10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
class common stock, par value $0.01 per share	NRE	New York Stock Exchange

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 every Interactive Data File required to be submitted 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 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 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, 50,289,245 shares outstanding as of August 2, 2019.

NORTHSTAR REALTY EUROPE CORP.

FORM 10-Q

TABLE OF CONTENTS

Index		Page
Part I.	Financial Information	6
Item 1.	Financial Statements	6
	Consolidated Balance Sheets as of June 30, 2019 (unaudited) and December 31, 2018	6
	Consolidated Statements of Operations (unaudited) for the three and six months ended June 30, 2019 and 2018	7
	Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three and six months ended June 30, 2019 and 2018	8
	Consolidated Statements of Equity (unaudited) for the three and six months ended June 30, 2019 and 2018	9
	Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2019 and 2018	11
	Notes to Consolidated Financial Statements (unaudited)	13
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	59
Item 4.	Controls and Procedures	61
Part II.
Item 1.	Legal Proceedings	62
Item 1A.	Risk Factors	62
Item 4.	Mine Safety Disclosures	63
Item 6.	Exhibits	64
Signatures		65

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 Merger (as defined in Note 1 to the financial statements included in Part I Item I) on our business, including, but not limited to, diversion of management’s attention due to the Merger, the impact of the announcement of the Merger on relationships with third parties, including commercial counterparties, tenants and competitors and risks associated with the loss and ongoing replacement of key personnel;

• our ability to consummate the Merger on the contemplated terms or at all;

• the ability of Colony Capital Inc., or CLNY, to effectively manage our company pending the Merger;

• 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 and the uncertain terms and timing of Brexit;

• 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 CLNY 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 CLNY among us and CLNY’s other sponsored or managed companies and strategic vehicles and various conflicts of interest in our relationship with CLNY;

• 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;

• the impact of adverse conditions affecting office properties;

3

• illiquidity of properties in our portfolio;

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

• 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, including potential litigation relating to the Merger, 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;

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

• 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;

• 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 Securities and Exchange Commission (“SEC”) included in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 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.

Additional Information and Where to Find It

This Quarterly Report on Form 10-Q may be deemed to be solicitation material in respect of the Merger. In connection with the Merger, NorthStar Realty Europe Corp. (the “Company”) filed a preliminary proxy statement on Schedule 14A on August 1, 2019, and intends to file other relevant documents with the SEC, including a proxy statement in definitive form. BEFORE MAKING ANY VOTING DECISION, STOCKHOLDERS OF THE COMPANY ARE URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE DEFINITIVE PROXY STATEMENT WHEN IT BECOMES AVAILABLE AND ANY OTHER DOCUMENTS TO BE FILED WITH THE SEC IN CONNECTION WITH THE MERGER OR INCORPORATED BY REFERENCE IN THE PROXY STATEMENT, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE MERGER.

4

Investors and security holders will be able to obtain, free of charge, a copy of the definitive proxy statement (when available) and other relevant documents filed with the SEC from the SEC’s website at http://www.sec.gov. In addition, the proxy statement and the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to section 13(a) or 15(d) of the Exchange Act will be available free of charge through the Company’s website at https://www.nrecorp.com/ as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC.

Participants in Solicitation

The Company and its directors and executive officers may be deemed to be participants in the solicitation of proxies from its stockholders in respect of the Merger. Information about the directors and executive officers of the Company is set forth in the proxy statement for the Company’s 2019 annual stockholders’ meeting, which was filed with the SEC on July 11, 2019. Investors may obtain additional information regarding the interest of such participants by reading the proxy statement regarding the Merger.

5

PART I

Item 1.    Financial Statements

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

(Unaudited)

	June 30, 2019			December 31, 2018
Assets
Operating real estate, gross	$	843,643		$	844,809
Less: accumulated depreciation	(72,033		)	(64,187		)
Operating real estate, net	771,610			780,622
Preferred equity investments	38,952			39,090
Cash and cash equivalents	377,393			438,931
Restricted cash	5,332			5,592
Receivables, net of allowance of $130 and $236 as of June 30, 2019 and December 31, 2018, respectively	5,347			8,989
Assets held for sale	—			73,345
Derivative assets, at fair value	3,288			6,440
Intangible assets, net and goodwill	23,834			58,173
Other assets, net	46,470			14,317
Total assets	$	1,272,226		$	1,425,499
Liabilities
Mortgage and other notes payable, net	$	546,349		$	682,912
Accounts payable and accrued expenses	20,155			22,367
Due to affiliates (refer to Note 6)	4,041			9,630
Intangible liabilities, net	8,825			9,722
Liabilities related to assets held for sale	—			1,498
Other liabilities	18,141			21,267
Total liabilities	597,511			747,396
Commitments and contingencies
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 June 30, 2019 and December 31, 2018	—			—
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 50,289,639 and 49,807,448 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively	502			498
Additional paid-in capital	864,696			862,240
Retained earnings (accumulated deficit)	(176,047		)	(170,669		)
Accumulated other comprehensive income (loss)	(18,498		)	(18,424		)
Total NorthStar Realty Europe Corp. stockholders’ equity	670,653			673,645
Noncontrolling interests	4,062			4,458
Total equity	674,715			678,103
Total liabilities and equity	$	1,272,226		$	1,425,499

Refer to accompanying notes to consolidated financial statements.

6

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands, Except Per Share Data)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Revenues
Lease income	$	16,499		$	30,162		$	33,583		$	62,727
Interest income	1,554			706			3,165			1,435
Other income	107			143			582			421
Total revenues	18,160			31,011			37,330			64,583
Expenses
Properties - operating expenses	3,557			6,930			6,463			13,732
Interest expense	3,413			5,855			7,093			11,962
Transaction costs	1,827			376			2,589			857
Management fee, related party	3,848			4,223			7,736			8,380
Other expenses	734			1,273			1,471			2,697
General and administrative expenses	1,317			1,801			3,053			3,679
Compensation expense	1,950			1,186			3,237			1,551
Depreciation and amortization	5,908			11,976			11,821			23,627
Total expenses	22,554			33,620			43,463			66,485
Other income (loss)
Other gain (loss), net	14			3,531			(2,503		)	529
Extinguishment of debt	(476		)	(1,441		)	(670		)	(1,441		)
Gain on sales, net	3,671			38,319			21,396			39,585
Income (loss) before income tax benefit (expense)	(1,185		)	37,800			12,090			36,771
Income tax benefit (expense)	(249		)	76			(2,401		)	37
Net income (loss)	(1,434		)	37,876			9,689			36,808
Net (income) loss attributable to noncontrolling interests	6			(217		)	(56		)	(221		)
Net income (loss) attributable to NorthStar Realty Europe Corp. common stockholders	$	(1,428	)	$	37,659		$	9,633		$	36,587
Earnings (loss) per share:
Basic	$	(0.03	)	$	0.72		$	0.19		$	0.68
Diluted	$	(0.03	)	$	0.69		$	0.19		$	0.65
Weighted average number of shares:
Basic	49,448,507			51,858,645			49,391,523			53,455,635
Diluted	49,448,507			54,007,807			50,749,631			55,432,191

Refer to accompanying notes to consolidated financial statements.

7

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Dollars in Thousands)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Net income (loss)	$	(1,434	)	$	37,876		$	9,689		$	36,808
Other comprehensive income (loss):
Foreign currency translation adjustment, net	(176		)	(39,923		)	(74		)	(19,922		)
Total other comprehensive income (loss)	(176		)	(39,923		)	(74		)	(19,922		)
Comprehensive income (loss)	(1,610		)	(2,047		)	9,615			16,886
Comprehensive (income) loss attributable to noncontrolling interests
Net income (loss)	6			(217		)	(56		)	(221		)
Foreign currency translation adjustment, net	—			270			—			140
Total comprehensive (income) loss attributable to noncontrolling interests	6			53			(56		)	(81		)
Comprehensive income (loss) attributable to NorthStar Realty Europe Corp. common stockholders	$	(1,604	)	$	(1,994	)	$	9,559		$	16,805

Refer to accompanying notes to consolidated financial statements.

8

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, 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)	—		—			365			—			—			365			—			365
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 (loss)	—		—			—			—			19,871			19,871			130			20,001
Dividends on common stock and equity-based compensation(1)	—		—			—			(8,332		)	—			(8,332		)	(60		)	(8,392		)
Net income (loss)	—		—			—			(1,072		)	—			(1,072		)	4			(1,068		)
Balance as of March 31, 2018 (Unaudited)	54,572		$	546		$	927,799		$	(356,457	)	$	45,489		$	617,377		$	3,973		$	621,350
Reallocation of interest in Operating Partnership (refer to Note 9)	—		—			105			—			—			105			(105		)	—
Distribution to noncontrolling interest	—		—			—			—			—			—			(131		)	(131		)
Redemption of Common Units	—		—			—			—			—			—			(31		)	(31		)
Amortization of equity-based compensation (refer to Note 7)	—		—			1,311			—			—			1,311			—			1,311
Issuance and vesting of restricted stock, net of tax withholding	150		2			(2		)	—			—			—			—			—
Retirement of shares of common stock	(4,018	)	(40		)	(56,255		)	—			—			(56,295		)	—			(56,295		)
Other comprehensive (loss)	—		—			—			—			(39,653		)	(39,653		)	(270		)	(39,923		)
Dividends on common stock and equity-based compensation	—		—			—			(7,755		)	—			(7,755		)	(53		)	(7,808		)
Net income (loss)	—		—			—			37,659			—			37,659			217			37,876
Balance as of June 30, 2018 (Unaudited)	50,704		$	508		$	872,958		$	(326,553	)	$	5,836		$	552,749		$	3,600		$	556,349

________________

(1) For each of the three months ended March 31, 2018 and June 30, 2018, the Company paid $0.15 of dividends per share of common stock.

Refer to accompanying notes to consolidated financial statements.

9

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY (Continued)

(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, 2018	49,807		$	498		$	862,240		$	(170,669	)	$	(18,424	)	$	673,645		$	4,458		$	678,103
Reallocation of interest in Operating Partnership (refer to Note 9)	—		—			186			—			—			186			(186		)	—
Conversion of Common Units to common stock (refer to Note 9)	22		—			132			—			—			132			(132		)	—
Amortization of equity-based compensation (refer to Note 7)	—		—			1,287			—			—			1,287			—			1,287
Issuance and vesting of restricted stock, net of tax withholding	(46	)	(1		)	(733		)	—			—			(734		)	—			(734		)
Other comprehensive income (loss)	—		—			—			—			102			102			—			102
Dividends on common stock and equity-based compensation(1)	—		—			—			(7,455		)	—			(7,455		)	(47		)	(7,502		)
Net income (loss)	—		—			—			11,061			—			11,061			62			11,123
Balance as of March 31, 2019 (Unaudited)	49,783		$	497		$	863,112		$	(167,063	)	$	(18,322	)	$	678,224		$	4,155		$	682,379
Reallocation of interest in Operating Partnership (refer to Note 9)	—		—			40			—			—			40			(40		)	—
Amortization of equity-based compensation (refer to Note 7)	—		—			1,950			—			—			1,950			—			1,950
Issuance and vesting of restricted stock, net of tax withholding	507		5			(406		)	—			—			(401		)	—			(401		)
Other comprehensive income (loss)	—		—			—			—			(176		)	(176		)	—			(176		)
Dividends on common stock and equity-based compensation(1)	—		—			—			(7,556		)	—			(7,556		)	(47		)	(7,603		)
Net income (loss)	—		—			—			(1,428		)	—			(1,428		)	(6		)	(1,434		)
Balance as of June 30, 2019 (Unaudited)	50,290		$	502		$	864,696		$	(176,047	)	$	(18,498	)	$	670,653		$	4,062		$	674,715

(1) For each of the three months ended March 31, 2019 and June 30, 2019, the Company paid $0.15 of dividends per share of common stock.

Refer to accompanying notes to consolidated financial statements.

10

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

(Unaudited)

	Six Months Ended June 30,
	2019			2018
Cash flows from operating activities:
Net income (loss)	$	9,689		$	36,808
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	11,821			23,627
Amortization of deferred financing costs	833			1,591
Amortization of equity-based compensation	3,237			1,551
Allowance for uncollectible accounts	146			492
Other (gain) loss, net	2,503			(529		)
Gain on sales, net	(21,396		)	(39,585		)
Extinguishment of debt	670			1,441
Amortization of capitalized above/below market leases	(499		)	259
Straight line rental income	324			(5,080		)
Deferred income tax (benefit)/expense, net	555			11
Changes in assets and liabilities:
Receivables	460			2,520
Other assets	(2,012		)	(3,067		)
Accounts payable and accrued expenses	(523		)	(4,181		)
Due to related party	(5,589		)	948
Other liabilities	(1,884		)	(709		)
Net cash provided by (used in) operating activities	(1,665		)	16,097
Cash flows from investing activities:
Improvements of operating real estate	(3,220		)	(8,171		)
Proceeds from sale of operating real estate	93,687			188,523
Settlement of foreign currency forwards	2,562			(4,371		)
Escrow release	562			3,305
Other deposits	—			4,746
Deferred leasing costs	(523		)	(694		)
Net cash provided by (used in) investing activities	93,068			183,338
Cash flows from financing activities:
Repayment of mortgage and other notes payable	(132,536		)	(122,145		)
Borrowings from credit facility	—			20,000
Repayment of credit facility	—			(20,000		)
Payment of financing costs	—			(811		)
Purchase of derivatives	—			(3,083		)
Issuance and vesting of restricted stock, net of tax withholding	(1,135		)	—
Repurchase of common stock	—			(69,352		)
Dividends	(15,105		)	(16,200		)
Redemption of Common Units	—			(583		)
Distributions to noncontrolling interest	—			(113		)
Net cash provided by (used in) financing activities	(148,776		)	(212,287		)
Effect of foreign currency translation on cash and cash equivalents and restricted cash	(6,030		)	(842		)
Net increase (decrease) in cash and cash equivalents and restricted cash	(63,403		)	(13,694		)
Cash and cash equivalents and restricted cash—beginning of period	446,128			71,582
Cash and cash equivalents and restricted cash—end of period	$	382,725		$	57,888

Refer to accompanying notes to consolidated financial statements.

11

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands) (Continued)

(Unaudited)

	Six Months Ended June 30,
	2019		2018
Reconciliation of cash, cash equivalents and restricted cash
Beginning of the period
Cash and cash equivalents	$	438,931	$	64,665
Restricted cash	5,592		6,917
Cash and restricted cash included in assets held for sale	1,605		—
Total cash, cash equivalents and restricted cash, beginning of period	$	446,128	$	71,582
End of period
Cash and cash equivalents	$	377,393	$	51,036
Restricted cash	5,332		6,852
Cash and restricted cash included in assets held for sale	—		—
Total cash, cash equivalents and restricted cash, end of period	$	382,725	$	57,888
Supplemental disclosure of non-cash investing and financing activities:
Conversion of Common Units to common stock	$	132	$	216
Reclassification of other assets and liabilities to assets held for sale	556		388
Retirement of shares of common stock	—		242
Reallocation of interest in Operating Partnership	226		85
Accrued capital expenditures, deferred assets	1,016		1,007

Refer to accompanying notes to consolidated financial statements.

12

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 Colony Capital, Inc. (“Colony Capital” or “CLNY”), formerly known as Colony NorthStar, Inc., before June 25, 2018.

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 Agreement with AXA Investment Managers

In July 2019, the Company announced that it had entered into a merger agreement (the “Merger Agreement”) with certain entities managed by AXA Investment Managers - Real Assets (“AXA Investment Managers”) under which the Company will merge with and into a wholly owned subsidiary of AXA Investment Managers (“Merger Sub”) with Merger Sub as the surviving entity in the merger (the “Merger”). The surviving entity of the Merger will not be a publicly-traded company and will become a wholly owned subsidiary of a fund managed by AXA Investment Managers. The Merger has been approved by the Company’s board of directors (the “Board”) upon the recommendation of the Strategic Review Committee of the Board consisting solely of independent directors of the Company (refer to Note 14 for more information).

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 for the fiscal year ended December 31, 2018, 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.

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.

13

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Reclassifications

Certain prior period amounts have been reclassified in the consolidated financial statements to conform to current period presentation. Unrealized gain (loss) on derivatives and other has been renamed to other gain (loss), net and realized gain (loss) on sales and other has been renamed to gain on sales, net for presentational purposes only. Additionally, the Company has reclassified the gain (loss) on net cash on derivatives from realized gain (loss) on sales and other to other gain (loss), net on the consolidated statements of operations for the three and six months endedJune 30, 2018 (refer to Note 10).

Finally, in connection with the new leasing guidance under ASU 2016-02, which the Company adopted on January 1, 2019, the Company has combined the rental income and escalation income line items into one line item, lease income. Further, in connection with the new leasing guidance, the Company has reclassified below market ground lease from intangible assets, net and goodwill on the consolidated balance sheets to the operating lease right of use asset recorded in other assets, net and operating lease liability recorded in other liabilities on the consolidated balance sheets as of June 30, 2019 (refer below for details on the new guidance).

Prior Period Adjustments

In connection with the new share-based payment guidance under ASU 2018-07, which the Company early adopted on July 1, 2018, the Company was required to retrospectively adjust compensation expense for the three and six months endedJune 30, 2018 by $1.6 million and $1.8 million, respectively. This prior period adjustment increased the previously stated earnings per share (“EPS”) disclosed for the three months ended June 30, 2018 by $0.03 per basic and dilutive share, respectively, and for the six months ended June 30, 2018 by $0.04 per basic share and $0.03 per dilutive share

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, 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 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 an operating segment, 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 June 30, 2019 and December 31, 2018 (dollars in thousands):

	June 30, 2019							December 31, 2018
	Gross Amount		Accumulated Amortization			Net		Gross Amount		Accumulated Amortization			Net
Intangible assets:
In-place lease	$	40,116	$	(24,575	)	$	15,541	$	40,545	$	(22,031	)	$	18,514
Above-market lease	3,032		(1,581		)	1,451		3,042		(1,401		)	1,641
Below-market ground lease(1)	—		—			—		32,552		(1,420		)	31,132
Goodwill(2)	6,842		N/A			6,842		6,886		N/A			6,886
Total	$	49,990	$	(26,156	)	$	23,834	$	83,025	$	(24,852	)	$	58,173
Intangible liabilities:
Below-market lease	$	16,252	$	(7,427	)	$	8,825	$	16,305	$	(6,583	)	$	9,722
Total	$	16,252	$	(7,427	)	$	8,825	$	16,305	$	(6,583	)	$	9,722

_____________________________

(1) Upon adoption of the new lease standard on January 1, 2019, the Company has reclassified below market ground lease from intangible assets, net and goodwill on the consolidated balance sheets to the operating lease right of use asset recorded in other assets, net on the consolidated balance sheets as of June 30, 2019.

(2) 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)

The following table presents annual amortization of intangible assets and liabilities (dollars in thousands):

	Intangible Assets				Intangible Liabilities
	In-place Leases, Net		Above-market Leases, Net		Below-market Leases, Net
Remaining 2019	$	2,588	$	181	$	834
2020	3,567		362		1,638
2021	2,969		362		1,475
2022	2,146		343		1,475
2023	1,373		203		1,475
2024 and thereafter	2,898		—		1,928
Total	$	15,541	$	1,451	$	8,825

Other Assets and Other Liabilities

The following tables present a summary of other assets and other liabilities as of June 30, 2019 and December 31, 2018 (dollars in thousands):

	June 30, 2019		December 31, 2018
Other assets:
Prepaid expenses	$	1,468	$	581
Deferred leasing and other costs, net	3,786		3,710
Deferred tax assets, net	241		801
Straight-line rent, net	7,261		7,479
Operating lease right of use asset	30,875		—
Other	2,839		1,746
Total	$	46,470	$	14,317
	June 30, 2019		December 31, 2018
Other liabilities:
Deferred tax liabilities	$	5,090	$	5,123
Prepaid rent received and unearned revenue	9,264		9,867
Tenant security deposits	3,686		3,914
Prepaid escalation and other income	—		2,121
Operating lease liability	25		—
Other	76		242
Total	$	18,141	$	21,267

Revenue Recognition

Operating Real Estate

Lease 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. Lease income also 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.

15

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Rental amounts due under tenant leases are generally subject to scheduled adjustments. The following tables present approximate future rental income under noncancelable operating leases to be received over the next five years and thereafter as of June 30, 2019 and December 31, 2018 (dollars in thousands):

As of June 30, 2019(1)
Remaining 2019	$	27,365
Years ending December 31:
2020	43,975
2021	40,114
2022	35,325
2023	35,602
Thereafter	94,031
Total	$	276,412

_________________________

(1) Translated to the U.S. dollar using the currency exchange rate as of June 30, 2019.

As of December 31, 2018(1)
Years Ending December 31:
2019	$	56,237
2020	46,178
2021	42,021
2022	35,736
2023	35,796
Thereafter	93,781
Total	$	309,749

_________________________

(1) Translated to the U.S. dollar using the currency exchange rate as of December 31, 2018.

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.

Equity-Based Compensation

Equity-classified stock awards granted to non-employees that have a service condition are measured at fair value at date of grant. For time-base awards, fair value is determined based on the closing price of the Company’s common stock at date of grant. For market-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 using a Monte Carlo analysis under a risk-neutral premise using a risk-free interest rate. The Company recognizes compensation expense on a straight-line basis over the requisite service period of the awards, with the amount of compensation expense recognized at the end of a reporting period at least equal to the fair value of the portion of the award that has vested through that date. Compensation expense is adjusted for actual forfeitures upon occurrence.

Earnings Per Share

The Company’s basic equity per share (“EPS”) is calculated using the two-class method for each class of common stock and participating security as if all earnings had been distributed by dividing net income (loss) attributable to common stockholders by the weighted average number of common stock outstanding. Diluted EPS reflects the maximum potential dilution that could occur from the Company’s share-based compensation, consisting of unvested restricted stock awards, restricted stock units (“RSUs”), performance common stock 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). Potential dilutive shares are excluded from the calculation if they have an anti-dilutive effect in the period. The Company’s unvested restricted stock awards and LTIP Units contain rights to receive non-forfeitable dividends and thus are participating securities. Due to the existence of these participating securities, the two-class method of computing EPS is required, unless another

16

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

method is determined to be more dilutive. Under the two-class method, net income is first reduced for distributions declared on all classes of participating securities to arrive at undistributed earnings. Under the two-class method, net loss is reduced for distributions declared on participating securities only if such security has the right to participate in the earnings of the entity and an objectively determinable contractual obligation to share in net losses of the entity.

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 other comprehensive income (“OCI”) in the consolidated statements of equity. For the three months endedJune 30, 2019 and 2018, the Company reclassified $0.1 million and $7.8 million, respectively, of CTA to gain on sales, net in the consolidated statements of operations due to the sale of certain real estate assets (refer to Note 3). For the six months endedJune 30, 2019 and 2018, the Company reclassified $(1.1) million, and $8.1 million, respectively, of CTA to gain on sales, net 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 other gain (loss), net in the consolidated statements of operations.

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 and six months endedJune 30, 2019 and 2018. Dividends distributed for the year ended December 31, 2018 were characterized, for U.S. federal income tax purposes, as capital gains. 

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 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 $0.2 million and an income tax benefit of $0.1 million for the three months endedJune 30, 2019 and 2018, respectively. The Company recorded an income tax expense of $2.4 million and an income tax benefit of $0.1 million for the six months endedJune 30, 2019 and 2018, respectively. Income tax expense recorded for the six months ended June 30, 2019 includes a $2.0 million capital gains tax related to assets sold in the first quarter 2019.

17

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Recent Accounting Pronouncements: Accounting Standards Adopted in 2019

Leases - In February 2016, the Financial Accounting Standards Board (“FASB”) issued guidance (ASU No. 2016-02) which amended lease accounting standards, along with several clarifying amendments were codified in Accounting Standards Codification (“ASC”) Topic 842. The new standard primarily requires lessees to recognize their rights and obligations under most leases on balance sheet, to be capitalized as a right of use (“ROU”) asset and a corresponding liability for future lease obligations. Targeted changes were made to lessor accounting, primarily to align to the lessee model and the new revenue recognition standard.

The Company adopted the new lease standard and related amendments on January 1, 2019 using the modified retrospective method to leases existing or commencing on or after January 1, 2019. Comparative periods have not been restated and continue to re reported under the standards in effect for those prior periods.

ASC 842 limits the definition of initial direct costs to only the incremental costs of obtaining a lease, such as leasing commissions, for both lessee and lessor accounting. Indirect costs such as allocated overhead, certain legal fees and negotiation costs are no longer capitalized under the new standard. The application of ASC 842 did not have a material impact on the statement of operations.

The Company applied the package of practical expedients, which exempts the Company from having to reassess whether any expired or expiring contracts contain leases, revisit lease classification for any expired or expiring leases and reassess initial direct costs for any existing leases. The Company also elected the practical expedient related to land easements, allowing the Company to carry forward the accounting treatment for land easements on existing agreements. The Company did not however elect the hindsight practical expedient to determine the lease terms for existing leases.

Lessee Accounting - The Company determines if an arrangement contains a lease and determines the classification of leasing arrangements at inception. A leasing arrangement is classified by the lessee either as a finance lease, which represents a financed purchased of the leased asset, or as an operating lease. The Company's operating leases relate primarily ground leases acquired with real estate. For these ground and office leases, the Company has elected the accounting policy to combine lease and related nonlease components as a single lease component.

ROU assets and lease liabilities are recognized at the lease commencement date based upon the present value of lease payments over the lease term. The ROU assets also include capitalized initial direct costs offset by lease incentives. Variable lease payments are excluded from the ROU assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred. The Company made the accounting policy election to recognize lease payments from short-term leases on a straight-line basis over the lease term and will not record these leases on the balance sheet.

Lease renewal or termination options are factored into the lease asset and lease liability only if it is reasonably certain that the option to extend or the option to terminate would be exercised.

As the implicit rate is not readily determinable in most leases, the present value of the remaining lease payments was calculated for each lease using an estimated incremental borrowing rate, which is the interest rate that the Company would have to pay to borrow over the lease term on a collateralized basis.

Lease expense is recognized over the lease term based on an effective interest method for finance leases and on a straight-line basis for operating leases.

The Company recognized operating lease right of use asset of $30.9 million in other assets, net and a corresponding operating lease liability of $25.0 thousand in other liabilities for ground leases in its real estate portfolio. There was no impact to beginning equity as a result of adoption related to lessee accounting as the difference between the asset and liability balance is attributable to the derecognition of pre-existing balances, including straight-line rent, lease incentives, prepaid or deferred rent and ground lease obligation intangibles.

Lessor Accounting - The Company determines if an arrangement contains a lease and determines the classification of leasing arrangements at inception. Therefore, such options are only recognized once they are deemed reasonably certain, typically at the time the option is exercised. Lease revenue is composed of rental income, which includes the effect of minimum rent increases and rent abatements and tenant reimbursements, such as common area maintenance costs and other costs associated to the leases.

As lessor, the Company made the accounting policy election to treat the lease and nonlease components in a contract as a single component to the extent that the timing and pattern of transfer are similar for the lease and nonlease components and the lease component qualifies as an operating lease. Nonlease components of tenant reimbursements for net leases qualify for the practical expedient to be combined with their respective lease component and accounted for as a single component under the lease standard as the lease component is predominant.

18

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Lease revenue is recognized on a straight-line basis over the remaining lease term and is included in property operating income on the consolidated statements of operations. The Company receives variable lease revenues from tenant reimbursements.

Under the new standard, lessors are required to evaluate the collectability of all lease payments based upon the creditworthiness of the lessee. Lease revenue is recognized only to the extent collection is determined to be probable. If collection is subsequently determined to no longer be probable, any previously accrued lease revenue that has not been collected is subject to reversal. If collection is subsequently determined to be probable, lease revenue and corresponding receivable would be reestablished to an amount that would have been recognized if collection had always been deemed to be probable. Upon adoption of ASC 842, the Company determined that collection of certain lease receivables, net of allowance for bad debts, is probable based on an evaluation of the tenants' creditworthiness and no cumulative adjustment to equity was required.

Recent Accounting Pronouncements: Future Application of Accounting Standards

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. Early adoption is permitted for annual and interim periods beginning after December 15, 2018. The adoption of this standard is not expected to have a material effect on the Company’s existing disclosures.

Fair Value Disclosures - In August 2018, the FASB issued guidance (ASU No. 2018-13) that requires new disclosures of changes in unrealized gains and losses in OCI for recurring Level 3 fair value of instruments held at balance sheet date, as well as the range and weighted average or other quantitative information, if more relevant, of significant unobservable inputs for recurring and nonrecurring Level 3 fair values. Certain disclosures are now eliminated, specifically around the valuation process required for Level 3 fair values, policy for timing of transfers between levels of the fair value hierarchy, as well as amounts and reason for transfers between Levels 1 and 2. The new guidance is effective for fiscal years and interim periods beginning after December 15, 2019. The adoption of this standard is not expected to have a material effect on the Company’s existing disclosures.

Variable Interest Entities - In November 2018, the FASB issued guidance (ASU No. 2018-17) which amends the VIE guidance to align the evaluation of a decision maker’s or service provider’s fee in assessing a variable interest with the guidance in the primary beneficiary test. Specifically, indirect interests held by a related party that is under common control will now be considered on a proportionate basis, rather than in their entirety, when assessing whether the fee qualifies as a variable interest. The proportionate basis approach is consistent with the treatment of indirect interests held by a related party under common control when evaluating the primary beneficiary of a VIE. This effectively means that when a decision maker or service provider has an interest in a related party, regardless of whether they are under common control, it will consider that related party’s interest in a VIE on a proportionate basis throughout the VIE model, for both the assessment of a variable interest and the determination of a primary beneficiary. Transition is generally on a modified retrospective basis, with the cumulative effect adjusted to retained earnings at the beginning of the earliest period presented. The new guidance is effective for fiscal years and interim periods beginning after December 15, 2019, with early adoption permitted in an interim period for which financial statements have not been issued. The Company is currently evaluating the impact of this new guidance but does not expect the adoption of this standard to have a material effect on its financial condition or results of operations.

3. Operating Real Estate

The following table presents operating real estate, net as of June 30, 2019 and December 31, 2018 (dollars in thousands):

	June 30, 2019			December 31, 2018
Land	$	267,465		$	269,149
Buildings and improvements	373,299			373,446
Building and leasehold interests	173,366			173,782
Tenant improvements	29,513			28,432
Operating real estate, gross	843,643			844,809
Less: accumulated depreciation	(72,033		)	(64,187		)
Operating real estate, net	$	771,610		$	780,622

19

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Real Estate Held for Sale

There were no operating real estate assets held for sale as of June 30, 2019.

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

			Assets(1)(2)								Liabilities(1)
Location	Type	Properties	Operating Real Estate, Net(2)		Intangible Assets, Net		Other Assets		Total		Other Liabilities
As of December 31, 2018:
Bremen, Germany(3)(6)	Other	1	$	1,060	$	18	$	—	$	1,078	$	—
Werl, Germany(3)(4)	Other	1	2,866		—		4		2,870		—
Marly, France(5)	Other	1	43,208		—		3,897		47,105		1,498
Frankfurt, Germany(6)	Office	1	21,274		216		802		22,292		—
Total		4	$	68,408	$	234	$	4,703	$	73,345	$	1,498

_____________________________

(1) The assets and liabilities classified as held for sale were sold as either asset sales or share sales subject to standard industry terms and conditions. The assets held-for-sale as of December 31, 2018 contributed $0.5 million and $1.1 million of revenue and $(0.3) million and $(2.1) million of income (loss) before income tax benefit (expense) for the three months ended June 30, 2019 and 2018, respectively. The assets held-for-sale as of December 31, 2018 contributed $1.8 million and $1.5 million of revenue and $0.2 million and $(2.5) million of income (loss) before income tax benefit (expense) for the six months endedJune 30, 2019 and 2018, respectively.

(2) Represents operating real estate and intangible assets, net of accumulated depreciation and amortization of $6.9 million as of December 31, 2018, prior to being reclassified into held for sale.

(3) Net of impairment loss of $0.3 million and $0.5 million, respectively, on the non-core retails assets in Bremen and Werl, Germany.

(4) Asset was sold in February 2019.

(5) Asset was sold in June 2019.

(6) Assets were sold in March 2019.

Real Estate Sales

The following table summarizes the Company’s real estate sales for the three and six months endedJune 30, 2019 and 2018 (dollars in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Properties	1		1		4		1
Carrying Value	$	44,587	$	156,107	$	70,590	$	156,107
Sales Price(1)	$	48,190	$	188,246	$	92,533	$	188,246
Net Proceeds(2)	$	47,753	$	186,064	$	91,863	$	186,064
Gain (3)(4)	$	3,166	$	29,957	$	21,273	$	29,957

_____________________________

(1) For the three months ended June 30, 2019 and 2018, the Company sold one asset for approximately €43 million and one asset for approximately €159 million, respectively. For the six months ended June 30, 2019 and 2018, the Company sold a total of four properties for approximately €82 million and one asset for approximately €159 million, respectively.

(2) Represents proceeds net of sales costs prior to the repayment of the associated property debt. For the three and six months ended June 30, 2019, the Company repaid $34.5 million and $51.6 million, respectively, of associated property debt, including release premiums. For the three and six months ended June 30, 2018 the Company repaid $102.4 million of associated property debt and $15.6 million of preferred equity certificates.

(3) For the three months ended June 30, 2019, the Company also recorded a gain on sale of $0.4 million related to adjustments from prior period disposals, net other gains and losses and a $0.1 million CTA gain. For the six months ended June 30, 2019, the Company also recorded a gain on sale of $1.2 million related to the release of escrow accounts and adjustments from prior period disposals, net other gains and losses offset by $1.1 million CTA loss.

(4) For the three months ended June 30, 2018, the Company also recorded a gain on sale of $0.5 million related to adjustments from prior period disposals, net other gains and losses and a $7.8 million CTA gain. For the six months ended June 30, 2018, the Company also recorded a gain on sale of $1.5 million related to the release of escrow accounts and adjustments from prior period disposals, net other gains and losses and a $8.1 million CTA gain.

4. Preferred Equity Investments

In December 2018, in connection with the sale of Trianon Tower, the Company retained a $5.7 million (€5 million) interest in the form of preferred equity, which the Company accounts for as a debt investment.

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NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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 $33.3 million (£26.2 million) of preferred equity, which the Company accounts for as a debt investment.

The following table presents the Company’s preferred equity investments as of June 30, 2019 and December 31, 2018 (dollars in thousands):

	June 30, 2019				December 31, 2018
Asset Type	Principal Amount		Carrying Value		Principal Amount		Carrying Value		Fixed Rate		Mandatory Redemption
Preferred equity investment
Gresham Street(1)	$	33,267	$	33,267	$	33,368	$	33,368	8.00	%	May 2020
Trianon Tower(2)	5,685		5,685		5,722		5,722		7.00	%	Dec 2023
Total	$	38,952	$	38,952	$	39,090	$	39,090

_____________________________

(1) Denominated in U.K. Pound Sterling, and as such, the principal amount decreased from 2018 to 2019 is due to the decrease in the U.K. Pound Sterling to U.S. dollar exchange rate.

(2) Denominated in Euro, and as such, the principal amount decreased from 2018 to 2019 is due to the decrease in the Euro to U.S. dollar exchange rate.

Credit Quality Monitoring

The Company’s preferred equity investments are 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 investments at least quarterly and determines the relative credit quality principally based on: (i) whether each borrower is currently paying debt service in accordance with its contractual terms; and (ii) whether the Company believes each 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.

As of June 30, 2019, the Company’s preferred equity investments were performing in accordance with the contractual terms of their governing documents, in all material respects, and were categorized as performing loans. For the three months ended June 30, 2019 and 2018, the preferred equity investments contributed $0.8 million and $0.7 million, respectively, of interest income recorded on the consolidated statement of operations. For the six months ended June 30, 2019 and 2018, the preferred equity investments contributed $1.6 million and $1.4 million, respectively, of interest income recorded on the consolidated statement of operations. The remaining balance of interest income for the three and six months ended June 30, 2019 of $0.8 million and $1.6 million, respectively, related to the interest income from cash held in interest bearing bank accounts.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

5. Borrowings

The following table presents borrowings as of June 30, 2019 and December 31, 2018 (dollars in thousands):

				June 30, 2019				December 31, 2018
	Country	Final Maturity	Contractual Interest Rate(2)	Principal Amount		Carrying Value		Principal Amount		Carrying Value
Mortgage and other notes payable:(1)
Trias Portfolio 1(4)(6)	France	Apr-22	EURIBOR + 1.65%	$	40,132	$	39,306	$	75,622	$	74,449
Trias Portfolio 2(4)(6)	Germany	Jun-25	EURIBOR + 1.00%	69,855		69,432		87,496		86,720
SEB Portfolio 1(4)	Germany/France	Jul-24	EURIBOR + 1.55%	201,610		199,383		202,921		200,459
SEB Portfolio 2(4)	U.K.	Jul-24	GBP LIBOR + 1.55%	236,065		233,908		236,777		234,402
SEB Portfolio - Preferred(3)	Germany/France/U.K.	Apr-60	0.90%	—		—		82,745		82,534
Other - Preferred(5)	Germany	Oct-45	1.00%	4,320		4,320		4,348		4,348
Total mortgage and other notes payable				$	551,982	$	546,349	$	689,909	$	682,912

_____________________________

(1) All mortgage notes and other notes payable are denominated in local currencies, and as such, the principal amount on debt balances generally decreased from December 31, 2018 to June 30, 2019 due to the decrease in the Euro and U.K. Pound Sterling to U.S. dollar exchange rate and the repayment of $51.6 million due to sales and $80.9 million due to the repayment of the SEB Portfolio - Preferred debt (based on the applicable exchange rate of when the debt was repaid). 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) Represents preferred equity certificates, which the Company repaid in April 2019, with a contractual interest rate of 0.90% through May 2019, which would have increased to EURIBOR plus 12.0% through May 2022 and subsequently to EURIBOR plus 15.0% through final maturity. Certain prepayments prior to May 2019 were subject to the payment of the unpaid coupon on outstanding principal amount through May 2019.

(4) Prepayment provisions include a fee based on principal amount of 0.50% through April 2020 for the Trias Portfolio 1 borrowings, 0.35% to 1.0% through May 2022 for the Trias Portfolio 2 borrowings and 0.5% through July 2019 for the SEB Portfolio borrowings.

(5) 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.

(6) In February and March 2019, the Company repaid a portion of the mortgage notes on Trias 2 and in June 2019, the Company repaid a portion of the mortgage notes on Trias 1 in connection with the sales of the associated properties (refer to Note 3). In addition, the Company expensed the remaining deferred financing costs associated with these mortgage notes and paid the related prepayment penalties which are recorded in extinguishment of debt in the consolidated statements of operations.

The following table presents a reconciliation of principal amount to carrying value of the Company’s mortgage and other notes payable as of June 30, 2019 and December 31, 2018 (dollars in thousands):

	June 30, 2019			December 31, 2018
Principal amount	$	551,982		$	689,909
Deferred financing costs, net	(5,633		)	(6,997		)
Carrying value	$	546,349		$	682,912

The following table presents scheduled principal on borrowings, based on final maturity as of June 30, 2019 (dollars in thousands):

	Mortgage and Other Notes Payable
Remaining 2019	$	—
Years ending December 31:
2020	—
2021	—
2022	40,132
2023	—
2024	437,675
2025 and thereafter	74,175
Total	$	551,982

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NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

As of June 30, 2019 and December 31, 2018, the Company was in compliance with all of its financial covenants.

Credit Facility

In March 2018, the Company amended the corporate revolving credit facility (the “Credit Facility”), increasing the size from $35.0 million to $70.0 million and extending the term until April 2020 with a one year extension option. The Credit Facility includes an accordion feature, providing for the ability to increase the facility to $105.0 million. As of June 30, 2019, there was no outstanding balance on the Credit Facility. In July 2019, the Company terminated the Credit Facility.

6.    Related Party Arrangements

Colony Capital, 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 (the “Amended and Restated Management Agreement”) with an affiliate of the Manager, effective as of January 1, 2018. As asset manager, the Manager is responsible for the Company’s day-to-day operations, subject to the supervision and management of 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 Amended and Restated Management Agreement with the Manager provides for a base management fee, incentive fee and expense reimbursement.

On November 7, 2018, the Company entered into Amendment No. 1 (the “Amendment”) to the Amended and Restated Management Agreement with an affiliate of the Manager. The Amendment provides for the termination of the Amended and Restated Management Agreement (the date of such termination, the “Termination Date”) upon the earlier of (i) the closing of an NRE Change of Control (as defined in the Amended and Restated Management Agreement) and (ii) the completion of an internalization of the management of the Company within nine months of the later of (x) April 30, 2019, if on such date there is not in place a definitive agreement for an NRE Change of Control and (y) if on April 30, 2019 there is a definitive agreement for an NRE Change of Control, such date on which such agreement is terminated, if any, if no other definitive agreement for an NRE Change of Control is entered into within 30 days thereafter.

