10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2017

Commission File Number: 001-37597

NORTHSTAR REALTY EUROPE CORP.

(Exact Name of Registrant as Specified in its Charter)

Maryland (State or Other Jurisdiction of Incorporation or Organization) 32-0468861 (IRS Employer Identification No.)

399 Park Avenue, 18th Floor, New York, NY 10022

(Address of Principal Executive Offices, Including Zip Code)

(212) 547-2600

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x    No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x    No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer x Non-accelerated filer o (Do not check if a smaller reporting company) Smaller reporting company o Emerging growth company x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No x

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date:

The Company has one class of common stock, $0.01 par value per share, 55,260,911 shares outstanding as of August 3, 2017.

NORTHSTAR REALTY EUROPE CORP.

FORM 10-Q

TABLE OF CONTENTS

Index		Page
Part I.	Financial Information	5
Item 1.	Financial Statements	5
	Consolidated Balance Sheets as of June 30, 2017 (unaudited) and December 31, 2016	5
	Consolidated Statements of Operations (unaudited) for the three and six months ended June 30, 2017 and 2016	6
	Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three and six months ended June 30, 2017 and 2016	7
	Consolidated Statements of Equity for the six months ended June 30, 2017 (unaudited) and the year ended December 31, 2016	8
	Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2017 and 2016	9
	Notes to Consolidated Financial Statements (unaudited)	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	53
Item 4.	Controls and Procedures	55
Part II.	Other Information	55
Item 1.	Legal Proceedings	55
Item 1A.	Risk Factors	55
Item 2.	Purchases of Equity Securities by Affiliated Purchasers	56
Item 4.	Mine Safety Disclosures	57
Item 6.	Exhibits	58
Signatures		59

2

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, or Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or Exchange Act. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “seek,” “anticipate,” “estimate,” “believe,” “could,” “project,” “predict,” “continue,” “future” or other similar words or expressions. Forward-looking statements are not guarantees of performance and are based on certain assumptions, discuss future expectations, describe plans and strategies, contain projections of results of operations or of financial condition or state other forward-looking information. Such statements include, but are not limited to, those relating to the operating performance of our investments, our liquidity and financing needs, the effects of our current strategies and investment activities, our ability to grow our business, our expected leverage, our expected cost of capital, our ability to divest non-strategic properties, our management’s track record and our ability to raise and effectively deploy capital. Our ability to predict results or the actual effect of plans or strategies is inherently uncertain, particularly given the economic environment. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements and you should not unduly rely on these statements. These forward-looking statements involve risks, uncertainties and other factors that may cause our actual results in future periods to differ materially from those forward-looking statements. These factors include, but are not limited to:

• the effect of economic conditions, particularly in Europe, on the valuation of our investments and on the tenants of the real property that we own;

• the effect of the Mergers (as defined in Note 1) on our business;

• the ability of Colony NorthStar Inc., or CLNS, to scale its operations in Europe to effectively manage our company;

• the unknown impact of the exit of the United Kingdom, or Brexit, or one or more other countries from the European Union, or EU, or the potential default of one or more countries in the EU or the potential break-up of the EU;

• our ability to qualify and remain qualified as a real estate investment trust, or REIT;

• adverse domestic or international economic geopolitical conditions and the impact on the commercial real estate industry;

• volatility, disruption or uncertainty in the financial markets;

• access to debt and equity capital and our liquidity;

• our substantial use of leverage and our ability to comply with the terms of our borrowing arrangements;

• our ability to monetize our assets on favorable terms or at all;

• our ability to obtain mortgage financing on our real estate portfolio on favorable terms or at all;

• our ability to acquire attractive investment opportunities and the impact of competition for attractive investment opportunities;

• the effect of an increased amount of activist stockholders owning our stock and stockholder activism generally;

• the effects of being an externally-managed company, including our reliance on CLNS and its affiliates and sub-advisors/co-venturers in providing management services to us, the payment of substantial base management and incentive fees to our manager, the allocation of investments by CLNS among us and CLNS’s other sponsored or managed companies and strategic vehicles and various conflicts of interest in our relationship with CLNS;

• performance of our investments relative to our expectations and the impact on our actual return on invested equity, as well as the cash provided by these investments and available for distribution;

• restrictions on our ability to engage in certain activities and the requirement that we may be required to access capital at inopportune times as a result of our borrowings;

• our ability to make borrowings under our credit facility;

• the impact of adverse conditions affecting office properties;

• illiquidity of properties in our portfolio;

• our ability to realize current and expected return over the life of our investments;

• tenant defaults or bankruptcy;

3

• any failure in our due diligence to identify all relevant facts in our underwriting process or otherwise;

• the impact of terrorism or hostilities involving Europe;

• our ability to manage our costs in line with our expectations and the impact on our cash available for distribution, or CAD, and net operating income, or NOI, of our properties;

• our ability to satisfy and manage our capital requirements;

• environmental and regulatory requirements, compliance costs and liabilities relating to owning and operating properties in our portfolio and to our business in general;

• effect of regulatory actions, litigation and contractual claims against us and our affiliates, including the potential settlement and litigation of such claims;

• changes in European, international and domestic laws or regulations governing various aspects of our business;

• our ability to effectively structure our investments in a tax efficient manner, including foreign, federal, state and local tax purposes;

• the impact that a rise in future interest rates may have on our floating rate financing;

• potential devaluation of foreign currencies, predominately the Euro and U.K. Pound Sterling, relative to the U.S. dollar due to quantitative easing in Europe, Brexit and/or other factors which could cause the U.S. dollar value of our investments to decline;

• general foreign exchange risk associated with properties located in European countries located outside of the Euro Area, including the United Kingdom;

• the loss of our exemption from the definition of an “investment company” under the Investment Company Act of 1940, as amended;

• CLNS’ ability to hire and retain qualified personnel and potential changes to key personnel providing management services to us;

• the lack of historical financial statements for properties we have acquired and may acquire in compliance with U.S. Securities and Exchange Commission, or SEC, requirements and U.S. generally accepted accounting principles, or U.S. GAAP, as well as the lack of familiarity of our tenants and third-party service providers with such requirements;

• the potential failure to maintain effective internal controls and disclosure controls and procedures;

• our status as an emerging growth company; and

• compliance with the rules governing REITs.

The foregoing list of factors is not exhaustive. All forward-looking statements included in this Quarterly Report on Form 10-Q are based on information available to us on the date hereof and we are under no duty to update any of the forward-looking statements after the date of this report to conform these statements to actual results.

Factors that could have a material adverse effect on our operations and future prospects are set forth in our filings with the SEC included in Part I, Item 1A. of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and in Part II, Item 1A. of this Form 10-Q, each under “Risk Factors.” The risk factors set forth in our filings with the SEC could cause our actual results to differ significantly from those contained in any forward-looking statement contained in this report.

4

PART I

Item 1.    Financial Statements

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

	June 30, 2017 (Unaudited)			December 31, 2016
Assets
Operating real estate, gross	$	1,738,608		$	1,614,432
Less: accumulated depreciation	(88,242		)	(63,585		)
Operating real estate, net	1,650,366			1,550,847
Preferred equity investments	34,064			—
Cash and cash equivalents	69,256			66,308
Restricted cash	10,654			10,242
Receivables, net of allowance of $579 and $553 as of June 30, 2017 and December 31, 2016, respectively	6,882			6,015
Assets held for sale	9,427			28,208
Derivative assets, at fair value	9,839			13,729
Intangible assets, net	149,352			148,403
Other assets, net	25,393			21,640
Total assets	$	1,965,233		$	1,845,392
Liabilities
Mortgage and other notes payable, net	$	1,232,354		$	1,149,119
Credit facility	23,000			—
Accounts payable and accrued expenses	26,778			28,004
Due to related party (refer to Note 6)	3,544			4,991
Derivative liabilities, at fair value	3,666			—
Intangible liabilities, net	31,010			30,802
Liabilities held for sale	—			2,041
Other liabilities	33,349			28,918
Total liabilities	1,353,701			1,243,875
Commitments and contingencies
Redeemable non-controlling interest (refer to Note 9)	1,749			1,610
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, 2017 and December 31, 2016	—			—
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 55,258,084 and 55,395,143 shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively	553			554
Additional paid-in capital	934,136			925,473
Retained earnings (accumulated deficit)	(325,158		)	(282,769		)
Accumulated other comprehensive income (loss)	(5,276		)	(51,424		)
Total NorthStar Realty Europe Corp. stockholders’ equity	604,255			591,834
Non-controlling interests	5,528			8,073
Total equity	609,783			599,907
Total liabilities, redeemable non-controlling interest and equity	$	1,965,233		$	1,845,392

Refer to accompanying notes to consolidated financial statements.

5

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands, Except Per Share Data)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Revenues
Rental income	$	26,025		$	33,990		$	51,561		$	68,823
Escalation income	5,558			5,908			10,719			11,998
Interest income	297			—			297			—
Other income	508			46			537			749
Total revenues	32,388			39,944			63,114			81,570
Expenses
Properties - operating expenses	7,680			8,540			15,002			17,771
Interest expense	6,722			11,641			13,105			24,183
Transaction costs	973			1,652			1,233			2,483
Impairment losses	—			27,468			—			27,468
Management fee, related party	3,572			3,500			7,131			7,000
Other expenses	2,608			3,041			4,608			6,731
General and administrative expenses	1,555			1,502			4,152			2,978
Compensation expense (1)	1,385			3,766			17,255			7,034
Depreciation and amortization	12,520			18,404			25,083			37,275
Total expenses	37,015			79,514			87,569			132,923
Other income (loss)
Unrealized gain (loss) on derivatives and other (refer to Note 11)	(7,655		)	1,159			(8,596		)	(14,594		)
Realized gain (loss) on sales and other	1,981			4,622			6,951			2,174
Income (loss) before income tax benefit (expense)	(10,301		)	(33,789		)	(26,100		)	(63,773		)
Income tax benefit (expense)	(237		)	(520		)	36			139
Net income (loss)	(10,538		)	(34,309		)	(26,064		)	(63,634		)
Net (income) loss attributable to non-controlling interests	91			400			267			743
Net income (loss) attributable to NorthStar Realty Europe Corp. common stockholders	$	(10,447	)	$	(33,909	)	$	(25,797	)	$	(62,891	)
Earnings (loss) per share:
Basic	$	(0.19	)	$	(0.57	)	$	(0.47	)	$	(1.06	)
Diluted	$	(0.19	)	$	(0.57	)	$	(0.47	)	$	(1.06	)
Weighted average number of shares:
Basic	55,023,535			59,115,895			54,928,364			59,266,850
Diluted	55,587,897			59,805,545			55,546,668			59,957,559
Dividends per share of common stock	$0.15			$0.15			$0.30			$0.30

____________________

(1) Compensation expense for the three and six months endedJune 30, 2017 and 2016 is comprised of equity-based compensation expenses. For the six months ended June 30, 2017, compensation expense includes the impact of substantially all time based and certain performance based awards vesting in connection with the change of control of the Manager (refer to Note 7).

Refer to accompanying notes to consolidated financial statements.

6

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Dollars in Thousands)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Net income (loss)	$	(10,538	)	$	(34,309	)	$	(26,064	)	$	(63,634	)
Other comprehensive income (loss):
Foreign currency translation adjustment, net	37,229			(32,363		)	46,473			(5,789		)
Total other comprehensive income (loss)	37,229			(32,363		)	46,473			(5,789		)
Comprehensive income (loss)	26,691			(66,672		)	20,409			(69,423		)
Comprehensive (income) loss attributable to non-controlling interests	(203		)	65			(325		)	469
Comprehensive income (loss) attributable to NorthStar Realty Europe Corp. common stockholders	$	26,488		$	(66,607	)	$	20,084		$	(68,954	)

Refer to accompanying notes to consolidated financial statements.

7

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(Dollars and Shares in Thousands)

	Common Stock					Additional Paid-in Capital			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Income (Loss)			Total NorthStar Stockholders’ Equity			Non-controlling Interests			Total Equity
	Shares		Amount
Balance as of December 31, 2015	59,326		$	593		$	968,662		$	(186,246	)	$	2,560		$	785,569		$	10,173		$	795,742
Reallocation of interest in Operating Partnership (refer to Note 9)	—		—			2,252			—			—			2,252			(2,252		)	—
Amortization of equity-based compensation	—		—			15,682			—			—			15,682			2,557			18,239
Issuance and vesting of restricted stock, net of tax withholding	1,731		17			(17		)	—			—			—			—			—
Tax withholding related to vesting of equity-based compensation	—		—			(2,546		)	—			—			(2,546		)	—			(2,546		)
Retirement of shares of common stock	(5,662	)	(56		)	(58,560		)	—			—			(58,616		)	—			(58,616		)
Other comprehensive income (loss)	—		—			—			—			(53,984		)	(53,984		)	(1,242		)	(55,226		)
Dividends on common stock and equity-based compensation	—		—			—			(34,770		)	—			(34,770		)	(414		)	(35,184		)
Net income (loss)	—		—			—			(61,753		)	—			(61,753		)	(749		)	(62,502		)
Balance as of December 31, 2016	55,395		554			925,473			(282,769		)	(51,424		)	591,834			8,073			599,907
Reallocation of interest in Operating Partnership (refer to Note 9)	—		—			1,801			—			—			1,801			(1,801		)	—
Conversion of Common Units to common stock (refer to Note 9)	238		3			2,796			—			—			2,799			(2,799		)	—
Amortization of equity-based compensation (refer to Note 7)	—		—			15,056			—			—			15,056			2,174			17,230
Issuance and vesting of restricted stock, net of tax withholding	486		5			(5		)	—			—			—			—			—
Tax withholding related to vesting of equity-based compensation	(861	)	(9		)	(10,985		)	—			—			(10,994		)	—			(10,994		)
Other comprehensive income (loss)	—		—			—			—			46,148			46,148			325			46,473
Dividends on common stock and equity-based compensation	—		—			—			(16,592		)	—			(16,592		)	(177		)	(16,769		)
Net income (loss)	—		—			—			(25,797		)	—			(25,797		)	(267		)	(26,064		)
Balance as of June 30, 2017 (unaudited)	55,258		$	553		$	934,136		$	(325,158	)	$	(5,276	)	$	604,255		$	5,528		$	609,783

Refer to accompanying notes to consolidated financial statements.

8

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

(Unaudited)

	Six Months Ended June 30,
	2017			2016
Cash flows from operating activities:
Net income (loss)	$	(26,064	)	$	(63,634	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	25,083			37,275
Amortization of deferred financing costs	1,689			3,789
Amortization of equity-based compensation	17,230			6,517
Allowance for uncollectible accounts	266			287
Unrealized (gain) loss on derivatives and other	8,596			14,594
Realized (gain) loss on sales and other	(6,951		)	(2,174		)
Impairment losses				27,468
Amortization of capitalized above/below market leases	533			2,318
Straight line rental income	(1,671		)	(3,825		)
Deferred income taxes, net	(310		)	(859		)
Changes in assets and liabilities:
Restricted cash	424			(4,142		)
Receivables	76			(4,788		)
Other assets	(1,850		)	(691		)
Accounts payable and accrued expenses	(4,914		)	(5,902		)
Due to related party	(1,447		)	(389		)
Other liabilities	2,702			2,914
Net cash provided by (used in) operating activities	13,392			8,758
Cash flows from investing activities:
Improvements of operating real estate	(5,552		)	(5,792		)
Origination of preferred equity investments	(34,064		)	—
Proceeds from sale of operating real estate	34,510			74,923
Other assets	(1,179		)	(10,691		)
Change in receivable	2,256			—
Changes in restricted cash	—			9,915
Net cash provided by (used in) investing activities	(4,029		)	68,355
Cash flows from financing activities:
Repayment of mortgage and other notes payable	(7,451		)	(32,088		)
Borrowings from credit facility	35,000			65,000
Repayment of credit facility	(12,000		)	(6,358		)
Repurchase of Senior Notes				(230,782		)
Payment of financing costs	(501		)	(2,271		)
Purchase of derivative instruments	—			(380		)
Settlement of derivatives	1,456			(1,195		)
Retirement of shares of common stock	—			(4,919		)
Tax withholding related to vesting of equity-based compensation	(10,994		)	(113		)
Dividends	(16,769		)	(17,986		)
Net cash provided by (used in) financing activities	(11,259		)	(231,092		)
Effect of foreign currency translation on cash and cash equivalents	4,844			(4,763		)
Net increase (decrease) in cash and cash equivalents	2,948			(158,742		)
Cash and cash equivalents—beginning of period	66,308			283,844
Cash and cash equivalents—end of period	$	69,256		$	125,102

Refer to accompanying notes to consolidated financial statements.

9

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands) (Continued)

(Unaudited)

	Six Months Ended June 30,
	2017		2016
Supplemental disclosure of non-cash investing and financing activities:
Reclassification of operating real estate to assets held for sale	$	8,468	$	276,513
Conversion of Common Units to common stock	2,799		—
Reclassification of intangibles to assets held for sale	959		37,394
Reclassification of other assets and liabilities to assets held for sale	—		7,593
Reclassification related to measurement adjustments/other	—		5,628
Retirement of shares of common stock	—		1,351
Reallocation of interest in Operating Partnership	1,801		1,360
Accrued capital expenditures and deferred assets	668		—
Reclassification from other assets to operating real estate	—		774

Refer to accompanying notes to consolidated financial statements.

10

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Formation and Organization

NorthStar Realty Europe Corp. (“NorthStar Europe” or the “Company”) (NYSE: NRE), a publicly-traded real estate investment trust (“REIT”), is a European focused commercial real estate company with predominantly prime office properties in key cities within Germany, the United Kingdom and France (the “Core Portfolio”). The Company’s objective is to provide its stockholders with stable and recurring cash flow supplemented by capital growth over time.

The Company is externally managed and advised by an affiliate of the Manager. References to “the Manager” refer to NorthStar Asset Management Group Inc. (“NSAM”) for the period prior to the Mergers (refer below) and Colony NorthStar, Inc. (“Colony NorthStar” or “CLNS”), for the period subsequent to the Mergers. As part of the Mergers, NSAM changed its name to Colony NorthStar, Inc.

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 has elected to be taxed, and will continue to conduct its operations so as to continue to qualify, as a REIT for U.S. federal income tax purposes.

All references herein to the Company refer to NorthStar Realty Europe Corp. and its consolidated subsidiaries, including the Operating Partnership, collectively, unless the context otherwise requires.

Merger Agreements among NSAM, NorthStar Realty and Colony Capital, Inc.

On January 10, 2017, the Company’s external manager, NSAM, completed a tri-party merger with NorthStar Realty Finance Corp. (“NorthStar Realty”) and Colony Capital, Inc. (“Colony”), pursuant to which the companies combined in an all-stock merger (“the Mergers”) of equals transaction to create a diversified real estate and investment management company. 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 (NYSE: CLNS). Colony NorthStar is a leading global equity REIT with an embedded investment management platform.

2. Summary of Significant Accounting Policies

Basis of Quarterly Presentation

The accompanying unaudited consolidated financial statements and related notes of the Company have been prepared 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 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 statement 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 consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, which was filed with the Securities and Exchange Commission (the “SEC”).

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, the Operating Partnership and their 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.

11

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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 to determine whether they are a VIE. The Company analyzes 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 or through a simple majority vote.

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.

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 consolidated balance sheets and presented separately as net income (loss) and other comprehensive income (loss) (“OCI”) attributable to 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 consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that could affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates and assumptions.

Reclassifications

Certain prior period amounts have been reclassified in the consolidated financial statements to conform to current period presentation.

Comprehensive Income (Loss)

The Company reports consolidated comprehensive income (loss) in separate statements following the 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 the foreign currency translation adjustment, net.

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 and amounts related to the Company’s borrowings.

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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 improvements which 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 accounts for purchases of operating real estate that qualify as business combinations using the acquisition method, where the purchase price is allocated to tangible assets such as land, building, tenant and land improvements and other identified intangibles, such as in-place leases, above/below-market leases and goodwill. Costs directly related to an acquisition deemed to be a business combination are expensed and included in transaction costs in the consolidated statements of operations.

Operating real estate is depreciated using the straight-line method over the estimated useful lives of the assets, summarized as follows:

Category:	Term:
Building	40 years
Building improvements	Lesser of the useful life or remaining life of the building
Building leasehold interests	Lesser of 40 years or remaining term of the lease
Tenant improvements	Lesser of the useful life or remaining term of the lease

Preferred Equity Investments

Preferred equity investments are generally intended to be held to maturity and, accordingly, are carried at cost, net of unamortized loan fees, premium, discount and unfunded commitments, if any. Preferred equity investments that are deemed to be impaired are carried at amortized cost less a loan loss reserve, if deemed appropriate, which approximates fair value. Preferred equity investments where the Company does not have the intent to hold the investment for the foreseeable future or until its expected payoff are classified as held for sale and recorded at the lower of cost or fair value.

Assets and Liabilities Held For Sale

Operating real estate which has met the criteria to be classified as held for sale is separately presented on the 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 net of the intangible assets associated with the asset, with any write-down to fair value less cost to sell recorded as an impairment loss. Once a property is determined to be held for sale, depreciation is no longer recorded. The Company records a gain or loss on sale of real estate when title is conveyed to the buyer and the Company has no substantial economic involvement with the property. If the sales criteria for the full accrual method are not met, the Company defers some or all of the gain or loss recognition by applying the finance, leasing, profit sharing, deposit, installment or cost recovery method, as appropriate, until the sales criteria are met.

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. Costs related to revolving credit facilities are recorded in other assets and are amortized to interest expense using the straight-line basis over the term of the facility. Costs related to other borrowings are recorded net against the carrying value of such borrowings and are amortized into interest expense using 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 to realized gain (loss) on sales and other. Costs incurred in seeking financing transactions, which do not close, are expensed in the period in which it is determined that the financing will not occur. 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 are recorded to depreciation and amortization in the consolidated statements of operations.

Intangible Assets and Intangible Liabilities

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 net to rental income, the value of below-market ground leases is amortized into properties - operating expense and in-place leases is amortized into depreciation and amortization expense, respectively, in the consolidated statements of operations on a straight-line basis over the respective 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 analyzes goodwill for impairment on an annual basis and whenever events or changes in circumstances indicate that the carrying value of goodwill may not be fully recoverable. The Company first assesses

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(Unaudited)

qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit, related to such goodwill, is less than the carrying amount as a basis to determine whether the two-step impairment test is necessary. The first step in the impairment test compares the fair value of the reporting unit with its carrying amount. If the carrying amount exceeds fair value, the second step is required to determine the amount of the impairment loss, if any, by comparing the implied fair value of the reporting unit goodwill with the carrying amount of such goodwill. The implied fair value of goodwill is derived by performing a hypothetical purchase price allocation for the reporting unit as of the measurement date, allocating the reporting unit’s estimated fair value to its net assets and identifiable intangible assets. The residual amount represents the implied fair value of goodwill. To the extent this amount is below the carrying value of goodwill, an impairment loss is recorded in the consolidated statements of operations.

The following table presents identified intangibles as of June 30, 2017 and December 31, 2016 (dollars in thousands):

	June 30, 2017							December 31, 2016
	Gross Amount		Accumulated Amortization			Net		Gross Amount		Accumulated Amortization			Net
Intangible assets:
In-place lease	$	89,838	$	(36,364	)	$	53,474	$	84,743	$	(29,012	)	$	55,731
Above-market lease	38,108		(10,066		)	28,042		36,704		(8,198		)	28,506
Below-market ground lease	54,000		(1,132		)	52,868		51,218		(832		)	50,386
Goodwill(1)	14,968		N/A			14,968		13,780		N/A			13,780
Total	$	196,914	$	(47,562	)	$	149,352	$	186,445	$	(38,042	)	$	148,403
Intangible liabilities:
Below-market lease	$	36,517	$	(10,625	)	$	25,892	$	34,163	$	(8,104	)	$	26,059
Above-market ground lease	5,258		(140		)	5,118		4,839		(96		)	4,743
Total	$	41,775	$	(10,765	)	$	31,010	$	39,002	$	(8,200	)	$	30,802

_______________________

(1) Represents goodwill associated with certain share-deal acquisitions in exchange for shares in the underlying portfolios. The goodwill and a corresponding deferred tax liability was recorded at acquisition based on tax basis differences.

Other Assets and Other Liabilities

The following tables present a summary of other assets and other liabilities as of June 30, 2017 and December 31, 2016 (dollars in thousands):

	June 30, 2017		December 31, 2016
Other assets:
Prepaid expenses	$	3,521	$	1,951
Deferred costs, net	4,765		3,029
Deferred tax assets, net	267		—
Straight-line rent, net	12,613		10,182
Escrow receivable	3,185		6,168
Other	1,042		310
Total	$	25,393	$	21,640
	June 30, 2017		December 31, 2016
Other liabilities:
Deferred tax liabilities	$	9,795	$	8,916
Prepaid rent received and unearned revenue	16,626		13,585
Tenant security deposits	4,807		4,322
Prepaid escalation income	1,907		1,560
Other	214		535
Total	$	33,349	$	28,918

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(Unaudited)

Revenue Recognition

Operating Real Estate

Rental and escalation income from operating real estate is derived from leasing of space to various types of tenants. Rental revenue recognition commences when the tenant takes possession of the leased space and the leased space is substantially ready for its intended use. The leases are for fixed terms of varying length and generally provide for annual rentals, subject to indexation, 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 other assets, net on the consolidated balance sheets. The Company amortizes any tenant inducements as a reduction of revenue utilizing the straight-line method over the term of the lease. 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.

In a situation in which a lease or leases associated with a significant tenant have been, or are expected to be, terminated early, the Company evaluates the remaining useful life of depreciable or amortizable assets in the asset group related to the lease that will be terminated (i.e., tenant improvements, above and below market lease intangibles, in-place lease value and leasing commissions). Based upon consideration of the facts and circumstances surrounding the termination, the Company may write-off or accelerate the depreciation and amortization associated with the asset group. Such amounts are included within depreciation and amortization in the consolidated statements of operations.

Preferred Equity Investments

Interest income is recognized on an accrual basis and any related premium, discount, origination costs and fees are amortized over the life of the investment using the effective interest method. The amortization is reflected as an adjustment to interest income in the consolidated statements of operations. The amortization of a premium or accretion of a discount is discontinued if such investment is reclassified to held for sale.

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 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 losses in the consolidated statements of operations. For the three and six months endedJune 30, 2017, the Company did not recognize any impairment losses. For the three and six months ended June 30, 2016, the Company recognized $27.5 million of impairment losses.

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.

Preferred Equity Investments

Preferred equity investments are considered impaired when, based on current information and events, it is probable that the Company will not be able to collect all principal and interest amounts due according to the contractual terms. The Company assesses the credit quality of the portfolio and adequacy of investment loss reserves on a quarterly basis or more frequently as necessary. Significant judgment of the Company is required in this analysis. The Company considers the estimated net recoverable value of the investment as well as other factors, including but not limited to the fair value of any collateral, the amount and the status of any senior debt, the quality and financial condition of the borrower and the competitive situation of the area where the underlying collateral is located. Because this determination is based on projections of future economic events, which are inherently subjective, the amount ultimately realized may differ materially from the carrying value as of the balance sheet date. If upon completion of the assessment, the estimated fair value of the underlying collateral is less than the net carrying value of the investment, an investment loss reserve is recorded with a corresponding charge to provision for investment losses. The investment loss reserve for each investment is maintained at a level that is determined to be adequate by management to absorb probable losses.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Income recognition is suspended for an investment at the earlier of the date at which payments become 90-days past due or when, in the opinion of the Company, a full recovery of income and principal becomes doubtful. When the ultimate collectability of the principal of an impaired investment is in doubt, all payments are applied to principal under the cost recovery method. When the ultimate collectability of the principal of an impaired investment is not in doubt, contractual interest is recorded as interest income when received, under the cash basis method until an accrual is resumed when the investment becomes contractually current and performance is demonstrated to be resumed. Interest accrued and not collected will be reversed against interest income. An investment is written off when it is no longer realizable and/or legally discharged. As of June 30, 2017, the Company did not have any impaired preferred equity investments.

Equity-Based Compensation

The Company accounts for equity-based compensation awards 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 recognizes compensation expense over the vesting period on a straight-line basis or the attribution method depending if the grant is to an employee or non-employee. 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 recognizes 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 recognizes 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 estimates the fair value as if it were two separate awards. First, the Company estimates the probability of achieving the performance measure. If it is not probable the performance condition will be met, the Company records the compensation expense based on the fair value of the market measure, as described above. This expense is recorded even if the market-based measure is never met. If the performance-based measure is subsequently estimated to be achieved, the Company records compensation expense based on the performance-based measure. The Company would then record a cumulative catch-up adjustment for any additional compensation expense.

Equity-based compensation issued to non-employees is accounted for using the fair value of the award at the earlier of the performance commitment date or performance completion date. Time-based 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 seeks to use derivative instruments to manage exposure to interest rate risk and foreign currency exchange rate risk. The change in fair value for a derivative is recorded in unrealized gain (loss) on derivatives and other in the consolidated statements of operations.

The Company’s derivative instruments are recorded on the consolidated balance sheets at fair value and do not qualify as hedges under U.S. GAAP.

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 (“CTA”), net, is recorded as a component of accumulated OCI in the consolidated statements of equity. For the three months endedJune 30, 2017 and 2016, the Company reclassified $0.1 million and $0.3 million, respectively, of CTA to realized gain (loss) on sales and other in the consolidated statements of operations due to the sale of certain real estate assets. For the six months endedJune 30, 2017 and 2016, the Company reclassified $(0.3) million and $0.7 million, respectively, of CTA to realized gain (loss) on sales and other in the consolidated statements of operations due to the sale of certain real estate assets (refer to Note 3).

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 derivatives and other in the consolidated statements of operations.

Earnings Per Share

The Company’s basic earnings per share (“EPS”) is calculated by dividing net income (loss) attributable to common stockholders by the weighted average number of common stock outstanding. Diluted EPS includes restricted stock and the potential dilution

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(Unaudited)

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 owned by holders other than the Company (“Common Units”) and Common Units which are structured as profits interests (“LTIP Units” collectively referred to as Unit Holders) (refer to Note 7), where such exercise or conversion would result in a lower EPS. The dilutive effect of such RSUs and Unit Holders is calculated assuming all units are converted to common stock.

Income Taxes

The Company has elected to be taxed as a REIT for U.S. federal income tax purposes and will continue to comply with the related provisions of the Internal Revenue Code of 1986, as amended, the (“Internal Revenue 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. Under certain circumstances, federal income and excise taxes may be due on its undistributed taxable income. The Company distributes to its stockholders 100% of its taxable income and therefore no provision for U.S. federal income taxes has been included in the accompanying consolidated financial statements for the three and six months endedJune 30, 2017 and 2016. Dividends distributed for the three and six months endedJune 30, 2017 and 2016 were characterized, for U.S. federal income tax purposes, as ordinary income.

The Company conducts its business through foreign subsidiaries which may be subject to local level income tax in the European jurisdictions it operates. The Company has also elected taxable REIT subsidiary (“TRS”) status for one of the Company’s foreign subsidiaries. This enables the Company to provide services that would otherwise be considered impermissible for REITs and participate in activities that do not qualify as “rents from real property.” The TRS is not resident in the U.S. and, as such, not subject to U.S. taxation but is subject to foreign income taxes only. In addition, the REIT will not generally be subject to any additional U.S. taxes on the repatriation of its earnings.

For the Company’s foreign subsidiaries, including the Company’s foreign TRS, deferred tax assets and liabilities are established for temporary differences between the financial reporting basis and the foreign tax basis of assets and liabilities at the enacted tax rates expected to be in effect when the temporary differences reverse. The Company evaluates the realizability of its deferred tax assets (e.g. net operating loss) 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. Due to past and projected losses in certain local jurisdictions where the Company does not have carryback potential and/or cannot sufficiently forecast future taxable income, the Company recognized net cumulative valuation allowances against the Company’s deferred tax assets. The Company will continue to review its deferred tax assets in accordance with U.S. GAAP.

The Company recorded an income tax expense for the three months endedJune 30, 2017 and 2016 of $0.2 million and $0.5 million, respectively. The Company recorded an income tax benefit for the six months endedJune 30, 2017 and 2016 of an immaterial amount and $0.1 million, respectively.

Other

Refer to Note 2 of the consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 for further disclosure of the Company’s significant accounting policies.

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 has commenced the process of adopting the new revenue standard; including forming a project team and compiling an inventory of the sources of revenue the Company expects will be impacted by the adoption of this standard. The new revenue standard specifically excludes revenue streams for which specific guidance is stipulated in other sections of the codification, therefore it will not impact rental income or interest income generated on financial instruments such as preferred equity investments. The Company’s escalation income includes lease-related executory cost payments (payments for maintenance activities, including common area maintenance, such as cleaning services) which are considered non-lease components and subject to the new standard on revenue recognition. The Company expects to apply the revenue recognition guidance related to its non-lease components within leases on January 1, 2019, upon its

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(Unaudited)

adoption of the lease accounting update. The Company expects that the impact will be to the pattern of revenue recognition and not the total revenue recognized over time. The Company is still completing its assessment of the overall impact of adopting this update.

In February 2016, the FASB issued an accounting update that sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The update requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The update is expected to result in the recognition of a right-to-use asset and related liability to account for the Company’s future obligations under its ground lease arrangements for which it is the lessee. As of June 30, 2017, the Company has three ground lease agreements with annual payments of $0.6 million. Additionally, the new update will require that lessees and lessors capitalize, as initial direct costs, only those costs that are incurred due to the execution of a lease. Under this guidance, allocated payroll costs and other costs that are incurred regardless of whether the lease is obtained will no longer be capitalized as initial direct costs and instead will be expensed as incurred. Lessors will continue to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. The new guidance is to be applied using a modified retrospective approach at the beginning of the earliest comparative period in the financial statements and is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is evaluating the impact, if any, that this guidance will have on its consolidated financial position, results of operations and financial statement disclosures.

In March 2016, the FASB issued guidance clarifying that an assessment of whether an embedded contingent put or call option is clearly and closely related to a borrowing requires only an analysis of the four-step decision sequence. Additionally, entities are not required to separately assess whether the contingency itself is clearly and closely related. Entities are required to apply the guidance to existing instruments in scope using a modified retrospective transition method as of the period of adoption. The guidance is effective for fiscal years beginning after December 15, 2016 and interim periods within those years. The Company has adopted this guidance and it did not have any material impact on its consolidated financial position, results of operations and financial statement disclosures.

In March 2016, the FASB issued guidance which amends several aspects of the accounting for equity-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statements of cash flows. The guidance is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2016. The Company has adopted this guidance and it did not have a material impact on its consolidated financial position, results of operations and financial statement disclosures.

In June 2016, the FASB issued guidance that changes the impairment model for most financial instruments by requiring companies to recognize an allowance for expected losses, rather than incurred losses as required currently by the other-than-temporary impairment model. The guidance will apply to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt securities, net investments in leases and off-balance-sheet credit exposures (e.g., loan commitments). The new guidance is effective for reporting periods beginning after December 15, 2019 and will be applied as a cumulative adjustment to retained earnings as of the effective date. The Company is evaluating the impact, if any, that this guidance will have on its consolidated financial position, results of operations and financial statement disclosures.

In August 2016, the FASB issued guidance that makes eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. The guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The new guidance requires adoption on a retrospective basis unless it is impracticable to apply, in which case the Company would be required to apply the amendments prospectively as of the earliest date practicable. The Company does not expect the adoption of this standard to have a material impact on its consolidated statements of cash flows.

In November 2016, the FASB issued guidance which requires entities to show the changes in the total of cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. Entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. The guidance is effective for reporting periods beginning after December 15, 2017 and will be applied retrospectively to all periods presented. The Company does not expect the adoption of this standard to have a material impact on its consolidated statement of cash flows.

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(Unaudited)

In January 2017, the FASB issued guidance to clarify the definition of a business under ASC 805. This new standard clarifies the definition of a business and provides a screen to determine when an integrated set of assets and activities is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. The guidance is effective for fiscal years, and interim periods within those years, beginning December 15, 2017. The amendments in this update will be applied on a prospective basis. The Company expects that acquisitions of real estate or in-substance real estate will not meet the revised definition of a business because substantially all of the fair value is concentrated in a single identifiable asset or group of similar identifiable assets (i.e. land, buildings, and related intangible assets).

In January 2017, the FASB issued guidance which removes Step 2 from the goodwill impairment test. The guidance is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019.  The Company is evaluating the impact, if any, that this guidance will have on its consolidated financial position, results of operations and financial statement disclosures.

In February 2017, the FASB issued an accounting update which clarifies the scope of recently established guidance on nonfinancial asset derecognition, which applies to the derecognition of all nonfinancial assets and in-substance nonfinancial assets.  In addition, the guidance clarifies the accounting for partial sales of nonfinancial assets and in-substance nonfinancial assets to align with the new revenue recognition standard to be more consistent with the accounting for sale of a business. Specifically, in a partial sale to a noncustomer, when a noncontrolling interest is received or retained, the latter is considered a noncash consideration and measured at fair value, which would result in full gain or loss recognized upon sale. This guidance has the same effective date as the new revenue guidance, which is January 1, 2018, with early adoption permitted beginning January 1, 2017.  Both the revenue guidance and this update must be adopted concurrently.  While the transition method is similar to the new revenue guidance, either full retrospective or modified retrospective, the transition approach need not be aligned between both updates. The Company is evaluating the impact, if any, that this guidance will have on its consolidated financial position, results of operations and financial statement disclosures.

