NEW YORK, May 10, 2018
/PRNewswire/ -- NorthStar Realty Europe Corp. (NYSE: NRE)
("NorthStar Realty Europe" or "NRE"), a European office REIT, today
announced its results for the first quarter
ended March 31, 2018.
First Quarter 2018 Highlights
- U.S. GAAP net loss to common stockholders: $(1.3) million, or $(0.02) per diluted share for the first quarter
2018. U.S. GAAP total equity was $621.2
million, or $11.31 per diluted
share as of March 31, 2018
- Cash available for distribution ("CAD"): $12.7 million, or $0.23 per share, for the three months ended
March 31, 2018
- EPRA1 net asset value ("NAV"): $20.50 per share as of March 31, 2018
- Same store year-over-year net operating income ("NOI")
increased by $1.5 million, or 6.3%,
and same store quarter-over-quarter NOI increased by $1.4 million, or 5.8%
- In March 2018, NRE repurchased
1.1 million shares of common stock for approximately $13.4 million. Subsequent to the first quarter,
through May 7, 2018, NRE repurchased an additional 2.4 million
shares of common stock for approximately $32.9 million
- Subsequent to the first quarter, NRE completed its exit from
the Netherlands with the disposal
of the Maastoren tower releasing approximately $60 million of net proceeds
- Cash dividend of $0.15 per share declared for the
first quarter 2018
First Quarter 2018 Financial Results
During the first
quarter 2018, U.S. GAAP net loss attributable to common
stockholders was $(1.3) million,
Adjusted EBITDA was $18.1 million and
CAD was $12.7 million. NOI was
$27.0 million and same store NOI was
$26.1 million during the first
quarter 2018. For more information and a reconciliation of Adjusted
EBITDA, CAD, NOI and same store NOI to net income (loss)
attributable to common stockholders, please refer to the tables on
the following pages.
Mahbod Nia, Chief Executive
Officer and President, commented, "We are pleased to announce
another successful period during which we increased same store NOI,
continued to make progress with our expense saving initiatives, and
exited the Netherlands. In
addition, we have made significant progress with the share
repurchase program taking advantage of the current trading discount
to underlying net asset value."
Portfolio Overview
$2.4
billion portfolio market value2 ("Portfolio
Market Value") comprising $2.3
billion real estate portfolio value based on the 2017
independent year-end valuation by Cushman & Wakefield LLP and a
$37 million preferred equity
investment.
Real Estate Portfolio Leasing Activity3,4
As of
March 31, 2018, NRE's real estate portfolio included 25
properties located across five European countries with
approximately 323,000 rentable square meters, 85% weighted average
occupancy and a 6.2 year weighted average remaining lease term to
expiry ("WALT").
- The office portfolio is comprised of 20 properties with 246,000
rentable square meters, has a 95% weighted average occupancy and a
6.3 year WALT as of March 31, 2018.
- The non-office portfolio, which represented 2% of the
first quarter 2018 portfolio NOI, includes 5 properties with
77,000 rentable square meters (including a 59,000 rentable square
meters logistics asset), has a 55% weighted average occupancy (87%
excluding the logistics asset) and a 5.4 year WALT as of
March 31, 2018.
Same Store Net Operating Income (Currency Adjusted)
In the first quarter 2018, same store sequential
quarter-over-quarter rental income increased by $0.2 million, or 0.7%, driven by the commencement
of new leases with Deutsche Bundesbank in the Trianon Tower,
partially offset by temporary vacancy in Uhlandstrasse, for which
we have secured a tenant from the second quarter 2018. In the first
quarter 2018, same store sequential quarter-over-quarter NOI
increased by $1.4 million, or 5.8%.
Properties - operating expenses in the fourth quarter 2017 included
$0.9 million straight line expense
related to Portman Square.
Same store portfolio year-over-year rental income for the three
months ended March 31, 2018 increased by $0.2 million, or 0.6% as the first quarter of
2017 preceded the value enhancing lease extensions in the Maastoren
tower. Same store year-over-year NOI increased by $1.5 million (6.3%), or $2.1 million (9.8%) excluding the Maastoren
tower.
Dispositions
As of March 31, 2018, two properties were classified as held
for sale - Office 123 located in Portugal and the Maastoren tower located in
the Netherlands.
On April 30, 2018, NRE completed
the sale of the Maastoren tower, NRE's largest remaining non-core
asset by value, for approximately $195
million, in line with the year end 2017 independent year-end
valuation by Cushman & Wakefield LLP and a 20% premium to the
valuation preceding lease extensions completed in the second half
of 2017. NRE released approximately $60
million of net equity after repayment of financing
(including release premium) and transaction costs.
