Two Loan Originations Secured For NorthStar Real Estate Income II

NorthStar Real Estate Income II Inc., a publicly registered non-traded real estate investment trust, originated two senior mortgage loans secured by properties in New York and Texas.

The first loan origination is for a $45.0 million senior mortgage loan secured by a Class A office building located in Lake Success, New York, approximately 15 miles from New York City.

NorthStar Income II initially funded $42.6 million of the senior loan with proceeds from its ongoing initial public offering. NorthStar Income II intends to fund the remaining $2.4 million for tenant improvements and leasing commissions over the term of the loan, subject to the satisfaction of certain requirements by the borrower.

The New York property contains more than 348,000 square feet and is centrally located within its submarket, in close proximity to major transportation routes and regional businesses, including two of the largest hospitals on Long Island. The borrower has invested more than $20 million in connection with its ownership of the property and plans to fund additional capital expenditures, tenant improvements and leasing commissions using proceeds from the office senior loan and cash flow from operations at the property. The borrower is a joint venture between two regional owners and operators of commercial real estate with a combined 5.7 million square feet of property currently owned or under management.

The senior loan bears interest at a floating rate of 3.85 percent over the one-month London Interbank Offered Rate, but at no point shall LIBOR be less than 0.25 percent, resulting in a minimum interest rate of 4.10 percent per year. The senior loan was originated at a 0.50 percent discount and NorthStar Income II will earn an exit fee equal to 1.00 percent of the outstanding amount of the senior loan at the time of repayment. The Office Senior Loan is currently unlevered and NorthStar Income II intends to finance the investment with one of its credit facilities in the future.

The initial term of the senior loan is 36 months, with two 12-month extension options available to the borrower, subject to the satisfaction of certain performance tests and the payment of an extension fee.

The loan-to-value ratio is approximately 71 percent. The loan-to-value ratio is the amount loaned to the borrower net of reserves funded and controlled by NorthStar Income II and its affiliates, if any, over the appraised value of the property at the time of origination.

The second loan origination is for a $39.2 million senior mortgage loan secured by a 360-unit apartment community located in Lewisville, Texas. NorthStar Income II funded the senior loan with proceeds from its ongoing initial public offering.

The Texas property contains more than 339,000 square feet and is located in close proximity to significant local economic drivers including major office parks, corporate headquarters and public transportation hubs. The borrower, an experienced regional owner and operator of multifamily properties, plans to invest over $1.6 million in capital expenditures using proceeds from the senior loan and cash flow from operations at the property. The borrower manages approximately 18,000 multifamily units across over 70 properties, including 14 assets in the Dallas-Ft. Worth metro area.

The senior loan bears interest at a floating rate of 4.30 percent over LIBOR, but at no point shall LIBOR be less than 0.25 percent, resulting in a minimum interest rate of 4.55 percent per year. The senior loan was originated at a 0.25 percent discount and NorthStar Income II will earn an exit fee equal to 0.75 percent of the outstanding amount at the time of repayment. The loan is currently unlevered and NorthStar Income II intends to finance the investment with one of its credit facilities in the future.

The initial term of the loan is 24 months, with three 12-month extension options available to the borrower, subject to the satisfaction of certain performance tests and the payment of an extension fee.

The loan-to-value ratio of the senior loan for the Texas property is approximately 83 percent.

As of July 7, 2015, NorthStar Income II’s $1.0 billion portfolio consists of 14 commercial real estate debt investments with a combined principal amount of $671.0 million, an industrial portfolio with an aggregate gross purchase price of approximately $317.5 million and a portfolio of real estate private equity fund interests with a carrying value of $38.4 million.

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