In May 2017, the FASB issued guidance clarifying when to account for a change to the terms or conditions of a share-based payment award as a modification.  The guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those years.  The Company is evaluating the impact, if any, that this guidance will have on its consolidated financial position, results of operations and financial statement disclosures.

3. Operating Real Estate

The following table presents operating real estate, net as of June 30, 2017 and December 31, 2016 (dollars in thousands):

	June 30, 2017 (Unaudited)			December 31, 2016
Land	$	387,254		$	360,555
Buildings and improvements	1,057,562			980,053
Building, leasehold interests and improvements	227,054			212,864
Furniture, fixtures and equipment	1,384			1,214
Tenant improvements	65,354			59,746
Operating real estate, gross	1,738,608			1,614,432
Less: accumulated depreciation	(88,242		)	(63,585		)
Operating real estate, net	$	1,650,366		$	1,550,847

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NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Real Estate Held for Sale

The following table summarizes the Company’s operating real estate held for sale as of June 30, 2017 (dollars in thousands):

			Assets(1)
Location	Type	Properties	Operating Real Estate, Net		Intangible Assets, Net		Total(2)
Spain(3)	Office	1	$	6,373	$	958	$	7,331
Netherlands	Office	1	2,095		1		2,096
Total		2	$	8,468	$	959	$	9,427

___________________

(1) The assets and liabilities classified as held for sale are expected to be sold on the open market as asset sales and share sales subject to standard industry terms and conditions. The assets contributed $0.3 million and $0.4 million of revenue and a loss before income tax benefit (expense) of $0.3 million and $0.1 millionfor the three months ended June 30, 2017 and 2016, respectively.

(2) Represents operating real estate and intangible assets, net of accumulated depreciation and amortization of $4.1 million prior to being reclassified into held for sale.

(3) Asset was subsequently sold in July 2017 for $9.0 million.

Real Estate Sales

For three months endedJune 30, 2017, the Company sold two non-core assets for $12.3 million. The Company received $11.7 million of proceeds, net of sales costs. In connection with the sales, for the three months endedJune 30, 2017, the Company recorded a $1.4 million realized gain in the Company’s consolidated statements of operations. As of June 30, 2017, there were $2.1 million in certain escrow accounts that were not held by the Company which the Company could potentially record as a realized gain.

For the six months endedJune 30, 2017, the Company sold three non-core assets for $33.2 million. The Company received $31.8 million of proceeds, net of sales costs. In connection with the sales, for the six months endedJune 30, 2017, the Company recorded a $4.1 million realized gain in the Company’s consolidated statements of operations. The Company also recorded an additional realized gain of $1.9 million for the six months endedJune 30, 2017 related to the release of escrow accounts from prior disposals.

4. Preferred Equity Investments

In May 2017, the Company partnered with a property developer in China to acquire 20 Gresham Street, a Class A office building in London, United Kingdom and the Company invested $34.1 million of preferred equity, which the Company accounts for as a debt investment.

The following table presents one preferred equity investment as of June 30, 2017 (dollars in thousands):

	June 30, 2017 (Unaudited)
Asset Type	Principal Amount		Carrying Value		Fixed Rate		Mandatory Redemption
Preferred equity investment	$	34,064	$	34,064	8.00	%	May 2020

Credit Quality Monitoring

The Company’s preferred equity investment is secured by interests in entities that directly own real estate properties, which serve as the primary source of cash for the payment of principal and interest. The Company evaluates its preferred equity investment at least quarterly and determines the relative credit quality principally based on: (i) whether the borrower is currently paying debt service in accordance with its contractual terms; and (ii) whether the Company believes the borrower will be able to perform under its contractual terms in the future, as well as the Company’s expectations as to the ultimate recovery of principal at maturity. The Company categorizes a preferred equity investment for which it expects to receive full payment of contractual principal and interest payments as “performing.” The Company will categorize a weaker credit quality preferred equity investment that is currently performing, but for which it believes future collection of all or some portion of principal and interest is in doubt, into a category called “performing with a loan loss reserve.” The Company will categorize a weaker credit quality preferred equity investment that is not performing, which the Company defines as a loan in maturity default and/or past due at least 90 days on its contractual debt service payments, as a non-performing loan (“NPL”).

As of June 30, 2017, the Company’s preferred equity investment was performing in accordance with the contractual terms of its governing documents, in all material respects, and was categorized as a performing loan. For the three and six months endedJune 30, 2017, the preferred equity investment contributed all interest income recorded on the consolidated statement of operations.

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NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

5. Borrowings

The following table presents borrowings as of June 30, 2017 and December 31, 2016 (dollars in thousands):

			June 30, 2017 (Unaudited)				December 31, 2016
	Final Maturity	Contractual Interest Rate(2)	Principal Amount		Carrying Value		Principal Amount		Carrying Value
Mortgage and other notes payable:(1)
U.K. Complex	Jan-20	GBP LIBOR + 1.75%	$	52,819	$	52,084	$	50,116	$	49,284
U.K. Complex - Mezzanine	Jan-20	8.325%	12,189		12,127		11,565		11,497
Trias Portfolio 1(3)(5)(8)	Apr-20	EURIBOR + 2.70%	12,107		11,854		9,477		13,301
Trias Portfolio 2(3)(5)	Dec-20	EURIBOR + 1.55%	81,615		81,429		78,952		78,708
Trias Portfolio 3(3)(5)	Apr-20	EURIBOR + 1.65%	43,539		42,240		45,170		39,568
Trias Portfolio 4(3)(5)	Apr-20	GBP LIBOR + 2.70%	16,697		16,314		15,843		15,446
SEB Portfolio 1(5)	Apr-22	EURIBOR + 1.80%	302,590		298,769		278,539		274,614
SEB Portfolio 2(5)	Apr-22	GBP LIBOR + 1.80%	241,724		238,613		229,353		226,078
SEB Portfolio - Preferred(4)	Apr-60	2.30%	97,800		97,492		90,033		89,720
Trianon Tower(5)	Jul-23	EURIBOR + 1.30%	376,949		375,356		347,012		345,422
Other - Preferred(6)	Oct-45	1.00%	6,684		6,076		6,151		5,481
Total mortgage and other notes payable			1,244,713		1,232,354		1,162,211		1,149,119
Credit Facility
Credit Facility	Apr-19(7)	LIBOR + 2.75%	23,000		23,000		—		—
Grand Total			$	1,267,713	$	1,255,354	$	1,162,211	$	1,149,119

________________________

(1) All mortgage notes and other notes payable are denominated in local currencies, as such, the principal amount generally increased due to the change in the Euro or U.K. Pound Sterling compared to the U.S. dollar. All borrowings are non-recourse and are interest-only through maturity, subject to compliance with covenants of the respective borrowing, and denominated in the same currency as the assets securing the borrowing.

(2) All floating rate debt is subject to interest caps of 0.5% for EURIBOR and 2.0% for GBP LIBOR which are used to manage interest rate exposure.

(3) Trias Portfolio represents the cross-collateralized borrowings among the IVG Portfolio, Internos Portfolio and Deka Portfolio. Such three portfolios were not under common control or management at the time of acquisition.

(4) Represents preferred equity certificates with a contractual interest rate of 2.3% through May 2019, which can be prepaid at that time without penalty in part or in full, which increases to EURIBOR plus 12.0% through May 2022 and subsequently to EURIBOR plus 15.0% through final maturity. Certain prepayments prior to May 2019 are subject to the payment of the unpaid coupon on outstanding principal amount through May 2019.

(5) Prepayment provisions include a fee based on principal amount ranging from 0.25% to 1.0% through December 2019 for the Trias Portfolio borrowings and 0.5% to 1.0% through April 2019 for the SEB Portfolio borrowings and 0.80% through June 30, 2017, 0.60% through June 30, 2018 and 0.30% through June 30, 2019 for Trianon Tower.

(6) Represents preferred equity certificates each with a fixed contractual interest rate of 1.0% per annum plus variable interest based on specified income levels associated with the German property companies of the Trias Portfolios which can be prepaid at any time without penalty through final maturity, which is thirty years from the issuance date.

(7) Subject to a one year extension at the discretion of the Company.

(8) In June 2017, the Company amended and restated the agreement to increase the loan amount by $5.1 million and reduce future minimum capital expenditure spending requirements.

The following table presents a reconciliation of principal amount to carrying value of the Company’s mortgage and other notes payable and Credit Facility as of June 30, 2017 and December 31, 2016 (dollars in thousands):

	June 30, 2017 (Unaudited)			December 31, 2016
Principal amount	$	1,267,713		$	1,162,211
Deferred financing costs, net	(12,359		)	(13,092		)
Carrying value	$	1,255,354		$	1,149,119

21

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The following table presents scheduled principal on borrowings, based on final maturity as of June 30, 2017 (dollars in thousands):

	Total		Mortgage and Other Notes Payable		Credit Facility
July 1 to December 31, 2017	$	—	$	—	$	—
Years ending December 31:
2018	—		—		—
2019	23,000		—		23,000
2020	218,967		218,967		—
2021	—		—		—
2022 and thereafter	1,025,746		1,025,746		—
Total	$	1,267,713	$	1,244,713	$	23,000

As of June 30, 2017 and December 31, 2016 the Company was in compliance with all of its financial covenants.

Senior Notes

In July 2015, the Company issued $340.0 million principal amount of 4.625% senior stock-settlable 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 were senior unsubordinated and unsecured obligations of the Company and NorthStar Realty and NorthStar Realty’s operating partnership guaranteed payments on the Senior Notes.

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 in equity in net transactions with NorthStar Realty. During 2016, the Company repurchased approximately $272.3 million of the Senior Notes, at a slight premium to par value, through privately negotiated transactions and settled the remaining Senior Notes in cash at maturity.

Credit Facility

In May 2016, the Company entered into a $75.0 million corporate revolving credit facility (the “Credit Facility”) with certain commercial bank lenders, with an initial one year term. The Credit Facility was secured by collateral relating to a borrowing base at that time and guarantees by certain subsidiaries of the Company. In October 2016, the Company permanently reduced the aggregate commitments under the Credit Facility to $35.0 million. In April 2017, the Company amended and restated the Credit Facility with aggregate commitments of $35 million and an initial two year term. The Credit Facility no longer contains a limitation on availability based on a borrowing base and the interest rate remains the same. The Credit Facility has an accordion feature, allowing the total facility to increase to $70 million. As of June 30, 2017, $23.0 million remained outstanding on the Credit Facility.

6.    Related Party Arrangements

Colony NorthStar, Inc.

Management Agreement

The Company entered into a management agreement with an affiliate of the Manager in November 2015 for an initial term of 20 years, which automatically renews for additional 20-year terms each anniversary thereafter unless earlier terminated. As asset manager, the Manager is responsible for the Company’s day-to-day operations, subject to supervision and management of the Company’s board of directors. Through its global network of subsidiaries and branch offices, the Manager performs services and engages in 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. The management agreement with the Manager provides for a base management fee and incentive fee.

Base Management Fee

For the three months endedJune 30, 2017 and 2016, the Company incurred $3.6 million and $3.5 million, respectively, related to the base management fee. For the six months endedJune 30, 2017 and 2016, the Company incurred $7.1 million and $7.0 million, respectively, related to the base management fee. As of June 30, 2017, $3.5 million is recorded in due to related party on the consolidated balance sheets. The base management fee to the Manager could increase subsequent to June 30, 2017 by an amount equal to 1.5% per annum of the sum of:

• any equity the Company issues in exchange or conversion of exchangeable or stock-settlable notes;

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NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

• 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”), if any, of the Company in excess of cumulative distributions paid on common stock, LTIP Units or other equity awards which began with the Company’s fiscal quarter ended March 31, 2016.

Incentive Fee

For the three and six months endedJune 30, 2017 and 2016, the Company did not incur an incentive fee. The incentive fee is 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, of any amount 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, of any amount 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 equity issuances are 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.

Additional Management Agreement Terms

The Company’s management agreement with the Manager provides that in the event of a change of control of the Manager or other event that could be deemed an assignment of the management agreement, the Company will consider such assignment in good faith and not unreasonably withhold, condition or delay the Company’s consent. The management agreement further provides that the Company anticipates consent would be granted for an assignment or deemed assignment to a party with expertise in commercial real estate and over $10 billion of assets under management. The management agreement also provides that, notwithstanding anything in the agreement to the contrary, to the maximum extent permitted by applicable law, rules and regulations, in connection with any merger, sale of all or substantially all of the assets, change of control, reorganization, consolidation or any similar transaction by the Company or the Manager, directly or indirectly, the surviving entity will succeed to the terms of the management agreement.

Payment of Costs and Expenses and Expense Allocation

The Company is responsible for all of its direct costs and expenses and reimburses the Manager for costs and expenses incurred by the Manager on the Company’s behalf. In addition, the Manager 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 the Manager (the “G&A Allocation”). The Company’s management agreement with the Manager provides that the amount of the G&A Allocation will not exceed the following: (i) 20% of the total of: (a) the Company’s general and administrative expenses as reported in their consolidated financial statements excluding: (1) equity-based compensation expense, (2) non-recurring items, (3) fees payable to the Manager under the terms of the applicable management agreement and (4) any allocation of expenses to the Company’s (“NRE’s G&A”); and (b) the Manager’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 the Manager; less (ii) NRE’s G&A. The G&A Allocation may include the Company’s allocable share of the Manager’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, based upon the percentage of time devoted by such personnel to the Company’s affairs. The G&A Allocation may also include rental and occupancy, technology, office supplies, travel and entertainment and other general and administrative costs and expenses, which may be allocated based on various methodologies, such as weighted average employee count or the percentage of time devoted by personnel to such the Company affairs. In addition, the Company will pay directly or reimburse the Manager for an allocable portion of any severance paid pursuant to any employment, consulting or similar service agreements in effect between the Manager and any of its executives, employees or other service providers.

The Company’s obligation to reimburse the Manager for the G&A Allocation and any severance, at the Manager’s discretion, and the 20% cap on the G&A Allocation, as described above, applies on an aggregate basis to the Company.

23

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

For the three and six months endedJune 30, 2017 and three months endedJune 30, 2016 the Manager did not allocate any general and administrative expenses to the Company. For the six months endedJune 30, 2016, the Manager allocated $0.1 million to the Company. For the three and six months endedJune 30, 2017 and 2016, the Manager did not allocate any severance to the Company.

In addition, the management agreement provides that the Company and any company spun-off from the Company, shall pay directly or reimburse the Manager for up to 50% of any long-term bonus or other compensation that the Manager’s compensation committee determines shall be paid and/or settled in the form of equity and/or equity-based compensation to executives, employees and service providers of the Managers’ during any year. Subject to this limitation and limitations contained in any applicable management agreement between the Manager and any company spun-off from the Company, the amount paid by the Company and any company spun-off from the Company will be determined by the Manager in its discretion. At the discretion of the Manager’s compensation committee, this 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; provided that if at any time a sufficient number of shares of the Company’s common stock are not available for issuance under the Company’s equity compensation plan, such compensation shall be paid in the form of RSUs, LTIP Units or other securities that may be settled in cash.The Company’s equity compensation for each year may be allocated on an individual-by-individual basis at the discretion of the Manager’s 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 does not have employment agreements with its named executive officers, but the Company has generally agreed to pay directly or reimburse the Manager for the portion of any severance paid by the Manager or any of its affiliates to an individual pursuant to the terms of any employment, consulting or similar service agreement, including any employment agreements with Colony NorthStar or its subsidiaries and its named executive officers, that corresponds to or is attributable to: (i) the equity compensation that the Company is required to pay directly or reimburse the Manager pursuant to the management agreement; (ii) any cash and/or equity compensation paid directly by the Company to such individual as an employee or other service provider of the Company; and (iii) any amounts paid to such individual by the Manager or any of its affiliates that the Company is obligated to reimburse the Manager pursuant to the management agreement. With respect to Mahbod Nia only, in lieu of the foregoing severance payment or reimbursement, the Company has agreed to pay directly or reimburse the Manager for 50% of any cash payments made by the Manager or any of its affiliates in connection with the termination of Mr. Nia’s employment either without cause or upon the non-renewal of Mr. Nia’s term of employment by the employer or by Mr. Nia for good reason; provided that the Company’s board of directors consented to the taking of such action (or, with respect to a termination for good reason, any action taken with the intent to create good reason). Because the Company’s obligation to pay these amounts is owed to the Manager and not directly to the Company’s named executive officers and the Company does not control the terms of the agreements between the Manager or its affiliates and the Company’s named executive officers, the discussion above does not include these amounts or a discussion of any arrangements that the Manager or its affiliates may have with the Company’s named executive officers pursuant to which our obligations to the Manager may arise.

Manager Ownership of Common Stock

As of June 30, 2017, Colony NorthStar and its subsidiaries owned 4,938,225 shares of the Company’s common stock, or approximately 9.0% of the total outstanding common stock.

7. Compensation Expense

The following summarizes the equity-based compensation for the three and six months endedJune 30, 2017 and 2016:

For the six months endedJune 30, 2017 and 2016, the Company recorded $17.3 million and $7.0 million, respectively, of equity-based compensation expense which is recorded in compensation expenses on the consolidated statements of operations. For the three months ended June 30, 2017 and 2016, the Company recorded $1.4 million and $3.8 million, respectively, of equity-based compensation expense which is recorded in compensation expenses on the consolidated statements of operations. In connection with the change of control of NSAM as a result of the Mergers, substantially all outstanding equity awards of the Company that were subject to vesting based solely on continued employment or services and a portion of the outstanding equity awards of the Company that were subject to vesting based on the achievement of additional performance-based criteria vested. As of June 30, 2017, equity-based compensation expense to be recognized over the remaining vesting period through January 2020 is $9.3 million, provided there are no additional forfeitures.

2015 Omnibus Stock Incentive Plan

Pursuant to the NorthStar Realty Europe Corp. 2015 Omnibus Stock Incentive Plan (the “2015 Plan”), the Company may issue equity awards to directors, officers, employees, co-employees, consultants and advisors of the Company, the Manager or of any

24

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

parent or subsidiary who provides services to the Company. The number of shares that may be issued under the 2015 Plan equals 10 million shares of common stock, plus on January 1, 2017 and each January 1 thereafter, an additional 2% of the number of shares of common stock issued and outstanding on the immediately preceding December 31. In addition, shares of common stock underlying any awards that are forfeited, canceled, held back upon exercise of a stock option or settlement of an award to cover the exercise price or tax withholding, reacquired by the Company prior to vesting, satisfied without the issuance of common stock or otherwise terminated (other than by exercise) will be added back to the shares of common stock available for issuance under the 2015 Plan. As of June 30, 2017, under the 2015 Plan, a total of 1.2 million shares of common stock had been issued (net of forfeitures and shares held back for tax withholding), 1.7 million shares were reserved for issuance pursuant to outstanding equity awards (including 0.1 million reserved for issuance upon conversion of outstanding LTIP Units and 1.6 million reserved for issuance pursuant to the outstanding Absolute RSUs and Relative RSUs) and 8.3 million otherwise unreserved shares remained available for issuance.

All of the equity awards issued by the Company since the spin-off from NorthStar Realty on November 1, 2015 (the “Spin-off”) have been issued under the 2015 Plan. During the six months endedJune 30, 2017, the Company issued 500,642 restricted shares of common stock under the 2015 Plan to employees of the Manager or its subsidiaries in accordance with the terms of the management agreement described above in Note 6, of which 379,594 vested in connection with the Mergers.

In March 2016, as contemplated in connection with the Spin-off, the Company granted an aggregate of 995,698 restricted shares of common stock and 1,493,551 restricted stock units (“RSUs”) to employees of the Manager or one of its subsidiaries under the 2015 Plan. The restricted shares of common stock were subject to vesting over the approximately four year period ending December 31, 2019, subject to continued employment with the Manager or one of its subsidiaries and the RSUs were market-based awards subject to the achievement of performance-based vesting conditions and continued employment with the Manager or one of its subsidiaries. Approximately one-half of these RSUs are subject to the achievement of performance-based hurdles relating to the Company’s absolute total stockholder return and continued employment with the Manager or one of its subsidiaries over the approximately four year period from the grant date through December 31, 2019 (the “Absolute RSUs”). The other approximately one-half of these RSUs are subject to the achievement of performance-based hurdles based on the Company’s total stockholder return relative to the MSCI US REIT Index and continued employment with the Manager or one of its subsidiaries over the approximately four year period from the grant date through December 31, 2019 (the “Relative RSUs”). Award recipients may earn up to 100% of the Absolute RSUs that were granted and up to 125% of the Relative RSUs that were granted. Upon vesting pursuant to the terms of the Absolute RSUs and Relative RSUs, the RSUs that vest will be settled in shares of common stock and the recipients will be entitled to receive the distributions that would have been paid with respect to a share of common stock (for each share that vests) on or after the date the RSUs were initially granted. In accordance with their terms, all of these restricted shares of common stock that remained outstanding vested in connection with the Mergers. The Absolute and Relative RSUs were not affected by the Mergers and remain outstanding, subject to forfeitures occurring in connection with termination of employment with the Manager or one of its subsidiaries.

Pre-Spin-Off NorthStar Realty Equity Awards

In addition to equity awards issued under the 2015 Plan, the Company also had equity subject to outstanding equity-based awards granted by NorthStar Realty prior to the Spin-Off. In connection with the Spin-Off, holders of shares of common stock of NorthStar Realty and LTIP units of NorthStar Realty’s operating partnership subject to outstanding equity awards received one share of the Company’s common stock or one Common Unit in the Operating Partnership, respectively, for every six shares of common stock of NorthStar Realty or LTIP units of NorthStar Realty’s operating partnership held. Other equity and equity-based awards relating to NorthStar Realty’s common stock, such as RSUs, were adjusted to also relate to one-sixth of a share of the Company’s common stock, but otherwise generally remained subject to the same vesting and other terms that applied prior to the Spin-off. Performance-based vesting conditions based on total stockholder return of NorthStar Realty or NorthStar Realty and NSAM were adjusted to refer to combined total stockholder return of NorthStar Realty and the Company or NorthStar Realty, NSAM and the Company, respectively, with respect to periods after the Spin-Off and references to a change of control or similar term in outstanding awards, which referred to a change of control of either NorthStar Realty or NSAM, were adjusted, to the extent such awards relate to common stock of the Company or Common Units in the Operating Partnership, to refer to a change of control of either the Company or NSAM.

Following the Spin-off, NorthStar Realty and the compensation committee of its board of directors continued to administer all awards granted by NorthStar Realty prior to the Spin-Off, but the Company was obligated to issue shares of the Company’s common stock or other equity awards of its subsidiaries or make cash payments in lieu thereof or with respect to dividend or distribution equivalent obligations to the extent required by these awards. These awards continued to be governed by the NorthStar Realty equity plans, as applicable, and shares of the Company’s common stock issued pursuant to these awards were not be issued pursuant

25

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

to, and did not reduce availability under, the 2015 Plan. In connection with the Mergers, all of these outstanding equity-based awards (other than an RSU relating to 83,333 shares of the Company’s common stock) vested or were forfeited.

The following table presents activity related to the issuance, vesting, conversion and forfeitures of restricted stock and Common Units. The balance as of June 30, 2017 represents vested Common Units and unvested market-based RSUs (grants in thousands):

	Six Months Ended June 30, 2017
	Restricted Stock(1)		Common Units(3)		Restricted Stock Units(4)	Performance RSUs(5)		Total Grants		Weighted Average Grant Price
December 31, 2016	1,139		688		83	1,868		3,778		$	11.29
Granted	501		—		—	—		501		12.69
Converted	—		(236	)	—	—		(236	)	21.21
Vested(2)	(1,519	)	—		—	(178	)	(1,697	)	10.22
Forfeited(6)	—		(1	)	—	(334	)	(335	)	5.62
June 30, 2017	121		451		83	1,356		2,011		$	12.30

___________________

(1) Represents restricted stock included in common stock.

(2) Vested primarily includes the acceleration of substantially all outstanding equity awards of the Company in connection with the change of control of NSAM as a result of the Mergers.

(3) Includes vested and unvested Common Units in the Operating Partnership issued in the Spin-Off with respect to equity-based awards granted by NorthStar Realty prior to the Spin-Off. As of June 30, 2017, all of these Common Units in the Operating Partnership were vested.

(4) Relates to an equity-based award granted by NorthStar Realty prior to the Spin-Off and represents a non-employee grant subject to service-based vesting conditions, which is scheduled to vest on January 22, 2019, unless certain conditions are met. The RSUs are entitled to dividend equivalents prior to vesting and may be settled either in shares of the Company’s common stock or in cash at the option of the Manager.

(5) As of June 30, 2017, represented outstanding Absolute and Relative RSUs.

(6) Includes the forfeiture of performance based RSUs issued to NSAM executives as part of historical bonus plans in connection with the change of control of NSAM.

8. Stockholders’ Equity

Share Repurchase

In November 2015, the Company’s board of directors authorized the repurchase of up to $100 million of its outstanding common stock. That authorization expired in November 2016 and at such time the Company’s board of directors authorized an additional repurchase of up to $100 million of its outstanding common stock. The authorization expires in November 2017, unless otherwise extended by the Company’s board of directors. For the six months endedJune 30, 2017, the Company did not repurchase any shares of its common stock. For the six months endedJune 30, 2016, the Company repurchased 0.6 million shares of its common stock for approximately $6.3 million. From the original authorization in November 2015 through June 30, 2017, the Company repurchased 9.3 million shares of its common stock for approximately $100.0 million.

Dividends

The following table presents dividends declared (on a per share basis) with respect to the six months endedJune 30, 2017 and 2016:

Common Stock
Declaration Date	Dividend Per Share
2017
May 1	$	0.15
August 2	$	0.15
2016
May 10	$	0.15
August 3	$	0.15

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NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Earnings Per Share

The following table presents EPS for the three and six months endedJune 30, 2017 and 2016 (dollars and shares in thousands, except per share data):

	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Numerator:
Net income (loss) attributable to NorthStar Realty Europe Corp. common stockholders	$	(10,447	)	$	(33,909	)	$	(25,797	)	$	(62,891	)
Net income (loss) attributable to Unit Holders non-controlling interest	(117		)	(349		)	(310		)	(700		)
Net income (loss) attributable to common stockholders and Unit Holders(1)	$	(10,564	)	$	(34,258	)	$	(26,107	)	$	(63,591	)
Denominator:(2)
Weighted average shares of common stock	55,024			59,116			54,928			59,267
Weighted average Unit Holders(1)	564			690			619			691
Weighted average shares of common stock and Unit Holders(2)	55,588			59,806			55,547			59,958
Earnings (loss) per share:
Basic	$	(0.19	)	$	(0.57	)	$	(0.47	)	$	(1.06	)
Diluted	$	(0.19	)	$	(0.57	)	$	(0.47	)	$	(1.06	)

____________________________________________________________

(1) The EPS calculation takes into account Unit Holders, which receive non-forfeitable dividends from the date of grant, share equally in the Company’s net income (loss) and convert on a one-for-one basis into common stock.

(2) Excludes the effect of restricted stock and RSUs outstanding that were not dilutive as of June 30, 2017. These instruments could potentially impact diluted EPS in future periods, depending on changes in the Company’s stock price and other factors.

9. Non-controlling Interests

Operating Partnership

Non-controlling interests include the aggregate Units Holders’ interest in the Operating Partnership. Net income (loss) attributable to the non-controlling interest is based on the weighted average Unit Holders’ ownership percentage of the Operating Partnership for the respective period. The issuance of additional common stock, Common Units or LTIP Units changes the percentage ownership of both the Unit Holders and the Company. Since a Common Unit or LTIP Unit is generally redeemable for cash or common stock at the option of the Company, it is deemed to be equivalent to common stock. Therefore, such transactions are treated as capital transactions and result in an allocation between stockholders’ equity and non-controlling interests on the accompanying consolidated balance sheets to account for the change in the ownership of the underlying equity in the Operating Partnership. On a quarterly basis, the carrying value of such non-controlling interest is allocated based on the number of Unit Holders in total in proportion to the number of Units Holders plus the number of shares of common stock outstanding. As of June 30, 2017, 450,861 Common Units and LTIP Units were outstanding, representing a 0.8% ownership and non-controlling interest in the Operating Partnership. Net income (loss) attributable to the Operating Partnership non-controlling interest for the three months endedJune 30, 2017 and 2016 was a net loss of $0.1 million and $0.3 million, respectively. Net income (loss) attributable to the Operating Partnership non-controlling interest for the six months endedJune 30, 2017 and 2016 was a net loss of $0.3 million and $0.7 million, respectively.

Redeemable Non-controlling Interest

In connection with the acquisition of the Trianon Tower in July 2015, 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 may 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. The carrying amount of redeemable noncontrolling interests is adjusted to its redemption value at the end of each reporting period, but no less than its initial carrying value, with such adjustments recognized in additional paid-in capital.

27

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

10. 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 in the form of interest cap agreements where the primary objective is to minimize interest rate risks associated with investment and financing activities and foreign currency forward agreements where the primary objective is to minimize foreign currency exchange rate risks associated with operating 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 tables present derivative instruments that were not designated as hedges under U.S. GAAP as of June 30, 2017 and December 31, 2016 (dollars in thousands):

	Number	Notional Amount		Fair Value Asset (Liability)			Range of Fixed GBP LIBOR / EURIBOR	Range of Maturity
As of June 30, 2017:
Interest rate caps	4	$	1,193,235	$	8,674		(1)	January 2020 - July 2023
Foreign currency forwards, net(2)	2	102,157		(2,501		)	N/A	August 2017 - November 2018
Total	6	$	1,295,392	$	6,173
As of December 31, 2016:
Interest rate caps	4	$	1,107,400	$	8,659		(1)	January 2020 - July 2023
Foreign currency forwards(2)	2	72,806		5,070			N/A	February 2017 - November 2017
Total	6	$	1,180,206	$	13,729

_____________________________

(1)    Includes a range of interest rate caps of 0.5% for EURIBOR and 2.0% for GBP LIBOR.

(2)    Includes Euro and U.K. Pounds Sterling currency forwards.

The following table presents the fair value of derivative instruments, as well as their classification on the consolidated balance sheets, as of June 30, 2017 and December 31, 2016 (dollars in thousands):

	Balance Sheet	June 30, 2017		December 31, 2016
	Location
Interest rate caps	Derivative assets	$	8,674	$	8,659
Foreign currency forwards	Derivative assets	$	1,165	$	5,070
Foreign currency forwards	Derivative liabilities	$	3,666	$	—

The following table presents the effect of derivative instruments in the consolidated statements of operations for the three and six months endedJune 30, 2017 and 2016 (dollars in thousands):

		Three Months Ended June 30,						Six Months Ended June 30,
		2017			2016			2017			2016
Amount of gain (loss) recognized in earnings:	Statements of operations location:
Adjustment to fair value of interest rate caps	Unrealized gain (loss) on derivatives and other(1)	$	(1,032	)	$	(3,391	)	$	(713	)	$	(14,175	)
Adjustment to fair value of foreign currency forwards	Unrealized gain (loss) on derivatives and other (1)	(6,308		)	4,638			(7,572		)	207
Net cash receipt (payment) on derivatives	Realized gain (loss) on sales and other	639			(776		)	1,456			(1,194		)

_____________________________

(1)    Excludes the unrealized gain (loss) relating to foreign currency remeasurement adjustments.

The Company’s counterparties held no cash margin as collateral against the Company’s derivative contracts as of June 30, 2017 and December 31, 2016. The Company had no derivative financial instruments that were designated as hedges in qualifying hedging relationships as of June 30, 2017 and December 31, 2016.

28

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

11. Fair Value

Fair Value Measurement

The fair value of financial instruments is categorized based on the priority of the inputs to the valuation technique and categorized 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). If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

Financial assets and liabilities are recorded at fair value on the consolidated balance sheets and 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.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

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

Derivative Instruments

Derivative instruments are valued using a third-party pricing service. These quotations are not adjusted and are generally based on valuation models with observable inputs such as interest rates and contractual cash flow, and as such, are classified as Level 2 of the fair value hierarchy. Derivative instruments are also assessed for credit valuation adjustments due to the risk of non-performance by the Company and derivative counterparties.

Fair Value of Financial Instruments

In addition to the above disclosures regarding financial assets or liabilities which are recorded at fair value, U.S. GAAP requires disclosure of fair value about all financial instruments. The following disclosure of estimated fair value of financial instruments was determined by the Company using available market information and appropriate valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize on disposition of the financial instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on estimated fair value.

29

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The following table presents the principal amount, carrying value and fair value of certain financial assets and liabilities as of June 30, 2017 and December 31, 2016 (dollars in thousands):

	June 30, 2017						December 31, 2016
	Principal/Notional Amount		Carrying Value		Fair Value		Principal/Notional Amount		Carrying Value		Fair Value
Financial assets:(1)
Derivative assets	$	1,198,630	$	9,839	$	9,839	$	1,180,206	$	13,729	$	13,729
Preferred equity investment	34,064		34,064		34,064		—		—		—
Financial liabilities:(1)
Mortgage and other notes payable, net	$	1,244,713	$	1,232,354	$	1,228,918	$	1,162,211	$	1,149,119	$	1,146,134
Credit Facility	23,000		23,000		23,000		—		—		—
Derivative liabilities	96,762		3,666		3,666		—		—		—

_____________________________

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

Disclosure about fair value of financial instruments is based on pertinent information available to management as of the reporting date. Although management is not aware of any factors that would significantly affect fair value, such amounts have not been comprehensively revalued for purposes of these consolidated financial statements since that date and current estimates of fair value may differ significantly from the amounts presented herein.

Mortgage and Other Notes Payable

For mortgage and other notes payable, the Company primarily uses rates currently available with similar terms and remaining maturities to estimate fair value. These measurements are determined using rates as of the end of the reporting period or market credit spreads over the rate payable on fixed rate of like maturities. These fair value measurements are based on observable inputs, and as such, are classified as Level 2 of the fair value hierarchy.

Preferred Equity Investments

For preferred equity investments, fair value was computed by comparing the current yield to the estimated yield for newly originated loans with similar credit risk or the market yield at which a third party might expect to purchase such investment. Fair value was determined assuming fully-extended maturities regardless of structural or economic tests required to achieve such extended maturities. These fair value measurements are generally based on unobservable inputs and, as such, are classified as Level 3 of the fair value hierarchy.

Credit Facility

As of the reporting date, the Company believes the carrying value of the Credit Facility approximates fair value. The fair value measurement is based on observable inputs, and as such, is classified as Level 2 of the fair value hierarchy.

12. Commitments and Contingencies

The Company is 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 current legal proceedings are not expected to have a material adverse effect on the Company’s financial position or results of operations.

The Company engages third-party service providers for its portfolio who are remunerated based on either a fixed fee or a percentage of rental income. The contract terms vary by party and are subject to termination options. These costs are recorded in properties - operating expense and other expenses in the consolidated statements of operations.

As part of the terms of agreements relating to certain assets the Company disposed, as is customary for such transactions in Europe, the Company agreed to provide certain warranties to the buyer.

Risk Management

Concentrations of credit risk arise when a number of tenants related to the Company’s investments are engaged in similar business activities or located in the same geographic region to be similarly affected by changes in economic conditions. The Company monitors its portfolios to identify potential concentrations of credit risks. For the three and six months endedJune 30, 2017, one tenant, DekaBank Deutsche Girozentrale, accounted for more than 10% of the Company’s total revenue. This tenant has 6.9 years remaining on its lease. Otherwise, the Company has no other tenant that generates 10% or more of its total revenue. Additionally,

30

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

for the three and six months endedJune 30, 2017, Germany, France, the United Kingdom and the Netherlands each accounted for more than 10% of the Company’s total revenue. The Company believes the remainder of its portfolio is well diversified and does not contain any unusual concentrations of credit risks.

13. Segment Reporting

The Company currently conducts its business through the following three segments, based on how management reviews and manages its business:

• Real Estate Equity- Focused on European prime office properties located in key cities within Germany, the United Kingdom and France.

• Preferred Equity - Represents the Company’s preferred equity investment secured by interest in an European prime office property.

• Corporate - The corporate segment includes corporate level interest expense, management fee and general and administrative expenses.

31

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The following tables present segment reporting for the three and six months endedJune 30, 2017 and 2016 (dollars in thousands):

	Three Months Ended June 30, 2017
Statement of Operations:	Real Estate Equity				Preferred Equity			Corporate				Total
Rental income	$	26,025		(1)	$	—		$	—			$	26,025
Escalation income	5,558			(1)	—			—				5,558
Interest income	—				297			—				297
Interest expense(2)	6,451				—			271				6,722
Management fee, related party	—				—			3,572				3,572
Transaction costs	—				546			427				973
Depreciation and amortization	12,520				—			—				12,520
Other expenses	9,804			(3)	—			8,590			(4)	18,394
Income (loss) before income tax benefit (expense)	2,808				(249		)	(12,860		)		(10,301		)
Income tax benefit (expense)	(237		)		—			—				(237		)
Net income (loss)	$	2,571			$	(249	)	$	(12,860	)		$	(10,538	)

___________________________________

(1) Includes revenues primarily attributable to Germany, the United Kingdom, France and the Netherlands of $13.1 million, $8.9 million, $5.5 million and $3.7 million, respectively.

(2) Includes $0.7 million and $0.1 million of amortization of deferred financing costs in the real estate equity and corporate segments, respectively.

(3) Primarily relates to properties - operating expenses and unrealized loss on interest rate caps.

(4) Primarily relates to general and administrative expense and unrealized loss on foreign currency forwards.

