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 March 31, 2019

OR

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

Commission file number: 001-37980

COLONY CAPITAL, INC. (Exact Name of Registrant as Specified in Its Charter)
	Maryland	46-4591526
	(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

515 South Flower Street, 44th Floor

Los Angeles, California 90071

(Address of Principal Executive Offices, Including Zip Code)

(310) 282-8820

(Registrant’s Telephone Number, Including Area Code)

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

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 ý No ¨

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.

Large Accelerated Filer	ý	Accelerated Filer	¨
Non-Accelerated Filer	¨	Smaller Reporting Company	¨
		Emerging Growth Company	¨

If 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 pursuant to Section 13(a) of the Exchange Act. Yes ¨    No  ¨

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

Securities registered pursuant to Section 12(b) of the Act:
Title of Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Class A Common Stock, $0.01 par value	CLNY	New York Stock Exchange
Preferred Stock, 8.25% Series B Cumulative Redeemable, $0.01 par value	CLNY.PRB	New York Stock Exchange
Preferred Stock, 8.75% Series E Cumulative Redeemable, $0.01 par value	CLNY.PRE	New York Stock Exchange
Preferred Stock, 7.50% Series G Cumulative Redeemable, $0.01 par value	CLNY.PRG	New York Stock Exchange
Preferred Stock, 7.125% Series H Cumulative Redeemable, $0.01 par value	CLNY.PRH	New York Stock Exchange
Preferred Stock, 7.15% Series I Cumulative Redeemable, $0.01 par value	CLNY.PRI	New York Stock Exchange
Preferred Stock, 7.125% Series J Cumulative Redeemable, $0.01 par value	CLNY.PRJ	New York Stock Exchange

As of May 7, 2019, 485,052,708 shares of the Registrant's class A common stock and 733,931 shares of class B common stock were outstanding.

COLONY CAPITAL, INC.

FORM 10-Q

TABLE OF CONTENTS

	PART I. FINANCIAL INFORMATION	Page
Item 1.	Financial Statements	4
	Consolidated Balance Sheets as of March 31, 2019 (Unaudited) and December 31, 2018	4
	Consolidated Statements of Operations for the Three Months Ended March 31, 2019 and 2018 (Unaudited)	5
	Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2019 and 2018 (Unaudited)	6
	Consolidated Statements of Equity for the Three Months Ended March 31, 2019 and 2018 (Unaudited)	7
	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2019 and 2018 (Unaudited)	9
	Notes to Consolidated Financial Statements:	11
	1. Business and Organization	11
	2. Summary of Significant Accounting Policies	11
	3. Real Estate	15
	4. Loans Receivable	18
	5. Equity and Debt Investments	21
	6. Goodwill, Deferred Leasing Costs and Other Intangibles	24
	7. Assets and Related Liabilities Held for Sale	26
	8. Restricted Cash, Other Assets and Other Liabilities	27
	9. Debt	28
	10. Derivatives	31
	11. Fair Value	34
	12. Variable Interest Entities	40
	13. Stockholders' Equity	42
	14. Noncontrolling Interests	45
	15. Earnings per Share	46
	16. Fee Income	46
	17. Equity-Based Compensation	48
	18. Transactions with Affiliates	50
	19. Commitments and Contingencies	52
	20. Segment Reporting	53
	21. Supplemental Disclosure of Cash Flow Information	55
	22. Subsequent Events	56
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	59
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	84
Item 4.	Controls and Procedures	85
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	87
Item 1A.	Risk Factors	87
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	87
Item 3.	Defaults Upon Senior Securities	87
Item 4.	Mine Safety Disclosures	87
Item 5.	Other Information	87
Item 6.	Exhibits	88
SIGNATURES		89

3

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

COLONY CAPITAL, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

	March 31, 2019 (Unaudited)			December 31, 2018
Assets
Cash and cash equivalents	$	321,199		$	461,912
Restricted cash	326,635			366,758
Real estate, net	14,536,041			13,619,014
Loans receivable, net	1,596,673			1,659,217
Equity and debt investments ($425,929 and $238,963 at fair value, respectively)	2,769,616			2,543,169
Goodwill	1,534,561			1,534,561
Deferred leasing costs and intangible assets, net	546,903			540,264
Assets held for sale ($223,052 and $269,145 at fair value, respectively)	786,467			941,258
Other assets ($29,742 and $33,558 at fair value, respectively)	757,752			503,317
Due from affiliates	45,186			45,779
Total assets	$	23,221,033		$	22,215,249
Liabilities
Debt, net	$	10,712,788		$	10,039,957
Accrued and other liabilities ($314,026 and $141,711 at fair value, respectively)	1,037,166			707,921
Intangible liabilities, net	141,744			159,386
Liabilities related to assets held for sale	22,435			68,217
Dividends and distributions payable	83,996			84,013
Total liabilities	11,998,129			11,059,494
Commitments and contingencies (Note 19)
Redeemable noncontrolling interests	7,463			9,385
Equity
Stockholders’ equity:
Preferred stock, $0.01 par value per share; $1,436,605 liquidation preference; 250,000 shares authorized; 57,464 shares issued and outstanding	1,407,495			1,407,495
Common stock, $0.01 par value per share
Class A, 949,000 shares authorized; 484,775 and 483,347 shares issued and outstanding, respectively	4,848			4,834
Class B, 1,000 shares authorized; 734 shares issued and outstanding	7			7
Additional paid-in capital	7,610,947			7,598,019
Distributions in excess of earnings	(2,176,730		)	(2,018,302		)
Accumulated other comprehensive income	22,138			13,999
Total stockholders’ equity	6,868,705			7,006,052
Noncontrolling interests in investment entities	3,996,206			3,779,728
Noncontrolling interests in Operating Company	350,530			360,590
Total equity	11,215,441			11,146,370
Total liabilities, redeemable noncontrolling interests and equity	$	23,221,033		$	22,215,249

The accompanying notes are an integral part of the consolidated financial statements.

4

COLONY CAPITAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

	Three Months Ended March 31,
	2019			2018
Revenues
Property operating income	$	540,130		$	554,730
Interest income	46,250			63,854
Fee income ($33,322 and $36,772 from affiliates, respectively)	33,500			36,842
Other income ($9,845 and $6,793 from affiliates, respectively)	13,023			11,238
Total revenues	632,903			666,664
Expenses
Property operating expense	293,079			305,770
Interest expense	149,516			148,889
Investment and servicing expense	18,979			18,653
Transaction costs	2,504			716
Placement fees	309			123
Depreciation and amortization	150,797			144,705
Provision for loan loss	3,611			5,375
Impairment loss	25,622			153,398
Compensation expense
Cash and equity-based compensation	34,176			49,484
Carried interest and incentive compensation	1,051			859
Administrative expenses	24,014			24,740
Total expenses	703,658			852,712
Other income (loss)
Gain on sale of real estate	52,301			18,444
Other gain (loss), net	(49,077		)	75,256
Equity method earnings	34,065			30,117
Equity method earnings—carried interest	4,422			2,148
Loss before income taxes	(29,044		)	(60,083		)
Income tax benefit (expense)	(1,111		)	32,808
Loss from continuing operations	(30,155		)	(27,275		)
Income from discontinued operations	—			117
Net loss	(30,155		)	(27,158		)
Net income (loss) attributable to noncontrolling interests:
Redeemable noncontrolling interests	1,444			(696		)
Investment entities	49,988			19,243
Operating Company	(6,611		)	(4,378		)
Net loss attributable to Colony Capital, Inc.	(74,976		)	(41,327		)
Preferred stock dividends	27,137			31,387
Net loss attributable to common stockholders	$	(102,113	)	$	(72,714	)
Basic loss per share
Loss from continuing operations per basic common share	$	(0.21	)	$	(0.14	)
Net loss per basic common share	$	(0.21	)	$	(0.14	)
Diluted loss per share
Loss from continuing operations per diluted common share	$	(0.21	)	$	(0.14	)
Net loss per diluted common share	$	(0.21	)	$	(0.14	)
Weighted average number of shares
Basic	478,874			530,680
Diluted	478,874			530,680
Dividends declared per common share	$	0.11		$	0.11

The accompanying notes are an integral part of the consolidated financial statements.

