NorthStar Asset Management Group Inc. (Form: 10-Q, Received: 08/10/2015 08:09:51)

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, 2015

Commission File Number: 001-36301

NORTHSTAR ASSET MANAGEMENT GROUP INC.

(Exact Name of Registrant as Specified in its Charter)



Delaware	46-4591526
(State or Other Jurisdiction of	(IRS Employer
Incorporation or Organization)	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 ý 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 ý No o

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



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

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

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, 193,711,077 shares outstanding and one class of performance common stock, $0.01 par value per share, 4,213,156 shares outstanding, each as of August 7, 2015 .

NORTHSTAR ASSET MANAGEMENT GROUP INC.

FORM 10-Q

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Index		Page
Part I.	Financial Information	5
Item 1.	Financial Statements	5
	Consolidated Balance Sheets as of June 30, 2015 (unaudited) and December 31, 2014	5
	Consolidated Statements of Operations (unaudited) for the three and six months ended June 30, 2015 and 2014	6
	Consolidated Statements of Equity for the six months ended June 30, 2015 (unaudited) and year ended December 31, 2014	7
	Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2015 and 2014	8
	Notes to Consolidated Financial Statements (unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	49
Item 4.	Controls and Procedures	50

Part II.	Other Information	50
Item 1.	Legal Proceedings	50
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51
Item 5.	Other Information	52
Item 6.	Exhibits	53

Signatures		55

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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 effects of our spin-off from NorthStar Realty Finance Corp., or NorthStar Realty, described in this Quarterly Report on Form 10-Q , our ability to effectively grow our business, our financing needs, the effects of our current asset management strategy, our management’s track record, our ability to manage credit risk and the assets of our Managed Companies (refer to our Financial Statements), our ability to source additional investment opportunities for our Managed Companies and our ability to obtain new Managed Companies and additional assets to manage. 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:


•	risks inherent in a recently spun-off company, including those related to operating as an independent public company, the capital resources required to protect against business risks, legal risks and risks associated with the tax and accounting treatment of a spin-off transaction;


•	our ability to realize our projected effective income tax rate;


•	adverse domestic or international economic conditions and the impact of the commercial real estate industry on our Managed Companies;


•	our ability to grow our business by raising capital for our existing Managed Companies and sponsoring new Managed Companies as well as our ability to otherwise continue to manage our Managed Companies in the future;


•	our ability to effectively implement the business plans of, and the performance of, our Managed Companies;


•	our ability to enter into, and grow our business through acquisitions, strategic investments and joint ventures;


•	our ability to realize the anticipated benefits of our strategic investments and joint ventures;


•	access to debt and equity capital and our liquidity;


•	our use of leverage;

•

changes in domestic or international laws or regulations governing various aspects of our business and our Managed Companies including the potential impact of rules recently proposed by the U.S. Department of Labor regarding fiduciary standards for brokers who are providing investment advice with respect to retirement plan assets and implementation of FINRA Rule 15-02 related to broker account statements;


•	the impact of any conflicts of interest arising from our asset management activities;


•	our ability to manage our costs in line with our expectations and the impact on our cash available for distribution;


•	competition for qualified personnel and our ability to retain key personnel;


•	the competitive nature of the asset management industry;


•	the effectiveness of our portfolio management techniques and strategies;


•	our ability to expand and successfully manage our operations internationally;


•	whether we repurchase any shares of our common stock and the terms of those repurchases, if any;


•	our ability to maintain our exclusion from the definition of an “investment company” under the Investment Company Act of 1940, as amended;


•	our ability to maintain effective disclosure and internal controls;


•	our historical financial information included in this Quarterly Report on Form 10-Q for periods prior to July 1, 2014 not providing an accurate indication of our performance in the future or reflecting what our financial position, results

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of operations or cash flows would have been had we operated as an independent public company during the periods presented; and


•	the effect of regulatory or tax actions, litigation and contractual claims against us, our affiliates or our Managed Companies, including the potential settlement and litigation of such claims.

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 United States Securities and Exchange Commission, or the SEC, included in Part I, Item 1A. of our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 under the heading “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.

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PART I. Financial Information

Item 1. Financial Statements

NORTHSTAR ASSET MANAGEMENT GROUP INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)



	June 30, 2015 (Unaudited)			December 31, 2014
Assets
Cash	$	100,652		$	109,199
Restricted cash	11,960			3,190
Receivables, related parties	90,141			77,626
Investments in unconsolidated ventures	90,720			54,480
Other assets	18,624			19,374
Total assets	$	312,097		$	263,869
Liabilities
Accounts payable and accrued expenses	$	55,403		$	49,116
Commission payable	5,367			12,164
Other liabilities	1,249			841
Total liabilities	62,019			62,121
Commitments and contingencies
Equity
NorthStar Asset Management Group Inc. Stockholders’ Equity
Performance common stock, $0.01 par value, 500,000,000 shares authorized, 4,213,156 and 3,738,314 shares issued and outstanding as of June 30, 2015 and December 31, 2014, respectively	42			37
Preferred stock, $0.01 par value, 100,000,000 shares authorized, no shares issued and outstanding as of June 30, 2015 and December 31, 2014	—			—
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 193,610,410 and 192,947,856 shares issued and outstanding as of June 30, 2015 and December 31, 2014, respectively	1,936			1,930
Additional paid-in capital	298,102			276,874
Retained earnings (accumulated deficit)	(56,626		)	(77,093		)
Total NorthStar Asset Management Group Inc. stockholders’ equity	243,454			201,748
Non-controlling interests	6,624			—
Total equity	250,078			201,748
Total liabilities and equity	$	312,097		$	263,869

Refer to accompanying notes to consolidated financial statements.

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NORTHSTAR ASSET MANAGEMENT GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands, Except Per Share and Dividends Data)

(Unaudited)



	Three Months Ended June 30, ⁽¹⁾						Six Months Ended June 30, ⁽¹⁾
	2015			2014			2015			2014
Revenues
Asset management and other fees, related parties ⁽²⁾	$	90,358		$	13,110		$	151,737		$	21,779
Selling commission and dealer manager fees, related parties	28,337			19,313			58,260			33,861
Other income	434			260			835			381
Total revenues	119,129			32,683			210,832			56,021
Expenses
Commission expense (refer to Note 3)	26,338			18,138			54,034			31,698
Transaction costs	73			21,926			375			24,476
Other expense	642			26			1,353			56
General and administrative expenses
Salaries and related expense	17,705			4,394			29,850			12,324
Equity-based compensation expense	15,002			8,045			28,620			13,745
Other general and administrative expenses	9,255			2,401			15,360			4,274
Total general and administrative expenses	41,962			14,840			73,830			30,343
Total expenses	69,015			54,930			129,592			86,573
Unrealized gain (loss) on foreign exchange	63			—			(285		)	—
Income (loss) before equity in earnings (losses) of unconsolidated ventures and income tax benefit (expense)	50,177			(22,247		)	80,955			(30,552		)
Equity in earnings (losses) of unconsolidated ventures (refer to Note 5)	90			—			(781		)	—
Income (loss) before income tax benefit (expense)	50,267			(22,247		)	80,174			(30,552		)
Income tax benefit (expense)	(12,055		)	—			(19,992		)	—
Net income (loss)	38,212			(22,247		)	60,182			(30,552		)
Net (income) loss attributable to non-controlling interests	(188		)	—			(390		)	—
Net income (loss) attributable to NorthStar Asset Management Group Inc. common stockholders	$	38,024		$	(22,247	)	$	59,792		$	(30,552	)
Earnings (loss) per share:
Basic	$	0.19		$	(0.12	)	$	0.30		$	(0.16	)
Diluted	$	0.19		$	(0.12	)	$	0.30		$	(0.16	)
Weighted average number of shares:
Basic	189,599,300			188,596,829			189,574,426			188,596,829
Diluted	194,472,434			188,596,829			193,357,126			188,596,829
Dividends per share of common stock	$	0.10		N/A			$	0.20		N/A