The Amendment provides that upon the Termination Date, the Company will be obligated to pay to the Manager a termination payment equal to (i) $70 million, minus (ii) the amount of any Incentive Fee (refer below) paid pursuant to the Amended and Restated Management Agreement. As of June 30, 2019, the termination fee that would be payable on the Termination Date was $64.6 million. No Incentive Fee will be payable to the Manager for any period following the Termination Date.

On April 23, 2019, the Company entered into Amendment No. 2 (“Amendment No. 2”) to the Amended and Restated Management Agreement with an affiliate of the Manager, extending the date used in the definition of Triggering Date (as defined in the Amended and Restated Management Agreement) from April 30, 2019 to June 30, 2019 to accommodate the ongoing strategic review process.

In addition to Amendment No.2, on April 22, 2019, the Company entered into an Employee Transition Agreement with an affiliate of the Manager (the “Employee Transition Agreement”). Pursuant to the terms of the Employee Transition Agreement, the parties agreed that certain employees of the Manager would be available for hire by the Company or an acquirer of the Company from and after the termination of the Amended and Restated Management Agreement pursuant to Amendment No. 2. The Employee Transition Agreement also (i) eliminates the Company’s obligation to reimburse the Manager for 50% of the cash severance payments payable to Mahbod Nia, the Chief Executive Officer of the Company, if his employment is terminated in connection with an NRE Change of Control, and reduces such reimbursement obligation from 50% to 25% of the cash severance payments payable to Mr. Nia if such termination of employment is in connection with an Internalization and (ii) addresses a number of other topics including, minimum 2018 annual cash bonuses, continuing compensation and cash severance payable by the Manager or one of its affiliates to key personnel providing services to the Company, the structure and minimum amount of the 2018 annual equity compensation pool established by the Company under the Amended and Restated Management Agreement and the amendment of outstanding equity awards to address vesting upon an NRE Change of Control or termination of the Amended and Restated Management Agreement.

Term

The Amendment, as modified by Amendment No. 2, provides for the termination of the Amended and Restated Management Agreement upon the earlier of (i) the closing of an NRE Change of Control and (ii) the completion of an internalization of the management of the Company within nine months of the later of (x) June 30, 2019, if on such date there is not in place a definitive agreement for an NRE Change of Control and (y) if on June 30, 2019 there is a definitive agreement for an NRE Change of Control, such date on which such agreement is terminated, if any, if no other definitive agreement for an NRE Change of Control is entered

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NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

into within 30 days thereafter. Because the Merger will qualify as an NRE Change of Control under the Amended and Restated Management Agreement, upon the closing of the Merger, the Amended and Restated Management Agreement will automatically terminate in accordance with its terms.

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.

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 endedJune 30, 2019 and 2018, the Company incurred $3.9 million and $4.2 million, respectively, related to the base management fee. For the six months ended June 30, 2019 and 2018, the Company incurred $7.7 million and $8.4 million, respectively, related to the base management fee.

Incentive Fee

In addition to the base management fees, pursuant to the Amended and Restated Management Agreement, 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 began January 1, 2018 (based on an initial price of $13.68) and ended on December 31, 2018 (at a price of $14.97) and subsequent measurement periods will begin on January 1 of the subsequent calendar year and end on December 31 of the applicable calendar year. Any future Incentive Fee will reduce the final termination payment payable to the Manager which, as of June 30, 2019, is $64.6 million and is payable on the Termination Date.

For the year ended December 31, 2018, the Company incurred a $5.4 million incentive fee which was paid in April 2019.

Costs and Expenses

Pursuant to the Amended and Restated Management Agreement, 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

24

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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 endedJune 30, 2019 and 2018, the Manager allocated $0.2 million and $0.2 million, respectively, of Internalized Service Costs to the Company, which is recorded in general and administrative expenses in the consolidated statements of operations. For the six months endedJune 30, 2019 and 2018, the Manager allocated $0.4 million and $0.5 million, respectively, of Internalized Service Costs to the Company, which is recorded in general and administrative expenses in the consolidated statements of operations.

Equity Based Compensation

In addition, pursuant to the Amended and Restated Management Agreement, 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.

Beginning with the Company’s 2018 annual stockholders’ meeting, the Manager has the right to nominate one individual to be included in the slate of nominees nominated by the Company’s board of directors for election at each annual meeting. In the third quarter of 2019, for the 2019 annual stockholders’ meeting, the Manager will nominate one individual to the Company’s board of directors.

Colony Capital Ownership Waiver and Voting Agreement

In connection with the entry into the Amended and Restated Management Agreement, the Company provided Colony Capital with an ownership waiver under the Company’s Articles of Amendment and Restatement, allowing Colony Capital to purchase up to 45% of the Company’s stock. The waiver provides that if the Amended and Restated Management Agreement is terminated, Colony Capital may not purchase any shares of the Company’s common stock to the extent Colony Capital 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 Capital also agreed that for all matters submitted to a vote of the Company’s stockholders, to the extent Colony Capital owns more than 25% of the Company’s common stock (such shares owned by Colony Capital 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 Capital 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 June 30, 2019, Colony Capital and its subsidiaries owned 5.6 million shares of the Company’s common stock, or approximately 11.2% of the total outstanding common stock.

7. Compensation Expense

The following summarizes the equity-based compensation for the three and six months endedJune 30, 2019 and 2018:

For the three months endedJune 30, 2019 and 2018, the Company recorded $2.0 million and $1.2 million, respectively, of equity-based compensation expense which is recorded in compensation expenses on the consolidated statement of operations. For the six months endedJune 30, 2019 and 2018, the Company recorded $3.2 million and $1.6 million, respectively, of equity-based compensation expense which is recorded in compensation expenses on the consolidated statements of operations. As of June 30,

25

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

2019, equity-based compensation expense to be recognized over the remaining vesting period through May 2022 is $12.1 million, provided there are no additional forfeitures.

In the third quarter 2018, the Company adopted ASU 2018-07 which required the Company to retrospectively adjust compensation expense for the three and six months endedJune 30, 2018 by $1.6 million and $1.8 million, respectively (refer to Note 2).

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. 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.

As of June 30, 2019, under the 2015 Plan, a total of 2.1 million shares of common stock had been issued (net of forfeitures and shares held back for tax withholding), 1.8 million shares were reserved for issuance pursuant to outstanding equity awards (including 0.3 million reserved for issuance upon conversion of outstanding LTIP Units and Common Units and 1.5 million reserved for issuance pursuant to the outstanding Absolute RSUs, Relative RSUs, 2018 Absolute RSUs and 2018 Relative RSUs, as defined below) and 9.3 million otherwise unreserved shares remained available for issuance.

In May 2019, under the 2015 Plan, the Company issued a total of 529,805 restricted shares of common stock subject to vesting based on continued service, which included the remaining 150,000 awards under the previously established retention pool, and reserved an additional 17,676 shares of common stock for issuance pursuant to previously forfeited 2018 Absolute RSUs and 2018 Relative RSUs that were reinstated.

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 tri-party merger with NorthStar Realty Finance Corp., NorthStar Asset Management Group Inc. and Colony Capital (the “NorthStar Colony Mergers”). The Absolute and Relative RSUs were not affected by the NorthStar Colony 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. In 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 were to 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 November2018, 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 issued retention grants consisting of 90,000restricted shares of common stock to non-executive officers of the Company that are subject to vesting based on continued service. In May

26

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

2019, the Company allocated the remaining awards under the retention pool, which resulted in the Company granting 150,000 restricted shares of common stock subject to vesting based on continued service.

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 16, 2021, subject to the Manager continuing to serve as the Company’s manager and the recipient’s continued employment with the Manager or Colony Capital or one of its subsidiaries. During the first quarter 2019, 98,310 shares vested, of which 44,342 were retired for tax withholdings. 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 the Company’s manager and the recipient’s continued employment with the Manager or Colony Capital 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. In May 2019, the Company reinstated 13,257 restricted shares of common stock and 8,838 performance-based RSUs that had been granted in March 2018 pursuant to the annual equity compensation pool, but had been previously been forfeited by an individual who has continued to provide services to the Company.

In May 2019, the Company granted annual equity awards consisting of an aggregate of 366,548 restricted shares of common stock subject to vesting based on continued service, a portion of which were specifically allocated by the compensation committee of the Company and a portion of which were allocated to individual award recipients by the Manager as contemplated by the Amended and Restated Management Agreement.

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 NorthStar Colony Mergers, all of these outstanding equity-based awards vested or were forfeited.

27

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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 June 30, 2019 represents vested Common Units and unvested restricted stock and performance RSUs (grants in thousands):

	Six Months Ended June 30, 2019
	Restricted Stock(1)		Common Units		Performance RSUs(2)		Total Grants		Weighted Average Grant Price
December 31, 2018	538		338		1,225		2,101		$	12.08
Granted	530		—		9		539		16.86
Vested/converted	(87	)	(22	)	—		(109	)	16.86
Withheld/retired	(67	)	—		—		(67	)	17.05
Forfeited	(3	)	—		(10	)	(13	)	16.74
June 30, 2019	911		316		1,224		2,451		$	12.87

_____________________________

(1) Represents restricted stock included in common stock.

(2) Represents outstanding Spin-off Absolute and Relative RSUs and 2018 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 expired in March 2019. For the three and six months endedJune 30, 2019, the Company did not repurchase any shares of its common stock. For the three months ended June 30, 2018, the Company repurchased 4.0 million shares of its common stock for approximately $56.3 million. For the six months endedJune 30, 2018, the Company repurchased 5.1 million shares of its common stock for approximately $69.6 million. From authorization through March 2019, the Company repurchased 6.1 million shares of its common stock for approximately $83.4 million.

Dividends

The following table presents dividends declared (on a per share basis) with respect to the six months endedJune 30, 2019 and 2018:

Common Stock
Declaration Date	Dividend Per Share
2019
May 1	$	0.15
August 2	$	0.15
2018
May 8	$	0.15
August 3	$	0.15

28

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Earnings Per Share

The following table presents EPS for the three and six months endedJune 30, 2019 and 2018 (dollars and shares in thousands, except per share data):

	Three Months Ended June 30,							Six Months Ended June 30,
	2019				2018			2019			2018
Numerator:
Net income (loss)	$	(1,434	)		$	37,876		$	9,689		$	36,808
Net (income) loss attributable to Unit Holders noncontrolling interest	6				(217		)	(56		)	(202		)
Net income (loss) attributable to common stockholders and Unit Holders(1)	$	(1,428	)		$	37,659		$	9,633		$	36,606
Net (income) allocated to participating securities	(191		)		(438		)	(242		)	(371		)
Net income (loss) allocated to common stockholders—basic and dilutive	$	(1,619	)		$	37,221		$	9,391		$	36,235
Denominator:
Weighted average shares of common stock - basic	49,449				51,859			49,392			53,456
Weighted average effect of dilutive share(3)	—			(2)	2,149			1,358			1,976
Weighted average shares of common stock - dilutive	49,449				54,008			50,750			55,432
Earnings (loss) per share:
Basic	$	(0.03	)		$	0.72		$	0.19		$	0.68
Diluted	$	(0.03	)		$	0.69		$	0.19		$	0.65

_____________________________

(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) For the three months ended June 30, 2019, shares in the diluted EPS calculation represents basic shares due to the net loss in that period. The shares exclude the effect of adding back 1.4 million weighted average dilutive common shares as their inclusion would be antidilutive.

(3) Includes the Absolute and Relative RSUs and 2018 Absolute and Relative RSUs as the performance targets would have been met if the performance period ended on June 30, 2019 and 2018.

9. Noncontrolling Interests

Operating Partnership

Noncontrolling interests include the aggregate Unit Holders’ interest in the Operating Partnership. Net income (loss) attributable to the noncontrolling 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 or the holder, 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 noncontrolling 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 noncontrolling 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 June 30, 2019 and December 31, 2018, the Company allocated $0.2 million and $0.2 million, respectively, from stockholders’ equity to noncontrolling interest on the consolidated balance sheets and consolidated statement of equity.

As of June 30, 2019, 315,434 Common Units and LTIP Units were outstanding, representing a 0.6% ownership and noncontrolling interest in the Operating Partnership. Net income (loss) attributable to the Operating Partnership noncontrolling interest for the three months endedJune 30, 2019 and 2018 was a net income (loss) of an immaterial amount and $0.2 million, respectively. Net income (loss) attributable to the Operating Partnership noncontrolling interest for the six months endedJune 30, 2019 and 2018 was a net income (loss) of $0.1 million and $0.2 million, respectively.

29

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

10. Risk Management and Derivative Activities

Derivatives

The Company uses derivative instruments primarily to manage certain 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 June 30, 2019 and December 31, 2018 (dollars, U.K. pound sterling and Euros in thousands):

	Number(1)	Notional Amount	Fair Value Asset (Liability)		Range of Fixed GBP LIBOR / EURIBOR/ Strike Price	Range of Maturity
As of June 30, 2019 (Unaudited):
Interest rate caps (EUR)	28	€564,694	$	531	3 Month EURIBOR 0.5%	April 2020 - May 2025
Interest rate caps (GBP)	5	£202,645	—		3 Month GBP LIBOR 2.0%	April 2020
Foreign currency forwards(2)	2	€24,480	2,757		1.25 EUR/USD(3)	August 2019 - November 2019
Total	35		$	3,288
As of December 31, 2018:
Interest rate caps (EUR)	28	€564,694	$	2,185	3 Month EURIBOR 0.5%	April 2020 - May 2025
Interest rate caps (GBP)	5	£202,645	20		3 Month GBP LIBOR 2.0%	April 2020
Foreign currency forwards(2)	4	€48,960	4,235		1.25 EUR/USD(3)	February 2019 - November 2019
Total	37		$	6,440

_____________________________

(1)    Represents number of transactions.

(2)    Includes Euro currency forwards.

(3)    The strike prices for the foreign currency forwards represent the average price.

The following table presents the fair value of derivative instruments, as well as their classification on the consolidated balance sheets, as of June 30, 2019 and December 31, 2018 (dollars in thousands):

	Balance Sheet	June 30, 2019		December 31, 2018
	Location
Interest rate caps	Derivative assets	$	531	$	2,205
Foreign currency forwards	Derivative assets	$	2,757	$	4,235

30

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 and six months endedJune 30, 2019 and 2018 (dollars in thousands):

		Three Months Ended June 30,						Six Months Ended   June 30,
		2019			2018			2019			2018
Amount of gain (loss) recognized in earnings:	Statements of operations location:
Adjustment to fair value of interest caps held at the end of the reporting period	Other gain (loss), net	$	(375	)	$	(1,880	)	$	(1,652	)	$	(1,999	)
Adjustment to fair value of foreign currency forwards held at the end of the reporting period	Other gain (loss), net	(1,596		)	7,566			(1,477		)	6,494
Net cash receipt (payment) on derivatives	Other gain (loss), net(1)	1,416			(2,631		)	2,562			(4,371		)

_____________________________

(1) Excludes the gain (loss) relating to foreign currency transactions for the three months ended June 30, 2019 and 2018 of $0.6 million and $0.4 million, respectively and for the six months endedJune 30, 2019 and 2018 of $(1.9) million and $0.4 million, respectively.

The Company’s counterparties held no cash margin as collateral against the Company’s derivative contracts as of June 30, 2019 and December 31, 2018. The Company had no derivative financial instruments that were designated as hedges in qualifying hedging relationships as of June 30, 2019 and December 31, 2018.

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.

31

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 June 30, 2019 and December 31, 2018 (dollars in thousands):

	June 30, 2019						December 31, 2018
	Principal/Notional Amount		Carrying Value		Fair Value		Principal/Notional Amount		Carrying Value		Fair Value
Financial assets:(1)
Derivative assets	$	927,254	$	3,288	$	3,288	$	960,401	$	6,440	$	6,440
Preferred equity investment	38,952		38,952		39,363		39,090		39,090		39,501
Financial liabilities:(1)
Mortgage and other notes payable, net	$	551,982	$	546,349	$	546,349	$	689,909	$	682,912	$	686,891

_____________________________

(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.

32

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.

Obligations Under Ground Leases

The Company has one ground lease on the Portman Square asset with an expiry in 2101. The annual rent is £1000 per year for the lease term and is not recoverable from the tenants (refer to Note 2).

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 and six months endedJune 30, 2019, one tenant, BNP Paribas RE, accounted for more than 10% of the Company’s total revenues. This tenant has 0.6 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 and six months endedJune 30, 2019, Germany, France and the United Kingdom each accounted for more than 10% of the Company’s total revenues. The Company believes its portfolio is well diversified and does not contain any unusual concentrations of credit risks.

Guarantee

In connection with the sale of the Trianon Tower in December 2018, the Company pledged its $5.7 million (€5 million) preferred equity certificates to secure certain of the seller representations and warranties made to the buyer in the definitive purchase agreement. The maximum exposure of this guarantee is the $5.7 million (€5 million) preferred equity certificates. To date, we have not experienced any significant losses related to this guarantee. We establish reserves when a loss is probable and the amount can be reasonably estimated.

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 investments secured by interest in prime office properties.

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

33

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The following tables present segment reporting for the three and six months endedJune 30, 2019 and 2018 (dollars in thousands):

	Three Months Ended June 30, 2019
Statement of Operations:	Real Estate Equity				Preferred Equity		Corporate				Total
Revenues
Lease income	$	16,499			$	—	$	—			$	16,499
Interest income	—				761		793				1,554
Expenses
Interest expense(1)	3,237				—		176				3,413
Management fee, related party	—				—		3,848				3,848
Transaction costs(2)	—				—		1,827				1,827
Depreciation and amortization	5,908				—		—				5,908
Gain on sales, net	(3,671		)		—		—				(3,671		)
Other expense (income)	4,815			(3)	—		3,098			(4)	7,913
Income (loss) before income tax benefit (expense)	6,210				761		(8,156		)		(1,185		)
Income tax benefit (expense)	(249		)		—		—				(249		)
Net income (loss)	$	5,961			$	761	$	(8,156	)		$	(1,434	)

_____________________________

(1) Includes $0.3 million and $0.1 million of amortization of deferred financing costs in the real estate equity and corporate segments, respectively.

(2) Represents costs associated with the continual work of the strategic review committee in the corporate segment.

(3) Primarily relates to properties - operating expenses, loss on interest rate caps, other expenses and extinguishment of debt in the real estate equity segment.

(4) Primarily relates to general and administrative expenses and compensation expense offset by a net gain on foreign currency derivatives.

	Three Months Ended June 30, 2018
Statement of Operations:	Real Estate Equity				Preferred Equity		Corporate				Total
Revenues
Lease income	$	30,162			$	—	$	—			$	30,162
Interest income	—				706		—				706
Expenses
Interest expense(1)	5,601				—		254				5,855
Management fee, related party	—				—		4,223				4,223
Transaction costs	—				—		376				376
Depreciation and amortization	11,976				—		—				11,976
Gain on sale, net	(38,319		)		—		—				(38,319		)
Other expense (income)	11,455			(2)	—		(2,498		)	(3)	8,957
Income (loss) before income tax benefit (expense)	39,449				706		(2,355		)		37,800
Income tax benefit (expense)	76				—		—				76
Net income (loss)	$	39,525			$	706	$	(2,355	)		$	37,876

_____________________________

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

(2) Primarily relates to properties - operating expenses and loss on interest rate caps.

(3) Primarily relates to the net gain on foreign currency derivatives offset by general and administrative expenses and compensation expense.

34

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

	Six Months Ended June 30, 2019
Statement of Operations:	Real Estate Equity				Preferred Equity		Corporate				Total
Revenues
Lease income	$	33,583			$	—	$	—			$	33,583
Interest income	—				1,538		1,627				3,165
Expenses											—
Interest expense(1)	6,691				—		402				7,093
Management fee, related party	—				—		7,736				7,736
Transaction costs(2)	—				—		2,589				2,589
Depreciation and amortization	11,821				—		—				11,821
Gain on sales, net	(21,396		)		—		—				(21,396		)
Other expense (income)	8,483			(3)	—		8,332			(4)	16,815
Income (loss) before income tax benefit (expense)	27,984				1,538		(17,432		)		12,090
Income tax benefit (expense)	(2,401		)		—		—				(2,401		)
Net income (loss)	$	25,583			$	1,538	$	(17,432	)		$	9,689

_____________________________

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

(2) Represents costs associated with the continual work of the strategic review committee in the corporate segment.

(3) Primarily relates to properties - operating expenses, loss on interest rate caps, other expenses and extinguishment of debt in the real estate equity segment.

(4) Primarily relates to general and administrative expenses and compensation expense offset by a net gain on foreign currency derivatives.

	Six Months Ended June 30, 2018
Statement of Operations:	Real Estate Equity				Preferred Equity		Corporate				Total
Revenues
Lease income	$	62,727			$	—	$	—			$	62,727
Interest income	—				1,435		—				1,435
Expenses
Interest expense(1)	11,556				—		406				11,962
Management fee, related party	—				—		8,380				8,380
Transaction costs	—				—		857				857
Depreciation and amortization	23,627				—		—				23,627
Gain on sale, net	(39,585		)		—		—				(39,585		)
Other expense (income)	19,910			(2)	—		2,240			(3)	22,150
Income (loss) before income tax benefit (expense)	47,219				1,435		(11,883		)		36,771
Income tax benefit (expense)	37				—		—				37
Net income (loss)	$	47,256			$	1,435	$	(11,883	)		$	36,808

_____________________________

(1) Includes $1.3 million and $0.3 million of amortization of deferred financing costs in the real estate equity and corporate segments, respectively.

(2) Primarily relates to properties - operating expenses and the loss on interest rate caps.

(3) Primarily relates to the net gain on foreign currency derivatives offset by general and administrative expenses and compensation expense.

The following table presents total assets by segment as of June 30, 2019 and December 31, 2018 (dollars in thousands):

Total Assets	Real Estate Equity		Preferred Equity		Corporate		Total
June 30, 2019	$	953,007	$	41,629	$	277,590	$	1,272,226
December 31, 2018	1,362,679		40,568		22,252		1,425,499

35

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 lease income for the six months endedJune 30, 2019 and 2018 (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Properties(1)	14			24			14			24
Office
Germany	$	3,847		$	14,437		$	8,037	(4)	$	29,224
United Kingdom	6,309			7,780			12,633			15,273
France	5,110			5,346			10,323			10,830
Other office	—			1,313		(2)	—			4,733		(2)
Subtotal	15,266			28,876			30,993			60,060
Other Property Types
France/Germany(5)	1,233		(3)	1,286		(5)	2,590		(4)	2,667		(5)
Total	$	16,499		$	30,162		$	33,583		$	62,727

_____________________________

(1) Represents the number of properties owned as of June 30, 2019 and 2018, respectively, including assets held-for-sale as of the respective period.

(2) Includes an asset in Portugal which is classified as held-for-sale as of June 30, 2018 and partial period rental income from the Maastoren property which was sold in April 2018.

(3) Represents income from two hotel (net lease) assets in Germany and partial period rental income from one industrial asset in France sold in the second quarter 2019.

(4) Represents income from two hotel (net lease) assets in Germany and partial period rental income from one industrial asset in France sold in the second quarter 2019 and one office asset in Germany and two retail assets in Germany sold in the first quarter 2019.

(5) Represents income from five assets including two retail in Germany, one industrial in France and two hotel (net lease) assets in Germany.

14. Subsequent Events

Dividends

On August 2, 2019, the Company declared a dividend of $0.15 per share of common stock. The common stock dividend is expected to be paid on August 23, 2019 to stockholders of record as of the close of business on August 19, 2019.

Credit Facility

On July 17, 2019 (the “Credit Facility Termination Date”) the Company terminated the Credit Facility. As of such date, no amounts were drawn under the Credit Facility and no fees or penalties were incurred as a result of the termination, other than the payment of an immaterial accrued commitment fee. The Company voluntarily terminated the Credit Facility to eliminate the obligation to pay the commitment fee with respect to undrawn lender commitments thereunder.

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NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Merger Agreement with AXA Investment Managers

In July 2019, the Company announced the Merger. The surviving entity of the Merger will not be a publicly-traded company and will become a wholly owned subsidiary of a fund managed by AXA Investment Managers. The Merger has been approved by the Board upon the recommendation of the Strategic Review Committee of the Board consisting solely of independent directors of the Company.

Under the terms of the Merger Agreement, upon the consummation of the Merger, each share of the Company’s common stock will be converted into the right to receive cash in U.S. dollars equal to the sum of $1.68 plus the U.S. dollar equivalent of €9.26 and £3.82 (the “Per Share Consideration”), without interest. The Company has entered into six-month forward contracts for the purchase of U.S. dollars for €482 million and £199 million, the approximate aggregate amount of the merger consideration denominated in euros and U.K Pound Sterling. In connection with the closing of the Mergers (as defined below), these forward contracts will be settled and the portion of the merger consideration denominated in euros and pound sterling will be paid to security holders of the Company in U.S. dollars reflecting the final exchange rates received in settlement of the forward contracts (which may be at rates greater or less than the currently estimated exchange rates, depending on the closing date of the Mergers). To the extent that the closing occurs prior to the end of the settlement period on the forward contracts, these contracts will be settled at the time of closing. An early settlement, prior to January 6, 2020, may reduce the U.S. dollars per share received by stockholders due to a shorter duration of the hedge. The Company currently estimates a closing in approximately three months, which would result in stockholders receiving approximately $17.03 per share in U.S. dollars. The settlement amount would be determined by the movement in the forward points from the date of closing to the final settlement date at the end of the six month period. There may also be an adjustment to present value the hedge settlement amount if the closing occurs before January 6, 2020. The settlement of the forward contracts is not contingent upon the consummation of the Mergers. Therefore, even if the Mergers are not competed, the hedges pursuant to the forward contract will remain in place and the Company will be required to settle the forward contracts at maturity of the hedges, which may result in a loss or gain to the Company. AXA Investment Managers will finance the Mergers and the other transactions contemplated by the Merger Agreement through the arrangement of equity financing and the Company’s available cash at closing. The closing of the Mergers is not subject to any financing condition.

The Merger is expected to close in the fourth quarter of 2019, subject to, among other things, the receipt of approval of the Company’s stockholders.

In addition, conditional upon, immediately prior to and in connection with the Merger, Nighthawk Partnership Merger Sub LLC (“Partnership Merger Sub”), a wholly owned subsidiary of the Company formed solely for the purposes of facilitating the transaction contemplated by the Merger Agreement, will merge with and into the Operating Partnership, with the Operating Partnership as the surviving entity (together with the Merger, the “Mergers”).

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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 Part I. 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 Colony Capital, Inc., formerly known as Colony NorthStar, Inc. before June 25, 2018.

Overview

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., 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 with AXA Investment Managers

In July 2019, we announced that we had entered into a merger agreement, or the Merger Agreement, with certain entities managed by AXA Investment Managers - Real Assets, or AXA Investment Managers, under which we will merge with and into a wholly owned subsidiary of AXA Investment Managers, or Merger Sub, with Merger Sub as the surviving entity in the merger, or the Merger. The surviving entity of the Merger will not be a publicly-traded company and will become a wholly owned subsidiary of a fund managed by AXA Investment Managers. The Merger has been approved by our board of directors, or our Board, upon the recommendation of our Strategic Review Committee of our Board consisting solely of our independent directors (refer to “Recent Developments” below for more information).

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.

Our Portfolio

The following presents a summary of our portfolio as of June 30, 2019:

		Portfolio by Geographic Location
		June 30, 2019(3)	June 30, 2018(3)
Gross Book Value(1)	$0.9 billion
Number of properties	14
Number of countries	3
Total square meters(2)	134,087
Weighted average occupancy	96%
Weighted average lease term (years)	5.9

_____________________________

(1) Represents gross operating real estate and intangibles as of June 30, 2019.

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

(3) Based on rental income for 14 assets owned as of June 30, 2019.

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The following table presents significant tenants in our portfolio as of June 30, 2019, based on in-place rental income as of June 30, 2019:

Significant tenants:	Asset (Location)	Square Meters(1)	Percentage of In-Place Rental Income	Weighted Average Lease Term (in years)
BNP PARIBAS RE	Berges de Seine (Paris, France)	15,406	17.8%	0.6
Invesco UK Limited	Portman Square (London, UK)	4,406	9.9%	8.2
BNP PARIBAS SA	Boulevard Macdonald (Paris, France)	11,210	9.9%	7.2
C & W (U.K.) LLP	Portman Square (London, UK)	5,150	9.1%	5.8
Morgan Lewis & Bockius LLP	Condor House (London, UK)	4,848	7.2%	6.5
PAREXEL International GmbH	Parexel (Berlin, Germany)	18,254	6.2%	15.0
Bigpoint GmbH	Drehbahn (Hamburg, Germany)	11,916	5.0%	1.9
Moelis & Co UK LLP	Condor House (London, UK)	3,366	4.9%	6.0
InterCityHotel GmbH	IC Berlin (Berlin, Germany)	8,457	3.1%	10.8
Baker Tilly GmbH & Co. KG	Valentinskamp (Hamburg, Germany)	6,933	2.9%	8.2
Total		89,946	76.0%	5.9

_____________________________

(1) Based on contractual rentable area.

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 June 30, 2019 (dollars in thousands):

Country	Number of Properties	Gross Book Value(1)		Percentage of NOI(2)	Square Meters(3)	Weighted Average Lease Term (in years)
Office
Germany	6	$	214,701	24%	68,005	7.9
United Kingdom	2	319,545		38%	21,758	6.4
France	4	305,565		34%	32,059	3.4
Subtotal	12	839,811		96%	121,822	5.7
Other Property Types
Germany(4)	2	37,570		4%	12,265	8.7
Total	14	$	877,381	100%	134,087	5.9

_____________________________

(1) Represents gross operating real estate and intangibles as of June 30, 2019.

(2) Based on annualized NOI, for the quarter ended June 30, 2019 (refer to “Non-GAAP Financial Measures” for a description of this metric) for the 14 assets held as of June 30, 2019.

(3) Based on contractual rentable area.

(4) Other represents two hotel (net lease) assets in Germany.

Preferred Equity

In December 2018, in connection with the sale of Trianon Tower, we retained a $5.7 million (€5 million) equity interest in the form of preferred equity, with a 7% yield and five year maturity.

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 5.9 year weighted average lease term to expiry. We invested approximately $33.3 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).

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Outlook and Recent Trends

Gross Domestic Product, or GDP, in the Eurozone and the European Union, or EU, grew by 0.2%¹ during the second quarter. This compares to 0.4%¹ and 0.5%¹, respectively, during the first quarter. The slowdown was attributed to a combination of factors including uncertainty in trade agreements and continued softening of major European economies such as Germany, Italy, France and Spain. In July 2019, the International Monetary Fund, or IMF, maintained its 2019 GDP forecast for the Eurozone at 1.3%².

In response to weakening economic indicators, the European Central Bank, or ECB, underlined the need for a highly accommodative stance on monetary policy for a sustained period of time. In June 2019, the ECB stated its intention to maintain interest rates at zero percent through the first half of 2020, or as long as necessary to ensure a continued, sustained convergence of inflation to 2.0%. As of July 2019, Eurozone inflation stood at 1.1%³, compared to 2.2%³ a year earlier. Unemployment continued to decline, reaching 7.5%⁴ in June 2019, the lowest level recorded in the Eurozone since July 2008.

U.K. economic growth remained subdued at 0.3%⁵ in the three months to May 2019. The impact of intensifying Brexit-related uncertainty on business investment and the perceived heightened risk of a hard Brexit following the recent election of Boris Johnson as the new Prime Minister continued to weigh on the U.K. economy. The IMF revised its U.K. GDP forecast up by 0.1%² to 1.3%² for 2019. On August 1, 2019, the Bank of England, or BoE, expressed concern regarding an elevated risk of a recession next year.

European commercial real estate investment volume totaled €120.3 billion⁶ in the first half of 2019, 19% below the same period in 2018. Office remained the most sought after asset class, representing approximately 40%⁶ of the first half 2019 transaction volume. Prime property yields in some asset classes and markets softened slightly but remain at or close to historically low levels, reflecting a significant premium to sovereign yields.

European office take-up declined 5%⁷ year over year in the second quarter of 2019. Despite supply shortages continuing to restrict occupier activity, there remains healthy levels of expansionary demand, with European net absorption outperforming the 10-year average by more than 30%⁷ in the second quarter. Vacancy continued to decline by 20 bps to 5.8%⁷ in the second quarter, the lowest level since 2002, fueling rental growth which stood at 5.9%⁷ year over year, well above the 10-year average of 2.7%⁷.

German real estate investment stood at €30.3 billion⁶ in the first half of 2019, 18% below the same period last year. Office remained the largest asset class, representing approximately 40%⁶ of total transaction volume. Vacancy across the top 6 German cities fell by a further 10 bps to 3.5%⁸ during the second quarter of 2019, supporting growth in prime rents which increased by 1.6%⁸.

Total U.K. investment volume stood at £21.2 billion⁶ in the first half of 2019, 36% below the same period last year, reflecting continued political uncertainty and more cautious investor sentiment. Central London office investment volume remained subdued totaling £4.9 billion⁹ in the first half of 2019. Take-up in Central London increased by 10%¹⁰ but remained below the 10-year average. Prime rents in the City and West End increased year over year by 5.1%¹⁰ and 2.4%¹⁰, respectively.

French investment volume was €13.5 billion⁶ in the first half of 2019, 1% increase from the same period last year. Office investment represented 73%⁶ of the total investment volume. The Paris occupational market remains robust with vacancy of 1.6%⁶.

Note: The Eurozone includes 19 countries: Belgium, Germany, Estonia, Ireland, Greece, Spain, France, Italy, Cyprus, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Austria, Portugal, Slovenia, Slovakia and Finland.

The EU includes Belgium, Bulgaria, Czechia, Denmark, Germany, Estonia, Ireland, Greece, Spain, France, Croatia, Italy, Cyprus, Latvia, Lithuania, Luxembourg, Hungary, Malta, the Netherlands, Austria, Poland, Portugal, Romania, Slovenia, Slovakia, Finland, Sweden and the United Kingdom.

1. Eurostat GDP news release, July 31, 2019.

2. IMF World Economic Outlook, July 2019.

3. Eurostat Inflation news release, July 31, 2019.

4. Eurostat Unemployment news release, July 31, 2019.

5. Office for National Statistics, GDP monthly estimate, UK: May 2019.

6. CBRE ERIX data as of June 30, 2019.

7. JLL Office Property Clock Q2 2019.

8. Savills Top-6 Office Markets, July 2019.

9. Savills West End and City Investment Watch, July 2019.

10. CBRE Central London Office MarketView Q2 2019.

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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.

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.

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

41

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.

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 Part I, Item 1. “Financial Statements.”

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Results of Operations

Comparison of the Three Months EndedJune 30, 2019 to June 30, 2018 (dollars in thousands):

	Three Months Ended June 30,						Increase (Decrease)
	2019			2018			Amount			%
Revenues
Lease income	$	16,499		$	30,162		$	(13,663	)	(45	)%
Interest income	1,554			706			848			120	%
Other income	107			143			(36		)	(25	)%
Total revenues	18,160			31,011			(12,851		)	(41	)%
Expenses
Properties - operating expenses	3,557			6,930			(3,373		)	(49	)%
Interest expense	3,413			5,855			(2,442		)	(42	)%
Transaction costs	1,827			376			1,451			386	%
Management fee, related party	3,848			4,223			(375		)	(9	)%
Other expenses	734			1,273			(539		)	(42	)%
General and administrative expenses	1,317			1,801			(484		)	(27	)%
Compensation expense	1,950			1,186			764			64	%
Depreciation and amortization	5,908			11,976			(6,068		)	(51	)%
Total expenses	22,554			33,620			(11,066		)	(33	)%
Other income (loss)
Other gain (loss), net	14			3,531			(3,517		)	(100	)%
Extinguishment of debt	(476		)	(1,441		)	965			(67	)%
Gain on sales, net	3,671			38,319			(34,648		)	(90	)%
Income (loss) before income tax benefit (expense)	(1,185		)	37,800			(38,985		)	(103	)%
Income tax benefit (expense)	(249		)	76			(325		)	(428	)%
Net income (loss)	$	(1,434	)	$	37,876		$	(39,310	)	(104	)%

Revenues

Lease Income

Lease income consists of rental revenue and tenant recoveries in our real estate equity segment. Lease income decreased $13.7 million, primarily due to the disposal of four properties during 2019 and seven properties during 2018, including the Maastoren property in April 2018 and Trianon Tower in December 2018 in our real estate equity segment.

Interest Income

Interest income relates to our preferred equity investments originated in December 2018 and May 2017 in our preferred equity segment and interests income on cash held interest bearing bank accounts in our corporate segment. Interest income increased due to additional interest income from the Trianon preferred equity investment in December 2018 in our preferred equity segment and the interest income from the cash held in connection with the sale of Trianon Tower in our corporate segment.

Other Income

Other income is principally related to insurance refunds and fees from vacating tenants in our real estate equity segment. Other income for the three months endedJune 30, 2019 predominantly reflects refunds for tenant improvements. Other income for the three months endedJune 30, 2018 predominantly reflects amounts received from vacating tenants for the demise of the premise.

Expenses

Properties - Operating Expenses

Properties - operating expenses decreased $3.7 million due to the disposal of four properties during 2019 and seven properties during 2018, including the Maastoren property in April 2018 and Trianon Tower in December 2018 partially offset by a $0.3 million increase primarily due to one-off repairs and maintenance and certain utility expenses in our real estate equity segment.

Interest Expense

Interest expense decreased $2.4 million due to the repayments of certain mortgage notes in connection with the disposal of four properties during 2019 and the repayment of the SEB Portfolio - Preferred debt during 2019 and seven properties during 2018, including the Maastoren property in April 2018 and Trianon Tower in December 2018, and the margin reduction associated with

43

the refinancing of the loan agreement related to the Trias France portfolio and Trias German portfolio in our real estate equity segment in the second half of 2018.

Transaction Costs

Transaction costs for the three months endedJune 30, 2019 and 2018 were primarily related to costs associated with the continual work of the Strategic Review Committee of our Board which was established in 2017 to work to evaluate opportunities to enhance stockholder value in our corporate segment and engaged financial and legal advisors to review strategic alternatives, including considering our potential sale or internalization of services in our corporate segment. The increase is due to the increased work by the Strategic Review Committee of our Board due to our strategic review in connection with the termination of the management contract and entering into the Merger Agreement (refer to “Related Party Arrangements” and “Recent Developments” below for more information).

Management Fee, Related Party

Management fee, related party relates to the management fee incurred to our Manager in our corporate segment. The decrease in management fee, related party is due to the decrease in reported EPRA NAV as of March 31, 2019 compared to March 31, 2018 due to sales and a decrease in the Euro and U.K. Pound Sterling to U.S. dollar exchange rate (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 $0.5 million is due to the internalization of certain third-party accounting, tax and asset management services which started in the first quarter of 2018 and continued throughout 2018.

General and Administrative Expenses

General and administrative expenses include external and internal audit, legal fees, public company costs and other corporate expenses incurred in our corporate segment. General and administrative expenses decreased $0.5 million due primarily to additional consulting fees relating to the implementation of a new accounting system in throughout 2018.

Compensation Expense

Compensation expense is comprised of non-cash amortization of time-based and market-based awards in our corporate segment. The increase for the three months endedJune 30, 2019, is mainly due to amortization of the new awards issued during 2019.

Depreciation and Amortization

Depreciation and amortization expense decreased due to the disposals of four properties during 2019 and seven properties during 2018, including the Maastoren property in April 2018 and Trianon Tower in December 2018, in our real estate equity segment.

Other Income (Loss)

Other Gain (Loss), Net

Other gain (loss), net is primarily related to the derivative instruments. The gain on the non-cash change in fair value related to foreign currency forwards used to hedge projected net property level cash flows in our corporate segment was primarily due to the weakening of the Euro against the U.S. dollar. The loss on the non-cash change in fair value related to the interest rate caps in our real estate equity segment is due to the movement in European interest rates in 2019 compared to 2018.

The following table presents a summary of other gain (loss), net for the three months endedJune 30, 2019 and 2018 (dollars in thousands):

	Three Months Ended June 30,
	2019									2018
	Real Estate Equity			Corporate			Total			Real Estate Equity			Corporate			Total
Change in fair value: derivatives, at fair value
Interest rate caps	$	(375	)	$	—		$	(375	)	$	(1,880	)	$	—		$	(1,880	)
Foreign currency forwards	—			(1,596		)	(1,596		)	—			7,566			7,566
Subtotal	(375		)	(1,596		)	(1,971		)	(1,880		)	7,566			5,686
Net cash (payments) receipts on derivatives	—			1,416			1,416			—			(2,631		)	(2,631		)
Foreign currency translations	358			211			569			354			122			476
Total other gain (loss), net	$	(17	)	$	31		$	14		$	(1,526	)	$	5,057		$	3,531

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Extinguishment of Debt

Extinguishment of debt primarily represents the write-off of deferred financing costs associated with the repayment connected with the disposal of real estate assets. Three months ended June 30, 2019 relates to the disposal of Marly in June 2019 and the subsequent repayment of debt and the repayment of the SEB Portfolio - Preferred debt in April 2019 in our real estate equity segment. Three months ended June 30, 2018 relates to the disposal of the Maastoren property in May 2018 and the subsequent repayment of debt in our real estate equity segment.