5

COLONY CAPITAL, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)

	Three Months Ended March 31,
	2019			2018
Net loss	$	(30,155	)	$	(27,158	)
Other comprehensive income (loss):
Other comprehensive income from investments in unconsolidated ventures, net	4,910			1,099
Net change in fair value of available-for-sale debt securities	2,064			(20,718		)
Net change in fair value of cash flow hedges	(663		)	—
Foreign currency translation adjustments:
Foreign currency translation gain (loss)	(28,246		)	76,401
Change in fair value of net investment hedges	12,864			(24,378		)
Net foreign currency translation adjustments	(15,382		)	52,023
Other comprehensive income (loss)	(9,071		)	32,404
Comprehensive income (loss)	(39,226		)	5,246
Comprehensive income (loss) attributable to noncontrolling interests:
Redeemable noncontrolling interests	1,444			(696		)
Investment entities	32,359			49,350
Operating Company	(6,098		)	(4,258		)
Comprehensive loss attributable to stockholders	$	(66,931	)	$	(39,150	)

The accompanying notes are an integral part of the consolidated financial statements.

6

COLONY CAPITAL, INC.

CONSOLIDATED STATEMENTS OF EQUITY (Continued)

(In thousands, except per share data)

(Unaudited)

	Preferred Stock		Common Stock			Additional Paid-in Capital			Distributions in Excess of Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity			Noncontrolling Interests in Investment Entities			Noncontrolling Interests in Operating Company			Total Equity
Balance at December 31, 2017	1,606,966		5,433			7,913,622			(1,165,412		)	47,316			8,407,925			3,539,072			402,395			12,349,392
Cumulative effect of adoption of new accounting pronouncements	—		—			—			(1,018		)	(202		)	(1,220		)	—			—			(1,220		)
Net income	—		—			—			(41,327		)	—			(41,327		)	19,243			(4,378		)	(26,462		)
Other comprehensive income	—		—			—			—			2,177			2,177			30,107			120			32,404
Common stock repurchases	—		(423		)	(246,018		)	—			—			(246,441		)	—			—			(246,441		)
Equity-based compensation	—		33			10,722			—			—			10,755			—			1,414			12,169
Redemption of OP Units for cash and class A common stock	—		—			24			—			—			24			—			(2,120		)	(2,096		)
Shares canceled for tax withholdings on vested stock awards	—		(29		)	(31,723		)	—			—			(31,752		)	—			—			(31,752		)
Deconsolidation of investment entities	—		—			—			—			—			—			(330,980		)	—			(330,980		)
Contributions from noncontrolling interests	—		—			—			—			—			—			97,867			—			97,867
Distributions to noncontrolling interests	—		—			—			—			—			—			(82,512		)	(3,551		)	(86,063		)
Preferred stock dividends	—		—			—			(31,387		)	—			(31,387		)	—			—			(31,387		)
Common stock dividends declared ($0.11 per share; Note 13)	—		—			—			(55,852		)	—			(55,852		)	—			—			(55,852		)
Reallocation of equity (Note 2 and 14)	—		—			(11,675		)	—			(254		)	(11,929		)	(5,822		)	17,751			—
Balance at March 31, 2018	$	1,606,966	$	5,014		$	7,634,952		$	(1,294,996	)	$	49,037		$	8,000,973		$	3,266,975		$	411,631		$	11,679,579

The accompanying notes are an integral part of the consolidated financial statements.

7

COLONY CAPITAL, INC.

CONSOLIDATED STATEMENTS OF EQUITY (Continued)

(In thousands, except per share data)

(Unaudited)

	Preferred Stock		Common Stock			Additional Paid-in Capital			Distributions in Excess of Earnings			Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity			Noncontrolling Interests in Investment Entities			Noncontrolling Interests in Operating Company			Total Equity
Balance at December 31, 2018	$	1,407,495	$	4,841		$	7,598,019		$	(2,018,302	)	$	13,999	$	7,006,052		$	3,779,728		$	360,590		$	11,146,370
Cumulative effect of adoption of new accounting pronouncement (Note 2)	—		—			—			(2,905		)	—		(2,905		)	(1,378		)	(185		)	(4,468		)
Net income (loss)	—		—			—			(74,976		)	—		(74,976		)	49,988			(6,611		)	(31,599		)
Other comprehensive loss	—		—			—			—			8,045		8,045			(17,629		)	513			(9,071		)
Common stock repurchases	—		(7		)	(3,160		)	—			—		(3,167		)	—			—			(3,167		)
Redemption of OP Units for cash and class A common stock	—		—			33			—			—		33			—			(33		)	—
Equity-based compensation	—		27			6,323			—			—		6,350			191			—			6,541
Shares canceled for tax withholdings on vested stock awards	—		(6		)	(3,001		)	—			—		(3,007		)	—			—			(3,007		)
Contributions from noncontrolling interests	—		—			—			—			—		—			305,216			—			305,216
Distributions to noncontrolling interests	—		—			—			—			—		—			(107,377		)	(3,450		)	(110,827		)
Preferred stock dividends	—		—			—			(27,137		)	—		(27,137		)	—			—			(27,137		)
Common stock dividends declared ($0.11 per share; Note 13)	—		—			—			(53,410		)	—		(53,410		)	—			—			(53,410		)
Reallocation of equity (Notes 2 and 14)	—		—			12,733			—			94		12,827			(12,533		)	(294		)	—
Balance at March 31, 2019	$	1,407,495	$	4,855		$	7,610,947		$	(2,176,730	)	$	22,138	$	6,868,705		$	3,996,206		$	350,530		$	11,215,441

The accompanying notes are an integral part of the consolidated financial statements.

