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 Press Release, dated November 10, 2016 |
NorthStar Realty Europe Corp. (Registrant) | ||
Date: November 10, 2016 | By: | /s/ Trevor K. Ross |
Trevor K. Ross General Counsel and Secretary |
Exhibit No. | Description | |
99.1 | NorthStar Realty Europe Press Release, dated November 10, 2016 |
• | U.S. GAAP net (loss) to common stockholders of $(12.7) million, or $(0.22) per diluted share |
• | Cash available for distribution (“CAD”) of $13.9 million, or $0.23 per share, an increase of $0.5 million from the second quarter 2016 |
• | Improved operational performance with same store occupancy in the core portfolio rising to 94% and rental income increasing by approximately 2.2% during the quarter1 |
• | Continued progress of NRE’s capital recycling plan with nine non-strategic properties sold in the third quarter 2016 for a combined sales price in excess of $300 million, in line with the mid-year independent valuation by Cushman & Wakefield LLP (“C&W”)2 |
• | $42 million of 4.625% senior stock-settable notes repurchased and canceled in the third quarter 2016, leaving only $67 million outstanding |
• | Under its existing stock repurchase program, NRE repurchased $25 million of its common stock in the third quarter and $93 million since the program commenced in November 2015. NRE announced the authorization of an additional $100 million share repurchase program |
• | Third quarter 2016 cash dividend of $0.15 per share |
• | Since the beginning of the third quarter through November 8, 2016, NRE sold nine non-strategic properties for a combined sales price in excess of $300 million, in line with the mid-year C&W independent valuation. |
• | Year to date, NRE has sold 15 non-strategic properties for a combined sales price of approximately $400 million, representing a 3% premium to the latest available C&W independent valuation. |
• | Three further properties are currently under contract with a number of others at various stages of the marketing or sales process. |
• | As of November 8, 2016, NRE owned 34 properties across seven countries valued at approximately $2.1 billion. |
• | As of September 30, 2016, adjusted for sales through November 8, 2016, NRE’s overall portfolio was 86% occupied (compared to same store occupancy of 85% as of June 30, 2016) with a 6.3 year weighted average remaining contractual lease term. Same store rental income in the overall portfolio increased by 1.8% during the third quarter 2016. |
• | As of September 30, 2016, NRE’s core portfolio of predominantly prime office properties represented 86% of the overall portfolio market value based on the C&W mid-year independent valuation and 82% of rental income. The |
• | Net income (loss) to common stockholders for the third quarter 2016 totaled $(12.7) million, or $(0.22) per diluted share and net operating income, or NOI, of $28 million. For more information and a reconciliation of NOI to net income (loss) attributable to common stockholders, please refer to the tables on the following pages. |
• | As of September 30, 2016, total equity was $662 million, or $11.26 per share. EPRA3 net asset value, or EPRA NAV, of $16.60 per share as of September 30, 2016, based on the mid-year independent valuation by C&W. For more information and a reconciliation of EPRA NAV to total equity, please refer to the tables on the following pages. |
• | Unrestricted cash as of September 30, 2016 was approximately $149 million. Unrestricted cash as of November 8, 2016, was approximately approximately $140 million. |
• | During the third quarter 2016, NRE repurchased approximately $42 million of its 4.625% senior stock-settable notes due December 2016 (the “Senior Notes”). Approximately $67 million of the Senior Notes remain outstanding as of November 8, 2016. |
• | No borrowings are outstanding under NRE’s revolving credit facility as of November 8, 2016. |
• | On November 23, 2015, the board of directors of NRE authorized the repurchase of up to $100 million of the company’s outstanding common stock. The repurchases may occur from time to time in the open market and/or in privately negotiated transactions. Between November 2015 and September 30, 2016, NRE repurchased 6.7 million shares of its common stock for approximately $72.3 million. Subsequent to September 30, 2016, NRE repurchased 2.0 million shares of its common stock for approximately $20.5 million. As of November 8, 2016, approximately $7.3 million remained available under NRE’s existing stock repurchase plan, which expires on November 23, 2016. |
