Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2015 | Nov. 30, 2015 | |
Document and Entity Information | ||
Entity Registrant Name | NORTHSTAR REALTY EUROPE CORP. | |
Entity Central Index Key | 1,646,587 | |
Entity Current Reporting Status | No | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2015 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Common Stock, Shares Outstanding | 63,005,391 | |
Document Fiscal Year Focus | 2,015 | |
Document Fiscal Period Focus | Q3 |
COMBINED CONSOLIDATED BALANCE S
COMBINED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Assets | ||
Cash | $ 97,574 | $ 2,100 |
Restricted cash | 10,285 | 5,277 |
Operating real estate, net | 2,168,435 | 54,896 |
Receivables | 13,009 | 740 |
Unbilled rent receivable | 3,779 | 264 |
Derivative assets, at fair value | 23,837 | 1,080 |
Deferred costs and intangible assets, net | 292,477 | 36,006 |
Assets of properties held for sale | 13,887 | 0 |
Other assets | 32,451 | 61,658 |
Total assets | 2,655,734 | 162,021 |
Liabilities | ||
Mortgage and other notes payable, net | 1,515,205 | 77,660 |
Senior notes | 340,000 | 0 |
Accounts payable and accrued expenses | 37,479 | 1,698 |
Derivative liabilities, at fair value | 3,428 | 0 |
Other liabilities | 101,244 | 2,589 |
Total liabilities | $ 1,997,356 | $ 81,947 |
Commitments and contingencies | ||
Redeemable non-controlling interest | $ 1,461 | $ 0 |
Equity | ||
NorthStar Realty Europe Corp. equity | 655,798 | 79,016 |
Non-controlling interests | 1,119 | 1,058 |
Total equity | 656,917 | 80,074 |
Total liabilities and equity | $ 2,655,734 | $ 162,021 |
COMBINED CONSOLIDATED STATEMENT
COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2014 | [1] | Sep. 30, 2015 | Sep. 15, 2014 | [1] | Sep. 30, 2015 | Sep. 15, 2014 | [1] | ||
Revenues | |||||||||
Rental and escalation income | $ 199 | $ 42,178 | $ 1,981 | $ 75,922 | $ 7,162 | ||||
Other revenue | 40 | 423 | 365 | 493 | 1,290 | ||||
Total property and other revenues | 239 | 42,601 | 2,346 | 76,415 | 8,452 | ||||
Expenses | |||||||||
Real estate properties—operating expenses | [2] | 135 | 10,508 | 901 | 16,739 | 3,113 | |||
Other interest expense | [2] | 0 | 14,567 | 1,033 | 21,391 | 3,486 | |||
Transaction costs | [2] | 4,311 | 21,619 | 0 | 109,743 | 0 | |||
Other expenses | [2] | 0 | 2,533 | 0 | 5,332 | 0 | |||
Total general and administrative expenses | [2] | 190 | 899 | 751 | 2,159 | 4,676 | |||
Depreciation and amortization | [2] | 147 | 19,224 | 701 | 34,845 | 2,294 | |||
Total expenses | [2] | 4,783 | 69,350 | 3,386 | 190,209 | 13,569 | |||
Unrealized gain (loss) on investments and other | 0 | (8,951) | 696 | (11,353) | 2,110 | ||||
Realized gain (loss) on investments and other | 0 | (72) | 0 | (37) | 0 | ||||
Income (loss) before income tax benefit (expense) | (4,544) | (35,772) | (344) | (125,184) | (3,007) | ||||
Income tax benefit (expense) | 0 | 3,840 | 0 | 15,218 | 0 | ||||
Net income (loss) | (4,544) | (31,932) | (344) | (109,966) | (3,007) | ||||
Net (income) loss attributable to non-controlling interests | 297 | 40 | 0 | 101 | 0 | ||||
Net income (loss) attributable to NorthStar Realty Finance Corp. common stockholders | $ (4,247) | $ (31,892) | $ (344) | $ (109,865) | $ (3,007) | ||||
Dividends per share of common stock (in dollars per share) | $ 0.15 | $ 0.15 | |||||||
[1] | The combined consolidated financial statements for the three and nine months ended September 30, 2015 and the period September 16, 2014 to September 30, 2014 represent: (i) the Company’s results of operations of the European Real Estate Business as if the transferred business was the business for the periods in which common control was present (refer to Notes 1 and 3); and (ii) an allocation of costs related to the Company. The period January 1, 2014 to September 15, 2014 and July 1, 2014 to September 15, 2014 includes: (i) the Prior Owner Period results of operations, which represents the ownership period of a third party; and (ii) an allocation of costs related to the launch of the European real estate business. As a result, results of operations for the three and nine months ended September 30, 2015 may not be comparable to the Company’s results of operations reported for the prior periods presented. | ||||||||
[2] | Excludes fees that the Company will begin paying from November 1, 2015, in connection with the management agreement with NSAM (refer to Note 1). |
COMBINED CONSOLIDATED STATEMEN4
COMBINED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | |||||
Sep. 30, 2014 | Sep. 30, 2015 | Sep. 15, 2014 | Sep. 30, 2015 | Sep. 15, 2014 | ||||
Statement of Comprehensive Income [Abstract] | ||||||||
Net income (loss) | $ (4,544) | [1] | $ (31,932) | $ (344) | [1] | $ (109,966) | $ (3,007) | [1] |
Other comprehensive income (loss): | ||||||||
Foreign currency translation adjustment, net | (1,040) | 502 | (540) | 34,185 | (57) | |||
Total other comprehensive income (loss) | (1,040) | 502 | (540) | 34,185 | (57) | |||
Comprehensive income (loss) | (5,584) | (31,430) | (884) | (75,781) | (3,064) | |||
Comprehensive (income) loss attributable to non-controlling interests | 367 | (12) | 0 | 51 | 0 | |||
Comprehensive income (loss) attributable to NorthStar Realty Europe Corp. | $ (5,217) | $ (31,442) | $ (884) | $ (75,730) | $ (3,064) | |||
[1] | The combined consolidated financial statements for the three and nine months ended September 30, 2015 and the period September 16, 2014 to September 30, 2014 represent: (i) the Company’s results of operations of the European Real Estate Business as if the transferred business was the business for the periods in which common control was present (refer to Notes 1 and 3); and (ii) an allocation of costs related to the Company. The period January 1, 2014 to September 15, 2014 and July 1, 2014 to September 15, 2014 includes: (i) the Prior Owner Period results of operations, which represents the ownership period of a third party; and (ii) an allocation of costs related to the launch of the European real estate business. As a result, results of operations for the three and nine months ended September 30, 2015 may not be comparable to the Company’s results of operations reported for the prior periods presented. |
COMBINED CONSOLIDATED STATEMEN5
COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 1 Months Ended | 9 Months Ended | ||||
Sep. 30, 2014 | Sep. 30, 2015 | Sep. 15, 2014 | ||||
Cash flows from operating activities: | ||||||
Net income (loss) | $ (4,544) | [1] | $ (109,966) | $ (3,007) | [1] | |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||
Depreciation and amortization | [2] | 147 | [1] | 34,845 | 2,294 | [1] |
Amortization of deferred financing costs | 0 | 3,290 | 0 | |||
Amortization of discount on borrowing | 0 | 0 | 846 | |||
Unrealized (gain) loss on investments and other | 0 | 11,139 | (2,110) | |||
Realized (gain) loss on investments and other | 0 | 37 | 0 | |||
Foreign currency loss on deposits included in transaction costs | 0 | 6,402 | 0 | |||
Amortization of capitalized above/below market leases | 5 | 1,796 | 37 | |||
Straight line rental income | (29) | (3,477) | (352) | |||
Deferred income taxes | 0 | (17,510) | 0 | |||
Changes in assets and liabilities: | ||||||
Restricted cash | (263) | (6,180) | 1,170 | |||
Receivables | (341) | (11,125) | 189 | |||
Other assets | 68 | (7,110) | 0 | |||
Accounts payable and accrued expenses | 772 | 33,493 | (1,979) | |||
Other liabilities | 2,754 | 15,623 | 231 | |||
Net cash provided by (used in) operating activities | (1,431) | (48,743) | (2,681) | |||
Cash flows from investing activities: | ||||||
Acquisition of operating real estate | (93,658) | (1,919,184) | 0 | |||
Improvements of operating real estate | 0 | (1,335) | (2,307) | |||
Change in restricted cash | 0 | 1,049 | 0 | |||
Net cash provided by (used in) investing activities | (93,658) | (1,919,470) | (2,307) | |||
Cash flows from financing activities: | ||||||
Borrowings from mortgage and other notes payable | 0 | 1,133,845 | 481 | |||
Repayment of mortgage notes and other notes payable | 0 | 0 | (527) | |||
Proceeds from issuance of Senior Notes | 0 | 340,000 | 0 | |||
Payment of financing costs | 0 | (31,305) | 0 | |||
Purchase of derivative instruments | 0 | (29,530) | 0 | |||
Net transactions with NorthStar Realty | 114,653 | 652,512 | 0 | |||
Contributions from non-controlling interests | 0 | 113 | 0 | |||
Net cash provided by (used in) financing activities | 114,653 | 2,065,635 | (46) | |||
Effect of foreign currency translation on cash | (966) | (1,948) | 3,722 | |||
Net increase (decrease) in cash | 18,598 | 95,474 | (1,312) | |||
Cash—beginning of period | 38 | 2,100 | 1,350 | |||
Cash—end of period | 18,598 | 97,574 | 38 | |||
Supplemental disclosure of non-cash investing and financing activities: | ||||||
Assumption of mortgage note payable upon acquisition | 0 | 273,023 | 0 | |||
Reclassification of other assets to operating real estate | 0 | 52,245 | 0 | |||
Assumption of deferred tax liabilities and corresponding goodwill | 0 | 31,485 | 0 | |||
Reclassification of operating real estate to assets of properties held for sale | 0 | 13,887 | 0 | |||
Contributions from non-controlling interests | $ 0 | $ 1,461 | $ 0 | |||
[1] | The combined consolidated financial statements for the three and nine months ended September 30, 2015 and the period September 16, 2014 to September 30, 2014 represent: (i) the Company’s results of operations of the European Real Estate Business as if the transferred business was the business for the periods in which common control was present (refer to Notes 1 and 3); and (ii) an allocation of costs related to the Company. The period January 1, 2014 to September 15, 2014 and July 1, 2014 to September 15, 2014 includes: (i) the Prior Owner Period results of operations, which represents the ownership period of a third party; and (ii) an allocation of costs related to the launch of the European real estate business. As a result, results of operations for the three and nine months ended September 30, 2015 may not be comparable to the Company’s results of operations reported for the prior periods presented. | |||||
[2] | Excludes fees that the Company will begin paying from November 1, 2015, in connection with the management agreement with NSAM (refer to Note 1). |
Formation and Organization
Formation and Organization | 9 Months Ended |
Sep. 30, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Formation and Organization | Formation and Organization On October 31, 2015, NorthStar Realty Finance Corp. (“NorthStar Realty”) completed the spin-off of its European real estate business (excluding its European healthcare properties) (“Spin-off”) into a newly-formed publicly-traded real estate investment trust (“REIT”), NorthStar Realty Europe Corp. (“NorthStar Europe” or the “Company”), a Maryland corporation. NorthStar Europe is a commercial real estate company that invests in a broad spectrum of European commercial real estate with a current focus on office properties and seeks to generate attractive risk-adjusted returns and stable cash flow for distribution to the Company’s stockholders and in turn build long-term franchise value. The European real estate business contributed by NorthStar Realty upon completion of the Spin-off is comprised of: (i) business activities related to the launch of the European real estate business and the acquisition of a $100 million multi-tenant office complex located in the United Kingdom (the “U.K. Complex”) on September 16, 2014 (“Acquisition Date”), referred to as the NorthStar Europe Predecessor; (ii) other European real estate acquisitions in 2015 primarily comprised of multi-tenant office properties (the “New European Investments”); and (iii) certain other assets and liabilities related to NorthStar Realty’s European real estate business, herein collectively referred to as the European Real Estate Business. All references herein to NorthStar Europe or the Company refer to the European Real Estate Business, unless the context otherwise requires. On November 2, 2015, the Company listed on the New York Stock Exchange (“NYSE”). Subsequent to the Spin-off, the Company is externally managed and advised by an affiliate of NorthStar Asset Management Group Inc. (NYSE: NSAM), which together with its affiliates is referred to as NSAM. Subsequent to the Spin-off, substantially all of the Company’s assets, directly or indirectly, are held by, and the Company conducts its operations, directly or indirectly, through NorthStar Realty Europe Limited Partnership, a Delaware limited partnership and the operating partnership of the Company (the “Operating Partnership”). The Company intends to conduct its operations so as to qualify as a REIT for U.S. federal income tax purposes. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Quarterly Presentation The accompanying unaudited combined consolidated financial statements and related notes of the Company are presented on a carve-out basis and have been prepared from the historical consolidated balance sheets, statements of operations, comprehensive income (loss) and cash flows of NorthStar Realty in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial reporting and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and note disclosures normally included in the combined consolidated financial statements prepared under U.S. GAAP have been condensed or omitted. In the opinion of management, all adjustments considered necessary for a fair presentation of the Company’s financial position, results of operations and cash flows have been included and are of a normal and recurring nature. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. These combined consolidated financial statements should be read in conjunction with the combined financial statements and notes thereto included in the Company’s Registration Statement on Form S-11, as amended. The contribution of the European Real Estate Business to the Company has been determined to be a combination of entities under common control that results in a change in the reporting entity which requires retrospective application to the Company’s financial statements under U.S. GAAP. Accordingly, the operations of the European Real Estate Business of NorthStar Realty transferred to the Company upon the Spin-off are presented as if the transferred business was the business of the Company for periods in which common control was present and at the carrying value of such assets and liabilities recorded in NorthStar Realty’s historical books and records. As a result, the combined consolidated balance sheet as of December 31, 2014 was updated to include items related to the New European Investments, such as cash of $0.5 million , certain deposits of $58.6 million , related foreign exchange loss of $1.1 million and transaction costs incurred of $27.5 million . The cash, deposits paid and transaction costs incurred are recorded as net transactions with NorthStar Realty through equity. Historically, financial statements of the Company have not been prepared as it has not operated separately from NorthStar Realty. These combined consolidated financial statements reflect the revenues and direct expenses of the Company and include material assets and liabilities of NorthStar Realty that are specifically identifiable to the European Real Estate Business and contributed to the Company upon completion of the Spin-off. The combined consolidated financial statements as of and for the three and nine months ended September 30, 2015 and 2014 represent the Company prior to the Spin-Off and include certain consolidated subsidiaries. Subsequent to the Spin-off, the financial statements will be presented on a consolidated basis. In addition, the combined consolidated financial statements include activity related to the ownership period prior to the Acquisition Date of the U.K. Complex, herein referred to as the Prior Owner Period. The three months ended September 30, 2014 include activities of the U.K. Complex from July 1, 2014 to the Acquisition Date and the nine months ended September 30, 2014 include activities of the U.K. Complex from January 1, 2014 to the Acquisition Date. Because the U.K. Complex was acquired from an unrelated third party on the Acquisition Date, a “blackline” presentation for the change in basis giving effect to purchase accounting pursuant to U.S. GAAP is presented. The combined consolidated financial statements for the period from the Acquisition Date (“NorthStar Europe Period”) and Prior Owner Period include an allocation of costs and expenses by NorthStar Realty related to the Company (primarily compensation and other general and administrative expense) based on an estimate of expenses had the Company been run as an independent entity. This allocation method is principally based on relative headcount and management’s knowledge of the operations of the Company. The amounts allocated in the accompanying combined consolidated financial statements are not necessarily indicative of the actual amount of such indirect expenses that would have been recorded had the Company been a separate independent entity. The Company believes the assumptions underlying its allocation of indirect expenses are reasonable. In addition, an estimate of management fees to NSAM of $0.1 million for the period from Acquisition Date through September 30, 2014 and for the three months ended September 30, 2015 and $0.3 million for the nine months ended September 30, 2015 was recorded for the NorthStar Europe Period as if the Company was managed as an independent entity and is included in general and administrative expense in the combined consolidated statement of operations. The Company will begin paying management fees to NSAM on November 1, 2015 in connection with the Company’s management agreement (refer to Note 5). Principles of Consolidation The combined consolidated financial statements include the combined accounts of the Company and its consolidated subsidiaries. The Company consolidates variable interest entities (“VIE”) where the Company is the primary beneficiary and voting interest entities which are generally majority owned or otherwise controlled by the Company. All significant intercompany balances are eliminated in consolidation. Variable Interest Entities A VIE is an entity that lacks one or more of the characteristics of a voting interest entity. A VIE is defined as an entity in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The determination of whether an entity is a VIE includes both a qualitative and quantitative analysis. The Company bases its qualitative analysis on its review of the design of the entity, its organizational structure including decision-making ability and relevant financial agreements and the quantitative analysis on the forecasted cash flow of the entity. The Company reassesses its initial evaluation of an entity as a VIE upon the occurrence of certain reconsideration events. A VIE must be consolidated only by its primary beneficiary, which is defined as the party who, along with its affiliates and agents has both the: (i) power to direct the activities that most significantly impact the VIE’s economic performance; and (ii) obligation to absorb the losses of the VIE or the right to receive the benefits from the VIE, which could be significant to the VIE. The