Liquidity and Financing
As of March 31, 2018,
leverage5 was 53% based on the Portfolio Market Value.
As of May 7, 2018, total liquidity was $150 million, comprised of $80 million of unrestricted cash and $70 million of availability under NRE's revolving
credit facility. The following table presents our liquidity
position as of May 7, 2018 (dollars in millions):
|
$ in
millions
|
Unrestricted
cash
|
$
|
80
|
Revolving credit
facility
|
70
|
Total
liquidity
|
$
|
150
|
In March 2018, NRE amended its
revolving credit facility with Bank of America Merrill Lynch
through a new commitment provided by Deutsche Bank AG New York,
increasing the size to $70 million
and extending the term until April
2020 with a one year extension option. The facility includes
an accordion feature, providing the ability to increase the
facility to $105 million.
Stockholder's Equity
NRE had 54.9 million shares
of common stock, operating partnership units and restricted stock
units ("RSUs") not subject to performance hurdles outstanding as of
March 31, 2018. As of May 7, 2018, NRE had 52.5 million
shares of common stock, operating partnership units and restricted
stock units ("RSUs") not subject to performance hurdles
outstanding.
As of March 31, 2018, total equity was $621 million (U.S. GAAP depreciated value), or
$11.31 per diluted share. EPRA NAV
was $20.50 per diluted share as of
March 31, 2018, based on the Portfolio Market Value compared
to $19.85 per diluted share as of
December 31, 2017. For more
information and a reconciliation of EPRA NAV to total equity,
please refer to the tables on the following pages.
Share Repurchase Program
On March 12, 2018, the board of
directors of NRE authorized the repurchase of up to $100 million of NRE's outstanding common
stock.
In March 2018, NRE repurchased 1.1
million shares of common stock for approximately $13.4 million at a weighted average price of
$12.70 per share. For the year
through May 7, 2018, NRE repurchased a total of 3.4 million
shares of common stock for approximately $46.3 million at an average price of $13.47 per share.
First Quarter 2018 Disclosure Supplement
Presentation
A first quarter 2018 disclosure supplement
presentation will be posted on NRE's website,
www.nrecorp.com, which provides additional details
regarding NRE's operations and portfolio.
First Quarter 2018 Conference Call
NRE will conduct a
conference call to discuss the results on Thursday, May 10, 2018 at 9:00 a.m. ET. Hosting the call will be
Mahbod Nia, Chief Executive Officer,
Keith Feldman, Chief Financial
Officer and Trevor Ross, General
Counsel.
To participate in the event by telephone, please dial +1 866 966
5335 (U.S. Toll Free), or +44 (0) 20 3003 2666 (International) or
0808 109 0700 (U.K. Toll Free), using passcode: NorthStar.
The call will also be broadcast live over the internet and can
be accessed from NRE's website at www.nrecorp.com. For those unable
to participate during the live call, a replay of the call will be
available approximately two hours after the call through
May 29, 2018 by dialing +1 866 583
1039 (U.S. Toll Free), or +44 (0) 20 8196 1998 (International) or
0800 633 8453 (UK Toll Free), using passcode: 6377687.
About NorthStar Realty Europe Corp.
NorthStar
Realty Europe Corp. is a European focused commercial real estate
company with predominately prime office properties within key
cities in Germany, the
United Kingdom and France, organized as a REIT and managed by an
affiliate of Colony NorthStar, Inc. (NYSE: CLNS), a leading global
equity REIT with an embedded investment management platform. For
more information about NorthStar Realty Europe Corp., please visit
www.nrecorp.com.
NorthStar Realty
Europe Corp.
