10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2018

Commission File Number: 001-37597

NORTHSTAR REALTY EUROPE CORP.

(Exact Name of Registrant as Specified in its Charter)

Maryland (State or Other Jurisdiction of Incorporation or Organization) 32-0468861 (IRS Employer Identification No.)

590 Madison Avenue, 34th Floor, New York, NY 10022

(Address of Principal Executive Offices, Including Zip Code)

(212) 547-2600

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x    No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x    No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer x Non-accelerated filer o (Do not check if a smaller reporting company) Smaller reporting company o Emerging growth company x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No x

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date:

The Company has one class of common stock, $0.01 par value per share, 52,189,114 shares outstanding as of May 7, 2018.

NORTHSTAR REALTY EUROPE CORP.

FORM 10-Q

TABLE OF CONTENTS

Index		Page
Part I.	Financial Information	5
Item 1.	Financial Statements	5
	Consolidated Balance Sheets as of March 31, 2018 (unaudited) and December 31, 2017	5
	Consolidated Statements of Operations (unaudited) for the three months ended March 31, 2018 and 2017	6
	Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three months ended March 31, 2018 and 2017	7
	Consolidated Statements of Equity (unaudited) for the three months ended March 31, 2018 and 2017	8
	Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2018 and 2017	9
	Notes to Consolidated Financial Statements (unaudited)	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	52
Item 4.	Controls and Procedures	54
Part II.		55
Item 1.	Legal Proceedings	55
Item 1A.	Risk Factors	55
Item 2.	Purchases of Equity Securities by Issuers	55
Item 4.	Mine Safety Disclosures	55
Item 5.	Other Information	56
Item 6.	Exhibits	57
Signatures		58

2

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, or Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or Exchange Act. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “seek,” “anticipate,” “estimate,” “believe,” “could,” “project,” “predict,” “continue,” “future” or other similar words or expressions. Forward-looking statements are not guarantees of performance and are based on certain assumptions, discuss future expectations, describe plans and strategies, contain projections of results of operations or of financial condition or state other forward-looking information. Such statements include, but are not limited to, those relating to the operating performance of our investments, our liquidity and financing needs, the effects of our current strategies and investment activities, our ability to grow our business, our expected leverage, our expected cost of capital, our ability to divest non-strategic properties, our management’s track record and our ability to raise and effectively deploy capital. Our ability to predict results or the actual effect of plans or strategies is inherently uncertain, particularly given the economic environment. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements and you should not unduly rely on these statements. These forward-looking statements involve risks, uncertainties and other factors that may cause our actual results in future periods to differ materially from those forward-looking statements. These factors include, but are not limited to:

• the effect of economic conditions, particularly in Europe, on the valuation of our investments and on the tenants of the real property that we own;

• the effect of the Mergers (as defined in Note 1 to the financial statements included in Part I Item I) on our business;

• the ability of Colony NorthStar Inc., or CLNS, to scale its operations in Europe to effectively manage our company;

• the unknown impact of the exit of the United Kingdom, or Brexit, or one or more other countries from the European Union, or EU, or the potential default of one or more countries in the EU or the potential break-up of the EU;

• our ability to qualify and remain qualified as a real estate investment trust, or REIT;

• adverse domestic or international economic geopolitical conditions and the impact on the commercial real estate industry;

• volatility, disruption or uncertainty in the financial markets;

• access to debt and equity capital and our liquidity;

• our substantial use of leverage and our ability to comply with the terms of our borrowing arrangements;

• the impact that rising interest rates may have on our floating rate financing;

• our ability to monetize our assets on favorable terms or at all;

• our ability to obtain mortgage financing on our real estate portfolio on favorable terms or at all;

• our ability to acquire attractive investment opportunities and the impact of competition for attractive investment opportunities;

• the effect of an increased number of activist stockholders owning our stock and stockholder activism generally;

• the effects of being an externally-managed company, including our reliance on CLNS and its affiliates and sub-advisors/co-venturers in providing management services to us, the payment of substantial base management and incentive fees to our manager, the allocation of investments by CLNS among us and CLNS’s other sponsored or managed companies and strategic vehicles and various conflicts of interest in our relationship with CLNS;

• performance of our investments relative to our expectations and the impact on our actual return on invested equity, as well as the cash provided by these investments and available for distribution;

• restrictions on our ability to engage in certain activities and the requirement that we may be required to access capital at inopportune times as a result of our borrowings;

• our ability to make borrowings under our credit facility;

• the impact of adverse conditions affecting office properties;

• illiquidity of properties in our portfolio;

• our ability to realize current and expected return over the life of our investments;

3

• tenant defaults or bankruptcy;

• any failure in our due diligence to identify all relevant facts in our underwriting process or otherwise;

• the impact of terrorism or hostilities involving Europe;

• our ability to manage our costs in line with our expectations and the impact on our cash available for distribution, or CAD, and net operating income, or NOI, of our properties;

• our ability to satisfy and manage our capital requirements;

• environmental and regulatory requirements, compliance costs and liabilities relating to owning and operating properties in our portfolio and to our business in general;

• effect of regulatory actions, litigation and contractual claims against us and our affiliates, including the potential settlement and litigation of such claims;

• changes in European, international and domestic laws or regulations governing various aspects of our business;

• future changes in foreign, federal, state and local tax law that may have an adverse impact on the cash flow and value of our investments;

• potential devaluation of foreign currencies, predominately the Euro and U.K. Pound Sterling, relative to the U.S. dollar due to quantitative easing in Europe, Brexit and/or other factors which could cause the U.S. dollar value of our investments to decline;

• general foreign exchange risk associated with properties located in European countries located outside of the Euro Area, including the United Kingdom;

• the loss of our exemption from the definition of an “investment company” under the Investment Company Act of 1940, as amended;

• CLNS’ ability to hire and retain qualified personnel and potential changes to key personnel providing management services to us;

• the lack of historical financial statements for properties we have acquired and may acquire in compliance with U.S. Securities and Exchange Commission, or SEC, requirements and U.S. generally accepted accounting principles, or U.S. GAAP, as well as the lack of familiarity of our tenants and third-party service providers with such requirements;

• the potential failure to maintain effective internal controls and disclosure controls and procedures;

• the historical consolidated financial statements included in this Quarterly Report on Form 10-Q not providing an accurate indication of our performance in the future or reflecting what our financial position, results of operations or cash flow would have been had we operated as an independent public company during the periods presented;

• our status as an emerging growth company; and

• compliance with the rules governing REITs.

The foregoing list of factors is not exhaustive. All forward-looking statements included in this Quarterly Report on Form 10-Q are based on information available to us on the date hereof and we are under no duty to update any of the forward-looking statements after the date of this report to conform these statements to actual results.

Factors that could have a material adverse effect on our operations and future prospects are set forth in our filings with the SEC included in Part I, Item 1A. of our Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, 2017 under “Risk Factors.” The risk factors set forth in our filings with the SEC could cause our actual results to differ significantly from those contained in any forward-looking statement contained in this report.

4

PART I

Item 1.    Financial Statements

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

(Unaudited)

	March 31, 2018			December 31, 2017
Assets
Operating real estate, gross	$	1,658,623		$	1,606,890
Less: accumulated depreciation	(107,538		)	(95,356		)
Operating real estate, net	1,551,085			1,511,534
Preferred equity investments	36,770			35,347
Cash and cash equivalents	50,204			64,665
Restricted cash	8,470			6,917
Receivables, net of allowance of $673 and $747 as of March 31, 2018 and December 31, 2017, respectively	6,093			9,048
Assets held for sale	176,088			169,082
Derivative assets, at fair value	7,100			7,024
Intangible assets, net	114,558			114,185
Other assets, net	29,296			23,115
Total assets	$	1,979,664		$	1,940,917
Liabilities
Mortgage and other notes payable, net	$	1,262,115		$	1,223,443
Accounts payable and accrued expenses	24,584			27,240
Due to related party (refer to Note 6)	4,436			3,590
Derivative liabilities, at fair value	6,342			5,270
Intangible liabilities, net	28,677			28,632
Liabilities related to assets held for sale	1,022			648
Other liabilities	29,261			25,757
Total liabilities	1,356,437			1,314,580
Commitments and contingencies
Redeemable non controlling interest (refer to Note 9)	2,049			1,992
Equity
NorthStar Realty Europe Corp. Stockholders’ Equity
Preferred stock, $0.01 par value, 200,000,000 shares authorized, no shares issued and outstanding as of March 31, 2018 and December 31, 2017	—			—
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 54,572,348 and 55,402,259 shares issued and outstanding as of March 31, 2018 and December 31, 2017, respectively	546			555
Additional paid-in capital	927,836			940,579
Retained earnings (accumulated deficit)	(356,666		)	(347,053		)
Accumulated other comprehensive income (loss)	45,489			25,618
Total NorthStar Realty Europe Corp. stockholders’ equity	617,205			619,699
Non-controlling interests	3,973			4,646
Total equity	621,178			624,345
Total liabilities, redeemable non controlling interest and equity	$	1,979,664		$	1,940,917

Refer to accompanying notes to consolidated financial statements.

5

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands, Except Per Share Data)

(Unaudited)

	Three Months Ended March 31,
	2018			2017
Revenues
Rental income	$	27,224		$	25,536
Escalation income	5,341			5,161
Interest income	729			—
Other income	278			29
Total revenues	33,572			30,726
Expenses
Properties - operating expenses	6,802			7,322
Interest expense	6,107			6,383
Transaction costs	481			260
Management fee, related party	4,157			3,559
Other expenses	1,424			2,000
General and administrative expenses	1,878			2,597
Compensation expense (1)	573			15,870
Depreciation and amortization	11,651			12,563
Total expenses	33,073			50,554
Other income (loss)
Unrealized gain (loss) on derivatives and other (refer to Note 10)	(1,189		)	(941		)
Realized gain (loss) on sales and other	(548		)	4,970
Income (loss) before income tax benefit (expense)	(1,238		)	(15,799		)
Income tax benefit (expense)	(39		)	273
Net income (loss)	(1,277		)	(15,526		)
Net (income) loss attributable to non controlling interests	(4		)	176
Net income (loss) attributable to NorthStar Realty Europe Corp. common stockholders	$	(1,281	)	$	(15,350	)
Earnings (loss) per share:
Basic	$	(0.02	)	$	(0.28	)
Diluted	$	(0.02	)	$	(0.28	)
Weighted average number of shares:
Basic	55,192,762			54,832,136
Diluted	55,603,500			55,504,981
Dividends per share of common stock	$	0.15		$	0.15

____________________________

(1) Compensation expense for the three months endedMarch 31, 2018and 2017 is comprised of equity-based compensation expenses. For the three months ended March 31, 2017, compensation expense includes the impact of substantially all time based and certain performance based awards vesting in connection with the change of control of the Manager (refer to Note 7).

Refer to accompanying notes to consolidated financial statements.

6

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Dollars in Thousands)

(Unaudited)

	Three Months Ended March 31,
	2018			2017
Net income (loss)	$	(1,277	)	$	(15,526	)
Other comprehensive income (loss):
Foreign currency translation adjustment, net	20,001			9,244
Total other comprehensive income (loss)	20,001			9,244
Comprehensive income (loss)	18,724			(6,282		)
Comprehensive (income) loss attributable to non-controlling interests	(134		)	54
Comprehensive income (loss) attributable to NorthStar Realty Europe Corp. common stockholders	$	18,590		$	(6,228	)

Refer to accompanying notes to consolidated financial statements.

7

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(Dollars and Shares in Thousands)

	Common Stock					Additional Paid-in Capital			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Income (Loss)			Total NorthStar Stockholders’ Equity			Non-controlling Interests			Total Equity
	Shares		Amount
Balance as of December 31, 2016	55,395		$	554		$	925,473		$	(282,769	)	$	(51,424	)	$	591,834		$	8,073		$	599,907
Reallocation of interest in Operating Partnership (refer to Note 9)	—		—			2,879			—			—			2,879			(2,879		)	—
Conversion of Common Units to common stock (refer to Note 9)	97		1			331			—			—			332			(332		)	—
Amortization of equity-based compensation (refer to Note 7)	—		—			13,683			—			—			13,683			2,174			15,857
Issuance and vesting of restricted stock, net of tax withholding	365		4			(4		)	—			—			—			—			—
Tax withholding related to vesting of equity-based compensation	(861	)	(9		)	(10,985		)	—			—			(10,994		)	—			(10,994		)
Other comprehensive income (loss)	—		—			—			—			9,122			9,122			122			9,244
Dividends on common stock and equity-based compensation	—		—			—			(8,341		)	—			(8,341		)	(88		)	(8,429		)
Net income (loss)	—		—			—			(15,350		)	—			(15,350		)	(176		)	(15,526		)
Balance as of March 31, 2017 (Unaudited)	54,996		$	550		$	931,377		$	(306,460	)	$	(42,302	)	$	583,165		$	6,894		$	590,059
Balance as of December 31, 2017	55,402		$	555		$	940,579		$	(347,053	)	$	25,618		$	619,699		$	4,646		$	624,345
Reallocation of interest in Operating Partnership (refer to Note 9)	—		—			(20		)	—			—			(20		)	20			—
Conversion of Common Units to common stock (refer to Note 9)	23		—			216			—			—			216			(216		)	—
Redemption of Common Units	—		—			—			—			—			—			(551		)	(551		)
Amortization of equity-based compensation (refer to Note 7)	—		—			402			—			—			402			—			402
Issuance and vesting of restricted stock, net of tax withholding	198		2			(2		)	—			—			—			—			—
Retirement of shares of common stock	(1,051	)	(11		)	(13,339		)	—			—			(13,350		)	—			(13,350		)
Other comprehensive income (loss)	—		—			—			—			19,871			19,871			130			20,001
Dividends on common stock and equity-based compensation	—		—			—			(8,332		)	—			(8,332		)	(60		)	(8,392		)
Net income (loss)	—		—			—			(1,281		)	—			(1,281		)	4			(1,277		)
Balance as of March 31, 2018 (Unaudited)	54,572		$	546		$	927,836		$	(356,666	)	$	45,489		$	617,205		$	3,973		$	621,178

Refer to accompanying notes to consolidated financial statements.

8

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

(Unaudited)

	Three Months Ended March 31,
	2018			2017
Cash flows from operating activities:
Net income (loss)	$	(1,277	)	$	(15,526	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	11,651			12,563
Amortization of deferred financing costs	717			857
Amortization of equity-based compensation	573			15,857
Allowance for uncollectible accounts	124			144
Unrealized (gain) loss on derivatives and other	1,189			941
Realized (gain) loss on sales and other	548			(4,970		)
Amortization of capitalized above/below market leases	137			280
Straight line rental income	(3,600		)	(1,314		)
Deferred income taxes, net	(151		)	(263		)
Changes in assets and liabilities:
Receivables	2,765			192
Other assets	(2,636		)	(963		)
Accounts payable and accrued expenses	(2,337		)	(4,166		)
Due to related party	839			(1,232		)
Other liabilities	2,252			1,988
Net cash provided by (used in) operating activities	10,794			4,388
Cash flows from investing activities:
Improvements of operating real estate	(4,285		)	(2,266		)
Payment relating to sale of operating real estate	(260		)	20,893
Other assets	154			(288		)
Change in receivable	—			2,243
Deferred leasing costs	(398		)	—
Net cash provided by (used in) investing activities	(4,789		)	20,582
Cash flows from financing activities:
Borrowings from credit facility	—			15,000
Repayment of credit facility	—			(15,000		)
Payment of financing costs	(445		)	—
Settlement of derivatives	(1,740		)	817
Tax withholding related to vesting of equity-based compensation	—			(10,994		)
Repurchase of common stock	(10,662		)	—
Dividends	(8,392		)	(8,429		)
Distributions to non-controlling interest	18			—
Net cash provided by (used in) financing activities	(21,221		)	(18,606		)
Effect of foreign currency translation on cash and cash equivalents and restricted cash	2,308			1,147
Net increase (decrease) in cash and cash equivalents and restricted cash	(12,908		)	7,511
Cash and cash equivalents—beginning of period	71,582			76,550
Cash and cash equivalents—end of period	$	58,674		$	84,061

Refer to accompanying notes to consolidated financial statements.

9

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands) (Continued)

(Unaudited)

	Three Months Ended March 31,
	2018		2017
Supplemental disclosure of non-cash investing and financing activities:
Reclassification of operating real estate to assets held for sale	$	—	$	5,929
Conversion of Common Units to common stock	216		—
Reclassification of intangibles to assets and liabilities held for sale	—		890
Redemption of Common Units	551		—
Reclassification of other assets and liabilities to assets held for sale	823		289
Retirement of shares of common stock	2,677		—
Reallocation of interest in Operating Partnership	20		2,879
Accrued capital expenditures and deferred assets	91		681

Refer to accompanying notes to consolidated financial statements.

10

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Formation and Organization

NorthStar Realty Europe Corp. (“NorthStar Europe” or the “Company”) (NYSE: NRE), a publicly-traded real estate investment trust (“REIT”), is a European focused commercial real estate company with predominantly prime office properties in key cities within Germany, the United Kingdom and France. The Company commenced operations on November 1, 2015 following the spin-off by NorthStar Realty Finance Corp. (“NorthStar Realty”) of its European real estate business (excluding its European healthcare properties) into a separate publicly-traded company, NorthStar Realty Europe Corp., a Maryland corporation (the “Spin-off”). The Company’s objective is to provide its stockholders with stable and recurring cash flow supplemented by capital growth over time.

The Company is externally managed and advised by an affiliate of the Manager. References to “the Manager” refer to NorthStar Asset Management Group Inc. (“NSAM”) for the period prior to the Mergers (refer below) and Colony NorthStar, Inc. (“Colony NorthStar” or “CLNS”), for the period subsequent to the Mergers. As part of the Mergers, NSAM changed its name to Colony NorthStar, Inc.

Substantially all of the Company’s assets, directly or indirectly, are held by, and the Company conducts its operations, directly or indirectly, through NorthStar Realty Europe Limited Partnership, a Delaware limited partnership and the operating partnership of the Company (the “Operating Partnership”). The Company has elected to be taxed, and will continue to conduct its operations so as to continue to qualify, as a REIT for U.S. federal income tax purposes.

All references herein to the Company refer to NorthStar Realty Europe Corp. and its consolidated subsidiaries, including the Operating Partnership, collectively, unless the context otherwise requires.

Merger Agreements among NSAM, NorthStar Realty and Colony Capital, Inc.

On January 10, 2017, the Company’s external manager, NSAM, completed a tri-party merger with NorthStar Realty and Colony Capital, Inc. (“Colony”), pursuant to which the companies combined in an all-stock merger (“the Mergers”) of equals transaction to create a diversified real estate and investment management company. Under the terms of the merger agreement, NSAM, Colony and NorthStar Realty, through a series of transactions, merged with and into NSAM, which was renamed Colony NorthStar (NYSE: CLNS). Colony NorthStar is a leading global equity REIT with an embedded investment management platform.

Amended and Restated Management Agreement

On November 9, 2017, the Company entered into an amended and restated management agreement (the “Amended and Restated Management Agreement”) with an affiliate of the Manager, effective as of January 1, 2018. Refer to Note 6 “Related Party Arrangements” for a description of the terms of the Amended and Restated Management Agreement.

2. Summary of Significant Accounting Policies

Basis of Quarterly Presentation

The accompanying unaudited consolidated financial statements and related notes of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial reporting and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and note disclosures normally included in the consolidated financial statements prepared under U.S. GAAP have been condensed or omitted. In the opinion of management, all adjustments considered necessary for a fair statement of the Company’s consolidated financial position, results of operations and cash flows have been included and are of a normal and recurring nature. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. These consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, 2017, which was filed with the U.S. Securities and Exchange Commission (the “SEC”).

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, the Operating Partnership and their consolidated subsidiaries. The Company consolidates variable interest entities (“VIE”) where the Company is the primary beneficiary and voting interest entities which are generally majority owned or otherwise controlled by the Company. All significant intercompany balances are eliminated in consolidation.

11

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Variable Interest Entities

A VIE is an entity that lacks one or more of the characteristics of a voting interest entity. A VIE is defined as an entity in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The determination of whether an entity is a VIE includes both a qualitative and quantitative analysis. The Company bases its qualitative analysis on its review of the design of the entity, its organizational structure including decision-making ability and relevant financial agreements and the quantitative analysis on the forecasted cash flow of the entity. The Company reassesses its initial evaluation of an entity as a VIE upon the occurrence of certain reconsideration events.

A VIE must be consolidated only by its primary beneficiary, which is defined as the party who, along with its affiliates and agents has both the: (i) power to direct the activities that most significantly impact the VIE’s economic performance; and (ii) obligation to absorb the losses of the VIE or the right to receive the benefits from the VIE, which could be significant to the VIE. The Company determines whether it is the primary beneficiary of a VIE by considering qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of its investment; the obligation or likelihood for the Company or other interests to provide financial support; consideration of the VIE’s purpose and design, including the risks the VIE was designed to create and pass through to its variable interest holders and the similarity with and significance to the business activities of the Company and the other interests. The Company reassesses its determination of whether it is the primary beneficiary of a VIE each reporting period. Significant judgments related to these determinations include estimates about the current and future fair value and performance of investments held by these VIEs and general market conditions.

The Company will evaluate its investments to determine whether they are a VIE. The Company analyzes new investments and financings, as well as reconsideration events for existing investments and financings, which vary depending on type of investment or financing.

Voting Interest Entities

A voting interest entity is an entity in which the total equity investment at risk is sufficient to enable it to finance its activities independently and the equity holders have the power to direct the activities of the entity that most significantly impact its economic performance, the obligation to absorb the losses of the entity and the right to receive the residual returns of the entity. The usual condition for a controlling financial interest in a voting interest entity is ownership of a majority voting interest. If the Company has a majority voting interest in a voting interest entity, the entity will generally be consolidated. The Company does not consolidate a voting interest entity if there are substantive participating rights by other parties and/or kick-out rights by a single party or through a simple majority vote.

The Company performs on-going reassessments of whether entities previously evaluated under the voting interest framework have become VIEs, based on certain events, and therefore subject to the VIE consolidation framework.

Non-controlling Interests

A non-controlling interest in a consolidated subsidiary is defined as the portion of the equity (net assets) in a subsidiary not attributable, directly or indirectly, to the Company. A non-controlling interest is required to be presented as a separate component of equity on the consolidated balance sheets and presented separately as net income (loss) and other comprehensive income (loss) (“OCI”) attributable to non-controlling interests. An allocation to a non-controlling interest may differ from the stated ownership percentage interest in such entity as a result of a preferred return and allocation formula, if any, as described in such governing documents.

Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that could affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates and assumptions.

Comprehensive Income (Loss)

The Company reports consolidated comprehensive income (loss) in separate statements following the consolidated statements of operations. Comprehensive income (loss) is defined as the change in equity resulting from net income (loss) and OCI. The components of OCI principally include the foreign currency translation adjustment, net.

12

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Cash and Cash Equivalents

The Company considers all highly-liquid investments with an original maturity date of three months or less and deposits held with third parties that are readily convertible to cash to be cash equivalents. Cash, including amounts restricted at certain banks and financial institutions, may at times exceed insurable amounts. The Company seeks to mitigate credit risk by placing cash and cash equivalents with major financial institutions. To date, the Company has not experienced any losses on cash and cash equivalents. Cash and cash equivalents exclude escrow arrangements entered into for specific warranties in relation to the real estate sales which are recorded in other assets in the consolidated financial statements.

Restricted Cash

Restricted cash primarily consists of amounts related to operating real estate such as escrows for taxes, insurance, capital expenditures, tenant security deposits and payments required under certain lease agreements and amounts related to the Company’s borrowings.

Operating Real Estate

Operating real estate is carried at historical cost less accumulated depreciation. Ordinary repairs and maintenance are expensed as incurred. Major replacements and improvements which extend the life of the asset are capitalized and depreciated over their useful life. Operating real estate is depreciated using the straight-line method over the estimated useful lives of the assets.

The Company accounts for purchases of operating real estate using the acquisition method, where the purchase price is allocated to tangible assets such as land, building, tenant and land improvements and other identified intangibles, such as in-place leases, above/below-market leases and goodwill to the extent the acquisition is a business combination. Costs directly related to an acquisition deemed to be a business combination are expensed and included in transaction costs in the consolidated statements of operations.

Operating real estate is depreciated using the straight-line method over the estimated useful lives of the assets, summarized as follows:

Category:	Term:
Building	40 years
Building improvements	Lesser of the useful life or remaining life of the building
Building leasehold interests	Lesser of 40 years or remaining term of the lease
Tenant improvements	Lesser of the useful life or remaining term of the lease

Preferred Equity Investments

Preferred equity investments are generally intended to be held to maturity and, accordingly, are carried at cost, net of unamortized loan fees, premium, discount and unfunded commitments, if any. Preferred equity investments that are deemed to be impaired are carried at amortized cost less a loan loss reserve, if deemed appropriate, which approximates fair value. Preferred equity investments where the Company does not intend to hold the investment for the foreseeable future or until its expected payoff are classified as held for sale and recorded at the lower of cost or fair value.

Assets and Related Liabilities Held For Sale

Operating real estate which has met the criteria to be classified as held for sale is separately presented on the consolidated balance sheets. Such operating real estate is recorded at the lower of its carrying value or its estimated fair value less the cost to sell, net of the intangible assets associated with the asset, with any write-down to fair value less cost to sell recorded as an impairment loss. Once a property is determined to be held for sale, depreciation and amortization is no longer recorded. The Company records a gain or loss on sale of real estate when title is conveyed to the buyer and the Company has no substantial economic involvement with the property. If the sales criteria for the full accrual method are not met, the Company defers some or all of the gain or loss recognition by applying the finance, leasing, profit sharing, deposit, installment or cost recovery method, as appropriate, until the sales criteria are met.

13

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Deferred Costs

Deferred costs primarily include deferred financing costs and deferred lease costs. Deferred financing costs represent commitment fees, legal and other third-party costs associated with obtaining financing. Costs related to revolving credit facilities are recorded in other assets and are amortized to interest expense using the straight-line basis over the term of the facility. Costs related to other borrowings are recorded net against the carrying value of such borrowings and are amortized into interest expense using the effective interest method or straight-line method depending on the type of financing. Unamortized deferred financing costs are expensed when the associated borrowing is repaid before maturity to realized gain (loss) on sales and other. Costs incurred in seeking financing transactions, which do not close, are expensed in the period in which it is determined that the financing will not occur. Deferred lease costs consist of fees incurred to initiate and renew operating leases, which are amortized on a straight-line basis over the remaining lease term and are recorded to depreciation and amortization in the consolidated statements of operations.

Intangible Assets and Intangible Liabilities

The Company records acquired identified intangibles, which includes intangible assets (such as value of the above-market leases, in-place leases, below-market ground leases, goodwill and other intangibles) and intangible liabilities (such as the value of below-market leases), based on estimated fair value. The value allocated to the above or below-market leases is amortized net to rental income, the value of below-market ground leases is amortized into properties - operating expense and in-place leases is amortized into depreciation and amortization expense, respectively, in the consolidated statements of operations on a straight-line basis over the respective remaining lease term.

Goodwill represents the excess of the purchase price over the fair value of net tangible and intangible assets acquired in a business combination and is not amortized. The Company analyzes goodwill for impairment on an annual basis and whenever events or changes in circumstances indicate that the carrying value of goodwill may not be fully recoverable. The Company assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit, related to such goodwill, is less than the carrying amount. If the carrying amount exceeds fair value an impairment is recorded for the difference.

The following table presents identified intangibles as of March 31, 2018 and December 31, 2017 (dollars in thousands):

	March 31, 2018 (Unaudited)							December 31, 2017
	Gross Amount		Accumulated Amortization			Net		Gross Amount		Accumulated Amortization			Net
Intangible assets:
In-place lease	$	66,787	$	(28,097	)	$	38,690	$	64,427	$	(24,290	)	$	40,137
Above-market lease	36,145		(11,469		)	24,676		34,882		(9,919		)	24,963
Below-market ground lease	36,801		(1,754		)	35,047		34,497		(1,109		)	33,388
Goodwill(1)	16,145		N/A			16,145		15,697		N/A			15,697
Total	$	155,878	$	(41,320	)	$	114,558	$	149,503	$	(35,318	)	$	114,185
Intangible liabilities:
Below-market lease	$	34,244	$	(11,029	)	$	23,215	$	32,267	$	(8,964	)	$	23,303
Above-market ground lease	5,670		(208		)	5,462		5,513		(184		)	5,329
Total	$	39,914	$	(11,237	)	$	28,677	$	37,780	$	(9,148	)	$	28,632

_____________________________

(1) Represents goodwill associated with certain acquisitions in exchange for shares in the underlying portfolios. The goodwill and a corresponding deferred tax liability was recorded at acquisition based on tax basis differences.

14

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Other Assets and Other Liabilities

The following tables present a summary of other assets and other liabilities as of March 31, 2018 and December 31, 2017 (dollars in thousands):

	March 31, 2018 (Unaudited)		December 31, 2017
Other assets:
Prepaid expenses	$	4,246	$	1,936
Deferred leasing and other costs, net	6,756		6,019
Deferred tax assets, net	435		—
Straight-line rent, net	13,939		10,969
Escrow receivable	3,209		3,286
Other	711		905
Total	$	29,296	$	23,115
	March 31, 2018 (Unaudited)		December 31, 2017
Other liabilities:
Deferred tax liabilities	$	8,837	$	8,548
Prepaid rent received and unearned revenue	13,290		8,406
Tenant security deposits	4,482		4,435
Prepaid escalation and other income	2,143		3,982
Other	509		386
Total	$	29,261	$	25,757

Revenue Recognition

Operating Real Estate

Rental and escalation income from operating real estate is derived from leasing of space to various types of tenants. Rental revenue recognition commences when the tenant takes possession of the leased space and the leased space is substantially ready for its intended use. The leases are for fixed terms of varying length and generally provide for annual rentals, subject to indexation, and expense reimbursements to be paid in quarterly or monthly installments. Rental income from leases is recognized on a straight-line basis over the term of the respective leases. The excess of rents recognized over amounts contractually due pursuant to the underlying leases are included in other assets, net on the consolidated balance sheets. The Company amortizes any tenant inducements as a reduction of revenue utilizing the straight-line method over the term of the lease. Escalation income represents revenue from tenant leases which provide for the recovery of all or a portion of the operating expenses and real estate taxes paid by the Company on behalf of the respective property. This revenue is accrued in the same period as the expenses are incurred.

In a situation in which a lease or leases associated with a significant tenant have been, or are expected to be, terminated early, the Company evaluates the remaining useful life of depreciable or amortizable assets in the asset group related to the lease that will be terminated (i.e., tenant improvements, above and below market lease intangibles, in-place lease value and leasing commissions). Based upon consideration of the facts and circumstances surrounding the termination, the Company may write-off or accelerate the depreciation and amortization associated with the asset group. Such amounts are included within depreciation and amortization in the consolidated statements of operations.

Preferred Equity Investments

Interest income is recognized on an accrual basis and any related premium, discount, origination costs and fees are amortized over the life of the investment using the effective interest method. The amortization is reflected as an adjustment to interest income in the consolidated statements of operations. The amortization of a premium or accretion of a discount is discontinued if such investment is reclassified to held for sale.

15

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Impairment on Investments

Operating Real Estate

The Company’s real estate portfolio is reviewed on a quarterly basis, or more frequently as necessary, to assess whether there are any indicators that the value of its operating real estate may be impaired or that its carrying value may not be recoverable. A property’s value is considered impaired if the Company’s estimate of the aggregate expected future undiscounted cash flow to be generated by the property is less than the carrying value of the property. In conducting this review, the Company considers global macroeconomic factors, real estate sector conditions, together with investment specific and other factors. To the extent an impairment has occurred, the loss is measured as the excess of the carrying value of the property over the estimated fair value of the property and recorded in impairment losses in the consolidated statements of operations. For the three months endedMarch 31, 2018 and 2017, the Company did not recognize any impairment losses.

An allowance for a doubtful account for a tenant receivable is established based on a periodic review of aged receivables resulting from estimated losses due to the inability of a tenant to make required rent and other payments contractually due. Additionally, the Company establishes, on a current basis, an allowance for future tenant credit losses on unbilled rent receivable based on an evaluation of the collectability of such amounts.

Preferred Equity Investments

Preferred equity investments are considered impaired when, based on current information and events, it is probable that the Company will not be able to collect all principal and interest amounts due according to the contractual terms. The Company assesses the credit quality of the portfolio and adequacy of investment loss reserves on an annual basis or more frequently as necessary. Significant judgment of the Company is required in this analysis. The Company considers the estimated net recoverable value of the investment as well as other factors, including but not limited to the fair value of any collateral, the amount and the status of any senior debt, the quality and financial condition of the borrower and the competitive situation of the area where the underlying collateral is located. Because this determination is based on projections of future economic events, which are inherently subjective, the amount ultimately realized may differ materially from the carrying value as of the balance sheet date. If upon completion of the assessment, the estimated fair value of the underlying collateral is less than the net carrying value of the investment, an investment loss reserve is recorded with a corresponding charge to provision for investment losses. The investment loss reserve for each investment is maintained at a level that is determined to be adequate by management to absorb probable losses.

Income recognition is suspended for an investment when, in the opinion of the Company, a full recovery of income and principal becomes doubtful. When the ultimate collectability of the principal of an impaired investment is in doubt, all payments are applied to principal under the cost recovery method. When the ultimate collectability of the principal of an impaired investment is not in doubt, contractual interest is recorded as interest income when received, under the cash basis method until an accrual is resumed when the investment becomes contractually current and performance is demonstrated to be resumed. Interest accrued and not collected will be reversed against interest income. An investment is written off when it is no longer realizable and/or legally discharged. As of March 31, 2018, the Company did not have any impaired preferred equity investments.

Equity-Based Compensation

The Company accounts for equity-based compensation awards using the fair value method, which requires an estimate of fair value of the award. Awards may be based on a variety of measures such as time, performance, market or a combination thereof. For time-based awards, fair value is determined based on the stock price on the grant date. The Company recognizes compensation expense over the vesting period on a straight-line basis or the attribution method depending if the grant is to an employee or non-employee. For performance-based awards, fair value is determined based on the stock price at the date of grant and an estimate of the probable achievement of such measure. The Company recognizes compensation expense over the requisite service period, net of estimated forfeitures, using the accelerated attribution expense method. For market-based measures, fair value is determined using a Monte Carlo analysis under a risk-neutral premise using a risk-free interest rate. The Company recognizes compensation expense, over the requisite service period, net of estimated forfeitures, on a straight-line basis. For awards with a combination of performance or market measures, the Company estimates the fair value as if it were two separate awards. First, the Company estimates the probability of achieving the performance measure. If it is not probable the performance condition will be met, the Company records the compensation expense based on the fair value of the market measure, as described above. This expense is recorded even if the market-based measure is never met. If the performance-based measure is subsequently estimated to be achieved, the Company records compensation expense based on the performance-based measure. The Company would then record a cumulative catch-up adjustment for any additional compensation expense.

16

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Equity-based compensation issued to non-employees is accounted for using the fair value of the award at the earlier of the performance commitment date or performance completion date. Time-based awards are remeasured every quarter based on the stock price as of the end of the reporting period until such awards vest, if any.

Derivatives

The Company seeks to use derivative instruments to manage exposure to interest rate risk and foreign currency exchange rate risk. The change in fair value for a derivative is recorded in unrealized gain (loss) on derivatives and other in the consolidated statements of operations.

The Company’s derivative instruments are recorded on the consolidated balance sheets at fair value and do not qualify as hedges under U.S. GAAP.

Foreign Currency

Assets and liabilities denominated in a foreign currency for which the functional currency is a foreign currency are translated using the currency exchange rate in effect at the end of the period presented and the results of operations for such entities are translated into U.S. dollars using the average currency exchange rate in effect during the period. The resulting foreign currency translation adjustment (“CTA”), net, is recorded as a component of accumulated OCI in the consolidated statements of equity. For the three months endedMarch 31, 2018 and 2017, the Company reclassified $0.3 million and $(0.4) million, respectively, of CTA to realized gain (loss) on sales and other in the consolidated statements of operations due to the sale of certain real estate assets (refer to Note 3).

Assets and liabilities denominated in a foreign currency for which the functional currency is the U.S. dollar are remeasured using the currency exchange rate in effect at the end of the period presented and the results of operations for such entities are remeasured into U.S. dollars using the average currency exchange rate in effect during the period. The resulting foreign currency remeasurement adjustment is recorded in unrealized gain (loss) on derivatives and other in the consolidated statements of operations.

Earnings Per Share

The Company’s basic earnings per share (“EPS”) is calculated by dividing net income (loss) attributable to common stockholders by the weighted average number of common stock outstanding. Diluted EPS includes restricted stock and the potential dilution that could occur if outstanding restricted stock units (“RSUs”) or other contracts to issue common stock, assuming performance hurdles have been met, were converted to common stock (including limited partnership interests in the Operating Partnership owned by holders other than the Company (“Common Units”) and Common Units which are structured as profits interests (“LTIP Units” collectively referred to as Unit Holders) (refer to Note 8), where such exercise or conversion would result in a lower EPS. The dilutive effect of such RSUs and Unit Holders is calculated assuming all units are converted to common stock.

Income Taxes

The Company has elected to be taxed as a REIT for U.S. federal income tax purposes with the initial filing of its 2015 U.S. federal tax return and will continue to comply with the related provisions of the Internal Revenue Code of 1986, as amended, the (“Internal Revenue Code”). Accordingly, the Company generally will not be subject to U.S. federal income tax to the extent of its distributions to stockholders and as long as certain asset, income and share ownership tests are met. To maintain its qualification as a REIT, the Company must annually distribute at least 90% of its REIT taxable income to its stockholders and meet certain other requirements. Under certain circumstances, federal income and excise taxes may be due on its undistributed taxable income. The Company distributes to its stockholders 100% of its taxable income and therefore no provision for U.S. federal income taxes has been included in the accompanying consolidated financial statements for the three months endedMarch 31, 2018 and 2017.

The Company conducts its business through foreign subsidiaries which may be subject to local level income tax in the European jurisdictions it operates. The Company has also elected taxable REIT subsidiary (“TRS”) status on certain subsidiaries. This enables the Company to provide services that would otherwise be considered impermissible for REITs and participate in activities that do not qualify as “rents from real property.” The TRS that is not resident in the U.S. (“foreign TRS”) and, as such, not subject to U.S. taxation but is subject to foreign income taxes only. In addition, the REIT will not generally be subject to any additional U.S. taxes on the repatriation of foreign TRS earnings.

For the Company’s foreign subsidiaries, including the Company’s foreign TRS, deferred tax assets and liabilities are established for temporary differences between the financial reporting basis and the foreign tax basis of assets and liabilities at the enacted tax rates expected to be in effect when the temporary differences reverse. The Company evaluates the realizability of its deferred tax assets (e.g. net operating loss) and recognizes a valuation allowance if, based on the available evidence, it is more likely than not that some portion or all of its deferred tax assets will not be realized. When evaluating the realizability of its deferred tax assets,

17

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

the Company considers estimates of expected future taxable income, existing and projected book/tax differences, tax planning strategies available and the general and industry specific economic outlook. This realizability analysis is inherently subjective, as it requires the Company to forecast its business and general economic environment in future periods. Due to past and projected losses in certain local jurisdictions where the Company does not have carryback potential and/or cannot sufficiently forecast future taxable income, the Company recognized net cumulative valuation allowances against the Company’s deferred tax assets. The Company will continue to review its deferred tax assets in accordance with U.S. GAAP. The Company recorded an income tax expense of $0.1 million for the three months ended March 31, 2018 and an income tax benefit of $0.3 million for the three months ended March 31, 2017.