Company determines whether it is the primary beneficiary of a VIE by considering qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of its investment; the obligation or likelihood for the Company or other interests to provide financial support; consideration of the VIE’s purpose and design, including the risks the VIE was designed to create and pass through to its variable interest holders and the similarity with and significance to the business activities of the Company and the other interests. The Company reassesses its determination of whether it is the primary beneficiary of a VIE each reporting period. Significant judgments related to these determinations include estimates about the current and future fair value and performance of investments held by these VIEs and general market conditions. The Company will evaluate its investments in unconsolidated ventures to determine whether they are a VIE. The Company will analyze new investments and financings, as well as reconsideration events for existing investments and financings, which vary depending on type of investment or financing. Voting Interest Entities A voting interest entity is an entity in which the total equity investment at risk is sufficient to enable it to finance its activities independently and the equity holders have the power to direct the activities of the entity that most significantly impact its economic performance, the obligation to absorb the losses of the entity and the right to receive the residual returns of the entity. The usual condition for a controlling financial interest in a voting interest entity is ownership of a majority voting interest. If the Company has a majority voting interest in a voting interest entity, the entity will generally be consolidated. The Company does not consolidate a voting interest entity if there are substantive participating rights by other parties and/or kick-out rights by a single party. The Company performs on-going reassessments of whether entities previously evaluated under the voting interest framework have become VIEs, based on certain events, and therefore subject to the VIE consolidation framework. Investments in Unconsolidated Ventures A non-controlling, unconsolidated ownership interest in an entity may be accounted for using the equity method, at fair value or the cost method. Under the equity method, the investment is adjusted each period for capital contributions and distributions and its share of the entity’s net income (loss). Capital contributions, distributions and net income (loss) of such entities are recorded in accordance with the terms of the governing documents. An allocation of net income (loss) may differ from the stated ownership percentage interest in such entity as a result of a preferred return and allocation formula, if any, as described in such governing documents. The Company may account for an investment in an unconsolidated entity at fair value by electing the fair value option. The Company records the change in fair value for its share of the projected future cash flow of any such investment from one period to another in equity in earnings (losses) from unconsolidated ventures in the combined consolidated statements of operations. Any change in fair value attributed to market related assumptions is considered unrealized gain (loss). The Company may account for an investment that does not qualify for equity method accounting or for which the fair value option was not elected using the cost method if the Company determines the investment in the unconsolidated entity is insignificant. Under the cost method, equity in earnings is recorded as dividends are received to the extent they are not considered a return of capital, which is recorded as a reduction of cost of the investment. Non-controlling Interests A non-controlling interest in a consolidated subsidiary is defined as the portion of the equity (net assets) in a subsidiary not attributable, directly or indirectly, to the Company. A non-controlling interest is required to be presented as a separate component of equity on the combined consolidated balance sheets and presented separately as net income (loss) and other comprehensive income (loss) (“OCI”) attributable to controlling and non-controlling interests. An allocation to a non-controlling interest may differ from the stated ownership percentage interest in such entity as a result of a preferred return and allocation formula, if any, as described in such governing documents. Estimates The preparation of combined consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that could affect the amounts reported in the combined consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates and assumptions. Comprehensive Income (Loss) The Company reports combined consolidated comprehensive income (loss) in separate statements following the combined consolidated statements of operations. Comprehensive income (loss) is defined as the change in equity resulting from net income (loss) and OCI. The components of OCI principally include foreign currency translation adjustment. Restricted Cash Restricted cash primarily consists of amounts related to operating real estate such as escrows for taxes, insurance, capital expenditures, tenant security deposits and payments required under certain lease agreements. Operating Real Estate Operating real estate is carried at historical cost less accumulated depreciation. Ordinary repairs and maintenance are expensed as incurred. Major replacements and betterments which improve or extend the life of the asset are capitalized and depreciated over their useful life. Operating real estate is depreciated using the straight-line method over the estimated useful lives of the assets. The Company follows the purchase method for an acquisition of operating real estate, where the purchase price is allocated to tangible assets such as land, building, tenant and land improvements and other identified intangibles, such as goodwill. Costs directly related to an acquisition deemed to be a business combination are expensed and included in transaction costs in the combined consolidated statements of operations. Operating real estate which has met the criteria to be classified as held for sale is separately presented on the combined consolidated balance sheets. Such operating real estate is recorded at the lower of its carrying value or its estimated fair value less the cost to sell. Once a property is determined to be held for sale, depreciation is no longer recorded. Deferred Costs and Intangible Assets Deferred Costs Deferred costs primarily include deferred financing costs and deferred lease costs. Deferred financing costs represent commitment fees, legal and other third-party costs associated with obtaining financing. These costs are amortized to interest expense over the term of the financing using either the effective interest method or straight-line method depending on the type of financing. Unamortized deferred financing costs are expensed when the associated borrowing is repaid before maturity. Costs incurred in seeking financing transactions, which do not close, are expensed in the period such financing transaction was terminated. Deferred lease costs consist of fees incurred to initiate and renew operating leases, which are amortized on a straight-line basis over the remaining lease term and is recorded to depreciation and amortization in the combined consolidated statements of operations. Identified Intangibles The Company records acquired identified intangibles, which includes intangible assets (such as value of the above-market leases, in-place leases, below-market ground leases, goodwill and other intangibles) and intangible liabilities (such as the value of below-market leases), based on estimated fair value. The value allocated to the above or below-market leases is amortized over the remaining lease term as a net adjustment to rental income. Other intangible assets are amortized into depreciation and amortization expense on a straight-line basis over the remaining lease term. Goodwill represents the excess of the purchase price over the fair value of net tangible and intangible assets acquired in a business combination and is not amortized. The Company performs an annual impairment test for goodwill and evaluates the recoverability whenever events or changes in circumstances indicate that the carrying value of goodwill may not be fully recoverable. In making such assessment, qualitative factors are used to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If the estimated fair value of the reporting unit is less than its carrying value, then an impairment charge is recorded. Identified intangible assets are recorded in deferred costs and intangible assets and identified intangible liabilities are recorded in other liabilities on the combined consolidated balance sheets. The following table presents a summary of deferred costs and intangible assets as of September 30, 2015 and December 31, 2014 (dollars in thousands): September 30, 2015 December 31, 2014 Intangible assets: In-place lease value, net $ 113,687 $ 7,892 Above-market lease value, net 51,031 1,603 Below-market ground lease value, net 71,627 24,761 Goodwill 31,485 — Subtotal intangible assets 267,830 34,256 Deferred financing costs, net 24,501 1,750 Other deferred costs, net 146 — Total $ 292,477 $ 36,006 Other Assets and Other Liabilities The following table presents a summary of other assets and other liabilities as of September 30, 2015 and December 31, 2014 (dollars in thousands): September 30, 2015 December 31, 2014 Other assets: Investment deposits and pending deal costs $ 8,706 $ 58,647 Deferred tax assets 17,510 — Prepaid expenses 3,200 2,269 Other 3,035 742 Total $ 32,451 $ 61,658 September 30, 2015 December 31, 2014 Other liabilities: Intangible liabilities, net $ 44,354 $ 133 Deferred tax liabilities 31,485 — Prepaid rent and unearned revenue 16,314 1,210 Tenant security deposits 5,073 250 Other 4,018 996 Total $ 101,244 $ 2,589 Revenue Recognition Operating Real Estate Rental and escalation income from operating real estate is derived from leasing of space to various types of tenants. The leases are for fixed terms of varying length and generally provide for annual rentals and expense reimbursements to be paid in quarterly or monthly installments. Rental income from leases is recognized on a straight-line basis over the term of the respective leases. The excess of rents recognized over amounts contractually due pursuant to the underlying leases are included in unbilled rent receivable on the combined consolidated balance sheets. Escalation income represents revenue from tenant leases which provide for the recovery of all or a portion of the operating expenses and real estate taxes paid by the Company on behalf of the respective property. This revenue is accrued in the same period as the expenses are incurred. Impairment on Investments Operating Real Estate The Company’s real estate portfolio is reviewed on a quarterly basis, or more frequently as necessary, to assess whether there are any indicators that the value of its operating real estate may be impaired or that its carrying value may not be recoverable. A property’s value is considered impaired if the Company’s estimate of the aggregate expected future undiscounted cash flow to be generated by the property is less than the carrying value of the property. In conducting this review, the Company considers factors including global macroeconomic factors, real estate sector conditions, together with investment specific and other factors. To the extent an impairment has occurred, the loss is measured as the excess of the carrying value of the property over the estimated fair value of the property and recorded in impairment on operating real estate in the combined consolidated statements of operations. An allowance for a doubtful account for a tenant receivable is established based on a periodic review of aged receivables resulting from estimated losses due to the inability of a tenant to make required rent and other payments contractually due. Additionally, the Company establishes, on a current basis, an allowance for future tenant credit losses on unbilled rent receivable based on an evaluation of the collectability of such amounts. Fair Value Fair Value Measurement The Company follows fair value guidance in accordance with U.S. GAAP to account for its financial instruments. The Company categorizes its financial instruments, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Financial assets and liabilities recorded at fair value on its combined consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows: Level 1. Quoted prices for identical assets or liabilities in an active market. Level 2. Financial assets and liabilities whose values are based on the following: (a) Quoted prices for similar assets or liabilities in active markets. (b) Quoted prices for identical or similar assets or liabilities in non-active markets. (c) Pricing models whose inputs are observable for substantially the full term of the asset or liability. (d) Pricing models whose inputs are derived principally from or corroborated by observable market data for substantially the full term of the asset or liability. Level 3. Prices or valuation techniques based on inputs that are both unobservable and significant to the overall fair value measurement. As of September 30, 2015 and December 31, 2014, the Company’s recurring financial measurements recorded at fair value were its derivative assets and liabilities. Such derivative instruments are valued using a third-party pricing service. This quotation is not adjusted and is generally based on valuation models with observable inputs such as interest rates and contractual cash flow, and as such, is classified as Level 2 of the fair value hierarchy. Equity-Based Compensation Equity-based compensation awards are accounted for using the fair value method, which requires an estimate of fair value of the award. Awards may be based on a variety of measures such as time, performance, market or a combination thereof. For time-based awards, fair value is determined based on the stock price on the grant date. The Company will recognize compensation expense over the vesting period on a straight-line basis. For performance-based awards, fair value is determined based on the stock price at the date of grant and an estimate of the probable achievement of such measure. The Company will recognize compensation expense over the requisite service period, net of estimated forfeitures, using the accelerated attribution expense method. For market-based measures, fair value is determined using a Monte Carlo analysis under a risk-neutral premise using a risk-free interest rate. The Company will recognize compensation expense, over the requisite service period, net of estimated forfeitures, on a straight-line basis. For awards with a combination of performance or market measures, the Company will estimate the fair value as if it were two separate awards. First, the Company will estimate the probability of achieving the performance measure. If it is not probable the performance condition will be met, the Company will record the compensation expense based on the fair value of the market measure, as described above. This expense will be recorded even if the market-based measure is never met. If the performance-based measure is subsequently estimated to be achieved, the Company will record compensation expense based on the performance-based measure. The Company would then record a cumulative catch-up adjustment for any additional compensation expense. All equity-based compensation is issued to non-employees and will be accounted for using the fair value of the award at the earlier of the performance commitment date or performance completion date. The awards are remeasured every quarter based on the stock price as of the end of the reporting period until such awards vest, if any. Derivatives The Company uses derivative instruments to manage exposure to interest rate risk and foreign currency exchange rate risk. For derivatives that qualify as a cash flow hedge, the effective portion of the change in fair value of derivatives designated as a hedge is recorded in accumulated OCI and is subsequently reclassified into income in the period that the hedged item affects income. Amounts reported in OCI that relate to the hedge of its floating-rate borrowings are reclassified to interest expense as interest payments are made on associated borrowings. The change in fair value for a derivative that does not qualify as a hedge for U.S. GAAP is recorded in earnings. The Company’s derivative instruments are recorded on the combined consolidated balance sheets at fair value and do not qualify as hedges under U.S. GAAP. Therefore, the change in fair value of derivative instruments are recorded in earnings. Foreign Currency Assets and liabilities denominated in a foreign currency for which the functional currency is a foreign currency are translated using the currency exchange rate in effect at the end of the period presented and the results of operations for such entities are translated into U.S. dollars using the average currency exchange rate in effect during the period. The resulting foreign currency translation adjustment is recorded as a component of accumulated OCI in the combined consolidated statements of equity. Assets and liabilities denominated in a foreign currency for which the functional currency is the U.S. dollar are remeasured using the currency exchange rate in effect at the end of the period presented and the results of operations for such entities are remeasured into U.S. dollars using the average currency exchange rate in effect during the period. The resulting foreign currency remeasurement adjustment is recorded in unrealized gain (loss) on investments and other in the combined consolidated statements of operations. Earnings Per Share Presentation of earnings per share information (“EPS”) is not applicable as the Spin-off occurred subsequent to the date of the combined consolidated financial statements and all of the Company’s common stock was owned directly by NorthStar Realty prior to then. Subsequent to the Spin-off, the Company’s basic EPS will be calculated by dividing net income (loss) attributable to common stockholders by the weighted average number of common stock outstanding. Diluted EPS will include restricted stock and the potential dilution that could occur if outstanding restricted stock units (“RSUs”) or other contracts to issue common stock, assuming performance hurdles have been met, were converted to common stock (including limited partnership interests in the Operating Partnership which are structured as profits interests (“LTIP Units”)) (refer to Note 6), where such exercise or conversion would result in a lower EPS. The dilutive effect of such RSUs and LTIP Units is calculated assuming all units are converted to common stock. Income Taxes The Company will elect to be taxed as a REIT with the initial filing of its 2015 tax return and will comply with the related provisions of the Internal Revenue Code of 1986, as amended, the (“Code”). Accordingly, the Company generally will not be subject to U.S. federal income tax to the extent of its distributions to stockholders and as long as certain asset, income and share ownership tests are met. To maintain its qualification as a REIT, the Company must annually distribute at least 90% of its REIT taxable income to its stockholders and meet certain other requirements. The Company may also be subject to certain foreign, state and local taxes and under certain circumstances, federal income and excise taxes may be due on its undistributed taxable income. If the Company were to fail to meet these requirements, it would be subject to U.S. federal income tax, which could have a material adverse impact on its results of operations and amounts available for distributions to its stockholders. There can be no assurance that these criteria will be met in subsequent periods. The Company has invested in certain real estate assets in Europe for which local country level taxes will be due. The Company will generally not be subject to any additional U.S. taxes on the repatriation of its earnings. Current and deferred taxes are recorded on the portion of earnings (losses) recognized by the Company with respect to its interest in taxable foreign subsidiaries. Deferred income tax assets and liabilities are calculated based on temporary differences between the Company’s U.S. GAAP combined consolidated financial statements and tax basis of assets and liabilities as of the combined consolidated balance sheets date. The Company evaluates the realizability of its deferred tax assets (e.g., net operating loss and capital loss carryforwards) and recognizes a valuation allowance if, based on the available evidence, it is more likely than not that some portion or all of its deferred tax assets will not be realized. When evaluating the realizability of its deferred tax assets, the Company considers estimates of expected future taxable income, existing and projected book/tax differences, tax planning strategies available and the general and industry specific economic outlook. This realizability analysis is inherently subjective, as it requires the Company to forecast its business and general economic environment in future periods. Changes in estimate of deferred tax asset realizability, if any, are included in provision for income tax expense included in income tax benefit (expense) in the combined consolidated statements of operations. The Company recorded an income tax benefit for the three and nine months ended September 30, 2015 of $3.8 million and $15.2 million , respectively. Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued an accounting update requiring a company to recognize as revenue the amount of consideration it expects to be entitled to in connection with the transfer of promised goods or services to customers. The accounting standard update will replace most of the existing revenue recognition guidance currently promulgated by U.S. GAAP. In July 2015, the FASB decided to delay the effective date of the new revenue standard by one year. The effective date of the new revenue standard for the Company will be January 1, 2018. The Company is in the process of evaluating the impact, if any, of the update on its combined consolidated financial position, results of operations and financial statement disclosures. In February 2015, the FASB issued updated guidance that changes the rules regarding consolidation. The pronouncement eliminates specialized guidance for limited partnerships and similar legal entities and removes the indefinite deferral for certain investment funds. The new guidance is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015, with early adoption permitted. The Company is currently assessing the impact of the guidance on the Company’s combined consolidated financial position, results of operations and financial statement disclosures. In April 2015, the FASB issued an accounting update changing the presentation of financing costs in financial statements. Under the new guidance, an entity would present these costs in the balance sheet as a direct deduction from the related liability rather than as an asset. Amortization of the costs would continue to be reported as interest expense. The new guidance is effective for annual periods and interim periods beginning after December 15, 2015, with early adoption permitted. The Company is currently assessing the impact of the guidance on the Company’s combined consolidated financial position, results of operations and financial statement disclosures. In September 2015, the FASB issued updated guidance that eliminates the requirement that an acquirer in a business combination account for measurement-period adjustments retrospectively. Under the new guidance, an acquirer will recognize a measurement-period adjustment during the period in which it determines the amount of the adjustment. The new guidance is effective for annual periods and interim periods beginning after December 15, 2015, with early adoption permitted. The Company adopted this guidance in the third quarter 2015 and it did not have a material impact on the Company’s combined consolidated financial position, results of operations and financial statement disclosures. |
Operating Real Estate
Operating Real Estate | 9 Months Ended |
Sep. 30, 2015 | |
Real Estate [Abstract] | |
Operating Real Estate | Operating Real Estate The following table presents operating real estate, net as of September 30, 2015 and December 31, 2014 (dollars in thousands): September 30, December 31, Land $ 476,115 $ — Buildings and improvements 1,308,034 — Building leasehold interests and improvements 333,842 51,646 Furniture, fixtures and equipment 225 — Tenant improvements 72,905 3,767 Subtotal 2,191,121 55,413 Less: Accumulated depreciation (22,686 ) (517 ) Operating real estate, net $ 2,168,435 $ 54,896 Real Estate Acquisitions The following table summarizes the Company’s acquisitions for the nine months ended September 30, 2015 (dollars in millions): Acquisition Date Name Primary Description Primary Location(s) Purchase Price (1) Properties Financing Equity Ownership Interest Transaction Costs April 2015 SEB Portfolio Multi-tenant office United Kingdom, France, Germany $ 1,250.4 11 $ 822.6 $ 517.8 95% (2) $ 90.0 (4) April 2015 Internos Portfolio Office/Hotel/Industrial/Retail Germany, France, Portugal 209.4 12 102.1 128.2 100% (3) 20.9 (4) April 2015 IVG Portfolio Multi-tenant office United Kingdom, France, Germany 206.9 15 93.9 126.9 100% (3) 13.9 (4) April 2015 Deka Portfolio Multi-tenant office Germany 92.3 10 52.6 47.9 100% (3) 8.2 (4) July 2015 Trianon Tower Multi-tenant office Frankfurt, Germany 629.0 3 371.0 260.7 95% (2) 4.2 ______________________________________ (1) Includes escrows and reserves and excludes transaction costs and is translated using the currency exchange rate as of September 30, 2015 . (2) The Company has an approximate 95% equity interest in certain subsidiaries that own the SEB Portfolio and Trianon Tower and is entitled to a 100% allocation of net income (loss) as a result of the allocation formula, as set forth in the governing documents. (3) In October 2015, the Company sold an approximate 5% ownership interest in certain subsidiaries that own certain properties in the Internos Portfolio, IVG Portfolio and Deka Portfolio to a third party. (4) Includes $27.5 million of transaction costs incurred in the fourth quarter of 2014. Transaction costs incurred in 2015 include $6.4 million of foreign currency related losses on deposits paid in 2014 in connection with the acquisitions in April 2015. The following table presents the initial allocation of the purchase price of the assets acquired and the liabilities issued or assumed upon the closing of the acquisition of the New European Investments that continue to be subject to refinement upon receipt of all information and the final allocation of the purchase price of the assets acquired and liabilities issued and assumed upon the closing of the U.K. Complex (dollars in thousands): Preliminary Final New European Investments U.K. Complex Assets: Land and improvements $ 485,698 $ 74 Buildings, leasehold interests and improvements 1,663,590 53,547 Acquired intangibles (1) 250,565 34,063 Other assets acquired 76,252 9,401 Total assets acquired $ 2,476,105 $ 97,085 Liabilities: Mortgage and other notes payable $ 1,213,690 (3) $ — (3) Other liabilities assumed (2) 88,005 712 Total liabilities 1,301,695 712 Redeemable non-controlling interest 1,484 — Total NorthStar Realty Europe Corp. equity 1,172,813 94,940 Non-controlling interests 113 1,433 Total equity 1,172,926 96,373 Total liabilities and equity $ 2,476,105 $ 97,085 ______________________________________ (1) Acquired intangibles primarily includes in-place leases, above-market leases and goodwill. (2) Other liabilities assumed primarily includes below-market lease intangibles and deferred tax liabilities. (3) Excludes $228.5 million of financing entered into subsequent to acquisition date on the SEB Portfolio (refer to Note 4). For the nine months ended September 30, 2015 , the Company recorded aggregate revenue and net loss of $69.2 million and $96.7 million , respectively, related to the acquisition of the New European Investments. Net loss is primarily related to transaction costs, depreciation and amortization. The following table presents unaudited consolidated pro forma results of operations adjusted for the acquisition of the New European Investments and related borrowings as if they occurred on January 1, 2014. The unaudited pro forma amounts were prepared for comparable purposes only and are not indicative of what actual combined consolidated results of operations would have been, nor are they indicative of the consolidated results of operations of the Company in the future (dollars in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2015 2014 2015 2014 Pro forma total revenues $ 44,270 $ 42,555 $ 129,015 $ 128,600 Pro forma net income (loss) attributable to NorthStar Realty Europe Corp. $ (31,849 ) $ (2,987 ) $ (107,773 ) $ (260 ) |
Borrowings
Borrowings | 9 Months Ended |
Sep. 30, 2015 | |
Debt Disclosure [Abstract] | |
Borrowings | Borrowings The following table presents borrowings, net as of September 30, 2015 and December 31, 2014 (dollars in thousands): September 30, 2015 December 31, 2014 Final Contractual Principal Carrying Principal Carrying Mortgage and other notes payable: (1) U.K. Complex Dec-19 (2) $ 75,820 $ 75,820 $ 77,660 $ 77,660 Internos Portfolio Apr-20 (3) 102,056 102,056 — — IVG Portfolio Apr-20 (3) 93,937 (7) 93,937 — — Deka Portfolio Apr-20 (3) 52,601 (7) 52,601 — — SEB Portfolio (4) Apr-22 (5) 703,408 (7) 702,619 — — SEB Portfolio - Preferred (6) Apr-60 (6) 119,176 (7) 119,176 — — Trianon Tower (4) Jul-23 (8) 371,019 (9) 368,996 — — Total mortgage and other notes payable 1,518,017 1,515,205 77,660 77,660 Senior Notes: Senior Notes Dec-16 4.625% 340,000 340,000 — — Grand Total $ 1,858,017 $ 1,855,205 $ 77,660 $ 77,660 ____________________________________________________________ (1) All borrowings are non-recourse to the Company and are interest-only through maturity, subject to compliance with covenants of the respective borrowing. (2) Comprised of $61.6 million principal amount of floating rate borrowing at GBP LIBOR plus 2.0% , with a related $61.6 million notional value interest rate cap at 2.0% and $14.2 million of fixed rate borrowing at 8.0% . (3) Represents a cross-collateralized borrowing between the IVG Portfolio, Internos Portfolio and Deka Portfolio. Comprised of $209.1 million principal amount of floating rate borrowings at EURIBOR plus 2.7% , with a related $209.1 million notional value interest rate cap at 2.0% and $39.5 million of floating rate borrowing at GBP LIBOR plus 2.7% , with a related $39.5 million notional value interest rate cap at 2.0% . (4) In July 2015, the Company borrowed an additional $109.3 million and $89.6 million , related to the SEB Portfolio and Trianon Tower, respectively, which was deemed to be a modification for accounting purposes and as such, the fees paid to the lender of $0.8 million and $2.1 million , respectively, were treated as a discount to such borrowings. The amortization of such fees is included in interest expense in the combined consolidated statements of operations. (5) Comprised of $398.4 million principal amount of floating rate borrowing at EURIBOR plus 1.8% , with a related $398.4 million notional value interest rate cap at 0.5% , $287.8 million of floating rate borrowing at GBP LIBOR plus 1.8% , with a related $287.8 million notional value interest rate cap at 2.0% and $17.2 million of floating rate borrowing at STIBOR plus 1.8% . (6) Represents preferred equity certificates with a contractual interest rate of 3% per annum through May 2019, which can be prepaid at that time without penalty, which increases to EURIBOR plus 12% through May 2022 and then increases to EURIBOR plus 15% through final maturity. (7) Prepayment provisions include a fee based on principal amount ranging from .75% to 1.5% through April 2018 for the Internos Portfolio, the IVG Portfolio and the Deka Portfolio borrowing and .5% to 2.0% through April 2019 for the SEB Portfolio borrowing. (8) Comprised of $371.0 million principal amount of floating rate borrowing at EURIBOR plus 1.5% , with a related $371.0 million notional value interest rate cap at 2.0% . (9) The Company has the ability to prepay the principal amount in part or in full through May 2019. Any prepayment prior to such date is subject to the payment of the unpaid coupon on outstanding principal amount through May 2019. The carrying value of mortgage and other notes payable approximates fair value as of September 30, 2015 and December 31, 2014, as such amounts bear floating rates of interest. The fair value of the Senior Notes as of September 30, 2015 is approximately $333.2 million which reflects the market price of a similar transaction near September 30, 2015. Such fair value measurements are based on observable inputs or quoted prices for similar liabilities in an active market, and as such, are classified as Level 2 of the fair value hierarchy. The following table presents scheduled principal on borrowings, based on final maturity as of September 30, 2015 (dollars in thousands): Total Mortgage Senior Notes October 1 to December 31, 2015 $ — $ — $ — Years ending December 31: 2016 340,000 — 340,000 2017 — — — 2018 — — — 2019 75,820 75,820 — Thereafter 1,442,197 1,442,197 — Total $ 1,858,017 $ 1,518,017 $ 340,000 Senior Notes In July 2015, the Company issued $340.0 million principal amount of 4.625% senior notes due December 2016 (the “Senior Notes”) for aggregate net proceeds of $331.0 million , after deducting the underwriters’ discount and other expenses. The Senior Notes are senior unsubordinated and unsecured obligations of the Company and NorthStar Realty and NorthStar Realty’s operating partnership guarantee payments on the Senior Notes. Subject to specified conditions being met, such as public notice at least 60 days prior to maturity, the Company may elect to settle all or part of the principal amount of the Senior Notes in the Company’s common stock in lieu of cash, in which case the number of shares delivered per note will be based on the Company’s common stock prices during a measurement period immediately preceding the maturity date. The proceeds from the issuance of the Senior Notes were distributed to subsidiaries of NorthStar Realty, which used such amounts for general corporate purposes, including, among other things, the funding of acquisitions, including the Trianon Tower and the repayment of NorthStar Realty’s borrowings. Such distribution to NorthStar Realty was recorded as net transactions with NorthStar Realty through equity (refer to Note 7). |
Related Party Arrangements
Related Party Arrangements | 9 Months Ended |
Sep. 30, 2015 | |
Related Party Transactions [Abstract] | |
Related Party Arrangements | Related Party Arrangements NorthStar Asset Management Group Inc. Management Agreement Upon completion of the Spin-off, the Company entered into a management agreement with an affiliate of NSAM for an initial term of 20 years, which will be automatically renewed for additional 20 -year terms each anniversary thereafter unless earlier terminated. As asset manager, NSAM is responsible for the Company’s day-to-day operations, subject to the supervision of the Company’s board of directors. Through its global network of subsidiaries and branch offices, NSAM performs (or causes to be performed) services and activities relating to, among other things, investments and financing, portfolio management and other administrative services, such as accounting and investor relations, to the Company and its subsidiaries. NSAM is not obligated to dedicate any of its executives or other personnel exclusively to the Company, nor to dedicate any specific amounts of time to fulfilling its obligations and NSAM may contract with and provide services to an unlimited number of additional managed companies. The management agreement with NSAM provides for a base management fee and incentive fee. Base Management Fee Effective November 1, 2015, the Company will pay an annualized base management fee to NSAM of $14.0 million and the fee will increase subsequent to such date by 1.5% per annum of the sum of: • any equity the Company issues in exchange or conversion of exchangeable or stock-settleable notes; • any other issuances by the Company of common equity, preferred equity or other forms of equity, including but not limited to LTIP Units in the Operating Partnership (excluding units issued to the Company and equity-based compensation, but including issuances related to an acquisition, investment, joint venture or partnership); and • cumulative cash available for distribution (“CAD”) of the Company, if any, in excess of cumulative distributions paid on common stock, LTIP Units or other equity awards beginning the first full calendar quarter after the completion of the Spin-off. Incentive Fee NSAM is entitled to an incentive fee, calculated and payable quarterly in arrears in cash, equal to: • the product of: (a) 15.0% and (b) the Company’s CAD before such incentive fee, divided by the weighted average shares outstanding for the calendar quarter, when such amount is in excess of $0.30 per share and up to $0.36 per share; plus • the product of: (a) 25.0% and (b) the Company’s CAD before such incentive fee, divided by the weighted average shares outstanding for the calendar quarter, when such amount is in excess of $0.36 per share; • multiplied by the Company’s weighted average shares outstanding for the calendar quarter. Weighted average shares represents the number of shares of the Company’s common stock, LTIP Units or other equity-based awards (with some exclusions), outstanding on a daily weighted average basis. With respect to the base management fee, all issuances shall be allocated on a daily weighted average basis during the fiscal quarter of issuance. With respect to the incentive fee, such amounts will be appropriately adjusted from time to time to take into account the effect of any stock split, reverse stock split, stock dividend, reclassification, recapitalization or other similar transaction. Furthermore, if the Company were to spin-off any asset or business in the