Consolidated Balance Sheets
($ in thousands, except per share
data) Unaudited
|
|
|
|
|
March 31,
2018
|
|
December 31,
2017
|
Assets
|
|
|
|
Operating real
estate, gross
|
$
|
1,658,623
|
|
|
$
|
1,606,890
|
|
Less: accumulated
depreciation
|
(107,538)
|
|
|
(95,356)
|
|
Operating real
estate, net
|
1,551,085
|
|
|
1,511,534
|
|
Preferred equity
investments
|
36,770
|
|
|
35,347
|
|
Cash and cash
equivalents
|
50,204
|
|
|
64,665
|
|
Restricted
cash
|
8,470
|
|
|
6,917
|
|
Receivables, net of
allowance of $673 and $747 as of March 31, 2018 and
December 31, 2017, respectively
|
6,093
|
|
|
9,048
|
|
Assets held for
sale
|
176,088
|
|
|
169,082
|
|
Derivative assets, at
fair value
|
7,100
|
|
|
7,024
|
|
Intangible assets,
net
|
114,558
|
|
|
114,185
|
|
Other assets,
net
|
29,296
|
|
|
23,115
|
|
Total
assets
|
$
|
1,979,664
|
|
|
$
|
1,940,917
|
|
Liabilities
|
|
|
|
Mortgage and other
notes payable, net
|
$
|
1,262,115
|
|
|
$
|
1,223,443
|
|
Accounts payable and
accrued expenses
|
24,584
|
|
|
27,240
|
|
Due to related
party
|
4,436
|
|
|
3,590
|
|
Derivative
liabilities, at fair value
|
6,342
|
|
|
5,270
|
|
Intangible
liabilities, net
|
28,677
|
|
|
28,632
|
|
Liabilities related
to assets held for sale
|
1,022
|
|
|
648
|
|
Other
liabilities
|
29,261
|
|
|
25,757
|
|
Total
liabilities
|
1,356,437
|
|
|
1,314,580
|
|
Commitments and
contingencies
|
|
|
|
Redeemable non
controlling interest
|
2,049
|
|
|
1,992
|
|
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 March 31, 2018 and December 31,
2017
|
—
|
|
|
—
|
|
Common stock, $0.01
par value, 1,000,000,000 shares authorized, 54,572,348 and
55,402,259
shares issued and outstanding as of March 31, 2018 and December 31,
2017, respectively
|
546
|
|
|
555
|
|
Additional paid-in
capital
|
927,836
|
|
|
940,579
|
|
Retained earnings
(accumulated deficit)
|
(356,666)
|
|
|
(347,053)
|
|
Accumulated other
comprehensive income (loss)
|
45,489
|
|
|
25,618
|
|
Total NorthStar
Realty Europe Corp. stockholders' equity
|
617,205
|
|
|
619,699
|
|
Non-controlling
interests
|
3,973
|
|
|
4,646
|
|
Total
equity
|
621,178
|
|
|
624,345
|
|
Total liabilities,
redeemable non controlling interest and equity
|
$
|
1,979,664
|
|
|
$
|
1,940,917
|
|
NorthStar Realty
Europe Corp.
Consolidated Statements of Operations
($ in thousands, except for per share
data) Unaudited
|
|
|
Three Months Ended
March 31,
|
|
2018
|
|
2017
|
Revenues
|
|
|
|
Rental
income
|
$
|
27,224
|
|
|
$
|
25,536
|
|
Escalation
income
|
5,341
|
|
|
5,161
|
|
Interest
income
|
729
|
|
|
—
|
|
Other
income
|
278
|
|
|
29
|
|
Total
revenues
|
33,572
|
|
|
30,726
|
|
Expenses
|
|
|
|
Properties -
operating expenses
|
6,802
|
|
|
7,322
|
|
Interest
expense
|
6,107
|
|
|
6,383
|
|
Transaction
costs
|
481
|
|
|
260
|
|
Management fee,
related party
|
4,157
|
|
|
3,559
|
|
Other
expenses
|
1,424
|
|
|
2,000
|
|
General and
administrative expenses
|
1,878
|
|
|
2,597
|
|
Compensation
expense
|
573
|
|
|
15,870
|
|
Depreciation and
amortization
|
11,651
|
|
|
12,563
|
|
Total
expenses
|
33,073
|
|
|
50,554
|
|
Other income
(loss)
|
|
|
|
Unrealized gain
(loss) on derivatives and other
|
(1,189)
|
|
|
(941)
|
|
Realized gain (loss)
on sales and other
|
(548)
|
|
|
4,970
|
|
Income (loss)
before income tax benefit (expense)
|
(1,238)
|
|
|
(15,799)
|
|
Income tax benefit
(expense)
|
(39)
|
|
|
273
|
|
Net income
(loss)
|
(1,277)
|
|
|
(15,526)
|
|
Net (income) loss
attributable to non controlling interests
|
(4)
|
|
|
176
|
|
Net income (loss)
attributable to NorthStar Realty Europe
Corp. common stockholders
|
$
|
(1,281)
|
|
|
$
|
(15,350)
|
|
Earnings (loss)
per share:
|
|
|
|
Basic
|
$
|
(0.02)
|
|
|
$
|
(0.28)
|
|
Diluted
|
$
|
(0.02)
|
|
|
$
|
(0.28)
|
|
Weighted average
number of shares:
|
|
|
|
Basic
|
55,192,762
|
|
|
54,832,136
|
|
Diluted
|
55,603,500
|
|
|
55,504,981
|
|
Dividends per
share of common stock
|
$
|
0.15
|
|
|
$
|
0.15
|
|
Non-GAAP Financial Measures
Included in this
press release are Cash Available for Distribution, or CAD, net
operating income, or NOI, same store net operating income, or same
store NOI, Adjusted Earnings before Interest, Taxes, Depreciation
and Amortization, or Adjusted EBITDA and EPRA net asset value, or
EPRA NAV, each a "non-GAAP financial measure," which
measures NRE's historical or future financial performance
that is different from measures calculated and presented in
accordance with accounting principles generally accepted
in the United States, or U.S.