Recent Accounting Pronouncements: Accounting Standards Adopted in 2018

Revenue Recognition - In May 2014, FASB issued an accounting update (ASU No. 2014-09) requiring a company to recognize as revenue the amount of consideration it expects to be entitled to in connection with the transfer of promised goods or services to customers. The Company has adopted the standard on its required effective date of January 1, 2018 using the modified retrospective approach and has applied the guidance to contracts not yet completed as of the date of adoption. The new revenue standard specifically excludes revenue streams for which specific guidance is stipulated in other sections of the codification and therefore it will not impact rental income or interest income generated on financial instruments such as preferred equity investments. The Company is the lessor for triple net and gross leases classified as operating leases in which rental income and tenant reimbursements are recorded. The revenue from these leases are scoped out of the new revenue recognition guidance. All leases are accounted for under ASC 840 until the adoption of the new leasing guidance within ASC 842. There were no significant changes as a result of the new revenue recognition standard. In addition, the Company expects to adopt the practical expedient which allows lessors to consider lease and non-lease components as a single performance obligation to the extent that the timing and pattern of transfer is the same and the lease is classified an operating lease.

Cash Flow Classification - In August 2016, the FASB issued guidance (ASU No. 2016-15) that makes eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. The new guidance requires adoption on a retrospective basis unless it is impracticable to apply, in which case the Company would be required to apply the amendments prospectively as of the earliest date practicable. The Company has adopted this guidance on January 1, 2018 and it did not have a material impact on its consolidated financial statements and related disclosures.

Restricted Cash - In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows: Restricted Cash,which requires that cash and cash equivalent balances in the statement of cash flows include restricted cash and restricted cash equivalent amounts, and therefore, changes in restricted cash and restricted cash equivalents be presented in the statement of cash flows. This will eliminate the presentation of transfers between cash and cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. When cash, cash equivalents, restricted cash and restricted cash equivalents are presented in more than one line item of the balance sheet, this ASU requires disclosure of a reconciliation between the totals in the statement of cash flows and the related captions on the balance sheet. The new guidance also requires disclosure of the nature of the restricted cash and restricted cash equivalents, similar to the existing requirements under Regulation S-X, however, it does not define restricted cash and restricted cash equivalents. The Company adopted this guidance on January 1, 2018 and the required retrospective application of this new standard resulted in changes to the previously reported statement of cash flows as follows (dollars in thousands):

	As of March 31, 2017
Cash flow provided by (used in):	As Previously Reported			After Adoption of ASU 2016-18
Operating activities	$	5,707		$	4,388
Investing activities	20,582			20,582
Financing activities	(18,606		)	(18,606		)

Business Combination - In January 2017, the FASB issued guidance (ASU No. 2017-01) to clarify the definition of a business under ASC 805. This new standard clarifies the definition of a business and provides a screen to determine when an integrated set of assets and activities is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. The Company expects that acquisitions of real estate or in-substance real estate will not meet the revised definition of a business because substantially all of the fair value is concentrated in a single identifiable asset or group of similar identifiable assets (i.e. land, buildings, and related intangible assets). A significant difference between the accounting for an asset acquisition and a business combination is that transaction costs are capitalized for an asset acquisition, rather than expensed for a business

18

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

combination. The Company adopted the standard on its required effective date of January 1, 2018. This guidance did not have a material impact on its consolidated financial statements and related disclosures.

Derecognition and Partial Sales of Nonfinancial Assets - In February 2017, the FASB issued an accounting update (ASU No. 2017-05) which clarifies the scope of recently established guidance on nonfinancial asset derecognition, which applies to the derecognition of all nonfinancial assets and in-substance nonfinancial assets.  In addition, the guidance clarifies the accounting for partial sales of nonfinancial assets and in-substance nonfinancial assets to align with the new revenue recognition standard to be more consistent with the accounting for sale of a business. Specifically, in a partial sale to a noncustomer, when a noncontrolling interest is received or retained, the latter is considered a noncash consideration and measured at fair value, which would result in full gain or loss recognized upon sale. The Company has adopted this guidance on January 1, 2018 and it did not have a material impact on its consolidated financial statements and related disclosures as there were no such sales for the three months ended March 31, 2018.

Goodwill Impairment - In January 2017, the FASB issued guidance (ASU No. 2017-04) which removes Step 2 from the goodwill impairment test. The Company has adopted this guidance on January 1, 2018 and it did not have a material impact on its consolidated financial statements and related disclosures.

Share-based Payments - In May 2017, the FASB issued guidance (ASU No. 2017-09) clarifying when to account for a change to the terms or conditions of a share-based payment award as a modification. The Company has adopted this guidance on January 1, 2018 and it did not have a material impact on its consolidated financial statements and related disclosures.

Recent Accounting Pronouncements: Future Application of Accounting Standards

Leases - In February 2016, the FASB issued an accounting update (ASU No. 2016-02) which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The update requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The update is expected to result in the recognition of a right-to-use asset and related liability to account for the Company’s future obligations under its ground lease arrangements for which it is the lessee. The update will require that lessees and lessors capitalize, as initial direct costs, only those costs that are incurred due to the execution of a lease. Under this guidance, allocated payroll costs and other costs that are incurred regardless of whether the lease is obtained will no longer be capitalized as initial direct costs and instead will be expensed as incurred. Lessors will continue to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. The Company expects to adopt the package of practical expedients under the guidance and the Company will not need to reassess whether any expired or expiring contracts contain leases; will not need to revisit lease classification for any expired or expiring leases; and will not need to reassess initial direct costs for any existing leases. In addition, the Company expects to adopt the practical expedient which allows lessors to consider lease and non-lease components as a single performance obligation to the extent that the timing and pattern of transfer is the same and the lease is classified an operating lease. As of March 31, 2018, the Company has two ground lease agreements with annual payments of $0.7 million. The new guidance is to be applied using a modified retrospective approach at the beginning of the earliest comparative period in the financial statements and is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is evaluating the impact, if any, that this guidance will have on its consolidated financial position, results of operations and financial statement disclosures.

Financial Instruments - In June 2016, the FASB issued guidance (ASU No. 2016-13) that changes the impairment model for most financial instruments by requiring companies to recognize an allowance for expected losses, rather than incurred losses as required currently by the other-than-temporary impairment model. The guidance will apply to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt securities, net investments in leases and off-balance-sheet credit exposures (e.g., loan commitments). The new guidance is effective for reporting periods beginning after December 15, 2019 and will be applied as a cumulative adjustment to retained earnings as of the effective date. The Company continues to assess the potential effect the adoption of this guidance will have on its consolidated financial statements and related disclosures.

19

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

3. Operating Real Estate

The following table presents operating real estate, net as of March 31, 2018 and December 31, 2017 (dollars in thousands):

	March 31, 2018 (Unaudited)			December 31, 2017
Land	$	405,248		$	393,691
Buildings and improvements	983,350			954,314
Building, leasehold interests and improvements	204,131			195,929
Furniture, fixtures and equipment	1,774			1,653
Tenant improvements	64,120			61,303
Operating real estate, gross	1,658,623			1,606,890
Less: accumulated depreciation	(107,538		)	(95,356		)
Operating real estate, net	$	1,551,085		$	1,511,534

Real Estate Held for Sale

The following table summarizes the Company’s operating real estate held for sale as of March 31, 2018 (dollars in thousands):

			Assets(1)(2)								Liabilities(1)(2)
Location	Type	Properties	Operating Real Estate, Net		Intangible Assets, Net		Other Assets		Total		Intangible Liabilities, Net		Other Liabilities		Total
Lisbon, Portugal	Office	1	$	12,250	$	64	$	1,175	$	13,489	$	—	$	355	$	355
Rotterdam, Netherlands(3)	Office	1	152,988		5,217		4,394		162,599		667		—		667
Total		2	$	165,238	$	5,281	$	5,569	$	176,088	$	667	$	355	$	1,022

_____________________________

(1) The assets and liabilities classified as held for sale are expected to be sold on the open market as an asset sale for the asset in Rotterdam and as a share sale for the asset in Lisbon subject to standard industry terms and conditions. The assets together contributed $3.5 million and $3.6 million of revenue and $(0.1) million and $(1.3) million of income (loss) before income tax benefit (expense) for the three months endedMarch 31, 2018 and 2017, respectively.

(2) Represents operating real estate and intangible assets, net of accumulated depreciation and amortization of $20.3 million prior to being reclassified into held for sale.

(3) In April 2018, the Company completed the sale of the Maastoren property in Rotterdam, our largest non-core asset, for approximately $195 million.

Real Estate Sales

During the first quarter 2018, the Company did not sell any properties. During the first quarter 2017, the Company sold one non-core asset for $20.6 million and received $19.9 million of proceeds, net of sales costs. In connection with this sale, for the three months ended March 31, 2017, the Company recorded a $3.4 million realized gain in the Company’s consolidated statements of operations.

Certain escrow accounts are not held by the Company and are expected to be released within the next 12 months and to the extent this cash has not been released to purchasers to satisfy claims, the Company will recognize an additional gain on the sale at the earlier of the time of the cash receipt or when collection can be reasonably assured. As of March 31, 2018, there were $1.2 million in certain escrow accounts that were not held by the Company which the Company could potentially record as a realized gain. The Company recorded a realized gain of $0.6 million and $1.7 million for the three months ended March 31, 2018 and 2017, respectively, related to the release of an escrow account from a prior disposal.

4. Preferred Equity Investments

In May 2017, the Company partnered with a property developer in China to acquire 20 Gresham Street, a Class A office building in London, United Kingdom and the Company invested $36.8 million (£26.2 million) of preferred equity, which the Company accounts for as a debt investment.

20

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The following table presents one preferred equity investment as of March 31, 2018 (dollars in thousands):

	March 31, 2018
Asset Type	Principal Amount		Carrying Value		Fixed Rate		Mandatory Redemption
Preferred equity investment	$	36,770	$	36,770	8.00	%	May 2020

Credit Quality Monitoring

The Company’s preferred equity investment is secured by interests in entities that directly own real estate properties, which serve as the primary source of cash for the payment of principal and interest. The Company evaluates its preferred equity investment at least quarterly and determines the relative credit quality principally based on: (i) whether the borrower is currently paying debt service in accordance with its contractual terms; and (ii) whether the Company believes the borrower will be able to perform under its contractual terms in the future, as well as the Company’s expectations as to the ultimate recovery of principal at maturity. The Company categorizes a preferred equity investment for which it expects to receive full payment of contractual principal and interest payments as “performing.” The Company will categorize a weaker credit quality preferred equity investment that is currently performing, but for which it believes future collection of all or some portion of principal and interest is in doubt, into a category called “performing with a loan loss reserve.” The Company will categorize a weaker credit quality preferred equity investment that is not performing, which the Company defines as a loan in maturity default and/or past due on its contractual debt service payments and deemed not to be collectible, as a non-performing loan (“NPL”).

As of March 31, 2018, the Company’s preferred equity investment was performing in accordance with the contractual terms of its governing documents, in all material respects, and was categorized as a performing loan. For the three months endedMarch 31, 2018, the preferred equity investment contributed all interest income recorded on the consolidated statement of operations.

5. Borrowings

The following table presents borrowings as of March 31, 2018 and December 31, 2017 (dollars in thousands):

			March 31, 2018 (Unaudited)				December 31, 2017
	Final Maturity	Contractual Interest Rate(2)	Principal Amount		Carrying Value		Principal Amount		Carrying Value
Mortgage and other notes payable:(1)
Trias Portfolio 1(3)(5)	Apr-20	EURIBOR + 2.70%	$	10,674	$	10,437	$	10,378	$	10,116
Trias Portfolio 2(3)(5)(7)	Dec-20	EURIBOR + 1.55%	94,188		93,552		91,577		90,880
Trias Portfolio 3(3)(5)	Apr-20	EURIBOR + 1.65%	46,092		45,069		44,814		43,684
Trias Portfolio 4(3)(5)	Apr-20	GBP LIBOR + 2.70%	18,023		17,816		17,326		17,123
SEB Portfolio 1(5)	Jul-24	EURIBOR + 1.55%(8)	326,365		322,275		317,317		313,153
SEB Portfolio 2(5)	Jul-24	GBP LIBOR + 1.55%(8)	260,924		258,022		250,825		247,902
SEB Portfolio - Preferred(4)	Apr-60	2.30%	105,484		105,204		102,560		102,271
Trianon Tower(5)	Jul-23	EURIBOR + 1.30%	406,567		405,059		395,294		393,763
Other - Preferred(6)	Oct-45	1.00%	4,681		4,681		4,551		4,551
Total mortgage and other notes payable			$	1,272,998	$	1,262,115	$	1,234,642	$	1,223,443

_____________________________

(1) All mortgage notes and other notes payable are denominated in local currencies, and as such, the principal amount generally increased from 2017 to 2018 due to the change in the Euro or U.K. Pound Sterling compared to the U.S. dollar. All borrowings are non-recourse and are interest-only through maturity, subject to compliance with covenants of the respective borrowing, and denominated in the same currency as the assets securing the borrowing.

(2) All floating rate debt is subject to interest rate caps of 0.5% for EURIBOR and 2.0% for GBP LIBOR which are used to manage interest rate exposure.

(3) Trias Portfolio represents the cross-collateralized borrowings among the IVG Portfolio, Internos Portfolio and Deka Portfolio.

(4) Represents preferred equity certificates with a contractual interest rate of 2.3% through May 2019, which increases to EURIBOR plus 12.0% through May 2022 and subsequently to EURIBOR plus 15.0% through final maturity. Certain prepayments prior to May 2019 are subject to the payment of the unpaid coupon on outstanding principal amount through May 2019.

(5) Prepayment provisions include a fee based on principal amount ranging from 0.25% to 1.0% through December 2019 for the Trias Portfolio borrowings and 1.0% to 2.0% through July 2020 for the SEB Portfolio borrowings and 0.60% through June 30, 2018 and 0.30% through June 30, 2019 for Trianon Tower borrowings.

(6) Represents preferred equity certificates each with a fixed contractual interest rate of 1.0% per annum plus variable interest based on specified income levels associated with the German property companies of the Trias Portfolio which can be prepaid at any time without penalty through final maturity, which is thirty years from the issuance date.

(7) In June 2017, the Company amended and restated the agreement to increase the loan amount by $5.9 million and reduce future minimum capital expenditure spending requirements.

21

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(8) In September 2017, the Company amended and restated the agreement to reduce the margin from 1.80% to 1.55% and extended the maturity date from April 1, 2022 to July 20, 2024.

The following table presents a reconciliation of principal amount to carrying value of the Company’s mortgage and other notes payable as of March 31, 2018 and December 31, 2017 (dollars in thousands):

	March 31, 2018 (Unaudited)			December 31, 2017
Principal amount	$	1,272,998		$	1,234,642
Deferred financing costs, net	(10,883		)	(11,199		)
Carrying value	$	1,262,115		$	1,223,443

The following table presents scheduled principal on borrowings, based on final maturity as of March 31, 2018 (dollars in thousands):

	Mortgage and Other Notes Payable
Remaining 2018	$	—
Years ending December 31:
2019	—
2020	168,977
2021	—
2022	—
2023	406,567
2024 and thereafter	697,454
Total	$	1,272,998

As of March 31, 2018 and December 31, 2017, the Company was in compliance with all of its financial covenants.

Credit Facility

In May 2016, the Company entered into a $75.0 million corporate revolving credit facility (the “Credit Facility”) with certain commercial bank lenders, with an initial one year term. The Credit Facility was secured by collateral relating to a borrowing base at that time and guarantees by certain subsidiaries of the Company. In October 2016, the Company permanently reduced the aggregate commitments under the Credit Facility to $35.0 million. In April 2017, the Company amended and restated the Credit Facility with aggregate commitments of $35.0 million and an initial two year term. The Credit Facility no longer contains a limitation on availability based on a borrowing base and the interest rate remains the same. The Credit Facility has an accordion feature, allowing the total facility to increase to $70 million. In March 2018, the Company amended the Credit Facility, increasing the size to $70 million and extending the term until April 2020 with one year extension option. The Credit Facility includes an accordion feature, providing for the ability to increase the facility to $105 million. As of March 31, 2018, there was no outstanding balance on the Credit Facility.

6.    Related Party Arrangements

Colony NorthStar, Inc.

The Company entered into a management agreement with an affiliate of the Manager in November 2015 (the “Original Management Agreement”). On November 9, 2017, the Company entered into an Amended and Restated Management Agreement with an affiliate of the Manager, effective as of January 1, 2018 (the “Amended and Restated Management Agreement”). As asset manager, the Manager is responsible for the Company’s day-to-day operations, subject to supervision and management of the Company’s board of directors (the “Board”). Through its global network of subsidiaries and branch offices, the Manager performs services and engages in activities relating to, among other things, investments and financing, portfolio management and other administrative services, such as accounting and investor relations, to the Company and its subsidiaries. The management agreement with the Manager provides for a base management fee, incentive fee and expense reimbursement.

Term: Renewals

The Amended and Restated Management Agreement provides for an initial term (beginning January 1, 2018) of five years (the “Initial Term”), with subsequent automatic renewals for additional three year terms, unless either party provides notice to the other

22

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

party of its intention to decline to renew the agreement at least six months prior to the expiration of the then-current term. During the Initial Term, the Amended and Restated Management Agreement is terminable only for cause (as described in the Amended and Restated Management Agreement).

If the Company elects not to renew the Amended and Restated Management Agreement at the end of a term, it will be obligated to pay the Manager a termination fee (the “Termination Fee”) equal to three times the amount of the base management fees earned by the Manager over the four most recent quarters immediately preceding the non-renewal. In addition, if at any time after the Initial Term, the Company undergoes a “change of control” (as described in the Amended and Restated Management Agreement), the Company may elect to terminate the agreement but upon any such termination it will be obligated to pay the Termination Fee to the Manager.

Assignment

The Amended and Restated Management Agreement provides that in the event of a change of control of the Manager or other event that could be deemed an assignment of the Amended and Restated Management Agreement, the Company will consider such assignment in good faith and not unreasonably withhold, condition or delay the Company’s consent. The Amended and Restated Management Agreement further provides that the Company anticipates consent would be granted for an assignment or deemed assignment to a party with expertise in commercial real estate and over $10 billion of assets under management. The Amended and Restated Management Agreement also provides that, notwithstanding anything in the agreement to the contrary, to the maximum extent permitted by applicable law, rules and regulations, in connection with any merger, sale of all or substantially all of the assets, change of control, reorganization, consolidation or any similar transaction by the Company or the Manager, directly or indirectly, the surviving entity will succeed to the terms of the Amended and Restated Management Agreement.

Base Management Fee

Pursuant to the Amended and Restated Management Agreement, beginning January 1, 2018, the Company is obligated to pay quarterly, in arrears, in cash, the Manager a base management fee per annum equal to:

• 1.50% of the Company’s reported EPRA NAV (as described in the Amended and Restated Management Agreement) for EPRA NAV amounts up to and including $2.0 billion; plus

• 1.25% of the Company’s reported EPRA NAV on any EPRA NAV amount exceeding $2.0 billion.

EPRA NAV is based on a U.S. GAAP balance sheet adjusted based on the Company’s interpretation of the European Public Real Estate Association (“EPRA”) guidelines, and similar as prior practices, including adjustments such as fair value of operating real estate, straight-line rent and deferred taxes and additional adjustments to be determined by the Company in good faith based on any changes to U.S. GAAP, international accounting standards or EPRA guidelines. In calculating EPRA NAV, the liquidation preference of preferred securities outstanding shall not be included as a liability of the Company and shall not reduce EPRA NAV.

For the three months ended March 31, 2018, the Company incurred $4.2 million related to the base management fee.

Under the Original Management Agreement, for the three months ended March 31, 2017, the Company incurred $3.6 million, related to the base management fee. The Original Management Agreement base management fee to the Manager was calculated as 1.5% per annum of the sum of:

• any equity the Company issues in exchange or conversion of exchangeable or stock-settlable notes;

• any other issuances by the Company of common equity, preferred equity or other forms of equity, including but not limited to LTIP Units in the Operating Partnership (excluding units issued to the Company and equity-based compensation, but including issuances related to an acquisition, investment, joint venture or partnership); and

• cumulative cash available for distribution (“CAD”), if any, of the Company in excess of cumulative distributions paid on common stock, LTIP Units or other equity awards which began with the Company’s fiscal quarter ended March 31, 2016.

Incentive Fee

In addition to the base management fees, the Company is obligated to pay the Manager an incentive fee, if any (the “Incentive Fee”), with respect to each measurement period equal to twenty percent (20%) of: (i) the excess of (a) the Company’s Total Stockholder Return (as defined in the Amended and Restated Management Agreement, which includes stock price appreciation and dividends received and is subject to a high watermark price established when a prior incentive fee is realized) for the relevant measurement period above (b) a 10% cumulative annual hurdle rate, multiplied by (ii) the Company’s Weighted Average Shares (as defined in the Amended and Restated Management Agreement) during the measurement period. The first measurement period for the incentive fee will begin January 1, 2018 (based on an initial price of $13.67) and end on December 31 of the applicable

23

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

calendar year and subsequent measurement periods will begin on January 1 of the subsequent calendar year. Subject to the conditions set forth in Section 4(d) of the Amended and Restated Management Agreement for common stock payments, the Company may elect to pay the Incentive Fee, if any, in cash or in shares of restricted common stock or shares of unrestricted common stock repurchased by the Company in the open market or a combination thereof. Any shares of common stock delivered by the Company will be subject to lock-up restrictions that will be released in equal one-third increments on each anniversary of the end of the measurement period with respect to which such incentive fee was earned. In calculating the value of the shares of the Company’s common stock paid in satisfaction of the Incentive Fee obligation, the shares of restricted common stock will be valued at the higher of: (i) the volume weighted average trading price per share for the ten consecutive trading days (as defined in the Amended and Restated Management Agreement) ending on the trading day prior to the date the payment is due and (ii) the Company’s EPRA NAV per share, based on the Company’s most recently published EPRA NAV and the Weighted Average Shares as of the end of the period with respect to which such EPRA NAV was published. For the three months ended March 31, 2018, the Company did not record an incentive fee.

Under the Original Management Agreement, for the three months ended March 31, 2017, the Company did not incur an incentive fee. The incentive fee under the Original Management Agreement was calculated and was payable quarterly in arrears in cash, equal to:

• the product of: (a) 15.0% and (b) the Company’s CAD before such incentive fee, divided by the weighted average shares outstanding for the calendar quarter, of any amount in excess of $0.30 per share and up to $0.36 per share; plus

• the product of: (a) 25.0% and (b) the Company’s CAD before such incentive fee, divided by the weighted average shares outstanding for the calendar quarter, of any amount in excess of $0.36 per share;

• multiplied by the Company’s Weighted Average Shares outstanding for the calendar quarter.

Weighted Average Shares represents the number of shares of the Company’s common stock, LTIP Units or other equity-based awards (with some exclusions), outstanding on a daily weighted average basis. With respect to the base management fee under the Original Management Agreement, all equity issuances are allocated on a daily weighted average basis during the fiscal quarter of issuance. With respect to the incentive fee under the Original Management Agreement, such amounts will be appropriately adjusted from time to time to take into account the effect of any stock split, reverse stock split, stock dividend, reclassification, recapitalization or other similar transaction.

Costs and Expenses

The Company is responsible to pay (or reimburse the Manager) for all of the Company’s direct, out of pocket costs and expenses of the Company as a stand alone company incurred by or on behalf of the Company and its subsidiaries, all of which must be reasonable, customary and documented. Internalized Service Costs (as defined below) are not intended to be covered costs and expenses under this provision and are subject to the limits described in the next paragraph.

The Company is obligated to reimburse the Manager for (i) all direct, reasonable, customary and documented costs and expenses incurred by the Manager for salaries, wages, bonuses, payroll taxes and employee benefits for personnel employed by the Manager: (a) who solely provide services to the Company which prior to January 1, 2018 were provided by unaffiliated third parties, including accounting and treasury services or (b) who were hired by the Manager after January 1, 2018 but who solely provide services to the Company in respect of one of the categories of services previously internalized pursuant to clause (a) and who were not hired in connection with any event which otherwise resulted in an increase to the Company’s net asset value (such costs and expenses set forth in clauses (i) and (ii), the “Internalized Service Costs”), plus (ii) 20% of the amount calculated under clause (i) to cover reasonable overhead charges with respect to such personnel, provided that the Company shall not be obligated to reimburse the Manager for such costs and expenses to the extent they exceed the following quarterly limits:

• 0.0375% of the Company’s aggregate gross asset value as of the end of the prior calendar quarter (excluding cash and cash equivalents and certain other exclusions) as calculated for purposes of determining EPRA NAV (“GAV”), for GAV amounts to and including $2.5 billion, plus

• 0.0313% of GAV amounts between $2.5 billion and $5.0 billion, plus

• 0.025% of GAV amounts exceeding $5.0 billion.

If the Manager’s actual Internalized Service Costs during any quarter exceed the quarterly limit described in the preceding paragraph (the cumulative excess amounts, if any, in respect of each quarter during a calendar year, the (“Quarterly Cap Excess Amount”), the Company is obligated to reimburse the Manager on an annual basis for an amount equal to the lesser of (i) the Quarterly Cap Excess Amount and (ii) the sum of the amounts, if any, determined for each quarter within such calendar year by which Internalized Services Costs in respect of such quarter were less than the quarterly limits described in the prior paragraph.

24

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

For the three months ended March 31, 2018, the Manager allocated $0.3 million of Internalized Service Costs to the Company which is recorded in general and administration expenses in the consolidation statements of operations.

Equity Based Compensation

In addition, the Company expects to make annual equity compensation grants to management of the Company and other employees of the Manager, provided that the aggregate annual grant amount, type and other terms of such equity compensation must be approved by the Company’s compensation committee. The Manager will have discretion in allocating the aggregate grant among the Company’s management and other employees of the Manager.

Under the Amended and Restated Management Agreement, beginning with the Company’s 2018 annual stockholders’ meeting, the Manager will have the right to nominate one director (who is expected to be one of the Company’s current directors employed by the Manager) to the Company’s board of directors.

Colony NorthStar Ownership Waiver and Voting Agreement

In connection with the entry into the Amended and Restated Management Agreement, the Company provided Colony NorthStar with an ownership waiver under the Company’s Articles of Amendment and Restatement, allowing Colony NorthStar to purchase up to 45% of the Company’s stock. The waiver provides that if the Amended and Restated Management Agreement is terminated, Colony NorthStar may not purchase any shares of the Company’s common stock to the extent Colony NorthStar owns (or would own as a result of such purchase) more than 9.8% of the Company’s capital stock. In connection with the waiver, Colony NorthStar also agreed that for all matters submitted to a vote of the Company’s stockholders, to the extent Colony NorthStar owns more than 25% of the Company’s common stock (such shares owned by Colony NorthStar in excess of the 25% threshold, the “Excess Shares”), it will vote the Excess Shares in the same proportion that the remaining shares of the Company not owned by Colony NorthStar or its affiliates are voted. If the Amended and Restated Management Agreement is terminated, then beginning on the third anniversary of such termination, the threshold described in the prior sentence will be reduced from 25% to 9.8%.

Manager Ownership of Common Stock

As of March 31, 2018, Colony NorthStar and its subsidiaries owned 5.6 million shares of the Company’s common stock, or approximately 10.3% of the total outstanding common stock.

7. Compensation Expense

The following summarizes the equity-based compensation for the three months ended March 31, 2018 and 2017:

For the three months endedMarch 31, 2018 and 2017, the Company recorded $0.6 million and $15.9 million respectively, of equity-based compensation expense which is recorded in compensation expenses on the consolidated statements of operations. As of March 31, 2018, equity-based compensation expense to be recognized over the remaining vesting period through March 2021 is $7.6 million, provided there are no additional forfeitures.

2015 Omnibus Stock Incentive Plan

Pursuant to the NorthStar Realty Europe Corp. 2015 Omnibus Stock Incentive Plan (the “2015 Plan”), the Company may issue equity awards to directors, officers, employees, co-employees, consultants and advisors of the Company, the Manager or of any parent or subsidiary who provides services to the Company. The number of shares that may be issued under the 2015 Plan equals 10 million shares of common stock, plus on January 1, 2017 and each January 1 thereafter, an additional 2% of the number of shares of common stock issued and outstanding on the immediately preceding December 31. In addition, shares of common stock underlying any awards that are forfeited, canceled, held back upon exercise of a stock option or settlement of an award to cover the exercise price or tax withholding, reacquired by the Company prior to vesting, satisfied without the issuance of common stock or otherwise terminated (other than by exercise) will be added back to the shares of common stock available for issuance under the 2015 Plan. As of March 31, 2018, under the 2015 Plan, a total of 1.4 million shares of common stock had been issued (net of forfeitures and shares held back for tax withholding), 1.6 million shares were reserved for issuance pursuant to outstanding equity awards (including 0.4 million reserved for issuance upon conversion of outstanding LTIP Units and Common Units and 1.2 million reserved for issuance pursuant to the outstanding Absolute RSUs and Relative RSUs) and 9.2 million otherwise unreserved shares remained available for issuance.

All of the equity awards issued by the Company since the spin-off from NorthStar Realty on November 1, 2015 have been issued under the 2015 Plan. During the year ended December 31, 2017, the Company issued 500,642 restricted shares of common stock under the 2015 Plan to employees of the Manager or its subsidiaries in accordance with the terms of the management agreement described above in Note 6, of which 379,594 vested in connection with the Mergers.

25

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

In March 2016, as contemplated in connection with the Spin-off, the Company granted an aggregate of 995,698 restricted shares of common stock and 1,493,551 RSUs to employees of the Manager or one of its subsidiaries under the 2015 Plan. The restricted shares of common stock were subject to vesting over the approximately four year period ending December 31, 2019, subject to continued employment with the Manager or one of its subsidiaries and the RSUs were market-based awards subject to the achievement of performance-based vesting conditions and continued employment with the Manager or one of its subsidiaries. Approximately one-half of these RSUs are subject to the achievement of performance-based hurdles relating to the Company’s absolute total stockholder return and continued employment with the Manager or one of its subsidiaries over the approximately four year period from the grant date through December 31, 2019 (the “Absolute RSUs”). The other approximately one-half of these RSUs are subject to the achievement of performance-based hurdles based on the Company’s total stockholder return relative to the MSCI US REIT Index and continued employment with the Manager or one of its subsidiaries over the approximately four year period from the grant date through December 31, 2019 (the “Relative RSUs”). Award recipients may earn up to 100% of the Absolute RSUs that were granted and up to 125% of the Relative RSUs that were granted. Upon vesting pursuant to the terms of the Absolute RSUs and Relative RSUs, the RSUs that vest will be settled in shares of common stock and the recipients will be entitled to receive the distributions that would have been paid with respect to a share of common stock (for each share that vests) on or after the date the RSUs were initially granted. In accordance with their terms, all of these restricted shares of common stock that remained outstanding vested in connection with the Mergers. The Absolute and Relative RSUs were not affected by the Mergers and remain outstanding, subject to forfeitures occurring in connection with termination of employment with the Manager or one of its subsidiaries. During the three months ended March 31, 2018, 170,454 Absolute RSUs and 170,453 Relative RSUs that had previously been granted to key employees of the Manager who are no longer providing services to the Company were forfeited. Subsequent to March 31, 2018, in order to assist in the retention of employees of the Manager who are continuing to provide services to the Company, the Company’s compensation committee utilized 300,000 of these forfeited RSUs to make retention grants consisting of 150,000 restricted shares of common stock that are subject to vesting based on continued service and established a retention pool consisting of an additional 150,000 shares of common stock or RSUs that will be allocated prior to May 2019 to employees of the Manager who are providing services to the Company as designated by the compensation committee, in its discretion.  

In March 2018, as contemplated by the Amended and Restated Management Agreement, the Company established an annual equity compensation pool under the 2015 Plan to be allocated among members of management of the Company and other employees of the Manager consisting of an aggregate of 198,000 restricted shares of common stock and 132,000 performance based RSUs. This annual equity compensation pool was then allocated to individual award recipients by the Manager, and individual grants were made. The restricted shares of common stock are subject to vesting in approximately equal annual installments over the three-year period ending March 1, 2021, subject to the Manager continuing to serve as our manager and the recipient’s continued employment with the Manager or Colony NorthStar or one of its subsidiaries. The RSUs are market-based awards subject to the achievement of performance-based vesting conditions. Approximately one-half of these RSUs are subject to the achievement of performance-based hurdles relating to the Company’s absolute total stockholder return over the three-year period from the grant date through February 28, 2021 (the “2018 Absolute RSUs”). The other approximately one-half of these RSUs are subject to the achievement of performance-based hurdles based on the Company’s total stockholder return relative to the MSCI US REIT Index over the three-year period from the grant date through February 28, 2021 (the “2018 Relative RSUs”). Award recipients may earn up to 200% of the 2018 Absolute RSUs and Relative RSUs that were granted. Vesting of the 2018 Absolute and Relative RSUs are also subject to the Manager continuing to serve as our manager and the recipient’s continued employment with the Manager or Colony NorthStar or one of its subsidiaries through the end of the performance period. The RSUs that vest will be settled in shares of common stock and the recipients will be entitled to receive the distributions that would have been paid with respect to a share of common stock (for each share that vests) on or after the date the RSUs were initially granted.

Pre-Spin-off NorthStar Realty Equity Awards

In addition to equity awards issued under the 2015 Plan, the Company also had equity subject to outstanding equity-based awards granted by NorthStar Realty prior to the Spin-Off. In connection with the Spin-Off, holders of shares of common stock of NorthStar Realty and LTIP units of NorthStar Realty’s operating partnership subject to outstanding equity awards received one share of the Company’s common stock or one Common Unit in the Operating Partnership, respectively, for every six shares of common stock of NorthStar Realty or LTIP units of NorthStar Realty’s operating partnership held. Other equity and equity-based awards relating to NorthStar Realty’s common stock, such as RSUs, were adjusted to also relate to one-sixth of a share of the Company’s common stock, but otherwise generally remained subject to the same vesting and other terms that applied prior to the Spin-off. Performance-based vesting conditions based on total stockholder return of NorthStar Realty or NorthStar Realty and NSAM were adjusted to refer to combined total stockholder return of NorthStar Realty and the Company or NorthStar Realty, NSAM and the Company, respectively, with respect to periods after the Spin-Off and references to a change of control or similar term in outstanding awards, which referred to a change of control of either NorthStar Realty or NSAM, were adjusted, to the extent such awards relate to

26

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

common stock of the Company or Common Units in the Operating Partnership, to refer to a change of control of either the Company or NSAM.

Following the Spin-off, NorthStar Realty and the compensation committee of its Board continued to administer all awards granted by NorthStar Realty prior to the Spin-off, but the Company was obligated to issue shares of the Company’s common stock or other equity awards of its subsidiaries or make cash payments in lieu thereof or with respect to dividend or distribution equivalent obligations to the extent required by these awards. These awards continued to be governed by the NorthStar Realty equity plans, as applicable, and shares of the Company’s common stock issued pursuant to these awards were not be issued pursuant to, and did not reduce availability under, the 2015 Plan. In connection with the Mergers, all of these outstanding equity-based awards vested or were forfeited.

The following table presents activity related to the issuance, vesting, redemption, conversion and forfeitures of restricted stock, Common Units and performance RSUs. The balance as of March 31, 2018 represents vested Common Units and unvested restricted stock and performance RSUs (grants in thousands):

	Three Months Ended March 31, 2018
	Restricted Stock(1)	Common Units		Performance RSUs(2)		Total Grants		Weighted Average Grant Price
December 31, 2017	121	420		1,453		1,994		$	11.95
Granted	198	—		132		330		12.65
Redeemed	—	(43	)	—		(43	)	12.67
Converted	—	(23	)	—		(23	)	11.92
Forfeited	—	—		(341	)	(341	)	12.60
March 31, 2018 (Unaudited)	319	354		1,244		1,917		$	11.94

_____________________________

(1) Represents restricted stock included in common stock.

(2) As of March 31, 2018, represented outstanding Absolute and Relative RSUs.

8. Stockholders’ Equity

Share Repurchase

In March 2018, the Company’s board of directors authorized the repurchase of up to $100 million of its outstanding common stock. The authorization expires in March 2019, unless otherwise extended by the Company’s board of directors.

The following table presents the number of share repurchased by the Company, the average price paid per share and the gross amount paid for the repurchased shares for the three months endedMarch 31, 2018 and the period subsequent to quarter end, from April 1, 2018 through May 7, 2018 (dollars and shares in thousands, except per share data):

Period	Shares	Average Price Paid per Share		Gross
January 1 - March 31 (1)	1,051	$	12.70	$	13,350
April 1 - May 7	2,383	13.81		32,918
Total	3,434	$	13.47	$	46,268

_____________________________

(1) The authorization for the repurchases was approved by the Company’s board of directors in March 2018. For the three months ended March 31, 2017, the Company did not repurchase any shares of its common stock.

27

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Dividends

The following table presents dividends declared (on a per share basis) with respect to the three months endedMarch 31, 2018 and 2017:

Common Stock
Declaration Date	Dividend Per Share
2018
May 7	$	0.15
2017
May 1	$	0.15

Earnings Per Share

The following table presents EPS for the three months endedMarch 31, 2018 and 2017 (dollars and shares in thousands, except per share data):

	Three Months Ended March 31,
	2018			2017
Numerator:
Net income (loss) attributable to NorthStar Realty Europe Corp. common stockholders	$	(1,281	)	$	(15,350	)
Net income (loss) attributable to Unit Holders non-controlling interest	(15		)	(193		)
Net income (loss) attributable to common stockholders and Unit Holders(1)	$	(1,296	)	$	(15,543	)
Denominator:(2)
Weighted average shares of common stock	55,193			54,832
Weighted average Unit Holders(1)	411			673
Weighted average shares of common stock and Unit Holders(2)	55,604			55,505
Earnings (loss) per share:
Basic	$	(0.02	)	$	(0.28	)
Diluted	$	(0.02	)	$	(0.28	)

_____________________________

(1) The EPS calculation takes into account Unit Holders, which receive non-forfeitable dividends from the date of grant, share equally in the Company’s net income (loss) and convert on a one-for-one basis into common stock.

(2) Excludes the effect of restricted stock and RSUs outstanding that were not dilutive as of March 31, 2018. These instruments could potentially impact diluted EPS in future periods, depending on changes in the Company’s stock price and other factors.

9. Non-controlling Interests

Operating Partnership

Non-controlling interests include the aggregate Unit Holders’ interest in the Operating Partnership. Net income (loss) attributable to the non-controlling interest is based on the weighted average Unit Holders’ ownership percentage of the Operating Partnership for the respective period. The issuance of additional common stock, Common Units or LTIP Units changes the percentage ownership of both the Unit Holders and the Company. Since a Common Unit or LTIP Unit is generally redeemable for cash or common stock at the option of the Company, it is deemed to be equivalent to common stock. Therefore, such transactions are treated as capital transactions and result in an allocation between stockholders’ equity and non-controlling interests on the accompanying consolidated balance sheets to account for the change in the ownership of the underlying equity in the Operating Partnership. On a quarterly basis, the carrying value of such non-controlling interest is reallocated based on the number of Unit Holders in total in proportion to the number of Units Holders plus the number of shares of common stock outstanding. As of March 31, 2018 and December 31, 2017, the Company allocated an immaterial amount and $1.8 million, respectively, from stockholders’ equity to non-controlling interest on the consolidated balance sheets and consolidated statement of equity.

As of March 31, 2018, 353,817 Common Units and LTIP Units were outstanding, representing a 0.7% ownership and non-controlling interest in the Operating Partnership. Net income (loss) attributable to the Operating Partnership non-controlling interest for the three months endedMarch 31, 2018 and 2017 was a net loss of an immaterial amount and $0.2 million, respectively.

28

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Redeemable Non-controlling Interest

In connection with the acquisition of the Trianon Tower in July 2015, the Company sold a 5.5% non-controlling interest in certain subsidiaries that own the Trianon Tower for $1.5 million. In conjunction with the sale, the Company entered into a put option whereby the holder may redeem its interest for cash at the greater of fair market value of such non-controlling interest or €2.1 million beginning in November 2020 through January 2021. The Company recorded the non-controlling interest at its acquisition date fair value as temporary equity due to the redemption option. The carrying amount of redeemable noncontrolling interests is adjusted to its redemption value at the end of each reporting period, but no less than its initial carrying value, with such adjustments recognized in additional paid-in capital.

