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Share Name | Share Symbol | Market | Type |
---|---|---|---|
NorthStar Realty Europe Corp | NYSE:NRE | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 17.02 | 0 | 01:00:00 |
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ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Maryland
(State or Other Jurisdiction of
Incorporation or
Organization)
|
32-0468861
(IRS Employer
Identification No.)
|
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
|
Large accelerated filer
o
|
|
Accelerated filer
x
|
|
Non-accelerated filer
o
|
|
Smaller reporting company
o
Emerging growth company
x
|
|
Index
|
|
Page
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||
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|
•
|
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;
|
•
|
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.
|
|
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
|
|
|
|
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
|
|
|
|
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
|
|
(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.
|
(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.
|
|
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
|
|
|
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
|
|
1.
|
Formation and Organization
|
2.
|
Summary of Significant Accounting Policies
|
|
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.
|
|
|
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
|
|
|
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
|
|
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
.
|
(1)
|
Translated to the U.S. dollar using the currency exchange rate as of December 31, 2018.
|
3.
|
Operating Real Estate
|
|
|
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
|
|
|
|
|
|
|
|
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 ended
June 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.
|
|
|
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
|
|
|
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.
|
5.
|
Borrowings
|
|
|
|
|
|
|
|
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.
|
|
|
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
|
|
|
|
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
|
|
•
|
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
.
|
•
|
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
.
|
7.
|
Compensation Expense
|
|
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
|
|
|
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
|
10.
|
Risk Management and Derivative Activities
|
|
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
|
|
|
|
|
|
|
|
|
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 ended
June 30, 2019
and
2018
of
$(1.9) million
and
$0.4 million
, respectively.
|
11.
|
Fair Value
|
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.
|
|
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.
|
12.
|
Commitments and Contingencies
|
13.
|
Segment Reporting
|
•
|
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.
|
|
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.
|
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
|
|
|
|
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
|
|
|
|
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
.
|
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.
|
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.
|
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.
|
|
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
|
)%
|
|
|
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
|
|
|
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 ended
June 30, 2018
is translated using the average exchange rate for the
three months ended
June 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 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.
|
|
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
|
)%
|
|
|
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
|
|
|
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 ended
June 30, 2018
is translated using the average exchange rate for the
six months ended
June 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 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.
|
•
|
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.
|
•
|
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.
|
|
|
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
|
)
|
•
|
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.
|
•
|
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.
|
|
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 ended
June 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 ended
June 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 ended
June 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 ended
June 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 ended
June 30, 2019
CAD includes a
$1.4 million
net gain related to the settlement of foreign currency derivatives.
Three months ended
June 30, 2018
CAD includes a
$1.0 million
net loss related to the settlement of foreign currency derivatives.
|
(4)
|
Six months ended
June 30, 2019
CAD includes a
$2.6 million
net gain related to the settlement of foreign currency derivatives.
Six months ended
June 30, 2018
CAD includes a $2.4 million net loss related to the settlement of foreign currency derivatives.
|
(5)
|
Three months ended
June 30, 2019
reflects an adjustment to exclude
$1.8 million
of transaction costs and
$0.5 million
related to extinguishment of debt.
Three months ended
June 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 ended
June 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 ended
June 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.
|
|
|
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 ended
June 30, 2019
primarily excludes
$(0.3) million
of amortization of above/below market leases.
Three months ended
June 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 ended
June 30, 2019
primarily excludes
$(0.5) million
of amortization of above/below market leases.
Six months ended
June 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 ended
June 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.
|
|
•
|
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.
|
Exhibit
Number
|
|
Description of Exhibit
|
|
2.1
|
|
|
|
3.1
|
|
|
|
3.2
|
|
|
|
10.1
|
|
*
|
|
10.2
|
|
*
|
|
10.3
|
|
*
|
|
31.1
|
|
*
|
|
31.2
|
|
*
|
|
32.1
|
|
*
|
|
32.2
|
|
*
|
|
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)
|
|
|
|
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
|
1 Year NorthStar Realty Europe Chart |
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