______________________

(1)

The consolidated financial statements for the three and six months ended June 30, 2015 represent the Company’s results of operations following the spin-off of NorthStar Realty’s historical asset management business on June 30, 2014. The three and six months ended June 30, 2014 represent a carve out of revenues and expenses attributable to the Company related to NorthStar Realty’s historical asset management business. As a result, results of operations for the three and six months ended June 30, 2015 may not be comparable to the Company’s results of operations reported for the prior periods presented.


(2)	The Company began earning fees on July 1, 2014, in connection with the management agreement with NorthStar Realty (refer to Note 1).

Refer to accompanying notes to consolidated financial statements.

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NORTHSTAR ASSET MANAGEMENT GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(Dollars and Shares in Thousands)



	Performance Common Stock			Common Stock					Additional Paid-in Capital			Retained Earnings (Accumulated Deficit)			Total NorthStar Stockholders’ Equity			Non-controlling Interests		Total Equity
	Shares	Amount		Shares		Amount			Additional Paid-in Capital			Retained Earnings (Accumulated Deficit)			Total NorthStar Stockholders’ Equity			Non-controlling Interests		Total Equity
Balance as of December 31, 2013	—	$	—	—		$	—		$	105,498		$	(77,130	)	$	28,368		$	—	$	28,368
Capital contribution of NorthStar Realty	—	—		188,597		1,886			119,323			—			121,209			—		121,209
Amortization of equity-based compensation	—	—		—		—			51,519			—			51,519			—		51,519
Issuance of common stock to directors	—	—		38		—			—			—			—			—		—
Issuance of common stock related to transactions (refer to Note 4)	—	—		956		10			10,300			—			10,310			—		10,310
Issuance of common stock relating to equity-based compensation, net of forfeitures	—	—		827		8			(8		)	—			—			—		—
Settlement of RSUs to common stock (refer to Note 7)	—	—		3,030		31			(31		)	—			—			—		—
Settlement of RSUs to performance common stock (refer to Note 8)	3,738	37		—		—			(37		)	—			—			—		—
Dividends on common stock and equity-based awards (refer to Note 7)	—	—		—		—			—			(19,063		)	(19,063		)	—		(19,063		)
Tax withholding related to vesting of restricted stock	—	—		(500	)	(5		)	(11,289		)	—			(11,294		)	—		(11,294		)
Excess tax benefit from equity-based compensation	—	—		—		—			1,599			—			1,599			—		1,599
Net income (loss)	—	—		—		—			—			19,100			19,100			—		19,100
Balance as of December 31, 2014	3,738	$	37	192,948		$	1,930		$	276,874		$	(77,093	)	$	201,748		$	—	$	201,748
Amortization of equity-based compensation	—	—		—		—			27,590			—			27,590			1,834		29,424
Issuance of common stock related to transactions (refer to Note 4)	—	—		208		2			4,505			—			4,507			—		4,507
Issuance of common stock relating to equity-based compensation, net of forfeitures	—	—		675		7			(7		)	—			—			—		—
Conversion of Deferred LTIP Units to LTIP Units and common stock, net	—	—		4		—			(4,400		)	—			(4,400		)	4,400		—
Retirement of common shares	—	—		(262	)	(3		)	(4,996		)	—			(4,999		)	—		(4,999		)
Issuance of performance common stock (refer to Note 8)	475	5		—		—			(5		)	—			—			—		—
Settlement of RSUs to common stock, net (refer to Note 7)	—	—		37		—			(1,453		)	—			(1,453		)	—		(1,453		)
Dividends on common stock and equity-based awards (refer to Note 7)	—	—		—		—			—			(39,325		)	(39,325		)	—		(39,325		)
Excess tax benefit from equity-based compensation	—	—		—		—			(6		)	—			(6		)	—		(6		)
Net income (loss)	—	—		—		—			—			59,792			59,792			390		60,182
Balance as of June 30, 2015 (unaudited)	4,213	$	42	193,610		$	1,936		$	298,102		$	(56,626	)	$	243,454		$	6,624	$	250,078

Refer to accompanying notes to consolidated financial statements.

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NORTHSTAR ASSET MANAGEMENT GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

(Unaudited)



	Six Months Ended June 30,
	2015			2014
Cash flows from operating activities:
Net income (loss)	$	60,182		$	(30,552	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Equity in (earnings) losses of unconsolidated ventures	781			—
Accrued transaction costs	1,356			15,338
Depreciation and amortization expense	1,238			46
Amortization of equity-based compensation	28,388			13,745
Unrealized (gain) loss on foreign exchange	285			—
Deferred income tax, net	4,487			—
Distribution from unconsolidated ventures	2,108			—
Change in assets and liabilities:
Restricted cash	(8,770		)	(3,132		)
Receivables, related parties	(12,515		)	6,099
Other assets	(5,339		)	(3,993		)
Other liabilities	408			—
Accounts payable and accrued expenses	9,902			1,242
Commission payable	(6,549		)	—
Net cash provided by (used in) operating activities	75,962			(1,207		)
Cash flows from investing activities:
Investments in unconsolidated ventures	(35,631		)	(4,000		)
Distribution from unconsolidated ventures	3,189			—
Net cash provided by (used in) investing activities	(32,442		)	(4,000		)
Cash flows from financing activities:
Contribution from NorthStar Realty	—			116,398
Repurchase of shares related to stock compensation agreements related to tax withholding	(12,747		)	—
Dividends	(39,035		)	—
Net cash provided by (used in) financing activities	(51,782		)	116,398
Effect of foreign exchange rate changes on cash	(285		)	—
Net increase (decrease) in cash	(8,547		)	111,191
Cash - beginning of period	109,199			7,537
Cash - end of period	$	100,652		$	118,728

Supplemental disclosure of non-cash investing and financing activities:
Conversion of Deferred LTIP Units to LTIP Units	$	4,400		$	—
Retirement of common shares	4,999			—
Deemed capital contribution from NorthStar Realty	—			4,811
Dividend payable related to RSUs	289			—
Distribution from unconsolidated ventures	231			—

Refer to accompanying notes to consolidated financial statements.