Gain on Sales, net

Gain on sales, net is primarily related to the sales of operating real estate including the subsequent sale costs relating to prior period sales, receipt of escrow arrangements entered into for specific indemnification obligations in relation to prior period sales and the reclassification of the currency translation adjustment, or CTA, from a component of accumulated other comprehensive income, or OCI, to gain on sales, net, in our real estate segment. Gain on sale, net for the three months endedJune 30, 2019 relates to a $3.2 million gain on the sale of operating real estate, a $0.4 million gain related to adjustments from prior period disposals, net other gains and losses and a CTA gain of $0.1 million. Gain on sale, net for the three months endedJune 30, 2018 relates to a $30.0 million gain on the sale of operating real estate, a $0.5 million gain related to adjustments from prior period disposals, net other gains and losses and a $7.8 million CTA gain.

Income Tax Benefit (Expense)

The income tax expense for the three months endedJune 30, 2019 reflects a net expense of $0.2 million in our real estate equity segment. The income tax benefit for the three months endedJune 30, 2018 reflects a net benefit of $0.1 million related to our real estate equity segment.

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Same Store Analysis

The following table presents our same store analysis for the preferred equity segment (Gresham Street) and real estate equity segment which comprises 14 properties (134,087 square meters) adjusted for currency movement and properties that were acquired or sold at any time during the three months endedJune 30, 2019 and 2018 (dollars in thousands):

	Same Store(4)
	Three Months Ended June 30,(1)					Increase (Decrease)
	2019		2018			Amount			%
Same Store Occupancy (end of period)	96%		97%
Same store
Rental income(2)	$	13,136	$	12,999		$	137		1.1	%
Escalation income	2,445		2,612			(167		)
Lease income	15,581		15,611			(30		)
Interest income	661		671			(10		)
Other income	66		(36		)	102
Total revenues	16,308		16,246			62			0.4	%
Utilities	775		484			291
Real estate taxes and insurance	709		794			(85		)
Management fees	231		246			(15		)
Repairs and maintenance	1,029		910			119
Other(2)(3)	224		243			(19		)
Properties - operating expenses	2,968		2,677			291			10.9	%
Same store net operating income	$	13,340	$	13,569		$	(229	)	(1.7	)%

_____________________________

(1) The three months endedJune 30, 2018 is translated using the average exchange rate for the three months endedJune 30, 2019.

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

(3) Includes non-recoverable value-added tax, or VAT, 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 year-over-year comparison. Same store net operating income is presented for the same store portfolio, which reflects 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

Same store rental income for the three months ended June 30, 2019 increased by $0.1 million, driven by indexation uplifts offset by partial vacancy in certain assets, including Marceau and Ludwigstrasse, and certain value enhancing leases, including a 10 year lease extension with Baker Tilly at Valentinskamp. Same store expense for the three months ended June 30, 2019 increased by $0.3 million due to one-off repairs and maintenance and certain utility expenses.

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Reconciliation of Net Income to Same Store NOI

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 endedJune 30, 2019 and 2018 (dollars in thousands):

	Same Store Reconciliation
	Three Months Ended June 30,
	2019			2018
Net income (loss)	$	(1,434	)	$	37,876
Corporate segment net (income) loss(1)	8,156			2,355
(Gain) on sales, net	(3,671		)	(38,319		)
Other (income) loss(2)	10,507			22,521
Net operating income	13,558			24,433
Sale of real estate investments and other(3)	(218		)	(10,864		)
Same store net operating income	$	13,340		$	13,569

_____________________________

(1) Includes management fees, general and administrative expense, compensation expense, corporate interest expense and corporate transaction costs offset by the net gain on foreign currency derivatives.

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

(3) Primarily reflects the impact of net operating income of sold assets, interest income on the Trianon preferred equity investment and the foreign currency effect relating to the translation of the June 30, 2018 balances to the June 30, 2019 exchange rate.

Comparison of the Six Months EndedJune 30, 2019 to June 30, 2018 (dollars in thousands):

	Six Months Ended June 30,						Increase (Decrease)
	2019			2018			Amount			%
Revenues
Lease income	$	33,583		$	62,727		$	(29,144	)	(46	)%
Interest income	3,165			1,435			1,730			121	%
Other income	582			421			161			38	%
Total revenues	37,330			64,583			(27,253		)	(42	)%
Expenses
Properties - operating expenses	6,463			13,732			(7,269		)	(53	)%
Interest expense	7,093			11,962			(4,869		)	(41	)%
Transaction costs	2,589			857			1,732			202	%
Management fee, related party	7,736			8,380			(644		)	(8	)%
Other expenses	1,471			2,697			(1,226		)	(45	)%
General and administrative expenses	3,053			3,679			(626		)	(17	)%
Compensation expense	3,237			1,551			1,686			109	%
Depreciation and amortization	11,821			23,627			(11,806		)	(50	)%
Total expenses	43,463			66,485			(23,022		)	(35	)%
Other income (loss)
Other gain (loss), net	(2,503		)	529			(3,032		)	(573	)%
Extinguishment of debt	(670		)	(1,441		)	771			(54	)%
Gain on sales, net	21,396			39,585			(18,189		)	(46	)%
Income (loss) before income tax benefit (expense)	12,090			36,771			(24,681		)	(67	)%
Income tax benefit (expense)	(2,401		)	37			(2,438		)	(6,589	)%
Net income (loss)	$	9,689		$	36,808		$	(27,119	)	(74	)%

Revenues

Lease Income

Lease income consists of rental revenue and tenant recoveries in our real estate equity segment. Lease income decreased $29.1 million, primarily due to the disposal of four properties during 2019 and seven properties during 2018, including the Maastoren property in April 2018 and Trianon Tower in December 2018 in our real estate equity segment.

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Interest Income

Interest income relates to our preferred equity investments originated in December 2018 and May 2017 in our preferred equity segment and interests income on cash held interest bearing bank accounts in our corporate segment. Interest income increased due to additional interest income from the Trianon preferred equity investment in December 2018 in our preferred equity segment and the interest income from the cash held in connection with the sale of Trianon Tower in our corporate segment.

Other Income

Other income is principally related to insurance refunds and fees from vacating tenants in our real estate equity segment. Other income for the six months endedJune 30, 2019 predominantly reflects refunds for tenant improvements. Other income for the six months endedJune 30, 2018 predominantly reflects amounts received from vacating tenants for the demise of the premise.

Expenses

Properties - Operating Expenses

Properties - operating expenses decreased $7.3 million due to the disposal of four properties during 2019 and seven properties during 2018, including the Maastoren property in April 2018 and Trianon Tower in December 2018 and an adjustment to utility accruals for assets sold in December 2018 in our real estate equity segment.

Interest Expense

Interest expense decreased $4.9 million due to the repayments of certain mortgage notes in connection with the disposal of four properties and the repayment of the SEB Portfolio - Preferred debt during 2019 and seven properties during 2018, including the Maastoren property in April 2018 and Trianon Tower in December 2018, and the margin reduction associated with the refinancing of the loan agreement related to the Trias France portfolio and Trias German portfolio in our real estate equity segment in the second half of 2018.

Transaction Costs

Transaction costs for the six months endedJune 30, 2019 and 2018 were primarily related to costs associated with the continual work of the Strategic Review Committee of our Board which was established in 2017 to work to evaluate opportunities to enhance stockholder value in our corporate segment and engaged financial and legal advisors to review strategic alternatives, including considering our potential sale or internalization of services in our corporate segment. The increase is due to the increased work by the Strategic Review Committee of our Board due to our strategic review in connection with the termination of the management contract and entering into the Merger Agreement (refer to “Related Party Arrangements” and “Recent Developments” below for more information).

Management Fee, Related Party

Management fee, related party relates to the management fee incurred to our Manager in our corporate segment. The decrease in management fee, related party is due to the decrease in reported EPRA NAV as of December 31, 2018 and March 31, 2019 compared to December 31, 2017 and March 31, 2018 due to sales and a decrease in the Euro and U.K. Pound Sterling to U.S. dollar exchange rate (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 $1.2 million is due to the internalization of certain third-party accounting, tax and asset management services which started in the first quarter of 2018 and continued throughout 2018.

General and Administrative Expenses

General and administrative expenses include external and internal audit, legal fees, public company costs and other corporate expenses incurred in our corporate segment. General and administrative expenses decreased $0.6 million due primarily to additional consulting fees relating to the implementation of a new accounting system throughout 2018.

Compensation Expense

Compensation expense is comprised of non-cash amortization of time-based and market-based awards in our corporate segment. The increased for the six months endedJune 30, 2019, is mainly due to amortization of the new awards issued during 2019.

Depreciation and Amortization

Depreciation and amortization expense decreased due to the disposals of four properties during 2019 and seven properties during 2018, including the Maastoren property in April 2018 and Trianon Tower in December 2018, in our real estate equity segment.

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Other Income (Loss)

Other Gain (Loss), Net

Other gain (loss), net is primarily related to the derivative instruments. The gain on the non-cash change in fair value related to foreign currency forwards used to hedge projected net property level cash flows in our corporate segment was primarily due to the weakening of the Euro against the U.S. dollar. The loss on the non-cash change in fair value related to the interest rate caps in our real estate equity segment is due to the movement in European interest rates in 2019 compared to 2018.

The following table presents a summary of other gain (loss), net for the six months endedJune 30, 2019 and 2018 (dollars in thousands):

	Six Months Ended June 30,
	2019									2018
	Real Estate Equity			Corporate			Total			Real Estate Equity			Corporate			Total
Change in fair value: derivatives, at fair value
Interest rate caps	$	(1,652	)	$	—		$	(1,652	)	$	(1,999	)	$	—		$	(1,999	)
Foreign currency forwards	—			(1,477		)	(1,477		)	—			6,494			6,494
Subtotal	(1,652		)	(1,477		)	(3,129		)	(1,999		)	6,494			4,495
Net cash (payments) receipts on derivatives	—			2,562			2,562			—			(4,371		)	(4,371		)
Foreign currency translations	1,304			(3,240		)	(1,936		)	305			100			405
Total other gain (loss), net	$	(348	)	$	(2,155	)	$	(2,503	)	$	(1,694	)	$	2,223		$	529

Extinguishment of Debt

Extinguishment of debt primarily represents the write-off of deferred financing costs associated with the repayment connected with the disposal of real estate assets. Six months ended June 30, 2019 relates to the disposal of Marly in June 2019, Uhlandstrasse property in March 2019 and Werl property in February 2019 and the subsequent repayment of debt and the repayment of the SEB Portfolio - Preferred debt in April 2019 in our real estate equity segment. Six months ended June 30, 2018 relates to the disposal of the Maastoren property in May 2018 and the subsequent repayment of debt in our real estate equity segment.

Gain on Sales, net

Gain on sales, net is primarily related to the sales of operating real estate including the subsequent sale costs relating to prior period sales, receipt of escrow arrangements entered into for specific indemnification obligations in relation to prior period sales and the reclassification of the currency translation adjustment, or CTA, from a component of accumulated other comprehensive income, or OCI, to gain on sales, net, in our real estate segment. Gain on sale, net for the six months endedJune 30, 2019 relates to a $21.3 million gain on the sale of operating real estate and a $1.2 million gain related to the release of escrow accounts and adjustments from prior period disposals, net other gains and losses offset by a CTA loss of $1.1 million. Gain on sale, net for the six months endedJune 30, 2018 relates to a $30.0 million gain on the sale of operating real estate, a $1.5 million gain related to the release of escrow accounts and adjustments from prior period disposals, net other gains and losses and a $8.1 million CTA gain.

Income Tax Benefit (Expense)

The income tax expense for the six months endedJune 30, 2019 reflects a net expense of $2.4 million including a $2.0 million capital gain tax related to our assets sold in our real estate equity segment. The income tax benefit for the six months endedJune 30, 2018 reflects a net benefit of $0.1 million related to our real estate equity segment.

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Same Store Analysis

The following table presents our same store analysis for the preferred equity segment (Gresham Street) and real estate equity segment which comprises 14 properties (134,087 square meters) adjusted for currency movement and to exclude the asset held for sale as of March 31, 2019 and properties that were acquired or sold at any time during the six months endedJune 30, 2019 and 2018 (dollars in thousands):

	Same Store(4)
	Six Months Ended June 30,(1)				Increase (Decrease)
	2019		2018		Amount			%
Same Store Occupancy (end of period)	96%		97%
Same store
Rental income(2)	$	26,493	$	26,449	$	44		0.2	%
Escalation income	5,014		4,802		212
Lease income	31,507		31,251		256
Interest income	1,343		1,345		(2		)
Other income	130		99		31
Total revenues	32,980		32,695		285			0.9	%
Utilities	1,464		1,010		454
Real estate taxes and insurance	1,417		1,366		51
Management fees	360		454		(94		)
Repairs and maintenance	2,123		1,751		372
Other(2)(3)	429		448		(19		)
Properties - operating expenses	5,793		5,029		764			15.2	%
Same store net operating income	$	27,187	$	27,666	$	(479	)	(1.7	)%

_____________________________

(1) The six months endedJune 30, 2018 is translated using the average exchange rate for the six months endedJune 30, 2019.

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

(3) Includes non-recoverable value-added tax, or VAT, 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 year-over-year comparison. Same store net operating income is presented for the same store portfolio, which reflects 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

Same store NOI for the six months ended June 30, 2019 decreased by $0.5 million, due to an increase in properties - operating expenses relating to one-off repairs and maintenance and certain utility expenses.

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Reconciliation of Net Income to Same Store NOI

The following table presents a reconciliation from net income (loss) to same store net operating income for the real estate equity segment for the six months endedJune 30, 2019 and 2018 (dollars in thousands):

	Same Store Reconciliation
	Six Months Ended June 30,
	2019			2018
Net income (loss)	$	9,689		$	36,808
Corporate segment net (income) loss(1)	17,432			11,883
(Gain) on sales, net	(21,396		)	(39,585		)
Other (income) loss(2)	23,011			42,317
Net operating income	28,736			51,423
Sale of real estate investments and other(3)	(1,549		)	(23,757		)
Same store net operating income	$	27,187		$	27,666

_____________________________

(1) Includes management fees, general and administrative expense, compensation expense, corporate interest expense and corporate transaction costs offset by the net gain on foreign currency derivatives.

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

(3) Primarily reflects the impact of net operating income of sold assets, interest income on the Trianon preferred equity investment and the foreign currency effect relating to the translation of the June 30, 2018 balances to the June 30, 2019 exchange rate.

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; 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 non-deductible excise tax. On a quarterly basis, our Board determines an appropriate common stock dividend based upon numerous

51

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 March 2018, our Board authorized the repurchase of up to $100 million of our outstanding common stock. The authorization expired in March 2019. For the six months endedJune 30, 2019, we did not repurchase any shares of our common stock. For the six months endedJune 30, 2018, we repurchased 5.1 million shares of our common stock for approximately $69.6 million. From authorization through March 2019, we repurchased 6.1 million shares of our common stock for approximately $83.4 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.

Cash Flows

The following presents a summary of our activity for the six months endedJune 30, 2019 and 2018:

	Six Months Ended June 30,
Cash flow provided by (used in):	2019			2018
Operating activities	$	(1,665	)	$	16,097
Investing activities	93,068			183,338
Financing activities	(148,776		)	(212,287		)
Effect of foreign currency translation on cash and cash equivalents and restricted cash	(6,030		)	(842		)
Net increase (decrease) in cash and cash equivalents and restricted cash	$	(63,403	)	$	(13,694	)

Six Months EndedJune 30, 2019 Compared to June 30, 2018

Net cash used in operating activities was $1.7 million for the six months endedJune 30, 2019 compared to net cash provided by operating activities of $16.1 million for the six months endedJune 30, 2018. The decrease was primarily due to sales and the timing of payments and collection of receivables.

Net cash provided by investing activities was $93.1 million for the six months endedJune 30, 2019 compared to net cash used in investing activities of $183.3 million for the six months endedJune 30, 2018. Cash flow provided by investing activities for the six months endedJune 30, 2019 was primarily due to proceeds from the sale of operating real estate of $93.7 million and net cash received from the settlement of foreign currency forwards of $4.4 million offset by and improvements of our operating real estate $3.2 million. Cash flow provided by investing activities for the for the six months endedJune 30, 2018 was primarily due to proceeds from the sale of operating real estate $188.5 million offset by and improvements of our operating real estate of $8.2 million.

Net cash used in financing activities was $148.8 million for the six months endedJune 30, 2019 compared to $212.3 million for the six months endedJune 30, 2018. Cash flow used in financing activities for the six months endedJune 30, 2019 was primarily due to repayment of mortgage and other notes payable of $132.5 million and dividend payments of $15.1 million. Cash flow used in financing activities for the six months endedJune 30, 2018 was primarily due to repayment of mortgage and other notes payable of $122.1 million, retirement of shares of common stock of $69.4 million, and dividend payments of $16.2 million.

Off-Balance Sheet Arrangements

We currently do not have any off-balance sheet arrangements except for the guarantee agreements entered into in connection with the sale of Trianon Tower (refer to Part I. Item 1. “Financial Statements” Note 12).

Related Party Arrangements

Colony Capital, Inc.

We 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 Capital, 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

52

us and our subsidiaries. The management agreement with the Manager provides for a base management fee, incentive fee and expense reimbursement.

On November 7, 2018, we entered into Amendment No. 1, or the Amendment, to the Amended and Restated Management Agreement with an affiliate of the Manager. The Amendment provides for the termination of the Amended and Restated Management Agreement (the date of such termination, or the Termination Date) upon the earlier of (i) the closing of NRE Change of Control (as defined in the Amended and Restated Management Agreement) and (ii) the completion of an internalization of the management of the Company within nine months of the later of (x) April 30, 2019, if on such date there is not in place a definitive agreement for an NRE Change of Control and (y) if on April 30, 2019 there is a definitive agreement for an NRE Change of Control, such date on which such agreement is terminated, if any, if no other definitive agreement for an NRE Change of Control is entered into within 30 days thereafter.

The Amendment provides that upon the Termination Date, the Company will be obligated to pay to the Manager a termination payment equal to (i) $70 million, minus (ii) the amount of any Incentive Fee (refer below) paid pursuant to the Amended and Restated Management Agreement. As of June 30, 2019, the termination fee that would be payable on the Termination Date was $64.5 million. No Incentive Fee will be payable to our Manager for any period following the Termination Date.

On April 23, 2019, we entered into Amendment No. 2, or Amendment No. 2, to the Amended and Restated Management Agreement with an affiliate of the Manager, extending the date used in the definition of Triggering Date (as defined in the Amended and Restated Management Agreement) from April 30, 2019 to June 30, 2019 to accommodate the ongoing strategic review process.

In addition to Amendment No. 2, on April 22, 2019, we entered into an Employee Transition Agreement with an affiliate of the Manager, or the Employee Transition Agreement. Pursuant to the terms of the Employee Transition Agreement, the parties agreed that certain employees of the Manager would be available for hire by us or an acquirer of NRE from and after the termination of the Amended and Restated Management Agreement pursuant to Amendment No. 2. The Employee Transition Agreement also (i) eliminates our obligation to reimburse the Manager for 50% of the cash severance payments payable to Mahbod Nia, our Chief Executive Officer, if his employment is terminated in connection with an NRE Change of Control, and reduces such reimbursement obligation from 50% to 25% of the cash severance payments payable to Mr. Nia if such termination of employment is in connection with an Internalization and (ii) addresses a number of other topics including, minimum 2018 annual cash bonuses, continuing compensation and cash severance payable by the Manager or one of its affiliates to key personnel providing services to us, the structure and minimum amount of the 2018 annual equity compensation pool established by us under the Amended and Restated Management Agreement and the amendment of outstanding equity awards to address vesting upon an NRE Change of Control or termination of the Amended and Restated Management Agreement.

Term

The Amendment, as modified by Amendment No. 2, provides for the termination of the Amended and Restated Management Agreement upon the earlier of (i) the closing of NRE Change of Control and (ii) the completion of an internalization of the management of the Company within nine months of the later of (x) June 30, 2019, if on such date there is not in place a definitive agreement for an NRE Change of Control and (y) if on June 30, 2019 there is a definitive agreement for an NRE Change of Control, such date on which such agreement is terminated, if any, if no other definitive agreement for an NRE Change of Control is entered into within 30 days thereafter. Because the Merger will qualify as an NRE Change of Control under the Amended and Restated Management Agreement, upon the closing of the Merger, the Amended and Restated Management Agreement will automatically terminate in accordance with its terms.

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.

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 described 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,

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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 endedJune 30, 2019 and 2018, we incurred $3.9 million and $4.2 million, respectively, related to the base management fee. For the six months ended June 30, 2019 and 2018, we incurred $7.7 million and $8.4 million, respectively, related to the base management fee.

Incentive Fee

In addition to the base management fees, pursuant to the Amended and Restated Management Agreement, 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 began January 1, 2018 (based on an initial price of $13.68) and ended on December 31, 2018 (at a price of $14.97) and subsequent measurement periods will begin on January 1 of the subsequent calendar year and end on December 31, of the applicable calendar year. Any future Incentive Fee will reduce the final termination payment payable to the Manager which, as of June 30, 2019, is $64.6 million and is payable on the Termination Date.

Costs and Expenses

Pursuant to the Amended and Restated Management Agreement, 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, gross asset value, 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 endedJune 30, 2019 and 2018, the Manager allocated $0.2 million and $0.2 million, respectively, of Internalized Service Costs to us. For the six months endedJune 30, 2019 and 2018, the Manager allocated $0.4 million and $0.5 million, respectively, 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.

Beginning with our 2018 annual stockholders’ meeting, the Manager has the right to nominate one individual to be included in the slate of nominees nominated by our board of directors for election at each annual meeting. In the third quarter 2019, for the 2019 annual stockholders’ meeting, the Manager will nominate one individual to our board of directors.

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Colony Capital Ownership Waiver and Voting Agreement

In connection with the entry into the Amended and Restated Management Agreement, we provided Colony Capital with an ownership waiver under our Articles of Amendment and Restatement, allowing Colony Capital to purchase up to 45% of our stock. The waiver provides that if the Amended and Restated Management Agreement is terminated, Colony Capital may not purchase any shares of our common stock to the extent Colony Capital owns (or would own as a result of such purchase) more than 9.8% of our capital stock. In connection with the waiver, Colony Capital also agreed that for all matters submitted to a vote of our stockholders, to the extent Colony Capital owns more than 25% of our common stock (such shares owned by Colony Capital 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 Capital 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 June 30, 2019, Colony Capital and its subsidiaries owned 5.6 million shares of our common stock, or approximately 11.2% of the total outstanding common stock.

Recent Developments

Dividends

On August 2, 2019, we declared a dividend of $0.15 per share of common stock. The common stock dividend is expected to be paid on August 23, 2019 to stockholders of record as of the close of business on August 19, 2019.

Credit Facility

On July 17, 2019, or Credit Facility Termination Date, we terminated the Credit Facility. As of such date, no amounts were drawn under the Credit Facility and no fees or penalties were incurred as a result of the termination, other than the payment of an immaterial accrued commitment fee. We voluntarily terminated the Credit Facility to eliminate the obligation to pay the commitment fee with respect to undrawn lender commitments thereunder.

Merger Agreement with AXA Investment Managers

In July 2019, we announced the Merger. The surviving entity of the Merger will not be a publicly-traded company and will become a direct wholly owned subsidiary of a fund managed by AXA Investment Managers. The Merger has been approved by our Board upon the recommendation of the Strategic Review Committee of our Board consisting solely of independent directors of the Company.

Under the terms of the Merger Agreement, upon the consummation of the Merger, each share of our common stock will be converted into the right to receive cash in U.S. dollars equal to the sum of $1.68 plus the U.S. dollar equivalent of €9.26 and £3.82, or the Per Share Consideration, without interest. We have entered into six-month forward contracts for the purchase of U.S. dollars for €482 million and £199 million, the approximate aggregate amount of the merger consideration denominated in euros and U.K. Pound Sterling. In connection with the closing of the Mergers, these forward contracts will be settled and the portion of the merger consideration denominated in euros and pound sterling will be paid to our security holders in U.S. dollars reflecting the final exchange rates received in settlement of the forward contracts (which may be at rates greater or less than the currently estimated exchange rates, depending on the closing date of the Mergers). To the extent that the closing occurs prior to the end of the settlement period on the forward contracts, these contracts will be settled at the time of closing. An early settlement, prior to January 6, 2020, may reduce the U.S. dollars per share received by stockholders due to a shorter duration of the hedge. We currently estimate a closing in approximately three months, which would result in stockholders receiving approximately $17.03 per share in U.S. dollars. The settlement amount would be determined by the movement in the forward points from the date of closing to the final settlement date at the end of the six month period. There may also be an adjustment to present value the hedge settlement amount if the closing occurs before January 6, 2020. The settlement of the forward contracts is not contingent upon the consummation of the Mergers. Therefore, even if the Mergers are not competed, the hedges pursuant to the forward contract will remain in place and we will be required to settle the forward contracts at maturity of the hedges, which may result in a loss or gain to us. AXA Investment Managers will finance the Mergers and the other transactions contemplated by the Merger Agreement through the arrangement of equity financing and our available cash at closing. The closing of the Mergers is not subject to any financing condition.

The Merger is expected to close in the fourth quarter of 2019, subject to, among other things, the receipt of approval of the Company’s stockholders.

In addition, conditional upon, immediately prior to and in connection with the Merger, Nighthawk Partnership Merger Sub LLC, or the Partnership Merger Sub, our wholly owned subsidiary formed solely for the purposes of facilitating the transaction

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contemplated by the Merger Agreement, will merge with and into the Operating Partnership, with the Operating Partnership as the surviving entity.

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, NOI and same store 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, gain on sales, net, 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, noncontrolling 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; other gain (loss), net (excluding any realized gain (loss) on the settlement on foreign currency derivatives); gain on sales, net; impairment on depreciable property; extinguishment of debt; acquisition gains or losses; transaction costs; foreign currency gains (losses) related to sales; goodwill impairment following the sale of operating real estate 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.

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The following table presents a reconciliation of net income (loss) attributable to common stockholders to CAD for the three and six months endedJune 30, 2019 and 2018 (dollars in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Net income (loss) attributable to common stockholders	$	(1,428	)	$	37,659		$	9,633		$	36,587
Noncontrolling interests	(6		)	217			56			221
Adjustments:
Depreciation and amortization items(1)(2)	8,017			14,241			15,436			27,194
Other (gain) loss, net(3)(4)	1,402			(4,541		)	5,065			(2,954		)
(Gain) on sales, net	(3,671		)	(38,319		)	(21,396		)	(39,585		)
Transaction costs and other(5)(6)	2,303			2,288			5,229			2,767
CAD	$	6,617		$	11,545		$	14,023		$	24,230

_____________________________

(1) Three months endedJune 30, 2019 reflects an adjustment to exclude depreciation and amortization of $5.9 million, amortization expense of capitalized above/below market leases of $(0.3) million, amortization of deferred financing costs of $0.4 million and amortization of equity-based compensation of $2.0 million. Three months endedJune 30, 2018 reflects an adjustment to exclude depreciation and amortization of $12.0 million, amortization expense of capitalized above/below market leases of $0.2 million, amortization of deferred financing costs of $0.9 million and amortization of equity-based compensation of $1.2 million.

(2) Six months endedJune 30, 2019 reflects an adjustment to exclude depreciation and amortization of $11.8 million, amortization expense of capitalized above/below market leases of $(0.5) million, amortization of deferred financing costs of $0.9 million and amortization of equity-based compensation of $3.2 million. Six months endedJune 30, 2018 reflects an adjustment to exclude depreciation and amortization of $23.6 million, amortization expense of capitalized above/below market leases of $0.4 million, amortization of deferred financing costs of $1.6 million and amortization of equity-based compensation of $1.6 million.

(3) Three months endedJune 30, 2019 CAD includes a $1.4 million net gain related to the settlement of foreign currency derivatives. Three months endedJune 30, 2018 CAD includes a $1.0 million net loss related to the settlement of foreign currency derivatives.

(4) Six months endedJune 30, 2019 CAD includes a $2.6 million net gain related to the settlement of foreign currency derivatives. Six months endedJune 30, 2018 CAD includes a $2.4 million net loss related to the settlement of foreign currency derivatives.

(5) Three months endedJune 30, 2019 reflects an adjustment to exclude $1.8 million of transaction costs and $0.5 million related to extinguishment of debt. Three months endedJune 30, 2018 reflects an adjustment to exclude $0.9 million of transaction costs and other one-time items and $1.4 million related to extinguishment of debt.

(6) Six months endedJune 30, 2019 reflects an adjustment to exclude $2.6 million of transaction costs, $0.7 million related to extinguishment of debt and $2.0 million of taxes related to sales. Six months endedJune 30, 2018 reflects an adjustment to exclude $1.3 million of transaction costs and other one-time items and $1.4 million related to extinguishment of debt.

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 reflects 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, gains on sales, net 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.

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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 and six months endedJune 30, 2019 and 2018 (dollars in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
	2019			2018		2019			2018
Lease income	$	16,499		$	30,162	$	33,583		$	62,727
Other income	107			143		582			421
Total property and other income	16,606			30,305		34,165			63,148
Properties - operating expenses	3,557			6,930		6,463			13,732
Adjustments:
Interest income	761			706		1,538			1,435
Amortization and other items(1)(2)	(252		)	352		(504		)	572
NOI(3)	$	13,558		$	24,433	$	28,736		$	51,423

_____________________________

(1) Three months endedJune 30, 2019 primarily excludes $(0.3) million of amortization of above/below market leases. Three months endedJune 30, 2018 primarily excludes $0.2 million of amortization of above/below market leases and $0.1 million of other one-time items.

(2) Six months endedJune 30, 2019 primarily excludes $(0.5) million of amortization of above/below market leases. Six months endedJune 30, 2018 primarily excludes $0.4 million of amortization of above/below market leases and $0.1 million of other one-time items.

(3) The following table presents a reconciliation of net income (loss) to NOI of our real estate equity and preferred equity segment for the three and six months endedJune 30, 2019 and 2018 (dollars in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Net income (loss)	$	(1,434	)	$	37,876		$	9,689		$	36,808
Remaining segments(i)	8,156			2,355			17,432			11,883
Real estate equity and preferred equity segment adjustments:
Interest expense	3,237			5,601			6,691			11,556
Other expenses	734			1,250			1,471			2,674
Depreciation and amortization	5,908			11,976			11,821			23,627
Other (gain) loss, net	17			1,526			348			1,694
Extinguishment of debt	476			1,441			670			1,441
Gain on sales, net	(3,671		)	(38,319		)	(21,396		)	(39,585		)
Income tax (benefit) expense	249			(76		)	2,401			(37		)
Other items	(114		)	803			(391		)	1,362
Total adjustments	6,836			(15,798		)	1,615			2,732
NOI	$	13,558		$	24,433		$	28,736		$	51,423

_____________________________

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

Same Store Net Operating Income

We believe same store NOI, 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 year-over-year comparison. Same store net operating income is presented for the same store portfolio, which reflects 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 to “Results of Operations” for the calculation and reconciliation of same store NOI to net income (loss) attributable to common stockholders calculated in accordance with U.S. GAAP.

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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 real estate 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 June 30, 2019, 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 $3.9 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 June 30, 2019, 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 other gain (loss), net 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 investments are 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.

We are subject to the credit risk of the borrower when we subscribe 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.

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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 six months ended June 30, 2019 and 2018:

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 $49.7 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 $2.0 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.

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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.

During the quarter ended June 30, 2019, 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.

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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

Except as set forth below, there have been no material changes to the risk factors previously disclosed in our 2018 Form 10-K.

Risks Relating to the Proposed Merger with AXA Investment Managers

The occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement could have a material adverse effect on the Company and our stock price.

As described in the following risk factor, we could experience certain consequences related to the termination of the Merger Agreement and failure to consummate the Merger. In addition, pursuant to the terms of the Merger Agreement, if the Merger Agreement is terminated under certain circumstances, including either AXA Investment Managers or the Company terminates the Merger Agreement based on the Board, upon the recommendation of the Strategic Review Committee of the Board consisting solely of independent directors, making a change in its recommendation in favor of the Mergers, a termination payment of $31 million will be payable by the Company to AXA Investment Managers. There can be no assurance that the Merger Agreement will not be terminated under the circumstances triggering our obligation to make the termination payment. If triggered, such obligation will negatively impact our results of operations, financial condition and cash flows and such impact will be over and above the consequences described below related to the failure to consummate the Merger.

The proposed Merger may not be consummated or may not be consummated in the timeframe or manner currently anticipated, which could have a material adverse effect on the Company and our stock price.

The proposed Merger is subject to various closing conditions such as the approval of our stockholders and the clearance from the German Federal Cartel Office (to the extent described in the Merger Agreement), among other customary closing conditions. It is possible that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the Merger. If any condition to the closing of the Merger is not satisfied or, if permissible, waived, the Merger will not be completed. In addition, satisfying the conditions to the closing of the Merger may take longer than we expect. There can be no assurance that any of the conditions to closing will be satisfied or waived or that other events will not intervene to delay or result in the failure to consummate the Merger.

If the Merger is not completed for any reason, the price of our common stock may decline to the extent that the current market price may reflect an assumption that the Merger will be consummated at the per share merger consideration specified in the Merger Agreement. Investor confidence could also decline. Further, we have expended, and continue to expend, significant management resources in an effort to complete the Merger. We also are, and will become, obligated to pay certain professional fees and related expenses in connection with the negotiation of the Merger Agreement and performance thereunder, whether or not the Merger is completed, and these expenses will impact our results of operations. If the Merger is not completed, we will have incurred these costs, including the diversion of management resources, for which we will have received little or no benefit.

Further, any delay in closing or a failure to close the Merger could exacerbate any negative impact on our business and our relationships with our commercial counterparties, tenants, joint venture partners, or other parties with which we maintain business relationships as described in the risk factors below, as well as negatively impact our ability to implement alternative business plans.

Our management’s attention from our ongoing business operations may be disrupted due to the proposed Merger.

We have expended, and continue to expend, significant management resources in an effort to complete the Merger. Management’s attention may be diverted away from the day-to-day operations of our business and execution of our existing business plan in our efforts to complete the Merger. This diversion of management resources could disrupt operations and have an adverse effect on our operating results and business.

The announcement of the proposed Merger could disrupt our relationships with our commercial counterparties, tenants, joint venture partners or other parties, as well as our operating results and business generally.

Whether or not the Merger is ultimately consummated, as a result of uncertainty related to the proposed Merger, risks relating to the impact of the announcement of the Merger on our business include the following:

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• our service providers may experience uncertainty about their business relationship with the us and their future roles, which might adversely affect our ability to retain key personnel and other service providers;

• commercial counterparties, tenants, joint venture partners and other parties with which we maintain business relationships may experience uncertainty about our future and seek alternative relationships with third parties, seek to alter their business relationships with us or fail to extend an existing relationship with us; and

• we have expended and will continue to expend significant costs, fees and expenses for professional services and transaction costs in connection with the proposed Merger; these costs will impact our results of operations regardless of whether or not the Merger is consummated.

Further, the Merger Agreement restricts the Company from taking certain actions without AXA Investment Managers’ consent while the Merger is pending. These restrictions may, among other matters, prevent us from pursuing otherwise attractive business opportunities, making certain investments or acquisitions, selling assets, engaging in capital expenditures in excess of certain agreed limits or outside certain agreed circumstances, incurring certain indebtedness or making certain other changes to our business pending the closing of the Merger. These restrictions could have an adverse effect on our business, financial condition and results of operations.

In addition to the foregoing, the amount of the per share merger consideration to be paid in cash pursuant to the Merger Agreement is fixed and will not be increased for changes in our business, assets, liabilities, prospects, outlook, financial condition or results of operation or in the event of any change in the market price of, analyst estimates of, or projections relating to, our common stock. Therefore, the market value of our common stock may vary significantly from the value on the date the Merger Agreement was executed or at other later dates.

An adverse judgment in a lawsuit challenging the Merger may prevent the Merger from becoming effective or from becoming effective within the expected timeframe.

There may be lawsuits filed challenging the Merger, which could, among other things, result in the Company incurring costs associated with defending these claims or any other liabilities that may be incurred in connection with the litigation or settlement of these claims. Further, an injunction could be issued, prohibiting the parties from completing the Mergers on the agreed-upon terms in the expected time frame, or may prevent it from being completed altogether. This type of litigation is often expensive and diverts management’s attention and resources, which could adversely affect the operation of the Company’s business.

The Merger Agreement contains provisions that could discourage a potential competing acquiror or could result in any competing proposal being at a lower price than it might otherwise be.

The Merger Agreement contains “no shop” provisions that, subject to limited exceptions, restrict our ability to initiate, solicit, or knowingly encourage or knowingly facilitate competing third-party proposals to acquire all or a significant part of the Company. In addition, as discussed above, under specified circumstances, including either AXA Investment Managers or the Company terminates the Merger Agreement based on the Board, upon the recommendation of the Strategic Review Committee of the Board consisting solely of independent directors, making a change in its recommendation in favor of the Mergers, a termination payment of $31 million will be payable by the Company to AXA Investment Managers.

These provisions could discourage a potential acquiror that might have an interest in acquiring all or a significant part of the Company from considering or proposing an acquisition, even if it were prepared to pay consideration with a higher per share value than the value proposed to be received or realized in the Merger, or might result in a potential competing acquiror proposing to pay a lower price than it might otherwise have proposed to pay because of the added expense of the termination payment that may become payable in certain circumstances.

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 4. Mine Safety Disclosures

None.

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Item 6.   Exhibits

Exhibit Number		Description of Exhibit
2.1		Agreement and Plan of Merger, dated as of July 3, 2019, by and among CoRE PANEURO 2019 13 S.à.r.l., Nighthawk Merger Sub LLC, NorthStar Realty Europe Corp., NorthStar Realty Europe Limited Partnership and Nighthawk Partnership Merger Sub LLC. (incorporated by reference to Exhibit 2.1 to NorthStar Realty Europe’s Current Report on Form 8-K filed on July 8, 2019)
3.1		Articles of Amendment, dated August 3, 2018 (incorporated by reference to Exhibit 3.1 to NorthStar Realty Europe’s Current Report on Form 8-K filed on August 6, 2018)
3.2		Amended and Restated Bylaws, effective as of August 3, 2018 (incorporated by reference to Exhibit 3.2 to NorthStar Realty Europe’s Current Report on Form 8-K filed on August 6, 2018)
10.1	*	Transition Agreement, dated as of April 23, 2019, by and among CNI NRE Advisors, LLC, Colony Capital Operating Company LLC and NorthStar Realty Europe Corp.
10.2	*	Employee Transition Agreement, dated as of April 23, 2019, by and among CNI NRE Advisors, LLC, Colony Capital Operating Company LLC and NorthStar Realty Europe Corp.
10.3	*	Amendment No. 2, dated as of April 23, 2019 hereby amends the Amended and Restated Asset Management Agreement, between NorthStar Realty Europe Corp. and CNI NRE Advisors, LLC
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	*	The following materials from the NorthStar Realty Europe Corp. Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2019, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of June 30, 2019 (unaudited) and December 31, 2018; (ii) Consolidated Statements of Operations (unaudited) for the three and six months ended June 30, 2019 and 2018; (iii) Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three and six months ended June 30, 2019 and 2018; (iv) Consolidated Statements of Equity (unaudited) for the three and six months ended June 30, 2019 and 2018; (v) Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2019 and 2018; and (vi) Notes to Consolidated Financial Statements (unaudited)

_____________________________

* Filed herewith.

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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:	August 7, 2019		By:	/s/ MAHBOD NIA
				Mahbod Nia
				Chief Executive Officer and President
			By:	/s/ KEITH A. FELDMAN
				Keith A. Feldman
				Chief Financial Officer and Treasurer

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EX-10.1

Exhibit 10.1

TRANSITION AGREEMENT

This TRANSITION AGREEMENT (as amended, restated, updated or modified from time to time, this “Agreement”), dated as of April 23, 2019 is entered into by and among CNI NRE Advisors, LLC, a Delaware limited liability company (the “Asset Manager”), Colony Capital Operating Company LLC, a Delaware limited liability company (the “Asset Manager Parent”, and together with Asset Manager, the “Asset Manager Parties”) and NorthStar Realty Europe Corp., a Maryland corporation (the “Company” and together with the Asset Manager Parties, the “Parties”).

R E C I T A L S:

WHEREAS, the Asset Manager provides certain services to the Company and its Subsidiaries pursuant to that certain Amended and Restated Asset Management Agreement, dated as of November 9, 2017 by and between the Company and the Asset Manager (as amended, restated, updated or modified from time to time, the “Asset Management Agreement”), as amended by that certain Amendment No. 1 dated as of November 7, 2018 (the “Amendment”).

WHEREAS, pursuant to the Amendment, the Asset Manager and the Company agreed to promptly formulate a management transition and retention program to induce the employees of the Asset Manager and its Affiliates set forth on Exhibit A thereto to continue providing certain services to the Company through the Termination Date (as defined below) and substantially similar services to the Company following the Termination Date which shall be executed simultaneously hereto (the “Employee Transition Agreement”).

WHEREAS, pursuant to the Amendment, the Asset Manager and the Company agreed to negotiate in good faith to execute a definitive transition services agreement, pursuant to which the Asset Manager and its Affiliates will provide, or cause to be provided, to the Company certain services on a transitional basis for up to nine (9) months following the Termination Date.

