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) |
(d) | Exhibits. |
Exhibit No. | Description |
99.1 | NorthStar Realty Europe Press Release, dated March 15, 2017 |
NorthStar Realty Europe Corp. (Registrant) | ||
Date: March 15, 2017 | By: | /s/ Trevor K. Ross |
Trevor K. Ross General Counsel and Secretary |
Exhibit No. | Description | |
99.1 | NorthStar Realty Europe Press Release, dated March 15, 2017 |
• | U.S. GAAP net income to common stockholders of $13.9 million, or $0.24 per diluted share for the fourth quarter 2016 and net loss to common stockholders for the year ended 2016 of $(61.8) million or $(1.07) per diluted share |
• | Cash available for distribution (“CAD”) of $9.9 million, or $0.17 per share for the quarter and $0.87 per share for the full year |
• | Cushman & Wakefield LLP1 issued an independent third party year-end valuation of approximately $2.0 billion for NRE’s real estate portfolio (“Portfolio Market Value”), in line with the mid-year valuation |
• | Continued progress of NRE’s capital recycling plan with 19 non-strategic properties sold since January 2016 through March 1, 2017 for a combined sales price in excess of $445 million, a slight premium to the latest available independent valuation |
• | Fully settled $340 million 4.625% senior stock-settable notes in cash |
• | Fourth quarter 2016 cash dividend of $0.15 per share |
• | Approximately 27,000 sqm (7% of the portfolio) leased or renewed in 2016 |
• | On January 10, 2017, NRE’s manager completed a tri-party merger to form Colony NorthStar, Inc. |
• | Since January 2016 through March 1, 2017, NRE sold 19 non-strategic properties for a combined sales price in excess of $445 million, representing a slight premium to the latest available independent valuation. |
• | As of March 1, 2017, NRE owned 30 properties across six countries valued at approximately $2.0 billion based on the Portfolio Market Value. |
• | As of December 31, 2016, adjusted for sales through March 1, 2017, NRE’s overall portfolio was 84%2 occupied with a 6.2 year weighted average remaining contractual lease term. |
• | As of December 31, 2016, NRE’s core portfolio3 of predominantly prime office properties represented 88% of the overall Portfolio Market Value and 83% of rental income. The core portfolio was 92% occupied with a 6.8 year weighted average remaining contractual lease term. |
• | Net income to common stockholders for the fourth quarter 2016 totaled $13.9 million and net operating income, or NOI, was $23.9 million. For more information and a reconciliation of NOI to net income attributable to common stockholders, please refer to the tables on the following pages. |
• | As of December 31, 2016, total equity was $600 million (U.S. GAAP depreciated value), or $10.67 per diluted share. |
• | EPRA4 net asset value, or EPRA NAV, of $15.88 per diluted share as of December 31, 2016, based on the Portfolio Market Value. The change compared to the third quarter of 2016 being primarily due to foreign exchange translation that was partially offset by the impact of share repurchases and a slight uplift in the year-end independent valuation. For more information and a reconciliation of EPRA NAV to total equity, please refer to the tables on the following pages. |
• | We seek to mitigate foreign currency exposure to NRE’s cash flow through FX forward contracts. |
• | Unrestricted cash as of December 31, 2016 was approximately $66.3 million. Unrestricted cash as of March 13, 2017 was approximately $55.7 million. |
• | During the fourth quarter 2016, NRE repaid its outstanding 4.625% senior stock-settable notes in cash, generating approximately $16 million of interest savings on an annual basis going forward. |
• | No borrowings are outstanding under NRE’s revolving credit facility as of March 13, 2017. |
• | 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. For the year ended December 31, 2016, NRE repurchased 5.7 million shares of its common stock for approximately $59 million at a weighted average price of $10.36 per share. From November 2015 through December 31, 2016, NRE repurchased 9.3 million shares of its common stock for approximately $100 million at a weighted average price of $10.71 per share. |
• | 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 December 31, 2016, NRE had 56.2 million total common shares outstanding, including LTIPs and RSUs not subject to performance hurdles. |