future, such entity would be managed by NSAM on terms substantially similar to those set forth in the management agreement between the Company and NSAM. The management agreement further provides that the aggregate base management fee in place immediately after any future spin-off will not be less than the aggregate base management fee in place at the Company immediately prior to such spin-off. Payment of Costs and Expenses and Expense Allocation The Company is responsible for all of its direct costs and expenses and will reimburse NSAM for costs and expenses incurred by NSAM on its behalf. In addition, NSAM may allocate indirect costs to the Company related to employees, occupancy and other general and administrative costs and expenses in accordance with the terms of, and subject to the limitations contained in, the Company’s management agreement with NSAM (the “G&A Allocation”). The Company’s management agreement with NSAM provides that the amount of the G&A Allocation will not exceed the following: (i) 20% of the combined total of: (a) the Company’s general and administrative expenses as reported in its combined consolidated financial statements excluding: (1) equity-based compensation expense, (2) non-recurring items, (3) fees payable to NSAM under the terms of the management agreement and (4) any allocation of expenses to the Company (“NorthStar Europe G&A”); and (b) NSAM’s general and administrative expenses as reported in its consolidated financial statements, excluding equity-based compensation expense and adding back any costs or expenses allocated to any managed company of NSAM; less (ii) the NorthStar Europe G&A. The G&A Allocation may include the Company’s allocable share of NSAM’s compensation and benefit costs associated with dedicated or partially dedicated personnel who spend all or a portion of their time managing the Company’s affairs. The G&A Allocation may also include rental and occupancy, technology, office supplies and other general and administrative costs and expenses. In connection with the Spin-off and the related amendments to NorthStar Realty’s management agreement with NSAM, the Company’s obligation to reimburse NSAM for the G&A Allocation and any severance will be shared with NorthStar Realty, at NSAM’s discretion, and the 20% cap on the G&A Allocation, as described above, will apply on an aggregate basis between the Company and NorthStar Realty. In addition, the Company, together with NorthStar Realty and any company spun-off from the Company or NorthStar Realty, will pay directly or reimburse NSAM for up to 50% of any long-term bonus or other compensation that the Company’s compensation committee determines shall be paid and/or settled in the form of equity and/or equity-based compensation to executives, including the Company’s named executive officers, employees, service providers and staff of NSAM during any year. Subject to the foregoing limitation and the limitations contained in any applicable management agreement between NSAM and NorthStar Realty or any company spun-off from the Company or NorthStar Realty, the amount paid by the Company, NorthStar Realty and any company spun-off from the Company or NorthStar Realty will be determined by NSAM in its discretion. At the discretion of NSAM’s compensation committee, the foregoing compensation may be granted in shares of the Company’s restricted stock, restricted stock units, long-term incentive plan units or other forms of equity compensation or stock-based awards. The Company’s equity compensation for each year may be allocated on an individual-by-individual and award-by-award basis at the discretion of the NSAM compensation committee and, as long as the aggregate amount of the equity compensation for such year does not exceed the limits set forth in the management agreement, the proportion of any particular individual’s equity compensation may be greater or less than 50% . The Company will also pay directly or reimburse NSAM for an allocable portion of any severance paid pursuant to any employment, consulting or similar service agreements in effect between NSAM and any of its executives, employees or other service providers. |
Equity-Based Compensation
Equity-Based Compensation | 9 Months Ended |
Sep. 30, 2015 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Equity-Based Compensation | Equity-Based Compensation NorthStar Realty Europe Equity Plan Equity Incentive Plan In October 2015, the board of directors of the Company adopted the NorthStar Realty Europe Corp. 2015 Omnibus Stock Incentive Plan (the “2015 Plan”), which was subsequently approved by the Company’s sole stockholder at the time. The 2015 Plan provides for the issuance of stock-based incentive awards, including incentive stock options, non-qualified stock options, stock appreciation rights, shares of common stock of NorthStar Europe, in the form of restricted shares and other equity based awards such as limited partnership interests in the operating partnership of NorthStar Europe which are structured as profits interests or any combination of the foregoing. Following the completion of the Spin-off, the 2015 Plan is administered by the compensation committee of the board of directors of the Company. The eligible participants in the 2015 Plan include directors, officers, employees, co-employees, consultants and advisors of the Company. No equity awards under the 2015 Plan were issued prior to the Spin-off. NorthStar Realty Equity Plans In addition, as part of the Spin-off, existing awards of NorthStar Realty were adjusted to reflect the impact of the Spin-off and relate to shares of the Company’s common stock in the same ratio as provided to the common stockholders of NorthStar Realty. The following summarizes the various equity-based compensation plans of NorthStar Realty: Omnibus Stock Incentive Plan In September 2004, the board of directors of NorthStar Realty adopted the NorthStar Realty Finance Corp. 2004 Omnibus Stock Incentive Plan and such plan, as amended and restated, was further adopted by the board of directors of NorthStar Realty on April 18, 2012 and approved by the stockholders on May 24, 2012 (the “Stock Incentive Plan”). The Stock Incentive Plan provides for the issuance of stock-based incentive awards, including incentive stock options, non-qualified stock options, stock appreciation rights, shares of common stock of NorthStar Realty, in the form of restricted shares and other equity based awards such as limited partnership interests in the operating partnership of NorthStar Realty which are structured as profits interests or any combination of the foregoing. The eligible participants in the Stock Incentive Plan include directors, officers, employees, consultants and advisors of NorthStar Realty. Incentive Compensation Plan In July 2009, the compensation committee of the board of directors (the “Committee”) of NorthStar Realty approved the material terms of an Incentive Compensation Plan for NorthStar Realty’s executive officers and other employees (the “Incentive Compensation Plan”). Under the Incentive Compensation Plan, a potential incentive compensation pool was established each calendar year. The size of the incentive pool was calculated as the sum of: (a) 1.75% of NorthStar Realty’s “adjusted equity capital;” and (b) 25.0% of NorthStar Realty’s adjusted funds from operations, as adjusted, above a 9.0% return hurdle on adjusted equity capital. Payout from the incentive pool is subject to achievement of additional performance goals to be divided into ranges of performance, each of which will correspond to a payout level equal to a percentage of a participant’s pool allocation for such component. NorthStar Realty has issued equity-based compensation under the Incentive Compensation Plan in each consecutive year since 2009. |
Equity
Equity | 9 Months Ended |
Sep. 30, 2015 | |
Stockholders' Equity Note [Abstract] | |
Equity | Equity The following table presents a rollforward of equity for the NorthStar Europe Period and the Prior Owner Period from January 1, 2014 to September 15, 2014 (dollars in thousands): Prior Owner Period Balance as of December 31, 2013 $ 23,584 Net income (loss) (3,007 ) Other comprehensive income (loss) (57 ) Balance as of September 15, 2014 $ 20,520 NorthStar Europe Period Balance as of September 16, 2014 $ — Net income (loss) attributable to NorthStar Europe (33,631 ) Other comprehensive income (loss) attributable to NorthStar Europe (4,336 ) Net transactions with NorthStar Realty 116,983 Non-controlling interest 1,058 Balance as of December 31, 2014 80,074 Net income (loss) attributable to NorthStar Europe (109,865 ) Other comprehensive income (loss) attributable to NorthStar Europe 34,135 Net transactions with NorthStar Realty 652,512 Non-controlling interests 61 Balance as of September 30, 2015 (unaudited) $ 656,917 Net transactions with NorthStar Realty represent contributions or distributions related to the operating activities between the Company and NorthStar Realty, which includes certain non-cash activity. Non-controlling interests represent equity interests in ventures that are consolidated with the Company’s financial statements. Net loss attributable to the non-controlling interests for the NorthStar Europe Period for the period from September 16, 2014 to September 30, 2014 was $0.3 million and for the three and nine months ended September 30, 2015 was net loss of an immaterial amount and $0.1 million , respectively. Redeemable Non-controlling Interest In connection with the acquisition of the Trianon Tower, the Company sold a 5.5% non-controlling interest in certain subsidiaries that own the Trianon Tower for $1.5 million . In conjunction with the sale, the Company entered into a put option whereby the holder can redeem its interest for cash at the greater of fair market value of such non-controlling interest or €2.1 million beginning in November 2020 through January 2021. The Company recorded the non-controlling interest at its acquisition date fair value as temporary equity, due to the redemption option. |
Risk Management and Derivative
Risk Management and Derivative Activities | 9 Months Ended |
Sep. 30, 2015 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Risk Management and Derivative Activities | Risk Management and Derivative Activities Derivatives The Company uses derivative instruments primarily to manage interest rate and currency risk and such derivatives are not considered speculative. These derivative instruments are typically in the form of interest and currency rate swap, cap and foreign currency forward agreements. The primary objective is to minimize interest rate risks associated with investment and financing activities. The counterparties of these arrangements are major financial institutions with which the Company may also have other financial relationships. The Company is exposed to credit risk in the event of non-performance by these counterparties and it monitors their financial condition; however, the Company currently does not anticipate that any of the counterparties will fail to meet their obligations. The following table presents derivative instruments that were not designated as hedges under U.S. GAAP as of September 30, 2015 and December 31, 2014 (dollars in thousands): Number Notional Amount Fair Value Net Asset (Liability) Range of Range of Maturity As of September 30, 2015: Interest rate caps 7 $ 1,367,525 $ 23,837 0.50% - 2.00% October 2015 - July 2023 Foreign currency forwards 3 144,015 (3,428 ) N/A November 2015 - August 2017 Total 10 $ 1,511,540 $ 20,409 As of December 31, 2014: Interest rate cap 1 $ 63,099 $ 1,080 2.00% January 2020 The change in number and notional amount of derivative instruments from December 31, 2014 relates to derivatives entered into in connection with the New European Investments. The Company had no derivative financial instruments that were designated as hedges in qualifying hedging relationships as of September 30, 2015 and December 31, 2014 . The following table presents the fair value of derivative instruments, as well as their classification on the combined consolidated balance sheets, as of September 30, 2015 and December 31, 2014 (dollars in thousands): Balance Sheet September 30, December 31, Location Interest rate caps Derivative assets $ 23,837 $ 1,080 Foreign currency forwards Derivative liabilities $ 3,428 $ — The following table presents the effect of derivative instruments in the combined consolidated statements of operations for the three and nine months ended September 30, 2015 and 2014 (dollars in thousands): Three Months Ended September 30, Nine Months Ended September 30, NorthStar Europe Period Prior Owner Period (1) NorthStar Europe Period Prior Owner Period (1) September 16, to September 30, July 1 to September 15, September 16 to September 30, January 1 to September 15, 2015 2014 2014 2015 2014 2014 Amount of gain (loss) recognized in earnings: Statements of operations location: Adjustment to fair value of interest rate caps/swaps Unrealized gain (loss) on investments and other $ (9,576 ) $ — $ 696 $ (7,821 ) $ — $ 2,110 Adjustment to fair value of foreign currency forwards Unrealized gain (loss) on investments and other 825 — — (3,428 ) — — Net cash payment on derivatives Unrealized gain (loss) on investments and other (214 ) — — (214 ) — — ____________________________________________________________ (1) During the Prior Owner Period, there were interest rate swaps associated with financing that were settled in connection with the acquisition of the U.K. Complex by NorthStar Realty. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies The Company may be involved in various litigation matters arising in the ordinary course of its business. Although the Company is unable to predict with certainty the eventual outcome of any litigation, in the opinion of management, the legal proceedings are not expected to have a material adverse effect on the Company’s financial position or results of operations. |
Segment Reporting
Segment Reporting | 9 Months Ended |
Sep. 30, 2015 | |
Segment Reporting [Abstract] | |
Segment Reporting | Segment Reporting The Company currently conducts its business through the following two segments, based on how management reviews and manages its business: • Real Estate - The European commercial real estate business is currently predominantly focused on office properties and may expand by acquiring other types of commercial real estate located throughout Europe. The Company acquired its first real estate investment in in September 2014. • Corporate - The corporate segment includes corporate level interest expense and general and administrative expenses. The following tables present segment reporting for the three and nine months ended September 30, 2015 and 2014 (dollars in thousands): NorthStar Europe Period Prior Owner Three Months Ended September 30, 2015 Period from September 16, 2014 to September 30, 2014 Period from July 1 to September 15, 2014 Statement of Operations: Real Estate Corporate Total Real Estate Corporate Total Real Estate Corporate Total Rental and escalation income $ 42,178 $ — $ 42,178 $ 199 $ — $ 199 $ 1,981 $ — $ 1,981 Interest expense 9,162 5,405 14,567 — — — 1,033 — 1,033 Income (loss) before income tax benefit (expense) (29,908 ) (1) (5,864 ) (2) (35,772 ) (4,411 ) (3) (133 ) (4) (4,544 ) 346 (690 ) (4) (344 ) Income tax benefit (expense) 3,840 — 3,840 — — — — — — Net income (loss) (26,068 ) (5,864 ) (31,932 ) (4,411 ) (133 ) (4,544 ) 346 (690 ) (344 ) ________ ___________________________ (1) Primarily relates to depreciation and amortization expense of $19.2 million and transaction costs related to the New European Investments of $21.6 million . (2) Includes an allocation of general and administrative expenses from NSAM of $0.4 million . (3) Primarily relates to transaction costs related to the U.K. Complex of $4.3 million . (4) Represents an allocation of general and administrative expense based on an estimate of expenses had the Company been run as an independent entity (refer to Note 2). NorthStar Europe Period Prior Owner Nine Months Ended September 30, 2015 Period from September 16, 2014 to September 30, 2014 Period from January 1 to September 15, 2014 Statement of Operations: Real Estate Corporate Total Real Estate Corporate Total Real Estate Corporate Total Rental and escalation income $ 75,922 $ — $ 75,922 $ 199 $ — $ 199 $ 7,162 $ — $ 7,162 Interest expense 15,986 5,405 21,391 — — — 3,486 — 3,486 Income (loss) before income tax benefit (expense) (113,977 ) (1) (11,207 ) (2) (125,184 ) (4,411 ) (3) (133 ) (4) (4,544 ) 1,434 (4,441 ) (4) (3,007 ) Income tax benefit (expense) 15,218 — 15,218 — — — — — — Net income (loss) (98,759 ) (11,207 ) (109,966 ) (4,411 ) (133 ) (4,544 ) 1,434 (4,441 ) (3,007 ) ___________________________________ (1) Primarily relates to depreciation and amortization expense of $34.8 million and transaction costs related to the New European Investments of $109.7 million . (2) Includes an allocation of general and administrative expenses from NSAM of $1.7 million . (3) Primarily relates to transaction costs related to the U.K. Complex of $4.3 million . (4) Represents an allocation of general and administrative expense based on an estimate of expenses had the Company been run as an independent entity (refer to Note 2). The following table presents total assets by segment as of September 30, 2015 and December 31, 2014 (dollars in thousands): Total Assets Real Estate Corporate Total September 30, 2015 $ 2,639,549 $ 16,185 $ 2,655,734 December 31, 2014 $ 162,021 $ — $ 162,021 |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2015 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events Spin-off On October 31, 2015, NorthStar Realty completed the Spin-off and the Company became a separate publicly-traded REIT. In connection with the Spin-off, each of NorthStar Realty’s common stockholders received shares of the Company’s common stock on a one-for-six basis, NSAM commenced managing the Company pursuant to a long-term management agreement, on substantially similar terms as NorthStar Realty’s management agreement with NSAM and NorthStar Realty provided the Company with an initial capitalization of $250.0 million . Dividends On November 23, 2015, the Company declared a dividend of $0.15 per share of common stock. The common stock dividend will be paid on December 11, 2015 to stockholders of record as of the close of business on December 7, 2015. Share Buyback In November 2015, the Company’s board of directors authorized the repurchase of up to $100.0 million of its outstanding common stock. The authorization will expire in twelve months, unless otherwise extended by the Company’s board of directors. The Company was in a restricted trading period since establishment of the plan and consequently, as of December 2, 2015, the Company has not repurchased any shares. |
Summary of Significant Accoun17
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