10. Risk Management and Derivative Activities

Derivatives

The Company uses derivative instruments primarily to manage interest rate and currency risk and such derivatives are not considered speculative. These derivative instruments are in the form of interest cap agreements where the primary objective is to minimize interest rate risks associated with investment and financing activities and foreign currency forward agreements where the primary objective is to minimize foreign currency exchange rate risks associated with operating activities. The counterparties of these arrangements are major financial institutions with which the Company may also have other financial relationships. The Company is exposed to credit risk in the event of non-performance by these counterparties and it monitors their financial condition; however, the Company currently does not anticipate that any of the counterparties will fail to meet their obligations.

The following tables present derivative instruments that were not designated as hedges under U.S. GAAP as of March 31, 2018 and December 31, 2017 (dollars in thousands):

	Number(1)	Notional Amount		Fair Value Asset (Liability)			Range of Fixed GBP LIBOR / EURIBOR	Range of Maturity
As of March 31, 2018 (Unaudited):
Interest rate caps	26	$	1,211,087	$	7,100		(2)	April 2020 - July 2023
Foreign currency forwards(3)	7	105,559		(6,342		)	N/A	May 2018 - November 2019
Total	33	$	1,316,646	$	758
As of December 31, 2017:
Interest rate caps	31	$	1,193,012	$	7,024		(2)	April 2020 - July 2023
Foreign currency forwards(3)	4	58,647		(5,270		)	N/A	February 2018 - November 2018
Total	35	$	1,251,659	$	1,754

_____________________________

(1)    Represents number of transactions.

(2)    Includes a range of interest rate caps of 0.5% for EURIBOR and 2.0% for GBP LIBOR.

(3)    Includes Euro currency forwards. The strike prices for the foreign currency forwards maturing in 2018 and 2019 are an average of $1.11 and 1.25, respectively.

The following table presents the fair value of derivative instruments, as well as their classification on the consolidated balance sheets, as of March 31, 2018 and December 31, 2017 (dollars in thousands):

	Balance Sheet	March 31, 2018 (Unaudited)		December 31, 2017
	Location
Interest rate caps	Derivative assets	$	7,100	$	7,024
Foreign currency forwards	Derivative liabilities	$	6,342	$	5,270

29

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The following table presents the effect of derivative instruments in the consolidated statements of operations for the three months endedMarch 31, 2018 and 2017 (dollars in thousands):

		Three Months Ended March 31,
		2018			2017
Amount of gain (loss) recognized in earnings:	Statements of operations location:
Adjustment to fair value of interest rate caps	Unrealized gain (loss) on derivatives and other(1)	$	(119	)	$	319
Adjustment to fair value of foreign currency forwards held at the end of the reporting period	Unrealized gain (loss) on derivatives and other (1)	(1,072		)	(1,264		)
Net cash receipt (payment) on derivatives	Realized gain (loss) on sales and other	(1,740		)	817

_____________________________

(1)    Excludes the unrealized gain (loss) relating to foreign currency remeasurement adjustments.

The Company’s counterparties held no cash margin as collateral against the Company’s derivative contracts as of March 31, 2018 and December 31, 2017. The Company had no derivative financial instruments that were designated as hedges in qualifying hedging relationships as of March 31, 2018 and December 31, 2017.

11. Fair Value

Fair Value Measurement

The fair value of financial instruments is categorized based on the priority of the inputs to the valuation technique and categorized into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

Financial assets and liabilities are recorded at fair value on the consolidated balance sheets and are categorized based on the inputs to the valuation techniques as follows:

Level 1. Quoted prices for identical assets or liabilities in an active market.

Level 2. Financial assets and liabilities whose values are based on the following:

(a) Quoted prices for similar assets or liabilities in active markets.

(b) Quoted prices for identical or similar assets or liabilities in non-active markets.

(c) Pricing models whose inputs are observable for substantially the full term of the asset or liability.

(d) Pricing models whose inputs are derived principally from or corroborated by observable market data for substantially the full term of the asset or liability.

Level 3. Prices or valuation techniques based on inputs that are both unobservable and significant to the overall fair value measurement.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following is a description of the valuation techniques used to measure fair value of assets and liabilities accounted for at fair value on a recurring basis and the general classification of these instruments pursuant to the fair value hierarchy.

Derivative Instruments

Derivative instruments consist of interest rate caps and foreign currency exchange contracts that are traded over-the-counter, and are valued using a third-party service provider. These quotations are not adjusted and are generally based on valuation models with observable inputs such as contractual cash flow, yield curve, foreign currency rates and credit spreads and as such, are classified as Level 2 of the fair value hierarchy. Derivative instruments are also assessed for credit valuation adjustments due to the risk of non-performance by the Company and derivative counterparties.

30

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Fair Value of Financial Instruments

In addition to the above disclosures regarding financial assets or liabilities which are recorded at fair value, U.S. GAAP requires disclosure of fair value about all financial instruments. The following disclosure of estimated fair value of financial instruments was determined by the Company using available market information and appropriate valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize on disposition of the financial instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on estimated fair value.

The following table presents the principal amount, carrying value and fair value of certain financial assets and liabilities as of March 31, 2018 and December 31, 2017 (dollars in thousands):

	March 31, 2018						December 31, 2017
	Principal/Notional Amount		Carrying Value		Fair Value		Principal/Notional Amount		Carrying Value		Fair Value
Financial assets:(1)
Derivative assets	$	1,211,087	$	7,100	$	7,100	$	1,193,012	$	7,024	$	7,024
Preferred equity investment	36,770		36,770		37,224		35,347		35,347		35,783
Financial liabilities:(1)
Mortgage and other notes payable, net	$	1,272,998	$	1,262,115	$	1,266,114	$	1,234,642	$	1,223,443	$	1,231,321
Derivative liabilities	105,559		6,342		6,342		58,647		5,270		5,270

_____________________________

(1) The fair value of other financial instruments not included in this table is estimated to approximate their carrying value.

Disclosure about fair value of financial instruments is based on pertinent information available to management as of the reporting date. Although management is not aware of any factors that would significantly affect fair value, such amounts have not been comprehensively revalued for purposes of these consolidated financial statements since that date and current estimates of fair value may differ significantly from the amounts presented herein.

Mortgage and Other Notes Payable

For mortgage and other notes payable, the Company primarily uses rates currently available with similar terms and remaining maturities to estimate fair value. These measurements are determined using rates as of the end of the reporting period or market credit spreads over the rate payable on fixed rate of like maturities. These fair value measurements are based on observable inputs, and as such, are classified as Level 2 of the fair value hierarchy.

Preferred Equity Investments

For preferred equity investments, fair value was computed by comparing the current yield to the estimated yield for newly originated loans with similar credit risk or the market yield at which a third party might expect to purchase such investment. Fair value was determined assuming fully-extended maturities regardless of structural or economic tests required to achieve such extended maturities. These fair value measurements are generally based on unobservable inputs and, as such, are classified as Level 3 of the fair value hierarchy.

12. Commitments and Contingencies

The Company is involved in various litigation matters arising in the ordinary course of its business. Although the Company is unable to predict with certainty the eventual outcome of any litigation, in the opinion of management, the current legal proceedings are not expected to have a material adverse effect on the Company’s financial position or results of operations.

The Company engages third-party service providers for its portfolio who are remunerated based on either a fixed fee or a percentage of rental income. The contract terms vary by party and are subject to termination options. These costs are recorded in properties - operating expense and other expenses in the consolidated statements of operations.

31

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

As part of the terms of agreements relating to certain assets the Company disposed, as is customary for such transactions in Europe, the Company agreed to provide certain warranties to the buyer.

Risk Management

Concentrations of credit risk arise when a number of tenants related to the Company’s investments are engaged in similar business activities or located in the same geographic region to be similarly affected by changes in economic conditions. The Company monitors its portfolios to identify potential concentrations of credit risks. For the three months ended March 31, 2018, one tenant, DekaBank Deutsche Girozentrale, accounted for more than 10% of the Company’s total revenues. This tenant has 6.2 years remaining on its lease. Otherwise, the Company has no other tenant that generates 10% or more of its total revenues. Additionally, for the three months ended March 31, 2018, Germany, France and the United Kingdom each accounted for more than 10% of the Company’s total revenues. The Company believes the remainder of its portfolio is well diversified and does not contain any unusual concentrations of credit risks.

13. Segment Reporting

The Company currently conducts its business through the following three segments, based on how management reviews and manages its business:

• Real Estate Equity- Focused on European prime office properties located in key cities within Germany, the United Kingdom and France.

• Preferred Equity - Represents the Company’s preferred equity investment secured by interest in a United Kingdom prime office property.

• Corporate - The corporate segment significantly includes corporate level interest expense, management fee and general and administrative expenses.

32

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The following tables present segment reporting for the three months endedMarch 31, 2018 and 2017 (dollars in thousands):

	Three Months Ended March 31, 2018
Statement of Operations:	Real Estate Equity				Preferred Equity		Corporate				Total
Revenues
Rental income	$	27,224			$	—	$	—			$	27,224
Escalation income	5,341				—		—				5,341
Interest income	—				729		—				729
Expenses
Interest expense(1)	5,955				—		152				6,107
Management fee, related party	—				—		4,157				4,157
Transaction costs	—				—		481				481
Depreciation and amortization	11,651				—		—				11,651
Other, net	7,189			(2)	—		4,947			(3)	12,136
Income (loss) before income tax benefit (expense)	7,770				729		(9,737		)		(1,238		)
Income tax benefit (expense)	(39		)		—		—				(39		)
Net income (loss)	$	7,731			$	729	$	(9,737	)		$	(1,277	)

_____________________________

(1) Includes $0.6 million and $0.1 million of amortization of deferred financing costs in the real estate equity and corporate segments, respectively.

(2) Primarily relates to properties - operating expenses and unrealized loss on interest rate caps offset by other income and realized gain on sale adjustments.

(3) Primarily relates to general and administrative expense, unrealized loss on foreign currency forwards and net realized loss related to the settlement of foreign currency derivatives.

	Three Months Ended March 31, 2017(1)
Statement of Operations:	Real Estate Equity			Corporate				Total
Revenues
Rental income	$	25,536		$	—			$	25,536
Escalation income	5,161			—				5,161
Expenses
Interest expense(2)	6,119			264				6,383
Management fee, related party	—			3,559				3,559
Transaction costs	—			260				260
Depreciation and amortization	12,563			—				12,563
Other, net	4,971		(3)	18,760			(4)	23,731
Income (loss) before income tax benefit (expense)	7,044			(22,843		)		(15,799		)
Income tax benefit (expense)	273			—				273
Net income (loss)	$	7,317		$	(22,843	)		$	(15,526	)

_____________________________

(1) The Company did not have a preferred equity segment for the three months ended September 30, 2016.

(2) Includes $0.7 million and 0.2 million of amortization of deferred financing costs in the real estate equity and corporate segments, respectively.

(3) Primarily relates to properties - operating expenses and unrealized loss on interest rate caps offset by other income and realized gain on sales.

(4) Primarily relates to general and administrative expense, compensation expense and unrealized loss on foreign currency forwards offset by the net realized gain related to the settlement of foreign currency derivatives.

The following table presents total assets by segment as of March 31, 2018 and December 31, 2017 (dollars in thousands):

Total Assets	Real Estate Equity		Preferred Equity		Corporate		Total
March 31, 2018 (Unaudited)	$	1,936,271	$	37,614	$	5,779	$	1,979,664
December 31, 2017	1,901,282		37,133		2,502		1,940,917

33

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Geography

The following table presents geographic information about the Company’s total rental income for the three months ended March 31, 2018 and 2017 (in thousands):

	Three Months Ended March 31,
	2018			2017
Office
Germany	$	11,964		$	9,915
United Kingdom	6,146			6,791
France	4,931			4,234
Other office	2,871		(1)	3,527
Subtotal	25,912			24,467
Other	1,312			1,069
Total	$	27,224		$	25,536

_____________________________

(1) Includes an asset in Portugal and an asset in the Netherlands which are classified as held-for-sale as of March 31, 2018.

14. Subsequent Events

Dividends

On May 7, 2018, the Company declared a dividend of $0.15 per share of common stock. The common stock dividend is expected be paid on May 25, 2018 to stockholders of record as of the close of business on May 21, 2018.

Share Repurchases

From the authorization in March 2018 through May 7, 2018, the Company repurchased 3.4 million shares of its common stock for approximately $46.3 million (refer to Note 8 “Stockholders’ Equity”).

Disposals

In April 2018, the Company completed the sale of the Maastoren property, our largest non-core asset, for approximately $195 million. The Company released approximately $60 million of net equity after repayment of financing (including release premium) and transaction costs.

34

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our consolidated financial statements and notes thereto included in Item 1. “Financial Statements” of this report. References to “NorthStar Europe,” “we,” “us” or “our” refer to NorthStar Realty Europe Corp. and its subsidiaries unless the context specifically requires otherwise. References to “our Manager” refer to NorthStar Asset Management Group Inc., or NSAM, for the period prior to the Mergers (refer below) and Colony NorthStar, Inc., for the period subsequent to the Mergers. As part of the Mergers, NSAM changed its name to Colony NorthStar, Inc.

NorthStar Realty Europe Corp., a publicly-traded real estate investment trust, or REIT, (NYSE: NRE) is a European focused commercial real estate company with predominantly prime office properties in key cities within Germany, the United Kingdom and France. We commenced operations on November 1, 2015 following the spin-off by NorthStar Realty Finance Corp., or NorthStar Realty, of its European real estate business (excluding its European healthcare properties) into a separate publicly-traded company, NorthStar Realty Europe Corp., a Maryland corporation, or the Spin-off. Our objective is to provide our stockholders with stable and recurring cash flow supplemented by capital growth over time.

We are externally managed and advised by an affiliate of our Manager. Substantially all of our assets, directly or indirectly, are held by, and we conduct our operations, directly or indirectly, through NorthStar Realty Europe Limited Partnership, a Delaware limited partnership and our operating partnership, or our Operating Partnership. We have elected to be taxed and will continue to conduct our operations so as to continue to qualify as a REIT for U.S. federal income tax purposes.

Significant Developments

Merger Agreement among NSAM, NorthStar Realty and Colony Capital, Inc.

On January 10, 2017, our external manager, NSAM completed a tri-party merger with NorthStar Realty and Colony Capital, Inc., or Colony, pursuant to which the companies combined in an all-stock merger, or the Mergers, of equals transaction to create a diversified real estate and investment management company. Under the terms of the merger agreement, NSAM, Colony and NorthStar Realty, through a series of transactions, merged with and into NSAM, which was renamed Colony NorthStar. Colony NorthStar is a leading global real estate and investment management firm.

Amended and Restated Management Agreement

On November 9, 2017, we entered into an amended and restated management agreement, or the Amended and Restated Management Agreement with an affiliate of our Manager, effective as of January 1, 2018. Refer to Note 6 “Related Party Arrangements” in our accompanying consolidated financial statements included in Part I “Financial Statements” for a description of the terms of the Amended and Restated Management Agreement.

Repurchases

In March 2018, the Company’s board of directors authorized the repurchase of up to $100 million of its outstanding common stock. The authorization expires in March 2019, unless otherwise extended by the Company’s board of directors. From the authorization in March 2018 through May 7, 2018, the Company repurchased 3.4 million shares of its common stock for approximately $46.3 million.

Our Investments

Our primary business line is investing in European real estate. We are predominantly focused on real estate equity and preferred equity, refer to Note 13, “Segment Reporting” in Part I, Item 1. “Financial Statements” for further disclosure.

Real Estate Equity

Overview

Our real estate equity investment strategy is focused on European prime office properties located in key cities within Germany, the United Kingdom and France.

35

Our Portfolio

The following presents a summary of our portfolio as of March 31, 2018:

		Portfolio by Geographic Location
		March 31, 2018(5)	March 31, 2017(5)
Gross Book Value(1)	$1.9 billion
Number of properties	25
Number of countries	5
Total square meters(2)	323,458
Weighted average occupancy	85%
Weighted average occupancy - Office	95%
Weighted average lease term	6.2 years
In-place rental income:(3)
Office portfolio	96%
Other(4)	4%

_____________________________

(1) Represents gross operating real estate and intangibles as of March 31, 2018 and includes gross assets held-for-sale.

(2) Based on contractual rentable area, located in many key European markets, including Frankfurt, Hamburg, Berlin, London and Paris.

(3) In-place rental income represents contractual rent adjusted for vacancies based on the rent roll as of March 31, 2018 and is translated using exchange rates as of March 31, 2018.

(4) Other represents retail, industrial and hotel (net lease) assets.

(5) Based on rental income for 25 assets owned as of March 31, 2018.

The following table presents significant tenants in our portfolio, based on in-place rental income as of March 31, 2018:

Significant tenants:	Asset (Location)	Square Meters(1)	Percentage of In-Place Rental Income	Weighted Average Lease Term (in years)
DekaBank Deutsche Girozentrale	Trianon (Frankfurt, Germany)	36,524	20.4%	6.2
BNP PARIBAS RE	Berges de Seine (Paris, France)	15,406	9.1%	1.8
Deutsche Bundesbank	Trianon (Frankfurt, Germany)	22,303	8.2%	8.8
Deloitte Holding B.V.	Maastoren (Rotterdam, Netherlands)	23,548	5.5%	9.1
Invesco UK Limited	Portman Square (London, UK)	4,406	5.3%	9.4
BNP PARIBAS SA	Mac Donald (Paris, France)	11,235	5.1%	3.1
Cushman & Wakefield LLP	Portman Square (London, UK)	5,150	4.9%	7.0
Morgan Lewis & Bockius LLP	Condor House (London, UK)	4,848	3.8%	7.5
PAREXEL International GmbH	Parexel (Berlin, Germany)	18,254	3.2%	16.2
Moelis & Co UK LLP	Condor House (London, UK)	3,366	2.6%	7.0
		145,040	68.1%	6.8

_____________________________

(1) Based on contractual rentable area.

36

The following table presents gross book value, percentage of net operating income, or NOI, square meters and weighted average lease term concentration by country and type for our portfolio as of March 31, 2018 (dollars in millions):

Country	Number of Properties	Gross Book Value(1)		Percentage of NOI(2)		Square Meters(3)	Weighted Average Lease Term (in years)
Office
Germany	9	$	914,105	48	%	143,357	7.0
United Kingdom	5	420,980		22	%	28,893	7.3
France	4	324,210		17	%	32,075	3.0
Other office(4)	2	189,048		11	%	42,078	6.7
Subtotal	20	1,848,343		98	%	246,403	6.3
Other Property Types
France/Germany(5)	5	99,149		2	%	77,055	5.4
Total	25	$	1,947,492	100	%	323,458	6.2

_____________________________

(1) Represents gross operating real estate and intangibles as of March 31, 2018 and includes gross assets held-for-sale.

(2) Based on annualized NOI, for the quarter ended March 31, 2018 (refer to “Non-GAAP Financial Measures” for a description of this metric).

(3) Based on contractual rentable area.

(4) Includes an asset in Portugal and an asset in the Netherlands which are both classified as held-for-sale as of March 31, 2018.

(5) Represents retail, industrial and hotel (net lease) assets.

Preferred Equity

In May 2017, we partnered with a leading property developer in China to acquire a Class A office building in London United Kingdom with 22,557 square meters, 100% occupancy and a 6.0 year weighted average lease term to expiry. We invested approximately $36.8 million (£26.2 million) of preferred equity with a base yield of 8% plus equity participation rights.

Sources of Operating Revenues and Cash Flows

We primarily generate revenue from rental and other operating income from our properties and interest income from our preferred equity investment. Our income is primarily derived through the difference between the revenue and the operating and financing expenses of our investments. We may also continue to acquire investments that generate attractive returns without any leverage.

Profitability and Performance Metrics

We calculate cash available for distribution, or CAD, and NOI, as metrics to evaluate the profitability and performance of our business (refer to “Non-GAAP Financial Measures” for a description of these metrics).

Outlook and Recent Trends

Having posted another year of robust economic performance in 2017, the European economy slowed somewhat during the first quarter of 2018, with Gross Domestic Product, or GDP, in the European Union, or EU, and the Euro Area growing by 0.4% during the quarter compared to 0.7% during the fourth quarter of 2017. While there is no consensus opinion on the reason behind the slowdown, fears of a trade war with the U.S., the unusually cold weather In May 2018, the European Commission, or EC, published its 2018 GDP forecast of 2.3% for the Euro Area citing sound underlying fundamentals and improving labor markets. Unemployment in the EU continued to fall, reaching 7.1% in March 2018, down from 7.9% a year earlier and the lowest level recorded since September 2008. The EC projects that Euro Area inflation, which stood at 1.2% in April 2018, will increase at a gradual pace remaining at 1.5% and 1.6% in 2018 and 2019, respectively, below the European Central Bank’s target of 2%.

The European Central Bank, or ECB, continues to remain confident in the prospects for the Eurozone economy. The 19 country bloc has posted twenty consecutive quarters of economic expansion and, despite a slowdown in the pace of growth during the first quarter of 2018, the ECB expects growth to remain “solid and broad based.” Consequently, the ECB recently signaled its intention to begin tapering its asset purchase program while citing that, any tightening of monetary policy is likely to be gradual and subject to ongoing review based on the future economic performance and inflation outlook of the region. On April 26, 2018, the ECB confirmed its intention to maintain interest rates at zero percent and continue with its asset purchase program of €30 billion per month through September 2018, and beyond if necessary.

The U.K. has made some progress in the highly complex ongoing Brexit negotiations including agreement on a transitional period it’s beyond March 29, 2019, the country’s scheduled date of departure from the EU; however, many key issues remain subject to negotiation ranging from legal sovereignty to citizen’s rights and farming and fishing rights. The U.K. economy experienced a sharp slowdown in growth during the first quarter of 2017 posting a mere 0.1% growth, the lowest level since the fourth quarter of 2012. While adverse weather conditions was largely blamed for the slowdown, general Brexit uncertainty combined with elevated levels of inflation have also been cited as contributing factors. The EC forecasts 1.5% growth for the U.K. economy in 2018.

37

Having increased the base interest rate increase from 0.25% to 0.50% in November 2017, the Bank of England has signaled that any further increases are likely to be at a gradual pace and limited in number. This cautious tone is reflective of the outlook for the U.K. economy, which remains uncertain and likely to be dependent on the duration and perceived outcome of ongoing Brexit negotiations.

European commercial real estate investment volume totaled €57 billion in the first quarter of 2018, slightly below the first quarter 2017. Office remained the most sought after asset class, representing approximately 40% of first quarter 2018 transaction volume. Prime property yields in most asset classes and markets were stable during the quarter and continue to remain at a significant premium to sovereign yields.

European office take-up grew 5% year over year in the first quarter of 2018, underlining the strength of European occupier market. Robust office take-up coupled with limited new supply continues to apply pressure on vacancy rates and rent levels in major European cities. During the first quarter of 2018, rental growth in the European office markets reached its highest point since the beginning of 2012.

German real estate investment reached €12.1 billion in the first quarter of 2018, in line with the same period last year, driven by strong demand for office properties, which represented more than 55% of the total transaction volume (23% year over year increase). As new supply remains subdued, vacancy across the top six German cities reduced below 5% during the first quarter of 2018, the lowest level since 2003.

Total U.K. investment volume reached £12.7 billion in the first quarter of 2018, 11% below the same period last year due to lack of available stock. Central London office investment volume totaled £2.4 billion in the first quarter of 2018. Take-up in Central London slowed down in the beginning of 2018, however, the amount of space under offer rose and was 14% above the 10 year average. Central London rents remained stable during the first quarter of 2018.

Following record investment activity in the fourth quarter of 2017, French investment volume was €3.3 billion in the first quarter of 2018 (13% below the same period last year). Office investment volume represented 85% of total investments. The Paris occupational market continues to be robust with vacancy in Central Paris dropping to 2.5%, the lowest level since 2001.

Investing Strategy

We seek to provide our stockholders with a stable and recurring cash flow for distribution supplemented by capital growth over time. Our business is predominantly focused on prime office properties in key cities within Germany, the United Kingdom and France which are not only the largest economies in Europe, but are the most established, liquid and among the most stable office markets in Europe. We seek to utilize our established local networks to source suitable investment opportunities. We have a long term investment approach and expect to make equity investments, directly or indirectly through joint ventures.

Financing Strategy

We pursue a variety of financing arrangements such as mortgage notes and bank loans available from the commercial mortgage-backed securities market, finance companies and banks. However, we generally seek to limit our reliance on recourse borrowings. We target overall leverage of 40% to 50% over time, although there is no assurance that this will be the case. Borrowing levels for our investments may be dependent upon the nature of the investments and the related financing that is available.

Attractive long-term, non-recourse, non-mark-to-market, financing continues to be available in the European markets. We predominately use floating rate financing and we seek to mitigate the risk of interest rates rising through hedging arrangements including interest rate caps.

In addition, we may use corporate level financing such as credit facilities. In April 2017, we amended and restated our revolving credit facility, or Credit Facility, with a commitment of $35 million and with an initial two year term. The Credit Facility no longer contains a limitation on availability based on a borrowing base and the interest rate remains the same.

In March 2018, we amended the Credit Facility, increasing the size to $70 million and extending the term until April 2020 with one year extension option. The Credit Facility includes an accordion feature, providing for the ability to increase the facility to $105 million.

Risk Management

Risk management is a significant component of our strategy to deliver consistent risk-adjusted returns to our stockholders. Given our need to maintain our qualification as a REIT for U.S. federal income tax purposes, we closely monitor our portfolio and actively seek to manage risks associated with, among other things, our assets, interest rates and foreign exchange rates. In addition, the audit committee of our board of directors, or the Board, in consultation with management, will periodically review our policies with respect to risk assessment and risk management, including key risks to which we are subject, such as credit risk, liquidity risk, financing risk, foreign currency risk and market risk, and the steps that management has taken to monitor and control such risks. The audit committee of the Board maintains oversight of financial reporting risk matters.

38

Underwriting

Prior to making any equity investments, our underwriting team, in conjunction with third-party providers, undertakes a rigorous asset-level due diligence process, involving intensive data collection and analysis, to seek to ensure that we understand fully the state of the market and the risk-reward profile of the asset. In addition, we evaluate material accounting, legal, financial and business matters in connection with such investment. These issues and risks are built into the valuation of an asset and ultimate pricing of an investment.

During the underwriting process, we review the following data, including, but not limited to: property financial data including historic and budgeted financial statements, liquidity and capital expenditure plans, property operating metrics (including occupancy, leasing activity, lease expirations, sales information, tenant credit review, tenant delinquency reports, operating expense efficiency and property management efficiency) and local real estate market conditions including vacancy rates, absorption, new supply, rent levels and comparable sale transactions, as applicable.

In addition to evaluating the merits of any proposed investment, we evaluate the diversification of our portfolio of assets. Prior to making a final investment decision, we determine whether a target asset will cause our portfolio of assets to be too heavily concentrated with, or cause too much exposure to, any one real estate sector, geographic region, source of cash flow such as tenants or borrowers, or other geopolitical issues. If we determine that a proposed investment presents excessive concentration risk, we may decide not to pursue an otherwise attractive investment.

Portfolio Management

Our Manager performs portfolio management services on our behalf. In addition, we rely on the services of local third-party service providers. The comprehensive portfolio management process includes day-to-day oversight by the portfolio management team, regular management meetings and a quarterly investment review process. These processes are designed to enable management to evaluate and proactively identify investment-specific matters and trends on a portfolio-wide basis. Nevertheless, we cannot be certain that such review will identify all potential issues within our portfolio due to, among other things, adverse economic conditions or events adversely affecting specific investments; therefore, potential future losses may also stem from investments that are not identified during these investment reviews.

Our Manager uses many methods to actively manage our risks to seek to preserve income and capital, which includes our ability to manage our investments and our tenants in a manner that preserves cost and income and minimizes credit losses that could decrease income and portfolio value. Frequent re-underwriting, dialogue with tenants/property managers and regular inspections of our properties have proven to be an effective process for identifying issues early. Monitoring tenant creditworthiness is an important component of our portfolio management process, which may include, to the extent available, a review of financial statements and operating statistics, delinquencies, third party ratings and market data. During the quarterly portfolio review, or more frequently if necessary, investments may be put on highly-monitored status and identified for possible asset impairment based upon several factors, including missed or late contractual payments, tenant rating downgrades (where applicable) and other data that may indicate a potential issue in our ability to recover our invested capital from an investment.

We may need to make unplanned capital expenditures in connection with changes in laws and governmental regulations in relation to real estate. Where properties are being repositioned or refurbished, we may also be exposed to unforeseen changes in scope and timing of capital expenditures.

Given our need to maintain our qualification as a REIT for U.S. federal income tax purposes, and in order to maximize returns and manage portfolio risk, we may dispose of an asset earlier than anticipated or hold an asset longer than anticipated if we determine it to be appropriate depending upon prevailing market conditions or factors regarding a particular asset. We can provide no assurances, however, that we will be successful in identifying or managing all of the risks associated with acquiring, holding or disposing of a particular investment or that we will not realize losses on certain dispositions.

Interest Rate and Foreign Currency Hedging

Subject to maintaining our qualification as a REIT for U.S. federal income tax purposes, we may mitigate the risk of interest rate volatility through the use of hedging instruments, such as interest rate swap agreements and interest rate cap agreements. The goal of our interest rate management strategy is to minimize or eliminate the effects of interest rate changes on the value of our assets, to improve risk-adjusted returns and, where possible, to lock in, on a long-term basis, a favorable spread between the yield on our assets and the cost of financing such assets.

In addition, because we are exposed to foreign currency exchange rate fluctuations, we employ foreign currency risk management strategies, including the use of, among others, currency hedges, and matched currency financing.

We can provide no assurances, however, that our efforts to manage interest rate and foreign currency exchange rate volatility will successfully mitigate the risks of such volatility on our portfolio.

39

Critical Accounting Policies

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP, which requires the use of estimates and assumptions that involve the exercise of judgment and that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Our significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies” in our accompanying consolidated financial statements included in Part I Item 1. “Financial Statements.”

Recent Accounting Pronouncements

For recent accounting pronouncements that may potentially impact our business, refer to Note 2, “Summary of Significant Accounting Policies” in our accompanying consolidated financial statements included in Item 1. “Financial Statements.”

40

Results of Operations

Comparison of the Three Months EndedMarch 31, 2018 to March 31, 2017 (dollars in thousands):

	Three Months Ended March 31,						Increase (Decrease)
	2018			2017			Amount			%
Revenues
Rental income	$	27,224		$	25,536		$	1,688		6.6	%
Escalation income	5,341			5,161			180			3.5	%
Interest income	729			—			729			100.0	%
Other income	278			29			249			858.6	%
Total revenues	33,572			30,726			2,846			9.3	%
Expenses
Properties - operating expenses	6,802			7,322			(520		)	(7.1	)%
Interest expense	6,107			6,383			(276		)	(4.3	)%
Transaction costs	481			260			221			85.0	%
Management fee, related party	4,157			3,559			598			16.8	%
Other expenses	1,424			2,000			(576		)	(28.8	)%
General and administrative expenses	1,878			2,597			(719		)	(27.7	)%
Compensation expense	573			15,870			(15,297		)	(96.4	)%
Depreciation and amortization	11,651			12,563			(912		)	(7.3	)%
Total expenses	33,073			50,554			(17,481		)	(34.6	)%
Other income (loss)
Unrealized gain (loss) on derivatives and other	(1,189		)	(941		)	(248		)	26.4	%
Realized gain (loss) on sales and other	(548		)	4,970			(5,518		)	(111.0	)%
Income (loss) before income tax benefit (expense)	(1,238		)	(15,799		)	14,561			(92.2	)%
Income tax benefit (expense)	(39		)	273			(312		)	(114.3	)%
Net income (loss)	$	(1,277	)	$	(15,526	)	$	14,249		(91.8	)%

Revenues

Rental Income

Rental income consists of rental revenue in our real estate equity segment. Rental income increased $1.7 million, primarily due to leasing activity such as the completion of the Deutsche Bundesbank lease in the Trianon Tower and the strengthening of the Euro and U.K. Pounds Sterling against the dollar offset by the disposal of six properties during 2017 and by the first quarter of 2017 preceded the value enhancing lease extensions in the Maastoren property.

Escalation Income

Escalation income consists of tenant recoveries in our real estate equity segment. Escalation income increased $0.2 million, due to increased recoverability in connection with higher occupancy and the timing of certain recoverable expenses.

Interest Income

Interest income relates to our preferred equity investment originated in the second quarter 2017 in our preferred equity segment.

Other Income

Other income is principally related to lease surrender premiums, insurance refunds and termination fees in our real estate equity segment. Other income for the three months endedMarch 31, 2018 predominantly represents lease surrender premium payments.

Expenses

Properties - Operating Expenses

Properties - operating expenses decreased $0.5 million due to due to timing of certain non-recoverable operating expenses and by the disposal of six properties during 2017 in our real estate equity segment. A majority of these costs are recovered from our tenants.

Interest Expense

Interest expense decreased $0.3 million due to the disposal of six properties during 2017 and corresponding repayments of certain mortgage notes and due to the refinancing of certain mortgage notes in our real estate equity segment in the third quarter 2017.

41

Transaction Costs

Transaction costs for the three months endedMarch 31, 2018 were primarily related to costs associated with the strategic review committee which was established in 2017 in our corporate segment. Transaction costs for the three months endedMarch 31, 2017 were primarily related to the Mergers in our corporate segment.

Management Fee, Related Party

Management fee, related party relates to the management fee incurred to our Manager in our corporate segment (refer to “Related Party Arrangements” below for more information).

Other Expenses

Other expenses primarily represent third-party service provider fees such as asset management, accounting, tax, legal fees and other compliance related fees related to portfolio management of our real estate equity segment. The decrease of $0.6 million is due to our Manager’s internalization of certain third-party accounting, tax and asset management services.

General and Administrative Expenses

General and administrative expenses including external and internal audit, legal fees and other corporate expenses are incurred in our corporate segment. The decrease for the three months endedMarch 31, 2018 is due to the one-time payroll tax associated with the acceleration of substantially all of our equity awards due to the Mergers in the first quarter 2017. For the three months endedMarch 31, 2018, our Manager allocated $0.3 million of Internalized Service Costs to us.

Compensation Expense

Compensation expense is comprised of non-cash amortization of time-based, market-based and performance-based awards in our corporate segment. The decrease for the three months endedMarch 31, 2018, is mainly due to the acceleration of a material portion of our time-based equity awards due to the Mergers which occurred in the first quarter of 2017. Refer to Note 7 “Compensation Expense” and Note 8 “Stockholders’ Equity” in our accompanying consolidated financial statements included in Part I Item 1. “Financial Statements” for further information.

Depreciation and Amortization

Depreciation and amortization expense decreased due to the disposal of six properties during 2017 in our real estate equity segment.

Other Income (Loss)

Unrealized Gain (Loss) on Derivatives and Other

Unrealized gain (loss) on derivatives and other is primarily related to the non-cash change in fair value of derivative instruments. The loss related to foreign currency forwards used to hedge projected net property level cash flows in our corporate segment was primarily due to the strengthened Euro against the U.S. dollar. The decrease in the loss related to the interest rate caps in our real estate equity segment is due to the movement in European interest rate in 2018 compared to 2017.

The following table presents a summary of unrealized gain (loss) on derivatives and other for the three months endedMarch 31, 2018 and 2017 (dollars in thousands):

	Three Months Ended March 31,
	2018									2017
	Real Estate Equity			Corporate			Total			Real Estate Equity		Corporate			Total
Change in fair value of:
Derivatives, at fair value
Interest rate caps	$	(119	)	$	—		$	(119	)	$	319	$	—		$	319
Foreign currency forwards	—			(1,072		)	(1,072		)	—		(1,264		)	(1,264		)
Foreign currency remeasurement and other	2			—			2			12		(8		)	4
Total unrealized gain (loss) on derivatives and other	$	(117	)	$	(1,072	)	$	(1,189	)	$	331	$	(1,272	)	$	(941	)

42

Realized Gain (Loss) on Sales and Other

The following table presents a summary of realized gain (loss) on sales and other for the three months endedMarch 31, 2018 and 2017 (dollars in thousands):

	Three Months Ended March 31,
	2018								2017
	Real Estate Equity		Corporate			Total			Real Estate Equity			Corporate			Total
Sale of real estate investments(1)	$	—	$	—		$	—		$	3,390		$	—		$	3,390
Foreign currency transactions(2)	322		(22		)	300			(409		)	(3		)	(412		)
Other(3)	892		—			892			1,175			—			1,175
Net cash payments (receipts) on derivatives	—		(1,740		)	(1,740		)	—			817			817
Total realized gain (loss) on sales and other	$	1,214	$	(1,762	)	$	(548	)	$	4,156		$	814		$	4,970

_____________________________

(1) Excludes subsequent sale costs relating to 2017 and 2016 sales, respectively, and escrow arrangements entered into for specific indemnification obligations in relation to the sales.

(2) Includes $0.3 million and ($0.4 million) for the three months ended March 31, 2018 and 2017, respectively, relating to the reclassification of the currency translation adjustment from a component of accumulated other comprehensive income, or OCI, to realized gain (loss) due to the sale of certain real estate assets.

(3) Includes the release of certain escrow arrangements for specific indemnification obligations in relation to the 2017 and 2016 sales, respectively, offset by subsequent costs relating to 2017 and 2016 sales, respectively.

Income Tax Benefit (Expense)

The income tax expense for the three months endedMarch 31, 2018 represents a net expense of $0.1 million related to our real estate equity segment. The income tax expense for the three months endedMarch 31, 2017 represents a net benefit of $0.3 million primarily related to deferred tax benefits for our assets in our real estate equity segment.

43

Same Store Analysis

The following table presents our same store analysis for the real estate equity segment which represents 25 properties (323,458 square meters) adjusted for currency movement and excludes properties that were acquired or sold at any time during the three months ended March 31, 2018 and 2017 (dollars in thousands):

	Same Store(4)
	Three Months Ended March 31,						Increase (Decrease)
	2018			2017(1)			Amount			%
Occupancy (end of period)	85.5		%	83.2		%
Same store
Rental income(2)	$	27,360		$	27,197		$	163
Escalation income	5,243			4,838			405
Other income	242			29			213
Total revenues	32,845			32,064			781			2.4	%
Utilities	1,467			1,675			(208		)
Real estate taxes and insurance	1,317			1,327			(10		)
Management fees	534			534			—
Repairs and maintenance	2,454			2,532			(78		)
Other(2)(3)	943			1,415			(472		)
Properties - operating expenses	6,715			7,483			(768		)	(10.3	)%
Same store net operating income	$	26,130		$	24,581		$	1,549		6.3	%

_____________________________

(1) Three months ended March 31, 2017 is translated using the average exchange rate for the three months ended March 31, 2018.

(2) Adjusted to exclude amortization of above/below market leases and ground leases.

(3) Includes bad debt expense, ground rent, administrative costs and other non-reimbursable expenses.

(4) We believe same store net operating income, a non-GAAP metric, is a useful metric for evaluating the operating performance as it reflects the operating performance of the real estate portfolio excluding the effects of non-cash adjustments and provides a better measure of operational performance for a quarter-over-quarter comparison. Same store net operating income is presented for the same store portfolio, which represents all properties that were owned by us in the end of the reporting period. We define same store net operating income as NOI excluding (i) properties that were acquired or sold during the period, (ii) impact of foreign currency changes and (iii) amortization of above/below market leases. We consider same store net operating income to be an appropriate and useful supplemental performance measure. Same store net operating income should not be considered as an alternative to net income (loss), determined in accordance with U.S. GAAP, as an indicator of operating performance.  In addition, our methodology for calculating same store net operating income involves subjective judgment and discretion and may differ from the methodologies used by other comparable companies, including other REITs, when calculating the same or similar supplemental financial measures and may not be comparable with these companies.  Refer below for a reconciliation of same store NOI to net income (loss) attributable to common stockholders calculated in accordance with U.S. GAAP.

Same Store Revenue

Same store rental income increased driven primarily due to 2017 leasing activity and rent reviews completed during the year offset by the first quarter of 2017 preceded value enhancing lease extensions in the Maastoren property.

Same Store Expense

Same store properties - operating expenses decreased due to timing of certain non-recoverable operating expenses.