• | On November 2, 2016, the board of directors of NRE authorized the repurchase of up to an additional $100 million of its outstanding common stock. The repurchases may occur from time to time in the open market and/or in privately negotiated transactions. The authorization will expire on November 2, 2017, unless otherwise extended by NRE's board of directors. |
• | As of September 30, 2016, NRE had 58.8 million total common shares outstanding, including LTIPs and RSUs not subject to performance hurdles. |
• | As November 8, 2016, NRE had 56.8 million total common shares outstanding, including LTIPs and RSUs not subject to performance hurdles. |
Three Months Ended September 30, | ||||||||
2016(1) | 2015(1) | |||||||
Revenues | ||||||||
Rental income | $ | 29,798 | $ | 34,072 | ||||
Escalation income | 7,828 | 8,106 | ||||||
Other revenue | 149 | 423 | ||||||
Total revenues | 37,775 | 42,601 | ||||||
Expenses | ||||||||
Properties - operating expenses | 9,493 | 10,508 | ||||||
Interest expense | 9,301 | 14,567 | ||||||
Transaction costs | 150 | 21,619 | ||||||
Management fee, related party(2) | 3,548 | — | ||||||
Other expenses | 2,848 | 2,533 | ||||||
General and administrative expenses | 2,199 | 899 | ||||||
Compensation expense(3) | 5,194 | — | ||||||
Depreciation and amortization | 13,989 | 19,224 | ||||||
Total expenses | 46,722 | 69,350 | ||||||
Other income (loss) | ||||||||
Unrealized gain (loss) on investments and other | (5,082 | ) | (8,951 | ) | ||||
Realized gain (loss) on investments and other | 3,914 | (72 | ) | |||||
Income (loss) before income tax benefit (expense) | (10,115 | ) | (35,772 | ) | ||||
Income tax benefit (expense) | (2,655 | ) | 3,840 | |||||
Net income (loss) | (12,770 | ) | (31,932 | ) | ||||
Net (income) loss attributable to non-controlling interests | 49 | 40 | ||||||
Net income (loss) attributable to NorthStar Realty Europe Corp. common stockholders | $ | (12,721 | ) | $ | (31,892 | ) | ||
Earnings (loss) per share: | ||||||||
Basic | $ | (0.22 | ) | $ | (0.51 | ) | (4) | |
Diluted | $ | (0.22 | ) | $ | (0.51 | ) | (4) |
(1) | The consolidated financial statements for the three months ended September 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 September 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 September 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) | Refers to equity based compensation expense. |
(4) | Basic and diluted earnings per common share for the three months ended September 30, 2015 was calculated using the common stock distributed on November 1, 2015 in connection with the spin-off. |
September 30, 2016 (Unaudited) | December 31, 2015 | ||||||
Assets | |||||||
Operating real estate, gross | $ | 1,723,972 | $ | 2,120,460 | |||
Less: accumulated depreciation | (57,619 | ) | (35,303 | ) | |||
Operating real estate, net | 1,666,353 | 2,085,157 | |||||
Cash and cash equivalents | 149,166 | 283,844 | |||||
Restricted cash | 11,393 | 20,871 | |||||
Receivables, net of allowance of $518 and $115 as of September 30, 2016 and December 31, 2015, respectively | 14,981 | 9,663 | |||||
Unbilled rent receivable | 10,258 | 5,869 | |||||
Assets held for sale | 50,323 | 6,094 | |||||
Derivative assets, at fair value | 7,346 | 23,792 | |||||
Intangible assets, net | 163,049 | 241,519 | |||||
Other assets, net | 8,890 | 6,241 | |||||
Total assets | $ | 2,081,759 | $ | 2,683,050 | |||
Liabilities | |||||||
Mortgage and other notes payable, net | $ | 1,233,195 | $ | 1,424,610 | |||
Senior notes, net | 66,928 | 333,798 | |||||
Accounts payable and accrued expenses | 33,945 | 39,964 | |||||
Due to related party | 3,655 | 3,995 | |||||
Derivative liabilities, at fair value | 1,881 | — | |||||
Intangible liabilities, net | 34,443 | 40,718 | |||||
Liabilities held for sale | 855 | — | |||||
Other liabilities | 43,043 | 42,654 | |||||
Total liabilities | 1,417,945 | 1,885,739 | |||||
Commitments and contingencies | |||||||