GAAP, within the meaning of the applicable Securities and
Exchange Commission, or SEC, rules. NRE believes
these metrics can be a useful measure of its performance which is
further defined below.
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, new leases, 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 the settlement on foreign currency derivatives);
impairment on depreciable property; acquisition gains or losses;
transaction costs; foreign currency gains (losses) related to
sales; impairment on goodwill and other intangible assets; the
incentive fee relating to the Amended and Restated Management
Agreement6 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.
The following table presents a reconciliation of net income
(loss) attributable to common stockholders to CAD for the three
months ended March 31, 2018 and 2017 (dollars in
thousands):
|
Three Months Ended
March 31,
|
|
2018
|
|
2017
|
Net income (loss)
attributable to common
stockholders
|
$
|
(1,281)
|
|
$
|
(15,350)
|
Non-controlling
interests
|
4
|
|
(176)
|
|
Adjustments:
|
Depreciation and
amortization items(1)(2)
|
13,160
|
|
29,571
|
Unrealized (gain)
loss on derivatives and other
|
1,189
|
|
941
|
Realized (gain) loss
on sales and other(3)(4)
|
(868)
|
|
(4,153)
|
Transaction costs and
other(5)(6)
|
481
|
|
1,175
|
CAD
|
$
|
12,685
|
|
$
|
12,008
|
CAD per
share(7)
|
$
|
0.23
|
|
$
|
0.22
|
(1) Three months ended March 31, 2018 represents an
adjustment to exclude depreciation and amortization of $11.7 million, amortization expense of
capitalized above/below market leases of $0.2 million, amortization of deferred financing
costs of $0.7 million and
amortization of equity-based compensation of $0.6 million.
(2) Three months ended March 31, 2017 represents an
adjustment to exclude depreciation and amortization of $12.6 million, amortization of above/below market
leases of $0.3 million, amortization
of deferred financing costs of $0.9
million and amortization of equity-based compensation of
$15.9 million.
(3) Three months ended March 31, 2018 CAD includes a $1.4
million net loss related to the settlement of foreign
currency derivatives.
(4) Three months ended March 31,
2017 CAD includes a $0.8
million net gain related to the settlement of foreign
currency derivatives.
(5) Three months ended March 31, 2018 represents an
adjustment to exclude $0.5 million of
transaction costs.
(6) Three months ended March 31, 2017 represents an
adjustment to exclude $0.3 million of
transaction costs and $0.9 million of
payroll taxes associated with the acceleration of equity awards due
to the tri-party merger completed on January
10, 2017.
(7) CAD per share is based on 55.8 million weighted average
shares (common shares outstanding including operating partnership
units and RSUs not subject to performance hurdles) for the the
three months ended March 31, 2018. Based on 55.7 million
weighted average shares (common shares outstanding, including LTIPs
and RSUs not subject to performance hurdles) for the three months
ended March 31, 2017. CAD per share
does not take into account any potential dilution from restricted
stock units subject to performance metrics not currently
achieved.
Net Operating Income
We believe NOI is a useful metric for evaluating 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, 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.
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
months ended March 31, 2018 and 2017 (dollars in
thousands):
|
Three Months Ended
March 31,
|
|
2018
|
|
2017
|
Rental
income
|
$
|
27,224
|
$
|
25,536
|
Escalation
income
|
5,341
|
5,161
|
Other
income
|
278
|
|
29
|
Total property and
other income
|
32,843
|
|
30,726
|
Properties -
operating expenses
|
6,802
|
|
7,322
|
Adjustments:
|
Interest
income
|
729
|
|
—
|
Amortization and
other items(1)(2)
|
220
|
|
280
|
NOI(3)
|
$
|
26,990
|
|
$
|
23,684
|
(1) Three months ended March 31, 2018 primarily
excludes $0.2 million of amortization
of above/below market leases.
(2) Three months ended March 31, 2017 primarily
excludes $0.3 million of amortization
of above/below market leases.