44

Reconciliation of Net Income to Same Store

The following table presents a reconciliation from net income (loss) to same store net operating income for the real estate equity segment for the three months ended March 31, 2018 and 2017 (dollars in thousands):

	Same Store Reconciliation
	Three Months Ended March 31,
	2018			2017
Net income (loss)	$	(1,277	)	$	(15,526	)
Corporate segment net (income) loss(1)	9,737			22,844
Other (income) loss(2)	18,530			16,366
Net operating income	26,990			23,684
Sale of real estate investments and other(3)	(131		)	897			(5)
Interest income(4)	(729		)	—
Same store net operating income	$	26,130		$	24,581

_____________________________

(1) Includes management fees, general and administrative expense, compensation expense, corporate interest expense and corporate transaction costs.

(2) Includes depreciation and amortization expense, unrealized loss on interest rate caps, and other expenses in the real estate equity segment.

(3) Represents the impact of sold assets.

(4) Represents interest income earned in the preferred equity segment.

(5) Three months ended March 31, 2017 is translated using the average exchange rate for the three months ended March 31, 2018.

Liquidity and Capital Resources

Our financing strategy is to employ investment-level financing to prudently leverage our investments and deliver attractive risk-adjusted returns to our stockholders through a wide range of secured and unsecured debt and public and private equity capital sources to fund our investment activities. In addition to investment-specific financings, we may use and have used credit facilities and repaid facilities on a shorter term basis and public and private, secured and unsecured debt issuances on a longer term basis.

Our current primary liquidity needs are to fund:

• our operating expenses and investment activities;

• acquisitions of our target assets and related ongoing commitments;

• capital improvements

• distributions to our stockholders;

• principal and interest payments on our borrowings; and

• income tax liabilities of taxable REIT subsidiaries and we are subject to limitations as a REIT.

Our current primary sources of liquidity are:

• cash flow generated from our investments, both from operations and return of capital

• net proceeds from asset disposals;

• financings secured by our assets such as mortgage notes, longer term senior and subordinate corporate capital such as revolving credit facilities; and

• cash on hand.

We seek to meet our long-term liquidity requirements, including the repayment of borrowings and our investment funding needs, through existing cash resources, issuance of debt or equity capital, return of capital from investments and the liquidation or refinancing of assets. Nonetheless, our ability to meet a long-term (beyond one year) liquidity requirement may be subject to obtaining additional debt and equity financing. Any decision by our lenders and investors to provide us with financing will depend upon a number of factors, such as our compliance with the terms of our existing credit arrangements, our financial performance, industry or market trends, the general availability of and rates applicable to financing transactions, such lenders’ and investors’ resources and policies concerning the terms under which they make capital commitments and the relative attractiveness of alternative investment or lending opportunities.

As a REIT, we are required to distribute at least 90% of our annual REIT taxable income to our stockholders, including taxable income where we do not receive corresponding cash, and we intend to distribute all or substantially all of our REIT taxable income in order to comply with the REIT distribution requirements of the Internal Revenue Code and to avoid federal income tax and the

45

non-deductible excise tax. On a quarterly basis, our Board determines an appropriate common stock dividend based upon numerous factors, including CAD, REIT qualification requirements, availability of existing cash balances, borrowing capacity under existing credit agreements, access to cash in the capital markets and other financing sources, our view of our ability to realize gains in the future through appreciation in the value of our assets, general economic conditions and economic conditions that more specifically impact our business or prospects. Future dividend levels are subject to adjustment based upon our evaluation of the factors described above, as well as other factors that our Board may, from time-to-time, deem relevant to consider when determining an appropriate common stock dividend.

In November 2015, our Board authorized the repurchase of up to $100 million of our outstanding common stock. That authorization expired in November 2016 and at such time the Board authorized an additional repurchase of up to $100 million of our outstanding common stock through November 2017. In March 2018, our board of directors authorized the repurchase of up to $100 million of our outstanding common stock. The authorization expires in March 2019, unless otherwise extended by our board of directors. For the three months endedMarch 31, 2018, the Company repurchased 1.1 million shares of its common stock for approximately $13.3 million. For the three months endedMarch 31, 2017, the Company did not repurchase any of its shares of its common stock. From the authorization in March 2018 through May 7, 2018, the Company repurchased 3.4 million shares of its common stock for approximately $46.3 million.

In March 2018, we amended the Credit Facility, increasing the size to $70 million and extending the term until April 2020 with one year extension option. The Credit Facility includes an accordion feature, providing for the ability to increase the facility to $105 million.

We believe that our existing sources of funds should be adequate for purposes of meeting our short-term liquidity needs. We expect our contractual rental income to be sufficient to meet our expected capital expenditures, interest expense, property operating and general and administrative expenses as well as common dividends declared by us. We may seek to raise additional capital in order to finance new acquisitions. As of May 7, 2018, total liquidity was $150 million, comprised of $80 million of unrestricted cash and $70 million of availability under our Credit Facility.

Cash Flows

The following presents a summary of our activity for the three months endedMarch 31, 2018 and 2017:

	Three Months Ended March 31,
Cash flow provided by (used in):	2018			2017
Operating activities	$	10,794		$	4,388
Investing activities	(4,789		)	20,582
Financing activities	(21,221		)	(18,606		)
Effect of foreign currency translation on cash and cash equivalents and restricted cash	2,308			1,147
Net increase (decrease) in cash and cash equivalents and restricted cash	$	(12,908	)	$	7,511

Three Months EndedMarch 31, 2018 Compared to March 31, 2017

Net cash provided by operating activities was $10.8 million for the three months endedMarch 31, 2018 compared to $4.4 million for the three months endedMarch 31, 2017. The increase was primarily due to a decrease in the change in operating assets and liabilities due to the timing of payments and collection of receivables.

Net cash used in investing activities was $4.8 million for the three months endedMarch 31, 2018 compared to net cash provided by $20.6 million for the three months endedMarch 31, 2017. Cash flow used in investing activities for the three months endedMarch 31, 2018 was primarily due to capital improvements of our operating real estate of $4.3 million and leasing costs of $0.4 million. Cash flow provided by the three months endedMarch 31, 2017 was primarily due to proceeds from sales of $20.9 million.

Net cash used in financing activities was $21.2 millionthree months endedMarch 31, 2018 compared to $18.6 million for the three months endedMarch 31, 2017. Cash flow used in financing activities for the three months endedMarch 31, 2018 was primarily due to retirement of shares of common stock of $10.7 million, dividend payments of $8.4 million and payment of financing costs of $0.4 million. Net cash flow used in financing activities for the three months endedMarch 31, 2017 was primarily due to the net cash payment on tax withholding of $11.0 million, repayment of the credit facility of $15.0 million and dividend payments of $8.4 million offset $15.0 million from the borrowing under the credit facility.

Off-Balance Sheet Arrangements

We currently do not have any off-balance sheet arrangements.

46

Related Party Arrangements

Colony NorthStar, Inc.

The Company entered into a management agreement with an affiliate of the Manager in November 2015, or the Original Management Agreement. On November 9, 2017, we entered into an amended and restated management agreement, or the Amended and Restated Management Agreement, with an affiliate of Colony NorthStar, effective as of January 1, 2018. As asset manager, the Manager is responsible for our day-to-day operations, subject to the supervision and management of our Board. Through its global network of subsidiaries and branch offices, the Manager performs services and engages in activities relating to, among other things, investments and financing, portfolio management and other administrative services, such as accounting and investor relations, to us and our subsidiaries. The management agreement with the Manager provides for a base management fee, incentive fee and expense reimbursement.

Term: Renewals

The Amended and Restated Management Agreement provides for an initial term (beginning January 1, 2018) of five years, or the Initial Term, with subsequent automatic renewals for additional three-year terms, unless either party provides notice to the other party of its intention to decline to renew the agreement at least six months prior to the expiration of the then-current term. During the Initial Term, the Amended and Restated Management Agreement is terminable only for cause (as defined in the Amended and Restated Management Agreement).

If we elect not to renew the Amended and Restated Management Agreement at the end of a term, we will be obligated to pay the Manager a termination fee, or the Termination Fee, equal to three times the amount of the base management fees earned by the Manager over the four most recent quarters immediately preceding the non-renewal. In addition, if at any time after the Initial Term, we undergo a “change of control” (as defined in the Amended and Restated Management Agreement), we may elect to terminate the agreement but upon any such termination it will be obligated to pay the Termination Fee to the Manager.

Assignment

The Amended and Restated Management Agreement provides that in the event of a change of control of the Manager or other event that could be deemed an assignment of the Amended and Restated Management Agreement, we will consider such assignment in good faith and not unreasonably withhold, condition or delay our consent. The Amended and Restated Management Agreement further provides that we anticipate consent would be granted for an assignment or deemed assignment to a party with expertise in commercial real estate and over $10 billion of assets under management. The Amended and Restated Management Agreement also provides that, notwithstanding anything in the agreement to the contrary, to the maximum extent permitted by applicable law, rules and regulations, in connection with any merger, sale of all or substantially all of the assets, change of control, reorganization, consolidation or any similar transaction by us or the Manager, directly or indirectly, the surviving entity will succeed to the terms of the Amended and Restated Management Agreement.

Base Management Fee

Pursuant to the Amended and Restated Management Agreement, beginning January 1, 2018, we are obligated to pay, quarterly, in arrears, in cash, the Manager a base management fee per annum equal to:

• 1.50% of our reported EPRA NAV (as defined in the Amended and Restated Management Agreement) for EPRA NAV amounts up to and including $2.0 billion; plus

• 1.25% of our reported EPRA NAV on any EPRA NAV amount exceeding $2.0 billion.

EPRA NAV is based on a U.S. GAAP balance sheet adjusted based on our interpretation of the European Public Real Estate Association, or EPRA, guidelines, and similar as prior practices, including adjustments such as fair value of operating real estate, straight-line rent and deferred taxes and additional adjustments to be determined by us in good faith based on any changes to U.S. GAAP, international accounting standards or EPRA guidelines. In calculating EPRA NAV, the liquidation preference of preferred securities outstanding shall not be included as a liability of us and shall not reduce EPRA NAV.

For the three months ended March 31, 2018, we incurred $4.2 million related to the base management fee.

Incentive Fee

In addition to the base management fees, we are obligated to pay the Manager an incentive fee, if any, or the Incentive Fee, with respect to each measurement period equal to twenty percent (20%) of: (i) the excess of (a) our Total Stockholder Return (as defined in the Amended and Restated Management Agreement, which includes stock price appreciation and dividends received and is subject to a high watermark price established when a prior incentive fee is realized) for the relevant measurement period above (b) a 10% cumulative annual hurdle rate, multiplied by (ii) our Weighted Average Shares (as defined in the Amended and Restated Management Agreement) during the measurement period. The first measurement period for the incentive fee will begin January 1, 2018 (based on an initial price of $13.67) and end on December 31 of the applicable calendar year and subsequent measurement

47

periods will begin on January 1 of the subsequent calendar year. Subject to the conditions set forth in Section 4(d) of the Amended and Restated Management Agreement for common stock payments, we may elect to pay the Incentive Fee, if any, in cash or in shares of restricted common stock or shares of unrestricted common stock repurchased by us in the open market or a combination thereof. Any shares of common stock delivered by us will be subject to lock-up restrictions that will be released in equal one-third increments on each anniversary of the end of the measurement period with respect to which such incentive fee was earned. In calculating the value of the shares of our common stock paid in satisfaction of the Incentive Fee obligation, the shares of restricted common stock will be valued at the higher of: (i) the volume weighted average trading price per share for the ten consecutive trading days (as defined in the Amended and Restated Management Agreement) ending on the trading day prior to the date the payment is due and (ii) our EPRA NAV per share, based on our most recently published EPRA NAV and the Weighted Average Shares as of the end of the period with respect to which such EPRA NAV was published.

Costs and Expenses

We are responsible to pay (or reimburse the Manager) for all of our direct, out of pocket costs and expenses as a stand alone company incurred by or on behalf of us and our subsidiaries, all of which must be reasonable, customary and documented. Internalized Service Costs (as defined below) are not intended to be covered costs and expenses under this provision and are subject to the limits described in the next paragraph.

We are obligated to reimburse the Manager for (i) all direct, reasonable, customary and documented costs and expenses incurred by the Manager for salaries, wages, bonuses, payroll taxes and employee benefits for personnel employed by the Manager: (a) who solely provide services to us which prior to January 1, 2018 were provided by unaffiliated third parties, including accounting and treasury services or (b) who were hired by the Manager after January 1, 2018 but who solely provide services to us in respect of one of the categories of services previously internalized pursuant to clause (a) and who were not hired in connection with any event which otherwise resulted in an increase to our net asset value (such costs and expenses set forth in clauses (i) and (ii), the “Internalized Service Costs”), plus (ii) 20% of the amount calculated under clause (i) to cover reasonable overhead charges with respect to such personnel, provided that we shall not be obligated to reimburse the Manager for such costs and expenses to the extent they exceed the following quarterly limits:

• 0.0375% of our aggregate gross asset value as of the end of the prior calendar quarter (excluding cash and cash equivalents and certain other exclusions) as calculated for purposes of determining EPRA NAV, or GAV, for GAV amounts to and including $2.5 billion, plus

• 0.0313% of GAV amounts between $2.5 billion and $5.0 billion, plus

• 0.025% of GAV amounts exceeding $5.0 billion.

If the Manager’s actual Internalized Service Costs during any quarter exceed the quarterly limit described in the preceding paragraph (the cumulative excess amounts, if any, in respect of each quarter during a calendar year, is referred to as the Quarterly Cap Excess Amount we are obligated to reimburse the Manager on an annual basis for an amount equal to the lesser of (i) the Quarterly Cap Excess Amount and (ii) the sum of the amounts, if any, determined for each quarter within such calendar year by which Internalized Services Costs in respect of such quarter were less than the quarterly limits described in the prior paragraph.

For the three months ended March 31, 2018, the Managed allocated $0.3 million of Internalized Service Costs to us.

Equity Based Compensation

In addition, we expect to make annual equity compensation grants to our management and other employees of the Manager, provided that the aggregate annual grant amount, type and other terms of such equity compensation must be approved by our compensation committee. The Manager will have discretion in allocating the aggregate grant among our management and other employees of the Manager.

Under the Amended and Restated Management Agreement, beginning with our 2018 annual stockholders’ meeting, the Manager will have the right to nominate one director (who is expected to be one of our current directors employed by the Manager) to our board of directors.

Colony NorthStar Ownership Waiver and Voting Agreement

In connection with the entry into the Amended and Restated Management Agreement, we provided Colony NorthStar with an ownership waiver under our Articles of Amendment and Restatement, allowing Colony NorthStar to purchase up to 45% of our stock. The waiver provides that if the Amended and Restated Management Agreement is terminated, Colony NorthStar may not purchase any shares of our common stock to the extent Colony NorthStar owns (or would own as a result of such purchase) more than 9.8% of our capital stock. In connection with the waiver, Colony NorthStar also agreed that for all matters submitted to a vote of our stockholders, to the extent Colony NorthStar owns more than 25% of our common stock (such shares owned by Colony NorthStar in excess of the 25% threshold, refer to as the Excess Shares, it will vote the Excess Shares in the same proportion that our remaining shares not owned by Colony NorthStar or its affiliates are voted. If the Amended and Restated Management

48

Agreement is terminated, then beginning on the third anniversary of such termination, the threshold described in the prior sentence will be reduced from 25% to 9.8%.

Manager Ownership of Common Stock

As of March 31, 2018, Colony NorthStar and its subsidiaries owned 5.6 million shares of our common stock, or approximately 10.3% of the total outstanding common stock.

Recent Developments

Dividends

On May 7, 2018, we declared a dividend of $0.15 per share of common stock. The common stock dividend will be paid on May 25, 2018 to stockholders of record as of the close of business on May 21, 2018.

Share Repurchases

From the authorization in March 2018 through May 7, 2018, we repurchased 3.4 million shares of our common stock for approximately $46.3 million.

Disposals

In April 2018, we completed the sale of the Maastoren property, our largest non-core asset, for approximately $195 million. We released approximately $60 million of net equity after repayment of financing (including release premium) and transaction costs.

Inflation

Virtually all of our assets and liabilities are interest rate and foreign currency exchange rate sensitive in nature. As a result, interest rates, foreign currency exchange rates and other factors influence our performance significantly more than inflation does. A change in interest rates and foreign currency exchange rates may correlate with changes in inflation rates. With the exception of the United Kingdom, rent is generally adjusted annually based on local consumer price indices. In the United Kingdom, rent is typically subject to an upward only rent review approximately every three to five years.

Refer to Item 3. “Quantitative and Qualitative Disclosures About Market Risk” for additional details.

Non-GAAP Financial Measures

We use CAD and NOI, each a non-GAAP measure, to evaluate our profitability.

Cash Available for Distribution

We believe that CAD provides investors and management with a meaningful indicator of operating performance. We also believe that CAD is useful because it adjusts for a variety of items that are consistent with presenting a measure of operating performance (such as transaction costs, depreciation and amortization, equity-based compensation, realized gain (loss) on sales and other, asset impairment and non-recurring bad debt expense). We adjust for transaction costs because these costs are not a meaningful indicator of our operating performance. For instance, these transaction costs include costs such as professional fees associated with new investments, which are expenses related to specific transactions. Management also believes that quarterly distributions are principally based on operating performance and our board of directors includes CAD as one of several metrics it reviews to determine quarterly distributions to stockholders. The definition of CAD may be adjusted from time to time for our reporting purposes in our discretion, acting through our audit committee or otherwise. CAD may fluctuate from period to period based upon a variety of factors, including, but not limited to, the timing and amount of investments, new leases, repayments and asset sales, capital raised, use of leverage, changes in the expected yield of investments and the overall conditions in commercial real estate and the economy generally.

We calculate CAD by subtracting from or adding to net income (loss) attributable to common stockholders, non-controlling interests and the following items: depreciation and amortization items including straight-line rental income or expense (excluding amortization of rent free periods), amortization of above/below market leases, amortization of deferred financing costs, amortization of discount on financings and other and equity-based compensation; unrealized gain (loss) on derivatives and other; realized gain (loss) on sales and other (excluding any realized gain (loss) on the settlement on foreign currency derivatives); impairment on depreciable property; acquisition gains or losses; transaction costs; foreign currency gains (losses) related to sales; impairment on goodwill and other intangible assets; the incentive fee relating to the Amended and Restated Management Agreement and one-time events pursuant to changes in U.S. GAAP and certain other non-recurring items. These items, if applicable, include any adjustments for unconsolidated ventures.

CAD should not be considered as an alternative to net income (loss) attributable to common stockholders, determined in accordance with U.S. GAAP, as an indicator of operating performance. In addition, our methodology for calculating CAD involves subjective judgment and discretion and may differ from the methodologies used by other comparable companies, including other REITs, when calculating the same or similar supplemental financial measures and may not be comparable with these companies.

49

The following table presents a reconciliation of net income (loss) attributable to common stockholders to CAD for the three months ended March 31, 2018 and 2017 (dollars in thousands):

	Three Months Ended March 31,
	2018			2017
Net income (loss) attributable to common stockholders	$	(1,281	)	$	(15,350	)
Non-controlling interests	4			(176		)
Adjustments:
Depreciation and amortization items(1)(2)	13,160			29,571
Unrealized (gain) loss on derivatives and other	1,189			941
Realized (gain) loss on sales and other(3)(4)	(868		)	(4,153		)
Transaction costs and other(5)(6)	481			1,175
CAD	$	12,685		$	12,008

_____________________________

(1) Three months ended March 31, 2018 represents an adjustment to exclude depreciation and amortization of $11.7 million, amortization expense of capitalized above/below market leases of $0.2 million, amortization of deferred financing costs of $0.7 million and amortization of equity-based compensation of $0.6 million.

(2) Three months ended March 31, 2017 represents an adjustment to exclude depreciation and amortization of $12.6 million, amortization of above/below market leases of $0.3 million, amortization of deferred financing costs of $0.9 million and amortization of equity-based compensation of $15.9 million.

(3) Three months ended March 31, 2018 CAD includes a $1.4 million net loss related to the settlement of foreign currency derivatives.

(4) Three months ended March 31, 2017 CAD includes a $0.8 million net gain related to the settlement of foreign currency derivatives.

(5) Three months ended March 31, 2018 represents an adjustment to exclude $0.5 million of transaction costs.

(6) Three months ended March 31, 2017 represents an adjustment to exclude $0.3 million of transaction costs and $0.9 million of payroll taxes associated with the acceleration of equity awards due to the Mergers.

Net Operating Income (NOI)

We believe NOI is a useful metric for evaluating the operating performance of our real estate portfolio in the aggregate. Portfolio results and performance metrics represent 100% for all consolidated investments. Net operating income represents total property and related revenues, adjusted for: (i) amortization of above/below market leases; (ii) straight-line rent (except with respect to rent free period); (iii) other items such as adjustments related to joint ventures and non-recurring bad debt expense and less property operating expenses. However, the usefulness of NOI is limited because it excludes general and administrative costs, interest expense, transaction costs, depreciation and amortization expense, realized gains (losses) on sales and other and other items under U.S. GAAP and capital expenditures and leasing costs, all of which may be significant economic costs. NOI may fail to capture significant trends in these components of U.S. GAAP net income (loss) which further limits its usefulness.

NOI should not be considered as an alternative to net income (loss), determined in accordance with U.S. GAAP, as an indicator of operating performance. In addition, our methodology for calculating NOI involves subjective judgment and discretion and may differ from the methodologies used by other comparable companies, including other REITs, when calculating the same or similar supplemental financial measures and may not be comparable with these companies.

50

The following table presents a reconciliation of NOI of our real estate equity and preferred equity segments to property and other related revenues less property operating expenses for the three months ended March 31, 2018 and 2017 (dollars in thousands):

	Three Months Ended March 31,
	2018		2017
Rental income	$	27,224	$	25,536
Escalation income	5,341		5,161
Other income	278		29
Total property and other income	32,843		30,726
Properties - operating expenses	6,802		7,322
Adjustments:
Interest income	729		—
Amortization and other items(1)(2)	220		280
NOI(3)	$	26,990	$	23,684

_____________________________

(1) Three months ended March 31, 2018 primarily excludes $0.2 million of amortization of above/below market leases.

(2) Three months ended March 31, 2017 primarily excludes $0.3 million of amortization of above/below market leases.

(3) The following table presents a reconciliation of net income (loss) to NOI of our real estate equity segment for the three months ended March 31, 2018 and 2017 (dollars in thousands):

	Three Months Ended March 31,
	2018			2017
Net income (loss)	$	(1,277	)	$	(15,526	)
Remaining segments(i)	9,737			22,844
Real estate equity and preferred equity segment adjustments:
Interest expense	5,955			6,119
Other expenses	1,424			2,000
Depreciation and amortization	11,651			12,563
Unrealized (gain) loss on derivatives and other	117			(331		)
Realized (gain) loss on sales and other	(1,214		)	(4,156		)
Income tax (benefit) expense	39			(273		)
Other items	558			444
Total adjustments	18,530			16,366
NOI	$	26,990		$	23,684

_____________________________

(i) Represents the net (income) loss in our corporate segment to reconcile to net operating income.

51

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are primarily subject to interest rate risk, credit risk and foreign currency exchange rate risk. These risks are dependent on various factors beyond our control, including monetary and fiscal policies, domestic and international economic conditions and political considerations. Our market risk sensitive assets, liabilities and related derivative positions are held for investment and not for trading purposes.

Interest Rate Risk

Changes in interest rates affect our net income primarily related to the impact to interest expense incurred in connection with our borrowings and derivatives.

Substantially all of our investments are financed with non-recourse mortgage notes. We predominately use floating rate financing and we seek to generally mitigate the risk of interest rates rising through derivative instruments including interest rate caps. As of March 31, 2018, a hypothetical 100 basis point increase in GBP LIBOR and EURIBOR applied to our liabilities would result in a decrease in net income of approximately $7.0 million annually.

A change in interest rates could affect the value of our properties, which may be influenced by changes in interest rates and credit spreads (as discussed below) because value is typically derived by discounting expected future cash flow generated by the property using interest rates plus a risk premium based on the property type and creditworthiness of the tenants. A lower risk-free rate generally results in a lower discount rate and, therefore, a higher valuation, and vice versa; however, an increase in the risk-free rate would not impact our net income.

As of March 31, 2018, none of our derivatives qualified for hedge accounting treatment, therefore, gains (losses) resulting from their fair value measurement at the end of each reporting period are recognized as an increase or decrease in unrealized gain (loss) on derivatives and other in our consolidated statements of operations. In addition, we are, and may in the future be, subject to additional expense based on the notional amount of the derivative and a specified spread over the applicable index. Because the fair value of these instruments can vary significantly between periods, we may experience significant fluctuations in the amount of our unrealized gain (loss) in any given period.

The objective of our interest rate management strategy is to minimize or eliminate the effects of interest rate changes on the value of our assets, to improve risk-adjusted returns and, where possible, to lock in, on a long-term basis, a favorable spread between the yield on our assets and the cost of financing such assets.

We can provide no assurances, however, that our efforts to manage interest rate volatility will successfully mitigate the risks of such volatility on our portfolio.

Credit Risk

We are subject to the credit risk of the tenants of our properties. We seek to undertake a credit evaluation of each tenant prior to acquiring properties. This analysis includes due diligence of each tenant’s business as well as an assessment of the strategic importance of the underlying real estate to the tenant’s core business operations. Where appropriate, we may seek to augment the tenant’s commitment to the property by structuring various credit enhancement mechanisms into the underlying leases. These mechanisms could include security deposit requirements, letters of credit or guarantees from entities we deem creditworthy. Additionally, we perform ongoing monitoring of creditworthiness of our tenants which is an important component of our portfolio management process. Such monitoring may include, to the extent available, a review of financial statements and operating statistics, delinquencies, third party ratings and market data. In addition, our preferred equity investment is subject to credit risk based on the borrower’s ability to make required interest payments on scheduled due dates and value of collateral. We seek to manage credit risk through our Manager’s comprehensive credit analysis prior to making an investment, actively monitoring our investment and the underlying credit quality, including subordination and diversification of our investment. Our analysis is based on a broad range of real estate, financial, economic and borrower-related factors, which we believe are critical to the evaluation of credit risk inherent in a transaction. For the three months endedMarch 31, 2018, our preferred equity investment contributed all of our interest income.

We are subject to the credit risk of the borrower when we originate preferred equity investments. We seek to undertake a rigorous credit evaluation of our borrower prior to making an investment. This analysis includes an extensive due diligence investigation of the borrower’s creditworthiness and business as well as an assessment of the strategic importance of the underlying real estate to the borrower’s core business operations.

Foreign Currency Exchange Rate Risk

We are subject to risks related to changes in foreign currency exchange rates as a result of our ownership of, or commitments to acquire, properties within Europe, predominantly the U.S. dollar/Euro and U.S. dollar/U.K. Pounds Sterling exchange rate. As a result, changes in exchange rate fluctuations may positively or negatively affect our consolidated revenues and expenses (as expressed in U.S. dollars) from our business.

52

In addition, because we are exposed to foreign currency exchange rate fluctuations, we employ foreign currency risk management strategies, including the use of, among others, currency hedges, and matched currency financing.

The following chart represents the change in the Euro/U.S. dollar and U.K. Pounds Sterling/U.S. dollar exchange rate during the three months endedMarch 31, 2018 and 2017:

Source: Oanda

Our properties and the rent payments under our leases for these properties are denominated predominantly in Euro and U.K. Pounds Sterling and we expect substantially all of our future leases for properties we may acquire in Europe to be denominated in the local currency of the country in which the underlying property is located. Additionally, our non-recourse mortgage borrowings are denominated in the same currency as the assets securing the borrowing. A majority portion of our operating expenses and borrowings with respect to such European properties are also transacted in local currency, however we do have corporate expenses, such as our dividend, that are paid in U.S. dollar. We report our results of operations and consolidated financial information in the U.S. dollars. Consequently, our results of operations as reported in U.S. dollars are impacted by fluctuations in the value of the local currencies in which we conduct our European business.

In an effort to mitigate the risk of fluctuations in foreign currency exchange rates, we, and our Operating Partnership, seek to actively manage our revenues and expenses so that we incur a significant portion of our expenses, including our operating costs and borrowings, in the same local currencies in which we receive our revenues. In addition, subject to satisfying the requirements for qualification as a REIT, we engage in various hedging strategies, which may include currency futures, swaps, forwards and options. We expect that these strategies and instruments may allow us to reduce, but not eliminate, the risk of fluctuations in foreign currency exchange rates. The counterparties to these arrangements are major financial institutions with which we may also have other financial relationships. In January 2018, we entered into additional foreign currency forwards with respect to the projected net property level cash flows which are hedged for the Euro through November 2019.

Based on our portfolio, a hypothetical 10% appreciation or depreciation in the applicable exchange rate to the U.S dollar, adjusting for our foreign currency forwards, applied to our assets and liabilities would result in an increase or decrease of stockholders’ equity of approximately $62.9 million, respectively. Such amount would be recorded in OCI. In addition, we enter into derivative instruments to manage foreign currency exposure of our operating income. A hypothetical 10% increase or decrease in applicable exchange rate to the U.S dollar applied to our assets and liabilities, adjusting for foreign currency forwards would result in an increase or decrease of net operating income adjusted for interest and other expenses of approximately $2.6 million annually, respectively.

We can provide no assurances, however, that our efforts to manage foreign currency exchange rate volatility will successfully mitigate the risks of such volatility on our portfolio.

53

Item 4.  Controls and Procedures

Disclosure Controls and Procedures

As of the end of the period covered by this report, management conducted an evaluation as required under Rules 13a-15(b) and 15d-15(b) under the Securities Exchange Act of 1934, as amended, or Exchange Act, under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act).

Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures are effective. Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures to disclose material information otherwise required to be set forth in the Company’s periodic reports.

Internal Control over Financial Reporting

Changes in internal control over financial reporting.

Our Manager has substantially completed the process of integrating the systems, processes and internal controls of Colony, NSAM and NorthStar Realty Finance. The Company leverages these systems, processes and internal controls to conduct its operations. We will continue to review our internal control practices, in conjunction with our Manager, in consideration of future integration and post merger activities.

Except as described above in the preceding paragraph, during the quarter ended March 31, 2018, there was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

54

PART II

Item 1. Legal Proceedings

We are involved in various litigation matters arising in the ordinary course of our business. Although we are unable to predict with certainty the eventual outcome of any litigation, in the opinion of management, our current legal proceedings are not expected to have a material adverse effect on our financial position or results of operations. Refer to Note 12, “Commitments and Contingencies” in Part I, Item 1. “Financial Statements” for further disclosure regarding legal proceedings.

Item 1A. Risk Factors

There have been no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, 2017.

You should carefully consider all information contained in this interim report on Form 10-Q, including our interim consolidated financial statements and the related notes thereto before making a decision to purchase our securities. The risks and uncertainties described are not the only ones facing us. Additional risks and uncertainties not presently known to us, or not presently deemed material by us, may also impair our operations and performance.

If any of the following risks actually occur, our business, financial condition or results of operations could be materially adversely affected. If that happens, the trading price of our securities could decline, and you may lose all or part of your investment.

Item 2. Purchases of Equity Securities by Issuer

The following table provides the information with respect to purchases made by us of our common stock during the three months endedMarch 31, 2018:

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs(1)
March 1 - March 31	1,051,029	$	12.70	1,051,029	$	86,650,987

__________________

(1) In March 2018, we announced that our board of directors authorized the repurchase of up to $100 million of our outstanding common stock. The authorization expires in March 2019, unless otherwise extended by our board of directors. There were no repurchases made during January or February 2018.

Item 4. Mine Safety Disclosures

None.

55

Item 5. Other Information

The 2018 Annual Meeting of stockholders of the Company will be held at 535 Madison Avenue, 7th Floor, New York, New York 10022, on August 3, 2018, beginning at 8:00 a.m. Eastern Time.  The record date for the determination of stockholders entitled to receive notice of and to vote at the 2018 Annual’ Meeting of stockholders of the Company will be the close of business on June 19, 2018.

56

Item 6.   Exhibits

Exhibit Number		Description of Exhibit
2.1		Separation Agreement between NorthStar Realty Europe Corp. and NorthStar Realty Finance Corp. (incorporated by reference to Exhibit 10.2 to NorthStar Realty Europe’s Current Report on Form 8-K filed on November 3, 2015)
3.1		Articles of Amendment and Restatement of NorthStar Realty Europe Corp. (incorporated by reference to Exhibit 3.1 to NorthStar Realty Europe’s Current Report on Form 8-K filed on October 23, 2015)
3.2		Bylaws of NorthStar Realty Europe Corp. (incorporated by reference to Exhibit 3.2 to NorthStar Realty’s Europe’s Registration Statement on Form S-11 filed on October 9, 2015)
10.2		First Amendment to Credit Agreement and New Lender Joinder Agreement dated March 9, 2018, to amend the Amended and Restated Credit Agreement dated April 6, 2017, among NorthStar Realty Europe Limited Partnership, as borrower, NorthStar Realty Europe Corp., the Lender party thereto, and Bank of America, N.A. as Administrative Agent, Swing Line Lender and L/C Issuer (incorporated by reference to Exhibit 10.2 to NorthStar Realty Europe’s Annual Report on Form 10-K for the year ended December 31, 2017)
31.1	*	Certification by the Chief Executive Officer pursuant to 17 CFR 240.13a-14(a)/15(d)-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	*	Certification by the Chief Financial Officer pursuant to 17 CFR 240.13a-14(a)/15(d)-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	*	Certification by the Chief Executive Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	*	Certification by the Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.0	*	The following materials from the NorthStar Realty Europe Corp. Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of March 31, 2018 (unaudited) and December 31, 2017; (ii) Consolidated Statements of Operations (unaudited) for the three months ended March 31, 2018 and 2017; (iii) Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three months ended March 31, 2018 and 2017; (iv) Consolidated Statements of Equity (unaudited) for the three months ended March 31, 2018 and 2017; (v) Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2018 and 2017; and (vi) Notes to Consolidated Financial Statements (unaudited)

_____________________________

* Filed herewith.

57

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		NorthStar Realty Europe Corp.
Date:	May 10, 2018		By:	/s/ MAHBOD NIA
				Mahbod Nia
				Chief Executive Officer and President
			By:	/s/ KEITH A. FELDMAN
				Keith A. Feldman
				Chief Financial Officer and Treasurer

58

EX-31.1

EXHIBIT 31.1

CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER PURSUANT TO

17 CFR 240.13a-14(a)/15(d)-14(a),

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Mahbod Nia, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of NorthStar Realty Europe Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	May 10, 2018	By:	/s/ MAHBOD NIA
			Mahbod Nia
			Chief Executive Officer and President

EX-31.2

EXHIBIT 31.2

CERTIFICATION BY THE CHIEF FINANCIAL OFFICER PURSUANT TO

17 CFR 240.13a-14(a)/15(d)-14(a),

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Keith A. Feldman, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of NorthStar Realty Europe Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	May 10, 2018	By:	/s/ KEITH A. FELDMAN
			KEITH A. FELDMAN
			Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

       In connection with the Quarterly Report on Form 10-Q of NorthStar Realty Europe Corp. (the “Company”) for the quarterly period ended March 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mahbod Nia, as Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	May 10, 2018	By:	/s/ MAHBOD NIA
			Mahbod Nia
			Chief Executive Officer and President

        This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

      A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

CERTIFICATION BY THE CHIEF FINANCIAL OFFICER PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report on Form 10-Q of NorthStar Realty Europe Corp. (the “Company”) for the quarterly period ended March 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Keith A. Feldman, as Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	May 10, 2018	By:	/s/ KEITH A. FELDMAN
			Keith A. Feldman
			Chief Financial Officer

        This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

      A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2018	May 07, 2018
Document and Entity Information
Entity Registrant Name	NorthStar Realty Europe Corp.
Entity Central Index Key	0001646587
Entity Current Reporting Status	Yes
Document Type	10-Q
Document Period End Date	Mar. 31, 2018
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		52,189,114
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q1

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Assets
Operating real estate, gross	$ 1,658,623	$ 1,606,890
Less: accumulated depreciation	(107,538)	(95,356)
Operating real estate, net	1,551,085	1,511,534
Preferred equity investments	36,770	35,347
Cash and cash equivalents	50,204	64,665
Restricted cash	8,470	6,917
Receivables, net of allowance of $673 and $747 as of March 31, 2018 and December 31, 2017, respectively	6,093	9,048
Assets held for sale	176,088	169,082
Derivative assets, at fair value	7,100	7,024
Intangible assets, net	114,558	114,185
Other assets, net	29,296	23,115
Total assets	1,979,664	1,940,917
Liabilities
Mortgage and other notes payable, net	1,262,115	1,223,443
Accounts payable and accrued expenses	24,584	27,240
Due to related party (refer to Note 6)	4,436	3,590
Derivative liabilities, at fair value	6,342	5,270
Intangible liabilities, net	28,677	28,632
Liabilities related to assets held for sale	1,022	648
Other liabilities	29,261	25,757
Total liabilities	1,356,437	1,314,580
Commitments and contingencies
Redeemable non controlling interest (refer to Note 9)	2,049	1,992
Equity
Preferred stock, $0.01 par value, 200,000,000 shares authorized, no shares issued and outstanding as of March 31, 2018 and December 31, 2017	0	0
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 54,572,348 and 55,402,259 shares issued and outstanding as of March 31, 2018 and December 31, 2017, respectively	546	555
Additional paid-in capital	927,836	940,579
Retained earnings (accumulated deficit)	(356,666)	(347,053)
Accumulated other comprehensive income (loss)	45,489	25,618
Total NorthStar Realty Europe Corp. stockholders’ equity	617,205	619,699
Non-controlling interests	3,973	4,646
Total equity	621,178	624,345
Total liabilities, redeemable non controlling interest and equity	$ 1,979,664	$ 1,940,917

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Statement of Financial Position [Abstract]
Receivables, allowance	$ 673	$ 747
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (shares)	200,000,000	200,000,000
Preferred stock, shares issued (shares)	0	0
Preferred stock, shares outstanding (shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (shares)	1,000,000,000	1,000,000,000
Common stock, shares issued (shares)	54,572,348	55,402,259
Common stock, shares outstanding (shares)	54,572,348	55,402,259

XML

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2018	Mar. 31, 2017
Revenues
Rental income		$ 27,224	$ 25,536
Escalation income		5,341	5,161
Interest income		729	0
Other income		278	29
Total revenues		33,572	30,726
Expenses
Properties - operating expenses		6,802	7,322
Interest expense		6,107	6,383
Transaction costs		481	260
Management fee, related party		4,157	3,559
Other expenses		1,424	2,000
General and administrative expenses		1,878	2,597
Compensation expense	[1]	573	15,870
Depreciation and amortization		11,651	12,563
Total expenses		33,073	50,554
Other income (loss)
Unrealized gain (loss) on derivatives and other (refer to Note 10)		(1,189)	(941)
Realized gain (loss) on sales and other		(548)	4,970
Income (loss) before income tax benefit (expense)		(1,238)	(15,799)
Income tax benefit (expense)		(39)	273
Net income (loss)		(1,277)	(15,526)
Net (income) loss attributable to non controlling interests		(4)	176
Net income (loss) attributable to NorthStar Realty Europe Corp. common stockholders		$ (1,281)	$ (15,350)
Earnings (loss) per share:
Basic (in dollars per share)		$ (0.02)	$ (0.28)
Diluted (in dollars per share)		$ (0.02)	$ (0.28)
Weighted average number of shares:
Basic (shares)		55,192,762	54,832,136
Diluted (shares)		55,603,500	55,504,981
Dividends per share of common stock (in dollars per share)		$ 0.15	$ 0.15

[1] Compensation expense for the three months ended March 31, 2018 and 2017 is comprised of equity-based compensation expenses. For the three months ended March 31, 2017, compensation expense includes the impact of substantially all time based and certain performance based awards vesting in connection with the change of control of the Manager (refer to Note 7).