WHEREAS, the Company is currently utilizing its commercially reasonable efforts, consistent with the fiduciary duties of the Strategic Review Committee (the “SRC”) and the Board of Directors of the Company, to enter into a definitive agreement providing for an NRE Change of Control (as defined in the Asset Management Agreement) (the “Sale Process”).

WHEREAS, the Company has agreed to pay the 2018 Incentive Fee (as such term is defined in the Asset Management Agreement) in cash in consideration of the Asset Manager Parties agreeing to this Agreement and the Employee Transition Agreement.

NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:

ARTICLE I

DEFINITIONS; INTERPRETATION

Section 1.1    Definitions. For the purposes of this Agreement, each of the following terms shall have the following respective meanings:

“Affiliate” means, with respect to a Person, any other Person that either directly or indirectly controls, is controlled by or is under common control with the first Person. The term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting interests, by contract or otherwise. For the avoidance of doubt, for purposes of this Agreement, none of the Company or any of its Subsidiaries shall be considered an Affiliate of the Asset Manager, the Asset Manager Parent or any of their respective Subsidiaries.

“Business Day” means a day other than Saturday, Sunday or other day on which commercial banks in New York, New York, United States of America are required to or may be closed.

“Change of Control Termination Date” means the date of the completion of an NRE Change of Control and termination of the Asset Management Agreement.

“Common Stock” means the Company’s common stock, par value $0.01 per share.

“Confidential Information” means all proprietary and confidential information of a Party or its Subsidiaries concerning the business, business relationships (including prospective customers and business partners) and financial affairs of such Party and its Subsidiaries, in each case whether or not in writing and whether or not labeled or identified as confidential or proprietary, including inventions, trade secrets, technical information, know-how, product and pricing information and plans, research and development activities, marketing plans and activities, customer, supplier and prospect information, employee and financial information, and information disclosed by third parties of a proprietary or confidential nature or under an obligation of confidence.

“Counterparty” means any potential counterparty to an NRE Change of Control identified to the Asset Manager Parties by the SRC.

“Governmental Authority” means any federal, state, local or foreign government, any court, tribunal, administrative agency or commission or other governmental or other regulatory authority or agency, whether federal, state, local, foreign or supranational, and any arbitral body.

“Law” means any order or any federal, state, local, foreign, supranational or international law, statute, treaty, convention or ordinance, common law, or any rule, regulation, standard, directive, requirement, policy, license or permit of any Governmental Authority.

“Liability” means any liability, cost, expense, debt, guarantee, assurance, commitment or obligation of any kind, character, or description, and whether known or unknown, accrued or

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unaccrued, absolute, fixed, contingent or otherwise, asserted or unasserted, matured or unmatured, liquidated or unliquidated, due or to become due and whenever or however arising.

“Person” means an individual, firm, corporation, partnership, limited liability company, incorporated or unincorporated association, joint venture, joint stock company, trust or other entity or organization of any kind, including a Governmental Authority.

“Subsidiary” means, with respect to any Person, any other Person of which at least a majority of the securities or ownership interests having by their terms ordinary voting power to elect a majority of the board of directors or other persons performing similar functions (or, in the case of a partnership, a majority of the general partnership interests) is directly or indirectly owned or controlled by such Person or by one or more of its Subsidiaries. For the avoidance of doubt, for purposes of this Agreement, none of the Company or any of its Subsidiaries shall be considered a Subsidiary of the Asset Manager, the Asset Manager Parent or any of their respective Subsidiaries.

“Termination Date” has the meaning set forth in the Amendment.

ARTICLE II

TRANSITION

Section 2.1    NRE Change of Control. In furtherance of the Sale Process, promptly following the request of the SRC, the Asset Manager Parties agree to negotiate in good faith with any Counterparty to amend this Agreement to provide transition services to such Counterparty following an NRE Change of Control on terms and conditions no less favorable to such Counterparty than those set forth in Article III through Article V, substituting the Change of Control Termination Date for the Internalization Termination Date, and to negotiate in good faith any such other changes and modifications to the Services as reasonably requested by a Counterparty (including the elimination of Services).

Section 2.2    NRE Internalization. From and after the Triggering Date (as defined in the Amendment), the Company may deliver written notice (the “Internalization Notice”) to the Asset Management Parties that the Company intends to internalize management of the Company (the “Internalization”). The Internalization Notice shall set forth the date on which the Internalization shall occur (the “Internalization Termination Date”), which date shall not be less than seventy-five (75) days after the date of the Internalization Notice and must be on or before the Outside Date (as defined in the Amendment). Concurrent with the delivery of the Internalization Notice, the Company shall deliver written notice of those NRE Employees (as defined in the Employee Transition Agreement) to which it is offering employment. Following delivery of the Internalization Notice and prior to the Internalization Closing Date, both parties will cooperate in good faith to take all actions reasonably required to facilitate the Internalization, including such actions as are related to some or all of the NRE Employees becoming employees of the Company. On the Internalization Termination Date, (i) the Company shall hire all persons who have accepted the offers of employment (the “Company Employees”), (ii) all Company Employees shall move to segregated office space provided pursuant to this Agreement (and vacate the office space of the Asset Manager Parties within five (5) Business Days of the Internalization Closing Date, (iii) the Company shall pay to the Asset Management Parties in cash the Termination Payment (as defined in the Amendment) and

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(iv) the Asset Management Agreement shall terminate. For the avoidance of doubt, the Internalization Termination Date must occur on or prior to the Outside Date. On the Internalization Termination Date, if any, the signature pages of the Asset Management Parties and the Company to the Internalization Agreement set forth on Exhibit C that are currently held in escrow will be released and be deemed delivered to the other parties and effective.

Section 2.3    Effectiveness. Other than in respect of the Section 2.1 and the second sentence of Section 2.2, this Agreement and the transactions contemplated herein shall be conditioned upon the occurrence of the Termination Date. In the event that the Termination Date does not occur on or prior to the Outside Date, this Agreement shall automatically terminate without any further action by any party and shall be void ab initio.

ARTICLE III

TRANSITION SERVICES

Section 3.1    Services. Subject to the terms and conditions of this Agreement, beginning on the Internalization Termination Date, and for the nine (9) month period immediately following the Internalization Termination Date (the “Services Period”), at the request of the Company, the Asset Manager Parties shall provide, or cause to be provided, to the Company and its Subsidiaries (i) any service provided by the Asset Manager Parties during the twelve (12) month period immediately prior to the date hereof and requested by the Company during the first three (3) months immediately following the date hereof which the Asset Manager Parties are able to provide using commercially reasonable efforts (excluding for the avoidance of doubt services predominately provided by individuals hired by the Company or any of its Subsidiaries), for a time period of nine (9) months, or a shorter period, if agreed by the parties, and a fee to be reasonably agreed by the parties (provided if the parties are unable to agree the fee for such services shall be as set forth in Section 4.1), and (ii) services necessary or reasonably required to transition the services described in clause (i) from the Asset Manager Parties to the Company or its Subsidiaries (each such service, a “Service,” and collectively, the “Services”).

Section 3.2    Provision of Services.

(a)    Provision of Services. The Asset Manager Parties acknowledge and agree that the operations of the Company are conducted through various Subsidiaries, which shall also be entitled to receive the Services as contemplated by this Agreement. The Company acknowledges and agrees that the Services to be provided hereunder may be provided, directly or indirectly, through one or more Subsidiaries of either Asset Manager Party or third party contractors, subcontractors, licensors, vendors, outsourcers or other third party service providers (each such third party, a “Third Party Service Provider”); provided that, without the prior written consent of the Company, no Services shall be provided by a Third Party Service Provider unless such Third Party Service Provider was utilized to provide such Services under the Asset Management Agreement during the twelve (12) months prior to the Internalization Termination Date or such Third Party Service Provider is being utilized for substantially similar Services for the entire business of the Asset Manager Parties and their Subsidiaries and not solely and specifically for the operations of the Company; provided further, that the Asset Manager Parties shall be ultimately responsible for the provision of the Services in accordance with this Agreement. The Company acknowledges and agrees that the Services are

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provided on a non-exclusive basis and nothing in this Agreement shall restrict or limit the Asset Manager Parties’ ability to provide similar services to any Person.

(b)    Cooperation. The Company shall (and shall cause its Subsidiaries to) provide to the Asset Manager Parties and their Affiliates such assistance as is reasonably necessary for such parties to perform the Services; provided that nothing in this Section 3.2(b) shall require the Company or any of its Subsidiaries to incur any out-of-pocket costs or expenses not contemplated by Section 4.1 unless agreed to in writing by the Company.

(c)    DISCLAIMER OF REPRESENTATIONS AND WARRANTIES. THE COMPANY ACKNOWLEDGES AND AGREES THAT, EXCEPT AS SET FORTH IN SECTION 3.4 HEREOF: (a) THE SERVICES ARE PROVIDED AS-IS AND (b) THE ASSET MANAGEMENT PARTIES EXPRESSLY DISCLAIM ANY AND ALL REPRESENTATIONS OR WARRANTIES WHATSOEVER, WHETHER EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT TO THE SERVICES, INCLUDING WARRANTIES WITH RESPECT TO MERCHANTABILITY, SUFFICIENCY OR SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE, TITLE AND NON INFRINGEMENT.

Section 3.3    Discontinuation of Services.

(a)    Expiration of Services. Upon the expiration of the Services Period, the obligation of the Asset Manager Parties to provide the Services and this Agreement shall automatically and immediately terminate, including upon the earlier termination of the last Services to be provided hereunder.

(b)    Early Termination of Services. Prior to the expiration of the Services Period, the Company may earlier terminate any or all of the Services by providing thirty (30) days’ prior written notice of such termination to the Asset Manager Parties. Unless earlier terminated as set forth above, the Services shall continue for the Services Period in accordance with the terms set forth herein, unless otherwise agreed to by the Parties. Such early termination by the Company shall not affect its obligation to pay any Services Fee that accrued prior to the effectiveness of such termination. Any termination notice delivered hereunder shall specify (x) the Service or Services to be terminated and (y) the effective date(s) of such termination.

(c)    Termination for Material Breach. This Agreement may be terminated by either Party in the event that the other Party breaches, in any material respect, any provision of this Agreement and fails to remedy such breach within thirty (30) days of receipt of written notice from the other Party of such breach.

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(d)    Effect of Termination. The expiration or termination of this Agreement or any Services pursuant to this Section 3.3 shall not act as a waiver of any breach or relieve any Party from Liability for any breach of this Agreement prior to such expiration or termination or any payment due for Services performed prior to such expiration or termination. Further, the provisions of Section 3.2(c), this Section 3.3(d), Section 3.7, Section 5.1, Section 5.3, Section 5.4, Section 5.5, Section 6.1, through Section 6.3, and Error! Reference source not found. shall survive any expiration or termination of this Agreement.

Section 3.4    Standard of Performance; Disputes. Subject to the terms and conditions of this Agreement, the Asset Manager Parties shall perform (or cause to be performed) the Services (i) in accordance with applicable Law and (ii) in a manner substantially similar in nature, quantity and quality to the manner in which such Services have been historically performed, which, for the avoidance of doubt, shall be no less than (A) a good, timely and workmanlike manner, (B) with the degree of care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances, and (C) in a manner that is consistent with standard practices in the real estate industry. The Asset Manager Parent and the Company each agree to work together in good faith to resolve any issues or disputes arising out of the performance of this Agreement prior to exercising other remedies available at Law. Notwithstanding anything in this Agreement to the contrary, during the pendency of any dispute with respect to this Agreement, (i) the Asset Manager Parties shall not withhold any Service until such Service is validly terminated in accordance with the terms of this Agreement and (ii) the Company shall not withhold the payment of any Services Fee in accordance with Section 4.5 below.

Section 3.6    Independent Contractor. In providing Services hereunder, the Asset Manager Parties, their Affiliates and any Third Party Service Providers shall act solely as independent contractors. Nothing herein shall constitute or be construed to be or create in any way or for any purpose a partnership, joint venture or principal-agent relationship between the Parties. No Party shall have any power to control the activities and/or operations of the other Party. No Party shall have any power or authority to bind or commit any other Party. In providing the Services hereunder, the Asset Manager Parties’ employees and agents shall not be considered employees or agents of the Company or any of its Subsidiaries, nor shall the Asset Manager Parties’ employees or agents be eligible or entitled to any compensation, benefits, or perquisites (including severance) given or extended to the employees of the Company or any of its Subsidiaries. For the avoidance of doubt, the Company and its Subsidiaries shall be solely responsible for the operation of their respective businesses and the decisions and actions taken in connection therewith.

Section 3.7    Access; Books and Records. During the term of this Agreement and following the termination of the Services, the Asset Manager Parties shall make available to the Company all information and materials reasonably requested by the Company and its Subsidiaries which relate to the operation of the Company and its Subsidiaries.

ARTICLE IV

SERVICE CHARGES

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Section 4.1    Fees. The fee, rate or amount to be charged for each Service (the “Services Fee”) shall be mutually agreed by the parties; provided that if the parties are unable to agree, the Service Fee shall be an amount equal to (i) the fully-burdened cost actually documented and incurred by the Asset Manager Parties to directly provide such Service without any markup or margin of profit (based on the internal transfer pricing of the Asset Manager Parties), plus (ii) a markup of twenty percent 20%; provided that the overhead portion of such fully-burdened cost of providing such Service shall in all cases exclude (a) depreciation, amortization, bad debt expense and impairment expenses, etc.), (b) all salaries, benefits, reimbursable travel expenses or other compensation attributable to executive leadership team or board of directors of any Asset Manager Party or its Affiliates, (c) all salaries, benefits, reimbursable travel expenses or other compensation attributable to any employees which are not directly providing the Services to the Company and its Subsidiaries, and (d) any fee, cost or expense that does not directly benefit the Company or its Subsidiaries; provided further that the fees, costs or expenses of employees of the Asset Manager and its Subsidiaries who are not fully dedicated to providing Services shall be allocated based on the percentage of their time dedicated to providing Services as documented in good faith by the Asset Manager Parties. For the avoidance of doubt, the Service Fee shall in no event exceed the amount paid under the Asset Management Agreement in calendar year 2018 and following the termination of a Service, the Company shall have no further obligation to pay any Service Fee in connection with such terminated Service other than any unpaid Service Fee relating to Services provided prior to such termination.

Section 4.2    Taxes.

(a) In addition to the Services Fee, the Company or its applicable Subsidiary shall pay all applicable sales, use, value added, or other similar taxes chargeable on the Services provided for herein, together with any interest and penalties imposed with respect thereto (“Sales Taxes”), provided, that the Company and its Subsidiaries shall not be liable for any interest, penalties or other charges attributable to the Asset Manager Parties’ or their Affiliates’ improper filing relating to Sales Taxes or late payment or failure to remit Sales Taxes to the relevant taxing authority. The Company or its applicable Subsidiary shall pay to the Asset Manager Parties any such Sales Taxes within twenty (20) days of receipt of an invoice with respect thereto. If the Company or its applicable Subsidiary is exempt from any such Sales Taxes, the Company or such Subsidiary shall furnish the Asset Manager Parties with a valid and properly completed resale or exemption certificate, as required under applicable Law, and the Company or such Subsidiary shall not be required to pay such Sales Taxes.

(b) If applicable Law requires that an amount in respect of any taxes, levies or charges be withheld from any payment to the Asset Manager Parties under this Agreement, the Company shall (i) promptly notify the Asset Manager Parties of such required withholding, (ii) withhold from amounts otherwise due to the Asset Manager Parties hereunder any taxes required to be withheld, and (iii) pay such withheld taxes when due to the applicable taxing authorities. All amounts so withheld and paid to the applicable taxing authority shall be treated for all purposes of this Agreement as having been paid to or on behalf of the Asset Manager Parties.

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Section 4.3    Payment. The Asset Manager Parties shall invoice the Company on a monthly basis for the Services Fee. If the Services Fee is determined based on costs or expenses incurred by the Asset Management Parties, such invoice shall provide a reasonable description and detail of all such costs or expenses used to calculate such Services Fee. Payment for the Services Fee shall be made within thirty (30) calendar days after the date of the applicable invoice. All accrued and unpaid charges for Services shall be due and payable upon termination of this Agreement with respect to such Services and shall be invoiced in accordance with this Section 4.3.

Section 4.4    Finance Charge. If the Company fails to make any payment of any amount within fifteen (15) calendar days of the date such payment was due to the Asset Manager Parties, a finance charge of two percent (2.0%) per month or, if less, the maximum rate allowed by applicable Law, shall be payable from the date of the invoice to the date such payment is received by the Company.

Section 4.5    Disputes. If the Company, acting in good faith, disputes the amount of any Services Fee invoiced pursuant to Section 4.3, the Company shall, within sixty (60) days after receipt of an invoice, deliver a written notice to the Asset Manager Parties notifying them of the amount of the disputed cost or expense and provide a reasonably detailed description of the reason for the dispute. The Parties agree to seek to resolve all such disputes expeditiously and in good faith; provided, however, pending resolution of any dispute, (i) the Asset Manager Parties shall continue performing Services in accordance with this Agreement and (ii) the Company shall not withhold the payment of any Services Fee.

Section 4.6    Audit Rights. Solely for purposes of any cost-based fees, at all times during the term of this Agreement, the Asset Manager Parties shall maintain books of account, receipts, disbursements and all other records relating to the Services performed by the Asset Manager Parties hereunder (the “Records”). Solely for purposes of any cost-based fees, the Company shall have the right, upon thirty (30) days’ prior notice to the Asset Manager Parties and at reasonable times during usual business hours of the Asset Manager Parties, to audit the Records in respect of the Services Fee included in any invoice pursuant to Section 4.3. In the event that the audit reveals that the Company was overbilled, the Company shall deliver a written notice to the Asset Manager Parties notifying them of such amount and providing a reasonably detailed description of such overbilling. Upon receipt of such notice, the Asset Manager Parties will research the items in question in a reasonably prompt manner and the Parties shall cooperate to resolve any differences.  The Company shall bear the cost of such audit unless the audit reveals that the Asset Manager Parties overbilled the Company by five percent (5.0%) or more with respect to the period being audited, in which case the Asset Manager Parties shall bear the reasonable costs of such audit; provided, that, the Asset Manager Parties shall not be responsible for reimbursing the cost of an audit in excess of the amount the Company was overbilled. Any discrepancy revealed by the audit and agreed by the Parties or otherwise resolved in accordance with this Agreement shall be paid promptly to the Company. This Section 4.6 shall survive termination or expiration of this Agreement for a period of one (1) year.

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ARTICLE V

CONFIDENTIALITY; LIMITATIONS OF LIABILITY;

INDEMNIFICATION

Section 5.1    Confidentiality.

(a)    Each Party, on behalf of itself and its Affiliates, shall keepconfidential the Confidential Information of the other Party obtained or used by it in connection with this Agreement or provision of the Services and shall not disclose any such information (or use the same except in furtherance of its duties and obligations under this Agreement) to unaffiliated third parties, except: (i) with the prior written consent of the other Party; (ii) to legal counsel, accountants and other professional advisors; (iii) to third parties who agree to keep such information confidential by contract or by professional or ethical duty and who need to know such information to perform the Services; (v) requested or required by Law or any Governmental Authority process so long as, to the extent legally permissible and reasonably practicable, the disclosing Party provides the other Party with reasonable prior written notice of such disclosure and a reasonable opportunity to contest such disclosure; or (vi) to comply with reporting, disclosure, filing or other requirements imposed on the applicable Party.

(b)    In addition to the foregoing, the Asset Manager Parties shall comply (and ensure that any subcontractor complies) with any applicable law or binding regulation on data protection or data privacy (“Applicable Privacy Laws”) in relation to any processing of personal data of the Company or any of its Subsidiaries in connection with this Agreement (“Relevant Data”). The Asset Manager Parties shall, and shall cause their Affiliates and Third Party Service Providers utilized in the performance of the Services to:

(i)    only process the Relevant Data as reasonably necessary to perform its obligations and exercise its rights under the Agreement;

(ii)    give the Company such information in relation to that processing as it reasonably requests from time to time to enable the Company and its Subsidiaries to comply with its obligations under Applicable Privacy Laws;

(iii)    notify the Company in writing if it becomes aware of, or suspects the occurrence of, any personal data breach in relation to those Applicable Privacy Laws in respect of the Relevant Data;

(iv)    give the Company such information, assistance and co-operation as it reasonably requests to enable it and its Subsidiaries to mitigate any adverse consequences of any personal data breach of which it receives notification under Section 5.1(b)(iii);

(v)    notify the Company in writing if it receives any communication from a data subject or competent data protection authority seeking to exercise rights under, or alleging or proposing to investigate an allegation of breach of, Applicable Privacy Laws in relation to the Relevant Data; and

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(vi)    ensure that each Third Party Service Provider which has access to Relevant Data in connection with the Services is bound by a written agreement imposing on it data security, privacy and related provisions which are compliant with Applicable Privacy Laws.

Section 5.2    System Security. If any Party is given access to the information systems of another Party in connection with the performance or receipt of Services, such Party shall comply with all reasonable security requirements of the other Party applicable to such access and use and shall not compromise or circumvent any security or audit measures employed by such other Party. Each Party shall cooperate and cause its Affiliates to cooperate promptly and fully (i) in notifying a Party of breaches of the information systems or data security of such Party; and (ii) with any investigation relating to the information systems or data security that is carried out by or on behalf of a Party or any of its Affiliates that arises in connection with this Agreement (such cooperation to include any relevant information or material in their possession or under their control). In no event shall a Party disclose the fact of a breach of another Party’s information systems or data to any Person other than such other Party without the prior written approval of such other Party, unless such disclosure is required under applicable Law (in which event, the disclosing Party shall give as much notice to the other Party as practicable under the circumstances).

Section 5.3    Indemnity. The Company agrees to indemnify and hold the Asset Manager Parties and their respective Subsidiaries (each, an “Asset Manager Indemnitee”) harmless from and against any Liability arising out of, or in connection with, the performance of the Services provided by such Asset Manager Indemnitee hereunder, or any use of such Services by the Company or any of Subsidiaries; provided that notwithstanding the foregoing, nothing contained herein shall protect or be deemed to protect any Asset Manager Indemnitee against, or entitle or be deemed to entitle any Asset Manager Indemnitee to indemnification in respect of any Liability arising out of any Asset Manager Party’s (i) breach or violation, in any material respect, of this Agreement, (ii) violation of applicable Law, or (iii) willful misconduct, gross negligence, fraud or bad faith. Subject to Section 5.5, the Asset Manager shall indemnify and hold the Company and its Subsidiaries (each, a “Company Indemnitee”) harmless from and against any Liability arising out of any Asset Manager Party’s (i) breach or violation of this Agreement, in any material respect, (ii) violation of applicable Law in the performance of the Services, or (iii) willful misconduct, gross negligence, fraud or bad faith in the performance of the Services.

Section 5.4    Indemnification Procedures. In the event that any Asset Manager Indemnitee or any Company Indemnitee is entitled to be indemnified under this Agreement (together, the “Indemnified Parties” and each an “Indemnified Party”), such Indemnified Party shall promptly notify the other Party (the “Indemnifying Party”) in writing of any pending or threatened action, claim or demand that the Indemnified Party has determined gives or would reasonably be expected to give rise to a right of indemnification under this Agreement (including a pending or threatened action, claim or demand asserted by a third Party against the Indemnified Party, such claim being a “Third Party Claim”), describing in reasonable detail the facts and circumstances with respect to the subject matter of such action, claim or demand to the extent then known; provided, however, that the failure to provide such notice shall not release the Indemnifying Party from any of its obligations under this Article V except to the extent that the Indemnifying Party is actually prejudiced by such failure. The Indemnifying Party shall be entitled to assume or maintain the defense of any

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Third Party Claim unless (i) the Third Party Claim seeks, in addition to or in lieu of monetary damages, any injunction or other equitable relief against the Indemnified Party (or any Affiliates thereof) or (ii) the Third Party Claim relates to or arises in connection with any criminal proceeding, action, indictment, allegation or investigation. No Indemnified Party will consent to the entry of any judgment or enter into any settlement or compromise with respect to a Third Party Claim without the prior written consent of the Indemnifying Party (not to be unreasonable withheld, conditioned or delayed); provided that, notwithstanding the foregoing, the Indemnified Party shall have the right to pay or settle any such claim if it irrevocably waives in a writing delivered to the Indemnifying Party any right to indemnity therefor under this Agreement. Further, no Indemnifying Party will consent to the entry of any judgment or enter into any settlement or compromise with respect to a Third Party Claim without the prior written consent of the Indemnified Party (not to be unreasonable withheld, conditioned or delayed) unless the settlement or compromise includes an unconditional release of the Indemnified Parties.

Section 5.5.    Limitation of Liability. IN NO EVENT SHALL ASSET MANAGER HAVE ANY LIABILITY UNDER THIS AGREEMENT IN EXCESS OF THE FEES PAID TO IT HEREUNDER. IN NO EVENT SHALL ANY PARTY BE LIABLE TO ANY OTHER PARTY OR ANY OF ITS AFFILIATES OR REPRESENTATIVES, WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE AND STRICT LIABILITY) OR OTHERWISE, AT LAW OR EQUITY, FOR ANY SPECIAL, INDIRECT, PUNITIVE OR CONSEQUENTIAL DAMAGES, UNLESS AWARDED TO A THIRD PARTY IN CIRCUMSTANCES IN WHICH AN INDEMNIFYING PARTY IS RESPONSIBLE HEREUNDER.

ARTICLE VI

ADDITIONAL CONSIDERATIONS

Section 6.1    Company Board of Directors. To the extent the Company has not consummated an NRE Change of Control or internalization of the management of the Company prior to the time the Asset Manager would be entitled to nominate its Designated Director (as defined in the Asset Management Agreement) for purposes of the 2019 stockholder’s meeting of the Company, the Asset Manager hereby agrees it will nominate a current employee of the Asset Manager. The Asset Manager further agrees that upon the termination of the Asset Management Agreement, the Asset Manager shall cause any Designated Director then on the Board of Directors of the Company to resign effective immediately.

Section 6.2    Voting Agreement. The Parties hereby agree that in connection with any NRE Change of Control which has been approved by the Board of Directors of the Company, Asset Manager Parent and its Affiliates shall enter into a customary voting agreement with the applicable Counterparty thereto, agreeing to vote their shares of Common Stock in favor of such NRE Change of Control.

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Section 6.3    No Setoff; Withholding. There shall be no right of setoff with respect to any claim, debt or obligation against payments to any Party or any of its respective Affiliates under this Agreement. Notwithstanding anything to the contrary herein, any and all payments made pursuant to this Agreement shall be made free and clear of any deduction or withholding.

Section 6.4    2018 Incentive Fee. The Company hereby agrees it will pay the 2018 Incentive Fee in cash.

ARTICLE VII

MISCELLANEOUS

Section 7.1    Amendment. Any provision of this Agreement may be amended or waived if, and only if, such amendment, termination is in writing and signed, in the case of an amendment, by the Company and the Asset Manager, or in the case of a waiver, by the Party against whom such waiver is intended to be effective. No failure or delay by any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

Section 7.2    Notices. All notices, requests, claims, demands and other communications required or permitted hereunder shall be in writing and shall be deemed sent, given and delivered (a) immediately if delivered by personal delivery, (b) one (1) Business Day after deposit with an overnight delivery service (with charges prepaid), (c) on the date of delivery, after deposit in the mail via registered or certified mail (postage prepaid, return receipt requested) to the Parties at the following addresses (or at such other address for a Party as shall be specified by like notice), and (d) upon confirmation of receipt if given by electronic mail or other customary means of electronic communication as provided below:

If to the Asset Manager or Asset Manager Parent:

Colony Capital, Inc.515 S. Flower Street, 44th FloorLos Angeles, California 90074

Attention: Director, Legal

If to the Company:

NorthStar Realty Europe Corp.

7 St. Paul Street

Suite 820

Baltimore, Maryland 21202

Attention: General Counsel

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with a copy (which shall not constitute notice) to:

Fried, Frank, Harris, Shriver & Jacobson LLP1 New York PlazaNew York, New York 10004

Attention: Steven Scheinfeld

Section 7.3    Assignment; Binding Effect; No Delegation of Services. This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective successors, legal representatives and permitted assigns. Notwithstanding the foregoing, except as expressly provided in this Agreement, no Party to this Agreement may assign any of its rights or delegate any or all of its obligations under this Agreement without the express prior written consent of the other Party hereto and any purported assignment in violation of the foregoing shall be null and void.

Section 7.4    Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other Governmental Authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any Party. Upon such a determination, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

Section 7.5    Governing Law, etc. This Agreement, and all actions (whether in contract or tort) that may be based upon, arise out of or relate to this Agreement, the transactions contemplated hereby or the negotiation, execution or performance hereof, shall be governed by and construed in accordance with the Law of the State of New York, without regard to the choice of Law or conflicts of Law principles thereof. The Parties expressly waive any right they may have, now or in the future, to demand or seek the application of a governing Law other than the Law of the State of New York.

Section 7.6    Jurisdiction; WAIVER OF JURY TRIAL.

(a)    Each of the parties hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the Supreme Court of the State of New York in New York County or, if such court shall not have jurisdiction, the United States District Court for the Southern District of New York, , and any appellate court from any appeal thereof, in any action arising out of or relating to this Agreement or the transactions contemplated hereby or the negotiation, execution or performance hereof or for recognition or enforcement of any judgment relating thereto, and each of the parties hereby irrevocably and unconditionally (i) agrees not to commence any such action except in such courts, (ii) agrees that any claim in respect of any such action may be heard and determined in the Supreme Court of the State of New York in New York County or the United States District Court for the Southern District of New York, to the extent permitted by Law, (iii) waives, to the fullest extent it may legally and effectively do so, any objection which it may now

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or hereafter have to the laying of venue of any such action in the Supreme Court of the State of New York in New York County or the United States District Court for the Southern District of New York, and (iv) waives, to the fullest extent permitted by Law, the defense of an inconvenient forum to the maintenance of such action in the Supreme Court of the State of New York or the United States District Court for the Southern District of New York. Each of the parties agrees that a final judgment in any such action shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law. Each party irrevocably consents to service of process in the manner provided for with respect to notices in Section 7.2. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by Law.

(b)    EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY OR THE NEGOTIATION, EXECUTION OR PERFORMANCE HEREOF. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (II) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (III) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (IV) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.6(b).

Section 7.7    Expenses. Except as otherwise expressly provided in this Agreement, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be borne by the Party incurring such costs and expenses.

Section 7.8     Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each Party shall have received a counterpart hereof signed by the other Party. Until and unless each Party has received a counterpart hereof signed by the other Party, this Agreement shall have no effect and no Party shall have any right or obligation hereunder (whether by virtue of any other oral or written agreement or other communication). The exchange of a fully executed Agreement (in counterparts or otherwise) by electronic transmission in .PDF or other equivalent format or by facsimile shall be sufficient to bind the Parties to the terms and conditions of this Agreement.

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Section 7.9    Force Majeure. The Asset Manager and the Asset Manager Parent shall be temporarily excused from performance under this Agreement if any force majeure, including but not limited to disaster, hurricane, fire, war, civil commotion, strike, labor shortage, slowdown, or the unavailability of labor, governmental regulation, energy shortage, or other occurrence beyond the reasonable control of the Asset Manager or the Asset Manager Parent, as applicable, should have happened and made it impossible for the Asset Manager or the Asset Manager Parent, as applicable, to perform its obligations under this Agreement. In any such event, the obligations of the Asset Manager or the Asset Manager Parent, as applicable, under this Agreement shall be postponed for such time as its performance is suspended or delayed on account thereof. In such event, the Asset Manager or the Asset Manager Parent, as applicable, will notify the Company, in writing, upon learning of the occurrence of such event of force majeure. Upon the occurrence of the force majeure event, the Asset Manager or the Asset Manager Parent, as applicable, will use commercially reasonable efforts to resume its performance with the least practicable delay.

Section 7.10    Construction. For the purposes of this Agreement, (a) words in the singular shall be held to include the plural and vice versa, and words of one gender shall be held to include the other gender as the context requires; (b) references to the terms Article, Section and paragraph are references to the Articles, Sections and paragraphs to this Agreement unless otherwise specified; (c) the terms “hereof,” “herein,” “hereby,” “hereto,” and derivative or similar words refer to this entire Agreement; (d) references to “$” shall mean U.S. dollars; (e) the word “including” and words of similar import when used in this Agreement shall mean “including without limitation,” unless otherwise specified; (f) the word “or” shall not be exclusive; (g) references to “written” or “in writing” include in electronic form; (h) provisions shall apply, when appropriate, to successive events and transactions; (i) the headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement; (j) the Parties have each participated in the negotiation and drafting of this Agreement and if an ambiguity or question of interpretation should arise, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or burdening either Party by virtue of the authorship of any of the provisions in this Agreement; (k) a reference to any Person includes such Person’s successors and permitted assigns; (l) any reference to “days” means calendar days unless Business Days are expressly specified; and (m) when calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period shall be excluded and if the last day of such period is not a Business Day, the period shall end at the close of business on the next succeeding Business Day.

Section 7.11    Entire Agreement. This Agreement, together with the Employee Transition Agreement, constitute the entire agreement among the parties with respect to the matters covered hereby and supersede all previous written, oral or implied understandings among them with respect to such matters.

[Remainder of page intentionally left blank; Signature Page Follows]

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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first written above.

CNI NRE ADVISORS, LLC

By: /s/ RONALD M. SANDERS

Name: Ronald M. Sanders
    Title: Vice President & Secretary

COLONY CAPITAL OPERATING COMPANY LLC

By: /s/ RONALD M. SANDERS

Name: Ronald M. Sanders
    Title: Vice President & Secretary

NORTHSTAR REALTY EUROPE CORP.

By: /s/ JUDITH A. HANNAWAY

Name: Judith A. Hannaway
Title: Lead Independent Director

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Exhibit A

INTERNALIZATION AGREEMENT

This INTERNALIZATION AGREEMENT (this “Agreement”), dated as of [___] [•], 2019, is made and entered into by and between NorthStar Realty Europe Corp., a Maryland corporation (the “Company”), CNI NRE Advisors, LLC, a Delaware limited liability company (the “Manager”), and Colony Capital Operating Company LLC, a Delaware limited liability company (the “Asset Manager Parent”, and together with Manager, the “Asset Manager Parties”). Capitalized terms used herein but not defined shall have the meanings ascribed to them in the Management Agreement (defined below).

WHEREAS, the Manager provides certain services to the Company and its Subsidiaries pursuant to that certain Amended and Restated Asset Management Agreement, dated as of November 9, 2017 by and between the Company and the Manager (as amended, restated, updated or modified from time to time, the “Management Agreement”), as amended by that certain Amendment No. 1 dated as of November 7, 2018 (the “Amendment”);

WHEREAS, the Amendment contemplates the possible internalization of the management of the Company (the “Internalization”);

WHEREAS, in accordance with the terms of the Transition Agreement, dated as of April 23, 2019, among the parties hereto (the “Transition Agreement”), on the Internalization Termination Date (as defined in the Transition Agreement) this Agreement came into effect; and

WHEREAS, the Company and the Manager desire to address and set forth certain covenants and agreements to be followed in connection with the Internalization.

NOW, THEREFORE, for the mutual promises made herein and in the other agreements executed by the parties concurrently herewith or contemplated hereby, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows:

ARTICLE I.

COVENANTS

Section 1.01    No Hire; Non-Solicitation. As from the date of this Agreement and for a period of one year from the Internalization Termination Date, the Asset Manager Parties shall not, and shall cause their respective affiliates not to solicit any of the Company Employees to leave their employment with the Company or the relevant subsidiary, or to hire or in any way employ, engage and/or make use of the services of any such Company Employees while engaged by the Company or any of its subsidiaries; provided that Asset Manager Parties shall not be precluded from soliciting or hiring any Company Employee, who is not an executive officer of the Company, who responds to general solicitations for employment made by the Asset Manager Parties not specifically directed at the Company Employees or responds to an executive or employee search

firm where such search firm was not directly or indirectly directed by the Asset Manager Parties to contact any Company Employee, in each case and whom none of the Asset Management Parties have directly or indirectly solicited prior to such general or search firm solicitation .

Section 1.02    Cooperation on Post-Closing Tax MattersSection. The Company and Manager each shall cooperate fully, as and to the extent reasonably requested by the other party, in connection with the preparation and filing of any return, amended return or other report (including elections, declarations, disclosures, schedules, estimates and information returns) required to be filed with any taxing authority with respect to any Tax (“Tax Return”) and any audit or other proceeding with respect to all U.S. federal, state, provincial, local or foreign taxes, charges, fees, levies or other assessments, however denominated, including all net income, gross income, gains, gross receipts, sales, use, ad valorem, goods and services, capital, production, transfer, franchise, windfall profits, license, withholding, payroll, employment, disability, employer health, excise, estimated, severance, stamp, occupation, property, environmental, unemployment or other taxes, custom duties, fees, assessments or charges, together with any interest and any penalties, additions to tax or additional amounts imposed by any taxing authority (collectively, “Taxes”). Such cooperation shall include the retention and (upon the other party’s reasonable request) the provision of records and information which are reasonably relevant to any such audit or other proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. For the period during which the applicable statute of limitations is open, the parties agree (a) to retain all books and records with respect to Tax matters pertinent to Manager and the Company relating to any pre-closing Tax period, and to abide by all record retention agreements entered into with any Tax authority and (b) if the other party so requests, the Company or Manager, as the case may be, shall allow the other party to take possession of such books and records. The Asset Management Parties agree to promptly notify the Company in the event that NorthStar Realty Finance Corporation is audited by the U.S. Internal Revenue Service with respect to its qualification as a real estate investment trust for its 2015 tax year, and provide such information in connection therewith that the Company may reasonably request.

Section 1.03     Litigation Support        In the event and for so long as any party is actively contesting or defending against any action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand (“Proceeding”) in connection with, arising out of, or in any way related to the period during which services were provided pursuant to the Management Agreement or the Transition Agreement, the other party will provide reasonable cooperation to the contesting or defending party and its legal counsel in the contest or defense; reasonably make its officers, employees, agents and other personnel available during regular business hours upon request for a reasonable amount of time; and provide such access to its books and records as shall be reasonably necessary in connection with such contest or defense, at the sole cost and expense of the requesting party. The requesting party shall have the right to make copies of such books and records; provided, however, that (i) the foregoing right of access shall not be exercisable in such a manner as to interfere unreasonably with the normal operations and business of the other party and (ii) the parties are under no obligation to disclose to the requesting party or its representatives any information the disclosure of which is restricted by contract or applicable law or would result in the waiver of any attorney-client, work product or other applicable privilege or contravene any law, rule, regulation, order, judgment, or decree. The requesting party shall not, and shall cause each other person with

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whom it shares any such information, including its officers, directors and representatives not to, disclose any information to which they have access pursuant to this Section 1.03 except (i) as required by law, (ii) with the prior written consent of the disclosing party, which consent shall not be unreasonably withheld, (iii) in connection with any proceeding involving the requesting party (provided that the requesting party shall use reasonable efforts to file any documents or information obtained from the other party under seal or in redacted form in the event of litigation) or (iv) when such information becomes available to the public generally, through sources other than the requesting party. This Section shall not apply to controversies or litigation between the parties or to any situation in which their legal interests are adverse. Each party agrees to reimburse each other for reasonable out-of-pocket costs and expenses, including attorneys’ fees, but excluding officers’ or employees’ salaries, incurred by the other party in connection with providing individuals and witnesses pursuant to this Section 1.03.

Section 1.04    Transfer of Books and Records. The Asset Manager Parties agree that all records maintained for the Company and any subsidiary are the property of the Company and/or such subsidiary and promptly following the date hereof will surrender to the Company all such records (in such format as reasonably requested by the Company); provided, that, the Asset Manager Parties may retain a copy of the Company’s records for internal retention purposes, which will be subject to the confidentiality provisions under the Transition Agreement. To the extent that any books and records pertain to both the Manager and the Company, the Manager may redact such books and records as necessary to remove information solely relating to the Manager or provide a full copy subject to the confidentiality provisions under the Transition Agreement. For the seven (7) year period following the date hereof, the Asset Manager Parties shall cause their employees, counsel, auditors and other representatives to answer questions and provide information to assist the Company (A) to comply with its (and its subsidiaries’) reporting, disclosure, filing or other requirements (including under applicable securities laws), and (B) to prepare its (and its subsidiaries’) financial statements or tax returns, or in order to satisfy audit, accounting or other similar requirements. Access to such persons shall be granted during normal business hours at a location and in a manner reasonably calculated to minimize disruption to such Persons and the parties. Each party agrees to reimburse each other for reasonable out-of-pocket expenses, including attorneys’ fees, but excluding officers’ or employees’ salaries, incurred by the other party in connection with providing such access pursuant to this Section 1.04.

Section 1.05    Information Support. At any time while any of the Asset Manager Parties or their affiliates has one or more classes of securities registered pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and is the beneficial owner (within the meaning of the Exchange Act) of more than 5% of any class of outstanding securities of the Company, the Company shall use commercially reasonable efforts to deliver to such beneficial owner, at such beneficial owner’s reasonable request, such information or documentation as may be required, to satisfy or demonstrate compliance with any legal, regulatory or disclosure obligation such beneficial owner may have under the Exchange Act or other federal securities laws or otherwise.

