March 31, 2018 (Unaudited) December 31, 2017
Assets
Cash and cash equivalents $ 334,952
$ 25,204
Restricted cash 117,443
41,901
Loans held for investment, net 1,816,218
1,300,784
Real estate securities, available for sale, at fair value 176,194
—
Real estate, net 1,495,096
219,740
Investments in unconsolidated ventures ($257,495 and $24,417 at fair value, respectively) 756,468
203,720
Receivables, net 60,999
35,512
Deferred leasing costs and intangible assets, net 113,239
11,014
Other assets 56,998
1,527
Mortgage loans held in securitization trusts, at fair value 3,193,298
—
Total assets $ 8,120,905
$ 1,839,402
Liabilities
Securitization bonds payable, net $ 172,113
$ 108,679
Mortgage and other notes payable, net 924,018
280,982
Credit facilities 602,277
—
Due to related party (Note 11) 12,649
—
Accrued and other liabilities 49,896
5,175
Intangible liabilities, net 19,637
36
Escrow deposits payable 67,757
36,960
Dividends payable 18,994
—
Mortgage obligations issued by securitization trusts, at fair value 3,051,315
—
Total liabilities 4,918,656
431,832
Commitments and contingencies (Note 10)

Equity
Stockholders’ equity
Preferred stock, $0.01 par value, 50,000,000 shares authorized, no shares issued and outstanding as of March 31, 2018 and December 31, 2017 —
—
Common stock, $0.01 par value per share
Class A, 905,000,000 shares authorized, 83,487,352 and 100 shares issued and outstanding as of March 31, 2018 and December 31, 2017, respectively 835
—
Class B-3, 45,000,000 shares authorized, 44,399,444 and no shares issued and outstanding as of March 31, 2018 and December 31, 2017, respectively 444
—
Additional paid-in capital 2,894,492
821,031
Retained earnings 136,446
258,777
Accumulated other comprehensive income (loss) (1,848 ) —
Total stockholders’ equity 3,030,369
1,079,808
Noncontrolling interests in investment entities 98,311
327,762
Noncontrolling interests in the Operating Partnership 73,569
—
Total equity 3,202,249
1,407,570
Total liabilities and equity $ 8,120,905
$ 1,839,402

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

COLONY ~~NORTHSTAR~~ CREDIT REAL ESTATE, INC.

CONSOLIDATED BALANCE SHEETS

(~~Dollars~~ in Thousands)

The following table presents assets and liabilities of securitization trusts and certain real estate properties that have ~~non-controlling~~noncontrolling interests as variable interest entities for which the Company is determined to be the primary beneficiary.


	June 30, 2020 (Unaudited)		December 31, 2019
Assets
Cash and cash equivalents	$	15,688	$	14,109
Restricted cash	20,055		25,646
Loans and preferred equity held for investment, net	996,148		1,016,781
Real estate, net	417,227		381,608
Investments in unconsolidated ventures	292,298		—
Receivables, net	27,224		26,044
Deferred leasing costs and intangible assets, net	56,461		36,323
Assets held for sale	188,477		102,397
Other assets	24,537		26,463
Mortgage loans held in securitization trusts, at fair value	1,839,953		1,872,970
Total assets	$	3,878,068	$	3,502,341
Liabilities
Securitization bonds payable, net	$	834,088	$	833,153
Mortgage and other notes payable, net	501,590		341,480
Credit facilities	7,106		23,882
Accrued and other liabilities	94,771		124,969
Intangible liabilities, net	8,378		20,230
Liabilities related to assets held for sale	10,842		251
Escrow deposits payable	4,719		10,485
Mortgage obligations issued by securitization trusts, at fair value	1,758,325		1,762,914
Total liabilities	$	3,219,819	$	3,117,364

March 31, 2018 (Unaudited) December 31, 2017
Assets
Cash and cash equivalents $ 45,309
$ 1,320
Restricted cash 29,281
24,928
Loans held for investment, net 459,882
379,305
Real estate, net 734,815
8,073
Receivables, net 48,869
11,994
Deferred leasing costs and intangible assets, net 69,709
—
Other assets 3,197
38
Mortgage loans held in securitization trusts, at fair value 3,193,298
—
Total assets $ 4,584,360
$ 425,658
Liabilities
Securitization bonds payable, net $ 91,320
$ 108,679
Mortgage and other notes payable, net 433,054
—
Accrued and other liabilities 29,410
3,764
Intangible liabilities, net 15,562
—
Escrow deposits payable 19,260
24,928
Mortgage obligations issued by securitization trusts, at fair value 3,051,315
—
Total liabilities $ 3,639,921
$ 137,371

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

Table of Contents

COLONY ~~NORTHSTAR~~ CREDIT REAL ESTATE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in Thousands, Except Per Share Data)

(Unaudited)


	Three Months Ended March 31,							Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017				2020		2019		2020		2019
Net interest income							Net interest income
Interest income	$	36,139		$	35,151		Interest income	$	39,508	$	42,073	$	85,612	$	80,482
Interest expense on loans held for investment	(7,415		)	(6,104		)
Interest expense							Interest expense	(16,745)		(21,046)		(37,489)		(40,338)
Interest income on mortgage loans held in securitization trusts	25,865			—			Interest income on mortgage loans held in securitization trusts	20,539		38,656		41,094		77,132
Interest expense on mortgage obligations issued by securitization trusts	(24,278		)	—			Interest expense on mortgage obligations issued by securitization trusts	(18,364)		(35,756)		(36,423)		(71,391)
Net interest income	30,311			29,047			Net interest income	24,938		23,927		52,794		45,885

Property and other income							Property and other income
Property operating income	28,545			5,139			Property operating income	43,722		64,767		96,235		127,901
Other income	517			161
Other income (loss)							Other income (loss)	(8,360)		434		1,049		611
Total property and other income	29,062			5,300			Total property and other income	35,362		65,201		97,284		128,512

Expenses							Expenses
Management fee expense	8,000			—			Management fee expense	7,206		11,357		15,152		22,715
Property operating expense	11,719			1,611			Property operating expense	16,311		28,140		38,842		56,320
Transaction, investment and servicing expense	30,941			701			Transaction, investment and servicing expense	2,907		1,051		6,041		1,580
Interest expense on real estate	6,393			976			Interest expense on real estate	11,818		13,898		24,896		27,505
Depreciation and amortization	18,792			2,285			Depreciation and amortization	14,020		29,257		31,996		56,919
Administrative expense (including $285 and $0 of equity-based compensation expense, respectively)	3,228			3,012
Provision for loan losses							Provision for loan losses	(51)		110,258		69,881		110,258
Impairment of operating real estate							Impairment of operating real estate	25,935		10,124		30,061		10,124
Administrative expense (including $1,549, $2,713, $1,891 and $4,556 of equity-based compensation expense, respectively)							Administrative expense (including $1,549, $2,713, $1,891 and $4,556 of equity-based compensation expense, respectively)	6,751		8,010		13,789		14,663
Total expenses	79,073			8,585			Total expenses	84,897		212,095		230,658		300,084

Other income (loss)							Other income (loss)
Unrealized gain on mortgage loans and obligations held in securitization trusts, net	497			—
Other gain on investments, net	465			—
Income (loss) before equity in earnings of unconsolidated ventures and income taxes	(18,738		)	25,762
Equity in earnings of unconsolidated ventures	15,788			6,038
Income tax benefit	549			223
Net income (loss)	(2,401		)	32,023
Net (income) loss attributable to noncontrolling interests:
Unrealized gain (loss) on mortgage loans and obligations held in securitization trusts, net							Unrealized gain (loss) on mortgage loans and obligations held in securitization trusts, net	(8,975)		5,549		(28,427)		6,578
Realized gain on mortgage loans and obligations held in securitization trusts, net							Realized gain on mortgage loans and obligations held in securitization trusts, net	—		—		—		48
Other loss, net							Other loss, net	(119,633)		(6,062)		(139,795)		(11,141)
Loss before equity in earnings of unconsolidated ventures and income taxes							Loss before equity in earnings of unconsolidated ventures and income taxes	(153,205)		(123,480)		(248,802)		(130,202)
Equity in earnings (loss) of unconsolidated ventures							Equity in earnings (loss) of unconsolidated ventures	(85,277)		12,557		(68,110)		33,867
Income tax benefit (expense)							Income tax benefit (expense)	(2,102)		133		(3,813)		502
Net loss							Net loss	(240,584)		(110,790)		(320,725)		(95,833)
Net loss attributable to noncontrolling interests:							Net loss attributable to noncontrolling interests:
Investment entities	(2,370		)	(9,137		)	Investment entities	8,107		880		7,584		1,178
Operating Partnership	57			—			Operating Partnership	5,418		2,569		7,310		2,222
Net income (loss) attributable to Colony NorthStar Credit Real Estate, Inc. common stockholders	$	(4,714	)	$	22,886
Net loss attributable to Colony Credit Real Estate, Inc. common stockholders							Net loss attributable to Colony Credit Real Estate, Inc. common stockholders	$	(227,059)	$	(107,341)	$	(305,831)	$	(92,433)

Net income (loss) per common share - basic and diluted (Note 17)	$	(0.05	)	$	0.47
Net loss per common share - basic and diluted (Note 18)							Net loss per common share - basic and diluted (Note 18)	$	(1.77)	$	(0.84)	$	(2.38)	$	(0.73)

Weighted average shares of common stock outstanding, basic and diluted (Note 17)	98,662			44,399

Dividends declared per share of common stock	$	0.29		$	—
Weighted average shares of common stock outstanding - basic and diluted (Note 18)							Weighted average shares of common stock outstanding - basic and diluted (Note 18)	128,539		128,534		128,513		128,240

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

Table of Contents

COLONY ~~NORTHSTAR~~ CREDIT REAL ESTATE, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(~~Dollars~~ in Thousands)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Net income (loss)	$	(240,584)	$	(110,790)	$	(320,725)	$	(95,833)
Other comprehensive income (loss)
Unrealized gain (loss) on real estate securities, available for sale	58,510		7,863		(16,519)		17,621
Change in fair value of net investment hedges	—		938		21,764		8,333
Foreign currency translation gain (loss)	11,097		3,923		(8,339)		613
Total other comprehensive income (loss)	69,607		12,724		(3,094)		26,567
Comprehensive income (loss)	(170,977)		(98,066)		(323,819)		(69,266)
Comprehensive (income) loss attributable to noncontrolling interests:
Investment entities	7,850		880		7,327		1,178
Operating Partnership	4,014		2,272		7,608		1,601
Comprehensive income (loss) attributable to common stockholders	$	(159,113)	$	(94,914)	$	(308,884)	$	(66,487)

Three Months Ended March 31,
2018 2017
Net income (loss) $ (2,401 ) $ 32,023
Other comprehensive income (loss)
Unrealized loss on real estate securities, available for sale (1,848 ) —
Total other comprehensive loss (1,848 ) —
Comprehensive income (loss) (4,249 ) 32,023
Comprehensive (income) loss attributable to noncontrolling interests:
Investment entities (2,370 ) (9,137 )
Operating partnership 57
—
Comprehensive income (loss) attributable to common stockholders $ (6,562 ) $ 22,886

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

Table of Contents

COLONY ~~NORTHSTAR~~ CREDIT REAL ESTATE, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(~~Dollars and Shares~~ in Thousands)

(Unaudited)


	Common Stock												Additional Paid-in Capital		Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Income			Total Stockholders’ Equity			Noncontrolling Interests in Investment Entities	Noncontrolling Interests in the Operating Partnership	Total Equity
	Class A				Class B-3
	Shares	Amount		Shares	Amount





Balance as of December 31, 2018	83,410	$	834	44,399	$	444	$	2,899,353	$	(193,327)	$	(399)	$	2,706,905		$	72,683		$	65,614		$	2,845,202
Contributions	—	—		—	—		—		—		—		—			24			—			24
Distributions	—	—		—	—		—		—		—		—			(394)			—			(394)

Conversion of Class B-3 common stock to Class A common stock	44,399	444		(44,399)	(444)		—		—		—		—			—			—			—
Issuance and amortization of equity-based compensation	800	8		—	—		1,835		—		—		1,843			—			—			1,843
Other comprehensive loss	—	—		—	—		—		—		13,519		13,519			—			324			13,843
Dividends and distributions declared ($0.44 per Class A share and $0.15 per Class B-3 share)	—	—		—	—		—		(55,726)		—		(55,726)			—			(1,340)			(57,066)
Shares canceled for tax withholding on vested stock awards	(96)	(1)		—	—		(1,496)		—		—		(1,497)			—			—			(1,497)
Reallocation of equity	—	—		—	—		(23)		—		—		(23)			—			23			—
Net income (loss)	—	—		—	—		—		14,908		—		14,908			(298)			347			14,957
Balance as of March 31, 2019	128,513	$	1,285	—	$	—	$	2,899,669	$	(234,145)	$	13,120	$	2,679,929		$	72,015		$	64,968		$	2,816,912
Contributions	—	—		—	—		—		—		—		—			11			—			11
Distributions	—	—		—	—		—		—		—		—			(1,198)			—			(1,198)
Issuance and amortization of equity-based compensation	32	—		—	—		2,713		—		—		2,713			—			—			2,713
Other comprehensive income	—	—		—	—		—		—		12,427		12,427			—			297			12,724
Dividends and distributions declared ($0.44 per share)	—	—		—	—		—		(55,912)		—		(55,912)			—			(1,342)			(57,254)

Reallocation of equity	—	—		—	—		744		—		—		744			—			(744)			—

Net income (loss)	—	—		—	—		—		(107,341)		—		(107,341)			(880)			(2,569)			(110,790)
Balance as of June 30, 2019	128,545	$	1,285	—	$	—	$	2,903,126	$	(397,398)	$	25,547	$	2,532,560		$	69,948		$	60,610		$	2,663,118

Common Stock
Additional
Paid-in
Capital

Retained
Earnings
(Accumulated
Deficit)

Accumulated
Other
Comprehensive
Income
(Loss)
Total
Company’s
Stockholders’
Equity Noncontrolling Interests in Investment Entities Noncontrolling interests in The OP
Total
Equity
Class A Class B-3
Shares Amount Shares Amount
Balance as of December 31, 2016 —
$ —
—
$ —
$ 714,443
$ 170,273
$ —
$ 884,716
$ 350,848
$ —
$ 1,235,564
Contributions —
—
—
—
354,219
—
—
354,219
14,537
—
368,756
Distributions —
—
—
—
(17,276 ) —
—
(17,276 ) (16,333 ) —
(33,609 )
Net income (loss) —
—
—
—
—
22,886
—
22,886
9,137
—
32,023
Balance as of March 31, 2017 (Unaudited) —
$ —
—
$ —
$ 1,051,386
$ 193,159
$ —
$ 1,244,545
$ 358,189
$ —
$ 1,602,734

Balance as of December 31, 2017 —
$ —
—
$ —
$ 821,031
$ 258,777
$ —
$ 1,079,808
$ 327,762
$ —
$ 1,407,570
Distributions —
—
—
—
—
—
—
—
(1,003 ) —
(1,003 )
Adjustments related to the Combination 82,484
825
44,399
444
2,073,186
(79,774 ) —
1,994,681
(230,818 ) 73,626
1,837,489
Issuance and amortization of equity-based compensation 1,004
10
—
—
275
—
—
285
—
—
285
Other comprehensive income (loss) —
—
—
—
—
—
(1,848 ) (1,848 ) —
—
(1,848 )
Common stock dividends declared —
—
—
—
—
(37,843 ) —
(37,843 ) —
—
(37,843 )
Net income (loss) —
—
—
—
—
(4,714 ) —
(4,714 ) 2,370
(57 ) (2,401 )
Balance as of March 31, 2018 (Unaudited) 83,488
$ 835
44,399
$ 444
$ 2,894,492
$ 136,446
$ (1,848 ) $ 3,030,369
$ 98,311
$ 73,569
$ 3,202,249

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

Table of Contents

COLONY ~~NORTHSTAR~~ CREDIT REAL ESTATE, INC.

CONSOLIDATED STATEMENTS OF EQUITY (Continued)

(in Thousands)

(Unaudited)


	Common Stock												Additional Paid-in Capital		Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Income			Total Stockholders’ Equity			Noncontrolling Interests in Investment Entities	Noncontrolling Interests in the Operating Partnership	Total Equity
	Class A				Class B-3
	Shares	Amount		Shares	Amount





Balance as of December 31, 2019	128,539	$	1,285	—	$	—	$	2,909,181	$	(819,738)	$	28,294	$	2,119,022		$	31,631		$	50,697		$	2,201,350

Distributions	—	—		—	—		—		—		—		—			(11,013)			—			(11,013)

Issuance and amortization of equity-based compensation	—	—		—	—		342		—		—		342			—			—			342
Other comprehensive income	—	—		—	—		—		—		(70,999)		(70,999)			—			(1,702)			(72,701)
Dividends and distributions declared ($0.30 per share)	—	—		—	—		—		(38,541)		—		(38,541)			—			(922)			(39,463)
Shares canceled for tax withholding on vested stock awards	(173)	(1)		—	—		(1,686)		—		—		(1,687)			—			—			(1,687)
Reallocation of equity	—	—		—	—		(41)		—		—		(41)			—			41			—
Effect of CECL adoption (see Note 2)	—	—		—	—		—		(22,644)		—		(22,644)			—			(542)			(23,186)
Net income (loss)	—	—		—	—		—		(78,772)		—		(78,772)			523			(1,892)			(80,141)
Balance as of March 31, 2020	128,366	$	1,284	—	$	—	$	2,907,796	$	(959,695)	$	(42,705)	$	1,906,680		$	21,141		$	45,680		$	1,973,501
Contributions	—	—		—	—		—		—		—		—			200,467			—			200,467
Distributions	—	—		—	—		—		—		—		—			(3,156)			—			(3,156)

Issuance and amortization of equity-based compensation	237	2		—	—		1,547		—		—		1,549			—			—			1,549
Other comprehensive income	—	—		—	—		—		—		67,946		67,946			257			1,404			69,607

Shares canceled for tax withholding on vested stock awards	(20)	—		—	—		(81)		—		—		(81)			—			—			(81)
Reallocation of equity	—	—		—	—		1,777		—		—		1,777			—			(1,777)			—

Costs of noncontrolling equity		—		—	—		(466)		—		—		(466)			—			—			(466)
Investment by JV partner in consolidated JV and equity reallocation related to that partner’s return (see Note 2)	—	—		—	—		(70,439)		—		—		(70,439)			70,439			—			—
Net income (loss)	—	—		—	—		—		(227,059)		—		(227,059)			(8,107)			(5,418)			(240,584)
Balance as of June 30, 2020	128,583	$	1,286	—	$	—	$	2,840,134	$	(1,186,754)	$	25,241	$	1,679,907		$	281,041		$	39,889		$	2,000,837

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

Table of Contents

COLONY CREDIT REAL ESTATE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(~~Dollars~~ in Thousands)

(Unaudited)


	Three Months Ended March 31,							Six Months Ended June 30,
	2018			2017				2020		2019
Cash flows from operating activities:							Cash flows from operating activities:
Net income (loss)	$	(2,401	)	$	32,023		Net income (loss)	$	(320,725)	$	(95,833)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Equity in earnings of unconsolidated ventures	(15,788		)	(6,038		)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:							Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Equity in (earnings) losses of unconsolidated ventures							Equity in (earnings) losses of unconsolidated ventures	68,110		(33,867)
Depreciation and amortization	18,792			2,285			Depreciation and amortization	31,996		56,919
Straight-line rental income	(1,373		)	(60		)	Straight-line rental income	(1,818)		(3,552)
Amortization of above/below market lease values, net	104			67			Amortization of above/below market lease values, net	(565)		(1,737)
Amortization of premium/accretion of discount and fees on investments and borrowings, net	(1,772		)	(1,486		)	Amortization of premium/accretion of discount and fees on investments and borrowings, net	(6,066)		(5,701)
Amortization of deferred financing costs	384			828			Amortization of deferred financing costs	6,290		4,252
Interest accretion on investments	(530		)	(1,878		)
Amortization of right-of-use lease assets and operating lease liabilities							Amortization of right-of-use lease assets and operating lease liabilities	49		48
Paid-in-kind interest added to loan principal, net of interest received							Paid-in-kind interest added to loan principal, net of interest received	(6,382)		(3,738)
Distributions of cumulative earnings from unconsolidated ventures	13,687			1,829			Distributions of cumulative earnings from unconsolidated ventures	13,429		30,879
Unrealized gain (loss) on mortgage loans and obligations held in securitization trusts, net	(497		)	—
Unrealized (gain) loss on mortgage loans and obligations held in securitization trusts, net							Unrealized (gain) loss on mortgage loans and obligations held in securitization trusts, net	28,427		(6,578)
Realized (gain) loss on mortgage loans and obligations held in securitization trusts, net							Realized (gain) loss on mortgage loans and obligations held in securitization trusts, net	—		(48)
Realized loss on securities from write-down to fair value							Realized loss on securities from write-down to fair value	29,240		—
Realized loss on sale of real estate securities, available for sale							Realized loss on sale of real estate securities, available for sale	57,045		—
Provision for loan losses							Provision for loan losses	69,881		110,258
Impairment of operating real estate							Impairment of operating real estate	30,061		10,124
Amortization of equity-based compensation	285			—			Amortization of equity-based compensation	1,891		4,556
Mortgage notes above/below market value amortization	(173		)	—			Mortgage notes above/below market value amortization	(817)		164
Deferred income tax (benefit) expense	(88		)	—			Deferred income tax (benefit) expense	719		(3,589)
Other (gain) loss, net							Other (gain) loss, net	23,531		—
Changes in assets and liabilities:							Changes in assets and liabilities:
Restricted cash	(882		)	469
Receivables, net	16,572			—			Receivables, net	2,159		(8,113)
Deferred costs and other assets	(13,883		)	2,923			Deferred costs and other assets	20,432		5,890
Due to related party	3,340			—			Due to related party	(1,377)		(2,672)
Other liabilities	1,499			208			Other liabilities	(15,943)		5,483
Net cash provided by operating activities	17,276			31,170			Net cash provided by operating activities	29,567		63,145
Cash flows from investing activities:							Cash flows from investing activities:
Origination and funding of loans held for investment, net	(5,059		)	(52,989		)
Repayment on loans held for investment	115,724			74,371
Cash received in the Combination	225,169			6,509
Acquisition, origination and funding of loans and preferred equity held for investment, net							Acquisition, origination and funding of loans and preferred equity held for investment, net	(66,722)		(886,397)
Repayment on loans and preferred equity held for investment							Repayment on loans and preferred equity held for investment	160,069		287,437

Repayment on loans held for sale							Repayment on loans held for sale	32,576		—
Proceeds from sale of real estate	—			8,916			Proceeds from sale of real estate	161,817		—
Improvements of real estate	(2,735		)	—

Acquisition of and additions to real estate, related intangibles and leasing commissions							Acquisition of and additions to real estate, related intangibles and leasing commissions	(15,196)		(9,281)
Investments in unconsolidated ventures	(1,730		)	(4,129		)	Investments in unconsolidated ventures	(47,541)		(7,801)
Proceeds from sale of investments in unconsolidated ventures							Proceeds from sale of investments in unconsolidated ventures	99,985		76,861
Distributions in excess of cumulative earnings from unconsolidated ventures	21,739			5,751			Distributions in excess of cumulative earnings from unconsolidated ventures	24,170		119,472
Acquisition of real estate securities, available for sale	(11,762		)	—
Change in restricted cash	(1,343		)	(142		)
Net cash provided by investing activities	340,003			38,287

Repayment of real estate securities, available for sale, from sales							Repayment of real estate securities, available for sale, from sales	89,680		—
Repayment of real estate securities, available for sale, from cost recovery							Repayment of real estate securities, available for sale, from cost recovery	2,106		—
Repayment of principal in mortgage loans held in securitization trusts							Repayment of principal in mortgage loans held in securitization trusts	13,138		—

Net receipts on settlement of derivative instruments							Net receipts on settlement of derivative instruments	19,637		1,638
Deposit on investments							Deposit on investments	—		(372)
Change in escrow deposits							Change in escrow deposits	(23,892)		(2,848)
Net cash provided (used in) by investing activities							Net cash provided (used in) by investing activities	449,827		(421,291)
Cash flows from financing activities:							Cash flows from financing activities:
Distributions paid on common stock	(18,849		)	—			Distributions paid on common stock	(51,705)		(111,536)
Distributions paid on common stock to noncontrolling interests							Distributions paid on common stock to noncontrolling interests	(922)		(2,682)
Shares canceled for tax withholding on vested stock awards							Shares canceled for tax withholding on vested stock awards	(1,769)		—
Borrowings from mortgage notes	41,823			18,043			Borrowings from mortgage notes	13,338		85,481
Repayment of mortgage notes	(762		)	(64,048		)	Repayment of mortgage notes	(77,893)		(2,948)
Borrowings from credit facilities	25,149			—			Borrowings from credit facilities	255,128		1,420,569
Repayment of credit facilities	(71,740		)	—			Repayment of credit facilities	(454,188)		(977,697)

Repayment of securitization bonds	(17,474		)	—			Repayment of securitization bonds	—		(57,995)
Repayment of mortgage obligations issued by securitization trusts							Repayment of mortgage obligations issued by securitization trusts	(13,138)		—
Payment of deferred financing costs	(4,675		)	—			Payment of deferred financing costs	(6,842)		(6,972)
Contributions	—			35,956
Distributions	(1,003		)	(33,609		)
Net cash used in financing activities	(47,531		)	(43,658		)
Net increase in cash and cash equivalents	309,748			25,799
Cash and cash equivalents - beginning of period	25,204			13,982
Cash and cash equivalents - end of period	$	334,952		$	39,781
Contributions from noncontrolling interests							Contributions from noncontrolling interests	200,001		35
Distributions to noncontrolling interests							Distributions to noncontrolling interests	(14,169)		(1,592)
Net cash provided by (used in) financing activities							Net cash provided by (used in) financing activities	(152,159)		344,663
Effect of exchange rates on cash, cash equivalents and restricted cash							Effect of exchange rates on cash, cash equivalents and restricted cash	(957)		(15)
Net increase (decrease) in cash, cash equivalents and restricted cash							Net increase (decrease) in cash, cash equivalents and restricted cash	326,278		(13,498)
Cash, cash equivalents and restricted cash - beginning of period							Cash, cash equivalents and restricted cash - beginning of period	195,684		187,463
Cash, cash equivalents and restricted cash - end of period							Cash, cash equivalents and restricted cash - end of period	$	521,962	$	173,965

On December 22, 2017, the Tax Cuts and Jobs Act was enacted, which provides for a reduction in the U.S. federal corporate income tax rate from 35% to 21% effective January 1, 2018. At December 31, 2017, the Company recognized a provisional amount of approximately $2.0 million of income tax expense relating to the remeasurement of its deferred tax balances based on the rate at which they are expected to reverse in the future, which is generally 21%. The Company is still analyzing certain aspects of the Tax Cuts and Jobs Act and refining their calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts.

~~For the three months ended March 31, 2018 and 2017, the Company recorded income tax benefits of $0.5 million and $0.2 million, respectively.~~

~~Recent Accounting Pronouncements~~

~~Revenue Recognition-In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09,~~ ~~Revenue from Contracts with Customers,~~ which amends existing revenue recognition standards by establishing principles for a single comprehensive model for revenue measurement and recognition, along with enhanced disclosure requirements. Key provisions include, but are not limited to, determining which goods or services are capable of being distinct in a contract to be accounted for separately as a performance obligation and recognizing variable consideration only to the extent that it is probable a significant revenue reversal would not occur. The new revenue standard may be applied retrospectively to each prior period presented (full retrospective) or retrospectively to contracts not completed as of date of initial application with the cumulative effect recognized in retained earnings (modified retrospective). ASU No. 2014-09 was originally effective for fiscal years and interim periods beginning after December 15, 2016 for public companies that are not emerging growth companies (“EGCs”) and December 15, 2017 for private companies and public companies that are EGCs. In July 2015, the FASB deferred the effective date of the new standard by one year. Early adoption is permitted but not before the original effective date. The FASB has subsequently issued several amendments to the standard, including clarifying the guidance on assessing principal versus agent based on the notion of control, which affects recognition of revenue on a gross or net basis. These amendments have the same effective date and transition requirements as the new standard.

The Company will adopt the standard using the modified retrospective approach on January 1, 2019. The standard excludes from its scope the areas of accounting that most significantly affect revenue recognition for the core activities of the Company, including accounting for financial instruments and leases. Evaluation of the impact of this new guidance is ongoing.

~~Financial Instruments-In January 2016, the FASB issued ASU No. 2016-01,~~ ~~Recognition and Measurement of Financial Assets and Financial Liabilities~~, which affects accounting for investments in equity securities, financial liabilities under the fair value option, as well as presentation and disclosures, but does not affect accounting for investments in debt securities and loans. Investments in equity securities, other than equity method investments, will be measured at fair value through earnings, except for equity securities without readily determinable fair values which may be measured at cost less impairment and adjusted for observable price changes under application of the measurement alternative, unless these equity securities qualify for the net asset value (“NAV”) practical expedient. This provision eliminates cost method accounting and recognition of unrealized holding gains or losses on equity investments in other comprehensive income. For financial liabilities under the fair value option, changes in fair value resulting from the Company’s own instrument-specific credit risk will be recorded separately in other comprehensive income. Fair value disclosures of financial instruments measured at amortized cost will be based on exit price and corresponding disclosures of valuation methodology and significant inputs will no longer be required. In February 2018, the FASB issued ASU 2018-03, ~~Technical Corrections and Improvements to Financial Instruments, Recognition and Measurement of Financial Assets and Financial Liabilities,~~ which provided several clarifications and amendments to the standard. These include specifying that for equity instruments without readily determinable fair values for which the measurement alternative is applied: (i) adjustments made when an observable transaction occurs for a similar security are intended to reflect the fair value as of the observable transaction date, not as of current reporting date; (ii) the measurement alternative may be discontinued upon an irrevocable election to change to a fair value measurement approach under fair value guidance, which would apply to all identical and similar investments of the same issuer; and (iii) the prospective transition approach for equity securities without readily determinable fair values is applicable only when the measurement alternative is applied. ASU No. 2016-01 is effective for fiscal years and interim periods beginning after December 15, 2017 for public companies that are not EGCs and December 15, 2018 for private companies and public companies that are EGCs. Early adoption is limited to specific provisions. ASU 2016-01 is to be applied retrospectively with cumulative effect as of the beginning of the first reporting period adopted recognized in retained earnings, except for provisions related to equity investments without readily determinable fair values for which the measurement alternative is applied and exit price fair value disclosures for financial instruments measured at amortized cost, which are to be applied prospectively.

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COLONY ~~NORTHSTAR~~ CREDIT REAL ESTATE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

AsThe Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was passed on March 27, 2020. Among other things, the CARES Act temporarily removed the 80% limitation on the amount of ~~March 31,~~taxable income that can be offset with a net operating loss (“NOL”) for 2019 and 2020 and allowed for a carryback of net operating losses generated in years 2018 ~~all~~through 2020 to each of the Company’s investments in unconsolidated ventures are equity method investments and the Company does not have any cost method investments nor has the Company elected fair value option on its financial liabilities which fall under the scope of this guidance.

preceding five years. The Company ~~will adopt the new guidance on January 1, 2019. Evaluation of~~is still evaluating the impact of ~~this new guidance is ongoing, but at this time~~the CARES Act on its NOLs and did not book any adjustments related to the CARES Act for the quarter ended June 30, 2020.

For the three months ended June 30, 2020 and June 30, 2019, the Company ~~does not expect~~recorded income tax expense of $2.1 million and income tax benefit of $0.1 million, respectively. For the ~~adoption of this standard to have a material effect on its financial condition or results of operations.~~

~~Leases-~~ ~~In February 2016, the FASB issued ASU No. 2016-02,~~ ~~Leases~~, which amends existing lease accounting standards, primarily requiring lessees to recognize most leases on balance sheet, as well as making targeted changes to lessor accounting. As lessee, a right-of-use assetsix months ended June 30, 2020 and corresponding liability for future obligations under a leasing arrangement would be recognized on balance sheet. As lessor, gross leases will be subject to allocation between lease and non-lease service components, with the latter accounted for under the new revenue recognition standard. As the new lease standard requires congruous accounting treatment between lessor and lessee in a sale-leaseback transaction, if the seller/lessee does not achieve sale accounting, it would be considered a financing transaction to the buyer/lessor. Additionally, under the new lease standard, only incremental initial direct costs incurred in the execution of a lease can be capitalized by the lessor and lessee.

ASU No. 2016-02 is effective for fiscal years and interim periods beginning after December 15, 2017 for public companies that are not EGCs and December 15, 2018 for private companies and public companies that are EGCs. Early adoption is permitted. The new leases standard requires adoption using a modified retrospective approach for all leases existing at, or entered into after, the date of initial application. Full retrospective application is prohibited. The FASB has subsequently issued and proposed several amendments to the standard, including approving an amendment to provide optional transitional relief to apply the effective date of the new lease standard as the date of initial application in transition instead of the earliest comparative period presented, as well as to provide certain practical expedients, which include not segregating non-lease components from the related lease components but to account for those components as a single lease component by class of underlying assets.

The Company intends to adopt the package of practical expedients under the guidance, which provides exemptions 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.

~~When the approved amendment is issued by the FASB,~~2019, the Company ~~expects to adopt the transition option,~~recorded income tax expense of $3.8 million and income tax benefit of $0.5 million, respectively.

Accounting Standards Adopted in which case, the cumulative effect adjustment to the opening balance of retained earnings will be recognized as of the effective date of adoption, including new disclosures, rather than as of the earliest period presented, and are not required for prior comparative periods. In addition, the Company expects to make an accounting policy election to treat lease and related non-lease components in a contract as a single performance obligation to the extent that the timing and pattern of revenue recognition are the same for the lease and non-lease components and the combined single lease component is classified as an operating lease.2020

~~Evaluation of the impact of this new guidance to the Company is ongoing.~~

Credit ~~Losses-~~Losses - In June 2016, the FASB issued ASU No. 2016-13, Financial ~~Instruments~~-~~Credit~~Instruments-Credit Losses,, which amends the credit impairment model for financial instruments. The Company adopted ASU 2016-13 using the modified retrospective method on January 1, 2020.