	Three Months Ended June 30, 2016
Statement of Operations:(1)	Real Estate Equity				Corporate				Total
Rental income	$	33,990		(2)	$	—			$	33,990
Escalation income	5,908			(2)	—				5,908
Interest expense(3)	8,691				2,950				11,641
Management fee, related party	—				3,500				3,500
Transaction costs	—				1,652				1,652
Depreciation and amortization	18,404				—				18,404
Other expenses	34,551			(4)	3,939			(5)	38,490
Income (loss) before income tax benefit (expense)	(21,748		)		(12,041		)		(33,789		)
Income tax benefit (expense)	(520		)		—				(520		)
Net income (loss)	$	(22,268	)		$	(12,041	)		$	(34,309	)

___________________________________

(1) The Company did not have a preferred equity segment for the three months ended June 30, 2016.

(2) Includes revenues primarily attributable to Germany, the United Kingdom, France and the Netherlands of $14 million, $10.2 million, $5.1 million and $4.7 million, respectively.

(3) Includes $0.8 million and $1.2 million of amortization of deferred financing costs in the real estate equity and corporate segment, respectively.

(4) Primarily relates to properties - operating expenses, unrealized loss on interest rate casps and impairment loss of $27.5 million.

(5) Primarily relates to general and administrative expense, realized loss related to the write-off of the deferred financing costs associated with the repurchase of the Senior Notes and unrealized gain on foreign currency forwards.

32

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

	Six Months Ended June 30, 2017
Statement of Operations:	Real Estate Equity			Preferred Equity			Corporate				Total
Rental income	$	51,561	(1)	$	—		$	—			$	51,561
Escalation income	10,719		(1)	—			—				10,719
Interest income	—			297			—				297
Interest expense(2)	12,571			—			534				13,105
Management fee, related party	—			—			7,131				7,131
Transaction costs	—			546			687				1,233
Depreciation and amortization	25,083			—			—				25,083
Other expenses	14,774		(3)	—			27,351			(4)	42,125
Income (loss) before income tax benefit (expense)	9,852			(249		)	(35,703		)		(26,100		)
Income tax benefit (expense)	36			—			—				36
Net income (loss)	$	9,888		$	(249	)	$	(35,703	)		$	(26,064	)

___________________________________

(1) Includes revenues primarily attributable to Germany, the United Kingdom, France and the Netherlands of $25.8 million, $17.5 million, $10.8 million and $7.3 million, respectively.

(2) Includes $1.5 million and $0.2 million of amortization of deferred financing costs in the real estate equity and corporate segments, respectively.

(3) Primarily relates to properties - operating expense offset by the realized gain on the sale of real estate.

(4) Primarily relates to general and administrative expense and unrealized loss on foreign currency forwards.

	Six Months Ended June 30, 2016
Statement of Operations:(1)	Real Estate Equity				Corporate				Total
Rental income	$	68,823		(2)	$	—			$	68,823
Escalation income	11,998			(2)	—				11,998
Interest expense(3)	17,117				7,066				24,183
Management fee, related party	—				7,000				7,000
Transaction costs	—				2,483				2,483
Depreciation and amortization	37,275				—				37,275
Other expenses	57,973			(4)	15,680			(5)	73,653
Income (loss) before income tax benefit (expense)	(31,544		)		(32,229		)		(63,773		)
Income tax benefit (expense)	139				—				139
Net income (loss)	$	(31,405	)		$	(32,229	)		$	(63,634	)

___________________________________

(1) The Company did not have a preferred equity segment for the six months ended June 30, 2016.

(2) Includes revenues primarily attributable to Germany, the United Kingdom, France and the Netherlands of $28.4 million, $20.0 million, $10.9 million and $9.8 million, respectively.

(3) Includes $1.7 million and $2.1 million of amortization of deferred financing costs in the real estate equity and corporate segment, respectively.

(4) Primarily relates to properties - operating expense, unrealized loss on derivatives and impairment loss of $27.5 million offset by the realized gain on the sale of real estate.

(5) Primarily relates to management fees, general and administrative expense, realized loss related to the write-off of the deferred financing costs associated with the repurchase of the Senior Notes and includes an allocation of general and administrative expenses from the Manager of $0.1 million.

The following table presents total assets by segment as of June 30, 2017 and December 31, 2016 (dollars in thousands):

Total Assets	Real Estate Equity		Preferred Equity		Corporate		Total
June 30, 2017	$	1,925,692	$	34,662	$	4,879	$	1,965,233
December 31, 2016	1,835,531		—		9,861		1,845,392

14. Subsequent Events

Dividends

On August 2, 2017, the Company declared a dividend of $0.15 per share of common stock. The common stock dividend is expected be paid on August 18, 2017 to stockholders of record as of the close of business on August 14, 2017.

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NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Sales

Subsequent to June 30, 2017, the Company sold one non-core asset with a carrying value of $7.3 million for $9.0 million, which was recorded in assets held for sale in the consolidated balance sheet as of June 30, 2017.

34

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our unaudited consolidated financial statements and notes thereto included in Item 1. “Financial Statements” of this report. References to “NorthStar Europe,” “we,” “us” or “our” refer to NorthStar Realty Europe Corp. and its subsidiaries unless the context specifically requires otherwise. References to “our Manager” refer to NorthStar Asset Management Group Inc., or NSAM, for the period prior to the Mergers (refer below) and Colony NorthStar, Inc., for the period subsequent to the Mergers. As part of the Mergers, NSAM changed its name to Colony NorthStar, Inc.

Introduction

NorthStar Realty Europe Corp., a publicly-traded REIT, (NYSE: NRE), is a European focused commercial real estate company with predominantly prime office properties in key cities within Germany, the United Kingdom and France, or the Core Portfolio. Our objective is to provide our stockholders with stable and recurring cash flow supplemented by capital growth over time.

We are externally managed and advised by an affiliate of our Manager. Substantially all of our assets are directly or indirectly are held by, and we conduct our operations, directly or indirectly, through NorthStar Realty Europe Limited Partnership, a Delaware limited partnership and our operating partnership, or our Operating Partnership. We have elected to be taxed, and will continue to conduct our operations so as to continue to qualify, as a REIT for U.S. federal income tax purposes.

Significant Developments

Mergers Agreement among NSAM, NorthStar Realty and Colony Capital, Inc.

On January 10, 2017, our external manager, NSAM completed a tri-party merger with NorthStar Realty Finance Corp., or NorthStar Realty, and Colony Capital, Inc., or Colony, pursuant to which the companies combined in an all-stock merger of equals transaction to create a diversified real estate and investment management company. 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. Colony NorthStar is a leading global equity REIT with an embedded investment management platform.

Investments

In May 2017, we partnered with a leading property developer in China to acquire 20 Gresham Street, a Class A office building in London, United Kingdom with 22,557 square meters, 100% occupancy and a 6.8 year weighted average lease term to expiry. We invested approximately $34 million of preferred equity with a base yield of 8% plus equity participation rights.

Summary of Business

Our primary business line is investing in European real estate. We are predominantly focused on the Core Portfolio.

Our Investments

Our portfolio as of June 30, 2017 adjusted for sales through July 31, 2017 includes the following (dollars in millions):

Investment Type	Primary Location(s)	Property Type	Cost(1)		Count		Ownership Interest
Real estate equity
U.K. Complex	United Kingdom	Multi-tenant office	$	77	1		93%
SEB Portfolio	Germany, United Kingdom, France	Multi-tenant office	984		7		95%	(2)
Trias Portfolio(3)	Germany, United Kingdom, France	Office/Hotel/Industrial/Retail	358		16	(4)	95%	(2)
Trianon Tower	Germany	Multi-tenant office	666		3		95%	(2)
Total real estate equity			2,085		27
Preferred Equity
Preferred equity investment			34		1
Total preferred equity			34		1
Total investments			$	2,119	28

__________________

(1) Amount includes transaction costs incurred, deferred financing costs and other assets assumed and is translated using exchange rates as of June 30, 2017.

(2) We are entitled to 100% of the economic benefits and incur 100% of the economic losses in accordance with the applicable governing documents.

(3) Trias Portfolio represents the IVG Portfolio, Internos Portfolio and Deka Portfolio. Such three portfolios were not under common control or management at the time of acquisition.

(4) Includes one asset held for sale.

35

Real Estate Equity

Overview

Our real estate equity investment strategy is focused on European prime office properties located in key cities within Germany, the United Kingdom and France.

Our Portfolio

The following presents a summary of our portfolio as of June 30, 2017 adjusted for sales through July 31, 2017:

		Portfolio by Geographic Location
		June 30, 2017	December 31, 2016
Total portfolio, at cost(1)	$2.1 billion
Number of properties	27
Number of countries	5
Total square meters(2)	351,514
Weighted average occupancy	83%
Weighted average lease term	5.9 years
In-place rental income:(3)
Core Portfolio	85%
Other markets	15%

___________________________________

(1) Amount includes transaction costs incurred, deferred financing costs and other assets assumed and is translated using exchange rates as of June 30, 2017.

(2) Based on contractual rentable area, located in many key European markets, including Frankfurt, Hamburg, Berlin, London and Paris.

(3) In-place rental income represents gross rent adjusted for vacancies based on the rent roll as of June 30, 2017 and is translated using exchange rates as of June 30, 2017.

The following table presents significant tenants in our portfolio, based on in-place rental income as of June 30, 2017:

Significant tenants:	Industry	Square Meters(1)	Percentage of In-Place Rental Income	Weighted Average Lease Term (in years)
DekaBank Deutsche Girozentrale	Finance	35,972	19%	6.9
BNP PARIBAS RE	Finance	15,406	9%	2.6
Deloitte Holding B.V.	Legal, Tax & Management Consultancy	23,684	7%	2.4
Deutsche Bundesbank	Finance	15,120	5%	9.4
BNP PARIBAS SA	Finance	11,235	5%	3.8
Cushman & Wakefield LLP	Legal, Tax & Management Consultancy	5,150	5%	7.8
Morgan Lewis & Bockius LLP	Legal, Tax & Management Consultancy	4,848	4%	8.2
PAREXEL International GmbH	Public Utilities & Telecommunications	18,254	3%	17.0
Moelis & Co UK LLP	Legal, Tax & Management Consultancy	3,366	3%	7.8
Bigpoint GmbH	Other	11,916	2%	3.9
		144,951	62%	6.4

__________________

(1) Based on contractual rentable area.

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The following table presents rental income concentration by country for our portfolio from inception through June 30, 2017 adjusted for sales through July 31, 2017:

Country	Number of Properties	Percentage of In-Place Rental Income(1)		Square Meters(2)	Weighted Average Lease Term (in years)
Germany	11	46	%	154,294	7.4
United Kingdom	5	27	%	46,520	6.7
France	4	16	%	32,075	3.8
Other(3)	7	11	%	118,626	2.8
Total	27	100	%	351,515	5.9

__________________

(1) In-place rental income represents gross rent adjusted for vacancies based on the rent roll as of June 30, 2017.

(2) Based on contractual rentable area.

(3) Includes assets in Portugal, Netherlands and assets outside our Core Portfolio in Germany, the United Kingdom and France.

Preferred Equity

In May 2017, we partnered with a leading property developer in China to acquire a Class A office building in London, United Kingdom with 22,557 square meters, 100% occupancy and a 6.8 year weighted average lease term to expiry. We invested approximately $34 million of preferred equity with a base yield of 8% plus equity participation rights.

Sources of Operating Revenues and Cash Flows

We primarily generate revenue from rental and other operating income from our properties. Our income is primarily derived through the difference between the revenue and the operating and financing expenses of our investments. We may also continue to acquire investments that generate attractive returns without any leverage.

Profitability and Performance Metrics

We calculate cash available for distribution, or CAD, and net operating income, or NOI, as metrics to evaluate the profitability and performance of our business (refer to “Non-GAAP Financial Measures” for a description of these metrics).

Outlook and Recent Trends

The European economy has been in a gradual and sustained state of recovery for the past four years. In the second quarter of 2017, Gross Domestic Product in the European Union, or EU, grew by 2.2% year on year. Unemployment in the EU continued to fall, reaching 7.7% in June 2017 (down from 8.6% a year earlier), the lowest level recorded since December 2008. Despite stronger than anticipated economic performance during 2016, the Bank of England recently revised its 2017 U.K. growth projection down by 0.2% to 1.7%, citing uncertainty following last summer’s EU referendum. This uncertainty has the potential to negatively impact investment and consumer demand as a higher inflation rate, primarily due to the weaker Pound Sterling, begins to erode real incomes. The outlook for the U.K. economy is likely to be highly dependent on the duration and perceived outcome of Brexit negotiations.

The Eurozone economy remains buoyant achieving 2.1% GDP growth in the second quarter. In July 2017, the International Monetary Fund, or IMF, upgraded its 2017 GDP forecast for the Euro Area up to 1.9% reflecting robust economic performance in the first half of 2017. Unemployment fell to 9.1%, its lowest level since February 2009. This stronger than anticipated economic recovery has resulted in the European Central Bank, or ECB, recently signaling its intention to consider reducing the level of economic stimulus provided. However, inflation remains subdued at 1.3% in the year to July, below the ECB’s target of just under 2%. A combination of below target inflation, lack of growth in real incomes and disparity in economic growth rates among Eurozone member countries means that any unwinding of stimulus is likely to be gradual and subject to ongoing review based on the future economic performance of the region.

Geopolitical uncertainty in the region appears to have receded for the time being.

European commercial real estate investment volume totaled €74 billion in the second quarter of 2017, and €130 billion in the first half of 2017, 13% above the first six months of 2016. Strong second quarter investment activity included the €12.2 billion sale of Logicor.

The office sector represented approximately 33% of total second quarter investment volume. Property yields in most asset classes and markets were stable during the second quarter and continue to remain at a significant premium to sovereign yields.

Driven by continued strong demand from foreign investors and a number of large transactions in the industrial segment, German transaction volume reached €26.2 billion in the first half of 2017 (41% above the same period last year), the highest mid-year transaction volume since 2007.

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Total U.K. investment volume was £27.2 billion in the first six month of 2017 (1% above the same period in 2016), with London accounting for 50% of all transactions and Chinese or Hong Kong based investors being the dominant source of overseas capital inflows. Despite further uncertainty created by the recent U.K. general election, yields remained broadly stable during the quarter.

Total French investment volume was €6.8 billion in the first six months of 2017 (27% below the same period in 2016), driven by scarcity of large transactions and uncertainty related to the recent general election.

A subdued new supply pipeline coupled with generally improving occupier demand is likely to continue placing downward pressure on vacancy rates and gradual upward pressure on rents across major European office markets. The upward pressure on rents may be further exacerbated by rising inflation levels as many leases across Europe are structured with inflation linked uplifts.

Investing Strategy

We seek to provide our stockholders with a stable and recurring cash flow for distribution supplemented by capital growth over time. Our business is predominantly focused on our Core Portfolio. Our Core Portfolio is not only the largest economies in Europe, but are the most established, liquid and among the most stable office markets in Europe. We seek to utilize our established local networks to source suitable investment opportunities. We have a long term investment approach and expect to make equity investments, directly or indirectly through joint ventures.

Financing Strategy

We pursue a variety of financing arrangements such as mortgage notes and bank loans available from the commercial mortgage-backed securities market, finance companies and banks. In addition, we may use corporate-level financing such as credit facilities and other term borrowings. We generally seek to limit our reliance on recourse borrowings. Borrowing levels for our investments may be dependent upon the nature of the investments and the related financing that is available.

Attractive long-term, non-recourse, non-mark-to-market, financing continues to be available in the European markets. We predominately use floating rate financing and we seek to mitigate the risk of interest rates rising through hedging arrangements including interest rate caps.

In April 2017, we amended and restated our revolving credit facility, or Credit Facility, with a commitment of $35 million and with an initial two year term. The Credit Facility no longer contains a limitation on availability based on a borrowing base and the interest rate remains the same.

Refer to Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” for discussion of liquidity requirements and sources of capital resources.

Risk Management

Risk management is a significant component of our strategy to deliver consistent risk-adjusted returns to our stockholders. Given our need to maintain our qualification as a REIT for U.S. federal income tax purposes, we closely monitor our portfolio and actively seek to manage risks associated with, among other things, our assets, interest rates and foreign exchange rates. In addition, the audit committee of our board of directors, in consultation with management, will periodically review our policies with respect to risk assessment and risk management, including key risks to which we are subject, such as credit risk, liquidity risk, financing risk, foreign currency risk and market risk, and the steps that management has taken to monitor and control such risks. The audit committee of our board of directors maintains oversight of financial reporting risk matters.

Underwriting

Prior to making any equity investments, our underwriting team, in conjunction with third-party providers, undertakes a rigorous asset-level due diligence process, involving intensive data collection and analysis, to seek to ensure that we understand fully the state of the market and the risk-reward profile of the asset. In addition, we evaluate material accounting, legal, financial and business matters in connection with such investment. These issues and risks are built into the valuation of an asset and ultimate pricing of an investment.

During the underwriting process, we review the following data, including, but not limited to: property financial data including historic and budgeted financial statements, liquidity and capital expenditure plans, property operating metrics (including occupancy, leasing activity, lease expirations, sales information, tenant credit review, tenant delinquency reports, operating expense efficiency and property management efficiency) and local real estate market conditions including vacancy rates, absorption, new supply, rent levels and comparable sale transactions, as applicable.

In addition to evaluating the merits of any proposed investment, we evaluate the diversification of our portfolio of assets. Prior to making a final investment decision, we determine whether a target asset will cause our portfolio of assets to be too heavily concentrated with, or cause too much exposure to, any one real estate sector, geographic region, source of cash flow such as tenants or borrowers, or other geopolitical issues. If we determine that a proposed investment presents excessive concentration risk, we may decide not to pursue an otherwise attractive investment.

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Portfolio Management

Our Manager performs portfolio management services on our behalf. In addition, we rely on the services of local third-party service providers. The comprehensive portfolio management process includes day-to-day oversight by the portfolio management team, regular management meetings and a quarterly investment review process. These processes are designed to enable management to evaluate and proactively identify investment-specific matters and trends on a portfolio-wide basis. Nevertheless, we cannot be certain that such review will identify all potential issues within our portfolio due to, among other things, adverse economic conditions or events adversely affecting specific investments; therefore, potential future losses may also stem from investments that are not identified during these investment reviews.

Our Manager uses many methods to actively manage our risks to seek to preserve income and capital, which includes our ability to manage our investments and our tenants in a manner that preserves cost and income and minimizes credit losses that could decrease income and portfolio value. Frequent re-underwriting, dialogue with tenants/partners and regular inspections of our properties have proven to be an effective process for identifying issues early. Monitoring tenant creditworthiness is an important component of our portfolio management process, which may include, to the extent available, a review of financial statements and operating statistics, delinquencies, third party ratings and market data. During the quarterly portfolio review, or more frequently if necessary, investments may be put on highly-monitored status and identified for possible asset impairment based upon several factors, including missed or late contractual payments, tenant rating downgrades (where applicable) and other data that may indicate a potential issue in our ability to recover our invested capital from an investment.

We may need to make unplanned capital expenditures in connection with changes in laws and governmental regulations in relation to real estate. Where properties are being repositioned or refurbished, we may also be exposed to unforeseen changes in scope of capital expenditures.

Given our need to maintain our qualification as a REIT for U.S. federal income tax purposes, and in order to maximize returns and manage portfolio risk, we may dispose of an asset earlier than anticipated or hold an asset longer than anticipated if we determine it to be appropriate depending upon prevailing market conditions or factors regarding a particular asset. We can provide no assurances, however, that we will be successful in identifying or managing all of the risks associated with acquiring, holding or disposing of a particular investment or that we will not realize losses on certain dispositions.

Interest Rate and Foreign Currency Hedging

Subject to maintaining our qualification as a REIT for U.S. federal income tax purposes, we may mitigate the risk of interest rate volatility through the use of hedging instruments, such as interest rate swap agreements and interest rate cap agreements. The goal of our interest rate management strategy is to minimize or eliminate the effects of interest rate changes on the value of our assets, to improve risk-adjusted returns and, where possible, to lock in, on a long-term basis, a favorable spread between the yield on our assets and the cost of financing such assets.

In addition, because we are exposed to foreign currency exchange rate fluctuations, we employ foreign currency risk management strategies, including the use of, among others, currency hedges, and matched currency financing.

We can provide no assurances, however, that our efforts to manage interest rate and foreign currency exchange rate volatility will successfully mitigate the risks of such volatility on our portfolio.

Critical Accounting Policies

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP, which requires the use of estimates and assumptions that involve the exercise of judgment and that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. There have been no material changes to our critical accounting policies since the filing of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.

Recent Accounting Pronouncements

For recent accounting pronouncements, refer to Note 2, “Significant Accounting Policies” in our accompanying consolidated financial statements included in Part I Item 1. “Financial Statements.”

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Results of Operations

The following presents a summary of our activity for the three and six months endedJune 30, 2017 and 2016:

Comparison of the Three Months Ended June 30, 2017 to June 30, 2016 (dollars in thousands):

	Three Months Ended June 30,						Increase (Decrease)
	2017			2016			Amount			%
Revenues
Rental income	$	26,025		$	33,990		$	(7,965	)	(23	)%
Escalation income	5,558			5,908			(350		)	(6	)%
Interest income	297			—			297			100	%
Other income	508			46			462			1,004	%
Total revenues	32,388			39,944			(7,556		)	(19	)%
Expenses
Properties - operating expenses	7,680			8,540			(860		)	(10	)%
Interest expense	6,722			11,641			(4,919		)	(42	)%
Transaction costs	973			1,652			(679		)	(41	)%
Impairment losses	—			27,468			(27,468		)	(100	)%
Management fee, related party	3,572			3,500			72			2	%
Other expenses	2,608			3,041			(433		)	(14	)%
General and administrative expenses	1,555			1,502			53			4	%
Compensation expense	1,385			3,766			(2,381		)	(63	)%
Depreciation and amortization	12,520			18,404			(5,884		)	(32	)%
Total expenses	37,015			79,514			(42,499		)	(53	)%
Other income (loss)
Unrealized gain (loss) on derivatives and other	(7,655		)	1,159			(8,814		)	(760	)%
Realized gain (loss) on sales and other	1,981			4,622			(2,641		)	(57	)%
Income (loss) before income tax benefit (expense)	(10,301		)	(33,789		)	23,488			(70	)%
Income tax benefit (expense)	(237		)	(520		)	283			(54	)%
Net income (loss)	$	(10,538	)	$	(34,309	)	$	23,771		(69	)%

Revenues

Rental Income

Rental income consists of rental revenue in our real estate equity segment. Rental income decreased $8.0 million, primarily due to the disposal of 18 properties during 2016.

Escalation Income

Escalation income consists of tenant recoveries in our real estate equity segment. Escalation income decreased $0.4 million, primarily due to the disposal of 18 properties during 2016, offset by an increase in recoverable operating expenses. There is a corresponding decrease in properties - operating expenses and a majority of these costs are recovered from our tenants.

Interest Income

Interest income relates to our preferred equity investment originated in the second quarter 2017 in our preferred equity segment.

Other Income

Other income is principally related to lease surrender premiums and termination fees in our real estate equity segment. Other income increased for the three months endedJune 30, 2017 due to one-time lease termination fees in the second quarter of 2017.

Expenses

Properties - Operating Expenses

Properties - operating expenses decreased $0.9 million due to the disposal of 18 properties during 2016 offset by an increase in recoverable repairs and maintenance during 2017 in our real estate equity segment. There is a corresponding decrease in escalation income and a majority of these costs are recovered from our tenants.

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Interest Expense

Interest expense decreased $4.9 million due to the disposal of 18 properties during 2016, the refinancing of certain mortgage notes in our real estate equity segment in the first quarter of 2016 and the repayment of our senior stock-settlable notes in our corporate segment in 2016.

Transaction Costs

Transaction costs for the three months endedJune 30, 2017 primarily relate to costs related to the Mergers in our corporate segment and other transaction costs in our preferred equity segment. A transaction fee was paid to a third party and reimbursed in total by the entity that originated the Company’s preferred equity investment resulting in no impact to transaction costs. Transaction costs for the three months endedJune 30, 2016 primarily relates to costs associated with exploring potential transactions in our corporate segment.

Management Fee, Related Party

Management fee, related party relates to the management fee incurred to our Manager in our corporate segment (refer to “Related Parties Arrangements” below for more information).

Other Expenses

Other expenses primarily represent third-party service provider fees such as audit and legal fees and other compliance related fees related to portfolio management of our real estate equity segment. We expect further benefit from cost savings from the asset disposals in the second half of 2017 due to timing of the unwind of the structures and the reduction in the number of entities.

General and Administrative Expenses

General and administrative expenses are incurred in our corporate segment. For the three months endedJune 30, 2017, our Manager did not allocate any general and administrative expenses to us. For the three months endedJune 30, 2016, our Manager allocated $0.1 million.

Compensation Expense

Compensation expense is comprised of time-based and performance equity-based based awards in our corporate segment. The decrease for the three months endedJune 30, 2017, is due to the acceleration of substantially all of our equity awards due to the Mergers which occurred in the first quarter of 2017. Refer to Note 6 to the Notes to Consolidated Financial Statements (unaudited) for further information.

Depreciation and Amortization

Depreciation and amortization expense decreased due to the disposal of 18 properties during 2016 and assets being reclassified into held for sale in our real estate equity segment in the second quarter 2017.

Other Income (Loss)

Unrealized Gain (Loss) on Derivatives and Other

Unrealized gain (loss) on derivatives and other is primarily related to the non-cash change in fair value of derivative instruments. The loss related to foreign currency forwards used to hedge projected net property level cash flows in our corporate segment was due to the strengthened the U.K. Pound Sterling and the Euro against the U.S. dollar. The decrease in the loss related to the interest rate caps in our real estate equity segment relates to the movement in interest rate spreads across Europe.

The following table presents a summary of unrealized gain (loss) on derivatives and other for the three months endedJune 30, 2017 and 2016 (dollars in thousands):

	Three Months Ended June 30,
	2017									2016
	Real Estate Equity			Corporate			Total			Real Estate Equity			Corporate			Total
Change in fair value of:
Derivatives, at fair value
Interest rate caps	$	(1,032	)	$	—		$	(1,032	)	$	(3,391	)	$	—		$	(3,391	)
Foreign currency forwards	—			(6,308		)	(6,308		)	—			4,638			4,638
Foreign currency remeasurement and other	(261		)	(54		)	(315		)	(9		)	(79		)	(88		)
Total unrealized gain (loss) on derivatives and other	$	(1,293	)	$	(6,362	)	$	(7,655	)	$	(3,400	)	$	4,559		$	1,159

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Realized Gain (Loss) on Sales and Other

The following table presents a summary of realized gain (loss) on sales and other for the three months endedJune 30, 2017 and 2016 (dollars in thousands):

	Three Months Ended June 30,
	2017											2016
	Real Estate Equity			Corporate		Preferred Equity			Total			Real Estate Equity			Corporate			Total
Sale of real estate investments(1)	$	1,433		$	—	$	—		$	1,433		$	8,078		$	—		$	8,078
Foreign currency transactions(2)	45			12		(6		)	51			(284		)	—			(284		)
Write-off of deferred financing costs	(142		)	—		—			(142		)	—			(2,396		)	(2,396		)
Net cash payments (receipts) on derivatives	—			639		—			639			—			(776		)	(776		)
Total realized gain (loss) on sales and other	$	1,336		$	651	$	(6	)	$	1,981		$	7,794		$	(3,172	)	$	4,622

_____________

(1) Excludes escrow arrangements entered into for specific indemnification obligations in relation to the sales.

(2) Includes $0.1 million relating to the reclassification of the currency translation adjustment from a component of accumulated OCI to realized gain (losses) due to the sale of certain real estate assets, offset by the realized loss on the repayment of the intercompany loans in different currencies.

Income Tax Benefit (Expense)

The income tax expense for the three months endedJune 30, 2017 represents a net expense of $0.2 million related to our real estate equity segment. The income tax expense for the three months endedJune 30, 2016 represents a net expense of $0.5 million related to our real estate equity segment.

Same Store Analysis

The following table presents our same store analysis for the real estate equity segment which excludes properties that were acquired or sold at any time during the three months endedJune 30, 2017 and 2016 (dollars in thousands):

	Same Store(3)
	Three Months Ended June 30,						Increase (Decrease)
	2017			2016(1)			Amount			%
Occupancy (end of period)	83.4		%	83.5		%
Same store
Rental income(2)	$	25,972		$	25,885		$	87
Escalation income	5,489			4,633			856
Other income	409			31			378
Total revenues	31,870			30,549			1,321			4.3	%
Utilities	2,015			1,833			182
Real estate taxes and insurance	1,477			1,211			266
Non-recoverable value added tax (VAT)	468			339			129
Management fees	557			560			(3		)
Repairs and maintenance	2,446			1,834			612
Ground rent(2)	184			167			17
Other	424			55			369
Properties - operating expenses	7,571			5,999			1,572			26.2	%
Same store net operating income	$	24,299		$	24,550		$	(251	)	(1.0	)%

__________________

(1) Three months ended June 30, 2016 is translated using the average exchange rate for the three months ended June 30, 2017.

(2) Adjusted to exclude amortization of above/below market leases.

(3) We believe same store net operating income, a non-GAAP metric, is a useful metric of the operating performance as it reflects the operating performance of the real estate portfolio excluding effects of non-cash adjustments and provides a better measure of operational performance for a quarter-over-quarter comparison. Same store net operating income is presented for the same store portfolio, which represents all properties that were owned by us in the end of the reporting period. We define same store net operating income as NOI excluding (i) properties that were acquired or sold during the period, (ii) impact of foreign currency changes and (iii) amortization of above/below market leases. We consider same store net operating income to be an appropriate and useful supplemental performance measure. Same store net operating income  should not be considered as an alternative to net income (loss), determined in accordance with U.S. GAAP, as an indicator of operating performance.  In addition, our methodology for calculating same store net operating income involves subjective judgment and discretion and may differ from the methodologies used by other comparable companies, including other REITs, when calculating the same or similar supplemental financial measures and may not be comparable with these companies. 

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Same Store Revenue

Same store rental income increased as a result of lease extensions and other market rent and indexation adjustments. Same store escalation income increased due to increased operating expenses, of which, a majority of these costs are recovered from our tenants. Same store other income increased due to one-time dilapidation fees in the second quarter of 2017.

Same Store Expense

Same store real estate taxes increased due to higher non-recoverable real estate taxes on one of our properties the Netherlands. Same store non-recoverable value added tax, or VAT, increased due to a new tenant, in Trianon, which is non-VAT eligible. Same store repairs and maintenance increased due to repairs for some of our assets in the U.K. which are fully recoverable from the tenant.

Reconciliation Net Income to Same Store

The following table presents a reconciliation from net income (loss) to same store net operating income for the real estate equity segment for the three months endedJune 30, 2017 and 2016 (dollars in thousands):

	Same Store Reconciliation
	Three Months Ended June 30,
	2017			2016
Net income (loss)	$	(10,538	)	$	(34,309	)
Corporate segment net (income) loss(1)	12,860			12,041
Interest income(2)	(297		)	—
Impairment losses	—			27,468
Other (income) loss(3)	22,736			27,424
Net operating income	24,761			32,624
Sale of real estate investments and other(4)	(462		)	(8,074		)	(5)
Same store net operating income	$	24,299		$	24,550

__________________

(1) Includes management fees, general and administrative expense, compensation expense, corporate interest expense and corporate transaction costs.

(2) Represents interest income earned in the preferred equity segment.

(3) Includes depreciation and amortization expense, transaction costs and other expenses in the real estate equity segment.

(4) Represents the impact of assets sold during the period.

(5) Three months ended June 30, 2016 is translated using the average exchange rate for the three months ended June 30, 2017.

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Comparison of the Six Months EndedJune 30, 2017 to June 30, 2016 (dollars in thousands):

	Six Months Ended   June 30,						Increase (Decrease)
	2017			2016			Amount			%
Revenues
Rental income	$	51,561		$	68,823		$	(17,262	)	(25	)%
Escalation income	10,719			11,998			(1,279		)	(11	)%
Interest income	297			—			297			100	%
Other income	537			749			(212		)	(28	)%
Total revenues	63,114			81,570			(18,456		)	(23	)%
Expenses
Properties - operating expenses	15,002			17,771			(2,769		)	(16	)%
Interest expense	13,105			24,183			(11,078		)	(46	)%
Transaction costs	1,233			2,483			(1,250		)	(50	)%
Impairment losses	—			27,468			(27,468		)	(100	)%
Management fee, related party	7,131			7,000			131			2	%
Other expenses	4,608			6,731			(2,123		)	(32	)%
General and administrative expenses	4,152			2,978			1,174			39	%
Compensation expense	17,255			7,034			10,221			145	%
Depreciation and amortization	25,083			37,275			(12,192		)	(33	)%
Total expenses	87,569			132,923			(45,354		)	(34	)%
Other income (loss)
Unrealized gain (loss) on derivatives and other	(8,596		)	(14,594		)	5,998			(41	)%
Realized gain (loss) on sales and other	6,951			2,174			4,777			220	%
Income (loss) before income tax benefit (expense)	(26,100		)	(63,773		)	37,673			(59	)%
Income tax benefit (expense)	36			139			(103		)	(74	)%
Net income (loss)	$	(26,064	)	$	(63,634	)	$	37,570		(59	)%

Revenues

Rental Income

Rental income consists of rental revenue in our real estate equity segment. Rental income decreased $17.3 million, primarily due to the disposal of 18 properties during 2016.

Escalation Income

Escalation income consists of tenant recoveries in our real estate equity segment. Escalation income decreased $1.3 million, primarily due to the disposal of 18 properties during 2016, offset by an increase in recoverable operating expenses. There is a corresponding decrease in properties - operating expenses and a majority of these costs are recovered from our tenants.

Interest Income

Interest income relates to our preferred equity investment originated in the second quarter 2017 in our preferred equity segment.

Other Income

Other income is principally related to lease surrender premiums and termination fees in our real estate equity segment. Other income decreased for the six months endedJune 30, 2017 due to a significant lease surrender premium in the first quarter of 2016.

Expenses

Properties - Operating Expenses

Properties - operating expenses decreased $2.8 million due to the disposal of 18 properties during 2016 offset by an increase in recoverable repairs and maintenance during 2017 in our real estate equity segment. There is a corresponding decrease in escalation income and a majority of these costs are recovered from our tenants.

Interest Expense

Interest expense decreased $11.1 million due to the disposal of 18 properties during 2016, the refinancing of certain mortgage notes in our real estate equity segment in the first quarter of 2016 and the repayment of our senior stock-settlable notes in our corporate segment in 2016.

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Transaction Costs

Transaction costs for the six months endedJune 30, 2017 primarily relate to costs related to the Mergers in our corporate segment and other transaction costs in our preferred equity segment. A transaction fee was paid to a third party and reimbursed in total by the entity that originated the Company’s preferred equity investment resulting in no impact to transaction costs. Transaction costs for the six months endedJune 30, 2016 primarily represented expenses such as real estate transfer tax and professional fees related to the acquisition of the assets in our real estate equity segment and the spin-off from NorthStar Realty in our corporate segment.

Management Fee, Related Party

Management fee, related party relates to the management fee incurred to our Manager in our corporate segment (refer to “Related Parties Arrangements” below for more information).

Other Expenses

Other expenses primarily represent third-party service provider fees such as audit and legal fees and other compliance related fees related to portfolio management of our real estate equity segment. We expect further benefit from cost savings from the asset disposals in the second half of 2017 due to timing of the unwind of the structures and the reduction in the number of entities.

General and Administrative Expenses

General and administrative expenses are incurred in our corporate segment. For the six months endedJune 30, 2017, our Manager did not allocate any general and administrative expenses to us. For the six months endedJune 30, 2017, our Manager allocated $0.1 million.

Compensation Expense

Compensation expense is comprised of time-based and performance equity-based based awards in our corporate segment. The increase for the six months endedJune 30, 2017, is due to the acceleration of substantially all of our equity awards due to the Mergers. Refer to Note 6 to the Notes to Consolidated Financial Statements (unaudited) for further information.

Depreciation and Amortization

Depreciation and amortization expense decreased due to the disposal of 18 properties during 2016 and assets being reclassified into held for sale in our real estate equity segment in the first and second quarter 2017.

Other Income (Loss)

Unrealized Gain (Loss) on Derivatives and Other

Unrealized gain (loss) on derivatives and other is primarily related to the non-cash change in fair value of derivative instruments. The loss related to the foreign currency forwards used to hedge projected net property level cash flows in our corporate segment was due to the strengthened U.K. Pound Sterling and the Euro against the U.S. dollar. The decreased loss in the interest rate caps in our real estate equity segment relates to the movement in interest rate spreads across Europe.

The following table presents a summary of unrealized gain (loss) on derivatives and other for the six months endedJune 30, 2017 and 2016 (dollars in thousands):

	Six Months Ended June 30,
	2017									2016
	Real Estate Equity			Corporate			Total			Real Estate Equity			Corporate			Total
Change in fair value of:
Derivatives, at fair value
Interest rate caps	$	(713	)	$	—		$	(713	)	$	(14,175	)	$	—		$	(14,175	)
Foreign currency forwards	—			(7,572		)	(7,572		)	—			207			207
Foreign currency remeasurement and other	(247		)	(64		)	(311		)	(210		)	(416		)	(626		)
Total unrealized gain (loss) on derivatives and other	$	(960	)	$	(7,636	)	$	(8,596	)	$	(14,385	)	$	(209	)	$	(14,594	)

Realized Gain (Loss) on Sales and Other

The following table presents a summary of realized gain (loss) on sales and other for the six months endedJune 30, 2017 and 2016 (dollars in thousands):

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	Six Months Ended June 30,
	2017											2016
	Real Estate Equity			Corporate		Preferred Equity			Total			Real Estate Equity			Corporate			Total
Sale of real estate investments(1)	$	5,997		$	—				$	5,997		$	7,825		$	—		$	7,825
Foreign currency transactions(2)	(323		)	10		(6		)	(319		)	(116		)	—			(116		)
Write-off of deferred financing costs	(183		)	—					(183		)	—			(4,341		)	(4,341		)
Net cash payments (receipts) on derivatives				1,456					1,456			—			(1,194		)	(1,194		)
Total realized gain (loss) on sales and other	$	5,491		$	1,466	$	(6	)	$	6,951		$	7,709		$	(5,535	)	$	2,174

_____________

(1) Excludes escrow arrangements entered into for specific indemnification obligations in relation to the sales.