8

COLONY CAPITAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Three Months Ended March 31,
	2019			2018
Cash Flows from Operating Activities
Net loss	$	(30,155	)	(27,158	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Amortization of discount and net origination fees on loans receivable and debt securities	(5,426		)	(7,995	)
Paid-in-kind interest added to loan principal, net of interest received	(9,780		)	(6,486	)
Straight-line rents	(5,529		)	(7,753	)
Amortization of above- and below-market lease values, net	(3,643		)	(1,925	)
Amortization of deferred financing costs and debt discount and premium	19,594			22,802
Equity method earnings	(38,487		)	(32,265	)
Distributions of income from equity method investments	26,923			23,307
Provision for loan losses	3,611			5,375
Allowance for doubtful accounts	4,389			1,305
Impairment of real estate and intangibles	25,622			153,398
Depreciation and amortization	150,797			144,705
Equity-based compensation	6,663			12,169
Change in fair value of contingent consideration—Internalization	—			(10,480	)
Gain on sales of real estate, net	(52,301		)	(18,444	)
Receipts (payments) of cash collateral on derivative	(31,054		)	1,897
Deferred income tax benefit	(840		)	(41,465	)
Other (gain) loss, net	49,077			(63,976	)
Increase in other assets and due from affiliates	(3,584		)	(18,742	)
Decrease in accrued and other liabilities and due to affiliates	(37,205		)	(29,197	)
Other adjustments, net	(2,036		)	880
Net cash provided by operating activities	66,636			99,952
Cash Flows from Investing Activities
Contributions to and acquisition of equity investments	(101,335		)	(96,406	)
Return of capital from equity method investments	18,310			159,929
Acquisition of loans receivable and debt securities	(451		)	(68,007	)
Net disbursements on originated loans	(21,892		)	(11,573	)
Repayments of loans receivable	89,199			40,085
Proceeds from sales of loans receivable and debt securities	13,373			90,877
Cash receipts in excess of accretion on purchased credit-impaired loans	8,607			21,463
Acquisition of and additions to real estate, related intangibles and leasing commissions	(1,267,762		)	(236,392	)
Proceeds from sales of real estate	294,667			112,562
Proceeds from paydown and maturity of debt securities	3,338			16,709
Cash and restricted cash contributed to Colony Credit	—			(141,153	)
Payment of cash collateral on derivatives	—			(10,900	)
Proceeds from sale of equity investments	19,505			4,340
Investment deposits	(14,294		)	(2,383	)
Net receipts (payments) on settlement of derivative instruments	19,608			(18,811	)
Other investing activities, net	14,176			(582	)
Net cash used in investing activities	(924,951		)	(140,242	)

9

COLONY CAPITAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(In thousands)

(Unaudited)

	Three Months Ended March 31,
	2019			2018
Cash Flows from Financing Activities
Dividends paid to preferred stockholders	(27,137		)	(32,821		)
Dividends paid to common stockholders	(53,426		)	(146,700		)
Repurchase of common stock	(10,734		)	(210,274		)
Borrowings from corporate credit facility	—			233,000
Repayment of borrowings from corporate credit facility	—			(183,000		)
Borrowings from secured debt	1,169,777			90,550
Repayments of secured debt	(498,259		)	(139,471		)
Payment of deferred financing costs	(16,700		)	(5,112		)
Contributions from noncontrolling interests	247,033			108,270
Distributions to and redemptions of noncontrolling interests	(129,734		)	(101,426		)
Shares canceled for tax withholdings on vested stock awards	(3,007		)	(31,752		)
Other financing activities, net	(1,138		)	—
Net cash provided by (used in) financing activities	676,675			(418,736		)
Effect of exchange rates on cash, cash equivalents and restricted cash	(1,196		)	4,832
Net decrease in cash, cash equivalents and restricted cash	(182,836		)	(454,194		)
Cash, cash equivalents and restricted cash, beginning of period	832,730			1,393,920
Cash, cash equivalents and restricted cash, end of period	$	649,894		$	939,726

Reconciliation of cash, cash equivalents and restricted cash to consolidated balance sheets

	Three Months Ended March 31,
	2019		2018
Beginning of the period
Cash and cash equivalents	$	461,912	$	921,822
Restricted cash	366,758		471,078
Restricted cash included in assets held for sale	4,060		1,020
Total cash, cash equivalents and restricted cash, beginning of period	$	832,730	$	1,393,920
End of the period
Cash and cash equivalents	$	321,199	$	484,827
Restricted cash	326,635		453,366
Restricted cash included in assets held for sale	2,060		1,533
Total cash, cash equivalents and restricted cash, end of period	$	649,894	$	939,726

The accompanying notes are an integral part of the consolidated financial statements.

10

COLONY CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2019

(Unaudited)

1. Business and Organization

Colony Capital, Inc. (together with its consolidated subsidiaries, the "Company" and formerly, Colony NorthStar, Inc. prior to June 25, 2018) is a leading global investment management firm with $43 billion of assets under management. The Company manages capital on behalf of its stockholders, as well as institutional and retail investors in private funds, and traded and non-traded real estate investment trusts ("REITs"). The Company has significant holdings in: (a) the healthcare, industrial and hospitality property sectors; (b) Colony Credit Real Estate, Inc. (NYSE: CLNC) and NorthStar Realty Europe, Corp. (NYSE: NRE), which are both externally managed by subsidiaries of the Company; and (c) various other equity and debt investments.

The Company was organized in May 2016 as a Maryland corporation and was formed through a tri-party merger (the "Merger") among Colony Capital, Inc. ("Colony"), NorthStar Asset Management Group Inc. ("NSAM") and NorthStar Realty Finance Corp. ("NRF") in an all-stock exchange on January 10, 2017. The Company elected to be taxed as a REIT under the Internal Revenue Code, for U.S. federal income tax purposes beginning with its taxable year ended December 31, 2017.

The Company conducts all of its activities and holds substantially all of its assets and liabilities through its operating subsidiary, Colony Capital Operating Company, LLC (the "Operating Company" or the "OP"). At March 31, 2019, the Company owned 93.9% of the OP, as its sole managing member. The remaining 6.1% is owned primarily by certain employees of the Company as noncontrolling interests.

Colony Credit

The Company owns an approximate 36.4% interest, on a fully diluted basis, in Colony Credit Real Estate, Inc. ("Colony Credit," formerly Colony NorthStar Credit Real Estate, Inc. prior to June 25, 2018). Colony Credit was formed on January 31, 2018 through a contribution of the CLNY Contributed Portfolio (as described below), represented by the Company's ownership interests ranging from 38% to 100% in certain investment entities ("CLNY Investment Entities"), and a concurrent all-stock merger with NorthStar Real Estate Income Trust, Inc. ("NorthStar I") and NorthStar Real Estate Income II, Inc. ("NorthStar II"), both publicly registered non-traded REITs sponsored and managed by a subsidiary of the Company (the "Combination"). The CLNY Contributed Portfolio comprised the Company's interests in certain commercial real estate loans, net lease properties and limited partnership interests in third party sponsored funds, which represented a select portfolio of U.S. investments within the Company’s other equity and debt segment that were transferable assets consistent with Colony Credit's strategy. Upon closing of the Combination, the Company's management contracts with NorthStar I and NorthStar II were terminated; concurrently, the Company entered into a new management agreement with Colony Credit.

Corporate Restructuring

Following a strategic review process, in November 2018, the Company announced a corporate restructuring and

reorganization plan aimed at reducing its annual compensation and administrative expenses over the next 12 months. The restructuring plan wasdesigned to match resources that further align the Company's increasing focus on its investment management business. In the fourth quarter of 2018, the Company incurred $19.3 million of restructuring costs, predominantly severance costs and accelerated equity-based compensation. In the first quarter of 2019, an additional $0.6 million of restructuring costs were incurred.

2. Summary of Significant Accounting Policies

The significant accounting policies of the Company are described below. The accounting policies of the Company's unconsolidated ventures are substantially similar to those of the Company.

