Maryland (State or other jurisdiction of incorporation) | 001-37597 (Commission File Number) | 32-0468861 (I.R.S. Employer Identification No.) |
399 Park Avenue, 18th Floor, New York, NY | 10022 | |
(Address of principal executive offices) | (Zip Code) |
Item 9.01. | Financial Statements and Exhibits. |
(d) | Exhibits. |
Exhibit No. | Description | |
99.1 | NorthStar Realty Europe Corp. Press Release, dated August 5, 2016 |
NorthStar Realty Europe Corp. (Registrant) | ||
Date: August 5, 2016 | By: | /s/ Trevor K. Ross |
Trevor K. Ross General Counsel and Secretary |
Exhibit No. | Description | ||
99.1 | NorthStar Realty Europe Corp. Press Release, dated August 5, 2016 |
• | U.S. GAAP net (loss) to common stockholders of $(33.9) million, or $(0.57) per diluted share and cash available for distribution (“CAD”) of $13.4 million, or $0.22 per share |
• | Second quarter 2016 cash dividend of $0.15 per share |
• | Capital recycling plan underway with 9 primarily non-strategic properties sold in 2016 for a combined sales price in excess of $300 million, reflecting a 4% premium to the year end 2015 valuation by Cushman & Wakefield LLP (“C&W”) |
• | $80 million of 4.625% senior stock-settable notes repurchased and canceled in June 2016 |
• | Reduced leverage to 55% LTV1 and weighted average debt margin from 2.2% to 2.0% |
• | C&W issued an independent third party mid-year valuation2 of approximately $2.2 billion for NorthStar Realty Europe’s real estate portfolio, excluding $300 million of properties sold in 2016, which implies a proforma NAV of $17 per share |
• | $48 million of NorthStar Realty Europe common stock repurchased and canceled since November 2015 |
• | As of June 30, 2016, adjusted for sales through August 4, 2016, NorthStar Realty Europe’s portfolio was 85% occupied with a 7 year weighted average remaining lease term through to contractual term.3 |
• | As of June 30, 2016, our core portfolio4 of predominantly prime office properties represented 84% of the overall portfolio market value based on the C&W independent mid-year valuation and 79% of rental income.3 Our core portfolio was 93% occupied with a 7 year weighted average remaining lease term through to contract term.3 |
• | For the second quarter 2016, NOI was $33 million. |
• | Total assets as of June 30, 2016 of approximately $2.4 billion comprising of real estate ($1.9 billion), assets held for sale ($0.3 billion), cash ($0.1 billion) and other assets ($0.1 billion). |
• | As of August 4, 2016, NorthStar Realty Europe owned 40 properties across 8 countries. |
• | C&W issued an estimated real estate portfolio value of approximately $2.2 billion for NorthStar Realty Europe’s real estate portfolio (excluding $0.3 billion of properties sold in 2016), in line with C&W’s year end 2015 valuation. This valuation implies a proforma NAV of approximately $17 per share. |
• | The capital recycling plan announced by NorthStar Realty Europe in the first quarter 2016 is progressing well. Through August 4, 2016, NorthStar Realty Europe sold 9 primarily non-strategic properties during 2016 for a combined sale price of approximately $300 million, with the weighted average sales price 4% above the C&W year end 2015 valuation. |
• | One non-strategic property is currently under contract with further properties being in various stages of the marketing process. |
• | Unrestricted cash as of June 30, 2016 was approximately $125 million. Unrestricted cash as of August 3, 2016 was approximately $166 million. |
• | In June 2016, NorthStar Realty Europe repurchased approximately $80 million of its 4.625% senior stock-settable notes due December 2016 (the “Senior Notes”). Approximately $110 million of the Senior Notes remain outstanding as of August 4, 2016. |
• | On May 10, 2016, NorthStar Realty Europe entered into a revolving credit facility with Merrill Lynch, Pierce, Fenner & Smith Incorporated as sole lead arranger and sole bookrunner and Bank of America, N.A. as administrative agent and a lender. The revolving credit facility has a one year term with a one year extension at NRE’s election, so long as NRE remains in compliance with the terms of the revolving credit facility. Amounts drawn under the revolving credit facility accrue interest at a rate per annum equal to LIBOR plus a margin of 2.75%. The proceeds of the revolving credit facility may be used for general corporate and working capital purposes including the repayment of indebtedness. As of August 4, 2016, there were no borrowings under the revolving credit facility. |