(2) Includes $0.1 million relating to the reclassification of the currency translation adjustment from a component of accumulated OCI to realized gain (losses) due to the sale of certain real estate assets, offset by the realized loss on the repayment of the intercompany loans in different currencies.

Income Tax Benefit (Expense)

The income tax expense for the six months endedJune 30, 2017 represents an immaterial tax benefit primarily related to deferred tax benefit for our assets in our real estate equity segment. The income tax benefit for the six months endedJune 30, 2016 represents a net benefit of $0.1 million primarily related to deferred tax benefits in our real estate equity segment.

Liquidity and Capital Resources

Our financing strategy is to employ investment-level financing to prudently leverage our investments and deliver attractive risk-adjusted returns to our stockholders through a wide range of secured and unsecured debt and public and private equity capital sources to fund our investment activities. In addition to investment-specific financings, we may use and have used credit facilities and repaid facilities on a shorter term basis and public and private, secured and unsecured debt issuances on a longer term basis. Our current primary liquidity needs are to fund:

• our operating expenses and investment activities, including the repurchase of our common stock;

• acquisitions of our target assets and related ongoing commitments;

• capital improvements

• distributions to our stockholders;

• principal and interest payments on our borrowings; and

• income tax liabilities of taxable REIT subsidiaries and we are subject to limitations as a REIT.

Our current primary sources of liquidity are:

• net proceeds from asset disposals;

• financings secured by our assets such as mortgage notes, long-term senior and subordinate corporate capital such as revolving credit facilities, senior term loans, senior notes, senior exchangeable notes and perpetual preferred stock and common stock;

• cash on hand; and

• cash flow generated from our investments, both from operations and return of capital.

We seek to meet our long-term liquidity requirements, including the repayment of borrowings and our investment funding needs, through existing cash resources, issuance of debt or equity capital, return of capital from investments and the liquidation or refinancing of assets. Nonetheless, our ability to meet a long-term (beyond one year) liquidity requirement may be subject to obtaining additional debt and equity financing. Any decision by our lenders and investors to provide us with financing will depend upon a number of factors, such as our compliance with the terms of our existing credit arrangements, our financial performance, industry or market trends, the general availability of and rates applicable to financing transactions, such lenders’ and investors’ resources and policies concerning the terms under which they make capital commitments and the relative attractiveness of alternative investment or lending opportunities.

As a REIT, we are required to distribute at least 90% of our annual REIT taxable income to our stockholders, including taxable income where we do not receive corresponding cash, and we intend to distribute all or substantially all of our REIT taxable income in order to comply with the REIT distribution requirements of the Internal Revenue Code and to avoid federal income tax and the non-deductible excise tax. On a quarterly basis, our board of directors determines an appropriate common stock dividend based upon numerous factors, including CAD, REIT qualification requirements, availability of existing cash balances, borrowing capacity under existing credit agreements, access to cash in the capital markets and other financing sources, our view of our ability to realize gains in the future through appreciation in the value of our assets, general economic conditions and economic conditions that more

46

specifically impact our business or prospects. Future dividend levels are subject to adjustment based upon our evaluation of the factors described above, as well as other factors that our board of directors may, from time-to-time, deem relevant to consider when determining an appropriate common stock dividend.

In November 2015, our board of directors authorized the repurchase of up to $100 million of our outstanding common stock. That authorization expired in November 2016 and at such time our board of directors authorized an additional repurchase of up to $100 million of our outstanding common stock. The authorization expires in November 2017, unless otherwise extended by our board of directors. For the six months endedJune 30, 2017, we did not repurchase any shares of our common stock.

We believe that our existing sources of funds should be adequate for purposes of meeting our short-term liquidity needs. We expect our contractual rental income is sufficient to meet our expected capital expenditures, interest expense, property operating and general and administrative expenses as well as common dividends declared by us. We may seek to raise additional capital in order to finance new acquisitions. Unrestricted cash as of August 3, 2017 was approximately $63 million.

Cash Flows

The following presents a summary of our consolidated statements of cash flows for the six months endedJune 30, 2017 and 2016 (dollars in thousands).

	Six Months Ended June 30,
Cash flow provided by (used in):	2017			2016
Operating activities	$	13,392		$	8,758
Investing activities	(4,029		)	68,355
Financing activities	(11,259		)	(231,092		)
Effect of foreign currency translation on cash and cash equivalents	4,844			(4,763		)
Net increase (decrease) in cash and cash equivalents	$	2,948		$	(158,742	)

Six Months EndedJune 30, 2017 Compared to June 30, 2016

Net cash provided by operating activities was $13.4 millionfor the six months endedJune 30, 2017 compared to $8.8 million for the six months endedJune 30, 2016. The increase was primarily due to an increase in the change in operating assets and liabilities due to the timing of payments and collection of receivables, offset by a decrease of net cash provided by operating activities before changes in operating assets and liabilities related to the disposal of 18 properties.

Net cash used in investing activities was$4.0 million for the six months endedJune 30, 2017 compared to net cash provided by $68.4 million for the six months endedJune 30, 2016. Cash flow used in investing activities for the six months endedJune 30, 2017 was primarily due to proceeds from the sale of real estate, offset by the origination of our preferred equity investment and improvements of our operating real estate. Cash flow provided by the six months endedJune 30, 2016 was primarily due to proceeds from the sale of operating real estate offset by improvements of our operating real estate.

Net cash used in financing activities was $11.3 million for the six months endedJune 30, 2017 compared to $231.1 million for the six months endedJune 30, 2016. Cash flow used in financing activities for the six months endedJune 30, 2017 was primarily due to the net cash payment on tax withholding of $11.0 million. repayments of mortgage notes and other notes payable of $7.8 million, repayment of the Credit Facility of $12 million and dividend payments of $16.8 million offset by the borrowings from the Credit Facility of $35 million. Net cash flow used in financing activities for the six months endedJune 30, 2016 was primarily due to $230.8 million from the repurchase of Senior Notes, the repayment of mortgage notes and other notes payable of $32.1 million, repayment of the credit facility of $6.4 million and dividend payments of $18.0 million off set by $65.0 million from the borrowing under the Credit Facility.

Off-Balance Sheet Arrangements

We currently do not have any off-balance sheet arrangements.

Related Party Arrangements

Colony NorthStar, Inc.

The management agreement with our Manager is for an initial term of 20 years and provides for a base management fee and incentive fee.

Base Management Fee

For the three months endedJune 30, 2017 and 2016, we incurred $3.6 million and $3.5 million, respectively, related to the base management fee. For the six months endedJune 30, 2017 and 2016, we incurred $7.1 million and $7.0 million respectively, related

47

to the base management fee. The base management fee to our Manager could increase subsequent to June 30, 2017 by an amount equal to 1.5% per annum of the sum of:

• any equity we issue in exchange or conversion of exchangeable or stock-settlable notes;

• any other issuances by us of common equity, preferred equity or other forms of equity, including but not limited to limited partnership interests in the Operating Partnership, which are structured as profits interests, or LTIP units (excluding units issued to us and equity-based compensation, but including issuances related to an acquisition, investment, joint venture or partnership); and

• cumulative CAD, if any, in excess of cumulative distributions paid on common stock, LTIP Units or other equity awards which began with our fiscal quarter ended March 31, 2016.

Incentive Fee

For the three and six months endedJune 30, 2017 and 2016, we did not incur an incentive fee. The incentive fee is calculated and payable quarterly in arrears in cash, equal to:

• the product of: (a) 15% and (b) our CAD before such incentive fee, divided by the weighted average shares outstanding for the calendar quarter, of any amount in excess of $0.30 per share and up to $0.36 per share; plus

• the product of: (a) 25% and (b) our CAD before such incentive fee, divided by the weighted average shares outstanding for the calendar quarter, of any amount in excess of $0.36 per share;

• multiplied by our weighted average shares outstanding for the calendar quarter.

Weighted average shares represents the number of shares of our 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 equity issuances are 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.

Additional Management Agreement Terms

Our management agreement with our Manager provides that in the event of a change of control of our Manager or other event that could be deemed an assignment of the management agreement, we will consider such assignment in good faith and not unreasonably withhold, condition or delay our consent. The management agreement further provides that we anticipate consent would be granted for an assignment or deemed assignment to a party with expertise in commercial real estate and over $10 billion of assets under management. The management agreement also provides that, notwithstanding anything in the agreement to the contrary, to the maximum extent permitted by applicable law, rules and regulations, in connection with any merger, sale of all or substantially all of the assets, change of control, reorganization, consolidation or any similar transaction of us or our Manager, directly or indirectly, the surviving entity will succeed to the terms of the management agreement.

Payment of Costs and Expenses and Expense Allocation

We are responsible for all of our direct costs and expenses and reimburse our Manager for costs and expenses incurred by our Manager on our behalf. In addition, our Manager may allocate indirect costs to us 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, our management agreement with our Manager, or the G&A Allocation. Our management agreement with our Manager provides that the amount of the G&A Allocation will not exceed the following: (i) 20% of the total of: (a) our general and administrative expenses as reported in our consolidated financial statements excluding (1) equity-based compensation expense, (2) non-recurring items, (3) fees payable to our Manager under the terms of the applicable management agreement and (4) any allocation of expenses to us, or NRE’s G&A; and (b) our Manager’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 our Manager; less (ii) NRE’s G&A. The G&A Allocation may include our allocable share of our Manager’s compensation and benefit costs associated with dedicated or partially dedicated personnel who spend all or a portion of their time managing our affairs, based upon the percentage of time devoted by such personnel to our affairs. The G&A Allocation may also include rental and occupancy, technology, office supplies, travel and entertainment and other general and administrative costs and expenses, which may be allocated based on various methodologies, such as weighted average employee count or the percentage of time devoted by personnel to our affairs. In addition, we will pay directly or reimburse our Manager for an allocable portion of any severance paid pursuant to any employment, consulting or similar service agreements in effect between our Manager and any of its executives, employees or other service providers.

Our obligation to reimburse our Manager for the G&A Allocation and any severance, at our Manager’s discretion, and the 20% cap on the G&A Allocation, as described above, applies on an aggregate basis to us.

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For the three and six months endedJune 30, 2017 and the three months endedJune 30, 2016 our Manager did not allocate any general and administrative expenses to us. For the six months endedJune 30, 2016, our Manager allocated $0.1 million to us. For the three and six months endedJune 30, 2017 and 2016, our Manager did not allocate any severance to us.

In addition, the management agreement provides that, we, together with any company spun-off from us shall pay directly or reimburse our Manager for up to 50% of any long-term bonus or other compensation that our Manager’s compensation committee determines shall be paid and/or settled in the form of equity and/or equity-based compensation to executives, employees and service providers of our Manager during any year. Subject to this limitation and limitations contained in any applicable management agreement between our Manager and any company spun-off from us, the amount paid by us and any company spun-off from us will be determined by our Manager in its discretion. At the discretion of our Manager’s compensation committee, this compensation may be granted in shares of our restricted stock, restricted stock units, LTIP Units or other forms of equity compensation or stock-based awards; provided that if at any time a sufficient number of shares of our common stock are not available for issuance under our equity compensation plan, such compensation shall be paid in the form of RSUs, LTIP Units or other securities that may be settled in cash. Our equity compensation for each year may be allocated on an individual-by-individual basis at the discretion of our Manager 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%.

We do not have employment agreements with our named executive officers, but we have generally agreed to pay directly or reimburse our Manager for the portion of any severance paid by our Manager or any of its affiliates to an individual pursuant to the terms of any employment, consulting or similar service agreement, including any employment agreements with Colony NorthStar or its subsidiaries and our named executive officers, that corresponds to or is attributable to: (i) the equity compensation that we are required to pay directly or reimburse our Manager pursuant to the management agreement; (ii) any cash and/or equity compensation paid directly by us to such individual as an employee or our other service providers; and (iii) any amounts paid to such individual by our Manager or any of its affiliates that we are obligated to reimburse our Manager pursuant to the management agreement. With respect to Mahbod Nia, in lieu of the foregoing severance payment or reimbursement, we have agreed to pay directly or reimburse our Manager for 50% of any cash payments made by our Manager or any of its affiliates in connection with the termination of Mr. Nia’s employment either without cause or upon the non-renewal of the named executive officer’s term of employment by his employer or by Mr. Nia for good reason; provided that our board of directors consented to the taking of such action (or, with respect to a termination for good reason, any action taken with the intent to create good reason). Because our obligation to pay these amounts is owed to our Manager and not directly to our named executive officers and we do not control the terms of the agreements between our Manager or its affiliates and our named executive officers, the discussion above does not include these amounts or a discussion of any arrangements that our Manager or its affiliates may have with our named executive officers pursuant to which our obligations to our Manager may arise.

Manager Ownership of Common Stock

As of June 30, 2017, Colony NorthStar and its subsidiaries owned 4,938,225 shares of our common stock, or 9.0% of the total outstanding common stock.

Recent Developments

Dividends

On August 2, 2017, we declared a dividend of $0.15 per share of common stock. The common stock dividend will be paid on August 18, 2017 to stockholders of record as of the close of business on August 14, 2017.

Sales

Subsequent to June 30, 2017, we sold one non-core asset with a carrying value of $7.3 million for $9.0 million, which was recorded in assets held for sale in the consolidated balance sheet as of June 30, 2017.

Inflation

Virtually all of our assets and liabilities are interest rate and foreign currency exchange rate sensitive in nature. As a result, interest rates, foreign currency exchange rates and other factors influence our performance significantly more than inflation does. A change in interest rates and foreign currency exchange rates may correlate with inflation rates. With the exception of the United Kingdom, rent is generally adjusted annually based on local consumer price indices. In the United Kingdom, rent is typically subject to an upward only rent review usually every three to five years.

Refer to Item 3. “Quantitative and Qualitative Disclosures About Market Risk” for additional details.

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Non-GAAP Financial Measures

We use CAD and NOI, each a non-GAAP measure, to evaluate our profitability.

Cash Available for Distribution

We believe that CAD provides investors and management with a meaningful indicator of operating performance. We also believe that CAD is useful because it adjusts for a variety of items that are consistent with presenting a measure of operating performance (such as transaction costs, depreciation and amortization, equity-based compensation, realized gain (loss) on sales and other, asset impairment and non-recurring bad debt expense). We adjust for transaction costs because these costs are not a meaningful indicator of our operating performance. For instance, these transaction costs include costs such as professional fees associated with new investments, which are expenses related to specific transactions. Management also believes that quarterly distributions are principally based on operating performance and our board of directors includes CAD as one of several metrics it reviews to determine quarterly distributions to stockholders. The definition of CAD may be adjusted from time to time for our reporting purposes in our discretion, acting through our audit committee or otherwise. CAD may fluctuate from period to period based upon a variety of factors, including, but not limited to, the timing and amount of investments, repayments and asset sales, capital raised, use of leverage, changes in the expected yield of investments and the overall conditions in commercial real estate and the economy generally.

We calculate CAD by subtracting from or adding to net income (loss) attributable to common stockholders, non-controlling interests and the following items: depreciation and amortization items including straight-line rental income or expense (excluding amortization of rent free periods), amortization of above/below market leases, amortization of deferred financing costs, amortization of discount on financings and other and equity-based compensation; unrealized gain (loss) on derivatives and other; realized gain (loss) on sales and other (excluding any realized gain (loss) on foreign currency derivatives); impairment on depreciable property; non-recurring bad debt expense; acquisition gains or losses; transaction costs; foreign currency gains (losses); impairment on goodwill and other intangible assets; and one-time events pursuant to changes in U.S. GAAP and certain other non-recurring items. These items, if applicable, include any adjustments for unconsolidated ventures.

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

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The following table presents a reconciliation of CAD to net income (loss) attributable to common stockholders for the three and six months endedJune 30, 2017 (dollars in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Net income (loss) attributable to common stockholders	$	(10,447	)	$	(33,909	)	$	(25,797	)	$	(62,891	)
Non-controlling interests	(91		)	(400		)	(267		)	(743		)
Adjustments:
Depreciation and amortization items(1)(2)	14,990			25,134			44,560			50,434
Impairment losses	—			27,468			—			27,468
Unrealized (gain) loss on derivatives and other	7,655			(1,159		)	8,596			14,594
Realized (gain) loss on sales and other(3)(4)	(1,342		)	(5,398		)	(5,495		)	(3,368		)
Transaction costs and other(5)(6)	973			1,623			2,148			2,769
CAD	$	11,738		$	13,359		$	23,745		$	28,263

__________________

(1) Three months ended June 30, 2017 represents an adjustment to exclude depreciation and amortization of $12.5 million, amortization expense of capitalized above/below market leases of $0.3 million, amortization of deferred financing costs of $0.8 million and amortization of equity-based compensation of $1.4 million. Three months ended June 30, 2016 represents an adjustment to exclude depreciation and amortization of $18.4 million, amortization of above/below market leases of $0.9 million, amortization of deferred financing costs of $2.0 million and amortization of equity-based compensation of $3.8 million.

(2) Six months endedJune 30, 2017 represents an adjustment to exclude depreciation and amortization of $25.1 million, amortization expense of capitalized above/below market leases of $0.5 million, amortization of deferred financing costs of $1.7 million and amortization of equity-based compensation of $17.3 million. Six months endedJune 30, 2016 represents an adjustment to exclude depreciation and amortization of $37.3 million, amortization expense of capitalized above/below market leases of $2.3 million, amortization of deferred financing costs of $3.8 million and amortization of equity-based compensation of $7.0 million.

(3) Three months ended June 30, 2017 represents an adjustment to exclude a $1.4 million net gain related to the sale of real estate, $0.1 million loss related to the write-off of the deferred financing costs associated with the repayment of the mortgage notes and a $0.1 million net gain related to foreign currency. CAD includes a $0.6 million net gain related to the settlement of foreign currency derivatives. Three months ended June 30, 2016 represents an adjustment to exclude an $8.1 million net gain related to the sale of real estate, $2.4 million loss related to the write-off of the deferred financing costs associated with the repurchase of the Senior Notes and a $0.3 million net loss related to foreign currency. CAD includes a $0.8 million net loss related to the settlement of foreign currency derivatives.

(4) Six months endedJune 30, 2017 represents an adjustment to exclude a $6.0 million net gain related to the sale of real estate investment, $0.2 million loss related to the write-off of the deferred financing costs associated with the repayment of the mortgage notes and a $0.3 million net loss related to foreign currency. CAD includes a $1.5 million net gain related to the settlement of foreign currency derivatives. Six months endedJune 30, 2016 represents an adjustment to exclude a $7.8 million net gain related to the sale of real estate, $4.3 million loss related to the write-off of the deferred financing costs associated with the repurchase of the Senior Notes and a $0.1 million net loss related to foreign currency. CAD includes a $1.2 million net loss related to the settlement of foreign currency derivatives.

(5) Three months ended June 30, 2017 represents an adjustment to exclude $1.0 million of transaction costs relating to the Mergers and transaction fees related to our preferred equity investment. Three months ended June 30, 2016 represents an adjustment to exclude $1.6 million of transaction costs.

(6) Six months endedJune 30, 2017 represents an adjustment to exclude $1.2 million of transaction costs relating to the Mergers and transaction fees related to our preferred equity investment and $0.9 million of payroll taxes associated with the acceleration of equity awards due to the Mergers. Six months endedJune 30, 2016 represents an adjustment to exclude $2.4 million of transaction costs and $0.3 million of other one-time items.

Net Operating Income (NOI)

We believe NOI is a useful metric of the operating performance of our real estate portfolio in the aggregate. Portfolio results and performance metrics represent 100% for all consolidated investments. Net operating income represents total property and related revenues, adjusted for: (i) amortization of above/below market leases; (ii) straight-line rent (except with respect to rent free period); (iii) other items such as adjustments related to joint ventures and non-recurring bad debt expense and less property operating expenses. However, the usefulness of NOI is limited because it excludes general and administrative costs, interest expense, transaction costs, depreciation and amortization expense, realized gains (losses) on sales and other and other items under U.S. GAAP and capital expenditures and leasing costs necessary to maintain the operating performance of properties, all of which may be significant economic costs. NOI may fail to capture significant trends in these components of U.S. GAAP net income (loss) which further limits its usefulness.

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

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The following table presents a reconciliation of NOI of our real estate equity and preferred equity segments to property and other related revenues less property operating expenses for the three and six months endedJune 30, 2017 and 2016 (dollars in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Rental income	$	26,025	$	33,990	$	51,561	$	68,823
Escalation income	5,558		5,908		10,719		11,998
Other income	508		46		537		749
Total property and other income	32,091		39,944		62,817		81,570
Properties - operating expenses	7,680		8,540		15,002		17,771
Adjustments:
Interest income	297		—		297		—
Amortization and other items(1)(2)	253		1,220		533		2,651
NOI(3)	$	24,961	$	32,624	$	48,645	$	66,450

___________________

(1) Three months ended June 30, 2017 primarily includes $0.3 million of amortization of above/below market leases. Three months ended June 30, 2016 primarily includes $1.1 million of amortization of above/below market leases.

(2) Six months endedJune 30, 2017 primarily includes $0.5 million of amortization of above/below market leases. Six months endedJune 30, 2016 primarily includes $2.3 million of amortization of above/below market lease and $0.3 million of non-recurring bad debt expense.

(3) The following table presents a reconciliation of net income (loss) to NOI of our real estate segment for the three and six months endedJune 30, 2017 and 2016 (dollars in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Net income (loss)	$	(10,538	)	$	(34,309	)	$	(26,064	)	$	(63,634	)
Remaining segments(i)	13,109			12,041			35,952			32,229
Real estate segment adjustments:
Interest expense	6,451			8,691			12,571			17,117
Other expenses	2,415			3,007			4,443			6,697
Depreciation and amortization	12,520			18,404			25,083			37,275
Unrealized (gain) loss on derivatives and other	1,293			3,400			960			14,385
Realized (gain) loss on sales and other	(1,336		)	(7,794		)	(5,491		)	(7,709		)
Income tax (benefit) expense	237			520			(36		)	(139		)
Impairment losses	—			27,468			—			27,468
Other items	810			1,196			1,227			2,761
Net (income) loss - Real estate segment	22,390			54,892			38,757			97,855
NOI	$	24,961		$	32,624		$	48,645		$	66,450

______________________

(i) Represents the net (income) loss in our corporate and preferred equity segments to reconcile to net operating income.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are primarily subject to interest rate risk, credit risk and foreign currency exchange rate risk. These risks are dependent on various factors beyond our control, including monetary and fiscal policies, domestic and international economic conditions and political considerations. Our market risk sensitive assets, liabilities and related derivative positions are held for investment and not for trading purposes.

Interest Rate Risk

Changes in interest rates affect our net income primarily related to the impact to interest expense incurred in connection with our borrowings and derivatives.

Substantially all of our investments are financed with non-recourse mortgage notes. We predominately use floating rate financing and we seek to generally mitigate the risk of interest rates rising through derivative instruments including interest rate caps. As of June 30, 2017, a hypothetical 100 basis point increase in the interest rate applied to our liabilities would result in a decrease in net income of approximately $6.0 million annually, respectively.

A change in interest rates could affect the value of our properties, which may be influenced by changes in interest rates and credit spreads (as discussed below) because value is typically derived by discounting expected future cash flow generated by the property using interest rates plus a risk premium based on the property type and creditworthiness of the tenants. A lower risk-free rate generally results in a lower discount rate and, therefore, a higher valuation, and vice versa; however, an increase in the risk-free rate would not impact our net income.

We use derivative instruments to manage interest rate exposure. These derivatives are typically in the form of interest rate cap agreements and the primary objective is to minimize interest rate risks associated with our investments and financing activities. The counterparties of these arrangements are major financial institutions with which we may also have other financial relationships. We are exposed to credit risk in the event of non-performance by these counterparties and we monitor their financial condition.

As of June 30, 2017, none of our derivatives qualified for hedge accounting treatment, therefore, gains (losses) resulting from their fair value measurement at the end of each reporting period are recognized as an increase or decrease in unrealized gain (loss) on derivatives and other in our consolidated statements of operations. In addition, we are, and may in the future be, subject to additional expense based on the notional amount of the derivative and a specified spread over the applicable index. Because the fair value of these instruments can vary significantly between periods, we may experience significant fluctuations in the amount of our unrealized gain (loss) in any given period.

Subject to maintaining our qualification as a REIT for U.S. federal income tax purposes, we may mitigate the risk of interest rate volatility through the use of hedging instruments, such as interest rate swap agreements and interest rate cap agreements. The goal of our interest rate management strategy is to minimize or eliminate the effects of interest rate changes on the value of our assets, to improve risk-adjusted returns and, where possible, to lock in, on a long-term basis, a favorable spread between the yield on our assets and the cost of financing such assets.

We can provide no assurances, however, that our efforts to manage interest rate volatility will successfully mitigate the risks of such volatility on our portfolio.

Credit Risk

We are subject to the credit risk of the tenants of our properties. We seek to undertake a credit evaluation of each tenant prior to acquiring properties. This analysis includes due diligence of each tenant’s business as well as an assessment of the strategic importance of the underlying real estate to the tenant’s core business operations. Where appropriate, we may seek to augment the tenant’s commitment to the property by structuring various credit enhancement mechanisms into the underlying leases. These mechanisms could include security deposit requirements, letters of credit or guarantees from entities we deem creditworthy. Additionally, we perform ongoing monitoring of creditworthiness of our tenants which is an important component of our portfolio management process. Such monitoring may include, to the extent available, a review of financial statements and operating statistics, delinquencies, third party ratings and market data. In addition, our preferred equity investment is subject to credit risk through our borrower’s ability to make required interest payments on scheduled due dates. We seek to manage credit risk through our Advisor’s comprehensive credit analysis prior to making an investment, actively monitoring our investment and the underlying credit quality, including subordination and diversification of our investment. Our analysis is based on a broad range of real estate, financial, economic and borrower-related factors, which we believe are critical to the evaluation of credit risk inherent in a transaction. For the six months ended June 30, 2017, our preferred equity investment contributed all of our interest income.

We are subject to the credit risk of the borrower when we originate preferred equity investments. We seek to undertake a rigorous credit evaluation of our borrower prior to making an investment. This analysis includes an extensive due diligence investigation of the borrower’s creditworthiness and business as well as an assessment of the strategic importance of the underlying real estate to the borrower’s core business operations.

53

Foreign Currency Exchange Rate Risk

We are subject to risks related to changes in foreign currency exchange rates as a result of our ownership of, or commitments to acquire, properties within Europe, predominantly the U.S. dollar/Euro and U.S. dollar/U.K. Pounds Sterling exchange rate. As a result, changes in exchange rate fluctuations may positively or negatively affect our consolidated revenues and expenses (as expressed in U.S. dollars) from our business. We may use several strategies to mitigate our exposure to exchange rate risk to hedge our equity and/or net income, including using local currency denominated financing and entering into forward or option foreign currency purchase contracts.

In addition, because we are exposed to foreign currency exchange rate fluctuations, we employ foreign currency risk management strategies, including the use of, among others, currency hedges, and matched currency financing.

The following chart represents the change in the U.S. dollar/Euro and U.S. dollar/U.K. Pounds Sterling exchange rate during the six months endedJune 30, 2017 and 2016:

Source: Oanda

Our properties and the rent payments under our leases for these properties are denominated predominantly in Euro and U.K. Pounds Sterling and we expect substantially all of our future leases for properties we may acquire in Europe to be denominated in the local currency of the country in which the underlying property is located. Additionally, our non-recourse mortgage borrowings are denominated in the same currency as the assets securing the borrowing. A majority portion of our operating expenses and borrowings with respect to such European properties are also transacted in local currency, however we do have corporate expenses, such as our dividend, that are paid in U.S. dollar. We report our results of operations and consolidated financial information in the U.S. dollars. Consequently, our results of operations as reported in U.S. dollars are impacted by fluctuations in the value of the local currencies in which we conduct our European business.

In an effort to mitigate the risk of fluctuations in foreign currency exchange rates, we, and our Operating Partnership, seek to actively manage our revenues and expenses so that we incur a significant portion of our expenses, including our operating costs and borrowings, in the same local currencies in which we receive our revenues. In addition, subject to satisfying the requirements for qualification as a REIT, we engage in various hedging strategies, which may include currency futures, swaps, forwards and options. We expect that these strategies and instruments may allow us to reduce, but not eliminate, the risk of fluctuations in foreign currency exchange rates. The counterparties to these arrangements are major financial institutions with which we may also have other financial relationships. As of June 30, 2017, we have entered into foreign currency forwards with respect to the project net property level cash flows which are hedged for 17 months.

Based on our portfolio, a hypothetical 10% appreciation or depreciation in the applicable exchange rate to the U.S dollar applied to our assets and liabilities and related derivatives would result in an increase or decrease of stockholders’ equity of approximately $61.5 million, respectively. Such amount would be recorded in OCI. In addition, we enter into derivative instruments to manage foreign currency exposure of our operating income. A hypothetical 10% increase or decrease in applicable exchange rate to the U.S dollar applied to our assets and liabilities and related derivatives would result in an increase or decrease of net income of approximately $1.2 million annually, respectively.

We can provide no assurances, however, that our efforts to manage foreign currency exchange rate volatility will successfully mitigate the risks of such volatility on our portfolio.

54

Item 4.  Controls and Procedures

Disclosure Controls and Procedures

As of the end of the period covered by this report, management conducted an evaluation as required under Rules 13a-15(b) and 15d-15(b) under the Securities Exchange Act of 1934, as amended, or Exchange Act, under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act).

Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures are effective. Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures to disclose material information otherwise required to be set forth in the Company’s periodic reports.

Internal Control over Financial Reporting

(a) Changes in internal control over financial reporting.

There have not been any changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II Other Information

Item 1. Legal Proceedings

We are involved in various litigation matters arising in the ordinary course of our business. Although we are unable to predict with certainty the eventual outcome of any litigation, in the opinion of management, our current legal proceedings are not expected to have a material adverse effect on our financial position or results of operations. Refer to Note 12, “Commitments and Contingencies” in Part I, Item 1. “Financial Statements” for further disclosure regarding legal proceedings.

Item 1A. Risk Factors

There have been no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.

You should carefully consider all information contained in this interim report on Form 10-Q, including our interim consolidated financial statements and the related notes thereto before making a decision to purchase our securities. The risks and uncertainties described are not the only ones facing us. Additional risks and uncertainties not presently known to us, or not presently deemed material by us, may also impair our operations and performance.

If any of the following risks actually occur, our business, financial condition or results of operations could be materially adversely affected. If that happens, the trading price of our securities could decline, and you may lose all or part of your investment.

55

Item 2. Purchases of Equity Securities by Affiliated Purchasers

The following table sets forth all purchases made by or on behalf of any affiliated purchaser, as defined in Rule10b-18(a)(3) under the Exchange Act, of shares of our common stock during the three months endedJune 30, 2017:

Period(1)	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
May 1 - May 31	4,376,102	$	12.64	N/A	N/A
June 1- June 30	315,769	$	12.27	N/A	N/A

__________________

(1) There were no purchases made by affiliated purchasers during April 2017.

56

Item 4. Mine Safety Disclosures

None.

57

Item 6.   Exhibits

Exhibit Number		Description of Exhibit
10.1	*	Reimbursement Agreement, (amending that certain Asset Management Agreement between NorthStar Realty Europe Corp. and an affiliate of NorthStar Asset Management Group Inc. (incorporated by reference to Exhibit 10.1 to NorthStar Realty Europe’s Current Report on Form 8-K filed on November 2, 2015) dated as of June 30, 2017, by and among NorthStar Realty Europe Limited Partnership and CNI NRE Advisors, LLC
31.1	*	Certification by the Chief Executive Officer pursuant to 17 CFR 240.13a-14(a)/15(d)-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	*	Certification by the Chief Financial Officer pursuant to 17 CFR 240.13a-14(a)/15(d)-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	*	Certification by the Chief Executive Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	*	Certification by the Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.0	*	The following materials from the NorthStar Realty Europe Corp. Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of June 30, 2017 (unaudited) and December 31, 2016; (ii) Consolidated Statements of Operations (unaudited) for the three and six months ended June 30, 2017 and 2016; (iii) Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three and six months ended June 30, 2017 and 2016; (iv) Consolidated Statements of Equity for the six months ended June 30, 2017 (unaudited) and year ended December 31, 2016; (v) Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2017 and 2016; and (vi) Notes to Consolidated Financial Statements (unaudited)

____________________________________________________________

* Filed herewith.

+ Denotes management contract or compensatory plan or arrangement required to be filed as an exhibit hereto.

58

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		NorthStar Realty Europe Corp.
Date:	August 8, 2017		By:	/s/ MAHBOD NIA
				Mahbod Nia
				Chief Executive Officer
			By:	/s/ KEITH A. FELDMAN
				Keith A. Feldman
				Chief Financial Officer and Treasurer

59

EX-10.1

Exhibit 10.1

REIMBURSEMENT AGREEMENT

This Reimbursement Agreement (this “Reimbursement Agreement”) between NorthStar Realty Europe Corp., a Maryland corporation (“NRE”), and CNI NRE Advisors, LLC, a Delaware limited liability company (the “Asset Manager”), as successor to NSAM J-NRE Ltd, a Jersey limited company (the “Original Asset Manager”), to that certain Asset Management Agreement, dated as of October 31, 2015, by and between NRE and the Original Asset Manager (the “Asset Management Agreement”), is dated as of June 30, 2017.

WHEREAS, all terms used but not otherwise defined herein shall have the meanings assigned to them in the Asset Management Agreement.

WHEREAS, the parties have entered into this Reimbursement Agreement to establish the agreement of the parties as to the reimbursement obligations of NRE in connection with severance payable by Asset Manager or its Affiliated Entities in connection with a termination under certain circumstances of the employment of Mahbod Nia, the Chief Executive Officer of NRE (the “Executive”) with Colony NorthStar UK, Ltd. (“Employer”).

NOW THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereby agree as follows:

1. Reimbursement Obligations. In lieu of any reimbursement obligations otherwise payable with respect to Executive pursuant to Section 3(c)(ii) of the Asset Management Agreement, NRE shall pay or directly reimburse Asset Manager for 50% of any cash payments made by the Asset Manager or its Affiliated Entities in connection with the termination of Executive’s employment with Employer either without Cause (as defined in the Employment Agreement), for Good Reason (as defined in the Employment Agreement), or as a result of Employer electing not to renew the Employment Agreement at the expiration of its term. For purposes hereof, Employment Agreement means the Amended and Restated Employment Agreement dated as of the date hereof by and between Executive and Employer. Notwithstanding the foregoing, NRE shall not be responsible for the reimbursement of any cash payments pursuant to this provision if (i) (a) Executive’s employment is terminated without Cause, (b) Executive is removed as CEO of NRE or the Asset Manager or Employer takes an action with the intent to create Good Reason, or (c) Employer elects not to renew the Employment Agreement at the expiration of its term, and (ii) NRE’s board of directors has not consented to the taking of such action.. Any cash payments reimbursable pursuant to this Reimbursement Agreement shall be directly payable by NRE upon notice by the Asset Manager or its Affiliated Entities and any such reimbursement will be paid in the manner described in Section 3(c)(ii) of the Asset Management Agreement.

2. Termination. This Reimbursement Agreement will terminate upon the termination of the Asset Management Agreement, unless earlier terminated by the parties.

3. Entire Agreement; Governing Law. This Reimbursement Agreement and the Asset Management Agreement contain the entire agreement of the parties and supersedes all prior agreements, understandings and arrangements with respect to the subject matter hereof. This Reimbursement Agreement shall be construed in accordance with the laws of the State of New York.

4. Applicability of Asset Management Agreement Provisions. The provisions of Section 16 (Assignment), Section 20 (Confidentiality), Section 22 (Notices), Section 23 (Amendments), Section 25 (Severability), Section 26 (Force Majeure), Section 27 (Waiver), Section 28 (Counterparts), Section 29 (Headings), Section 30 (Binding Effect; Benefit); Section 31

1

(Miscellaneous), Section 32 (Arbitration) and Section 33 (Submission to Jurisdiction; Consent to Service of Process) of the Asset Management Agreement shall apply to this Reimbursement Agreement to the same extent such provisions apply to the Asset Management Agreement.

[Signature Page Follows.]

2

IN WITNESS WHEREOF, the parties have caused this Reimbursement Agreement to be executed by their duly authorized officers as of the day and year first written above.

NORTHSTAR REALTY EUROPE CORP.
By:	/s/ Keith Feldman
	Name:	Keith Feldman
	Title:	Chief Financial Officer

CNI NRE ADVISORS, LLC
By:	/s/ Mark M. Hedstrom
	Name:	Mark M. Hedstrom
	Title:	V.P.