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NORTHSTAR ASSET MANAGEMENT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


1.	Business and Organization

NorthStar Asset Management Group Inc. (“NSAM” or the “Company”) is a global asset management firm focused on strategically managing real estate and other investment platforms in the United States and internationally. The Company commenced operations on July 1, 2014, upon the spin-off by NorthStar Realty Finance Corp. (“NorthStar Realty”) of its asset management business into a separate publicly-traded company, NSAM, a Delaware corporation. The spin-off was in the form of a tax-free distribution to NorthStar Realty’s common stockholders where each NorthStar Realty common stockholder received shares of the Company’s common stock on a one -for-one basis. At the same time, NorthStar Realty became externally managed by an affiliate of the Company through a management contract with an initial term of 20 years . NorthStar Realty continues to operate its commercial real estate debt origination business.

Certain of the Company’s affiliates also manage NorthStar Realty’s previously sponsored non-traded companies which raise money through the retail market, as well as any new non-traded company and any future sponsored company (referred to as the “Sponsored Companies” and together with NorthStar Realty, referred to as the “Managed Companies”).

The Company is organized to provide asset management and other services to the Managed Companies or any other companies it may sponsor in the future, both in the United States and internationally. The Managed Companies have historically invested in the commercial real estate (“CRE”) industry. The Company seeks to expand the scope of its asset management business beyond real estate into new asset classes and geographies by organically creating and managing additional investment vehicles or through acquisitions, strategic partnerships and joint ventures. To date, the Company has acquired a 43% interest in American Healthcare Investors LLC (the “AHI Interest”), a 45% interest in Island Hospitality Management Inc. (the “Island Interest”) and a 50% interest in Distributed Finance Corporation (“Distributed Finance”) (refer to Note 4).

The Company earns asset management, incentive and other fees, directly or indirectly, pursuant to management and other contracts and direct investments. In addition, the Company owns NorthStar Securities, LLC (“NorthStar Securities”), a captive broker-dealer platform registered with the Securities and Exchange Commission (“SEC”) which raises capital in the retail market for the Sponsored Companies.

On March 13, 2015, the Company restructured by converting its current holding company into NSAM LP, a Delaware limited partnership and the operating partnership of the Company (the “Operating Partnership”). The Operating Partnership holds substantially all of the Company’s assets and the Company conducts its operations, directly or indirectly, through the Operating Partnership.

References to the historical asset management business of NorthStar Realty including assets, liabilities and results of operations relate to managing the Sponsored Companies, owning NorthStar Securities and operating its special servicing business and are generally referred to as those of the Company.

Proposed Spin-off of European Real Estate Business

On February 26, 2015, NorthStar Realty announced that its board of directors unanimously approved a plan to spin-off its European real estate business (the “NRF Proposed European Spin”) into a newly-formed publicly-traded real estate investment trust (“REIT”), NorthStar Realty Europe Corp. (“NRE”) expected to be listed on the New York Stock Exchange (“NYSE”). As of August 5, 2015, NorthStar Realty acquired approximately $2.6 billion , at cost, of European real estate (excluding NorthStar Realty’s European healthcare properties) comprised of 52 properties spanning across some of Europe’s top markets that will be contributed to NRE upon the completion of the NRF Proposed European Spin. The Company will manage NRE pursuant to a long-term management agreement, on substantially similar terms as the Company’s management agreement with NorthStar Realty. The NRF Proposed European Spin is expected to be completed in the second half of 2015. NRE filed its registration statement on Form S-11 with the SEC in July 2015.

All references herein to the Company refer to NorthStar Asset Management Group Inc. and its consolidated subsidiaries, including the Operating Partnership, collectively, unless the context otherwise requires.


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

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NORTHSTAR ASSET MANAGEMENT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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 presentation 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, 2014, which was filed with the SEC.

Periods prior to June 30, 2014 present a carve-out of NorthStar Realty’s historical financial information, including revenues and expenses allocated to the Company, related to NorthStar Realty’s historical asset management business. Expenses also included an allocation of indirect expenses from NorthStar Realty, including salaries, equity-based compensation and other general and administrative expenses (primarily occupancy and other cost) based on an estimate had NorthStar Realty’s historical asset management business been run as an independent entity. This allocation method was principally based on relative headcount and management’s knowledge of NorthStar Realty’s operations. Additionally, periods prior to June 30, 2014 did not reflect the management agreement the Company entered into with NorthStar Realty effective July 1, 2014.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, the Operating Partnership and their consolidated subsidiaries. All significant intercompany balances are eliminated in consolidation.

Variable Interest Entities

A variable interest entity (“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 evaluates the Managed Companies, investments in unconsolidated ventures and securitization financing transactions to which the Company is the special servicer to determine whether they are a VIE.

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NORTHSTAR ASSET MANAGEMENT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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.

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.

Investments in Unconsolidated Ventures

A non-controlling, unconsolidated ownership interest in an entity may be accounted for using the equity method, at fair value or the cost method.

Under the equity method, the investment is adjusted each period for capital contributions and distributions and its share of the entity’s net income (loss). Capital contributions, distributions and net income (loss) of such entities are recorded in accordance with the terms of the governing documents. An allocation of net income (loss) 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.

The Company may account for an investment in an unconsolidated entity at fair value by electing the fair value option. The Company records the change in fair value for its share of the projected future cash flow of such investments from one period to another in equity in earnings (losses) from unconsolidated ventures in the consolidated statements of operations. Any change in fair value attributed to market related assumptions is considered unrealized gain (loss).

The Company may account for an investment that does not qualify for equity method accounting or for which the fair value option was not elected using the cost method if the Company determines the investment in the unconsolidated entity is insignificant. Under the cost method, equity in earnings is recorded as dividends are received to the extent they are not considered a return of capital, which is recorded as a reduction of cost of the investment.

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 controlling and 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.

Restricted Cash

Restricted cash represents cash held by the Company’s foreign subsidiaries due to certain regulatory capital requirements.

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Other Assets and Accounts Payable and Accrued Expenses

The following tables present a summary of other assets and accounts payable and accrued expenses as of June 30, 2015 and December 31, 2014 (dollars in thousands):



	June 30, 2015 (Unaudited)		December 31, 2014 ⁽¹⁾
Other assets:
Deferred tax asset	$	7,642	$	3,155
Furniture, fixtures and equipment, net	4,484		4,629
Prepaid expenses	2,287		2,279
Security deposits	2,378		2,232
Due from participating broker-dealers	680		1,965
Prepaid income taxes	—		3,538
Pending deal costs	369		1,045
Other	784		531
Total	$	18,624	$	19,374

__________________


(1)	Includes fixed assets, tenant improvements and deposits related to leased offices that were transferred to the Company at the time of the spin-off on June 30, 2014.



	June 30, 2015 (Unaudited)		December 31, 2014
Accounts payable and accrued expenses:
Accrued bonus	$	25,803	$	25,911
Income tax payable	15,218		—
Accrued share repurchase ⁽¹⁾	4,999		—
Accrued transaction expense	3,849		5,205
Accrued payroll	1,184		1,400
Accrued professional fees	840		740
Accrued equity-based compensation awards (refer to Note 7)	617		—
Accrued dividends	448		—
Accrued tax withholding ⁽²⁾	—		11,938
Other	2,445		3,922
Total	$	55,403	$	49,116

__________________


(1)	In June 2015, the Company repurchased 261,600 common shares for approximately $5.0 million , which settled in July 2015 (refer to Note 8).