The existing incurred loss model ~~will be~~has been 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 ~~AFS~~available-for-sale (“AFS”) debt securities, unrealized credit losses ~~will be~~are recognized as allowances rather than reductions in amortized cost basis and elimination of the OTTI concept will result in more frequent estimation of credit losses. The accounting model for purchased credit impaired loans and debt securities ~~will be~~has been 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~~was amended to conform to the new impairment models for HTM and AFS debt securities. ~~Expanded disclosures~~

Upon adoption of ASU 2016-13 on January 1, 2020 the Company recorded the following (dollars in thousands):


	Impact of ASU 2016-13 Adoption
Assets:
CECL reserve on Loans and preferred equity held for investment, net	$	21,093
Liabilities:
CECL reserve on Accrued and other liabilities	2,093
Total Impact of ASU 2016-13 adoption on Accumulated deficit	$	23,186

The following discussion highlights changes to the Company’s accounting policies as a result of this adoption.

CECL reserve

The CECL reserve for the Company’s financial instruments carried at amortized cost and off-balance sheet credit ~~risk~~exposures, such as loans, loan commitments and trade receivables represents a lifetime estimate of expected credit losses. Factors considered by the Company when determining the CECL reserve include ~~credit quality indicators by~~loan-specific characteristics such as loan-to-value (“LTV”) ratio, vintage ~~for financing receivables~~year, loan term, property type, occupancy and ~~net investment in leases. Transition will generally be~~geographic location, financial performance of the borrower, expected payments of principal and interest, as well as internal or external information relating to past events, current conditions and reasonable and supportable forecasts.

The CECL reserve is measured on a ~~modified retrospective~~collective (pool) basis ~~with prospective application~~when similar risk characteristics exist for ~~other-than-temporarily impaired debt securities and purchased credit impaired assets. ASU No. 2016-13~~multiple financial instruments. If similar risk characteristics do not exist, the Company measures the CECL reserve on an individual instrument basis. The determination of whether a particular financial instrument should be included in a pool can change over time. If a financial asset’s risk characteristics change, the Company evaluates whether it is ~~effective~~appropriate to continue to keep the financial instrument in its existing pool or evaluate it individually.

In measuring the CECL reserve for ~~fiscal years and interim periods beginning after December 15, 2019~~financial instruments that share similar risk characteristics, the Company primarily applies a probability of default (“PD”)/loss given default (“LGD”) model for ~~public companies~~instruments that are not EGCs and December 15, 2020 for private companies and public companies that are EGCs. 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 undercollectively assessed, whereby the CECL ~~model. Evaluation~~reserve is calculated as the product of PD, LGD and exposure at default (“EAD”). The Company’s model principally utilizes historical loss rates derived from a commercial mortgage backed securities database with historical losses from 1998 through June 2020 provided by a third party, Trepp LLC, forecasting the ~~impact of this new guidance is ongoing.~~

~~Cash Flow Classifications-~~ ~~In August 2016, the FASB issued ASU No. 2016-15,~~ ~~Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments, which is intended to reduce diversity in practice in certain classifications on the statement of~~

loss parameters using a scenario-based statistical

Table of Contents

COLONY ~~NORTHSTAR~~ CREDIT REAL ESTATE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

approach over a reasonable and supportable forecast period of twelve months, followed by a straight-line reversion period of twelve-months back to average historical losses.

~~cash flows. This guidance addresses eight types~~For financial instruments assessed outside of ~~cash flows, which includes clarifying how~~ the ~~predominance principle should be applied~~PD/LGD model on an individual basis, including when cash receipts and cash payments have aspects of more than one class of cash flows, as well as requiring an accounting policy election for classification of distributions received from equity method investees using eitherit is probable that the cumulative earnings or nature of distributions approach, among others. Transition will generally be on a retrospective basis. ASU No. 2016-15 is effective for fiscal years and interim periods beginning after December 15, 2017 for public companies that are not EGCs and December 15, 2018 for private companies and public companies that are EGCs. Early adoption is permitted, provided that all amendments within the guidance are adopted in the same period. The Company will ~~adopt~~be unable to collect the ~~new guidance~~full payment of principal and interest on ~~January 1, 2019. Upon adoption,~~the instrument, the Company ~~anticipates making an accounting policy election for classification of distributions from its equity method investees using~~applies a discounted cash flow (“DCF”) methodology. For financial instruments where the ~~cumulative earnings approach.~~

~~Restricted Cash-~~ ~~In November 2016, the FASB issued ASU No. 2016-18,~~ ~~Statement of Cash Flows: Restricted Cash~~, which requires that cash and cash equivalent balances in the statement of cash flows include restricted cash and restricted cash equivalent amounts, and therefore, changes in restricted cash and restricted cash equivalents be presented in the statement of cash flows. This will eliminate the presentation of transfers between cash and cash equivalents with restricted cash and restricted cash equivalents in the statement of cash flows. When cash, cash equivalents, restricted cash and restricted cash equivalents are presented in more than one line item on the balance sheet, this ASU requires disclosure of a reconciliation between the totals in the statement of cash flows and the related captions in the balance sheet. The new guidance also requires disclosure of the nature of restricted cash and restricted cash equivalents, similar to existing requirements under Regulation S-X; however, it does not define restricted cash and restricted cash equivalents. ASU No. 2016-18borrower is effective for fiscal years and interim periods beginning after December 15, 2017 for public companies that are not EGCs and December 15, 2018 for private companies and public companies that are EGCs, to be applied retrospectively, with early adoption permitted. If early adopted in an interim period, adjustments are to be reflected as of the beginning of the fiscal year of adoption. As of March 31, 2018, the Company has $117.4 million of restricted cash that will be subject to changes in presentation on the statement of cash flows. The Company will adopt the new guidance on January 1, 2019.

~~Derecognition and Partial Sales of Nonfinancial Assets-~~ ~~In February 2017, the FASB issued ASU 2017-05,~~ ~~Clarifying the Scope of Asset Derecognition and Accounting for Partial Sales of Nonfinancial Assets, which clarifies the scope and application of ASC 610-20,~~ ~~Other Income~~-~~Gains and Losses from Derecognition of Nonfinancial Assets, and defines in substance nonfinancial assets. ASC 610-20 applies to derecognition of all nonfinancial assets which are not contracts with customers or revenue transactions under ASC 606,~~ ~~Revenue from Contracts with Customers. Derecognition of a business is governed by ASC 810,~~ ~~Consolidation, while derecognition of~~experiencing financial ~~assets, including equity method investments, even if the investee holds predominantly nonfinancial assets, is governed by ASC 860,~~ ~~Transfers and Servicing~~. The ASU also aligns the accounting for partial sales of nonfinancial assets to be more consistent with accounting for sale of a business. Specifically, in a partial sale to a noncustomer, when a noncontrolling interest is received or retained, the latter is considered a noncash consideration and measured at fair value in accordance with ASC 606, which would result in full gain or loss recognized upon sale. This ASU removes guidance on partial exchanges of nonfinancial assets in ASC 845, ~~Nonmonetary Transactions, and eliminates the real estate sales guidance in ASC 360-20,~~ ~~Property, Plant and Equipment~~-~~Real Estate Sales~~. ASU 2017-05 has the same effective date as the new revenue guidance, which is January 1, 2018 for public companies that are not EGCs and January 1, 2019 for private companies and public companies that are EGCs, with early adoption permitted beginning January 1, 2017. Both ASC 606 and ASC 610-20 must be adopted concurrently. While the transition method is similar to the new revenue guidance, either full retrospective or modified retrospective, the transition approach applied need not be aligned between both standards.

The Company will adopt the new guidance on January 1, 2019 using the modified retrospective approach, consistent with the adoption of the new revenue standard. Under the new standard, if a partial interest in real estate is sold to noncustomers or contributed to unconsolidated ventures, and a noncontrolling interest in the asset is retained, such transactions could result in a larger gain on sale. The adoption of this standard could have a material impact to the results of operations in a period that a significant partial interest in real estate is sold. There were no such sales in the three months ended March 31, 2018.


3.	~~Business Combinations~~

~~The Combination~~

~~On the Closing Date, the Combination of the CLNS Contributed Portfolio, NorthStar I and NorthStar II was completed, creating CLNC.~~

In consideration for the contribution of the CLNS Contributed Portfolio, CLNS OP received approximately 44.4 million shares of the Company’s Class B-3 common stock (the “CLNC B-3 Common Stock”) and a subsidiary of CLNS OP received approximately 3.1 million common membership units in the OP (“CLNC OP Units”). The CLNC B-3 Common Stock will automatically convert to Class A common stock of the Company on a one-for-one basis upon the close of trading on February 1, 2019. The CLNC OP

Units are redeemable for cash, or at the Company’s election, the Company’s Class A common stock on a one-for-one basis, in the sole discretion of the Company. Subject to certain limited exceptions, CLNS OP has agreed that it and its affiliates will not make any transfers of the CLNC OP Units to non-affiliates of CLNS OP until the one year anniversary of the closing of the Combination, unless such transfer is approved by a majority of the Company’s board of directors, including a majority of the independent directors. In connection with the merger of NorthStar I and NorthStar II into the Company, their respective stockholders received shares of the Company’s Class A common stock based on pre-determined exchange ratios. Following the foregoing transaction, the Company contributed the CLNS Contributed Portfolio and the operating partnerships of NorthStar I and NorthStar II to the OP in exchange for ownership interests in the OP. Upon the closing of the Combination, CLNS OP and its affiliates, NorthStar I stockholders and NorthStar II stockholders each owned approximately 37%, 32% and 31%, respectively, of the Company on a fully diluted basis.

Prior to the closing of the Combination, a special dividend was declared by NorthStar I, which generated the lesser amount of cash leakage, in order to true up the agreed contribution values of NorthStar I and NorthStar II in relation to each other. In addition, following the CLNS Contributions, but prior to the effective time of the Combination, there was a cash settlement between the Company and Colony NorthStar for the difference between (i) the sum of (a) the loss in value of NorthStar I and NorthStar II as a result of the distributions made by NorthStar I and NorthStar II in excess of FFO (as such term is defined in the Combination Agreement) from July 1, 2017 through the day immediately preceding the Closing Date (excluding the dividend payment made by each of NorthStar I and NorthStar II on July 1, 2017), (b) FFO for the CLNS Investment Entities from July 1, 2017 through the day immediately preceding the closing date, (c) cash contributions or contributions of certain intercompany receivables made to the CLNS Investment Entities from July 1, 2017 through the day immediately preceding the Closing Date, and (d) the expected present value of certain unreimbursed operating expenses of NorthStar I and NorthStar II paid on each company’s behalf by their respective advisors, and (ii) cash distributions made by the CLNS Investment Entities from July 1, 2017 through the day immediately preceding the Closing Date, excluding that certain distribution made by the CLNS Investment Entities in July 2017 relating to the partial repayment of a certain investment (collectively, “CLNS true-up adjustment”). The settlement of the CLNS true-up adjustment resulted in a payment of approximately $55 million from Colony NorthStar to the Company.

The Combination is accounted under the acquisition method for business combinations with the CLNS Investment Entities as the accounting acquirer for purposes of the financial information set forth herein. Refer to Note 2, “Summary of Significant Accounting Policies” for further discussion on the accounting treatment of the Combination.

~~Combination Consideration~~

Each share of NorthStar I and NorthStar II common stock issued and outstanding immediately prior to the effective time of the Combination was converted into the right to receive 0.3532 shares (the “NorthStar I Exchange Ratio”) and 0.3511 shares (the “NorthStar II Exchange Ratio”), respectively of the Company’s Class A common stock, plus cash in lieu of fractional shares. Approximately 21,000 shares of NorthStar I restricted common stock and 25,000 shares of NorthStar II restricted common stock automatically vested in connection with the Combination and the holders thereof were entitled to receive the same equity exchange as the other holders of NorthStar I and NorthStar II common stock, respectively.

~~The Company acquired all of the common stock of NorthStar I and NorthStar II through the exchange of all such outstanding shares into shares of Class A common stock~~difficulty based on the ~~pre-determined NorthStar I Exchange Ratio~~Company’s assessment at the reporting date and ~~NorthStar II Exchange Ratio, respectively. As~~ the ~~Combination was a stock-for-stock exchange (except for cash consideration for fractional shares), fair value~~repayment is expected to be provided substantially through the operation or sale of the ~~consideration~~collateral, the Company may elect to ~~be transferred was dependent upon~~use as a practical expedient the fair value of the ~~Company~~collateral at the ~~Closing Date~~reporting date when determining the provision for loan losses.

In developing the CECL reserve for its loans and preferred equity held for investment, the Company considers the risk rating of each loan and preferred equity as a key credit quality indicator. The risk ratings are based on a variety of factors, including, without limitation, underlying real estate performance and asset value, values of comparable properties, durability and quality of property cash flows, sponsor experience and financial wherewithal, and the existence of a risk-mitigating loan structure. Additional key considerations include loan-to-value ratios, debt service coverage ratios, loan structure, real estate and credit market dynamics, and risk of default or principal loss. Based on a five-point scale, the Company’s loans and preferred equity held for investment are rated “1” through “5,” from less risk to greater risk, and the ratings are updated quarterly. At the time of origination or purchase, loans and preferred equity held for investment are ranked as a “3” and will move accordingly going forward based on the ratings which are defined as follows:

1.Very Low Risk-The loan is performing as agreed. The underlying property performance has exceeded underwritten expectations with very strong net operating income (”NOI”), debt service coverage ratio, debt yield and occupancy metrics. Sponsor is investment grade, very well capitalized, and employs very experienced management team.

2.Low Risk-The loan is performing as agreed. The underlying property performance has met or exceeds underwritten expectations with high occupancy at market rents, resulting in consistent cash flow to service the debt. Strong sponsor that is well capitalized with experienced management team.

3.Average Risk-The loan is performing as agreed. The underlying property performance is consistent with underwriting expectations. The property generates adequate cash flow to service the debt, and/or there is enough reserve or loan structure to provide time for sponsor to execute the business plan. Sponsor has routinely met its obligations and has experience owning/operating similar real estate.

4.High Risk/Delinquent/Potential for Loss-The loan is in excess of 30 days delinquent and/or has a risk of a principal loss. The underlying property performance is behind underwritten expectations. Loan covenants may require occasional waivers/modifications. Sponsor has been unable to execute its business plan and local market fundamentals have deteriorated. Operating cash flow is not sufficient to service the debt and debt service payments may be coming from sponsor equity/loan reserves.

5.Impaired/Defaulted/Loss Likely-The loan is in default or a default is imminent, and has a high risk of a principal loss, or has incurred a principal loss. The underlying property performance is significantly worse than underwritten expectation and sponsor has failed to execute its business plan. The property has significant vacancy and current cash flow does not support debt service. Local market fundamentals have significantly deteriorated resulting in depressed comparable property valuations versus underwriting.

The Company also considers qualitative and environmental factors, including, but not limited to, economic and business conditions, nature and volume of the ~~Combination.~~

~~Fair value~~loan portfolio, lending terms, volume and severity of past due loans, concentration of credit and changes in the level of such concentrations in its determination of the ~~merger consideration was~~CECL reserve.

The Company has elected to not measure a CECL reserve for accrued interest receivable as it is reversed against interest income when a loan or preferred equity investment is placed on nonaccrual status. Loans and preferred equity investments are charged off against the provision for loan losses when all or a portion of the principal amount is determined to be uncollectible.

Changes in the CECL reserve for the Company’s financial instruments are recorded in provision for loan losses on the Statement of Operations with a corresponding offset to the loans and preferred equity held for investment or as ~~follows (dollars in thousands, except exchange ratio~~a component of other liabilities for future loan fundings recorded on the Company’s consolidated balance sheets. See Note 3, “Loans and ~~price per share):~~Preferred Equity Held for Investment, net and Loans Held for Sale” for further detail.

NorthStar I NorthStar II Total
Outstanding shares of common stock at January 31, 2018 ⁽¹⁾
119,333
114,943

Exchange ratio ⁽²⁾
0.3532
0.3511

Shares of Class A common stock issued in the mergers ⁽³⁾
42,149
40,356
82,505
Fair value consideration per share ⁽⁴⁾
$ 24.50
$ 24.50
$ 24.50
Fair value of NorthStar I and NorthStar II consideration $ 1,032,651
$ 988,722
$ 2,021,373


~~(1)~~	~~Includes 21,000 and 25,000 shares of common stock of NorthStar I and NorthStar II equity awards, respectively, that vested in connection with the consummation of the Combination.~~


~~(2)~~	~~Represents the pre-determined exchange ratio of 0.3532 NorthStar I shares and 0.3511 NorthStar II shares per one share of the Company’s Class A common stock.~~


~~(3)~~	~~Includes the issuance of fractional shares, aggregating to approximately 21,000 shares, for which holders received cash in lieu of the fractional shares.~~


~~(4)~~	~~Represents the estimated per share fair value of the Company at the Closing Date of the Combination.~~

Table of Contents

COLONY ~~NORTHSTAR~~ CREDIT REAL ESTATE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Troubled Debt Restructuring (“TDR”)—The Company classifies an individual financial instrument as a TDR when it has a reasonable expectation that the financial instrument’s contractual terms will be modified in a manner that grants concession to the borrower who is experiencing financial difficulty. Concessions could include term extensions, payment deferrals, interest rate reductions, principal forgiveness, forbearance, or other actions designed to maximize the Company’s collection on the financial instrument. The Company determines the CECL reserve for financial instruments that are TDRs individually.

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 ~~following table presents a preliminary allocation~~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 the 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 ~~Combination consideration to assets acquired, liabilities assumed~~fair value hierarchy, as well as amounts and ~~noncontrolling interests~~reason for transfers between Levels 1 and 2. Additionally, the new guidance clarifies or modifies certain existing disclosures, including clarifying that information about measurement uncertainty of ~~NorthStar I and NorthStar II based on their respective estimated~~Level 3 fair values should be as of the ~~Closing Date.~~

~~The estimated fair values~~reporting date and ~~allocation~~requiring disclosures of the ~~Combination consideration presented below~~timing of liquidity events for investments measured under the 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 ~~preliminary~~to be applied prospectively, while all other provisions are to be applied retrospectively. The Company adopted ASU No. 2018-13 on January 1, 2020.

Related Party Guidance for VIEs—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, throughout the VIE model, the evaluation of a decision maker's or service provider's fee held by a related party whether or not they are under common control, in both the assessment of whether a fee qualifies as a variable interest and ~~based~~the determination of a primary beneficiary. Specifically, a decision maker or service provider considers interests in a VIE held by a related party under common control only if it has a direct interest in the related party under common control and considers such indirect interest in the VIE held by the related party under common control on ~~information available as~~a proportionate basis, rather than its entirety. Transition is generally on a modified retrospective basis, with the cumulative effect adjusted to retained earnings at the beginning of the ~~Closing Date as~~earliest period presented. The Company adopted ASU No. 2018-17 on January 1, 2020, with no transitional impact upon adoption.

Reference Rate Reform-In March 2020, the Company continues to evaluate the underlying inputs and assumptions. Accordingly, these preliminary estimates may be subject to adjustments during the measurement period, not to exceed one year, based upon new information obtained about facts and circumstances that existed asFASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the ~~Closing Date. Preliminary fair values assigned to~~Effects of Reference Rate Reform on Financial Reporting. The guidance in Topic 848 is optional, the ~~assets acquired, liabilities assumed~~election of which provides temporary relief for the accounting effects on contracts, hedging relationships and ~~noncontrolling interests of NorthStar I and NorthStar II~~other transactions impacted by the transition from interbank offered rates (such as ~~of the Closing Date were as follows (dollars in thousands):~~

January 31, 2018
NorthStar I NorthStar II Total
Merger consideration $ 1,032,651
$ 988,722
$ 2,021,373
Allocation of merger consideration:
Assets acquired
Cash and cash equivalents $ 130,197
$ 51,360
$ 181,557
Restricted cash 30,564
61,313
91,877
Loans held for investment 521,462
728,271
1,249,733
Real estate securities, available for sale, at fair value 100,731
64,793
165,524
Real estate, net 790,996
492,317
1,283,313
Investments in unconsolidated ventures 67,899
375,694
443,593
Receivables, net 12,363
11,479
23,842
Deferred leasing costs and intangible assets, net 74,243
37,090
111,333
Other assets 16,407
21,668
38,075
Mortgage loans held in securitization trusts, at fair value 1,894,404
1,432,795
3,327,199
Total assets acquired 3,639,266
3,276,780
6,916,046
Liabilities assumed
Securitization bonds payable, net —
80,825
80,825
Mortgage and other notes payable, net 399,131
382,485
781,616
Credit facilities 293,340
355,529
648,869
Due to related party 4,533
1,842
6,375
Accrued and other liabilities 21,640
18,219
39,859
Intangible liabilities, net 17,931
1,808
19,739
Escrow deposits payable 12,994
36,362
49,356
Mortgage obligations issued by securitization trusts, at fair value 1,784,223
1,401,491
3,185,714
Total liabilities assumed 2,533,792
2,278,561
4,812,353
Noncontrolling interests 72,823
9,497
82,320
Fair value of net assets acquired $ 1,032,651
$ 988,722
$ 2,021,373

~~Fair value of other assets acquired, liabilities assumed and noncontrolling interests were estimated as follows:~~

~~Real Estate and Related Intangibles~~—Fair value is based on the income approach which includes a direct capitalization method with overall capitalization rates ranging between 6.5% and 8.3%. Real estate fair value was allocated to tangible assets such as land, building and leaseholds, tenant and land improvements as well as identified intangible assets and liabilities such as above- and below-market leases, and in-place lease value. Useful lives of the intangibles acquired range from 1 year to 10 years.

~~Loans held for investment—Fair value is determined by comparing the current yield to the estimated yield for newly originated loans with similar credit risk~~London Interbank Offered Rate, or ~~the market yield at which a third party might expect to purchase such investment; or based on discounted cash flow projections of principal and interest~~LIBOR) that are expected to be ~~collected, which include consideration~~discontinued by the end of ~~borrower~~2021 to alternative reference rates (such as Secured Overnight Financing Rate, or ~~sponsor credit,~~SOFR). Modification of contractual terms to effect the reference rate reform transition on debt, leases, derivatives and other contracts is eligible for relief from modification accounting and accounted for as ~~well as operating results~~a continuation of the ~~underlying collateral. For~~existing contract. Topic 848 is effective upon issuance through December 31, 2022, and may be applied retrospectively to January 1, 2020. The Company has elected to apply the hedge accounting expedients related to probability and assessment of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives, which preserves existing derivative treatment and presentation. The Company may elect other practical expedients or exceptions as applicable over time as reference rate reform activities occur.

Future Application of Accounting Standards

Income Tax Accounting—In December 2019, the FASB issued ASU No. 2019-12, Simplifying Accounting for Income Taxes. The ASU simplifies accounting for income taxes by eliminating certain ~~loans held for investment, NorthStar II has a contractual right~~exceptions to ~~equity-like participation or other ownership interests~~the general approach in ~~the underlying collateral which was considered in calculating the fair value~~ASC 740, Income Taxes, and clarifies certain aspects of the ~~loans held~~guidance for ~~investment.~~

~~Investments~~more consistent application. The simplifications relate to intraperiod tax allocations when there is a loss in ~~Unconsolidated Ventures—Fair value is~~continuing operations and a gain outside of continuing operations, accounting for tax law or tax rate changes and year-to-date losses in interim periods, recognition of deferred tax liability for outside basis difference when investment ownership changes, and accounting for franchise taxes that are partially based on ~~timing and amount~~income. The ASU also provides new guidance that clarifies the accounting for transactions resulting in a step-up in tax basis of ~~expected future cash flows for income as well as realization events~~goodwill, among other changes. Transition is generally prospective, other than the provision related to outside basis difference which is on a modified retrospective basis with the cumulative effect adjusted to retained earnings at the beginning of the ~~underlying assets~~period adopted, and franchise tax provision which is on either full or modified retrospective. ASU No. 2019-12 is effective January 1, 2021, with early adoption permitted in an interim period, to be applied to all provisions. The Company is currently evaluating the impact of ~~the investees. Investments in unconsolidated ventures includes a preferred~~

this new guidance.

Table of Contents

COLONY ~~NORTHSTAR~~ CREDIT REAL ESTATE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Accounting for Certain Equity Investments—In January 2020, the FASB issued ASU No. 2020-01, Clarifying the Interactions between Topic 321 Investments-Equity Securities, Topic 323-Investments Equity Method and Joint Ventures, and Topic 815-Derivatives and Hedging. The ASU clarifies that if as a result of an observable transaction, an equity investment under the measurement alternative is transitioned into equity method and vice versa, an equity method investment is transitioned into measurement alternative, the investment is to be remeasured immediately before and after the transaction, respectively. The ASU also clarifies that certain forward contracts or purchased options to acquire equity securities that are not deemed to be derivatives or in-substance common stock will generally be measured using the fair value principles of ASC 321 before settlement or exercise, and that an entity should not be considering how it will account for the resulting investments upon eventual settlement or exercise. ASU No. 2020-01 is to be applied prospectively, effective January 1, 2021, with early adoption permitted in an interim period. The Company is currently evaluating the impact of this new guidance.

Accounting for Convertible Instruments and Contracts on Entity's Own Equity— In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt With Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity.

With respect to convertible instruments, under the new guidance, a convertible debt instrument will be accounted for wholly as debt, and convertible preferred stock wholly as preferred stock, that is, as a single unit of account, except for (1) a convertible instrument that contains features requiring bifurcation as a derivative under Topic 815 or (2) a convertible debt instrument that was issued at a substantial premium. Expanded disclosures are required, including, but not limited to, the terms and features of convertible instruments, and information about events, conditions, and circumstances that could affect assessment of the amount or timing of future cash flows related to those instruments.

With respect to contracts on an ~~ADC arrangement,~~entity's own equity, one of the requirements prescribed by the new guidance is to account for freestanding contracts on an entity’s own equity that do not qualify as ~~well as an investment in a joint venture which holds a mezzanine loan. The~~equity under Subtopic ASC 815-40 at fair value, ~~for both investments was based~~with changes in fair value recognized in earnings, irrespective of whether such contracts meet the definition of a derivative in Topic 815.

The ASU also amends certain guidance on the ~~outstanding principal~~computation of earnings per share for convertible instruments and contracts on an entity’s own equity. In calculating diluted earnings per share, the new guidance (1) requires the if-converted method to be applied for all convertible instruments (the treasury stock method is no longer available), and (2) removes the ability to rebut the presumption of share settlement for contracts that may be settled in cash or stock.

Upon adoption, a one-time election may be made to apply the fair value ~~plus~~option for any liability-classified financial instrument that is a convertible security. In the ~~undiscounted value~~period of ~~any applicable contractual exit fees associated with~~adoption, disclosure is required of (1) the ~~investments. The ADC arrangement has an equity-like participation which was considered~~nature of and reason for the change in ~~its fair value. The capitalization rate used was 6.8%.~~

~~Securities—Fair value is based on quotations from brokers or financial institutions that act as underwriters~~accounting principle in both the interim and annual period of change, and (2) earnings per share transition information about the effect of the ~~debt securities, third-party pricing service or discounted cash flows depending~~change on ~~the type of debt securities.~~affected per-share amounts.

~~Debt~~—The fair value of debt was determined by either comparing the contractual interest rate to the interest rate for newly originated debt with similar credit risk or the market rate at which a third party might expect to assume such debt or based on discounted cash flow (“DCF”) projections of principal and interest expected to be collected, which include consideration of borrower or sponsor credit, as well as operating resultsAdoption of the ~~underlying collateral. All of~~new standard may be made either on a full or modified retrospective approach, with cumulative effect adjustment recorded to beginning retained earnings under the debt was priced consistent with current interest rates attainable for similarly situated investments, and therefore was attributed a value equal to each debt’s outstanding principal amount less any applicable premium or discount on the secured debt.

~~Noncontrolling Interests~~—NorthStar I’s noncontrolling interests are attributable to the minority ownership interests of its operating partners in its CRE properties. The estimated value of NorthStar I’s noncontrolling interests represents the minority owner’s pro rata share of the estimated net book value of the CRE properties, as determined in accordance with the above description of the valuation process for real estate and related intangibles. NorthStar II’s noncontrolling interestlatter. ASU No. 2020-06 is attributable to the minority ownership interest of its operating partner in its Bothell, Washington office portfolio. The estimated value of NorthStar II’s noncontrolling interest represents the operating partner’s pro rata share of the estimated net book value of the portfolio, as determined in accordance with the above description of the valuation process for real estate and related intangibles. The major classes of intangible assets and liabilities include leasing commissions, above- and below-market lease values and in-place lease values.

~~Results of NorthStar I and NorthStar II~~

~~For the three months ended March 31, 2018, the Company’s results of operations included contributions from the acquired business of NorthStar I and NorthStar II as follows (dollars in thousands):~~

February 1, 2018 to March 31, 2018
NorthStar I NorthStar II Total
Total revenues $ 37,312
$ 39,207
$ 76,519

Net income (loss) attributable to common stockholders (2,175 ) 8,626
6,451

~~Combination-Related Costs~~

Transaction costs of $30.2 million were incurred in connection with the Combination in the three months ended March 31, 2018, consisting largely of professional fees for legal, financial advisory, accounting and consulting services. Approximately $24.3 million of the transaction costs represent fees paid to investment bankers that were contingent upon consummation of the Combination.

~~Additionally, the Company also incurred $5.9 million of other Combination-related costs during the three months ended March 31, 2018.~~

~~Combination-related costs are expensed as incurred and such costs expensed by NorthStar I and NorthStar II prior to the Closing Date were excluded from the Company's results of operations.~~

~~Pro Forma Financial Information (Unaudited)~~

~~The following table presents pro forma financial information of the Company as if the Combination had been consummated on~~effective January 1, ~~2017.~~2022, with early adoption permitted in interim periods beginning January 1, 2021. The ~~pro forma financial information includes~~Company is currently evaluating the ~~pro forma~~ impact of purchase accounting adjustments primarily related to fair value adjustments and depreciation and amortization, and excludes Combination-related expenses of $30.2 million for the three months ended March 31, 2018. The pro forma financial information, however, does not reflect any potential benefits that may result from realization of future cost savings from operating efficiencies, or other incremental synergies expected to result from the Combination.this new guidance.

Table of Contents

COLONY ~~NORTHSTAR~~ CREDIT REAL ESTATE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

~~The pro forma financial information is presented~~3. Loans and Preferred Equity Held for ~~illustrative purposes only~~Investment, net and is not necessarily indicative of the results of operations of the Company had the Combination been completed on January 1, 2017, nor indicative of future results of operations of the Company (dollars in thousands, except per share data):Loans Held for Sale

Three Months Ended March 31,
2018 2017
Pro forma:
Total revenues $ 136,038
$ 123,426
Net income (loss) attributable to Colony NorthStar Credit Real Estate, Inc. 37,628
49,196
Net income (loss) attributable to common stockholders 35,229
39,852
Earnings (loss) per common share:
Basic $ 0.27
$ 0.31
Diluted $ 0.27
$ 0.31


4.	~~Loans Held for Investment, net~~

The following table provides a summary of the Company’s loans and preferred equity held for investment, net (dollars in thousands):

March 31, 2018 (Unaudited) December 31, 2017
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
Non-PCI Loans
Fixed rate
Mortgage loans $ 16,240
$ 16,159
10.5 % 6.0 $ 471,669
$ 463,748
8.3 % 2.0
Mezzanine loans 116,231
116,152
13.1 % 5.1 141,931
141,828
13.2 % 3.2
132,471
132,311
613,600
605,576

Variable rate
Mortgage loans $ 1,039,007
$ 1,046,581
6.6 % 3.1 $ 260,366
$ 260,932
8.1 % 2.3
Securitized loans⁽¹⁾
497,849
501,055
6.9 % 0.9 377,939
379,670
6.7 % 0.3
Mezzanine loans 109,821
110,014
10.1 % 3.4 34,391
34,279
9.8 % 1.3
Preferred equity interests 26,488
26,774
14.2 % 1.7 —
—
—
—
1,673,165
1,684,424
672,696
674,881

1,805,636
1,816,735
1,286,296
1,280,457

PCI Loans
Mortgage loans —
—
21,444
20,844

Allowance for loan losses NA
(517 ) NA
(517 )
Loans held for investment, net $ 1,805,636
$ 1,816,218
$ 1,307,740
$ 1,300,784


	June 30, 2020													December 31, 2019
	Unpaid Principal Balance		Carrying Value		Weighted Average Coupon⁽¹⁾		Weighted Average Maturity in Years	Unpaid Principal Balance		Carrying Value		Weighted Average Coupon⁽¹⁾		Weighted Average Maturity in Years
Fixed rate
Mezzanine loans	$	135,389	$	134,654	12.8	%	4.5	$	223,395	$	222,503	12.8	%	4.2
Preferred equity interests	118,715		118,696		12.5	%	6.4	115,384		115,313		12.5	%	6.9
Other loans⁽²⁾	13,898		13,800		15.0	%	3.9	12,572		12,448		15.0	%	4.4
	268,002		267,150					351,351		350,264
Variable rate
Senior loans	1,011,334		1,008,062		5.4	%	3.6	1,462,467		1,457,738		6.0	%	3.8
Securitized loans⁽³⁾	1,007,152		1,004,301		5.1	%	3.8	1,006,495		1,002,696		5.2	%	4.2
Mezzanine loans	15,462		15,582		10.1	%	2.2	38,110		38,258		11.4	%	2.0
	2,033,948		2,027,945					2,507,072		2,498,692
	2,301,950		2,295,095					2,858,423		2,848,956

Allowance for loan losses	NA		(52,521)					NA		(272,624)
Loans and preferred equity held for investment, net	$	2,301,950	$	2,242,574				$	2,858,423	$	2,576,332

(1)Calculated based on contractual interest rate.

(2)Includes one corporate term loan secured by the borrower’s limited partnership interests in a fund at June 30, 2020 and December 31, 2019.

(3)Represents loans transferred into securitization trusts that are consolidated by the Company.

As of June 30, 2020, the weighted average maturity, including extensions, of loans and preferred equity investments was 3.9 years.

The Company had $8.3 million and $9.8 million of interest receivable related to its loans and preferred equity held for investment, net as of June 30, 2020 and December 31, 2019, respectively. This is included in receivables, net on the Company’s consolidated balance sheets.