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ (1,277)	$ (15,526)
Other comprehensive income (loss):
Foreign currency translation adjustment, net	20,001	9,244
Total other comprehensive income (loss)	20,001	9,244
Comprehensive income (loss)	18,724	(6,282)
Comprehensive (income) loss attributable to non-controlling interests	(134)	54
Comprehensive income (loss) attributable to NorthStar Realty Europe Corp. common stockholders	$ 18,590	$ (6,228)

XML

CONSOLIDATED STATEMENTS OF EQUITY - USD ($) shares in Thousands, $ in Thousands	Total	Total NorthStar Stockholders’ Equity	Common Stock	Additional Paid-in Capital	Retained Earnings (Accumulated Deficit)	Accumulated Other Comprehensive Income (Loss)	Non-controlling Interests
Beginning Balance (shares) at Dec. 31, 2016			55,395
Beginning Balance at Dec. 31, 2016	$ 599,907	$ 591,834	$ 554	$ 925,473	$ (282,769)	$ (51,424)	$ 8,073
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Reallocation of interest in Operating Partnership (refer to Note 9)	0	2,879		2,879			(2,879)
Non-controlling interest conversion of common units to common stock (shares)			97
Conversion of Common Units to common stock (refer to Note 9)	0	332	$ 1	331			(332)
Amortization of equity-based compensation (refer to Note 7)	15,857	13,683		13,683			2,174
Issuance and vesting of restricted stock, net of tax withholding (shares)			365
Issuance and vesting of restricted stock, net of tax withholding	0		$ 4	(4)
Tax withholding related to vesting of equity-based compensation (in shares)			(861)
Tax withholding related to vesting of equity-based compensation	(10,994)	(10,994)	$ (9)	(10,985)
Other comprehensive income (loss)	9,244	9,122				9,122	122
Dividends on common stock and equity-based compensation	(8,429)	(8,341)			(8,341)		(88)
Net income (loss)	(15,526)	(15,350)			(15,350)		(176)
Ending Balance (shares) at Mar. 31, 2017			54,996
Ending Balance at Mar. 31, 2017	590,059	583,165	$ 550	931,377	(306,460)	(42,302)	6,894
Beginning Balance (shares) at Dec. 31, 2016			55,395
Beginning Balance at Dec. 31, 2016	599,907	591,834	$ 554	925,473	(282,769)	(51,424)	8,073
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Reallocation of interest in Operating Partnership (refer to Note 9)							(1,800)
Ending Balance (shares) at Dec. 31, 2017			55,402
Ending Balance at Dec. 31, 2017	624,345	619,699	$ 555	940,579	(347,053)	25,618	4,646
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Reallocation of interest in Operating Partnership (refer to Note 9)	0	(20)		(20)			20
Non-controlling interest conversion of common units to common stock (shares)			23
Conversion of Common Units to common stock (refer to Note 9)	0	216	$ 0	216			(216)
Redemption of Common Units	(551)	0		0			(551)
Amortization of equity-based compensation (refer to Note 7)	402	402		402			0
Issuance and vesting of restricted stock, net of tax withholding (shares)			198
Issuance and vesting of restricted stock, net of tax withholding	0		$ 2	(2)
Retirement of shares of common stock (shares)			(1,051)
Retirement of shares of common stock	(13,350)	(13,350)	$ (11)	(13,339)
Other comprehensive income (loss)	20,001	19,871				19,871	130
Dividends on common stock and equity-based compensation	(8,392)	(8,332)			(8,332)		(60)
Net income (loss)	(1,277)	(1,281)			(1,281)		4
Ending Balance (shares) at Mar. 31, 2018			54,572
Ending Balance at Mar. 31, 2018	$ 621,178	$ 617,205	$ 546	$ 927,836	$ (356,666)	$ 45,489	$ 3,973

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Cash flows from operating activities:
Net income (loss)	$ (1,277)	$ (15,526)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	11,651	12,563
Amortization of deferred financing costs	717	857
Amortization of equity-based compensation	573	15,857
Allowance for uncollectible accounts	124	144
Unrealized (gain) loss on derivatives and other	1,189	941
Realized (gain) loss on sales and other	548	(4,970)
Amortization of capitalized above/below market leases	137	280
Straight line rental income	(3,600)	(1,314)
Deferred income taxes, net	(151)	(263)
Changes in assets and liabilities:
Receivables	2,765	192
Other assets	(2,636)	(963)
Accounts payable and accrued expenses	(2,337)	(4,166)
Due to related party	839	(1,232)
Other liabilities	2,252	1,988
Net cash provided by (used in) operating activities	10,794	4,388
Cash flows from investing activities:
Improvements of operating real estate	(4,285)	(2,266)
Payment relating to sale of operating real estate	(260)	20,893
Other assets	154	(288)
Change in receivable	0	2,243
Deferred leasing costs	(398)	0
Net cash provided by (used in) investing activities	(4,789)	20,582
Cash flows from financing activities:
Borrowings from credit facility	0	15,000
Repayment of credit facility	0	(15,000)
Payment of financing costs	(445)	0
Settlement of derivatives	(1,740)	817
Tax withholding related to vesting of equity-based compensation	0	(10,994)
Repurchase of common stock	(10,662)	0
Dividends	(8,392)	(8,429)
Distributions to non-controlling interest	18	0
Net cash provided by (used in) financing activities	(21,221)	(18,606)
Effect of foreign currency translation on cash and cash equivalents and restricted cash	2,308	1,147
Net increase (decrease) in cash and cash equivalents and restricted cash	(12,908)	7,511
Cash and cash equivalents—beginning of period	71,582	76,550
Cash and cash equivalents—end of period	58,674	84,061
Supplemental disclosure of non-cash investing and financing activities:
Reclassification of operating real estate to assets held for sale	0	5,929
Conversion of Common Units to common stock	216	0
Reclassification of intangibles to assets and liabilities held for sale	0	890
Redemption of Common Units	551	0
Reclassification of other assets and liabilities to assets held for sale	823	289
Retirement of shares of common stock	2,677	0
Reallocation of interest in Operating Partnership	20	2,879
Accrued capital expenditures and deferred assets	$ 91	$ 681

XML

Formation and Organization

3 Months Ended

Mar. 31, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Formation and Organization

Formation and Organization

NorthStar Realty Europe Corp. (“NorthStar Europe” or the “Company”) (NYSE: NRE), a publicly-traded real estate investment trust (“REIT”), is a European focused commercial real estate company with predominantly prime office properties in key cities within Germany, the United Kingdom and France. The Company commenced operations on November 1, 2015 following the spin-off by NorthStar Realty Finance Corp. (“NorthStar Realty”) of its European real estate business (excluding its European healthcare properties) into a separate publicly-traded company, NorthStar Realty Europe Corp., a Maryland corporation (the “Spin-off”). The Company’s objective is to provide its stockholders with stable and recurring cash flow supplemented by capital growth over time.

The Company is externally managed and advised by an affiliate of the Manager. References to “the Manager” refer to NorthStar Asset Management Group Inc. (“NSAM”) for the period prior to the Mergers (refer below) and Colony NorthStar, Inc. (“Colony NorthStar” or “CLNS”), for the period subsequent to the Mergers. As part of the Mergers, NSAM changed its name to Colony NorthStar, Inc.

Substantially all of the Company’s assets, directly or indirectly, are held by, and the Company conducts its operations, directly or indirectly, through NorthStar Realty Europe Limited Partnership, a Delaware limited partnership and the operating partnership of the Company (the “Operating Partnership”). The Company has elected to be taxed, and will continue to conduct its operations so as to continue to qualify, as a REIT for U.S. federal income tax purposes.

All references herein to the Company refer to NorthStar Realty Europe Corp. and its consolidated subsidiaries, including the Operating Partnership, collectively, unless the context otherwise requires.

Merger Agreements among NSAM, NorthStar Realty and Colony Capital, Inc.

On January 10, 2017, the Company’s external manager, NSAM, completed a tri-party merger with NorthStar Realty and Colony Capital, Inc. (“Colony”), pursuant to which the companies combined in an all-stock merger (“the Mergers”) of equals transaction to create a diversified real estate and investment management company. Under the terms of the merger agreement, NSAM, Colony and NorthStar Realty, through a series of transactions, merged with and into NSAM, which was renamed Colony NorthStar (NYSE: CLNS). Colony NorthStar is a leading global equity REIT with an embedded investment management platform.

Amended and Restated Management Agreement

On November 9, 2017, the Company entered into an amended and restated management agreement (the “Amended and Restated Management Agreement”) with an affiliate of the Manager, effective as of January 1, 2018. Refer to Note 6 “Related Party Arrangements” for a description of the terms of the Amended and Restated Management Agreement.

XML

Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2018

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Basis of Quarterly Presentation

The accompanying unaudited consolidated financial statements and related notes of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial reporting and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and note disclosures normally included in the consolidated financial statements prepared under U.S. GAAP have been condensed or omitted. In the opinion of management, all adjustments considered necessary for a fair statement of the Company’s consolidated financial position, results of operations and cash flows have been included and are of a normal and recurring nature. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. These consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, 2017, which was filed with the U.S. Securities and Exchange Commission (the “SEC”).

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, the Operating Partnership and their consolidated subsidiaries. The Company consolidates variable interest entities (“VIE”) where the Company is the primary beneficiary and voting interest entities which are generally majority owned or otherwise controlled by the Company. All significant intercompany balances are eliminated in consolidation.

Variable Interest Entities

A VIE is an entity that lacks one or more of the characteristics of a voting interest entity. A VIE is defined as an entity in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The determination of whether an entity is a VIE includes both a qualitative and quantitative analysis. The Company bases its qualitative analysis on its review of the design of the entity, its organizational structure including decision-making ability and relevant financial agreements and the quantitative analysis on the forecasted cash flow of the entity. The Company reassesses its initial evaluation of an entity as a VIE upon the occurrence of certain reconsideration events.

A VIE must be consolidated only by its primary beneficiary, which is defined as the party who, along with its affiliates and agents has both the: (i) power to direct the activities that most significantly impact the VIE’s economic performance; and (ii) obligation to absorb the losses of the VIE or the right to receive the benefits from the VIE, which could be significant to the VIE. The Company determines whether it is the primary beneficiary of a VIE by considering qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of its investment; the obligation or likelihood for the Company or other interests to provide financial support; consideration of the VIE’s purpose and design, including the risks the VIE was designed to create and pass through to its variable interest holders and the similarity with and significance to the business activities of the Company and the other interests. The Company reassesses its determination of whether it is the primary beneficiary of a VIE each reporting period. Significant judgments related to these determinations include estimates about the current and future fair value and performance of investments held by these VIEs and general market conditions.

The Company will evaluate its investments to determine whether they are a VIE. The Company analyzes new investments and financings, as well as reconsideration events for existing investments and financings, which vary depending on type of investment or financing.

Voting Interest Entities

A voting interest entity is an entity in which the total equity investment at risk is sufficient to enable it to finance its activities independently and the equity holders have the power to direct the activities of the entity that most significantly impact its economic performance, the obligation to absorb the losses of the entity and the right to receive the residual returns of the entity. The usual condition for a controlling financial interest in a voting interest entity is ownership of a majority voting interest. If the Company has a majority voting interest in a voting interest entity, the entity will generally be consolidated. The Company does not consolidate a voting interest entity if there are substantive participating rights by other parties and/or kick-out rights by a single party or through a simple majority vote.

The Company performs on-going reassessments of whether entities previously evaluated under the voting interest framework have become VIEs, based on certain events, and therefore subject to the VIE consolidation framework.

Non-controlling Interests

A non-controlling interest in a consolidated subsidiary is defined as the portion of the equity (net assets) in a subsidiary not attributable, directly or indirectly, to the Company. A non-controlling interest is required to be presented as a separate component of equity on the consolidated balance sheets and presented separately as net income (loss) and other comprehensive income (loss) (“OCI”) attributable to non-controlling interests. An allocation to a non-controlling interest may differ from the stated ownership percentage interest in such entity as a result of a preferred return and allocation formula, if any, as described in such governing documents.

Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that could affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates and assumptions.

Comprehensive Income (Loss)

The Company reports consolidated comprehensive income (loss) in separate statements following the consolidated statements of operations. Comprehensive income (loss) is defined as the change in equity resulting from net income (loss) and OCI. The components of OCI principally include the foreign currency translation adjustment, net.

Cash and Cash Equivalents

The Company considers all highly-liquid investments with an original maturity date of three months or less and deposits held with third parties that are readily convertible to cash to be cash equivalents. Cash, including amounts restricted at certain banks and financial institutions, may at times exceed insurable amounts. The Company seeks to mitigate credit risk by placing cash and cash equivalents with major financial institutions. To date, the Company has not experienced any losses on cash and cash equivalents. Cash and cash equivalents exclude escrow arrangements entered into for specific warranties in relation to the real estate sales which are recorded in other assets in the consolidated financial statements.

Restricted Cash

Restricted cash primarily consists of amounts related to operating real estate such as escrows for taxes, insurance, capital expenditures, tenant security deposits and payments required under certain lease agreements and amounts related to the Company’s borrowings.

Operating Real Estate

Operating real estate is carried at historical cost less accumulated depreciation. Ordinary repairs and maintenance are expensed as incurred. Major replacements and improvements which extend the life of the asset are capitalized and depreciated over their useful life. Operating real estate is depreciated using the straight-line method over the estimated useful lives of the assets.

The Company accounts for purchases of operating real estate using the acquisition method, where the purchase price is allocated to tangible assets such as land, building, tenant and land improvements and other identified intangibles, such as in-place leases, above/below-market leases and goodwill to the extent the acquisition is a business combination. Costs directly related to an acquisition deemed to be a business combination are expensed and included in transaction costs in the consolidated statements of operations.

Operating real estate is depreciated using the straight-line method over the estimated useful lives of the assets, summarized as follows:

Category:	Term:
Building	40 years
Building improvements	Lesser of the useful life or remaining life of the building
Building leasehold interests	Lesser of 40 years or remaining term of the lease
Tenant improvements	Lesser of the useful life or remaining term of the lease

Preferred Equity Investments

Preferred equity investments are generally intended to be held to maturity and, accordingly, are carried at cost, net of unamortized loan fees, premium, discount and unfunded commitments, if any. Preferred equity investments that are deemed to be impaired are carried at amortized cost less a loan loss reserve, if deemed appropriate, which approximates fair value. Preferred equity investments where the Company does not intend to hold the investment for the foreseeable future or until its expected payoff are classified as held for sale and recorded at the lower of cost or fair value.

Assets and Related Liabilities Held For Sale

Operating real estate which has met the criteria to be classified as held for sale is separately presented on the consolidated balance sheets. Such operating real estate is recorded at the lower of its carrying value or its estimated fair value less the cost to sell, net of the intangible assets associated with the asset, with any write-down to fair value less cost to sell recorded as an impairment loss. Once a property is determined to be held for sale, depreciation and amortization is no longer recorded. The Company records a gain or loss on sale of real estate when title is conveyed to the buyer and the Company has no substantial economic involvement with the property. If the sales criteria for the full accrual method are not met, the Company defers some or all of the gain or loss recognition by applying the finance, leasing, profit sharing, deposit, installment or cost recovery method, as appropriate, until the sales criteria are met.

Deferred Costs

Deferred costs primarily include deferred financing costs and deferred lease costs. Deferred financing costs represent commitment fees, legal and other third-party costs associated with obtaining financing. Costs related to revolving credit facilities are recorded in other assets and are amortized to interest expense using the straight-line basis over the term of the facility. Costs related to other borrowings are recorded net against the carrying value of such borrowings and are amortized into interest expense using the effective interest method or straight-line method depending on the type of financing. Unamortized deferred financing costs are expensed when the associated borrowing is repaid before maturity to realized gain (loss) on sales and other. Costs incurred in seeking financing transactions, which do not close, are expensed in the period in which it is determined that the financing will not occur. Deferred lease costs consist of fees incurred to initiate and renew operating leases, which are amortized on a straight-line basis over the remaining lease term and are recorded to depreciation and amortization in the consolidated statements of operations.

Intangible Assets and Intangible Liabilities

The Company records acquired identified intangibles, which includes intangible assets (such as value of the above-market leases, in-place leases, below-market ground leases, goodwill and other intangibles) and intangible liabilities (such as the value of below-market leases), based on estimated fair value. The value allocated to the above or below-market leases is amortized net to rental income, the value of below-market ground leases is amortized into properties - operating expense and in-place leases is amortized into depreciation and amortization expense, respectively, in the consolidated statements of operations on a straight-line basis over the respective remaining lease term.

Goodwill represents the excess of the purchase price over the fair value of net tangible and intangible assets acquired in a business combination and is not amortized. The Company analyzes goodwill for impairment on an annual basis and whenever events or changes in circumstances indicate that the carrying value of goodwill may not be fully recoverable. The Company assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit, related to such goodwill, is less than the carrying amount. If the carrying amount exceeds fair value an impairment is recorded for the difference.

The following table presents identified intangibles as of March 31, 2018 and December 31, 2017 (dollars in thousands):

	March 31, 2018 (Unaudited)							December 31, 2017
	Gross Amount		Accumulated Amortization			Net		Gross Amount		Accumulated Amortization			Net
Intangible assets:
In-place lease	$	66,787	$	(28,097	)	$	38,690	$	64,427	$	(24,290	)	$	40,137
Above-market lease	36,145		(11,469		)	24,676		34,882		(9,919		)	24,963
Below-market ground lease	36,801		(1,754		)	35,047		34,497		(1,109		)	33,388
Goodwill(1)	16,145		N/A			16,145		15,697		N/A			15,697
Total	$	155,878	$	(41,320	)	$	114,558	$	149,503	$	(35,318	)	$	114,185
Intangible liabilities:
Below-market lease	$	34,244	$	(11,029	)	$	23,215	$	32,267	$	(8,964	)	$	23,303
Above-market ground lease	5,670		(208		)	5,462		5,513		(184		)	5,329
Total	$	39,914	$	(11,237	)	$	28,677	$	37,780	$	(9,148	)	$	28,632

_____________________________

(1) Represents goodwill associated with certain acquisitions in exchange for shares in the underlying portfolios. The goodwill and a corresponding deferred tax liability was recorded at acquisition based on tax basis differences.

Other Assets and Other Liabilities

The following tables present a summary of other assets and other liabilities as of March 31, 2018 and December 31, 2017 (dollars in thousands):

	March 31, 2018 (Unaudited)		December 31, 2017
Other assets:
Prepaid expenses	$	4,246	$	1,936
Deferred leasing and other costs, net	6,756		6,019
Deferred tax assets, net	435		—
Straight-line rent, net	13,939		10,969
Escrow receivable	3,209		3,286
Other	711		905
Total	$	29,296	$	23,115
	March 31, 2018 (Unaudited)		December 31, 2017
Other liabilities:
Deferred tax liabilities	$	8,837	$	8,548
Prepaid rent received and unearned revenue	13,290		8,406
Tenant security deposits	4,482		4,435
Prepaid escalation and other income	2,143		3,982
Other	509		386
Total	$	29,261	$	25,757

Revenue Recognition

Operating Real Estate

Rental and escalation income from operating real estate is derived from leasing of space to various types of tenants. Rental revenue recognition commences when the tenant takes possession of the leased space and the leased space is substantially ready for its intended use. The leases are for fixed terms of varying length and generally provide for annual rentals, subject to indexation, and expense reimbursements to be paid in quarterly or monthly installments. Rental income from leases is recognized on a straight-line basis over the term of the respective leases. The excess of rents recognized over amounts contractually due pursuant to the underlying leases are included in other assets, net on the consolidated balance sheets. The Company amortizes any tenant inducements as a reduction of revenue utilizing the straight-line method over the term of the lease. Escalation income represents revenue from tenant leases which provide for the recovery of all or a portion of the operating expenses and real estate taxes paid by the Company on behalf of the respective property. This revenue is accrued in the same period as the expenses are incurred.

In a situation in which a lease or leases associated with a significant tenant have been, or are expected to be, terminated early, the Company evaluates the remaining useful life of depreciable or amortizable assets in the asset group related to the lease that will be terminated (i.e., tenant improvements, above and below market lease intangibles, in-place lease value and leasing commissions). Based upon consideration of the facts and circumstances surrounding the termination, the Company may write-off or accelerate the depreciation and amortization associated with the asset group. Such amounts are included within depreciation and amortization in the consolidated statements of operations.

Preferred Equity Investments

Interest income is recognized on an accrual basis and any related premium, discount, origination costs and fees are amortized over the life of the investment using the effective interest method. The amortization is reflected as an adjustment to interest income in the consolidated statements of operations. The amortization of a premium or accretion of a discount is discontinued if such investment is reclassified to held for sale.

Impairment on Investments

Operating Real Estate

The Company’s real estate portfolio is reviewed on a quarterly basis, or more frequently as necessary, to assess whether there are any indicators that the value of its operating real estate may be impaired or that its carrying value may not be recoverable. A property’s value is considered impaired if the Company’s estimate of the aggregate expected future undiscounted cash flow to be generated by the property is less than the carrying value of the property. In conducting this review, the Company considers global macroeconomic factors, real estate sector conditions, together with investment specific and other factors. To the extent an impairment has occurred, the loss is measured as the excess of the carrying value of the property over the estimated fair value of the property and recorded in impairment losses in the consolidated statements of operations. For the three months endedMarch 31, 2018 and 2017, the Company did not recognize any impairment losses.

An allowance for a doubtful account for a tenant receivable is established based on a periodic review of aged receivables resulting from estimated losses due to the inability of a tenant to make required rent and other payments contractually due. Additionally, the Company establishes, on a current basis, an allowance for future tenant credit losses on unbilled rent receivable based on an evaluation of the collectability of such amounts.

Preferred Equity Investments

Preferred equity investments are considered impaired when, based on current information and events, it is probable that the Company will not be able to collect all principal and interest amounts due according to the contractual terms. The Company assesses the credit quality of the portfolio and adequacy of investment loss reserves on an annual basis or more frequently as necessary. Significant judgment of the Company is required in this analysis. The Company considers the estimated net recoverable value of the investment as well as other factors, including but not limited to the fair value of any collateral, the amount and the status of any senior debt, the quality and financial condition of the borrower and the competitive situation of the area where the underlying collateral is located. Because this determination is based on projections of future economic events, which are inherently subjective, the amount ultimately realized may differ materially from the carrying value as of the balance sheet date. If upon completion of the assessment, the estimated fair value of the underlying collateral is less than the net carrying value of the investment, an investment loss reserve is recorded with a corresponding charge to provision for investment losses. The investment loss reserve for each investment is maintained at a level that is determined to be adequate by management to absorb probable losses.

Income recognition is suspended for an investment when, in the opinion of the Company, a full recovery of income and principal becomes doubtful. When the ultimate collectability of the principal of an impaired investment is in doubt, all payments are applied to principal under the cost recovery method. When the ultimate collectability of the principal of an impaired investment is not in doubt, contractual interest is recorded as interest income when received, under the cash basis method until an accrual is resumed when the investment becomes contractually current and performance is demonstrated to be resumed. Interest accrued and not collected will be reversed against interest income. An investment is written off when it is no longer realizable and/or legally discharged. As of March 31, 2018, the Company did not have any impaired preferred equity investments.

Equity-Based Compensation

The Company accounts for equity-based compensation awards using the fair value method, which requires an estimate of fair value of the award. Awards may be based on a variety of measures such as time, performance, market or a combination thereof. For time-based awards, fair value is determined based on the stock price on the grant date. The Company recognizes compensation expense over the vesting period on a straight-line basis or the attribution method depending if the grant is to an employee or non-employee. For performance-based awards, fair value is determined based on the stock price at the date of grant and an estimate of the probable achievement of such measure. The Company recognizes compensation expense over the requisite service period, net of estimated forfeitures, using the accelerated attribution expense method. For market-based measures, fair value is determined using a Monte Carlo analysis under a risk-neutral premise using a risk-free interest rate. The Company recognizes compensation expense, over the requisite service period, net of estimated forfeitures, on a straight-line basis. For awards with a combination of performance or market measures, the Company estimates the fair value as if it were two separate awards. First, the Company estimates the probability of achieving the performance measure. If it is not probable the performance condition will be met, the Company records the compensation expense based on the fair value of the market measure, as described above. This expense is recorded even if the market-based measure is never met. If the performance-based measure is subsequently estimated to be achieved, the Company records compensation expense based on the performance-based measure. The Company would then record a cumulative catch-up adjustment for any additional compensation expense.

Equity-based compensation issued to non-employees is accounted for using the fair value of the award at the earlier of the performance commitment date or performance completion date. Time-based awards are remeasured every quarter based on the stock price as of the end of the reporting period until such awards vest, if any.

Derivatives

The Company seeks to use derivative instruments to manage exposure to interest rate risk and foreign currency exchange rate risk. The change in fair value for a derivative is recorded in unrealized gain (loss) on derivatives and other in the consolidated statements of operations.

The Company’s derivative instruments are recorded on the consolidated balance sheets at fair value and do not qualify as hedges under U.S. GAAP.

Foreign Currency

Assets and liabilities denominated in a foreign currency for which the functional currency is a foreign currency are translated using the currency exchange rate in effect at the end of the period presented and the results of operations for such entities are translated into U.S. dollars using the average currency exchange rate in effect during the period. The resulting foreign currency translation adjustment (“CTA”), net, is recorded as a component of accumulated OCI in the consolidated statements of equity. For the three months endedMarch 31, 2018 and 2017, the Company reclassified $0.3 million and $(0.4) million, respectively, of CTA to realized gain (loss) on sales and other in the consolidated statements of operations due to the sale of certain real estate assets (refer to Note 3).

Assets and liabilities denominated in a foreign currency for which the functional currency is the U.S. dollar are remeasured using the currency exchange rate in effect at the end of the period presented and the results of operations for such entities are remeasured into U.S. dollars using the average currency exchange rate in effect during the period. The resulting foreign currency remeasurement adjustment is recorded in unrealized gain (loss) on derivatives and other in the consolidated statements of operations.

Earnings Per Share

The Company’s basic earnings per share (“EPS”) is calculated by dividing net income (loss) attributable to common stockholders by the weighted average number of common stock outstanding. Diluted EPS includes restricted stock and the potential dilution that could occur if outstanding restricted stock units (“RSUs”) or other contracts to issue common stock, assuming performance hurdles have been met, were converted to common stock (including limited partnership interests in the Operating Partnership owned by holders other than the Company (“Common Units”) and Common Units which are structured as profits interests (“LTIP Units” collectively referred to as Unit Holders) (refer to Note 8), where such exercise or conversion would result in a lower EPS. The dilutive effect of such RSUs and Unit Holders is calculated assuming all units are converted to common stock.

Income Taxes

The Company has elected to be taxed as a REIT for U.S. federal income tax purposes with the initial filing of its 2015 U.S. federal tax return and will continue to comply with the related provisions of the Internal Revenue Code of 1986, as amended, the (“Internal Revenue Code”). Accordingly, the Company generally will not be subject to U.S. federal income tax to the extent of its distributions to stockholders and as long as certain asset, income and share ownership tests are met. To maintain its qualification as a REIT, the Company must annually distribute at least 90% of its REIT taxable income to its stockholders and meet certain other requirements. Under certain circumstances, federal income and excise taxes may be due on its undistributed taxable income. The Company distributes to its stockholders 100% of its taxable income and therefore no provision for U.S. federal income taxes has been included in the accompanying consolidated financial statements for the three months endedMarch 31, 2018 and 2017.

The Company conducts its business through foreign subsidiaries which may be subject to local level income tax in the European jurisdictions it operates. The Company has also elected taxable REIT subsidiary (“TRS”) status on certain subsidiaries. This enables the Company to provide services that would otherwise be considered impermissible for REITs and participate in activities that do not qualify as “rents from real property.” The TRS that is not resident in the U.S. (“foreign TRS”) and, as such, not subject to U.S. taxation but is subject to foreign income taxes only. In addition, the REIT will not generally be subject to any additional U.S. taxes on the repatriation of foreign TRS earnings.

For the Company’s foreign subsidiaries, including the Company’s foreign TRS, deferred tax assets and liabilities are established for temporary differences between the financial reporting basis and the foreign tax basis of assets and liabilities at the enacted tax rates expected to be in effect when the temporary differences reverse. The Company evaluates the realizability of its deferred tax assets (e.g. net operating loss) and recognizes a valuation allowance if, based on the available evidence, it is more likely than not that some portion or all of its deferred tax assets will not be realized. When evaluating the realizability of its deferred tax assets, the Company considers estimates of expected future taxable income, existing and projected book/tax differences, tax planning strategies available and the general and industry specific economic outlook. This realizability analysis is inherently subjective, as it requires the Company to forecast its business and general economic environment in future periods. Due to past and projected losses in certain local jurisdictions where the Company does not have carryback potential and/or cannot sufficiently forecast future taxable income, the Company recognized net cumulative valuation allowances against the Company’s deferred tax assets. The Company will continue to review its deferred tax assets in accordance with U.S. GAAP. The Company recorded an income tax expense of $0.1 million for the three months ended March 31, 2018 and an income tax benefit of $0.3 million for the three months ended March 31, 2017.

Recent Accounting Pronouncements: Accounting Standards Adopted in 2018

Revenue Recognition - In May 2014, FASB issued an accounting update (ASU No. 2014-09) requiring a company to recognize as revenue the amount of consideration it expects to be entitled to in connection with the transfer of promised goods or services to customers. The Company has adopted the standard on its required effective date of January 1, 2018 using the modified retrospective approach and has applied the guidance to contracts not yet completed as of the date of adoption. The new revenue standard specifically excludes revenue streams for which specific guidance is stipulated in other sections of the codification and therefore it will not impact rental income or interest income generated on financial instruments such as preferred equity investments. The Company is the lessor for triple net and gross leases classified as operating leases in which rental income and tenant reimbursements are recorded. The revenue from these leases are scoped out of the new revenue recognition guidance. All leases are accounted for under ASC 840 until the adoption of the new leasing guidance within ASC 842. There were no significant changes as a result of the new revenue recognition standard. In addition, the Company expects to adopt the practical expedient which allows lessors to consider lease and non-lease components as a single performance obligation to the extent that the timing and pattern of transfer is the same and the lease is classified an operating lease.

Cash Flow Classification - In August 2016, the FASB issued guidance (ASU No. 2016-15) that makes eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. The new guidance requires adoption on a retrospective basis unless it is impracticable to apply, in which case the Company would be required to apply the amendments prospectively as of the earliest date practicable. The Company has adopted this guidance on January 1, 2018 and it did not have a material impact on its consolidated financial statements and related disclosures.

Restricted Cash - In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows: Restricted Cash,which requires that cash and cash equivalent balances in the statement of cash flows include restricted cash and restricted cash equivalent amounts, and therefore, changes in restricted cash and restricted cash equivalents be presented in the statement of cash flows. This will eliminate the presentation of transfers between cash and cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. When cash, cash equivalents, restricted cash and restricted cash equivalents are presented in more than one line item of the balance sheet, this ASU requires disclosure of a reconciliation between the totals in the statement of cash flows and the related captions on the balance sheet. The new guidance also requires disclosure of the nature of the restricted cash and restricted cash equivalents, similar to the existing requirements under Regulation S-X, however, it does not define restricted cash and restricted cash equivalents. The Company adopted this guidance on January 1, 2018 and the required retrospective application of this new standard resulted in changes to the previously reported statement of cash flows as follows (dollars in thousands):

	As of March 31, 2017
Cash flow provided by (used in):	As Previously Reported			After Adoption of ASU 2016-18
Operating activities	$	5,707		$	4,388
Investing activities	20,582			20,582
Financing activities	(18,606		)	(18,606		)

Business Combination - In January 2017, the FASB issued guidance (ASU No. 2017-01) to clarify the definition of a business under ASC 805. This new standard clarifies the definition of a business and provides a screen to determine when an integrated set of assets and activities is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. The Company expects that acquisitions of real estate or in-substance real estate will not meet the revised definition of a business because substantially all of the fair value is concentrated in a single identifiable asset or group of similar identifiable assets (i.e. land, buildings, and related intangible assets). A significant difference between the accounting for an asset acquisition and a business combination is that transaction costs are capitalized for an asset acquisition, rather than expensed for a business combination. The Company adopted the standard on its required effective date of January 1, 2018. This guidance did not have a material impact on its consolidated financial statements and related disclosures.

Derecognition and Partial Sales of Nonfinancial Assets - In February 2017, the FASB issued an accounting update (ASU No. 2017-05) which clarifies the scope of recently established guidance on nonfinancial asset derecognition, which applies to the derecognition of all nonfinancial assets and in-substance nonfinancial assets.  In addition, the guidance clarifies the accounting for partial sales of nonfinancial assets and in-substance nonfinancial assets to align with the new revenue recognition standard to be more consistent with the accounting for sale of a business. Specifically, in a partial sale to a noncustomer, when a noncontrolling interest is received or retained, the latter is considered a noncash consideration and measured at fair value, which would result in full gain or loss recognized upon sale. The Company has adopted this guidance on January 1, 2018 and it did not have a material impact on its consolidated financial statements and related disclosures as there were no such sales for the three months ended March 31, 2018.

Goodwill Impairment - In January 2017, the FASB issued guidance (ASU No. 2017-04) which removes Step 2 from the goodwill impairment test. The Company has adopted this guidance on January 1, 2018 and it did not have a material impact on its consolidated financial statements and related disclosures.

Share-based Payments - In May 2017, the FASB issued guidance (ASU No. 2017-09) clarifying when to account for a change to the terms or conditions of a share-based payment award as a modification. The Company has adopted this guidance on January 1, 2018 and it did not have a material impact on its consolidated financial statements and related disclosures.

Recent Accounting Pronouncements: Future Application of Accounting Standards

Leases - In February 2016, the FASB issued an accounting update (ASU No. 2016-02) which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The update requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The update is expected to result in the recognition of a right-to-use asset and related liability to account for the Company’s future obligations under its ground lease arrangements for which it is the lessee. The update will require that lessees and lessors capitalize, as initial direct costs, only those costs that are incurred due to the execution of a lease. Under this guidance, allocated payroll costs and other costs that are incurred regardless of whether the lease is obtained will no longer be capitalized as initial direct costs and instead will be expensed as incurred. Lessors will continue to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. The Company expects to adopt the package of practical expedients under the guidance and the Company will not need to reassess whether any expired or expiring contracts contain leases; will not need to revisit lease classification for any expired or expiring leases; and will not need to reassess initial direct costs for any existing leases. In addition, the Company expects to adopt the practical expedient which allows lessors to consider lease and non-lease components as a single performance obligation to the extent that the timing and pattern of transfer is the same and the lease is classified an operating lease. As of March 31, 2018, the Company has two ground lease agreements with annual payments of $0.7 million. The new guidance is to be applied using a modified retrospective approach at the beginning of the earliest comparative period in the financial statements and is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is evaluating the impact, if any, that this guidance will have on its consolidated financial position, results of operations and financial statement disclosures.

Financial Instruments - In June 2016, the FASB issued guidance (ASU No. 2016-13) that changes the impairment model for most financial instruments by requiring companies to recognize an allowance for expected losses, rather than incurred losses as required currently by the other-than-temporary impairment model. The guidance will apply to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt securities, net investments in leases and off-balance-sheet credit exposures (e.g., loan commitments). The new guidance is effective for reporting periods beginning after December 15, 2019 and will be applied as a cumulative adjustment to retained earnings as of the effective date. The Company continues to assess the potential effect the adoption of this guidance will have on its consolidated financial statements and related disclosures.

XML

Operating Real Estate

3 Months Ended

Mar. 31, 2018

Real Estate [Abstract]

Operating Real Estate

Operating Real Estate

The following table presents operating real estate, net as of March 31, 2018 and December 31, 2017 (dollars in thousands):

	March 31, 2018 (Unaudited)			December 31, 2017
Land	$	405,248		$	393,691
Buildings and improvements	983,350			954,314
Building, leasehold interests and improvements	204,131			195,929
Furniture, fixtures and equipment	1,774			1,653
Tenant improvements	64,120			61,303
Operating real estate, gross	1,658,623			1,606,890
Less: accumulated depreciation	(107,538		)	(95,356		)
Operating real estate, net	$	1,551,085		$	1,511,534

Real Estate Held for Sale

The following table summarizes the Company’s operating real estate held for sale as of March 31, 2018 (dollars in thousands):

			Assets(1)(2)								Liabilities(1)(2)
Location	Type	Properties	Operating Real Estate, Net		Intangible Assets, Net		Other Assets		Total		Intangible Liabilities, Net		Other Liabilities		Total
Lisbon, Portugal	Office	1	$	12,250	$	64	$	1,175	$	13,489	$	—	$	355	$	355
Rotterdam, Netherlands(3)	Office	1	152,988		5,217		4,394		162,599		667		—		667
Total		2	$	165,238	$	5,281	$	5,569	$	176,088	$	667	$	355	$	1,022

_____________________________

(1) The assets and liabilities classified as held for sale are expected to be sold on the open market as an asset sale for the asset in Rotterdam and as a share sale for the asset in Lisbon subject to standard industry terms and conditions. The assets together contributed $3.5 million and $3.6 million of revenue and $(0.1) million and $(1.3) million of income (loss) before income tax benefit (expense) for the three months endedMarch 31, 2018 and 2017, respectively.

(2) Represents operating real estate and intangible assets, net of accumulated depreciation and amortization of $20.3 million prior to being reclassified into held for sale.

(3) In April 2018, the Company completed the sale of the Maastoren property in Rotterdam, our largest non-core asset, for approximately $195 million.

Real Estate Sales

During the first quarter 2018, the Company did not sell any properties. During the first quarter 2017, the Company sold one non-core asset for $20.6 million and received $19.9 million of proceeds, net of sales costs. In connection with this sale, for the three months ended March 31, 2017, the Company recorded a $3.4 million realized gain in the Company’s consolidated statements of operations.

Certain escrow accounts are not held by the Company and are expected to be released within the next 12 months and to the extent this cash has not been released to purchasers to satisfy claims, the Company will recognize an additional gain on the sale at the earlier of the time of the cash receipt or when collection can be reasonably assured. As of March 31, 2018, there were $1.2 million in certain escrow accounts that were not held by the Company which the Company could potentially record as a realized gain. The Company recorded a realized gain of $0.6 million and $1.7 million for the three months ended March 31, 2018 and 2017, respectively, related to the release of an escrow account from a prior disposal.

XML

Preferred Equity Investments

3 Months Ended

Mar. 31, 2018

Mortgage Loans on Real Estate [Abstract]

Preferred Equity Investments

Preferred Equity Investments

In May 2017, the Company partnered with a property developer in China to acquire 20 Gresham Street, a Class A office building in London, United Kingdom and the Company invested $36.8 million (£26.2 million) of preferred equity, which the Company accounts for as a debt investment.

The following table presents one preferred equity investment as of March 31, 2018 (dollars in thousands):

	March 31, 2018
Asset Type	Principal Amount		Carrying Value		Fixed Rate		Mandatory Redemption
Preferred equity investment	$	36,770	$	36,770	8.00	%	May 2020

Credit Quality Monitoring

The Company’s preferred equity investment is secured by interests in entities that directly own real estate properties, which serve as the primary source of cash for the payment of principal and interest. The Company evaluates its preferred equity investment at least quarterly and determines the relative credit quality principally based on: (i) whether the borrower is currently paying debt service in accordance with its contractual terms; and (ii) whether the Company believes the borrower will be able to perform under its contractual terms in the future, as well as the Company’s expectations as to the ultimate recovery of principal at maturity. The Company categorizes a preferred equity investment for which it expects to receive full payment of contractual principal and interest payments as “performing.” The Company will categorize a weaker credit quality preferred equity investment that is currently performing, but for which it believes future collection of all or some portion of principal and interest is in doubt, into a category called “performing with a loan loss reserve.” The Company will categorize a weaker credit quality preferred equity investment that is not performing, which the Company defines as a loan in maturity default and/or past due on its contractual debt service payments and deemed not to be collectible, as a non-performing loan (“NPL”).

As of March 31, 2018, the Company’s preferred equity investment was performing in accordance with the contractual terms of its governing documents, in all material respects, and was categorized as a performing loan. For the three months endedMarch 31, 2018, the preferred equity investment contributed all interest income recorded on the consolidated statement of operations.