(2)	Represents withholding tax related to vesting and net settlement of restricted stock.

Revenue Recognition

Asset Management and Other Fees

Asset management and other fees include asset management, incentive and other fees, such as acquisition and disposition fees, earned from the Managed Companies. Base asset management and other fees are recognized based on contractual terms specified in the underlying governing documents in the periods during which the related services are performed and the amounts have been contractually earned. Incentive fees and payments are recognized subject to the achievement of return hurdles in accordance with the respective terms set forth in the governing documents of the Managed Companies.

Selling Commission and Dealer Manager Fees and Commission Expense

Selling commission and dealer manager fees represent income earned by the Company for selling equity in the Sponsored Companies through NorthStar Securities. Selling commission and dealer manager fees and commission expense are accrued on a trade date basis. As of June 30, 2015 , commission payable of $5.4 million includes $0.7 million due to NorthStar Securities employees.

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Allowance for Doubtful Accounts

An allowance for a doubtful account is established when, in the opinion of the Company, a full recovery of a receivable becomes doubtful. A receivable is written off when it is no longer collectible and/or legally discharged. As of June 30, 2015 and December 31, 2014 , there was no allowance for doubtful accounts.

Equity-Based Compensation

The Company accounts for equity-based compensation awards, including awards granted to co-employees, 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. 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. The awards are remeasured every quarter based on the stock price as of the end of the reporting period until such awards vest, if any.

Foreign Currency

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 spot currency exchange rate at the time of the transaction. The resulting foreign currency remeasurement adjustment is recorded in unrealized gain (loss) on foreign currency in the consolidated statements of operations.

Comprehensive Income (Loss)

The Company had no items of other comprehensive income (loss), so its comprehensive (loss) is the same as the net (loss) for all periods presented.

Earnings Per Share

The Company’s basic earnings per share (“EPS”) is calculated using the two-class method for each class of common stock and participating security as if all earnings had been distributed by dividing net income (loss) attributable to common stockholders by the weighted average number of common stock outstanding. Diluted EPS reflects the maximum potential dilution that could occur from the Company’s share-based compensation, consisting of unvested restricted stock awards, restricted stock units (“RSUs”), performance common stock 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 which are structured as profits interests (“LTIP Units”). Potential dilutive shares are excluded from the calculation if they have an anti-dilutive effect in the period. The Company’s unvested restricted stock awards, RSUs and LTIPs units contain rights to receive non-forfeitable dividends and thus are participating securities. Due to the existence of these participating securities, the two-class method of computing EPS is required, unless another method is determined to be more dilutive.

Under the two-class method, net income is first reduced for distributions declared on all classes of participating securities to arrive at undistributed earnings. Under the two-class method, net loss is reduced for distributions declared on participating securities only if such security has the right to participate in the earnings of the entity and an objectively determinable contractual obligation to share in net losses of the entity.

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Income Taxes

Certain subsidiaries of the Company are subject to taxation by federal, state, local and foreign authorities for the periods presented. On March 13, 2015, the Company restructured by converting, under Delaware law, an existing limited liability company disregarded as separate from the Company for federal income tax purposes to a Delaware limited partnership and admitting as limited partners LTIP Unit Holders, forming the Company’s new Operating Partnership. The Operating Partnership is taxed as a partnership for federal income tax purposes and consequently, its items of income gain, loss, deduction and credit are passed through to, and included in, the taxable income of each of its partners including the Company. For the period prior to March 13, 2015, the Company and its U.S. subsidiaries will file consolidated federal income tax returns. Income taxes are accounted for by the asset/liability approach in accordance with U.S. GAAP. Deferred taxes, if any, represent the expected future tax consequences when the reported amounts of assets and liabilities are recovered or paid. Such amounts arise from differences between the financial reporting and tax bases of assets and liabilities and are adjusted for changes in tax laws and tax rates in the period which such changes are enacted. A provision for income tax represents the total of income taxes paid or payable for the current period, plus the change in deferred tax assets and liabilities.

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 is in the process of evaluating the impact, if any, of the update on its consolidated financial position, results of operations and financial statement disclosures.

In February 2015, the FASB issued updated guidance that changes the rules regarding consolidation. The pronouncement eliminates specialized guidance for limited partnerships and similar legal entities and removes the indefinite deferral for certain investment funds. The new guidance is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015, with early adoption permitted. The Company is currently assessing the impact of the guidance on the Company’s consolidated financial position, results of operations and financial statement disclosures.

In April 2015, the FASB issued an accounting update changing the presentation of financing costs in financial statements. Under the new guidance, an entity would present these costs in the balance sheet as a direct deduction from the related liability rather than as an asset. Amortization of the costs would continue to be reported as interest expense. The new guidance is effective for annual periods and interim periods beginning after December 15, 2015, with early adoption permitted. The Company is currently assessing the impact of the guidance on the Company’s consolidated financial position, results of operations and financial statement disclosures.


3.	Management Agreements and Managed Companies

NorthStar Realty

Management Agreement

Upon completion of the spin-off, the Company entered into a management agreement with NorthStar Realty for an initial term of 20 years, which will be automatically renewed for additional 20 -year terms each anniversary thereafter unless earlier terminated. As asset manager, the Company is responsible for NorthStar Realty’s day-to-day operations, subject to the supervision of the NorthStar Realty board of directors. Through its global network of subsidiaries and branch offices, the Company performs services and activities relating to, among other things, investments and financing, portfolio management and other administrative services, such as accounting and investor relations, to NorthStar Realty and its subsidiaries other than NorthStar Realty’s commercial real estate loan origination business. The management agreement with NorthStar Realty provides for a base management fee and incentive fee.

Base Management Fee

For the three and six months ended June 30, 2015 , the Company earned $48.2 million and $93.6 million , respectively, related to the base management fee, of which $48.2 million is recorded in receivable, related parties on the consolidated balance sheets. The management contract with NorthStar Realty commenced on July 1, 2014, and as such, there were no management fees earned for the three and six months ended June 30, 2014 . The base management fee from NorthStar Realty will increase subsequent to June 30, 2015 by an amount equal to 1.5% per annum of the sum of:

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•	cumulative net proceeds of all future common equity and preferred equity issued by NorthStar Realty, including any shares issued as part of a forward agreement such as the remaining $246.0 million of shares currently available under the NorthStar Realty forward contract;


•	equity issued by NorthStar Realty in exchange or conversion of exchangeable senior notes based on the stock price at the date of issuance;


•	any other issuances by NorthStar Realty of common equity, preferred equity or other forms of equity, including but not limited to LTIP Units (excluding equity-based compensation, but including issuances related to an acquisition, investment, joint venture or partnership); and


•	cumulative cash available for distribution (“CAD”) of NorthStar Realty in excess of cumulative distributions paid on common stock, LTIP units or other equity awards beginning the first full calendar quarter after the spin-off.

Additionally, NorthStar Realty’s equity interest in RXR Realty LLC (“RXR Realty”) and Aerium Group is structured so that the Company is entitled to the portion of distributable cash flow from each investment in excess of the $10.0 million minimum annual base amount.