Activity relating to the Company’s loans and preferred equity held for investment, net was as follows (dollars in thousands):


~~(1)~~	~~Represents~~	Carrying Value
Balance at January 1, 2020		$	2,576,332
Acquisitions/originations/additional funding		66,722
Loan maturities/principal repayments		(176,021)

Transfer to loans ~~transferred into securitization trusts that are consolidated by the Company~~.held for sale		(154,370)
Discount accretion/premium amortization		4,289
Capitalized interest		6,382
Provision for loan losses⁽¹⁾		(75,200)
Effect of CECL adoption⁽²⁾		(21,093)


Charge-off		15,533
Balance at June 30, 2020		$	2,242,574

(1)Provision for loan losses includes $5.2 million for a loan that was subsequently transferred to held for sale during the second quarter. Provision for loan losses excludes a reversal of $0.1 million determined by the Company’s PD/LGD model for unfunded commitments reported on the consolidated statement of operations, with a corresponding offset to other liabilities recorded on the Company’s consolidated balance sheets.

(2)Calculated by the Company’s PD/LGD model upon CECL adoption on January 1, 2020. See Note 2, “Summary of Significant Accounting Polices” for further details.

Table of Contents

COLONY ~~NORTHSTAR~~ CREDIT REAL ESTATE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

~~Activity relating to the Company’s loans held for investments, net was as follows (dollars in thousands):~~

Carrying Value
Balance at January 1, 2018 $ 1,300,784
Loans held for investment acquired in the Combination (refer to Note 3) 1,249,733
Deconsolidation of investment entities⁽¹⁾
(553,678 )
Acquisitions/originations/additional funding 5,059
Loan maturities/principal repayments (136,913 )
Combination adjustment⁽²⁾
(50,314 )
Discount accretion/premium amortization 1,017
Capitalized interest 530
Balance at March 31, 2018 $ 1,816,218


~~(1)~~	~~Represents loans held for investment, net which were deconsolidated as a result of the Combination. Refer to Note 2, “Summary of Significant Accounting Policies,” for further detail.~~


~~(2)~~	Represents a loan held for investment, net that was previously sold by the CLNS Investment Entities to NorthStar I and was treated as a secured financing by the CLNS Investment Entities. This loan was eliminated as a result of the Combination.

Nonaccrual and Past Due Loans and Preferred Equity

~~Non-PCI loans~~Loans and preferred equity 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. At June 30, 2020, other than the Midwest Hospitality loan discussed below, all other loans and preferred equity held for investment remained current on interest payments.

In March 2018, the borrower on the Company’s ~~$260.2 million~~4 NY hospitality ~~loan~~loans in its Legacy, Non-Strategic Portfolio failed to make ~~its~~all required interest ~~payment. The~~payments and the loans were placed on nonaccrual status. These 4 loans are secured by the same collateral. During 2018, the Company ~~has placed~~recorded $53.8 million of provision for loan losses to reflect the ~~loan on non-accrual status and has commenced discussions with~~estimated value to be recovered from the borrower ~~to resolve~~following a sale. During 2019, the ~~matter. No~~Company recorded an additional provision for loan loss of $154.3 million based on significant deterioration in the NY hospitality market, feedback from the sales process and the estimated value to be recovered from the borrower following a potential sale. During the three months ended March 31, 2020, the significant detrimental impact of COVID-19 on the U.S. hospitality industry further contributed to the deterioration of the Company’s 4 NY hospitality loans and as such the Company recorded an additional provision for loan losses of $36.8 million. During the three months ending June 30, 2020, the Company completed a discounted payoff of the NY hospitality loans and related investment interests.

Within its Legacy, Non-Strategic Portfolio, the Company previously held other loans secured by regional malls that were sold during the six months ended June 30, 2020:

•The Company placed 1 loan secured by a regional mall (“Midwest Regional Mall”) on nonaccrual status during 2019 as collectability of the principal was uncertain; as such, interest collected is recognized using the cost recovery method by applying interest collected as a reduction to loan carrying value. The Company recorded $10.6 million of impairment related to Midwest Regional Mall and transferred the loan to held for sale during 2019. During the three months ending June 30, 2020 the Midwest Regional Mall was sold. The Company received $8.3 million in gross proceeds and recognized a gain of $3.7 million.

•During 2018, the Company recorded $8.8 million of provision for loan losses on one loan secured by a regional mall (“Northeast Regional Mall B”) to reflect the estimated fair value of the collateral. During 2019, the Company recognized additional provision for loan losses of $10.5 million on Northeast Regional Mall B. The additional provisions were based on then-current and prospective leasing activity to reflect the estimated fair value of the collateral. During the three months ended March 31, 2020, the Northeast Regional Mall was sold. The Company received $9.2 million in gross proceeds and recognized a gain of $1.8 million.

•Also, during 2019, the Company separately recognized provision for loan losses of $18.5 million on 2 loans secured by 1 regional mall (“West Regional Mall”) to reflect the estimated fair value of the collateral. During the three months ended June 30, 2020 the West Regional Mall loan was sold. The Company received $23.5 million in gross proceeds and recognized a gain of $6.5 million.

•Furthermore, during 2019, the Company recognized a $26.7 million provision for loan losses on 3 loans to 2 separate borrowers (“South Regional Mall A” and “South Regional Mall B”) to reflect the estimated fair value of the collateral. During the three months ended March 31, 2020, the Company accepted a discounted payoff of South Regional Mall A. The Company received $22.0 million in gross proceeds and recognized a loss of $1.6 million. Additionally, during the three months ended March 31, 2018 as the Company believes sufficient collateral value exists to cover the outstanding loan balances. These discussions typically include numerous points of negotiation as the Company and the borrower work towards a settlement or other alternative resolution, which can impact the potential for loan repayment or receipt of collateral.

~~The following table provides an aging summary of non-PCI loans held for investment at carrying values before allowance for loan losses (dollars 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 / Nonaccrual ⁽¹⁾
Total Non-PCI Loans
March 31, 2018 (Unaudited) $ 1,384,599

$ —

$ —

$ 432,136

$ 1,816,735
December 31, 2017 1,101,522
144,241
7,929
26,765
1,280,457


~~(1)~~	~~Loans held for investment with a total carrying value of $42.2 million which were 90 days or more past due repaid in full subsequent to March 31, 2018.~~

~~Troubled Debt Restructuring~~

~~At March 31, 2018 and December 31, 2017, there~~2020, South Regional Mall B was ~~one mezzanine loan previously modified in a TDR with carrying value before allowance for loan losses of $28.6 million. The loan had been modified in 2015.~~sold. The Company ~~also has three other loans with~~received $13.5 million in gross proceeds and recognized a ~~combined carrying value~~gain of $108.5 million that are cross-defaulted with the TDR loan to the same borrower. Two loans matured in November 2017 and were in default at both March 31, 2018 and December 31, 2017, while the third loan remains current. All four loans are collateralized with 27 office, retail, multifamily and industrial properties with an estimated aggregate fair value of approximately $137.1$8.7 million. In February 2018, the borrower and the Company entered into a forebearance agreement to allow both parties to review the exit strategy for a period through the end of May 2018, which may be extended at the Company’s option for an additional 90 day period. No provision for loan loss was made at March 31, 2018 or December 31, 2017 on the two defaulted loans as the Company believes there is sufficient collateral value to cover the outstanding loan balances in aggregate.

Within its Core Portfolio:

•The Company ~~has no additional commitments~~placed 1 loan secured by a hotel in Bloomington, Minnesota (“Midwest Hospitality”) on nonaccrual status due to ~~lend to~~a borrower default during the ~~borrower with the TDR loan.~~

~~There were no loans modified as TDRs during~~fourth quarter of 2019. During the three months ended March 31, ~~2018~~2020 the Company recognized a $2.3 million provision for loan loss on the Midwest Hospitality loan to reflect the estimated fair value of the collateral, which was based on feedback from the sales process and ~~year ended December~~the estimated value to be recovered from the borrower following a potential sale. The Company had been sweeping cash from the hotel to amortize the unpaid principal balance of the loan. Subsequent to June 30, 2020 the hotel property securing this loan was sold and the Company received $24.5 million in gross proceeds and concurrently provided a bridge loan in the amount of$19.5 million to a new borrower, secured by Midwest Hospitality.

•Additionally, the Company had a total $20.9 million allowance for loan losses recorded as of March 31, ~~2017.~~

2020, which included an $8.8 million allowance for loan losses resulting from CECL adoption and an additional $12.1 million

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

provision for loan losses recognition during the three months ended March 31, 2020, on 1 loan secured by 6 suburban office buildings (“Northeast Office Portfolio”). Subsequent to June 30, 2020 the Company received gross proceeds of $80.7 million in a discounted payoff of the Northeast Office Portfolio which was equal to the carrying value of the loan, net of current provision for loan losses. As such, no additional provision for loan losses were required at June 30, 2020.

~~Non-PCI~~ •Also, during the three months ended June 30, 2020 the Company classified 1 loan secured by a hospitality asset in San Diego, California (“West Hospitality”) as held for sale and recognized a net loss of $32.8 million to reflect the expected proceeds to be collected in a sale of the loan. The Company had recorded a $5.2 million allowance for loan losses as of March 31, 2020, which included a $2.6 million allowance for loan losses resulting from CECL adoption and an additional $2.6 million provision for loan losses recognized for West Hospitality during the three months ended March 31, 2020. In connection with transferring the loan to held for sale during the current quarter, the Company reversed out the $5.2 million from provision for loan losses line item and recorded a $38.0 million in other loss, net. Subsequent to June 30, 2020 the West Hospitality loan was sold. The Company received $105.2 million in gross proceeds and will recognize an additional loss of $0.3 million.

The following table provides an aging summary of loans and preferred equity held for investment at carrying values before allowance for loan losses, if any (dollars in thousands):


	Current or Less Than 30 Days Past Due		30-59 Days Past Due⁽¹⁾		60-89 Days Past Due		90 Days or More Past Due⁽¹⁾⁽²⁾		Total Loans
June 30, 2020	$	2,265,249	$	—	$	—	$	29,846	$	2,295,095
December 31, 2019	2,558,505		32,322		—		258,129		2,848,956

(1)At December 31, 2019, 30-59 days past due includes 1 loan (Midwest Hospitality) that was placed on nonaccrual status during the fourth quarter of 2019 following a borrower default. At June 30, 2020, the Midwest Hospitality loan was 90 days or more past due. Subsequent to June 30, 2020, Midwest Hospitality was repaid in a discounted payoff at which time the Company provided a bridge loan totaling $19.5 million to a new borrower.

(2)At December 31, 2019, 90 days or more past due loans includes 4 NY hospitality loans to the same borrower and secured by the same collateral with combined carrying value before allowance for loan losses of $258.1 million on nonaccrual status. All other loans in this table remain current on interest payments. The Company completed a discounted payoff of the 4 NY hospitality loans in April 2020.

Impaired Loans - 2019

~~Non-PCI loans~~Loans 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~~Impaired loans include predominantly loans under nonaccrual, performing and nonperforming ~~TDRs.~~TDRs, as well as loans in maturity default. The following table presents ~~non-PCI~~ impaired loans at ~~the respective reporting dates~~December 31, 2019 (dollars in thousands):


	Unpaid Principal Balance⁽¹⁾		Gross Carrying Value
					With Allowance for Loan Losses⁽²⁾			Without Allowance for Loan Losses			Total⁽²⁾			Allowance for Loan Losses
December 31, 2019	$	408,058	$	377,421		$	32,322		$	409,743		$	272,624

(1)Includes 4 NY hospitality loans to the same borrower and secured by the same collateral with combined unpaid principal balance of $257.2 million and gross carrying value of $258.1 million on nonaccrual status. All other loans included in this table remain current on interest payments. The Company completed a discounted payoff of the 4 NY hospitality loans in April 2020.

(2)Includes unpaid principal balance plus any applicable exit fees less net deferred loan fees.

Upon adoption of ASU 2016-13 the incurred loss model has been replaced with a lifetime current expected credit loss model for the Company’s loans carried at amortized cost, and as such all loans in the Company’s portfolio maintain an allowance for loan losses at June 30, 2020. See Note 2 “Summary of Significant Accounting Policies—Accounting Standards Adopted in 2020—Credit Losses” for further details.

Unpaid Principal Balance Gross Carrying Value
With Allowance for Loan Losses Without Allowance for Loan Losses Total Allowance for Loan Losses
March 31, 2018 (Unaudited) $ 430,053

$ 42,176

$ 389,960

$ 432,136

$ 517
December 31, 2017 215,997
42,176
175,090
217,266
517

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The average carrying value and interest income recognized on ~~non-PCI~~ impaired loans for the three and six months ended June 30, 2019 were as follows (dollars in thousands):


	Three Months Ended June 30,		Six Months Ended June 30,
	2019		2019
Average carrying value before allowance for loan losses	$	320,934	$	389,500
Interest income	1,305		2,651

Three Months Ended March 31,
2018 2017
Average carrying value before allowance for loan losses $ 385,067
$ 40,066
Interest income 3,758
756

~~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.~~

~~Changes in accretable yield of PCI loans were as follows (dollars in thousands):~~

Three Months Ended March 31,
2018 2017
Beginning accretable yield $ 726
$ 5,929
Changes in accretable yield⁽¹⁾
(605 ) (572 )
Accretion recognized in earnings (121 ) (1,522 )
Ending accretable yield $ —
$ 3,835


~~(1)~~	~~Change in accretable yield during the three months ended March 31, 2018 is a result of the deconsolidation of certain CLNS Contributed Portfolio investments.~~

Allowance for Loan Losses

As of ~~March 31, 2018 and~~ December 31, ~~2017~~2019, the allowance for loan losses was ~~$0.5~~$272.6 million related to ~~$42.2~~$409.7 million in carrying value of ~~non-PCI~~ loans.

Changes in allowance for loan losses on ~~non-PCI~~ loans are presented below (dollars in thousands):


	Six Months Ended June 30,
	2020		2019
Allowance for loan losses at beginning of period	$	272,624	$	109,328
Effect of CECL adoption⁽¹⁾	21,093		—

Provision for loan losses⁽²⁾	75,200		110,258
Charge-off	(15,533)		(46,692)

Transfer to loans held for sale	(300,863)		—
Allowance for loan losses at end of period⁽³⁾	$	52,521	$	172,894

(1)Calculated by the Company’s PD/LGD model upon CECL adoption on January 1, 2020. See Note 2, “Summary of Significant Accounting Policies” for further details.

Three Months Ended March 31,
2018 2017
Allowance for loan losses at beginning of period $ (517 ) $ (3,386 )
Provision for loan losses —
—
Charge-off —
3,210
Allowance for loan losses at end of period $ (517 ) $ (176 )
(2)Provision for loan losses includes $5.2 million for a loan that was subsequently transferred to held for sale during the second quarter of 2020. Provision for loan losses excludes a reversal of $0.1 million determined by the Company’s PD/LGD model for unfunded commitments reported on the consolidated statement of operations, with a corresponding offset to other liabilities recorded on the Company’s consolidated balance sheets.

As(3)At June 30, 2020, includes $29.3 million related to the Company’s PD/LGD model, $20.9 million relating to the Northeast Office Portfolio and $2.3 million related to the Midwest Hospitality loan, both of ~~March~~which were evaluated individually. See further discussion in “Nonaccrual and Past Due Loans and Preferred Equity.”

Loans and Preferred Equity Held for Sale

The following table summarizes the Company’s assets held for sale related to loans and preferred equity (dollars in thousands):


	June 30, 2020		December 31, 2019
Assets
Loans and preferred equity held for investment, net	$	104,900	$	5,016
Total assets held for sale	$	104,900	$	5,016

At June 30, 2020, the Company classified 1 loan, West Hospitality, in its Core Portfolio as held for sale. Subsequent to June 30, 2020 the West Hospitality loan was sold. The Company received $105.2 million in gross proceeds and will recognize a loss of $0.3 million.

There were 0 assets held for sale that constituted discontinued operations as of June 30, 2020 and December 31, ~~2018, the weighted average maturity, including extensions, of CRE debt investments was 2.7 years.~~2019.

Credit Quality Monitoring

~~CRE debt~~Loan and preferred equity investments are typically loans secured by direct senior priority liens on real estate properties or by interests in entities that directly own real estate properties, which serve as the primary source of cash for the payment of principal and interest. The Company evaluates its ~~debt~~loan and preferred equity investments at least quarterly and differentiates the relative credit quality principally based on: (i)

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~~COLONY NORTHSTAR CREDIT REAL ESTATE, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

whether the borrower is currently paying contractual debt service in accordance with its contractual terms; and (ii) whether the Company believes the borrower will be able to perform under its contractual terms in the future, as well as the Company’s expectations as to the ultimate recovery of principal at maturity.

As of ~~March 31, 2018,~~June 30, 2020, there ~~were seven real estate debt investments~~was 1 loan to 1 borrower with contractual payments past ~~due.~~due, which was the Midwest Hospitality loan in the Core Portfolio, as previously discussed. The remaining ~~CRE debt~~loans and preferred equity investments were

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COLONY CREDIT REAL ESTATE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

performing in accordance with the contractual terms of their governing documents and were categorized as performing loans. There were ~~seven real estate debt investments~~5 loans held for investment with contractual payments past due as of December 31, ~~2017.~~2019. For the ~~three~~six months ended ~~March 31, 2018, no~~June 30, 2020, 0 debt investment contributed more than 10.0% of interest income.

The following table provides a summary by carrying values before any allowance for loan losses of the Company’s loans and preferred equity held for investment by year of origination and credit quality risk ranking (dollars in thousands). Refer to Note 2, “Summary of Significant Accounting Policies—Accounting Standards Adopted in 2020—Credit Losses” for loans risk ranking definitions.


	2020		2019		2018		2017		2016		Prior		Total
Senior loans
Risk Rankings:


3	$	—	$	265,249	$	296,631	$	33,581	$	—	$	—	$	595,461
4	—		924,265		462,795		—		—		—		1,387,060
5	—		—		—		—		—		29,846		29,846
Total Senior loans	—		1,189,514		759,426		33,581		—		29,846		2,012,367

Mezzanine loans
Risk Rankings:


3	—		—		—		—		—		—		—
4	—		79,053		54,534		12,120		—		4,529		150,236

Total Mezzanine loans	—		79,053		54,534		12,120		—		4,529		150,236

Preferred equity interests and other
Risk Rankings:



4	—		13,800		18,007		—		—		—		31,807

5	—		—		100,685		—		—		—		100,685
Total Preferred equity interests and other	—		13,800		118,692		—		—		—		132,492

Total Loans and preferred equity held for investment	$	—	$	1,282,367	$	932,652	$	45,701	$	—	$	34,375	$	2,295,095

The Company considers several risk factors when assigning risk ratings each quarter. Beginning with the quarter ended March 31, 2020, average risk ranking was impacted by the current and potential future effects of the COVID-19 pandemic, resulting in a number of assets moving from average risk (3) to high risk (4) during the quarter and an average rating of 3.8.

For the three months ended June 30, 2020, the Company believes the extended impact of the COVID-19 pandemic remains uncertain, and therefore continues to represent a significant risk to our portfolio. As such, the current period average rating is 3.9, which is consistent with the first quarter 2020.

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, 2018,~~June 30, 2020, assuming the terms to qualify for future fundings, if any, have been met, total gross unfunded lending commitments was ~~$53.6~~$205.0 million, excluding $1.4 million for ~~mortgage~~ loans ~~$12.5~~held for sale. Refer to Note 16, “Commitments and Contingencies” for further details. At June 30, 2020, the Company recorded a $1.9 million allowance for ~~securitized loans,~~lending commitments in accrued and ~~$2.2 million~~other liabilities on its consolidated balance sheets in accordance with the credit losses accounting standard No. 2016-13. See Note 2, “Summary of Significant Accounting Policies” for ~~preferred equity interests. Future funding commitments were $19.2 million for mortgage loans at December 31, 2017.~~further details.

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5.	~~Investments in Unconsolidated Ventures~~

COLONY CREDIT REAL ESTATE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

4. Investments in Unconsolidated Ventures

Summary

The Company’s investments in unconsolidated ventures represent noncontrolling equity interests in various entities, as follows (dollars in thousands):

March 31, 2018 (Unaudited) December 31, 2017
Equity method investments
Investment ventures $ 498,973
$ 179,303
498,973
179,303
Investments under fair value option
Private funds 257,495
24,417
$ 756,468
$ 203,720

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~


	June 30, 2020		December 31, 2019
Equity method investments	$	410,214	$	585,022

Investments under fair value option	7,093		10,283
Investments in Unconsolidated Ventures	$	417,307	$	595,305

Equity Method Investments

Investment Ventures

Certain of the Company’s equity method investments are structured as joint ventures with one or more private funds or other investment vehicles managed by ~~the~~ Colony ~~NorthStar~~Capital with third party joint venture partners. These investment entities are generally capitalized through equity contributions from the members, although certain investments are leveraged through various financing arrangements.

The assets of the equity method investment entities may only be used to settle the liabilities of these entities and there is no recourse to the general credit of the Company nor 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 as of ~~March 31, 2018~~June 30, 2020 and December 31, ~~2017~~,2019, respectively.

As discussed in Note 2, “Summary of Significant Accounting Policies”, certain of the CLNS Investment Entities were deconsolidated by the Company upon closing of the Combination and accounted for as investments in unconsolidated ventures. The Company’s investments accounted for under the equity method are summarized below (dollars in thousands):


		Carrying Value
Investments	Description	June 30, 2020		December 31, 2019
ADC investments^(1)(2)(3)	Interests in 3 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	$	57,575	$	59,576
Other investment ventures⁽¹⁾⁽⁴⁾	Interests in 9 investments, each with less than $181.6 million carrying value at June 30, 2020	352,639		525,446

(1)The Company’s ownership interest in ADC investments and other investment ventures varies and 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 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)The Company owns varying levels of stated equity interests in certain ADC investments, as well as profit participation interests in real estate ventures without a stated ownership interest in other ADC investments.

(3)Includes 2 investments with a carrying value of $57.6 million that were contributed to a preferred financing arrangement. See Note 13, “Noncontrolling Interests,” for further information.

(4)Includes 5 investments with a carrying value of $196.2 million that were contributed to a preferred financing arrangement. See Note 13, “Noncontrolling Interests,” for further information.

Impairment

Within the Company’s Legacy, Non-Strategic Portfolio:

•During 2019, the Company recognized its proportionate share of impairment loss totaling $14.7 million on 1 senior loan secured by a regional mall (“Southeast Regional Mall”). Southeast Regional Mall was sold during the three months ended March 31, 2020 and the Company received $13.4 million in gross sales proceeds and recognized a gain of $1.6 million.

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COLONY CREDIT REAL ESTATE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Ownership Interest⁽¹⁾ at March 31, 2018
Carrying Value
Investments Description March 31, 2018 (Unaudited) December 31, 2017
ADC investments Interests in eight 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
Various⁽²⁾
$ 320,991
$ 179,303
Other investment ventures Interests in 10 investments, each with less than $60.4 million carrying value at March 31, 2018 Various 177,982
—
•Also during 2019, the Company recorded its proportionate share of impairment loss totaling $16.1 million on 2 loans and an equity partnership interest secured by residential development projects as a result of revised property sales expectations.

~~(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 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)~~	The Company owns varying levels of stated equity interests in certain ADC investments, as well as profit participation interests in real estate ventures without a stated ownership interest in other ADC investments.

Within the Company’s Core Portfolio:

During 2019 the Company recorded a $17.6 million impairment loss related to an equity participation interest in a joint venture to reflect the estimated fair value of the collateral. During the three months ended June 30, 2020 the Company sold the related preferred equity investment at par and included one-third of the Company’s equity participation in the sale and recognized a loss of $10.1 million.

The impairment recorded on each of these investments is included in equity in earnings of unconsolidated ventures on the Company’s consolidated statements of operations.

Fair Value Measurement

At January 1, 2020, for loans and preferred equity investments included in the Company’s equity method investments, the fair value option was elected.Under the fair value option, loans and preferred equity investments are measured each reporting period based on their exit values in an orderly transaction. Fair value adjustments recorded on each of these investments is included in equity in earnings of unconsolidated ventures on the Company’s consolidated statements of operations.

Within the Company’s Core Portfolio:

•The Company has a mezzanine loan and preferred equity investment in a development project in Los Angeles County which includes a hospitality and retail renovation and a new condominium tower construction (the “Mixed-use Project”). The Company’s interests are held through a joint venture which maintains total commitments to the Mixed-use Project of $574.0 million of which the Company’s proportionate share of the commitment is $189.0 million. The Mixed-use Project’s total interest income recorded for the six months ended June 30, 2020 and June 30, 2019 was $13.8 million and $18.4 million, respectively. The Company recognized its proportionate share of interest income for the six months ended June 30, 2020 and June 30, 2019 of $2.4 million and $5.8 million, respectively.

In April 2020, the senior mortgage lender notified the borrower developer that the Mixed-use Project loan funding was over budget, due to cost overruns from certain hard and soft costs and senior loan interest reserve shortfalls projected through completion. As a result, during the second quarter, the Company and its affiliates made two protective advances to the senior mortgage lender totaling $67.7 million, of which the Company’s proportionate share was $28.5 million. The Company and its affiliates have a remaining unfunded commitment of $39.3 million, of which the Company’s proportionate share is $14.5 million. The Company has placed this investment on nonaccrual status.

In June 2020, the senior mortgage lender sought a third protective advance of $15.5 million of which the Company’s proportionate share would have been $7.0 million. While the Company and its affiliates did not fund its proportionate share, the senior mortgage lender funded the full amount of the required June advances. The senior mortgage lenders funding did not relieve the Company and its affiliates from its commitment to fund. As a result during the three months ended June 30, 2020, the Mixed-use Project’s recorded fair value losses totaling $250.0 million. The Company recognized its proportionate share of fair value losses equaling $89.3 million. The Mixed-use Project’s fair value was based on a weighted average probability analysis of potential resolutions based on a number of factors which included the maturity default of the loan, cost overruns, COVID-19 related delays, lack of funding by the borrower and recent negotiations with the senior lender, the borrower and potential sources of additional mezzanine financing.

•Additionally, during the three months ended June 30, 2020, the Company recognized its proportionate share of fair value losses totaling $7.0 million on 1 mezzanine loan secured by a mixed-use development project (“West Mixed-use”). West Mixed-use’s decrease in fair value is a result of revised sale expectations. The Company previously placed West Mixed-use on nonaccrual status in January 2020.

Investments under Fair Value Option

Private Funds

The Company elected to account for its limited partnership interests, which range from 0.1% to ~~30.3%~~16.1%, in PE Investments under the fair value option. The Company records equity in earnings for these investments based on a change in fair value of its share of projected future cash flows.

~~Summarized Financial Information~~

The combined statements of operations for the unconsolidated ventures, including PE Investments and excluding unconsolidated ventures accounted for under the cost method, for the three months ended March 31, 2018 and 2017, are as follows (dollars in thousands):

Three Months Ended March 31,⁽¹⁾
2018 2017
Total revenues $ 19,938
$ 7,803
Net income (loss)⁽²⁾
10,107
6,937


~~(1)~~	~~Includes summarized financial information for PE Investments on a one quarter lag, which is the most recent financial information available from the underlying funds.~~


~~(2)~~	~~Includes net investment income and unrealized and realized gains and losses for PE Investments.~~

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COLONY ~~NORTHSTAR~~ CREDIT REAL ESTATE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

During the six months ended June 30, 2020, the Company received the final $1.8 million in proceeds related to the sale of its PE Investments.


6.	~~Real Estate, net~~

Investments in Unconsolidated Ventures Held for Sale

During the six months ended June 30, 2020, the Company classified 1 investment in an unconsolidated venture it its Legacy, Non-Strategic Portfolio with a carrying value of $11.0 million as held for sale.

5. Real Estate Securities, Available for Sale

Investments in CRE Securities

CRE securities are composed of CMBS backed by a pool of CRE loans which are typically well-diversified by type and geography. The following table presents CMBS investments as of June 30, 2020 and December 31, 2019 (dollars in thousands):


														Weighted Average
		Principal Amount⁽¹⁾		Total Discount		Amortized Cost		Cumulative Unrealized on Investments								Fair Value			Coupon⁽²⁾		Unleveraged Current Yield⁽³⁾
As of Date:	Count													Gain						(Loss)
June 30, 2020	16	$	108,512	$	(48,502)	$	60,010	$	—	$	—	$	60,010	3.37	%		—	%
December 31, 2019	43	292,284		(55,981)		236,303		17,084		(563)		252,824		3.19	%		7.12	%

(1)CRE securities serve as collateral for financing transactions including carrying value of $60.0 million as of June 30, 2020 for the CMBS Credit Facilities (refer to Note 9, “Debt,” for further detail). The remainder is unleveraged.

(2)All CMBS are fixed rate.

(3)The Company placed all of its CRE securities on cost recovery status as of April 1, 2020.

During the three months ended June 30, 2020, the Company sold 27 CRE securities for a total gross sales price of $89.7 million and recognized a loss of $57.0 million of which $36.4 million was previously recorded as an unrealized loss in other comprehensive income at March 31, 2020. The loss is recorded in other loss, net on the Company’s consolidated statements of operations. In connection with these sales, the Company repaid $66.1 million of debt on our CMBS Credit Facility.

Consistent with the overall market, the Company’s CRE securities, which it marks to fair value, lost significant value since the onset of the COVID-19 pandemic. Although the market at June 30, 2020 experienced a slight rebound in some securities from the marks taken at March 31, 2020, the Company believes bond prices will remain at or around current levels over the next six to twelve months. While the Company will evaluate selling its investment grade and non-investment grade rated CRE securities over the next twelve months, it is more likely than not that the Company will sell before recovery. For the three months ended June 30, 2020 the Company recorded an impairment loss of $29.2 million. This impairment loss was a result of writing down the Company’s amortized cost basis to equal fair value. The loss is recorded in other loss, net on the Company’s consolidated statements of operations. Additionally, the Company has placed its investment grade and non-investment grade rated CRE securities on cost recovery and as a result, has ceased accretion of any discounts to expected maturity and applied any cash interest received against the CRE securities’ carrying value. This decision was made given the inability to project future cash flows from the Company’s CRE securities. To the extent that the carrying value of any CRE security is reduced to zero, any cash subsequently received would be recorded as interest income.

The Company recorded an unrealized gain in OCI of $58.5 million and an unrealized loss of $16.5 million for the three and six months ended June 30, 2020 and an unrealized gain in OCI of $7.9 million and $17.6 million for the three and six months ended June 30, 2019. During the three months ended June 30, 2020, the Company realized the gain in OCI as it no longer has the intent to hold its CRE securities until maturity and caused the Company to write down its amortized cost basis to fair value. As of June 30, 2020, the Company held no securities in an unrealized loss position.

As of June 30, 2020, the weighted average contractual maturity of CRE securities was 28.7 years with an expected maturity of 5.6 years.

The Company had $0.7 million of interest receivable related to its real estate securities, available for sale as of December 31, 2019. This is included in receivables, net on the Company’s consolidated balance sheets.

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COLONY CREDIT REAL ESTATE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Investments in Investing VIEs

The Company is the directing certificate holder of 2 securitization trusts and has the ability to appoint and replace the special servicer on all mortgage loans. As such, U.S. GAAP requires the Company to consolidate the assets, liabilities, income and expenses of the securitization trusts as Investing VIEs. Refer to Note 2, “Summary of Significant Accounting Policies” for further discussion on Investing VIEs.

In July 2019, the Company sold its retained investments in the subordinate tranches of 1 securitization trust for $33.4 million in total proceeds. As a result of the sale, the Company deconsolidated 1 of the securitization trusts with gross assets and liabilities of approximately $1.2 billion and $1.2 billion, respectively.

Other than the securities represented by the Company’s subordinate tranches of the securitization trusts, the Company does not have any claim to the assets or exposure to the liabilities of the securitization trusts. The original issuers, who are unrelated third parties, guarantee the interest and principal payments related to the investment grade securitization bonds in the securitization trusts, therefore these obligations do not have any recourse to the general credit of the Company as the consolidator of the securitization trusts. The Company’s maximum exposure to loss would not exceed the carrying value of its retained investments in the securitization trusts, or the subordinate tranches of the securitization trusts.

As of June 30, 2020, the mortgage loans and the related mortgage obligations held in the securitization trusts had an unpaid principal balance of $1.8 billion and $1.6 billion, respectively. As of December 31, 2019, the mortgage loans and the related mortgage obligations held in the securitization trusts had an unpaid principal balance of $1.8 billion and $1.6 billion, respectively. As of June 30, 2020, across the 2 consolidated securitization trusts, the underlying collateral consisted of 115 underlying commercial mortgage loans, with a weighted average coupon of 4.5% and a weighted average loan to value ratio of 56.4%.

The following table presents the assets and liabilities recorded on the consolidated balance sheets attributable to the securitization trust as of June 30, 2020 and December 31, 2019 (dollars in thousands):


	June 30, 2020		December 31, 2019
Assets
Mortgage loans held in a securitization trust, at fair value	$	1,839,953	$	1,872,970
Receivables, net	7,170		7,020
Total assets	$	1,847,123	$	1,879,990
Liabilities
Mortgage obligations issued by a securitization trust, at fair value	$	1,758,325	$	1,762,914
Accrued and other liabilities	6,254		6,267
Total liabilities	$	1,764,579	$	1,769,181

The Company elected the fair value option to measure the assets and liabilities of the securitization trusts, which requires that changes in valuations of the securitization trusts be reflected in the Company’s consolidated statements of operations.

The difference between the carrying values of the mortgage loans held in securitization trusts and the carrying value of the mortgage obligations issued by securitization trusts was $81.6 million and $110.1 million as of June 30, 2020 and December 31, 2019, respectively, and approximates the fair value of the Company’s retained investments in the subordinate tranches of the securitization trusts, which are eliminated in consolidation. Refer to Note 14, “Fair Value” for a description of the valuation techniques used to measure fair value of assets and liabilities of the Investing VIEs.

