRE Change of Control and (y) if on June 30, 2019 there is a definitive agreement for an NRE Change of Control, such date on which such agreement is terminated, if any, if no other definitive agreement for an NRE Change of Control is entered into within 30 days thereafter.


https://www.sec.gov/Archives/edgar/data/1646587/000164658719...

David
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Right, a deal, not "the" deal. The big positive is that CLNY is getting rid of the management contract, meaning that there's not a lot of reason for the stock to trade much below NAV. (That said, this company is sitting on a pile of cash and is sub-scale, so it won't get the multiple to FFO that a larger company would get.) There are two external suitors, I've read, and CLNY is a possibility as well. I think it would be hard (for CLNY) to justify paying much less than 95% of appraised value as long as NRE doesn't have a management contract. Of course, whether they can afford this...

At this point, the best solution is for a 3rd party to buy it, I think. The prices NRE has been getting seem good as far as I can see. We should know relatively soon.

Jim
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https://seekingalpha.com/news/3450359-axa-schroders-bid-nort...

"Goldman had been seeking a buyer for the entire REIT, but some bidders, including Axa and Schroders, have proposed acquiring its properties."

Is there some baggage tucked away inside NRE that makes it unattractive as a full entity?

Is the debt ($660MM) poorly written? It seems as though the bidders want to buy the buildings and let NRE deal with paying off the debt. And yet, we also read that NRE has an attractive set of assets and is undervalued as a whole.

There has to be something in there that smells?
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This may be dated info, but I recall there was a 'buyout' fee if someone other than CLNY bought the company. If that's still the case, buying the buildings may circumvent that added purchase cost.

-srockaz
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This thing is down to $15.80/sh.
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Don't I know it?!

It just keeps sliding over the past few weeks. I'm at a bit of a loss as to why, but maybe there's some knowledge leaking out that a deal is off. I'm still holding on to my stock, however.

I will just remind people of what happened at BOBE, after it sold its restaurant unit and paid out a special dividend. It foundered and fell for weeks as the shot-in-the-arm special dividend wore off and the prospects for a buyout seemed to be lower. But recall this is when the company was even more svelte, reduced to its best unit -- the packaged goods group -- which was growing nicely. In BOBE's case, it was merely rumors that there would be a sale, given that Sandell was getting what he asked for.

In the case of NRE, we have a stated intent to sell the company. And seemingly we have a backstop in CLNY. Mr Market gets bored when there's no action for a while, but often that's a good point to remember and focus on the thesis. We have two weeks until the extended deadline passes, and no word from the company since late April. Apparently there were two bidders who were interested in the property. It will be interesting to read the behind-the-scenes details on this if they're ever filed. That's some of the juiciest (SEC) reading out there.

Jim
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