Incentive Fee

For the three and six months ended June 30, 2015 , the Company earned $3.5 million and $6.4 million , respectively, related to the incentive fee, of which $3.5 million is recorded in receivable, related parties on the consolidated balance sheets. The incentive fee is calculated and payable quarterly in arrears in cash, equal to:


•	the product of: (a) 15.0% and (b) CAD of NorthStar Realty before such incentive fee, divided by the weighted average shares outstanding of NorthStar Realty for the calendar quarter, when such amount is in excess of $0.39 per share of NorthStar Realty but less than $0.45 per share of NorthStar Realty; plus


•	the product of: (a) 25.0% and (b) CAD of NorthStar Realty before such incentive fee, divided by the weighted average shares outstanding of NorthStar Realty for the calendar quarter, when such amount is equal to or in excess of $0.45 per share of NorthStar Realty;


•	multiplied by the weighted average shares outstanding of NorthStar Realty for the calendar quarter.

In addition, the Company may also earn an incentive fee from NorthStar Realty’s healthcare investments in connection with the Company’s Healthcare Strategic Partnership (refer to Note 5).

Weighted average shares represents the number of shares of NorthStar Realty’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.

Furthermore, if NorthStar Realty were to spin-off any asset or business in the future, including the NRF Proposed European Spin, such entity would be managed by the Company on terms substantially similar to those set forth in the management agreement between the Company and NorthStar Realty. The management agreement further provides that the aggregate base management fee in place immediately after any future spin-off will not be less than the aggregate base management fee in place at NorthStar Realty immediately prior to such spin-off.

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Payment of Costs and Expenses and Expense Allocation

NorthStar Realty is responsible for all of its direct costs and expenses and will reimburse the Company for costs and expenses incurred by the Company on its behalf. In addition to NorthStar Realty’s costs and expenses, following the spin-off, NorthStar Realty is obligated to reimburse the Company for additional costs and expenses incurred by the Company for an amount not to exceed the following: (i) 20.0% of the combined total of: (a) NorthStar Realty’s general and administrative expenses as reported in its consolidated financial statements excluding: (1) equity-based compensation expense, (2) non-recurring items, (3) fees payable to the Company under the terms of the management agreement and (4) any allocation of expenses to NorthStar Realty (“NorthStar Realty G&A”); and (b) the Company’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 of the Managed Companies, less (ii) the NorthStar Realty G&A. For the three and six months ended June 30, 2015 , the Company allocated $0.8 million and $2.8 million , respectively, to NorthStar Realty, of which $0.8 million is recorded in receivables, related parties in the consolidated balance sheets. In addition, NorthStar Realty will pay directly or reimburse the Company for an allocable portion of any severance paid pursuant to any employment, consulting or similar service agreements in effect between the Company and any of its executives, employees or other service providers.

Sponsored Companies

The following table presents a summary of the fee arrangements with the current Sponsored Companies, which are effective:



	NorthStar	NorthStar	NorthStar	NorthStar/RXR
	Income	Healthcare	Income II	New York Metro ⁽⁹⁾
Offering amount ⁽¹⁾	$1.1 billion	$1.8 billion ⁽⁸⁾	$1.65 billion	$2.0 billion
Total raised through August 4, 2015 ⁽²⁾	$1.2 billion	$1.3 billion	$700 million	(10)
Primary strategy	CRE Debt	Healthcare Equity and Debt	CRE Debt	Tri-State CRE Equity and Debt
Primary offering period	Completed July 2013	Ends February 2017 ⁽⁸⁾	Ends May 2016 ⁽¹¹⁾	Ends February 2017 ⁽¹¹⁾
Asset Management and Other Fees:
Asset management fees ⁽³⁾	1.25% of assets	1.00% of assets	1.25% of assets	1.25% of assets
Acquisition fees ⁽⁴⁾	1.00% of investments	2.25% for real estate properties 1.00% of other investments	1.00% of investments	2.25% for real estate properties 1.00% of other investments
Disposition fees ⁽⁵⁾	1.00% of sales price	2.00% for real estate properties 1.00% of sales price for debt investments	1.00% of sales price	2.00% for real estate properties 1.00% of sales price for debt investments
Incentive payments ⁽⁶⁾	15.00% of net cash flows after an 8.00% return	15.00% of net cash flows after a 6.75% return ⁽⁷⁾	15.00% of net cash flows after a 7.00% return	15.00% of net cash flows after a 6.00% return

________________


(1)	Represents amount of shares registered to offer pursuant to each Sponsored Company’s public offering and includes the follow-on public offering of up to $700 million for NorthStar Healthcare.


(2)	Includes capital raised through dividend reinvestment plans.


(3)	Assets represent principal amount funded or allocated for debt investments originated or acquired and the cost of all other investments, including expenses and any financing attributable to such investments, less any principal received on debt and securities investments (or the Company’s proportionate share thereof in the case of an investment made in a joint venture).


(4)	Calculated based on the amount funded or allocated by the Sponsored Companies to originate or acquire investments, including acquisition expenses and any financing attributable to such investments (or the proportionate share thereof in the case of an equity investment made through a joint venture).


(5)	Calculated based on contractual sales price of each investment sold.

(6)

The Company is entitled to receive distributions equal to 15% of net cash flow of the respective Sponsored Company, whether from continuing operations, repayment of loans, disposition of assets or otherwise, but only after stockholders have received, in the aggregate, cumulative distributions equal to their invested capital plus the respective cumulative, non-compounded annual pre-tax return (as noted in the table above) on such invested capital.


(7)	The Healthcare Strategic Partnership is entitled to the incentive fees earned from managing NorthStar Healthcare, of which the Company earn its proportionate interest (refer to Note 5).


(8)	NorthStar Healthcare successfully completed its public offering on February 2, 2015 by raising $1.1 billion in capital. The Company began raising capital for NorthStar Healthcare’s follow-on public offering at the end of February 2015.

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(9)	Any asset management and other fees incurred by NorthStar/RXR New York Metro will be shared equally between the Company and RXR Realty, as co-sponsors.


(10)	The Company expects to begin raising capital for NorthStar/RXR New York Metro in the second half of 2015.


(11)	Offering period subject to extension as determined by the board of directors of each Sponsored Company.

In addition to the Sponsored Companies described above, the Company is sponsoring the following additional companies:

•

NorthStar Corporate Income, Inc. (“NorthStar Corporate”) confidentially submitted its amended registration statement on Form N-2 to the SEC in June 2015. NorthStar Corporate seeks to raise up to $1.0 billion in a public offering of common stock. NorthStar Corporate is structured as a non-diversified, closed-end management investment company that intends to elect to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “Investment Company Act”). NorthStar Corporate intends to invest in senior and subordinate loans to middle-market companies.

•

NorthStar Global Corporate Income Fund (“NorthStar Global”) filed its registration statement on Form N-2 with the SEC in July 2015. NorthStar Global seeks to raise up to $3.0 billion in a public offering of common stock. NorthStar Global is structured as a non-diversified, closed-end management investment company that is registered under the Investment Company Act. NorthStar Global intends to invest in global corporate credit, including first and second lien loans, subordinated debt, bonds and structured credit.

