NorthStar Realty Finance Corp., a U.S. mortgage real estate investment trust, hired a division of UBS Group AG to advise on a potential recombination with NorthStar Asset Management Group Inc., the company from which it was spun off in 2014.
The REIT’s board formed a special committee that will be composed of independent directors who aren’t also on the board of NorthStar Asset Management, including a new director to be appointed shortly.
NorthStar Realty shares jumped 16 percent, the most on record, to close at $12.47. The company has seen some its biggest hedge fund owners reduce their stakes and is under pressure by activist investor Jonathan Litt of Land & Buildings Investment Management LLC. Litt nominated six directors for election to the management company’s board and expressed interest in the REIT selling assets and returning to an internally managed structure.
Because the REIT is externally managed, NorthStar Asset Management gets a flat fee regardless of the company’s performance. NorthStar Realty and its manager have an interminable 20-year contract, which could limit the upside for investors, Jade Rahmani, a Keefe Bruyette & Woods Inc. analyst, said in a report earlier this month.
“We believe the strategic initiatives take precedence and view the hiring of a separate adviser to NRF positively,” Rahmani wrote in a note to clients, referring to the REIT by its stock symbol.