Basis of Presentation

The accompanying consolidated financial statements include the accounts of the Company and its controlled subsidiaries. All significant intercompany accounts and transactions have been eliminated. The portions of equity, net income and other comprehensive income of consolidated subsidiaries that are not attributable to the parent are presented separately as amounts attributable to noncontrolling interests in the consolidated financial statements. A substantial portion of noncontrolling interests represents interests held by private investment funds or other investment vehicles

managed by the Company and which invest alongside the Company and membership interests in OP primarily held by certain employees of the Company.

To the extent the Company consolidates a subsidiary that is subject to industry-specific guidance, the Company retains the industry-specific guidance applied by that subsidiary in its consolidated financial statements.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States ("GAAP") requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates and assumptions.

Merger

The Merger was accounted for under the acquisition method for a business combination as a reverse acquisition, with NSAM as the legal acquirer for certain legal and regulatory matters, and Colony as the accounting acquirer for financial reporting purposes.

The financial statements of the Company represent a continuation of the financial information of Colony as the accounting acquirer, except that the equity structure of the Company was adjusted to reflect the equity structure of the legal acquirer, including for any comparative periods presented.

Principles of Consolidation

The Company consolidates entities in which it has a controlling financial interest by first considering if an entity meets the definition of a variable interest entity ("VIE") for which the Company is deemed to be the primary beneficiary, or if the Company has the power to control an entity through a majority of voting interest or through other arrangements.

Variable Interest Entities—A VIE is an entity that either (i) lacks sufficient equity to finance its activities without additional subordinated financial support from other parties; (ii) whose equity holders lack the characteristics of a controlling financial interest; or (iii) is established with non-substantive voting rights. A VIE is consolidated by its primary beneficiary, which is defined as the party who has a controlling financial interest in the VIE through (a) power to direct the activities of the VIE that most significantly affect the VIE’s economic performance, and (b) obligation to absorb losses or right to receive benefits of the VIE that could be significant to the VIE. The Company also considers interests held by its related parties, including de facto agents. The Company assesses whether it is a member of a related party group that collectively meets the power and benefits criteria and, if so, whether the Company is most closely associated with the VIE. In performing the related party analysis, the Company considers both qualitative and quantitative factors, including, but not limited to: the amount and characteristics of its investment relative to the related party; the Company’s and the related party's ability to control or significantly influence key decisions of the VIE including consideration of involvement by de facto agents; the obligation or likelihood for the Company or the related party to fund operating losses of the VIE; and the similarity and significance of the VIE’s business activities to those of the Company and the related party. The determination of whether an entity is a VIE, and whether the Company is the primary beneficiary, may involve significant judgment, including the determination of which activities most significantly affect the entities’ performance, and estimates about the current and future fair values and performance of assets held by the VIE.

Voting Interest Entities—Unlike VIEs, voting interest entities have sufficient equity to finance their activities and equity investors exhibit the characteristics of a controlling financial interest through their voting rights. The Company consolidates such entities when it has the power to control these entities through ownership of a majority of the entities' voting interests or through other arrangements.

At each reporting period, the Company reassesses whether changes in facts and circumstances cause a change in the status of an entity as a VIE or voting interest entity, and/or a change in the Company's consolidation assessment. Changes in consolidation status are applied prospectively. An entity may be consolidated as a result of this reassessment, in which case, the assets, liabilities and noncontrolling interest in the entity are recorded at fair value upon initial consolidation. Any existing equity interest held by the Company in the entity prior to the Company obtaining control will be remeasured at fair value, which may result in a gain or loss recognized upon initial consolidation. However, if the consolidation represents an asset acquisition of a voting interest entity, the Company's existing interest in the acquired assets, if any, is not remeasured to fair value but continues to be carried at historical cost. The Company may also deconsolidate a subsidiary as a result of this reassessment, which may result in a gain or loss recognized upon deconsolidation depending on the carrying values of deconsolidated assets and liabilities compared to the fair value of any interests retained.

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Noncontrolling Interests

Redeemable Noncontrolling Interests—This represents noncontrolling interests in a consolidated open-end fund sponsored by the Company. The limited partners in the consolidated open-end fund, who represent noncontrolling interests, generally have the ability to withdraw all or a portion of their interests in cash with 30 days' notice.

Redeemable noncontrolling interests is presented outside of permanent equity. Allocation of net income or loss to redeemable noncontrolling interests is based upon their ownership percentage during the period. The carrying amount of redeemable noncontrolling interests is adjusted to its redemption value at the end of each reporting period to an amount not less than its initial carrying value, with such adjustments recognized in additional paid-in capital.

Noncontrolling Interests in Investment Entities—This represents predominantly interests in consolidated investment entities held by private investment funds or retail companies managed by the Company or held by third party joint venture partners. Allocation of net income or loss is generally based upon relative ownership interests held by equity owners in each investment entity, or based upon contractual arrangements that may provide for disproportionate allocation of economic returns among equity interests, including using a hypothetical liquidation at book value basis, where applicable and substantive.

Noncontrolling Interests in Operating Company—This represents membership interests in OP held primarily by certain employees of the Company. Noncontrolling interests in OP are allocated a share of net income or loss in OP based on their weighted average ownership interest in OP during the period. Noncontrolling interests in OP have the right to require OP to redeem part or all of such member’s membership units in OP ("OP Units") for cash based on the market value of an equivalent number of shares of class A common stock at the time of redemption, or at the Company's election as managing member of OP, through issuance of shares of class A common stock (registered or unregistered) on a one-for-one basis. At the end of each reporting period, noncontrolling interests in OP is adjusted to reflect their ownership percentage in OP at the end of the period, through a reallocation between controlling and noncontrolling interests in OP, as applicable.

Reclassifications

Beginning in the fourth quarter of 2018, the portion of carried interests earned by the Company that is allocated to employees is presented as carried interest and incentive compensation on the statement of operations. Such amounts had previously been presented as net income attributable to noncontrolling interests in investment entities. For the three months ended March 31, 2018, approximately $0.9 million was reclassified from net income attributable to noncontrolling interests in investment entities to compensation expense in the statement of operations to conform to the current period presentation. The reclassification increased net loss but did not have an impact on net loss attributable to Colony Capital, Inc. and net loss attributable to common stockholders. 

Accounting Standards Adopted in 2019

Leases

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02, Leases, which amended lease accounting standards. ASU 2016-02, 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, with a cumulative effect adjustment to beginning retained earnings. Comparative periods have not been restated and continue to be 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 on accounting for initial direct costs 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

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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 purchase of the leased asset, or as an operating lease. The Company's operating leases relate primarily to ground leases acquired with real estate and leases for its corporate offices. 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 makes variable lease payments for: (i) leases with rental payments that are adjusted periodically for inflation or increases in property fair value, (ii) hotel ground leases with rental payments calculated based on a percentage of revenue over contractual levels, or (iii) nonlease services, such as common area maintenance in net leases. Variable lease payments are not included in lease liability and are instead recognized as lease expense when 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 ROU assets totaling $143.7 million in other assets and corresponding operating lease liabilities totaling $126.8 million in accrued and other liabilities for ground leases in its real estate portfolio and corporate office leases. 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. The Company has operating leases with property tenants that expire at various dates through 2038 with renewal options typically exercised at the lessee's election. 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, resident fee income from healthcare properties, and tenant reimbursements, such as common area maintenance costs and other costs associated with 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 and resident fee income 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 and resident fee income from ancillary services provided to nursing home residents.