XML

Borrowings

3 Months Ended

Mar. 31, 2018

Debt Disclosure [Abstract]

Borrowings

Borrowings

The following table presents borrowings as of March 31, 2018 and December 31, 2017 (dollars in thousands):

			March 31, 2018 (Unaudited)				December 31, 2017
	Final Maturity	Contractual Interest Rate(2)	Principal Amount		Carrying Value		Principal Amount		Carrying Value
Mortgage and other notes payable:(1)
Trias Portfolio 1(3)(5)	Apr-20	EURIBOR + 2.70%	$	10,674	$	10,437	$	10,378	$	10,116
Trias Portfolio 2(3)(5)(7)	Dec-20	EURIBOR + 1.55%	94,188		93,552		91,577		90,880
Trias Portfolio 3(3)(5)	Apr-20	EURIBOR + 1.65%	46,092		45,069		44,814		43,684
Trias Portfolio 4(3)(5)	Apr-20	GBP LIBOR + 2.70%	18,023		17,816		17,326		17,123
SEB Portfolio 1(5)	Jul-24	EURIBOR + 1.55%(8)	326,365		322,275		317,317		313,153
SEB Portfolio 2(5)	Jul-24	GBP LIBOR + 1.55%(8)	260,924		258,022		250,825		247,902
SEB Portfolio - Preferred(4)	Apr-60	2.30%	105,484		105,204		102,560		102,271
Trianon Tower(5)	Jul-23	EURIBOR + 1.30%	406,567		405,059		395,294		393,763
Other - Preferred(6)	Oct-45	1.00%	4,681		4,681		4,551		4,551
Total mortgage and other notes payable			$	1,272,998	$	1,262,115	$	1,234,642	$	1,223,443

_____________________________

(1) All mortgage notes and other notes payable are denominated in local currencies, and as such, the principal amount generally increased from 2017 to 2018 due to the change in the Euro or U.K. Pound Sterling compared to the U.S. dollar. All borrowings are non-recourse and are interest-only through maturity, subject to compliance with covenants of the respective borrowing, and denominated in the same currency as the assets securing the borrowing.

(2) All floating rate debt is subject to interest rate caps of 0.5% for EURIBOR and 2.0% for GBP LIBOR which are used to manage interest rate exposure.

(3) Trias Portfolio represents the cross-collateralized borrowings among the IVG Portfolio, Internos Portfolio and Deka Portfolio.

(4) Represents preferred equity certificates with a contractual interest rate of 2.3% through May 2019, which increases to EURIBOR plus 12.0% through May 2022 and subsequently to EURIBOR plus 15.0% through final maturity. Certain prepayments prior to May 2019 are subject to the payment of the unpaid coupon on outstanding principal amount through May 2019.

(5) Prepayment provisions include a fee based on principal amount ranging from 0.25% to 1.0% through December 2019 for the Trias Portfolio borrowings and 1.0% to 2.0% through July 2020 for the SEB Portfolio borrowings and 0.60% through June 30, 2018 and 0.30% through June 30, 2019 for Trianon Tower borrowings.

(6) Represents preferred equity certificates each with a fixed contractual interest rate of 1.0% per annum plus variable interest based on specified income levels associated with the German property companies of the Trias Portfolio which can be prepaid at any time without penalty through final maturity, which is thirty years from the issuance date.

(7) In June 2017, the Company amended and restated the agreement to increase the loan amount by $5.9 million and reduce future minimum capital expenditure spending requirements.

(8) In September 2017, the Company amended and restated the agreement to reduce the margin from 1.80% to 1.55% and extended the maturity date from April 1, 2022 to July 20, 2024.

The following table presents a reconciliation of principal amount to carrying value of the Company’s mortgage and other notes payable as of March 31, 2018 and December 31, 2017 (dollars in thousands):

	March 31, 2018 (Unaudited)			December 31, 2017
Principal amount	$	1,272,998		$	1,234,642
Deferred financing costs, net	(10,883		)	(11,199		)
Carrying value	$	1,262,115		$	1,223,443

The following table presents scheduled principal on borrowings, based on final maturity as of March 31, 2018 (dollars in thousands):

	Mortgage and Other Notes Payable
Remaining 2018	$	—
Years ending December 31:
2019	—
2020	168,977
2021	—
2022	—
2023	406,567
2024 and thereafter	697,454
Total	$	1,272,998

As of March 31, 2018 and December 31, 2017, the Company was in compliance with all of its financial covenants.

Credit Facility

In May 2016, the Company entered into a $75.0 million corporate revolving credit facility (the “Credit Facility”) with certain commercial bank lenders, with an initial one year term. The Credit Facility was secured by collateral relating to a borrowing base at that time and guarantees by certain subsidiaries of the Company. In October 2016, the Company permanently reduced the aggregate commitments under the Credit Facility to $35.0 million. In April 2017, the Company amended and restated the Credit Facility with aggregate commitments of $35.0 million and an initial two year term. The Credit Facility no longer contains a limitation on availability based on a borrowing base and the interest rate remains the same. The Credit Facility has an accordion feature, allowing the total facility to increase to $70 million. In March 2018, the Company amended the Credit Facility, increasing the size to $70 million and extending the term until April 2020 with one year extension option. The Credit Facility includes an accordion feature, providing for the ability to increase the facility to $105 million. As of March 31, 2018, there was no outstanding balance on the Credit Facility.

XML

Related Party Arrangements

3 Months Ended

Mar. 31, 2018

Related Party Transactions [Abstract]

Related Party Arrangements

Related Party Arrangements

Colony NorthStar, Inc.

The Company entered into a management agreement with an affiliate of the Manager in November 2015 (the “Original Management Agreement”). On November 9, 2017, the Company entered into an Amended and Restated Management Agreement with an affiliate of the Manager, effective as of January 1, 2018 (the “Amended and Restated Management Agreement”). As asset manager, the Manager is responsible for the Company’s day-to-day operations, subject to supervision and management of the Company’s board of directors (the “Board”). Through its global network of subsidiaries and branch offices, the Manager performs services and engages in activities relating to, among other things, investments and financing, portfolio management and other administrative services, such as accounting and investor relations, to the Company and its subsidiaries. The management agreement with the Manager provides for a base management fee, incentive fee and expense reimbursement.

Term: Renewals

The Amended and Restated Management Agreement provides for an initial term (beginning January 1, 2018) of five years (the “Initial Term”), with subsequent automatic renewals for additional three year terms, unless either party provides notice to the other party of its intention to decline to renew the agreement at least six months prior to the expiration of the then-current term. During the Initial Term, the Amended and Restated Management Agreement is terminable only for cause (as described in the Amended and Restated Management Agreement).

If the Company elects not to renew the Amended and Restated Management Agreement at the end of a term, it will be obligated to pay the Manager a termination fee (the “Termination Fee”) equal to three times the amount of the base management fees earned by the Manager over the four most recent quarters immediately preceding the non-renewal. In addition, if at any time after the Initial Term, the Company undergoes a “change of control” (as described in the Amended and Restated Management Agreement), the Company may elect to terminate the agreement but upon any such termination it will be obligated to pay the Termination Fee to the Manager.

Assignment

The Amended and Restated Management Agreement provides that in the event of a change of control of the Manager or other event that could be deemed an assignment of the Amended and Restated Management Agreement, the Company will consider such assignment in good faith and not unreasonably withhold, condition or delay the Company’s consent. The Amended and Restated Management Agreement further provides that the Company anticipates consent would be granted for an assignment or deemed assignment to a party with expertise in commercial real estate and over $10 billion of assets under management. The Amended and Restated Management Agreement also provides that, notwithstanding anything in the agreement to the contrary, to the maximum extent permitted by applicable law, rules and regulations, in connection with any merger, sale of all or substantially all of the assets, change of control, reorganization, consolidation or any similar transaction by the Company or the Manager, directly or indirectly, the surviving entity will succeed to the terms of the Amended and Restated Management Agreement.

Base Management Fee

Pursuant to the Amended and Restated Management Agreement, beginning January 1, 2018, the Company is obligated to pay quarterly, in arrears, in cash, the Manager a base management fee per annum equal to:

• 1.50% of the Company’s reported EPRA NAV (as described in the Amended and Restated Management Agreement) for EPRA NAV amounts up to and including $2.0 billion; plus

• 1.25% of the Company’s reported EPRA NAV on any EPRA NAV amount exceeding $2.0 billion.

EPRA NAV is based on a U.S. GAAP balance sheet adjusted based on the Company’s interpretation of the European Public Real Estate Association (“EPRA”) guidelines, and similar as prior practices, including adjustments such as fair value of operating real estate, straight-line rent and deferred taxes and additional adjustments to be determined by the Company in good faith based on any changes to U.S. GAAP, international accounting standards or EPRA guidelines. In calculating EPRA NAV, the liquidation preference of preferred securities outstanding shall not be included as a liability of the Company and shall not reduce EPRA NAV.

For the three months ended March 31, 2018, the Company incurred $4.2 million related to the base management fee.

Under the Original Management Agreement, for the three months ended March 31, 2017, the Company incurred $3.6 million, related to the base management fee. The Original Management Agreement base management fee to the Manager was calculated as 1.5% per annum of the sum of:

• any equity the Company issues in exchange or conversion of exchangeable or stock-settlable notes;

• any other issuances by the Company of common equity, preferred equity or other forms of equity, including but not limited to LTIP Units in the Operating Partnership (excluding units issued to the Company and equity-based compensation, but including issuances related to an acquisition, investment, joint venture or partnership); and

• cumulative cash available for distribution (“CAD”), if any, of the Company in excess of cumulative distributions paid on common stock, LTIP Units or other equity awards which began with the Company’s fiscal quarter ended March 31, 2016.

Incentive Fee

In addition to the base management fees, the Company is obligated to pay the Manager an incentive fee, if any (the “Incentive Fee”), with respect to each measurement period equal to twenty percent (20%) of: (i) the excess of (a) the Company’s Total Stockholder Return (as defined in the Amended and Restated Management Agreement, which includes stock price appreciation and dividends received and is subject to a high watermark price established when a prior incentive fee is realized) for the relevant measurement period above (b) a 10% cumulative annual hurdle rate, multiplied by (ii) the Company’s Weighted Average Shares (as defined in the Amended and Restated Management Agreement) during the measurement period. The first measurement period for the incentive fee will begin January 1, 2018 (based on an initial price of $13.67) and end on December 31 of the applicable calendar year and subsequent measurement periods will begin on January 1 of the subsequent calendar year. Subject to the conditions set forth in Section 4(d) of the Amended and Restated Management Agreement for common stock payments, the Company may elect to pay the Incentive Fee, if any, in cash or in shares of restricted common stock or shares of unrestricted common stock repurchased by the Company in the open market or a combination thereof. Any shares of common stock delivered by the Company will be subject to lock-up restrictions that will be released in equal one-third increments on each anniversary of the end of the measurement period with respect to which such incentive fee was earned. In calculating the value of the shares of the Company’s common stock paid in satisfaction of the Incentive Fee obligation, the shares of restricted common stock will be valued at the higher of: (i) the volume weighted average trading price per share for the ten consecutive trading days (as defined in the Amended and Restated Management Agreement) ending on the trading day prior to the date the payment is due and (ii) the Company’s EPRA NAV per share, based on the Company’s most recently published EPRA NAV and the Weighted Average Shares as of the end of the period with respect to which such EPRA NAV was published. For the three months ended March 31, 2018, the Company did not record an incentive fee.

Under the Original Management Agreement, for the three months ended March 31, 2017, the Company did not incur an incentive fee. The incentive fee under the Original Management Agreement was calculated and was payable quarterly in arrears in cash, equal to:

• the product of: (a) 15.0% and (b) the Company’s CAD before such incentive fee, divided by the weighted average shares outstanding for the calendar quarter, of any amount in excess of $0.30 per share and up to $0.36 per share; plus

• the product of: (a) 25.0% and (b) the Company’s CAD before such incentive fee, divided by the weighted average shares outstanding for the calendar quarter, of any amount in excess of $0.36 per share;

• multiplied by the Company’s Weighted Average Shares outstanding for the calendar quarter.

Weighted Average Shares represents the number of shares of the Company’s common stock, LTIP Units or other equity-based awards (with some exclusions), outstanding on a daily weighted average basis. With respect to the base management fee under the Original Management Agreement, all equity issuances are allocated on a daily weighted average basis during the fiscal quarter of issuance. With respect to the incentive fee under the Original Management Agreement, such amounts will be appropriately adjusted from time to time to take into account the effect of any stock split, reverse stock split, stock dividend, reclassification, recapitalization or other similar transaction.

Costs and Expenses

The Company is responsible to pay (or reimburse the Manager) for all of the Company’s direct, out of pocket costs and expenses of the Company as a stand alone company incurred by or on behalf of the Company and its subsidiaries, all of which must be reasonable, customary and documented. Internalized Service Costs (as defined below) are not intended to be covered costs and expenses under this provision and are subject to the limits described in the next paragraph.

The Company is obligated to reimburse the Manager for (i) all direct, reasonable, customary and documented costs and expenses incurred by the Manager for salaries, wages, bonuses, payroll taxes and employee benefits for personnel employed by the Manager: (a) who solely provide services to the Company which prior to January 1, 2018 were provided by unaffiliated third parties, including accounting and treasury services or (b) who were hired by the Manager after January 1, 2018 but who solely provide services to the Company in respect of one of the categories of services previously internalized pursuant to clause (a) and who were not hired in connection with any event which otherwise resulted in an increase to the Company’s net asset value (such costs and expenses set forth in clauses (i) and (ii), the “Internalized Service Costs”), plus (ii) 20% of the amount calculated under clause (i) to cover reasonable overhead charges with respect to such personnel, provided that the Company shall not be obligated to reimburse the Manager for such costs and expenses to the extent they exceed the following quarterly limits:

• 0.0375% of the Company’s aggregate gross asset value as of the end of the prior calendar quarter (excluding cash and cash equivalents and certain other exclusions) as calculated for purposes of determining EPRA NAV (“GAV”), for GAV amounts to and including $2.5 billion, plus

• 0.0313% of GAV amounts between $2.5 billion and $5.0 billion, plus

• 0.025% of GAV amounts exceeding $5.0 billion.

If the Manager’s actual Internalized Service Costs during any quarter exceed the quarterly limit described in the preceding paragraph (the cumulative excess amounts, if any, in respect of each quarter during a calendar year, the (“Quarterly Cap Excess Amount”), the Company is obligated to reimburse the Manager on an annual basis for an amount equal to the lesser of (i) the Quarterly Cap Excess Amount and (ii) the sum of the amounts, if any, determined for each quarter within such calendar year by which Internalized Services Costs in respect of such quarter were less than the quarterly limits described in the prior paragraph.

For the three months ended March 31, 2018, the Manager allocated $0.3 million of Internalized Service Costs to the Company which is recorded in general and administration expenses in the consolidation statements of operations.

Equity Based Compensation

In addition, the Company expects to make annual equity compensation grants to management of the Company and other employees of the Manager, provided that the aggregate annual grant amount, type and other terms of such equity compensation must be approved by the Company’s compensation committee. The Manager will have discretion in allocating the aggregate grant among the Company’s management and other employees of the Manager.

Under the Amended and Restated Management Agreement, beginning with the Company’s 2018 annual stockholders’ meeting, the Manager will have the right to nominate one director (who is expected to be one of the Company’s current directors employed by the Manager) to the Company’s board of directors.

Colony NorthStar Ownership Waiver and Voting Agreement

In connection with the entry into the Amended and Restated Management Agreement, the Company provided Colony NorthStar with an ownership waiver under the Company’s Articles of Amendment and Restatement, allowing Colony NorthStar to purchase up to 45% of the Company’s stock. The waiver provides that if the Amended and Restated Management Agreement is terminated, Colony NorthStar may not purchase any shares of the Company’s common stock to the extent Colony NorthStar owns (or would own as a result of such purchase) more than 9.8% of the Company’s capital stock. In connection with the waiver, Colony NorthStar also agreed that for all matters submitted to a vote of the Company’s stockholders, to the extent Colony NorthStar owns more than 25% of the Company’s common stock (such shares owned by Colony NorthStar in excess of the 25% threshold, the “Excess Shares”), it will vote the Excess Shares in the same proportion that the remaining shares of the Company not owned by Colony NorthStar or its affiliates are voted. If the Amended and Restated Management Agreement is terminated, then beginning on the third anniversary of such termination, the threshold described in the prior sentence will be reduced from 25% to 9.8%.

Manager Ownership of Common Stock

As of March 31, 2018, Colony NorthStar and its subsidiaries owned 5.6 million shares of the Company’s common stock, or approximately 10.3% of the total outstanding common stock.

XML

Compensation Expense

3 Months Ended

Mar. 31, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Compensation Expense

Compensation Expense

The following summarizes the equity-based compensation for the three months ended March 31, 2018 and 2017:

For the three months endedMarch 31, 2018 and 2017, the Company recorded $0.6 million and $15.9 million respectively, of equity-based compensation expense which is recorded in compensation expenses on the consolidated statements of operations. As of March 31, 2018, equity-based compensation expense to be recognized over the remaining vesting period through March 2021 is $7.6 million, provided there are no additional forfeitures.

2015 Omnibus Stock Incentive Plan

Pursuant to the NorthStar Realty Europe Corp. 2015 Omnibus Stock Incentive Plan (the “2015 Plan”), the Company may issue equity awards to directors, officers, employees, co-employees, consultants and advisors of the Company, the Manager or of any parent or subsidiary who provides services to the Company. The number of shares that may be issued under the 2015 Plan equals 10 million shares of common stock, plus on January 1, 2017 and each January 1 thereafter, an additional 2% of the number of shares of common stock issued and outstanding on the immediately preceding December 31. In addition, shares of common stock underlying any awards that are forfeited, canceled, held back upon exercise of a stock option or settlement of an award to cover the exercise price or tax withholding, reacquired by the Company prior to vesting, satisfied without the issuance of common stock or otherwise terminated (other than by exercise) will be added back to the shares of common stock available for issuance under the 2015 Plan. As of March 31, 2018, under the 2015 Plan, a total of 1.4 million shares of common stock had been issued (net of forfeitures and shares held back for tax withholding), 1.6 million shares were reserved for issuance pursuant to outstanding equity awards (including 0.4 million reserved for issuance upon conversion of outstanding LTIP Units and Common Units and 1.2 million reserved for issuance pursuant to the outstanding Absolute RSUs and Relative RSUs) and 9.2 million otherwise unreserved shares remained available for issuance.

All of the equity awards issued by the Company since the spin-off from NorthStar Realty on November 1, 2015 have been issued under the 2015 Plan. During the year ended December 31, 2017, the Company issued 500,642 restricted shares of common stock under the 2015 Plan to employees of the Manager or its subsidiaries in accordance with the terms of the management agreement described above in Note 6, of which 379,594 vested in connection with the Mergers.

In March 2016, as contemplated in connection with the Spin-off, the Company granted an aggregate of 995,698 restricted shares of common stock and 1,493,551 RSUs to employees of the Manager or one of its subsidiaries under the 2015 Plan. The restricted shares of common stock were subject to vesting over the approximately four year period ending December 31, 2019, subject to continued employment with the Manager or one of its subsidiaries and the RSUs were market-based awards subject to the achievement of performance-based vesting conditions and continued employment with the Manager or one of its subsidiaries. Approximately one-half of these RSUs are subject to the achievement of performance-based hurdles relating to the Company’s absolute total stockholder return and continued employment with the Manager or one of its subsidiaries over the approximately four year period from the grant date through December 31, 2019 (the “Absolute RSUs”). The other approximately one-half of these RSUs are subject to the achievement of performance-based hurdles based on the Company’s total stockholder return relative to the MSCI US REIT Index and continued employment with the Manager or one of its subsidiaries over the approximately four year period from the grant date through December 31, 2019 (the “Relative RSUs”). Award recipients may earn up to 100% of the Absolute RSUs that were granted and up to 125% of the Relative RSUs that were granted. Upon vesting pursuant to the terms of the Absolute RSUs and Relative RSUs, the RSUs that vest will be settled in shares of common stock and the recipients will be entitled to receive the distributions that would have been paid with respect to a share of common stock (for each share that vests) on or after the date the RSUs were initially granted. In accordance with their terms, all of these restricted shares of common stock that remained outstanding vested in connection with the Mergers. The Absolute and Relative RSUs were not affected by the Mergers and remain outstanding, subject to forfeitures occurring in connection with termination of employment with the Manager or one of its subsidiaries. During the three months ended March 31, 2018, 170,454 Absolute RSUs and 170,453 Relative RSUs that had previously been granted to key employees of the Manager who are no longer providing services to the Company were forfeited. Subsequent to March 31, 2018, in order to assist in the retention of employees of the Manager who are continuing to provide services to the Company, the Company’s compensation committee utilized 300,000 of these forfeited RSUs to make retention grants consisting of 150,000 restricted shares of common stock that are subject to vesting based on continued service and established a retention pool consisting of an additional 150,000 shares of common stock or RSUs that will be allocated prior to May 2019 to employees of the Manager who are providing services to the Company as designated by the compensation committee, in its discretion.  

In March 2018, as contemplated by the Amended and Restated Management Agreement, the Company established an annual equity compensation pool under the 2015 Plan to be allocated among members of management of the Company and other employees of the Manager consisting of an aggregate of 198,000 restricted shares of common stock and 132,000 performance based RSUs. This annual equity compensation pool was then allocated to individual award recipients by the Manager, and individual grants were made. The restricted shares of common stock are subject to vesting in approximately equal annual installments over the three-year period ending March 1, 2021, subject to the Manager continuing to serve as our manager and the recipient’s continued employment with the Manager or Colony NorthStar or one of its subsidiaries. The RSUs are market-based awards subject to the achievement of performance-based vesting conditions. Approximately one-half of these RSUs are subject to the achievement of performance-based hurdles relating to the Company’s absolute total stockholder return over the three-year period from the grant date through February 28, 2021 (the “2018 Absolute RSUs”). The other approximately one-half of these RSUs are subject to the achievement of performance-based hurdles based on the Company’s total stockholder return relative to the MSCI US REIT Index over the three-year period from the grant date through February 28, 2021 (the “2018 Relative RSUs”). Award recipients may earn up to 200% of the 2018 Absolute RSUs and Relative RSUs that were granted. Vesting of the 2018 Absolute and Relative RSUs are also subject to the Manager continuing to serve as our manager and the recipient’s continued employment with the Manager or Colony NorthStar or one of its subsidiaries through the end of the performance period. The RSUs that vest will be settled in shares of common stock and the recipients will be entitled to receive the distributions that would have been paid with respect to a share of common stock (for each share that vests) on or after the date the RSUs were initially granted.

Pre-Spin-off NorthStar Realty Equity Awards

In addition to equity awards issued under the 2015 Plan, the Company also had equity subject to outstanding equity-based awards granted by NorthStar Realty prior to the Spin-Off. In connection with the Spin-Off, holders of shares of common stock of NorthStar Realty and LTIP units of NorthStar Realty’s operating partnership subject to outstanding equity awards received one share of the Company’s common stock or one Common Unit in the Operating Partnership, respectively, for every six shares of common stock of NorthStar Realty or LTIP units of NorthStar Realty’s operating partnership held. Other equity and equity-based awards relating to NorthStar Realty’s common stock, such as RSUs, were adjusted to also relate to one-sixth of a share of the Company’s common stock, but otherwise generally remained subject to the same vesting and other terms that applied prior to the Spin-off. Performance-based vesting conditions based on total stockholder return of NorthStar Realty or NorthStar Realty and NSAM were adjusted to refer to combined total stockholder return of NorthStar Realty and the Company or NorthStar Realty, NSAM and the Company, respectively, with respect to periods after the Spin-Off and references to a change of control or similar term in outstanding awards, which referred to a change of control of either NorthStar Realty or NSAM, were adjusted, to the extent such awards relate to common stock of the Company or Common Units in the Operating Partnership, to refer to a change of control of either the Company or NSAM.

Following the Spin-off, NorthStar Realty and the compensation committee of its Board continued to administer all awards granted by NorthStar Realty prior to the Spin-off, but the Company was obligated to issue shares of the Company’s common stock or other equity awards of its subsidiaries or make cash payments in lieu thereof or with respect to dividend or distribution equivalent obligations to the extent required by these awards. These awards continued to be governed by the NorthStar Realty equity plans, as applicable, and shares of the Company’s common stock issued pursuant to these awards were not be issued pursuant to, and did not reduce availability under, the 2015 Plan. In connection with the Mergers, all of these outstanding equity-based awards vested or were forfeited.

The following table presents activity related to the issuance, vesting, redemption, conversion and forfeitures of restricted stock, Common Units and performance RSUs. The balance as of March 31, 2018 represents vested Common Units and unvested restricted stock and performance RSUs (grants in thousands):

	Three Months Ended March 31, 2018
	Restricted Stock(1)	Common Units		Performance RSUs(2)		Total Grants		Weighted Average Grant Price
December 31, 2017	121	420		1,453		1,994		$	11.95
Granted	198	—		132		330		12.65
Redeemed	—	(43	)	—		(43	)	12.67
Converted	—	(23	)	—		(23	)	11.92
Forfeited	—	—		(341	)	(341	)	12.60
March 31, 2018 (Unaudited)	319	354		1,244		1,917		$	11.94

_____________________________

(1) Represents restricted stock included in common stock.

(2) As of March 31, 2018, represented outstanding Absolute and Relative RSUs.

XML

Stockholders' Equity

3 Months Ended

Mar. 31, 2018

Equity [Abstract]

Stockholders' Equity

Stockholders’ Equity

Share Repurchase

In March 2018, the Company’s board of directors authorized the repurchase of up to $100 million of its outstanding common stock. The authorization expires in March 2019, unless otherwise extended by the Company’s board of directors.

The following table presents the number of share repurchased by the Company, the average price paid per share and the gross amount paid for the repurchased shares for the three months endedMarch 31, 2018 and the period subsequent to quarter end, from April 1, 2018 through May 7, 2018 (dollars and shares in thousands, except per share data):

Period	Shares	Average Price Paid per Share		Gross
January 1 - March 31 (1)	1,051	$	12.70	$	13,350
April 1 - May 7	2,383	13.81		32,918
Total	3,434	$	13.47	$	46,268

_____________________________

(1) The authorization for the repurchases was approved by the Company’s board of directors in March 2018. For the three months ended March 31, 2017, the Company did not repurchase any shares of its common stock.

Dividends

The following table presents dividends declared (on a per share basis) with respect to the three months endedMarch 31, 2018 and 2017:

Common Stock
Declaration Date	Dividend Per Share
2018
May 7	$	0.15
2017
May 1	$	0.15

Earnings Per Share

The following table presents EPS for the three months endedMarch 31, 2018 and 2017 (dollars and shares in thousands, except per share data):

	Three Months Ended March 31,
	2018			2017
Numerator:
Net income (loss) attributable to NorthStar Realty Europe Corp. common stockholders	$	(1,281	)	$	(15,350	)
Net income (loss) attributable to Unit Holders non-controlling interest	(15		)	(193		)
Net income (loss) attributable to common stockholders and Unit Holders(1)	$	(1,296	)	$	(15,543	)
Denominator:(2)
Weighted average shares of common stock	55,193			54,832
Weighted average Unit Holders(1)	411			673
Weighted average shares of common stock and Unit Holders(2)	55,604			55,505
Earnings (loss) per share:
Basic	$	(0.02	)	$	(0.28	)
Diluted	$	(0.02	)	$	(0.28	)

_____________________________

(1) The EPS calculation takes into account Unit Holders, which receive non-forfeitable dividends from the date of grant, share equally in the Company’s net income (loss) and convert on a one-for-one basis into common stock.

(2) Excludes the effect of restricted stock and RSUs outstanding that were not dilutive as of March 31, 2018. These instruments could potentially impact diluted EPS in future periods, depending on changes in the Company’s stock price and other factors.

XML

Non-controlling Interests

3 Months Ended

Mar. 31, 2018

Noncontrolling Interest [Abstract]

Non-controlling Interests

Non-controlling Interests

Operating Partnership

Non-controlling interests include the aggregate Unit Holders’ interest in the Operating Partnership. Net income (loss) attributable to the non-controlling interest is based on the weighted average Unit Holders’ ownership percentage of the Operating Partnership for the respective period. The issuance of additional common stock, Common Units or LTIP Units changes the percentage ownership of both the Unit Holders and the Company. Since a Common Unit or LTIP Unit is generally redeemable for cash or common stock at the option of the Company, it is deemed to be equivalent to common stock. Therefore, such transactions are treated as capital transactions and result in an allocation between stockholders’ equity and non-controlling interests on the accompanying consolidated balance sheets to account for the change in the ownership of the underlying equity in the Operating Partnership. On a quarterly basis, the carrying value of such non-controlling interest is reallocated based on the number of Unit Holders in total in proportion to the number of Units Holders plus the number of shares of common stock outstanding. As of March 31, 2018 and December 31, 2017, the Company allocated an immaterial amount and $1.8 million, respectively, from stockholders’ equity to non-controlling interest on the consolidated balance sheets and consolidated statement of equity.

As of March 31, 2018, 353,817 Common Units and LTIP Units were outstanding, representing a 0.7% ownership and non-controlling interest in the Operating Partnership. Net income (loss) attributable to the Operating Partnership non-controlling interest for the three months endedMarch 31, 2018 and 2017 was a net loss of an immaterial amount and $0.2 million, respectively.

Redeemable Non-controlling Interest

In connection with the acquisition of the Trianon Tower in July 2015, the Company sold a 5.5% non-controlling interest in certain subsidiaries that own the Trianon Tower for $1.5 million. In conjunction with the sale, the Company entered into a put option whereby the holder may redeem its interest for cash at the greater of fair market value of such non-controlling interest or €2.1 million beginning in November 2020 through January 2021. The Company recorded the non-controlling interest at its acquisition date fair value as temporary equity due to the redemption option. The carrying amount of redeemable noncontrolling interests is adjusted to its redemption value at the end of each reporting period, but no less than its initial carrying value, with such adjustments recognized in additional paid-in capital.

XML

Risk Management and Derivative Activities

3 Months Ended

Mar. 31, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Risk Management and Derivative Activities

Risk Management and Derivative Activities

Derivatives

The Company uses derivative instruments primarily to manage interest rate and currency risk and such derivatives are not considered speculative. These derivative instruments are in the form of interest cap agreements where the primary objective is to minimize interest rate risks associated with investment and financing activities and foreign currency forward agreements where the primary objective is to minimize foreign currency exchange rate risks associated with operating activities. The counterparties of these arrangements are major financial institutions with which the Company may also have other financial relationships. The Company is exposed to credit risk in the event of non-performance by these counterparties and it monitors their financial condition; however, the Company currently does not anticipate that any of the counterparties will fail to meet their obligations.

The following tables present derivative instruments that were not designated as hedges under U.S. GAAP as of March 31, 2018 and December 31, 2017 (dollars in thousands):

	Number(1)	Notional Amount		Fair Value Asset (Liability)			Range of Fixed GBP LIBOR / EURIBOR	Range of Maturity
As of March 31, 2018 (Unaudited):
Interest rate caps	26	$	1,211,087	$	7,100		(2)	April 2020 - July 2023
Foreign currency forwards(3)	7	105,559		(6,342		)	N/A	May 2018 - November 2019
Total	33	$	1,316,646	$	758
As of December 31, 2017:
Interest rate caps	31	$	1,193,012	$	7,024		(2)	April 2020 - July 2023
Foreign currency forwards(3)	4	58,647		(5,270		)	N/A	February 2018 - November 2018
Total	35	$	1,251,659	$	1,754

_____________________________

(1)    Represents number of transactions.

(2)    Includes a range of interest rate caps of 0.5% for EURIBOR and 2.0% for GBP LIBOR.

(3)    Includes Euro currency forwards. The strike prices for the foreign currency forwards maturing in 2018 and 2019 are an average of $1.11 and 1.25, respectively.

The following table presents the fair value of derivative instruments, as well as their classification on the consolidated balance sheets, as of March 31, 2018 and December 31, 2017 (dollars in thousands):

	Balance Sheet	March 31, 2018 (Unaudited)		December 31, 2017
	Location
Interest rate caps	Derivative assets	$	7,100	$	7,024
Foreign currency forwards	Derivative liabilities	$	6,342	$	5,270

The following table presents the effect of derivative instruments in the consolidated statements of operations for the three months endedMarch 31, 2018 and 2017 (dollars in thousands):

		Three Months Ended March 31,
		2018			2017
Amount of gain (loss) recognized in earnings:	Statements of operations location:
Adjustment to fair value of interest rate caps	Unrealized gain (loss) on derivatives and other(1)	$	(119	)	$	319
Adjustment to fair value of foreign currency forwards held at the end of the reporting period	Unrealized gain (loss) on derivatives and other (1)	(1,072		)	(1,264		)
Net cash receipt (payment) on derivatives	Realized gain (loss) on sales and other	(1,740		)	817

_____________________________

(1)    Excludes the unrealized gain (loss) relating to foreign currency remeasurement adjustments.

The Company’s counterparties held no cash margin as collateral against the Company’s derivative contracts as of March 31, 2018 and December 31, 2017. The Company had no derivative financial instruments that were designated as hedges in qualifying hedging relationships as of March 31, 2018 and December 31, 2017.

XML

Fair Value

3 Months Ended

Mar. 31, 2018

Fair Value Disclosures [Abstract]

Fair Value

Fair Value

Fair Value Measurement

The fair value of financial instruments is categorized based on the priority of the inputs to the valuation technique and categorized into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

Financial assets and liabilities are recorded at fair value on the consolidated balance sheets and are categorized based on the inputs to the valuation techniques as follows:

Level 1. Quoted prices for identical assets or liabilities in an active market.

Level 2. Financial assets and liabilities whose values are based on the following:

(a) Quoted prices for similar assets or liabilities in active markets.

(b) Quoted prices for identical or similar assets or liabilities in non-active markets.

(c) Pricing models whose inputs are observable for substantially the full term of the asset or liability.

(d) Pricing models whose inputs are derived principally from or corroborated by observable market data for substantially the full term of the asset or liability.

Level 3. Prices or valuation techniques based on inputs that are both unobservable and significant to the overall fair value measurement.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following is a description of the valuation techniques used to measure fair value of assets and liabilities accounted for at fair value on a recurring basis and the general classification of these instruments pursuant to the fair value hierarchy.

Derivative Instruments

Derivative instruments consist of interest rate caps and foreign currency exchange contracts that are traded over-the-counter, and are valued using a third-party service provider. These quotations are not adjusted and are generally based on valuation models with observable inputs such as contractual cash flow, yield curve, foreign currency rates and credit spreads and as such, are classified as Level 2 of the fair value hierarchy. Derivative instruments are also assessed for credit valuation adjustments due to the risk of non-performance by the Company and derivative counterparties.

Fair Value of Financial Instruments

In addition to the above disclosures regarding financial assets or liabilities which are recorded at fair value, U.S. GAAP requires disclosure of fair value about all financial instruments. The following disclosure of estimated fair value of financial instruments was determined by the Company using available market information and appropriate valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize on disposition of the financial instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on estimated fair value.

The following table presents the principal amount, carrying value and fair value of certain financial assets and liabilities as of March 31, 2018 and December 31, 2017 (dollars in thousands):

	March 31, 2018						December 31, 2017
	Principal/Notional Amount		Carrying Value		Fair Value		Principal/Notional Amount		Carrying Value		Fair Value
Financial assets:(1)
Derivative assets	$	1,211,087	$	7,100	$	7,100	$	1,193,012	$	7,024	$	7,024
Preferred equity investment	36,770		36,770		37,224		35,347		35,347		35,783
Financial liabilities:(1)
Mortgage and other notes payable, net	$	1,272,998	$	1,262,115	$	1,266,114	$	1,234,642	$	1,223,443	$	1,231,321
Derivative liabilities	105,559		6,342		6,342		58,647		5,270		5,270

_____________________________

(1) The fair value of other financial instruments not included in this table is estimated to approximate their carrying value.

Disclosure about fair value of financial instruments is based on pertinent information available to management as of the reporting date. Although management is not aware of any factors that would significantly affect fair value, such amounts have not been comprehensively revalued for purposes of these consolidated financial statements since that date and current estimates of fair value may differ significantly from the amounts presented herein.

Mortgage and Other Notes Payable

For mortgage and other notes payable, the Company primarily uses rates currently available with similar terms and remaining maturities to estimate fair value. These measurements are determined using rates as of the end of the reporting period or market credit spreads over the rate payable on fixed rate of like maturities. These fair value measurements are based on observable inputs, and as such, are classified as Level 2 of the fair value hierarchy.

Preferred Equity Investments

For preferred equity investments, fair value was computed by comparing the current yield to the estimated yield for newly originated loans with similar credit risk or the market yield at which a third party might expect to purchase such investment. Fair value was determined assuming fully-extended maturities regardless of structural or economic tests required to achieve such extended maturities. These fair value measurements are generally based on unobservable inputs and, as such, are classified as Level 3 of the fair value hierarchy.

XML

Commitments and Contingencies

3 Months Ended

Mar. 31, 2018

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

The Company is involved in various litigation matters arising in the ordinary course of its business. Although the Company is unable to predict with certainty the eventual outcome of any litigation, in the opinion of management, the current legal proceedings are not expected to have a material adverse effect on the Company’s financial position or results of operations.

The Company engages third-party service providers for its portfolio who are remunerated based on either a fixed fee or a percentage of rental income. The contract terms vary by party and are subject to termination options. These costs are recorded in properties - operating expense and other expenses in the consolidated statements of operations.

As part of the terms of agreements relating to certain assets the Company disposed, as is customary for such transactions in Europe, the Company agreed to provide certain warranties to the buyer.

Risk Management

Concentrations of credit risk arise when a number of tenants related to the Company’s investments are engaged in similar business activities or located in the same geographic region to be similarly affected by changes in economic conditions. The Company monitors its portfolios to identify potential concentrations of credit risks. For the three months ended March 31, 2018, one tenant, DekaBank Deutsche Girozentrale, accounted for more than 10% of the Company’s total revenues. This tenant has 6.2 years remaining on its lease. Otherwise, the Company has no other tenant that generates 10% or more of its total revenues. Additionally, for the three months ended March 31, 2018, Germany, France and the United Kingdom each accounted for more than 10% of the Company’s total revenues. The Company believes the remainder of its portfolio is well diversified and does not contain any unusual concentrations of credit risks.

XML

Segment Reporting

3 Months Ended

Mar. 31, 2018

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

The Company currently conducts its business through the following three segments, based on how management reviews and manages its business:

• Real Estate Equity- Focused on European prime office properties located in key cities within Germany, the United Kingdom and France.

• Preferred Equity - Represents the Company’s preferred equity investment secured by interest in a United Kingdom prime office property.

• Corporate - The corporate segment significantly includes corporate level interest expense, management fee and general and administrative expenses.

The following tables present segment reporting for the three months endedMarch 31, 2018 and 2017 (dollars in thousands):

	Three Months Ended March 31, 2018
Statement of Operations:	Real Estate Equity				Preferred Equity		Corporate				Total
Revenues
Rental income	$	27,224			$	—	$	—			$	27,224
Escalation income	5,341				—		—				5,341
Interest income	—				729		—				729
Expenses
Interest expense(1)	5,955				—		152				6,107
Management fee, related party	—				—		4,157				4,157
Transaction costs	—				—		481				481
Depreciation and amortization	11,651				—		—				11,651
Other, net	7,189			(2)	—		4,947			(3)	12,136
Income (loss) before income tax benefit (expense)	7,770				729		(9,737		)		(1,238		)
Income tax benefit (expense)	(39		)		—		—				(39		)
Net income (loss)	$	7,731			$	729	$	(9,737	)		$	(1,277	)

_____________________________

(1) Includes $0.6 million and $0.1 million of amortization of deferred financing costs in the real estate equity and corporate segments, respectively.

(2) Primarily relates to properties - operating expenses and unrealized loss on interest rate caps offset by other income and realized gain on sale adjustments.

(3) Primarily relates to general and administrative expense, unrealized loss on foreign currency forwards and net realized loss related to the settlement of foreign currency derivatives.