ARTICLE II.
MISCELLANEOUS PROVISIONS

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Section 2.01    Amendment. Any provision of this Agreement may be amended or waived if, and only if, such amendment, termination is in writing and signed, in the case of an amendment, by the Company and the Manager, or in the case of a waiver, by the party against whom such waiver is intended to be effective. No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

Section 2.02    Notices. All notices, requests, claims, demands and other communications required or permitted hereunder shall be in writing and shall be deemed sent, given and delivered (a) immediately if delivered by personal delivery, (b) one (1) Business Day after deposit with an overnight delivery service (with charges prepaid), (c) on the date of delivery, after deposit in the mail via registered or certified mail (postage prepaid, return receipt requested) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice), and (d) upon confirmation of receipt if given by electronic mail or other customary means of electronic communication as provided below:

If to the Manager or Asset Manager Parent:

Colony Capital, Inc.515 S. Flower Street, 44th FloorLos Angeles, California 90074

Attention: Director, Legal

If to the Company:

NorthStar Realty Europe Corp.

7 St. Paul Street

Suite 820

Baltimore, Maryland 21202

Attention: General Counsel

Section 2.03    Assignment; Binding Effect; No Delegation of Services. This Agreement is binding upon and inures to the benefit of the parties hereto and their respective successors, legal representatives and permitted assigns. Notwithstanding the foregoing, except as expressly provided in this Agreement, no party to this Agreement may assign any of its rights or delegate any or all of its obligations under this Agreement without the express prior written consent of the other party hereto and any purported assignment in violation of the foregoing shall be null and void.

Section 2.04    Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other governmental authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

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Section 2.05    Governing Law, etc. This Agreement, and all actions (whether in contract or tort) that may be based upon, arise out of or relate to this Agreement, the transactions contemplated hereby or the negotiation, execution or performance hereof, shall be governed by and construed in accordance with the Law of the State of New York, without regard to the choice of Law or conflicts of Law principles thereof. The parties expressly waive any right they may have, now or in the future, to demand or seek the application of a governing Law other than the Law of the State of New York.

Section 2.06    Jurisdiction; WAIVER OF JURY TRIAL.

(a)    Each of the parties hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the Supreme Court of the State of New York in New York County or, if such court shall not have jurisdiction, the United States District Court for the Southern District of New York, and any appellate court from any appeal thereof, in any action arising out of or relating to this Agreement or the transactions contemplated hereby or the negotiation, execution or performance hereof or for recognition or enforcement of any judgment relating thereto, and each of the parties hereby irrevocably and unconditionally (i) agrees not to commence any such action except in such courts, (ii) agrees that any claim in respect of any such action may be heard and determined in the Supreme Court of the State of New York in New York County or the United States District Court for the Southern District of New York, to the extent permitted by Law, (iii) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such action in the Supreme Court of the State of New York in New York County or the United States District Court for the Southern District of New York, and (iv) waives, to the fullest extent permitted by Law, the defense of an inconvenient forum to the maintenance of such action in the Supreme Court of the State of New York or the United States District Court for the Southern District of New York. Each of the parties agrees that a final judgment in any such action shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law. Each party irrevocably consents to service of process in the manner provided for with respect to notices in Section 2.02. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by Law.

(b)    EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY OR THE NEGOTIATION, EXECUTION OR PERFORMANCE HEREOF. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (II) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (III) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (IV) IT HAS

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BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 2.06(b).

Section 2.07    Expenses. Except as otherwise expressly provided in this Agreement, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be borne by the party incurring such costs and expenses.

Section 2.08    Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party shall have received a counterpart hereof signed by the other party. Until and unless each party has received a counterpart hereof signed by the other party, this Agreement shall have no effect and no party shall have any right or obligation hereunder (whether by virtue of any other oral or written agreement or other communication). The exchange of a fully executed Agreement (in counterparts or otherwise) by electronic transmission in .PDF or other equivalent format or by facsimile shall be sufficient to bind the parties to the terms and conditions of this Agreement.

Section 2.09    Construction. For the purposes of this Agreement, (a) words in the singular shall be held to include the plural and vice versa, and words of one gender shall be held to include the other gender as the context requires; (b) references to the terms Article, Section and paragraph are references to the Articles, Sections and paragraphs to this Agreement unless otherwise specified; (c) the terms “hereof,” “herein,” “hereby,” “hereto,” and derivative or similar words refer to this entire Agreement; (d) references to “$” shall mean U.S. dollars; (e) the word “including” and words of similar import when used in this Agreement shall mean “including without limitation,” unless otherwise specified; (f) the word “or” shall not be exclusive; (g) references to “written” or “in writing” include in electronic form; (h) provisions shall apply, when appropriate, to successive events and transactions; (i) the headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement; (j) the parties have each participated in the negotiation and drafting of this Agreement and if an ambiguity or question of interpretation should arise, this Agreement shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or burdening either party by virtue of the authorship of any of the provisions in this Agreement; (k) a reference to any Person includes such Person’s successors and permitted assigns; (l) any reference to “days” means calendar days unless Business Days are expressly specified; and (m) when calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period shall be excluded and if the last day of such period is not a Business Day, the period shall end at the close of business on the next succeeding Business Day.

Section 2.10    Entire Agreement. This Agreement, together with the Transition Agreement and Employee Transition Agreement constitute the entire agreement among the parties with respect to the matters covered hereby and supersede all previous written, oral or implied understandings among them with respect to such matters.

Section 2.11    Effectiveness. The effectiveness of this Agreement and the transactions contemplated herein shall be conditioned upon the occurrence of the Internalization Termination Date. In the event that the Internalization Termination Date does not occur on or prior to the

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Outside Date, this Agreement shall not take effect and shall automatically terminate without any further action by any party and shall be void ab initio.

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their representatives on the date first written above.

MANAGER

CNI NRE Advisors, LLC    a Delaware limited liability company

By:

Name:

Title:

ASSET MANAGER PARENT

COLONY CAPITAL OPERATING COMPANY LLC

a Delaware limited liability company

    By:

Name:

Title:

COMPANY

NORTHSTAR REALTY EUROPE CORP.,    a Maryland corporation

    By:

Name:

Title:

EX-10.2

Exhibit 10.2

EMPLOYEE TRANSITION AGREEMENT

This EMPLOYEE TRANSITION AGREEMENT (as amended, restated, updated or modified from time to time, this “Agreement”), dated as of April 23, 2019 is entered into by and among CNI NRE Advisors, LLC, a Delaware limited liability company (the “Asset Manager”), Colony Capital Operating Company LLC, a Delaware limited liability company (the “Asset Manager Parent”, and together with Asset Manager, the “Asset Manager Parties”), and NorthStar Realty Europe Corp., a Maryland corporation (the “Company” and together with the Asset Manager Parties, the “Parties”).

R E C I T A L S:

WHEREAS, the Asset Manager provides certain services to the Company and its Subsidiaries pursuant to that certain Amended and Restated Asset Management Agreement, dated as of November 9, 2017 by and between the Company and the Asset Manager (as amended, restated, updated or modified from time to time, the “Asset Management Agreement”), as amended by that certain Amendment No. 1 dated as of November 7, 2018 (the “Amendment”).

WHEREAS, pursuant to the Amendment, the Asset Manager and the Company agreed to promptly formulate a management transition and retention program to induce the employees of the Asset Manager and its Affiliates set forth on Exhibit A thereto to continue providing certain services to the Company through the Termination Date (as defined below) and substantially similar services to the Company following the Termination Date.

WHEREAS, pursuant to the Amendment, the Asset Manager and the Company agreed to negotiate in good faith to execute a definitive transition services agreement, pursuant to which the Asset Manager and its Affiliates will provide, or cause to be provided, to the Company certain services on a transitional basis for up to nine (9) months following the Termination Date, which shall be executed simultaneously herewith (the “Transition Services Agreement”).

WHEREAS, the Company is currently utilizing its commercially reasonable efforts, consistent with the fiduciary duties of the Strategic Review Committee (the “SRC”) and the Board of Directors of the Company, to enter into a definitive agreement providing for an NRE Change of Control (as defined in the Asset Management Agreement).

WHEREAS, the Company has agreed to pay the 2018 Incentive Fee (as such term is defined in the Asset Management Agreement) in cash in consideration of the Asset Manager Parties agreeing to certain of the management transition and retention provisions set forth in this Agreement and the Transition Services Agreement.

NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:

ARTICLE I

DEFINITIONS; INTERPRETATION

Section 1.1    Definitions. For the purposes of this Agreement, each of the following terms shall have the following respective meanings:

“Affiliate” means, with respect to a Person, any other Person that either directly or indirectly controls, is controlled by or is under common control with the first Person. The term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting interests, by contract or otherwise. For the avoidance of doubt, for purposes of this Agreement, none of the Company or any of its Subsidiaries shall be considered an Affiliate of the Asset Manager, the Asset Manager Parent or any of their respective Subsidiaries.

“Business Day” means a day other than Saturday, Sunday or other day on which commercial banks in New York, New York, United States of America are required to or may be closed.

“Cause” means (i) with respect to Mahbod Nia, the definition of cause in the Employment Agreement, or (ii) with respect to any other employee of the Asset Manager or any of its Affiliates, the definition of cause contained in the restricted stock awards granted to certain individuals by the Company on November 2, 2018.

“Counterparty” means any potential counterparty to an NRE Change of Control identified to the Asset Manager Parties by the SRC.

“Employment Agreement” means the Amended and Restated Employment Agreement, dated as of June 30, 2017 by and between Nia and Colony NorthStar UK, Ltd.

“Governmental Authority” means any federal, state, local or foreign government, any court, tribunal, administrative agency or commission or other governmental or other regulatory authority or agency, whether federal, state, local, foreign or supranational, and any arbitral body.

“Law” means any order or any federal, state, local, foreign, supranational or international law, statute, treaty, convention or ordinance, common law, or any rule, regulation, standard, directive, requirement, policy, license or permit of any Governmental Authority.

“NRE Equity Plan” means the NorthStar Realty Europe Corp. 2015 Omnibus Stock Incentive Plan.

“Person” means an individual, firm, corporation, partnership, limited liability company, incorporated or unincorporated association, joint venture, joint stock company, trust or other entity or organization of any kind, including a Governmental Authority.

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“Termination Date” has the meaning set forth in the Amendment.

ARTICLE IIMANAGEMENT TRANSITION AND RETENTION

Section 2.1    Employment.

(a)    The Parties agree that from and after the date hereof and prior to the first to occur of (a) the Termination Date and (b) the Outside Date (as defined in the Amendment), none of the employees listed on Exhibit A hereto (each, an “NRE Employee”) shall (i) have his or her base salary or target cash or equity bonus opportunity reduced or (ii) have his or her employment terminated without Cause, in each case without the express written consent of the SRC.

(b)    Except as designated otherwise on Exhibit A hereto, on and after the Termination Date, each of the employees listed on Exhibit A hereto will be made available for hire by the Company, any of its Subsidiaries or a Counterparty on a direct basis.

Section 2.2    2018 NRE Annual Bonuses.

(a)    Annual cash bonuses for 2018 performance shall be paid to executive officers of the Company and other NRE Employees by the Asset Manager Parent or one of its Subsidiaries in amounts that are not less than the amounts set forth in the NRE 2018 Compensation Summary, dated as of the date hereof and acknowledged by the Company and the Asset Manager (the “Compensation Summary”).

(b)    Subject to Section 2.4(d) below, annual equity bonuses for 2018 performance shall be granted to executive officers of the Company and other NRE Employees by the Company in accordance with the amounts set forth in the Compensation Summary using a per share price equal to $17.75. The annual equity bonuses shall be granted in shares of Company restricted stock pursuant to the NRE Equity Plan and such shares of Company restricted stock will vest in three substantially equal annual installments on March 15, 2020, 2021 and 2022, provided that a Termination Event (as defined below) has not occurred prior to the applicable vesting date. Notwithstanding the foregoing, the vesting of the restricted stock shall immediately accelerate in full upon (i) the closing of an NRE Change of Control, (ii) termination of the employment of the applicable NRE Employee without Cause (with Company consent) or (iii) if there is no NRE Change of Control and the Asset Management Agreement is terminated (and no other Asset Manager Affiliate is then serving as the external manager of the Company), other than as a result of a termination by the Company pursuant to Section 12(a) of the Asset Management Agreement or a termination by the Asset Manager that constitutes a breach of the Asset Management Agreement; except, with respect to clauses (ii) and (iii), in connection with an internalization of the management of the Company pursuant to which the applicable NRE Employee is offered employment with the Company (each, an “NRE Employee Acceleration Event”); provided that such acceleration with respect to clauses (ii) and (iii) may be subject to the effectiveness of a release of claims in favor of the Company and related persons and entities in a form and manner satisfactory to the Company. For purposes hereof, a “Termination Event” means either (i) the NRE Employee’s employment with the Asset Manager and any direct or indirect parent entities

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of the Asset Manager (which, for avoidance of doubt, currently includes Asset Manager Parent) and any Subsidiaries of any such parent entity (collectively, “Asset Manager Affiliates”), as applicable, is voluntarily or involuntarily terminated for any reason (including death) or (ii) the Asset Manager is terminated (and no other Asset Manager Affiliate is then serving) as the external manager of the Company, in each case, other than an event constituting an NRE Employee Acceleration Event; provided that if such a termination occurs in connection with an internalization of the management of the Company and the applicable NRE Employee becomes an employee of the Company or one of its Subsidiaries in connection with such termination, then (x) such termination will not constitute a Termination Event and (y) thereafter, a termination of such NRE Employee’s employment with the Company and its Subsidiaries shall constitute a Termination Event.

(c)    The Parties agree that the Company shall establish an equity bonus pool consisting of 48,815 shares of Company restricted stock that shall be allocated by the Asset Manager or an Asset Manager Affiliate at its sole discretion to employees of the Asset Manager or an Asset Manager Affiliate who are not executive officers of the Company or NRE Employees, subject to Section 2.4(d) below. The shares of restricted stock shall be granted pursuant to the NRE Equity Plan and will vest on March 15, 2020, 2021 and 2022 in three substantially equal annual installments, provided that neither of the following has occurred prior to the applicable vesting date: (i) the recipient’s employment with the Asset Manager and any Asset Manager Affiliates, as applicable, is voluntarily or involuntarily terminated for any reason (including death) or (ii) the Asset Manager is terminated (and no other Asset Manager Affiliate is then serving) as the external manager of the Company, in each case, other than an event pursuant to which vesting is accelerated as set forth below. Notwithstanding the foregoing, the vesting of the Company restricted stock shall immediately accelerate upon (i) the closing of an NRE Change of Control, or (ii) if there is no NRE Change of Control and the Asset Management Agreement is terminated (and no other Asset Manager Affiliate is then serving as the external manager of the Company), other than as a result of a termination by the Company pursuant to Section 12(a) of the Asset Management Agreement or a termination by the Asset Manager that constitutes a breach of the Asset Management Agreement; provided that such acceleration with respect to clause (ii) may be subject to the effectiveness of a release of claims (each, an “Asset Management Acceleration Event”).

Section 2.3    Cash Severance.

(a)    The Parties agree that the Asset Manager or an Asset Manager Affiliate shall pay to each NRE Employee (other than Mahbod Nia, whose cash severance will be determined and paid in accordance with the Employment Agreement and Section 2.3(b)) cash severance upon a qualifying termination of employment by the Asset Manager or an Asset Manager Affiliate that is no less than the amounts determined in accordance with the severance policy maintained by the Asset Manager and the Asset Manager Affiliate (the material terms of which are summarized on Exhibit B attached hereto and which will not be amended in a manner that is materially adverse to any NRE Employee unless the Company consents to such change prior to the consummation of an NRE Change of Control) or the minimum statutory requirement, whichever is greatest; provided that each termination occurs prior to the Outside Date or within nine (9) months following the Termination Date.

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For the avoidance of doubt, in no event shall a termination of employment be considered a qualifying termination of employment if such termination either (i) is in connection with an internalization of the management of the Company, (ii) is in connection with an NRE Change of Control and, in connection with such NRE Change of Control, the applicable NRE Employee is offered employment with the Company or applicable Counterparty or their respective Subsidiaries on employment terms that, as a whole, are not materially less favorable than the applicable NRE Employee’s current employment terms or (iii) is for “Cause”, as defined in a manner consistent with how “Cause” is customarily defined in award agreements memorializing grants of awards pursuant to the Colony Capital Inc. 2014 Omnibus Stock Incentive Plan. In addition to the severance amounts described in the first sentence of this Section 2.3, the Asset Manager or an Asset Manager Affiliate shall pay to each NRE Employee whose employment is terminated in any such qualifying termination a pro rata annual bonus determined by multiplying the quotient of (i) the number of days worked by the NRE Employee in the year of termination of employment (and the prior year, if bonuses for such year have not been paid) divided by (ii) 365, multiplied by the 2018 annual cash bonus target amount for such NRE Employee as set forth on the Compensation Summary.

(b)    The Parties agree that, notwithstanding anything to the contrary in any other agreement, including the Reimbursement Agreement, by and between the Company and the Asset Manager dated June 30, 2017, in connection with the termination of Mahbod Nia’s (“Nia”) employment with the Asset Manager or an Asset Manager Affiliate occurring prior to the Outside Date or within nine (9) months following the Termination Date, (i) if such termination of employment is in connection with an NRE Change of Control, the Asset Manager Parent or an Asset Manager Affiliate shall be solely responsible for all cash severance payments payable to Nia, and (ii) if such termination of employment is in connection with an internalization of the management of the Company, the Asset Manager Parent or an Asset Manager Affiliate shall be responsible for 75%, and the Company shall be responsible for 25%, of all cash severance payments payable to Nia pursuant to the Employment Agreement. Such payment of cash severance shall be made by the Asset Manager Parent or an Asset Manager Affiliate and the Company (if applicable) on the Termination Date concurrently with the Asset Manager’s receipt of the Termination Payment or earlier.

Section 2.4    Treatment of Outstanding Equity Awards

(a)    The Company shall amend the terms of all currently outstanding Company equity awards held by employees of the Asset Manager and the Asset Manager Affiliates who are executive officers of the Company or NRE Employees, to provide for vesting provisions consistent with the terms set forth on Exhibit C hereto, subject to Section 2.4(d) below.

(b)    The Company shall amend the terms of all currently outstanding Company equity awards held by employees of the Asset Manager and the Asset Manager Affiliates who are not executive officers of the Company or an NRE Employee, to provide that upon an Asset Management Acceleration Event occurring prior to the Outside Date (i) all then outstanding time-based awards will vest in full and, (ii) all then outstanding performance

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based equity awards will vest and settle based on the greater of (x) a Performance Percentage (as defined in the applicable award agreement relating to such grant) equal to 100% or (y) if there is an NRE Change of Control the Performance Percentage determined based on the price at which such NRE Change of Control occurred. In addition, the Company shall reinstate the Company equity awards previously granted to Richard B. Saltzman in March 2018 that were forfeited, with amended terms consistent with the terms set forth above; provided that the vesting of the reinstated Company equity awards will accelerate upon the termination of Mr. Saltzman’s service on the Board of Directors (including by not nominating Mr. Saltzman for re-election to the Board of Directors of the Company) prior to an Asset Management Acceleration Event, unless Mr. Saltzman either voluntarily resigns from the Board of Directors or his service on the Board of Directors terminates (through his resignation or otherwise) in connection with a conflict of interest, in each case prior to an Asset Management Acceleration Event, in which case, the reinstated Company equity awards will immediately be forfeited for no consideration.

(c)    Asset Manager Parent covenants that it has caused to be taken all actions necessary to approve the amendment of outstanding Asset Manager Parent and CLNC equity awards, both time-vested and performance-vested, granted to NRE Employees pursuant to the “Colony 2014 Equity Incentive Plan” or the “CLNC Equity Incentive Plan”, as applicable, to provide that such equity awards shall vest (with outstanding performance-based awards vesting at target level) upon (i) an NRE Change of Control, or (ii) if there is no NRE Change of Control and the Asset Management Agreement is terminated, (and no other Asset Manager Affiliate is then serving as the external manager of the Company), other than as a result of a termination by the Company pursuant to Section 12(a) of the Asset Management Agreement or a termination by the Asset Manager that constitutes a breach of the Asset Management Agreement; in each case, occurring prior to the Outside Date; provided that performance based equity awards will be paid at target, and such acceleration with respect to clause (ii) may be subject to the effectiveness of a release of claims. The Asset Manager Parent shall cause all such equity awards to reflect such approved terms.

(d)    The Company may choose to condition the granting of the equity awards set forth in Sections 2.2(b) and (c) above, and the amendments set forth in Section 2.4(a)and Section 2.4(b) above, with respect to a particular recipient, on the recipient’s agreement to amend all currently outstanding Company equity awards held by the recipient to modify all existing acceleration of vesting provisions to provide that, in the event vesting of such equity awards otherwise would have accelerated in connection with stockholder approval of a plan of complete liquidation or dissolution or a sale of substantially all of the assets of the Company, continued service through the completion of the sale of all debt and equity interests in any real estate property and all other substantial assets of the Company and its Subsidiaries, other than cash or cash equivalents, will be required for such acceleration of vesting unless otherwise agreed to by the Company.

ARTICLE III

MISCELLANEOUS

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Section 3.1    Amendment. Any provision of this Agreement may be amended or waived if, and only if, such amendment, termination is in writing and signed, in the case of an amendment, by the Company and the Asset Manager, or in the case of a waiver, by the Party against whom such waiver is intended to be effective. No failure or delay by any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

Section 3.2    Notices. All notices, requests, claims, demands and other communications required or permitted hereunder shall be in writing and shall be deemed sent, given and delivered (a) immediately if delivered by personal delivery, (b) one (1) Business Day after deposit with an overnight delivery service (with charges prepaid), (c) on the date of delivery, after deposit in the mail via registered or certified mail (postage prepaid, return receipt requested) to the Parties at the following addresses (or at such other address for a Party as shall be specified by like notice), and (d) upon confirmation of receipt if given by electronic mail or other customary means of electronic communication as provided below:

If to the Manager or Asset Manager Parent:

Colony Capital, Inc.515 South Flower Street, 44th FloorLos Angeles, California 90074

Attention: Director, Legal

If to the Company:

NorthStar Realty Europe Corp.

7 St. Paul Street

Suite 820

Baltimore, Maryland 21202

Attention: General Counsel

with a copy (which shall not constitute notice) to:

Fried, Frank, Harris, Shriver & Jacobson LLP1 New York PlazaNew York, New York 10004

Attention: Steven Scheinfeld

Section 3.3    Assignment; Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective successors, legal representatives and permitted assigns. Notwithstanding the foregoing, except as expressly provided in this Agreement, no Party to this Agreement may assign any of its rights or delegate any or all of its obligations under this Agreement without the express prior written

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consent of the other Party hereto and any purported assignment in violation of the foregoing shall be null and void.

Section 3.4    Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other Governmental Authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any Party. Upon such a determination, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

Section 3.5    Governing Law, etc. This Agreement, and all actions (whether in contract or tort) that may be based upon, arise out of or relate to this Agreement, the transactions contemplated hereby or the negotiation, execution or performance hereof, shall be governed by and construed in accordance with the Law of the State of New York, without regard to the choice of Law or conflicts of Law principles thereof. The Parties expressly waive any right they may have, now or in the future, to demand or seek the application of a governing Law other than the Law of the State of New York.

Section 3.6    Jurisdiction; WAIVER OF JURY TRIAL.

(a)    Each of the parties hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the Supreme Court of the State of New York in New York County or, if such court shall not have jurisdiction, the United States District Court for the Southern District of New York, and any appellate court from any appeal thereof, in any action arising out of or relating to this Agreement or the transactions contemplated hereby or the negotiation, execution or performance hereof or for recognition or enforcement of any judgment relating thereto, and each of the parties hereby irrevocably and unconditionally (i) agrees not to commence any such action except in such courts, (ii) agrees that any claim in respect of any such action may be heard and determined in the Supreme Court of the State of New York in New York County or the United States District Court for the Southern District of New York, to the extent permitted by Law, (iii) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such action in the Supreme Court of the State of New York in New York County or the United States District Court for the Southern District of New York, and (iv) waives, to the fullest extent permitted by Law, the defense of an inconvenient forum to the maintenance of such action in the Supreme Court of the State of New York or the United States District Court for the Southern District of New York. Each of the Parties agrees that a final judgment in any such action shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law. Each Party irrevocably consents to service of process in the manner provided for with respect to notices in Section 3.2. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by Law.

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(b)    EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY OR THE NEGOTIATION, EXECUTION OR PERFORMANCE HEREOF. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (II) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (III) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (IV) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 3.6(b).

Section 3.7     Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each Party shall have received a counterpart hereof signed by the other Party. Until and unless each Party has received a counterpart hereof signed by the other Party, this Agreement shall have no effect and no Party shall have any right or obligation hereunder (whether by virtue of any other oral or written agreement or other communication). The exchange of a fully executed Agreement (in counterparts or otherwise) by electronic transmission in .PDF or other equivalent format or by facsimile shall be sufficient to bind the Parties to the terms and conditions of this Agreement.

Section 3.8    Force Majeure. The Asset Manager and the Asset Manager Parent shall be temporarily excused from performance under this Agreement if any force majeure, including but not limited to disaster, hurricane, fire, war, civil commotion, strike, labor shortage, slowdown, or the unavailability of labor, governmental regulation, energy shortage, or other occurrence beyond the reasonable control of the Asset Manager or the Asset Manager Parent, as applicable, should have happened and made it impossible for the Asset Manager or the Asset Manager Parent, as applicable, to perform its obligations under this Agreement. In any such event, the obligations of the Asset Manager or the Asset Manager Parent, as applicable, under this Agreement shall be postponed for such time as its performance is suspended or delayed on account thereof. In such event, the Asset Manager or the Asset Manager Parent, as applicable, will notify the Company, in writing, upon learning of the occurrence of such event of force majeure. Upon the occurrence of the force majeure event, the Asset Manager or the Asset Manager Parent, as applicable, will use commercially reasonable efforts to resume its performance with the least practicable delay.

Section 3.9    Construction. For the purposes of this Agreement, (a) words in the singular shall be held to include the plural and vice versa, and words of one gender shall be held to include the other gender as the context requires; (b) references to the terms Article, Section and paragraph are references to the Articles, Sections and paragraphs to this

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Agreement unless otherwise specified; (c) the terms “hereof,” “herein,” “hereby,” “hereto,” and derivative or similar words refer to this entire Agreement; (d) references to “$” shall mean U.S. dollars; (e) the word “including” and words of similar import when used in this Agreement shall mean “including without limitation,” unless otherwise specified; (f) the word “or” shall not be exclusive; (g) references to “written” or “in writing” include in electronic form; (h) provisions shall apply, when appropriate, to successive events and transactions; (i) the headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement; (j) the Parties have each participated in the negotiation and drafting of this Agreement and if an ambiguity or question of interpretation should arise, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or burdening either Party by virtue of the authorship of any of the provisions in this Agreement; (k) a reference to any Person includes such Person’s successors and permitted assigns; (l) any reference to “days” means calendar days unless Business Days are expressly specified; and (m) when calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period shall be excluded and if the last day of such period is not a Business Day, the period shall end at the close of business on the next succeeding Business Day.

Section 3.10    Entire Agreement. This Agreement, together with the Transition Agreement, constitutes the entire agreement among the Parties with respect to the matters covered hereby and supersedes all previous written, oral or implied understandings among them with respect to such matters.

[Remainder of page intentionally left blank; Signature Page Follows]

-10-

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first written above.

CNI NRE ADVISORS, LLC

By:    /s/ RONALD M. SANDERS

Name: Ronald M. Sanders

Title: Vice President and Secretary

COLONY CAPITAL OPERATING COMPANY LLC

By:    /s/ RONALD M. SANDERS

Name: Ronald M. Sanders

Title: Vice President and Secretary

NORTHSTAR REALTY EUROPE CORP.

By:    /s/ JUDITH A. HANNAWAY

Name: Judith A. Hannaway    Title: Lead Independent Director

EX-10.3

Exhibit 10.3

AMENDMENT NO. 2 TO AMENDED AND RESTATED ASSET

MANAGEMENT AGREEMENT

This Amendment No. 2 (this “Amendment”), dated as of April 23, 2019 hereby amends the Amended and Restated Asset Management Agreement dated as of November 9, 2017 (the “Asset Management Agreement”) by and between NorthStar Realty Europe Corp., a Maryland corporation (“NRE”), and CNI NRE Advisors, LLC, a Delaware limited liability company (the “Asset Manager”), as amended by Amendment No. 1 to the Asset Management Agreement, dated as of November 7, 2018. Each capitalized term used in this Amendment and not otherwise defined herein shall have the meaning ascribed to such term in the Asset Management Agreement.

NOW, THEREFORE, the parties hereto, for good and valuable consideration, the adequacy of which is hereby acknowledged, and intending to be legally bound, hereby wish to amend the Asset Management Agreement on the terms set forth herein:

AGREEMENTS

1.Triggering Date. “April 30, 2019”, as used in the definition of “Triggering Date” shall be replaced with “June 30, 2019.”

2.Miscellaneous. The provisions set forth in Section 22 through Section 30 and Section 32 through Section 35 of the Asset Management Agreement are hereby incorporated herein, with all references to the “Agreement” being references to the Asset Management Agreement as amended by this Amendment. This Amendment may be executed in one or more counterparts, and each of such counterparts shall, for all purposes, be deemed to be an original, but all of such counterparts shall constitute one and the same instrument.

[Signatures on Next Page]

1

NORTHSTAR REALTY EUROPE CORP.

By:    /s/ JUDITH A. HANNAWAY

Name: Judith A. Hannaway    Title: Lead Independent Director

CNI NRE ADVISORS, LLC

By:    /s/ RONALD M. SANDERS

Name: Ronald M. Sanders

Title: Vice President and Secretary

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:	August 7, 2019	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:	August 7, 2019	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 June 30, 2019 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:	August 7, 2019	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 June 30, 2019 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:	August 7, 2019	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	6 Months Ended
	Jun. 30, 2019	Aug. 02, 2019
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	Jun. 30, 2019
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Emerging Growth Company	true
Entity Transition Period	true
Entity Small Business	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		50,289,245
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Entity Interactive Data Current	Yes

XML

CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Assets
Operating real estate, gross	$ 843,643	$ 844,809
Less: accumulated depreciation	(72,033)	(64,187)
Operating real estate, net	771,610	780,622
Preferred equity investments	38,952	39,090
Cash and cash equivalents	377,393	438,931
Restricted cash	5,332	5,592
Receivables, net of allowance of $130 and $236 as of June 30, 2019 and December 31, 2018, respectively	5,347	8,989
Assets held for sale	0	73,345
Derivative assets, at fair value	3,288	6,440
Intangible assets, net and goodwill	23,834	58,173
Other assets, net	46,470	14,317
Total assets	1,272,226	1,425,499
Liabilities
Mortgage and other notes payable, net	546,349	682,912
Accounts payable and accrued expenses	20,155	22,367
Due to affiliates (refer to Note 6)	4,041	9,630
Intangible liabilities, net	8,825	9,722
Liabilities related to assets held for sale	0	1,498
Other liabilities	18,141	21,267
Total liabilities	597,511	747,396
Commitments and contingencies
Equity
Preferred stock, $0.01 par value, 200,000,000 shares authorized, no shares issued and outstanding as of June 30, 2019 and December 31, 2018	0	0
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 50,289,639 and 49,807,448 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively	502	498
Additional paid-in capital	864,696	862,240
Retained earnings (accumulated deficit)	(176,047)	(170,669)
Accumulated other comprehensive income (loss)	(18,498)	(18,424)
Total NorthStar Realty Europe Corp. stockholders’ equity	670,653	673,645
Noncontrolling interests	4,062	4,458
Total equity	674,715	678,103
Total liabilities and equity	$ 1,272,226	$ 1,425,499

XML

CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Statement of Financial Position [Abstract]
Receivables, allowance	$ 130	$ 236
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)	50,289,639	49,807,448
Common stock, shares outstanding (shares)	50,289,639	49,807,448

XML

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Revenues
Lease income	$ 16,499		$ 33,583
Lease income		$ 30,162		$ 62,727
Interest income	1,554	706	3,165	1,435
Other income	107	143	582	421
Total revenues	18,160	31,011	37,330	64,583
Expenses
Properties - operating expenses	3,557	6,930	6,463	13,732
Interest expense	3,413	5,855	7,093	11,962
Transaction costs	1,827	376	2,589	857
Management fee, related party	3,848	4,223	7,736	8,380
Other expenses	734	1,273	1,471	2,697
General and administrative expenses	1,317	1,801	3,053	3,679
Compensation expense	1,950	1,186	3,237	1,551
Depreciation and amortization	5,908	11,976	11,821	23,627
Total expenses	22,554	33,620	43,463	66,485
Other income (loss)
Other gain (loss), net	14	3,531	(2,503)	529
Extinguishment of debt	(476)	(1,441)	(670)	(1,441)
Gain on sales, net	3,671	38,319	21,396	39,585
Income (loss) before income tax benefit (expense)	(1,185)	37,800	12,090	36,771
Income tax benefit (expense)	(249)	76	(2,401)	37
Net income (loss)	(1,434)	37,876	9,689	36,808
Net (income) loss attributable to noncontrolling interests	6	(217)	(56)	(221)
Net income (loss) attributable to NorthStar Realty Europe Corp. common stockholders	$ (1,428)	$ 37,659	$ 9,633	$ 36,587
Earnings (loss) per share:
Basic (in dollars per share)	$ (0.03)	$ 0.72	$ 0.19	$ 0.68
Diluted (in dollars per share)	$ (0.03)	$ 0.69	$ 0.19	$ 0.65
Weighted average number of shares:
Basic (shares)	49,448,507	51,858,645	49,391,523	53,455,635
Diluted (shares)	49,448,507	54,007,807	50,749,631	55,432,191

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ (1,434)	$ 37,876	$ 9,689	$ 36,808
Other comprehensive income (loss):
Foreign currency translation adjustment, net	(176)	(39,923)	(74)	(19,922)
Total other comprehensive income (loss)	(176)	(39,923)	(74)	(19,922)
Comprehensive income (loss)	(1,610)	(2,047)	9,615	16,886
Comprehensive (income) loss attributable to noncontrolling interests
Net income (loss)	6	(217)	(56)	(221)
Foreign currency translation adjustment, net	0	270	0	140
Total comprehensive (income) loss attributable to noncontrolling interests	6	53	(56)	(81)
Comprehensive income (loss) attributable to NorthStar Realty Europe Corp. common stockholders	$ (1,604)	$ (1,994)	$ 9,559	$ 16,805

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, 2017				55,402
Beginning 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
Conversion of Common Units to common stock (shares)				23
Conversion of Common Units to common stock (refer to Note 9)		0	216		216			(216)
Redemption of Common Units		(551)						(551)
Amortization of equity-based compensation (refer to Note 7)		365	365		365
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 (loss)		20,001	19,871				19,871	130
Dividends on common stock and equity-based compensation	[1]	(8,392)	(8,332)			(8,332)		(60)
Net income (loss)		(1,068)	(1,072)			(1,072)		4
Ending Balance (shares) at Mar. 31, 2018				54,572
Ending Balance at Mar. 31, 2018		$ 621,350	617,377	$ 546	927,799	(356,457)	45,489	3,973
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Common stock dividends paid (in dollars per share)		$ 0.15
Beginning Balance (shares) at Dec. 31, 2017				55,402
Beginning 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)								(200)
Ending Balance (shares) at Dec. 31, 2018				49,807
Ending Balance at Dec. 31, 2018		678,103	673,645	$ 498	862,240	(170,669)	(18,424)	4,458
Beginning Balance (shares) at Mar. 31, 2018				54,572
Beginning Balance at Mar. 31, 2018		621,350	617,377	$ 546	927,799	(356,457)	45,489	3,973
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Reallocation of interest in Operating Partnership (refer to Note 9)		0	105		105			(105)
Distribution to noncontrolling interest		(131)						(131)
Redemption of Common Units		(31)						(31)
Amortization of equity-based compensation (refer to Note 7)		1,311	1,311		1,311
Issuance and vesting of restricted stock, net of tax withholding (shares)				150
Issuance and vesting of restricted stock, net of tax withholding		0		$ 2	(2)
Retirement of shares of common stock (shares)				(4,018)
Retirement of shares of common stock		(56,295)	(56,295)	$ (40)	(56,255)
Other comprehensive (loss)		(39,923)	(39,653)				(39,653)	(270)
Dividends on common stock and equity-based compensation	[1]	(7,808)	(7,755)			(7,755)		(53)
Net income (loss)		37,876	37,659			37,659		217
Ending Balance (shares) at Jun. 30, 2018				50,704
Ending Balance at Jun. 30, 2018		$ 556,349	552,749	$ 508	872,958	(326,553)	5,836	3,600
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Common stock dividends paid (in dollars per share)		$ 0.15
Beginning Balance (shares) at Dec. 31, 2018				49,807
Beginning Balance at Dec. 31, 2018		$ 678,103	673,645	$ 498	862,240	(170,669)	(18,424)	4,458
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Reallocation of interest in Operating Partnership (refer to Note 9)		0	186		186			(186)
Conversion of Common Units to common stock (shares)				22
Conversion of Common Units to common stock (refer to Note 9)		0	132		132			(132)
Amortization of equity-based compensation (refer to Note 7)		1,287	1,287		1,287
Issuance and vesting of restricted stock, net of tax withholding (shares)				46
Issuance and vesting of restricted stock, net of tax withholding		(734)	(734)	$ (1)	(733)
Other comprehensive (loss)		102	102				102
Dividends on common stock and equity-based compensation	[2]	(7,502)	(7,455)			(7,455)		(47)
Net income (loss)		11,123	11,061			11,061		62
Ending Balance (shares) at Mar. 31, 2019				49,783
Ending Balance at Mar. 31, 2019		$ 682,379	678,224	$ 497	863,112	(167,063)	(18,322)	4,155
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Common stock dividends paid (in dollars per share)		$ 0.15
Beginning Balance (shares) at Dec. 31, 2018				49,807
Beginning Balance at Dec. 31, 2018		$ 678,103	673,645	$ 498	862,240	(170,669)	(18,424)	4,458
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Reallocation of interest in Operating Partnership (refer to Note 9)								(200)
Ending Balance (shares) at Jun. 30, 2019				50,290
Ending Balance at Jun. 30, 2019		674,715	670,653	$ 502	864,696	(176,047)	(18,498)	4,062
Beginning Balance (shares) at Mar. 31, 2019				49,783
Beginning Balance at Mar. 31, 2019		682,379	678,224	$ 497	863,112	(167,063)	(18,322)	4,155
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Reallocation of interest in Operating Partnership (refer to Note 9)			40		40			(40)
Amortization of equity-based compensation (refer to Note 7)		1,950	1,950		1,950
Issuance and vesting of restricted stock, net of tax withholding (shares)				507
Issuance and vesting of restricted stock, net of tax withholding		(401)	(401)	$ 5	(406)
Other comprehensive (loss)		(176)	(176)			0	(176)	0
Dividends on common stock and equity-based compensation	[2]	(7,603)	(7,556)			(7,556)		(47)
Net income (loss)		(1,434)	(1,428)			(1,428)		(6)
Ending Balance (shares) at Jun. 30, 2019				50,290
Ending Balance at Jun. 30, 2019		$ 674,715	$ 670,653	$ 502	$ 864,696	$ (176,047)	$ (18,498)	$ 4,062
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Common stock dividends paid (in dollars per share)		$ 0.15

[1] For each of the three months ended March 31, 2018 and June 30, 2018, the Company paid $0.15 of dividends per share of common stock.

[2] For each of the three months ended March 31, 2019 and June 30, 2019, the Company paid $0.15 of dividends per share of common stock.