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 of all rents over the life of the lease 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 existing allowance for bad debts, is not probable and recorded a cumulative adjustment of $4.5 million to reduce beginning equity.

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Beginning January 1, 2019, the Company also made the accounting policy election to present on a net basis sales and similar taxes assessed by a governmental authority that is imposed on specific lease revenue producing transactions with related collections from lessees. Property taxes and insurance paid directly by lessees to third parties on behalf of the Company are no longer recognized in the statement of operations, while such amounts paid by the Company and reimbursed by lessees continue to be presented as gross property operating income and expenses.

Hedge Accounting

In August 2017, the FASB issued ASU No. 2017-12, Targeted Improvements to Accounting for Hedging Activities, which simplifies and expands the application of hedge accounting. This standard amends hedge accounting recognition and presentation, including eliminating the requirement to separately measure and present hedge ineffectiveness as well as presenting the entire fair value change of a hedging instrument in the same income statement line as the hedged item. The new guidance also provides alternatives for applying hedge accounting to additional hedging strategies, and easing requirements for effectiveness testing and hedging documentation, although the "highly effective" threshold for a qualifying hedging relationship has not changed. Revised disclosures include tabular disclosures that focus on the effect of hedge accounting by income statement line item. Transition will generally be on a modified retrospective basis applied to existing hedging relationships as of date of adoption, with prospective application for income statement presentation and disclosure, and specific transition elections are available to modify existing hedge documentation.

The Company adopted the standard on its effective date of January 1, 2019. Upon adoption, as it relates to the Company’s cash flow and net investment hedges, the Company records the entire change in fair value of the hedging instrument (other than amounts excluded from assessment of hedge effectiveness for net investment hedges) in other comprehensive income and no hedge ineffectiveness is recorded in earnings. Additionally, subsequent to initial quantitative hedge assessment, the Company has elected to perform effectiveness testing qualitatively so long as the Company can reasonably support an expectation that the hedge is highly effective now and in subsequent periods. As the standard allows more flexibility in hedging interest rate risk in cash flow hedges beyond a specified benchmark rate, the Company may be able to designate in the future other contractually specified variable interest rate as the hedged risk, which if effective, could decrease fluctuations in earnings. There was no impact to the Company's financial condition and results of operations upon adoption of this standard.

Future Application of Accounting Standards

Credit Losses

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses, which amends the credit impairment model for financial instruments. The existing incurred loss model will be replaced with a lifetime current expected credit loss ("CECL") model for financial instruments carried at amortized cost and off-balance sheet credit exposures, such as loans, loan commitments, held-to-maturity ("HTM") debt securities, financial guarantees, net investment in leases, reinsurance and trade receivables, which will generally result in earlier recognition of allowance for losses. For available-for-sale ("AFS") debt securities, unrealized credit losses will be recognized as allowances rather than reductions in amortized cost basis and elimination of the other than temporary impairment ("OTTI") concept will result in more frequent estimation of credit losses. The accounting model for purchased credit-impaired loans and debt securities will be simplified, including elimination of some of the asymmetrical treatment between credit losses and credit recoveries, to be consistent with the CECL model for originated and purchased non-credit-impaired assets. The existing model for beneficial interests that are not of high credit quality will be amended to conform to the new impairment models for HTM and AFS debt securities. Expanded disclosures on credit risk include credit quality indicators by vintage for financing receivables and net investment in leases. Transition will generally be on a modified retrospective basis, with prospective application for other than temporarily impaired debt securities and purchased credit-impaired assets. ASU No. 2016-13 is effective for fiscal years and interim periods beginning after December 15, 2019. Early adoption is permitted for annual and interim periods beginning after December 15, 2018. The Company expects that recognition of credit losses will generally be accelerated under the CECL model. Evaluation of the impact of this new guidance is ongoing.

Fair Value Disclosures

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurements. The ASU requires new disclosures of changes in unrealized gains and losses in other comprehensive income for recurring Level 3 fair value measurements 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 previously required disclosures are 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.

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Additionally, the new guidance clarifies or modifies certain existing disclosures, including clarifying that information about measurement uncertainty of Level 3 fair values should be as of reporting date and requiring disclosures of the timing of liquidity events for investments measured under the net asset value ("NAV") practical expedient, but only if the investee has communicated this information or has announced it publicly. The provisions on new disclosures and modification to disclosure of Level 3 measurement uncertainty are to be applied prospectively, while all other provisions are to be applied retrospectively. ASU No. 2018-13 is effective for fiscal years and interim periods beginning after December 15, 2019. Early adoption is permitted in an interim period for which financial statements have not been issued, and may be made only to provisions that eliminate or modify existing disclosures. 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 ASU No. 2018-17, Targeted Improvements to Related Party Guidance for Variable Interest Entities. The ASU 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. ASU No. 2018-17 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. Real Estate

The Company's real estate held for investment was as follows:

(In thousands)	March 31, 2019			December 31, 2018
Land	$	2,079,432		$	1,950,412
Buildings and improvements	12,729,805			11,895,642
Tenant improvements	173,914			163,397
Furniture, fixtures and equipment	398,918			389,969
Construction in progress	207,684			155,511
	15,589,753			14,554,931
Less: Accumulated depreciation	(1,053,712		)	(935,917		)
Real estate assets, net	$	14,536,041		$	13,619,014

Real Estate Sales

Results from sales of real estate were as follows:

	Three Months Ended March 31,
(In thousands)	2019		2018
Proceeds from sales of real estate	$	294,667	$	112,562
Gain on sale of real estate	52,301		18,444

Real estate held for sale is presented in Note 7.

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Real Estate Acquisitions

The following table summarizes the Company's real estate acquisitions, excluding real estate acquired as part of business combinations.

($ in thousands)						Purchase Price Allocation (1)
	Acquisition Date	Property Type and Location	Number of Buildings	Purchase Price (1)		Land		Building and Improvements		Lease Intangible Assets		Lease Intangible Liabilities
Three Months Ended March 31, 2019
Asset Acquisitions(2)
	February	Bulk Industrial—Various in U.S.	6	$	373,182	$	49,446	$	296,348	$	27,553	$	(165	)
	Various	Light industrial—Various in U.S.(3)	47	789,486		144,250		612,582		35,519		(2,865		)
				$	1,162,668	$	193,696	$	908,930	$	63,072	$	(3,030	)
Year Ended Ended December 31, 2018
Asset Acquisitions
	September	Healthcare—United Kingdom(4)	1	$	24,444	$	10,231	$	12,733	$	1,480	$	—
	November	Office and Industrial—France	220	478,844		109,858		330,752		38,234		—
	Various	Light industrial—Various in U.S.(3)	40	569,442		111,194		433,040		30,183		(4,975		)
				$	1,072,730	$	231,283	$	776,525	$	69,897	$	(4,975	)

__________

⁽¹⁾  Dollar amounts of purchase price and allocation to assets acquired and liabilities assumed are translated using foreign exchange rates as of the respective dates of acquisition, where applicable.