• | On November 23, 2015, the board of directors of NorthStar Realty Europe authorized the repurchase of up to $100 million of the company’s outstanding common stock. The repurchases will occur from time to time in the open market and/or in privately negotiated transactions. The authorization expires in November 2016, unless otherwise extended by NorthStar Realty Europe’s board of directors. Since November 2015, NorthStar Realty Europe repurchased approximately $48 million of its common stock pursuant to this stock repurchase program with $52 million remaining under the plan. |
• | As of June 30, 2016, NorthStar Realty Europe had 61.2 million total common shares outstanding, including LTIPs and RSUs not subject to performance hurdles. |
Three Months Ended June 30, | ||||||||
2016(1) | 2015(1) | |||||||
Revenues | ||||||||
Rental income | $ | 33,990 | $ | 28,344 | ||||
Escalation income | 5,908 | 3,213 | ||||||
Other revenue | 46 | 67 | ||||||
Total revenues | 39,944 | 31,624 | ||||||
Expenses | ||||||||
Properties - operating expenses | 8,540 | 5,423 | ||||||
Interest expense | 11,641 | 6,072 | ||||||
Transaction costs | 1,652 | 79,120 | ||||||
Impairment losses | 27,468 | — | ||||||
Management fee, related party(2) | 3,500 | — | ||||||
Other expenses | 3,041 | 2,799 | ||||||
General and administrative expenses | 1,502 | 306 | ||||||
Compensation expense | 3,766 | — | ||||||
Depreciation and amortization | 18,404 | 14,694 | ||||||
Total expenses | 79,514 | 108,414 | ||||||
Other income (loss) | ||||||||
Unrealized gain (loss) on investments and other | 383 | 3,629 | ||||||
Realized gain (loss) on investments and other | 5,398 | 41 | ||||||
Income (loss) before income tax benefit (expense) | (33,789 | ) | (73,120 | ) | ||||
Income tax benefit (expense) | (520 | ) | 11,379 | |||||
Net income (loss) | (34,309 | ) | (61,741 | ) | ||||
Net (income) loss attributable to non-controlling interests | 400 | 30 | ||||||
Net income (loss) attributable to NorthStar Realty Europe Corp. common stockholders | $ | (33,909 | ) | $ | (61,711 | ) | ||
Earnings (loss) per share: | ||||||||
Basic | $ | (0.57 | ) | $ | (0.98 | ) | (3) | |
Diluted | $ | (0.57 | ) | $ | (0.98 | ) | (3) |
(1) | The combined consolidated financial statements for the three months ended June 30, 2016 represent NRE’s results of operations following its spin-off from NorthStar Realty Finance Corp. on October 31, 2015. The combined consolidated financial statements for the three months ended June 30, 2015 represent: (i) NRE’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; and (ii) an allocation of costs related to NRE. As a result, results of operations for the three months ended June 30, 2016 may not be comparable to the NRE’s results of operations reported for the prior period presented. |
(2) | NRE began paying fees on November 1, 2015, in connection with the management agreement with NSAM. |
(3) | Basic and diluted earnings per common share for the three months ended June 30, 2015 was calculated using the common stock distributed on November 1, 2015 in connection with the spin-off. |
June 30, 2016 (Unaudited) | December 31, 2015 | ||||||
Assets | |||||||
Operating real estate, gross | $ | 1,765,653 | $ | 2,120,460 | |||
Less: accumulated depreciation | (48,615 | ) | (35,303 | ) | |||
Operating real estate, net | 1,717,038 | 2,085,157 | |||||
Cash and cash equivalents | 125,102 | 283,844 | |||||
Restricted cash | 13,913 | 20,871 | |||||
Receivables, net of allowance of $399 and $115 as of June 30, 2016 and December 31, 2015, respectively | 9,214 | 9,663 | |||||
Unbilled rent receivable | 8,418 | 5,869 | |||||
Assets held for sale | 299,953 | 6,094 | |||||
Derivative assets, at fair value | 11,672 | 23,792 | |||||
Intangible assets, net | 173,139 | 241,519 | |||||
Other assets, net | 9,817 | 6,241 | |||||
Total assets | $ | 2,368,266 | $ | 2,683,050 | |||
Liabilities | |||||||
Mortgage and other notes payable, net | $ | 1,377,584 | $ | 1,424,610 | |||
Senior notes, net | 109,233 | 333,798 | |||||
Credit facility | 58,642 | — | |||||
Accounts payable and accrued expenses | 27,678 | 39,964 | |||||
Derivative liabilities, at fair value | 1,221 | — | |||||
Due to related party | 3,606 | 3,995 | |||||
Intangible liabilities, net | 36,075 | 40,718 | |||||
Liabilities held for sale | 10,565 | — | |||||
Other liabilities | 33,600 | 42,654 | |||||
Total liabilities | 1,658,204 | 1,885,739 | |||||
Commitments and contingencies | |||||||
Redeemable non-controlling interest | 1,598 | 1,569 | |||||
Equity | |||||||
NorthStar Realty Europe Corp. Stockholders’ Equity | |||||||
Preferred stock, $0.01 par value, 200,000,000 shares authorized, no shares issued and outstanding as of June 30, 2016 and December 31, 2015 | — | — | |||||