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Cash flows from operating activities:
Net income (loss)	$ 9,689	$ 36,808
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	11,821	23,627
Amortization of deferred financing costs	833	1,591
Amortization of equity-based compensation	3,237	1,551
Allowance for uncollectible accounts	146	492
Other (gain) loss, net	2,503	(529)
Gain on sales, net	(21,396)	(39,585)
Extinguishment of debt	670	1,441
Amortization of capitalized above/below market leases	(499)	259
Straight line rental income	324	(5,080)
Deferred income tax (benefit)/expense, net	555	11
Changes in assets and liabilities:
Receivables	460	2,520
Other assets	(2,012)	(3,067)
Accounts payable and accrued expenses	(523)	(4,181)
Due to related party	(5,589)	948
Other liabilities	(1,884)	(709)
Net cash provided by (used in) operating activities	(1,665)	16,097
Cash flows from investing activities:
Improvements of operating real estate	(3,220)	(8,171)
Proceeds from sale of operating real estate	93,687	188,523
Settlement of foreign currency forwards	2,562
Settlement of foreign currency forwards		(4,371)
Escrow release	562	3,305
Other deposits	0	4,746
Deferred leasing costs	(523)	(694)
Net cash provided by (used in) investing activities	93,068	183,338
Cash flows from financing activities:
Repayment of mortgage and other notes payable	(132,536)	(122,145)
Borrowings from credit facility	0	20,000
Repayment of credit facility	0	(20,000)
Payment of financing costs	0	(811)
Settlement of derivatives	0	(3,083)
Issuance and vesting of restricted stock, net of tax withholding	(1,135)	0
Repurchase of common stock	0	(69,352)
Dividends	(15,105)	(16,200)
Redemption of Common Units	0	(583)
Distributions to noncontrolling interest	0	(113)
Net cash provided by (used in) financing activities	(148,776)	(212,287)
Effect of foreign currency translation on cash and cash equivalents and restricted cash	(6,030)	(842)
Net increase (decrease) in cash and cash equivalents and restricted cash	(63,403)	(13,694)
Cash and cash equivalents and restricted cash—beginning of period	446,128	71,582
Cash and cash equivalents and restricted cash—end of period	382,725	57,888
Beginning Balance Cash and Cash Equivalents, Restricted Cash And Restricted Cash Equivalents [Abstract]
Cash and cash equivalents	438,931	64,665
Restricted cash	5,592	6,917
Cash and restricted cash included in assets held for sale	1,605	0
Cash and cash equivalents and restricted cash—beginning of period	446,128	71,582
Ending Balance, Cash And Cash Equivalents, Restricted Cash And Restricted Cash Equivalents [Abstract]
Cash and cash equivalents	377,393	51,036
Restricted cash	5,332	6,852
Cash and restricted cash included in assets held for sale	0	0
Cash and cash equivalents and restricted cash—end of period	382,725	57,888
Supplemental disclosure of non-cash investing and financing activities:
Conversion of Common Units to common stock	132	216
Reclassification of other assets and liabilities to assets held for sale	556	388
Retirement of shares of common stock	0	242
Reallocation of interest in Operating Partnership	226	85
Accrued capital expenditures, deferred assets	$ 1,016	$ 1,007

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Formation and Organization

6 Months Ended

Jun. 30, 2019

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 Colony Capital, Inc. (“Colony Capital” or “CLNY”), formerly known as Colony NorthStar, Inc., before June 25, 2018.

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 Agreement with AXA Investment Managers

In July 2019, the Company announced that it had entered into a merger agreement (the “Merger Agreement”) with certain entities managed by AXA Investment Managers - Real Assets (“AXA Investment Managers”) under which the Company will merge with and into a wholly owned subsidiary of AXA Investment Managers (“Merger Sub”) with Merger Sub as the surviving entity in the merger (the “Merger”). The surviving entity of the Merger will not be a publicly-traded company and will become a wholly owned subsidiary of a fund managed by AXA Investment Managers. The Merger has been approved by the Company’s board of directors (the “Board”) upon the recommendation of the Strategic Review Committee of the Board consisting solely of independent directors of the Company (refer to Note 14 for more information).

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2019

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 for the fiscal year ended December 31, 2018, 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.

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.

Reclassifications

Certain prior period amounts have been reclassified in the consolidated financial statements to conform to current period presentation. Unrealized gain (loss) on derivatives and other has been renamed to other gain (loss), net and realized gain (loss) on sales and other has been renamed to gain on sales, net for presentational purposes only. Additionally, the Company has reclassified the gain (loss) on net cash on derivatives from realized gain (loss) on sales and other to other gain (loss), net on the consolidated statements of operations for the three and six months endedJune 30, 2018 (refer to Note 10).

Finally, in connection with the new leasing guidance under ASU 2016-02, which the Company adopted on January 1, 2019, the Company has combined the rental income and escalation income line items into one line item, lease income. Further, in connection with the new leasing guidance, the Company has reclassified below market ground lease from intangible assets, net and goodwill on the consolidated balance sheets to the operating lease right of use asset recorded in other assets, net and operating lease liability recorded in other liabilities on the consolidated balance sheets as of June 30, 2019 (refer below for details on the new guidance).

Prior Period Adjustments

In connection with the new share-based payment guidance under ASU 2018-07, which the Company early adopted on July 1, 2018, the Company was required to retrospectively adjust compensation expense for the three and six months endedJune 30, 2018 by $1.6 million and $1.8 million, respectively. This prior period adjustment increased the previously stated earnings per share (“EPS”) disclosed for the three months ended June 30, 2018 by $0.03 per basic and dilutive share, respectively, and for the six months ended June 30, 2018 by $0.04 per basic share and $0.03 per dilutive share

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, 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 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 an operating segment, 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 June 30, 2019 and December 31, 2018 (dollars in thousands):

	June 30, 2019							December 31, 2018
	Gross Amount		Accumulated Amortization			Net		Gross Amount		Accumulated Amortization			Net
Intangible assets:
In-place lease	$	40,116	$	(24,575	)	$	15,541	$	40,545	$	(22,031	)	$	18,514
Above-market lease	3,032		(1,581		)	1,451		3,042		(1,401		)	1,641
Below-market ground lease(1)	—		—			—		32,552		(1,420		)	31,132
Goodwill(2)	6,842		N/A			6,842		6,886		N/A			6,886
Total	$	49,990	$	(26,156	)	$	23,834	$	83,025	$	(24,852	)	$	58,173
Intangible liabilities:
Below-market lease	$	16,252	$	(7,427	)	$	8,825	$	16,305	$	(6,583	)	$	9,722
Total	$	16,252	$	(7,427	)	$	8,825	$	16,305	$	(6,583	)	$	9,722

_____________________________

(1) Upon adoption of the new lease standard on January 1, 2019, the Company has reclassified below market ground lease from intangible assets, net and goodwill on the consolidated balance sheets to the operating lease right of use asset recorded in other assets, net on the consolidated balance sheets as of June 30, 2019.

(2) 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.

The following table presents annual amortization of intangible assets and liabilities (dollars in thousands):

	Intangible Assets				Intangible Liabilities
	In-place Leases, Net		Above-market Leases, Net		Below-market Leases, Net
Remaining 2019	$	2,588	$	181	$	834
2020	3,567		362		1,638
2021	2,969		362		1,475
2022	2,146		343		1,475
2023	1,373		203		1,475
2024 and thereafter	2,898		—		1,928
Total	$	15,541	$	1,451	$	8,825

Other Assets and Other Liabilities

The following tables present a summary of other assets and other liabilities as of June 30, 2019 and December 31, 2018 (dollars in thousands):

	June 30, 2019		December 31, 2018
Other assets:
Prepaid expenses	$	1,468	$	581
Deferred leasing and other costs, net	3,786		3,710
Deferred tax assets, net	241		801
Straight-line rent, net	7,261		7,479
Operating lease right of use asset	30,875		—
Other	2,839		1,746
Total	$	46,470	$	14,317
	June 30, 2019		December 31, 2018
Other liabilities:
Deferred tax liabilities	$	5,090	$	5,123
Prepaid rent received and unearned revenue	9,264		9,867
Tenant security deposits	3,686		3,914
Prepaid escalation and other income	—		2,121
Operating lease liability	25		—
Other	76		242
Total	$	18,141	$	21,267

Revenue Recognition

Operating Real Estate

Lease 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. Lease income also 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.

Rental amounts due under tenant leases are generally subject to scheduled adjustments. The following tables present approximate future rental income under noncancelable operating leases to be received over the next five years and thereafter as of June 30, 2019 and December 31, 2018 (dollars in thousands):

As of June 30, 2019(1)
Remaining 2019	$	27,365
Years ending December 31:
2020	43,975
2021	40,114
2022	35,325
2023	35,602
Thereafter	94,031
Total	$	276,412

_________________________

(1) Translated to the U.S. dollar using the currency exchange rate as of June 30, 2019.

As of December 31, 2018(1)
Years Ending December 31:
2019	$	56,237
2020	46,178
2021	42,021
2022	35,736
2023	35,796
Thereafter	93,781
Total	$	309,749

_________________________

(1) Translated to the U.S. dollar using the currency exchange rate as of December 31, 2018.

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.

Equity-Based Compensation

Equity-classified stock awards granted to non-employees that have a service condition are measured at fair value at date of grant. For time-base awards, fair value is determined based on the closing price of the Company’s common stock at date of grant. For market-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 using a Monte Carlo analysis under a risk-neutral premise using a risk-free interest rate. The Company recognizes compensation expense on a straight-line basis over the requisite service period of the awards, with the amount of compensation expense recognized at the end of a reporting period at least equal to the fair value of the portion of the award that has vested through that date. Compensation expense is adjusted for actual forfeitures upon occurrence.

Earnings Per Share

The Company’s basic equity per share (“EPS”) is calculated using the two-class method for each class of common stock and participating security as if all earnings had been distributed by dividing net income (loss) attributable to common stockholders by the weighted average number of common stock outstanding. Diluted EPS reflects the maximum potential dilution that could occur from the Company’s share-based compensation, consisting of unvested restricted stock awards, restricted stock units (“RSUs”), performance common stock 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). Potential dilutive shares are excluded from the calculation if they have an anti-dilutive effect in the period. The Company’s unvested restricted stock awards and LTIP Units contain rights to receive non-forfeitable dividends and thus are participating securities. Due to the existence of these participating securities, the two-class method of computing EPS is required, unless another method is determined to be more dilutive. Under the two-class method, net income is first reduced for distributions declared on all classes of participating securities to arrive at undistributed earnings. Under the two-class method, net loss is reduced for distributions declared on participating securities only if such security has the right to participate in the earnings of the entity and an objectively determinable contractual obligation to share in net losses of the entity.

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 other comprehensive income (“OCI”) in the consolidated statements of equity. For the three months endedJune 30, 2019 and 2018, the Company reclassified $0.1 million and $7.8 million, respectively, of CTA to gain on sales, net in the consolidated statements of operations due to the sale of certain real estate assets (refer to Note 3). For the six months endedJune 30, 2019 and 2018, the Company reclassified $(1.1) million, and $8.1 million, respectively, of CTA to gain on sales, net 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 other gain (loss), net in the consolidated statements of operations.

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 and six months endedJune 30, 2019 and 2018. Dividends distributed for the year ended December 31, 2018 were characterized, for U.S. federal income tax purposes, as capital gains. 

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 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 $0.2 million and an income tax benefit of $0.1 million for the three months endedJune 30, 2019 and 2018, respectively. The Company recorded an income tax expense of $2.4 million and an income tax benefit of $0.1 million for the six months endedJune 30, 2019 and 2018, respectively. Income tax expense recorded for the six months ended June 30, 2019 includes a $2.0 million capital gains tax related to assets sold in the first quarter 2019.

Recent Accounting Pronouncements: Accounting Standards Adopted in 2019

Leases - In February 2016, the Financial Accounting Standards Board (“FASB”) issued guidance (ASU No. 2016-02) which amended lease accounting standards, along with several clarifying amendments were codified in Accounting Standards Codification (“ASC”) Topic 842. The new standard primarily requires lessees to recognize their rights and obligations under most leases on balance sheet, to be capitalized as a right of use (“ROU”) asset and a corresponding liability for future lease obligations. Targeted changes were made to lessor accounting, primarily to align to the lessee model and the new revenue recognition standard.

The Company adopted the new lease standard and related amendments on January 1, 2019 using the modified retrospective method to leases existing or commencing on or after January 1, 2019. Comparative periods have not been restated and continue to re reported under the standards in effect for those prior periods.

ASC 842 limits the definition of initial direct costs to only the incremental costs of obtaining a lease, such as leasing commissions, for both lessee and lessor accounting. Indirect costs such as allocated overhead, certain legal fees and negotiation costs are no longer capitalized under the new standard. The application of ASC 842 did not have a material impact on the statement of operations.

The Company applied the package of practical expedients, which exempts the Company from having to reassess whether any expired or expiring contracts contain leases, revisit lease classification for any expired or expiring leases and reassess initial direct costs for any existing leases. The Company also elected the practical expedient related to land easements, allowing the Company to carry forward the accounting treatment for land easements on existing agreements. The Company did not however elect the hindsight practical expedient to determine the lease terms for existing leases.

Lessee Accounting - The Company determines if an arrangement contains a lease and determines the classification of leasing arrangements at inception. A leasing arrangement is classified by the lessee either as a finance lease, which represents a financed purchased of the leased asset, or as an operating lease. The Company's operating leases relate primarily ground leases acquired with real estate. For these ground and office leases, the Company has elected the accounting policy to combine lease and related nonlease components as a single lease component.

ROU assets and lease liabilities are recognized at the lease commencement date based upon the present value of lease payments over the lease term. The ROU assets also include capitalized initial direct costs offset by lease incentives. Variable lease payments are excluded from the ROU assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred. The Company made the accounting policy election to recognize lease payments from short-term leases on a straight-line basis over the lease term and will not record these leases on the balance sheet.

Lease renewal or termination options are factored into the lease asset and lease liability only if it is reasonably certain that the option to extend or the option to terminate would be exercised.

As the implicit rate is not readily determinable in most leases, the present value of the remaining lease payments was calculated for each lease using an estimated incremental borrowing rate, which is the interest rate that the Company would have to pay to borrow over the lease term on a collateralized basis.

Lease expense is recognized over the lease term based on an effective interest method for finance leases and on a straight-line basis for operating leases.

The Company recognized operating lease right of use asset of $30.9 million in other assets, net and a corresponding operating lease liability of $25.0 thousand in other liabilities for ground leases in its real estate portfolio. There was no impact to beginning equity as a result of adoption related to lessee accounting as the difference between the asset and liability balance is attributable to the derecognition of pre-existing balances, including straight-line rent, lease incentives, prepaid or deferred rent and ground lease obligation intangibles.

Lessor Accounting - The Company determines if an arrangement contains a lease and determines the classification of leasing arrangements at inception. Therefore, such options are only recognized once they are deemed reasonably certain, typically at the time the option is exercised. Lease revenue is composed of rental income, which includes the effect of minimum rent increases and rent abatements and tenant reimbursements, such as common area maintenance costs and other costs associated to the leases.

As lessor, the Company made the accounting policy election to treat the lease and nonlease components in a contract as a single component to the extent that the timing and pattern of transfer are similar for the lease and nonlease components and the lease component qualifies as an operating lease. Nonlease components of tenant reimbursements for net leases qualify for the practical expedient to be combined with their respective lease component and accounted for as a single component under the lease standard as the lease component is predominant.

Lease revenue is recognized on a straight-line basis over the remaining lease term and is included in property operating income on the consolidated statements of operations. The Company receives variable lease revenues from tenant reimbursements.

Under the new standard, lessors are required to evaluate the collectability of all lease payments based upon the creditworthiness of the lessee. Lease revenue is recognized only to the extent collection is determined to be probable. If collection is subsequently determined to no longer be probable, any previously accrued lease revenue that has not been collected is subject to reversal. If collection is subsequently determined to be probable, lease revenue and corresponding receivable would be reestablished to an amount that would have been recognized if collection had always been deemed to be probable. Upon adoption of ASC 842, the Company determined that collection of certain lease receivables, net of allowance for bad debts, is probable based on an evaluation of the tenants' creditworthiness and no cumulative adjustment to equity was required.

Recent Accounting Pronouncements: Future Application of Accounting Standards

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. Early adoption is permitted for annual and interim periods beginning after December 15, 2018. The adoption of this standard is not expected to have a material effect on the Company’s existing disclosures.

Fair Value Disclosures - In August 2018, the FASB issued guidance (ASU No. 2018-13) that requires new disclosures of changes in unrealized gains and losses in OCI for recurring Level 3 fair value of instruments held at balance sheet date, as well as the range and weighted average or other quantitative information, if more relevant, of significant unobservable inputs for recurring and nonrecurring Level 3 fair values. Certain disclosures are now eliminated, specifically around the valuation process required for Level 3 fair values, policy for timing of transfers between levels of the fair value hierarchy, as well as amounts and reason for transfers between Levels 1 and 2. The new guidance is effective for fiscal years and interim periods beginning after December 15, 2019. The adoption of this standard is not expected to have a material effect on the Company’s existing disclosures.

Variable Interest Entities - In November 2018, the FASB issued guidance (ASU No. 2018-17) which amends the VIE guidance to align the evaluation of a decision maker’s or service provider’s fee in assessing a variable interest with the guidance in the primary beneficiary test. Specifically, indirect interests held by a related party that is under common control will now be considered on a proportionate basis, rather than in their entirety, when assessing whether the fee qualifies as a variable interest. The proportionate basis approach is consistent with the treatment of indirect interests held by a related party under common control when evaluating the primary beneficiary of a VIE. This effectively means that when a decision maker or service provider has an interest in a related party, regardless of whether they are under common control, it will consider that related party’s interest in a VIE on a proportionate basis throughout the VIE model, for both the assessment of a variable interest and the determination of a primary beneficiary. Transition is generally on a modified retrospective basis, with the cumulative effect adjusted to retained earnings at the beginning of the earliest period presented. The new guidance is effective for fiscal years and interim periods beginning after December 15, 2019, with early adoption permitted in an interim period for which financial statements have not been issued. The Company is currently evaluating the impact of this new guidance but does not expect the adoption of this standard to have a material effect on its financial condition or results of operations.

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Operating Real Estate

6 Months Ended

Jun. 30, 2019

Real Estate [Abstract]

Operating Real Estate

Operating Real Estate

The following table presents operating real estate, net as of June 30, 2019 and December 31, 2018 (dollars in thousands):

	June 30, 2019			December 31, 2018
Land	$	267,465		$	269,149
Buildings and improvements	373,299			373,446
Building and leasehold interests	173,366			173,782
Tenant improvements	29,513			28,432
Operating real estate, gross	843,643			844,809
Less: accumulated depreciation	(72,033		)	(64,187		)
Operating real estate, net	$	771,610		$	780,622

Real Estate Held for Sale

There were no operating real estate assets held for sale as of June 30, 2019.

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

			Assets(1)(2)								Liabilities(1)
Location	Type	Properties	Operating Real Estate, Net(2)		Intangible Assets, Net		Other Assets		Total		Other Liabilities
As of December 31, 2018:
Bremen, Germany(3)(6)	Other	1	$	1,060	$	18	$	—	$	1,078	$	—
Werl, Germany(3)(4)	Other	1	2,866		—		4		2,870		—
Marly, France(5)	Other	1	43,208		—		3,897		47,105		1,498
Frankfurt, Germany(6)	Office	1	21,274		216		802		22,292		—
Total		4	$	68,408	$	234	$	4,703	$	73,345	$	1,498

_____________________________

(1) The assets and liabilities classified as held for sale were sold as either asset sales or share sales subject to standard industry terms and conditions. The assets held-for-sale as of December 31, 2018 contributed $0.5 million and $1.1 million of revenue and $(0.3) million and $(2.1) million of income (loss) before income tax benefit (expense) for the three months ended June 30, 2019 and 2018, respectively. The assets held-for-sale as of December 31, 2018 contributed $1.8 million and $1.5 million of revenue and $0.2 million and $(2.5) million of income (loss) before income tax benefit (expense) for the six months endedJune 30, 2019 and 2018, respectively.

(2) Represents operating real estate and intangible assets, net of accumulated depreciation and amortization of $6.9 million as of December 31, 2018, prior to being reclassified into held for sale.

(3) Net of impairment loss of $0.3 million and $0.5 million, respectively, on the non-core retails assets in Bremen and Werl, Germany.

(4) Asset was sold in February 2019.

(5) Asset was sold in June 2019.

(6) Assets were sold in March 2019.

Real Estate Sales

The following table summarizes the Company’s real estate sales for the three and six months endedJune 30, 2019 and 2018 (dollars in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Properties	1		1		4		1
Carrying Value	$	44,587	$	156,107	$	70,590	$	156,107
Sales Price(1)	$	48,190	$	188,246	$	92,533	$	188,246
Net Proceeds(2)	$	47,753	$	186,064	$	91,863	$	186,064
Gain (3)(4)	$	3,166	$	29,957	$	21,273	$	29,957

_____________________________

(1) For the three months ended June 30, 2019 and 2018, the Company sold one asset for approximately €43 million and one asset for approximately €159 million, respectively. For the six months ended June 30, 2019 and 2018, the Company sold a total of four properties for approximately €82 million and one asset for approximately €159 million, respectively.

(2) Represents proceeds net of sales costs prior to the repayment of the associated property debt. For the three and six months ended June 30, 2019, the Company repaid $34.5 million and $51.6 million, respectively, of associated property debt, including release premiums. For the three and six months ended June 30, 2018 the Company repaid $102.4 million of associated property debt and $15.6 million of preferred equity certificates.

(3) For the three months ended June 30, 2019, the Company also recorded a gain on sale of $0.4 million related to adjustments from prior period disposals, net other gains and losses and a $0.1 million CTA gain. For the six months ended June 30, 2019, the Company also recorded a gain on sale of $1.2 million related to the release of escrow accounts and adjustments from prior period disposals, net other gains and losses offset by $1.1 million CTA loss.

(4) For the three months ended June 30, 2018, the Company also recorded a gain on sale of $0.5 million related to adjustments from prior period disposals, net other gains and losses and a $7.8 million CTA gain. For the six months ended June 30, 2018, the Company also recorded a gain on sale of $1.5 million related to the release of escrow accounts and adjustments from prior period disposals, net other gains and losses and a $8.1 million CTA gain.

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Preferred Equity Investments

6 Months Ended

Jun. 30, 2019

SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Abstract]

Preferred Equity Investments

Preferred Equity Investments

In December 2018, in connection with the sale of Trianon Tower, the Company retained a $5.7 million (€5 million) interest in the form of preferred equity, which the Company accounts for as a debt investment.

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 $33.3 million (£26.2 million) of preferred equity, which the Company accounts for as a debt investment.

The following table presents the Company’s preferred equity investments as of June 30, 2019 and December 31, 2018 (dollars in thousands):

	June 30, 2019				December 31, 2018
Asset Type	Principal Amount		Carrying Value		Principal Amount		Carrying Value		Fixed Rate		Mandatory Redemption
Preferred equity investment
Gresham Street(1)	$	33,267	$	33,267	$	33,368	$	33,368	8.00	%	May 2020
Trianon Tower(2)	5,685		5,685		5,722		5,722		7.00	%	Dec 2023
Total	$	38,952	$	38,952	$	39,090	$	39,090

_____________________________

(1) Denominated in U.K. Pound Sterling, and as such, the principal amount decreased from 2018 to 2019 is due to the decrease in the U.K. Pound Sterling to U.S. dollar exchange rate.

(2) Denominated in Euro, and as such, the principal amount decreased from 2018 to 2019 is due to the decrease in the Euro to U.S. dollar exchange rate.

Credit Quality Monitoring

The Company’s preferred equity investments are 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 investments at least quarterly and determines the relative credit quality principally based on: (i) whether each borrower is currently paying debt service in accordance with its contractual terms; and (ii) whether the Company believes each 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.

As of June 30, 2019, the Company’s preferred equity investments were performing in accordance with the contractual terms of their governing documents, in all material respects, and were categorized as performing loans. For the three months ended June 30, 2019 and 2018, the preferred equity investments contributed $0.8 million and $0.7 million, respectively, of interest income recorded on the consolidated statement of operations. For the six months ended June 30, 2019 and 2018, the preferred equity investments contributed $1.6 million and $1.4 million, respectively, of interest income recorded on the consolidated statement of operations. The remaining balance of interest income for the three and six months ended June 30, 2019 of $0.8 million and $1.6 million, respectively, related to the interest income from cash held in interest bearing bank accounts.

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Borrowings

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Borrowings

Borrowings

The following table presents borrowings as of June 30, 2019 and December 31, 2018 (dollars in thousands):

				June 30, 2019				December 31, 2018
	Country	Final Maturity	Contractual Interest Rate(2)	Principal Amount		Carrying Value		Principal Amount		Carrying Value
Mortgage and other notes payable:(1)
Trias Portfolio 1(4)(6)	France	Apr-22	EURIBOR + 1.65%	$	40,132	$	39,306	$	75,622	$	74,449
Trias Portfolio 2(4)(6)	Germany	Jun-25	EURIBOR + 1.00%	69,855		69,432		87,496		86,720
SEB Portfolio 1(4)	Germany/France	Jul-24	EURIBOR + 1.55%	201,610		199,383		202,921		200,459
SEB Portfolio 2(4)	U.K.	Jul-24	GBP LIBOR + 1.55%	236,065		233,908		236,777		234,402
SEB Portfolio - Preferred(3)	Germany/France/U.K.	Apr-60	0.90%	—		—		82,745		82,534
Other - Preferred(5)	Germany	Oct-45	1.00%	4,320		4,320		4,348		4,348
Total mortgage and other notes payable				$	551,982	$	546,349	$	689,909	$	682,912

_____________________________

(1) All mortgage notes and other notes payable are denominated in local currencies, and as such, the principal amount on debt balances generally decreased from December 31, 2018 to June 30, 2019 due to the decrease in the Euro and U.K. Pound Sterling to U.S. dollar exchange rate and the repayment of $51.6 million due to sales and $80.9 million due to the repayment of the SEB Portfolio - Preferred debt (based on the applicable exchange rate of when the debt was repaid). 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) Represents preferred equity certificates, which the Company repaid in April 2019, with a contractual interest rate of 0.90% through May 2019, which would have increased to EURIBOR plus 12.0% through May 2022 and subsequently to EURIBOR plus 15.0% through final maturity. Certain prepayments prior to May 2019 were subject to the payment of the unpaid coupon on outstanding principal amount through May 2019.

(4) Prepayment provisions include a fee based on principal amount of 0.50% through April 2020 for the Trias Portfolio 1 borrowings, 0.35% to 1.0% through May 2022 for the Trias Portfolio 2 borrowings and 0.5% through July 2019 for the SEB Portfolio borrowings.

(5) 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.

(6) In February and March 2019, the Company repaid a portion of the mortgage notes on Trias 2 and in June 2019, the Company repaid a portion of the mortgage notes on Trias 1 in connection with the sales of the associated properties (refer to Note 3). In addition, the Company expensed the remaining deferred financing costs associated with these mortgage notes and paid the related prepayment penalties which are recorded in extinguishment of debt in the consolidated statements of operations.

The following table presents a reconciliation of principal amount to carrying value of the Company’s mortgage and other notes payable as of June 30, 2019 and December 31, 2018 (dollars in thousands):

	June 30, 2019			December 31, 2018
Principal amount	$	551,982		$	689,909
Deferred financing costs, net	(5,633		)	(6,997		)
Carrying value	$	546,349		$	682,912

The following table presents scheduled principal on borrowings, based on final maturity as of June 30, 2019 (dollars in thousands):

	Mortgage and Other Notes Payable
Remaining 2019	$	—
Years ending December 31:
2020	—
2021	—
2022	40,132
2023	—
2024	437,675
2025 and thereafter	74,175
Total	$	551,982

As of June 30, 2019 and December 31, 2018, the Company was in compliance with all of its financial covenants.

Credit Facility

In March 2018, the Company amended the corporate revolving credit facility (the “Credit Facility”), increasing the size from $35.0 million to $70.0 million and extending the term until April 2020 with a one year extension option. The Credit Facility includes an accordion feature, providing for the ability to increase the facility to $105.0 million. As of June 30, 2019, there was no outstanding balance on the Credit Facility. In July 2019, the Company terminated the Credit Facility.

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Related Party Arrangements

6 Months Ended

Jun. 30, 2019

Related Party Transactions [Abstract]

Related Party Arrangements

Related Party Arrangements

Colony Capital, 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 (the “Amended and Restated Management Agreement”) with an affiliate of the Manager, effective as of January 1, 2018. As asset manager, the Manager is responsible for the Company’s day-to-day operations, subject to the supervision and management of 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 Amended and Restated Management Agreement with the Manager provides for a base management fee, incentive fee and expense reimbursement.

On November 7, 2018, the Company entered into Amendment No. 1 (the “Amendment”) to the Amended and Restated Management Agreement with an affiliate of the Manager. The Amendment provides for the termination of the Amended and Restated Management Agreement (the date of such termination, the “Termination Date”) upon the earlier of (i) the closing of an NRE Change of Control (as defined in the Amended and Restated Management Agreement) and (ii) the completion of an internalization of the management of the Company within nine months of the later of (x) April 30, 2019, if on such date there is not in place a definitive agreement for an NRE Change of Control and (y) if on April 30, 2019 there is a definitive agreement for an NRE Change of Control, such date on which such agreement is terminated, if any, if no other definitive agreement for an NRE Change of Control is entered into within 30 days thereafter.

The Amendment provides that upon the Termination Date, the Company will be obligated to pay to the Manager a termination payment equal to (i) $70 million, minus (ii) the amount of any Incentive Fee (refer below) paid pursuant to the Amended and Restated Management Agreement. As of June 30, 2019, the termination fee that would be payable on the Termination Date was $64.6 million. No Incentive Fee will be payable to the Manager for any period following the Termination Date.

On April 23, 2019, the Company entered into Amendment No. 2 (“Amendment No. 2”) to the Amended and Restated Management Agreement with an affiliate of the Manager, extending the date used in the definition of Triggering Date (as defined in the Amended and Restated Management Agreement) from April 30, 2019 to June 30, 2019 to accommodate the ongoing strategic review process.

In addition to Amendment No.2, on April 22, 2019, the Company entered into an Employee Transition Agreement with an affiliate of the Manager (the “Employee Transition Agreement”). Pursuant to the terms of the Employee Transition Agreement, the parties agreed that certain employees of the Manager would be available for hire by the Company or an acquirer of the Company from and after the termination of the Amended and Restated Management Agreement pursuant to Amendment No. 2. The Employee Transition Agreement also (i) eliminates the Company’s obligation to reimburse the Manager for 50% of the cash severance payments payable to Mahbod Nia, the Chief Executive Officer of the Company, if his employment is terminated in connection with an NRE Change of Control, and reduces such reimbursement obligation from 50% to 25% of the cash severance payments payable to Mr. Nia if such termination of employment is in connection with an Internalization and (ii) addresses a number of other topics including, minimum 2018 annual cash bonuses, continuing compensation and cash severance payable by the Manager or one of its affiliates to key personnel providing services to the Company, the structure and minimum amount of the 2018 annual equity compensation pool established by the Company under the Amended and Restated Management Agreement and the amendment of outstanding equity awards to address vesting upon an NRE Change of Control or termination of the Amended and Restated Management Agreement.

Term

The Amendment, as modified by Amendment No. 2, provides for the termination of the Amended and Restated Management Agreement upon the earlier of (i) the closing of an NRE Change of Control and (ii) the completion of an internalization of the management of the Company within nine months of the later of (x) June 30, 2019, if on such date there is not in place a definitive agreement for an NRE Change of Control and (y) if on June 30, 2019 there is a definitive agreement for an NRE Change of Control, such date on which such agreement is terminated, if any, if no other definitive agreement for an NRE Change of Control is entered into within 30 days thereafter. Because the Merger will qualify as an NRE Change of Control under the Amended and Restated Management Agreement, upon the closing of the Merger, the Amended and Restated Management Agreement will automatically terminate in accordance with its terms.

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.

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 endedJune 30, 2019 and 2018, the Company incurred $3.9 million and $4.2 million, respectively, related to the base management fee. For the six months ended June 30, 2019 and 2018, the Company incurred $7.7 million and $8.4 million, respectively, related to the base management fee.

Incentive Fee

In addition to the base management fees, pursuant to the Amended and Restated Management Agreement, 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 began January 1, 2018 (based on an initial price of $13.68) and ended on December 31, 2018 (at a price of $14.97) and subsequent measurement periods will begin on January 1 of the subsequent calendar year and end on December 31 of the applicable calendar year. Any future Incentive Fee will reduce the final termination payment payable to the Manager which, as of June 30, 2019, is $64.6 million and is payable on the Termination Date.

For the year ended December 31, 2018, the Company incurred a $5.4 million incentive fee which was paid in April 2019.

Costs and Expenses

Pursuant to the Amended and Restated Management Agreement, 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 endedJune 30, 2019 and 2018, the Manager allocated $0.2 million and $0.2 million, respectively, of Internalized Service Costs to the Company, which is recorded in general and administrative expenses in the consolidated statements of operations. For the six months endedJune 30, 2019 and 2018, the Manager allocated $0.4 million and $0.5 million, respectively, of Internalized Service Costs to the Company, which is recorded in general and administrative expenses in the consolidated statements of operations.

Equity Based Compensation

In addition, pursuant to the Amended and Restated Management Agreement, 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.

Beginning with the Company’s 2018 annual stockholders’ meeting, the Manager has the right to nominate one individual to be included in the slate of nominees nominated by the Company’s board of directors for election at each annual meeting. In the third quarter of 2019, for the 2019 annual stockholders’ meeting, the Manager will nominate one individual to the Company’s board of directors.

Colony Capital Ownership Waiver and Voting Agreement

In connection with the entry into the Amended and Restated Management Agreement, the Company provided Colony Capital with an ownership waiver under the Company’s Articles of Amendment and Restatement, allowing Colony Capital to purchase up to 45% of the Company’s stock. The waiver provides that if the Amended and Restated Management Agreement is terminated, Colony Capital may not purchase any shares of the Company’s common stock to the extent Colony Capital 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 Capital also agreed that for all matters submitted to a vote of the Company’s stockholders, to the extent Colony Capital owns more than 25% of the Company’s common stock (such shares owned by Colony Capital 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 Capital 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 June 30, 2019, Colony Capital and its subsidiaries owned 5.6 million shares of the Company’s common stock, or approximately 11.2% of the total outstanding common stock.

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Compensation Expense

6 Months Ended

Jun. 30, 2019

Share-based Payment Arrangement [Abstract]

Compensation Expense

Compensation Expense

The following summarizes the equity-based compensation for the three and six months endedJune 30, 2019 and 2018:

For the three months endedJune 30, 2019 and 2018, the Company recorded $2.0 million and $1.2 million, respectively, of equity-based compensation expense which is recorded in compensation expenses on the consolidated statement of operations. For the six months endedJune 30, 2019 and 2018, the Company recorded $3.2 million and $1.6 million, respectively, of equity-based compensation expense which is recorded in compensation expenses on the consolidated statements of operations. As of June 30, 2019, equity-based compensation expense to be recognized over the remaining vesting period through May 2022 is $12.1 million, provided there are no additional forfeitures.

In the third quarter 2018, the Company adopted ASU 2018-07 which required the Company to retrospectively adjust compensation expense for the three and six months endedJune 30, 2018 by $1.6 million and $1.8 million, respectively (refer to Note 2).

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. 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.

As of June 30, 2019, under the 2015 Plan, a total of 2.1 million shares of common stock had been issued (net of forfeitures and shares held back for tax withholding), 1.8 million shares were reserved for issuance pursuant to outstanding equity awards (including 0.3 million reserved for issuance upon conversion of outstanding LTIP Units and Common Units and 1.5 million reserved for issuance pursuant to the outstanding Absolute RSUs, Relative RSUs, 2018 Absolute RSUs and 2018 Relative RSUs, as defined below) and 9.3 million otherwise unreserved shares remained available for issuance.

In May 2019, under the 2015 Plan, the Company issued a total of 529,805 restricted shares of common stock subject to vesting based on continued service, which included the remaining 150,000 awards under the previously established retention pool, and reserved an additional 17,676 shares of common stock for issuance pursuant to previously forfeited 2018 Absolute RSUs and 2018 Relative RSUs that were reinstated.

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 tri-party merger with NorthStar Realty Finance Corp., NorthStar Asset Management Group Inc. and Colony Capital (the “NorthStar Colony Mergers”). The Absolute and Relative RSUs were not affected by the NorthStar Colony 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. In 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 were to 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 November2018, 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 issued retention grants consisting of 90,000restricted shares of common stock to non-executive officers of the Company that are subject to vesting based on continued service. In May 2019, the Company allocated the remaining awards under the retention pool, which resulted in the Company granting 150,000 restricted shares of common stock subject to vesting based on continued service.

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 16, 2021, subject to the Manager continuing to serve as the Company’s manager and the recipient’s continued employment with the Manager or Colony Capital or one of its subsidiaries. During the first quarter 2019, 98,310 shares vested, of which 44,342 were retired for tax withholdings. 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 the Company’s manager and the recipient’s continued employment with the Manager or Colony Capital 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. In May 2019, the Company reinstated 13,257 restricted shares of common stock and 8,838 performance-based RSUs that had been granted in March 2018 pursuant to the annual equity compensation pool, but had been previously been forfeited by an individual who has continued to provide services to the Company.

In May 2019, the Company granted annual equity awards consisting of an aggregate of 366,548 restricted shares of common stock subject to vesting based on continued service, a portion of which were specifically allocated by the compensation committee of the Company and a portion of which were allocated to individual award recipients by the Manager as contemplated by the Amended and Restated Management Agreement.

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 NorthStar Colony 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 June 30, 2019 represents vested Common Units and unvested restricted stock and performance RSUs (grants in thousands):

	Six Months Ended June 30, 2019
	Restricted Stock(1)		Common Units		Performance RSUs(2)		Total Grants		Weighted Average Grant Price
December 31, 2018	538		338		1,225		2,101		$	12.08
Granted	530		—		9		539		16.86
Vested/converted	(87	)	(22	)	—		(109	)	16.86
Withheld/retired	(67	)	—		—		(67	)	17.05
Forfeited	(3	)	—		(10	)	(13	)	16.74
June 30, 2019	911		316		1,224		2,451		$	12.87

_____________________________

(1) Represents restricted stock included in common stock.

(2) Represents outstanding Spin-off Absolute and Relative RSUs and 2018 Absolute and Relative RSUs.

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Stockholders' Equity

6 Months Ended

Jun. 30, 2019

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 expired in March 2019. For the three and six months endedJune 30, 2019, the Company did not repurchase any shares of its common stock. For the three months ended June 30, 2018, the Company repurchased 4.0 million shares of its common stock for approximately $56.3 million. For the six months endedJune 30, 2018, the Company repurchased 5.1 million shares of its common stock for approximately $69.6 million. From authorization through March 2019, the Company repurchased 6.1 million shares of its common stock for approximately $83.4 million.

Dividends

The following table presents dividends declared (on a per share basis) with respect to the six months endedJune 30, 2019 and 2018:

Common Stock
Declaration Date	Dividend Per Share
2019
May 1	$	0.15
August 2	$	0.15
2018
May 8	$	0.15
August 3	$	0.15

Earnings Per Share

The following table presents EPS for the three and six months endedJune 30, 2019 and 2018 (dollars and shares in thousands, except per share data):

	Three Months Ended June 30,							Six Months Ended June 30,
	2019				2018			2019			2018
Numerator:
Net income (loss)	$	(1,434	)		$	37,876		$	9,689		$	36,808
Net (income) loss attributable to Unit Holders noncontrolling interest	6				(217		)	(56		)	(202		)
Net income (loss) attributable to common stockholders and Unit Holders(1)	$	(1,428	)		$	37,659		$	9,633		$	36,606
Net (income) allocated to participating securities	(191		)		(438		)	(242		)	(371		)
Net income (loss) allocated to common stockholders—basic and dilutive	$	(1,619	)		$	37,221		$	9,391		$	36,235
Denominator:
Weighted average shares of common stock - basic	49,449				51,859			49,392			53,456
Weighted average effect of dilutive share(3)	—			(2)	2,149			1,358			1,976
Weighted average shares of common stock - dilutive	49,449				54,008			50,750			55,432
Earnings (loss) per share:
Basic	$	(0.03	)		$	0.72		$	0.19		$	0.68
Diluted	$	(0.03	)		$	0.69		$	0.19		$	0.65

_____________________________

(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) For the three months ended June 30, 2019, shares in the diluted EPS calculation represents basic shares due to the net loss in that period. The shares exclude the effect of adding back 1.4 million weighted average dilutive common shares as their inclusion would be antidilutive.

(3) Includes the Absolute and Relative RSUs and 2018 Absolute and Relative RSUs as the performance targets would have been met if the performance period ended on June 30, 2019 and 2018.

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Noncontrolling Interests

6 Months Ended

Jun. 30, 2019

Noncontrolling Interest [Abstract]

Noncontrolling Interests

Noncontrolling Interests

Operating Partnership

Noncontrolling interests include the aggregate Unit Holders’ interest in the Operating Partnership. Net income (loss) attributable to the noncontrolling 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 or the holder, 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 noncontrolling 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 noncontrolling 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 June 30, 2019 and December 31, 2018, the Company allocated $0.2 million and $0.2 million, respectively, from stockholders’ equity to noncontrolling interest on the consolidated balance sheets and consolidated statement of equity.

As of June 30, 2019, 315,434 Common Units and LTIP Units were outstanding, representing a 0.6% ownership and noncontrolling interest in the Operating Partnership. Net income (loss) attributable to the Operating Partnership noncontrolling interest for the three months endedJune 30, 2019 and 2018 was a net income (loss) of an immaterial amount and $0.2 million, respectively. Net income (loss) attributable to the Operating Partnership noncontrolling interest for the six months endedJune 30, 2019 and 2018 was a net income (loss) of $0.1 million and $0.2 million, respectively.

