Land And Buildings Urges NSAM To Evaluate All Options, Incl. Sale Of Company

(RTTNews) - Land and Buildings Investment Management said that it believes NorthStar Asset Management (NSAM) is materially undervalued and there are numerous paths to unlock that value. There is one straightforward solution that should be at the top of the list: recombining NSAM and NorthStar Realty Finance (NRF).

In a letter to David Hamamoto, Executive Chairman of NorthStar Asset Management, Land and Buildings Investment Management LLC, said, " An NSAM/ NRF recombination appears to us to be the right thing to do and the right time to do it for all NRF and NSAM shareholders. However, consistent with its fiduciary duties to NSAM shareholders the Board must explore and evaluate all options, including an outright sale of the entire company to a third party."

The $200 million largely perpetual, non-cancelable annual management fee NRF/NRE pays to NSAM, if sold, could be worth nearly $2.6 billion at a 7% yield, after taking a $20 million G&A allocation. In order to purchase the contract, NRF could sell manufactured housing, apartment and other assets at yields well below 7% in addition to utilizing retained earnings to acquire the management contract from NSAM accretively.

According to Land and Buildings, NSAM could pay a special dividend of $2.6 billion in proceeds from the sale of the public REIT management contracts, or $13 per share, to NSAM shareholders, which is 20% more than the current share price. The remainder of NSAM would have considerable value with the highly regarded Townsend asset management and consulting business as well as the real estate management contracts with several private REITs and a nicely producing broker-dealer. These remaining businesses at modest valuations are likely worth $7 per share or more as a going concern or in a sale scenario. As of the end of the third quarter 2015, NSAM had no debt.

Land and Buildings noted that the NSAM Board of Directors made an important first step in the right direction by hiring Goldman Sachs to evaluate strategic alternatives. However, it is disappointed that the Board of NSAM has neither extended the deadline for shareholders to nominate directors nor immediately added new independent directors on the Board to oversee the strategic review process as it requested over a week ago.

Land and Buildings said it continues to be adamant that Board reconstitution to add shareholder representatives in the boardroom is essential to ensure that shareholders' interests are prioritized and options are explored open-mindedly as the Board goes through the process of evaluating all viable alternatives to create value.