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COLONY CREDIT REAL ESTATE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The below table presents net income attributable to the Company’s common stockholders for the six months ended June 30, 2020 and 2019 generated from the Company’s investments in the subordinate tranches of the securitization trusts (dollars in thousands):


	Three Months Ended June 30,									Six Months Ended June 30,
		2020		2019		2020		2019
Statement of Operations
Interest expense		$	(160)	$	(278)	$	(345)	$	(541)
Interest income on mortgage loans held in securitization trusts		20,539		38,656		41,094		77,132
Interest expense on mortgage obligations issued by securitization trusts		(18,364)		(35,756)		(36,423)		(71,391)
Net interest income		2,015		2,622		4,326		5,200
Administrative expense		(180)		(331)		(695)		(690)
Unrealized gain (loss) on mortgage loans and obligations held in securitization trusts, net		(8,975)		5,549		(28,427)		6,578
Realized gain on mortgage loans and obligations held in securitization trusts, net		—		—		—		48
Net income (loss) attributable to Colony Credit Real Estate, Inc. common stockholders		$	(7,140)	$	7,840	$	(24,796)	$	11,136

6. Real Estate, net and Real Estate Held for Sale

The following table presents the Company’s net lease portfolio, net, as of ~~March 31, 2018~~June 30, 2020, and December 31, ~~2017~~2019 (dollars in thousands):


	June 30, 2020		December 31, 2019
Land and improvements	$	127,483	$	209,693
Buildings, building leaseholds, and improvements	474,402		899,889
Tenant improvements	13,366		25,077
Construction-in-progress	3,144		415
Subtotal	$	618,395	$	1,135,074
Less: Accumulated depreciation	(35,567)		(63,995)
Less: Impairment⁽¹⁾	—		(23,911)
Net lease portfolio, net	$	582,828	$	1,047,168

March 31, 2018 (Unaudited) December 31, 2017
Land and improvements $ 102,764
$ 25,262
Buildings, building leaseholds, and improvements 575,589
178,109
Tenant improvements 8,901
2,316
Construction-in-progress 23
21
Subtotal $ 687,277
$ 205,708
Less: Accumulated depreciation (10,294 ) (5,516 )
Net lease portfolio, net $ 676,983
$ 200,192
(1)See Note 14, “Fair Value,” for discussion of impairment of real estate.

The following table presents the Company’s ~~other~~ portfolio ~~net,~~of real estate included in its Legacy, Non-Strategic Portfolio, including foreclosed properties, as of ~~March 31, 2018~~June 30, 2020 and December 31, ~~2017~~2019 (dollars in thousands):


	June 30, 2020		December 31, 2019
Land and improvements	$	63,234	$	91,997
Buildings, building leaseholds, and improvements	341,168		536,046
Tenant improvements	25,470		38,230
Furniture, fixtures and equipment	3,782		3,183
Construction-in-progress	1,013		6,325
Subtotal	$	434,667	$	675,781
Less: Accumulated depreciation	(33,633)		(46,079)
Less: Impairment⁽¹⁾	(160,331)		(192,074)
Other portfolio, net	$	240,703	$	437,628

March 31, 2018 (Unaudited) December 31, 2017
Land and improvements $ 134,675
$ 667
Buildings, building leaseholds, and improvements 643,527
18,477
Tenant improvements 28,641
36
Furniture, fixtures and equipment 15,526
680
Construction-in-progress 500
—
Subtotal $ 822,869
$ 19,860
Less: Accumulated depreciation (4,756 ) (312 )
Other portfolio, net $ 818,113
$ 19,548
(1)See Note 14, “Fair Value,” for discussion of impairment of real estate.

For the ~~three~~six months ended ~~March 31, 2018,~~June 30, 2020, the Company had no0 single property with rental and other income equal to or greater than 10.0% of total revenue.

Table of Contents

COLONY CREDIT REAL ESTATE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

At ~~March~~June 30, 2020 and December 31, ~~2018,~~2019, the Company held foreclosed properties which are included in real estate, net with a carrying value of ~~$19.9 million.~~$26.1 million and $50.7 million, respectively. At June 30, 2020 and December 31, ~~2017,~~2019, the Company held foreclosed properties ~~with a carrying value~~in assets held for sale of ~~$19.5 million.~~$55.4 million and $57.9 million, respectively.

Depreciation Expense

Depreciation expense on real estate was $9.4 million and $20.7 million for the three months ended June 30, 2020 and June 30, 2019, respectively. Depreciation expense on real estate was $21.4 million and $40.6 million for the six months ended June 30, 2020 and 2019, respectively.

Property Operating Income

For the six months ended June 30, 2020 and 2019, the components of property operating income were as follows (dollars in thousands):


	Three Months Ended June 30, 2020									Six Months Ended June 30,
			2020			2019			2020			2019
Lease revenues⁽¹⁾
Minimum lease revenue	$	37,204		$	45,115		$	79,162		$	89,643
Variable lease revenue	6,041			5,518			12,690			12,174
	$	43,245		$	50,633		$	91,852		$	101,817
Hotel operating income	317			13,188			3,818			24,522
	$	43,562		$	63,821		$	95,670		$	126,339

(1)Excludes net amortization income related to above and below-market leases of $0.2 million and $0.6 million for the three and six months ended June 30, 2020, respectively.

Table of Contents

COLONY CREDIT REAL ESTATE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Minimum Future Rents

Minimum rental amounts due under leases are generally either subject to scheduled fixed increases or adjustments. The following table presents approximate future minimum rental income under ~~non-cancellable~~noncancellable operating leases, excluding variable lease revenue of tenant reimbursements, to be received over the next five years and thereafter as of June 30, 2020 (dollars in thousands):


Remainder of 2020	$	39,129
2021	76,450
2022	71,920
2023	63,830
2024	58,500
2025 and thereafter	435,117
Total⁽¹⁾	$	744,946

(1)Excludes minimum future rents for real estate that is classified as held for sale totaling $199.7 million through 2050.

The following table presents approximate future minimum rental income under noncancellable operating leases to be received over the next five years and thereafter as of ~~March~~December 31, ~~2018~~2019 (dollars in thousands):


Remainder of 2018	$	66,776
2019	83,587
2020	74,400		2020	$	120,967
2021	62,095		2021	113,170
2022	50,667		2022	102,314
2023 and thereafter	94,018
2023			2023	85,367
2024			2024	71,714
2025 and thereafter			2025 and thereafter	448,812
Total	$	431,543	Total	$	942,344

The rental properties owned at ~~March 31, 2018~~June 30, 2020 are leased under ~~non-cancellable~~noncancellable operating leases with current expirations ranging from ~~2018~~2020 to ~~2029,~~2038, with certain tenant renewal rights. For certain properties, the tenants pay the Company, in addition to the contractual base rent, their pro rata share of real estate taxes and operating expenses. Certain lease agreements provide for periodic rental increases and others provide for increases based on the consumer price index.

Lease Concessions Related to COVID-19

~~Table~~As a result of ~~Contents~~the COVID-19 crisis, some tenants sought more flexible payment terms and the Company is currently engaged with affected tenants on a case-by-case basis to evaluate and respond to the current environment. For lease concessions resulting directly from the impact of COVID-19 that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee, for example, where total payments required by the modified contract will be substantially the same as or less than the original contract, the Company made a policy election to account for the concessions as though the enforceable rights and obligations for those concessions existed in the lease contracts, under a relief provided by the FASB. Under the relief, the concessions will not be treated as lease modifications that are accounted for over the remaining term of the respective leases, as the Company believes this would not accurately reflect the temporary economic effect of the concessions. Instead, (i) rent deferrals that meet the criteria will be treated as if no changes were made to the lease contract, with continued recognition of lease income and receivable under the original terms of the contract; and (ii) rent forgiveness that meets the criteria will be accounted for as variable lease payments in the affected periods.

~~COLONY NORTHSTAR CREDIT REAL ESTATE, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

Commitments and Contractual Obligations

Ground Lease Obligation

In connection with real estate acquisitions, the Company assumed certain ~~noncancelable~~noncancellable operating ground leases as lessee or sublessee with expiration dates through ~~2027.~~2055. Rents on certain ground leases are paid directly by the tenants. Ground rent expense for the three and six months ended ~~March 31, 2018~~June 30, 2020 was $0.8 million and ~~2017~~$1.6 million, respectively. Ground rent expense for the three and six months ended June 30, 2019 was ~~approximately~~ $0.7 million and ~~de minimis,~~$1.5 million, respectively.

~~At March 31, 2018,~~Refer to Note 16, “Commitments and Contingencies” for the details of future minimum rental payments ~~excluding contingent rents,~~ on ~~noncancelable~~noncancellable ground ~~leases~~lease on real estate ~~were as follows (dollars in thousands):~~

Remainder of 2018 $ 2,115
2019 2,821
2020 2,812
2021 2,720
2022 1,798
2023 and thereafter 2,891
Total $ 15,157


7.	~~Real Estate Securities, Available for Sale~~

~~Investments in CRE Securities~~

~~CRE securities are comprised of CMBS backed by a pool of CRE loans which are typically well-diversified by type and geography. The following table presents CMBS investments~~ as of ~~March 31, 2018 (dollars in thousands):~~June 30, 2020.

Weighted Average

Principal
Amount⁽¹⁾
Total Discount
Amortized
Cost

Cumulative Unrealized
on Investments
Fair
Value
Coupon⁽³⁾
Unleveraged
Current
Yield
As of Date: Count Gain (Loss)
March 31, 2018⁽²⁾
32 $ 234,357
$ (56,315 ) $ 178,042
$ 432
$ (2,280 ) $ 176,194
3.15 % 7.36 %


~~(1)~~	~~Certain CRE securities serve as collateral for financing transactions including carrying value of $139.6 million for the CMBS Credit Facilities (refer to Note 10). The remainder is unleveraged.~~


~~(2)~~	~~Includes a CRE security with an underlying loan that was non-performing at acquisition. The CRE security was acquired from NorthStar II for~~ ~~$31.3 million, net of a~~ ~~$16.9 million~~ ~~discount. As of March 31, 2018, the non-accretable amount of total cash flows was~~ ~~$4.9 million~~.


~~(3)~~	~~All CMBS are fixed rate.~~

~~The Company acquired the CRE Securities from NorthStar I and NorthStar II in the Combination. The Company held no CRE Securities as of December 31, 2017.~~

The Company recorded an unrealized loss in OCI for the three months ended March 31, 2018 of $1.8 million. As of March 31, 2018, the Company held 25 securities with an aggregate carrying value of $138.2 million with an unrealized loss of $2.3 million. Based on management’s quarterly evaluation, no OTTI was identified related to these securities. The Company does not intend to sell these securities and it is more likely than not that the Company will not be required to sell these securities prior to recovery of its amortized cost basis, which may be at maturity.

~~As of March 31, 2018, the weighted average contractual maturity of CRE securities was 29.9 years with an expected maturity of 7.9 years.~~

~~Investments in Investing VIEs~~

The Company is the directing certificate holder of three securitization trusts and has the ability to appoint and replace the special servicer on all mortgage loans. As such, U.S. GAAP requires the Company to consolidate the assets, liabilities, income and expenses of the securitization trusts as Investing VIEs. Refer to Note 2, “Summary of Significant Accounting Policies” for further discussion on Investing VIEs.

Table of Contents

COLONY ~~NORTHSTAR~~ CREDIT REAL ESTATE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

trusts, therefore these obligations do not have any recourse to the general credit of the Company as the consolidator of the securitization trusts. The Company’s maximum exposure to loss would not exceed the carrying value of its retained investments in the securitization trusts, or the subordinate tranches of the securitization trusts.

As of March 31, 2018, the mortgage loans and the related mortgage obligations held in the securitization trusts had an unpaid principal balance of $3.1 billion and $2.9 billion, respectively. As of March 31, 2018, across the three consolidated securitization trusts, the underlying collateral consisted of 159 underlying mortgage loans, with a weighted average coupon of 4.9% and a weighted average loan to value ratio of 58.0%.Real Estate Asset Acquisitions

The following table ~~presents~~summarizes the ~~assets and liabilities recorded on~~Company’s real estate asset acquisitions for the ~~consolidated balance sheets attributable to the securitization trust as of March~~year ended December 31, ~~2018~~2019 (dollars in thousands):


					Purchase Price Allocation
Acquisition Date	Property Type and Location	Number of Buildings	Purchase Price⁽¹⁾		Land and Improvements⁽²⁾		Building and Improvements⁽²⁾		Furniture, Fixtures and Equipment		Lease Intangible Assets⁽²⁾		Other Assets		Other Liabilities
Year Ended December 31, 2019
June	Retail - Massachusetts⁽³⁾	3	$	21,919	$	9,294	$	6,598	$	—	$	5,256	$	1,538	$	(767)
January	Various - in U.S.⁽³⁾	28	105,437		38,145		66,413		—		879		3,223		(3,223)
			$	127,356	$	47,439	$	73,011	$	—	$	6,135	$	4,761	$	(3,990)

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

March 31, 2018
Assets
Mortgage loans held in a securitization trust, at fair value $ 3,193,298
Receivables, net 13,337
Total assets $ 3,206,635
Liabilities
Mortgage obligations issued by a securitization trust, at fair value $ 3,051,315
Accrued and other liabilities 12,490
Total liabilities $ 3,063,805
(2)Useful life of real estate acquired is 4 to 33 years for buildings, 1 to 20 years for site improvements, 1 to 27 years for tenant improvements, 5 to 7 years for furniture, fixtures and equipment, and 1 to 27 years for lease intangibles.

(3)Represents assets acquired by the Company through foreclosure.

The Company ~~elected the fair value option to measure the assets and liabilities of the securitization trusts, which requires that changes~~did 0t have any real estate acquisitions in ~~valuations of the securitization trusts be reflected in the Company’s consolidated statements of operations.~~2020.

The difference between the carrying values of the mortgage loans held in securitization trusts and the carrying value of the mortgage obligations issued by securitization trusts was $142.0 million as of March 31, 2018 and approximates the fair value of the Company’s underlying investments in the subordinate tranches of the securitization trusts, which are eliminated in consolidation. Refer to Note 15, “Fair Value”Real Estate Held for ~~a description of the valuation techniques used to measure fair value of assets and liabilities of the Investing VIEs.~~Sale

The following table ~~presents~~summarizes the ~~activity recorded~~Company’s assets and related liabilities held for sale related to real estate (dollars in thousands):


	June 30, 2020		December 31, 2019
Assets
Real estate, net	$	620,403	$	178,564
Deferred leasing costs and intangible assets, net	23,972		5,890
Total assets held for sale	$	644,375	$	184,454

Liabilities
Intangible liabilities, net	$	12,131	$	294
Total liabilities related to assets held for sale	$	12,131	$	294

During the three months ended ~~March 31, 2018 related to~~June 30, 2020, the ~~consolidated securitization trusts on the consolidated statement~~Company classified several properties in its Net Leased Real Estate and Legacy, Non-Strategic Portfolio as held for sale.

There were no assets held for sale that constituted discontinued operations as of operations. Approximately $2.2 million for the three months ended March 31, 2018, relates to net income attributable to the Company’s common stockholders generated from the Company’s investments in the subordinate tranches of the securitization trusts (dollars in thousands):

Three Months Ended March 31, 2018
Statement of Operations
Interest income on mortgage loans held in securitization trusts $ 25,865
Interest expense on mortgage obligations issued by securitization trusts (24,277 )
Net interest income 1,588
Administrative expenses 99
Unrealized gain (loss) on mortgage loans and obligations held in securitization trusts, net 497
Net income attributable to Colony NorthStar Credit Real Estate, Inc. common stockholders $ 2,184


8.	~~Deferred Leasing Costs and Other Intangibles~~

~~The Company’s deferred leasing costs, other intangible assets and intangible liabilities at March 31, 2018~~June 30, 2020 and December 31, ~~2017 are as follows (dollars~~2019.

Real Estate Sales

During the six months ended June 30, 2020, the Company completed the sale of 7 properties, including 4 office, 1 hotel, 1 multifamily and 1 manufactured housing for a total gross sales price of $173.6 million and a total loss on sale of $3.6 million. All properties were included in ~~thousands):~~the Company’s Legacy, Non-Strategic Portfolio.

The real estate sold during the six months ended June 30, 2020 did not constitute discontinued operations.

Refer to Note 19, “Subsequent Events” for further detail on additional real estate sales.

March 31, 2018 (Unaudited)
Carrying Amount Accumulated Amortization Net Carrying Amount
Deferred Leasing Costs and Intangible Assets
In-place lease values $ 77,303
$ (11,203 ) $ 66,100
Above-market lease values 20,027
(1,190 ) 18,837
Below-market ground lease obligations 52
(10 ) 42
Deferred leasing costs 29,940
(1,680 ) 28,260
$ 127,322
$ (14,083 ) $ 113,239
Intangible Liabilities
Below-market lease values $ 20,453
$ (816 ) $ 19,637

Table of Contents

COLONY ~~NORTHSTAR~~ CREDIT REAL ESTATE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

7. Deferred Leasing Costs and Other Intangibles

The Company’s deferred leasing costs, other intangible assets and intangible liabilities, excluding those related to assets held for sale, at June 30, 2020 and December 31, 2019 are as follows (dollars in thousands):


	December 31, 2017								June 30, 2020
	Carrying Amount		Accumulated Amortization			Net Carrying Amount			Carrying Amount		Accumulated Amortization		Net Carrying Amount
Deferred Leasing Costs and Intangible Assets								Deferred Leasing Costs and Intangible Assets
In-place lease values	$	9,214	$	(2,657	)	$	6,557	In-place lease values	$	81,429	$	(24,837)	$	56,592
Deferred leasing costs								Deferred leasing costs	28,668		(10,104)		18,564
Above-market lease values	1,682		(283		)	1,399		Above-market lease values	10,468		(5,844)		4,624
Below-market ground lease obligations	52		(8		)	44
Deferred leasing costs	3,671		(657		)	3,014
	$	14,619	$	(3,605	)	$	11,014		$	120,565	$	(40,785)	$	79,780
Intangible Liabilities								Intangible Liabilities
Below-market lease values	$	51	$	(15	)	$	36	Below-market lease values	$	16,200	$	(7,822)	$	8,378

March 31, 2018 (Unaudited) December 31, 2017
Capacity ($)
Recourse vs.
Non-Recourse⁽¹⁾
Final
Maturity Contractual
Interest Rate
Principal
Amount⁽²⁾

Carrying
Value⁽²⁾

Principal
Amount⁽²⁾

Carrying
Value⁽²⁾
2014 FL1⁽⁴⁾

Non-recourse Apr-31 LIBOR + 3.24% 27,119
27,119
27,119
27,004
2014 FL2⁽⁴⁾

Non-recourse Nov-31 LIBOR + 3.65% 47,580
47,560
55,430
55,430
2015 FL3⁽⁴⁾⁽⁵⁾

Non-recourse Sep-32 LIBOR + 4.50% 16,621
16,609
26,245
26,245
Securitization 2016-1

Non-recourse Sep-31 LIBOR + 2.74% 80,825
80,825
—
—
Subtotal securitization bonds payable, net 172,145
172,113
108,794
108,679

Mortgage and other notes payable, net
Net lease 1 Non-recourse Oct-27 4.45% 24,955
24,955
25,074
25,022
Net lease 2 Non-recourse Nov-26 4.45% 3,529
3,413
3,544
3,425
Net lease 3 Non-recourse Nov-26 4.45% 7,615
7,364
7,647
7,390
Net lease 4 Non-recourse Jun-21 4.00% 13,057
12,877
13,133
12,939
Net lease 5 Non-recourse Jul-23 LIBOR + 2.15% 2,383
2,320
2,482
2,416
Net lease 6 Non-recourse Aug-26 4.08% 32,600
32,245
32,600
32,234
Net lease 7⁽⁶⁾
Non-recourse Nov-26 4.45% 19,158
18,529
19,241
18,593
Net lease 8 Non-recourse Mar-28 4.38% 12,585
12,029
—
—
Net lease 9 Non-recourse Apr-21 LIBOR + 2.20% 71,890
71,830
—
—
Net lease 10 Non-recourse Jul-25 4.31% 250,000
246,124
—
—
Hotel development loan⁽⁷⁾
Non-recourse Oct-19 LIBOR + 3.50% —
—
130,000
128,649
Hotel A-Note⁽⁸⁾
Non-recourse May-23 LIBOR + 1.60% —
—
50,314
50,314
Multifamily 1 Non-recourse Dec-23 4.84%
43,500
44,086
—
—
Multifamily 2 Non-recourse Dec-23 4.94%
43,000
43,578
—
—
Multifamily 3 Non-recourse Jan-24 5.15%
16,000
16,663

Multifamily 4⁽⁹⁾
Non-recourse Dec-20 5.27%
12,135
12,502

Multifamily 5 Non-recourse Nov-26 3.98%
24,606
23,708

Office 1 Non-recourse Oct-24 4.47% 108,850
109,921
—
—
Office 2 Non-recourse Jan-25 4.30% 77,381
76,449
—
—
Office 3 Non-recourse Apr-23 LIBOR + 3.99% 29,800
28,217
—
—
Multi-tenant office Non-recourse
Aug-20⁽¹⁰⁾
LIBOR + 1.78% 96,143
96,797
—
—
Other notes payable
Limited recourse⁽¹¹⁾

Dec-20⁽¹²⁾
LIBOR + 2.48% 40,411
40,411
—
—
Subtotal mortgage and other notes payable, net 929,598
924,018
284,035
280,982

Master repurchase facilities
Bank 1 facility 1 $ 150,000

Limited Recourse⁽¹³⁾

Oct-21⁽¹⁴⁾
LIBOR + 2.35% (15) 42,840
42,840
—
—
Bank 1 facility 2 150,000

Limited Recourse⁽¹³⁾

Oct-19⁽¹⁶⁾
LIBOR + 2.43% (15) 48,750
48,750
—
—
Bank 2 facility 1 200,000

Limited Recourse⁽¹⁷⁾
Jul-18 NA —
—
—
—
Bank 2 facility 2 200,000

Limited Recourse⁽¹⁷⁾

Jul-19⁽¹⁸⁾
LIBOR + 2.35% (15) 26,742
26,742
—
—
Bank 3 facility 1 200,000

Limited Recourse⁽¹⁹⁾
(20) LIBOR + 2.37% (15) 179,994
179,994
—
—
Bank 3 facility 2 300,000

Limited Recourse⁽¹⁹⁾
(21) LIBOR + 2.41% (15) 202,934
202,934
—
—
Subtotal master repurchase facilities $ 1,200,000
501,260
501,260
—
—

CMBS credit facilities
Bank 3 facility

Recourse (22) NA —

—
—
—
Bank 4 facility Recourse (22) NA —

—
—
—
Bank 5 facility 2 Recourse (22) NA —
—
—
—
Bank 1 facility 1 Recourse (22) LIBOR + 1.45% (15) 29,185

29,185
—
—
Bank 1 facility 2 Recourse (22) LIBOR + 1.43% (15) 10,568

10,568
—
—

Table of Contents

COLONY ~~NORTHSTAR~~ CREDIT REAL ESTATE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)


						June 30, 2020						December 31, 2019
	Capacity ($)	Recourse vs. Non-Recourse⁽¹⁾	Final Maturity	Contractual Interest Rate		Principal Amount⁽²⁾		Carrying Value⁽²⁾		Principal Amount⁽²⁾		Carrying Value⁽²⁾

CMBS credit facilities
Bank 1 facility 1		Recourse	(24)	NA	(25)	—		—		20,375		20,375
Bank 1 facility 2		Recourse	(24)	NA	(25)	—		—		18,834		18,834
Bank 3 facility		Recourse	(24)	NA	(25)	—		—		—		—
Bank 4 facility		Recourse	(24)	NA	(25)	—		—		—		—
Bank 5 facility 1		Recourse	(24)	NA	(25)	—		—		—		—
Bank 5 facility 2		Recourse	(24)	NA	(25)	—		—		—		—
Bank 6 facility 1		Recourse	(24)	4.25%		23,122		23,122		83,584		83,584
Bank 6 facility 2		Recourse	(24)	4.25%		15,230		15,230		82,729		82,729
Subtotal CMBS credit facilities						38,352		38,352		205,522		205,522
Subtotal credit facilities						900,173		900,173		1,099,233		1,099,233

Total						$	2,919,670	$	2,908,407	$	3,199,923	$	3,188,498

(1)Subject to customary non-recourse carveouts.

(2)Difference between principal amount and carrying value of securitization bonds payable, net and mortgage and other notes payable, net is attributable to deferred financing costs, net and premium/discount on mortgage notes payable.

(3)The Company, through indirect Cayman subsidiaries, securitized commercial mortgage loans originated by the Company. Senior notes issued by the securitization trusts were generally sold to third parties and subordinated notes retained by the Company. These securitizations are accounted for as secured financing with the underlying mortgage loans pledged as collateral. Principal payments from underlying collateral loans must be applied to repay the notes until fully paid off, irrespective of the contractual maturities on the notes. Underlying collateral loans have initial terms of two to three years.

(4)Represents a mortgage note collateralized by an investment in the Company’s Core Portfolio.

(5)Represents a mortgage note collateralized by an investment in the Company’s Legacy, Non-Strategic Portfolio.

(6)Payment terms are periodic payment of principal and interest for debt on 2 properties and periodic payment of interest only with principal at maturity (except for principal repayments to release collateral properties disposed) for debt on 1 property.

(7)Represents a mortgage note collateralized by 3 properties in the Company’s Legacy, Non-Strategic Portfolio.

(8)The current maturity of the mortgage payable is April 2021, with a one-year extension available at the Company’s option, which may be subject to the satisfaction of certain customary conditions set forth in the governing documents.

(9)As of June 30, 2020, the outstanding principal of the mortgage payable was NOK 1.6 billion, which translated to $165.3 million.

(10)Represents a mortgage note that was repaid during the first quarter of 2020 in connection with the sale of the collateralized properties.

(11)Represents 2 separate senior mortgage notes with a weighted average maturity of December 2020 and weighted average interest rate of 3.53%.

(12)The current maturity of the mortgage payable is April 2022, with 2 one-year extensions available at the Company’s option, which may be subject to the satisfaction of certain customary conditions set forth in the governing documents.

(13)The current maturity of the note payable is June 2021, with 3 one-year extensions available at the Company’s option, which may be subject to the satisfaction of certain customary conditions set forth in the governing documents. The loan is included in the Company’s Core Portfolio.

(14)The ability to borrow additional amounts terminates on February 1, 2022 at which time the Company may, at its election, extend the termination date for 2 additional six-month terms.

(15)Recourse solely with respect to 25.0% of the financed amount.

(16)The next maturity date is April 2021, with 2 one-year extensions available at the option of the Company, which may be exercised upon the satisfaction of certain customary conditions set forth in the governing documents.

(17)Represents the weighted average spread as of June 30, 2020. The contractual interest rate depends upon asset type and characteristics and ranges from one-month London Interbank Offered Rates (“LIBOR”) plus 1.50% to 2.60%.

(18)The next maturity date is October 2020, with 2 one-year extension options available, which may be subject to the satisfaction of certain customary conditions set forth in the governing documents.

(19)The next maturity date is April 2021, with a one-year extension available, which may be subject to the satisfaction of certain customary conditions set forth in the governing documents.

(20)The next maturity date is June 2021, with a one-year extension available, which may be subject to the satisfaction of certain customary conditions set forth in the governing documents.

(21)Recourse is either 25.0% or 50.0% depending on loan metrics.

(22)The next maturity date is November 2021, with 2 one-year extension options available, which may be subject to the satisfaction of certain customary conditions set forth in the governing documents.

(23)The interest rate will be determined by the lender in its sole discretion.

(24)The maturity dates on the CMBS Credit Facilities are dependent upon asset type and will typically range from one to three months.

(25)CMBS Credit Facilities are undrawn and fully available.

March 31, 2018 (Unaudited) December 31, 2017
Capacity ($)
Recourse vs.
Non-Recourse⁽¹⁾
Final
Maturity Contractual
Interest Rate
Principal
Amount⁽²⁾

Carrying
Value⁽²⁾

Principal
Amount⁽²⁾

Carrying
Value⁽²⁾
Bank 5 facility 1 Recourse (22) LIBOR + 1.16% (15) 2,546
2,546
—
—
Bank 6 facility 1 Recourse (22) LIBOR + 1.37% (15) 23,684
23,684
—
—
Bank 6 facility 2 Recourse (22) LIBOR + 1.25% (15) 35,034
35,034
—
—
Subtotal CMBS credit facilities 101,017
101,017
—
—
Subtotal master repurchase facilities 602,277
602,277
—
—

Total

$ 1,704,020
$ 1,698,408
$ 392,829
$ 389,661


~~(1)~~	~~Subject to customary non-recourse carveouts.~~


~~(2)~~	Difference between principal amount and carrying value of securitization bonds payable, net and mortgage and other notes payable, net is attributable to deferred financing costs, net and premium/discount on mortgage notes payable.


~~(3)~~	~~The ability to borrow additional amounts terminates on February 1, 2022 at which time the Company may, at its election, extend the termination date for two additional six month terms.~~

~~(4)~~

The Company, through indirect Cayman subsidiaries, securitized commercial mortgage loans originated by the Company. Senior notes issued by the securitization trusts were generally sold to third parties and subordinated notes retained by the Company. These securitizations are accounted for as secured financing with the underlying mortgage loans pledged as collateral. Principal payments from underlying collateral loans must be applied to repay the notes until fully paid off, irrespective of the contractual maturities on the notes. Underlying collateral loans have initial terms of two to three years.


~~(5)~~	~~2015 FL3 was repaid in full subsequent to March 31, 2018.~~


~~(6)~~	Payment terms are periodic payment of principal and interest for debt on two properties and periodic payment of interest only with principal at maturity (except for principal repayments to release collateral properties disposed) for debt on one property.

~~(7)~~

A development loan originated by the Company was restructured into a senior and junior note, with the senior note assumed by a third party lender. The Company accounted for the transfer of the senior note as a financing transaction. The senior note bears interest at one-month LIBOR plus 3.5%, with a 4.0% floor, and is subject to two one-year extension options on its initial term, exercisable by the borrower. The investment entity that held the debt was deconsolidated upon closing of the Combination (refer to Note 2, “Summary of Significant Accounting Policies”).

~~(8)~~

Represents the Company’s senior participation interest in a first mortgage loan that was transferred at cost into a securitization trust with the transfer accounted for as a secured financing transaction. The Company did not retain any legal interest in the senior participation and retained the junior participation on an unleveraged basis. The secured financing transaction was eliminated as a result of the Combination (refer to Note 4, “Loans Held for Investment, net”).


~~(9)~~	~~Represents two separate senior mortgage notes with a weighted average maturity of December 1, 2020 and weighted average interest rate of 5.27%.~~


~~(10)~~	The initial maturity of the mortgage payable is August 2018, with a two-year extension available at the Company’s option, which may be subject to the satisfaction of certain customary conditions set forth in the governing documents.


~~(11)~~	~~Recourse solely with respect to 25.0% of the financed amount.~~


~~(12)~~	The initial maturity of the note payable is December 2018, with two one-year extensions available at the Company’s option, which may be subject to the satisfaction of certain customary conditions set forth in the governing documents.


~~(13)~~	Recourse solely with respect to 25.0% of the repurchase price for purchased assets with a lender debt yield equal to or greater than 10.0% at the time of financing plus 100.0% of the repurchase price for purchased assets with a lender debt yield less than 10.0% at the time of financing.


~~(14)~~	The next maturity date is October 2018, with three, one-year extensions available at the option of the Company, which may be exercised upon the satisfaction of certain customary conditions set forth in the governing documents.


~~(15)~~	Represents the weighted average spread as of March 31, 2018. The contractual interest rate depends upon asset type and characteristics and ranges from one-month to six-month LIBOR plus 1.20% to 2.75%.


~~(16)~~	~~The next maturity date is October 2018, with a one-year extension available, which may be subject to the satisfaction of certain customary conditions set forth in the governing documents.~~


~~(17)~~	Recourse solely with respect to the greater of: (i) 25.0% of the financed amount of stabilized loans plus the financed amount of transitional loans, as further defined in the governing documents; or (ii) the lesser of $25.0 million or the aggregate financed amount of all loans.


~~(18)~~	The Company has exercised the third of four, one-year extensions available at the Company’s option, respectively. These extensions may be subject to the satisfaction of certain customary conditions set forth in the governing documents.


~~(19)~~	~~Recourse solely with respect to 25.0% of the financed amount.~~


~~(20)~~	~~The initial maturity is October 2018. The Company may, at its option, extend the facility for one-year periods indefinitely, subject to the approval of the global financial institution.~~


~~(21)~~	~~The initial maturity is June 2019. The Company may, at its option, extend the facility for one-year periods indefinitely, subject to the approval of the global financial institution.~~


~~(22)~~	~~The maturity dates on the CMBS Credit Facilities are dependent upon asset type and will typically range from three to six months.~~

Table of Contents

COLONY ~~NORTHSTAR~~ CREDIT REAL ESTATE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Future Minimum Principal Payments

The following table summarizes future scheduled minimum principal payments at ~~March 31, 2018~~June 30, 2020 based on ~~current contractual~~initial maturity dates or extended maturity dates to the extent criteria are met and the extension option is at the borrower’s discretion (dollars in thousands):


	Total		Securitization Bonds Payable, Net		Mortgage Notes Payable, Net⁽¹⁾		Credit Facilities⁽¹⁾
Remainder of 2020	$	39,683	$	—	$	1,331	$	38,352
2021	242,811		—		90,474		152,337
2022	412,445		—		2,520		409,925
2023	344,595		—		45,036		299,559
2024	203,338		—		203,338		—
2025 and thereafter	1,676,798		840,423		836,375		—
Total	$	2,919,670	$	840,423	$	1,179,074	$	900,173

Total Securitization Bonds Payable, Net Mortgage Notes Payable, Net Credit
Facilities
Remainder of 2018 $ 419,172
$ —
$ 138,161
$ 281,011
2019 280,970
—
2,544
278,426
2020 14,778
—
14,778
—
2021 159,053
—
116,213
42,840
2022 2,519
—
2,519
—
2023 and thereafter 827,528
172,145
655,383
—
Total $ 1,704,020
$ 172,145
$ 929,598
$ 602,277
(1)Includes $427.4 million of future minimum principal payments related to assets held for sale.

Bank Credit Facility

On February 1, 2018, the Company, through subsidiaries, including the OP, entered into a credit agreement with several lenders to provide a revolving credit facility in the aggregate principal amount of up to $400.0 million (the “Bank Credit Facility”). ~~The ability~~On December 17, 2018, the aggregate amount of revolving commitments was increased to ~~borrow additional amounts under~~$525.0 million and on February 4, 2019, the aggregate amount of revolving commitments was increased to $560.0 million. On May 6, 2020 these commitments were reduced to $450.0 million. The Bank Credit Facility ~~terminates~~will mature on February 1, 2022, ~~at which time~~unless the ~~Company may, at its election,~~OP elects to extend the ~~termination~~maturity date for ~~two~~up to 2 additional ~~six month~~six-month terms.