[Signature Page to Reimbursement Agreement]

EX-31.1

EXHIBIT 31.1

CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER PURSUANT TO

17 CFR 240.13a-14(a)/15(d)-14(a),

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Mahbod Nia, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of NorthStar Realty Europe Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	August 8, 2017	By:	/s/ MAHBOD NIA
			Mahbod Nia
			Chief Executive Officer and President

EX-31.2

EXHIBIT 31.2

CERTIFICATION BY THE CHIEF FINANCIAL OFFICER PURSUANT TO

17 CFR 240.13a-14(a)/15(d)-14(a),

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Keith A. Feldman, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of NorthStar Realty Europe Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and;

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	August 8, 2017	By:	/s/ KEITH A. FELDMAN
			Keith A. Feldman
			Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

       In connection with the Quarterly Report on Form 10-Q of NorthStar Realty Europe Corp. (the “Company”) for the quarterly period ended June 30, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mahbod Nia, as Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	August 8, 2017	By:	/s/ MAHBOD NIA
			Mahbod Nia
			Chief Executive Officer and President

        This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

      A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

CERTIFICATION BY THE CHIEF FINANCIAL OFFICER PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report on Form 10-Q of NorthStar Realty Europe Corp. (the “Company”) for the quarterly period ended June 30, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Keith A. Feldman, as Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	August 8, 2017	By:	/s/ KEITH A. FELDMAN
			Keith A. Feldman
			Chief Financial Officer

        This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

      A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2017	Aug. 03, 2017
Document and Entity Information
Entity Registrant Name	NorthStar Realty Europe Corp.
Entity Central Index Key	0001646587
Entity Current Reporting Status	Yes
Document Type	10-Q
Document Period End Date	Jun. 30, 2017
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		55,260,911
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q2

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Assets
Operating real estate, gross	$ 1,738,608	$ 1,614,432
Less: accumulated depreciation	(88,242)	(63,585)
Operating real estate, net	1,650,366	1,550,847
Preferred equity investments	34,064	0
Cash and cash equivalents	69,256	66,308
Restricted cash	10,654	10,242
Receivables, net of allowance of $579 and $553 as of June 30, 2017 and December 31, 2016, respectively	6,882	6,015
Assets held for sale	9,427	28,208
Derivative assets, at fair value	9,839	13,729
Intangible assets, net	149,352	148,403
Other assets, net	25,393	21,640
Total assets	1,965,233	1,845,392
Liabilities
Mortgage and other notes payable, net	1,232,354	1,149,119
Credit facility	23,000	0
Accounts payable and accrued expenses	26,778	28,004
Due to related party (refer to Note 6)	3,544	4,991
Derivative liabilities, at fair value	3,666	0
Intangible liabilities, net	31,010	30,802
Liabilities held for sale	0	2,041
Other liabilities	33,349	28,918
Total liabilities	1,353,701	1,243,875
Commitments and contingencies
Redeemable non-controlling interest (refer to Note 9)	1,749	1,610
Equity
Preferred stock, $0.01 par value, 200,000,000 shares authorized, no shares issued and outstanding as of June 30, 2017 and December 31, 2016	0	0
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 55,258,084 and 55,395,143 shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively	553	554
Additional paid-in capital	934,136	925,473
Retained earnings (accumulated deficit)	(325,158)	(282,769)
Accumulated other comprehensive income (loss)	(5,276)	(51,424)
Total NorthStar Realty Europe Corp. stockholders’ equity	604,255	591,834
Non-controlling interests	5,528	8,073
Total equity	609,783	599,907
Total liabilities, redeemable non-controlling interest and equity	$ 1,965,233	$ 1,845,392

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Statement of Financial Position [Abstract]
Receivables, allowance	$ 579	$ 553
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (shares)	200,000,000	200,000,000
Preferred stock, shares issued (shares)	0	0
Preferred stock, shares outstanding (shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (shares)	1,000,000,000	1,000,000,000
Common stock, shares issued (shares)	55,258,084	55,395,143
Common stock, shares outstanding (shares)	55,258,084	55,395,143

XML

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)		3 Months Ended		6 Months Ended
		Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Revenues
Rental income		$ 26,025,000	$ 33,990,000	$ 51,561,000	$ 68,823,000
Escalation income		5,558,000	5,908,000	10,719,000	11,998,000
Interest income		297,000	0	297,000	0
Other revenue		508,000	46,000	537,000	749,000
Total revenues		32,388,000	39,944,000	63,114,000	81,570,000
Expenses
Properties - operating expenses		7,680,000	8,540,000	15,002,000	17,771,000
Interest expense		6,722,000	11,641,000	13,105,000	24,183,000
Transaction costs		973,000	1,652,000	1,233,000	2,483,000
Impairment losses		0	27,468,000	0	27,468,000
Management fee, related party		3,572,000	3,500,000	7,131,000	7,000,000
Other expenses		2,608,000	3,041,000	4,608,000	6,731,000
General and administrative expenses		1,555,000	1,502,000	4,152,000	2,978,000
Compensation expense	[1]	1,385,000	3,766,000	17,255,000	7,034,000
Depreciation and amortization		12,520,000	18,404,000	25,083,000	37,275,000
Total expenses		37,015,000	79,514,000	87,569,000	132,923,000
Other income (loss)
Unrealized gain (loss) on derivatives and other		(7,655,000)	1,159,000	(8,596,000)	(14,594,000)
Realized gain (loss) on investments and other		1,981,000	4,622,000	6,951,000	2,174,000
Income (loss) before income tax benefit (expense)		(10,301,000)	(33,789,000)	(26,100,000)	(63,773,000)
Income tax benefit (expense)		(237,000)	(520,000)	36,000	139,000
Net income (loss)		(10,538,000)	(34,309,000)	(26,064,000)	(63,634,000)
Net (income) loss attributable to non-controlling interests		91,000	400,000	267,000	743,000
Net income (loss) attributable to NorthStar Realty Europe Corp. common stockholders		$ (10,447,000)	$ (33,909,000)	$ (25,797,000)	$ (62,891,000)
Earnings (loss) per share:
Basic (in dollars per share)		$ (0.19)	$ (0.57)	$ (0.47)	$ (1.06)
Diluted (in dollars per share)		$ (0.19)	$ (0.57)	$ (0.47)	$ (1.06)
Weighted average number of shares:
Basic (shares)		55,023,535	59,115,895	54,928,364	59,266,850
Diluted (shares)		55,587,897	59,805,545	55,546,668	59,957,559
Dividends per share of common stock
Common stock dividends declared (in dollars per share)		$ 0.15	$ 0.15	$ 0.30	$ 0.3

[1] Compensation expense for the three and six months ended June 30, 2017 and 2016 is comprised of equity-based compensation expenses. For the six months ended June 30, 2017, compensation expense includes the impact of substantially all time based and certain performance based awards vesting in connection with the change of control of the Manager (refer to Note 7).

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ (10,538)	$ (34,309)	$ (26,064)	$ (63,634)
Other comprehensive income (loss):
Foreign currency translation adjustment, net	37,229	(32,363)	46,473	(5,789)
Total other comprehensive income (loss)	37,229	(32,363)	46,473	(5,789)
Comprehensive income (loss)	26,691	(66,672)	20,409	(69,423)
Comprehensive (income) loss attributable to non-controlling interests	(203)	65	(325)	469
Comprehensive income (loss) attributable to NorthStar Realty Europe Corp. common stockholders	$ 26,488	$ (66,607)	$ 20,084	$ (68,954)

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CONSOLIDATED STATEMENTS OF EQUITY - USD ($) shares in Thousands, $ in Thousands	Total	Total NorthStar Stockholders’ Equity	Common Stock	Additional Paid-in Capital	Retained Earnings (Accumulated Deficit)	Accumulated Other Comprehensive Income (Loss)	Non-controlling Interests
Beginning Balance (shares) at Dec. 31, 2015			59,326
Beginning Balance at Dec. 31, 2015	$ 795,742	$ 785,569	$ 593	$ 968,662	$ (186,246)	$ 2,560	$ 10,173
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Reallocation of interest in Operating Partnership	0	2,252		2,252			(2,252)
Amortization of equity-based compensation	18,239	15,682		15,682			2,557
Issuance and vesting of restricted stock, net of tax withholding (shares)			1,731
Issuance and vesting of restricted stock, net of tax withholding	0	0	$ 17	(17)
Tax withholding related to vesting of equity-based compensation	(2,546)	(2,546)		(2,546)
Retirement of shares of common stock (shares)			(5,662)
Retirement of shares of common stock	(58,616)	(58,616)	$ (56)	(58,560)
Other comprehensive income (loss)	(55,226)	(53,984)				(53,984)	(1,242)
Dividends on common stock and equity-based compensation	(35,184)	(34,770)			(34,770)		(414)
Net income (loss)	(62,502)	(61,753)			(61,753)		(749)
Ending Balance (shares) at Dec. 31, 2016			55,395
Ending Balance at Dec. 31, 2016	599,907	591,834	$ 554	925,473	(282,769)	(51,424)	8,073
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Reallocation of interest in Operating Partnership	0	1,801		1,801			(1,801)
Conversion of common units to common stock (shares)			238
Conversion of Common Units to common stock	0	2,799	$ 3	2,796			(2,799)
Amortization of equity-based compensation	17,230	15,056		15,056			2,174
Issuance and vesting of restricted stock, net of tax withholding (shares)			486
Issuance and vesting of restricted stock, net of tax withholding	0		$ 5	(5)
Tax withholding related to vesting of equity-based compensation (in shares)			(861)
Tax withholding related to vesting of equity-based compensation	(10,994)	(10,994)	$ (9)	(10,985)
Other comprehensive income (loss)	46,473	46,148				46,148	325
Dividends on common stock and equity-based compensation	(16,769)	(16,592)			(16,592)		(177)
Net income (loss)	(26,064)	(25,797)			(25,797)		(267)
Ending Balance (shares) at Jun. 30, 2017			55,258
Ending Balance at Jun. 30, 2017	$ 609,783	$ 604,255	$ 553	$ 934,136	$ (325,158)	$ (5,276)	$ 5,528

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Cash flows from operating activities:
Net income (loss)	$ (26,064,000)	$ (63,634,000)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	25,083,000	37,275,000
Amortization of deferred financing costs	1,689,000	3,789,000
Amortization of equity-based compensation	17,230,000	6,517,000
Allowance for uncollectible accounts	266,000	287,000
Unrealized (gain) loss on derivatives and other	8,596,000	14,594,000
Realized (gain) loss on sales and other	(6,951,000)	(2,174,000)
Impairment losses	0	27,468,000
Amortization of capitalized above/below market leases	533,000	2,318,000
Straight line rental income	(1,671,000)	(3,825,000)
Deferred income taxes, net	(310,000)	(859,000)
Changes in assets and liabilities:
Restricted cash	424,000	(4,142,000)
Receivables	76,000	(4,788,000)
Other assets	(1,850,000)	(691,000)
Accounts payable and accrued expenses	(4,914,000)	(5,902,000)
Due to related party	(1,447,000)	(389,000)
Other liabilities	2,702,000	2,914,000
Net cash provided by (used in) operating activities	13,392,000	8,758,000
Cash flows from investing activities:
Improvements of operating real estate	(5,552,000)	(5,792,000)
Origination of preferred equity investments	(34,064,000)	0
Proceeds from sale of operating real estate	34,510,000	74,923,000
Other assets	(1,179,000)	(10,691,000)
Change in receivable	2,256,000	0
Changes in restricted cash	0	9,915,000
Net cash provided by (used in) investing activities	(4,029,000)	68,355,000
Cash flows from financing activities:
Repayment of mortgage and other notes payable	(7,451,000)	(32,088,000)
Borrowings from credit facility	35,000,000	65,000,000
Repayment of credit facility	(12,000,000)	(6,358,000)
Repurchase of Senior Notes		(230,782,000)
Payment of financing costs	(501,000)	(2,271,000)
Purchase of derivative instruments	0	(380,000)
Settlement of derivatives	1,456,000	(1,195,000)
Retirement of shares of common stock	0	(4,919,000)
Tax withholding related to vesting of equity-based compensation	(10,994,000)	(113,000)
Dividends	(16,769,000)	(17,986,000)
Net cash provided by (used in) financing activities	(11,259,000)	(231,092,000)
Effect of foreign currency translation on cash and cash equivalents	4,844,000	(4,763,000)
Net increase (decrease) in cash and cash equivalents	2,948,000	(158,742,000)
Cash and cash equivalents—beginning of period	66,308,000	283,844,000
Cash and cash equivalents—end of period	69,256,000	125,102,000
Supplemental disclosure of non-cash investing and financing activities:
Reclassification of operating real estate to assets held for sale	8,468,000	276,513,000
Conversion of Common Units to common stock	2,799,000	0
Reclassification of intangibles to assets held for sale	959,000	37,394,000
Reclassification of other assets and liabilities to assets held for sale	0	7,593,000
Reclassification related to measurement adjustments/other	0	5,628,000
Retirement of shares of common stock	0	1,351,000
Reallocation of interest in Operating Partnership	1,801,000	1,360,000
Accrued capital expenditures and deferred assets	668,000	0
Reclassification from other assets to operating real estate	$ 0	$ 774,000

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Formation and Organization

6 Months Ended

Jun. 30, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Formation and Organization

Formation and Organization

NorthStar Realty Europe Corp. (“NorthStar Europe” or the “Company”) (NYSE: NRE), a publicly-traded real estate investment trust (“REIT”), is a European focused commercial real estate company with predominantly prime office properties in key cities within Germany, the United Kingdom and France (the “Core Portfolio”). The Company’s objective is to provide its stockholders with stable and recurring cash flow supplemented by capital growth over time.

The Company is externally managed and advised by an affiliate of the Manager. References to “the Manager” refer to NorthStar Asset Management Group Inc. (“NSAM”) for the period prior to the Mergers (refer below) and Colony NorthStar, Inc. (“Colony NorthStar” or “CLNS”), for the period subsequent to the Mergers. As part of the Mergers, NSAM changed its name to Colony NorthStar, Inc.

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 has elected to be taxed, and will continue to conduct its operations so as to continue to qualify, as a REIT for U.S. federal income tax purposes.

All references herein to the Company refer to NorthStar Realty Europe Corp. and its consolidated subsidiaries, including the Operating Partnership, collectively, unless the context otherwise requires.

Merger Agreements among NSAM, NorthStar Realty and Colony Capital, Inc.

On January 10, 2017, the Company’s external manager, NSAM, completed a tri-party merger with NorthStar Realty Finance Corp. (“NorthStar Realty”) and Colony Capital, Inc. (“Colony”), pursuant to which the companies combined in an all-stock merger (“the Mergers”) of equals transaction to create a diversified real estate and investment management company. 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 (NYSE: CLNS). Colony NorthStar is a leading global equity REIT with an embedded investment management platform.

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2017

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Basis of Quarterly Presentation

The accompanying unaudited consolidated financial statements and related notes of the Company have been prepared 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 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 statement 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 consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, which was filed with the Securities and Exchange Commission (the “SEC”).

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, the Operating Partnership and their 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 to determine whether they are a VIE. The Company analyzes 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 or through a simple majority vote.

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.

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 consolidated balance sheets and presented separately as net income (loss) and other comprehensive income (loss) (“OCI”) attributable to 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 consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that could affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates and assumptions.

Reclassifications

Certain prior period amounts have been reclassified in the consolidated financial statements to conform to current period presentation.

Comprehensive Income (Loss)

The Company reports consolidated comprehensive income (loss) in separate statements following the 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 the foreign currency translation adjustment, net.

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 and amounts related to the Company’s borrowings.

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 improvements which 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 accounts for purchases of operating real estate that qualify as business combinations using the acquisition method, where the purchase price is allocated to tangible assets such as land, building, tenant and land improvements and other identified intangibles, such as in-place leases, above/below-market leases and goodwill. Costs directly related to an acquisition deemed to be a business combination are expensed and included in transaction costs in the consolidated statements of operations.

Operating real estate is depreciated using the straight-line method over the estimated useful lives of the assets, summarized as follows:

Category:	Term:
Building	40 years
Building improvements	Lesser of the useful life or remaining life of the building
Building leasehold interests	Lesser of 40 years or remaining term of the lease
Tenant improvements	Lesser of the useful life or remaining term of the lease

Preferred Equity Investments

Preferred equity investments are generally intended to be held to maturity and, accordingly, are carried at cost, net of unamortized loan fees, premium, discount and unfunded commitments, if any. Preferred equity investments that are deemed to be impaired are carried at amortized cost less a loan loss reserve, if deemed appropriate, which approximates fair value. Preferred equity investments where the Company does not have the intent to hold the investment for the foreseeable future or until its expected payoff are classified as held for sale and recorded at the lower of cost or fair value.

Assets and Liabilities Held For Sale

Operating real estate which has met the criteria to be classified as held for sale is separately presented on the 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 net of the intangible assets associated with the asset, with any write-down to fair value less cost to sell recorded as an impairment loss. Once a property is determined to be held for sale, depreciation is no longer recorded. The Company records a gain or loss on sale of real estate when title is conveyed to the buyer and the Company has no substantial economic involvement with the property. If the sales criteria for the full accrual method are not met, the Company defers some or all of the gain or loss recognition by applying the finance, leasing, profit sharing, deposit, installment or cost recovery method, as appropriate, until the sales criteria are met.

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. Costs related to revolving credit facilities are recorded in other assets and are amortized to interest expense using the straight-line basis over the term of the facility. Costs related to other borrowings are recorded net against the carrying value of such borrowings and are amortized into interest expense using 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 to realized gain (loss) on sales and other. Costs incurred in seeking financing transactions, which do not close, are expensed in the period in which it is determined that the financing will not occur. 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 are recorded to depreciation and amortization in the consolidated statements of operations.

Intangible Assets and Intangible Liabilities

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 net to rental income, the value of below-market ground leases is amortized into properties - operating expense and in-place leases is amortized into depreciation and amortization expense, respectively, in the consolidated statements of operations on a straight-line basis over the respective 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 analyzes goodwill for impairment on an annual basis and whenever events or changes in circumstances indicate that the carrying value of goodwill may not be fully recoverable. The Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit, related to such goodwill, is less than the carrying amount as a basis to determine whether the two-step impairment test is necessary. The first step in the impairment test compares the fair value of the reporting unit with its carrying amount. If the carrying amount exceeds fair value, the second step is required to determine the amount of the impairment loss, if any, by comparing the implied fair value of the reporting unit goodwill with the carrying amount of such goodwill. The implied fair value of goodwill is derived by performing a hypothetical purchase price allocation for the reporting unit as of the measurement date, allocating the reporting unit’s estimated fair value to its net assets and identifiable intangible assets. The residual amount represents the implied fair value of goodwill. To the extent this amount is below the carrying value of goodwill, an impairment loss is recorded in the consolidated statements of operations.

The following table presents identified intangibles as of June 30, 2017 and December 31, 2016 (dollars in thousands):

	June 30, 2017							December 31, 2016
	Gross Amount		Accumulated Amortization			Net		Gross Amount		Accumulated Amortization			Net
Intangible assets:
In-place lease	$	89,838	$	(36,364	)	$	53,474	$	84,743	$	(29,012	)	$	55,731
Above-market lease	38,108		(10,066		)	28,042		36,704		(8,198		)	28,506
Below-market ground lease	54,000		(1,132		)	52,868		51,218		(832		)	50,386
Goodwill(1)	14,968		N/A			14,968		13,780		N/A			13,780
Total	$	196,914	$	(47,562	)	$	149,352	$	186,445	$	(38,042	)	$	148,403
Intangible liabilities:
Below-market lease	$	36,517	$	(10,625	)	$	25,892	$	34,163	$	(8,104	)	$	26,059
Above-market ground lease	5,258		(140		)	5,118		4,839		(96		)	4,743
Total	$	41,775	$	(10,765	)	$	31,010	$	39,002	$	(8,200	)	$	30,802

_______________________

(1) Represents goodwill associated with certain share-deal acquisitions in exchange for shares in the underlying portfolios. The goodwill and a corresponding deferred tax liability was recorded at acquisition based on tax basis differences.

Other Assets and Other Liabilities

The following tables present a summary of other assets and other liabilities as of June 30, 2017 and December 31, 2016 (dollars in thousands):

	June 30, 2017		December 31, 2016
Other assets:
Prepaid expenses	$	3,521	$	1,951
Deferred costs, net	4,765		3,029
Deferred tax assets, net	267		—
Straight-line rent, net	12,613		10,182
Escrow receivable	3,185		6,168
Other	1,042		310
Total	$	25,393	$	21,640
	June 30, 2017		December 31, 2016
Other liabilities:
Deferred tax liabilities	$	9,795	$	8,916
Prepaid rent received and unearned revenue	16,626		13,585
Tenant security deposits	4,807		4,322
Prepaid escalation income	1,907		1,560
Other	214		535
Total	$	33,349	$	28,918

Revenue Recognition

Operating Real Estate

Rental and escalation income from operating real estate is derived from leasing of space to various types of tenants. Rental revenue recognition commences when the tenant takes possession of the leased space and the leased space is substantially ready for its intended use. The leases are for fixed terms of varying length and generally provide for annual rentals, subject to indexation, 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 other assets, net on the consolidated balance sheets. The Company amortizes any tenant inducements as a reduction of revenue utilizing the straight-line method over the term of the lease. 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.

In a situation in which a lease or leases associated with a significant tenant have been, or are expected to be, terminated early, the Company evaluates the remaining useful life of depreciable or amortizable assets in the asset group related to the lease that will be terminated (i.e., tenant improvements, above and below market lease intangibles, in-place lease value and leasing commissions). Based upon consideration of the facts and circumstances surrounding the termination, the Company may write-off or accelerate the depreciation and amortization associated with the asset group. Such amounts are included within depreciation and amortization in the consolidated statements of operations.

Preferred Equity Investments

Interest income is recognized on an accrual basis and any related premium, discount, origination costs and fees are amortized over the life of the investment using the effective interest method. The amortization is reflected as an adjustment to interest income in the consolidated statements of operations. The amortization of a premium or accretion of a discount is discontinued if such investment is reclassified to held for sale.

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 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 losses in the consolidated statements of operations. For the three and six months endedJune 30, 2017, the Company did not recognize any impairment losses. For the three and six months ended June 30, 2016, the Company recognized $27.5 million of impairment losses.

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.

Preferred Equity Investments

Preferred equity investments are considered impaired when, based on current information and events, it is probable that the Company will not be able to collect all principal and interest amounts due according to the contractual terms. The Company assesses the credit quality of the portfolio and adequacy of investment loss reserves on a quarterly basis or more frequently as necessary. Significant judgment of the Company is required in this analysis. The Company considers the estimated net recoverable value of the investment as well as other factors, including but not limited to the fair value of any collateral, the amount and the status of any senior debt, the quality and financial condition of the borrower and the competitive situation of the area where the underlying collateral is located. Because this determination is based on projections of future economic events, which are inherently subjective, the amount ultimately realized may differ materially from the carrying value as of the balance sheet date. If upon completion of the assessment, the estimated fair value of the underlying collateral is less than the net carrying value of the investment, an investment loss reserve is recorded with a corresponding charge to provision for investment losses. The investment loss reserve for each investment is maintained at a level that is determined to be adequate by management to absorb probable losses.

Income recognition is suspended for an investment at the earlier of the date at which payments become 90-days past due or when, in the opinion of the Company, a full recovery of income and principal becomes doubtful. When the ultimate collectability of the principal of an impaired investment is in doubt, all payments are applied to principal under the cost recovery method. When the ultimate collectability of the principal of an impaired investment is not in doubt, contractual interest is recorded as interest income when received, under the cash basis method until an accrual is resumed when the investment becomes contractually current and performance is demonstrated to be resumed. Interest accrued and not collected will be reversed against interest income. An investment is written off when it is no longer realizable and/or legally discharged. As of June 30, 2017, the Company did not have any impaired preferred equity investments.

Equity-Based Compensation

The Company accounts for equity-based compensation awards 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 recognizes compensation expense over the vesting period on a straight-line basis or the attribution method depending if the grant is to an employee or non-employee. 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 recognizes 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 recognizes 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 estimates the fair value as if it were two separate awards. First, the Company estimates the probability of achieving the performance measure. If it is not probable the performance condition will be met, the Company records the compensation expense based on the fair value of the market measure, as described above. This expense is recorded even if the market-based measure is never met. If the performance-based measure is subsequently estimated to be achieved, the Company records compensation expense based on the performance-based measure. The Company would then record a cumulative catch-up adjustment for any additional compensation expense.

Equity-based compensation issued to non-employees is accounted for using the fair value of the award at the earlier of the performance commitment date or performance completion date. Time-based 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 seeks to use derivative instruments to manage exposure to interest rate risk and foreign currency exchange rate risk. The change in fair value for a derivative is recorded in unrealized gain (loss) on derivatives and other in the consolidated statements of operations.

The Company’s derivative instruments are recorded on the consolidated balance sheets at fair value and do not qualify as hedges under U.S. GAAP.

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 (“CTA”), net, is recorded as a component of accumulated OCI in the consolidated statements of equity. For the three months endedJune 30, 2017 and 2016, the Company reclassified $0.1 million and $0.3 million, respectively, of CTA to realized gain (loss) on sales and other in the consolidated statements of operations due to the sale of certain real estate assets. For the six months endedJune 30, 2017 and 2016, the Company reclassified $(0.3) million and $0.7 million, respectively, of CTA to realized gain (loss) on sales and other in the consolidated statements of operations due to the sale of certain real estate assets (refer to Note 3).

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 derivatives and other in the consolidated statements of operations.

Earnings Per Share

The Company’s basic earnings per share (“EPS”) is calculated by dividing net income (loss) attributable to common stockholders by the weighted average number of common stock outstanding. Diluted EPS includes 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 owned by holders other than the Company (“Common Units”) and Common Units which are structured as profits interests (“LTIP Units” collectively referred to as Unit Holders) (refer to Note 7), where such exercise or conversion would result in a lower EPS. The dilutive effect of such RSUs and Unit Holders is calculated assuming all units are converted to common stock.

Income Taxes

The Company has elected to be taxed as a REIT for U.S. federal income tax purposes and will continue to comply with the related provisions of the Internal Revenue Code of 1986, as amended, the (“Internal Revenue 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. Under certain circumstances, federal income and excise taxes may be due on its undistributed taxable income. The Company distributes to its stockholders 100% of its taxable income and therefore no provision for U.S. federal income taxes has been included in the accompanying consolidated financial statements for the three and six months endedJune 30, 2017 and 2016. Dividends distributed for the three and six months endedJune 30, 2017 and 2016 were characterized, for U.S. federal income tax purposes, as ordinary income.

The Company conducts its business through foreign subsidiaries which may be subject to local level income tax in the European jurisdictions it operates. The Company has also elected taxable REIT subsidiary (“TRS”) status for one of the Company’s foreign subsidiaries. This enables the Company to provide services that would otherwise be considered impermissible for REITs and participate in activities that do not qualify as “rents from real property.” The TRS is not resident in the U.S. and, as such, not subject to U.S. taxation but is subject to foreign income taxes only. In addition, the REIT will not generally be subject to any additional U.S. taxes on the repatriation of its earnings.

For the Company’s foreign subsidiaries, including the Company’s foreign TRS, deferred tax assets and liabilities are established for temporary differences between the financial reporting basis and the foreign tax basis of assets and liabilities at the enacted tax rates expected to be in effect when the temporary differences reverse. The Company evaluates the realizability of its deferred tax assets (e.g. net operating loss) 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. Due to past and projected losses in certain local jurisdictions where the Company does not have carryback potential and/or cannot sufficiently forecast future taxable income, the Company recognized net cumulative valuation allowances against the Company’s deferred tax assets. The Company will continue to review its deferred tax assets in accordance with U.S. GAAP.

The Company recorded an income tax expense for the three months endedJune 30, 2017 and 2016 of $0.2 million and $0.5 million, respectively. The Company recorded an income tax benefit for the six months endedJune 30, 2017 and 2016 of an immaterial amount and $0.1 million, respectively.

Other

Refer to Note 2 of the consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 for further disclosure of the Company’s significant accounting policies.

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 has commenced the process of adopting the new revenue standard; including forming a project team and compiling an inventory of the sources of revenue the Company expects will be impacted by the adoption of this standard. The new revenue standard specifically excludes revenue streams for which specific guidance is stipulated in other sections of the codification, therefore it will not impact rental income or interest income generated on financial instruments such as preferred equity investments. The Company’s escalation income includes lease-related executory cost payments (payments for maintenance activities, including common area maintenance, such as cleaning services) which are considered non-lease components and subject to the new standard on revenue recognition. The Company expects to apply the revenue recognition guidance related to its non-lease components within leases on January 1, 2019, upon its adoption of the lease accounting update. The Company expects that the impact will be to the pattern of revenue recognition and not the total revenue recognized over time. The Company is still completing its assessment of the overall impact of adopting this update.

In February 2016, the FASB issued an accounting update that sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The update requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The update is expected to result in the recognition of a right-to-use asset and related liability to account for the Company’s future obligations under its ground lease arrangements for which it is the lessee. As of June 30, 2017, the Company has three ground lease agreements with annual payments of $0.6 million. Additionally, the new update will require that lessees and lessors capitalize, as initial direct costs, only those costs that are incurred due to the execution of a lease. Under this guidance, allocated payroll costs and other costs that are incurred regardless of whether the lease is obtained will no longer be capitalized as initial direct costs and instead will be expensed as incurred. Lessors will continue to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. The new guidance is to be applied using a modified retrospective approach at the beginning of the earliest comparative period in the financial statements and is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is evaluating the impact, if any, that this guidance will have on its consolidated financial position, results of operations and financial statement disclosures.

In March 2016, the FASB issued guidance clarifying that an assessment of whether an embedded contingent put or call option is clearly and closely related to a borrowing requires only an analysis of the four-step decision sequence. Additionally, entities are not required to separately assess whether the contingency itself is clearly and closely related. Entities are required to apply the guidance to existing instruments in scope using a modified retrospective transition method as of the period of adoption. The guidance is effective for fiscal years beginning after December 15, 2016 and interim periods within those years. The Company has adopted this guidance and it did not have any material impact on its consolidated financial position, results of operations and financial statement disclosures.

In March 2016, the FASB issued guidance which amends several aspects of the accounting for equity-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statements of cash flows. The guidance is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2016. The Company has adopted this guidance and it did not have a material impact on its consolidated financial position, results of operations and financial statement disclosures.

In June 2016, the FASB issued guidance that changes the impairment model for most financial instruments by requiring companies to recognize an allowance for expected losses, rather than incurred losses as required currently by the other-than-temporary impairment model. The guidance will apply to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt securities, net investments in leases and off-balance-sheet credit exposures (e.g., loan commitments). The new guidance is effective for reporting periods beginning after December 15, 2019 and will be applied as a cumulative adjustment to retained earnings as of the effective date. The Company is evaluating the impact, if any, that this guidance will have on its consolidated financial position, results of operations and financial statement disclosures.

In August 2016, the FASB issued guidance that makes eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. The guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The new guidance requires adoption on a retrospective basis unless it is impracticable to apply, in which case the Company would be required to apply the amendments prospectively as of the earliest date practicable. The Company does not expect the adoption of this standard to have a material impact on its consolidated statements of cash flows.

In November 2016, the FASB issued guidance which requires entities to show the changes in the total of cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. Entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. The guidance is effective for reporting periods beginning after December 15, 2017 and will be applied retrospectively to all periods presented. The Company does not expect the adoption of this standard to have a material impact on its consolidated statement of cash flows.

In January 2017, the FASB issued guidance to clarify the definition of a business under ASC 805. This new standard clarifies the definition of a business and provides a screen to determine when an integrated set of assets and activities is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. The guidance is effective for fiscal years, and interim periods within those years, beginning December 15, 2017. The amendments in this update will be applied on a prospective basis. The Company expects that acquisitions of real estate or in-substance real estate will not meet the revised definition of a business because substantially all of the fair value is concentrated in a single identifiable asset or group of similar identifiable assets (i.e. land, buildings, and related intangible assets).

In January 2017, the FASB issued guidance which removes Step 2 from the goodwill impairment test. The guidance is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019.  The Company is evaluating the impact, if any, that this guidance will have on its consolidated financial position, results of operations and financial statement disclosures.

In February 2017, the FASB issued an accounting update which clarifies the scope of recently established guidance on nonfinancial asset derecognition, which applies to the derecognition of all nonfinancial assets and in-substance nonfinancial assets.  In addition, the guidance clarifies the accounting for partial sales of nonfinancial assets and in-substance nonfinancial assets to align with the new revenue recognition standard to be more consistent with the accounting for sale of a business. Specifically, in a partial sale to a noncustomer, when a noncontrolling interest is received or retained, the latter is considered a noncash consideration and measured at fair value, which would result in full gain or loss recognized upon sale. This guidance has the same effective date as the new revenue guidance, which is January 1, 2018, with early adoption permitted beginning January 1, 2017.  Both the revenue guidance and this update must be adopted concurrently.  While the transition method is similar to the new revenue guidance, either full retrospective or modified retrospective, the transition approach need not be aligned between both updates. The Company is evaluating the impact, if any, that this guidance will have on its consolidated financial position, results of operations and financial statement disclosures.

In May 2017, the FASB issued guidance clarifying when to account for a change to the terms or conditions of a share-based payment award as a modification.  The guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those years.  The Company is evaluating the impact, if any, that this guidance will have on its consolidated financial position, results of operations and financial statement disclosures.

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Operating Real Estate

6 Months Ended

Jun. 30, 2017

Real Estate [Abstract]

Operating Real Estate

Operating Real Estate

The following table presents operating real estate, net as of June 30, 2017 and December 31, 2016 (dollars in thousands):

	June 30, 2017 (Unaudited)			December 31, 2016
Land	$	387,254		$	360,555
Buildings and improvements	1,057,562			980,053
Building, leasehold interests and improvements	227,054			212,864
Furniture, fixtures and equipment	1,384			1,214
Tenant improvements	65,354			59,746
Operating real estate, gross	1,738,608			1,614,432
Less: accumulated depreciation	(88,242		)	(63,585		)
Operating real estate, net	$	1,650,366		$	1,550,847

Real Estate Held for Sale

The following table summarizes the Company’s operating real estate held for sale as of June 30, 2017 (dollars in thousands):

			Assets(1)
Location	Type	Properties	Operating Real Estate, Net		Intangible Assets, Net		Total(2)
Spain(3)	Office	1	$	6,373	$	958	$	7,331
Netherlands	Office	1	2,095		1		2,096
Total		2	$	8,468	$	959	$	9,427

___________________

(1) The assets and liabilities classified as held for sale are expected to be sold on the open market as asset sales and share sales subject to standard industry terms and conditions. The assets contributed $0.3 million and $0.4 million of revenue and a loss before income tax benefit (expense) of $0.3 million and $0.1 millionfor the three months ended June 30, 2017 and 2016, respectively.

(2) Represents operating real estate and intangible assets, net of accumulated depreciation and amortization of $4.1 million prior to being reclassified into held for sale.

(3) Asset was subsequently sold in July 2017 for $9.0 million.

Real Estate Sales

For three months endedJune 30, 2017, the Company sold two non-core assets for $12.3 million. The Company received $11.7 million of proceeds, net of sales costs. In connection with the sales, for the three months endedJune 30, 2017, the Company recorded a $1.4 million realized gain in the Company’s consolidated statements of operations. As of June 30, 2017, there were $2.1 million in certain escrow accounts that were not held by the Company which the Company could potentially record as a realized gain.

For the six months endedJune 30, 2017, the Company sold three non-core assets for $33.2 million. The Company received $31.8 million of proceeds, net of sales costs. In connection with the sales, for the six months endedJune 30, 2017, the Company recorded a $4.1 million realized gain in the Company’s consolidated statements of operations. The Company also recorded an additional realized gain of $1.9 million for the six months endedJune 30, 2017 related to the release of escrow accounts from prior disposals.

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Preferred Equity Investments

6 Months Ended

Jun. 30, 2017

Mortgage Loans on Real Estate [Abstract]

Preferred Equity Investments

Preferred Equity Investments

In May 2017, the Company partnered with a property developer in China to acquire 20 Gresham Street, a Class A office building in London, United Kingdom and the Company invested $34.1 million of preferred equity, which the Company accounts for as a debt investment.

The following table presents one preferred equity investment as of June 30, 2017 (dollars in thousands):

	June 30, 2017 (Unaudited)
Asset Type	Principal Amount		Carrying Value		Fixed Rate		Mandatory Redemption
Preferred equity investment	$	34,064	$	34,064	8.00	%	May 2020

Credit Quality Monitoring

The Company’s preferred equity investment is secured by interests in entities that directly own real estate properties, which serve as the primary source of cash for the payment of principal and interest. The Company evaluates its preferred equity investment at least quarterly and determines the relative credit quality principally based on: (i) whether the borrower is currently paying debt service in accordance with its contractual terms; and (ii) whether the Company believes the borrower will be able to perform under its contractual terms in the future, as well as the Company’s expectations as to the ultimate recovery of principal at maturity. The Company categorizes a preferred equity investment for which it expects to receive full payment of contractual principal and interest payments as “performing.” The Company will categorize a weaker credit quality preferred equity investment that is currently performing, but for which it believes future collection of all or some portion of principal and interest is in doubt, into a category called “performing with a loan loss reserve.” The Company will categorize a weaker credit quality preferred equity investment that is not performing, which the Company defines as a loan in maturity default and/or past due at least 90 days on its contractual debt service payments, as a non-performing loan (“NPL”).

As of June 30, 2017, the Company’s preferred equity investment was performing in accordance with the contractual terms of its governing documents, in all material respects, and was categorized as a performing loan. For the three and six months endedJune 30, 2017, the preferred equity investment contributed all interest income recorded on the consolidated statement of operations.