(3) The following table presents a reconciliation of net
income (loss) to NOI of our real estate equity segment for the
three months ended March 31, 2018 and
2017 (dollars in thousands):
|
Three Months Ended
March 31,
|
|
2018
|
|
2017
|
Net income
(loss)
|
$
|
(1,277)
|
|
$
|
(15,526)
|
Remaining
segments(i)
|
9,737
|
|
22,844
|
Real estate equity
and preferred equity segment adjustments:
|
|
|
|
Interest
expense
|
5,955
|
|
6,119
|
Other
expenses
|
1,424
|
|
2,000
|
Depreciation and
amortization
|
11,651
|
|
12,563
|
Unrealized (gain)
loss on derivatives and other
|
117
|
|
(331)
|
Realized (gain) loss
on sales and other
|
(1,214)
|
|
(4,156)
|
Income tax (benefit)
expense
|
39
|
|
(273)
|
Other
items
|
558
|
|
444
|
Total
adjustments
|
18,530
|
|
16,366
|
NOI
|
$
|
26,990
|
|
$
|
23,684
|
(i) Represents the net (income) loss in our corporate segment to
reconcile to net operating income.
Same store Net Operating Income
We believe same store NOI is a useful metric for evaluating the
operating performance as it reflects the operating performance of
the real estate portfolio 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 at
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 NOI to be an appropriate and useful supplemental performance
measure. Same store 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 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. Same
store portfolio is defined as properties in operation throughout
the full periods presented under the comparison, excluding the
impact of foreign currency changes, and included 25 properties.
The following table presents our same store analysis for the
real estate equity segment which represents 25 properties (323,458
rentable square meters) and excludes properties that were acquired
or sold at any time during the three months ended March 31,
2018 and December 31, 2017 (dollars
in thousands):
|
Three Months
Ended
|
|
Increase
(Decrease)
|
|
March 31,
2018
|
|
December 31,
2017(1)
|
|
Amount
|
%
|
Occupancy (end of
period)
|
85.5%
|
|
|
86.1%
|
|
|
|
|
Same
store
|
|
|
|
|
|
|
Rental
income(2)
|
$
|
27,360
|
|
|
$
|
27,176
|
|
|
$
|
184
|
|
0.7%
|
Escalation
income
|
5,243
|
|
|
5,372
|
|
|
(129)
|
|
|
Other
income
|
242
|
|
|
555
|
|
|
(313)
|
|
|
Total
revenues
|
32,845
|
|
|
33,103
|
|
|
(258)
|
|
(0.8)%
|
Utilities
|
1,467
|
|
|
1,657
|
|
|
(190)
|
|
|
Real estate taxes and
insurance
|
1,317
|
|
|
1,263
|
|
|
54
|
|
|
Management
fees
|
534
|
|
|
536
|
|
|
(2)
|
|
|
Repairs and
maintenance
|
2,454
|
|
|
2,567
|
|
|
(113)
|
|
|
Other(2)(3)
|
943
|
|
|
2,392
|
|
|
(1,449)
|
|
Properties -
operating expenses
|
6,715
|
|
|
8,415
|
|
|
(1,700)
|
|
(20.2)%
|
Same store
NOI
|
$
|
26,130
|
|
|
$
|
24,688
|
|
|
$
|
1,442
|
|
5.8%
|
Same store NOI
excl. Maastoren
|
$
|
23,558
|
|
|
$
|
22,233
|
|
|
$
|
1,325
|
|
6.0%
|
(1) Three months ended December 31,
2017 is translated using the average exchange rate for the
three months ended March 31, 2018.
(2) Adjusted to exclude amortization of above/below market
leases.
(3) Includes bad debt expense, ground rent, administrative
costs and other non-reimbursable expenses.
The following table presents a reconciliation of net income
(loss) to same store NOI for the three months ended March 31,
2018 and December 31, 2017 (dollars
in thousands):
|
Same Store
Reconciliation
|
|
|
Three Months
Ended
|
|
|
March 31,
2018
|
|
December 31,
2017
|
|
Net income
(loss)
|
$
|
(1,277)
|
|
$
|
2,537
|
|
Corporate segment net
(income) loss(1)
|
9,737
|
|
13,917
|
|
Other (income)
loss(2)
|
18,530
|
|
8,416
|
|
NOI
|
26,990
|
|
24,870
|
|
Sale of real estate
investments and other(3)
|
(131)
|
|
523
|
(5)
|
Interest
income(4)
|
(729)
|
|
(705)
|
|
Same store
NOI
|
$
|
26,130
|
|
$
|
24,688
|
|
__________________
(1) Includes management fees, general and administrative
expense, compensation expense, corporate interest expense and
corporate transaction costs.
(2) Includes depreciation and amortization expense,
transaction costs, unrealized loss on interest rate caps, and other
expenses in the real estate equity segment.
(3) Represents the impact of sold assets.
(4) Represents interest income earned in the preferred equity
segment.
(5) Three months ended December 31,
2017 is translated using the average exchange rate for the
three months ended March 31, 2018.
