NorthStar Realty Europe Corp. - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - December 17, 2018

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8-K - 8-K - NorthStar Realty Europe Corp.nreproforma8-k.htm


Exhibit 99.1
NORTHSTAR REALTY EUROPE CORP.
TABLE OF CONTENTS










NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On December 12, 2018, a subsidiary of NorthStar Realty Europe Corp. (the “Company”) completed the sale of Trianon Tower and received net proceeds of approximately $363 million (the “Trianon Sale”) after repayment of mortgage financing and associated prepayment penalties, its $6 million retained preferred equity interest and transaction costs (based on the September 30, 2018 applicable exchange rate). The Trianon Sale, the repayment of the mortgage financing and the $6 million preferred equity investment are referred to, collectively, as the “Transactions.”

The unaudited pro forma condensed consolidated balance sheet as of September 30, 2018 included in Exhibit 99.1 have been prepared giving effect to the Transactions as if they were completed on September 30, 2018.
 
The unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 2018 and the year ended December 31, 2017 included in Exhibit 99.1 have been prepared giving effect to the Transactions as if they occurred on January 1, 2017, the beginning of the earliest period presented.
 
The unaudited pro forma condensed consolidated financial statements are presented for illustrative purposes only and are not necessarily indicative of the financial position or results of operations of the Company had the Transactions been completed as of the beginning of the earliest period presented, nor indicative of future results of operations or future financial position of the Company. The unaudited pro forma condensed consolidated financial statements should be read in connection with the historical consolidated financial statements and notes thereto of the Company, included as Item 8 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, and as Item 1 in the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2018.

The unaudited pro forma condensed consolidated financial statements reflect management’s best estimates based on currently available information.





NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
September 30, 2018
(Dollars in Thousands)
    
 
As Reported (Unaudited)
 
Trianon Sale Adjustments
(Note 2)
 
Pro Forma
Assets
 
 
 
 
 
Operating real estate, gross
$
1,566,505

 
$
(603,537
)
 
$
962,968

Less: accumulated depreciation
(119,133
)
 
49,976

 
(69,157
)
Operating real estate, net
1,447,372

 
(553,561
)
 
893,811

Preferred equity investments
34,137

 
5,970

 
40,107

Cash and cash equivalents
61,869

 
363,024

 
424,893

Restricted cash
7,097

 
—

 
7,097

Receivables, net
8,013

 
(1,077
)
 
6,936

Derivative assets, at fair value
10,941

 
(4,901
)
 
6,040

Intangible assets, net
100,831

 
(38,180
)
 
62,651

Other assets, net
28,466

 
(10,954
)
 
17,512

Total assets
$
1,698,726

 
$
(239,679
)
 
$
1,459,047

Liabilities
 
 
 
 

Mortgage and other notes payable, net
$
1,092,708

 
$
(381,670
)
 
$
711,038

Accounts payable and accrued expenses
16,954

 
(3,553
)
 
13,401

Due to affiliates
4,259

 
—

 
4,259

Derivative liabilities, at fair value
426

 
—

 
426

Intangible liabilities, net
25,142

 
(14,714
)
 
10,428

Other liabilities
24,276

 
(4,380
)
 
19,896

Total liabilities
1,163,765

 
(404,317
)
 
759,448

Commitments and contingencies
 
 
 
 

Redeemable noncontrolling interest
1,930

 
(1,930
)
 
—

Equity
 
 
 
 

NorthStar Realty Europe Corp. Stockholders’ Equity
 
 
 
 


Preferred stock
—

 
—

 
—

Common stock
498

 
—

 
498

Additional paid-in capital
860,853

 
158

 
861,011

Retained earnings (accumulated deficit)
(333,464
)
 
178,308

 
(155,156
)
Accumulated other comprehensive income (loss)
1,564

 
(11,905
)
 
(10,341
)
Total NorthStar Realty Europe Corp. stockholders’ equity
529,451

 
166,561

 
696,012

Noncontrolling interests
3,580

 
7

 
3,587

Total equity
533,031

 
166,568

 
699,599

Total liabilities, redeemable noncontrolling interest and equity
$
1,698,726

 
$
(239,679
)
 
$
1,459,047

    










Refer to accompanying notes to unaudited pro forma condensed consolidated financial statements.






NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Nine Months Ended September 30, 2018
(Dollars in Thousands, Except Per Share Data)
 
As Reported (Unaudited)
 
Trianon Sale Adjustments
(Note 2)
 
Pro Forma
Revenues
 
 
 
 
 
Rental income
$
75,744

 
$
(24,260
)
 
$
51,484

Escalation income
15,186

 
(5,836
)
 
9,350

Interest income
2,143

 
316

 
2,459

Other income
497

 
(20
)
 
477

Total revenues
93,570

 
(29,800
)
 
63,770

Expenses
 
 
 
 

Properties - operating expenses
19,422

 
(7,303
)
 
12,119

Interest expense
17,280

 
(4,170
)
 
13,110

Transaction costs
1,986

 
—

 
1,986

Management fee, related party
12,391

 
—

 
12,391

Other expenses
3,847

 
(1,029
)
 
2,818

General and administrative expenses
5,631

 
(40
)
 
5,591

Compensation expense(1)
3,292

 
—

 
3,292

Depreciation and amortization
34,640

 
(13,373
)
 
21,267

Total expenses
98,489

 
(25,915
)
 
72,574

Other income (loss)
 
 
 
 
—

Other gain (loss), net
(15
)
 
1,449

 
1,434

Realized gain on sales, net
42,020

 
—

 
42,020

Income (loss) before income tax benefit (expense)
37,086


(2,436
)
 
34,650

Income tax benefit (expense)
277

 
(308
)
 
(31
)
Net income (loss)
37,363

 
(2,744
)
 
34,619

Net (income) loss attributable to noncontrolling interests
(225
)
 
19

 
(206
)
Net income (loss) attributable to NorthStar Realty Europe Corp. common stockholders
$
37,138

 
$
(2,725
)
 
$
34,413

Earnings (loss) per share (Note 3):
 
 
 
 
 
Basic
$
0.70

 
 
 
$
0.65

Diluted
$
0.68

 
 
 
$
0.63

Weighted average number of shares:
 
 
 
 
 
Basic
52,125,685

 
 
 
52,125,685

Diluted
53,960,553

 
 
 
53,960,553















Refer to accompanying notes to unaudited pro forma condensed consolidated financial statements.





NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31, 2017
(Dollars in Thousands, Except Per Share Data)
 
As Reported (Unaudited)
 
Trianon Sale Adjustments
(Note 2)
 
Pro Forma
Revenues
 
 
 
 
 
Rental income
$
105,349

 
$
(27,890
)
 
$
77,459

Escalation income
21,625

 
(6,377
)
 
15,248

Interest income
1,706

 
413

 
2,119

Other income
1,243

 
(234
)
 
1,009

Total revenues
129,923

 
(34,088
)
 
95,835

Expenses
 
 
 
 

Properties - operating expenses
31,119

 
(10,375
)
 
20,744

Interest expense
25,844

 
(5,237
)
 
20,607

Transaction costs
6,117

 
—

 
6,117

Management fee, related party
14,408

 
—

 
14,408

Other expenses
9,251

 
(1,197
)
 
8,054

General and administrative expenses
7,384

 
(116
)
 
7,268

Compensation expense
23,768

 
—

 
23,768

Depreciation and amortization
54,014

 
(16,962
)
 
37,052

Total expenses
171,905

 
(33,887
)
 
138,018

Other income (loss)
 
 
 
 
—

Other gain (loss), net
(12,863
)
 
1,411

 
(11,452
)
Realized gain on sales, net
22,367

 
—

 
22,367

Income (loss) before income tax benefit (expense)
(32,478
)