⁽²⁾  Useful life of real estate acquired in 2019 is 37 to 49 years for buildings, 12 to 14 years for site improvements, 4 to 11 years for tenant improvements and 1 to 15 years for lease intangibles (based on remaining lease terms).

⁽³⁾  Includes acquisition of land totaling $5.8 million in the three months ended March 31, 2019 and $13.1 million in the year endedDecember 31, 2018 for co-development with operating partners.

⁽⁴⁾  Net leased senior housing acquired pursuant to a purchase option under the Company's development facility to the healthcare operator at a purchase price equivalent to the outstanding loan balance.

Depreciation and Impairment

Depreciation expense on real estate was $121.5 million and $118.4 million and for the three months endedMarch 31, 2019 and 2018, respectively.

Refer to Note 11 for discussion of impairment on real estate.

Property Operating Income

For the three months ended March 31, 2018, property operating income was composed of $270.7 million of total lease revenue and $284.0 million of hotel operating income. For the three months ended March 31, 2019, the components of property operating income were as follows.

(In thousands)	Three Months Ended March 31, 2019
Lease revenue:
Fixed lease revenue	$	231,561
Variable lease revenue	36,434
	267,995
Hotel operating income	272,135
	$	540,130

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Future Fixed Lease Revenue

At March 31, 2019, future fixed lease revenue under noncancelable operating leases for real estate held for investment were as follows:

Year Ending December 31,	(In thousands)
Remaining 2019	$	419,198
2020	525,601
2021	470,848
2022	426,274
2023	375,828
2024 and thereafter	1,303,576
Total	$	3,521,325

At December 31, 2018, future contractual minimum lease payments to be received under noncancelable operating leases for real estate held for investment were as follows:

Year Ending December 31,	(In thousands)
2019	$	495,765
2020	464,229
2021	413,416
2022	372,432
2023	327,836
2024 and thereafter	1,123,879
Total	$	3,197,557

Commitments and Contractual Obligations

Purchase Commitments—At March 31, 2019, the Company had funded aggregate deposits of $14.4 million with remaining unfunded purchase commitments totaling $363.5 million for the acquisition of 39 light industrial buildings in the industrial segment, of which eight are under construction.

Guarantee Agreements—In July 2017, the Company and certain investment vehicles managed by the Company took control of a portfolio of limited service hotels, primarily located across the Southwest and Midwest U.S. (the "THL Hotel Portfolio") through a consensual foreclosure following maturity default by the borrower on the junior mezzanine loan owned by the Company. In connection with the foreclosure, the Company entered into guarantee agreements with various hotel franchisors, pursuant to which the Company guaranteed the payment of its obligations as a franchisee, including payments of franchise fees and marketing fees for the term of the agreements, which expire between 2027 and 2032. In the event of default or termination of the franchise agreements, the Company is liable for liquidated damages not to exceed $75 million. The Company had similar provisions related to its core hotel portfolio in the hospitality segment, but has met the required minimum payments under the respective franchise agreements and no longer has an obligation to the franchisors.

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4. Loans Receivable

The following table provides a summary of the Company’s loans held for investment, including purchased credit-impaired ("PCI") loans:

	March 31, 2019								December 31, 2018
($ in thousands)	Unpaid Principal Balance		Carrying Value			Weighted Average Coupon		Weighted Average Maturity in Years	Unpaid Principal Balance		Carrying Value			Weighted Average Coupon		Weighted Average Maturity in Years
Loans at amortized cost
Non-PCI Loans
Fixed rate
Mortgage loans	$	573,062	$	599,479		10.5	%	2.0	$	643,973	$	667,590		10.7	%	2.2
Mezzanine loans	377,336		374,650			12.5	%	1.2	357,590		354,326			12.5	%	1.5
Corporate loans	107,792		106,658			12.3	%	5.7	108,944		107,796			12.3	%	5.8
	1,058,190		1,080,787						1,110,507		1,129,712
Variable rate
Mortgage loans	175,313		175,650			4.4	%	0.4	178,650		179,711			4.3	%	0.1
Mezzanine loans	35,899		35,565			13.5	%	2.3	27,772		27,417			13.4	%	2.5
	211,212		211,215						206,422		207,128
	1,269,402		1,292,002						1,316,929		1,336,840
PCI Loans
Mortgage loans	1,289,671		337,357						1,324,287		351,646
Mezzanine loans	7,425		3,671						7,425		3,671
	1,297,096		341,028						1,331,712		355,317
Allowance for loan losses			(36,357		)						(32,940		)
Loans receivable, net	$	2,566,498	$	1,596,673					$	2,648,641	$	1,659,217

Nonaccrual and Past Due Loans

Non-PCI loans, excluding loans carried at fair value, that are 90 days or more past due as to principal or interest, or where reasonable doubt exists as to timely collection, are generally considered nonperforming and placed on nonaccrual status.

The following table provides an aging summary of non-PCI loans held for investment at carrying values before allowance for loan losses:

(In thousands)	Current or Less Than 30 Days Past Due		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due and Nonaccrual		Total Non-PCI Loans
March 31, 2019	$	1,079,224	$	44,325	$	—	$	168,453	$	1,292,002
December 31, 2018	1,052,303		—		44,392		240,145		1,336,840

Troubled Debt Restructuring

During the three months endedMarch 31, 2019 and 2018, there were no loans modified as TDRs, in which the Company provided borrowers, who are experiencing financial difficulties, with various concessions in interest rates, payment terms or default waivers. At both March 31, 2019 and December 31, 2018, the Company had one existing TDR loan that was in maturity default, with a carrying value before allowance for loan loss of $37.8 million, and for which the Company had previously recorded an allowance for loan loss. The Company has no additional lending commitment on this TDR loan.

Non-PCI Impaired Loans

Non-PCI loans, excluding loans carried at fair value, are identified as impaired when it is no longer probable that interest or principal will be collected according to the contractual terms of the original loan agreement. Non-PCI impaired loans include predominantly loans under nonaccrual, performing and nonperforming TDRs, as well as loans in maturity default.

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The following table summarizes non-PCI impaired loans:

			Gross Carrying Value
(In thousands)	Unpaid Principal Balance		With Allowance for Loan Losses		Without Allowance for Loan Losses		Total		Allowance for Loan Losses
March 31, 2019	$	320,211	$	74,254	$	250,073	$	324,327	$	18,115
December 31, 2018	280,337		75,179		206,628		281,807		18,304

The average carrying value and interest income recognized on non-PCI impaired loans were as follows.

	Three Months Ended March 31,
(In thousands)	2019		2018
Average carrying value before allowance for loan losses	$	244,532	$	273,410
Total interest income recognized during the period impaired	3,003		29
Cash basis interest income recognized	447		—

Purchased Credit-Impaired Loans

PCI loans are acquired loans with evidence of credit quality deterioration for which it is probable at acquisition that the Company will collect less than the contractually required payments. PCI loans are recorded at the initial investment in the loans and accreted to the estimated cash flows expected to be collected as measured at acquisition date. The excess of cash flows expected to be collected, measured as of acquisition date, over the estimated fair value represents the accretable yield and is recognized in interest income over the remaining life of the loan. The difference between contractually required payments as of the acquisition date and the cash flows expected to be collected, which represents the nonaccretable difference, is not recognized as an adjustment of yield, loss accrual or valuation allowance.