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 ended
March 31, 2018 and 2017 (dollars in thousands):
|
Three Months Ended
March 31,
|
|
Increase
(Decrease)
|
|
2018
|
|
2017(1)
|
|
Amount
|
|
%
|
Occupancy (end of
period)
|
|
85.5%
|
|
83.2%
|
|
|
|
|
Same
store
|
|
|
|
|
|
|
|
Rental
income(2)
|
$
|
27,360
|
|
$
|
27,197
|
|
$
|
163
|
|
0.6%
|
Escalation
income
|
5,243
|
|
4,838
|
|
405
|
|
|
Other
income
|
242
|
|
29
|
|
213
|
|
|
Total
revenues
|
32,845
|
|
32,064
|
|
781
|
|
2.4%
|
Utilities
|
1,467
|
|
1,675
|
|
(208)
|
|
|
Real estate taxes and
insurance
|
1,317
|
|
1,327
|
|
(10)
|
|
|
Management
fees
|
534
|
|
534
|
|
—
|
|
|
Repairs and
maintenance
|
2,454
|
|
2,532
|
|
(78)
|
|
|
Other(2)(3)
|
943
|
|
1,415
|
|
(472)
|
|
|
Properties -
operating expenses
|
6,715
|
|
7,483
|
|
(768)
|
|
(10.3)%
|
Same store
NOI
|
$
|
26,130
|
|
$
|
24,581
|
|
$
|
1,549
|
|
6.3%
|
Same store NOI
excl. Maastoren
|
$
|
23,558
|
|
$
|
21,459
|
|
$
|
2,099
|
|
9.8%
|
(1) Three months ended March 31,
2017 is translated using the average exchange rate for the
three months ended March 31, 2018.
(2) Adjusted to exclude amortization of above/below market
leases.
(3) Includes bad debt expense, ground rent, administrative
costs and other non-reimbursable expenses.
The following table presents a reconciliation of net income
(loss) to same store NOI for the three months ended March 31,
2018 and 2017 (dollars in thousands):
|
Same Store
Reconciliation
|
|
|
Three Months Ended
March 31,
|
|
|
2018
|
2017
|
|
Net income
(loss)
|
$
|
(1,277)
|
|
$
|
(15,526)
|
|
Corporate segment net
(income) loss(1)
|
9,737
|
|
22,844
|
|
Other (income)
loss(2)
|
18,530
|
|
16,366
|
|
NOI
|
26,990
|
|
23,684
|
|
Sale of real estate
investments and other(3)
|
(131)
|
|
897
|
(5)
|
Interest
income(4)
|
(729)
|
|
|
—
|
|
Same store
NOI
|
$
|
26,130
|
|
$
|
|
24,581
|
|
(1) Includes management fees, general and administrative
expense, compensation expense, corporate interest expense and
corporate transaction costs.
(2) Includes depreciation and amortization expense,
transaction costs, unrealized loss on interest rate caps, and other
expenses in the real estate equity segment.
(3) Represents the impact of sold assets.
(4) Represents interest income earned in the preferred equity
segment.
(5) Three months ended March 31,
2017 is translated using the average exchange rate for the
three months ended March 31, 2018.
Adjusted EBITDA
We believe that Adjusted EBITDA provides investors and
management with a meaningful indication of operating performance.
We also believe that Adjusted EBITDA is useful because it adjusts
for a variety of items that are consistent with presenting a
measure of operating performance (such as depreciation and
amortization items, interest expense, income tax benefit (expense),
realized gain (loss) on investments, transaction costs,
equity-based compensation and asset impairment). The definition of
Adjusted EBITDA may be adjusted from time to time for our reporting
purposes in our discretion, acting through our audit committee or
otherwise. Adjusted EBITDA 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, changes in the expected yield of investments and
the overall conditions in commercial real estate and the economy
generally.
We calculate Adjusted EBITDA 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 and equity-based compensation; interest
expense; income tax (benefit) expense; unrealized gain (loss) on
derivatives and other; realized gain (loss) on investments and
other (excluding any realized gain (loss) on foreign currency
derivatives); impairment on depreciable property; acquisition gains
or losses; transaction costs; foreign currency gains (losses)
related to sales; impairment on goodwill and any other intangible
assets; the incentive fee relating to the Amended and Restated
Management Agreement 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.
Adjusted EBITDA 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 Adjusted
EBITDA 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.