Basis of Quarterly Presentation | The accompanying unaudited combined consolidated financial statements and related notes of the Company are presented on a carve-out basis and have been prepared from the historical consolidated balance sheets, statements of operations, comprehensive income (loss) and cash flows of NorthStar Realty in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial reporting and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and note disclosures normally included in the combined consolidated financial statements prepared under U.S. GAAP have been condensed or omitted. In the opinion of management, all adjustments considered necessary for a fair presentation of the Company’s financial position, results of operations and cash flows have been included and are of a normal and recurring nature. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. These combined consolidated financial statements should be read in conjunction with the combined financial statements and notes thereto included in the Company’s Registration Statement on Form S-11, as amended. The contribution of the European Real Estate Business to the Company has been determined to be a combination of entities under common control that results in a change in the reporting entity which requires retrospective application to the Company’s financial statements under U.S. GAAP. Accordingly, the operations of the European Real Estate Business of NorthStar Realty transferred to the Company upon the Spin-off are presented as if the transferred business was the business of the Company for periods in which common control was present and at the carrying value of such assets and liabilities recorded in NorthStar Realty’s historical books and records. As a result, the combined consolidated balance sheet as of December 31, 2014 was updated to include items related to the New European Investments, such as cash of $0.5 million , certain deposits of $58.6 million , related foreign exchange loss of $1.1 million and transaction costs incurred of $27.5 million . The cash, deposits paid and transaction costs incurred are recorded as net transactions with NorthStar Realty through equity. Historically, financial statements of the Company have not been prepared as it has not operated separately from NorthStar Realty. These combined consolidated financial statements reflect the revenues and direct expenses of the Company and include material assets and liabilities of NorthStar Realty that are specifically identifiable to the European Real Estate Business and contributed to the Company upon completion of the Spin-off. The combined consolidated financial statements as of and for the three and nine months ended September 30, 2015 and 2014 represent the Company prior to the Spin-Off and include certain consolidated subsidiaries. Subsequent to the Spin-off, the financial statements will be presented on a consolidated basis. In addition, the combined consolidated financial statements include activity related to the ownership period prior to the Acquisition Date of the U.K. Complex, herein referred to as the Prior Owner Period. The three months ended September 30, 2014 include activities of the U.K. Complex from July 1, 2014 to the Acquisition Date and the nine months ended September 30, 2014 include activities of the U.K. Complex from January 1, 2014 to the Acquisition Date. Because the U.K. Complex was acquired from an unrelated third party on the Acquisition Date, a “blackline” presentation for the change in basis giving effect to purchase accounting pursuant to U.S. GAAP is presented. The combined consolidated financial statements for the period from the Acquisition Date (“NorthStar Europe Period”) and Prior Owner Period include an allocation of costs and expenses by NorthStar Realty related to the Company (primarily compensation and other general and administrative expense) based on an estimate of expenses had the Company been run as an independent entity. This allocation method is principally based on relative headcount and management’s knowledge of the operations of the Company. The amounts allocated in the accompanying combined consolidated financial statements are not necessarily indicative of the actual amount of such indirect expenses that would have been recorded had the Company been a separate independent entity. The Company believes the assumptions underlying its allocation of indirect expenses are reasonable. In addition, an estimate of management fees to NSAM of $0.1 million for the period from Acquisition Date through September 30, 2014 and for the three months ended September 30, 2015 and $0.3 million for the nine months ended September 30, 2015 was recorded for the NorthStar Europe Period as if the Company was managed as an independent entity and is included in general and administrative expense in the combined consolidated statement of operations. The Company will begin paying management fees to NSAM on November 1, 2015 in connection with the Company’s management agreement (refer to Note 5). |
Principles of Consolidation | The combined consolidated financial statements include the combined accounts of the Company and its consolidated subsidiaries. The Company consolidates variable interest entities (“VIE”) where the Company is the primary beneficiary and voting interest entities which are generally majority owned or otherwise controlled by the Company. All significant intercompany balances are eliminated in consolidation. |
Variable Interest Entities | A VIE is an entity that lacks one or more of the characteristics of a voting interest entity. A VIE is defined as an entity in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The determination of whether an entity is a VIE includes both a qualitative and quantitative analysis. The Company bases its qualitative analysis on its review of the design of the entity, its organizational structure including decision-making ability and relevant financial agreements and the quantitative analysis on the forecasted cash flow of the entity. The Company reassesses its initial evaluation of an entity as a VIE upon the occurrence of certain reconsideration events. A VIE must be consolidated only by its primary beneficiary, which is defined as the party who, along with its affiliates and agents has both the: (i) power to direct the activities that most significantly impact the VIE’s economic performance; and (ii) obligation to absorb the losses of the VIE or the right to receive the benefits from the VIE, which could be significant to the VIE. The Company determines whether it is the primary beneficiary of a VIE by considering qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of its investment; the obligation or likelihood for the Company or other interests to provide financial support; consideration of the VIE’s purpose and design, including the risks the VIE was designed to create and pass through to its variable interest holders and the similarity with and significance to the business activities of the Company and the other interests. The Company reassesses its determination of whether it is the primary beneficiary of a VIE each reporting period. Significant judgments related to these determinations include estimates about the current and future fair value and performance of investments held by these VIEs and general market conditions. The Company will evaluate its investments in unconsolidated ventures to determine whether they are a VIE. The Company will analyze new investments and financings, as well as reconsideration events for existing investments and financings, which vary depending on type of investment or financing. |
Voting Interest Entities | A voting interest entity is an entity in which the total equity investment at risk is sufficient to enable it to finance its activities independently and the equity holders have the power to direct the activities of the entity that most significantly impact its economic performance, the obligation to absorb the losses of the entity and the right to receive the residual returns of the entity. The usual condition for a controlling financial interest in a voting interest entity is ownership of a majority voting interest. If the Company has a majority voting interest in a voting interest entity, the entity will generally be consolidated. The Company does not consolidate a voting interest entity if there are substantive participating rights by other parties and/or kick-out rights by a single party. The Company performs on-going reassessments of whether entities previously evaluated under the voting interest framework have become VIEs, based on certain events, and therefore subject to the VIE consolidation framework. |
Investments in Unconsolidated Ventures | A non-controlling, unconsolidated ownership interest in an entity may be accounted for using the equity method, at fair value or the cost method. Under the equity method, the investment is adjusted each period for capital contributions and distributions and its share of the entity’s net income (loss). Capital contributions, distributions and net income (loss) of such entities are recorded in accordance with the terms of the governing documents. An allocation of net income (loss) may differ from the stated ownership percentage interest in such entity as a result of a preferred return and allocation formula, if any, as described in such governing documents. The Company may account for an investment in an unconsolidated entity at fair value by electing the fair value option. The Company records the change in fair value for its share of the projected future cash flow of any such investment from one period to another in equity in earnings (losses) from unconsolidated ventures in the combined consolidated statements of operations. Any change in fair value attributed to market related assumptions is considered unrealized gain (loss). The Company may account for an investment that does not qualify for equity method accounting or for which the fair value option was not elected using the cost method if the Company determines the investment in the unconsolidated entity is insignificant. Under the cost method, equity in earnings is recorded as dividends are received to the extent they are not considered a return of capital, which is recorded as a reduction of cost of the investment. |
Non-controlling Interests | A non-controlling interest in a consolidated subsidiary is defined as the portion of the equity (net assets) in a subsidiary not attributable, directly or indirectly, to the Company. A non-controlling interest is required to be presented as a separate component of equity on the combined consolidated balance sheets and presented separately as net income (loss) and other comprehensive income (loss) (“OCI”) attributable to controlling and non-controlling interests. An allocation to a non-controlling interest may differ from the stated ownership percentage interest in such entity as a result of a preferred return and allocation formula, if any, as described in such governing documents. |
Estimates | The preparation of combined consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that could affect the amounts reported in the combined consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates and assumptions. |
Comprehensive Income (Loss) | The Company reports combined consolidated comprehensive income (loss) in separate statements following the combined consolidated statements of operations. Comprehensive income (loss) is defined as the change in equity resulting from net income (loss) and OCI. The components of OCI principally include foreign currency translation adjustment. |
Restricted Cash | Restricted cash primarily consists of amounts related to operating real estate such as escrows for taxes, insurance, capital expenditures, tenant security deposits and payments required under certain lease agreements. |
Operating Real Estate | Operating real estate is carried at historical cost less accumulated depreciation. Ordinary repairs and maintenance are expensed as incurred. Major replacements and betterments which improve or extend the life of the asset are capitalized and depreciated over their useful life. Operating real estate is depreciated using the straight-line method over the estimated useful lives of the assets. The Company follows the purchase method for an acquisition of operating real estate, where the purchase price is allocated to tangible assets such as land, building, tenant and land improvements and other identified intangibles, such as goodwill. Costs directly related to an acquisition deemed to be a business combination are expensed and included in transaction costs in the combined consolidated statements of operations. Operating real estate which has met the criteria to be classified as held for sale is separately presented on the combined consolidated balance sheets. Such operating real estate is recorded at the lower of its carrying value or its estimated fair value less the cost to sell. Once a property is determined to be held for sale, depreciation is no longer recorded. |
Deferred Costs | Deferred costs primarily include deferred financing costs and deferred lease costs. Deferred financing costs represent commitment fees, legal and other third-party costs associated with obtaining financing. These costs are amortized to interest expense over the term of the financing using either the effective interest method or straight-line method depending on the type of financing. Unamortized deferred financing costs are expensed when the associated borrowing is repaid before maturity. Costs incurred in seeking financing transactions, which do not close, are expensed in the period such financing transaction was terminated. Deferred lease costs consist of fees incurred to initiate and renew operating leases, which are amortized on a straight-line basis over the remaining lease term and is recorded to depreciation and amortization in the combined consolidated statements of operations. |
Identified Intangibles | The Company records acquired identified intangibles, which includes intangible assets (such as value of the above-market leases, in-place leases, below-market ground leases, goodwill and other intangibles) and intangible liabilities (such as the value of below-market leases), based on estimated fair value. The value allocated to the above or below-market leases is amortized over the remaining lease term as a net adjustment to rental income. Other intangible assets are amortized into depreciation and amortization expense on a straight-line basis over the remaining lease term. Goodwill represents the excess of the purchase price over the fair value of net tangible and intangible assets acquired in a business combination and is not amortized. The Company performs an annual impairment test for goodwill and evaluates the recoverability whenever events or changes in circumstances indicate that the carrying value of goodwill may not be fully recoverable. In making such assessment, qualitative factors are used to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If the estimated fair value of the reporting unit is less than its carrying value, then an impairment charge is recorded. Identified intangible assets are recorded in deferred costs and intangible assets and identified intangible liabilities are recorded in other liabilities on the combined consolidated balance sheets. |
Revenue Recognition | Operating Real Estate Rental and escalation income from operating real estate is derived from leasing of space to various types of tenants. The leases are for fixed terms of varying length and generally provide for annual rentals and expense reimbursements to be paid in quarterly or monthly installments. Rental income from leases is recognized on a straight-line basis over the term of the respective leases. The excess of rents recognized over amounts contractually due pursuant to the underlying leases are included in unbilled rent receivable on the combined consolidated balance sheets. Escalation income represents revenue from tenant leases which provide for the recovery of all or a portion of the operating expenses and real estate taxes paid by the Company on behalf of the respective property. This revenue is accrued in the same period as the expenses are incurred. |
Impairment on Investments | Operating Real Estate The Company’s real estate portfolio is reviewed on a quarterly basis, or more frequently as necessary, to assess whether there are any indicators that the value of its operating real estate may be impaired or that its carrying value may not be recoverable. A property’s value is considered impaired if the Company’s estimate of the aggregate expected future undiscounted cash flow to be generated by the property is less than the carrying value of the property. In conducting this review, the Company considers factors including global macroeconomic factors, real estate sector conditions, together with investment specific and other factors. To the extent an impairment has occurred, the loss is measured as the excess of the carrying value of the property over the estimated fair value of the property and recorded in impairment on operating real estate in the combined consolidated statements of operations. An allowance for a doubtful account for a tenant receivable is established based on a periodic review of aged receivables resulting from estimated losses due to the inability of a tenant to make required rent and other payments contractually due. Additionally, the Company establishes, on a current basis, an allowance for future tenant credit losses on unbilled rent receivable based on an evaluation of the collectability of such amounts. |
Fair Value | Fair Value Measurement The Company follows fair value guidance in accordance with U.S. GAAP to account for its financial instruments. The Company categorizes its financial instruments, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Financial assets and liabilities recorded at fair value on its combined consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows: Level 1. Quoted prices for identical assets or liabilities in an active market. Level 2. Financial assets and liabilities whose values are based on the following: (a) Quoted prices for similar assets or liabilities in active markets. (b) Quoted prices for identical or similar assets or liabilities in non-active markets. (c) Pricing models whose inputs are observable for substantially the full term of the asset or liability. (d) Pricing models whose inputs are derived principally from or corroborated by observable market data for substantially the full term of the asset or liability. Level 3. Prices or valuation techniques based on inputs that are both unobservable and significant to the overall fair value measurement. As of September 30, 2015 and December 31, 2014, the Company’s recurring financial measurements recorded at fair value were its derivative assets and liabilities. Such derivative instruments are valued using a third-party pricing service. This quotation is not adjusted and is generally based on valuation models with observable inputs such as interest rates and contractual cash flow, and as such, is classified as Level 2 of the fair value hierarchy. |