Factors that most significantly affect estimates of cash flows expected to be collected, and accordingly the accretable yield, include: (i) estimate of the remaining life of acquired loans which may change the amount of future interest income; (ii) changes to prepayment assumptions; (iii) changes to collateral value assumptions for loans expected to foreclose; and (iv) changes in interest rates on variable rate loans.

There were no PCI loans acquired in the three months ended March 31, 2019 and 2018.

Changes in accretable yield of PCI loans were as follows:

	Three Months Ended March 31,
(In thousands)	2019			2018
Beginning accretable yield	$	9,620		$	42,435
Dispositions	—			(2,565		)
Changes in accretable yield	1,442			1,989
Accretion recognized in earnings	(3,087		)	(12,579		)
Effect of changes in foreign exchange rates	(40		)	354
Ending accretable yield	$	7,935		$	29,634

The Company applied either the cash basis or cost recovery method for recognition of interest income on PCI loans with carrying value before allowance for loan losses of $171.6 million at March 31, 2019 and $175.6 million at December 31, 2018, as the Company did not have reasonable expectations of the timing and amount of future cash receipts on these loans.

Allowance for Loan Losses

On a periodic basis, the Company analyzes the extent and effect of any credit migration from underwriting and the initial investment review associated with the performance of a loan and/or value of its underlying collateral, financial and operating capability of the borrower or sponsor, as well as amount and status of any senior loan, where applicable. Specifically, operating results of collateral properties and any cash reserves are analyzed and used to assess whether cash from operations are sufficient to cover debt service requirements currently and into the future, ability of the borrower to refinance the loan, liquidation value of collateral properties, financial wherewithal of any loan guarantors as well as the borrower’s competency in managing and operating the collateral properties. Such analysis is performed at least quarterly, or more often as needed when impairment indicators are present.

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Allowance for loan losses represents the estimated probable credit losses inherent in loans held for investment at balance sheet date and is generally measured as the difference between the carrying value of the loan and either the present value of cash flows expected to be collected or an observable market price for the loan.

For PCI loans, provision for loan losses is recorded if it is assessed that decreases in cash flows expected to be collected would result in a decrease in the estimated fair value of the loan below its amortized cost.

The allowance for loan losses and related carrying values of loans held for investment were as follows:

	March 31, 2019				December 31, 2018
(In thousands)	Allowance for Loan Losses		Carrying Value		Allowance for Loan Losses		Carrying Value
Non-PCI loans	$	18,115	$	74,254	$	18,304	$	75,179
PCI loans	18,242		67,650		14,636		54,440
	$	36,357	$	141,904	$	32,940	$	129,619

Changes in allowance for loan losses is presented below:

	Three Months Ended March 31,
(In thousands)	2019			2018
Allowance for loan losses at January 1	$	32,940		$	52,709
Contribution to Colony Credit	—			(518		)
Provision for loan losses, net	3,611			5,375
Charge-off	(194		)	(3,586		)
Allowance for loan losses at March 31	$	36,357		$	53,980

Provision for loan losses by loan type is as follows:

	Three Months Ended March 31,
(In thousands)	2019		2018
Non-PCI loans	$	—	$	2,662
PCI loans	3,611		2,713
Total provision for loan losses, net	$	3,611	$	5,375

Lending Commitments

The Company has lending commitments to borrowers pursuant to certain loan agreements in which the borrower may submit a request for funding contingent on achieving certain criteria, which must be approved by the Company as lender, such as leasing, performance of capital expenditures and construction in progress with an approved budget. At March 31, 2019, total unfunded lending commitments was $227.5 million, of which the Company's share was $99.8 million, net of amounts attributable to noncontrolling interests.

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5. Equity and Debt Investments

The Company's equity investments and debt securities are represented by the following:

(In thousands)	March 31, 2019		December 31, 2018
Equity Investments
Equity method investments
Investment ventures	$	2,282,817	$	2,151,847
Private funds	142,388		138,248
	2,425,205		2,290,095
Other equity investments
Marketable equity securities	131,226		36,438
Investment ventures	96,612		95,196
Private fund and retail company	31,024		24,607
Total equity investments	2,684,067		2,446,336
Debt Securities
N-Star CDO bonds, available for sale	64,410		64,127
CMBS of consolidated fund, at fair value	21,139		32,706
Total debt securities	85,549		96,833
Equity and debt investments	$	2,769,616	$	2,543,169

Equity Investments

The Company's equity investments represent noncontrolling equity interests in various entities, including investments for which fair value option was elected.

Equity Method Investments

The Company owns significant interests in Colony Credit and NRE, both publicly-traded REITs that it manages. The Company accounts for its investments under the equity method as it exercises significant influence over operating and financial policies of these entities through a combination of its ownership interest, its role as the external manager and board representation, but does not control these entities. The Company also owns equity method investments that are structured as joint ventures with one or more private funds or other investment vehicles managed by the Company, or with third party joint venture partners. These investment ventures are generally capitalized through equity contributions from the members and/or leveraged through various financing arrangements. The Company elected the fair value option to account for its interests in certain investment ventures and limited partnership interests in third party private equity funds (see Note 11).

The liabilities of the equity method investment entities may only be settled using the assets of these entities and there is no recourse to the general credit of either the Company or the other investors for the obligations of these investment entities. Neither the Company nor the other investors are required to provide financial or other support in excess of their capital commitments. The Company’s exposure to the investment entities is limited to its equity method investment balance.

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The Company’s investments accounted for under the equity method, including investments for which fair value option was elected, are summarized below:

($ in thousands)			Ownership Interestat March 31, 2019 (1)	Carrying Value at
Investments	Description			March 31, 2019		December 31, 2018
Colony Credit Real Estate, Inc.	Common equity in publicly traded commercial real estate credit REIT managed by the Company and membership units in its operating subsidiary	(2)	36.4%	$	1,027,345	$	1,037,754
NorthStar Realty Europe Corp.	Common equity in publicly traded equity REIT managed by the Company	(2)	11.3%	88,058		87,696
RXR Realty	Common equity in investment venture with a real estate investor, developer and investment manager		27.2%	100,386		95,418
Preferred equity	Preferred equity investments with underlying real estate	(3)	NA	221,183		219,913
ADC investments	Investments in acquisition, development and construction loans in which the Company participates in residual profits from the projects, and the risk and rewards of the arrangements are more similar to those associated with investments in joint ventures	(4)	Various	502,023		481,477
Private funds	General partner and/or limited partner interests in private funds (excluding carried interest allocation)		Various	111,183		110,610
Private funds—carried interest	Disproportionate allocation of returns to the Company as general partner or equivalent based on the extent to which cumulative performance of the fund exceeds minimum return hurdles		Various	25,850		21,730
Other investment ventures	Interests in 17 investments at March 31, 2019		Various	171,046		154,412
Fair value option	Interests in initial stage, real estate development and hotel ventures and limited partnership interests in private equity funds		Various	178,131		81,085
				$	2,425,205	$	2,290,095

__________

⁽¹⁾ The Company's ownership interest represents capital contributed to date and may not be reflective of the Company's economic interest in the entity because of provisions in operating agreements governing various matters, such as classes of partner or member interests, allocations of profits and losses, preferential returns and guaranty of debt. Each equity method investment has been determined to be either a VIE for which the Company was not deemed to be the primary beneficiary or a voting interest entity in which the Company does not have the power to control through a majority of voting interest or through other arrangements.