The following table presents a reconciliation of net income
(loss) attributable to common stockholders to Adjusted EBITDA for
the three months ended March 31,
2018, December 31, 2017 and
March 31, 2017 (dollars in
thousands):
|
Three Months
Ended
|
|
March 31,
2018
|
|
December 31,
2017
|
|
March 31,
2017
|
Net income (loss)
attributable to common stockholders
|
$
|
(1,281)
|
|
|
$
|
1,442
|
|
|
$
|
(15,350)
|
|
Non-controlling
interests
|
4
|
|
|
1,095
|
|
|
(176)
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
Depreciation and
amortization items(1)(2)(3)
|
12,444
|
|
|
19,129
|
|
|
28,714
|
|
Income tax (benefit)
expense
|
39
|
|
|
(2,461)
|
|
|
(273)
|
|
Interest
expense
|
6,107
|
|
|
6,203
|
|
|
6,383
|
|
Unrealized (gain)
loss on derivatives and other
|
1,189
|
|
|
795
|
|
|
941
|
|
Realized (gain) loss
on sales and other(4)(5)(6)
|
(868)
|
|
|
(14,444)
|
|
|
(4,153)
|
|
Transaction costs and
other(7)(8)(9)
|
481
|
|
|
4,552
|
|
|
1,175
|
|
Adjusted
EBITDA
|
$
|
18,115
|
|
|
$
|
16,311
|
|
|
$
|
17,261
|
|
(1) Three months ended March 31, 2018 represents an
adjustment to exclude depreciation and amortization of $11.7 million, amortization expense of
capitalized above/below market leases of $0.2 million and amortization of equity-based
compensation of $0.6 million.
(2) Three months ended December 31, 2017 represents an
adjustment to exclude depreciation and amortization of $14.5 million, amortization expense of
capitalized above/below market leases of $0.9 million and amortization of equity-based
compensation of $3.7 million.
(3) Three months ended March 31, 2017 represents an
adjustment to exclude depreciation and amortization of $12.6 million, amortization of above/below market
leases of $0.3 million and
amortization of equity-based compensation of $15.9 million.
(4) Three months ended March 31, 2018 Adjusted EBITDA
includes a $1.4 million net loss
related to the settlement of foreign currency derivatives.
(5) Three months ended December 31, 2017 Adjusted EBITDA
includes a $0.7 million net loss
related to the settlement of foreign currency derivatives.
(6) Three months ended March 31,
2017 Adjusted EBITDA includes a $0.8
million net gain related to the settlement of foreign
currency derivatives.
(7) Three months ended March 31, 2018 represents an
adjustment to exclude $0.5 million of
transaction costs.
(8) Three months ended December 31, 2017 represents an
adjustment to exclude $4.6 million of
transaction costs.
(9) Three months ended March 31, 2017 represents an
adjustment to exclude $0.3 million of
transaction costs and $0.9 million of
payroll taxes associated with the acceleration of equity awards due
to the tri-party merger completed on January
10, 2017.
EPRA Net Asset Value (EPRA NAV)
As our entire portfolio is based in Europe, our management calculates European
Public Real Estate Association net asset value, or EPRA NAV, a
non-GAAP measure, to compare our balance sheet to other European
real estate companies and believes that disclosing EPRA NAV
provides investors with a meaningful measure of our net asset
value. Our calculation of EPRA NAV is derived from our U.S. GAAP
balance sheet with adjustments reflecting our interpretation of
EPRA's best practices recommendations. Accordingly, our calculation
of EPRA NAV may be different from how other European real estate
companies calculate EPRA NAV, which utilize International Financial
Reporting Standards ("IFRS") to prepare their balance sheet. EPRA
NAV makes adjustments to net assets as determined in accordance
with U.S. GAAP in order to provide our stockholders a measure of
fair value of our assets and liabilities with a long-term
investment strategy. This performance measure excludes assets and
liabilities that are not expected to materialize in normal
circumstances. EPRA NAV includes the revaluation of investment
properties and excludes the fair value of financial instruments
that we intend to hold to maturity, deferred tax and goodwill that
resulted from deferred tax. All other assets, including real
property and investments reported at cost are adjusted to fair
value based upon an independent third party valuation conducted in
December and June of each year. This measure should not be
considered as an alternative to measuring our net assets in
accordance with U.S. GAAP.
The following table presents a reconciliation of total equity to
EPRA NAV as at March 31, 2018 (dollars in thousands, other
than per share data):
|
March 31,
2018
|
Total
Equity
|
$
|
621,178
|
|
Adjustments
|
|
Operating real estate
and net intangibles
|
(1,817,134)
|
|
Fair value of
properties
|
2,329,225
|
|
Adjusted
NAV
|
1,133,269
|
|
|
|
Diluted NAV, after
the exercise of options, convertibles and other equity
interests
|
1,132,914
|
|
Fair value of
financial instruments
|
(7,100)
|
|
EPRA
NAV
|
1,125,814
|
|
EPRA NAV per
diluted share(1)
|
$
|
20.50
|
|
(1) Based on 54.9 million common shares, operating
partnership units and RSUs not subject to performance hurdles
outstanding as of March 31, 2018. EPRA NAV per diluted share
does not take into account any potential dilution from restricted
stock units subject to performance metrics not currently
achieved.