Equity-Based Compensation | Equity-based compensation awards are accounted for using the fair value method, which requires an estimate of fair value of the award. Awards may be based on a variety of measures such as time, performance, market or a combination thereof. For time-based awards, fair value is determined based on the stock price on the grant date. The Company will recognize compensation expense over the vesting period on a straight-line basis. For performance-based awards, fair value is determined based on the stock price at the date of grant and an estimate of the probable achievement of such measure. The Company will recognize compensation expense over the requisite service period, net of estimated forfeitures, using the accelerated attribution expense method. For market-based measures, fair value is determined using a Monte Carlo analysis under a risk-neutral premise using a risk-free interest rate. The Company will recognize compensation expense, over the requisite service period, net of estimated forfeitures, on a straight-line basis. For awards with a combination of performance or market measures, the Company will estimate the fair value as if it were two separate awards. First, the Company will estimate the probability of achieving the performance measure. If it is not probable the performance condition will be met, the Company will record the compensation expense based on the fair value of the market measure, as described above. This expense will be recorded even if the market-based measure is never met. If the performance-based measure is subsequently estimated to be achieved, the Company will record compensation expense based on the performance-based measure. The Company would then record a cumulative catch-up adjustment for any additional compensation expense. All equity-based compensation is issued to non-employees and will be accounted for using the fair value of the award at the earlier of the performance commitment date or performance completion date. The awards are remeasured every quarter based on the stock price as of the end of the reporting period until such awards vest, if any. |
Derivatives | The Company uses derivative instruments to manage exposure to interest rate risk and foreign currency exchange rate risk. For derivatives that qualify as a cash flow hedge, the effective portion of the change in fair value of derivatives designated as a hedge is recorded in accumulated OCI and is subsequently reclassified into income in the period that the hedged item affects income. Amounts reported in OCI that relate to the hedge of its floating-rate borrowings are reclassified to interest expense as interest payments are made on associated borrowings. The change in fair value for a derivative that does not qualify as a hedge for U.S. GAAP is recorded in earnings. The Company’s derivative instruments are recorded on the combined consolidated balance sheets at fair value and do not qualify as hedges under U.S. GAAP. Therefore, the change in fair value of derivative instruments are recorded in earnings. |
Foreign Currency | Assets and liabilities denominated in a foreign currency for which the functional currency is a foreign currency are translated using the currency exchange rate in effect at the end of the period presented and the results of operations for such entities are translated into U.S. dollars using the average currency exchange rate in effect during the period. The resulting foreign currency translation adjustment is recorded as a component of accumulated OCI in the combined consolidated statements of equity. Assets and liabilities denominated in a foreign currency for which the functional currency is the U.S. dollar are remeasured using the currency exchange rate in effect at the end of the period presented and the results of operations for such entities are remeasured into U.S. dollars using the average currency exchange rate in effect during the period. The resulting foreign currency remeasurement adjustment is recorded in unrealized gain (loss) on investments and other in the combined consolidated statements of operations. |
Earnings Per Share | Presentation of earnings per share information (“EPS”) is not applicable as the Spin-off occurred subsequent to the date of the combined consolidated financial statements and all of the Company’s common stock was owned directly by NorthStar Realty prior to then. Subsequent to the Spin-off, the Company’s basic EPS will be calculated by dividing net income (loss) attributable to common stockholders by the weighted average number of common stock outstanding. Diluted EPS will include restricted stock and the potential dilution that could occur if outstanding restricted stock units (“RSUs”) or other contracts to issue common stock, assuming performance hurdles have been met, were converted to common stock (including limited partnership interests in the Operating Partnership which are structured as profits interests (“LTIP Units”)) (refer to Note 6), where such exercise or conversion would result in a lower EPS. The dilutive effect of such RSUs and LTIP Units is calculated assuming all units are converted to common stock. |
Income Taxes | The Company will elect to be taxed as a REIT with the initial filing of its 2015 tax return and will comply with the related provisions of the Internal Revenue Code of 1986, as amended, the (“Code”). Accordingly, the Company generally will not be subject to U.S. federal income tax to the extent of its distributions to stockholders and as long as certain asset, income and share ownership tests are met. To maintain its qualification as a REIT, the Company must annually distribute at least 90% of its REIT taxable income to its stockholders and meet certain other requirements. The Company may also be subject to certain foreign, state and local taxes and under certain circumstances, federal income and excise taxes may be due on its undistributed taxable income. If the Company were to fail to meet these requirements, it would be subject to U.S. federal income tax, which could have a material adverse impact on its results of operations and amounts available for distributions to its stockholders. There can be no assurance that these criteria will be met in subsequent periods. The Company has invested in certain real estate assets in Europe for which local country level taxes will be due. The Company will generally not be subject to any additional U.S. taxes on the repatriation of its earnings. Current and deferred taxes are recorded on the portion of earnings (losses) recognized by the Company with respect to its interest in taxable foreign subsidiaries. Deferred income tax assets and liabilities are calculated based on temporary differences between the Company’s U.S. GAAP combined consolidated financial statements and tax basis of assets and liabilities as of the combined consolidated balance sheets date. The Company evaluates the realizability of its deferred tax assets (e.g., net operating loss and capital loss carryforwards) and recognizes a valuation allowance if, based on the available evidence, it is more likely than not that some portion or all of its deferred tax assets will not be realized. When evaluating the realizability of its deferred tax assets, the Company considers estimates of expected future taxable income, existing and projected book/tax differences, tax planning strategies available and the general and industry specific economic outlook. This realizability analysis is inherently subjective, as it requires the Company to forecast its business and general economic environment in future periods. Changes in estimate of deferred tax asset realizability, if any, are included in provision for income tax expense included in income tax benefit (expense) in the combined consolidated statements of operations. The Company recorded an income tax benefit for the three and nine months ended September 30, 2015 of $3.8 million and $15.2 million , respectively. |
Recent Accounting Pronouncements | In May 2014, the Financial Accounting Standards Board (“FASB”) issued an accounting update requiring a company to recognize as revenue the amount of consideration it expects to be entitled to in connection with the transfer of promised goods or services to customers. The accounting standard update will replace most of the existing revenue recognition guidance currently promulgated by U.S. GAAP. In July 2015, the FASB decided to delay the effective date of the new revenue standard by one year. The effective date of the new revenue standard for the Company will be January 1, 2018. The Company is in the process of evaluating the impact, if any, of the update on its combined consolidated financial position, results of operations and financial statement disclosures. In February 2015, the FASB issued updated guidance that changes the rules regarding consolidation. The pronouncement eliminates specialized guidance for limited partnerships and similar legal entities and removes the indefinite deferral for certain investment funds. The new guidance is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015, with early adoption permitted. The Company is currently assessing the impact of the guidance on the Company’s combined consolidated financial position, results of operations and financial statement disclosures. In April 2015, the FASB issued an accounting update changing the presentation of financing costs in financial statements. Under the new guidance, an entity would present these costs in the balance sheet as a direct deduction from the related liability rather than as an asset. Amortization of the costs would continue to be reported as interest expense. The new guidance is effective for annual periods and interim periods beginning after December 15, 2015, with early adoption permitted. The Company is currently assessing the impact of the guidance on the Company’s combined consolidated financial position, results of operations and financial statement disclosures. In September 2015, the FASB issued updated guidance that eliminates the requirement that an acquirer in a business combination account for measurement-period adjustments retrospectively. Under the new guidance, an acquirer will recognize a measurement-period adjustment during the period in which it determines the amount of the adjustment. The new guidance is effective for annual periods and interim periods beginning after December 15, 2015, with early adoption permitted. The Company adopted this guidance in the third quarter 2015 and it did not have a material impact on the Company’s combined consolidated financial position, results of operations and financial statement disclosures. |
Summary of Significant Accoun18
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
Schedule of Deferred Costs and Intangible Assets | The following table presents a summary of deferred costs and intangible assets as of September 30, 2015 and December 31, 2014 (dollars in thousands): September 30, 2015 December 31, 2014 Intangible assets: In-place lease value, net $ 113,687 $ 7,892 Above-market lease value, net 51,031 1,603 Below-market ground lease value, net 71,627 24,761 Goodwill 31,485 — Subtotal intangible assets 267,830 34,256 Deferred financing costs, net 24,501 1,750 Other deferred costs, net 146 — Total $ 292,477 $ 36,006 |
Schedule of Other Assets and Other Liabilities | The following table presents a summary of other assets and other liabilities as of September 30, 2015 and December 31, 2014 (dollars in thousands): September 30, 2015 December 31, 2014 Other assets: Investment deposits and pending deal costs $ 8,706 $ 58,647 Deferred tax assets 17,510 — Prepaid expenses 3,200 2,269 Other 3,035 742 Total $ 32,451 $ 61,658 September 30, 2015 December 31, 2014 Other liabilities: Intangible liabilities, net $ 44,354 $ 133 Deferred tax liabilities 31,485 — Prepaid rent and unearned revenue 16,314 1,210 Tenant security deposits 5,073 250 Other 4,018 996 Total $ 101,244 $ 2,589 |
Operating Real Estate (Tables)
Operating Real Estate (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Real Estate [Abstract] | |
Schedule of operating real estate | The following table presents operating real estate, net as of September 30, 2015 and December 31, 2014 (dollars in thousands): September 30, December 31, Land $ 476,115 $ — Buildings and improvements 1,308,034 — Building leasehold interests and improvements 333,842 51,646 Furniture, fixtures and equipment 225 — Tenant improvements 72,905 3,767 Subtotal 2,191,121 55,413 Less: Accumulated depreciation (22,686 ) (517 ) Operating real estate, net $ 2,168,435 $ 54,896 |
Schedule of real estate acquisitions | The following table summarizes the Company’s acquisitions for the nine months ended September 30, 2015 (dollars in millions): Acquisition Date Name Primary Description Primary Location(s) Purchase Price (1) Properties Financing Equity Ownership Interest Transaction Costs April 2015 SEB Portfolio Multi-tenant office United Kingdom, France, Germany $ 1,250.4 11 $ 822.6 $ 517.8 95% (2) $ 90.0 (4) April 2015 Internos Portfolio Office/Hotel/Industrial/Retail Germany, France, Portugal 209.4 12 102.1 128.2 100% (3) 20.9 (4) April 2015 IVG Portfolio Multi-tenant office United Kingdom, France, Germany 206.9 15 93.9 126.9 100% (3) 13.9 (4) April 2015 Deka Portfolio Multi-tenant office Germany 92.3 10 52.6 47.9 100% (3) 8.2 (4) July 2015 Trianon Tower Multi-tenant office Frankfurt, Germany 629.0 3 371.0 260.7 95% (2) 4.2 ______________________________________ (1) Includes escrows and reserves and excludes transaction costs and is translated using the currency exchange rate as of September 30, 2015 . (2) The Company has an approximate 95% equity interest in certain subsidiaries that own the SEB Portfolio and Trianon Tower and is entitled to a 100% allocation of net income (loss) as a result of the allocation formula, as set forth in the governing documents. (3) In October 2015, the Company sold an approximate 5% ownership interest in certain subsidiaries that own certain properties in the Internos Portfolio, IVG Portfolio and Deka Portfolio to a third party. (4) Includes $27.5 million of transaction costs incurred in the fourth quarter of 2014 |
Schedule of recognized identified assets acquired and liabilities assumed | The following table presents the initial allocation of the purchase price of the assets acquired and the liabilities issued or assumed upon the closing of the acquisition of the New European Investments that continue to be subject to refinement upon receipt of all information and the final allocation of the purchase price of the assets acquired and liabilities issued and assumed upon the closing of the U.K. Complex (dollars in thousands): Preliminary Final New European Investments U.K. Complex Assets: Land and improvements $ 485,698 $ 74 Buildings, leasehold interests and improvements 1,663,590 53,547 Acquired intangibles (1) 250,565 34,063 Other assets acquired 76,252 9,401 Total assets acquired $ 2,476,105 $ 97,085 Liabilities: Mortgage and other notes payable $ 1,213,690 (3) $ — (3) Other liabilities assumed (2) 88,005 712 Total liabilities 1,301,695 712 Redeemable non-controlling interest 1,484 — Total NorthStar Realty Europe Corp. equity 1,172,813 94,940 Non-controlling interests 113 1,433 Total equity 1,172,926 96,373 Total liabilities and equity $ 2,476,105 $ 97,085 ______________________________________ (1) Acquired intangibles primarily includes in-place leases, above-market leases and goodwill. (2) Other liabilities assumed primarily includes below-market lease intangibles and deferred tax liabilities. (3) Excludes $228.5 million of financing entered into subsequent to acquisition date on the SEB Portfolio (refer to Note 4). |
Summary of Pro Forma Amounts | The unaudited pro forma amounts were prepared for comparable purposes only and are not indicative of what actual combined consolidated results of operations would have been, nor are they indicative of the consolidated results of operations of the Company in the future (dollars in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2015 2014 2015 2014 Pro forma total revenues $ 44,270 $ 42,555 $ 129,015 $ 128,600 Pro forma net income (loss) attributable to NorthStar Realty Europe Corp. $ (31,849 ) $ (2,987 ) $ (107,773 ) $ (260 ) |
Borrowings (Tables)
Borrowings (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Debt Disclosure [Abstract] | |
Schedule of long-term debt instruments | The following table presents borrowings, net as of September 30, 2015 and December 31, 2014 (dollars in thousands): September 30, 2015 December 31, 2014 Final Contractual Principal Carrying Principal Carrying Mortgage and other notes payable: (1) U.K. Complex Dec-19 (2) $ 75,820 $ 75,820 $ 77,660 $ 77,660 Internos Portfolio Apr-20 (3) 102,056 102,056 — — IVG Portfolio Apr-20 (3) 93,937 (7) 93,937 — — Deka Portfolio Apr-20 (3) 52,601 (7) 52,601 — — SEB Portfolio (4) Apr-22 (5) 703,408 (7) 702,619 — — SEB Portfolio - Preferred (6) Apr-60 (6) 119,176 (7) 119,176 — — Trianon Tower (4) Jul-23 (8) 371,019 (9) 368,996 — — Total mortgage and other notes payable 1,518,017 1,515,205 77,660 77,660 Senior Notes: Senior Notes Dec-16 4.625% 340,000 340,000 — — Grand Total $ 1,858,017 $ 1,855,205 $ 77,660 $ 77,660 ____________________________________________________________ (1) All borrowings are non-recourse to the Company and are interest-only through maturity, subject to compliance with covenants of the respective borrowing. (2) Comprised of $61.6 million principal amount of floating rate borrowing at GBP LIBOR plus 2.0% , with a related $61.6 million notional value interest rate cap at 2.0% and $14.2 million of fixed rate borrowing at 8.0% . (3) Represents a cross-collateralized borrowing between the IVG Portfolio, Internos Portfolio and Deka Portfolio. Comprised of $209.1 million principal amount of floating rate borrowings at EURIBOR plus 2.7% , with a related $209.1 million notional value interest rate cap at 2.0% and $39.5 million of floating rate borrowing at GBP LIBOR plus 2.7% , with a related $39.5 million notional value interest rate cap at 2.0% . (4) In July 2015, the Company borrowed an additional $109.3 million and $89.6 million , related to the SEB Portfolio and Trianon Tower, respectively, which was deemed to be a modification for accounting purposes and as such, the fees paid to the lender of $0.8 million and $2.1 million , respectively, were treated as a discount to such borrowings. The amortization of such fees is included in interest expense in the combined consolidated statements of operations. (5) Comprised of $398.4 million principal amount of floating rate borrowing at EURIBOR plus 1.8% , with a related $398.4 million notional value interest rate cap at 0.5% , $287.8 million of floating rate borrowing at GBP LIBOR plus 1.8% , with a related $287.8 million notional value interest rate cap at 2.0% and $17.2 million of floating rate borrowing at STIBOR plus 1.8% . (6) Represents preferred equity certificates with a contractual interest rate of 3% per annum through May 2019, which can be prepaid at that time without penalty, which increases to EURIBOR plus 12% through May 2022 and then increases to EURIBOR plus 15% through final maturity. (7) Prepayment provisions include a fee based on principal amount ranging from .75% to 1.5% through April 2018 for the Internos Portfolio, the IVG Portfolio and the Deka Portfolio borrowing and .5% to 2.0% through April 2019 for the SEB Portfolio borrowing. (8) Comprised of $371.0 million principal amount of floating rate borrowing at EURIBOR plus 1.5% , with a related $371.0 million notional value interest rate cap at 2.0% . (9) The Company has the ability to prepay the principal amount in part or in full through May 2019. Any prepayment prior to such date is subject to the payment of the unpaid coupon on outstanding principal amount through May 2019. |