NorthStar Corporate and NorthStar Global intend to engage OZ Institutional Credit Management LP (“OZ Credit Management”) an affiliate of Och-Ziff Capital Management Group, LLC (“Och-Ziff”), an alternative asset manager, to serve as the sub-advisor to manage NorthStar Corporate and NorthStar Global’s investments and oversee operations. Any asset management and other fees incurred by NorthStar Corporate and NorthStar Global will be shared between the Company and OZ Credit Management, as co-sponsors.

For the three months ended June 30, 2015 and 2014 , the Company earned $38.6 million and $13.1 million , respectively, of asset management and other fees from the Sponsored Companies. For the six months ended June 30, 2015 and 2014 , the Company earned $51.7 million and $21.8 million , respectively, of asset management and other fees from the Sponsored Companies.

Pursuant to each of the advisory agreements with the Company’s current Sponsored Companies, the Company may determine, in its sole discretion, to defer or waive, in whole or in part, certain asset management and other fees incurred. In considering whether to defer or waive any such fees, the Company evaluates the specific facts and circumstances surrounding the incurrence of a particular fee and makes its decision on a case by case basis.

Distribution Support

NorthStar Realty committed to invest up to $10.0 million in each of the Sponsored Companies that are in their offering stage. In addition, consistent with its past practices, NorthStar Realty will commit up to $10.0 million for distribution support in any Sponsored Company that the Company may sponsor, up to a total of five new companies per year.

The distribution support agreement related to NorthStar/RXR New York Metro is an obligation of both NorthStar Realty and RXR Realty, where each agreed to purchase up to an aggregate of $10.0 million in Class A common stock during the two -year period following commencement of the offering, with NorthStar Realty and RXR Realty agreeing to purchase 75% and 25% of any shares purchased, respectively.

The distribution support agreement related to NorthStar Global is an obligation of both NorthStar Realty and Och-Ziff, where each agreed to purchase up to an aggregate of $10.0 million in Class A common stock during the two -year period following commencement of the offering, with NorthStar Realty and Och-Ziff agreeing to equally purchase any shares.

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Payment of Costs and Expenses and Expense Allocation

In addition, the Company is entitled to certain expense allocations for costs paid on behalf of its Sponsored Companies which include: (i) reimbursement for organization and offering costs such as professional fees and other costs associated with the formation and offering of the Sponsored Company; and (ii) reimbursement for direct and indirect operating costs such as certain salaries, equity-based compensation and professional and other costs associated with managing the operations of the Sponsored Company. The following table presents a summary of the expense arrangements with the current Sponsored Companies which are effective:



	NorthStar Income	NorthStar Healthcare	NorthStar Income II	NorthStar/RXR New York Metro
Organization and offering costs ⁽¹⁾	$11.0 million ⁽²⁾	$22.5 million, or 1.5% of the proceeds expected to be raised from the offering ⁽⁴⁾	$24.8 million, or 1.5% of the proceeds expected to be raised from the offering ⁽⁴⁾	$30.0 million, or 1.5% of the proceeds expected to be raised from the offering ⁽⁴⁾
Operating costs ⁽³⁾	Greater of 2.0% of its average invested assets or 25.0% of its net income (net of 1.25% asset management fee)	Greater of 2.0% of its average invested assets or 25.0% of its net income (net of 1.00% asset management fee)	Greater of 2.0% of its average invested assets or 25.0% of its net income (net of 1.25% asset management fee)	Greater of 2.0% of its average invested assets or 25.0% of its net income (net of 1.25% asset management fee)

__________________

(1)

Represents reimbursement for organization and offering costs paid on behalf of the Sponsored Companies in connection with their respective offerings. The Company is facilitating the payment of organization and offering costs on behalf of the Sponsored Companies. The Company records these costs as receivables, related parties on its consolidated balance sheets until repaid. The Sponsored Companies record these costs as either advisory fees, related parties on their consolidated statements of operations or as a cost of capital in their consolidated statements of equity.


(2)	Represents the total expense allocation for organization and offering costs through the end of the offering period in July 2013.


(3)	Calculated based on the four preceding fiscal quarters not to exceed the greater of: (i) 2.0% of each Sponsored Company’s average invested assets; or (ii) 25.0% of each Sponsored Company’s net income determined without reduction for any additions to reserves for depreciation, loan losses or other similar non-cash reserves and excluding any gain from the sale of assets for that period.


(4)	Excludes shares being offered pursuant to dividend reinvestment plans.

The following table presents receivables, related parties on the consolidated balance sheets as of June 30, 2015 and December 31, 2014 (dollars in thousands):



	June 30, 2015 (Unaudited)		December 31, 2014
NorthStar Realty:
Base management fee	$	48,244	$	41,395
Incentive fee	3,500		2,000
NorthStar Realty fees	51,744		43,395
Sponsored Companies:
Fees	842		245
Other receivables	36,542		29,319
Subtotal Sponsored Companies ⁽¹⁾	37,384		29,564
Other ⁽²⁾	1,013		4,667
Total ⁽³⁾	$	90,141	$	77,626

________________________


(1)	As of June 30, 2015 and December 31, 2014 , the Company had unreimbursed costs from the Sponsored Companies of $25.3 million and $23.0 million respectively, recorded as receivables, related parties on the consolidated balance sheets.


(2)	Includes direct and indirect costs due from NorthStar Realty.


(3)	Subsequent to June 30, 2015 , the Company received $52.5 million from the Managed Companies.

Selling Commission and Dealer Manager Fees and Commission Expense

Selling commissions and dealer manager fees represents income earned by selling equity in Sponsored Companies through NorthStar Securities. Pursuant to dealer manager agreements between NorthStar Securities and the Sponsored Companies, the Company generally receives selling commissions of up to 7.0% of gross offering proceeds raised. The Company reallows all selling commissions earned to participating broker-dealers. In addition, the Company also generally receives a dealer manager fee of up to 3.0% of gross offering proceeds raised, a portion of which may be reallowed to participating broker-dealers. The Company earns net commission income through NorthStar Securities for selling equity in the Sponsored Companies, which is expected to cover the costs of the broker-dealer business. Commission expense represents fees to participating broker-dealers with whom the Company has selling agreements and commissions to employees of NorthStar Securities.

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The following table summarizes selling commission and dealer manager fees, commission expense and net commission income for the three and six months ended June 30, 2015 and 2014 (dollar in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Selling commission and dealer manager fees	$	28,337	$	19,313	$	58,260	$	33,861
Commission expense ⁽¹⁾	26,338		18,138		54,034		31,698
Net commission income ⁽²⁾	$	1,999	$	1,175	$	4,226	$	2,163

________________________


(1)	Includes reallowed commission expense to NorthStar Securities employees. For the three months ended June 30, 2015 and 2014 , the Company reallowed $3.2 million and $2.3 million , respectively. For the six months ended June 30, 2015 and 2014 , the Company reallowed $6.6 million and $4.0 million , respectively.


(2)	Excludes direct expenses of NorthStar Securities.

