Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from James Shanahan - Wachovia.
James Shanahan - Wachovia
Does NorthStar then still have approximately $16 million of capital invested in the Monroe JV?
Andrew C. Richardson
I think after the recapitalization we're going to have about $80 million of capital in the JV, and it will be deconsolidated on our financial statements so we'll use the equity method of accounting going forward.
James Shanahan - Wachovia
Can you [inaudible] a walk forward there? If you were at $16 million at March 31, was there incremental capital invested or how did that work?
Andrew C. Richardson
No, we had $16 million of capital invested in the warehouse that matured on March 31 of '08 and it was extended as part of this recap, but we also had capital invested in the VFCC facility that had an initial maturity of July 29 of this year.
And then in addition to that we also had a 40% interest in the first CLO that Monroe did last year. They completed that one as well as a couple of third-party CLO equity interests in that business. So we combined our total investment in that middle market lending venture into this recapitalization.
James Shanahan - Wachovia
What is, at this point, given everything that's happened and the new financing, what is the anticipated annualized return on equity on the $80 million in capital that's invested in that vehicle now?
Andrew C. Richardson
It depends on the performance of the underlying assets, but we expect it to have a much lower yield than it had previously delivered on that highly leveraged warehouse.
David Hamamoto
But part of the variable, Jim, is that as part of the facility there's a 25% reinvestment-backed basket so that the term debt will stay out for a longer period of time and we can get the benefit of that leverage by reset and cycling the capital into higher-yielding loans as loans pay off or get sold.
But I think one of the variables will be how accretively that 25% gets invested. But I think in our projections we would expect that the ROEs would be below our core real estate portfolio performance.
James Shanahan - Wachovia
But a clear positive, I'm assuming then. You had discussed if the one facility within the Monroe JV, if it were to be terminated that the $16 million of capital would be at risk and would have been a loss. That's off the table, then, it sounds like.
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