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Risk Management and Derivative Activities

6 Months Ended

Jun. 30, 2019

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 certain 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 June 30, 2019 and December 31, 2018 (dollars, U.K. pound sterling and Euros in thousands):

	Number(1)	Notional Amount	Fair Value Asset (Liability)		Range of Fixed GBP LIBOR / EURIBOR/ Strike Price	Range of Maturity
As of June 30, 2019 (Unaudited):
Interest rate caps (EUR)	28	€564,694	$	531	3 Month EURIBOR 0.5%	April 2020 - May 2025
Interest rate caps (GBP)	5	£202,645	—		3 Month GBP LIBOR 2.0%	April 2020
Foreign currency forwards(2)	2	€24,480	2,757		1.25 EUR/USD(3)	August 2019 - November 2019
Total	35		$	3,288
As of December 31, 2018:
Interest rate caps (EUR)	28	€564,694	$	2,185	3 Month EURIBOR 0.5%	April 2020 - May 2025
Interest rate caps (GBP)	5	£202,645	20		3 Month GBP LIBOR 2.0%	April 2020
Foreign currency forwards(2)	4	€48,960	4,235		1.25 EUR/USD(3)	February 2019 - November 2019
Total	37		$	6,440

_____________________________

(1)    Represents number of transactions.

(2)    Includes Euro currency forwards.

(3)    The strike prices for the foreign currency forwards represent the average price.

The following table presents the fair value of derivative instruments, as well as their classification on the consolidated balance sheets, as of June 30, 2019 and December 31, 2018 (dollars in thousands):

	Balance Sheet	June 30, 2019		December 31, 2018
	Location
Interest rate caps	Derivative assets	$	531	$	2,205
Foreign currency forwards	Derivative assets	$	2,757	$	4,235

The following table presents the effect of derivative instruments in the consolidated statements of operations for the three and six months endedJune 30, 2019 and 2018 (dollars in thousands):

		Three Months Ended June 30,						Six Months Ended   June 30,
		2019			2018			2019			2018
Amount of gain (loss) recognized in earnings:	Statements of operations location:
Adjustment to fair value of interest caps held at the end of the reporting period	Other gain (loss), net	$	(375	)	$	(1,880	)	$	(1,652	)	$	(1,999	)
Adjustment to fair value of foreign currency forwards held at the end of the reporting period	Other gain (loss), net	(1,596		)	7,566			(1,477		)	6,494
Net cash receipt (payment) on derivatives	Other gain (loss), net(1)	1,416			(2,631		)	2,562			(4,371		)

_____________________________

(1) Excludes the gain (loss) relating to foreign currency transactions for the three months ended June 30, 2019 and 2018 of $0.6 million and $0.4 million, respectively and for the six months endedJune 30, 2019 and 2018 of $(1.9) million and $0.4 million, respectively.

The Company’s counterparties held no cash margin as collateral against the Company’s derivative contracts as of June 30, 2019 and December 31, 2018. The Company had no derivative financial instruments that were designated as hedges in qualifying hedging relationships as of June 30, 2019 and December 31, 2018.

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Fair Value

6 Months Ended

Jun. 30, 2019

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 June 30, 2019 and December 31, 2018 (dollars in thousands):

	June 30, 2019						December 31, 2018
	Principal/Notional Amount		Carrying Value		Fair Value		Principal/Notional Amount		Carrying Value		Fair Value
Financial assets:(1)
Derivative assets	$	927,254	$	3,288	$	3,288	$	960,401	$	6,440	$	6,440
Preferred equity investment	38,952		38,952		39,363		39,090		39,090		39,501
Financial liabilities:(1)
Mortgage and other notes payable, net	$	551,982	$	546,349	$	546,349	$	689,909	$	682,912	$	686,891

_____________________________

(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.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2019

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.

Obligations Under Ground Leases

The Company has one ground lease on the Portman Square asset with an expiry in 2101. The annual rent is £1000 per year for the lease term and is not recoverable from the tenants (refer to Note 2).

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 and six months endedJune 30, 2019, one tenant, BNP Paribas RE, accounted for more than 10% of the Company’s total revenues. This tenant has 0.6 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 and six months endedJune 30, 2019, Germany, France and the United Kingdom each accounted for more than 10% of the Company’s total revenues. The Company believes its portfolio is well diversified and does not contain any unusual concentrations of credit risks.

Guarantee

In connection with the sale of the Trianon Tower in December 2018, the Company pledged its $5.7 million (€5 million) preferred equity certificates to secure certain of the seller representations and warranties made to the buyer in the definitive purchase agreement. The maximum exposure of this guarantee is the $5.7 million (€5 million) preferred equity certificates. To date, we have not experienced any significant losses related to this guarantee. We establish reserves when a loss is probable and the amount can be reasonably estimated.

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Segment Reporting

6 Months Ended

Jun. 30, 2019

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 investments secured by interest in prime office properties.

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

The following tables present segment reporting for the three and six months endedJune 30, 2019 and 2018 (dollars in thousands):

	Three Months Ended June 30, 2019
Statement of Operations:	Real Estate Equity				Preferred Equity		Corporate				Total
Revenues
Lease income	$	16,499			$	—	$	—			$	16,499
Interest income	—				761		793				1,554
Expenses
Interest expense(1)	3,237				—		176				3,413
Management fee, related party	—				—		3,848				3,848
Transaction costs(2)	—				—		1,827				1,827
Depreciation and amortization	5,908				—		—				5,908
Gain on sales, net	(3,671		)		—		—				(3,671		)
Other expense (income)	4,815			(3)	—		3,098			(4)	7,913
Income (loss) before income tax benefit (expense)	6,210				761		(8,156		)		(1,185		)
Income tax benefit (expense)	(249		)		—		—				(249		)
Net income (loss)	$	5,961			$	761	$	(8,156	)		$	(1,434	)

_____________________________

(1) Includes $0.3 million and $0.1 million of amortization of deferred financing costs in the real estate equity and corporate segments, respectively.

(2) Represents costs associated with the continual work of the strategic review committee in the corporate segment.

(3) Primarily relates to properties - operating expenses, loss on interest rate caps, other expenses and extinguishment of debt in the real estate equity segment.

(4) Primarily relates to general and administrative expenses and compensation expense offset by a net gain on foreign currency derivatives.

	Three Months Ended June 30, 2018
Statement of Operations:	Real Estate Equity				Preferred Equity		Corporate				Total
Revenues
Lease income	$	30,162			$	—	$	—			$	30,162
Interest income	—				706		—				706
Expenses
Interest expense(1)	5,601				—		254				5,855
Management fee, related party	—				—		4,223				4,223
Transaction costs	—				—		376				376
Depreciation and amortization	11,976				—		—				11,976
Gain on sale, net	(38,319		)		—		—				(38,319		)
Other expense (income)	11,455			(2)	—		(2,498		)	(3)	8,957
Income (loss) before income tax benefit (expense)	39,449				706		(2,355		)		37,800
Income tax benefit (expense)	76				—		—				76
Net income (loss)	$	39,525			$	706	$	(2,355	)		$	37,876

_____________________________

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

(2) Primarily relates to properties - operating expenses and loss on interest rate caps.

(3) Primarily relates to the net gain on foreign currency derivatives offset by general and administrative expenses and compensation expense.

	Six Months Ended June 30, 2019
Statement of Operations:	Real Estate Equity				Preferred Equity		Corporate				Total
Revenues
Lease income	$	33,583			$	—	$	—			$	33,583
Interest income	—				1,538		1,627				3,165
Expenses											—
Interest expense(1)	6,691				—		402				7,093
Management fee, related party	—				—		7,736				7,736
Transaction costs(2)	—				—		2,589				2,589
Depreciation and amortization	11,821				—		—				11,821
Gain on sales, net	(21,396		)		—		—				(21,396		)
Other expense (income)	8,483			(3)	—		8,332			(4)	16,815
Income (loss) before income tax benefit (expense)	27,984				1,538		(17,432		)		12,090
Income tax benefit (expense)	(2,401		)		—		—				(2,401		)
Net income (loss)	$	25,583			$	1,538	$	(17,432	)		$	9,689

_____________________________

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

(2) Represents costs associated with the continual work of the strategic review committee in the corporate segment.

(3) Primarily relates to properties - operating expenses, loss on interest rate caps, other expenses and extinguishment of debt in the real estate equity segment.

(4) Primarily relates to general and administrative expenses and compensation expense offset by a net gain on foreign currency derivatives.

	Six Months Ended June 30, 2018
Statement of Operations:	Real Estate Equity				Preferred Equity		Corporate				Total
Revenues
Lease income	$	62,727			$	—	$	—			$	62,727
Interest income	—				1,435		—				1,435
Expenses
Interest expense(1)	11,556				—		406				11,962
Management fee, related party	—				—		8,380				8,380
Transaction costs	—				—		857				857
Depreciation and amortization	23,627				—		—				23,627
Gain on sale, net	(39,585		)		—		—				(39,585		)
Other expense (income)	19,910			(2)	—		2,240			(3)	22,150
Income (loss) before income tax benefit (expense)	47,219				1,435		(11,883		)		36,771
Income tax benefit (expense)	37				—		—				37
Net income (loss)	$	47,256			$	1,435	$	(11,883	)		$	36,808

_____________________________

(1) Includes $1.3 million and $0.3 million of amortization of deferred financing costs in the real estate equity and corporate segments, respectively.

(2) Primarily relates to properties - operating expenses and the loss on interest rate caps.

(3) Primarily relates to the net gain on foreign currency derivatives offset by general and administrative expenses and compensation expense.

The following table presents total assets by segment as of June 30, 2019 and December 31, 2018 (dollars in thousands):

Total Assets	Real Estate Equity		Preferred Equity		Corporate		Total
June 30, 2019	$	953,007	$	41,629	$	277,590	$	1,272,226
December 31, 2018	1,362,679		40,568		22,252		1,425,499

Geography

The following table presents geographic information about the Company’s total lease income for the six months endedJune 30, 2019 and 2018 (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Properties(1)	14			24			14			24
Office
Germany	$	3,847		$	14,437		$	8,037	(4)	$	29,224
United Kingdom	6,309			7,780			12,633			15,273
France	5,110			5,346			10,323			10,830
Other office	—			1,313		(2)	—			4,733		(2)
Subtotal	15,266			28,876			30,993			60,060
Other Property Types
France/Germany(5)	1,233		(3)	1,286		(5)	2,590		(4)	2,667		(5)
Total	$	16,499		$	30,162		$	33,583		$	62,727

_____________________________

(1) Represents the number of properties owned as of June 30, 2019 and 2018, respectively, including assets held-for-sale as of the respective period.

(2) Includes an asset in Portugal which is classified as held-for-sale as of June 30, 2018 and partial period rental income from the Maastoren property which was sold in April 2018.

(3) Represents income from two hotel (net lease) assets in Germany and partial period rental income from one industrial asset in France sold in the second quarter 2019.

(4) Represents income from two hotel (net lease) assets in Germany and partial period rental income from one industrial asset in France sold in the second quarter 2019 and one office asset in Germany and two retail assets in Germany sold in the first quarter 2019.

(5) Represents income from five assets including two retail in Germany, one industrial in France and two hotel (net lease) assets in Germany.

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Subsequent Events

6 Months Ended

Jun. 30, 2019

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

Dividends

On August 2, 2019, the Company declared a dividend of $0.15 per share of common stock. The common stock dividend is expected to be paid on August 23, 2019 to stockholders of record as of the close of business on August 19, 2019.

Credit Facility

On July 17, 2019 (the “Credit Facility Termination Date”) the Company terminated the Credit Facility. As of such date, no amounts were drawn under the Credit Facility and no fees or penalties were incurred as a result of the termination, other than the payment of an immaterial accrued commitment fee. The Company voluntarily terminated the Credit Facility to eliminate the obligation to pay the commitment fee with respect to undrawn lender commitments thereunder.

Merger Agreement with AXA Investment Managers

In July 2019, the Company announced the Merger. The surviving entity of the Merger will not be a publicly-traded company and will become a wholly owned subsidiary of a fund managed by AXA Investment Managers. The Merger has been approved by the Board upon the recommendation of the Strategic Review Committee of the Board consisting solely of independent directors of the Company.

Under the terms of the Merger Agreement, upon the consummation of the Merger, each share of the Company’s common stock will be converted into the right to receive cash in U.S. dollars equal to the sum of $1.68 plus the U.S. dollar equivalent of €9.26 and £3.82 (the “Per Share Consideration”), without interest. The Company has entered into six-month forward contracts for the purchase of U.S. dollars for €482 million and £199 million, the approximate aggregate amount of the merger consideration denominated in euros and U.K Pound Sterling. In connection with the closing of the Mergers (as defined below), these forward contracts will be settled and the portion of the merger consideration denominated in euros and pound sterling will be paid to security holders of the Company in U.S. dollars reflecting the final exchange rates received in settlement of the forward contracts (which may be at rates greater or less than the currently estimated exchange rates, depending on the closing date of the Mergers). To the extent that the closing occurs prior to the end of the settlement period on the forward contracts, these contracts will be settled at the time of closing. An early settlement, prior to January 6, 2020, may reduce the U.S. dollars per share received by stockholders due to a shorter duration of the hedge. The Company currently estimates a closing in approximately three months, which would result in stockholders receiving approximately $17.03 per share in U.S. dollars. The settlement amount would be determined by the movement in the forward points from the date of closing to the final settlement date at the end of the six month period. There may also be an adjustment to present value the hedge settlement amount if the closing occurs before January 6, 2020. The settlement of the forward contracts is not contingent upon the consummation of the Mergers. Therefore, even if the Mergers are not competed, the hedges pursuant to the forward contract will remain in place and the Company will be required to settle the forward contracts at maturity of the hedges, which may result in a loss or gain to the Company. AXA Investment Managers will finance the Mergers and the other transactions contemplated by the Merger Agreement through the arrangement of equity financing and the Company’s available cash at closing. The closing of the Mergers is not subject to any financing condition.

The Merger is expected to close in the fourth quarter of 2019, subject to, among other things, the receipt of approval of the Company’s stockholders.

In addition, conditional upon, immediately prior to and in connection with the Merger, Nighthawk Partnership Merger Sub LLC (“Partnership Merger Sub”), a wholly owned subsidiary of the Company formed solely for the purposes of facilitating the transaction contemplated by the Merger Agreement, will merge with and into the Operating Partnership, with the Operating Partnership as the surviving entity (together with the Merger, the “Mergers”).

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2019

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 for the fiscal year ended December 31, 2018, 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.

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.

Reclassifications

Reclassifications

Certain prior period amounts have been reclassified in the consolidated financial statements to conform to current period presentation. Unrealized gain (loss) on derivatives and other has been renamed to other gain (loss), net and realized gain (loss) on sales and other has been renamed to gain on sales, net for presentational purposes only. Additionally, the Company has reclassified the gain (loss) on net cash on derivatives from realized gain (loss) on sales and other to other gain (loss), net on the consolidated statements of operations for the three and six months endedJune 30, 2018 (refer to Note 10).

Finally, in connection with the new leasing guidance under ASU 2016-02, which the Company adopted on January 1, 2019, the Company has combined the rental income and escalation income line items into one line item, lease income. Further, in connection with the new leasing guidance, the Company has reclassified below market ground lease from intangible assets, net and goodwill on the consolidated balance sheets to the operating lease right of use asset recorded in other assets, net and operating lease liability recorded in other liabilities on the consolidated balance sheets as of June 30, 2019 (refer below for details on the new guidance).

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, 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 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 an operating segment, 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

Lease 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. Lease income also 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

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.

Equity-Based Compensation

Equity-Based Compensation

Equity-classified stock awards granted to non-employees that have a service condition are measured at fair value at date of grant. For time-base awards, fair value is determined based on the closing price of the Company’s common stock at date of grant. For market-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 using a Monte Carlo analysis under a risk-neutral premise using a risk-free interest rate. The Company recognizes compensation expense on a straight-line basis over the requisite service period of the awards, with the amount of compensation expense recognized at the end of a reporting period at least equal to the fair value of the portion of the award that has vested through that date. Compensation expense is adjusted for actual forfeitures upon occurrence.

Earnings Per Share

Earnings Per Share

The Company’s basic equity per share (“EPS”) is calculated using the two-class method for each class of common stock and participating security as if all earnings had been distributed by dividing net income (loss) attributable to common stockholders by the weighted average number of common stock outstanding. Diluted EPS reflects the maximum potential dilution that could occur from the Company’s share-based compensation, consisting of unvested restricted stock awards, restricted stock units (“RSUs”), performance common stock 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). Potential dilutive shares are excluded from the calculation if they have an anti-dilutive effect in the period. The Company’s unvested restricted stock awards and LTIP Units contain rights to receive non-forfeitable dividends and thus are participating securities. Due to the existence of these participating securities, the two-class method of computing EPS is required, unless another method is determined to be more dilutive. Under the two-class method, net income is first reduced for distributions declared on all classes of participating securities to arrive at undistributed earnings. Under the two-class method, net loss is reduced for distributions declared on participating securities only if such security has the right to participate in the earnings of the entity and an objectively determinable contractual obligation to share in net losses of the entity.

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 other comprehensive income (“OCI”) in the consolidated statements of equity. For the three months endedJune 30, 2019 and 2018, the Company reclassified $0.1 million and $7.8 million, respectively, of CTA to gain on sales, net in the consolidated statements of operations due to the sale of certain real estate assets (refer to Note 3). For the six months endedJune 30, 2019 and 2018, the Company reclassified $(1.1) million, and $8.1 million, respectively, of CTA to gain on sales, net 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 other gain (loss), net in the consolidated statements of operations.

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 and six months endedJune 30, 2019 and 2018. Dividends distributed for the year ended December 31, 2018 were characterized, for U.S. federal income tax purposes, as capital gains. 

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 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 2019

Leases - In February 2016, the Financial Accounting Standards Board (“FASB”) issued guidance (ASU No. 2016-02) which amended lease accounting standards, along with several clarifying amendments were codified in Accounting Standards Codification (“ASC”) Topic 842. The new standard primarily requires lessees to recognize their rights and obligations under most leases on balance sheet, to be capitalized as a right of use (“ROU”) asset and a corresponding liability for future lease obligations. Targeted changes were made to lessor accounting, primarily to align to the lessee model and the new revenue recognition standard.

The Company adopted the new lease standard and related amendments on January 1, 2019 using the modified retrospective method to leases existing or commencing on or after January 1, 2019. Comparative periods have not been restated and continue to re reported under the standards in effect for those prior periods.

ASC 842 limits the definition of initial direct costs to only the incremental costs of obtaining a lease, such as leasing commissions, for both lessee and lessor accounting. Indirect costs such as allocated overhead, certain legal fees and negotiation costs are no longer capitalized under the new standard. The application of ASC 842 did not have a material impact on the statement of operations.

The Company applied the package of practical expedients, which exempts the Company from having to reassess whether any expired or expiring contracts contain leases, revisit lease classification for any expired or expiring leases and reassess initial direct costs for any existing leases. The Company also elected the practical expedient related to land easements, allowing the Company to carry forward the accounting treatment for land easements on existing agreements. The Company did not however elect the hindsight practical expedient to determine the lease terms for existing leases.

Lessee Accounting - The Company determines if an arrangement contains a lease and determines the classification of leasing arrangements at inception. A leasing arrangement is classified by the lessee either as a finance lease, which represents a financed purchased of the leased asset, or as an operating lease. The Company's operating leases relate primarily ground leases acquired with real estate. For these ground and office leases, the Company has elected the accounting policy to combine lease and related nonlease components as a single lease component.

ROU assets and lease liabilities are recognized at the lease commencement date based upon the present value of lease payments over the lease term. The ROU assets also include capitalized initial direct costs offset by lease incentives. Variable lease payments are excluded from the ROU assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred. The Company made the accounting policy election to recognize lease payments from short-term leases on a straight-line basis over the lease term and will not record these leases on the balance sheet.

Lease renewal or termination options are factored into the lease asset and lease liability only if it is reasonably certain that the option to extend or the option to terminate would be exercised.

As the implicit rate is not readily determinable in most leases, the present value of the remaining lease payments was calculated for each lease using an estimated incremental borrowing rate, which is the interest rate that the Company would have to pay to borrow over the lease term on a collateralized basis.

Lease expense is recognized over the lease term based on an effective interest method for finance leases and on a straight-line basis for operating leases.

The Company recognized operating lease right of use asset of $30.9 million in other assets, net and a corresponding operating lease liability of $25.0 thousand in other liabilities for ground leases in its real estate portfolio. There was no impact to beginning equity as a result of adoption related to lessee accounting as the difference between the asset and liability balance is attributable to the derecognition of pre-existing balances, including straight-line rent, lease incentives, prepaid or deferred rent and ground lease obligation intangibles.

Lessor Accounting - The Company determines if an arrangement contains a lease and determines the classification of leasing arrangements at inception. Therefore, such options are only recognized once they are deemed reasonably certain, typically at the time the option is exercised. Lease revenue is composed of rental income, which includes the effect of minimum rent increases and rent abatements and tenant reimbursements, such as common area maintenance costs and other costs associated to the leases.

As lessor, the Company made the accounting policy election to treat the lease and nonlease components in a contract as a single component to the extent that the timing and pattern of transfer are similar for the lease and nonlease components and the lease component qualifies as an operating lease. Nonlease components of tenant reimbursements for net leases qualify for the practical expedient to be combined with their respective lease component and accounted for as a single component under the lease standard as the lease component is predominant.

Lease revenue is recognized on a straight-line basis over the remaining lease term and is included in property operating income on the consolidated statements of operations. The Company receives variable lease revenues from tenant reimbursements.

Under the new standard, lessors are required to evaluate the collectability of all lease payments based upon the creditworthiness of the lessee. Lease revenue is recognized only to the extent collection is determined to be probable. If collection is subsequently determined to no longer be probable, any previously accrued lease revenue that has not been collected is subject to reversal. If collection is subsequently determined to be probable, lease revenue and corresponding receivable would be reestablished to an amount that would have been recognized if collection had always been deemed to be probable. Upon adoption of ASC 842, the Company determined that collection of certain lease receivables, net of allowance for bad debts, is probable based on an evaluation of the tenants' creditworthiness and no cumulative adjustment to equity was required.

Recent Accounting Pronouncements: Future Application of Accounting Standards

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. Early adoption is permitted for annual and interim periods beginning after December 15, 2018. The adoption of this standard is not expected to have a material effect on the Company’s existing disclosures.

Fair Value Disclosures - In August 2018, the FASB issued guidance (ASU No. 2018-13) that requires new disclosures of changes in unrealized gains and losses in OCI for recurring Level 3 fair value of instruments held at balance sheet date, as well as the range and weighted average or other quantitative information, if more relevant, of significant unobservable inputs for recurring and nonrecurring Level 3 fair values. Certain disclosures are now eliminated, specifically around the valuation process required for Level 3 fair values, policy for timing of transfers between levels of the fair value hierarchy, as well as amounts and reason for transfers between Levels 1 and 2. The new guidance is effective for fiscal years and interim periods beginning after December 15, 2019. The adoption of this standard is not expected to have a material effect on the Company’s existing disclosures.

Variable Interest Entities - In November 2018, the FASB issued guidance (ASU No. 2018-17) which amends the VIE guidance to align the evaluation of a decision maker’s or service provider’s fee in assessing a variable interest with the guidance in the primary beneficiary test. Specifically, indirect interests held by a related party that is under common control will now be considered on a proportionate basis, rather than in their entirety, when assessing whether the fee qualifies as a variable interest. The proportionate basis approach is consistent with the treatment of indirect interests held by a related party under common control when evaluating the primary beneficiary of a VIE. This effectively means that when a decision maker or service provider has an interest in a related party, regardless of whether they are under common control, it will consider that related party’s interest in a VIE on a proportionate basis throughout the VIE model, for both the assessment of a variable interest and the determination of a primary beneficiary. Transition is generally on a modified retrospective basis, with the cumulative effect adjusted to retained earnings at the beginning of the earliest period presented. The new guidance is effective for fiscal years and interim periods beginning after December 15, 2019, with early adoption permitted in an interim period for which financial statements have not been issued. The Company is currently evaluating the impact of this new guidance but does not expect the adoption of this standard to have a material effect on its financial condition or results of operations.

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Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Schedule of Identified Intangibles

The following table presents identified intangibles as of June 30, 2019 and December 31, 2018 (dollars in thousands):

	June 30, 2019							December 31, 2018
	Gross Amount		Accumulated Amortization			Net		Gross Amount		Accumulated Amortization			Net
Intangible assets:
In-place lease	$	40,116	$	(24,575	)	$	15,541	$	40,545	$	(22,031	)	$	18,514
Above-market lease	3,032		(1,581		)	1,451		3,042		(1,401		)	1,641
Below-market ground lease(1)	—		—			—		32,552		(1,420		)	31,132
Goodwill(2)	6,842		N/A			6,842		6,886		N/A			6,886
Total	$	49,990	$	(26,156	)	$	23,834	$	83,025	$	(24,852	)	$	58,173
Intangible liabilities:
Below-market lease	$	16,252	$	(7,427	)	$	8,825	$	16,305	$	(6,583	)	$	9,722
Total	$	16,252	$	(7,427	)	$	8,825	$	16,305	$	(6,583	)	$	9,722

_____________________________

(1) Upon adoption of the new lease standard on January 1, 2019, the Company has reclassified below market ground lease from intangible assets, net and goodwill on the consolidated balance sheets to the operating lease right of use asset recorded in other assets, net on the consolidated balance sheets as of June 30, 2019.

(2) 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 Finite-Lived Intangible Assets, Liabilities, and Deferred Leasing Costs, Future Amortization Expense

The following table presents annual amortization of intangible assets and liabilities (dollars in thousands):

	Intangible Assets				Intangible Liabilities
	In-place Leases, Net		Above-market Leases, Net		Below-market Leases, Net
Remaining 2019	$	2,588	$	181	$	834
2020	3,567		362		1,638
2021	2,969		362		1,475
2022	2,146		343		1,475
2023	1,373		203		1,475
2024 and thereafter	2,898		—		1,928
Total	$	15,541	$	1,451	$	8,825

Schedule of Other Assets and Other Liabilities

The following tables present a summary of other assets and other liabilities as of June 30, 2019 and December 31, 2018 (dollars in thousands):

	June 30, 2019		December 31, 2018
Other assets:
Prepaid expenses	$	1,468	$	581
Deferred leasing and other costs, net	3,786		3,710
Deferred tax assets, net	241		801
Straight-line rent, net	7,261		7,479
Operating lease right of use asset	30,875		—
Other	2,839		1,746
Total	$	46,470	$	14,317
	June 30, 2019		December 31, 2018
Other liabilities:
Deferred tax liabilities	$	5,090	$	5,123
Prepaid rent received and unearned revenue	9,264		9,867
Tenant security deposits	3,686		3,914
Prepaid escalation and other income	—		2,121
Operating lease liability	25		—
Other	76		242
Total	$	18,141	$	21,267

Lessor, Operating Lease, Payments to be Received, Maturity

The following tables present approximate future rental income under noncancelable operating leases to be received over the next five years and thereafter as of June 30, 2019 and December 31, 2018 (dollars in thousands):

As of June 30, 2019(1)
Remaining 2019	$	27,365
Years ending December 31:
2020	43,975
2021	40,114
2022	35,325
2023	35,602
Thereafter	94,031
Total	$	276,412

_________________________

(1) Translated to the U.S. dollar using the currency exchange rate as of June 30, 2019.

Schedule of Future Minimum Rental Payments for Operating Leases

As of December 31, 2018(1)
Years Ending December 31:
2019	$	56,237
2020	46,178
2021	42,021
2022	35,736
2023	35,796
Thereafter	93,781
Total	$	309,749

_________________________

(1) Translated to the U.S. dollar using the currency exchange rate as of December 31, 2018.

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Operating Real Estate (Tables)

6 Months Ended

Jun. 30, 2019

Real Estate [Abstract]

Schedule of Operating Real Estate

The following table presents operating real estate, net as of June 30, 2019 and December 31, 2018 (dollars in thousands):

	June 30, 2019			December 31, 2018
Land	$	267,465		$	269,149
Buildings and improvements	373,299			373,446
Building and leasehold interests	173,366			173,782
Tenant improvements	29,513			28,432
Operating real estate, gross	843,643			844,809
Less: accumulated depreciation	(72,033		)	(64,187		)
Operating real estate, net	$	771,610		$	780,622

Schedule of Operating Real Estate Held for Sale

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

			Assets(1)(2)								Liabilities(1)
Location	Type	Properties	Operating Real Estate, Net(2)		Intangible Assets, Net		Other Assets		Total		Other Liabilities
As of December 31, 2018:
Bremen, Germany(3)(6)	Other	1	$	1,060	$	18	$	—	$	1,078	$	—
Werl, Germany(3)(4)	Other	1	2,866		—		4		2,870		—
Marly, France(5)	Other	1	43,208		—		3,897		47,105		1,498
Frankfurt, Germany(6)	Office	1	21,274		216		802		22,292		—
Total		4	$	68,408	$	234	$	4,703	$	73,345	$	1,498

_____________________________

(1) The assets and liabilities classified as held for sale were sold as either asset sales or share sales subject to standard industry terms and conditions. The assets held-for-sale as of December 31, 2018 contributed $0.5 million and $1.1 million of revenue and $(0.3) million and $(2.1) million of income (loss) before income tax benefit (expense) for the three months ended June 30, 2019 and 2018, respectively. The assets held-for-sale as of December 31, 2018 contributed $1.8 million and $1.5 million of revenue and $0.2 million and $(2.5) million of income (loss) before income tax benefit (expense) for the six months endedJune 30, 2019 and 2018, respectively.

(2) Represents operating real estate and intangible assets, net of accumulated depreciation and amortization of $6.9 million as of December 31, 2018, prior to being reclassified into held for sale.

(3) Net of impairment loss of $0.3 million and $0.5 million, respectively, on the non-core retails assets in Bremen and Werl, Germany.

(4) Asset was sold in February 2019.

(5) Asset was sold in June 2019.

(6) Assets were sold in March 2019.

Schedule Of Proceeds From Sales Of Real Estate

The following table summarizes the Company’s real estate sales for the three and six months endedJune 30, 2019 and 2018 (dollars in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Properties	1		1		4		1
Carrying Value	$	44,587	$	156,107	$	70,590	$	156,107
Sales Price(1)	$	48,190	$	188,246	$	92,533	$	188,246
Net Proceeds(2)	$	47,753	$	186,064	$	91,863	$	186,064
Gain (3)(4)	$	3,166	$	29,957	$	21,273	$	29,957

_____________________________

(1) For the three months ended June 30, 2019 and 2018, the Company sold one asset for approximately €43 million and one asset for approximately €159 million, respectively. For the six months ended June 30, 2019 and 2018, the Company sold a total of four properties for approximately €82 million and one asset for approximately €159 million, respectively.

(2) Represents proceeds net of sales costs prior to the repayment of the associated property debt. For the three and six months ended June 30, 2019, the Company repaid $34.5 million and $51.6 million, respectively, of associated property debt, including release premiums. For the three and six months ended June 30, 2018 the Company repaid $102.4 million of associated property debt and $15.6 million of preferred equity certificates.

(3) For the three months ended June 30, 2019, the Company also recorded a gain on sale of $0.4 million related to adjustments from prior period disposals, net other gains and losses and a $0.1 million CTA gain. For the six months ended June 30, 2019, the Company also recorded a gain on sale of $1.2 million related to the release of escrow accounts and adjustments from prior period disposals, net other gains and losses offset by $1.1 million CTA loss.

(4) For the three months ended June 30, 2018, the Company also recorded a gain on sale of $0.5 million related to adjustments from prior period disposals, net other gains and losses and a $7.8 million CTA gain. For the six months ended June 30, 2018, the Company also recorded a gain on sale of $1.5 million related to the release of escrow accounts and adjustments from prior period disposals, net other gains and losses and a $8.1 million CTA gain.

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Preferred Equity Investments (Tables)

6 Months Ended

Jun. 30, 2019

SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Abstract]

Schedule of Mortgage Loans on Real Estate

The following table presents the Company’s preferred equity investments as of June 30, 2019 and December 31, 2018 (dollars in thousands):

	June 30, 2019				December 31, 2018
Asset Type	Principal Amount		Carrying Value		Principal Amount		Carrying Value		Fixed Rate		Mandatory Redemption
Preferred equity investment
Gresham Street(1)	$	33,267	$	33,267	$	33,368	$	33,368	8.00	%	May 2020
Trianon Tower(2)	5,685		5,685		5,722		5,722		7.00	%	Dec 2023
Total	$	38,952	$	38,952	$	39,090	$	39,090

_____________________________

(1) Denominated in U.K. Pound Sterling, and as such, the principal amount decreased from 2018 to 2019 is due to the decrease in the U.K. Pound Sterling to U.S. dollar exchange rate.

(2) Denominated in Euro, and as such, the principal amount decreased from 2018 to 2019 is due to the decrease in the Euro to U.S. dollar exchange rate.

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Borrowings (Tables)

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Schedule of Long-term Borrowings

The following table presents borrowings as of June 30, 2019 and December 31, 2018 (dollars in thousands):

				June 30, 2019				December 31, 2018
	Country	Final Maturity	Contractual Interest Rate(2)	Principal Amount		Carrying Value		Principal Amount		Carrying Value
Mortgage and other notes payable:(1)
Trias Portfolio 1(4)(6)	France	Apr-22	EURIBOR + 1.65%	$	40,132	$	39,306	$	75,622	$	74,449
Trias Portfolio 2(4)(6)	Germany	Jun-25	EURIBOR + 1.00%	69,855		69,432		87,496		86,720
SEB Portfolio 1(4)	Germany/France	Jul-24	EURIBOR + 1.55%	201,610		199,383		202,921		200,459
SEB Portfolio 2(4)	U.K.	Jul-24	GBP LIBOR + 1.55%	236,065		233,908		236,777		234,402
SEB Portfolio - Preferred(3)	Germany/France/U.K.	Apr-60	0.90%	—		—		82,745		82,534
Other - Preferred(5)	Germany	Oct-45	1.00%	4,320		4,320		4,348		4,348
Total mortgage and other notes payable				$	551,982	$	546,349	$	689,909	$	682,912

_____________________________

(1) All mortgage notes and other notes payable are denominated in local currencies, and as such, the principal amount on debt balances generally decreased from December 31, 2018 to June 30, 2019 due to the decrease in the Euro and U.K. Pound Sterling to U.S. dollar exchange rate and the repayment of $51.6 million due to sales and $80.9 million due to the repayment of the SEB Portfolio - Preferred debt (based on the applicable exchange rate of when the debt was repaid). 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) Represents preferred equity certificates, which the Company repaid in April 2019, with a contractual interest rate of 0.90% through May 2019, which would have increased to EURIBOR plus 12.0% through May 2022 and subsequently to EURIBOR plus 15.0% through final maturity. Certain prepayments prior to May 2019 were subject to the payment of the unpaid coupon on outstanding principal amount through May 2019.

(4) Prepayment provisions include a fee based on principal amount of 0.50% through April 2020 for the Trias Portfolio 1 borrowings, 0.35% to 1.0% through May 2022 for the Trias Portfolio 2 borrowings and 0.5% through July 2019 for the SEB Portfolio borrowings.

(5) 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.

(6) In February and March 2019, the Company repaid a portion of the mortgage notes on Trias 2 and in June 2019, the Company repaid a portion of the mortgage notes on Trias 1 in connection with the sales of the associated properties (refer to Note 3). In addition, the Company expensed the remaining deferred financing costs associated with these mortgage notes and paid the related prepayment penalties which are recorded in extinguishment of debt in the consolidated statements of operations.

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 June 30, 2019 and December 31, 2018 (dollars in thousands):

	June 30, 2019			December 31, 2018
Principal amount	$	551,982		$	689,909
Deferred financing costs, net	(5,633		)	(6,997		)
Carrying value	$	546,349		$	682,912

Schedule of Principal Payments on Borrowings, Based on Final Maturity

The following table presents scheduled principal on borrowings, based on final maturity as of June 30, 2019 (dollars in thousands):

	Mortgage and Other Notes Payable
Remaining 2019	$	—
Years ending December 31:
2020	—
2021	—
2022	40,132
2023	—
2024	437,675
2025 and thereafter	74,175
Total	$	551,982

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Compensation Expense (Tables)

6 Months Ended

Jun. 30, 2019

Share-based Payment Arrangement [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 June 30, 2019 represents vested Common Units and unvested restricted stock and performance RSUs (grants in thousands):

	Six Months Ended June 30, 2019
	Restricted Stock(1)		Common Units		Performance RSUs(2)		Total Grants		Weighted Average Grant Price
December 31, 2018	538		338		1,225		2,101		$	12.08
Granted	530		—		9		539		16.86
Vested/converted	(87	)	(22	)	—		(109	)	16.86
Withheld/retired	(67	)	—		—		(67	)	17.05
Forfeited	(3	)	—		(10	)	(13	)	16.74
June 30, 2019	911		316		1,224		2,451		$	12.87

_____________________________

(1) Represents restricted stock included in common stock.

(2) Represents outstanding Spin-off Absolute and Relative RSUs and 2018 Absolute and Relative RSUs.

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Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2019

Equity [Abstract]

Schedule of Dividends Declared

The following table presents dividends declared (on a per share basis) with respect to the six months endedJune 30, 2019 and 2018:

Common Stock
Declaration Date	Dividend Per Share
2019
May 1	$	0.15
August 2	$	0.15
2018
May 8	$	0.15
August 3	$	0.15

Schedule of Earnings Per Share

The following table presents EPS for the three and six months endedJune 30, 2019 and 2018 (dollars and shares in thousands, except per share data):

	Three Months Ended June 30,							Six Months Ended June 30,
	2019				2018			2019			2018
Numerator:
Net income (loss)	$	(1,434	)		$	37,876		$	9,689		$	36,808
Net (income) loss attributable to Unit Holders noncontrolling interest	6				(217		)	(56		)	(202		)
Net income (loss) attributable to common stockholders and Unit Holders(1)	$	(1,428	)		$	37,659		$	9,633		$	36,606
Net (income) allocated to participating securities	(191		)		(438		)	(242		)	(371		)
Net income (loss) allocated to common stockholders—basic and dilutive	$	(1,619	)		$	37,221		$	9,391		$	36,235
Denominator:
Weighted average shares of common stock - basic	49,449				51,859			49,392			53,456
Weighted average effect of dilutive share(3)	—			(2)	2,149			1,358			1,976
Weighted average shares of common stock - dilutive	49,449				54,008			50,750			55,432
Earnings (loss) per share:
Basic	$	(0.03	)		$	0.72		$	0.19		$	0.68
Diluted	$	(0.03	)		$	0.69		$	0.19		$	0.65

_____________________________

(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) For the three months ended June 30, 2019, shares in the diluted EPS calculation represents basic shares due to the net loss in that period. The shares exclude the effect of adding back 1.4 million weighted average dilutive common shares as their inclusion would be antidilutive.

(3) Includes the Absolute and Relative RSUs and 2018 Absolute and Relative RSUs as the performance targets would have been met if the performance period ended on June 30, 2019 and 2018.

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Risk Management and Derivative Activities (Tables)

6 Months Ended

Jun. 30, 2019

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 June 30, 2019 and December 31, 2018 (dollars, U.K. pound sterling and Euros in thousands):

	Number(1)	Notional Amount	Fair Value Asset (Liability)		Range of Fixed GBP LIBOR / EURIBOR/ Strike Price	Range of Maturity
As of June 30, 2019 (Unaudited):
Interest rate caps (EUR)	28	€564,694	$	531	3 Month EURIBOR 0.5%	April 2020 - May 2025
Interest rate caps (GBP)	5	£202,645	—		3 Month GBP LIBOR 2.0%	April 2020
Foreign currency forwards(2)	2	€24,480	2,757		1.25 EUR/USD(3)	August 2019 - November 2019
Total	35		$	3,288
As of December 31, 2018:
Interest rate caps (EUR)	28	€564,694	$	2,185	3 Month EURIBOR 0.5%	April 2020 - May 2025
Interest rate caps (GBP)	5	£202,645	20		3 Month GBP LIBOR 2.0%	April 2020
Foreign currency forwards(2)	4	€48,960	4,235		1.25 EUR/USD(3)	February 2019 - November 2019
Total	37		$	6,440

_____________________________

(1)    Represents number of transactions.

(2)    Includes Euro currency forwards.

(3)    The strike prices for the foreign currency forwards represent the average price.