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 60,418,459 and 59,325,730 shares issued and outstanding as of June 30, 2016 and December 31, 2015, respectively | 604 | 593 | |||||
Additional paid-in capital | 968,871 | 968,662 | |||||
Retained earnings (accumulated deficit) | (266,915 | ) | (186,246 | ) | |||
Accumulated other comprehensive income (loss) | (2,955 | ) | 2,560 | ||||
Total NorthStar Realty Europe Corp. stockholders’ equity | 699,605 | 785,569 | |||||
Non-controlling interests | 8,859 | 10,173 | |||||
Total equity | 708,464 | 795,742 | |||||
Total liabilities and equity | $ | 2,368,266 | $ | 2,683,050 |
Net income (loss) attributable to common stockholders | $ | (33,909 | ) |
Non-controlling interests | (400 | ) | |
Adjustments: | |||
Depreciation and amortization items(1) | 25,134 | ||
Impairment losses | 27,468 | ||
Unrealized (gain) loss from fair value adjustments(2) | (1,159 | ) | |
Realized (gain) loss on investments(3) | (5,398 | ) | |
Transaction costs and other(4) | 1,623 | ||
CAD | $ | 13,359 | |
CAD per share(5) | $ | 0.22 |
(1) | Represents an adjustment to exclude depreciation and amortization of $18.4 million, amortization of above/below market leases of $1.2 million, amortization of deferred financing costs of $2.0 million and amortization of equity-based compensation of $3.8 million. |
(2) | Excludes unrealized loss relating to cash payment on derivatives. |
(3) | Represents an adjustment to exclude a $7.8 million net gain related to the sale of real estate investment and $2.4 million loss related to the write-off of the deferred financing costs associated with the repurchase of the Senior Notes. |
(4) | Represents an adjustment to exclude $1.6 million of transaction costs. |
(5) | Based on a weighted average number of shares of 61.4 million (common shares outstanding, including LTIPs and RSUs not subject to performance hurdles) for the three months ending June 30, 2016. |
Rental income | $ | 33,990 | |
Escalation income | 5,908 | ||
Other revenue | 46 | ||
Total property and other revenues | 39,944 | ||
Properties - operating expenses | 8,540 | ||
Adjustments: | |||
Amortization and other items(1) | 1,220 | ||
NOI | $ | 32,624 |
(1) | Includes $1.1 million of amortization of above/below market rent. |
(2) | The following table presents a reconciliation of NOI of our real estate segment to net income (loss) for the three months ended June 30, 2016 (dollars in thousands): |
NOI | $ | 32,624 | |
Adjustments: | — | ||
Interest expense—mortgage and corporate borrowings | (8,691 | ) | |
Other expenses | (3,007 | ) | |
Depreciation and amortization | (18,404 | ) | |
Unrealized gain (loss) on investments and other | (3,400 | ) | |
Realized gain (loss) on investments and other | 7,794 | ||
Other items | (27,443 | ) | |
Net income (loss) - Real estate segment | $ | (20,527 | ) |
Remaining segments(i) | (13,782 | ) | |
Net income (loss) | $ | (34,309 | ) |
(i) | Represents the net income (loss) in our corporate segments to reconcile to total net income (loss). |
1. | Capitalizations includes property level debt, portfolio level preferred equity and common equity (including ccash net of corporate debt). |
2. | The external third-party appraisal was prepared by Cushman & Wakefield LLP in accordance with the current U.K. and Global edition of the Royal Institution of Chartered Surveyors' (RICS) Valuation - Professional Standards (the "Red Book") on the basis of "Fair Value," which is widely recognized within Europe as the leading professional standards for independent valuation professionals. Each property is classified as an investment and has been valued on the basis of Fair Value adopted by the International Accounting Standards Board. This is the equivalent to the Red Book definition of Market Value. The Red Book defines Market Value as the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm's-length transaction after proper marketing where the parties had each acted knowledgeably, prudently and without compulsion. The Cushman & Wakefield LLP appraisal assumes that certain of the properties would be purchased through market accepted structures resulting in lower purchaser transaction expenses (taxes, duties, and similar costs). This Cushman & Wakefield LLP appraisal is as of June 30, 2016. The results of the Cushman & Wakefield LLP appraisal exclude the value ascribed to assets sold as of June 30, 2016. |
3. | Based on rent roll as of June 30, 2016. |
4. | Core portfolio comprises primarily office properties in Germany, the U.K. and France. |