Advances under the Bank Credit Facility accrue interest at a per annum rate equal to, at the ~~Company’s~~applicable borrower’s election, either a LIBOR rate plus a margin of 2.25%, or a base rate determined according to a prime rate or federal funds rate plus a margin of 1.25%. ~~At March 31, 2018, the Company had no outstanding borrowings.~~ The Company pays a commitment fee of 0.25% or 0.35% per annum of the unused amount (0.35%) at ~~March 31, 2018)~~June 30, 2020), depending upon the amount of facility utilization.

~~Some~~Substantially all material wholly owned subsidiaries of the ~~Company’s subsidiaries guaranty~~Company guarantee the obligations of the Company and any other borrowers under the Bank Credit Facility. As security for the advances under the Bank Credit Facility, the Company pledged substantially all equity interests it owns ~~as well as~~and granted a security interest in deposit accounts ~~of the Company~~ in which the proceeds of investment asset distributions are maintained.

The Bank Credit Facility contains various affirmative and negative covenants including financial covenants that require the Company to maintain minimum tangible net worth, liquidity levels and financial ratios, as ~~defined~~specified in the Bank Credit Facility. On May 6, 2020, the Company amended the Bank Credit Facility to, among other things, (i) reduce the minimum tangible net worth covenant to $1.5 billion, providing portfolio management flexibilities as a result of any disruptions in investments caused by COVID-19 or other factors; (ii) reduce the facility size to $450.0 million, (iii) limit dividends in line with taxable income and restrict stock repurchases, each for liquidity preservation purposes, and (iv) focus new investments on senior mortgages. At ~~March 31, 2018,~~June 30, 2020, the Company was in compliance with all of the financial covenants.

Securitization Financing Transactions

Securitization bonds payable, net represent debt issued by securitization vehicles consolidated by the Company. Senior notes issued by these securitization trusts were generally sold to third parties and subordinated notes retained by the Company. Payments from underlying collateral loans must be applied to repay the notes until fully paid off, irrespective of the contractual maturities of the loans.

Table of Contents

COLONY CREDIT REAL ESTATE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

In October 2019, the Company executed a securitization transaction, through wholly-owned subsidiaries, CLNC 2019-FL1, Ltd. and CLNC 2019-FL1, LLC (collectively, “CLNC 2019-FL1”), which resulted in the sale of $840.4 million of investment grade notes. The securitization reflects an advance rate of 83.5% at a weighted average cost of funds of LIBOR plus 1.59%, and is collateralized by a pool of 22 senior loans originated by the Company.

CLNC 2019-FL1 includes a two-year reinvestment feature that allows us to contribute existing or newly originated loan investments in exchange for proceeds from repayments or repurchases of loans held in CLNC 2019-FL1, subject to the satisfaction of certain conditions set forth in the indenture. In addition to existing eligible loans available for reinvestment, the continued origination of securitization eligible loans is required to ensure that we reinvest the available proceeds within CLNC 2019-FL1.

Additionally, CLNC 2019-FL1 contains note protection tests that can be triggered as a result of contributed loan defaults, losses, and certain other events outlined in the indenture, beyond established thresholds. A note protection test failure that is not remedied can result in the redirection of interest proceeds from the below investment grade tranches to amortize the most senior outstanding tranche. While we continue to closely monitor all loan investments contributed to CLNC 2019-FL1, a deterioration in the performance of an underlying loan could negatively impact our liquidity position.

As of ~~March 31, 2018,~~June 30, 2020, the Company had ~~$500.7 million~~$1.0 billion carrying value of CRE debt investments financed with ~~$172.1~~$840.4 million of securitization bonds payable, net.

Master Repurchase Facilities

As of ~~March 31, 2018,~~June 30, 2020, the Company, through subsidiaries, had entered into repurchase agreements with multiple global financial institutions to provide an aggregate principal amount of up to ~~$1.2~~$2.3 billion to finance the origination of first mortgage loans and senior loan participations secured by CRE debt investments (“Master Repurchase Facilities”). The Company agreed to guarantee certain obligations under the Master Repurchase Facilities, which contain representations, warranties, covenants, conditions precedent to funding, events of default and indemnities that are customary for agreements of this type. The Master Repurchase

~~Table of Contents~~

~~COLONY NORTHSTAR CREDIT REAL ESTATE, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

Facilities act as revolving loan facilities that can be paid down as assets are repaid or sold and re-drawn upon for new investments. As of ~~March 31, 2018,~~June 30, 2020, the Company was in compliance with all of its financial covenants under the Master Repurchase Facilities.

As of ~~March 31, 2018,~~June 30, 2020, the Company had ~~$703.0 million~~$1.0 billion carrying value of CRE debt investments financed with ~~$501.3~~$666.8 million under the ~~Term Loan Facilities.~~master repurchase facilities.

On ~~April 20, 2018,~~May 7, 2020, the Company ~~through subsidiaries, entered into an Amended and Restated~~amended all six of its Master Repurchase ~~and Securities Contract Agreement (“~~Facilities to reduce the minimum tangible net worth covenant consistent with the Bank ~~3 Facility 3”). The Repurchase Agreement provides up to $500.0 million to finance~~Credit Facility. During the first ~~mortgage loans, senior loan participations and other commercial mortgage loan debt instruments secured by commercial real estate. Refer to Note 18, “Subsequent Events” for further discussion.~~

~~On April 23, 2018,~~quarter of 2020, the Company ~~through subsidiaries, entered~~received and timely paid a margin call on a hospitality loan and made voluntarily paydowns on 2 other hospitality and 1 retail loan. The lender granted the Company a holiday from future margin calls between three and four months, and it obtained broader discretion to enter into ~~a Master Repurchase Agreement (“Bank 1 Facility 3”). The Repurchase Agreement provides up to $300.0 million to finance first mortgage~~permitted modifications with the borrowers on these three specific loans, ~~senior loan participations and other commercial mortgage loan debt instruments secured by commercial real estate. Refer to Note 18, “Subsequent Events” for further discussion.~~if necessary.

~~On April 26, 2018,~~In May, the Company entered into ~~a three-year master~~agreements to modify two of its Master Repurchase Facilities pursuant to which it reduced facility advances corresponding to ten senior mortgage loans financed under such facilities. The Company and its lender counterparties agreed to temporary modifications providing for six-month holidays from future margin calls as well as providing additional protections before certain repurchase ~~agreement~~obligations may be triggered. The Company was also provided broader discretion to negotiate with ~~a major financial institution through a subsidiary (“Bank 7 Facility 1”). This agreement provides up~~the borrowers to ~~$500.0 million~~implement certain modifications to ~~finance~~ the ~~Company’s lending activities. Refer to Note 18, “Subsequent Events” for further discussion.~~underlying loans during such period.

CMBS Credit Facilities

As of ~~March 31, 2018,~~June 30, 2020, the Company ~~has~~ entered into ~~seven~~8 master repurchase agreements (collectively the “CMBS Credit Facilities”) to finance CMBS investments. The CMBS Credit Facilities are on a recourse basis and contain representations, warranties, covenants, conditions precedent to funding, events of default and indemnities that are customary for agreements of this type. As of ~~March 31, 2018,~~June 30, 2020, the Company had ~~$139.6~~$60.0 million carrying value of CRE securities financed with ~~$101.0~~$31.6 million under its CMBS Credit Facilities. As of June 30, 2020, the Company had $23.1 million carrying value of underlying investments in the subordinate tranches of the securitization trusts financed with $6.8 million under its CMBS Credit Facilities.

During the first quarter, the Company received and paid margin calls on its CMBS Credit Facilities of $48.9 million. During the second quarter, the Company consolidated its CMBS Credit Facilities borrowings with one existing counterparty bank. In connection with the consolidation, the Company paid down the CMBS Credit Facilities borrowing advance rate to a blended borrowing advance rate of 62% and extended the repurchase date on all such borrowings first to June 30, 2020 and then to

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~~11.~~	~~Related Party Arrangements~~

COLONY CREDIT REAL ESTATE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

December 31, 2020. This $73.9 million paydown allowed for a 15% additional loss on a bond specific basis before further margin calls. As of August 6, 2020, the Company had $38.4 million outstanding under its CMBS Credit Facilities. The consolidated facility bears a fixed interest rate of 4.25%.

10. Related Party Arrangements

Management Agreement

On January 31, 2018, the Company and the OP entered into a management agreement (the “Management Agreement”) with the Manager, pursuant to which the Manager manages the Company’s assets and its day-to-day operations. The Manager ~~will be~~is responsible for, among other matters, (1) the selection, origination, acquisition, management and sale of the Company’s portfolio investments, (2) the Company’s financing activities and (3) providing the Company with investment advisory services. The Manager is also responsible for the Company’s day-to-day operations and will perform (or will cause to be performed) such services and activities relating to the Company’s investments and business and affairs as may be appropriate. The Management Agreement requires the Manager to manage the Company’s business affairs in conformity with the investment guidelines and other policies that are approved and monitored by the ~~board~~Board of ~~directors.~~Directors. Each of the Company’s executive officers is also an employee of the Manager or its affiliates. The Manager’s role as Manager will be under the supervision and direction of the Company’s ~~board~~Board of ~~directors.~~Directors.

The initial term of the Management Agreement expires on the third anniversary of the ~~closing of the Combination~~Closing Date and will be automatically renewed for a one-year term each anniversary date thereafter unless earlier terminated as described below. The Company’s independent directors review the Manager’s performance and the fees that may be payable to the Manager annually and, following the initial term, the Management Agreement may be terminated ~~annually~~ if there has been an affirmative vote of at least two-thirds of the Company’s independent directors determining that (1) there has been unsatisfactory performance by the Manager that is materially detrimental to the Company or (2) the compensation payable to the Manager, in the form of base management fees and incentive fees taken as a whole, or the amount thereof, is not fair to the Company, subject to the Manager’s right to prevent such termination due to unfair fees by accepting reduced compensation as agreed to by at least two-thirds of the Company’s independent directors. The Company must provide the Manager 180 days’ prior written notice of any such termination.

The Company may also terminate the Management Agreement for cause (as defined in the Management Agreement) at any time, including during the initial term, without the payment of any termination fee, with at least 30 days’ prior written notice from the Company’s ~~board~~Board of ~~directors.~~Directors. Unless terminated for cause, the Manager will be paid a termination fee as described below. The Manager may terminate the Management Agreement if the Company becomes required to register as an investment company under the Investment Company Act with such termination deemed to occur immediately before such event, in which case the Company would not be required to pay a termination fee. The Manager may decline to renew the Management Agreement by providing the Company with 180 days’ prior written notice, in which case the Company would not be required to pay a termination fee. The

Manager may also terminate the Management Agreement with at least 60 days’ prior written notice if the Company breaches the Management Agreement in any material respect or otherwise is unable to perform its obligations thereunder and the breach continues for a period of 30 days after written notice to the Company, in which case the Manager will be paid a termination fee as described below.

In November 2019 the Manager, the Company and the OP amended and restated the Management Agreement to modify the “Core Earnings” definition, providing that “unrealized provisions for loan losses and real estate impairments” shall only be applied as exclusions from the definition of Core Earnings if approved by a majority of the independent directors of the Company. Such change became effective during the fourth quarter of 2019 and results in a reduction to Core Earnings which thereby reduces the annual management fee and any incentive fee paid by the Company due to accumulated unrealized provisions for loan losses and real estate impairments to date.

Fees to Manager

Base Management Fee

The base management fee payable to the Manager is equal to 1.5% of the Company’s stockholders’ equity (as defined in the Management Agreement), per annum (0.375% per quarter), payable quarterly in arrears in cash. For purposes of calculating the base management fee, the Company’s stockholders’ equity means: (a) the sum of (1) the net proceeds received by the Company (or, without duplication, the Company’s direct subsidiaries, such as the OP) from all issuances of the Company’s or such subsidiaries’ common and preferred equity securities since inception (allocated on a pro rata basis for such issuances during the calendar quarter of any such issuance), plus (2) the Company’s cumulative ~~core earnings~~Core Earnings (as defined in the Management

Table of Contents

COLONY CREDIT REAL ESTATE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Agreement) from and after the ~~closing date of the Combination~~Closing Date to the end of the most recently completed calendar quarter, less (b)(1) any distributions to the Company’s common stockholders (or owners of common equity of the Company’s direct subsidiaries, such as the OP, other than the Company or any of such subsidiaries), (2) any amount that the Company or any of the Company’s direct subsidiaries, such as the OP, have paid to (x) repurchase for cash the Company’s common stock or common equity securities of such subsidiaries or (y) repurchase or redeem for cash the Company’s preferred equity securities or preferred equity securities of such subsidiaries, in each case since the ~~closing date of the Combination~~Closing Date and (3) any incentive fee (as described below) paid to the Manager since the ~~closing date~~Closing Date.

For the three and six months ended June 30, 2020, the total management fee expense incurred was $7.2 million and $15.2 million, respectively. For the three and six months ended June 30, 2019, the total management fee expense incurred was $11.4 million and $22.7 million, respectively. As of June 30, 2020 and December 31, 2019, $7.3 million and $8.4 million, respectively, of unpaid management fee were included in due to related party in the ~~Combination.~~Company’s consolidated balance sheets.

Incentive Fee

The incentive fee payable to the Manager is equal to the difference between (i) the product of (a) 20% and (b) the difference between (1) ~~core earnings~~Core Earnings (as defined in the Management Agreement) for the most recent 12-month period (or the Closing Date if it has been less than 12 months since the Closing Date), including the current quarter, and (2) the product of (A) common equity (as defined in the Management Agreement) in the most recent 12-month period (or the Closing Date if it has been less than 12 months since the Closing Date), and (B) 7% per annum and (ii) the sum of any incentive fee paid to the Manager with respect to the first three calendar quarters of the most recent 12-month period (or the Closing Date if it has been less than 12 months since the Closing Date), provided, however, that no incentive fee is payable with respect to any calendar quarter unless ~~core earnings~~Core Earnings (as defined in the Management Agreement) is greater than zero for the most recently completed 12 calendar quarters (or the Closing Date if it has been less than 12 calendar quarters since the Closing ~~Date~~)Date).

The Company did ~~not~~0t incur any incentive fees during the three and six months ended ~~March 31, 2018.~~June 30, 2020 and 2019.

Reimbursements of Expenses

Reimbursement of expenses related to the Company incurred by the Manager, including legal, accounting, financial, due diligence and other services are paid on the Company’s behalf by the OP or its designee(s). The Company reimburses the Manager for the Company’s allocable share of the salaries and other compensation of the Company’s chief financial officer and certain of its affiliates’ non-investment personnel who spend all or a portion of their time managing the Company’s affairs, and the Company’s share of such costs are based upon the percentage of such time devoted by personnel of ~~our~~the Manager (or its affiliates) to the Company’s affairs. The Company may be required to pay the Company’s pro rata portion of rent, telephone, utilities, office furniture, equipment, machinery and other office, internal and overhead expenses of the Manager and its affiliates required for the Company’s operations.

~~Other Payables to~~For the three and six months ended June 30, 2020, the total reimbursements of expenses incurred by the Manager

~~Other payables to Manager include Combination related adjustments that consist of certain cash contributions from and distributions to Colony NorthStar or its subsidiaries~~ on behalf of the ~~CLNS Contributed Portfolio.~~Company and reimbursable in accordance with the Management Agreement was $2.4 million and $5.1 million, respectively, and are included in administrative expense on the consolidated statements of operations. For the three and six months ended June 30, 2019, the total reimbursements of expenses incurred by the Manager on behalf of the Company and reimbursable in accordance with the Management Agreement was $2.8 million and $5.6 million, respectively. As of June 30, 2020 and December 31, 2019, there were $2.3 million and $2.7 million, respectively, of unpaid expenses included in due to related party in the Company’s consolidated balance sheets.

~~Manager~~ Equity Plan Grants

In April 2020, the Company granted 143,000 shares to its chief executive officer, an employee of the Manager, under the 2018 Equity Incentive Plan (the "2018 Plan"). In March 2019, the Company granted 800,000 shares to the Manager and/or employees thereof under the 2018 Plan. In March 2018, the Company granted 978,946 shares to its non-independent directors, officers and the Manager and/or employees thereof under the 2018 ~~Equity Incentive~~Plan. 928,230 shares remain granted and unvested as of June 30, 2020. See Note 11, “Equity-Based Compensation” for further discussion on the 2018 Plan ~~(the “2018 Plan”).~~including shares issued to independent directors of the Company. In connection with ~~this grant,~~these grants, the Company recognized share-based compensation expense of ~~$0.3~~$1.5 million and $1.7 million to its Manager within administrative expense in the consolidated statement of operations for the three and six months ended ~~March 31, 2018. See Note 12, “Equity-Based Compensation”~~June 30, 2020, respectively. The Company recognized share-based compensation expense of $2.6 million and $4.3 million to its Manager within administrative expense in the consolidated statement of operations for ~~further discussion of~~ the ~~2018 Plan.~~

three and six months ended June 30, 2019, respectively.

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COLONY ~~NORTHSTAR~~ CREDIT REAL ESTATE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Colony Capital, Inc. Internalization Discussions with the Company

~~Summary~~As previously disclosed, the Company’s Board of ~~Fees~~Directors formed a special committee consisting exclusively of independent and ~~Reimbursements~~

disinterested directors (the “Special Committee”) to explore an internalization proposal made by Colony Capital as well as other strategic alternatives. Subsequently, due to ongoing uncertainty surrounding the duration and magnitude of the COVID-19 pandemic and its impact on the global economy, on April 1, 2020, Colony Capital reported in Amendment No. 3 to Schedule 13D (filed with the U.S. Securities and Exchange Commission) that it has postponed any decision regarding a disposition of its management agreement with the Company until market conditions improve. The ~~following table presents the fees and reimbursements incurred and payable~~Special Committee has continued to ~~the Manager~~explore alternatives but has been unable to negotiate mutually acceptable terms with Colony Capital. The Special Committee will continue to consider value-enhancing alternatives for the ~~three months ended March 31, 2018 and the amount due to related party~~Company as ~~of March 31, 2018 and December 31, 2017 (dollars in thousands):~~opportunities arise.

Type of Fee or Reimbursement Financial Statement Location
Due to Related Party as of
December 31, 2017
Three Months Ended
March 31, 2018
Due to Related Party as of
March 31, 2018 (Unaudited)
Combination Related Consideration Incurred Paid
Fees to Manager
   Management Fee expense $ —
$ —
$ 8,000
$ —
$ 8,000
Reimbursements to Manager

   Operating costs Administrative expense —
—
1,715
—
1,715
Other

   Other Payables to Manager Additional paid-in capital —
2,934
—
—
2,934
   Liabilities assumed in the Combination (1) —
6,375
—
(6,375 ) —
Total $ —
$ 9,309
$ 9,715
$ (6,375 ) $ 12,649


~~(1)~~	~~Represents due to related party balance assumed as a result of the Combination. Refer to Note 3, “Business Combinations,” for further detail.~~

~~Expense Allocations~~

For the three months ended March 31, 2017, the Company’s consolidated financial statements present the operations of the CLNS Investment Entities as carved out from the financial statements of Colony NorthStar. Certain general and administrative costs borne by Colony NorthStar, including, but not limited to, compensation and benefits, and corporate overhead, have been allocated to the CLNS Investment Entities using reasonable allocation methodologies. Such costs do not necessarily reflect what the actual general and administrative costs would have been if the CLNS Investment Entities had been operating as a separate stand-alone public company. For the three months ended March 31, 2017, a total of $3.0 million of allocated expenses are included as a component of administrative expenses in the Company’s consolidated statements of operations.

Investment Activity

~~In November 2016, NorthStar II entered into~~All investment acquisitions are approved in accordance with the Company’s investment and related party guidelines, which may include approval by either the audit committee or disinterested members of the Company’s Board of Directors. No investment by the Company will require approval under the related party transaction policy solely because such investment constitutes a ~~$284.2 million securitization financing transaction (“Securitization 2016-1”). Securitization 2016-1 was collateralized~~co-investment made by ~~a pool~~and between the Company and any of ~~10 CRE debt investments with a committed aggregate principal balance of $254.7 million primarily originated~~its subsidiaries, on the one hand, and one or more investment vehicles formed, sponsored, or managed by ~~NorthStar II and three senior participations with a committed aggregate principal balance of $29.5 million originated by NorthStar I. An~~an affiliate of the Manager ~~was appointed special servicer of Securitization 2016-1. The transaction was approved by~~on the ~~NorthStar II’s board of directors, including all of its independent directors. Securitization 2016-1 was assumed by the Company in connection with the Combination.~~other hand.

In July 2017, NorthStar II entered into a joint venture with an affiliate of the Manager to make a $60.0 million investment in a $180.0 million mezzanine loan which was originated by such affiliate of the Manager. The transaction was approved by NorthStar II’s board of directors, including all of its independent directors. The investment was purchased by the Company in connection with the Combination. In June 2018, the Company increased its commitment to $101.8 million in connection with the joint venture bifurcating the mezzanine loan into a mezzanine loan and a preferred equity investment. The Company’s interest in both the underlying mezzanine loan and preferred equity investment is 31.8%, and the affiliate entities own the remaining 68.2%. Both the underlying mezzanine loan and preferred equity investment carry a fixed 13.0% interest rate. This investment is recorded in investments in unconsolidated ventures in the Company’s consolidated balance sheets. In July 2019, the Company increased its commitment in the mezzanine loan from $101.8 million to $189.0 million. The Company’s interest in the ~~joint venture~~upsized mezzanine loan is ~~50.0%~~45.2% and it carries a fixed 13.0% interest rate. As of June 30, 2020, the Company had an unfunded commitment of $14.5 million remaining. During the three months ended June 30, 2020, the Company made its pro-rata share of two protective advances to the senior mortgage lender totaling $28.5 million. See Note 4, “Investments in Unconsolidated Ventures,” for further information.

In May 2018, the Company acquired an $89.1 million (at par) preferred equity investment in an investment vehicle that owns a seven-property office portfolio located in the New York metropolitan area from an affiliate of the Company’s Manager. The affiliate has a 27.2% ownership interest in the ~~underlying~~borrower. The preferred equity investment carries a fixed 12.0% interest rate. This investment is recorded in loans and preferred equity held for investment, net in the Company’s consolidated balance sheets. Subsequent to June 30, 2020, the Company accepted a discounted payoff and recognized an impairment loss of $20.9 million. See Note 4, “Loans and Preferred Equity Held for Investment, net and Loans Held for Sale” for further information.

In July 2018, the Company acquired a $326.8 million Class A office campus located in Norway from an affiliate of the Company’s Manager. In connection with the purchase, the Company assumed senior mortgage financing from a private bond issuance of $197.7 million. The bonds have a five-year term remaining, and carry a fixed interest rate of 3.91%.

In July 2018, the Company entered into a joint venture to invest in a development project for land and a Grade A office building in Ireland. The Company agreed to invest up to $69.9 million of the $139.7 million total commitment. The Company co-invested along with two affiliates of the Manager, with the Company owning 50.0% of the joint venture and the affiliate entities owning the remaining 50.0%. The joint venture invested in a senior mortgage loan of $66.7 million with a fixed interest rate of 12.5% and a maturity date of 3.5 years from origination and common equity.

In October 2018, the Company entered into a joint venture to invest in a mixed-use development project in Ireland. The Company agreed to invest up to $162.4 million of the $266.5 million total commitment. The Company co-invested along with two affiliates of the Manager, with the Company owning 61.0% of the joint venture and the affiliate entities owning the remaining 39.0%. The joint venture invested in a senior mortgage loan with a fixed interest rate of 15.0% and a maturity date of two years from origination.

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COLONY CREDIT REAL ESTATE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

In October 2018, the Company acquired a $20.0 million mezzanine loan ~~is 33.3%.~~from an affiliate of the Company’s Manager, secured by a pledge of an ownership interest in a luxury condominium development project located in New York, NY. The ~~Company’s total commitment is $60.0 million.~~loan bears interest at 9.5% plus LIBOR. The borrower repaid the loan in February 2020.


~~12.~~	~~Equity-Based Compensation~~

11. Equity-Based Compensation

On January 29, 2018 the Company’s ~~board~~Board of ~~directors~~Directors adopted the 2018 Plan. The 2018 Plan permits the grant of awards with respect to 4.0 million shares of the Class A common stock, subject to adjustment pursuant to the terms of the 2018 Plan. Awards may be granted under the 2018 Plan to (x) the Manager or any employee, officer, director, consultant or advisor (who is a natural person) providing services to the Company, the Manager or their affiliates and (y) any other individual whose participation in the 2018 Plan is determined to be in the best interests of the Company. The following types of awards may be made under the 2018 Plan, subject to the limitations set forth in the plan: (i) stock options (which may be either incentive stock options or non-qualified stock options); (ii) stock appreciation ~~rights (“SARs”);~~rights; (iii) restricted stock awards; ~~(iii)~~(iv) stock units; ~~(iv)~~(v) unrestricted stock awards; ~~(v)~~(vi) dividend equivalent rights; ~~(vi)~~(vii) performance awards; ~~(vii)~~(viii) annual cash incentive awards; ~~(viii)~~(ix) long-term incentive units; and ~~(ix)~~(x) other equity-based awards.

~~Table of Contents~~

~~COLONY NORTHSTAR CREDIT REAL ESTATE, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

Shares subject to an award granted under the 2018 Plan will be counted against the maximum number of shares of Class A common stock available for issuance thereunder as one share of Class A common stock for every one share of Class A common stock subject to such an award. Shares subject to an award granted under the 2018 Plan will again become available for issuance under the 2018 Plan if the award terminates by expiration, forfeiture, cancellation, or otherwise without the issuance of such shares (except as set forth in the following sentence). The number of shares of Class A common stock available for issuance under the 2018 Plan will not be increased by (i) any shares tendered or withheld in connection with the purchase of shares upon exercise of a stock option, (ii) any shares deducted or delivered in connection with the Company’s tax withholding obligations, or (iii) any shares purchased by the Company with proceeds from stock option exercises. The shares granted in May 2020 to the independent directors of the Company under the 2018 Plan vest in May ~~2019.~~2021. Shares granted to non-independent directors, officers and the Manager under the 2018 Plan vest ratably in three annual ~~installments beginning in March 2018.~~installments.

The table below summarizes our awards granted, forfeited or vested under the 2018 Plan during the ~~three~~six months ended ~~March 31, 2018:~~June 30, 2020:


	Number of Shares
	Restricted Stock	Total	Weighted Average Grant Date Fair Value




Unvested Shares at December 31, 2019	1,335,590	1,335,590	$	17.79
Granted	237,340	237,340	3.70
Vested	(451,855)	(451,855)	17.34
Forfeited	(192,845)	(192,845)	17.21
Unvested shares at June 30, 2020	928,230	928,230	$	16.14

Number of Shares
Restricted Stock Total Weighted Average Grant Date Fair Value
Unvested Shares at December 31, 2017 —
—
$ —
Granted 1,003,818
1,003,818
19.39
Vested —
—
—
Forfeited —
—
—
Unvested shares at March 31, 2018 1,003,818
1,003,818
$ 19.39

NoFair value of equity awards that vested during the ~~three~~six months ended~~March 31, 2018. There~~ June 30, 2020 and June 30, 2019, determined based on their respective fair values at vesting date, was ~~no equity-based compensation plan for the three months ended March 31, 2017.~~$2.7 million and $5.4 million, respectively. Fair value of ~~vested~~granted awards is determined based on the closing price of the ~~Company’s class~~Class A common stock on the date of grant ~~for employee awards, and remeasured each period end based on the closing price~~ of the ~~Company’s class A common stock of such period end for non-employee~~ awards. Equity-based compensation is classified within administrative expense in the consolidated statement of operations.

At ~~March 31, 2018,~~June 30, 2020, aggregate unrecognized compensation cost for all unvested equity awards was ~~$18.7~~$6.3 million, which is expected to be recognized over a weighted-average period of ~~2.9~~1.4 years.


~~13.~~	~~Stockholders’ Equity~~

12. Stockholders’ Equity

Authorized Capital

As of ~~March 31, 2018,~~June 30, 2020, the Company had the authority to issue up to 1.0 billion shares of stock, at $0.01 par value per share, consisting of ~~905.0~~950.0 million shares of Class A ~~common stock, 45.0 million shares of Class B-3~~ common stock and 50.0 million shares of preferred stock. On February 1, 2019, the Class B-3 common stock automatically converted to Class A common stock and each unissued share of Class B-3 common stock was automatically reclassified as one share of Class A common stock.

The Company had no0 shares of preferred stock issued and outstanding as of ~~March 31, 2018.~~June 30, 2020.

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COLONY CREDIT REAL ESTATE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Dividends

During the ~~three~~six months ended ~~March 31, 2018,~~June 30, 2020, the Company declared the following dividends on its common stock:

Declaration Date

Record Date

Payment Date

Per Share

January 15, 2020

January 31, 2020

February 10, 2020

$0.10

February 14, 2020

February 29, 2020

March 10, 2020

$0.10

March 16, 2020

March 31, 2020

April 10, 2020

$0.10

~~Declaration Date~~

~~Record Date~~

~~Payment Date~~

~~Per Share~~

~~February 26, 2018~~

~~March 8, 2018~~

~~March 16, 2018~~

~~$0.145~~

~~March 15, 2018~~

~~March 29, 2018~~

~~April 10, 2018~~

~~$0.145~~

The Company and its Board of Directors suspended the Company’s monthly stock dividend beginning with the monthly period ending April 30, 2020.

Stock Repurchase Program

The Company’s ~~board~~Board of ~~directors~~Directors authorized a stock repurchase program (the “Stock Repurchase Program”), under which the Company ~~may~~could repurchase up to $300.0 million of its outstanding Class A common stock until March 31, ~~2019.~~2020. On February 18, 2020, the Company’s Board of Directors voted to extend the Stock Repurchase Program through March 31, 2021. Under the Stock Repurchase Program, the Company may repurchase shares in open market purchases, through tender offers or otherwise in accordance with all applicable securities laws and regulations, including Rule 10b-18 of the Securities Exchange Act of 1934, as amended.

As of ~~March 31, 2018,~~June 30, 2020, the Company had ~~not~~0t repurchased any shares under the Stock Repurchase Program.

Accumulated Other Comprehensive Income (Loss)

The following tables present the changes in each component of Accumulated Other Comprehensive Income (Loss) (“AOCI”) attributable to stockholders and noncontrolling interests in the OP, net of immaterial tax effect.

Changes in Components of AOCI - Stockholders


(in thousands)	Unrealized gain (loss) on real estate securities, available for sale		Unrealized gain on net investment hedges		Foreign currency translation gain (loss)		Total
AOCI at December 31, 2019	$	15,909	$	25,872	$	(13,487)	$	28,294
Other comprehensive income (loss)	(73,273)		21,255		(18,981)		(70,999)
AOCI at March 31, 2020	$	(57,364)	$	47,127	$	(32,468)	$	(42,705)
Other comprehensive loss before reclassification	(26,905)		—		—		(26,905)
Amounts reclassified from AOCI	84,269		—		—		84,269
Net current period OCI	57,364		—		10,581		67,945
AOCI at June 30, 2020	$	—	$	47,127	$	(21,887)	$	25,240


(in thousands)	Unrealized gain (loss) on real estate securities, available for sale		Unrealized gain on net investment hedges		Foreign currency translation gain (loss)		Total
AOCI at December 31, 2018	$	(1,295)	$	11,037	$	(10,141)	$	(399)
Other comprehensive income (loss)	9,530		7,222		(3,233)		13,519
AOCI at March 31, 2019	$	8,235	$	18,259	$	(13,374)	$	13,120
Other comprehensive income	7,679		916		3,832		12,427
AOCI at June 30, 2019	$	15,914	$	19,175	$	(9,542)	$	25,547

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COLONY CREDIT REAL ESTATE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Changes in Components of AOCI - Noncontrolling Interests in the OP


(in thousands)	Unrealized gain (loss) on real estate securities, available for sale		Unrealized gain (loss) on net investment hedges		Foreign currency translation gain (loss)		Total
AOCI at December 31, 2019	$	612	$	893	$	(801)	$	704
Other comprehensive income (loss)	(1,756)		509		(455)		(1,702)
AOCI at March 31, 2020	$	(1,144)	$	1,402	$	(1,256)	$	(998)
Other comprehensive income before reclassification	(872)		—		—		(872)
Amounts reclassified from AOCI	2,016		—		—		2,016
Net current period OCI	1,144		—		259		1,403
AOCI at June 30, 2020	$	—	$	1,402	$	(997)	$	405


(in thousands)	Unrealized gain (loss) on real estate securities, available for sale		Unrealized gain on net investment hedges		Foreign currency translation gain (loss)		Total
AOCI at December 31, 2018	$	(32)	$	268	$	(246)	$	(10)
Other comprehensive income (loss)	228		173		(77)		324
AOCI at March 31, 2019	$	196	$	441	$	(323)	$	314
Other comprehensive income	184		22		91		297
AOCI at June 30, 2019	$	380	$	463	$	(232)	$	611

Changes in Components of AOCI - Noncontrolling Interests in investment entities


(in thousands)	Unrealized gain (loss) on real estate securities, available for sale		Unrealized gain (loss) on net investment hedges		Foreign currency translation gain (loss)		Total
AOCI at December 31, 2019	$	—	$	—	$	—	$	—
Other comprehensive income (loss)	—		—		—		—
AOCI at March 31, 2020	$	—	$	—	$	—	$	—
Other comprehensive income	—		—		257		257
AOCI at June 30, 2020	$	—	$	—	$	257	$	257

The following table presents the details of the reclassifications from AOCI for the six months ended June 30, 2020:

~~14.~~(in thousands)

~~Noncontrolling Interests~~

Component of AOCI reclassified into earnings

Six Months Ended June 30, 2020

Affected Line Item in the Consolidated Statements of Operations

Realized loss on sale of real estate securities

(57,364)

Other gain (loss), net

Impairment of real estate securities

(26,905)

Other gain (loss), net

The Company had no reclassifications from AOCI for the six months ended June 30, 2019.