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Borrowings

6 Months Ended

Jun. 30, 2017

Debt Disclosure [Abstract]

Borrowings

Borrowings

The following table presents borrowings as of June 30, 2017 and December 31, 2016 (dollars in thousands):

			June 30, 2017 (Unaudited)				December 31, 2016
	Final Maturity	Contractual Interest Rate(2)	Principal Amount		Carrying Value		Principal Amount		Carrying Value
Mortgage and other notes payable:(1)
U.K. Complex	Jan-20	GBP LIBOR + 1.75%	$	52,819	$	52,084	$	50,116	$	49,284
U.K. Complex - Mezzanine	Jan-20	8.325%	12,189		12,127		11,565		11,497
Trias Portfolio 1(3)(5)(8)	Apr-20	EURIBOR + 2.70%	12,107		11,854		9,477		13,301
Trias Portfolio 2(3)(5)	Dec-20	EURIBOR + 1.55%	81,615		81,429		78,952		78,708
Trias Portfolio 3(3)(5)	Apr-20	EURIBOR + 1.65%	43,539		42,240		45,170		39,568
Trias Portfolio 4(3)(5)	Apr-20	GBP LIBOR + 2.70%	16,697		16,314		15,843		15,446
SEB Portfolio 1(5)	Apr-22	EURIBOR + 1.80%	302,590		298,769		278,539		274,614
SEB Portfolio 2(5)	Apr-22	GBP LIBOR + 1.80%	241,724		238,613		229,353		226,078
SEB Portfolio - Preferred(4)	Apr-60	2.30%	97,800		97,492		90,033		89,720
Trianon Tower(5)	Jul-23	EURIBOR + 1.30%	376,949		375,356		347,012		345,422
Other - Preferred(6)	Oct-45	1.00%	6,684		6,076		6,151		5,481
Total mortgage and other notes payable			1,244,713		1,232,354		1,162,211		1,149,119
Credit Facility
Credit Facility	Apr-19(7)	LIBOR + 2.75%	23,000		23,000		—		—
Grand Total			$	1,267,713	$	1,255,354	$	1,162,211	$	1,149,119

________________________

(1) All mortgage notes and other notes payable are denominated in local currencies, as such, the principal amount generally increased due to the change in the Euro or U.K. Pound Sterling compared to the U.S. dollar. All borrowings are non-recourse and are interest-only through maturity, subject to compliance with covenants of the respective borrowing, and denominated in the same currency as the assets securing the borrowing.

(2) All floating rate debt is subject to interest caps of 0.5% for EURIBOR and 2.0% for GBP LIBOR which are used to manage interest rate exposure.

(3) Trias Portfolio represents the cross-collateralized borrowings among the IVG Portfolio, Internos Portfolio and Deka Portfolio. Such three portfolios were not under common control or management at the time of acquisition.

(4) Represents preferred equity certificates with a contractual interest rate of 2.3% through May 2019, which can be prepaid at that time without penalty in part or in full, which increases to EURIBOR plus 12.0% through May 2022 and subsequently to EURIBOR plus 15.0% through final maturity. Certain prepayments prior to May 2019 are subject to the payment of the unpaid coupon on outstanding principal amount through May 2019.

(5) Prepayment provisions include a fee based on principal amount ranging from 0.25% to 1.0% through December 2019 for the Trias Portfolio borrowings and 0.5% to 1.0% through April 2019 for the SEB Portfolio borrowings and 0.80% through June 30, 2017, 0.60% through June 30, 2018 and 0.30% through June 30, 2019 for Trianon Tower.

(6) Represents preferred equity certificates each with a fixed contractual interest rate of 1.0% per annum plus variable interest based on specified income levels associated with the German property companies of the Trias Portfolios which can be prepaid at any time without penalty through final maturity, which is thirty years from the issuance date.

(7) Subject to a one year extension at the discretion of the Company.

(8) In June 2017, the Company amended and restated the agreement to increase the loan amount by $5.1 million and reduce future minimum capital expenditure spending requirements.

The following table presents a reconciliation of principal amount to carrying value of the Company’s mortgage and other notes payable and Credit Facility as of June 30, 2017 and December 31, 2016 (dollars in thousands):

	June 30, 2017 (Unaudited)			December 31, 2016
Principal amount	$	1,267,713		$	1,162,211
Deferred financing costs, net	(12,359		)	(13,092		)
Carrying value	$	1,255,354		$	1,149,119

The following table presents scheduled principal on borrowings, based on final maturity as of June 30, 2017 (dollars in thousands):

	Total		Mortgage and Other Notes Payable		Credit Facility
July 1 to December 31, 2017	$	—	$	—	$	—
Years ending December 31:
2018	—		—		—
2019	23,000		—		23,000
2020	218,967		218,967		—
2021	—		—		—
2022 and thereafter	1,025,746		1,025,746		—
Total	$	1,267,713	$	1,244,713	$	23,000

As of June 30, 2017 and December 31, 2016 the Company was in compliance with all of its financial covenants.

Senior Notes

In July 2015, the Company issued $340.0 million principal amount of 4.625% senior stock-settlable 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 were senior unsubordinated and unsecured obligations of the Company and NorthStar Realty and NorthStar Realty’s operating partnership guaranteed payments on the Senior Notes.

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 in equity in net transactions with NorthStar Realty. During 2016, the Company repurchased approximately $272.3 million of the Senior Notes, at a slight premium to par value, through privately negotiated transactions and settled the remaining Senior Notes in cash at maturity.

Credit Facility

In May 2016, the Company entered into a $75.0 million corporate revolving credit facility (the “Credit Facility”) with certain commercial bank lenders, with an initial one year term. The Credit Facility was secured by collateral relating to a borrowing base at that time and guarantees by certain subsidiaries of the Company. In October 2016, the Company permanently reduced the aggregate commitments under the Credit Facility to $35.0 million. In April 2017, the Company amended and restated the Credit Facility with aggregate commitments of $35 million and an initial two year term. The Credit Facility no longer contains a limitation on availability based on a borrowing base and the interest rate remains the same. The Credit Facility has an accordion feature, allowing the total facility to increase to $70 million. As of June 30, 2017, $23.0 million remained outstanding on the Credit Facility.

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Related Party Arrangements

6 Months Ended

Jun. 30, 2017

Related Party Transactions [Abstract]

Related Party Arrangements

Related Party Arrangements

Colony NorthStar, Inc.

Management Agreement

The Company entered into a management agreement with an affiliate of the Manager in November 2015 for an initial term of 20 years, which automatically renews for additional 20-year terms each anniversary thereafter unless earlier terminated. As asset manager, the Manager is responsible for the Company’s day-to-day operations, subject to supervision and management of the Company’s board of directors. Through its global network of subsidiaries and branch offices, the Manager performs services and engages in 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. The management agreement with the Manager provides for a base management fee and incentive fee.

Base Management Fee

For the three months endedJune 30, 2017 and 2016, the Company incurred $3.6 million and $3.5 million, respectively, related to the base management fee. For the six months endedJune 30, 2017 and 2016, the Company incurred $7.1 million and $7.0 million, respectively, related to the base management fee. As of June 30, 2017, $3.5 million is recorded in due to related party on the consolidated balance sheets. The base management fee to the Manager could increase subsequent to June 30, 2017 by an amount equal to 1.5% per annum of the sum of:

• any equity the Company issues in exchange or conversion of exchangeable or stock-settlable 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”), if any, of the Company in excess of cumulative distributions paid on common stock, LTIP Units or other equity awards which began with the Company’s fiscal quarter ended March 31, 2016.

Incentive Fee

For the three and six months endedJune 30, 2017 and 2016, the Company did not incur an incentive fee. The incentive fee is 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, of any amount 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, of any amount 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 equity issuances are 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.

Additional Management Agreement Terms

The Company’s management agreement with the Manager provides that in the event of a change of control of the Manager or other event that could be deemed an assignment of the management agreement, the Company will consider such assignment in good faith and not unreasonably withhold, condition or delay the Company’s consent. The management agreement further provides that the Company anticipates consent would be granted for an assignment or deemed assignment to a party with expertise in commercial real estate and over $10 billion of assets under management. The management agreement also provides that, notwithstanding anything in the agreement to the contrary, to the maximum extent permitted by applicable law, rules and regulations, in connection with any merger, sale of all or substantially all of the assets, change of control, reorganization, consolidation or any similar transaction by the Company or the Manager, directly or indirectly, the surviving entity will succeed to the terms of the management agreement.

Payment of Costs and Expenses and Expense Allocation

The Company is responsible for all of its direct costs and expenses and reimburses the Manager for costs and expenses incurred by the Manager on the Company’s behalf. In addition, the Manager 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 the Manager (the “G&A Allocation”). The Company’s management agreement with the Manager provides that the amount of the G&A Allocation will not exceed the following: (i) 20% of the total of: (a) the Company’s general and administrative expenses as reported in their consolidated financial statements excluding: (1) equity-based compensation expense, (2) non-recurring items, (3) fees payable to the Manager under the terms of the applicable management agreement and (4) any allocation of expenses to the Company’s (“NRE’s G&A”); and (b) the Manager’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 the Manager; less (ii) NRE’s G&A. The G&A Allocation may include the Company’s allocable share of the Manager’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, based upon the percentage of time devoted by such personnel to the Company’s affairs. The G&A Allocation may also include rental and occupancy, technology, office supplies, travel and entertainment and other general and administrative costs and expenses, which may be allocated based on various methodologies, such as weighted average employee count or the percentage of time devoted by personnel to such the Company affairs. In addition, the Company will pay directly or reimburse the Manager for an allocable portion of any severance paid pursuant to any employment, consulting or similar service agreements in effect between the Manager and any of its executives, employees or other service providers.

The Company’s obligation to reimburse the Manager for the G&A Allocation and any severance, at the Manager’s discretion, and the 20% cap on the G&A Allocation, as described above, applies on an aggregate basis to the Company.

For the three and six months endedJune 30, 2017 and three months endedJune 30, 2016 the Manager did not allocate any general and administrative expenses to the Company. For the six months endedJune 30, 2016, the Manager allocated $0.1 million to the Company. For the three and six months endedJune 30, 2017 and 2016, the Manager did not allocate any severance to the Company.

In addition, the management agreement provides that the Company and any company spun-off from the Company, shall pay directly or reimburse the Manager for up to 50% of any long-term bonus or other compensation that the Manager’s compensation committee determines shall be paid and/or settled in the form of equity and/or equity-based compensation to executives, employees and service providers of the Managers’ during any year. Subject to this limitation and limitations contained in any applicable management agreement between the Manager and any company spun-off from the Company, the amount paid by the Company and any company spun-off from the Company will be determined by the Manager in its discretion. At the discretion of the Manager’s compensation committee, this 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; provided that if at any time a sufficient number of shares of the Company’s common stock are not available for issuance under the Company’s equity compensation plan, such compensation shall be paid in the form of RSUs, LTIP Units or other securities that may be settled in cash.The Company’s equity compensation for each year may be allocated on an individual-by-individual basis at the discretion of the Manager’s 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 does not have employment agreements with its named executive officers, but the Company has generally agreed to pay directly or reimburse the Manager for the portion of any severance paid by the Manager or any of its affiliates to an individual pursuant to the terms of any employment, consulting or similar service agreement, including any employment agreements with Colony NorthStar or its subsidiaries and its named executive officers, that corresponds to or is attributable to: (i) the equity compensation that the Company is required to pay directly or reimburse the Manager pursuant to the management agreement; (ii) any cash and/or equity compensation paid directly by the Company to such individual as an employee or other service provider of the Company; and (iii) any amounts paid to such individual by the Manager or any of its affiliates that the Company is obligated to reimburse the Manager pursuant to the management agreement. With respect to Mahbod Nia only, in lieu of the foregoing severance payment or reimbursement, the Company has agreed to pay directly or reimburse the Manager for 50% of any cash payments made by the Manager or any of its affiliates in connection with the termination of Mr. Nia’s employment either without cause or upon the non-renewal of Mr. Nia’s term of employment by the employer or by Mr. Nia for good reason; provided that the Company’s board of directors consented to the taking of such action (or, with respect to a termination for good reason, any action taken with the intent to create good reason). Because the Company’s obligation to pay these amounts is owed to the Manager and not directly to the Company’s named executive officers and the Company does not control the terms of the agreements between the Manager or its affiliates and the Company’s named executive officers, the discussion above does not include these amounts or a discussion of any arrangements that the Manager or its affiliates may have with the Company’s named executive officers pursuant to which our obligations to the Manager may arise.

Manager Ownership of Common Stock

As of June 30, 2017, Colony NorthStar and its subsidiaries owned 4,938,225 shares of the Company’s common stock, or approximately 9.0% of the total outstanding common stock.

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Compensation Expense

6 Months Ended

Jun. 30, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Compensation Expense

Compensation Expense

The following summarizes the equity-based compensation for the three and six months endedJune 30, 2017 and 2016:

For the six months endedJune 30, 2017 and 2016, the Company recorded $17.3 million and $7.0 million, respectively, of equity-based compensation expense which is recorded in compensation expenses on the consolidated statements of operations. For the three months ended June 30, 2017 and 2016, the Company recorded $1.4 million and $3.8 million, respectively, of equity-based compensation expense which is recorded in compensation expenses on the consolidated statements of operations. In connection with the change of control of NSAM as a result of the Mergers, substantially all outstanding equity awards of the Company that were subject to vesting based solely on continued employment or services and a portion of the outstanding equity awards of the Company that were subject to vesting based on the achievement of additional performance-based criteria vested. As of June 30, 2017, equity-based compensation expense to be recognized over the remaining vesting period through January 2020 is $9.3 million, provided there are no additional forfeitures.

2015 Omnibus Stock Incentive Plan

Pursuant to the NorthStar Realty Europe Corp. 2015 Omnibus Stock Incentive Plan (the “2015 Plan”), the Company may issue equity awards to directors, officers, employees, co-employees, consultants and advisors of the Company, the Manager or of any parent or subsidiary who provides services to the Company. The number of shares that may be issued under the 2015 Plan equals 10 million shares of common stock, plus on January 1, 2017 and each January 1 thereafter, an additional 2% of the number of shares of common stock issued and outstanding on the immediately preceding December 31. In addition, shares of common stock underlying any awards that are forfeited, canceled, held back upon exercise of a stock option or settlement of an award to cover the exercise price or tax withholding, reacquired by the Company prior to vesting, satisfied without the issuance of common stock or otherwise terminated (other than by exercise) will be added back to the shares of common stock available for issuance under the 2015 Plan. As of June 30, 2017, under the 2015 Plan, a total of 1.2 million shares of common stock had been issued (net of forfeitures and shares held back for tax withholding), 1.7 million shares were reserved for issuance pursuant to outstanding equity awards (including 0.1 million reserved for issuance upon conversion of outstanding LTIP Units and 1.6 million reserved for issuance pursuant to the outstanding Absolute RSUs and Relative RSUs) and 8.3 million otherwise unreserved shares remained available for issuance.

All of the equity awards issued by the Company since the spin-off from NorthStar Realty on November 1, 2015 (the “Spin-off”) have been issued under the 2015 Plan. During the six months endedJune 30, 2017, the Company issued 500,642 restricted shares of common stock under the 2015 Plan to employees of the Manager or its subsidiaries in accordance with the terms of the management agreement described above in Note 6, of which 379,594 vested in connection with the Mergers.

In March 2016, as contemplated in connection with the Spin-off, the Company granted an aggregate of 995,698 restricted shares of common stock and 1,493,551 restricted stock units (“RSUs”) to employees of the Manager or one of its subsidiaries under the 2015 Plan. The restricted shares of common stock were subject to vesting over the approximately four year period ending December 31, 2019, subject to continued employment with the Manager or one of its subsidiaries and the RSUs were market-based awards subject to the achievement of performance-based vesting conditions and continued employment with the Manager or one of its subsidiaries. Approximately one-half of these RSUs are subject to the achievement of performance-based hurdles relating to the Company’s absolute total stockholder return and continued employment with the Manager or one of its subsidiaries over the approximately four year period from the grant date through December 31, 2019 (the “Absolute RSUs”). The other approximately one-half of these RSUs are subject to the achievement of performance-based hurdles based on the Company’s total stockholder return relative to the MSCI US REIT Index and continued employment with the Manager or one of its subsidiaries over the approximately four year period from the grant date through December 31, 2019 (the “Relative RSUs”). Award recipients may earn up to 100% of the Absolute RSUs that were granted and up to 125% of the Relative RSUs that were granted. Upon vesting pursuant to the terms of the Absolute RSUs and Relative RSUs, the RSUs that vest will be settled in shares of common stock and the recipients will be entitled to receive the distributions that would have been paid with respect to a share of common stock (for each share that vests) on or after the date the RSUs were initially granted. In accordance with their terms, all of these restricted shares of common stock that remained outstanding vested in connection with the Mergers. The Absolute and Relative RSUs were not affected by the Mergers and remain outstanding, subject to forfeitures occurring in connection with termination of employment with the Manager or one of its subsidiaries.

Pre-Spin-Off NorthStar Realty Equity Awards

In addition to equity awards issued under the 2015 Plan, the Company also had equity subject to outstanding equity-based awards granted by NorthStar Realty prior to the Spin-Off. In connection with the Spin-Off, holders of shares of common stock of NorthStar Realty and LTIP units of NorthStar Realty’s operating partnership subject to outstanding equity awards received one share of the Company’s common stock or one Common Unit in the Operating Partnership, respectively, for every six shares of common stock of NorthStar Realty or LTIP units of NorthStar Realty’s operating partnership held. Other equity and equity-based awards relating to NorthStar Realty’s common stock, such as RSUs, were adjusted to also relate to one-sixth of a share of the Company’s common stock, but otherwise generally remained subject to the same vesting and other terms that applied prior to the Spin-off. Performance-based vesting conditions based on total stockholder return of NorthStar Realty or NorthStar Realty and NSAM were adjusted to refer to combined total stockholder return of NorthStar Realty and the Company or NorthStar Realty, NSAM and the Company, respectively, with respect to periods after the Spin-Off and references to a change of control or similar term in outstanding awards, which referred to a change of control of either NorthStar Realty or NSAM, were adjusted, to the extent such awards relate to common stock of the Company or Common Units in the Operating Partnership, to refer to a change of control of either the Company or NSAM.

Following the Spin-off, NorthStar Realty and the compensation committee of its board of directors continued to administer all awards granted by NorthStar Realty prior to the Spin-Off, but the Company was obligated to issue shares of the Company’s common stock or other equity awards of its subsidiaries or make cash payments in lieu thereof or with respect to dividend or distribution equivalent obligations to the extent required by these awards. These awards continued to be governed by the NorthStar Realty equity plans, as applicable, and shares of the Company’s common stock issued pursuant to these awards were not be issued pursuant to, and did not reduce availability under, the 2015 Plan. In connection with the Mergers, all of these outstanding equity-based awards (other than an RSU relating to 83,333 shares of the Company’s common stock) vested or were forfeited.

The following table presents activity related to the issuance, vesting, conversion and forfeitures of restricted stock and Common Units. The balance as of June 30, 2017 represents vested Common Units and unvested market-based RSUs (grants in thousands):

	Six Months Ended June 30, 2017
	Restricted Stock(1)		Common Units(3)		Restricted Stock Units(4)	Performance RSUs(5)		Total Grants		Weighted Average Grant Price
December 31, 2016	1,139		688		83	1,868		3,778		$	11.29
Granted	501		—		—	—		501		12.69
Converted	—		(236	)	—	—		(236	)	21.21
Vested(2)	(1,519	)	—		—	(178	)	(1,697	)	10.22
Forfeited(6)	—		(1	)	—	(334	)	(335	)	5.62
June 30, 2017	121		451		83	1,356		2,011		$	12.30

___________________

(1) Represents restricted stock included in common stock.

(2) Vested primarily includes the acceleration of substantially all outstanding equity awards of the Company in connection with the change of control of NSAM as a result of the Mergers.

(3) Includes vested and unvested Common Units in the Operating Partnership issued in the Spin-Off with respect to equity-based awards granted by NorthStar Realty prior to the Spin-Off. As of June 30, 2017, all of these Common Units in the Operating Partnership were vested.

(4) Relates to an equity-based award granted by NorthStar Realty prior to the Spin-Off and represents a non-employee grant subject to service-based vesting conditions, which is scheduled to vest on January 22, 2019, unless certain conditions are met. The RSUs are entitled to dividend equivalents prior to vesting and may be settled either in shares of the Company’s common stock or in cash at the option of the Manager.

(5) As of June 30, 2017, represented outstanding Absolute and Relative RSUs.

(6) Includes the forfeiture of performance based RSUs issued to NSAM executives as part of historical bonus plans in connection with the change of control of NSAM.

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Stockholders' Equity

6 Months Ended

Jun. 30, 2017

Stockholders' Equity Note [Abstract]

Stockholders' Equity

Stockholders’ Equity

Share Repurchase

In November 2015, the Company’s board of directors authorized the repurchase of up to $100 million of its outstanding common stock. That authorization expired in November 2016 and at such time the Company’s board of directors authorized an additional repurchase of up to $100 million of its outstanding common stock. The authorization expires in November 2017, unless otherwise extended by the Company’s board of directors. For the six months endedJune 30, 2017, the Company did not repurchase any shares of its common stock. For the six months endedJune 30, 2016, the Company repurchased 0.6 million shares of its common stock for approximately $6.3 million. From the original authorization in November 2015 through June 30, 2017, the Company repurchased 9.3 million shares of its common stock for approximately $100.0 million.

Dividends

The following table presents dividends declared (on a per share basis) with respect to the six months endedJune 30, 2017 and 2016:

Common Stock
Declaration Date	Dividend Per Share
2017
May 1	$	0.15
August 2	$	0.15
2016
May 10	$	0.15
August 3	$	0.15

Earnings Per Share

The following table presents EPS for the three and six months endedJune 30, 2017 and 2016 (dollars and shares in thousands, except per share data):

	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Numerator:
Net income (loss) attributable to NorthStar Realty Europe Corp. common stockholders	$	(10,447	)	$	(33,909	)	$	(25,797	)	$	(62,891	)
Net income (loss) attributable to Unit Holders non-controlling interest	(117		)	(349		)	(310		)	(700		)
Net income (loss) attributable to common stockholders and Unit Holders(1)	$	(10,564	)	$	(34,258	)	$	(26,107	)	$	(63,591	)
Denominator:(2)
Weighted average shares of common stock	55,024			59,116			54,928			59,267
Weighted average Unit Holders(1)	564			690			619			691
Weighted average shares of common stock and Unit Holders(2)	55,588			59,806			55,547			59,958
Earnings (loss) per share:
Basic	$	(0.19	)	$	(0.57	)	$	(0.47	)	$	(1.06	)
Diluted	$	(0.19	)	$	(0.57	)	$	(0.47	)	$	(1.06	)

____________________________________________________________

(1) The EPS calculation takes into account Unit Holders, which receive non-forfeitable dividends from the date of grant, share equally in the Company’s net income (loss) and convert on a one-for-one basis into common stock.

(2) Excludes the effect of restricted stock and RSUs outstanding that were not dilutive as of June 30, 2017. These instruments could potentially impact diluted EPS in future periods, depending on changes in the Company’s stock price and other factors.

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Non-controlling Interests

6 Months Ended

Jun. 30, 2017

Noncontrolling Interest [Abstract]

Non-controlling Interests

Non-controlling Interests

Operating Partnership

Non-controlling interests include the aggregate Units Holders’ interest in the Operating Partnership. Net income (loss) attributable to the non-controlling interest is based on the weighted average Unit Holders’ ownership percentage of the Operating Partnership for the respective period. The issuance of additional common stock, Common Units or LTIP Units changes the percentage ownership of both the Unit Holders and the Company. Since a Common Unit or LTIP Unit is generally redeemable for cash or common stock at the option of the Company, it is deemed to be equivalent to common stock. Therefore, such transactions are treated as capital transactions and result in an allocation between stockholders’ equity and non-controlling interests on the accompanying consolidated balance sheets to account for the change in the ownership of the underlying equity in the Operating Partnership. On a quarterly basis, the carrying value of such non-controlling interest is allocated based on the number of Unit Holders in total in proportion to the number of Units Holders plus the number of shares of common stock outstanding. As of June 30, 2017, 450,861 Common Units and LTIP Units were outstanding, representing a 0.8% ownership and non-controlling interest in the Operating Partnership. Net income (loss) attributable to the Operating Partnership non-controlling interest for the three months endedJune 30, 2017 and 2016 was a net loss of $0.1 million and $0.3 million, respectively. Net income (loss) attributable to the Operating Partnership non-controlling interest for the six months endedJune 30, 2017 and 2016 was a net loss of $0.3 million and $0.7 million, respectively.

Redeemable Non-controlling Interest

In connection with the acquisition of the Trianon Tower in July 2015, 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 may 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. The carrying amount of redeemable noncontrolling interests is adjusted to its redemption value at the end of each reporting period, but no less than its initial carrying value, with such adjustments recognized in additional paid-in capital.

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Risk Management and Derivative Activities

6 Months Ended

Jun. 30, 2017

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 in the form of interest cap agreements where the primary objective is to minimize interest rate risks associated with investment and financing activities and foreign currency forward agreements where the primary objective is to minimize foreign currency exchange rate risks associated with operating 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 tables present derivative instruments that were not designated as hedges under U.S. GAAP as of June 30, 2017 and December 31, 2016 (dollars in thousands):

	Number	Notional Amount		Fair Value Asset (Liability)			Range of Fixed GBP LIBOR / EURIBOR	Range of Maturity
As of June 30, 2017:
Interest rate caps	4	$	1,193,235	$	8,674		(1)	January 2020 - July 2023
Foreign currency forwards, net(2)	2	102,157		(2,501		)	N/A	August 2017 - November 2018
Total	6	$	1,295,392	$	6,173
As of December 31, 2016:
Interest rate caps	4	$	1,107,400	$	8,659		(1)	January 2020 - July 2023
Foreign currency forwards(2)	2	72,806		5,070			N/A	February 2017 - November 2017
Total	6	$	1,180,206	$	13,729

_____________________________

(1)    Includes a range of interest rate caps of 0.5% for EURIBOR and 2.0% for GBP LIBOR.

(2)    Includes Euro and U.K. Pounds Sterling currency forwards.

The following table presents the fair value of derivative instruments, as well as their classification on the consolidated balance sheets, as of June 30, 2017 and December 31, 2016 (dollars in thousands):

	Balance Sheet	June 30, 2017		December 31, 2016
	Location
Interest rate caps	Derivative assets	$	8,674	$	8,659
Foreign currency forwards	Derivative assets	$	1,165	$	5,070
Foreign currency forwards	Derivative liabilities	$	3,666	$	—

The following table presents the effect of derivative instruments in the consolidated statements of operations for the three and six months endedJune 30, 2017 and 2016 (dollars in thousands):

		Three Months Ended June 30,						Six Months Ended June 30,
		2017			2016			2017			2016
Amount of gain (loss) recognized in earnings:	Statements of operations location:
Adjustment to fair value of interest rate caps	Unrealized gain (loss) on derivatives and other(1)	$	(1,032	)	$	(3,391	)	$	(713	)	$	(14,175	)
Adjustment to fair value of foreign currency forwards	Unrealized gain (loss) on derivatives and other (1)	(6,308		)	4,638			(7,572		)	207
Net cash receipt (payment) on derivatives	Realized gain (loss) on sales and other	639			(776		)	1,456			(1,194		)

_____________________________

(1)    Excludes the unrealized gain (loss) relating to foreign currency remeasurement adjustments.

The Company’s counterparties held no cash margin as collateral against the Company’s derivative contracts as of June 30, 2017 and December 31, 2016. The Company had no derivative financial instruments that were designated as hedges in qualifying hedging relationships as of June 30, 2017 and December 31, 2016.

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Fair Value

6 Months Ended

Jun. 30, 2017

Fair Value Disclosures [Abstract]

Fair Value

Fair Value

Fair Value Measurement

The fair value of financial instruments is categorized based on the priority of the inputs to the valuation technique and categorized 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). If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

Financial assets and liabilities are recorded at fair value on the consolidated balance sheets and 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.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

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

Derivative Instruments

Derivative instruments are valued using a third-party pricing service. These quotations are not adjusted and are generally based on valuation models with observable inputs such as interest rates and contractual cash flow, and as such, are classified as Level 2 of the fair value hierarchy. Derivative instruments are also assessed for credit valuation adjustments due to the risk of non-performance by the Company and derivative counterparties.

Fair Value of Financial Instruments

In addition to the above disclosures regarding financial assets or liabilities which are recorded at fair value, U.S. GAAP requires disclosure of fair value about all financial instruments. The following disclosure of estimated fair value of financial instruments was determined by the Company using available market information and appropriate valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize on disposition of the financial instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on estimated fair value.

The following table presents the principal amount, carrying value and fair value of certain financial assets and liabilities as of June 30, 2017 and December 31, 2016 (dollars in thousands):

	June 30, 2017						December 31, 2016
	Principal/Notional Amount		Carrying Value		Fair Value		Principal/Notional Amount		Carrying Value		Fair Value
Financial assets:(1)
Derivative assets	$	1,198,630	$	9,839	$	9,839	$	1,180,206	$	13,729	$	13,729
Preferred equity investment	34,064		34,064		34,064		—		—		—
Financial liabilities:(1)
Mortgage and other notes payable, net	$	1,244,713	$	1,232,354	$	1,228,918	$	1,162,211	$	1,149,119	$	1,146,134
Credit Facility	23,000		23,000		23,000		—		—		—
Derivative liabilities	96,762		3,666		3,666		—		—		—

_____________________________

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

Disclosure about fair value of financial instruments is based on pertinent information available to management as of the reporting date. Although management is not aware of any factors that would significantly affect fair value, such amounts have not been comprehensively revalued for purposes of these consolidated financial statements since that date and current estimates of fair value may differ significantly from the amounts presented herein.

Mortgage and Other Notes Payable

For mortgage and other notes payable, the Company primarily uses rates currently available with similar terms and remaining maturities to estimate fair value. These measurements are determined using rates as of the end of the reporting period or market credit spreads over the rate payable on fixed rate of like maturities. These fair value measurements are based on observable inputs, and as such, are classified as Level 2 of the fair value hierarchy.

Preferred Equity Investments

For preferred equity investments, fair value was computed by comparing the current yield to the estimated yield for newly originated loans with similar credit risk or the market yield at which a third party might expect to purchase such investment. Fair value was determined assuming fully-extended maturities regardless of structural or economic tests required to achieve such extended maturities. These fair value measurements are generally based on unobservable inputs and, as such, are classified as Level 3 of the fair value hierarchy.

Credit Facility

As of the reporting date, the Company believes the carrying value of the Credit Facility approximates fair value. The fair value measurement is based on observable inputs, and as such, is classified as Level 2 of the fair value hierarchy.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

The Company is 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 current legal proceedings are not expected to have a material adverse effect on the Company’s financial position or results of operations.

The Company engages third-party service providers for its portfolio who are remunerated based on either a fixed fee or a percentage of rental income. The contract terms vary by party and are subject to termination options. These costs are recorded in properties - operating expense and other expenses in the consolidated statements of operations.

As part of the terms of agreements relating to certain assets the Company disposed, as is customary for such transactions in Europe, the Company agreed to provide certain warranties to the buyer.

Risk Management

Concentrations of credit risk arise when a number of tenants related to the Company’s investments are engaged in similar business activities or located in the same geographic region to be similarly affected by changes in economic conditions. The Company monitors its portfolios to identify potential concentrations of credit risks. For the three and six months endedJune 30, 2017, one tenant, DekaBank Deutsche Girozentrale, accounted for more than 10% of the Company’s total revenue. This tenant has 6.9 years remaining on its lease. Otherwise, the Company has no other tenant that generates 10% or more of its total revenue. Additionally, for the three and six months endedJune 30, 2017, Germany, France, the United Kingdom and the Netherlands each accounted for more than 10% of the Company’s total revenue. The Company believes the remainder of its portfolio is well diversified and does not contain any unusual concentrations of credit risks.

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Segment Reporting

6 Months Ended

Jun. 30, 2017

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

The Company currently conducts its business through the following three segments, based on how management reviews and manages its business:

• Real Estate Equity- Focused on European prime office properties located in key cities within Germany, the United Kingdom and France.

• Preferred Equity - Represents the Company’s preferred equity investment secured by interest in an European prime office property.

• Corporate - The corporate segment includes corporate level interest expense, management fee and general and administrative expenses.

The following tables present segment reporting for the three and six months endedJune 30, 2017 and 2016 (dollars in thousands):

	Three Months Ended June 30, 2017
Statement of Operations:	Real Estate Equity				Preferred Equity			Corporate				Total
Rental income	$	26,025		(1)	$	—		$	—			$	26,025
Escalation income	5,558			(1)	—			—				5,558
Interest income	—				297			—				297
Interest expense(2)	6,451				—			271				6,722
Management fee, related party	—				—			3,572				3,572
Transaction costs	—				546			427				973
Depreciation and amortization	12,520				—			—				12,520
Other expenses	9,804			(3)	—			8,590			(4)	18,394
Income (loss) before income tax benefit (expense)	2,808				(249		)	(12,860		)		(10,301		)
Income tax benefit (expense)	(237		)		—			—				(237		)
Net income (loss)	$	2,571			$	(249	)	$	(12,860	)		$	(10,538	)

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(1) Includes revenues primarily attributable to Germany, the United Kingdom, France and the Netherlands of $13.1 million, $8.9 million, $5.5 million and $3.7 million, respectively.

(2) Includes $0.7 million and $0.1 million of amortization of deferred financing costs in the real estate equity and corporate segments, respectively.

(3) Primarily relates to properties - operating expenses and unrealized loss on interest rate caps.

(4) Primarily relates to general and administrative expense and unrealized loss on foreign currency forwards.

	Three Months Ended June 30, 2016
Statement of Operations:(1)	Real Estate Equity				Corporate				Total
Rental income	$	33,990		(2)	$	—			$	33,990
Escalation income	5,908			(2)	—				5,908
Interest expense(3)	8,691				2,950				11,641
Management fee, related party	—				3,500				3,500
Transaction costs	—				1,652				1,652
Depreciation and amortization	18,404				—				18,404
Other expenses	34,551			(4)	3,939			(5)	38,490
Income (loss) before income tax benefit (expense)	(21,748		)		(12,041		)		(33,789		)
Income tax benefit (expense)	(520		)		—				(520		)
Net income (loss)	$	(22,268	)		$	(12,041	)		$	(34,309	)

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(1) The Company did not have a preferred equity segment for the three months ended June 30, 2016.

(2) Includes revenues primarily attributable to Germany, the United Kingdom, France and the Netherlands of $14 million, $10.2 million, $5.1 million and $4.7 million, respectively.

(3) Includes $0.8 million and $1.2 million of amortization of deferred financing costs in the real estate equity and corporate segment, respectively.

(4) Primarily relates to properties - operating expenses, unrealized loss on interest rate casps and impairment loss of $27.5 million.

(5) Primarily relates to general and administrative expense, realized loss related to the write-off of the deferred financing costs associated with the repurchase of the Senior Notes and unrealized gain on foreign currency forwards.

	Six Months Ended June 30, 2017
Statement of Operations:	Real Estate Equity			Preferred Equity			Corporate				Total
Rental income	$	51,561	(1)	$	—		$	—			$	51,561
Escalation income	10,719		(1)	—			—				10,719
Interest income	—			297			—				297
Interest expense(2)	12,571			—			534				13,105
Management fee, related party	—			—			7,131				7,131
Transaction costs	—			546			687				1,233
Depreciation and amortization	25,083			—			—				25,083
Other expenses	14,774		(3)	—			27,351			(4)	42,125
Income (loss) before income tax benefit (expense)	9,852			(249		)	(35,703		)		(26,100		)
Income tax benefit (expense)	36			—			—				36
Net income (loss)	$	9,888		$	(249	)	$	(35,703	)		$	(26,064	)

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(1) Includes revenues primarily attributable to Germany, the United Kingdom, France and the Netherlands of $25.8 million, $17.5 million, $10.8 million and $7.3 million, respectively.

(2) Includes $1.5 million and $0.2 million of amortization of deferred financing costs in the real estate equity and corporate segments, respectively.

(3) Primarily relates to properties - operating expense offset by the realized gain on the sale of real estate.

(4) Primarily relates to general and administrative expense and unrealized loss on foreign currency forwards.

	Six Months Ended June 30, 2016
Statement of Operations:(1)	Real Estate Equity				Corporate				Total
Rental income	$	68,823		(2)	$	—			$	68,823
Escalation income	11,998			(2)	—				11,998
Interest expense(3)	17,117				7,066				24,183
Management fee, related party	—				7,000				7,000
Transaction costs	—				2,483				2,483
Depreciation and amortization	37,275				—				37,275
Other expenses	57,973			(4)	15,680			(5)	73,653
Income (loss) before income tax benefit (expense)	(31,544		)		(32,229		)		(63,773		)
Income tax benefit (expense)	139				—				139
Net income (loss)	$	(31,405	)		$	(32,229	)		$	(63,634	)

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(1) The Company did not have a preferred equity segment for the six months ended June 30, 2016.

(2) Includes revenues primarily attributable to Germany, the United Kingdom, France and the Netherlands of $28.4 million, $20.0 million, $10.9 million and $9.8 million, respectively.

(3) Includes $1.7 million and $2.1 million of amortization of deferred financing costs in the real estate equity and corporate segment, respectively.

(4) Primarily relates to properties - operating expense, unrealized loss on derivatives and impairment loss of $27.5 million offset by the realized gain on the sale of real estate.

(5) Primarily relates to management fees, general and administrative expense, realized loss related to the write-off of the deferred financing costs associated with the repurchase of the Senior Notes and includes an allocation of general and administrative expenses from the Manager of $0.1 million.