• | On January 10, 2017, NRE’s external manager, NorthStar Asset Manager Group Inc. (“NSAM”), completed a tri-party merger with NorthStar Realty Finance Corp. (“NorthStar Realty”) and Colony Capital, Inc. (“Colony”), under which the companies combined in an all-stock merger of equals transaction. Under the terms of the merger agreement, NSAM, Colony and NorthStar Realty, through a series of transactions, merged with and into NSAM, which was renamed Colony NorthStar, Inc. (NYSE: CLNS). Colony NorthStar, Inc. is a leading global equity REIT with an embedded investment management platform. |
Three Months Ended December 31, | |||||||
2016(1) | 2015(1) | ||||||
Revenues | |||||||
Rental income | $ | 25,700 | $ | 37,098 | |||
Escalation income | 5,347 | 6,825 | |||||
Other revenue | 823 | 200 | |||||
Total revenues | 31,870 | 44,123 | |||||
Expenses | |||||||
Properties - operating expenses | 8,628 | 9,794 | |||||
Interest expense | 7,955 | 14,738 | |||||
Transaction costs | (23 | ) | 10,358 | ||||
Impairment losses | — | 1,710 | |||||
Management fee, related party(2) | 3,520 | 2,333 | |||||
Other expenses | 2,797 | 5,203 | |||||
General and administrative expenses | 2,900 | 1,369 | |||||
Compensation expense | 7,029 | 850 | |||||
Depreciation and amortization | 13,715 | 21,439 | |||||
Total expenses | 46,521 | 67,794 | |||||
Other income (loss) | |||||||
Unrealized gain (loss) on investments and other | 9,613 | 2,622 | |||||
Realized gain (loss) on investments and other | 19,166 | 1,413 | |||||
Income (loss) before income tax benefit (expense) | 14,128 | (19,636 | ) | ||||
Income tax benefit (expense) | (226 | ) | (14,544 | ) | |||
Net income (loss) | 13,902 | (34,180 | ) | ||||
Net (income) loss attributable to non-controlling interests | (43 | ) | 231 | ||||
Net income (loss) attributable to NorthStar Realty Europe Corp. common stockholders | $ | 13,859 | $ | (33,949 | ) | ||
Earnings (loss) per share: | |||||||
Basic | $ | 0.25 | $ | (0.55 | ) | ||
Diluted | $ | 0.24 | $ | (0.55 | ) | ||
Weighted average number of shares: | |||||||
Basic | 54,766,995 | 62,183,638 | |||||
Diluted | 55,455,164 | 62,865,124 |
(1) | The consolidated financial statements for the three months ended December 31, 2016 and for the period from November 1, 2015 to December 31, 2015 represent NRE’s results of operations following the spin-off on October 31, 2015. The consolidated financial statements for the period from October 1, 2015 to October 31, 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 December 31, 2016 may not be comparable to 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 NRE’s manager, which refers to NorthStar Asset Management Group Inc. for the period prior to the mergers (between NorthStar Asset Management Group Inc., NorthStar Realty Finance Corp. and Colony NorthStar, Inc.) and Colony NorthStar, Inc. for the period subsequent to the mergers. |
Year Ended Ended December 31, | |||||||
2016(1) | 2015(1) | ||||||
Revenues | |||||||
Rental income | $ | 124,321 | $ | 101,023 | |||
Escalation income | 25,173 | 18,822 | |||||
Other revenue | 1,721 | 694 | |||||
Total revenues | 151,215 | 120,539 | |||||
Expenses | |||||||
Properties - operating expenses | 35,892 | 26,559 | |||||
Interest expense | 41,439 | 36,129 | |||||
Transaction costs | 2,610 | 120,101 | |||||
Impairment losses | 27,468 | 1,710 | |||||
Management fee, related party(2) | 14,068 | 2,333 | |||||
Other expenses | 12,376 | 10,535 | |||||
General and administrative expenses | 8,077 | 3,502 | |||||
Compensation expense | 19,257 | 850 | |||||
Depreciation and amortization | 64,979 | 56,283 | |||||
Total expenses | 226,166 | 258,002 | |||||
Other income (loss) | |||||||
Unrealized gain (loss) on investments and other | (11,257 | ) | (8,731 | ) | |||
Realized gain (loss) on investments and other | 26,448 | 1,376 | |||||
Income (loss) before income tax benefit (expense) | (59,760 | ) | (144,818 | ) | |||
Income tax benefit (expense) | (2,742 | ) | 675 | ||||
Net income (loss) | (62,502 | ) | (144,143 | ) | |||
Net (income) loss attributable to non-controlling interests | 749 | 1,007 | |||||
Net income (loss) attributable to NorthStar Realty Europe Corp. common stockholders | $ | (61,753 | ) | $ | (143,136 | ) | |
Earnings (loss) per share: | |||||||
Basic | $ | (1.07 | ) | $ | (2.30 | ) | |
Diluted | $ | (1.07 | ) | $ | (2.30 | ) | |
Weighted average number of shares: | |||||||
Basic | 57,875,479 | 62,183,638 | |||||
Diluted | 58,564,986 | 62,865,124 |