Table of Contents

COLONY CREDIT REAL ESTATE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

13. Noncontrolling Interests

Operating Partnership

Noncontrolling interests include the aggregate limited partnership interests in the OP held by RED REIT. Net ~~loss~~income (loss) attributable to the noncontrolling interests is based on the limited partners’ ownership percentage of the OP. Net loss attributable to the noncontrolling interests of the OP was $5.4 million and ~~was $0.1~~$7.3 million for the three and six months ended ~~March 31, 2018.~~June 30, 2020, respectively. Net loss attributable to the noncontrolling interests of the OP for the three and six months ended June 30, 2019 was $2.6 million and $2.2 million, respectively.

Investment Entities

Noncontrolling interests in investment entities represent third-party equity interests in ventures that are consolidated with the Company’s financial statements. Net ~~income~~loss attributable to noncontrolling interests in the investment entities for the three and six months

~~Table of Contents~~

~~COLONY NORTHSTAR CREDIT REAL ESTATE, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

ended ~~March 31, 2018~~June 30, 2020 was ~~$2.4~~$8.1 million and ~~net income~~$7.6 million, respectively.

Net loss attributable to noncontrolling interests in the investment entities for the three and six months ended ~~March 31, 2017~~June 30, 2019 was ~~$9.1 million.~~$0.9 million and $1.2 million, respectively.

5-Investment Preferred Financing


~~15.~~	~~Fair Value~~

On June 5, 2020, subsidiaries of the Company entered into a preferred financing arrangement (on a portfolio of five underlying Company investment interests) (the “5-Investment Preferred Financing”) from investment vehicles managed by Goldman Sachs (“GS”). The financing provided $200 million of proceeds at closing. The preferred financing is limited to (i) the Company’s interests in 4 co-investments, 3 of which are in the Company’s Core Portfolio and 1 which is in the Legacy, Non-Strategic Portfolio, alongside investment funds managed by affiliates of the Company’s manager, each of which are financings on underlying development projects (including residential, office and/or mixed-use components), and (ii) a wholly-owned triple-net industrial distribution center investment leased to a national grocery chain, which is included in the Company’s Core Portfolio. The preferred financing provides GS a 10% preferred return and certain other minimum returns, as well as a minority interest in future cash flows.

The Company and its affiliates control the continuing investment and portfolio management of such investments and thus continues to consolidate these investments on the Consolidated Balance Sheet at June 30, 2020. The preferred financing provides for a disproportionate allocation of profits and losses, and thus each party’s share of earnings or loss is determined using a balance sheet approach known as the HLBV method. Under the HLBV method, earnings and losses are recognized based on the change in each party’s capital account from the beginning of the period in question to the end of the period, adjusting for the effects of distributions and new investments. The entity measures each party’s capital account assuming that the subsidiary was liquidated or sold at book value. The noncontrolling interest in investment entities on the Company’s consolidated balance sheet includes $270 million representing GS’s investment at June 30, 2020 under the HLBV method. The preferred financing resulted in a reallocation of a portion of stockholders equity to noncontrolling interest, resulting in a $70 million reduction in stockholders equity.

14. Fair Value

Determination of Fair Value

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

PE Investments

The Company accounts for PE Investments at fair value which is determined based on either a valuation model using assumptions for the timing and amount of expected future cash flow for income and realization events for the underlying assets in the funds and discount ~~rate.~~rate, or pending sales prices, if applicable. This fair value measurement is generally based on unobservable inputs and, as such, is classified as Level 3 of the fair value hierarchy, unless the PE Investments are valued based on pending sales prices, which are classified as Level 2 of the fair value hierarchy. The Company considers cash flow and NAV information provided by general partners of ~~private~~the underlying funds (“GP NAV”) and the implied yields of those funds in valuing its PE Investments. ~~However,~~The Company also considers the values derived from the valuation model as a percentage of GP NAV, and compares the resulting percentage of GP NAV to precedent transactions, independent research, industry reports as well as pricing from executed purchase and sale agreements related to the disposition of its PE Investments. The Company may, as a

Table of Contents

COLONY CREDIT REAL ESTATE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

result of that comparison, apply a mark-to-market adjustment. The Company has not elected the practical expedient to measure the fair value of its PE Investments using the NAV of the underlying funds.

Real Estate Securities

CRE securities are generally valued using a third-party pricing service or broker quotations. These quotations are not adjusted and are based on observable inputs that can be validated, and as such, are classified as Level 2 of the fair value hierarchy. Certain CRE securities may be valued based on a single broker quote, dealer bid or an internal ~~price which may have less observable pricing,~~price. Situations where management applies adjustments based on or using unobservable inputs and ~~as such,~~ would be classified as Level 3 of the fair value hierarchy. Management determines the prices are representative of fair value through a review of available data, including observable inputs, recent transactions as well as its knowledge of and experience in the market.

Investing VIEs

As discussed in Note 7,5, “Real Estate Securities, Available for Sale,” the Company has elected the fair value option for the financial assets and liabilities of the consolidated Investing VIEs. The Investing VIEs are “static,” that is no reinvestment is permitted and there is very limited active management of the underlying assets. The Company is required to determine whether the fair value of the financial assets or the fair value of the financial liabilities of the Investing VIEs are more observable, but in either case, the methodology results in the fair value of the assets of the securitization trusts being equal to the fair value of their liabilities. The Company has determined that the fair value of the liabilities of the securitization trusts are more observable, since market prices for the liabilities are available from a third-party pricing service or are based on quoted prices provided by dealers who make markets in similar financial instruments. The financial assets of the securitization trusts are not readily marketable and their fair value measurement requires information that may be limited in availability.

In determining the fair value of the trusts’ financial liabilities, the dealers will consider contractual cash payments and yields expected by market participants. Dealers also incorporate common market pricing methods, including a spread measurement to the treasury curve or interest rate swap curve as well as underlying characteristics of the particular security including coupon, periodic and life caps, collateral type, rate reset period and seasoning or age of the security. The Company’s collateralized mortgage obligations are classified as Level 2 of the fair value hierarchy, where a third-party pricing service or broker quotations are available and are based on observable valuation inputs, and as Level 3 of the fair value hierarchy, where internal price is utilized ~~which may have less observable pricing.~~based on or using unobservable inputs. In accordance with ASC 810, Consolidation, the assets of the securitization trusts are an aggregate value derived from the fair value of the trust’s liabilities, and the Company has determined that the valuation of the trust’s assets in their entirety including its retained interests from the securitizations (eliminated in consolidation in accordance with U.S. GAAP) should be classified as Level 3 of the fair value hierarchy.

Derivatives

Derivative instruments consist of interest rate contracts and foreign exchange contracts that are generally traded over-the-counter, and are valued using a third-party service provider. Quotations on over-the counter derivatives are not adjusted and are generally valued using observable inputs such as contractual cash flows, yield curve, foreign currency rates and credit spreads, and are classified as Level 2 of the fair value hierarchy. Although credit valuation adjustments, such as the risk of default, rely on Level 3 inputs, these inputs are not significant to the overall valuation of its derivatives. As a result, derivative valuations in their entirety are classified as Level 2 of the fair value hierarchy.

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COLONY ~~NORTHSTAR~~ CREDIT REAL ESTATE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Fair Value Hierarchy

Financial assets recorded at fair value on a recurring basis are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following table presents financial assets that were accounted for at fair value on a recurring basis as of ~~March 31, 2018~~June 30, 2020 and December 31, ~~2017~~2019 by level within the fair value hierarchy (dollars in thousands):


	June 30, 2020														December 31, 2019
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Investments in unconsolidated ventures - PE Investments	$	—	$	124	$	6,969	$	7,093	$	—	$	1,425	$	8,858	$	10,283
Real estate securities, available for sale	—		60,010		—		60,010		—		252,824		—		252,824
Mortgage loans held in securitization trusts, at fair value	—		—		1,839,953		1,839,953		—		—		1,872,970		1,872,970
Other assets - derivative assets	—		7				7		—		4,122		—		4,122
Liabilities:
Mortgage obligations issued by securitization trusts, at fair value	$	—	$	1,758,325	$	—	$	1,758,325	$	—	$	1,762,914	$	—	$	1,762,914
Other liabilities - derivative liabilities	—		44		—		44		—		19,133		—		19,133

March 31, 2018 (Unaudited) December 31, 2017
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Assets:
Investments in unconsolidated ventures⁽¹⁾
$ —
$ —
$ 257,495
$ 257,495
$ —
$ —
$ 24,717
$ 24,717
Real estate securities, available for sale —
176,194
—
176,194
—
—
—
—
Mortgage loans held in securitization trusts, at fair value —
—
3,193,298
3,193,298
—
—
—
—
Liabilities:
Mortgage obligations issued by securitization trusts, at fair value $ —
$ 3,051,315
$ —
$ 3,051,315
$ —
$ —
$ —
$ —


~~(1)~~	~~Represents investments for which the Company elected fair value option.~~

The following table presents the changes in fair value of financial assets which are measured at fair value on a recurring basis using Level 3 inputs to determine fair value for the ~~three~~six months ended ~~March 31, 2018~~June 30, 2020 and year ended December 31, ~~2017~~2019 (dollars in thousands):


	Three Months Ended March 31, 2018 (Unaudited)						Year Ended December 31, 2017				Six Months Ended June 30,						Year Ended December 31, 2019
	PE Investments			Mortgage loans held in securitization trusts⁽¹⁾			PE Investments				Investments in unconsolidated ventures - PE Investments		Mortgage loans held in securitization trusts⁽¹⁾		Investments in unconsolidated ventures - PE Investments		Mortgage loans held in securitization trusts⁽¹⁾
Beginning balance	$	24,417		$	—		$	—		Beginning balance	$	8,858	$	1,872,970	$	160,851	$	3,116,978
Contributions⁽²⁾/purchases	243,786			3,327,199			72,325			Contributions⁽²⁾/purchases	—		—		151		—
Distributions/paydowns	(15,946		)	(111,181		)	(49,344		)	Distributions/paydowns	(2,558)		(13,138)		(18,407)		(55,288)
Deconsolidation of securitization trust⁽³⁾										Deconsolidation of securitization trust⁽³⁾	—		—		—		(1,239,627)
Equity in earnings	6,320			—			6,829			Equity in earnings	669		—		—		—
Unrealized loss in earnings	(1,082		)	(22,720		)	(5,393		)
Sale of investments										Sale of investments	—		—		(48,930)		(39,848)
Transfers out of Level 3										Transfers out of Level 3			—		(84,807)		—
Unrealized gain (loss) in earnings										Unrealized gain (loss) in earnings	—		(19,879)		—		87,983
Realized gain in earnings										Realized gain in earnings			—		—		2,772
Ending balance	$	257,495		$	3,193,298		$	24,417		Ending balance	$	6,969	$	1,839,953	$	8,858	$	1,872,970

•Net Leased Real Estate. We may also invest directly in well-located commercial real estate with long-term leases to tenants on a net lease basis, where such tenants generally will be responsible for property operating expenses such as insurance, utilities, maintenance capital expenditures and real estate taxes. In addition, tenants of our properties typically pay rent increases based on: (1) increases in the consumer price index (typically subject to ceilings), (2) fixed increases, or (3) additional rent calculated as a percentage of the tenants’ gross sales above a specified level. We believe that a portfolio of properties under long-term, net lease agreements generally produces a more predictable income stream than many other types of real estate portfolios, while continuing to offer the potential for growth in rental income.

•CRE Debt Securities. We made investments that consist of bonds comprising certain tranches of CRE securitization pools, such as CMBS (including Non-Investment Grade “B-pieces” of a CMBS securitization pool). These bonds have been investment grade or below investment grade and are collateralized by CRE debt, typically secured by senior mortgage loans and may be fixed rate or floating rate securities. Due to their first-loss position, CMBS B-pieces are typically offered at a discount to par. These investments typically carry a 10-year weighted average life due to prepayment restrictions. We will continue to manage and monitor our remaining CMBS investments and are likely to selectively reduce exposure. Any future investments in more highly rated investment grade CRE Debt Securities would be selective and opportunistic.

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The allocation of our capital among our target assets will depend on prevailing market conditions at the time we invest and may change over time in response to different prevailing market conditions. In addition, in the future, we may invest in assets other than our target assets or change our target assets. With respect to all of our investments, we invest so as to maintain our qualification as a REIT for U.S. federal income tax purposes and our exclusion or exemption from regulation under the Investment Company Act of 1940, as amended (the “Investment Company Act”).

We believe that events in the financial markets from time to time, including the current and potential impacts of the COVID-19 pandemic, have created and will create significant dislocation between price and intrinsic value in certain asset classes as well as a supply and demand imbalance of available credit to finance these assets. We believe that our Manager’s in-depth understanding of CRE and real estate-related investments, in-house underwriting, asset management and resolution capabilities, provides the Company and management with a full-service value-add platform to regularly evaluate our investments and determine primary, secondary or alternative disposition strategies. This includes intermediate servicing and negotiating, restructuring of non-performing investments, foreclosure considerations, management or development of owned real estate, in each case to reposition and achieve optimal value realization for the Company and its stockholders. Depending on the nature of the underlying investment, we may pursue repositioning strategies through judicious capital investment in order to extract maximum value from the investment or recognize unanticipated losses to reinvest resulting liquidity in higher-yielding performing investments.

Our Business Segments

Following the Combination, we conducted our business through the following five operating segments: the loan portfolio, CRE debt securities, net leased real estate, other, and corporate. We continually monitor and review our segment reporting structure in accordance with authoritative guidance to determine whether any changes have occurred that would impact our reportable segments.

During the third quarter of 2019, we realigned the business and reportable segment information to reflect how the Chief Operating Decision Makers regularly review and manage the business. As a result, effective for the quarter ended September 30, 2019, we present our business segments as follows:

•Core Portfolio, which consists of the following four segments and remain unchanged from the prior segments:

◦Senior and Mezzanine Loans and Preferred Equity—CRE debt investments including senior mortgage loans, mezzanine loans, and preferred equity interests as well as participations in such loans. The segment also includes acquisition, development and construction (“ADC”) arrangements accounted for as equity method investments.

◦CRE Debt Securities— securities investments currently consisting of BBB and some BB rated CMBS (including Non-Investment Grade “B-pieces” of a CMBS securitization pool) or CRE CLOs (including the junior tranches thereof, collateralized by pools of CRE debt investments).

◦Net Leased Real Estate—direct investments in commercial real estate with long-term leases to tenants on a net lease basis, where such tenants generally will be responsible for property operating expenses such as insurance, utilities, maintenance, capital expenditures and real estate taxes.

◦Corporate—includes corporate-level asset management and other fees including expenses related to our secured revolving credit facility, related party and general and administrative expenses to the Core Portfolio only.

•Legacy, Non-Strategic Portfolio—segment consists of direct investments in operating real estate such as multi-tenant office and multifamily residential assets such as real estate acquired in settlement of loans which we plan to exit. It also includes two portfolios of private equity funds (“PE Investments”) and certain retail and other legacy loans originated prior to the Combination. This segment also includes corporate-level asset management and other fees including expenses related to secured revolving credit facility, related party and general and administrative expenses related to the Legacy, Non-Strategic Portfolio only.

There were no changes in the structure of our internal organization that prompted the change in reportable segments. Prior year amounts have been revised to conform to the current year presentation. Accordingly, we realigned the discussion and analysis of our portfolio and results of operations to reflect these reportable segments.

COVID 19 Initiatives

Throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations, we highlight significant actions we have taken to further protect the balance sheet from COVID-19 related risks. We have executed on certain liquidity

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generating measures that include the sale of select Core Portfolio assets; some of which have closed and others which are under contract with an expected closing in the coming months. The Core Portfolio asset sales consist of loans, securities and equity investments. The Core Portfolio assets involved in these sales dispositions to date have mainly been CMBS securities and select hotel and preferred equity loans. We have also completed a long-term asset level financing against select Core Portfolio and Legacy, Non-Strategic assets. To date, these initiatives have not only generated liquidity but also reduced financing exposures. However, Core Portfolio assets sold to date along with those under contract to be sold will result in a material impact on earnings and certain downward adjustments to stockholders’ equity.

~~Highlights~~For more information, refer to “Part II - Item 1A. Risk Factors” and “Significant Developments,” in “Our Core Portfolio” and “COVID-19 Liquidity Update” in our “Liquidity and Capital Resources” sections below for further discussion regarding these action steps, the COVID-19 pandemic and its impact on our future operating results, liquidity and financial condition.

Significant Developments

During the three months ended June 30, 2020 and through August 6, 2020, significant developments affecting our business and results of operations of our Core Portfolio and Legacy, Non-Strategic Portfolio, respectively, included the following:

Capital Resources

•We reduced borrowing under our Bank Credit Facility (as defined below), master repurchase facilities and CMBS Credit Facilities as a result of COVID-19 uncertainties. In July 2020, we fully repaid all outstanding borrowings on our Bank Credit Facility. Total combined reduction of debt on these facilities through the date hereof is $617.4 million.

•Executed a $229 million asset level preferred financing on a portfolio of five of our investments generating $200 million of proceeds at closing with $29.0 million future funding. For further description refer to “COVID-19 Liquidity Update” in our “Liquidity and Capital Resources”; and

•Suspended monthly dividends beginning with the monthly period ended April 30, 2020.

Core Portfolio

•Sold 27 CRE debt securities and one loan for a total gross sales price of $188.0 million and recognized a net loss of $68.9 million, reducing CMBS Credit Facility borrowings to $38.4 million and generating $121.2 million in net liquidity;

•Recognized an impairment loss of $29.2 million on our CRE debt security investments and $7.0 million for our proportionate share of a fair value adjustment on a loan held in a joint venture;

•We unwound our interest rate swaps and in connection realized a loss of $34.0 million; which was previously reported as an unrealized loss in the first quarter. This resulted in the release of $32.0 million previously held in a margin account;

•Made two protective advances totaling $28.5 million on our Los Angeles Mixed-use project and recorded our proportionate share of a fair value loss adjustment totaling $89.3 million. See “Los Angeles Construction Loan and Preferred Equity Investment” in “Our Core Portfolio” below;

•We recorded $58.9 million of specific reserves for two loans to two separate borrowers collateralized by hotel and office properties. Subsequent to June 30, 2020, we settled both loans generating gross proceeds of $175.2 million; and

•We agreed to sell two industrial portfolios that are expected to close before year-end and generate gross proceeds of $466.4 million versus a $438.4 million book value at June 30, 2020. These are expected to generate net proceeds of $118.0 million.

Legacy, Non-Strategic Portfolio

•Sold four investments (one real estate property and three loans) for a total gross sales price of $32.8 million and a net gain of $10.1 million;

•Recorded impairment on held for sale operating real estate properties of $25.9 million; and

•Subsequent to June 30, 2020, we completed the sale of two operating real estate properties classified as held for sale; generating gross proceeds of $5.0 million.

In summary, the combined asset sales and preferred financing referenced under “Significant Developments” above will provide $1.1 billion and $610.5 million of gross proceeds and net liquidity respectively, and an adjustment to book value of $258.5 million or $2.01 per share. This includes an adjustment to book value for the ~~three months ended March 31, 2018 include:~~

~~Completed the Combination~~Core Portfolio of ~~the CLNS Contributed Portfolio, NorthStar I and NorthStar II on January 31, 2018 in an all-stock transaction;~~

~~Completed listing on the NYSE under the ticker symbol “CLNC” on February 1, 2018;~~

~~Secured $400.0~~$242.9 million ~~corporate revolving credit facility with a maturity of February 1, 2022, with two six-month extension options, at our election;~~

~~Deployed~~ ~~$228.0 million~~ ~~of capital;~~

~~Announced the approval of a $300.0 million stock repurchase program of our outstanding Class A common stock, through which no stock has yet been repurchased; and~~

~~Declared and paid a monthly dividend of $0.145~~or $1.89 per share and an adjustment to book value for the Legacy, Non-Strategic Portfolio of ~~Class A and Class B-3 common stock for February and March 2018.~~

$15.6 million or $0.12 per share.

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Results of Operations

Core

•Generated U.S. GAAP net loss of $(210.3) million, or $(1.64) per share and Core Earnings of $(239.8) million, or $(1.82) per share during the three months ended June 30, 2020; and

•Since April 1, 2020, we have collected 99% of interest payments and 97% of total rents due from our loan portfolio and net leased real estate portfolio, respectively. For further detail, refer to “COVID-19 Update” in “Our Core Portfolio;”

Legacy, Non-Strategic Portfolio

•Generated U.S. GAAP net loss of $(16.7) million, or $(0.13) per share, and Legacy, Non-Strategic Earnings of $9.2 million, or $0.07 per share during the three months ended June 30, 2020; and

•Since April 1, 2020, we have collected 89.2% of total rents due from our owned real estate portfolio.

Impact of COVID-19

Since its discovery in December 2019, a new strain of coronavirus, which causes the viral disease known as COVID-19, has spread throughout the world, including the United States. The outbreak was declared to be a pandemic by the World Health Organization, and the Health and Human Services Secretary has declared a public health emergency in the United States in response to the outbreak. Considerable uncertainty still surrounds COVID-19 and its potential effects, and the extent of and effectiveness of any responses taken on a national and local level.

Accordingly, the COVID-19 pandemic has negatively impacted CRE credit REITs across the industry, as well as other companies that own and operate commercial real estate investments, including our company. As we manage the impact and uncertainties of the COVID-19 pandemic, cash preservation, liquidity and investment and portfolio management are our key priorities.

We are working closely with our borrowers and tenants to address the impact of COVID-19 on their business. To the extent that certain borrowers are experiencing significant financial dislocation we have and may continue to consider the use of interest and other reserves and/or replenishment obligations of the borrower and/or guarantors to meet current interest payment obligations, for a limited period. Similarly, we have and may in the future evaluate converting certain current interest payment obligations to payment-in-kind as a potential bridge period solution. We have in limited cases allowed some portions of current interest to convert to payment-in-kind.

As described above in “Significant Developments,” we have taken actions since the onset of the COVID-19 pandemic to mitigate the impact on our financial condition while establishinga defensive posture through this period.As of the date of this report, we have approximately $325 million in cash on hand and $200.0 million available on our bank facility. We anticipate liquidity to increase further as a result of proceeds from sales related to assets under contract. It is important to note that while the ~~Combination, comparisons~~combined result of these activities and events is an increase in liquidity and a reduction in debt, these events will also reduce future period earnings.

The decisive steps taken to protect the balance sheet and generate liquidity, position us to address further market and investment deterioration related to COVID-19. Asset and liability management and liquidity remain our primary focus.Our focus will shift toward new investment and growth initiatives when circumstances related to COVID-19 improve sufficiently to reduce exposure to further liquidity demands.

The COVID-19 pandemic has created uncertainties that have and will negatively impact our future operating results, liquidity and financial condition. However, we believe there are too many uncertainties to predict and quantify the continuing impact. The potential concerns and risks include, but are not limited to, mortgage borrowers ability to make monthly payments, lessees’ capacity to pay their rent, and the resulting impact on us to meet our obligations. Therefore, there can be no assurances that we will not need to take impairment charges in future quarters or experience further declines in revenues and net income, which could be material. For more information, refer to “COVID-19 Update” in “Our Core Portfolio” and “Our Legacy, Non-Strategic Portfolio” and “COVID-19 Liquidity Update” in our “Liquidity and Capital Resources” sections below and “Part II - Item 1A. Risk Factors” of our ~~period to period~~Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 for further discussion regarding the COVID-19 pandemic and its impact on our future operating results, liquidity and financial ~~information as set forth herein may not be meaningful.~~ condition.

Internal Controls

The ~~historical financial information included herein as of any date, or for any periods, on or prior to January 31, 2018, represents the pre-merger financial information~~health and well-being of the ~~CLNS Investment Entities,~~Manager’s employees continues to be strong. Our Manager instituted a full remote work policy in early March that remains in effect.

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Our internal control framework, which includes controls over financial reporting and disclosure, continues to operate effectively. Considering the COVID-19 pandemic, we have supplemented our ~~accounting predecessor, on a stand-alone basis.~~ framework by instituting certain entity level procedures and controls that ensure communication amongst our team that enhances our ability to prevent and detect material errors and/or omissions.

Results of Operations Summary

The ~~CLNS Investment Entities represent only a portion of our business~~ following ~~the Combination and therefore does not represent the results of operations the Company would have had for any period prior to the Combination. As of February 1, 2018,~~tables present our results of operations reflect our operation following the Combination of our accounting predecessor, the CLNS Investment Entities, and NorthStar I and NorthStar II. The results of operations of NorthStar I and NorthStar II are incorporated into ours effective from February 1, 2018.

~~Comparison of the Three Months Ended March 31, 2018 to 2017 (Dollars in Thousands):~~

Three Months Ended March 31, Increase (Decrease)
2018 2017 Amount %
Net interest income
Interest income $ 36,139
$ 35,151
$ 988
2.8 %
Interest expense on loans held for investment (7,415 ) (6,104 ) 1,311
(21.5 )%
Interest income on mortgage loans held in securitization trusts 25,865
—
25,865
100.0 %
Interest expense on mortgage obligations issued by securitization trusts (24,278 ) —
(24,278 ) 100.0 %
Net interest income 30,311
29,047
1,264
4.4 %

Property and other income
Property operating income 28,545
5,139
23,406
455.5 %
Other income 517
161
356
221.1 %
Total property and other income 29,062
5,300
23,762
448.3 %

Expenses
Management fee expense 8,000
—
8,000
100.0 %
Property operating expense 11,719
1,611
10,108
627.4 %
Transaction, investment and servicing expense 30,941
701
30,240
4,313.8 %
Interest expense on real estate 6,393
976
5,417
555.0 %
Depreciation and amortization 18,792
2,285
16,507
722.4 %
Administrative expense (including $285 and $0 of equity-based compensation expense) 3,228
3,012
216
7.2 %
Total expenses 79,073
8,585
70,488
821.1 %

Other income (loss)
Unrealized gain on mortgage loans and obligations held in securitization trusts, net 497
—
497
100.0 %
Other gain on investments, net 465
—
465
100.0 %
Loss before equity in earnings (losses) of unconsolidated ventures and income tax benefit (expense) (18,738 ) 25,762
(44,500 ) (172.7 )%
Equity in earnings of unconsolidated ventures 15,788
6,038
9,750
161.5 %
Income tax benefit 549
223
326
146.2 %
Net income (loss) $ (2,401 ) $ 32,023
$ (34,424 ) (107.5 )%

~~Net Interest Income~~

~~Interest income~~

~~Interest income increased by $1.0 million to $36.1 million~~ for the three and six months ended ~~March 31, 2018 due to an increase of $19.1 million related to the acquisition of NorthStar I~~June 30, 2020 and ~~NorthStar II, partially offset by $18.1 million decrease~~2019 (dollars in ~~the CLNS Investment Entities primarily driven by the deconsolidation of certain investment entities.~~thousands):


	Three Months Ended June 30,
	2020										2019
	Core Portfolio		Legacy, Non-Strategic Portfolio		Total		Core Portfolio		Legacy, Non-Strategic Portfolio		Total
Net interest income	$	25,449	$	(511)	$	24,938	$	20,891	$	3,036	$	23,927
Property and other income	14,833		20,529		35,362		30,070		35,131		65,201
Management fee expense	(6,485)		(721)		(7,206)		(9,086)		(2,271)		(11,357)
Property operating expense	(3,275)		(13,036)		(16,311)		(7,901)		(20,239)		(28,140)
Transaction, investment and servicing expense	(1,440)		(1,467)		(2,907)		(317)		(734)		(1,051)
Interest expense on real estate	(8,085)		(3,733)		(11,818)		(8,814)		(5,084)		(13,898)
Depreciation and amortization	(9,297)		(4,723)		(14,020)		(12,888)		(16,369)		(29,257)
Provision for loan losses	86		(35)		51		—		(110,258)		(110,258)
Impairment of operating real estate	—		(25,935)		(25,935)		—		(10,124)		(10,124)
Administrative expense	(4,412)		(2,339)		(6,751)		(4,168)		(3,842)		(8,010)
Unrealized gain (loss) on mortgage loans and obligations held in securitization trusts, net	(8,975)		—		(8,975)		5,549		—		5,549
Other gain (loss) on investments, net	(126,562)		6,929		(119,633)		(6,016)		(46)		(6,062)
Income (loss) before equity in earnings of unconsolidated ventures and income taxes	(128,163)		(25,042)		(153,205)		7,320		(130,800)		(123,480)
Equity in earnings (loss) of unconsolidated ventures	(85,328)		51		(85,277)		17,917		(5,360)		12,557
Income tax benefit (expense)	(2,101)		(1)		(2,102)		(359)		492		133
Net income (loss)	$	(215,592)	$	(24,992)	$	(240,584)	$	24,878	$	(135,668)	$	(110,790)


	Six Months Ended June 30,
	2020										2019
	Core Portfolio		Legacy, Non-Strategic Portfolio		Total		Core Portfolio		Legacy, Non-Strategic Portfolio		Total
Net interest income	$	52,605	$	189	$	52,794	$	39,225	$	6,660	$	45,885
Property and other income	45,466		51,818		97,284		60,134		68,378		128,512
Management fee expense	(13,002)		(2,150)		(15,152)		(18,172)		(4,543)		(22,715)
Property operating expense	(6,958)		(31,884)		(38,842)		(16,847)		(39,473)		(56,320)
Transaction, investment and servicing expense	(3,654)		(2,387)		(6,041)		(372)		(1,208)		(1,580)
Interest expense on real estate	(16,546)		(8,350)		(24,896)		(17,384)		(10,121)		(27,505)
Depreciation and amortization	(20,449)		(11,547)		(31,996)		(25,972)		(30,947)		(56,919)
Provision for loan losses	(31,413)		(38,468)		(69,881)		—		(110,258)		(110,258)
Impairment of operating real estate	—		(30,061)		(30,061)		—		(10,124)		(10,124)
Administrative expense	(8,543)		(5,246)		(13,789)		(7,808)		(6,855)		(14,663)
Unrealized gain on mortgage loans and obligations held in securitization trusts, net	(28,427)		—		(28,427)		6,578		—		6,578
Realized gain (loss) on mortgage loans and obligations held in securitization trusts, net	—		—		—		48		—		48
Other gain (loss) on investments, net	(147,074)		7,279		(139,795)		(9,842)		(1,299)		(11,141)
Income (loss) before equity in earnings of unconsolidated ventures and income taxes	(177,995)		(70,807)		(248,802)		9,588		(139,790)		(130,202)
Equity in earnings (loss) of unconsolidated ventures	(71,255)		3,145		(68,110)		36,285		(2,418)		33,867
Income tax benefit (expense)	(2,264)		(1,549)		(3,813)		1,629		(1,127)		502
Net income (loss)	$	(251,514)	$	(69,211)	$	(320,725)	$	47,502	$	(143,335)	$	(95,833)

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~~Interest expense on loans held~~See “Our Core Portfolio” and “Our Legacy, Non-Strategic Portfolio” sections for ~~investment~~

Interest expense increased by $1.3 million to $7.4 million due to a $5.1 million increase as a result of the acquisition of NorthStar I and NorthStar II, partially offset by a $3.8 million decrease in CLNS Investment Entities primarily driven by the deconsolidation of certain investment entities.

~~Net interest income on mortgage loans and obligations held in securitization trusts, net~~

Net interest income on mortgage loans and obligations held in securitization trusts, net was $1.6 million and relates to our investment in the subordinate tranches of the consolidated securitization trusts acquired as a result of the Combination.

~~Property and other income~~

~~Property operating income~~

~~Property operating income increased by $23.4 million to $28.5 million primarily as a result of the properties acquired in connection with the acquisition of NorthStar I and NorthStar II.~~

~~Expenses~~

~~Management fee expense~~

Management fee expense represents fees paid to our Manager in accordance with the Management Agreement. During the three months ended March 31, 2018, management fee expense was $8.0 million. We entered into the Management Agreement on January 31, 2018 and therefore we did not incur any management fee expenses prior to this date.

~~Property operating expense~~

~~Property operating expense increased by $10.1 million to $11.7 million primarily as a result of the properties acquired in connection with the acquisition of NorthStar I and NorthStar II.~~

~~Transaction, investment and servicing expense~~

Transaction, investment and servicing expense represents costs such as professional fees associated with new investments and transactions. Transaction, investment and servicing expense increased by $30.2 million to $30.9 million for the three months ended March 31, 2018 as compared to the three months ended March 31, 2017 primarily as a result of costs associated with the Combination.

~~Interest expense on real estate~~

~~Interest expense on real estate increased by $5.4 million to $6.4 million primarily as a result of the properties acquired in connection with the acquisition of NorthStar I and NorthStar II.~~

~~Depreciation and amortization~~

~~Depreciation and amortization expense increased by $16.5 million to $18.8 million primarily as a result of the properties acquired in connection with the acquisition of NorthStar I and NorthStar II.~~

~~Other income (loss)~~

~~Unrealized gain (loss) on mortgage loans and obligations held in securitization trusts, net~~

During the three months ended March 31, 2018, we recorded an unrealized gain on mortgage loans and obligations held in securitization trusts, net of $0.5 million which represents the change in the fair value of the consolidated assets and liabilitiesfurther discussion of our ~~investment in the subordinate tranches~~portfolio and results of ~~the securitization trusts acquired as a result of the Combination.~~

~~Other gain on investments, net~~

~~During the three months ended March 31, 2018, we recorded a $0.5 million gain realized on the foreclosure of a loan held for investment.~~

~~Equity in earnings of unconsolidated ventures~~

~~Equity in earnings of unconsolidated ventures increased by $9.8 million to $15.8 million primarily driven by investments acquired as a result of the acquisition of NorthStar I and NorthStar II.~~

operations.

