What is NorthStar Realty Finance Probability of Financial Distress (%)?
Probability of Financial Distress (%) measures the probability that a company will go bankrupt in the upcoming year given its current financial position. A higher ratio indicates a larger probability of bankruptcy for the company, while a lower ratio indicates a healthier fundamental. As of today, NorthStar Realty Finance's Probability of Financial Distress (%) is 50.00%.
Like the Altman Z-Score, the PFD measures a company's bankruptcy risk. However, the main drawback of the Z-score is it does not apply to banks and insurance companies. According to Investopedia, the concept of "working capital" does not apply to banks and insurance companies, as financial institutions do not have typical current assets or current liabilities like inventories or accounts payable.
Competitive Comparison of NorthStar Realty Finance's Probability of Financial Distress (%)
For the REIT - Retail subindustry, NorthStar Realty Finance's Probability of Financial Distress (%), along with its competitors' market caps and Probability of Financial Distress (%) data, can be viewed below:
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.
NorthStar Realty Finance's Probability of Financial Distress (%) Distribution in the REITs Industry
For the REITs industry and Real Estate sector, NorthStar Realty Finance's Probability of Financial Distress (%) distribution charts can be found below:
* The bar in red indicates where NorthStar Realty Finance's Probability of Financial Distress (%) falls into.
NorthStar Realty Finance Probability of Financial Distress (%) Calculation
Probability of Financial Distress (%) (PFD) was developed by John Campbell, Jens Hilscher and Jan Szilagyi in their Search of Distress Risk. It measures the probability that a company will go bankrupt within the next 12 months given its current financial position.
The Probability of Financial Distress (%) was obtained by a logit probability model based on eight explanatory variables. The logit formula to compute the probability of financial distress (LPFD) is given below:
| LPFD | = | -20.12 * NIMTAAVG | + | 1.60 * TLMTA | - | 7.88 * EXRETAVG | + | 1.55 * SIGMA | - | 0.005 * RSIZE | - | 2.27 * CASHMTA | + | 0.070 * MB | - | 0.09 * PRICE | - | 8.87 |
| = | 0.00 |
The Probability of Financial Distress (%) (PFD) was then obtianed by:
| PFD | = | 1 | / | (1 + e^(-LPFD)) | * | 100% |
| = | 50.00% |
The eight explanatory variables are:
1. NIMTAAVG = Net Income to Market Total Assets
*Note that for companies reported quarterly, geometrically declining weighted quarterly Net Income data in latest four quarters are used.
2. TLMTA = Total liabilities to Market Total Assets
3. CASHMTA = Cash to Market Total Assets
For non-financial companies, CASHMTA is measured as:
4. EXRETAVG = Excess Return compared to the S&P 500
EXRETAVG is the weighted excess return compared to the S&P 500 in past 12 month. Geometrically declining weights are imposed on the monthly excess return to reflect lagged information. The weight is halved each quarter.
5. SIGMA = Standard Deviation of Daily Returns
For sigma, we use the annualized standard deviation of a company's returns over the past 92 days (or 63 trading days).
6. RSIZE = Relative Size
| RSIZE | = | log (Market Cap | / | Total Market Cap of S&P 500 companies) |
7. MB = Market to Adjusted Book Equity Ratio
8. PRICE
PRICE is measured as the log of the stock price, capped at log(15).
NorthStar Realty Finance (NorthStar Realty Finance) Business Description
Traded in Other Exchanges
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Northstar Realty Finance Corp is a Maryland corporation formed in October 2003. The Company is an internally managed REIT, and is a diversified commercial real estate investment and asset management company. NorthStar Realty Finance Limited Partnership holds all of the Company's assets and conducts its operation directly or indirectly. The Company invests in multiple asset classes across commercial real estate. These investments are in the form of acquiring real estate, originating or acquiring senior or subordinate loans, as well as CRE investments, both in the United States and internationally. The asset management business is focused on raising and managing capital on a fee basis from alternative sources, which includes non-traded real estate investment trusts, and sponsoring other companies through joint ventures and partnerships, such as RXR Realty, LLC, or RXR Realty. The Company's commercial real estate debt business is focused on originating, structuring, acquiring and managing senior and subordinate debt investments secured by commercial real estate, including first mortgage loans, subordinate interests, mezzanine loans, credit tenant loans and other loans, including preferred equity interests in borrowers who own such properties. The Company competes with many third parties engaged in real estate investment activities including publicly-traded REITs, non-traded REITs, insurance companies, commercial and investment banking firms, private equity funds. The Company is subject to supervision and regulation by state and federal governmental authorities and is subject to various laws and judicial and administrative decisions imposing various requirements and restrictions.
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