Redeemable non-controlling interest | 1,711 | 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 September 30, 2016 and December 31, 2015 | — | — | |||||
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 58,036,214 and 59,325,730 shares issued and outstanding as of September 30, 2016 and December 31, 2015, respectively | 580 | 593 | |||||
Additional paid-in capital | 949,748 | 968,662 | |||||
Retained earnings (accumulated deficit) | (288,403 | ) | (186,246 | ) | |||
Accumulated other comprehensive income (loss) | (8,246 | ) | 2,560 | ||||
Total NorthStar Realty Europe Corp. stockholders’ equity | 653,679 | 785,569 | |||||
Non-controlling interests | 8,424 | 10,173 | |||||
Total equity | 662,103 | 795,742 | |||||
Total liabilities and equity | $ | 2,081,759 | $ | 2,683,050 |
Net income (loss) attributable to common stockholders | $ | (12,721 | ) |
Non-controlling interests | (49 | ) | |
Adjustments: | |||
Depreciation and amortization items(1) | 20,870 | ||
Unrealized (gain) loss from fair value adjustments(2) | 5,182 | ||
Realized (gain) loss on investments(3) | (3,914 | ) | |
Transaction costs and other(4) | 4,564 | ||
CAD | $ | 13,932 | |
CAD per share(5) | $ | 0.23 |
(1) | Represents an adjustment to exclude depreciation and amortization of $14.0 million, net amortization of above/below market leases of $(0.1) million, amortization of deferred financing costs of $1.8 million and amortization of equity-based compensation of $5.2 million. |
(2) | Excludes unrealized loss relating to cash payment on derivatives. |
(3) | Represents an adjustment to exclude a $5.0 million realized net loss related to the sale of real estate investment, a $11.5 million realized net gain related to foreign currency transactions, a $0.3 million realized loss related to the write-off of the deferred financing costs associated with the repurchase of the Senior Notes and a $2.3 million realized loss related to the write-off of the deferred financing costs associated with the repayment of our mortgage and other note payables. |
(4) | Represents an adjustment to exclude $0.3 million of transaction costs and $4.3 million of taxes associated with the capital gain tax on the sale of real estate investments. |
(5) | Based on a weighted average number of shares of 60.5 million (common shares outstanding, including LTIPs and RSUs not subject to performance hurdles) for the three months ending September 30, 2016. |
Rental income | $ | 29,798 | |
Escalation income | 7,828 | ||
Other revenue | 149 | ||
Total property and other revenues | 37,775 | ||
Properties - operating expenses | 9,493 | ||
Adjustments: | |||
Amortization and other items(1) | 166 | ||
NOI | $ | 28,448 |
(1) | Primarily includes $0.1 million of amortization of above/below market rent. |
(2) | The following table presents a reconciliation of NOI of NRE’s real estate segment to net income (loss) for the three months ended September 30, 2016 (dollars in thousands): |
NOI | $ | 28,448 | |
Adjustments: | |||
Interest expense | (7,132 | ) | |
Other expenses | (2,850 | ) | |
Depreciation and amortization | (13,989 | ) | |
Unrealized gain (loss) on investments and other | (4,330 | ) | |
Realized gain (loss) on investments and other | 4,190 | ||
Other items | (517 | ) | |
Net income (loss) - Real estate segment | $ | 1,165 | |
Remaining segments(i) | (13,935 | ) | |
Net income (loss) | $ | (12,770 | ) |
(i) | Represents the net income (loss) in NRE’s corporate segments to reconcile to total net income (loss). |
Total equity | $ | 662,103 | |
Adjustments | |||
Operating real estate and net intangibles | (1,829,394 | ) | |
Fair value of properties | 2,148,819 | ||
IFRS NAV | 981,528 | ||
Diluted NAV, after the exercise of options, convertibles and other equity interests | 981,528 | ||
Fair value of financial instruments | (5,421 | ) | |
EPRA NAV | 976,107 | ||
EPRA NAV per share(1) | $ | 16.60 |
(1) | Based on 58.8 million total common shares outstanding as of September 30, 2016, including LTIPs and RSUs not subject to performance hurdles. |
1. | - Core portfolio comprises primarily office properties in Germany, the United Kingdom and France. |
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. FX rates used as of September 30, 2016. |
3. | EPRA = European Public Real Estate Association. |