Schedule of principal amount on the borrowings, based on maturity | The following table presents scheduled principal on borrowings, based on final maturity as of September 30, 2015 (dollars in thousands): Total Mortgage Senior Notes October 1 to December 31, 2015 $ — $ — $ — Years ending December 31: 2016 340,000 — 340,000 2017 — — — 2018 — — — 2019 75,820 75,820 — Thereafter 1,442,197 1,442,197 — Total $ 1,858,017 $ 1,518,017 $ 340,000 |
Equity (Tables)
Equity (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Stockholders' Equity Note [Abstract] | |
Schedule of Equity Rollforward | The following table presents a rollforward of equity for the NorthStar Europe Period and the Prior Owner Period from January 1, 2014 to September 15, 2014 (dollars in thousands): Prior Owner Period Balance as of December 31, 2013 $ 23,584 Net income (loss) (3,007 ) Other comprehensive income (loss) (57 ) Balance as of September 15, 2014 $ 20,520 NorthStar Europe Period Balance as of September 16, 2014 $ — Net income (loss) attributable to NorthStar Europe (33,631 ) Other comprehensive income (loss) attributable to NorthStar Europe (4,336 ) Net transactions with NorthStar Realty 116,983 Non-controlling interest 1,058 Balance as of December 31, 2014 80,074 Net income (loss) attributable to NorthStar Europe (109,865 ) Other comprehensive income (loss) attributable to NorthStar Europe 34,135 Net transactions with NorthStar Realty 652,512 Non-controlling interests 61 Balance as of September 30, 2015 (unaudited) $ 656,917 |
Risk Management and Derivativ22
Risk Management and Derivative Activities (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Summary of derivative instruments that were not designated as hedges under U.S. GAAP | The following table presents derivative instruments that were not designated as hedges under U.S. GAAP as of September 30, 2015 and December 31, 2014 (dollars in thousands): Number Notional Amount Fair Value Net Asset (Liability) Range of Range of Maturity As of September 30, 2015: Interest rate caps 7 $ 1,367,525 $ 23,837 0.50% - 2.00% October 2015 - July 2023 Foreign currency forwards 3 144,015 (3,428 ) N/A November 2015 - August 2017 Total 10 $ 1,511,540 $ 20,409 As of December 31, 2014: Interest rate cap 1 $ 63,099 $ 1,080 2.00% January 2020 |
Schedule of fair value of the derivative instruments as well as their classification on consolidated balance sheets | The following table presents the fair value of derivative instruments, as well as their classification on the combined consolidated balance sheets, as of September 30, 2015 and December 31, 2014 (dollars in thousands): Balance Sheet September 30, December 31, Location Interest rate caps Derivative assets $ 23,837 $ 1,080 Foreign currency forwards Derivative liabilities $ 3,428 $ — |
Schedule of the effect of the derivative instruments on consolidated statements of operations | The following table presents the effect of derivative instruments in the combined consolidated statements of operations for the three and nine months ended September 30, 2015 and 2014 (dollars in thousands): Three Months Ended September 30, Nine Months Ended September 30, NorthStar Europe Period Prior Owner Period (1) NorthStar Europe Period Prior Owner Period (1) September 16, to September 30, July 1 to September 15, September 16 to September 30, January 1 to September 15, 2015 2014 2014 2015 2014 2014 Amount of gain (loss) recognized in earnings: Statements of operations location: Adjustment to fair value of interest rate caps/swaps Unrealized gain (loss) on investments and other $ (9,576 ) $ — $ 696 $ (7,821 ) $ — $ 2,110 Adjustment to fair value of foreign currency forwards Unrealized gain (loss) on investments and other 825 — — (3,428 ) — — Net cash payment on derivatives Unrealized gain (loss) on investments and other (214 ) — — (214 ) — — ____________________________________________________________ (1) During the Prior Owner Period, there were interest rate swaps associated with financing that were settled in connection with the acquisition of the U.K. Complex by NorthStar Realty. |
Segment Reporting (Tables)
Segment Reporting (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Segment Reporting [Abstract] | |
Schedule of Segment Reporting | The following tables present segment reporting for the three and nine months ended September 30, 2015 and 2014 (dollars in thousands): NorthStar Europe Period Prior Owner Three Months Ended September 30, 2015 Period from September 16, 2014 to September 30, 2014 Period from July 1 to September 15, 2014 Statement of Operations: Real Estate Corporate Total Real Estate Corporate Total Real Estate Corporate Total Rental and escalation income $ 42,178 $ — $ 42,178 $ 199 $ — $ 199 $ 1,981 $ — $ 1,981 Interest expense 9,162 5,405 14,567 — — — 1,033 — 1,033 Income (loss) before income tax benefit (expense) (29,908 ) (1) (5,864 ) (2) (35,772 ) (4,411 ) (3) (133 ) (4) (4,544 ) 346 (690 ) (4) (344 ) Income tax benefit (expense) 3,840 — 3,840 — — — — — — Net income (loss) (26,068 ) (5,864 ) (31,932 ) (4,411 ) (133 ) (4,544 ) 346 (690 ) (344 ) ________ ___________________________ (1) Primarily relates to depreciation and amortization expense of $19.2 million and transaction costs related to the New European Investments of $21.6 million . (2) Includes an allocation of general and administrative expenses from NSAM of $0.4 million . (3) Primarily relates to transaction costs related to the U.K. Complex of $4.3 million . (4) Represents an allocation of general and administrative expense based on an estimate of expenses had the Company been run as an independent entity (refer to Note 2). NorthStar Europe Period Prior Owner Nine Months Ended September 30, 2015 Period from September 16, 2014 to September 30, 2014 Period from January 1 to September 15, 2014 Statement of Operations: Real Estate Corporate Total Real Estate Corporate Total Real Estate Corporate Total Rental and escalation income $ 75,922 $ — $ 75,922 $ 199 $ — $ 199 $ 7,162 $ — $ 7,162 Interest expense 15,986 5,405 21,391 — — — 3,486 — 3,486 Income (loss) before income tax benefit (expense) (113,977 ) (1) (11,207 ) (2) (125,184 ) (4,411 ) (3) (133 ) (4) (4,544 ) 1,434 (4,441 ) (4) (3,007 ) Income tax benefit (expense) 15,218 — 15,218 — — — — — — Net income (loss) (98,759 ) (11,207 ) (109,966 ) (4,411 ) (133 ) (4,544 ) 1,434 (4,441 ) (3,007 ) ___________________________________ (1) Primarily relates to depreciation and amortization expense of $34.8 million and transaction costs related to the New European Investments of $109.7 million . (2) Includes an allocation of general and administrative expenses from NSAM of $1.7 million . (3) Primarily relates to transaction costs related to the U.K. Complex of $4.3 million . (4) Represents an allocation of general and administrative expense based on an estimate of expenses had the Company been run as an independent entity (refer to Note 2). The following table presents total assets by segment as of September 30, 2015 and December 31, 2014 (dollars in thousands): Total Assets Real Estate Corporate Total September 30, 2015 $ 2,639,549 $ 16,185 $ 2,655,734 December 31, 2014 $ 162,021 $ — $ 162,021 |
Formation and Organization (Det
Formation and Organization (Details) $ in Millions | Sep. 16, 2014USD ($) |
Multi-tenant Office Complex | Office Building | UNITED KINGDOM | |
Business Combination, Separately Recognized Transactions [Line Items] | |
Real estate acquisition | $ 100 |
Summary of Significant Accoun25
Summary of Significant Accounting Policies - Basis of Quarterly Presentation (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2015 | Dec. 31, 2014 | Sep. 16, 2014 | Sep. 15, 2014 | Dec. 31, 2013 | |
Business Acquisition [Line Items] | |||||||
Cash | $ 18,598 | $ 97,574 | $ 97,574 | $ 2,100 | $ 0 | $ 38 | $ 1,350 |
Management fees | General and administrative expense | |||||||
Business Acquisition [Line Items] | |||||||
Estimate of management fees | $ 100 | $ 100 | $ 300 | ||||
New European Investments | |||||||
Business Acquisition [Line Items] | |||||||
Cash | 500 | ||||||
Certain deposits | 58,600 | ||||||
Related foreign exchange gain (loss) | 1,100 | ||||||
Transaction costs payable | $ 27,500 |
Summary of Significant Accoun26
Summary of Significant Accounting Policies - Deferred Costs and Intangible Assets (Details) - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Goodwill | $ 31,485 | $ 0 |
Subtotal intangible assets | 267,830 | 34,256 |
Deferred financing costs, net | 24,501 | 1,750 |
Other deferred costs, net | 146 | 0 |
Total | 292,477 | 36,006 |
In-place lease value, net | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Finite-lived intangible assets, net | 113,687 | 7,892 |
Above-market lease value, net | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Finite-lived intangible assets, net | 51,031 | 1,603 |
Below-market ground lease value, net | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Finite-lived intangible assets, net | $ 71,627 | $ 24,761 |
Summary of Significant Accoun27
Summary of Significant Accounting Policies - Other Assets and Liabilities (Details) - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Other assets: | ||
Investment deposits and pending deal costs | $ 8,706 | $ 58,647 |
Deferred tax assets | 17,510 | 0 |
Prepaid expenses | 3,200 | 2,269 |
Other | 3,035 | 742 |
Total | 32,451 | 61,658 |
Other liabilities: | ||
Intangible liabilities, net | 44,354 | 133 |
Deferred tax liabilities | 31,485 | 0 |
Prepaid rent and unearned revenue | 16,314 | 1,210 |
Tenant security deposits | 5,073 | 250 |
Other | 4,018 | 996 |
Total | $ 101,244 | $ 2,589 |
Summary of Significant Accoun28
Summary of Significant Accounting Policies - Income Taxes (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | |||||
Sep. 30, 2014 | Sep. 30, 2015 | Sep. 15, 2014 | Sep. 30, 2015 | Sep. 15, 2014 | ||||
Accounting Policies [Abstract] | ||||||||
Income tax benefit (expense) | $ 0 | [1] | $ 3,840 | $ 0 | [1] | $ 15,218 | $ 0 | [1] |
[1] | The combined consolidated financial statements for the three and nine months ended September 30, 2015 and the period September 16, 2014 to September 30, 2014 represent: (i) the Company’s results of operations of the European Real Estate Business as if the transferred business was the business for the periods in which common control was present (refer to Notes 1 and 3); and (ii) an allocation of costs related to the Company. The period January 1, 2014 to September 15, 2014 and July 1, 2014 to September 15, 2014 includes: (i) the Prior Owner Period results of operations, which represents the ownership period of a third party; and (ii) an allocation of costs related to the launch of the European real estate business. As a result, results of operations for the three and nine months ended September 30, 2015 may not be comparable to the Company’s results of operations reported for the prior periods presented. |
Operating Real Estate - Operati
Operating Real Estate - Operating Real Estate, Net (Details) - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Real Estate [Abstract] | ||
Land | $ 476,115 | $ 0 |
Buildings and improvements | 1,308,034 | 0 |
Building leasehold interests and improvements | 333,842 | 51,646 |
Furniture, fixtures and equipment | 225 | 0 |
Tenant improvements | 72,905 | 3,767 |
Subtotal | 2,191,121 | 55,413 |
Less: Accumulated depreciation | (22,686) | (517) |
Operating real estate, net | $ 2,168,435 | $ 54,896 |
Operating Real Estate - Acquisi
Operating Real Estate - Acquisitions (Details) $ in Thousands | 1 Months Ended | 9 Months Ended | |||||
Jul. 31, 2015USD ($)property | Apr. 30, 2015USD ($)property | Sep. 30, 2014USD ($) | Sep. 30, 2015USD ($) | Sep. 15, 2014USD ($) | Oct. 31, 2015 | Dec. 31, 2014USD ($) | |
Business Acquisition [Line Items] | |||||||
Transaction Costs | $ 27,500 | ||||||
Foreign currency related losses on deposits | $ 0 | $ 6,402 | $ 0 | ||||
SEB Portfolio | |||||||
Business Acquisition [Line Items] | |||||||
Purchase Price | $ 1,250,400 | ||||||
Properties | property | 11 | ||||||
Financing | $ 822,600 | ||||||
Equity | $ 517,800 | ||||||
Ownership Interest | 95.00% | ||||||
Transaction Costs | $ 90,000 | ||||||
Parent's percentage allocation of net income (loss) | 100.00% | ||||||
Internos Portfolio | |||||||
Business Acquisition [Line Items] | |||||||
Purchase Price | $ 209,400 | ||||||
Properties | property | 12 | ||||||
Financing | $ 102,100 | ||||||
Equity | $ 128,200 | ||||||
Ownership Interest | 100.00% | ||||||
Transaction Costs | $ 20,900 | ||||||
IVG Portfolio | |||||||
Business Acquisition [Line Items] | |||||||
Purchase Price | $ 206,900 | ||||||
Properties | property | 15 | ||||||
Financing | $ 93,900 | ||||||
Equity | $ 126,900 | ||||||
Ownership Interest | 100.00% | ||||||
Transaction Costs | $ 13,900 | ||||||
Deka Portfolio | |||||||
Business Acquisition [Line Items] | |||||||
Purchase Price | $ 92,300 | ||||||
Properties | property | 10 | ||||||
Financing | $ 52,600 | ||||||
Equity | $ 47,900 | ||||||
Ownership Interest | 100.00% | ||||||
Transaction Costs | $ 8,200 | ||||||
Trianon Tower | |||||||
Business Acquisition [Line Items] | |||||||
Purchase Price | $ 629,000 | ||||||
Properties | property | 3 | ||||||
Financing | $ 371,000 | ||||||
Equity | $ 260,700 | ||||||
Ownership Interest | 95.00% | ||||||
Transaction Costs | $ 4,200 | ||||||
SEB Portfolio and Trianon Tower | |||||||
Business Acquisition [Line Items] | |||||||
Ownership Interest | 95.00% | ||||||
Subsequent Event | Internos Portfolio, IVG Portfolio, and Deka Portfolio | |||||||
Business Acquisition [Line Items] | |||||||
Ownership Interest | 5.00% |
Operating Real Estate - Purchas
Operating Real Estate - Purchase Price Allocation (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | |||||||
Sep. 30, 2014 | [1] | Sep. 30, 2015 | Sep. 15, 2014 | [1] | Sep. 30, 2015 | Sep. 15, 2014 | [1] | May. 01, 2015 | Dec. 31, 2014 | |
Business Combination, Separately Recognized Transactions [Line Items] | ||||||||||
Mortgage and other notes payable | $ 228,500 | |||||||||
Redeemable non-controlling interest | $ 1,461 | $ 1,461 | $ 0 | |||||||
Aggregate revenue | $ 239 | 42,601 | $ 2,346 | 76,415 | $ 8,452 | |||||
Net loss | $ 4,544 | 31,932 | $ 344 | 109,966 | $ 3,007 | |||||
New European Investments and U.K. Complex | ||||||||||
Business Combination, Separately Recognized Transactions [Line Items] | ||||||||||
Aggregate revenue | 69,200 | |||||||||
Net loss | 96,700 | |||||||||
Preliminary, New European Investments | ||||||||||
Business Combination, Separately Recognized Transactions [Line Items] | ||||||||||
Land and improvements | 485,698 | 485,698 | ||||||||
Buildings, leasehold interests and improvements | 1,663,590 | 1,663,590 | ||||||||
Acquired intangibles | 250,565 | 250,565 | ||||||||
Other assets acquired | 76,252 | 76,252 | ||||||||
Total assets acquired | 2,476,105 | 2,476,105 | ||||||||
Mortgage and other notes payable | 1,213,690 | 1,213,690 | ||||||||
Other liabilities assumed | 88,005 | 88,005 | ||||||||
Total liabilities | 1,301,695 | 1,301,695 | ||||||||
Redeemable non-controlling interest | 1,484 | 1,484 | ||||||||
Total NorthStar Realty Europe Corp. equity | 1,172,813 | 1,172,813 | ||||||||
Non-controlling interests | 113 | 113 | ||||||||
Total equity | 1,172,926 | 1,172,926 | ||||||||
Total liabilities and equity | 2,476,105 | 2,476,105 | ||||||||
Final, U.K. Complex | ||||||||||
Business Combination, Separately Recognized Transactions [Line Items] | ||||||||||
Land and improvements | 74 | 74 | ||||||||
Buildings, leasehold interests and improvements | 53,547 | 53,547 | ||||||||
Acquired intangibles | 34,063 | 34,063 | ||||||||
Other assets acquired | 9,401 | 9,401 | ||||||||
Total assets acquired | 97,085 | 97,085 | ||||||||
Mortgage and other notes payable | 0 | 0 | ||||||||
Other liabilities assumed | 712 | 712 | ||||||||
Total liabilities | 712 | 712 | ||||||||
Total NorthStar Realty Europe Corp. equity | 94,940 | 94,940 | ||||||||
Non-controlling interests | 1,433 | 1,433 | ||||||||
Total equity | 96,373 | 96,373 | ||||||||
Total liabilities and equity | $ 97,085 | $ 97,085 | ||||||||
[1] | The combined consolidated financial statements for the three and nine months ended September 30, 2015 and the period September 16, 2014 to September 30, 2014 represent: (i) the Company’s results of operations of the European Real Estate Business as if the transferred business was the business for the periods in which common control was present (refer to Notes 1 and 3); and (ii) an allocation of costs related to the Company. The period January 1, 2014 to September 15, 2014 and July 1, 2014 to September 15, 2014 includes: (i) the Prior Owner Period results of operations, which represents the ownership period of a third party; and (ii) an allocation of costs related to the launch of the European real estate business. As a result, results of operations for the three and nine months ended September 30, 2015 may not be comparable to the Company’s results of operations reported for the prior periods presented. |
Operating Real Estate - Pro For
Operating Real Estate - Pro Forma (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Real Estate [Abstract] | ||||
Pro forma total revenues | $ 44,270 | $ 42,555 | $ 129,015 | $ 128,600 |
Pro forma net income (loss) attributable to NorthStar Realty Europe Corp. | $ (31,849) | $ (2,987) | $ (107,773) | $ (260) |
Borrowings (Details)
Borrowings (Details) - USD ($) | 1 Months Ended | 9 Months Ended | |||
Jul. 31, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 15, 2014 | Dec. 31, 2014 | |
Debt Instrument [Line Items] | |||||
Principal Amount | $ 1,858,017,000 | $ 77,660,000 | |||
Carrying Value | 1,855,205,000 | 77,660,000 | |||
Fees paid to lender related to modifications | $ 0 | $ 0 | $ 846,000 | ||
Senior mortgage notes | European | SEB Portfolio | Minimum | |||||
Debt Instrument [Line Items] | |||||
Prepayment fee percentage range on principal | 0.50% | ||||
Senior mortgage notes | European | SEB Portfolio | Maximum | |||||
Debt Instrument [Line Items] | |||||
Prepayment fee percentage range on principal | 2.00% | ||||
Senior mortgage notes | European | IVG, Internos, and Deka Portfolio | Minimum | |||||
Debt Instrument [Line Items] | |||||
Prepayment fee percentage range on principal | 0.75% | ||||
Senior mortgage notes | European | IVG, Internos, and Deka Portfolio | Maximum | |||||
Debt Instrument [Line Items] | |||||
Prepayment fee percentage range on principal | 1.50% | ||||
Senior mortgage notes | Europe | European | |||||
Debt Instrument [Line Items] | |||||
Principal Amount | $ 1,518,017,000 | 77,660,000 | |||
Carrying Value | 1,515,205,000 | 77,660,000 | |||
Senior mortgage notes | Europe | European | UK Property | |||||
Debt Instrument [Line Items] | |||||
Principal Amount | 75,820,000 | 77,660,000 | |||
Carrying Value | 75,820,000 | 77,660,000 | |||
Senior mortgage notes | Europe | European | Internos Portfolio | |||||
Debt Instrument [Line Items] | |||||
Principal Amount | 102,056,000 | ||||
Carrying Value | 102,056,000 | ||||
Senior mortgage notes | Europe | European | IVG Portfolio | |||||