	Three Months Ended March 31, 2017(1)
Statement of Operations:	Real Estate Equity			Corporate				Total
Revenues
Rental income	$	25,536		$	—			$	25,536
Escalation income	5,161			—				5,161
Expenses
Interest expense(2)	6,119			264				6,383
Management fee, related party	—			3,559				3,559
Transaction costs	—			260				260
Depreciation and amortization	12,563			—				12,563
Other, net	4,971		(3)	18,760			(4)	23,731
Income (loss) before income tax benefit (expense)	7,044			(22,843		)		(15,799		)
Income tax benefit (expense)	273			—				273
Net income (loss)	$	7,317		$	(22,843	)		$	(15,526	)

_____________________________

(1) The Company did not have a preferred equity segment for the three months ended September 30, 2016.

(2) Includes $0.7 million and 0.2 million of amortization of deferred financing costs in the real estate equity and corporate segments, respectively.

(3) Primarily relates to properties - operating expenses and unrealized loss on interest rate caps offset by other income and realized gain on sales.

(4) Primarily relates to general and administrative expense, compensation expense and unrealized loss on foreign currency forwards offset by the net realized gain related to the settlement of foreign currency derivatives.

The following table presents total assets by segment as of March 31, 2018 and December 31, 2017 (dollars in thousands):

Total Assets	Real Estate Equity		Preferred Equity		Corporate		Total
March 31, 2018 (Unaudited)	$	1,936,271	$	37,614	$	5,779	$	1,979,664
December 31, 2017	1,901,282		37,133		2,502		1,940,917

Geography

The following table presents geographic information about the Company’s total rental income for the three months ended March 31, 2018 and 2017 (in thousands):

	Three Months Ended March 31,
	2018			2017
Office
Germany	$	11,964		$	9,915
United Kingdom	6,146			6,791
France	4,931			4,234
Other office	2,871		(1)	3,527
Subtotal	25,912			24,467
Other	1,312			1,069
Total	$	27,224		$	25,536

_____________________________

(1) Includes an asset in Portugal and an asset in the Netherlands which are classified as held-for-sale as of March 31, 2018.

XML

Subsequent Events

3 Months Ended

Mar. 31, 2018

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

Dividends

On May 7, 2018, the Company declared a dividend of $0.15 per share of common stock. The common stock dividend is expected be paid on May 25, 2018 to stockholders of record as of the close of business on May 21, 2018.

Share Repurchases

From the authorization in March 2018 through May 7, 2018, the Company repurchased 3.4 million shares of its common stock for approximately $46.3 million (refer to Note 8 “Stockholders’ Equity”).

Disposals

In April 2018, the Company completed the sale of the Maastoren property, our largest non-core asset, for approximately $195 million. The Company released approximately $60 million of net equity after repayment of financing (including release premium) and transaction costs.

XML

Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2018

Accounting Policies [Abstract]

Basis of Quarterly Presentation

Basis of Quarterly Presentation

The accompanying unaudited consolidated financial statements and related notes of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial reporting and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and note disclosures normally included in the consolidated financial statements prepared under U.S. GAAP have been condensed or omitted. In the opinion of management, all adjustments considered necessary for a fair statement of the Company’s consolidated financial position, results of operations and cash flows have been included and are of a normal and recurring nature. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. These consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, 2017, which was filed with the U.S. Securities and Exchange Commission (the “SEC”).

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, the Operating Partnership and their consolidated subsidiaries. The Company consolidates variable interest entities (“VIE”) where the Company is the primary beneficiary and voting interest entities which are generally majority owned or otherwise controlled by the Company. All significant intercompany balances are eliminated in consolidation.

Variable Interest Entities

Variable Interest Entities

A VIE is an entity that lacks one or more of the characteristics of a voting interest entity. A VIE is defined as an entity in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The determination of whether an entity is a VIE includes both a qualitative and quantitative analysis. The Company bases its qualitative analysis on its review of the design of the entity, its organizational structure including decision-making ability and relevant financial agreements and the quantitative analysis on the forecasted cash flow of the entity. The Company reassesses its initial evaluation of an entity as a VIE upon the occurrence of certain reconsideration events.

A VIE must be consolidated only by its primary beneficiary, which is defined as the party who, along with its affiliates and agents has both the: (i) power to direct the activities that most significantly impact the VIE’s economic performance; and (ii) obligation to absorb the losses of the VIE or the right to receive the benefits from the VIE, which could be significant to the VIE. The Company determines whether it is the primary beneficiary of a VIE by considering qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of its investment; the obligation or likelihood for the Company or other interests to provide financial support; consideration of the VIE’s purpose and design, including the risks the VIE was designed to create and pass through to its variable interest holders and the similarity with and significance to the business activities of the Company and the other interests. The Company reassesses its determination of whether it is the primary beneficiary of a VIE each reporting period. Significant judgments related to these determinations include estimates about the current and future fair value and performance of investments held by these VIEs and general market conditions.

The Company will evaluate its investments to determine whether they are a VIE. The Company analyzes new investments and financings, as well as reconsideration events for existing investments and financings, which vary depending on type of investment or financing.

Voting Interest Entities

Voting Interest Entities

A voting interest entity is an entity in which the total equity investment at risk is sufficient to enable it to finance its activities independently and the equity holders have the power to direct the activities of the entity that most significantly impact its economic performance, the obligation to absorb the losses of the entity and the right to receive the residual returns of the entity. The usual condition for a controlling financial interest in a voting interest entity is ownership of a majority voting interest. If the Company has a majority voting interest in a voting interest entity, the entity will generally be consolidated. The Company does not consolidate a voting interest entity if there are substantive participating rights by other parties and/or kick-out rights by a single party or through a simple majority vote.

The Company performs on-going reassessments of whether entities previously evaluated under the voting interest framework have become VIEs, based on certain events, and therefore subject to the VIE consolidation framework.

Non-controlling Interests

Non-controlling Interests

A non-controlling interest in a consolidated subsidiary is defined as the portion of the equity (net assets) in a subsidiary not attributable, directly or indirectly, to the Company. A non-controlling interest is required to be presented as a separate component of equity on the consolidated balance sheets and presented separately as net income (loss) and other comprehensive income (loss) (“OCI”) attributable to non-controlling interests. An allocation to a non-controlling interest may differ from the stated ownership percentage interest in such entity as a result of a preferred return and allocation formula, if any, as described in such governing documents.

Estimates

Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that could affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates and assumptions.

Comprehensive Income (Loss)

Comprehensive Income (Loss)

The Company reports consolidated comprehensive income (loss) in separate statements following the consolidated statements of operations. Comprehensive income (loss) is defined as the change in equity resulting from net income (loss) and OCI. The components of OCI principally include the foreign currency translation adjustment, net.

Cash and Cash Equivalents

Cash and Cash Equivalents

The Company considers all highly-liquid investments with an original maturity date of three months or less and deposits held with third parties that are readily convertible to cash to be cash equivalents. Cash, including amounts restricted at certain banks and financial institutions, may at times exceed insurable amounts. The Company seeks to mitigate credit risk by placing cash and cash equivalents with major financial institutions. To date, the Company has not experienced any losses on cash and cash equivalents. Cash and cash equivalents exclude escrow arrangements entered into for specific warranties in relation to the real estate sales which are recorded in other assets in the consolidated financial statements.

Restricted Cash

Restricted Cash

Restricted cash primarily consists of amounts related to operating real estate such as escrows for taxes, insurance, capital expenditures, tenant security deposits and payments required under certain lease agreements and amounts related to the Company’s borrowings.

Operating Real Estate

Operating Real Estate

Operating real estate is carried at historical cost less accumulated depreciation. Ordinary repairs and maintenance are expensed as incurred. Major replacements and improvements which extend the life of the asset are capitalized and depreciated over their useful life. Operating real estate is depreciated using the straight-line method over the estimated useful lives of the assets.

The Company accounts for purchases of operating real estate using the acquisition method, where the purchase price is allocated to tangible assets such as land, building, tenant and land improvements and other identified intangibles, such as in-place leases, above/below-market leases and goodwill to the extent the acquisition is a business combination. Costs directly related to an acquisition deemed to be a business combination are expensed and included in transaction costs in the consolidated statements of operations.

Operating real estate is depreciated using the straight-line method over the estimated useful lives of the assets, summarized as follows:

Category:	Term:
Building	40 years
Building improvements	Lesser of the useful life or remaining life of the building
Building leasehold interests	Lesser of 40 years or remaining term of the lease
Tenant improvements	Lesser of the useful life or remaining term of the lease

Preferred Equity Investments

Preferred Equity Investments

Preferred equity investments are generally intended to be held to maturity and, accordingly, are carried at cost, net of unamortized loan fees, premium, discount and unfunded commitments, if any. Preferred equity investments that are deemed to be impaired are carried at amortized cost less a loan loss reserve, if deemed appropriate, which approximates fair value. Preferred equity investments where the Company does not intend to hold the investment for the foreseeable future or until its expected payoff are classified as held for sale and recorded at the lower of cost or fair value.

Assets and Liabilities Held For Sale

Assets and Related Liabilities Held For Sale

Operating real estate which has met the criteria to be classified as held for sale is separately presented on the consolidated balance sheets. Such operating real estate is recorded at the lower of its carrying value or its estimated fair value less the cost to sell, net of the intangible assets associated with the asset, with any write-down to fair value less cost to sell recorded as an impairment loss. Once a property is determined to be held for sale, depreciation and amortization is no longer recorded. The Company records a gain or loss on sale of real estate when title is conveyed to the buyer and the Company has no substantial economic involvement with the property. If the sales criteria for the full accrual method are not met, the Company defers some or all of the gain or loss recognition by applying the finance, leasing, profit sharing, deposit, installment or cost recovery method, as appropriate, until the sales criteria are met.

Deferred Costs

Deferred Costs

Deferred costs primarily include deferred financing costs and deferred lease costs. Deferred financing costs represent commitment fees, legal and other third-party costs associated with obtaining financing. Costs related to revolving credit facilities are recorded in other assets and are amortized to interest expense using the straight-line basis over the term of the facility. Costs related to other borrowings are recorded net against the carrying value of such borrowings and are amortized into interest expense using the effective interest method or straight-line method depending on the type of financing. Unamortized deferred financing costs are expensed when the associated borrowing is repaid before maturity to realized gain (loss) on sales and other. Costs incurred in seeking financing transactions, which do not close, are expensed in the period in which it is determined that the financing will not occur. Deferred lease costs consist of fees incurred to initiate and renew operating leases, which are amortized on a straight-line basis over the remaining lease term and are recorded to depreciation and amortization in the consolidated statements of operations.

Intangible Assets and Intangible Liabilities

Intangible Assets and Intangible Liabilities

The Company records acquired identified intangibles, which includes intangible assets (such as value of the above-market leases, in-place leases, below-market ground leases, goodwill and other intangibles) and intangible liabilities (such as the value of below-market leases), based on estimated fair value. The value allocated to the above or below-market leases is amortized net to rental income, the value of below-market ground leases is amortized into properties - operating expense and in-place leases is amortized into depreciation and amortization expense, respectively, in the consolidated statements of operations on a straight-line basis over the respective remaining lease term.

Goodwill represents the excess of the purchase price over the fair value of net tangible and intangible assets acquired in a business combination and is not amortized. The Company analyzes goodwill for impairment on an annual basis and whenever events or changes in circumstances indicate that the carrying value of goodwill may not be fully recoverable. The Company assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit, related to such goodwill, is less than the carrying amount. If the carrying amount exceeds fair value an impairment is recorded for the difference.

Revenue Recognition

Revenue Recognition

Operating Real Estate

Rental and escalation income from operating real estate is derived from leasing of space to various types of tenants. Rental revenue recognition commences when the tenant takes possession of the leased space and the leased space is substantially ready for its intended use. The leases are for fixed terms of varying length and generally provide for annual rentals, subject to indexation, and expense reimbursements to be paid in quarterly or monthly installments. Rental income from leases is recognized on a straight-line basis over the term of the respective leases. The excess of rents recognized over amounts contractually due pursuant to the underlying leases are included in other assets, net on the consolidated balance sheets. The Company amortizes any tenant inducements as a reduction of revenue utilizing the straight-line method over the term of the lease. Escalation income represents revenue from tenant leases which provide for the recovery of all or a portion of the operating expenses and real estate taxes paid by the Company on behalf of the respective property. This revenue is accrued in the same period as the expenses are incurred.

In a situation in which a lease or leases associated with a significant tenant have been, or are expected to be, terminated early, the Company evaluates the remaining useful life of depreciable or amortizable assets in the asset group related to the lease that will be terminated (i.e., tenant improvements, above and below market lease intangibles, in-place lease value and leasing commissions). Based upon consideration of the facts and circumstances surrounding the termination, the Company may write-off or accelerate the depreciation and amortization associated with the asset group. Such amounts are included within depreciation and amortization in the consolidated statements of operations.

Preferred Equity Investments

Interest income is recognized on an accrual basis and any related premium, discount, origination costs and fees are amortized over the life of the investment using the effective interest method. The amortization is reflected as an adjustment to interest income in the consolidated statements of operations. The amortization of a premium or accretion of a discount is discontinued if such investment is reclassified to held for sale.

Impairment on Investments

Impairment on Investments

Operating Real Estate

The Company’s real estate portfolio is reviewed on a quarterly basis, or more frequently as necessary, to assess whether there are any indicators that the value of its operating real estate may be impaired or that its carrying value may not be recoverable. A property’s value is considered impaired if the Company’s estimate of the aggregate expected future undiscounted cash flow to be generated by the property is less than the carrying value of the property. In conducting this review, the Company considers global macroeconomic factors, real estate sector conditions, together with investment specific and other factors. To the extent an impairment has occurred, the loss is measured as the excess of the carrying value of the property over the estimated fair value of the property and recorded in impairment losses in the consolidated statements of operations. For the three months endedMarch 31, 2018 and 2017, the Company did not recognize any impairment losses.

An allowance for a doubtful account for a tenant receivable is established based on a periodic review of aged receivables resulting from estimated losses due to the inability of a tenant to make required rent and other payments contractually due. Additionally, the Company establishes, on a current basis, an allowance for future tenant credit losses on unbilled rent receivable based on an evaluation of the collectability of such amounts.

Preferred Equity Investments

Preferred equity investments are considered impaired when, based on current information and events, it is probable that the Company will not be able to collect all principal and interest amounts due according to the contractual terms. The Company assesses the credit quality of the portfolio and adequacy of investment loss reserves on an annual basis or more frequently as necessary. Significant judgment of the Company is required in this analysis. The Company considers the estimated net recoverable value of the investment as well as other factors, including but not limited to the fair value of any collateral, the amount and the status of any senior debt, the quality and financial condition of the borrower and the competitive situation of the area where the underlying collateral is located. Because this determination is based on projections of future economic events, which are inherently subjective, the amount ultimately realized may differ materially from the carrying value as of the balance sheet date. If upon completion of the assessment, the estimated fair value of the underlying collateral is less than the net carrying value of the investment, an investment loss reserve is recorded with a corresponding charge to provision for investment losses. The investment loss reserve for each investment is maintained at a level that is determined to be adequate by management to absorb probable losses.

Income recognition is suspended for an investment when, in the opinion of the Company, a full recovery of income and principal becomes doubtful. When the ultimate collectability of the principal of an impaired investment is in doubt, all payments are applied to principal under the cost recovery method. When the ultimate collectability of the principal of an impaired investment is not in doubt, contractual interest is recorded as interest income when received, under the cash basis method until an accrual is resumed when the investment becomes contractually current and performance is demonstrated to be resumed. Interest accrued and not collected will be reversed against interest income. An investment is written off when it is no longer realizable and/or legally discharged. As of March 31, 2018, the Company did not have any impaired preferred equity investments.

Equity-Based Compensation

Equity-Based Compensation

The Company accounts for equity-based compensation awards using the fair value method, which requires an estimate of fair value of the award. Awards may be based on a variety of measures such as time, performance, market or a combination thereof. For time-based awards, fair value is determined based on the stock price on the grant date. The Company recognizes compensation expense over the vesting period on a straight-line basis or the attribution method depending if the grant is to an employee or non-employee. For performance-based awards, fair value is determined based on the stock price at the date of grant and an estimate of the probable achievement of such measure. The Company recognizes compensation expense over the requisite service period, net of estimated forfeitures, using the accelerated attribution expense method. For market-based measures, fair value is determined using a Monte Carlo analysis under a risk-neutral premise using a risk-free interest rate. The Company recognizes compensation expense, over the requisite service period, net of estimated forfeitures, on a straight-line basis. For awards with a combination of performance or market measures, the Company estimates the fair value as if it were two separate awards. First, the Company estimates the probability of achieving the performance measure. If it is not probable the performance condition will be met, the Company records the compensation expense based on the fair value of the market measure, as described above. This expense is recorded even if the market-based measure is never met. If the performance-based measure is subsequently estimated to be achieved, the Company records compensation expense based on the performance-based measure. The Company would then record a cumulative catch-up adjustment for any additional compensation expense.

Equity-based compensation issued to non-employees is accounted for using the fair value of the award at the earlier of the performance commitment date or performance completion date. Time-based awards are remeasured every quarter based on the stock price as of the end of the reporting period until such awards vest, if any.

Derivatives

Derivatives

The Company seeks to use derivative instruments to manage exposure to interest rate risk and foreign currency exchange rate risk. The change in fair value for a derivative is recorded in unrealized gain (loss) on derivatives and other in the consolidated statements of operations.

The Company’s derivative instruments are recorded on the consolidated balance sheets at fair value and do not qualify as hedges under U.S. GAAP.

Foreign Currency

Foreign Currency

Assets and liabilities denominated in a foreign currency for which the functional currency is a foreign currency are translated using the currency exchange rate in effect at the end of the period presented and the results of operations for such entities are translated into U.S. dollars using the average currency exchange rate in effect during the period. The resulting foreign currency translation adjustment (“CTA”), net, is recorded as a component of accumulated OCI in the consolidated statements of equity. For the three months endedMarch 31, 2018 and 2017, the Company reclassified $0.3 million and $(0.4) million, respectively, of CTA to realized gain (loss) on sales and other in the consolidated statements of operations due to the sale of certain real estate assets (refer to Note 3).

Assets and liabilities denominated in a foreign currency for which the functional currency is the U.S. dollar are remeasured using the currency exchange rate in effect at the end of the period presented and the results of operations for such entities are remeasured into U.S. dollars using the average currency exchange rate in effect during the period. The resulting foreign currency remeasurement adjustment is recorded in unrealized gain (loss) on derivatives and other in the consolidated statements of operations.

Earnings Per Share

Earnings Per Share

The Company’s basic earnings per share (“EPS”) is calculated by dividing net income (loss) attributable to common stockholders by the weighted average number of common stock outstanding. Diluted EPS includes restricted stock and the potential dilution that could occur if outstanding restricted stock units (“RSUs”) or other contracts to issue common stock, assuming performance hurdles have been met, were converted to common stock (including limited partnership interests in the Operating Partnership owned by holders other than the Company (“Common Units”) and Common Units which are structured as profits interests (“LTIP Units” collectively referred to as Unit Holders) (refer to Note 8), where such exercise or conversion would result in a lower EPS. The dilutive effect of such RSUs and Unit Holders is calculated assuming all units are converted to common stock.

Income Taxes

Income Taxes

The Company has elected to be taxed as a REIT for U.S. federal income tax purposes with the initial filing of its 2015 U.S. federal tax return and will continue to comply with the related provisions of the Internal Revenue Code of 1986, as amended, the (“Internal Revenue Code”). Accordingly, the Company generally will not be subject to U.S. federal income tax to the extent of its distributions to stockholders and as long as certain asset, income and share ownership tests are met. To maintain its qualification as a REIT, the Company must annually distribute at least 90% of its REIT taxable income to its stockholders and meet certain other requirements. Under certain circumstances, federal income and excise taxes may be due on its undistributed taxable income. The Company distributes to its stockholders 100% of its taxable income and therefore no provision for U.S. federal income taxes has been included in the accompanying consolidated financial statements for the three months endedMarch 31, 2018 and 2017.

The Company conducts its business through foreign subsidiaries which may be subject to local level income tax in the European jurisdictions it operates. The Company has also elected taxable REIT subsidiary (“TRS”) status on certain subsidiaries. This enables the Company to provide services that would otherwise be considered impermissible for REITs and participate in activities that do not qualify as “rents from real property.” The TRS that is not resident in the U.S. (“foreign TRS”) and, as such, not subject to U.S. taxation but is subject to foreign income taxes only. In addition, the REIT will not generally be subject to any additional U.S. taxes on the repatriation of foreign TRS earnings.

For the Company’s foreign subsidiaries, including the Company’s foreign TRS, deferred tax assets and liabilities are established for temporary differences between the financial reporting basis and the foreign tax basis of assets and liabilities at the enacted tax rates expected to be in effect when the temporary differences reverse. The Company evaluates the realizability of its deferred tax assets (e.g. net operating loss) and recognizes a valuation allowance if, based on the available evidence, it is more likely than not that some portion or all of its deferred tax assets will not be realized. When evaluating the realizability of its deferred tax assets, the Company considers estimates of expected future taxable income, existing and projected book/tax differences, tax planning strategies available and the general and industry specific economic outlook. This realizability analysis is inherently subjective, as it requires the Company to forecast its business and general economic environment in future periods. Due to past and projected losses in certain local jurisdictions where the Company does not have carryback potential and/or cannot sufficiently forecast future taxable income, the Company recognized net cumulative valuation allowances against the Company’s deferred tax assets. The Company will continue to review its deferred tax assets in accordance with U.S. GAAP.

Recent Accounting Pronouncements

Recent Accounting Pronouncements: Accounting Standards Adopted in 2018

Revenue Recognition - In May 2014, FASB issued an accounting update (ASU No. 2014-09) requiring a company to recognize as revenue the amount of consideration it expects to be entitled to in connection with the transfer of promised goods or services to customers. The Company has adopted the standard on its required effective date of January 1, 2018 using the modified retrospective approach and has applied the guidance to contracts not yet completed as of the date of adoption. The new revenue standard specifically excludes revenue streams for which specific guidance is stipulated in other sections of the codification and therefore it will not impact rental income or interest income generated on financial instruments such as preferred equity investments. The Company is the lessor for triple net and gross leases classified as operating leases in which rental income and tenant reimbursements are recorded. The revenue from these leases are scoped out of the new revenue recognition guidance. All leases are accounted for under ASC 840 until the adoption of the new leasing guidance within ASC 842. There were no significant changes as a result of the new revenue recognition standard. In addition, the Company expects to adopt the practical expedient which allows lessors to consider lease and non-lease components as a single performance obligation to the extent that the timing and pattern of transfer is the same and the lease is classified an operating lease.

Cash Flow Classification - In August 2016, the FASB issued guidance (ASU No. 2016-15) that makes eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. The new guidance requires adoption on a retrospective basis unless it is impracticable to apply, in which case the Company would be required to apply the amendments prospectively as of the earliest date practicable. The Company has adopted this guidance on January 1, 2018 and it did not have a material impact on its consolidated financial statements and related disclosures.

Restricted Cash - In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows: Restricted Cash,which requires that cash and cash equivalent balances in the statement of cash flows include restricted cash and restricted cash equivalent amounts, and therefore, changes in restricted cash and restricted cash equivalents be presented in the statement of cash flows. This will eliminate the presentation of transfers between cash and cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. When cash, cash equivalents, restricted cash and restricted cash equivalents are presented in more than one line item of the balance sheet, this ASU requires disclosure of a reconciliation between the totals in the statement of cash flows and the related captions on the balance sheet. The new guidance also requires disclosure of the nature of the restricted cash and restricted cash equivalents, similar to the existing requirements under Regulation S-X, however, it does not define restricted cash and restricted cash equivalents. The Company adopted this guidance on January 1, 2018 and the required retrospective application of this new standard resulted in changes to the previously reported statement of cash flows as follows (dollars in thousands):

	As of March 31, 2017
Cash flow provided by (used in):	As Previously Reported			After Adoption of ASU 2016-18
Operating activities	$	5,707		$	4,388
Investing activities	20,582			20,582
Financing activities	(18,606		)	(18,606		)

Business Combination - In January 2017, the FASB issued guidance (ASU No. 2017-01) to clarify the definition of a business under ASC 805. This new standard clarifies the definition of a business and provides a screen to determine when an integrated set of assets and activities is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. The Company expects that acquisitions of real estate or in-substance real estate will not meet the revised definition of a business because substantially all of the fair value is concentrated in a single identifiable asset or group of similar identifiable assets (i.e. land, buildings, and related intangible assets). A significant difference between the accounting for an asset acquisition and a business combination is that transaction costs are capitalized for an asset acquisition, rather than expensed for a business combination. The Company adopted the standard on its required effective date of January 1, 2018. This guidance did not have a material impact on its consolidated financial statements and related disclosures.

Derecognition and Partial Sales of Nonfinancial Assets - In February 2017, the FASB issued an accounting update (ASU No. 2017-05) which clarifies the scope of recently established guidance on nonfinancial asset derecognition, which applies to the derecognition of all nonfinancial assets and in-substance nonfinancial assets.  In addition, the guidance clarifies the accounting for partial sales of nonfinancial assets and in-substance nonfinancial assets to align with the new revenue recognition standard to be more consistent with the accounting for sale of a business. Specifically, in a partial sale to a noncustomer, when a noncontrolling interest is received or retained, the latter is considered a noncash consideration and measured at fair value, which would result in full gain or loss recognized upon sale. The Company has adopted this guidance on January 1, 2018 and it did not have a material impact on its consolidated financial statements and related disclosures as there were no such sales for the three months ended March 31, 2018.

Goodwill Impairment - In January 2017, the FASB issued guidance (ASU No. 2017-04) which removes Step 2 from the goodwill impairment test. The Company has adopted this guidance on January 1, 2018 and it did not have a material impact on its consolidated financial statements and related disclosures.

Share-based Payments - In May 2017, the FASB issued guidance (ASU No. 2017-09) clarifying when to account for a change to the terms or conditions of a share-based payment award as a modification. The Company has adopted this guidance on January 1, 2018 and it did not have a material impact on its consolidated financial statements and related disclosures.

Recent Accounting Pronouncements: Future Application of Accounting Standards

Leases - In February 2016, the FASB issued an accounting update (ASU No. 2016-02) which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The update requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The update is expected to result in the recognition of a right-to-use asset and related liability to account for the Company’s future obligations under its ground lease arrangements for which it is the lessee. The update will require that lessees and lessors capitalize, as initial direct costs, only those costs that are incurred due to the execution of a lease. Under this guidance, allocated payroll costs and other costs that are incurred regardless of whether the lease is obtained will no longer be capitalized as initial direct costs and instead will be expensed as incurred. Lessors will continue to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. The Company expects to adopt the package of practical expedients under the guidance and the Company will not need to reassess whether any expired or expiring contracts contain leases; will not need to revisit lease classification for any expired or expiring leases; and will not need to reassess initial direct costs for any existing leases. In addition, the Company expects to adopt the practical expedient which allows lessors to consider lease and non-lease components as a single performance obligation to the extent that the timing and pattern of transfer is the same and the lease is classified an operating lease. As of March 31, 2018, the Company has two ground lease agreements with annual payments of $0.7 million. The new guidance is to be applied using a modified retrospective approach at the beginning of the earliest comparative period in the financial statements and is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is evaluating the impact, if any, that this guidance will have on its consolidated financial position, results of operations and financial statement disclosures.

Financial Instruments - In June 2016, the FASB issued guidance (ASU No. 2016-13) that changes the impairment model for most financial instruments by requiring companies to recognize an allowance for expected losses, rather than incurred losses as required currently by the other-than-temporary impairment model. The guidance will apply to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt securities, net investments in leases and off-balance-sheet credit exposures (e.g., loan commitments). The new guidance is effective for reporting periods beginning after December 15, 2019 and will be applied as a cumulative adjustment to retained earnings as of the effective date. The Company continues to assess the potential effect the adoption of this guidance will have on its consolidated financial statements and related disclosures.

XML

Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2018

Accounting Policies [Abstract]

Property, Plant and Equipment

Operating real estate is depreciated using the straight-line method over the estimated useful lives of the assets, summarized as follows:

Category:	Term:
Building	40 years
Building improvements	Lesser of the useful life or remaining life of the building
Building leasehold interests	Lesser of 40 years or remaining term of the lease
Tenant improvements	Lesser of the useful life or remaining term of the lease

Schedule of Identified Intangibles

The following table presents identified intangibles as of March 31, 2018 and December 31, 2017 (dollars in thousands):

	March 31, 2018 (Unaudited)							December 31, 2017
	Gross Amount		Accumulated Amortization			Net		Gross Amount		Accumulated Amortization			Net
Intangible assets:
In-place lease	$	66,787	$	(28,097	)	$	38,690	$	64,427	$	(24,290	)	$	40,137
Above-market lease	36,145		(11,469		)	24,676		34,882		(9,919		)	24,963
Below-market ground lease	36,801		(1,754		)	35,047		34,497		(1,109		)	33,388
Goodwill(1)	16,145		N/A			16,145		15,697		N/A			15,697
Total	$	155,878	$	(41,320	)	$	114,558	$	149,503	$	(35,318	)	$	114,185
Intangible liabilities:
Below-market lease	$	34,244	$	(11,029	)	$	23,215	$	32,267	$	(8,964	)	$	23,303
Above-market ground lease	5,670		(208		)	5,462		5,513		(184		)	5,329
Total	$	39,914	$	(11,237	)	$	28,677	$	37,780	$	(9,148	)	$	28,632

_____________________________

(1) Represents goodwill associated with certain acquisitions in exchange for shares in the underlying portfolios. The goodwill and a corresponding deferred tax liability was recorded at acquisition based on tax basis differences.

Schedule of Other Assets and Other Liabilities

The following tables present a summary of other assets and other liabilities as of March 31, 2018 and December 31, 2017 (dollars in thousands):

	March 31, 2018 (Unaudited)		December 31, 2017
Other assets:
Prepaid expenses	$	4,246	$	1,936
Deferred leasing and other costs, net	6,756		6,019
Deferred tax assets, net	435		—
Straight-line rent, net	13,939		10,969
Escrow receivable	3,209		3,286
Other	711		905
Total	$	29,296	$	23,115
	March 31, 2018 (Unaudited)		December 31, 2017
Other liabilities:
Deferred tax liabilities	$	8,837	$	8,548
Prepaid rent received and unearned revenue	13,290		8,406
Tenant security deposits	4,482		4,435
Prepaid escalation and other income	2,143		3,982
Other	509		386
Total	$	29,261	$	25,757

Schedule of New Accounting Pronouncements and Changes in Accounting Principles

The Company adopted this guidance on January 1, 2018 and the required retrospective application of this new standard resulted in changes to the previously reported statement of cash flows as follows (dollars in thousands):

	As of March 31, 2017
Cash flow provided by (used in):	As Previously Reported			After Adoption of ASU 2016-18
Operating activities	$	5,707		$	4,388
Investing activities	20,582			20,582
Financing activities	(18,606		)	(18,606		)

XML

Operating Real Estate (Tables)

3 Months Ended

Mar. 31, 2018

Real Estate [Abstract]

Schedule of Operating Real Estate

The following table presents operating real estate, net as of March 31, 2018 and December 31, 2017 (dollars in thousands):

	March 31, 2018 (Unaudited)			December 31, 2017
Land	$	405,248		$	393,691
Buildings and improvements	983,350			954,314
Building, leasehold interests and improvements	204,131			195,929
Furniture, fixtures and equipment	1,774			1,653
Tenant improvements	64,120			61,303
Operating real estate, gross	1,658,623			1,606,890
Less: accumulated depreciation	(107,538		)	(95,356		)
Operating real estate, net	$	1,551,085		$	1,511,534

Schedule of Real Estate Held for Sale

The following table summarizes the Company’s operating real estate held for sale as of March 31, 2018 (dollars in thousands):

			Assets(1)(2)								Liabilities(1)(2)
Location	Type	Properties	Operating Real Estate, Net		Intangible Assets, Net		Other Assets		Total		Intangible Liabilities, Net		Other Liabilities		Total
Lisbon, Portugal	Office	1	$	12,250	$	64	$	1,175	$	13,489	$	—	$	355	$	355
Rotterdam, Netherlands(3)	Office	1	152,988		5,217		4,394		162,599		667		—		667
Total		2	$	165,238	$	5,281	$	5,569	$	176,088	$	667	$	355	$	1,022

_____________________________

(1) The assets and liabilities classified as held for sale are expected to be sold on the open market as an asset sale for the asset in Rotterdam and as a share sale for the asset in Lisbon subject to standard industry terms and conditions. The assets together contributed $3.5 million and $3.6 million of revenue and $(0.1) million and $(1.3) million of income (loss) before income tax benefit (expense) for the three months endedMarch 31, 2018 and 2017, respectively.

(2) Represents operating real estate and intangible assets, net of accumulated depreciation and amortization of $20.3 million prior to being reclassified into held for sale.

(3) In April 2018, the Company completed the sale of the Maastoren property in Rotterdam, our largest non-core asset, for approximately $195 million.

XML

Preferred Equity Investments (Tables)

3 Months Ended

Mar. 31, 2018

Mortgage Loans on Real Estate [Abstract]

Schedule of Mortgage Loans on Real Estate

The following table presents one preferred equity investment as of March 31, 2018 (dollars in thousands):

	March 31, 2018
Asset Type	Principal Amount		Carrying Value		Fixed Rate		Mandatory Redemption
Preferred equity investment	$	36,770	$	36,770	8.00	%	May 2020

XML

Borrowings (Tables)

3 Months Ended

Mar. 31, 2018

Debt Disclosure [Abstract]

Schedule of Long-term Borrowings

The following table presents borrowings as of March 31, 2018 and December 31, 2017 (dollars in thousands):

			March 31, 2018 (Unaudited)				December 31, 2017
	Final Maturity	Contractual Interest Rate(2)	Principal Amount		Carrying Value		Principal Amount		Carrying Value
Mortgage and other notes payable:(1)
Trias Portfolio 1(3)(5)	Apr-20	EURIBOR + 2.70%	$	10,674	$	10,437	$	10,378	$	10,116
Trias Portfolio 2(3)(5)(7)	Dec-20	EURIBOR + 1.55%	94,188		93,552		91,577		90,880
Trias Portfolio 3(3)(5)	Apr-20	EURIBOR + 1.65%	46,092		45,069		44,814		43,684
Trias Portfolio 4(3)(5)	Apr-20	GBP LIBOR + 2.70%	18,023		17,816		17,326		17,123
SEB Portfolio 1(5)	Jul-24	EURIBOR + 1.55%(8)	326,365		322,275		317,317		313,153
SEB Portfolio 2(5)	Jul-24	GBP LIBOR + 1.55%(8)	260,924		258,022		250,825		247,902
SEB Portfolio - Preferred(4)	Apr-60	2.30%	105,484		105,204		102,560		102,271
Trianon Tower(5)	Jul-23	EURIBOR + 1.30%	406,567		405,059		395,294		393,763
Other - Preferred(6)	Oct-45	1.00%	4,681		4,681		4,551		4,551
Total mortgage and other notes payable			$	1,272,998	$	1,262,115	$	1,234,642	$	1,223,443

_____________________________

(1) All mortgage notes and other notes payable are denominated in local currencies, and as such, the principal amount generally increased from 2017 to 2018 due to the change in the Euro or U.K. Pound Sterling compared to the U.S. dollar. All borrowings are non-recourse and are interest-only through maturity, subject to compliance with covenants of the respective borrowing, and denominated in the same currency as the assets securing the borrowing.

(2) All floating rate debt is subject to interest rate caps of 0.5% for EURIBOR and 2.0% for GBP LIBOR which are used to manage interest rate exposure.

(3) Trias Portfolio represents the cross-collateralized borrowings among the IVG Portfolio, Internos Portfolio and Deka Portfolio.

(4) Represents preferred equity certificates with a contractual interest rate of 2.3% through May 2019, which increases to EURIBOR plus 12.0% through May 2022 and subsequently to EURIBOR plus 15.0% through final maturity. Certain prepayments prior to May 2019 are subject to the payment of the unpaid coupon on outstanding principal amount through May 2019.

(5) Prepayment provisions include a fee based on principal amount ranging from 0.25% to 1.0% through December 2019 for the Trias Portfolio borrowings and 1.0% to 2.0% through July 2020 for the SEB Portfolio borrowings and 0.60% through June 30, 2018 and 0.30% through June 30, 2019 for Trianon Tower borrowings.

(6) Represents preferred equity certificates each with a fixed contractual interest rate of 1.0% per annum plus variable interest based on specified income levels associated with the German property companies of the Trias Portfolio which can be prepaid at any time without penalty through final maturity, which is thirty years from the issuance date.

(7) In June 2017, the Company amended and restated the agreement to increase the loan amount by $5.9 million and reduce future minimum capital expenditure spending requirements.

(8) In September 2017, the Company amended and restated the agreement to reduce the margin from 1.80% to 1.55% and extended the maturity date from April 1, 2022 to July 20, 2024.

Summary of Reconciliation of Principal Amount to Carrying Value

The following table presents a reconciliation of principal amount to carrying value of the Company’s mortgage and other notes payable as of March 31, 2018 and December 31, 2017 (dollars in thousands):

	March 31, 2018 (Unaudited)			December 31, 2017
Principal amount	$	1,272,998		$	1,234,642
Deferred financing costs, net	(10,883		)	(11,199		)
Carrying value	$	1,262,115		$	1,223,443

Schedule of Principal Payments on Borrowings, Based on Final Maturity

The following table presents scheduled principal on borrowings, based on final maturity as of March 31, 2018 (dollars in thousands):

	Mortgage and Other Notes Payable
Remaining 2018	$	—
Years ending December 31:
2019	—
2020	168,977
2021	—
2022	—
2023	406,567
2024 and thereafter	697,454
Total	$	1,272,998

XML

Compensation Expense (Tables)

3 Months Ended

Mar. 31, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Common Unit and Unvested Restricted Stock Activity

The following table presents activity related to the issuance, vesting, redemption, conversion and forfeitures of restricted stock, Common Units and performance RSUs. The balance as of March 31, 2018 represents vested Common Units and unvested restricted stock and performance RSUs (grants in thousands):

	Three Months Ended March 31, 2018
	Restricted Stock(1)	Common Units		Performance RSUs(2)		Total Grants		Weighted Average Grant Price
December 31, 2017	121	420		1,453		1,994		$	11.95
Granted	198	—		132		330		12.65
Redeemed	—	(43	)	—		(43	)	12.67
Converted	—	(23	)	—		(23	)	11.92
Forfeited	—	—		(341	)	(341	)	12.60
March 31, 2018 (Unaudited)	319	354		1,244		1,917		$	11.94

_____________________________

(1) Represents restricted stock included in common stock.

(2) As of March 31, 2018, represented outstanding Absolute and Relative RSUs.

XML

Stockholders' Equity (Tables)

3 Months Ended

Mar. 31, 2018

Equity [Abstract]

Schedule of Repurchase Agreements

The following table presents the number of share repurchased by the Company, the average price paid per share and the gross amount paid for the repurchased shares for the three months endedMarch 31, 2018 and the period subsequent to quarter end, from April 1, 2018 through May 7, 2018 (dollars and shares in thousands, except per share data):

Period	Shares	Average Price Paid per Share		Gross
January 1 - March 31 (1)	1,051	$	12.70	$	13,350
April 1 - May 7	2,383	13.81		32,918
Total	3,434	$	13.47	$	46,268

_____________________________

(1) The authorization for the repurchases was approved by the Company’s board of directors in March 2018. For the three months ended March 31, 2017, the Company did not repurchase any shares of its common stock.

Schedule of Dividends Declared

The following table presents dividends declared (on a per share basis) with respect to the three months endedMarch 31, 2018 and 2017:

Common Stock
Declaration Date	Dividend Per Share
2018
May 7	$	0.15
2017
May 1	$	0.15

Schedule of Earnings Per Share

The following table presents EPS for the three months endedMarch 31, 2018 and 2017 (dollars and shares in thousands, except per share data):

	Three Months Ended March 31,
	2018			2017
Numerator:
Net income (loss) attributable to NorthStar Realty Europe Corp. common stockholders	$	(1,281	)	$	(15,350	)
Net income (loss) attributable to Unit Holders non-controlling interest	(15		)	(193		)
Net income (loss) attributable to common stockholders and Unit Holders(1)	$	(1,296	)	$	(15,543	)
Denominator:(2)
Weighted average shares of common stock	55,193			54,832
Weighted average Unit Holders(1)	411			673
Weighted average shares of common stock and Unit Holders(2)	55,604			55,505
Earnings (loss) per share:
Basic	$	(0.02	)	$	(0.28	)
Diluted	$	(0.02	)	$	(0.28	)

_____________________________

(1) The EPS calculation takes into account Unit Holders, which receive non-forfeitable dividends from the date of grant, share equally in the Company’s net income (loss) and convert on a one-for-one basis into common stock.