Other

A subsidiary of the Company is a rated special servicer by Standard & Poor’s and Fitch Ratings and receives special servicing fees for services related to certain securitization transactions. For the three months ended June 30, 2015 and 2014 , the Company earned $0.4 million and $0.3 million of special servicing fees, respectively. For the six months ended June 30, 2015 and 2014 , the Company earned $0.8 million and $0.4 million of special servicing fees, respectively.


4.	Investments in Unconsolidated Ventures

The following is a description of the Company’s investments in unconsolidated ventures, all of which are currently accounted for under the equity method.

Distributed Finance

In June 2014, the Company acquired an interest in Distributed Finance, a marketplace finance platform, for $4.0 million . In addition to earning a proportionate share of net income, the Company will also earn a net 0.50% fee on any syndicated investments, a minimum base management fee of 1.0% and an incentive fee of 15.0% on contractually defined excess cash flows. As of June 30, 2015 , the carrying value of the investment was $3.1 million . For the three and six months ended June 30, 2015 , the Company recognized equity in losses, operating losses of $0.3 million and $0.5 million , respectively, related to start-up costs incurred by Distributed Finance.

AHI Interest

In December 2014, the Company acquired the AHI Interest in AHI Newco, LLC (“AHI Ventures”), a direct wholly-owned subsidiary of American Healthcare Investors LLC (“AHI”) for $57.5 million , consisting of $37.5 million in cash and $20.0 million of the Company’s common stock, subject to certain lock-up and vesting restrictions ( $10.0 million of the Company's common stock vested immediately). The Company’s investment in AHI Ventures is structured as a joint venture between the Company, the principals of AHI and James F. Flaherty III. The members of AHI are entitled to receive certain distributions of operating cash flow and certain promote fees in accordance with the allocations set forth in the joint venture agreement. As of June 30, 2015 , the carrying value of the investment was $46.0 million . For the three months ended June 30, 2015 , the Company recognized in equity in earnings, operating income of $1.5 million , which excludes $0.5 million of equity-based compensation expense and $2.3 million of depreciation and amortization expense. For the six months ended June 30, 2015 , the Company recognized in equity in earnings, operating income of $3.1 million , which excludes $1.6 million of equity-based compensation expense and $4.5 million of depreciation and amortization expense (refer to Note 5).

Island Interest

In January 2015, the Company acquired the Island Interest in Island Hospitality Group Inc. (“Island”) through Island Hospitality Joint Venture, LLC (“Island Ventures”), a subsidiary of Island JV Members Inc. (“Island Members”) for $37.7 million , consisting of $33.2 million in cash and $4.5 million of the Company’s common stock, subject to certain lock-up and vesting restrictions. The Company’s investment in Island Ventures is structured as a joint venture between the Company and Island Members. The members of Island Ventures are entitled to receive certain distributions of operating cash flow and certain promote fees in accordance with the allocations set forth in the joint venture agreement. As of June 30, 2015 , the carrying value of the investment was $41.6 million . For the three months ended June 30, 2015 , the Company recognized in equity in earnings,

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operating income of $1.7 million . From closing to June 30, 2015 , the Company recognized in equity in earnings, operating income of $2.8 million (refer to Note 5).


5.	Related Party Arrangements

NorthStar Realty

Investment Opportunities

Under the management agreement, NorthStar Realty agreed to make available to the Company for the benefit of the Managed Companies, including NorthStar Realty, all investment opportunities sourced by NorthStar Realty. The Company agreed to fairly allocate such opportunities among the Managed Companies, including NorthStar Realty, in accordance with an investment allocation policy. Pursuant to the management agreement, NorthStar Realty is entitled to fair and reasonable compensation for its services in connection with any loan origination opportunities sourced by it, which may include first mortgage loans, subordinate mortgage interests, mezzanine loans and preferred equity interests, in each case relating to commercial real estate.

The Company provides services with regard to such areas as payroll, human resources and employee benefits, financial systems management, treasury and cash management, accounts payable services, telecommunications services, information technology services, property management services, legal and accounting services and various other corporate services to NorthStar Realty as it relates to its loan origination business for commercial real estate debt.

Credit Agreement

In connection with the spin-off, the Company entered into a revolving credit agreement with NorthStar Realty pursuant to which NorthStar Realty makes available to the Company, on an “as available basis,” up to $250.0 million of financing with a maturity of June 30, 2019 at LIBOR plus 3.50% . The revolving credit facility is unsecured. The Company expects to use the proceeds for general corporate purposes, including potential future acquisitions. In addition, the Company may use the proceeds to acquire assets on behalf of the Managed Companies that the Company intends to allocate to such Managed Company but for which such Managed Company may not then have immediately available funds. The terms of the revolving credit facility contain various representations, warranties, covenants and conditions, including the condition that NorthStar Realty’s obligation to advance proceeds to the Company is dependent upon NorthStar Realty and its affiliates having at least $100.0 million of either unrestricted cash and cash equivalents or amounts available under committed lines of credit, after taking into account the amount the Company seeks to draw under the facility. As of June 30, 2015 , the Company had no borrowings outstanding under the credit agreement.

Healthcare Strategic Joint Venture

In January 2014, the Company entered into a long-term strategic partnership with James F. Flaherty III, former Chief Executive Officer of HCP, Inc., focused on expanding the Company’s healthcare business into a preeminent healthcare platform (“Healthcare Strategic Partnership”). In connection with the partnership, Mr. Flaherty oversees and seeks to grow both NorthStar Realty’s healthcare real estate portfolio and the portfolio of NorthStar Healthcare. In connection with entering into the partnership, NorthStar Realty granted Mr. Flaherty certain RSUs, half of which became the Company’s RSUs as a result of NorthStar Realty’s reverse stock split and the spin-off (refer to Note 7). The Healthcare Strategic Partnership is entitled to incentive fees ranging from 20% to 25% above certain hurdles for new and existing healthcare real estate investments held by NorthStar Realty and NorthStar Healthcare. The partnership will also be entitled to any incentive fees earned from NorthStar Healthcare or any future healthcare non-traded vehicles sponsored by the Company, NorthStar Realty or any affiliates, as well as future healthcare non-traded vehicles sponsored by AHI Ventures. For the three and six months ended June 30, 2015 and 2014, the Company did not earn incentive fees related to the Healthcare Strategic Partnership. On February 2, 2015, in connection with the completion of NorthStar Healthcare’s initial primary offering, the Company issued 20,305 RSUs to Mr. Flaherty.