Debt Instrument [Line Items] | |||||
Principal Amount | 93,937,000 | ||||
Carrying Value | 93,937,000 | ||||
Senior mortgage notes | Europe | European | SEB Portfolio | |||||
Debt Instrument [Line Items] | |||||
Principal Amount | $ 109,300,000 | 703,408,000 | |||
Carrying Value | 702,619,000 | ||||
Fees paid to lender related to modifications | 800,000 | ||||
Senior mortgage notes | Europe | European | Trianon Tower | |||||
Debt Instrument [Line Items] | |||||
Principal Amount | 89,600,000 | 371,019,000 | |||
Carrying Value | 368,996,000 | ||||
Fees paid to lender related to modifications | $ 2,100,000 | ||||
Senior mortgage notes | Europe | European | Trianon Tower | EURIBOR | |||||
Debt Instrument [Line Items] | |||||
Principal Amount | $ 371,000,000 | ||||
Interest rate added to variable rate | 1.50% | ||||
Senior mortgage notes | Variable interest rates, Non-recourse, Due April 2020 | Europe | European | Deka Portfolio | |||||
Debt Instrument [Line Items] | |||||
Principal Amount | $ 52,601,000 | ||||
Carrying Value | $ 52,601,000 | ||||
Senior mortgage notes | 3.00%, Non-recourse, Due April 2060 | European | SEB Portfolio - Preferred | |||||
Debt Instrument [Line Items] | |||||
Contractual Interest Rate | 3.00% | ||||
Senior mortgage notes | 3.00%, Non-recourse, Due April 2060 | European | SEB Portfolio - Preferred | May 2019 through May 2022 | |||||
Debt Instrument [Line Items] | |||||
Contractual Interest Rate | 12.00% | ||||
Senior mortgage notes | 3.00%, Non-recourse, Due April 2060 | European | SEB Portfolio - Preferred | May 2022 through Maturity | |||||
Debt Instrument [Line Items] | |||||
Contractual Interest Rate | 15.00% | ||||
Senior mortgage notes | 3.00%, Non-recourse, Due April 2060 | Europe | European | SEB Portfolio - Preferred | |||||
Debt Instrument [Line Items] | |||||
Principal Amount | $ 119,176,000 | ||||
Carrying Value | 119,176,000 | ||||
Senior mortgage notes | GBP LIBOR Plus 2% Non-recourse Note Payable, Due December 2019 | European | UK Property | GBP LIBOR | |||||
Debt Instrument [Line Items] | |||||
Principal Amount | $ 61,600,000 | ||||
Interest rate added to variable rate | 2.00% | ||||
Senior mortgage notes | Notional value interest rate cap of 2% Non-recourse Note Payable, Due December 2019 | European | UK Property | GBP LIBOR | |||||
Debt Instrument [Line Items] | |||||
Notional value | $ 61,600,000 | ||||
Notional value interest rate cap | 2.00% | ||||
Senior mortgage notes | Fixed 8% Non-recourse Note Payable, Due December 2019 | European | UK Property | |||||
Debt Instrument [Line Items] | |||||
Principal Amount | $ 14,200,000 | ||||
Contractual Interest Rate | 8.00% | ||||
Senior mortgage notes | EURIBOR Plus 2.7%, Non-recourse, Due April 2020 | European | IVG, Internos, and Deka Portfolio | EURIBOR | |||||
Debt Instrument [Line Items] | |||||
Principal Amount | $ 209,100,000 | ||||
Senior mortgage notes | EURIBOR Plus 2.7%, Non-recourse, Due April 2020 | Europe | European | Deka Portfolio | EURIBOR | |||||
Debt Instrument [Line Items] | |||||
Interest rate added to variable rate | 2.70% | ||||
Senior mortgage notes | Notional value interest rate cap of 2%, Non-recourse, Due April 2020 | Europe | European | Deka Portfolio | GBP LIBOR | |||||
Debt Instrument [Line Items] | |||||
Notional value | $ 39,500,000 | ||||
Notional value interest rate cap | 2.00% | ||||
Senior mortgage notes | Notional value interest rate cap of 2%, Non-recourse, Due April 2020 | Europe | European | Deka Portfolio | EURIBOR | |||||
Debt Instrument [Line Items] | |||||
Notional value | $ 209,100,000 | ||||
Notional value interest rate cap | 2.00% | ||||
Senior mortgage notes | GBP LIBOR Plus 2.7%, Non-recourse, Due April 2020 | Europe | European | Deka Portfolio | GBP LIBOR | |||||
Debt Instrument [Line Items] | |||||
Principal Amount | $ 39,500,000 | ||||
Interest rate added to variable rate | 2.70% | ||||
Senior mortgage notes | EURIBOR Plus 1.6%, Non-recourse, Due April 2022 | European | SEB Portfolio | EURIBOR | |||||
Debt Instrument [Line Items] | |||||
Principal Amount | $ 398,400,000 | ||||
Interest rate added to variable rate | 1.80% | ||||
Senior mortgage notes | Notional value interest rate cap of 0.5%, Non-recourse, Due April 2022 | European | SEB Portfolio | EURIBOR | |||||
Debt Instrument [Line Items] | |||||
Notional value | $ 398,400,000 | ||||
Notional value interest rate cap | 0.50% | ||||
Senior mortgage notes | GBP LIBOR Plus 1.8%, Non-recourse, Due April 2022 | European | SEB Portfolio | GBP LIBOR | |||||
Debt Instrument [Line Items] | |||||
Principal Amount | $ 287,800,000 | ||||
Interest rate added to variable rate | 1.80% | ||||
Senior mortgage notes | Notional value interest rate cap of 2%, Non-recourse, Due April 2022 | European | SEB Portfolio | GBP LIBOR | |||||
Debt Instrument [Line Items] | |||||
Notional value | $ 287,800,000 | ||||
Notional value interest rate cap | 2.00% | ||||
Senior mortgage notes | Notional value interest rate cap of 2%, Non-recourse, Due April 2022 | Europe | European | Trianon Tower | GBP LIBOR | |||||
Debt Instrument [Line Items] | |||||
Notional value | $ 371,000,000 | ||||
Notional value interest rate cap | 2.00% | ||||
Senior mortgage notes | STIBOR Plus One Point Eight Percent, Non-recourse, Due April 2022 | European | SEB Portfolio | STIBOR | |||||
Debt Instrument [Line Items] | |||||
Principal Amount | $ 17,200,000 | ||||
Interest rate added to variable rate | 1.80% | ||||
Senior Notes | |||||
Debt Instrument [Line Items] | |||||
Principal Amount | $ 340,000,000 | $ 0 | |||
Carrying Value | $ 340,000,000 | ||||
Contractual Interest Rate | 4.625% |
Borrowings - Scheduled Principa
Borrowings - Scheduled Principal on Borrowings (Details) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Debt Instrument [Line Items] | ||
October 1 to December 31, 2015 | $ 0 | |
2,016 | 340,000,000 | |
2,017 | 0 | |
2,018 | 0 | |
2,019 | 75,820,000 | |
Thereafter | 1,442,197,000 | |
Total | 1,858,017,000 | $ 77,660,000 |
Mortgage and Other Notes Payable | ||
Debt Instrument [Line Items] | ||
October 1 to December 31, 2015 | 0 | |
2,016 | 0 | |
2,017 | 0 | |
2,018 | 0 | |
2,019 | 75,820,000 | |
Thereafter | 1,442,197,000 | |
Total | 1,518,017,000 | |
Senior Notes | ||
Debt Instrument [Line Items] | ||
October 1 to December 31, 2015 | 0 | |
2,016 | 340,000,000 | |
2,017 | 0 | |
2,018 | 0 | |
2,019 | 0 | |
Thereafter | 0 | |
Total | $ 340,000,000 | $ 0 |
Borrowings - Narrative (Details
Borrowings - Narrative (Details) - USD ($) | 1 Months Ended | ||
Jul. 31, 2015 | Sep. 30, 2015 | Dec. 31, 2014 | |
Debt Instrument [Line Items] | |||
Total | $ 1,858,017,000 | $ 77,660,000 | |
Senior Notes | |||
Debt Instrument [Line Items] | |||
Total | $ 340,000,000 | $ 0 | |
Stated interest rate | 4.625% | ||
Senior Notes | Fair Value, Inputs, Level 2 | |||
Debt Instrument [Line Items] | |||
Long-term Debt, Fair Value | $ 333,200,000 | ||
Exchangeable Senior Notes | 4.625% Notes | |||
Debt Instrument [Line Items] | |||
Total | $ 340,000,000 | ||
Stated interest rate | 4.625% | ||
Aggregate net proceeds | $ 331,000,000 | ||
Senior unsubordinated unsecured note | Consolidated Entity Excluding Variable Interest Entities (VIE) | |||
Debt Instrument [Line Items] | |||
Notice required prior to maturity to settle outstanding principal in common stock, term | 60 days |
Related Party Arrangements (Det
Related Party Arrangements (Details) - NSAM - USD ($) $ / shares in Units, $ in Millions | Nov. 01, 2015 | Sep. 30, 2015 |
Related Party Transaction [Line Items] | ||
Asset management agreement, initial term | 20 years | |
Asset management agreement, renewal term | 20 years | |
Increase in annualized base management fee | 20.00% | |
Tier 1 | ||
Related Party Transaction [Line Items] | ||
Asset management agreement, incentive fee | 15.00% | |
Tier 2 | ||
Related Party Transaction [Line Items] | ||
Asset management agreement, incentive fee | 25.00% | |
Minimum | Tier 1 | ||
Related Party Transaction [Line Items] | ||
Asset management agreement, incentive fee, per share (dollars per share) | $ 0.30 | |
Minimum | Tier 2 | ||
Related Party Transaction [Line Items] | ||
Asset management agreement, incentive fee, per share (dollars per share) | 0.36 | |
Maximum | Tier 1 | ||
Related Party Transaction [Line Items] | ||
Asset management agreement, incentive fee, per share (dollars per share) | $ 0.36 | |
Base Management Fee | Subsequent Event | ||
Related Party Transaction [Line Items] | ||
Annualized base management fee to be paid | $ 14 | |
Additional asset management fee | 1.50% | |
Long-term Bonus or Other Compensation | ||
Related Party Transaction [Line Items] | ||
Reimbursement percentage | 50.00% |
Equity-Based Compensation - Nar
Equity-Based Compensation - Narrative (Details) - Incentive Compensation Plan | 1 Months Ended |
Jul. 31, 2009 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Percentage of adjusted equity capital used in calculating size of incentive pool | 1.75% |
Percentage of adjusted funds from operations used in calculating size of incentive pool | 25.00% |
Percentage of return hurdle on adjusted equity capital | 9.00% |
Equity (Details)
Equity (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2014 | Sep. 30, 2015 | Dec. 31, 2014 | Sep. 15, 2014 | Sep. 30, 2015 | Sep. 15, 2014 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Beginning Balance | $ 20,520 | $ 0 | $ 80,074 | $ 23,584 | |||||
Net income (loss) | (4,247) | [1] | $ (31,892) | $ (344) | [1] | (109,865) | (3,007) | [1] | |
Other comprehensive income (loss) | $ (1,040) | 502 | (540) | 34,185 | (57) | ||||
Net income (loss) attributable to NorthStar Europe | (33,631) | (109,865) | |||||||
Other comprehensive income (loss) attributable to NorthStar Europe | (4,336) | 34,135 | |||||||
Net transactions with NorthStar Realty | 116,983 | 652,512 | |||||||
Non-controlling interests | 1,058 | 61 | |||||||
Ending Balance | $ 656,917 | $ 80,074 | $ 20,520 | $ 656,917 | $ 20,520 | ||||
[1] | The combined consolidated financial statements for the three and nine months ended September 30, 2015 and the period September 16, 2014 to September 30, 2014 represent: (i) the Company’s results of operations of the European Real Estate Business as if the transferred business was the business for the periods in which common control was present (refer to Notes 1 and 3); and (ii) an allocation of costs related to the Company. The period January 1, 2014 to September 15, 2014 and July 1, 2014 to September 15, 2014 includes: (i) the Prior Owner Period results of operations, which represents the ownership period of a third party; and (ii) an allocation of costs related to the launch of the European real estate business. As a result, results of operations for the three and nine months ended September 30, 2015 may not be comparable to the Company’s results of operations reported for the prior periods presented. |
Equity - Narrative (Details)
Equity - Narrative (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | |||||
Sep. 30, 2014 | Sep. 30, 2015 | Sep. 15, 2014 | Sep. 30, 2015 | Sep. 15, 2014 | ||||
Equity [Abstract] | ||||||||
Net income (loss) attributable to other non-controlling interests | $ (297) | [1] | $ (40) | $ 0 | [1] | $ (101) | $ 0 | [1] |
[1] | The combined consolidated financial statements for the three and nine months ended September 30, 2015 and the period September 16, 2014 to September 30, 2014 represent: (i) the Company’s results of operations of the European Real Estate Business as if the transferred business was the business for the periods in which common control was present (refer to Notes 1 and 3); and (ii) an allocation of costs related to the Company. The period January 1, 2014 to September 15, 2014 and July 1, 2014 to September 15, 2014 includes: (i) the Prior Owner Period results of operations, which represents the ownership period of a third party; and (ii) an allocation of costs related to the launch of the European real estate business. As a result, results of operations for the three and nine months ended September 30, 2015 may not be comparable to the Company’s results of operations reported for the prior periods presented. |
Equity Equity - Redeemable Non-
Equity Equity - Redeemable Non-controlling Interest (Narrative) (Details) € in Millions, $ in Millions | Sep. 30, 2015USD ($) | Sep. 30, 2015EUR (€) |
Redeemable Noncontrolling Interest [Line Items] | ||
Ownership percentage of noncontrolling interest sold | 5.50% | 5.50% |
Alternative redeemable amount | € | € 2.1 | |
Subsidiaries that own Trianon Tower | ||
Redeemable Noncontrolling Interest [Line Items] | ||
Noncontrolling interest sold | $ 1.5 |
Risk Management and Derivativ41
Risk Management and Derivative Activities (Details) $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2014USD ($) | Sep. 30, 2015USD ($)instrument | Sep. 15, 2014USD ($) | Sep. 30, 2015USD ($)instrument | Sep. 15, 2014USD ($) | Dec. 31, 2014USD ($)instrument | |
Unrealized gain (loss) on investments and other | Derivatives | ||||||
Non-hedge derivatives | ||||||
Net cash payment on derivatives | $ 0 | $ (214) | $ 0 | $ (214) | $ 0 | |
Interest rate caps | ||||||
Derivative assets | ||||||
Derivative assets | 23,837 | 23,837 | $ 1,080 | |||
Foreign currency forwards | ||||||
Derivative liabilities | ||||||
Derivative liabilities | 3,428 | 3,428 | $ 0 | |||
Foreign currency forwards | Unrealized gain (loss) on investments and other | Derivatives | ||||||
Non-hedge derivatives | ||||||
Adjustments to fair value | 0 | 825 | 0 | (3,428) | 0 | |
Interest rate caps/swaps | Unrealized gain (loss) on investments and other | Derivatives | ||||||
Non-hedge derivatives | ||||||
Adjustments to fair value | $ 0 | $ (9,576) | $ 696 | $ (7,821) | $ 2,110 | |
Not designated as hedges | ||||||
Derivative instruments | ||||||
Number of Instruments | instrument | 10 | 10 | ||||
Notional Amount | $ 1,511,540 | $ 1,511,540 | ||||
Fair Value Net Asset (Liability) | $ 20,409 | $ 20,409 | ||||
Not designated as hedges | Interest rate caps | ||||||
Derivative instruments | ||||||
Number of Instruments | instrument | 7 | 7 | 1 | |||
Notional Amount | $ 1,367,525 | $ 1,367,525 | $ 63,099 | |||
Fair Value Net Asset (Liability) | $ 23,837 | $ 23,837 | $ 1,080 | |||
Not designated as hedges | Interest rate caps | LIBOR | ||||||
Derivative instruments | ||||||
Lower Range of Fixed LIBOR (as a percent) | 0.50% | 0.50% | ||||
Higher Range of Fixed LIBOR (as a percent) | 2.00% | 2.00% | ||||
Fixed LIBOR (as a percent) | 2.00% | |||||
Not designated as hedges | Foreign currency forwards | ||||||
Derivative instruments | ||||||
Number of Instruments | instrument | 3 | 3 | ||||
Notional Amount | $ 144,015 | $ 144,015 | ||||
Fair Value Net Asset (Liability) | $ (3,428) | $ (3,428) | ||||
Designated as hedge | ||||||
Derivative instruments | ||||||
Number of Instruments | instrument | 0 | 0 |
Segment Reporting (Details)
Segment Reporting (Details) $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | |||||||
Sep. 30, 2014USD ($) | Sep. 30, 2015USD ($) | Sep. 15, 2014USD ($) | Sep. 30, 2015USD ($)segment | Sep. 15, 2014USD ($) | Dec. 31, 2014USD ($) | |||||
Segment Reporting Information [Line Items] | ||||||||||
Number of reporting segments | segment | 2 | |||||||||
Rental and escalation income | $ 199 | [1] | $ 42,178 | $ 1,981 | [1] | $ 75,922 | $ 7,162 | [1] | ||
Other interest expense | [2] | 0 | [1] | 14,567 | 1,033 | [1] | 21,391 | 3,486 | [1] | |
Income (loss) before income tax benefit (expense) | (4,544) | [1] | (35,772) | (344) | [1] | (125,184) | (3,007) | [1] | ||
Income tax benefit (expense) | 0 | [1] | 3,840 | 0 | [1] | 15,218 | 0 | [1] | ||
Net income (loss) | (4,544) | [1] | (31,932) | (344) | [1] | (109,966) | (3,007) | [1] | ||
Transaction costs | [2] | 4,311 | [1] | 21,619 | 0 | [1] | 109,743 | 0 | [1] | |
General and administrative expense | [2] | 190 | [1] | 899 | 751 | [1] | 2,159 | 4,676 | [1] | |
Total Assets | 2,655,734 | 2,655,734 | $ 162,021 | |||||||
Operating Segments | Real Estate | European | ||||||||||
Segment Reporting Information [Line Items] | ||||||||||
Rental and escalation income | 199 | 42,178 | 1,981 | 75,922 | 7,162 | |||||
Other interest expense | 0 | 9,162 | 1,033 | 15,986 | 3,486 | |||||
Income (loss) before income tax benefit (expense) | (4,411) | (29,908) | 346 | (113,977) | 1,434 | |||||
Income tax benefit (expense) | 0 | 3,840 | 0 | 15,218 | 0 | |||||
Net income (loss) | (4,411) | (26,068) | 346 | (98,759) | 1,434 | |||||
Depreciation expense | 19,200 | 34,800 | ||||||||
Total Assets | 2,639,549 | 2,639,549 | 162,021 | |||||||
Operating Segments | Real Estate | European | New European Investments | ||||||||||
Segment Reporting Information [Line Items] | ||||||||||
Transaction costs | 21,600 | 109,700 | ||||||||
Operating Segments | Real Estate | European | UK Complex | ||||||||||
Segment Reporting Information [Line Items] | ||||||||||
Transaction costs | 4,300 | |||||||||
Corporate | ||||||||||
Segment Reporting Information [Line Items] | ||||||||||
Rental and escalation income | 0 | 0 | 0 | 0 | 0 | |||||
Other interest expense | 0 | 5,405 | 0 | 5,405 | 0 | |||||
Income (loss) before income tax benefit (expense) | (133) | (5,864) | (690) | (11,207) | (4,441) | |||||
Income tax benefit (expense) | 0 | 0 | 0 | 0 | 0 | |||||
Net income (loss) | $ (133) | (5,864) | $ (690) | (11,207) | $ (4,441) | |||||
Total Assets | 16,185 | 16,185 | $ 0 | |||||||
Corporate | European | ||||||||||
Segment Reporting Information [Line Items] | ||||||||||
General and administrative expense | $ 400 | $ 1,700 | ||||||||
[1] | The combined consolidated financial statements for the three and nine months ended September 30, 2015 and the period September 16, 2014 to September 30, 2014 represent: (i) the Company’s results of operations of the European Real Estate Business as if the transferred business was the business for the periods in which common control was present (refer to Notes 1 and 3); and (ii) an allocation of costs related to the Company. The period January 1, 2014 to September 15, 2014 and July 1, 2014 to September 15, 2014 includes: (i) the Prior Owner Period results of operations, which represents the ownership period of a third party; and (ii) an allocation of costs related to the launch of the European real estate business. As a result, results of operations for the three and nine months ended September 30, 2015 may not be comparable to the Company’s results of operations reported for the prior periods presented. | |||||||||
[2] | Excludes fees that the Company will begin paying from November 1, 2015, in connection with the management agreement with NSAM (refer to Note 1). |
Subsequent Events (Details)
Subsequent Events (Details) | Nov. 23, 2015$ / shares | Oct. 31, 2015USD ($) | Nov. 25, 2015USD ($) | Sep. 30, 2015$ / shares | Sep. 30, 2015$ / shares |
Subsequent Event [Line Items] | |||||
Common stock dividends declared (in dollars per share) | $ 0.15 | $ 0.15 | |||
Subsequent Event | |||||
Subsequent Event [Line Items] | |||||
Conversion of common shares received at time of Spin-off (shares) | 0.1667 | ||||
Initial capitalization | $ | $ 250,000,000 | ||||
Common stock dividends declared (in dollars per share) | $ 0.15 | ||||
Amount of outstanding common stock authorized for repurchase | $ | $ 100,000,000 | ||||
Expiration period for stock authorization | 12 months |