(2) Excludes the effect of restricted stock and RSUs outstanding that were not dilutive as of March 31, 2018. These instruments could potentially impact diluted EPS in future periods, depending on changes in the Company’s stock price and other factors.

XML

Risk Management and Derivative Activities (Tables)

3 Months Ended

Mar. 31, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Summary of Derivative Instruments not Designated as Hedges under U.S. GAAP

The following tables present derivative instruments that were not designated as hedges under U.S. GAAP as of March 31, 2018 and December 31, 2017 (dollars in thousands):

	Number(1)	Notional Amount		Fair Value Asset (Liability)			Range of Fixed GBP LIBOR / EURIBOR	Range of Maturity
As of March 31, 2018 (Unaudited):
Interest rate caps	26	$	1,211,087	$	7,100		(2)	April 2020 - July 2023
Foreign currency forwards(3)	7	105,559		(6,342		)	N/A	May 2018 - November 2019
Total	33	$	1,316,646	$	758
As of December 31, 2017:
Interest rate caps	31	$	1,193,012	$	7,024		(2)	April 2020 - July 2023
Foreign currency forwards(3)	4	58,647		(5,270		)	N/A	February 2018 - November 2018
Total	35	$	1,251,659	$	1,754

_____________________________

(1)    Represents number of transactions.

(2)    Includes a range of interest rate caps of 0.5% for EURIBOR and 2.0% for GBP LIBOR.

(3)    Includes Euro currency forwards. The strike prices for the foreign currency forwards maturing in 2018 and 2019 are an average of $1.11 and 1.25, respectively.

Schedule of Fair Value of Derivative Instruments and Balance Sheet Classification

The following table presents the fair value of derivative instruments, as well as their classification on the consolidated balance sheets, as of March 31, 2018 and December 31, 2017 (dollars in thousands):

	Balance Sheet	March 31, 2018 (Unaudited)		December 31, 2017
	Location
Interest rate caps	Derivative assets	$	7,100	$	7,024
Foreign currency forwards	Derivative liabilities	$	6,342	$	5,270

Schedule of the Effect of Derivative Instruments on Combined Statements of Operations

The following table presents the effect of derivative instruments in the consolidated statements of operations for the three months endedMarch 31, 2018 and 2017 (dollars in thousands):

		Three Months Ended March 31,
		2018			2017
Amount of gain (loss) recognized in earnings:	Statements of operations location:
Adjustment to fair value of interest rate caps	Unrealized gain (loss) on derivatives and other(1)	$	(119	)	$	319
Adjustment to fair value of foreign currency forwards held at the end of the reporting period	Unrealized gain (loss) on derivatives and other (1)	(1,072		)	(1,264		)
Net cash receipt (payment) on derivatives	Realized gain (loss) on sales and other	(1,740		)	817

_____________________________

(1)    Excludes the unrealized gain (loss) relating to foreign currency remeasurement adjustments.

XML

Fair Value (Tables)

3 Months Ended

Mar. 31, 2018

Fair Value Disclosures [Abstract]

Schedule of Financial Assets and Liabilities

The following table presents the principal amount, carrying value and fair value of certain financial assets and liabilities as of March 31, 2018 and December 31, 2017 (dollars in thousands):

	March 31, 2018						December 31, 2017
	Principal/Notional Amount		Carrying Value		Fair Value		Principal/Notional Amount		Carrying Value		Fair Value
Financial assets:(1)
Derivative assets	$	1,211,087	$	7,100	$	7,100	$	1,193,012	$	7,024	$	7,024
Preferred equity investment	36,770		36,770		37,224		35,347		35,347		35,783
Financial liabilities:(1)
Mortgage and other notes payable, net	$	1,272,998	$	1,262,115	$	1,266,114	$	1,234,642	$	1,223,443	$	1,231,321
Derivative liabilities	105,559		6,342		6,342		58,647		5,270		5,270

_____________________________

(1) The fair value of other financial instruments not included in this table is estimated to approximate their carrying value.

XML

Segment Reporting (Tables)

3 Months Ended

Mar. 31, 2018

Segment Reporting [Abstract]

Schedule of Segment Reporting

The following tables present segment reporting for the three months endedMarch 31, 2018 and 2017 (dollars in thousands):

	Three Months Ended March 31, 2018
Statement of Operations:	Real Estate Equity				Preferred Equity		Corporate				Total
Revenues
Rental income	$	27,224			$	—	$	—			$	27,224
Escalation income	5,341				—		—				5,341
Interest income	—				729		—				729
Expenses
Interest expense(1)	5,955				—		152				6,107
Management fee, related party	—				—		4,157				4,157
Transaction costs	—				—		481				481
Depreciation and amortization	11,651				—		—				11,651
Other, net	7,189			(2)	—		4,947			(3)	12,136
Income (loss) before income tax benefit (expense)	7,770				729		(9,737		)		(1,238		)
Income tax benefit (expense)	(39		)		—		—				(39		)
Net income (loss)	$	7,731			$	729	$	(9,737	)		$	(1,277	)

_____________________________

(1) Includes $0.6 million and $0.1 million of amortization of deferred financing costs in the real estate equity and corporate segments, respectively.

(2) Primarily relates to properties - operating expenses and unrealized loss on interest rate caps offset by other income and realized gain on sale adjustments.

(3) Primarily relates to general and administrative expense, unrealized loss on foreign currency forwards and net realized loss related to the settlement of foreign currency derivatives.

	Three Months Ended March 31, 2017(1)
Statement of Operations:	Real Estate Equity			Corporate				Total
Revenues
Rental income	$	25,536		$	—			$	25,536
Escalation income	5,161			—				5,161
Expenses
Interest expense(2)	6,119			264				6,383
Management fee, related party	—			3,559				3,559
Transaction costs	—			260				260
Depreciation and amortization	12,563			—				12,563
Other, net	4,971		(3)	18,760			(4)	23,731
Income (loss) before income tax benefit (expense)	7,044			(22,843		)		(15,799		)
Income tax benefit (expense)	273			—				273
Net income (loss)	$	7,317		$	(22,843	)		$	(15,526	)

_____________________________

(1) The Company did not have a preferred equity segment for the three months ended September 30, 2016.

(2) Includes $0.7 million and 0.2 million of amortization of deferred financing costs in the real estate equity and corporate segments, respectively.

(3) Primarily relates to properties - operating expenses and unrealized loss on interest rate caps offset by other income and realized gain on sales.

(4) Primarily relates to general and administrative expense, compensation expense and unrealized loss on foreign currency forwards offset by the net realized gain related to the settlement of foreign currency derivatives.

The following table presents total assets by segment as of March 31, 2018 and December 31, 2017 (dollars in thousands):

Total Assets	Real Estate Equity		Preferred Equity		Corporate		Total
March 31, 2018 (Unaudited)	$	1,936,271	$	37,614	$	5,779	$	1,979,664
December 31, 2017	1,901,282		37,133		2,502		1,940,917

The following table presents geographic information about the Company’s total rental income for the three months ended March 31, 2018 and 2017 (in thousands):

	Three Months Ended March 31,
	2018			2017
Office
Germany	$	11,964		$	9,915
United Kingdom	6,146			6,791
France	4,931			4,234
Other office	2,871		(1)	3,527
Subtotal	25,912			24,467
Other	1,312			1,069
Total	$	27,224		$	25,536

_____________________________

(1) Includes an asset in Portugal and an asset in the Netherlands which are classified as held-for-sale as of March 31, 2018.

XML

Summary of Significant Accounting Policies - Schedule of Property Plant and Equipment Useful Lives (Details)	3 Months Ended
	Mar. 31, 2018
Building
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life	40 years
Building leasehold interests | Maximum
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life	40 years

XML

Summary of Significant Accounting Policies - Intangible Assets and Intangible Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Intangible assets:
Goodwill, Gross Amount	$ 16,145	$ 15,697
Total, Gross Amount	155,878	149,503
Intangible assets, Accumulated Amortization	(41,320)	(35,318)
Goodwill, Net	16,145	15,697
Total, Net	114,558	114,185
Intangible liabilities:
Below-market lease, Gross Amount	34,244	32,267
Below-market lease, Accumulated Amortization	(11,029)	(8,964)
Total	23,215	23,303
Total, gross intangible liabilities	39,914	37,780
Total, accumulated amortization intangible liabilities	(11,237)	(9,148)
Total, net intangible liabilities	28,677	28,632
In-place lease
Intangible assets:
Intangible assets, Gross Amount	66,787	64,427
Intangible assets, Accumulated Amortization	(28,097)	(24,290)
Total	38,690	40,137
Above-market Leases, Net
Intangible assets:
Intangible assets, Gross Amount	36,145	34,882
Intangible assets, Accumulated Amortization	(11,469)	(9,919)
Total	24,676	24,963
Intangible liabilities:
Above-market ground lease, gross	5,670	5,513
Above-market ground lease, accumulated amortization	(208)	(184)
Total	5,462	5,329
Below-market ground lease
Intangible assets:
Intangible assets, Gross Amount	36,801	34,497
Intangible assets, Accumulated Amortization	(1,754)	(1,109)
Total	$ 35,047	$ 33,388

XML

Summary of Significant Accounting Policies - Other Assets and Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Other assets:
Prepaid expenses	$ 4,246	$ 1,936
Deferred leasing and other costs, net	6,756	6,019
Deferred tax assets, net	435	0
Straight-line rent, net	13,939	10,969
Escrow receivable	3,209	3,286
Other	711	905
Total	29,296	23,115
Other liabilities:
Deferred tax liabilities	8,837	8,548
Prepaid rent received and unearned revenue	13,290	8,406
Tenant security deposits	4,482	4,435
Prepaid escalation and other income	2,143	3,982
Other	509	386
Total	$ 29,261	$ 25,757

XML

Summary of Significant Accounting Policies - Impairment on Investment (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2016
Accounting Policies [Abstract]
Impairment losses	$ 0.0	$ 0.0

XML

Summary of Significant Accounting Policies - Equity Based Compensation (Details)	3 Months Ended
	Mar. 31, 2018 award
Accounting Policies [Abstract]
Share based compensation number of award types	2

XML

Summary of Significant Accounting Policies - Foreign Currency (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Accounting Policies [Abstract]
CTA reclassified to realized gain (loss)	$ 0.3	$ (0.4)

XML

Summary of Significant Accounting Policies - Income Taxes (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Accounting Policies [Abstract]
Tax expense (benefit)	$ (0.1)	$ 0.3

XML

Summary of Significant Accounting Policies - Recent Accounting Pronouncements (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2018 USD ($) lease	Mar. 31, 2017 USD ($)
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating activities	$ 10,794	$ 4,388
Investing activities	(4,789)	20,582
Financing activities	$ (21,221)	(18,606)
Ground Leases
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Number of ground lease agreements | lease	2
ASU 2016-02 | Ground Leases
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Annual rental income	$ 700
As Previously Reported | Accounting Standards Update 2016-18
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating activities		5,707
Investing activities		20,582
Financing activities		$ (18,606)

XML

Operating Real Estate - Operating Real Estate, Net (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Real Estate [Abstract]
Land	$ 405,248	$ 393,691
Buildings and improvements	983,350	954,314
Building, leasehold interests and improvements	204,131	195,929
Furniture, fixtures and equipment	1,774	1,653
Tenant improvements	64,120	61,303
Operating real estate, gross	1,658,623	1,606,890
Less: accumulated depreciation	(107,538)	(95,356)
Operating real estate, net	$ 1,551,085	$ 1,511,534

XML

Operating Real Estate - Real Estate Held for Sale (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2018 USD ($) property	Mar. 31, 2017 USD ($)	Apr. 30, 2018 USD ($)	Dec. 31, 2017 USD ($)
Real Estate Properties [Line Items]
Operating Real Estate, Net	$ 176,088			$ 169,082
Revenue	3,500	$ 3,600
Pretax loss	(100)	$ (1,300)
Depreciation and amortization	$ 20,300
Held-for-sale
Real Estate Properties [Line Items]
Properties | property	2
Operating Real Estate, Net	$ 165,238
Intangible Assets, Net	5,281
Other Assets	5,569
Total assets held-for-sale	176,088
Intangible Liabilities, Net	667
Other Liabilities	355
Total liabilities held-for-sale	$ 1,022
Held-for-sale | Lisbon, Portugal
Real Estate Properties [Line Items]
Properties | property	1
Operating Real Estate, Net	$ 12,250
Intangible Assets, Net	64
Other Assets	1,175
Total assets held-for-sale	13,489
Intangible Liabilities, Net	0
Other Liabilities	355
Total liabilities held-for-sale	$ 355
Held-for-sale | Rotterdam, Netherlands(3)
Real Estate Properties [Line Items]
Properties | property	1
Operating Real Estate, Net	$ 152,988
Intangible Assets, Net	5,217
Other Assets	4,394
Total assets held-for-sale	162,599
Intangible Liabilities, Net	667
Other Liabilities	0
Total liabilities held-for-sale	$ 667
Subsequent Event | Maastoren | Held-for-sale
Real Estate Properties [Line Items]
Consideration received			$ 195,000

XML

Operating Real Estate - Narrative (Details) $ in Millions	3 Months Ended
	Mar. 31, 2018 USD ($)	Mar. 31, 2017 USD ($) property
Held-for-sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Escrow reserves	$ 1.2
One Non-Core Asset Sold
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of properties sold | property		1
Sales Price		$ 20.6
Net proceeds		19.9
Realized gain		3.4
Prior Disposal Release From Escrow | Held-for-sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Realized gain	$ 0.6	$ 1.7

XML

Preferred Equity Investments (Details) $ in Thousands, £ in Millions	3 Months Ended
	Mar. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)	May 31, 2017 USD ($)	May 31, 2017 GBP (£)
Mortgage Loans on Real Estate [Line Items]
Principal Amount	$ 36,770
Carrying Value	$ 36,770	$ 35,347
Fixed Rate	8.00%
20 Gresham Street
Mortgage Loans on Real Estate [Line Items]
Carrying Value			$ 36,800	£ 26.2

XML

Borrowings (Details) - USD ($) $ in Thousands	1 Months Ended		3 Months Ended	8 Months Ended
	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2018	Aug. 31, 2017	Dec. 31, 2017
Debt Instrument [Line Items]
Principal Amount			$ 1,272,998		$ 1,234,642
Carrying Value			1,262,115		1,223,443
Mortgage and Other Notes Payable
Debt Instrument [Line Items]
Principal Amount			1,272,998		1,234,642
Carrying Value			$ 1,262,115		1,223,443
Mortgage and Other Notes Payable | SEB Portfolio | Minimum
Debt Instrument [Line Items]
Prepayment fee percentage range on principal			1.00%
Mortgage and Other Notes Payable | SEB Portfolio | Maximum
Debt Instrument [Line Items]
Prepayment fee percentage range on principal			2.00%
Mortgage and Other Notes Payable | Trias Portfolio | Minimum
Debt Instrument [Line Items]
Prepayment fee percentage range on principal			0.25%
Mortgage and Other Notes Payable | Trias Portfolio | Maximum
Debt Instrument [Line Items]
Prepayment fee percentage range on principal			1.00%
Mortgage and Other Notes Payable | EURIBOR Plus 2.70% | Trias Portfolio 1
Debt Instrument [Line Items]
Principal Amount			$ 10,674		10,378
Carrying Value			$ 10,437		10,116
Increase in loan amount		$ 5,900
Mortgage and Other Notes Payable | EURIBOR Plus 2.70% | Trias Portfolio 1 | EURIBOR
Debt Instrument [Line Items]
Basis spread on variable rate			2.70%
Mortgage and Other Notes Payable | EURIBOR Plus 1.55% | Trias Portfolio 2
Debt Instrument [Line Items]
Principal Amount			$ 94,188		91,577
Carrying Value			$ 93,552		90,880
Mortgage and Other Notes Payable | EURIBOR Plus 1.55% | Trias Portfolio 2 | EURIBOR
Debt Instrument [Line Items]
Basis spread on variable rate			1.55%
Mortgage and Other Notes Payable | EURIBOR Plus 1.55% | SEB Portfolio 1
Debt Instrument [Line Items]
Principal Amount			$ 326,365		317,317
Carrying Value			$ 322,275		313,153
Mortgage and Other Notes Payable | EURIBOR Plus 1.55% | SEB Portfolio 1 | EURIBOR
Debt Instrument [Line Items]
Basis spread on variable rate	1.55%		1.55%	1.80%
Mortgage and Other Notes Payable | EURIBOR Plus 1.65% | Trias Portfolio 3
Debt Instrument [Line Items]
Principal Amount			$ 46,092		44,814
Carrying Value			$ 45,069		43,684
Mortgage and Other Notes Payable | EURIBOR Plus 1.65% | Trias Portfolio 3 | EURIBOR
Debt Instrument [Line Items]
Basis spread on variable rate			1.65%
Mortgage and Other Notes Payable | GBP LIBOR Plus 2.70% | Trias Portfolio 4
Debt Instrument [Line Items]
Principal Amount			$ 18,023		17,326
Carrying Value			$ 17,816		17,123
Mortgage and Other Notes Payable | GBP LIBOR Plus 2.70% | Trias Portfolio 4 | GBP LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate			2.70%
Mortgage and Other Notes Payable | GBP LIBOR Plus 1.80% | SEB Portfolio 2
Debt Instrument [Line Items]
Principal Amount			$ 260,924		250,825
Carrying Value			$ 258,022		247,902
Mortgage and Other Notes Payable | GBP LIBOR Plus 1.80% | SEB Portfolio 2 | GBP LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate			1.55%
Mortgage and Other Notes Payable | Fixed rate at 2.30% | SEB Portfolio - Preferred
Debt Instrument [Line Items]
Principal Amount			$ 105,484		102,560
Carrying Value			$ 105,204		102,271
Stated interest rate			2.30%
Mortgage and Other Notes Payable | EURIBOR Plus 1.30% | Trianon Tower
Debt Instrument [Line Items]
Principal Amount			$ 406,567		395,294
Carrying Value			$ 405,059		393,763
Mortgage and Other Notes Payable | EURIBOR Plus 1.30% | Trianon Tower | EURIBOR
Debt Instrument [Line Items]
Basis spread on variable rate			1.30%
Mortgage and Other Notes Payable | EURIBOR Plus 1.30% | Trianon Tower | EURIBOR | Repayment provision through June 30, 2018
Debt Instrument [Line Items]
Prepayment fee percentage range on principal			0.60%
Mortgage and Other Notes Payable | EURIBOR Plus 1.30% | Trianon Tower | EURIBOR | Repayment provision through June 30, 2019
Debt Instrument [Line Items]
Prepayment fee percentage range on principal			0.30%
Mortgage and Other Notes Payable | Fixed rate at 1.00% | Trias Portfolio
Debt Instrument [Line Items]
Stated interest rate			1.00%
Maturity			30 years
Mortgage and Other Notes Payable | Fixed rate at 1.00% | Other-Preferred
Debt Instrument [Line Items]
Principal Amount			$ 4,681		4,551
Carrying Value			$ 4,681		$ 4,551
Stated interest rate			1.00%
Mortgage and Other Notes Payable | Variable rate | SEB Portfolio - Preferred
Debt Instrument [Line Items]
Stated interest rate			2.30%
Mortgage and Other Notes Payable | Variable rate | SEB Portfolio - Preferred | May 2019 through May 2022
Debt Instrument [Line Items]
Stated interest rate			12.00%
Mortgage and Other Notes Payable | Variable rate | SEB Portfolio - Preferred | May 2022 through Maturity
Debt Instrument [Line Items]
Stated interest rate			15.00%
Interest rate caps | Not designated as hedges | GBP LIBOR | Maximum
Debt Instrument [Line Items]
Interest rate caps			2.00%
Interest rate caps | Not designated as hedges | EURIBOR | Minimum
Debt Instrument [Line Items]
Interest rate caps			0.50%

XML

Borrowings - Reconciliation of Principal to Carrying Amount (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Debt Disclosure [Abstract]
Principal amount	$ 1,272,998	$ 1,234,642
Deferred financing costs, net	(10,883)	(11,199)
Carrying value	$ 1,262,115	$ 1,223,443

XML

Borrowings - Scheduled Principal on Borrowings (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Years ending December 31:
Total	$ 1,272,998	$ 1,234,642
Mortgage and Other Notes Payable
Debt Instrument [Line Items]
Remaining 2018	0
Years ending December 31:
2019	0
2020	168,977
2021	0
2022	0
2023	406,567
2024 and thereafter	697,454
Total	$ 1,272,998

XML

Borrowings - Narrative (Details) - USD ($)	1 Months Ended
	Mar. 31, 2018	Apr. 30, 2017	May 31, 2016	Dec. 31, 2017	Oct. 31, 2016
Debt Instrument [Line Items]
Principal amount	$ 1,272,998,000			$ 1,234,642,000
Credit Facility | Revolving Credit Facility
Debt Instrument [Line Items]
Corporate revolving credit facility	70,000,000	$ 35,000,000	$ 75,000,000.0		$ 35,000,000.0
Initial term		2 years	1 year
Higher borrowing capacity	$ 105,000,000	$ 70,000,000
Debt instrument term extension option	1 year
Credit facility	$ 0

XML

Related Party Arrangements (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions		3 Months Ended		12 Months Ended
	Nov. 09, 2017	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Affiliated Entity | Colony NorthStar, Inc.
Related Party Transaction [Line Items]
Asset management agreement, assets under management		$ 10,000.0
Asset management fee expense, related party		$ 4.2	$ 3.6
Affiliated Entity | Tier One | Colony NorthStar, Inc.
Related Party Transaction [Line Items]
Asset management agreement, incentive fee				15.00%
Affiliated Entity | Tier Two | Colony NorthStar, Inc.
Related Party Transaction [Line Items]
Asset management agreement, incentive fee				25.00%
Affiliated Entity | Minimum | Tier One | Colony NorthStar, Inc.
Related Party Transaction [Line Items]
Asset management agreement, incentive fee, per share (in dollars per share)				$ 0.30
Affiliated Entity | Minimum | Tier Two | Colony NorthStar, Inc.
Related Party Transaction [Line Items]
Asset management agreement, incentive fee, per share (in dollars per share)				0.36
Affiliated Entity | Maximum | Tier One | Colony NorthStar, Inc.
Related Party Transaction [Line Items]
Asset management agreement, incentive fee, per share (in dollars per share)				$ 0.36
Affiliated Entity | Management fees | Colony NorthStar, Inc.
Related Party Transaction [Line Items]
Additional asset management fee			1.50%
Asset Manager | Colony NorthStar, Inc.
Related Party Transaction [Line Items]
Management agreement initial term	5 years
Management agreement renewal term	3 years
Notice period for declining to renew agreement	6 months
Termination fee as percentage of preceding twelve months management fee	300.00%
NAV threshhold	$ 2,000.0
Asset management agreement, incentive fee	20.00%
Incentive fee annual hurdle rate	10.00%
Incentive fee base price (in dollars per share)		$ 13.67
Measurement period number of trading days	10 days
Asset Manager | Internal Service Costs Allocation | Colony NorthStar, Inc.
Related Party Transaction [Line Items]
Related party transaction amount		$ 0.3
NorthStar Realty Europe Corp. | Colony NorthStar, Inc.
Related Party Transaction [Line Items]
Common stock owned (shares)		5.6
Ownership percentage by parent		10.30%
Tier One | Asset Manager | Colony NorthStar, Inc.
Related Party Transaction [Line Items]
Base management fee	1.50%
Tier Two | Asset Manager | Colony NorthStar, Inc.
Related Party Transaction [Line Items]
Base management fee	1.25%
Tier One | Asset Manager | Colony NorthStar, Inc.
Related Party Transaction [Line Items]
Overhead reimbursement percentage	20.00%
Service cost as percentage of GAV	0.0375%
Gross asset value threshhold	$ 2,500.0
Tier Two | Asset Manager | Colony NorthStar, Inc.
Related Party Transaction [Line Items]
Service cost as percentage of GAV	0.0313%
Gross asset value threshhold	$ 5,000.0
Tier Three | Asset Manager | Colony NorthStar, Inc.
Related Party Transaction [Line Items]
Service cost as percentage of GAV	0.025%
NorthStar Realty Europe Corp. (NRE) | Colony NorthStar, Inc.
Related Party Transaction [Line Items]
Equity method investment ownership percentage allowed under waiver	45.00%
Equity method investment ownership allowed upon agreement termination	9.80%
NorthStar Realty Europe Corp. (NRE) | Colony NorthStar, Inc. | Minimum
Related Party Transaction [Line Items]
Equity method investment ownership percentage voting threshhold	25.00%

XML

Compensation Expense - Narrative (Details) $ in Millions		1 Months Ended			3 Months Ended		12 Months Ended
	Oct. 31, 2015 shares	May 10, 2018 shares	Mar. 31, 2018 USD ($) shares	Mar. 31, 2016 shares	Mar. 31, 2018 USD ($) shares	Mar. 31, 2017 USD ($)	Dec. 31, 2017 shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options outstanding (shares)			1,917,000		1,917,000		1,994,000
Awards granted (shares)					330,000
Forfeited or canceled grants (shares)					341,000
Spinoff conversion ratio	0.1667
Conversion ratio	0.50
Common stock given as payout (shares)	0.3333
2015 Omnibus Stock Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized (shares)			10,000,000		10,000,000
Number of shares authorized, percent increase			2.00%		2.00%
Options outstanding (shares)			1,400,000		1,400,000
Common stock, capital shares reserved for future issuance (shares)			1,600,000		1,600,000
Shares unreserved and available for issuance (shares)			9,200,000		9,200,000
Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation expense | $					$ 0.6	$ 15.9
Equity-based compensation expense not yet recognized | $			$ 7.6		$ 7.6
Options outstanding (shares)			319,000		319,000		121,000
Awards granted (shares)					198,000
Forfeited or canceled grants (shares)					0
Restricted Stock | 2015 Omnibus Stock Incentive Plan | Executive Officer
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards granted (shares)							500,642
Vesting of restricted stock (shares)							379,594
Restricted Stock | Spin-off
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards granted (shares)				995,698
Award vesting period				4 years
Restricted Stock | Amended And Restated NRE Management Agreement
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards granted (shares)			198,000
Award vesting period			3 years
LTIP Units | 2015 Omnibus Stock Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock, capital shares reserved for future issuance (shares)			400,000		400,000
Absolute and Relative Restricted Stock Units (RSUs) | 2015 Omnibus Stock Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock, capital shares reserved for future issuance (shares)			1,200,000		1,200,000
Absolute and Relative Restricted Stock Units (RSUs) | Spin-off
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Forfeited or canceled grants (shares)					300,000
Restricted Stock Units (RSUs) | 2015 Omnibus Stock Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percent of performance-based equity instruments based on total shareholder return				50.00%
Percent of performance-based equity instruments, subject to total shareholder return relative to the MSCI US REIT index				50.00%
Restricted Stock Units (RSUs) | Spin-off
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards granted (shares)				1,493,551
Maximum award vesting rights based on absolute performance, percentage				100.00%
Maximum award vesting rights based on relative performance, percentage				125.00%
Restricted Stock Units (RSUs) | Amended And Restated NRE Management Agreement
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards granted (shares)			132,000
Maximum award vesting rights based on absolute performance, percentage			200.00%
Absolute Restricted Stock Units | Spin-off
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Forfeited or canceled grants (shares)					170,454
Relative Restricted Stock Units | Spin-off
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Forfeited or canceled grants (shares)					170,453
Subsequent Event | Restricted Stock | Spin-off
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized (shares)		150,000
Awards granted (shares)		150,000

XML

Compensation Expense - Common Units and Unvested Restricted Stock Activity (Details) shares in Thousands	3 Months Ended
	Mar. 31, 2018 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Beginning balance (shares)	1,994
New grants (shares)	330
Redeemed in period (shares)	(43)
Conversions in period (shares)	(23)
Forfeited or canceled grants (shares)	(341)
Ending balance (shares)	1,917
Weighted Average Grant Price
Beginning balance (in dollars per share) | $ / shares	$ 11.95
New grants (in dollars per share) | $ / shares	12.65
Redeemed in period (in dollars per share) | $ / shares	12.67
Conversions in period (in dollars per share) | $ / shares	11.92
Forfeited or canceled grants (in dollars per share) | $ / shares	12.60
Ending balance (in dollars per share) | $ / shares	$ 11.94
Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Beginning balance (shares)	121
New grants (shares)	198
Redeemed in period (shares)	0
Conversions in period (shares)	0
Forfeited or canceled grants (shares)	0
Ending balance (shares)	319
Common Units
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Beginning balance (shares)	420
New grants (shares)	0
Redeemed in period (shares)	(43)
Conversions in period (shares)	(23)
Forfeited or canceled grants (shares)	0
Ending balance (shares)	354
Performance RSUs
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Beginning balance (shares)	1,453
New grants (shares)	132
Redeemed in period (shares)	0
Conversions in period (shares)	0
Forfeited or canceled grants (shares)	(341)
Ending balance (shares)	1,244

XML

Stockholders' Equity - Narrative (Details)	Mar. 31, 2018 USD ($)
Equity [Abstract]
Authorized amount of outstanding common stock (up to)	$ 100,000,000

XML

Stockholders' Equity - Schedule of Share Repurchases (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	1 Months Ended	2 Months Ended	3 Months Ended
	May 07, 2018	May 07, 2018	Mar. 31, 2018	Mar. 31, 2017
Class of Stock [Line Items]
Shares repurchased (shares)			1,051
Average price paid per share (in dollars per share)			$ 12.70
Common stock repurchased			$ 13,350
Common stock repurchased (shares)				0
Subsequent Event
Class of Stock [Line Items]
Shares repurchased (shares)	2,383	3,434
Average price paid per share (in dollars per share)	$ 13.81	$ 13.47
Common stock repurchased	$ 32,918	$ 46,268

XML

Stockholders' Equity - Dividends Declared (Details) - $ / shares			3 Months Ended
	May 07, 2018	May 01, 2017	Mar. 31, 2018	Mar. 31, 2017
Class of Stock [Line Items]
Dividends per share of common stock (in dollars per share)		$ 0.15	$ 0.15	$ 0.15
Subsequent Event
Class of Stock [Line Items]
Dividends per share of common stock (in dollars per share)	$ 0.15

XML

Stockholders' Equity - Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Common Stock
Net income (loss) attributable to NorthStar Realty Europe Corp. common stockholders	$ (1,281)	$ (15,350)
Net income (loss) attributable to Unit Holders non-controlling interest	(15)	(193)
Net income (loss) attributable to common stockholders and Unit Holders	$ (1,296)	$ (15,543)
Weighted average shares of common stock (shares)	55,192,762	54,832,136
Weighted average Unit Holders (shares)	411,000	673,000
Weighted average shares of common stock and Unit Holders (shares)	55,603,500	55,504,981
Earnings (loss) per share:
Basic (in dollars per share)	$ (0.02)	$ (0.28)
Diluted (in dollars per share)	$ (0.02)	$ (0.28)
LTIP Units
Earnings (loss) per share:
Shares issued upon conversion of awards (shares)	1

XML

Non-controlling Interests (Details) $ in Thousands, € in Millions	3 Months Ended		12 Months Ended
	Mar. 31, 2018 USD ($) shares	Mar. 31, 2017 USD ($)	Dec. 31, 2017 USD ($)	Jul. 31, 2015 USD ($)	Jul. 31, 2015 EUR (€)
Noncontrolling Interest [Line Items]
Reallocation of interest in Operating Partnership (refer to Note 9)	$ 0	$ 0
Non-controlling ownership interest	0.70%
Net income (loss) attributable to Unit Holders non-controlling interest	$ (15)	(193)
Ownership percentage in disposed asset				5.50%	5.50%
Redeemable noncontrolling interest, equity, redemption value | €					€ 2.1
Non-controlling Interest in Subsidiaries Owning Trianon Tower
Noncontrolling Interest [Line Items]
Consideration received				$ 1,500
Non-controlling interest
Noncontrolling Interest [Line Items]
Reallocation of interest in Operating Partnership (refer to Note 9)	$ (20)	$ 2,879	$ 1,800
LTIP units | Non-controlling interest
Noncontrolling Interest [Line Items]
Number of units outstanding (shares) | shares	353,817

XML

Risk Management and Derivative Activities - Derivative Instruments Not Designated as Hedges (Details) $ in Thousands	Mar. 31, 2018 USD ($) instrument $ / unit	Dec. 31, 2017 USD ($) instrument
Foreign Currency Forwards Maturing In 2018
Derivative [Line Items]
Foreign currency option strike price (in dollars per share) | $ / unit	1.11
Foreign Currency Forwards Maturing In 2019
Derivative [Line Items]
Foreign currency option strike price (in dollars per share) | $ / unit	1.25
Not designated as hedges
Derivative [Line Items]
Number | instrument	33	35
Notional Amount	$ 1,316,646	$ 1,251,659
Fair Value Asset (Liability)	$ 758	$ 1,754
Not designated as hedges | Interest rate caps
Derivative [Line Items]
Number | instrument	26	31
Notional Amount	$ 1,211,087	$ 1,193,012
Fair Value Asset (Liability)	$ 7,100	$ 7,024
Not designated as hedges | Interest rate caps | EURIBOR | Minimum
Derivative [Line Items]
Interest rate caps	0.50%
Not designated as hedges | Interest rate caps | GBP LIBOR | Maximum
Derivative [Line Items]
Interest rate caps	2.00%
Not designated as hedges | Foreign currency forwards, net
Derivative [Line Items]
Number | instrument	7	4
Notional Amount	$ 105,559	$ 58,647
Fair Value Asset (Liability)	$ (6,342)	$ (5,270)

XML

Risk Management and Derivative Activities - Fair Value of Derivative Instruments (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Derivative assets | Interest rate caps
Derivative [Line Items]
Derivatives	$ 7,100	$ 7,024
Derivative liabilities | Foreign currency forwards
Derivative [Line Items]
Derivatives	$ 6,342	$ 5,270

XML

Risk Management and Derivative Activities - Effect of Derivative Instruments in the Combined Consolidated Statements of Operations (Details) - Unrealized gain (loss) on derivatives and other(1) - Derivatives - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Derivative [Line Items]
Net cash receipt (payment) on derivatives	$ (1,740)	$ 817
Interest rate caps
Derivative [Line Items]
Adjustments to fair value	(119)	319
Foreign currency forwards
Derivative [Line Items]
Adjustments to fair value	$ (1,072)	$ (1,264)

XML

Risk Management and Derivative Activities - Narrative (Details)	Mar. 31, 2018 USD ($) instrument	Mar. 31, 2017 USD ($) instrument
Derivative [Line Items]
Cash collateral held by counter parties | $	$ 0	$ 0
Designated as hedge
Derivative [Line Items]
Number of derivative instruments | instrument	0	0

XML

Fair Value (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	$ 7,100	$ 7,024
Derivative liabilities	6,342	5,270
Principal/Notional Amount
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	1,211,087	1,193,012
Preferred equity investment	36,770	35,347
Derivative liabilities	105,559	58,647
Principal/Notional Amount | Mortgage and other notes payable, net
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Mortgage and other notes payable, net	1,272,998	1,234,642
Carrying Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	7,100	7,024
Preferred equity investment	36,770	35,347
Derivative liabilities	6,342	5,270
Carrying Value | Mortgage and other notes payable, net
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Mortgage and other notes payable, net	1,262,115	1,223,443
Fair Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	7,100	7,024
Preferred equity investment	37,224	35,783
Derivative liabilities	6,342	5,270
Fair Value | Mortgage and other notes payable, net
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Mortgage and other notes payable, net	$ 1,266,114	$ 1,231,321

XML

Commitments and Contingencies - Schedule of Future Minimum Rental Payments (Details)	3 Months Ended
	Mar. 31, 2018 lessee
Commitments and Contingencies Disclosure [Abstract]
Number of significant lessees	1
Significant lessee remaining lease term	6 years 2 months 12 days

XML

Segment Reporting (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2018 USD ($) segment	Mar. 31, 2017 USD ($)	Dec. 31, 2017 USD ($)
Segment Reporting Information [Line Items]
Number of reporting segments | segment	3
Revenues
Rental income	$ 27,224	$ 25,536
Escalation income	5,341	5,161
Interest income	729	0
Expenses
Interest expense	6,107	6,383
Management fee, related party	4,157	3,559
Transaction costs	481	260
Depreciation and amortization	11,651	12,563
Other, net	12,136	23,731
Income (loss) before income tax benefit (expense)	(1,238)	(15,799)
Income tax benefit (expense)	(39)	273
Net income (loss)	(1,277)	(15,526)
Amortization of deferred financing costs	717	857
Total Assets	1,979,664		$ 1,940,917
Real Estate Equity
Revenues
Rental income	27,224	25,536
Escalation income	5,341	5,161
Interest income	0
Expenses
Interest expense	5,955	6,119
Management fee, related party	0	0
Transaction costs	0	0
Depreciation and amortization	11,651	12,563
Other, net	7,189	4,971
Income (loss) before income tax benefit (expense)	7,770	7,044
Income tax benefit (expense)	(39)	273
Net income (loss)	7,731	7,317
Amortization of deferred financing costs	600	700
Total Assets	1,936,271		1,901,282
Preferred Equity
Revenues
Rental income	0
Escalation income	0
Interest income	729
Expenses
Interest expense	0
Management fee, related party	0
Transaction costs	0
Depreciation and amortization	0
Other, net	0
Income (loss) before income tax benefit (expense)	729
Income tax benefit (expense)	0
Net income (loss)	729
Total Assets	37,614		37,133
Corporate
Revenues
Rental income	0	0
Escalation income	0	0
Interest income	0
Expenses
Interest expense	152	264
Management fee, related party	4,157	3,559
Transaction costs	481	260
Depreciation and amortization	0	0
Other, net	4,947	18,760
Income (loss) before income tax benefit (expense)	(9,737)	(22,843)
Income tax benefit (expense)	0	0
Net income (loss)	(9,737)	(22,843)
Amortization of deferred financing costs	100	$ 200
Total Assets	$ 5,779		$ 2,502

XML

Segment Reporting - Geographical Segments (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Segment Reporting Information [Line Items]
Rental and escalation income	$ 27,224	$ 25,536
Office
Segment Reporting Information [Line Items]
Rental and escalation income	25,912	24,467
Office | Germany
Segment Reporting Information [Line Items]
Rental and escalation income	11,964	9,915
Office | United Kingdom
Segment Reporting Information [Line Items]
Rental and escalation income	6,146	6,791
Office | France
Segment Reporting Information [Line Items]
Rental and escalation income	4,931	4,234
Office | Other
Segment Reporting Information [Line Items]
Rental and escalation income	2,871	3,527
Non-Office | Other
Segment Reporting Information [Line Items]
Rental and escalation income	$ 1,312	$ 1,069

XML

Subsequent Events (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands			1 Months Ended		2 Months Ended	3 Months Ended
	May 07, 2018	May 01, 2017	May 07, 2018	Apr. 30, 2018	May 07, 2018	Mar. 31, 2018	Mar. 31, 2017
Subsequent Event [Line Items]
Dividends per share of common stock (in dollars per share)		$ 0.15				$ 0.15	$ 0.15
Shares repurchased (shares)						1,051
Common stock repurchased						$ 13,350
Subsequent Event
Subsequent Event [Line Items]
Dividends per share of common stock (in dollars per share)	$ 0.15
Shares repurchased (shares)			2,383		3,434
Common stock repurchased			$ 32,918		$ 46,268
Maastoren | Held-for-sale | Subsequent Event
Subsequent Event [Line Items]
Consideration received				$ 195,000
Realized gain				$ 60,000