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~~Income tax benefit~~

~~For the three months ended March 31, 2018 and 2017, we recorded income tax benefit of $0.5 million and $0.2 million, respectively, related to our PE Investments.~~

Our Core Portfolio

As of ~~March 31, 2018,~~June 30, 2020, our ~~portfolio~~Core Portfolio, including our senior and mezzanine loans and preferred equity, CRE debt securities, net leased real estate and corporate segments, consisted of ~~153~~81 investments representing approximately ~~$7.6~~$3.7 billion in book value (excluding cash, cash equivalents and certain other assets). Our ~~loan portfolio~~senior and mezzanine loans and preferred equity consisted of 8351 senior mortgage loans, mezzanine loans, ~~and~~ preferred equity investments and other loans and had a weighted average cash coupon of ~~8.0%~~5.1% and a weighted average all-in ~~levered~~unlevered yield of ~~8.2%~~6.3%. Our CRE debt securities portfolio had a weighted average cash coupon of ~~3.7%~~2.8%. Our ~~owned~~net leased real estate ~~portfolio (including net lease and other real estate)~~ consisted of approximately ~~12.7~~12.5 million total square feet of space and ~~the~~ total ~~annualized base rent~~first quarter net operating income (“NOI”) of that portfolio was approximately ~~$134.6 million (based on leases in place as of March 31, 2018).~~$18.2 million.

As of ~~March 31, 2018,~~June 30, 2020, our ~~portfolio~~Core Portfolio consisted of the following investments (dollars in thousands):

Asset Count Book value
Noncontrolling interest⁽¹⁾

Book value at our share⁽²⁾
Senior mortgage loans⁽³⁾
56
$ 1,597,868
$ 9,176
$ 1,588,692
Mezzanine loans⁽⁴⁾
22
534,776
9,177
525,599
Preferred equity⁽⁵⁾
5
182,549
—
182,549
CMBS⁽⁶⁾
42
350,896
32,719
318,177
Mortgage loans held in securitization trusts⁽⁶⁾
—
3,018,603
—
3,018,603
Owned real estate-Net lease⁽⁷⁾
10
713,574
35,078
678,496
Owned real estate-Other⁽⁷⁾⁽⁸⁾
12
894,752
134,934
759,818
Private equity interests 6
257,495
—
257,495
Total 153
$ 7,550,513
$ 221,084
$ 7,329,429


	Count⁽¹⁾	Book value (Consolidated)		Book value (at CLNC share)⁽²⁾		Net book value (Consolidated)⁽³⁾		Net book value (at CLNC share)⁽⁴⁾
Core Portfolio
Senior mortgage loans⁽⁵⁾	35	$	2,279,394	$	2,136,279	$	700,400	$	557,284
Mezzanine loans⁽⁵⁾	9	273,242		234,337		273,242		234,337
Preferred equity and other loans⁽⁵⁾⁽⁶⁾	7	145,543		142,515		145,543		142,515
CRE debt securities	24	141,638		141,638		103,287		103,287
Net leased real estate	6	1,074,887		1,002,622		328,215		308,408
Total/Weighted average Core Portfolio	81	$	3,914,704	$	3,657,391	$	1,550,687	$	1,345,831


~~(1)~~	~~Non-controlling interest (“NCI”) represent interests in assets held by third party partners.~~


~~(2)~~	~~Book value at our share represents the proportionate book value based on our ownership by asset; book values at our share for securitization assets are net of the accounting impact from consolidation.~~

~~(3)~~

Senior mortgage loans include junior participations in our originated senior mortgage loans for which we have syndicated the senior participations to other investors and retained the junior participations for our portfolio and contiguous mezzanine loans where we own both the senior and junior loan positions. We believe these investments are more similar to the senior mortgage loans we originate than other loan types given their credit quality and risk profile.


~~(4)~~	~~Mezzanine loans include other subordinated loans.~~


~~(5)~~	~~Preferred equity balances include $41.9 million of book value at our share attributable to related equity participation interests.~~

~~(6)~~

Mortgage loans held in securitization trusts includes $3.2 billion of book value assets in three securitization trusts in which we own the controlling class of securities and therefore consolidate. The consolidated liabilities related to these consolidated assets are $3.1 billion. The difference between the carrying values of the mortgage loans held in securitization trusts and the carrying value of the mortgage obligations issued by the securitization trusts was $142.0 million as of March 31, 2018 and approximates the fair value of the Company’s underlying investments in the subordinate tranches of the securitization trusts.


~~(7)~~	~~Owned real estate - net lease and owned real estate - other include deferred leasing costs and intangible assets.~~


~~(8)~~	~~Owned real estate - other consists of multi-tenant office and multifamily residential assets.~~

(1)Count for net leased real estate represents number of investments.

57(2)Book value at our share represents the proportionate book value based on ownership by asset as of June 30, 2020.

~~Table~~(3)Net book value represents book value less any associated financing as of ~~Contents~~

June 30, 2020.

(4)Net book value at our share represents the proportionate book value based on asset ownership less any associated financing based on ownership as of June 30, 2020.

(5)Senior mortgage loans, mezzanine loans, and preferred equity include investments in joint ventures whose underlying interest is in a loan or preferred equity.

(6)Preferred equity balances include $17.0 million of book value at our share attributable to related equity participation interests.

The following charts illustrate the diversification of our ~~portfolio~~Core Portfolio (not including ~~CMBS, mortgage loans held in securitization trusts, and private equity interests)~~CRE Debt Securities) based on investment type, underlying property type, and geography, as of ~~March 31, 2018~~June 30, 2020 (percentages based on book value at our share, which represents the proportionate book value based on our ownership by asset):


Investment Type						Property Type

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~~Investment Type~~				~~Property Type~~Geography

~~Geography~~

~~(1)~~


~~(2)~~	~~Mezzanine loans include other subordinated loans.~~


~~(3)~~	~~Preferred equity balances include $41.9 million of book value at our share attributable to related equity participation interests.~~


~~(4)~~	~~Various includes one non-U.S. collateral asset.~~

(1)Senior mortgage loans include junior participations in our originated senior mortgage loans for which we have syndicated the senior participations to other investors and retained the junior participations for our portfolio and contiguous mezzanine loans where we own both the senior and junior loan positions. We believe these investments are more similar to the senior mortgage loans we originate than other loan types given their credit quality and risk profile.

(2)Mezzanine loans include other subordinated loans.

(3)Preferred equity balances include $17.0 million of book value at our share attributable to related equity participation interests.

(4)Other contains one corporate term loan secured by the borrower’s limited partnership interests in a fund.

(5)Other includes commercial and residential development and predevelopment assets, one corporate term loan secured by the borrower’s limited partnership interests in a fund, and a preferred equity investment in a loan origination platform.

Underwriting Process

We use ~~a rigorous~~an investment and underwriting process that has been developed and utilized by our Manager’s and its affiliates’ senior management teams leveraging their extensive commercial real estate expertise over many years and real estate ~~cycles which~~cycles. The underwriting process focuses on some or all of the following factors designed to ensure each investment is evaluated appropriately: (i) macroeconomic conditions that may influence operating performance; (ii) fundamental analysis of underlying real estate, including tenant rosters, lease terms, zoning, necessary licensing, operating costs and the asset’s overall competitive position in its market; (iii) real estate market factors that may influence the economic performance of the investment, including leasing conditions and overall competition; (iv) the operating expertise and financial strength and reputation of a tenant, operator, partner or borrower; (v) the cash flow in place and projected to be in place over the term of the investment and potential return; (vi) the appropriateness of the business plan and estimated costs associated with tenant buildout, repositioning or capital improvements; (vii) an internal and third-party valuation of a property, investment basis relative to the competitive set and the ability to liquidate an investment through a sale or refinancing; (viii) review of third-party reports including appraisals, engineering and environmental reports; (ix) physical inspections of properties and markets; (x) the overall legal structure of the investment, contractual implications and the lenders’ rights; and (xi) the tax and accounting impact.

Loan Risk Rankings

In addition to reviewing loans and preferred equity held for investment for impairment quarterly, the Company evaluates loans and preferred equity held for investment to determine if an allowance for loan loss should be established. In conjunction with this review, the Company assesses the risk factors of each senior and mezzanine loans and preferred equity and assigns a risk rating based on a variety of factors, including, without limitation, underlying real estate performance and asset value, values of comparable properties, durability and quality of property cash flows, sponsor experience and financial wherewithal, and the existence of a risk-mitigating loan structure. Additional key considerations include loan-to-value ratios, debt service coverage ratios, loan structure, real estate and credit market dynamics, and risk of default or principal loss. Based on a five-point scale, the Company’s loans and preferred equity held for investment are rated “1” through “5,” from less risk to greater risk. At the time of origination or purchase, loans and preferred equity held for investment are ranked as a “3” and will move accordingly going forward based on the ratings which are defined as follows

1.Very Low Risk—The ~~following section describes~~loan is performing as agreed. The underlying property performance has exceeded underwritten expectations with very strong NOI, debt service coverage ratio, debt yield and occupancy metrics. Sponsor is investment grade, very well capitalized, and employs very experienced management team.

2.Low Risk—The loan is performing as agreed. The underlying property performance has met or exceeds underwritten expectations with high occupancy at market rents, resulting in consistent cash flow to service the ~~major CRE asset classes in which we may invest and actively manage to maximize value and to protect capital.~~

debt. Strong sponsor that is well capitalized with experienced management team.

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3.Average Risk—The loan is performing as agreed. The underlying property performance is consistent with underwriting expectations. The property generates adequate cash flow to service the debt, and/or there is a sufficient reserve or loan structure to provide time for sponsor to execute the business plan. Sponsor has routinely met its obligations and has experience owning/operating similar real estate.

4.High Risk/Delinquent/Potential for Loss—The loan is in excess of 30 days delinquent and/or has a risk of a principal loss. The underlying property performance is behind underwritten expectations. Loan ~~Portfolio~~covenants may require occasional waivers/modifications. Sponsor has been unable to execute its business plan and local market fundamentals have deteriorated. Operating cash flow is not sufficient to service the debt and debt service payments may be coming from sponsor equity/loan reserves.

5.Impaired/Defaulted/Loss Likely—The loan is in default or a default is imminent, and has a high risk of a principal loss, or has incurred a principal loss. The underlying property performance is significantly worse than underwritten expectation and sponsor has failed to execute its business plan. The property has significant vacancy and current cash flow does not support debt service. Local market fundamentals have significantly deteriorated resulting in depressed comparable property valuations versus underwriting.

As mentioned above, management considers several risk factors when assigning our risk rating each quarter. Beginning with the quarter ended March 31, 2020, our average risk ranking was impacted by the current and potential future effects of the COVID-19 pandemic, resulting in a number of assets moving from average risk (3) to high risk (4) during the quarter and an average rating of 3.8.

For the quarter ended June 30, 2020, management believes the extended impact of the COVID-19 pandemic remains uncertain, and therefore continues to represent a significant risk to our portfolio. As such, the current period average rating is 3.9, which is consistent with the first quarter 2020.

Senior and Mezzanine Loans and Preferred Equity

Our ~~loan portfolio~~senior and mezzanine loans and preferred equity consists of senior mortgage loans, mezzanine loans and preferred equity interests, some of which have equity participation interests.

The following table provides a summary of our ~~loan portfolio~~senior and mezzanine loans and preferred equity in our Core Portfolio based on our internal risk rankings as of ~~March 31, 2018~~June 30, 2020 (dollars in thousands):

Book Value Principal Balance
Weighted Average⁽⁵⁾
Asset Count Book value NCI
Book value at our share⁽⁴⁾
Principal balance NCI
Principal balance value at our share⁽⁴⁾

Cash Coupon⁽⁶⁾

All-in yield⁽⁷⁾

Remaining term⁽⁸⁾

Extended remaining term⁽⁹⁾
Senior loans⁽¹⁾
56
$ 1,597,868
$ 9,176
$ 1,588,692
$ 1,594,386
$ 17,838
$ 1,576,548
6.8 % 7 % 1.2
2.9
Mezzanine loans⁽²⁾
22
534,776
9,177
525,599
523,954
9,201
514,753
10.4 % 11.6 % 2.1
3.2
Preferred equity⁽³⁾
5
182,549
—
182,549
134,874
—
134,874
12.4 % 9.6 % 7.5
7.6
Total / Weighted average 83
$ 2,315,193
$ 18,353
$ 2,296,840
$ 2,253,214
$ 27,039
$ 2,226,175
8.0 % 8.2 % 1.9
3.3


		Carrying Value (at CLNC share)⁽¹⁾
Risk Ranking	Count⁽²⁾	Senior mortgage loans⁽³⁾		Mezzanine loans		Preferred equity and other loans		Total		% of Core Portfolio


3	10	$	590,938	$	—	$	—	$	590,938	23.5	%
4	34	1,440,653		120,509		44,794		1,605,956		63.9	%
5	6	132,400		86,116		97,718		316,234		12.6	%
	50	$	2,163,991	$	206,625	$	142,512	$	2,513,128	100.0	%

Weighted average risk ranking										3.9

~~(1)~~


~~(2)~~	~~Mezzanine loans include other subordinated loans.~~


~~(3)~~	~~Preferred equity balances include $41.9 million of book value at our share attributable to related equity participation interests.~~


~~(4)~~	~~Book and principal value at our share represents the proportionate book and principal value based on our ownership by asset.~~


~~(5)~~	~~Weighted average metrics weighted by book value at our share, except for cash coupon which is weighted by principal balance value at our share.~~


~~(6)~~	~~Represents the stated coupon on loans; for floating rate loans, assumes USD 1-month LIBOR, which was 1.88% as of March 31, 2018.~~


~~(7)~~	In addition to cash coupon, all-in yield includes non-cash payment in-kind interest income and the accrual of both extension and exit fees. All-in yield for the loan portfolio assumes the applicable floating benchmark rate as of March 31, 2018 for weighted average calculations.


~~(8)~~	~~Represents the remaining term based on the current contractual maturity date of loans.~~


~~(9)~~	Represents the remaining term based on a maximum maturity date assuming all extension options on loans are exercised by the borrower term based on a maximum maturity date assuming all extension options on loans are exercised by the borrower.

(1)Book value at our share represents the proportionate book value based on ownership by asset as of June 30, 2020.

(2)Count excludes one equity method participation held in a joint venture with a de minimis carrying value (at CLNC share) which was not assigned a risk ranking.

(3)Includes one mezzanine loan totaling $27.7 million where we are also the senior lender.

The following table ~~details~~provides asset level detail for senior and mezzanine loans and preferred equity included in our ~~loan portfolio by rate-type~~Core Portfolio as of ~~March 31, 2018~~June 30, 2020 (dollars in thousands):

Book Value Principal Balance Unfunded Loan Commitments
Weighted Average⁽²⁾
Number of loans Book value NCI
Book value at our share⁽¹⁾
Principal balance NCI
Principal balance at our share⁽¹⁾
Unfunded loan commitments NCI
Unfunded loan commitments at our share⁽¹⁾
Spread to LIBOR
All-in yield⁽³⁾

Remaining term⁽⁴⁾

Extended remaining term⁽⁵⁾
Floating rate loans 62
$ 1,784,144
$ 18,191
$ 1,765,953
$ 1,770,004
$ 18,159
$ 1,751,845
$ 70,117
$ 533
$ 69,584
5.4 % 7.3 % 1.2
2.9
Fixed rate loans⁽⁶⁾
21
531,049
162
530,887
483,210
8,880
474,330
1,712
—
1,712
— % 11.2 % 4.4
4.9
Total/ Weighted average 83
$ 2,315,193
$ 18,353
$ 2,296,840
$ 2,253,214
$ 27,039
$ 2,226,175
$ 71,829
$ 533
$ 71,296
4.3 % 8.2 % 1.9
3.3


~~(1)~~	Book value at our share represents the proportionate book value, principal value, and unfunded loan commitments based on our ownership by asset. Principal balance at our share represents the proportionate principal value based on our ownership by asset.


~~(2)~~	~~Weighted average metrics weighted by book value at our share, except for spread to LIBOR which is weighted by principal balance value at our share.~~


~~(3)~~	In addition to cash coupon, all-in yield includes the amortization of deferred origination fees, purchase price premium and discount, loan origination costs and accrual of both extension and exit fees. All-in yield for the loan portfolio assumes the applicable floating benchmark rate as of March 31, 2018 for weighted average calculations.


~~(4)~~	~~Represents the remaining term in years based on the original maturity date or current extension maturity date of loans.~~


~~(5)~~	~~Represents the remaining term in years based on a maximum maturity date assuming all extension options on loans are exercised by the borrower.~~


~~(6)~~	~~Includes preferred equity investments.~~

Collateral type

Origination Date

City, State

Carrying value⁽¹⁾

Principal balance

Coupon type

Cash Coupon⁽²⁾

Unlevered all-in yield⁽³⁾

Extended maturity date

Loan-to-value⁽⁴⁾

Q2/Q1/Q4 Risk ranking⁽⁵⁾

Senior loans

Loan 1

Multifamily

6/21/2019

Milpitas, CA

174,435

176,771

Floating

3.1%

5.5%

7/9/2024

72%

3/3/3

Loan 2

Hotel

1/2/2018

San Jose, CA

169,920

173,485

Floating

4.3%

5.3%

1/9/2023

62%

4/4/3

Loan 3

Hotel

6/28/2018

Berkeley, CA

118,022

120,517

Floating

3.2%

5.2%

7/9/2025

66%

4/4/3

Table of Contents

Collateral type

Origination Date

City, State

Carrying value⁽¹⁾

Principal balance

Coupon type

Cash Coupon⁽²⁾

Unlevered all-in yield⁽³⁾

Extended maturity date

Loan-to-value⁽⁴⁾

Q2/Q1/Q4 Risk ranking⁽⁵⁾

Loan 4

Industrial

9/19/2019

New York, NY

114,950

116,000

Floating

3.1%

5.8%

9/19/2024

76%

4/3/3

Loan 5

Office

12/7/2018

Carlsbad, CA

113,315

115,563

Floating

3.7%

6.1%

12/9/2023

73%

3/3/3

Loan 6

Hotel

10/29/2018

San Diego, CA

104,900

143,777

Floating

4.8%

6.9%

10/9/2024

71%

5/4/4

Loan 7⁽⁶⁾

Multifamily

6/18/2019

Santa Clara, CA

100,410

101,987

Floating

4.4%

7.3%

6/18/2024

64%

4/4/3

Loan 8

Multifamily

4/11/2019

Various - U.S.

91,533

92,000

Floating

3.0%

5.9%

4/9/2024

65%

4/4/3

Loan 9

Office

5/31/2019

Stamford, CT

90,027

91,443

Floating

3.5%

5.8%

6/9/2025

71%

4/4/3

Loan 10

Office

6/27/2018

Burlingame, CA

73,222

73,254

Floating

2.8%

5.1%

7/9/2023

61%

3/3/3

Loan 11

Hotel

6/25/2018

Englewood, CO

71,826

73,000

Floating

3.5%

5.3%

7/9/2023

69%

4/4/3

Loan 12

Other (Mixed-use)

10/24/2019

Brooklyn, NY

67,729

69,535

Floating

3.4%

5.9%

11/9/2024

66%

4/4/3

Loan 13

Office

8/28/2018

San Jose, CA

67,582

67,651

Floating

2.5%

4.5%

8/28/2025

66%

3/3/3

Loan 14

Office

4/5/2019

Long Island City, NY

62,371

62,981

Floating

3.3%

5.8%

4/9/2024

58%

4/4/3

Loan 15

Office

5/29/2019

Long Island City, NY

61,326

63,135

Floating

3.5%

6.0%

6/9/2024

59%

4/4/3

Loan 16

Office

2/13/2019

Baltimore, MD

54,926

55,438

Floating

3.5%

6.2%

2/9/2024

74%

4/4/3

Loan 17

Office

7/12/2019

Washington, D.C.

53,278

53,828

Floating

2.8%

5.7%

8/9/2024

68%

4/4/3

Loan 18

Multifamily

7/1/2019

Phoenix, AZ

44,218

44,384

Floating

2.7%

5.0%

7/9/2024

76%

4/4/3

Loan 19

Multifamily

10/9/2018

Dupont, WA

40,350

40,500

Floating

3.3%

5.6%

11/9/2023

82%

3/3/3

Loan 20⁽⁶⁾

Other (Mixed-use)

10/17/2018

Dublin, Ireland

38,426

38,349

Fixed

—%

15.0%

12/31/2023

94%

4/4/3

Loan 21

Multifamily

2/8/2019

Las Vegas, NV

38,278

38,551

Floating

3.2%

5.9%

2/9/2024

71%

4/4/3

Loan 22

Multifamily

5/22/2018

Henderson, NV

37,188

37,700

Floating

3.3%

5.3%

6/9/2023

73%

4/4/3

Loan 23

Multifamily

5/3/2019

North Phoenix, AZ

36,530

36,844

Floating

3.4%

5.6%

5/9/2024

81%

4/4/3

Loan 24

Office

9/26/2019

Salt Lake City, UT

35,855

36,355

Floating

2.7%

5.0%

10/9/2024

72%

4/4/3

Loan 25

Multifamily

4/26/2018

Oxnard, CA

34,297

36,500

Floating

5.2%

7.2%

11/9/2020

71%

4/4/3

Loan 26

Office

6/16/2017

Miami, FL

33,316

33,241

Floating

4.9%

5.9%

7/9/2022

68%

3/3/3

Loan 27

Office

3/28/2019

San Jose, CA

30,101

30,251

Floating

3.0%

5.9%

4/9/2024

64%

4/4/3

Loan 28⁽⁷⁾

Hotel

11/8/2013

Bloomington, MN

27,500

29,587

n/a⁽⁷⁾

100%

5/5/4

Loan 29

Multifamily

1/11/2019

Tempe, AZ

26,505

26,540

Floating

2.9%

5.2%

2/9/2024

79%

4/4/3

Loan 30

Office

1/15/2019

Santa Barbara, CA

25,960

26,236

Floating

3.2%

5.7%

2/9/2024

80%

3/3/3

Loan 31

Office

9/16/2019

San Francisco, CA

22,667

22,841

Floating

3.4%

6.1%

10/9/2024

72%

3/3/3

Loan 32

Multifamily

12/21/2018

Phoenix, AZ

22,049

22,081

Floating

2.9%

5.2%

1/9/2023

73%

4/4/3

Loan 33

Office

8/27/2019

San Francisco, CA

20,325

20,507

Floating

2.8%

5.6%

9/9/2024

73%

3/3/3

Loan 34

Office

2/26/2019

Charlotte, NC

19,765

19,941

Floating

3.4%

6.0%

3/9/2024

56%

3/3/3

Loan 35

Multifamily

2/8/2019

Las Vegas, NV

13,177

13,302

Floating

3.2%

5.9%

2/9/2024

71%

4/4/3

Total/Weighted average senior loans

2,136,279

2,204,075

5.8%

3/17/2024

70%

3.8/3.7/3.1

Mezzanine loans

Loan 36⁽⁶⁾⁽⁷⁾

Other (Mixed-use)

7/14/2017

Los Angeles, CA

83,821

162,826

n/a⁽⁷⁾

7/9/2022

n/a

5/5/4

Loan 37⁽⁶⁾

Multifamily

12/26/2018

Santa Clarita, CA

51,713

54,874

Fixed

7.0%

13.8%

12/26/2024

56% – 84%

4/4/3

Loan 38

Hotel

9/23/2019

Berkeley, CA

27,712

28,773

Fixed

9.0%

11.5%

7/9/2025

66% – 81%

4/4/3

Loan 39

Multifamily

7/11/2019

Placentia, CA

25,219

26,551

Fixed

8.0%

13.3%

7/11/2024

51% – 84%

4/4/3

Loan 40⁽⁷⁾

Multifamily

12/3/2019

Milpitas, CA

20,061

20,663

Fixed

8.00%

13.3%

12/3/2024

49% – 71%

4/4/3

Loan 41

Hotel

1/9/2017

New York, NY

11,182

12,000

Floating

11.0%

11.8%

1/9/2022

63% – 76%

4/4/3

Loan 42⁽⁶⁾

Office

7/20/2018

Dublin, Ireland

8,151

7,812

Fixed

—%

12.5%

12/20/2021

45% – 68%

4/4/2

Loan 43

Multifamily

7/30/2014

Various - TX

4,183

4,529

Fixed

9.5%

8/11/2024

71% – 83%

4/4/3

Loan 44⁽⁷⁾

Other (Mixed-use)

3/19/2013

San Rafael, CA

2,295

3,765

n/a⁽⁷⁾

9/30/2020

32% – 86%

5/4/4

Total/Weighted average mezzanine loans

234,337

321,793

8.1%

10/26/2023

54% - 77%

4.4/4.4/3.3

Table of Contents

Collateral type

Origination Date

City, State

Carrying value⁽¹⁾

Principal balance

Coupon type

Cash Coupon⁽²⁾

Unlevered all-in yield⁽³⁾

Extended maturity date

Loan-to-value⁽⁴⁾

Q2/Q1/Q4 Risk ranking⁽⁵⁾

Preferred equity & other loans

Loan 45

Office

5/8/2018

Various - N.Y.

79,850

100,689

Fixed

7.0%

12.0%

6/5/2027

n/a

5/4/4

Loan 46⁽⁷⁾

Other (Mixed-use)

7/14/2017

Los Angeles, CA

17,869

27,005

n/a⁽⁷⁾

7/9/2022

n/a

5/5/4

Loan 47⁽⁶⁾

Industrial

9/1/2016

Various - U.S.

16,200

—

n/a

9/2/2027

n/a

4/4/3

Loan 48⁽⁶⁾⁽⁸⁾

Office

8/22/2018

Las Vegas, NV

15,660

18,026

Fixed

8.0%

15.5%

9/9/2023

n/a

4/4/3

Loan 49

Other

6/28/2019

Various - U.S.

12,120

13,898

Fixed

10.0%

15.3%

5/28/2024

n/a

4/4/3

Loan 50

Office

7/20/2018

Dublin, Ireland

813

—

n/a

12/20/2021

n/a

4/4/2

Loan 51⁽⁸⁾

Hotel

10/24/2014

Austin, TX

—

n/a

Total/Weighted average preferred equity & other loans⁽⁹⁾

142,515

159,618

9.7%

2/19/2026

n/a

4.7/4.1/3.4

Total/Weighted average senior and mezzanine loans and preferred equity - Core Portfolio

2,513,131

2,685,486

6.3%

4/12/2024

n/a

3.9/3.8/3.1

(1)Represents carrying values at our share as of June 30, 2020.

(2)Represents the stated coupon rate for loans; for floating rate loans, does not include USD 1-month London Interbank Offered Rate (“LIBOR”) which was 0.16% as of June 30, 2020.

(3)In addition to the stated cash coupon rate, unlevered all-in yield includes non-cash payment in-kind interest income and the accrual of origination, extension and exit fees. Unlevered all-in yield for the loan portfolio assumes the applicable floating benchmark rate as of June 30, 2020 for weighted average calculations.

(4)Except for construction loans, senior loans reflect the initial loan amount divided by the as-is value as of the date the loan was originated, or the principal amount divided by the appraised value as of the date of the most recent as-is appraisal. Mezzanine loans include attachment loan-to-value and detachment loan-to-value, respectively. Attachment loan-to-value reflects initial funding of loans senior to our position divided by the as-is value as of the date the loan was originated, or the principal amount divided by the appraised value as of the date of the most recent appraisal. Detachment loan-to-value reflects the cumulative initial funding of our loan and the loans senior to our position divided by the as-is value as of the date the loan was originated, or the cumulative principal amount divided by the appraised value as of the date of the most recent appraisal.

(5)On a quarterly basis, the Company’s senior and mezzanine loans and preferred equity are rated “1” through “5,” from less risk to greater risk. Represents risk ranking as of June 30, 2020, March 31, 2020 and December 31, 2019 (our last pre-COVID-19 risk ranking), respectively.

(6)Construction senior loans’ loan-to-value reflect the total commitment amount of the loan divided by the as completed appraised value, or the total commitment amount of the loan divided by the projected total cost basis. Construction mezzanine loans include attachment loan-to-value and detachment loan-to-value, respectively. Attachment loan-to-value reflects the total commitment amount of loans senior to our position divided by as-completed appraised value, or the total commitment amount of loans senior to our position divided by projected total cost basis. Detachment loan-to-value reflect the cumulative commitment amount of our loan and the loans senior to our position divided by as-completed appraised value, or the cumulative commitment amount of our loan and loans senior to our position divided by projected total cost basis.

(7)Loans 28, 36, 44 and 46 are on nonaccrual status as of June 30, 2020; as such, no income is being recognized.

(8)Represents equity participation interests related to senior loans, mezzanine loans and/or preferred equity investments.

(9)Weighted average calculation for preferred equity and other loans excludes equity participation interests.

Table of Contents

The following table details the types of properties securing our ~~loan portfolio~~ senior and mezzanine loans and preferred equity included in our Core Portfolioand geographic distribution as of ~~March 31, 2018~~June 30, 2020 (dollars in thousands):


										Book value (at CLNC share)
Collateral property type	Book value		NCI		Book value at our share⁽¹⁾		% of total		Collateral property type	Count	Senior mortgage loans		Mezzanine loans and preferred equity ⁽¹⁾		Total		% of Total
Office	$	222,378	$	4,212	$	218,166	10	%	Office	19	$	764,039	$	104,474	$	868,513	34.7	%
Multifamily	319,104		—		319,104		14	%	Multifamily	16	658,969		101,184		760,153		30.2	%
Industrial	163,586		—		163,586		7	%	Industrial	2	114,950		16,200		131,150		5.2	%
Hotel	922,993		7,337		915,656		40	%	Hotel	8	492,168		38,902		531,070		21.1	%
Retail	472,756		6,357		466,399		20	%
Other⁽²⁾	214,376		447		213,929		9	%	Other⁽²⁾	6	106,153		116,092		222,245		8.8	%
Total	$	2,315,193	$	18,353	$	2,296,840	100	%	Total	51	$	2,136,279	$	376,852	$	2,513,131	100.0	%


										Book value (at CLNC share)
Region	Book value		NCI		Book value at our share⁽¹⁾		% of total		Region	Count	Senior mortgage loans		Mezzanine loans and preferred equity ⁽¹⁾		Total		% of Total
West	$	964,523	$	10,301	$	954,222	42	%
Northeast	512,648		2,376		510,272		22	%
Southwest	237,576		850		236,726		10	%
Southeast	412,561		3,089		409,472		18	%
Midwest	167,260		1,737		165,523		7	%
Other⁽³⁾	20,625		—		20,625		1	%
US West									US West	26	$	1,255,974	$	249,100	$	1,505,074	59.9	%
US Northeast									US Northeast	9	504,607		91,635		596,242		23.7	%
US Southwest									US Southwest	8	256,690		5,789		262,479		10.4	%
US Southeast									US Southeast	2	53,082		4,033		57,115		2.3	%
US Midwest									US Midwest	1	27,500		5,215		32,715		1.3	%
Europe									Europe	3	38,426		8,964		47,390		1.9	%
US Other⁽³⁾									US Other⁽³⁾	2	—		12,116		12,116		0.5	%
Total	$	2,315,193	$	18,353	$	2,296,840	100	%	Total	51	$	2,136,279	$	376,852	$	2,513,131	100.0	%

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The following ~~table presents~~tables present a reconciliation of net income (loss) attributable to our common stockholders to Core Earnings/Legacy, Non-Strategic Earnings attributable to our common stockholders and noncontrolling interest of the Operating Partnership (dollars and share amounts in thousands, except per share data): for the three and six months ended June 30, 2020:


	Three Months Ended June 30, 2020
	Total		Legacy, Non-Strategic Portfolio		Core Portfolio
Net loss attributable to Colony Credit Real Estate, Inc. common stockholders	$	(227,059)	$	(16,728)	$	(210,331)
Adjustments:
Net loss attributable to noncontrolling interest of the Operating Partnership	(5,418)		(373)		(5,045)
Non-cash equity compensation expense	1,549		697		852
Transaction costs	705		292		413
Depreciation and amortization	13,386		4,318		9,068
Net unrealized loss (gain) on investments:
Impairment of operating real estate and preferred equity	25,935		25,935		—
Other unrealized gain	(23,798)		(1)		(23,797)
CECL reserves	(20,925)		—		(20,925)
Losses on sales of real estate and preferred equity	13,520		3,437		10,083
Adjustments related to noncontrolling interests	(8,428)		(8,329)		(99)
Core Earnings (Loss) / Legacy, Non-Strategic Earnings (Loss) attributable to Colony Credit Real Estate, Inc. common stockholders and noncontrolling interest of the Operating Partnership	$	(230,533)	$	9,248	$	(239,781)
Core Earnings (Loss) / Legacy, Non-Strategic Earnings (Loss) per share⁽¹⁾	$	(1.75)	$	0.07	$	(1.82)
Weighted average number of common shares and OP units⁽¹⁾	131,615		131,615		131,615

(1)We calculate Core Earnings (Loss) / Legacy, Non-Strategic Earnings (Loss) per share, a non-GAAP financial measure, based on a weighted-average number of common shares and OP units (held by members other than us or our subsidiaries). For the three months ended June 30, 2020, weighted average number of common shares includes 3.1 million OP units.

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							Six Months Ended June 30, 2020
	Three Months Ended March 31,						Total		Legacy, Non-Strategic Portfolio		Core Portfolio
	2018			2017
Net income (loss) attributable to Colony NorthStar Credit Real Estate, Inc. common stockholders	$	(4,714	)	$	22,886
Net income (loss) attributable to Colony Credit Real Estate, Inc. common stockholders						Net income (loss) attributable to Colony Credit Real Estate, Inc. common stockholders	$	(305,831)	$	(60,502)	$	(245,329)
Adjustments:						Adjustments:
Net income (loss) attributable to noncontrolling interest of the Operating Partnership	(57		)	—		Net income (loss) attributable to noncontrolling interest of the Operating Partnership	(7,310)		(1,422)		(5,888)
Non-cash equity compensation expense	285			—		Non-cash equity compensation expense	1,891		851		1,040
Transaction costs	30,179			—		Transaction costs	2,570		976		1,594
Depreciation and amortization	18,834			2,250		Depreciation and amortization	30,893		10,448		20,445
Net unrealized gain (loss) on investments	1,304			—
Adjustments related to non-controlling interests	(1,442		)	—
Core Earnings attributable to Colony NorthStar Credit Real Estate, Inc. common stockholders	$	44,389		$	25,136
Core Earnings per share⁽¹⁾	$	0.44		$	0.53
Net unrealized loss (gain) on investments:						Net unrealized loss (gain) on investments:
Impairment of operating real estate and preferred equity						Impairment of operating real estate and preferred equity	30,064		30,064		—
Other Unrealized loss						Other Unrealized loss	16,562		33		16,529
CECL reserves						CECL reserves	8,075		(153)		8,228
Losses on sales of real estate and preferred equity						Losses on sales of real estate and preferred equity	13,068		2,985		10,083
Adjustments related to noncontrolling interests						Adjustments related to noncontrolling interests	(9,016)		(8,705)		(311)
Core Earnings (Loss) Legacy, Non-Strategic Earnings (Loss) attributable to Colony Credit Real Estate, Inc. common stockholders and noncontrolling interest of the Operating Partnership						Core Earnings (Loss) Legacy, Non-Strategic Earnings (Loss) attributable to Colony Credit Real Estate, Inc. common stockholders and noncontrolling interest of the Operating Partnership	$	(219,034)	$	(25,425)	$	(193,609)
Core Earnings (Loss) / Legacy, Non-Strategic Earnings (Loss) per share⁽¹⁾						Core Earnings (Loss) / Legacy, Non-Strategic Earnings (Loss) per share⁽¹⁾	$	(1.66)	$	(0.19)	$	(1.47)
Weighted average number of common shares and OP units⁽¹⁾	101,737			47,475		Weighted average number of common shares and OP units⁽¹⁾	131,615		131,615		131,615

~~(1)~~

We calculate core earnings per share, a non-GAAP financial measure, based on a weighted-average number of common shares and OP units (held by members other than us or our subsidiaries). For Core Earnings per share, we assume the 44.4 million shares of class B-3 common stock and the 3.1 million OP units (held by members other than us or our subsidiaries) were outstanding prior to January 31, 2018 to reflect the standalone pre-merger financial information of the accounting acquirer. Following January 31, 2018, we assume approximately 131.0 million of shares of class A common stock, class B-3 common stock and OP units (held by members other than us or our subsidiaries) were outstanding. This results in a weighted average share count for the three months ended March 31, 2018 of approximately 101.7 million shares.

