What: Shares of NorthStar Realty Finance Corp. (NYSE:NRF) are plunging today, trading down by 16% at 2:30 p.m. ET, after an analyst downgraded the stock.

So what: KBW analyst Jade J. Rahmani downgraded the REIT to "market perform" from "outperform," and reduced his price target to $13 from $23 per share.

As Rahmani wrote, "While asset sales, share repurchases, and a dividend reduction may prove wise, the volatile capital markets and potential for widening cap rates in commercial real estate (CRE) significantly increase uncertainty."

He also noted that the fixed fee the REIT pays to NorthStar Asset Management (NYSE:CLNY) and the "non-terminability" of the contract may limit the REIT's upside.

Now what: NorthStar Realty Finance has been in the spotlight after an activist, Land and Buildings, announced its intention to force changes at the company's external manager. L&B nominated six directors for election at NorthStar Asset Management.

The Land and Buildings' plan calls for selling the asset manager's contracts to a third-party or recombining NorthStar Realty Finance and NorthStar Asset Management so that the REIT regains internally managed status. Importantly, the recombination, if it were to happen per Land and Buildings' plan, would call for the REIT to sell assets to acquire the management contract from its external manager.