(1) | The consolidated financial statements for the year ended December 31, 2016 and for the period from November 1, 2015 to December 31, 2015 represent NRE’s results of operations following the spin-off on October 31, 2015. The consolidated financial statements for the period from January 1, 2015 to October 31, 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 year ended December 31, 2016 may not be comparable to NRE’s results of operations reported for the prior periods presented. |
(2) | NRE began paying fees on November 1, 2015, in connection with the management agreement with NRE’s manager, which refers to NorthStar Asset Management Group Inc. for the period prior to the mergers (between NorthStar Asset Management Group Inc., NorthStar Realty Finance Corp. and Colony NorthStar, Inc.) and Colony NorthStar, Inc. for the period subsequent to the mergers. |
December 31, | |||||||
2016 | 2015 | ||||||
Assets | |||||||
Operating real estate, gross | $ | 1,614,432 | $ | 2,120,460 | |||
Less: accumulated depreciation | (63,585 | ) | (35,303 | ) | |||
Operating real estate, net | 1,550,847 | 2,085,157 | |||||
Cash and cash equivalents | 66,308 | 283,844 | |||||
Restricted cash | 10,242 | 20,871 | |||||
Receivables, net of allowance of $553 and $115 as of December 31, 2016 and 2015, respectively | 6,015 | 9,663 | |||||
Unbilled rent receivable | — | 5,869 | |||||
Assets held for sale | 28,208 | 6,094 | |||||
Derivative assets, at fair value | 13,729 | 23,792 | |||||
Intangible assets, net | 148,403 | 241,519 | |||||
Other assets, net | 21,640 | 6,241 | |||||
Total assets | $ | 1,845,392 | $ | 2,683,050 | |||
Liabilities | |||||||
Mortgage and other notes payable, net | $ | 1,149,119 | $ | 1,424,610 | |||
Senior notes, net | — | 333,798 | |||||
Accounts payable and accrued expenses | 28,004 | 39,964 | |||||
Due to related party | 4,991 | 3,995 | |||||
Intangible liabilities, net | 30,802 | 40,718 | |||||
Liabilities held for sale | 2,041 | — | |||||
Other liabilities | 28,918 | 42,654 | |||||
Total liabilities | 1,243,875 | 1,885,739 | |||||
Commitments and contingencies | |||||||
Redeemable non-controlling interest | 1,610 | 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 December 31, 2016 and 2015 | — | — | |||||
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 55,395,143 and 59,325,730 shares issued and outstanding as of December 31, 2016 and 2015, respectively | 554 | 593 | |||||
Additional paid-in capital | 925,473 | 968,662 | |||||
Retained earnings (accumulated deficit) | (282,769 | ) | (186,246 | ) | |||
Accumulated other comprehensive income (loss) | (51,424 | ) | 2,560 | ||||
Total NorthStar Realty Europe Corp. stockholders’ equity | 591,834 | 785,569 | |||||
Non-controlling interests | 8,073 | 10,173 | |||||
Total equity | 599,907 | 795,742 | |||||
Total liabilities and equity | $ | 1,845,392 | $ | 2,683,050 |
December 31, 2016 | ||||||
Three Months Ended | Year Ended | |||||
Net income (loss) attributable to common stockholders | 13,859 | (61,753 | ) | |||
Non-controlling interests | 43 | (749 | ) | |||
Adjustments: | ||||||
Depreciation and amortization items(1) | 22,609 | 93,913 | ||||
Impairment losses | — | 27,468 | ||||
Unrealized (gain) loss from fair value adjustments | (9,613 | ) | 11,257 | |||
Realized (gain) loss on investments(2) | (18,858 | ) | (27,235 | ) | ||
Transaction costs and other(3) | 1,884 | 9,217 | ||||
CAD(4) | $ | 9,924 | $ | 52,118 | ||
CAD per share(5) | $ | 0.17 | $ | 0.87 |
(1) | Three months ended December 31, 2016 represents an adjustment to exclude depreciation and amortization of $13.7 million, net amortization of above/below market leases of $0.3 million, amortization of deferred financing costs of $1.6 million and amortization of equity-based compensation of $7.0 million. Year ended December 31, 2016 represents an adjustment to exclude depreciation and amortization of $65.0 million, net amortization of above/below market leases of $2.6 million, amortization of deferred financing costs of $7.1 million and amortization of equity-based compensation of $19.3 million. |
(2) | Three months ended December 31, 2016 includes an adjustment to exclude a $15.8 million realized net gain related to the sale of real estate investment, a $4.5 million realized net gain related to foreign currency transactions, a $1.5 million realized loss related to the write-off of the deferred financing costs associated with the repayment of our mortgage and other note payables and excludes $0.3 million of realized gain on the net cash received from derivatives. Year ended December 31, 2016 includes an adjustment to exclude a $18.6 million realized net gain related to the sale of real estate investment, a $16.0 million realized net gain related to foreign currency transactions, a $7.3 million realized loss related to the write-off of the deferred financing costs associated with the repayment of our mortgage and other note payables and excludes a $0.8 million realized loss on the net cash received from derivatives. |
