For NorthStar, the decline is exacerbated by its corporate structure and management contract. The firm is externally managed, which shrinks its base of potential investors because of perceived conflicts of interest associated with that structure, said Jason Weaver, an analyst with Sterne Agee Group Inc. NorthStar’s managers get a flat fee regardless of the company’s performance. New Residential is managed by an affiliate of Fortress Investment Group LLC. Colony and IStar are internally managed.

NorthStar, which was once internally managed, spun off NorthStar Asset Management Group Inc. in mid-2014. Now the two have a 20-year contract that could limit upside given that it calls for a fixed fee that’s not tied to performance and that the agreement is non-terminable, Rahmani wrote in his note.

The REIT has recently gained the attention of activist investor Jonathan Litt, who announced plans to force changes at NorthStar’s management company. Litt’s Land & Buildings Investment Management LLC nominated six directors for election to NorthStar Asset Management and expressed an interest in the firm selling assets and returning to an internally managed structure.

Hedge funds are drawn to REITs that are growing quickly or aggressively raising money, according to Cranston. That was the case for many of the real estate firms last year.

More typical REIT investors, he said, will wait a while “before they are willing to step in, especially given how volatile the market has been this year.”

First « 1 2 3 » Next