⁽²⁾ These entities are governed by their respective boards of directors. The Company's role as manager is under the supervision and direction of such entity's board of directors, which includes representatives from the Company but the majority of whom are independent directors.

In connection with the Company's investment in NRE, the Company has an ownership waiver under NRE’s charter which allows the Company to own up to 45% of NRE’s common stock, and to the extent the Company owns more than 25% of NRE’s common stock, the Company will vote the excess shares in the same proportion that the remaining NRE shares not owned by the Company are voted.

⁽³⁾  Some preferred equity investments may not have a stated ownership interest.

⁽⁴⁾  The Company owns varying levels of stated equity interests in certain acquisition, development and construction ("ADC") arrangements as well as profit participation interests without a stated ownership interest in other ADC arrangements.

Impairment of Equity Method Investments

The Company evaluates its equity method investments for other-than-temporary impairment ("OTTI").

Impairment of $2.6 million was recorded in equity method earnings for the three months endedMarch 31, 2019 based upon a pending sale of the underlying real estate held by the investee.

No OTTI was recognized for the three months ended March 31, 2018. However, impairment of $61.2 million was subsequently recorded during the year ended December 31, 2018. In making its assessment, the Company considered a variety of factors and assumptions specific to each investment, including: offer prices on the Company's investment; expected payoffs from sales of the underlying business of the investee; estimated fair values or sale proceeds of the underlying real estate held by the investee; estimated enterprise value of the investee; or discounted cash flows from the investment.

Colony Credit—In January 2018, the Company deconsolidated the CLNY Contributed Entities and measured its interest in Colony Credit based upon its proportionate share of Colony Credit's estimated fair value at the closing date of the Combination. The excess of fair value over carrying value of the Company's equity interest in the CLNY Investment Entities upon deconsolidation of $9.9 million was recognized in other gain on the consolidated statement of operations in the three months ended March 31, 2018.

Colony Credit’s class A common stock had traded between $15.32 and $23.23 per share since its inception through March 29, 2019, the last trading day of the first quarter. At March 31, 2019, the Company's investment in Colony Credit had a carrying value of $1.03 billion or $21.43 per share, which was approximately $276.7 million in excess of its fair

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value of $750.7 million based upon the closing stock price of $15.66 per share on March 29, 2019. The Company believes that the carrying value of its investment in Colony Credit is recoverable in the near term and determined that its investment in Colony Credit was not other-than-temporarily impaired as of March 31, 2019. If Colony Credit's common stock continues to trade below the Company's carrying value for a prolonged period of time, an other-than-temporary impairment may be recognized in the future.

Other Equity Investments

Other equity investments that do not qualify for equity method accounting consist of the following:

Marketable Equity Securities—These are equity investment in a third party managed mutual fund and publicly traded equity securities held by a consolidated private open-end fund. The equity securities of the consolidated fund comprise listed stock predominantly in the U.S. and to a lesser extent, in the United Kingdom, and primarily in the financial, real estate and consumer sectors.

Investment Ventures—This represents primarily common equity in the Albertsons/Safeway supermarket chain (with 50% ownership by a co-investment partner) which was initially recorded at cost and prior to 2018, adjusted for distributions in excess of cumulative earnings. There were no adjustments for any impairment or observable price changes.

Private Fund and Retail Company—This represents limited partnership interest in a third party private fund sponsored by an equity method investee and interest in the Company's sponsored non-traded REIT, NorthStar Healthcare Income, Inc. ("NorthStar Healthcare"), for which the Company elected the NAV practical expedient (see Note 11).

Investment Commitments

Investment Ventures—Pursuant to the operating agreements of certain unconsolidated ventures, the venture partners may be required to fund additional amounts for future investments, unfunded lending commitments, ordinary operating costs, guaranties or commitments of the venture entities. The Company also has lending commitments under ADC arrangements which are accounted for as equity method investments. At March 31, 2019, the Company’s share of these commitments was $31.3 million.

Private Funds—At March 31, 2019, the Company has unfunded commitments of $270.8 million to funds sponsored or co-sponsored by the Company that are accounted for as equity method investments.

Debt Securities

The Company's investment in debt securities is composed of N-Star CDO Bonds, classified as available-for-sale ("AFS") and commercial mortgage-backed securities (“CMBS”) held by a consolidated sponsored investment company that is currently in liquidation, accounted for at fair value through earnings.

AFS Debt Securities

The N-Star CDO bonds are investment-grade subordinate bonds retained by NRF from its sponsored collateralized debt obligations ("CDOs"), and CDO bonds originally issued by NRF that were subsequently repurchased by NRF at a discount. These CDOs are collateralized primarily by commercial real estate ("CRE") debt and CRE securities.

The following tables summarize the balance and activities of the N-Star CDO bonds.

			Gross Cumulative Unrealized
(in thousands)	Amortized Cost		Gains		Losses			Fair Value
March 31, 2019	$	65,732	$	2,180	$	(3,502	)	$	64,410
December 31, 2018	67,513		1,565		(4,951		)	64,127

Results from disposition of N-Star CDO bonds, with realized gains (losses) recorded in other gain (loss), were as follows for the three months ended March 31, 2018. There were no dispositions in the three months endedMarch 31, 2019.

	Three Months Ended March 31,
(In thousands)	2018
Proceeds from sale	$	63,185
Gross realized gain (including $8,205 of unrealized gain transferred from AOCI)	8,384
Gross realized loss	499

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Impairment of AFS Debt Securities

The following table presents AFS debt securities that have been in a gross unrealized loss position:

	March 31, 2019								December 31, 2018
	Less Than 12 Months				More Than 12 Months				Less Than 12 Months
(In thousands)	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
N-Star CDO bonds	$	9,194	$	409	$	42,865	$	3,093	$	54,459	$	4,951

The Company performs an assessment, at least quarterly, to determine whether a decline in fair value below

amortized cost of AFS debt securities is other than temporary. OTTI exists when either (i) the holder has the intent to sell

the impaired security, (ii) it is more likely than not the holder will be required to sell the security, or (iii) the holder does not

expect to recover the entire amortized cost of the security. In assessing OTTI and estimating future expected cash flows,

factors considered include, but are not limited to, credit rating of the security, financial condition of the issuer, defaults for

similar securities, performance and value of assets underlying an asset-backed security.

OTTI loss of $0.7 million was recorded during the three months endedMarch 31, 2019. For the three months ended March 31, 2018, the Company recorded $4.4 million of OTTI loss in other gain (loss) due to an adverse change in expected cash flows on N-Star CDOs, and CMBS held by consolidated N-Star CDOs which were subsequently deconsolidated in the second quarter of 2018. The Company believed that it was not likely that it would recover the amortized cost on these securities prior to selling them.

At March 31, 2019 and December 31, 2018, the Company believed that the N-Star CDOs with unrealized loss in accumulated other comprehensive income were not other than temporarily impaired as it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases.

6. Goodwill, Deferred Leasing Costs and Other Intangibles

Goodwill

The following table presents the goodwill balance by reportable segment.

(In thousands)	March 31, 2019		December 31, 2018
Balance by reportable segment:
Industrial	$	20,000	$	20,000
Investment management	1,514,561		1,514,561
	$	1,534,561