(3) | Three months ended December 31, 2016 represents an adjustment to exclude $0.9 million of bad debt expense and $1.0 million of taxes associated with the capital gain tax on the sale of real estate investments. Year ended December 31, 2016 represents an adjustment to exclude $1.3 million of bad debt expense, $2.6 million of transaction expense and $5.3 million of taxes associated with the capital gain tax on the sale of real estate investments. |
(4) | CAD for the three months ended December 31, 2016 included the following items: (i) property operating expenses of approximately $(2.2) million, or $(0.03) per share and; (ii) audit and other corporate G&A expenses of $0.4 million or ($0.01) per diluted share. The fourth quarter CAD includes an element of non-recurring expenses that we do not anticipate being the run-rate in the future. Excluding these non-recurring expenses, CAD per share for the fourth quarter 2016 would have been approximately $0.21 per share. |
(5) | CAD per share for the three months ending December 31, 2016 based on 57.1 million shares representing a weighted average number of shares. CAD per share for the year ended December 31, 2016 based on a weighted average number of shares of 60.0 million (common shares outstanding, including LTIPs and RSUs not subject to performance hurdles) for the year ending December 31, 2016. |
December 31, 2016 | |||||||
Three Months Ended | Year Ended | ||||||
Rental income | $ | 25,700 | $ | 124,321 | |||
Escalation income | 5,347 | 25,173 | |||||
Other revenue | 823 | 1,721 | |||||
Total property and other revenues | 31,870 | 151,215 | |||||
Properties - operating expenses | 8,628 | 35,892 | |||||
Adjustments: | |||||||
Amortization and other items(1) | 691 | 3,756 | |||||
NOI | $ | 23,933 | $ | 119,079 |
(1) | Three months ended December 31, 2016 primarily includes $0.9 million bad debt expense, offset by $0.2 million of amortization of above/below market rent. Year ended December 31, 2016 primarily includes $1.3 million bad debt expense and $2.5 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 and year ended December 31, 2016 (dollars in thousands): |
December 31, 2016 | ||||||
Three Months Ended | Year Ended | |||||
NOI | $ | 23,933 | $ | 119,079 | ||
Adjustments: | ||||||
Interest expense | (6,734 | ) | (30,974 | ) | ||
Other expenses | (2,770 | ) | (12,307 | ) | ||
Depreciation and amortization | (13,716 | ) | (64,979 | ) | ||
Unrealized gain (loss) on investments and other | 3,675 | (15,040 | ) | |||
Realized gain (loss) on investments and other | 20,616 | 32,019 | ||||
Income tax benefit (expense) | (227 | ) | (2,742 | ) | ||
Other items | (457 | ) | (31,054 | ) | ||
Net income (loss) - Real estate segment | $ | 24,320 | $ | (5,998 | ) | |
Remaining segments(i) | (10,461 | ) | (55,755 | ) | ||
Net income (loss) attributable to common stockholders | $ | 13,859 | $ | (61,753 | ) |
(i) | Represents the net income (loss) in our corporate segment to reconcile to total net income (loss). |
Total equity | $ | 599,907 | |
Adjustments | |||
Operating real estate and net intangibles | (1,697,515 | ) | |
Fair value of properties | 1,999,491 | ||
IFRS NAV | 901,883 | ||
Diluted NAV, after the exercise of options, convertibles and other equity interests | 901,883 | ||
Fair value of financial instruments | (8,659 | ) | |
EPRA NAV | 893,224 | ||
Total equity per diluted share(1) | 10.67 | ||
EPRA NAV per diluted share(1) | $ | 15.88 |
(1) | Based on 56.2 million total common shares outstanding as of December 31, 2016, including LTIPs and RSUs not subject to performance hurdles. |
1. | The external third-party valuation 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 valuation assumes that certain properties would be purchased through |
2. | Based on rent roll as of December 31, 2016. FX rates used as of December 31, 2016: EUR/USD = 1.05155, GBP/USD = 1.23363. |
3. | Core portfolio comprises primarily office properties in Germany, the United Kingdom and France. |
4. | EPRA = European Public Real Estate Association. |