Safe Harbor Statement
This press release 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, and Section 21E of the
Securities Exchange Act of 1934, as amended. 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," "hypothetical," "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, the timing and certainty with respect to
new lease commencements; the availability of future borrowings
under the revolving credit facility; the expected use of proceeds
from the sale of any properties; the ability to execute on NRE's
strategy; NRE's ability to maintain dividend payments, at current
levels, or at all, and the timing of dividend levels declared;
whether NRE will make repurchases of its common stock pursuant to
the stock repurchase program and the level or timing of any such
repurchases. Forward looking statements are necessarily speculative
in nature, and it can be expected that some or all of the
assumptions underlying any forward-looking statements will not
materialize or will vary significantly from actual results.
Variations of assumptions and results may be material. Factors that
could cause actual results to differ materially
from NRE's expectations include, but are not limited
to, NRE's liquidity and financial
flexibility; NRE's future cash available for
distribution; the pace and result of any asset disposals
contemplated by NRE; NRE's use of leverage; and the
anticipated strength and growth of NRE's business.
Factors that could cause actual results to differ materially from
those in the forward looking statements are specified
in NRE's annual report on Form 10-K for the year ended
December 31, 2017, and its other
filings with the Securities and Exchange Commission. Such
forward looking statements speak only as of the date of this press
release. NRE expressly disclaims any obligation to
release publicly any updates or revisions to any forward looking
statements contained herein to reflect any change in its
expectations with regard thereto or change in events, conditions or
circumstances on which any statement is based.
Disclaimer
As an opinion, the valuation by Cushman
& Wakefield LLP referenced in this release is not a measure of
realizable value and may not reflect the amount that would be
received if the property in question were sold. Real estate
valuation is inherently subjective due to, among other factors, the
individual nature of each property, its location, the expected
future rental revenues from that particular property and the
valuation methodology adopted. Real estate valuations are subject
to a large degree of uncertainty and are made on the basis of
assumptions and methodologies that may not prove to be accurate,
particularly in periods of volatility, low transaction flow or
restricted debt availability in the commercial or residential real
estate markets. For example, in the appraisal, a number of the
properties were valued using the special assumption that such
properties would be purchased through a tax-efficient special
purpose vehicle, and is therefore subject to lower purchaser
transaction expenses. If one or more assumptions are
incorrect, the value may be materially lower than the appraised
value.
Endnotes
- EPRA = European Public Real Estate Association.
- The external third-party valuation was prepared by Cushman
& Wakefield LLP in accordance with the current U.K. and Global
edition of the Royal Institution of Chartered Surveyors' (RICS)
Valuation - Professional Standards (the "Red Book") on the basis of
"Fair Value", which is widely recognized within Europe as the leading professional standards
for independent valuation professionals. Each property is
classified as an investment and has been valued on the basis of
Fair Value adopted by the International Accounting Standards Board.
This is the equivalent to the Red Book definition of Market Value.
The Red Book defines Market Value as the estimated amount for which
an asset or liability should exchange on the valuation date between
a willing buyer and a willing seller in an arm's-length transaction
after proper marketing where the parties had each acted
knowledgeably, prudently and without compulsion. The Cushman &
Wakefield LLP valuation assumes that certain properties would be
purchased through market accepted structures resulting in lower
purchaser transaction expenses (taxes, duties, and similar costs).
This Cushman & Wakefield LLP valuation is as of December 31, 2017 adjusted for currency movements
as of March 31, 2018. The
$2.4 billion Portfolio Market Value
comprises $2.3 billion real estate
portfolio value based on the independent valuation by Cushman &
Wakefield LLP and $37 million
preferred equity investment (please refer to Note 11, "Fair Value"
in the NRE Quarterly Report on Form 10-Q for the three months ended
March 31, 2018 included in Part I
Item 1. "Financial Statements").
- Excludes the preferred equity investment.
- Occupancy and weighted average remaining contractual lease term
based on rent roll as of March 31, 2018.
- Leverage is calculated as property level debt plus portfolio
level preferred equity divided by the Portfolio Market Value and
unrestricted cash net of any outstanding balance on the revolving
credit facility.
- Please see NRE's Annual Report on Form 10-K for the year ended
December 31, 2017 and the exhibits
thereto for additional details relating to the terms of the amended
and restated management agreement ("Amended and Restated Management
Agreement").
Investor Relations
Gordon
Simpson
Finsbury
+1 855 527 8539 or +44 (0) 207 2513801
nre@finsbury.com
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SOURCE NorthStar Realty Europe Corp.