(1)We calculate Core Earnings (Loss) / Legacy, Non-Strategic Earnings (Loss) per share, a non-GAAP financial measure, based on a weighted-average number of common shares and OP units (held by members other than us or our subsidiaries). For the six months ended June 30, 2020, weighted average number of common shares includes 3.1 million OP units.

NOI and EBITDA

We believe NOI and EBITDA are useful measures of operating performance of our net leased and other real estate portfolios as they are more closely linked to the direct results of operations at the property level. NOI and EBITDA excludes historical cost depreciation and amortization, which are based on different useful life estimates depending on the age of the properties, as well as adjusts for the effects of real estate impairment and gains or losses on sales of depreciated properties, which eliminate differences arising from investment and disposition decisions. Additionally, by excluding corporate level expenses or benefits such as interest expense, any gain or loss on early extinguishment of debt and income taxes, which are incurred by the parent entity and are not directly linked to the operating performance of the Company’s properties, NOI and EBITDA provide a measure of operating performance independent of the Company’s capital structure and indebtedness. However, the exclusion of these items as well as others, such as capital expenditures and leasing costs, which are necessary to maintain the operating performance of the Company’s properties, and transaction costs and administrative costs, may limit the usefulness of NOI and EBITDA. NOI and EBITDA may fail to capture significant trends in these components of U.S. GAAP net income (loss) which further limits its usefulness.

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

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The following tables present a reconciliation of net income (loss) attributable to our common stockholders to NOI/EBITDA attributable to our common stockholders (dollars in thousands) for the three and six months ended June 30, 2020:


	Three Months Ended June 30, 2020
	Total		Legacy, Non-Strategic Portfolio		Core Portfolio
Net income (loss) attributable to Colony Credit Real Estate, Inc. common stockholders	$	(21,237)	$	(23,536)	$	2,299
Adjustments:	—
Net income (loss) attributable to noncontrolling interest in investment entities	(7,295)		(7,520)		225
Amortization of above- and below-market lease intangibles	(160)		130		(290)

Interest expense on real estate	11,816		3,733		8,083
Other income	8,557		(3)		8,560
Transaction, investment and servicing expense	144		140		4
Depreciation and amortization	14,020		4,723		9,297
Impairment of operating real estate	25,935		25,935		—
Administrative expense	138		16		122
Other (gain) loss on investments, net	(4,555)		4,001		(8,556)
Income tax benefit	(99)		—		(99)
NOI/EBITDA attributable to noncontrolling interest in investment entities	(1,928)		(465)		(1,463)
Total NOI/EBITDA attributable to Colony Credit Real Estate, Inc. common stockholders	$	25,336	$	7,154	$	18,182


	Six Months Ended June 30, 2020
	Total		Legacy Non-Strategic Portfolio		Core Portfolio
Net income (loss) attributable to Colony Credit Real Estate, Inc. common stockholders	$	(21,117)	$	(26,612)	$	5,495
Adjustments:
Net income (loss) attributable to noncontrolling interest in investment entities	(7,150)		(7,310)		160
Amortization of above- and below-market lease intangibles	(564)		(269)		(295)

Interest expense on real estate	24,885		8,350		16,535
Other income	(723)		(264)		(459)
Transaction, investment and servicing expense	344		197		147
Depreciation and amortization	31,996		11,546		20,450
Impairment of operating real estate	30,061		30,061		—
Administrative expense	229		25		204
Other (gain) loss on investments, net	(822)		3,651		(4,473)
Income tax benefit	(296)		—		(296)
NOI/EBITDA attributable to noncontrolling inters in investment entities	(4,072)		(1,289)		(2,783)
Total NOI/EBITDA attributable to Colony Credit Real Estate, Inc. common stockholders	$	52,771	$	18,086	$	34,685

Liquidity and Capital Resources

Overview

Our primary liquidity needs include commitments to repay borrowings, finance our assets and operations, meet future funding obligations, make distributions to our stockholders ~~repurchase our shares~~ and fund other general business needs. We use significant cash to make additional investments, meet commitments to existing investments, repay the principal of and interest on our borrowings and pay other financing costs, make distributions to our stockholders and fund our operations, which includes making payments to our Manager in accordance with the management agreement.

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Our primary sources of liquidity include cash on hand, cash generated from our operating activities and cash generated from asset sales and investment maturities. However, subject to maintaining our qualification as a REIT and our Investment Company Act exclusion, we may use ~~a number of~~several sources to finance our business, including bank credit facilities (including term loans and revolving facilities), master repurchase facilities and securitizations, as described below. In addition to our current sources of liquidity, ~~we have~~there may be opportunities from time to time to access to liquidity through public offerings of debt and equity securities. We also ~~expect to invest~~invested in a number of our assets through co-investments with other investment vehicles managed by affiliates of our Manager and/or other third parties, which has and may allow us to pool capital to access larger transactions and diversify investment exposure.

Financing Strategy

We have a multi-pronged financing strategy that includes an up to ~~$400~~$450 million secured revolving credit facility, up to approximately ~~$1.3~~$2.3 billion in secured revolving repurchase facilities, non-recourse securitization financing, commercial mortgages and other asset-level financing structures. In addition, we may use other forms of financing, including additional warehouse facilities, public and private secured and unsecured debt issuances and equity or equity-related securities issuances by us or our subsidiaries. We may also finance a portion of our investments through the syndication of one or more interests in a whole loan or securitization. We will seek to match the nature and duration of the financing with the underlying asset’s cash flow, including ~~through the use of~~using hedges, as appropriate.

Debt-to-Equity Ratio

The following table presents our debt-to-equity ratio:

~~March 31, 2018~~June 30, 2020

December 31, ~~2017~~2019

Debt-to-equity ratio⁽¹⁾

~~0.4x~~1.2x

~~0.3x~~1.4x


~~(1)~~	~~Represents (i) total outstanding secured debt less cash to (ii) total stockholders’ equity, in each case, at period end.~~

~~Table~~(1)Represents (i) total outstanding secured debt less cash and cash equivalents of ~~Contents~~

~~The following table presents our~~$438.0 million to (ii) total ~~sources of liquidity as of March 31, 2018 (dollars~~equity, in ~~thousands):~~

each case, at period end.

Total Sources of Corporate Liquidity
Cash and cash equivalents $ 334,952
Bank credit facility availability 400,000
Loans held for investment payoff due from servicer⁽¹⁾
14,333
Total sources of corporate liquidity $ 749,285


~~(1)~~	Represents proceeds from a loan repayment by the borrower to our third-party servicer, but not yet received by us as of March 31, 2018. We received this loan repayment from our third-party servicer in April 2018, net of the related secured debt balance.

Potential Sources of Liquidity

Bank Credit Facilities

We use bank credit facilities (including term loans and revolving facilities) to finance our business. These financings may be collateralized or non-collateralized and may involve one or more lenders. Credit facilities typically have maturities ranging from two to five years and may accrue interest at either fixed or floating rates.

On February 1, 2018, the OP (together with certain subsidiaries of the OP from time to time party thereto as borrowers, collectively, the “Borrowers”) entered into a credit agreement (the “Bank Credit Facility”) with JPMorgan Chase Bank, N.A., as administrative agent, and the several lenders from time to time party thereto (the “Lenders”), pursuant to which the Lenders agreed to provide a revolving credit facility in the aggregate principal amount of up to $400.0 million. On December 17, 2018, the aggregate amount of revolving commitments was increased to $525.0 million and on February 4, 2019, the aggregate amount of revolving commitments was increased to $560.0 million. On May 6, 2020 these commitments were reduced to $450.0 million.

Advances under the Bank Credit Facility accrue interest at a per annum rate equal to, at the applicable Borrower’s election, either a LIBOR rate plus a margin of 2.25%, or a base rate determined according to a prime rate or federal funds rate plus a margin of 1.25%. An unused commitment fee at a rate of 0.25% or 0.35%, per annum, depending on the amount of facility utilization, applies to un-utilized borrowing capacity under the Bank Credit Facility. Amounts owing under the Bank Credit Facility may be prepaid at any time without premium or penalty, subject to customary breakage costs in the case of borrowings with respect to which a LIBOR rate election is in effect.

The maximum amount available for borrowing at any time under the Bank Credit Facility is limited to a borrowing base valuation of certain investment assets, with the valuation of such investment assets generally determined according to a percentage of adjusted net book value. As of the date hereof, the borrowing base valuation is sufficient to ~~permit borrowings of up to~~support the ~~entire $400.0 million commitment.~~outstanding borrowings. The ~~ability to borrow additional amounts under the~~ Bank Credit Facility ~~terminates~~will mature on February 1, 2022, ~~at which time~~unless the OP ~~may, at its election and by written notice~~elects to exercise the ~~administrative agent, extend the termination date~~extension options for up to two ~~(2)~~ additional terms of six ~~(6)~~ months each, subject to the terms and conditions in the Bank Credit Facility, resulting in a latest ~~termination~~maturity date of February 1, 2023.

The obligations of the Borrowers under the Bank Credit Facility are guaranteed by substantially all material wholly owned subsidiaries of the OP pursuant to a Guarantee and Collateral Agreement with the OP and certain subsidiaries of the OP in favor of JPMorgan Chase Bank, N.A., as administrative agent (the “Guarantee and Collateral Agreement”) ~~by substantially all material wholly owned subsidiaries of the OP~~ and, subject to certain exceptions, secured by a pledge of substantially all equity interests owned by the Borrowers and the guarantors, as well as by a

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security interest in deposit accounts of the Borrowers and the Guarantors (as such terms are defined in the Guarantee and Collateral Agreement) in which the proceeds of investment asset distributions are maintained.

The Bank Credit Facility contains various affirmative and negative covenants, including, among other things, the obligation of the Company to maintain REIT status and be listed on the NYSE, and limitations on debt, liens and restricted payments. In addition, the Bank Credit Facility includes the following financial covenants applicable to the OP and its consolidated subsidiaries: (a) ~~minimum~~ consolidated tangible net worth of the OP must be greater than or equal to the sum of (i) ~~$2.105~~$1.5 billion and (ii) ~~50%~~75% of the proceeds received by the OP from any offering of its common equity and of the proceeds from any offering by the Company of its common equity to the extent such proceeds are contributed to the OP, excluding any such proceeds that are contributed to the OP within ninety (90) days of receipt and applied to acquire capital stock of the OP; (b) the OP’s earnings before interest, income tax, depreciation, and amortization ~~(“EBITDA”)~~ plus lease expenses to fixed charges for any period of four (4) consecutive fiscal quarters must be not less than 1.50 to 1.00; (c) the OP’s ~~minimum~~ interest coverage ratio must be not less than 3.00 to 1.00; and (d) the OP’s ratio of consolidated total debt to consolidated total assets must be not ~~exceed~~more than 0.70 to 1.00. The Bank Credit Facility also includes customary events of default, including, among other things, failure to make payments when due, breach of covenants or representations, cross default to material indebtedness or material judgment defaults, bankruptcy matters involving any Borrower or any Guarantor and certain change of control events. Further, we may not make distributions in excess of amounts required to maintain REIT status and may not repurchase shares, among other provisions. The occurrence of an event of default will limit the ability of the OP and its subsidiaries to make distributions and may result in the termination of the credit facility, acceleration of repayment obligations and the exercise of remedies by the Lenders with respect to the collateral.

~~Table of Contents~~

Refer to “COVID-19 Impact on Liquidity” below for further discussion regarding the COVID-19 pandemic and its impact on our future operating results, liquidity and financial condition.

Master Repurchase Facilities and CMBS Credit Facilities

Currently, our primary source of financing is our ~~master repurchase facilities,~~Master Repurchase Facilities, which we use to finance the origination of senior ~~loans.~~loans, and CMBS Credit Facilities, which we use to finance the purchase of securities. Repurchase agreements effectively allow us to borrow against loans, participations and securities that we own in an amount generally equal to (i) the market value of such loans, participations and/or securities multiplied by (ii) the applicable advance rate. Under these agreements, we sell our loans, participations and securities to a counterparty and agree to repurchase the same loans and securities from the counterparty at a price equal to the original sales price plus an interest factor. During the term of a repurchase agreement, we receive the principal and interest on the related loans, participations and securities and pay interest to the lender under the master repurchase agreement. We intend to maintain formal relationships with multiple counterparties to obtain master repurchase financing on favorable terms.

Refer to “COVID-19 Impact on Liquidity” below regarding for further discussion regarding the COVID-19 pandemic and its impact on our future operating results, liquidity and financial condition.

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The following table presents a summary of our ~~master repurchase facilities~~Master Repurchase, CMBS and Bank Credit Facilities as of ~~March 31, 2018~~June 30, 2020 (dollars in thousands):


	Maximum Facility Size		Current Borrowings		Weighted Average Final Maturity (Years)	Weighted Average Interest Rate		Maximum Facility Size		Current Borrowings		Weighted Average Final Maturity (Years)	Weighted Average Interest Rate
Master Repurchase Facilities							Master Repurchase Facilities
Bank 1	$	300,000	$	91,590	2.4	LIBOR + 2.39%	Bank 1	$	400,000	$	104,559	2.8	LIBOR + 1.91%
Bank 2	400,000		26,742		1.3	LIBOR + 2.35%	Bank 2	200,000		21,353		2.3	LIBOR + 2.50%
Bank 3	500,000		382,928		(1)	LIBOR + 2.39%	Bank 3	600,000		207,176		1.8	LIBOR + 2.15%
Bank 7							Bank 7	500,000		181,396		1.8	LIBOR + 1.93%
Bank 8							Bank 8	250,000		152,337		1.0	LIBOR + 2.00%
Bank 9							Bank 9	300,000		—		3.3	—
Total Master Repurchase Facilities	1,200,000		501,260				Total Master Repurchase Facilities	2,250,000		666,821

CMBS Credit Facilities							CMBS Credit Facilities
Bank 1	39,753		39,753		(2)	LIBOR + 1.45%
Bank 5	2,546		2,546		(2)	LIBOR + 1.16%
Bank 1⁽²⁾							Bank 1⁽²⁾	—		—		—	—
Bank 6	58,718		58,718		(2)	LIBOR + 1.30%	Bank 6	38,352		38,352		(1)	4.25%
Bank 3	—		—		—
Bank 4	—		—		—
Bank 3⁽²⁾							Bank 3⁽²⁾	—		—		—	—
Bank 4⁽²⁾							Bank 4⁽²⁾	—		—		—	—
Bank 5⁽²⁾							Bank 5⁽²⁾	—		—		—	—
Total CMBS Credit Facilities	101,017		101,017				Total CMBS Credit Facilities	38,352		38,352

Bank Credit Facility	400,000		—		4.8		Bank Credit Facility	450,000		195,000		2.8	LIBOR + 2.25%

Total Facilities	$	1,701,017	$	602,277			Total Facilities	$	2,738,352	$	900,173



Index		Page

Part I.	Financial Information	54
Item 1.	Financial Statements	54
	Consolidated Balance Sheets as of ~~March 31, 2018~~June 30, 2020 (unaudited) and December 31, ~~2017~~2019	54
	Consolidated Statements of Operations (unaudited) for the three and six months ended ~~March 31, 2018~~June 30 , 2020 and ~~2017~~2019	76
	Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three and six months ended ~~March 31, 2018~~June 3 0 , 2020 and ~~2017~~2019	87
	Consolidated Statements of Equity (unaudited) for the three and six months ended ~~March 31, 2018~~June 30 , 2020 and ~~2017~~2019	98
	Consolidated Statements of Cash Flows (unaudited) for the ~~three~~ six months ended ~~March 31, 2018~~June 30 , 2020 and ~~2017~~2019	10
	Notes to ~~Consolidated~~ Financial Statements (unaudited)	12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	5270
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	69115
Item 4.	Controls and Procedures	71117
Part II.	Other Information	72119
Item 1.	Legal Proceedings	72119
Item 1A.	Risk Factors	72119
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	72121
Item 3.	Defaults Upon Senior Securities	72122
Item 4.	Mine Safety Disclosures	72122
Item 5.	Other Information	72122
Item 6.	Exhibits	73123
Signatures		76


	Six Months Ended June 30,
	2020		2019
Reconciliation of cash, cash equivalents, and restricted cash to consolidated balance sheets
Beginning of the period
Cash and cash equivalents	$	69,619	$	77,317
Restricted cash	126,065		110,146
Total cash, cash equivalents and restricted cash, beginning of period	$	195,684	$	187,463

End of the period
Cash and cash equivalents	$	437,951	$	59,838
Restricted cash	84,011		114,127
Total cash, cash equivalents and restricted cash, end of period	$	521,962	$	173,965


	Six Months Ended June 30,
	2020		2019



Supplemental disclosure of non-cash investing and financing activities:


Consolidation of securitization trust (VIE asset/liability additions)	$	—	$	52,346

Accrual of distribution payable	(13,164)		19,088
Foreclosure of loans held for investment, net of provision for loan losses	—		127,356
Right-of-use lease assets and operating lease liabilities	(730)		26,348




Conversion of Class B-3 common stock to Class A common stock	—		444



Real Estate Assets						Term
Building (fee interest)						7 to 5348 years
Building leasehold interests						Lesser of remaining term of the lease or remaining life of the building
Building improvements						Lesser of the useful life or remaining life of the building
Land improvements						61 to 1215 years
Tenant improvements						Lesser of the useful life or remaining term of the lease
Furniture, fixtures and equipment						72 to 8 years



ý☒			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



	March 31, 2018 (Unaudited)			December 31, 2017
Assets
Cash and cash equivalents	$	334,952		$	25,204
Restricted cash	117,443			41,901
Loans held for investment, net	1,816,218			1,300,784
Real estate securities, available for sale, at fair value	176,194			—
Real estate, net	1,495,096			219,740
Investments in unconsolidated ventures ($257,495 and $24,417 at fair value, respectively)	756,468			203,720
Receivables, net	60,999			35,512
Deferred leasing costs and intangible assets, net	113,239			11,014
Other assets	56,998			1,527
Mortgage loans held in securitization trusts, at fair value	3,193,298			—
Total assets	$	8,120,905		$	1,839,402
Liabilities
Securitization bonds payable, net	$	172,113		$	108,679
Mortgage and other notes payable, net	924,018			280,982
Credit facilities	602,277			—
Due to related party (Note 11)	12,649			—
Accrued and other liabilities	49,896			5,175
Intangible liabilities, net	19,637			36
Escrow deposits payable	67,757			36,960
Dividends payable	18,994			—
Mortgage obligations issued by securitization trusts, at fair value	3,051,315			—
Total liabilities	4,918,656			431,832
Commitments and contingencies (Note 10)
Equity
Stockholders’ equity
Preferred stock, $0.01 par value, 50,000,000 shares authorized, no shares issued and outstanding as of March 31, 2018 and December 31, 2017	—			—
Common stock, $0.01 par value per share
Class A, 905,000,000 shares authorized, 83,487,352 and 100 shares issued and outstanding as of March 31, 2018 and December 31, 2017, respectively	835			—
Class B-3, 45,000,000 shares authorized, 44,399,444 and no shares issued and outstanding as of March 31, 2018 and December 31, 2017, respectively	444			—
Additional paid-in capital	2,894,492			821,031
Retained earnings	136,446			258,777
Accumulated other comprehensive income (loss)	(1,848		)	—
Total stockholders’ equity	3,030,369			1,079,808
Noncontrolling interests in investment entities	98,311			327,762
Noncontrolling interests in the Operating Partnership	73,569			—
Total equity	3,202,249			1,407,570
Total liabilities and equity	$	8,120,905		$	1,839,402



	Carrying Value		Maximum Exposure to Loss
Real estate securities, available for sale	$	176,194	$	176,194
Investments in unconsolidated ventures	379,018		379,018
Loans held for investment, net	340,448		342,600
Total assets	$	895,660	$	897,812



	As of the Closing Date
Assets
Cash and cash equivalents	$	(11,408	)
Restricted cash	(14,704		)
Loans held for investment, net	(553,678		)
Investments in unconsolidated ventures	127,062
Receivables, net	(4,344		)
Other assets	(114		)
Total assets	$	(457,186	)
Liabilities
Mortgage and other notes payable, net	$	(128,709	)
Accrued and other liabilities	(640		)
Escrow deposits payable	(14,704		)
Total liabilities	(144,053		)

Stockholders’ equity	(313,133		)
Total liabilities and equity	$	(457,186	)



	NorthStar I		NorthStar II		Total
Outstanding shares of common stock at January 31, 2018 ⁽¹⁾	119,333		114,943
Exchange ratio ⁽²⁾	0.3532		0.3511
Shares of Class A common stock issued in the mergers ⁽³⁾	42,149		40,356		82,505
Fair value consideration per share ⁽⁴⁾	$	24.50	$	24.50	$	24.50
Fair value of NorthStar I and NorthStar II consideration	$	1,032,651	$	988,722	$	2,021,373



	January 31, 2018
	NorthStar I		NorthStar II		Total
Merger consideration	$	1,032,651	$	988,722	$	2,021,373
Allocation of merger consideration:
Assets acquired
Cash and cash equivalents	$	130,197	$	51,360	$	181,557
Restricted cash	30,564		61,313		91,877
Loans held for investment	521,462		728,271		1,249,733
Real estate securities, available for sale, at fair value	100,731		64,793		165,524
Real estate, net	790,996		492,317		1,283,313
Investments in unconsolidated ventures	67,899		375,694		443,593
Receivables, net	12,363		11,479		23,842
Deferred leasing costs and intangible assets, net	74,243		37,090		111,333
Other assets	16,407		21,668		38,075
Mortgage loans held in securitization trusts, at fair value	1,894,404		1,432,795		3,327,199
Total assets acquired	3,639,266		3,276,780		6,916,046
Liabilities assumed
Securitization bonds payable, net	—		80,825		80,825
Mortgage and other notes payable, net	399,131		382,485		781,616
Credit facilities	293,340		355,529		648,869
Due to related party	4,533		1,842		6,375
Accrued and other liabilities	21,640		18,219		39,859
Intangible liabilities, net	17,931		1,808		19,739
Escrow deposits payable	12,994		36,362		49,356
Mortgage obligations issued by securitization trusts, at fair value	1,784,223		1,401,491		3,185,714
Total liabilities assumed	2,533,792		2,278,561		4,812,353
Noncontrolling interests	72,823		9,497		82,320
Fair value of net assets acquired	$	1,032,651	$	988,722	$	2,021,373



	February 1, 2018 to March 31, 2018
	NorthStar I			NorthStar II		Total
Total revenues	$	37,312		$	39,207	$	76,519

Net income (loss) attributable to common stockholders	(2,175		)	8,626		6,451



	Carrying Value
Balance at January 1, 2018	$	1,300,784
Loans held for investment acquired in the Combination (refer to Note 3)	1,249,733
Deconsolidation of investment entities⁽¹⁾	(553,678		)
Acquisitions/originations/additional funding	5,059
Loan maturities/principal repayments	(136,913		)
Combination adjustment⁽²⁾	(50,314		)
Discount accretion/premium amortization	1,017
Capitalized interest	530
Balance at March 31, 2018	$	1,816,218



	Current or Less Than 30 Days Past Due		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due / Nonaccrual ⁽¹⁾		Total Non-PCI Loans
March 31, 2018 (Unaudited)	$	1,384,599	$	—	$	—	$	432,136	$	1,816,735
December 31, 2017	1,101,522		144,241		7,929		26,765		1,280,457


2.	~~Summary of Significant Accounting Policies~~



	Three Months Ended March 31,⁽¹⁾
	2018		2017
Total revenues	$	19,938	$	7,803
Net income (loss)⁽²⁾	10,107		6,937



Remainder of 2018	$	2,115
2019	2,821
2020	2,812
2021	2,720
2022	1,798
2023 and thereafter	2,891
Total	$	15,157



																Weighted Average
		Principal Amount⁽¹⁾		Total Discount			Amortized Cost		Cumulative Unrealized on Investments					Fair Value		Coupon⁽³⁾		Unleveraged Current Yield
As of Date:	Count	Principal Amount⁽¹⁾		Total Discount			Amortized Cost		Gain		(Loss)			Fair Value		Coupon⁽³⁾		Unleveraged Current Yield
March 31, 2018⁽²⁾	32	$	234,357	$	(56,315	)	$	178,042	$	432	$	(2,280	)	$	176,194	3.15	%	7.36	%



	March 31, 2018
Assets
Mortgage loans held in a securitization trust, at fair value	$	3,193,298
Receivables, net	13,337
Total assets	$	3,206,635
Liabilities
Mortgage obligations issued by a securitization trust, at fair value	$	3,051,315
Accrued and other liabilities	12,490
Total liabilities	$	3,063,805



	Three Months Ended March 31, 2018
Statement of Operations
Interest income on mortgage loans held in securitization trusts	$	25,865
Interest expense on mortgage obligations issued by securitization trusts	(24,277		)
Net interest income	1,588
Administrative expenses	99
Unrealized gain (loss) on mortgage loans and obligations held in securitization trusts, net	497
Net income attributable to Colony NorthStar Credit Real Estate, Inc. common stockholders	$	2,184


	June 30, 2020		December 31, 2019
Restricted cash:
Borrower escrow deposits	$	50,605	$	74,496
Real estate escrow reserves	19,354		18,020
Capital expenditure reserves	6,499		8,882
Working capital and other reserves	3,882		4,198
Margin pledged as collateral	2,633		19,536
Tenant lockboxes	1,038		933
Total	$	84,011	$	126,065


	June 30, 2020		December 31, 2019
Other assets:
Right-of-use lease asset	$	23,745	$	25,480
Prepaid taxes and deferred tax assets	17,795		21,989
Deferred financing costs, net - credit facilities	10,150		8,382
Prepaid expenses	5,854		5,311
Investment deposits and pending deal costs	807		20,779
Other assets	177		1,644
Derivative asset	7		4,122
Total	$	58,535	$	87,707


	June 30, 2020		December 31, 2019
Accrued and other liabilities:
Current and deferred tax liability	$	28,514	$	31,510
Operating lease liability	23,810		25,495
Accounts payable, accrued expenses and other liabilities	22,143		28,278
Interest payable	12,380		16,259
Prepaid rent and unearned revenue	10,611		16,744
Tenant security deposits	2,518		3,005
Unfunded CECL loan allowance	1,925		—
Derivative liability	44		19,133
Total	$	101,945	$	140,424



	Total		Securitization Bonds Payable, Net		Mortgage Notes Payable, Net		Credit Facilities
Remainder of 2018	$	419,172	$	—	$	138,161	$	281,011
2019	280,970		—		2,544		278,426
2020	14,778		—		14,778		—
2021	159,053		—		116,213		42,840
2022	2,519		—		2,519		—
2023 and thereafter	827,528		172,145		655,383		—
Total	$	1,704,020	$	172,145	$	929,598	$	602,277



Type of Fee or Reimbursement	Financial Statement Location	Due to Related Party as of December 31, 2017		Three Months Ended March 31, 2018							Due to Related Party as of March 31, 2018 (Unaudited)
Type of Fee or Reimbursement	Financial Statement Location	Due to Related Party as of December 31, 2017		Combination Related Consideration		Incurred		Paid			Due to Related Party as of March 31, 2018 (Unaudited)
Fees to Manager
Management	Fee expense	$	—	$	—	$	8,000	$	—		$	8,000
Reimbursements to Manager
Operating costs	Administrative expense	—		—		1,715		—			1,715
Other
Other Payables to Manager	Additional paid-in capital	—		2,934		—		—			2,934
Liabilities assumed in the Combination	(1)	—		6,375		—		(6,375		)	—
Total		$	—	$	9,309	$	9,715	$	(6,375	)	$	12,649


~~(2)~~	~~Includes initial investments, before distribution and contribution closing statement adjustments, and subsequent contributions, including deferred purchase price fundings.~~


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


~~(2)~~	~~Excludes future funding commitments of $68.3 million and $19.2 million as of March 31, 2018 and December 31, 2017, respectively.~~


	June 30, 2020						December 31, 2019
	Non-Designated Hedges		Total		Designated Hedges		Non-Designated Hedges		Total
Derivative Assets
Foreign exchange contracts	$	—	$	—	$	—	$	4,122	$	4,122
Interest rate contracts	7		7		—		—		—
Included in other assets	$	7	$	7	$	—	$	4,122	$	4,122
Derivative Liabilities
Foreign exchange contracts	$	—	$	—	$	(2,128)	$	(29)	$	(2,157)
Interest rate contracts	(44)		(44)		—		(16,976)		(16,976)
Included in accrued and other liabilities	$	(44)	$	(44)	$	(2,128)	$	(17,005)	$	(19,133)


	Gross Amounts of Assets (Liabilities) Included on Consolidated Balance Sheets		Gross Amounts Not Offset on Consolidated Balance Sheets						Net Amounts of Assets (Liabilities)
							(Assets) Liabilities			Cash Collateral Pledged
June 30, 2020
Derivative Assets

Interest rate contracts	$	7	$	(7)	$	—	$	—
	$	7	$	(7)	$	—	$	—
Derivative Liabilities

Interest rate contracts	$	(44)	$	7	$	37	$	—
	$	(44)	$	7	$	37	$	—

December 31, 2019
Derivative Assets
Foreign exchange contracts	$	4,122	$	(2,157)	$	—	$	1,965

	$	4,122	$	(2,157)	$	—	$	1,965
Derivative Liabilities
Foreign exchange contracts	$	(2,157)	$	2,157	$	—	$	—
Interest rate contracts	(16,976)		—		16,976		—
	$	(19,133)	$	2,157	$	16,976	$	—


Remainder of 2020	$	1,593
2021	3,171
2022	3,199
2023	3,229
2024	2,338
2025 and thereafter	21,725
Total lease payments	35,255
Less: Present value discount	11,445
Operating lease liability (Note 8)	$	23,810


2020	$	3,232
2021	3,216
2022	3,244
2023	3,274
2024	2,383
2025 and thereafter	23,079
Total lease payments	38,428
Less: Present value discount	12,933
Operating lease liability (Note 8)	$	25,495



Three Months Ended March 31, 2018	Loan			CRE Debt Securities			Net leased real estate			Other			Corporate⁽¹⁾			Total
Net interest income	$	28,232		$	2,902		$	—		$	—		$	(823	)	$	30,311
Property and other income	2,237			2			12,442			14,204			177			29,062
Management fee expense	—			—			—			—			(8,000		)	(8,000		)
Property operating expense	(1,223		)	—			(4,106		)	(6,390		)	—			(11,719		)
Transaction, investment and servicing expense	(441		)	—			(10		)	(12		)	(30,478		)	(30,941		)
Interest expense on real estate	(223		)	—			(3,498		)	(2,672		)	—			(6,393		)
Depreciation and amortization	(677		)	—			(6,570		)	(11,545		)	—			(18,792		)
Administrative expense	(135		)	84			(1		)	(4		)	(3,172		)	(3,228		)
Unrealized gain on mortgage loans and obligations held in securitization trusts, net	—			(110		)	—			—			607			497
Other gain on investments, net	442			—			23			—			—			465
Income (loss) before equity in earnings of unconsolidated ventures and income taxes	28,212			2,878			(1,720		)	(6,419		)	(41,689		)	(18,738		)
Equity in earnings of unconsolidated ventures	10,550			—			—			5,238			—			15,788
Income tax benefit (expense)	816			—			—			(267		)	—			549
Net income (loss)	$	39,578		$	2,878		$	(1,720	)	$	(1,448	)	$	(41,689	)	$	(2,401	)



Three Months Ended March 31, 2017	Loan			Net leased real estate			Other		Corporate			Total
Net interest income	$	29,047		$	—		$	—	$	—		$	29,047
Property and other income	724			4,576			—		—			5,300
Property operating expense	(537		)	(1,074		)	—		—			(1,611		)
Transaction, investment and servicing expense	(614		)	(87		)	—		—			(701		)
Interest expense on real estate	—			(976		)	—		—			(976		)
Depreciation and amortization	(97		)	(2,188		)	—		—			(2,285		)
Administrative expense	(65		)	—			—		(2,947		)	(3,012		)
Income (loss) before equity in earnings (losses) of unconsolidated ventures and income tax benefit (expense)	28,458			251			—		(2,947		)	25,762
Equity in earnings of unconsolidated ventures	4,209			—			1,829		—			6,038
Income tax benefit (expense)	—			—			223		—			223
Net income (loss)	$	32,667		$	251		$	2,052	$	(2,947	)	$	32,023



Total Assets	Loan⁽¹⁾		CRE Debt Securities		Net leased real estate		Other⁽¹⁾⁽²⁾		Corporate⁽³⁾		Total
March 31, 2018 (Unaudited)	$	2,590,367	$	3,597,300	$	741,861	$	1,148,338	$	43,039	$	8,120,905
December 31, 2017	1,573,714		—		241,271		24,417		—		1,839,402