THE CORPORATE LIBRARY

Related Party Transactions and Outside Related Director Information

NorthStar Realty Finance Corp. (NRF)

4/20/2006 Proxy Information

On September 1, 2005, the Company entered into a loan agreement, as lender, with a subsidiary of Legacy Partners Realty Fund I, LLC, or the Legacy Fund, as borrowers, in the original principal amount of $66.6 million, secured by a first-priority mortgage lien on an office property located in San Jose, California. At the closing of this loan the Company funded $60.9 million of the original principal amount and has an additional $5.7 million of future funding commitments. Simultaneously with the closing of this loan, the Company entered into a participation and servicing agreement with a major financial institution pursuant to which the Company sold a 50% participation in this loan and the future funding commitments. Additionally, on September 8, 2005, the Company entered into a loan agreement with another subsidiary of the Legacy Fund in the original principal amount of $47.4 million, secured by a first-priority mortgage lien on an office property located in San Jose, California. The Company funded $32.6 million at closing and has an additional $14.8 million of future funding commitments. Simultaneously with the closing of this loan, the Company entered into a participation and servicing agreement with a major financial institution pursuant to which the Company sold a 50% participation in this loan and the future funding commitments. One of the Company's directors, Preston Butcher, is the chairman of the board of directors and chief executive officer and owns a significant interest in Legacy Partners Commercial, LLC, which indirectly owns an equity interest in, and owns the manager of, the Legacy Fund.

Shared Facilities and Services Agreement; Sublease

In connection with our initial public offering in October 2004, we entered into a shared facilities and services agreement with NorthStar Capital, an affiliate of the Company, pursuant to which certain general and administrative services required to run these businesses were provided by NorthStar Capital for a period of one year in exchange for an annual fee of $1.57 million.

Since our initial public offering, we have hired additional accounting, legal and administrative personnel and have obtained separate office space sufficient to temporarily accommodate most of our business operations. Accordingly, following the initial one-year term of the shared facilities and services agreement, which expired on October 29, 2005, we terminated the shared facilities and services agreement and entered into a more limited sublease agreement with NorthStar Capital. Under the new sublease, we will rent on a month-to-month basis the NorthStar Capital office space currently used by our accounting, legal and administrative personnel (currently 9 people). The sublease rent is calculated as a per person monthly charge, based on a "turn key" office arrangement (computer, network, telephone and furniture supplied) for each person utilizing the NorthStar Capital facilities. We may increase or decrease the number of people needing such accommodations, and we expect that the sublease rental payment would increase or decrease accordingly.

Management fees-related parties

NorthStar Capital owns 49.94% of Emmes Asset Management Co. LLC, or Emmes. Emmes manages the retail and commercial properties in the Company’s New York property portfolio pursuant to an asset management agreement with ALGM. On December 28, 2004, ALGM terminated its existing asset management agreement with Emmes. ALGM and Emmes entered into a new asset management agreement, which is cancelable on 30 days notice. The annual asset management fee under the new agreement is equal to 3.5% of gross collections from tenants of the properties not to exceed $350,000 or be less than $300,000 per year, except that in the event the assets under management are decreased the fee shall not have a minimum subject to certain provisions. Total fees incurred under this agreement amounted to $291,000 for the year ended December 31, 2005.

EDS portfolio

In September 2005, we acquired a portfolio of four office buildings with 387,842 square feet of rentable space for $61.4 million, which were leased to Electronic Data Systems Corporation, or EDS, under leases expiring in 2015. In connection with the acquisition of the EDS portfolio, Koll Development Company, an affiliate of the Company owned by NorthStar Capital, received a brokerage commission of $921,000.

Legacy Fund

On September 1, 2005, the Company entered into a loan agreement, as lender, with a subsidiary of Legacy Partners Realty Fund I, LLC, or the Legacy Fund, as borrowers, in the original principal amount of $66.6 million, secured by a first-priority mortgage lien on an office property located in San Jose, California. At the closing of this loan the Company funded $60.9 million of the original principal amount and has an additional $5.7 million of future funding commitments. Simultaneously with the closing of this loan, the Company entered into a participation and servicing agreement with a major financial institution pursuant to which the Company sold a 50% participation in this loan and the future funding commitments.

Additionally, on September 8, 2005, the Company entered into a loan agreement with another subsidiary of the Legacy Fund in the original principal amount of $47.4 million, secured by a first-priority mortgage lien on an office property located in San Jose, California. The Company funded $32.6 million at closing and has an additional $14.8 million of future funding commitments. Simultaneously with the closing of this loan, the Company entered into a participation and servicing agreement with a major financial institution pursuant to which the Company sold a 50% participation in this loan and the future funding commitments.

One of the Company's directors, Preston Butcher, is the chairman of the board of directors and chief executive officer and owns a significant interest in Legacy Partners Commercial, LLC, which indirectly owns an equity interest in, and owns the manager of, the Legacy Fund.

25-27 West 34th Street

On January 31, 2006, the Company sold its leasehold interests in 25-27 West 34th for $2.3 million. The same buyer that purchased the 34th Street leasehold had also offered to purchase the fee interest in 25-27 West 34th Street and 29 West 34th Street and conditioned its purchase of the fee interest on the simultaneous purchase of the Company’s leasehold. The fee interest was owned by New Rock Asset Partners LP, or New Rock, an investment partnership managed by Emmes. Additionally, NorthStar Capital owns approximately 18% of the beneficial interest in New Rock and received approximately $2.75 million in connection with the sale of the fee interest. The buyer was an unaffiliated third party.

Distribution of Operating Partnership Units to Officer

On January 19, 2005, Mr. Wasterlain received 206,850 operating partnership units as part of NS Advisors Holdings LLC's pro rata distribution of 2,967,032 operating partnership units to its members. Upon the closing of our initial public offering, our operating partnership issued an aggregate of 2,967,032 operating partnership units to NS Advisors Holdings LLC in exchange for its contribution to our operating partnership of interests in NorthStar Capital's real estate securities business including 100% of the membership interests in NS Advisors LLC. In July 2002, Mr. Wasterlain was granted a 15% profit sharing interest in NS Advisors LLC which vested ratably over a three-year period from the date of grant. Immediately prior to the contribution of interests in NS Advisors LLC to our operating partnership, Mr. Wasterlain agreed to exchange his 15% profit sharing interest in NS Advisors LLC for a membership interest in NS Advisors Holdings LLC that entitled him to 206,850 of the operating partnership units issued to NS Advisors Holdings LLC in exchange for its contribution, subject to the same vesting terms of his profit sharing interest in NS Advisors LLC. Therefore, two-thirds of the 206,850 operating partnership units distributed to Mr. Wasterlain on January 19, 2005 were vested and the remaining one third vested in July 2005. The 206,850 operating partnership units had a fair market value of $2,231,912 as of such date.

Indemnification Agreements

We have entered into indemnification agreements with each of our directors and executive officers which will require us to indemnify such directors and officers to the maximum extent permitted by Maryland law and pay such persons' expenses in defending any civil or criminal proceeding in advance of final disposition of such proceeding.

Employment Agreements

The company has entered into employment agreements with its executive officers. See “Executive Compensation and Related Information—Employment Agreements” for a discussion of these agreements.