1,210

 
(31,268
)
Income tax benefit (expense)
2,145

 
(750
)
 
1,395

Net income (loss)
(30,333
)

460

 
(29,873
)
Net (income) loss attributable to noncontrolling interests
(792
)
 
(1
)
 
(793
)
Net income (loss) attributable to NorthStar Realty Europe Corp. common stockholders
$
(31,125
)

$
459

 
$
(30,666
)
Earnings (loss) per share (Note 3):
 
 
 
 
 
Basic
$
(0.57
)
 
 
 
$
(0.54
)
Diluted
$
(0.57
)
 
 
 
$
(0.53
)
Weighted average number of shares:
 
 
 
 
 
Basic
55,073,383

 
 
 
55,073,383

Diluted
55,599,222

 
 
 
55,599,222















Refer to accompanying notes to unaudited pro forma condensed consolidated financial statements.





NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The unaudited pro forma condensed consolidated balance sheet as of September 30, 2018 is presented as if the Trianon disposition had been completed on September 30, 2018. The unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 2018 and for the year ended December 31, 2017 reflect adjustments related to the Trianon disposition as if the transaction had been completed on January 1, 2017, the beginning of the earliest period presented.
The unaudited pro forma condensed consolidated financial statements have been prepared in accordance with Article 11 of Regulation S-X and, in the opinion of management, reflect all necessary adjustments that are: (i) directly attributable to the transactions; (ii) factually supportable; and (iii) with respect to the unaudited pro forma condensed consolidated statements of operations, expected to have a continuing impact on the results of the Company.
2. Trianon Disposition
Trianon disposition adjustments (based on the September 30, 2018 applicable exchange rate) to the unaudited pro forma condensed consolidated balance sheet at September 30, 2018 reflect adjustments to:
•
Exclude the balance sheet of the Trianon Tower
•
Cash received from the sale of $363 million representing the sale price after repayment of mortgage financing and associated prepayment penalties ($384 million), the Preferred Equity Certificates and payment of transaction costs
•
Retained a $6 million equity interest in Symbol Holdco C-T S.à. r.l in the form of preferred equity certificates with a 7% yield (the "Preferred Equity Certificates")
•
The reclassification of the currency translation adjustment ("CTA") from a component of accumulated other comprehensive income ("OCI")
Trianon disposition adjustments to the unaudited pro forma condensed consolidated statement of operations for the nine months ended September 30, 2018 and the year ended December 31, 2017 reflect adjustments to exclude the results of operations of Trianon, including amounts allocated to redeemable noncontrolling interests and noncontrolling interests in the Operating Company and include the interest income earned on the 7% yield on the Preferred Equity Certificates. The adjustment to other gain (loss), net reflects the adjustment to eliminate the gain on the non-cash change in fair value related to the interest rate caps for the periods presented.
3. Pro Forma Earnings Per Share
The following table presents pro forma basic and diluted loss per share after giving effect to the pro forma adjustments to the unaudited consolidated statements of operations (dollars and shares in thousands, except per share data):
 
Nine Months Ended September 30, 2018
 
Year Ended December 31, 2017
Numerator:
 
 
 
Net income (loss)
$
34,619

 
$
(29,873
)
Net (income) loss attributable to Unit Holders noncontrolling interest
(206
)
 
372

Net income (loss) attributable to common stockholders and Unit Holders
$
34,413

 
$
(29,501
)
Net (income) allocated to participating securities
(412
)
 
—

Net income (loss) allocated to common stockholders—basic and dilutive
$
34,001

 
$
(29,501
)
Denominator:
 
 
 
Weighted average shares of common stock - basic
52,126

 
55,073

Weighted average effect of dilutive shares
1,835

 
526

Weighted average shares of common stock - dilutive
53,961

 
55,599

Earnings (loss) per share:
 
 
 
Basic
$
0.65

 
$
(0.54
)
Diluted
$
0.63

 
$
(0.53
)




NorthStar Realty Europe Corp. Reports