The following table presents total assets by segment as of June 30, 2017 and December 31, 2016 (dollars in thousands):

Total Assets	Real Estate Equity		Preferred Equity		Corporate		Total
June 30, 2017	$	1,925,692	$	34,662	$	4,879	$	1,965,233
December 31, 2016	1,835,531		—		9,861		1,845,392

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Subsequent Events

6 Months Ended

Jun. 30, 2017

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

Dividends

On August 2, 2017, the Company declared a dividend of $0.15 per share of common stock. The common stock dividend is expected be paid on August 18, 2017 to stockholders of record as of the close of business on August 14, 2017.

Sales

Subsequent to June 30, 2017, the Company sold one non-core asset with a carrying value of $7.3 million for $9.0 million, which was recorded in assets held for sale in the consolidated balance sheet as of June 30, 2017.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2017

Accounting Policies [Abstract]

Basis of Quarterly Presentation

Basis of Quarterly Presentation

The accompanying unaudited consolidated financial statements and related notes of the Company have been prepared 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 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 statement 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 consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, which was filed with the Securities and Exchange Commission (the “SEC”).

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, the Operating Partnership and their 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

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 to determine whether they are a VIE. The Company analyzes 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

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 or through a simple majority vote.

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.

Non-controlling Interests

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 consolidated balance sheets and presented separately as net income (loss) and other comprehensive income (loss) (“OCI”) attributable to 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

Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that could affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates and assumptions.

Reclassification

Reclassifications

Certain prior period amounts have been reclassified in the consolidated financial statements to conform to current period presentation.

Comprehensive Income (Loss)

Comprehensive Income (Loss)

The Company reports consolidated comprehensive income (loss) in separate statements following the 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 the foreign currency translation adjustment, net.

Restricted Cash

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 and amounts related to the Company’s borrowings.

Operating Real Estate

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 improvements which 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 accounts for purchases of operating real estate that qualify as business combinations using the acquisition method, where the purchase price is allocated to tangible assets such as land, building, tenant and land improvements and other identified intangibles, such as in-place leases, above/below-market leases and goodwill. Costs directly related to an acquisition deemed to be a business combination are expensed and included in transaction costs in the consolidated statements of operations.

Operating real estate is depreciated using the straight-line method over the estimated useful lives of the assets, summarized as follows:

Category:	Term:
Building	40 years
Building improvements	Lesser of the useful life or remaining life of the building
Building leasehold interests	Lesser of 40 years or remaining term of the lease
Tenant improvements	Lesser of the useful life or remaining term of the lease

Preferred Equity Investments

Preferred Equity Investments

Preferred equity investments are generally intended to be held to maturity and, accordingly, are carried at cost, net of unamortized loan fees, premium, discount and unfunded commitments, if any. Preferred equity investments that are deemed to be impaired are carried at amortized cost less a loan loss reserve, if deemed appropriate, which approximates fair value. Preferred equity investments where the Company does not have the intent to hold the investment for the foreseeable future or until its expected payoff are classified as held for sale and recorded at the lower of cost or fair value.

Assets and Liabilities Held For Sale

Assets and Liabilities Held For Sale

Operating real estate which has met the criteria to be classified as held for sale is separately presented on the 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 net of the intangible assets associated with the asset, with any write-down to fair value less cost to sell recorded as an impairment loss. Once a property is determined to be held for sale, depreciation is no longer recorded. The Company records a gain or loss on sale of real estate when title is conveyed to the buyer and the Company has no substantial economic involvement with the property. If the sales criteria for the full accrual method are not met, the Company defers some or all of the gain or loss recognition by applying the finance, leasing, profit sharing, deposit, installment or cost recovery method, as appropriate, until the sales criteria are met.

Deferred Costs

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. Costs related to revolving credit facilities are recorded in other assets and are amortized to interest expense using the straight-line basis over the term of the facility. Costs related to other borrowings are recorded net against the carrying value of such borrowings and are amortized into interest expense using 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 to realized gain (loss) on sales and other. Costs incurred in seeking financing transactions, which do not close, are expensed in the period in which it is determined that the financing will not occur. 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 are recorded to depreciation and amortization in the consolidated statements of operations.

Intangible Assets and Intangible Liabilities

Intangible Assets and Intangible Liabilities

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 net to rental income, the value of below-market ground leases is amortized into properties - operating expense and in-place leases is amortized into depreciation and amortization expense, respectively, in the consolidated statements of operations on a straight-line basis over the respective 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 analyzes goodwill for impairment on an annual basis and whenever events or changes in circumstances indicate that the carrying value of goodwill may not be fully recoverable. The Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit, related to such goodwill, is less than the carrying amount as a basis to determine whether the two-step impairment test is necessary. The first step in the impairment test compares the fair value of the reporting unit with its carrying amount. If the carrying amount exceeds fair value, the second step is required to determine the amount of the impairment loss, if any, by comparing the implied fair value of the reporting unit goodwill with the carrying amount of such goodwill. The implied fair value of goodwill is derived by performing a hypothetical purchase price allocation for the reporting unit as of the measurement date, allocating the reporting unit’s estimated fair value to its net assets and identifiable intangible assets. The residual amount represents the implied fair value of goodwill. To the extent this amount is below the carrying value of goodwill, an impairment loss is recorded in the consolidated statements of operations.

Revenue Recognition

Revenue Recognition

Operating Real Estate

Rental and escalation income from operating real estate is derived from leasing of space to various types of tenants. Rental revenue recognition commences when the tenant takes possession of the leased space and the leased space is substantially ready for its intended use. The leases are for fixed terms of varying length and generally provide for annual rentals, subject to indexation, 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 other assets, net on the consolidated balance sheets. The Company amortizes any tenant inducements as a reduction of revenue utilizing the straight-line method over the term of the lease. 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.

In a situation in which a lease or leases associated with a significant tenant have been, or are expected to be, terminated early, the Company evaluates the remaining useful life of depreciable or amortizable assets in the asset group related to the lease that will be terminated (i.e., tenant improvements, above and below market lease intangibles, in-place lease value and leasing commissions). Based upon consideration of the facts and circumstances surrounding the termination, the Company may write-off or accelerate the depreciation and amortization associated with the asset group. Such amounts are included within depreciation and amortization in the consolidated statements of operations.

Preferred Equity Investments

Interest income is recognized on an accrual basis and any related premium, discount, origination costs and fees are amortized over the life of the investment using the effective interest method. The amortization is reflected as an adjustment to interest income in the consolidated statements of operations. The amortization of a premium or accretion of a discount is discontinued if such investment is reclassified to held for sale.

Impairment on Investments

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 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 losses in the consolidated statements of operations. For the three and six months endedJune 30, 2017, the Company did not recognize any impairment losses. For the three and six months ended June 30, 2016, the Company recognized $27.5 million of impairment losses.

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.

Preferred Equity Investments

Preferred equity investments are considered impaired when, based on current information and events, it is probable that the Company will not be able to collect all principal and interest amounts due according to the contractual terms. The Company assesses the credit quality of the portfolio and adequacy of investment loss reserves on a quarterly basis or more frequently as necessary. Significant judgment of the Company is required in this analysis. The Company considers the estimated net recoverable value of the investment as well as other factors, including but not limited to the fair value of any collateral, the amount and the status of any senior debt, the quality and financial condition of the borrower and the competitive situation of the area where the underlying collateral is located. Because this determination is based on projections of future economic events, which are inherently subjective, the amount ultimately realized may differ materially from the carrying value as of the balance sheet date. If upon completion of the assessment, the estimated fair value of the underlying collateral is less than the net carrying value of the investment, an investment loss reserve is recorded with a corresponding charge to provision for investment losses. The investment loss reserve for each investment is maintained at a level that is determined to be adequate by management to absorb probable losses.

Income recognition is suspended for an investment at the earlier of the date at which payments become 90-days past due or when, in the opinion of the Company, a full recovery of income and principal becomes doubtful. When the ultimate collectability of the principal of an impaired investment is in doubt, all payments are applied to principal under the cost recovery method. When the ultimate collectability of the principal of an impaired investment is not in doubt, contractual interest is recorded as interest income when received, under the cash basis method until an accrual is resumed when the investment becomes contractually current and performance is demonstrated to be resumed. Interest accrued and not collected will be reversed against interest income. An investment is written off when it is no longer realizable and/or legally discharged.

Equity-Based Compensation

Equity-Based Compensation

The Company accounts for equity-based compensation awards 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 recognizes compensation expense over the vesting period on a straight-line basis or the attribution method depending if the grant is to an employee or non-employee. 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 recognizes 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 recognizes 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 estimates the fair value as if it were two separate awards. First, the Company estimates the probability of achieving the performance measure. If it is not probable the performance condition will be met, the Company records the compensation expense based on the fair value of the market measure, as described above. This expense is recorded even if the market-based measure is never met. If the performance-based measure is subsequently estimated to be achieved, the Company records compensation expense based on the performance-based measure. The Company would then record a cumulative catch-up adjustment for any additional compensation expense.

Equity-based compensation issued to non-employees is accounted for using the fair value of the award at the earlier of the performance commitment date or performance completion date. Time-based 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

Derivatives

The Company seeks to use derivative instruments to manage exposure to interest rate risk and foreign currency exchange rate risk. The change in fair value for a derivative is recorded in unrealized gain (loss) on derivatives and other in the consolidated statements of operations.

The Company’s derivative instruments are recorded on the consolidated balance sheets at fair value and do not qualify as hedges under U.S. GAAP.

Foreign Currency

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 (“CTA”), net, is recorded as a component of accumulated OCI in the consolidated statements of equity. For the three months endedJune 30, 2017 and 2016, the Company reclassified $0.1 million and $0.3 million, respectively, of CTA to realized gain (loss) on sales and other in the consolidated statements of operations due to the sale of certain real estate assets. For the six months endedJune 30, 2017 and 2016, the Company reclassified $(0.3) million and $0.7 million, respectively, of CTA to realized gain (loss) on sales and other in the consolidated statements of operations due to the sale of certain real estate assets (refer to Note 3).

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 derivatives and other in the consolidated statements of operations.

Earnings Per Share

Earnings Per Share

The Company’s basic earnings per share (“EPS”) is calculated by dividing net income (loss) attributable to common stockholders by the weighted average number of common stock outstanding. Diluted EPS includes 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 owned by holders other than the Company (“Common Units”) and Common Units which are structured as profits interests (“LTIP Units” collectively referred to as Unit Holders) (refer to Note 7), where such exercise or conversion would result in a lower EPS. The dilutive effect of such RSUs and Unit Holders is calculated assuming all units are converted to common stock.

Income Taxes

Income Taxes

The Company has elected to be taxed as a REIT for U.S. federal income tax purposes and will continue to comply with the related provisions of the Internal Revenue Code of 1986, as amended, the (“Internal Revenue 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. Under certain circumstances, federal income and excise taxes may be due on its undistributed taxable income. The Company distributes to its stockholders 100% of its taxable income and therefore no provision for U.S. federal income taxes has been included in the accompanying consolidated financial statements for the three and six months endedJune 30, 2017 and 2016. Dividends distributed for the three and six months endedJune 30, 2017 and 2016 were characterized, for U.S. federal income tax purposes, as ordinary income.

The Company conducts its business through foreign subsidiaries which may be subject to local level income tax in the European jurisdictions it operates. The Company has also elected taxable REIT subsidiary (“TRS”) status for one of the Company’s foreign subsidiaries. This enables the Company to provide services that would otherwise be considered impermissible for REITs and participate in activities that do not qualify as “rents from real property.” The TRS is not resident in the U.S. and, as such, not subject to U.S. taxation but is subject to foreign income taxes only. In addition, the REIT will not generally be subject to any additional U.S. taxes on the repatriation of its earnings.

For the Company’s foreign subsidiaries, including the Company’s foreign TRS, deferred tax assets and liabilities are established for temporary differences between the financial reporting basis and the foreign tax basis of assets and liabilities at the enacted tax rates expected to be in effect when the temporary differences reverse. The Company evaluates the realizability of its deferred tax assets (e.g. net operating loss) 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. Due to past and projected losses in certain local jurisdictions where the Company does not have carryback potential and/or cannot sufficiently forecast future taxable income, the Company recognized net cumulative valuation allowances against the Company’s deferred tax assets. The Company will continue to review its deferred tax assets in accordance with U.S. GAAP.

Recent Accounting Pronouncements

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 has commenced the process of adopting the new revenue standard; including forming a project team and compiling an inventory of the sources of revenue the Company expects will be impacted by the adoption of this standard. The new revenue standard specifically excludes revenue streams for which specific guidance is stipulated in other sections of the codification, therefore it will not impact rental income or interest income generated on financial instruments such as preferred equity investments. The Company’s escalation income includes lease-related executory cost payments (payments for maintenance activities, including common area maintenance, such as cleaning services) which are considered non-lease components and subject to the new standard on revenue recognition. The Company expects to apply the revenue recognition guidance related to its non-lease components within leases on January 1, 2019, upon its adoption of the lease accounting update. The Company expects that the impact will be to the pattern of revenue recognition and not the total revenue recognized over time. The Company is still completing its assessment of the overall impact of adopting this update.

In February 2016, the FASB issued an accounting update that sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The update requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The update is expected to result in the recognition of a right-to-use asset and related liability to account for the Company’s future obligations under its ground lease arrangements for which it is the lessee. As of June 30, 2017, the Company has three ground lease agreements with annual payments of $0.6 million. Additionally, the new update will require that lessees and lessors capitalize, as initial direct costs, only those costs that are incurred due to the execution of a lease. Under this guidance, allocated payroll costs and other costs that are incurred regardless of whether the lease is obtained will no longer be capitalized as initial direct costs and instead will be expensed as incurred. Lessors will continue to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. The new guidance is to be applied using a modified retrospective approach at the beginning of the earliest comparative period in the financial statements and is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is evaluating the impact, if any, that this guidance will have on its consolidated financial position, results of operations and financial statement disclosures.

In March 2016, the FASB issued guidance clarifying that an assessment of whether an embedded contingent put or call option is clearly and closely related to a borrowing requires only an analysis of the four-step decision sequence. Additionally, entities are not required to separately assess whether the contingency itself is clearly and closely related. Entities are required to apply the guidance to existing instruments in scope using a modified retrospective transition method as of the period of adoption. The guidance is effective for fiscal years beginning after December 15, 2016 and interim periods within those years. The Company has adopted this guidance and it did not have any material impact on its consolidated financial position, results of operations and financial statement disclosures.

In March 2016, the FASB issued guidance which amends several aspects of the accounting for equity-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statements of cash flows. The guidance is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2016. The Company has adopted this guidance and it did not have a material impact on its consolidated financial position, results of operations and financial statement disclosures.

In June 2016, the FASB issued guidance that changes the impairment model for most financial instruments by requiring companies to recognize an allowance for expected losses, rather than incurred losses as required currently by the other-than-temporary impairment model. The guidance will apply to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt securities, net investments in leases and off-balance-sheet credit exposures (e.g., loan commitments). The new guidance is effective for reporting periods beginning after December 15, 2019 and will be applied as a cumulative adjustment to retained earnings as of the effective date. The Company is evaluating the impact, if any, that this guidance will have on its consolidated financial position, results of operations and financial statement disclosures.

In August 2016, the FASB issued guidance that makes eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. The guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The new guidance requires adoption on a retrospective basis unless it is impracticable to apply, in which case the Company would be required to apply the amendments prospectively as of the earliest date practicable. The Company does not expect the adoption of this standard to have a material impact on its consolidated statements of cash flows.

In November 2016, the FASB issued guidance which requires entities to show the changes in the total of cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. Entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. The guidance is effective for reporting periods beginning after December 15, 2017 and will be applied retrospectively to all periods presented. The Company does not expect the adoption of this standard to have a material impact on its consolidated statement of cash flows.

In January 2017, the FASB issued guidance to clarify the definition of a business under ASC 805. This new standard clarifies the definition of a business and provides a screen to determine when an integrated set of assets and activities is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. The guidance is effective for fiscal years, and interim periods within those years, beginning December 15, 2017. The amendments in this update will be applied on a prospective basis. The Company expects that acquisitions of real estate or in-substance real estate will not meet the revised definition of a business because substantially all of the fair value is concentrated in a single identifiable asset or group of similar identifiable assets (i.e. land, buildings, and related intangible assets).

In January 2017, the FASB issued guidance which removes Step 2 from the goodwill impairment test. The guidance is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019.  The Company is evaluating the impact, if any, that this guidance will have on its consolidated financial position, results of operations and financial statement disclosures.

In February 2017, the FASB issued an accounting update which clarifies the scope of recently established guidance on nonfinancial asset derecognition, which applies to the derecognition of all nonfinancial assets and in-substance nonfinancial assets.  In addition, the guidance clarifies the accounting for partial sales of nonfinancial assets and in-substance nonfinancial assets to align with the new revenue recognition standard to be more consistent with the accounting for sale of a business. Specifically, in a partial sale to a noncustomer, when a noncontrolling interest is received or retained, the latter is considered a noncash consideration and measured at fair value, which would result in full gain or loss recognized upon sale. This guidance has the same effective date as the new revenue guidance, which is January 1, 2018, with early adoption permitted beginning January 1, 2017.  Both the revenue guidance and this update must be adopted concurrently.  While the transition method is similar to the new revenue guidance, either full retrospective or modified retrospective, the transition approach need not be aligned between both updates. The Company is evaluating the impact, if any, that this guidance will have on its consolidated financial position, results of operations and financial statement disclosures.

In May 2017, the FASB issued guidance clarifying when to account for a change to the terms or conditions of a share-based payment award as a modification.  The guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those years.  The Company is evaluating the impact, if any, that this guidance will have on its consolidated financial position, results of operations and financial statement disclosures.

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Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2017

Accounting Policies [Abstract]

Property, Plant and Equipment

Operating real estate is depreciated using the straight-line method over the estimated useful lives of the assets, summarized as follows:

Category:	Term:
Building	40 years
Building improvements	Lesser of the useful life or remaining life of the building
Building leasehold interests	Lesser of 40 years or remaining term of the lease
Tenant improvements	Lesser of the useful life or remaining term of the lease

Schedule of Identified Intangibles

The following table presents identified intangibles as of June 30, 2017 and December 31, 2016 (dollars in thousands):

	June 30, 2017							December 31, 2016
	Gross Amount		Accumulated Amortization			Net		Gross Amount		Accumulated Amortization			Net
Intangible assets:
In-place lease	$	89,838	$	(36,364	)	$	53,474	$	84,743	$	(29,012	)	$	55,731
Above-market lease	38,108		(10,066		)	28,042		36,704		(8,198		)	28,506
Below-market ground lease	54,000		(1,132		)	52,868		51,218		(832		)	50,386
Goodwill(1)	14,968		N/A			14,968		13,780		N/A			13,780
Total	$	196,914	$	(47,562	)	$	149,352	$	186,445	$	(38,042	)	$	148,403
Intangible liabilities:
Below-market lease	$	36,517	$	(10,625	)	$	25,892	$	34,163	$	(8,104	)	$	26,059
Above-market ground lease	5,258		(140		)	5,118		4,839		(96		)	4,743
Total	$	41,775	$	(10,765	)	$	31,010	$	39,002	$	(8,200	)	$	30,802

_______________________

(1) Represents goodwill associated with certain share-deal acquisitions in exchange for shares in the underlying portfolios. The goodwill and a corresponding deferred tax liability was recorded at acquisition based on tax basis differences.

Schedule of Other Assets and Other Liabilities

The following tables present a summary of other assets and other liabilities as of June 30, 2017 and December 31, 2016 (dollars in thousands):

	June 30, 2017		December 31, 2016
Other assets:
Prepaid expenses	$	3,521	$	1,951
Deferred costs, net	4,765		3,029
Deferred tax assets, net	267		—
Straight-line rent, net	12,613		10,182
Escrow receivable	3,185		6,168
Other	1,042		310
Total	$	25,393	$	21,640
	June 30, 2017		December 31, 2016
Other liabilities:
Deferred tax liabilities	$	9,795	$	8,916
Prepaid rent received and unearned revenue	16,626		13,585
Tenant security deposits	4,807		4,322
Prepaid escalation income	1,907		1,560
Other	214		535
Total	$	33,349	$	28,918

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Operating Real Estate (Tables)

6 Months Ended

Jun. 30, 2017

Real Estate [Abstract]

Schedule of Operating Real Estate

The following table presents operating real estate, net as of June 30, 2017 and December 31, 2016 (dollars in thousands):

	June 30, 2017 (Unaudited)			December 31, 2016
Land	$	387,254		$	360,555
Buildings and improvements	1,057,562			980,053
Building, leasehold interests and improvements	227,054			212,864
Furniture, fixtures and equipment	1,384			1,214
Tenant improvements	65,354			59,746
Operating real estate, gross	1,738,608			1,614,432
Less: accumulated depreciation	(88,242		)	(63,585		)
Operating real estate, net	$	1,650,366		$	1,550,847

Schedule of Real Estate Held for Sale

The following table summarizes the Company’s operating real estate held for sale as of June 30, 2017 (dollars in thousands):

			Assets(1)
Location	Type	Properties	Operating Real Estate, Net		Intangible Assets, Net		Total(2)
Spain(3)	Office	1	$	6,373	$	958	$	7,331
Netherlands	Office	1	2,095		1		2,096
Total		2	$	8,468	$	959	$	9,427

___________________

(1) The assets and liabilities classified as held for sale are expected to be sold on the open market as asset sales and share sales subject to standard industry terms and conditions. The assets contributed $0.3 million and $0.4 million of revenue and a loss before income tax benefit (expense) of $0.3 million and $0.1 millionfor the three months ended June 30, 2017 and 2016, respectively.

(2) Represents operating real estate and intangible assets, net of accumulated depreciation and amortization of $4.1 million prior to being reclassified into held for sale.

(3) Asset was subsequently sold in July 2017 for $9.0 million.

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Preferred Equity Investments (Tables)

6 Months Ended

Jun. 30, 2017

Mortgage Loans on Real Estate [Abstract]

Schedule of Mortgage Loans on Real Estate

The following table presents one preferred equity investment as of June 30, 2017 (dollars in thousands):

	June 30, 2017 (Unaudited)
Asset Type	Principal Amount		Carrying Value		Fixed Rate		Mandatory Redemption
Preferred equity investment	$	34,064	$	34,064	8.00	%	May 2020

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Borrowings (Tables)

6 Months Ended

Jun. 30, 2017

Debt Disclosure [Abstract]

Schedule of Long-term Borrowings

The following table presents borrowings as of June 30, 2017 and December 31, 2016 (dollars in thousands):

			June 30, 2017 (Unaudited)				December 31, 2016
	Final Maturity	Contractual Interest Rate(2)	Principal Amount		Carrying Value		Principal Amount		Carrying Value
Mortgage and other notes payable:(1)
U.K. Complex	Jan-20	GBP LIBOR + 1.75%	$	52,819	$	52,084	$	50,116	$	49,284
U.K. Complex - Mezzanine	Jan-20	8.325%	12,189		12,127		11,565		11,497
Trias Portfolio 1(3)(5)(8)	Apr-20	EURIBOR + 2.70%	12,107		11,854		9,477		13,301
Trias Portfolio 2(3)(5)	Dec-20	EURIBOR + 1.55%	81,615		81,429		78,952		78,708
Trias Portfolio 3(3)(5)	Apr-20	EURIBOR + 1.65%	43,539		42,240		45,170		39,568
Trias Portfolio 4(3)(5)	Apr-20	GBP LIBOR + 2.70%	16,697		16,314		15,843		15,446
SEB Portfolio 1(5)	Apr-22	EURIBOR + 1.80%	302,590		298,769		278,539		274,614
SEB Portfolio 2(5)	Apr-22	GBP LIBOR + 1.80%	241,724		238,613		229,353		226,078
SEB Portfolio - Preferred(4)	Apr-60	2.30%	97,800		97,492		90,033		89,720
Trianon Tower(5)	Jul-23	EURIBOR + 1.30%	376,949		375,356		347,012		345,422
Other - Preferred(6)	Oct-45	1.00%	6,684		6,076		6,151		5,481
Total mortgage and other notes payable			1,244,713		1,232,354		1,162,211		1,149,119
Credit Facility
Credit Facility	Apr-19(7)	LIBOR + 2.75%	23,000		23,000		—		—
Grand Total			$	1,267,713	$	1,255,354	$	1,162,211	$	1,149,119

________________________

(1) All mortgage notes and other notes payable are denominated in local currencies, as such, the principal amount generally increased due to the change in the Euro or U.K. Pound Sterling compared to the U.S. dollar. All borrowings are non-recourse and are interest-only through maturity, subject to compliance with covenants of the respective borrowing, and denominated in the same currency as the assets securing the borrowing.

(2) All floating rate debt is subject to interest caps of 0.5% for EURIBOR and 2.0% for GBP LIBOR which are used to manage interest rate exposure.

(3) Trias Portfolio represents the cross-collateralized borrowings among the IVG Portfolio, Internos Portfolio and Deka Portfolio. Such three portfolios were not under common control or management at the time of acquisition.

(4) Represents preferred equity certificates with a contractual interest rate of 2.3% through May 2019, which can be prepaid at that time without penalty in part or in full, which increases to EURIBOR plus 12.0% through May 2022 and subsequently to EURIBOR plus 15.0% through final maturity. Certain prepayments prior to May 2019 are subject to the payment of the unpaid coupon on outstanding principal amount through May 2019.

(5) Prepayment provisions include a fee based on principal amount ranging from 0.25% to 1.0% through December 2019 for the Trias Portfolio borrowings and 0.5% to 1.0% through April 2019 for the SEB Portfolio borrowings and 0.80% through June 30, 2017, 0.60% through June 30, 2018 and 0.30% through June 30, 2019 for Trianon Tower.

(6) Represents preferred equity certificates each with a fixed contractual interest rate of 1.0% per annum plus variable interest based on specified income levels associated with the German property companies of the Trias Portfolios which can be prepaid at any time without penalty through final maturity, which is thirty years from the issuance date.

(7) Subject to a one year extension at the discretion of the Company.

(8) In June 2017, the Company amended and restated the agreement to increase the loan amount by $5.1 million and reduce future minimum capital expenditure spending requirements.

Summary of Reconciliation of Principal Amount to Carrying Value

The following table presents a reconciliation of principal amount to carrying value of the Company’s mortgage and other notes payable and Credit Facility as of June 30, 2017 and December 31, 2016 (dollars in thousands):

	June 30, 2017 (Unaudited)			December 31, 2016
Principal amount	$	1,267,713		$	1,162,211
Deferred financing costs, net	(12,359		)	(13,092		)
Carrying value	$	1,255,354		$	1,149,119

Schedule of Principal Payments on Borrowings, Based on Final Maturity

The following table presents scheduled principal on borrowings, based on final maturity as of June 30, 2017 (dollars in thousands):

	Total		Mortgage and Other Notes Payable		Credit Facility
July 1 to December 31, 2017	$	—	$	—	$	—
Years ending December 31:
2018	—		—		—
2019	23,000		—		23,000
2020	218,967		218,967		—
2021	—		—		—
2022 and thereafter	1,025,746		1,025,746		—
Total	$	1,267,713	$	1,244,713	$	23,000

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Compensation Expense (Tables)

6 Months Ended

Jun. 30, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Common Unit and Unvested Restricted Stock Activity

The following table presents activity related to the issuance, vesting, conversion and forfeitures of restricted stock and Common Units. The balance as of June 30, 2017 represents vested Common Units and unvested market-based RSUs (grants in thousands):

	Six Months Ended June 30, 2017
	Restricted Stock(1)		Common Units(3)		Restricted Stock Units(4)	Performance RSUs(5)		Total Grants		Weighted Average Grant Price
December 31, 2016	1,139		688		83	1,868		3,778		$	11.29
Granted	501		—		—	—		501		12.69
Converted	—		(236	)	—	—		(236	)	21.21
Vested(2)	(1,519	)	—		—	(178	)	(1,697	)	10.22
Forfeited(6)	—		(1	)	—	(334	)	(335	)	5.62
June 30, 2017	121		451		83	1,356		2,011		$	12.30

___________________

(1) Represents restricted stock included in common stock.

(2) Vested primarily includes the acceleration of substantially all outstanding equity awards of the Company in connection with the change of control of NSAM as a result of the Mergers.

(3) Includes vested and unvested Common Units in the Operating Partnership issued in the Spin-Off with respect to equity-based awards granted by NorthStar Realty prior to the Spin-Off. As of June 30, 2017, all of these Common Units in the Operating Partnership were vested.

(4) Relates to an equity-based award granted by NorthStar Realty prior to the Spin-Off and represents a non-employee grant subject to service-based vesting conditions, which is scheduled to vest on January 22, 2019, unless certain conditions are met. The RSUs are entitled to dividend equivalents prior to vesting and may be settled either in shares of the Company’s common stock or in cash at the option of the Manager.

(5) As of June 30, 2017, represented outstanding Absolute and Relative RSUs.

(6) Includes the forfeiture of performance based RSUs issued to NSAM executives as part of historical bonus plans in connection with the change of control of NSAM.

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Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2017

Stockholders' Equity Note [Abstract]

Schedule of Dividends Declared

The following table presents dividends declared (on a per share basis) with respect to the six months endedJune 30, 2017 and 2016:

Common Stock
Declaration Date	Dividend Per Share
2017
May 1	$	0.15
August 2	$	0.15
2016
May 10	$	0.15
August 3	$	0.15

Schedule of Earnings Per Share

The following table presents EPS for the three and six months endedJune 30, 2017 and 2016 (dollars and shares in thousands, except per share data):

	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Numerator:
Net income (loss) attributable to NorthStar Realty Europe Corp. common stockholders	$	(10,447	)	$	(33,909	)	$	(25,797	)	$	(62,891	)
Net income (loss) attributable to Unit Holders non-controlling interest	(117		)	(349		)	(310		)	(700		)
Net income (loss) attributable to common stockholders and Unit Holders(1)	$	(10,564	)	$	(34,258	)	$	(26,107	)	$	(63,591	)
Denominator:(2)
Weighted average shares of common stock	55,024			59,116			54,928			59,267
Weighted average Unit Holders(1)	564			690			619			691
Weighted average shares of common stock and Unit Holders(2)	55,588			59,806			55,547			59,958
Earnings (loss) per share:
Basic	$	(0.19	)	$	(0.57	)	$	(0.47	)	$	(1.06	)
Diluted	$	(0.19	)	$	(0.57	)	$	(0.47	)	$	(1.06	)

____________________________________________________________

(1) The EPS calculation takes into account Unit Holders, which receive non-forfeitable dividends from the date of grant, share equally in the Company’s net income (loss) and convert on a one-for-one basis into common stock.

(2) Excludes the effect of restricted stock and RSUs outstanding that were not dilutive as of June 30, 2017. These instruments could potentially impact diluted EPS in future periods, depending on changes in the Company’s stock price and other factors.

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Risk Management and Derivative Activities (Tables)

6 Months Ended

Jun. 30, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Summary of Derivative Instruments not Designated as Hedges under U.S. GAAP

The following tables present derivative instruments that were not designated as hedges under U.S. GAAP as of June 30, 2017 and December 31, 2016 (dollars in thousands):

	Number	Notional Amount		Fair Value Asset (Liability)			Range of Fixed GBP LIBOR / EURIBOR	Range of Maturity
As of June 30, 2017:
Interest rate caps	4	$	1,193,235	$	8,674		(1)	January 2020 - July 2023
Foreign currency forwards, net(2)	2	102,157		(2,501		)	N/A	August 2017 - November 2018
Total	6	$	1,295,392	$	6,173
As of December 31, 2016:
Interest rate caps	4	$	1,107,400	$	8,659		(1)	January 2020 - July 2023
Foreign currency forwards(2)	2	72,806		5,070			N/A	February 2017 - November 2017
Total	6	$	1,180,206	$	13,729

_____________________________

(1)    Includes a range of interest rate caps of 0.5% for EURIBOR and 2.0% for GBP LIBOR.

(2)    Includes Euro and U.K. Pounds Sterling currency forwards.

Schedule of Fair Value of Derivative Instruments and Balance Sheet Classification

The following table presents the fair value of derivative instruments, as well as their classification on the consolidated balance sheets, as of June 30, 2017 and December 31, 2016 (dollars in thousands):

	Balance Sheet	June 30, 2017		December 31, 2016
	Location
Interest rate caps	Derivative assets	$	8,674	$	8,659
Foreign currency forwards	Derivative assets	$	1,165	$	5,070
Foreign currency forwards	Derivative liabilities	$	3,666	$	—

Schedule of the Effect of Derivative Instruments on Combined Statements of Operations

The following table presents the effect of derivative instruments in the consolidated statements of operations for the three and six months endedJune 30, 2017 and 2016 (dollars in thousands):

		Three Months Ended June 30,						Six Months Ended June 30,
		2017			2016			2017			2016
Amount of gain (loss) recognized in earnings:	Statements of operations location:
Adjustment to fair value of interest rate caps	Unrealized gain (loss) on derivatives and other(1)	$	(1,032	)	$	(3,391	)	$	(713	)	$	(14,175	)
Adjustment to fair value of foreign currency forwards	Unrealized gain (loss) on derivatives and other (1)	(6,308		)	4,638			(7,572		)	207
Net cash receipt (payment) on derivatives	Realized gain (loss) on sales and other	639			(776		)	1,456			(1,194		)

_____________________________

(1)    Excludes the unrealized gain (loss) relating to foreign currency remeasurement adjustments

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Fair Value (Tables)

6 Months Ended

Jun. 30, 2017

Fair Value Disclosures [Abstract]

Schedule of Financial Assets and Liabilities

The following table presents the principal amount, carrying value and fair value of certain financial assets and liabilities as of June 30, 2017 and December 31, 2016 (dollars in thousands):

	June 30, 2017						December 31, 2016
	Principal/Notional Amount		Carrying Value		Fair Value		Principal/Notional Amount		Carrying Value		Fair Value
Financial assets:(1)
Derivative assets	$	1,198,630	$	9,839	$	9,839	$	1,180,206	$	13,729	$	13,729
Preferred equity investment	34,064		34,064		34,064		—		—		—
Financial liabilities:(1)
Mortgage and other notes payable, net	$	1,244,713	$	1,232,354	$	1,228,918	$	1,162,211	$	1,149,119	$	1,146,134
Credit Facility	23,000		23,000		23,000		—		—		—
Derivative liabilities	96,762		3,666		3,666		—		—		—

_____________________________

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

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Segment Reporting (Tables)

6 Months Ended

Jun. 30, 2017

Segment Reporting [Abstract]

Schedule of Segment Reporting

The following tables present segment reporting for the three and six months endedJune 30, 2017 and 2016 (dollars in thousands):

	Three Months Ended June 30, 2017
Statement of Operations:	Real Estate Equity				Preferred Equity			Corporate				Total
Rental income	$	26,025		(1)	$	—		$	—			$	26,025
Escalation income	5,558			(1)	—			—				5,558
Interest income	—				297			—				297
Interest expense(2)	6,451				—			271				6,722
Management fee, related party	—				—			3,572				3,572
Transaction costs	—				546			427				973
Depreciation and amortization	12,520				—			—				12,520
Other expenses	9,804			(3)	—			8,590			(4)	18,394
Income (loss) before income tax benefit (expense)	2,808				(249		)	(12,860		)		(10,301		)
Income tax benefit (expense)	(237		)		—			—				(237		)
Net income (loss)	$	2,571			$	(249	)	$	(12,860	)		$	(10,538	)

___________________________________

(1) Includes revenues primarily attributable to Germany, the United Kingdom, France and the Netherlands of $13.1 million, $8.9 million, $5.5 million and $3.7 million, respectively.

(2) Includes $0.7 million and $0.1 million of amortization of deferred financing costs in the real estate equity and corporate segments, respectively.

(3) Primarily relates to properties - operating expenses and unrealized loss on interest rate caps.

(4) Primarily relates to general and administrative expense and unrealized loss on foreign currency forwards.

	Three Months Ended June 30, 2016
Statement of Operations:(1)	Real Estate Equity				Corporate				Total
Rental income	$	33,990		(2)	$	—			$	33,990
Escalation income	5,908			(2)	—				5,908
Interest expense(3)	8,691				2,950				11,641
Management fee, related party	—				3,500				3,500
Transaction costs	—				1,652				1,652
Depreciation and amortization	18,404				—				18,404
Other expenses	34,551			(4)	3,939			(5)	38,490
Income (loss) before income tax benefit (expense)	(21,748		)		(12,041		)		(33,789		)
Income tax benefit (expense)	(520		)		—				(520		)
Net income (loss)	$	(22,268	)		$	(12,041	)		$	(34,309	)

___________________________________

(1) The Company did not have a preferred equity segment for the three months ended June 30, 2016.

(2) Includes revenues primarily attributable to Germany, the United Kingdom, France and the Netherlands of $14 million, $10.2 million, $5.1 million and $4.7 million, respectively.

(3) Includes $0.8 million and $1.2 million of amortization of deferred financing costs in the real estate equity and corporate segment, respectively.

(4) Primarily relates to properties - operating expenses, unrealized loss on interest rate casps and impairment loss of $27.5 million.

(5) Primarily relates to general and administrative expense, realized loss related to the write-off of the deferred financing costs associated with the repurchase of the Senior Notes and unrealized gain on foreign currency forwards.