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 June 30, 2019 and December 31, 2018 (dollars in thousands):

	Balance Sheet	June 30, 2019		December 31, 2018
	Location
Interest rate caps	Derivative assets	$	531	$	2,205
Foreign currency forwards	Derivative assets	$	2,757	$	4,235

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 and six months endedJune 30, 2019 and 2018 (dollars in thousands):

		Three Months Ended June 30,						Six Months Ended   June 30,
		2019			2018			2019			2018
Amount of gain (loss) recognized in earnings:	Statements of operations location:
Adjustment to fair value of interest caps held at the end of the reporting period	Other gain (loss), net	$	(375	)	$	(1,880	)	$	(1,652	)	$	(1,999	)
Adjustment to fair value of foreign currency forwards held at the end of the reporting period	Other gain (loss), net	(1,596		)	7,566			(1,477		)	6,494
Net cash receipt (payment) on derivatives	Other gain (loss), net(1)	1,416			(2,631		)	2,562			(4,371		)

_____________________________

(1) Excludes the gain (loss) relating to foreign currency transactions for the three months ended June 30, 2019 and 2018 of $0.6 million and $0.4 million, respectively and for the six months endedJune 30, 2019 and 2018 of $(1.9) million and $0.4 million, respectively

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Fair Value (Tables)

6 Months Ended

Jun. 30, 2019

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 June 30, 2019 and December 31, 2018 (dollars in thousands):

	June 30, 2019						December 31, 2018
	Principal/Notional Amount		Carrying Value		Fair Value		Principal/Notional Amount		Carrying Value		Fair Value
Financial assets:(1)
Derivative assets	$	927,254	$	3,288	$	3,288	$	960,401	$	6,440	$	6,440
Preferred equity investment	38,952		38,952		39,363		39,090		39,090		39,501
Financial liabilities:(1)
Mortgage and other notes payable, net	$	551,982	$	546,349	$	546,349	$	689,909	$	682,912	$	686,891

_____________________________

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

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Segment Reporting (Tables)

6 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Schedule of Segment Reporting

The following table presents geographic information about the Company’s total lease income for the six months endedJune 30, 2019 and 2018 (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Properties(1)	14			24			14			24
Office
Germany	$	3,847		$	14,437		$	8,037	(4)	$	29,224
United Kingdom	6,309			7,780			12,633			15,273
France	5,110			5,346			10,323			10,830
Other office	—			1,313		(2)	—			4,733		(2)
Subtotal	15,266			28,876			30,993			60,060
Other Property Types
France/Germany(5)	1,233		(3)	1,286		(5)	2,590		(4)	2,667		(5)
Total	$	16,499		$	30,162		$	33,583		$	62,727

_____________________________

(1) Represents the number of properties owned as of June 30, 2019 and 2018, respectively, including assets held-for-sale as of the respective period.

(2) Includes an asset in Portugal which is classified as held-for-sale as of June 30, 2018 and partial period rental income from the Maastoren property which was sold in April 2018.

(3) Represents income from two hotel (net lease) assets in Germany and partial period rental income from one industrial asset in France sold in the second quarter 2019.

(4) Represents income from two hotel (net lease) assets in Germany and partial period rental income from one industrial asset in France sold in the second quarter 2019 and one office asset in Germany and two retail assets in Germany sold in the first quarter 2019.

(5) Represents income from five assets including two retail in Germany, one industrial in France and two hotel (net lease) assets in Germany

The following table presents total assets by segment as of June 30, 2019 and December 31, 2018 (dollars in thousands):

Total Assets	Real Estate Equity		Preferred Equity		Corporate		Total
June 30, 2019	$	953,007	$	41,629	$	277,590	$	1,272,226
December 31, 2018	1,362,679		40,568		22,252		1,425,499

The following tables present segment reporting for the three and six months endedJune 30, 2019 and 2018 (dollars in thousands):

	Three Months Ended June 30, 2019
Statement of Operations:	Real Estate Equity				Preferred Equity		Corporate				Total
Revenues
Lease income	$	16,499			$	—	$	—			$	16,499
Interest income	—				761		793				1,554
Expenses
Interest expense(1)	3,237				—		176				3,413
Management fee, related party	—				—		3,848				3,848
Transaction costs(2)	—				—		1,827				1,827
Depreciation and amortization	5,908				—		—				5,908
Gain on sales, net	(3,671		)		—		—				(3,671		)
Other expense (income)	4,815			(3)	—		3,098			(4)	7,913
Income (loss) before income tax benefit (expense)	6,210				761		(8,156		)		(1,185		)
Income tax benefit (expense)	(249		)		—		—				(249		)
Net income (loss)	$	5,961			$	761	$	(8,156	)		$	(1,434	)

_____________________________

(1) Includes $0.3 million and $0.1 million of amortization of deferred financing costs in the real estate equity and corporate segments, respectively.

(2) Represents costs associated with the continual work of the strategic review committee in the corporate segment.

(3) Primarily relates to properties - operating expenses, loss on interest rate caps, other expenses and extinguishment of debt in the real estate equity segment.

(4) Primarily relates to general and administrative expenses and compensation expense offset by a net gain on foreign currency derivatives.

	Three Months Ended June 30, 2018
Statement of Operations:	Real Estate Equity				Preferred Equity		Corporate				Total
Revenues
Lease income	$	30,162			$	—	$	—			$	30,162
Interest income	—				706		—				706
Expenses
Interest expense(1)	5,601				—		254				5,855
Management fee, related party	—				—		4,223				4,223
Transaction costs	—				—		376				376
Depreciation and amortization	11,976				—		—				11,976
Gain on sale, net	(38,319		)		—		—				(38,319		)
Other expense (income)	11,455			(2)	—		(2,498		)	(3)	8,957
Income (loss) before income tax benefit (expense)	39,449				706		(2,355		)		37,800
Income tax benefit (expense)	76				—		—				76
Net income (loss)	$	39,525			$	706	$	(2,355	)		$	37,876

_____________________________

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

(2) Primarily relates to properties - operating expenses and loss on interest rate caps.

(3) Primarily relates to the net gain on foreign currency derivatives offset by general and administrative expenses and compensation expense.

	Six Months Ended June 30, 2019
Statement of Operations:	Real Estate Equity				Preferred Equity		Corporate				Total
Revenues
Lease income	$	33,583			$	—	$	—			$	33,583
Interest income	—				1,538		1,627				3,165
Expenses											—
Interest expense(1)	6,691				—		402				7,093
Management fee, related party	—				—		7,736				7,736
Transaction costs(2)	—				—		2,589				2,589
Depreciation and amortization	11,821				—		—				11,821
Gain on sales, net	(21,396		)		—		—				(21,396		)
Other expense (income)	8,483			(3)	—		8,332			(4)	16,815
Income (loss) before income tax benefit (expense)	27,984				1,538		(17,432		)		12,090
Income tax benefit (expense)	(2,401		)		—		—				(2,401		)
Net income (loss)	$	25,583			$	1,538	$	(17,432	)		$	9,689

_____________________________

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

(2) Represents costs associated with the continual work of the strategic review committee in the corporate segment.

(3) Primarily relates to properties - operating expenses, loss on interest rate caps, other expenses and extinguishment of debt in the real estate equity segment.

(4) Primarily relates to general and administrative expenses and compensation expense offset by a net gain on foreign currency derivatives.

	Six Months Ended June 30, 2018
Statement of Operations:	Real Estate Equity				Preferred Equity		Corporate				Total
Revenues
Lease income	$	62,727			$	—	$	—			$	62,727
Interest income	—				1,435		—				1,435
Expenses
Interest expense(1)	11,556				—		406				11,962
Management fee, related party	—				—		8,380				8,380
Transaction costs	—				—		857				857
Depreciation and amortization	23,627				—		—				23,627
Gain on sale, net	(39,585		)		—		—				(39,585		)
Other expense (income)	19,910			(2)	—		2,240			(3)	22,150
Income (loss) before income tax benefit (expense)	47,219				1,435		(11,883		)		36,771
Income tax benefit (expense)	37				—		—				37
Net income (loss)	$	47,256			$	1,435	$	(11,883	)		$	36,808

_____________________________

(1) Includes $1.3 million and $0.3 million of amortization of deferred financing costs in the real estate equity and corporate segments, respectively.

(2) Primarily relates to properties - operating expenses and the loss on interest rate caps.

(3) Primarily relates to the net gain on foreign currency derivatives offset by general and administrative expenses and compensation expense.

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Summary of Significant Accounting Policies Summary of Significant Accounting Policies - Prior Period Adjustments (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended			6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Basic (in dollars per share)	$ (0.03)	$ 0.72		$ 0.19	$ 0.68
Diluted (in dollars per share)	$ (0.03)	$ 0.69		$ 0.19	$ 0.65
Restricted Stock
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Prior period reclassification adjustment	$ 2.0	$ 1.2		$ 3.2	$ 1.6
Accounting Standards Update 2017-08
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Basic (in dollars per share)		$ 0.03		$ 0.04	$ 0.03
Diluted (in dollars per share)					$ 0.03
Accounting Standards Update 2017-08 | Restricted Stock
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Prior period reclassification adjustment			$ 1.6		$ 1.8

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Summary of Significant Accounting Policies - Intangible Assets and Intangible Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Intangible assets:
Intangible assets, Accumulated Amortization	$ (26,156)	$ (24,852)
Goodwill, Gross Amount	6,842	6,886
Goodwill, Net	6,842	6,886
Total, Gross Amount	49,990	83,025
Total, Net	23,834	58,173
Intangible liabilities:
Below-market lease, Gross Amount	16,252	16,305
Below-market lease, Accumulated Amortization	(7,427)	(6,583)
Total	8,825	9,722
Total, gross intangible liabilities	16,252	16,305
Total, accumulated amortization intangible liabilities	(7,427)	(6,583)
Total, net intangible liabilities	8,825	9,722
In-place lease
Intangible assets:
Intangible assets, Gross Amount	40,116	40,545
Intangible assets, Accumulated Amortization	(24,575)	(22,031)
Total	15,541	18,514
Above-market lease
Intangible assets:
Intangible assets, Gross Amount	3,032	3,042
Intangible assets, Accumulated Amortization	(1,581)	(1,401)
Total	1,451	1,641
Below-market ground lease(1)
Intangible assets:
Intangible assets, Gross Amount	0	32,552
Intangible assets, Accumulated Amortization	0	(1,420)
Total	$ 0	$ 31,132

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Summary of Significant Accounting Policies - Schedule of Future Intangible Amortization (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Below-market Leases, Net
Remaining 2019	$ 834
2020	1,638
2021	1,475
2022	1,475
2023	1,475
2024 and thereafter	1,928
Total	8,825	$ 9,722
In-place Leases, Net
Intangible Assets
Remaining 2019	2,588
2020	3,567
2021	2,969
2022	2,146
2023	1,373
2024 and thereafter	2,898
Total	15,541	18,514
Above-market Leases, Net
Intangible Assets
Remaining 2019	181
2020	362
2021	362
2022	343
2023	203
2024 and thereafter	0
Total	$ 1,451	$ 1,641

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Summary of Significant Accounting Policies - Other Assets and Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Other assets:
Prepaid expenses	$ 1,468	$ 581
Deferred leasing and other costs, net	3,786	3,710
Deferred tax assets, net	241	801
Straight-line rent, net	7,261	7,479
Operating lease right of use asset	30,875	0
Other	2,839	1,746
Total	46,470	14,317
Other liabilities:
Deferred tax liabilities	5,090	5,123
Prepaid rent received and unearned revenue	9,264	9,867
Tenant security deposits	3,686	3,914
Prepaid escalation and other income	0	2,121
Operating lease liability	25	0
Other	76	242
Total	$ 18,141	$ 21,267

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Summary of Significant Accounting Policies - Schedule of Lease Maturities (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Accounting Policies [Abstract]
Remaining 2019	$ 27,365
Years ending December 31:
2020	43,975
2021	40,114
2022	35,325
2023	35,602
Thereafter	94,031
Total	$ 276,412
Lease Maturities Under Topic 840
2019		$ 56,237
2020		46,178
2021		42,021
2022		35,736
2023		35,796
Thereafter		93,781
Total		$ 309,749

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Summary of Significant Accounting Policies - Foreign Currency (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Accounting Policies [Abstract]
CTA reclassified to realized gain (loss)	$ 0.1	$ 7.8	$ (1.1)	$ 8.1

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Summary of Significant Accounting Policies - Income Taxes (Details) - USD ($) $ in Millions	3 Months Ended			6 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Accounting Policies [Abstract]
Current foreign tax expense (benefit)	$ 0.2		$ (0.1)	$ 2.4	$ 0.1
Capital gains tax		$ 2.0

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Summary of Significant Accounting Policies - Recent Accounting Pronouncements (Details) - USD ($)	Jun. 30, 2019	Jan. 01, 2019	Dec. 31, 2018
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Right of use assets	$ 30,875,000		$ 0
Operating lease liability	$ 25,000		$ 0
Accounting Standards Update 2016-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Right of use assets		$ 30,900,000
Operating lease liability		$ 25,000

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Operating Real Estate - Operating Real Estate, Net (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Real Estate [Abstract]
Land	$ 267,465	$ 269,149
Buildings and improvements	373,299	373,446
Building and leasehold interests	173,366	173,782
Tenant improvements	29,513	28,432
Operating real estate, gross	843,643	844,809
Less: accumulated depreciation	(72,033)	(64,187)
Operating real estate, net	$ 771,610	$ 780,622

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Operating Real Estate - Real Estate Held for Sale (Details) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2019 USD ($) property	Jun. 30, 2018 USD ($) property	Jun. 30, 2019 USD ($) property	Jun. 30, 2018 USD ($) property	Dec. 31, 2018 USD ($) property
Real Estate Properties [Line Items]
Properties | property	14	24	14	24
Assets
Operating Real Estate, Net	$ 0		$ 0		$ 73,345
Liabilities
Depreciation and amortization					6,900
Bremen, Germany
Liabilities
Real estate impairment losses					300
Werl, Germany
Liabilities
Real estate impairment losses					$ 500
Assets Held For Sale 2019 | Held-for-sale
Real Estate Properties [Line Items]
Properties | property	0		0
Assets Held For Sale 2018 | Held-for-sale
Real Estate Properties [Line Items]
Properties | property					4
Assets
Operating Real Estate, Net					$ 68,408
Intangible Assets, Net					234
Other Assets					4,703
Total assets held-for-sale					73,345
Liabilities
Other Liabilities					$ 1,498
Revenue	$ 500	$ 1,100	$ 1,800	$ 1,500
Pretax loss	$ (300)	$ (2,100)	$ 200	$ (2,500)
Assets Held For Sale 2018 | Held-for-sale | Bremen, Germany
Real Estate Properties [Line Items]
Properties | property					1
Assets
Operating Real Estate, Net					$ 1,060
Intangible Assets, Net					18
Other Assets					0
Total assets held-for-sale					1,078
Liabilities
Other Liabilities					$ 0
Assets Held For Sale 2018 | Held-for-sale | Werl, Germany
Real Estate Properties [Line Items]
Properties | property					1
Assets
Operating Real Estate, Net					$ 2,866
Intangible Assets, Net					0
Other Assets					4
Total assets held-for-sale					2,870
Liabilities
Other Liabilities					$ 0
Assets Held For Sale 2018 | Held-for-sale | Marly, France
Real Estate Properties [Line Items]
Properties | property					1
Assets
Operating Real Estate, Net					$ 43,208
Intangible Assets, Net					0
Other Assets					3,897
Total assets held-for-sale					47,105
Liabilities
Other Liabilities					$ 1,498
Assets Held For Sale 2018 | Held-for-sale | Frankfurt, Germany
Real Estate Properties [Line Items]
Properties | property					1
Assets
Operating Real Estate, Net					$ 21,274
Intangible Assets, Net					216
Other Assets					802
Total assets held-for-sale					22,292
Liabilities
Other Liabilities					$ 0

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Operating Real Estate - Real Estate Sales (Details) $ in Thousands, € in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019 USD ($) property	Jun. 30, 2018 USD ($) property	Jun. 30, 2019 USD ($) property	Jun. 30, 2018 USD ($) property	Jun. 30, 2019 EUR (€)	Dec. 31, 2018 USD ($)	Jun. 30, 2018 EUR (€)
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Carrying Value	$ 0		$ 0			$ 73,345
CTA reclassified to realized gain (loss)	$ 100	$ 7,800	(1,100)	$ 8,100
Three Noncore Assets Sold | Held-for-sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Properties | property	1	1		1
Carrying Value	$ 44,587	$ 156,107	44,587	$ 156,107
Sales price	48,190	188,246	$ 48,190	188,246	€ 43		€ 159
Net proceeds	47,753	186,064		186,064
Gain	3,166	29,957		29,957
Repayments of debt	34,500	102,400
Payments of preferred equity certificates		15,600
Four Noncore Assets Sold | Held-for-sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Properties | property			4
Carrying Value	70,590		$ 70,590
Sales price	92,533		92,533		€ 82
Net proceeds			91,863
Gain			21,273
Repayments of debt			51,600
Prior Disposal Release From Escrow | Held-for-sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Gain	$ 400	$ 500	$ 1,200	$ 1,500

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Preferred Equity Investments (Details) $ in Thousands, € in Millions, £ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)	Dec. 31, 2018 EUR (€)	May 31, 2017 USD ($)	May 31, 2017 GBP (£)
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Carrying Value	$ 38,952		$ 38,952		$ 39,090
Principal Amount	38,952		38,952		39,090
Preferred equity interest income	800	$ 700	1,600	$ 1,400
Interest income deposits with financial institutions	800		1,600
Trianon Tower
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Carrying Value	5,685		5,685		5,722	€ 5
Principal Amount	5,685		$ 5,685		5,722
Fixed Rate			7.00%
20 Gresham Street
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Carrying Value	33,267		$ 33,267		33,368		$ 33,300	£ 26.2
Principal Amount	$ 33,267		$ 33,267		$ 33,368
Fixed Rate			8.00%

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Borrowings (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Debt Instrument [Line Items]
Principal Amount	$ 551,982	$ 689,909
Carrying Value	546,349	682,912
Repayments of notes payable	51,600
Mortgage and Other Notes Payable
Debt Instrument [Line Items]
Principal Amount	551,982	689,909
Carrying Value	$ 546,349	682,912
Mortgage and Other Notes Payable | Trias Portfolio 1 | Minimum
Debt Instrument [Line Items]
Prepayment fee percentage range on principal	0.50%
Mortgage and Other Notes Payable | Trias Portfolio 2 | Minimum
Debt Instrument [Line Items]
Prepayment fee percentage range on principal	0.35%
Mortgage and Other Notes Payable | Trias Portfolio 2 | Maximum
Debt Instrument [Line Items]
Prepayment fee percentage range on principal	1.00%
Mortgage and Other Notes Payable | SEB Portfolio | Minimum
Debt Instrument [Line Items]
Prepayment fee percentage range on principal	0.50%
Mortgage and Other Notes Payable | EURIBOR Plus 1.65% | Trias Portfolio 1
Debt Instrument [Line Items]
Principal Amount	$ 40,132	75,622
Carrying Value	$ 39,306	74,449
Mortgage and Other Notes Payable | EURIBOR Plus 1.65% | Trias Portfolio 1 | EURIBOR
Debt Instrument [Line Items]
Basis spread on variable rate	1.65%
Mortgage and Other Notes Payable | EURIBOR Plus 1.00% | Trias Portfolio 2
Debt Instrument [Line Items]
Principal Amount	$ 69,855	87,496
Carrying Value	$ 69,432	86,720
Mortgage and Other Notes Payable | EURIBOR Plus 1.00% | Trias Portfolio 2 | EURIBOR
Debt Instrument [Line Items]
Basis spread on variable rate	1.00%
Mortgage and Other Notes Payable | EURIBOR Plus 1.55% | SEB Portfolio 1
Debt Instrument [Line Items]
Principal Amount	$ 201,610	202,921
Carrying Value	$ 199,383	200,459
Mortgage and Other Notes Payable | EURIBOR Plus 1.55% | SEB Portfolio 1 | EURIBOR
Debt Instrument [Line Items]
Basis spread on variable rate	1.55%
Mortgage and Other Notes Payable | GBP LIBOR Plus 1.55% | SEB Portfolio 2
Debt Instrument [Line Items]
Principal Amount	$ 236,065	236,777
Carrying Value	$ 233,908	234,402
Mortgage and Other Notes Payable | GBP LIBOR Plus 1.55% | SEB Portfolio 2 | GBP LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate	1.55%
Mortgage and Other Notes Payable | Fixed Rate at 0.90% | SEB Portfolio - Preferred
Debt Instrument [Line Items]
Stated interest rate	0.90%
Principal Amount	$ 0	82,745
Carrying Value	0	82,534
Repayments of notes payable	$ 80,900
Mortgage and Other Notes Payable | Fixed rate at 1.00% | Other-Preferred
Debt Instrument [Line Items]
Stated interest rate	1.00%
Principal Amount	$ 4,320	4,348
Carrying Value	$ 4,320	$ 4,348
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 | Variable rate | SEB Portfolio - Preferred
Debt Instrument [Line Items]
Stated interest rate	0.90%
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 | EURIBOR | Minimum
Debt Instrument [Line Items]
Interest rate caps	0.50%
Interest rate caps | Not designated as hedges | EURIBOR | Maximum
Debt Instrument [Line Items]
Interest rate caps	0.50%	0.50%
Interest rate caps | Not designated as hedges | GBP LIBOR | Maximum
Debt Instrument [Line Items]
Interest rate caps	2.00%	2.00%

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Borrowings - Reconciliation of Principal to Carrying Amount (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Debt Disclosure [Abstract]
Principal amount	$ 551,982	$ 689,909
Deferred financing costs, net	(5,633)	(6,997)
Carrying value	$ 546,349	$ 682,912

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Borrowings - Scheduled Principal on Borrowings (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Debt Instrument [Line Items]
Total	$ 551,982	$ 689,909
Mortgage and Other Notes Payable
Debt Instrument [Line Items]
Remaining 2019	0
2020	0
2021	0
2022	40,132
2023	0
2024	437,675
2025 and thereafter	74,175
Total	$ 551,982

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Borrowings - Narrative (Details) - Credit Facility - Revolving Credit Facility - USD ($)	1 Months Ended
	Mar. 31, 2018	Jun. 30, 2019	Feb. 28, 2018
Debt Instrument [Line Items]
Corporate revolving credit facility	$ 70,000,000		$ 35,000,000.0
Debt instrument term extension option	1 year
Higher borrowing capacity	$ 105,000,000
Credit facility		$ 0

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Related Party Arrangements (Details) $ / shares in Units, shares in Millions							1 Months Ended	3 Months Ended			6 Months Ended
	Apr. 22, 2019	Apr. 21, 2019	Dec. 31, 2018 $ / shares	Nov. 07, 2018 USD ($)	Jan. 01, 2018 USD ($) $ / shares	Nov. 09, 2017 USD ($) Rate	Apr. 30, 2019 USD ($)	Jun. 30, 2019 USD ($) shares	Sep. 30, 2018 director	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($) shares	Jun. 30, 2018 USD ($)
Affiliated Entity | Colony Capital, Inc.
Related Party Transaction [Line Items]
Asset management agreement, assets under management								$ 10,000,000,000			$ 10,000,000,000
Asset management fee expense, related party								3,900,000		$ 4,200,000	7,700,000	$ 8,400,000
Asset Manager | Colony Capital, Inc.
Related Party Transaction [Line Items]
Period to internalize management	9 months			9 months
Threshold after agreement terminated change of control deemed to exist	30 days			30 days
Termination payment				$ 70,000,000							64,600,000
Termination payment, net											64,600,000
NAV threshold					$ 2,000,000,000
Asset management agreement, incentive fee						20.00%
Incentive fee annual hurdle rate | Rate						10.00%
Incentive fee base price (in dollars per share) | $ / shares			$ 14.97		$ 13.68
Number of individuals nominated to board of directors | director									1
Asset Manager | Post Agreement Termination Payments | Colony Capital, Inc.
Related Party Transaction [Line Items]
Payment for incentive fee				$ 0			$ 5,400,000.0
Asset Manager | Internal Service Costs Allocation | Colony Capital, Inc.
Related Party Transaction [Line Items]
Related party transaction amount								$ 200,000		$ 200,000	$ 400,000	$ 500,000
NorthStar Realty Europe Corp. | Colony Capital, Inc.
Related Party Transaction [Line Items]
Common stock owned (shares) | shares								5.6			5.6
Ownership percentage by parent								11.20%			11.20%
Tier One | Asset Manager | Colony Capital, Inc.
Related Party Transaction [Line Items]
Base management fee					1.50%
Tier Two | Asset Manager | Colony Capital, Inc.
Related Party Transaction [Line Items]
Base management fee					1.25%
Tier One | Asset Manager | Colony Capital, Inc.
Related Party Transaction [Line Items]
Overhead reimbursement percentage						20.00%
Service cost as percentage of GAV						0.0375%
Gross asset value threshold						$ 2,500,000,000
Tier Two | Asset Manager | Colony Capital, Inc.
Related Party Transaction [Line Items]
Service cost as percentage of GAV						0.0313%
Gross asset value threshold						$ 5,000,000,000
Tier Three | Asset Manager | Colony Capital, Inc.
Related Party Transaction [Line Items]
Service cost as percentage of GAV						0.025%
NorthStar Realty Europe Corp. (NRE) | Colony Capital, 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 Capital, Inc. | Minimum
Related Party Transaction [Line Items]
Equity method investment ownership percentage voting threshold						25.00%
Chief Executive Officer | Affiliated Entity | Colony Capital, Inc.
Related Party Transaction [Line Items]
Obligation to reimburse manager for cash severance	25.00%	50.00%

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Compensation Expense - Narrative (Details) $ in Millions			1 Months Ended			3 Months Ended				6 Months Ended		12 Months Ended
	Nov. 30, 2018 shares	Oct. 31, 2015 shares	May 31, 2019 shares	Mar. 31, 2018 shares	Mar. 31, 2016 shares	Jun. 30, 2019 USD ($) shares	Mar. 31, 2019 shares	Jun. 30, 2018 USD ($)	Mar. 31, 2018 USD ($) shares	Jun. 30, 2019 USD ($) shares	Jun. 30, 2018 USD ($)	May 08, 2019 shares	Dec. 31, 2018 shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options outstanding (shares)						2,451,000				2,451,000			2,101,000
Granted (in shares)										539,000
Forfeited or canceled grants (shares)										13,000
Spinoff conversion ratio		0.1667
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)						2,100,000				2,100,000
Common stock, capital shares reserved for future issuance (shares)						1,800,000				1,800,000
Shares unreserved and available for issuance (shares)						9,300,000				9,300,000
Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation expense | $						$ 2.0		$ 1.2		$ 3.2	$ 1.6
Equity-based compensation expense not yet recognized | $						$ 12.1				$ 12.1
Options outstanding (shares)						911,000				911,000			538,000
Granted (in shares)										530,000
Forfeited or canceled grants (shares)										3,000
Restricted Stock | 2015 Omnibus Stock Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)			529,805
Restricted Stock | Spin-off
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized (shares)													150,000
Granted (in shares)	90,000				995,698								150,000
Award vesting period					4 years
Restricted Stock | Amended And Restated NRE Management Agreement
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)			366,548	198,000
Vesting of restricted stock (shares)							98,310
Shares paid for tax withholding (in shares)							44,342
Award vesting period				3 years
Previously Retained Restricted Stock | 2015 Omnibus Stock Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)			150,000									150,000
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)						300,000				300,000
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)						1,500,000				1,500,000
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]
Common stock, capital shares reserved for future issuance (shares)			17,676
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]
Granted (in 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]
Granted (in shares)				132,000
Maximum award vesting rights based on absolute performance, percentage				200.00%
Reinstated Restricted Stock | Amended And Restated NRE Management Agreement
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)			13,257
Reinstated Performance-based Restricted Stock Units | Amended And Restated NRE Management Agreement
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)			8,838
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
Accounting Standards Update 2017-08 | Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation expense | $									$ 1.6		$ 1.8

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Compensation Expense - Common Units and Unvested Restricted Stock Activity (Details) shares in Thousands	6 Months Ended
	Jun. 30, 2019 $ / 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)	2,101
Granted (in shares)	539
Vested/Converted (in shares)	(109)
Withheld/retired (in shares)	(67)
Forfeited (in shares)	(13)
Ending balance (shares)	2,451
Weighted Average Grant Price
Beginning balance (in dollars per share) | $ / shares	$ 12.08
Granted (in dollars per share) | $ / shares	16.86
Vested/Converted (in dollars per share) | $ / shares	16.86
Withheld/retired (in dollars per share) | $ / shares	17.05
Forfeited (in dollars per share) | $ / shares	16.74
Ending balance (in dollars per share) | $ / shares	$ 12.87
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)	538
Granted (in shares)	530
Vested/Converted (in shares)	(87)
Withheld/retired (in shares)	(67)
Forfeited (in shares)	(3)
Ending balance (shares)	911
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)	338
Granted (in shares)	0
Vested/Converted (in shares)	(22)
Withheld/retired (in shares)	0
Forfeited (in shares)	0
Ending balance (shares)	316
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)	1,225
Granted (in shares)	9
Vested/Converted (in shares)	0
Withheld/retired (in shares)	0
Forfeited (in shares)	(10)
Ending balance (shares)	1,224

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Stockholders' Equity - Narrative (Details) - USD ($)	3 Months Ended		6 Months Ended		13 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Mar. 31, 2019	Mar. 31, 2018
Equity [Abstract]
Authorized amount of outstanding common stock (up to)						$ 100,000,000
Shares repurchased (shares)	0		0
Stock repurchased during period (in shares)		4,000,000		5,100,000	6,100,000
Common stock repurchased		$ 56,300,000		$ 69,600,000	$ 83,400,000

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Stockholders' Equity - Dividends Declared (Details) - $ / shares	Aug. 02, 2019	May 01, 2019	Aug. 03, 2018	May 08, 2018
Subsequent Event [Line Items]
Dividends per share of common stock (in dollars per share)		$ 0.15	$ 0.15	$ 0.15
Subsequent Event
Subsequent Event [Line Items]
Dividends per share of common stock (in dollars per share)	$ 0.15

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Stockholders' Equity - Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Numerator:
Net income (loss)	$ (1,434)	$ 37,876	$ 9,689	$ 36,808
Net income (loss) attributable to Unit Holders noncontrolling interest	6	(217)	(56)	(202)
Net income (loss) attributable to NorthStar Realty Europe Corp. common stockholders	(1,428)	37,659	9,633	36,606
Net (income) allocated to participating securities	(191)	(438)	(242)	(371)
Net income (loss) allocated to common stockholders—basic and dilutive	$ (1,619)	$ 37,221	$ 9,391	$ 36,235
Denominator:
Weighted average shares of common stock - basic (shares)	49,448,507	51,858,645	49,391,523	53,455,635
Weighted average effect of dilutive shares (shares)	0	2,149,000	1,358,000	1,976,000
Weighted average shares of common stock - dilutive (shares)	49,448,507	54,007,807	50,749,631	55,432,191
Earnings (loss) per share:
Basic (in dollars per share)	$ (0.03)	$ 0.72	$ 0.19	$ 0.68
Diluted (in dollars per share)	$ (0.03)	$ 0.69	$ 0.19	$ 0.65
Antidilutive securities (in shares)	1,400,000
LTIP Units
Earnings (loss) per share:
Shares issued upon conversion of awards (shares)			1

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Noncontrolling Interests (Details) - USD ($) $ in Thousands	3 Months Ended				6 Months Ended		12 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Noncontrolling Interest [Line Items]
Reallocation of interest in Operating Partnership		$ 0	$ 0	$ 0
Net income (loss) attributable to Unit Holders noncontrolling interest			200		$ 100	$ 200
Noncontrolling interest
Noncontrolling Interest [Line Items]
Reallocation of interest in Operating Partnership	$ 40	$ 186	$ 105	$ (20)	$ 200		$ 200
LTIP units | Noncontrolling interest
Noncontrolling Interest [Line Items]
Number of units outstanding (shares)	315,434				315,434
NorthStar Realty Europe Limited Partnership
Noncontrolling Interest [Line Items]
Noncontrolling ownership interest	0.60%				0.60%

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Risk Management and Derivative Activities - Derivative Instruments Not Designated as Hedges (Details) € in Thousands, £ in Thousands, $ in Thousands	Jun. 30, 2019 USD ($) instrument € / unit	Jun. 30, 2019 GBP (£) instrument € / unit	Jun. 30, 2019 EUR (€) instrument € / unit	Dec. 31, 2018 USD ($) instrument € / unit	Dec. 31, 2018 GBP (£) instrument € / unit	Dec. 31, 2018 EUR (€) instrument € / unit
Interest rate caps
Derivative [Line Items]
Foreign currency option strike price (in euros per usd) | € / unit	1.25	1.25	1.25	1.25	1.25	1.25
Not designated as hedges
Derivative [Line Items]
Number of derivative instruments | instrument	35	35	35	37	37	37
Fair Value Asset (Liability) | $	$ 3,288			$ 6,440
Not designated as hedges | Interest rate caps | EURIBOR
Derivative [Line Items]
Number of derivative instruments | instrument	28	28	28	28	28	28
Notional Amount | €			€ 564,694			€ 564,694
Fair Value Asset (Liability) | $	$ 531			$ 2,185
Not designated as hedges | Interest rate caps | EURIBOR | Maximum
Derivative [Line Items]
Interest rate caps	0.50%	0.50%	0.50%	0.50%	0.50%	0.50%
Not designated as hedges | Interest rate caps | GBP LIBOR
Derivative [Line Items]
Number of derivative instruments | instrument	5	5	5	5	5	5
Notional Amount | £		£ 202,645			£ 202,645
Fair Value Asset (Liability) | $	$ 0			$ 20
Not designated as hedges | Interest rate caps | GBP LIBOR | Maximum
Derivative [Line Items]
Interest rate caps	2.00%	2.00%	2.00%	2.00%	2.00%	2.00%
Not designated as hedges | Foreign currency forwards, net
Derivative [Line Items]
Number of derivative instruments | instrument	2	2	2	4	4	4
Notional Amount | €			€ 24,480			€ 48,960
Fair Value Asset (Liability) | $	$ 2,757			$ 4,235

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Risk Management and Derivative Activities - Fair Value of Derivative Instruments (Details) - Derivative assets - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Interest rate caps
Derivative [Line Items]
Derivatives	$ 531	$ 2,205
Foreign currency forwards
Derivative [Line Items]
Derivatives	$ 2,757	$ 4,235

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Risk Management and Derivative Activities - Effect of Derivative Instruments in the Combined Consolidated Statements of Operations (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Derivative [Line Items]
Foreign currency transaction gain (loss)	$ 600	$ 400	$ (1,900)	$ 400
Other gain (loss), net | Derivatives
Derivative [Line Items]
Net cash receipt (payment) on derivatives	1,416	(2,631)	2,562	(4,371)
Interest rate caps | Other gain (loss), net | Derivatives
Derivative [Line Items]
Adjustments to fair value	(375)	(1,880)	(1,652)	(1,999)
Foreign currency forwards | Other gain (loss), net | Derivatives
Derivative [Line Items]
Adjustments to fair value	$ (1,596)	$ 7,566	$ (1,477)	$ 6,494

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Risk Management and Derivative Activities - Narrative (Details)	Jun. 30, 2019 USD ($) instrument	Dec. 31, 2018 USD ($) 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

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Fair Value (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	$ 3,288	$ 6,440
Principal/Notional Amount
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	927,254	960,401
Preferred equity investment	38,952	39,090
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	551,982	689,909
Carrying Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	3,288	6,440
Preferred equity investment	38,952	39,090
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	546,349	682,912
Fair Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	3,288	6,440
Preferred equity investment	39,363	39,501
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	$ 546,349	$ 686,891

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Commitments and Contingencies - Narrative (Details) $ in Thousands, € in Millions	6 Months Ended
	Jun. 30, 2019 USD ($) property lessee	Jun. 30, 2019 GBP (£) property	Dec. 31, 2018 USD ($)	Dec. 31, 2018 EUR (€)
Finite-Lived Intangible Assets [Line Items]
Number of significant lessees | lessee	1
Significant lessee remaining lease term	7 months
Preferred equity investments | $	$ 38,952		$ 39,090
Trianon Tower
Finite-Lived Intangible Assets [Line Items]
Preferred equity investments	$ 5,685		$ 5,722	€ 5
Land
Finite-Lived Intangible Assets [Line Items]
Number of properties subject to ground leases | property	1	1
Annual rent | £		£ 1,000

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Segment Reporting (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($) segment	Jun. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)
Segment Reporting Information [Line Items]
Number of reporting segments | segment			3
Revenues
Lease income	$ 16,499		$ 33,583
Lease income		$ 30,162		$ 62,727
Interest income	1,554	706	3,165	1,435
Expenses
Interest expense	3,413	5,855	7,093	11,962
Management fee, related party	3,848	4,223	7,736	8,380
Transaction costs	1,827	376	2,589	857
Depreciation and amortization	5,908	11,976	11,821	23,627
Realized (gain) on sale	(3,671)	(38,319)	(21,396)	(39,585)
Other, net	7,913	8,957	16,815	22,150
Income (loss) before income tax benefit (expense)	(1,185)	37,800	12,090	36,771
Income tax benefit (expense)	(249)	76	(2,401)	37
Net income (loss)	(1,434)	37,876	9,689	36,808
Amortization of deferred financing costs			833	1,591
Total Assets	1,272,226		1,272,226		$ 1,425,499
Real Estate Segment
Revenues
Lease income	16,499		33,583
Lease income		30,162		62,727
Interest income	0	0	0	0
Expenses
Interest expense	3,237	5,601	6,691	11,556
Management fee, related party	0	0	0	0
Transaction costs	0	0	0	0
Depreciation and amortization	5,908	11,976	11,821	23,627
Realized (gain) on sale	(3,671)	(38,319)	(21,396)	(39,585)
Other, net	4,815	11,455	8,483	19,910
Income (loss) before income tax benefit (expense)	6,210	39,449	27,984	47,219
Income tax benefit (expense)	(249)	76	(2,401)	37
Net income (loss)	5,961	39,525	25,583	47,256
Amortization of deferred financing costs	300	700	700	1,300
Total Assets	953,007		953,007		1,362,679
Preferred Equity
Revenues
Lease income	0		0
Lease income		0		0
Interest income	761	706	1,538	1,435
Expenses
Interest expense	0	0	0	0
Management fee, related party	0	0	0	0
Transaction costs	0	0	0	0
Depreciation and amortization	0	0	0	0
Realized (gain) on sale	0	0	0	0
Other, net	0	0	0	0
Income (loss) before income tax benefit (expense)	761	706	1,538	1,435
Income tax benefit (expense)	0	0	0	0
Net income (loss)	761	706	1,538	1,435
Total Assets	41,629		41,629		40,568
Corporate
Revenues
Lease income	0		0
Lease income		0		0
Interest income	793	0	1,627	0
Expenses
Interest expense	176	254	402	406
Management fee, related party	3,848	4,223	7,736	8,380
Transaction costs	1,827	376	2,589	857
Depreciation and amortization	0	0	0	0
Realized (gain) on sale	0	0	0	0
Other, net	3,098	(2,498)	8,332	2,240
Income (loss) before income tax benefit (expense)	(8,156)	(2,355)	(17,432)	(11,883)
Income tax benefit (expense)	0	0	0	0
Net income (loss)	(8,156)	(2,355)	(17,432)	(11,883)
Amortization of deferred financing costs	100	$ 200	200	$ 300
Total Assets	$ 277,590		$ 277,590		$ 22,252

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Segment Reporting Geographical Segments (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019 USD ($) property	Jun. 30, 2018 USD ($) property	Jun. 30, 2019 USD ($) property	Jun. 30, 2018 USD ($) property
Segment Reporting Information [Line Items]
Properties | property	14	24	14	24
Rental income	$ 16,499	$ 30,162	$ 33,583	$ 62,727
Office
Segment Reporting Information [Line Items]
Rental income	15,266	28,876	30,993	60,060
Office | Germany
Segment Reporting Information [Line Items]
Rental income	3,847	14,437	8,037	29,224
Office | United Kingdom
Segment Reporting Information [Line Items]
Rental income	6,309	7,780	12,633	15,273
Office | France
Segment Reporting Information [Line Items]
Rental income	5,110	5,346	10,323	10,830
Office | Other
Segment Reporting Information [Line Items]
Rental income	0	$ 1,313	0	$ 4,733
Non-Office | Other
Segment Reporting Information [Line Items]
Properties | property		5		5
Rental income	$ 1,233	$ 1,286	$ 2,590	$ 2,667
Retail Site | Germany
Segment Reporting Information [Line Items]
Properties | property		2		2
Industrial Property | France
Segment Reporting Information [Line Items]
Properties | property		1		1
Hotel | Germany
Segment Reporting Information [Line Items]
Properties | property	2	2	2	2

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Subsequent Events (Details)	Aug. 02, 2019 $ / shares	Jul. 17, 2019 USD ($)	May 01, 2019 $ / shares	Aug. 03, 2018 $ / shares	May 08, 2018 $ / shares	Dec. 31, 2019 GBP (£) £ / shares	Dec. 31, 2019 EUR (€) € / shares	Dec. 31, 2019 $ / shares	Jun. 30, 2019 USD ($)
Subsequent Event [Line Items]
Dividends per share of common stock (in dollars per share) | $ / shares			$ 0.15	$ 0.15	$ 0.15
Subsequent Event
Subsequent Event [Line Items]
Dividends per share of common stock (in dollars per share) | $ / shares	$ 0.15
Revolving Credit Facility | Credit Facility
Subsequent Event [Line Items]
Credit facility | $									$ 0
Revolving Credit Facility | Credit Facility | Subsequent Event
Subsequent Event [Line Items]
Credit facility | $		$ 0
Termination fees | $		$ 0
AXA Merger | Subsequent Event
Subsequent Event [Line Items]
Merger share price (in dollars per share) | (per share)						£ 3.82	€ 9.26	$ 1.68
Forecast | AXA Merger | Subsequent Event
Subsequent Event [Line Items]
Merger share price (in dollars per share) | $ / shares								$ 17.03
US Euro Forward Contract | Subsequent Event
Subsequent Event [Line Items]
Foreign currency forward | €							€ 482,000,000
US UK Pound Sterling Forward Contract | Subsequent Event
Subsequent Event [Line Items]
Foreign currency forward | £						£ 199,000,000