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NorthStar Real Estate Income Trust Originates $45 Million Senior Mortgage Loan

NorthStar Real Estate Income Trust Inc., a publicly registered non-traded real estate investment trust, originated a $45.1 million senior mortgage loan secured by Airport Tower in Irvine, California. 

Airport Tower is a Class A office building totaling 241,000 square feet and is within close proximity to major transportation routes and John Wayne International Airport. The property also has various amenities, including a full service café/deli, two conference rooms and a storage facility. 

NorthStar Income initially funded $39.2 million of the senior loan at origination, and intends to fund the remaining $5.9 million for capital and tenant improvements and leasing commissions over the term of the loan. The borrower, which was unnamed, is a subsidiary of a partnership between a real estate private equity firm and a commercial real estate operator.

The senior loan bears interest at a floating rate of 3.73 percent over the one-month London Interbank Offered Rate, but at no point shall LIBOR be less than 0.20 percent, resulting in a minimum interest rate of 3.93 percent per year. NorthStar Income will earn an exit fee equal to 1.0 percent of the outstanding amount at the time of repayment. The senior loan is currently unlevered and the company 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. It may be prepaid during the first 18 months, provided the borrower pays an additional amount equal to the remaining interest due on the amount prepaid through month 18. Thereafter, the loan may be prepaid in whole or in part without penalty. 

The loan’s loan-to-value ratio is approximately 52.9 percent. The LTV Ratio is the amount loaned to the borrower net of reserves funded and controlled by NorthStar Income and its affiliates, if any, over the appraised value of the property at the time of origination.

NorthStar Real Estate Income Trust Inc. was formed to originate, acquire and asset manage a diversified portfolio of commercial real estate debt, select equity and securities investments, predominantly in the United States. The company initially registered to offer up to 100 million shares in its primary offering to the public and up to 10,526,315 distribution reinvestment plan shares. In April 2013, the board of directors authorized the reallocation of shares available under the DRP to the primary offering. The primary offering (including 7.6 million shares reallocated from the DRP, was completed in July 2013 and all of the shares initially registered were issued. As a result of a registration statement to offer up to an additional 15 million shares pursuant to the DRP, the company continues to offer shares and has raised total of $1.2 billion.