	Six Months Ended June 30, 2017
Statement of Operations:	Real Estate Equity			Preferred Equity			Corporate				Total
Rental income	$	51,561	(1)	$	—		$	—			$	51,561
Escalation income	10,719		(1)	—			—				10,719
Interest income	—			297			—				297
Interest expense(2)	12,571			—			534				13,105
Management fee, related party	—			—			7,131				7,131
Transaction costs	—			546			687				1,233
Depreciation and amortization	25,083			—			—				25,083
Other expenses	14,774		(3)	—			27,351			(4)	42,125
Income (loss) before income tax benefit (expense)	9,852			(249		)	(35,703		)		(26,100		)
Income tax benefit (expense)	36			—			—				36
Net income (loss)	$	9,888		$	(249	)	$	(35,703	)		$	(26,064	)

___________________________________

(1) Includes revenues primarily attributable to Germany, the United Kingdom, France and the Netherlands of $25.8 million, $17.5 million, $10.8 million and $7.3 million, respectively.

(2) Includes $1.5 million and $0.2 million of amortization of deferred financing costs in the real estate equity and corporate segments, respectively.

(3) Primarily relates to properties - operating expense offset by the realized gain on the sale of real estate.

(4) Primarily relates to general and administrative expense and unrealized loss on foreign currency forwards.

	Six Months Ended June 30, 2016
Statement of Operations:(1)	Real Estate Equity				Corporate				Total
Rental income	$	68,823		(2)	$	—			$	68,823
Escalation income	11,998			(2)	—				11,998
Interest expense(3)	17,117				7,066				24,183
Management fee, related party	—				7,000				7,000
Transaction costs	—				2,483				2,483
Depreciation and amortization	37,275				—				37,275
Other expenses	57,973			(4)	15,680			(5)	73,653
Income (loss) before income tax benefit (expense)	(31,544		)		(32,229		)		(63,773		)
Income tax benefit (expense)	139				—				139
Net income (loss)	$	(31,405	)		$	(32,229	)		$	(63,634	)

___________________________________

(1) The Company did not have a preferred equity segment for the six months ended June 30, 2016.

(2) Includes revenues primarily attributable to Germany, the United Kingdom, France and the Netherlands of $28.4 million, $20.0 million, $10.9 million and $9.8 million, respectively.

(3) Includes $1.7 million and $2.1 million of amortization of deferred financing costs in the real estate equity and corporate segment, respectively.

(4) Primarily relates to properties - operating expense, unrealized loss on derivatives and impairment loss of $27.5 million offset by the realized gain on the sale of real estate.

(5) Primarily relates to management fees, general and administrative expense, realized loss related to the write-off of the deferred financing costs associated with the repurchase of the Senior Notes and includes an allocation of general and administrative expenses from the Manager of $0.1 million.

The following table presents total assets by segment as of June 30, 2017 and December 31, 2016 (dollars in thousands):

Total Assets	Real Estate Equity		Preferred Equity		Corporate		Total
June 30, 2017	$	1,925,692	$	34,662	$	4,879	$	1,965,233
December 31, 2016	1,835,531		—		9,861		1,845,392

XML

Summary of Significant Accounting Policies - Schedule of Property Plant and Equipment Useful Lives (Details)	6 Months Ended
	Jun. 30, 2017
Building
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life	40 years
Building leasehold interests | Maximum
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life	40 years

XML

Summary of Significant Accounting Policies - Intangible Assets and Intangible Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Intangible assets:
Goodwill, Gross Amount	$ 14,968	$ 13,780
Total, Gross Amount	196,914	186,445
Intangible assets, Accumulated Amortization	(47,562)	(38,042)
Goodwill, Net	14,968	13,780
Total, Net	149,352	148,403
Intangible liabilities:
Below-market lease, Gross Amount	36,517	34,163
Below-market lease, Accumulated Amortization	(10,625)	(8,104)
Total	25,892	26,059
Total, Gross Amount	41,775	39,002
Total, Accumulated Amortization	(10,765)	(8,200)
Total, Net	31,010	30,802
In-place lease
Intangible assets:
Intangible assets, Gross Amount	89,838	84,743
Intangible assets, Accumulated Amortization	(36,364)	(29,012)
Total	53,474	55,731
Above-market Leases, Net
Intangible assets:
Intangible assets, Gross Amount	38,108	36,704
Intangible assets, Accumulated Amortization	(10,066)	(8,198)
Total	28,042	28,506
Intangible liabilities:
Gross Amount	5,258	4,839
Accumulated Amortization	(140)	(96)
Net	5,118	4,743
Below-market ground lease
Intangible assets:
Intangible assets, Gross Amount	54,000	51,218
Intangible assets, Accumulated Amortization	(1,132)	(832)
Total	$ 52,868	$ 50,386

XML

Summary of Significant Accounting Policies - Other Assets and Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Other assets:
Prepaid expenses	$ 3,521	$ 1,951
Deferred costs, net	4,765	3,029
Deferred tax assets, net	267	0
Straight-line rent, net	12,613	10,182
Escrow receivable	3,185	6,168
Other	1,042	310
Total	25,393	21,640
Other liabilities:
Deferred tax liabilities	9,795	8,916
Prepaid rent received and unearned revenue	16,626	13,585
Tenant security deposits	4,807	4,322
Prepaid escalation income	1,907	1,560
Other	214	535
Total	$ 33,349	$ 28,918

XML

Summary of Significant Accounting Policies - Impairment on Investment (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Accounting Policies [Abstract]
Impairment losses	$ 0	$ 27,468,000	$ 0	$ 27,468,000

XML

Summary of Significant Accounting Policies - Equity Based Compensation (Details)	6 Months Ended
	Jun. 30, 2017 awardtype
Accounting Policies [Abstract]
Share based compensation number of award types	2

XML

Summary of Significant Accounting Policies - Foreign Currency (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Accounting Policies [Abstract]
CTA reclassified to realized gain (loss)	$ 0.1	$ 0.3	$ (0.3)	$ 0.7

XML

Summary of Significant Accounting Policies - Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Accounting Policies [Abstract]
Income tax benefit (expense)	$ 237	$ 520	$ (36)	$ (139)

XML

Summary of Significant Accounting Policies - Recent Accounting Pronouncements (Details) - Ground Leases $ in Millions	6 Months Ended
	Jun. 30, 2017 USD ($) lease
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Number of ground lease agreements | lease	3
ASU 2016-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Annual rental income | $	$ 0.6

XML

Operating Real Estate - Operating Real Estate, Net (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Real Estate [Abstract]
Land	$ 387,254	$ 360,555
Buildings and improvements	1,057,562	980,053
Building, leasehold interests and improvements	227,054	212,864
Furniture, fixtures and equipment	1,384	1,214
Tenant improvements	65,354	59,746
Operating real estate, gross	1,738,608	1,614,432
Less: accumulated depreciation	(88,242)	(63,585)
Operating real estate, net	$ 1,650,366	$ 1,550,847

XML

Operating Real Estate - Real Estate Held for Sale (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017 USD ($) property	Jun. 30, 2016 USD ($)	Jun. 30, 2017 USD ($) property	Dec. 31, 2016 USD ($)
Real Estate Properties [Line Items]
Operating Real Estate, Net	$ 9,427		$ 9,427	$ 28,208
Revenue	300	$ 400
Pretax loss	$ (300)	$ (100)
Depreciation and amortization			$ (4,100)
Held-for-sale
Real Estate Properties [Line Items]
Properties | property	2		2
Operating Real Estate, Net	$ 8,468		$ 8,468
Intangible Assets, Net	959		959
Total	$ 9,427		9,427
Pretax loss
Held-for-sale | Netherlands
Real Estate Properties [Line Items]
Properties | property	1		1
Operating Real Estate, Net	$ 2,095		$ 2,095
Intangible Assets, Net	1		1
Total	$ 2,096		$ 2,096
Held-for-sale | Spain
Real Estate Properties [Line Items]
Properties | property	1		1
Operating Real Estate, Net	$ 6,373		$ 6,373
Intangible Assets, Net	958		958
Total	$ 7,331		$ 7,331

XML

Operating Real Estate - Narrative (Details) - Held-for-sale $ in Millions	3 Months Ended	6 Months Ended
	Jun. 30, 2017 USD ($) property	Jun. 30, 2017 USD ($) property
Two Non-core Assets Sold
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of real estate properties sold | property	2
Proceeds from sale	$ 12.3	$ 12.3
Proceeds from sale, net of sales costs and associated property debt repayments	11.7
Gain (loss) in connection with sale	1.4
Escrow reserves	2.1	2.1
Prior Disposal Release From Escrow
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Gain (loss) in connection with sale		$ 1.9
Three Non-core Assets Sold
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of real estate properties sold | property		3
Proceeds from sale	$ 33.2	$ 33.2
Proceeds from sale, net of sales costs and associated property debt repayments		31.8
Gain (loss) in connection with sale		$ 4.1

XML

Preferred Equity Investments (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2017	May 31, 2017	Dec. 31, 2016
Mortgage Loans on Real Estate [Line Items]
Principal Amount	$ 34,064
Carrying Value	$ 34,064		$ 0
Fixed Rate	8.00%
Minimum
Mortgage Loans on Real Estate [Line Items]
Number of days past due	90 days
20 Gresham Street
Mortgage Loans on Real Estate [Line Items]
Carrying Value		$ 34,100

XML

Borrowings (Details) - USD ($) $ in Thousands	1 Months Ended			6 Months Ended
	Jun. 30, 2017	Apr. 30, 2017	May 31, 2016	Jun. 30, 2017	Dec. 31, 2016	Jul. 31, 2016
Debt Instrument [Line Items]
Principal Amount	$ 1,267,713			$ 1,267,713	$ 1,162,211
Carrying Value	1,255,354			$ 1,255,354	1,149,119
GBP LIBOR plus 2.75%
Debt Instrument [Line Items]
Basis spread on variable rate				2.75%
Mortgage and Other Notes Payable
Debt Instrument [Line Items]
Principal Amount	1,244,713			$ 1,244,713	1,162,211
Carrying Value	1,232,354			$ 1,232,354	1,149,119
Mortgage and Other Notes Payable | SEB Portfolio | Minimum
Debt Instrument [Line Items]
Prepayment fee percentage range on principal				0.50%
Mortgage and Other Notes Payable | SEB Portfolio | Maximum
Debt Instrument [Line Items]
Prepayment fee percentage range on principal				1.00%
Mortgage and Other Notes Payable | Trias Portfolio | Minimum
Debt Instrument [Line Items]
Prepayment fee percentage range on principal				0.25%
Mortgage and Other Notes Payable | Trias Portfolio | Maximum
Debt Instrument [Line Items]
Prepayment fee percentage range on principal				1.00%
Mortgage and Other Notes Payable | Floating - GBP LIBOR Plus 1.75% | U.K. Complex
Debt Instrument [Line Items]
Principal Amount	52,819			$ 52,819	50,116
Carrying Value	52,084			$ 52,084	49,284
Mortgage and Other Notes Payable | Floating - GBP LIBOR Plus 1.75% | U.K. Complex | GBP LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate				1.75%
Mortgage and Other Notes Payable | Fixed - at 8.325% | U.K. Complex
Debt Instrument [Line Items]
Principal Amount	12,189			$ 12,189	11,565
Carrying Value	$ 12,127			$ 12,127	11,497
Stated interest rate	8.325%			8.325%
Mortgage and Other Notes Payable | EURIBOR Plus 2.70% | Trias Portfolio 1
Debt Instrument [Line Items]
Principal Amount	$ 12,107			$ 12,107	9,477
Carrying Value	11,854			$ 11,854	13,301
Increase in loan amount	5,100
Mortgage and Other Notes Payable | EURIBOR Plus 2.70% | Trias Portfolio 1 | EURIBOR
Debt Instrument [Line Items]
Basis spread on variable rate				2.70%
Mortgage and Other Notes Payable | EURIBOR Plus 1.55% | Trias Portfolio 2
Debt Instrument [Line Items]
Principal Amount	81,615			$ 81,615	78,952
Carrying Value	81,429			$ 81,429	78,708
Mortgage and Other Notes Payable | EURIBOR Plus 1.55% | Trias Portfolio 2 | EURIBOR
Debt Instrument [Line Items]
Basis spread on variable rate				1.55%
Mortgage and Other Notes Payable | EURIBOR Plus 1.65% | Trias Portfolio 3
Debt Instrument [Line Items]
Principal Amount	43,539			$ 43,539	45,170
Carrying Value	42,240			$ 42,240	39,568
Mortgage and Other Notes Payable | EURIBOR Plus 1.65% | Trias Portfolio 3 | EURIBOR
Debt Instrument [Line Items]
Basis spread on variable rate				1.65%
Mortgage and Other Notes Payable | GBP LIBOR Plus 2.70% | Trias Portfolio 4
Debt Instrument [Line Items]
Principal Amount	16,697			$ 16,697	15,843
Carrying Value	16,314			$ 16,314	15,446
Mortgage and Other Notes Payable | GBP LIBOR Plus 2.70% | Trias Portfolio 4 | GBP LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate				2.70%
Mortgage and Other Notes Payable | EURIBOR Plus 1.80% | SEB Portfolio 1
Debt Instrument [Line Items]
Principal Amount	302,590			$ 302,590	278,539
Carrying Value	298,769			$ 298,769	274,614
Mortgage and Other Notes Payable | EURIBOR Plus 1.80% | SEB Portfolio 1 | EURIBOR
Debt Instrument [Line Items]
Basis spread on variable rate				1.80%
Mortgage and Other Notes Payable | GBP LIBOR Plus 1.80% | SEB Portfolio 2
Debt Instrument [Line Items]
Principal Amount	241,724			$ 241,724	229,353
Carrying Value	238,613			$ 238,613	226,078
Mortgage and Other Notes Payable | GBP LIBOR Plus 1.80% | SEB Portfolio 2 | GBP LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate				1.80%
Mortgage and Other Notes Payable | Fixed rate at 2.30% | SEB Portfolio - Preferred
Debt Instrument [Line Items]
Principal Amount	97,800			$ 97,800	90,033
Carrying Value	97,492			$ 97,492	89,720
Basis spread on variable rate				2.30%
Mortgage and Other Notes Payable | EURIBOR Plus 1.30% | Trianon Tower
Debt Instrument [Line Items]
Principal Amount	376,949			$ 376,949	347,012
Carrying Value	$ 375,356			$ 375,356	345,422
Mortgage and Other Notes Payable | EURIBOR Plus 1.30% | Trianon Tower | EURIBOR
Debt Instrument [Line Items]
Basis spread on variable rate				1.30%
Mortgage and Other Notes Payable | EURIBOR Plus 1.30% | Trianon Tower | EURIBOR | Repayment provision through June 30, 2017
Debt Instrument [Line Items]
Prepayment fee percentage range on principal				0.80%
Mortgage and Other Notes Payable | EURIBOR Plus 1.30% | Trianon Tower | EURIBOR | Repayment provision through June 30, 2018
Debt Instrument [Line Items]
Prepayment fee percentage range on principal				0.60%
Mortgage and Other Notes Payable | EURIBOR Plus 1.30% | Trianon Tower | EURIBOR | Repayment provision through June 30, 2019
Debt Instrument [Line Items]
Prepayment fee percentage range on principal				0.30%
Mortgage and Other Notes Payable | Fixed rate at 1.00% | Trias Portfolio
Debt Instrument [Line Items]
Stated interest rate	1.00%			1.00%
Maturity				30 years
Mortgage and Other Notes Payable | Fixed rate at 1.00% | Other-Preferred
Debt Instrument [Line Items]
Principal Amount	$ 6,684			$ 6,684	6,151
Carrying Value	$ 6,076			$ 6,076	5,481
Basis spread on variable rate				1.00%
Mortgage and Other Notes Payable | Variable rate | SEB Portfolio - Preferred
Debt Instrument [Line Items]
Stated interest rate						2.30%
Mortgage and Other Notes Payable | Variable rate | SEB Portfolio - Preferred | May 2019 through May 2022
Debt Instrument [Line Items]
Stated interest rate	12.00%			12.00%
Mortgage and Other Notes Payable | Variable rate | SEB Portfolio - Preferred | May 2022 through Maturity
Debt Instrument [Line Items]
Stated interest rate	15.00%			15.00%
Interest rate caps | Not designated as hedges | GBP LIBOR | Maximum
Debt Instrument [Line Items]
Interest rate caps	2.00%			2.00%
Interest rate caps | Not designated as hedges | EURIBOR | Minimum
Debt Instrument [Line Items]
Interest rate caps	0.50%			0.50%
Revolving Credit Facility | Credit Facility
Debt Instrument [Line Items]
Principal Amount	$ 23,000			$ 23,000
Maturity		2 years	1 year
Revolving Credit Facility | Credit Facility | GBP LIBOR plus 2.75%
Debt Instrument [Line Items]
Principal Amount	23,000			23,000	0
Carrying Value	$ 23,000			$ 23,000	$ 0
Optional extension period (in years)				1 year

XML

Borrowings - Reconciliation of Principal to Carrying Amount (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Debt Disclosure [Abstract]
Principal amount	$ 1,267,713	$ 1,162,211
Deferred financing costs, net	(12,359)	(13,092)
Carrying value	$ 1,255,354	$ 1,149,119

XML

Borrowings - Scheduled Principal on Borrowings (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Debt Instrument [Line Items]
April 1 - December 31, 2017	$ 0
2018	0
2019	23,000
2020	218,967
2021	0
Thereafter	1,025,746
Total	1,267,713	$ 1,162,211
Mortgage and Other Notes Payable
Debt Instrument [Line Items]
April 1 - December 31, 2017	0
2018	0
2019	0
2020	218,967
2021	0
Thereafter	1,025,746
Total	1,244,713
Revolving Credit Facility | Credit Facility
Debt Instrument [Line Items]
April 1 - December 31, 2017	0
2018	0
2019	23,000
2020	0
2021	0
Thereafter	0
Total	$ 23,000

XML

Borrowings - Narrative (Details) - USD ($)	1 Months Ended
	Apr. 30, 2017	May 31, 2016	Jul. 31, 2015	Jun. 30, 2017	Dec. 31, 2016	Oct. 31, 2016
Debt Instrument [Line Items]
Principal amount				$ 1,267,713,000	$ 1,162,211,000
Credit facility				23,000,000	0
Senior Notes
Debt Instrument [Line Items]
Principal amount					$ 272,300,000
Credit Facility | Revolving Credit Facility
Debt Instrument [Line Items]
Principal amount				23,000,000
Corporate revolving credit facility	$ 35,000,000	$ 75,000,000.0				$ 35,000,000.0
Initial term	2 years	1 year
Higher borrowing capacity	$ 70,000,000
Credit facility				$ 23,000,000
Senior Notes, 4.625 Percent Due December 2016 | Exchangeable Debt
Debt Instrument [Line Items]
Debt instrument, face amount			$ 340,000,000.0
Stated interest rate			4.625%
Proceeds from issuance of debt			$ 331,000,000

XML

Related Party Arrangements (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016
Related Party Transaction [Line Items]
Annualized base management fee to be paid	$ 3,544,000		$ 3,544,000		$ 4,991,000
Long-term bonus or other compensation | Colony NorthStar, Inc.
Related Party Transaction [Line Items]
Reimbursement percentage			50.00%
Affiliated Entity | Colony NorthStar, Inc.
Related Party Transaction [Line Items]
Asset management agreement, initial term			20 years
Asset management agreement, renewal term			20 years
Asset management fee expense, related party	3,600,000	$ 3,500,000	$ 7,100,000	$ 7,000,000
Annualized base management fee to be paid	3,500,000		3,500,000
Asset management agreement, assets under management	$ 10,000,000,000		$ 10,000,000,000
Increase in annualized base management fee			20.00%
Affiliated Entity | Tier 1 | Colony NorthStar, Inc.
Related Party Transaction [Line Items]
Asset management agreement, incentive fee			15.00%
Affiliated Entity | Tier 2 | Colony NorthStar, Inc.
Related Party Transaction [Line Items]
Asset management agreement, incentive fee			25.00%
Affiliated Entity | Minimum | Tier 1 | Colony NorthStar, Inc.
Related Party Transaction [Line Items]
Asset management agreement, incentive fee, per share (in dollars per share)			$ 0.30
Affiliated Entity | Minimum | Tier 2 | Colony NorthStar, Inc.
Related Party Transaction [Line Items]
Asset management agreement, incentive fee, per share (in dollars per share)			0.36
Affiliated Entity | Maximum | Tier 1 | Colony NorthStar, Inc.
Related Party Transaction [Line Items]
Asset management agreement, incentive fee, per share (in dollars per share)			$ 0.36
Affiliated Entity | Allocation of Severance Costs | Due to Related Party | Colony NorthStar, Inc.
Related Party Transaction [Line Items]
Allocated general and administrative expense			$ 0	0
Affiliated Entity | Management fees | Colony NorthStar, Inc.
Related Party Transaction [Line Items]
Additional asset management fee			1.50%
Affiliated Entity | Cost and expense reimbursement | Due to Related Party | Colony NorthStar, Inc.
Related Party Transaction [Line Items]
Allocated general and administrative expense				$ 100,000
Affiliated Entity | Long-term bonus or other compensation | Colony NorthStar, Inc.
Related Party Transaction [Line Items]
Reimbursement percentage			50.00%
NorthStar Realty Europe Corp. | Colony NorthStar, Inc.
Related Party Transaction [Line Items]
Common stock owned (in shares)	4,938,225		4,938,225
Ownership percentage by parent	9.00%		9.00%

XML

Compensation Expense - Narrative (Details) $ in Millions		1 Months Ended	3 Months Ended		6 Months Ended
	Oct. 31, 2015 shares	Mar. 31, 2016 shares	Jun. 30, 2017 USD ($) shares	Jun. 30, 2016 USD ($)	Jun. 30, 2017 USD ($) shares	Jun. 30, 2016 USD ($)	Dec. 31, 2016 shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards granted (shares)					501,000
Vesting of restricted stock (shares)					1,697,000
Spinoff conversion ratio	0.1667
Conversion ratio	0.50
Common stock given as payout (shares)	0.3333
Options outstanding (in shares)			2,011,000		2,011,000		3,778,000
2015 Omnibus Stock Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized (in shares)							10,000,000
Number of shares authorized, percent increase							2.00%
Common stock, capital shares reserved for future issuance (in shares)			1,700,000		1,700,000
Shares unreserved and available for issuance (in shares)			8,300,000		8,300,000
Options outstanding (in shares)			1,200,000		1,200,000
Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation expense | $			$ 1.4	$ 3.8	$ 17.3	$ 7.0
Equity-based compensation expense not yet recognized | $			$ 9.3		$ 9.3
Awards granted (shares)					501,000
Vesting of restricted stock (shares)					1,519,000
Options outstanding (in shares)			121,000		121,000		1,139,000
Restricted Stock | 2015 Omnibus Stock Incentive Plan | Executive Officer
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards granted (shares)					500,642
Vesting of restricted stock (shares)					379,594
Restricted Stock | Spin-off
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards granted (shares)		995,698
Award vesting period		4 years
LTIP Units | 2015 Omnibus Stock Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock, capital shares reserved for future issuance (in shares)			100,000		100,000
Absolute and Relative Restricted Stock Units (RSUs) | 2015 Omnibus Stock Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock, capital shares reserved for future issuance (in shares)			1,600,000		1,600,000
Restricted Stock Units (RSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards granted (shares)					0
Vesting of restricted stock (shares)					0
Options outstanding (in shares)			83,333		83,333		83,000
Restricted Stock Units (RSUs) | 2015 Omnibus Stock Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percent of performance-based equity instruments based on total shareholder return		50.00%
Percent of performance-based equity instruments, subject to total shareholder return relative to the MSCI US REIT index		50.00%
Restricted Stock Units (RSUs) | Spin-off
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards granted (shares)		1,493,551
Maximum award vesting rights based on absolute performance, percentage		100.00%
Maximum award vesting rights based on relative performance, percentage		125.00%

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Compensation Expense - Common Units and Unvested Restricted Stock Activity (Details)	6 Months Ended
	Jun. 30, 2017 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Beginning balance (shares)	3,778,000
New grants (shares)	501,000
Conversions in period (in shares)	(236,000)
Vesting of restricted stock (shares)	(1,697,000)
Forfeited or canceled grants (shares)	(335,000)
Ending balance (shares)	2,011,000
Weighted Average Grant Price
Beginning balance (in dollars per share) | $ / shares	$ 11.29
New grants (in dollars per share) | $ / shares	12.69
Conversions in period (in dollars per share) | $ / shares	21.21
Vesting of restricted stock (in dollars per share) | $ / shares	10.22
Forfeited or canceled grants (in dollars per share) | $ / shares	5.62
Ending balance (in dollars per share) | $ / shares	$ 12.30
Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Beginning balance (shares)	1,139,000
New grants (shares)	501,000
Conversions in period (in shares)	0
Vesting of restricted stock (shares)	(1,519,000)
Forfeited or canceled grants (shares)	0
Ending balance (shares)	121,000
Common Units
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Beginning balance (shares)	688,000
New grants (shares)	0
Conversions in period (in shares)	(236,000)
Vesting of restricted stock (shares)	0
Forfeited or canceled grants (shares)	(1,000)
Ending balance (shares)	451,000
Restricted Stock Units (RSUs)
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Beginning balance (shares)	83,000
New grants (shares)	0
Conversions in period (in shares)	0
Vesting of restricted stock (shares)	0
Forfeited or canceled grants (shares)	0
Ending balance (shares)	83,333
Performance RSUs
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Beginning balance (shares)	1,868,000
New grants (shares)	0
Conversions in period (in shares)	0
Vesting of restricted stock (shares)	(178,000)
Forfeited or canceled grants (shares)	(334,000)
Ending balance (shares)	1,356,000

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Stockholders' Equity - Narrative (Details) - USD ($) shares in Millions	6 Months Ended	17 Months Ended
	Jun. 30, 2016	Mar. 31, 2017	Nov. 30, 2016	Nov. 30, 2015
Equity [Abstract]
Authorized amount of outstanding common stock (up to)			$ 100,000,000	$ 100,000,000
Common stock repurchased (shares)	0.6
Common stock repurchased	$ 6,300,000
Shares repurchased (shares)		9.3
Repurchase of equity		$ 100,000,000

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Stockholders' Equity - Dividends Declared (Details) - $ / shares					3 Months Ended		6 Months Ended
	Aug. 02, 2017	May 01, 2017	Aug. 03, 2016	May 10, 2016	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Common Stock
Common stock dividends declared (in dollars per share)		$ 0.15	$ 0.15	$ 0.15	$ 0.15	$ 0.15	$ 0.30	$ 0.3
Subsequent Event
Common Stock
Common stock dividends declared (in dollars per share)	$ 0.15

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Stockholders' Equity - Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Common Stock
Net income (loss) attributable to NorthStar Realty Europe Corp. common stockholders	$ (10,447)	$ (33,909)	$ (25,797)	$ (62,891)
Net income (loss) attributable to Unit Holders non-controlling interest	(117)	(349)	(310)	(700)
Net income (loss) attributable to common stockholders and Unit Holders	$ (10,564)	$ (34,258)	$ (26,107)	$ (63,591)
Weighted average shares of common stock (shares)	55,023,535	59,115,895	54,928,364	59,266,850
Weighted average Unit Holders (shares)	564,000	690,000	619,000	691,000
Weighted average shares of common stock and Unit Holders (shares)	55,587,897	59,805,545	55,546,668	59,957,559
Earnings (loss) per share:
Basic (in dollars per share)	$ (0.19)	$ (0.57)	$ (0.47)	$ (1.06)
Diluted (in dollars per share)	$ (0.19)	$ (0.57)	$ (0.47)	$ (1.06)
LTIP Units
Earnings (loss) per share:
Shares issued upon conversion of awards (shares)			1

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Non-controlling Interests (Details) $ in Thousands, € in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2017 USD ($) shares	Jun. 30, 2016 USD ($)	Jun. 30, 2017 USD ($) shares	Jun. 30, 2016 USD ($)	Jul. 31, 2015 USD ($)	Jul. 31, 2015 EUR (€)
Noncontrolling Interest [Line Items]
Non-controlling ownership interest	0.80%		0.80%
Net loss attributable to Unit Holders non-controlling interest	$ 117	$ 349	$ 310	$ 700
Ownership percentage in disposed asset					5.50%	5.50%
Redeemable noncontrolling interest, equity, redemption value | €						€ 2.1
Non-controlling Interest in Subsidiaries Owning Trianon Tower
Noncontrolling Interest [Line Items]
Consideration received					$ 1,500
LTIP units | Non-controlling interest
Noncontrolling Interest [Line Items]
Number of units outstanding (shares) | shares	450,861		450,861

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Risk Management and Derivative Activities - Derivative Instruments Not Designated as Hedges (Details) - Not designated as hedges $ in Thousands	Jun. 30, 2017 USD ($) instrument	Dec. 31, 2016 USD ($) instrument
Derivative [Line Items]
Number | instrument	6	6
Notional Amount	$ 1,295,392	$ 1,180,206
Fair Value Asset (Liability)	$ 6,173	$ 13,729
Interest rate caps
Derivative [Line Items]
Number | instrument	4	4
Notional Amount	$ 1,193,235	$ 1,107,400
Fair Value Asset (Liability)	$ 8,674	$ 8,659
Interest rate caps | EURIBOR | Minimum
Derivative [Line Items]
Interest rate caps	0.50%
Interest rate caps | GBP LIBOR | Maximum
Derivative [Line Items]
Interest rate caps	2.00%
Foreign currency forwards, net
Derivative [Line Items]
Number | instrument	2	2
Notional Amount	$ 102,157	$ 72,806
Fair Value Asset (Liability)	$ (2,501)	$ 5,070

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Risk Management and Derivative Activities - Fair Value of Derivative Instruments (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Derivative assets | Interest rate caps
Derivative [Line Items]
Derivatives	$ 8,674	$ 8,659
Derivative assets | Foreign currency forwards
Derivative [Line Items]
Derivatives	1,165	5,070
Derivative liabilities | Foreign currency forwards
Derivative [Line Items]
Derivatives	$ 3,666	$ 0

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Risk Management and Derivative Activities - Effect of Derivative Instruments in the Combined Consolidated Statements of Operations (Details) - Unrealized gain (loss) on derivatives and other(1) - Derivatives - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Derivative [Line Items]
Net cash receipt (payment) on derivatives	$ 639	$ (776)	$ 1,456	$ (1,194)
Interest rate caps
Derivative [Line Items]
Adjustments to fair value	(1,032)	(3,391)	(713)	(14,175)
Foreign currency forwards
Derivative [Line Items]
Adjustments to fair value	$ (6,308)	$ 4,638	$ (7,572)	$ 207

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Risk Management and Derivative Activities - Narrative (Details)	Jun. 30, 2017 USD ($) instrument	Dec. 31, 2016 USD ($) instrument
Derivative [Line Items]
Cash collateral held by counter parties | $	$ 0	$ 0
Designated as hedge
Derivative [Line Items]
Number of derivative instruments | instrument	0	0

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Fair Value (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	$ 9,839	$ 13,729
Derivative liabilities	3,666	0
Principal/Notional Amount
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	1,198,630	1,180,206
Preferred equity investment	34,064	0
Derivative liabilities	96,762	0
Principal/Notional Amount | Mortgage and other notes payable, net
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial liabilities	1,244,713	1,162,211
Carrying Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	9,839	13,729
Preferred equity investment	34,064	0
Derivative liabilities	3,666	0
Carrying Value | Mortgage and other notes payable, net
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial liabilities	1,232,354	1,149,119
Fair Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	9,839	13,729
Preferred equity investment	34,064	0
Derivative liabilities	3,666	0
Fair Value | Mortgage and other notes payable, net
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial liabilities	1,228,918	1,146,134
Revolving Credit Facility | Principal/Notional Amount | Credit Facility
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial liabilities	23,000	0
Revolving Credit Facility | Carrying Value | Credit Facility
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial liabilities	23,000	0
Revolving Credit Facility | Fair Value | Credit Facility
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial liabilities	$ 23,000	$ 0

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Commitments and Contingencies - Schedule of Future Minimum Rental Payments (Details) - lessee	3 Months Ended	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2017
Commitments and Contingencies Disclosure [Abstract]
Number of significant lessees	1	1
Significant lessee remaining lease term		6 years 10 months 12 days

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Segment Reporting (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2017 USD ($)	Jun. 30, 2016 USD ($)	Jun. 30, 2017 USD ($) segment	Jun. 30, 2016 USD ($)	Dec. 31, 2016 USD ($)
Segment Reporting Information [Line Items]
Number of reporting segments | segment			3
Rental income	$ 26,025,000	$ 33,990,000	$ 51,561,000	$ 68,823,000
Escalation income	5,558,000	5,908,000	10,719,000	11,998,000
Interest income	297,000	0	297,000	0
Interest expense	6,722,000	11,641,000	13,105,000	24,183,000
Management fee, related party	3,572,000	3,500,000	7,131,000	7,000,000
Transaction costs	973,000	1,652,000	1,233,000	2,483,000
Depreciation and amortization	12,520,000	18,404,000	25,083,000	37,275,000
Other expenses	18,394,000	38,490,000	42,125,000	73,653,000
Income (loss) before income tax benefit (expense)	(10,301,000)	(33,789,000)	(26,100,000)	(63,773,000)
Income tax benefit (expense)	(237,000)	(520,000)	36,000	139,000
Net income (loss)	(10,538,000)	(34,309,000)	(26,064,000)	(63,634,000)
Revenues	32,388,000	39,944,000	63,114,000	81,570,000
Impairment losses	0	27,468,000	0	27,468,000
Amortization of deferred financing costs			1,689,000	3,789,000
General and administrative expenses	1,555,000	1,502,000	4,152,000	2,978,000
Total assets	1,965,233,000		1,965,233,000		$ 1,845,392,000
Real Estate Equity
Segment Reporting Information [Line Items]
Rental income	26,025,000	33,990,000	51,561,000	68,823,000
Escalation income	5,558,000	5,908,000	10,719,000	11,998,000
Interest income	0		0
Interest expense	6,451,000	8,691,000	12,571,000	17,117,000
Management fee, related party	0	0	0	0
Transaction costs	0	0	0	0
Depreciation and amortization	12,520,000	18,404,000	25,083,000	37,275,000
Other expenses	9,804,000	34,551,000	14,774,000	57,973,000
Income (loss) before income tax benefit (expense)	2,808,000	(21,748,000)	9,852,000	(31,544,000)
Income tax benefit (expense)	(237,000)	(520,000)	36,000	139,000
Net income (loss)	2,571,000	(22,268,000)	9,888,000	(31,405,000)
Amortization of deferred financing costs	700,000	800,000	1,500,000	1,700,000
Total assets	1,925,692,000		1,925,692,000		1,835,531,000
Preferred Equity
Segment Reporting Information [Line Items]
Rental income	0		0
Escalation income	0		0
Interest income	297,000		297,000
Interest expense	0		0
Management fee, related party	0		0
Transaction costs	546,000		546,000
Depreciation and amortization	0		0
Other expenses	0		0
Income (loss) before income tax benefit (expense)	(249,000)		(249,000)
Income tax benefit (expense)	0		0
Net income (loss)	(249,000)		(249,000)
Total assets	34,662,000		34,662,000		0
Corporate
Segment Reporting Information [Line Items]
Rental income	0	0	0	0
Escalation income	0	0	0	0
Interest income	0		0
Interest expense	271,000	2,950,000	534,000	7,066,000
Management fee, related party	3,572,000	3,500,000	7,131,000	7,000,000
Transaction costs	427,000	1,652,000	687,000	2,483,000
Depreciation and amortization	0	0	0	0
Other expenses	8,590,000	3,939,000	27,351,000	15,680,000
Income (loss) before income tax benefit (expense)	(12,860,000)	(12,041,000)	(35,703,000)	(32,229,000)
Income tax benefit (expense)	0	0	0	0
Net income (loss)	(12,860,000)	(12,041,000)	(35,703,000)	(32,229,000)
Amortization of deferred financing costs	100,000	1,200,000	200,000	2,100,000
General and administrative expenses				100,000
Total assets	4,879,000		4,879,000		$ 9,861,000
Germany
Segment Reporting Information [Line Items]
Revenues	13,100,000	14,000,000	25,800,000	28,400,000
UNITED KINGDOM
Segment Reporting Information [Line Items]
Revenues	8,900,000	10,200,000	17,500,000	20,000,000
France
Segment Reporting Information [Line Items]
Revenues	5,500,000	5,100,000	10,800,000	10,900,000
Netherlands
Segment Reporting Information [Line Items]
Revenues	$ 3,700,000	$ 4,700,000	$ 7,300,000	$ 9,800,000

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Subsequent Events (Details) $ / shares in Units, $ in Thousands					1 Months Ended	3 Months Ended		6 Months Ended
	Aug. 02, 2017 $ / shares	May 01, 2017 $ / shares	Aug. 03, 2016 $ / shares	May 10, 2016 $ / shares	Aug. 08, 2017 USD ($) property	Jun. 30, 2017 USD ($) $ / shares	Jun. 30, 2016 $ / shares	Jun. 30, 2017 USD ($) $ / shares	Jun. 30, 2016 $ / shares	Dec. 31, 2016 USD ($)
Subsequent Event [Line Items]
Common stock dividends declared (in dollars per share) | $ / shares		$ 0.15	$ 0.15	$ 0.15		$ 0.15	$ 0.15	$ 0.30	$ 0.3
Assets held for sale						$ 9,427		$ 9,427		$ 28,208
Subsequent Event
Subsequent Event [Line Items]
Common stock dividends declared (in dollars per share) | $ / shares	$ 0.15
Held-for-sale
Subsequent Event [Line Items]
Assets held for sale						$ 8,468		$ 8,468
Non-Core Asset Sold | Held-for-sale | Subsequent Event
Subsequent Event [Line Items]
Number of real estate properties sold | property					1
Assets held for sale					$ 7,300
Proceeds from sale					$ 9,000