AHI Venture

In connection with the AHI Interest, AHI Ventures provides certain asset management, property management and other services to affiliates of the Company assisting in managing the current and future healthcare assets (excluding any joint venture assets) of NorthStar Realty and other Sponsored Companies, including the assets formerly owned by Griffin-American Healthcare REIT II, Inc. (“Griffin-American”) and its former operating partnership, Griffin-American Healthcare REIT II Holdings, LP (“Griffin-America OP portfolio”). AHI Ventures receives a base management fee of $0.6 million per year plus 0.50% of the equity invested by NorthStar Realty in future healthcare assets (excluding assets in the Griffin-American OP portfolio and other

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joint ventures) that AHI Ventures may manage. AHI Ventures may also participate in the incentive fees earned by the Company and its affiliates with respect to new and existing healthcare real estate investments held by NorthStar Realty and NorthStar Healthcare, including the Griffin-American OP portfolio, any future healthcare non-traded vehicles sponsored by the Company, NorthStar Realty or any affiliates, as well as any future healthcare non-traded vehicles sponsored by AHI Ventures. AHI Ventures would also be entitled to additional base management fees should it manage assets on behalf of any other Managed Companies. AHI Ventures also intends to directly or indirectly sponsor, co-sponsor, form, register, market, advise, manage and/or operate investment vehicles that are intended to invest primarily in healthcare real estate assets. In addition, Mr. Flaherty acquired a 12.3% interest, as adjusted, in AHI Ventures.

In April 2015, Griffin-American Healthcare REIT III, Inc., a vehicle managed by an affiliate of AHI, distributed shares of its common stock to the members of AHI Ventures, of which the Company received 0.2 million shares in connection with the distribution, which, is recorded in other assets on the consolidated balance sheets.

Island Venture

Island is a leading, independent select service hotel management company that currently manages 149 hotel properties, representing $3.7 billion , of which 101 hotel properties are owned by NorthStar Realty. Island provides certain asset management, property management and other services to NorthStar Realty to assist in managing its hotel properties. Island receives a base management fee of 2.5% to 3.0% of the current monthly revenue of the NorthStar Realty hotel properties it manages for NorthStar Realty. For the three and six months ended June 30, 2015 , NorthStar Realty paid $3.0 million and $6.4 million , respectively, related to the base management fee to Island.

RXR Realty

In December 2013, NorthStar Realty entered into a strategic transaction with RXR Realty, the co-sponsor of NorthStar/RXR New York Metro. The investment in RXR Realty includes an approximate 27% equity interest. NorthStar Realty’s equity interest in RXR Realty is structured so that the Company is entitled to certain fees in connection with RXR Realty’s investment management business.


6.	Commitments and Contingencies

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


7.	Equity-Based Compensation

Impact of the Spin-off

NorthStar Realty issued equity-based awards to directors, officers, employees, consultants and advisors pursuant to the NorthStar Realty Finance Corp. 2004 Omnibus Stock Incentive Plan, as amended and restated (the “NorthStar Realty Stock Plan”), and the NorthStar Realty Executive Incentive Bonus Plan, as amended (the “NorthStar Realty Plan” and collectively the “NorthStar Realty Equity Plans”). In addition, the Company issued equity-based awards to directors, officers, employees, consultants and advisors pursuant to the NorthStar Asset Management Group Inc. 2014 Omnibus Stock Incentive Plan (the “NSAM Stock Plan”) and the NorthStar Asset Management Group Inc. Executive Incentive Bonus Plan (the “NSAM Bonus Plan” and collectively, with the NSAM Stock Plan, the “NSAM Plans”)

All of the vested and unvested equity-based awards granted by NorthStar Realty prior to the spin-off remained outstanding immediately following the spin-off with various adjustments made to these awards to reflect NorthStar Realty’s reverse stock split as well as the impact of the spin-off, as described below.

NorthStar Realty’s equity awards outstanding at the time of the spin-off, including LTIP Units converted to common shares in connection with NorthStar Realty’s internal corporate reorganization, were adjusted to an equal number of shares of the Company’s common stock or Deferred LTIP Units, as described below, but generally continue to remain, subject to the same vesting and other terms that applied prior to the spin-off. Vesting conditions for outstanding awards were adjusted to reflect the impact of the spin-off with respect to employment conditions for service-based awards and total stockholder return for performance-based awards. The shares of the Company’s common stock (representing LTIP Units previously issued by NorthStar Realty’s operating partnership prior to the spin-off) that remain subject to vesting after the spin-off, as well as grants of shares of the Company’s common stock subject to time-based vesting issued by the Company since the time of the spin-off, are herein referred to as restricted stock.

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Deferred LTIP Units outstanding immediately prior to the spin-off were equity awards issued by NorthStar Realty representing the right to receive either LTIP Units in NorthStar Realty’s successor operating partnership or, if such LTIP Units were not available by March 13, 2015, shares of NorthStar Realty common stock (subject to the same vesting conditions). On March 13, 2015, all of the Company’s outstanding Deferred LTIP Units were settled in LTIP Units in the Operating Partnership, or shares of restricted stock, which remain subject to the same vesting conditions that applied to the Deferred LTIP Units.

Following the spin-off, NorthStar Realty and the compensation committee of its board of directors (the “NorthStar Realty Compensation Committee”) continue to administer all awards issued under the NorthStar Realty Equity Plans but the Company is 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 such awards previously issued under the NorthStar Realty Equity Plans. These awards will continue to be governed by the NorthStar Realty Equity Plans, as applicable, and shares of the Company’s common stock issued pursuant to these awards will not be issued pursuant to, or reduce availability under the NorthStar Realty Equity Plans.

In connection with the spin-off, most of NorthStar Realty’s employees at the time of the spin-off became employees of the Company except for executive officers, employees engaged in NorthStar Realty’s loan origination business at the time of the spin-off and certain other employees that became co-employees of both the Company and NorthStar Realty.

The following summarizes the equity-based compensation plans and related expenses.

NorthStar Asset Management Plans

NSAM Stock Plan

In March 2014, the NorthStar Realty Compensation Committee approved the NSAM Stock Plan, which was subsequently adopted by the Company’s board of directors and approved by its sole stockholder at the time. The NSAM Stock Plan was administered by the NorthStar Realty Compensation Committee prior to the spin-off and is administered by the Company’s compensation committee following the spin-off. The NSAM Stock Plan provides flexibility to use various equity-based and cash incentive awards as compensation tools to motivate the Company’s workforce.

In anticipation of the spin-off, on April 3, 2014, the Company granted an aggregate of 6,230,529 RSUs to its executive officers pursuant to the NSAM Stock Plan. The RSUs vest over four years and are subject to the achievement of performance-based vesting conditions and continued employment. 40% of these RSUs are performance-based awards and were subject to the achievement of performance-based hurdles relating to CAD of the Company and NorthStar Realty and capital raising of the Sponsored Companies, as well as continued employment through December 31, 2017 (“Performance RSUs”). 30% of these RSUs are market-based awards and are subject to the achievement of performance-based hurdles relating to the Company’s absolute total stockholder return and continued employment over a four-year period ended April 2, 2018 (“Absolute RSUs”). The remaining 30% of these RSUs are market-based awards and are subject to the achievement of performance-based hurdles based on the Company’s total stockholder return relative to the Russell 2000 Index and continued employment over a four-year period ended April 2, 2018 (“Relative RSUs”). With respect to these grants, the grant date fair value for the Performance RSUs, Absolute RSUs and Relative RSUs was $17.01 , $10.22 and $16.21 per RSU, respectively. The grant date fair value was determined using a risk-free interest rate of 1.48% . In May 2014, the Company also granted an aggregate of 1,315,615 of the Performance RSUs, Absolute RSUs and Relative RSUs (net of forfeitures occurring prior to June 30, 2015) with substantially similar terms as the RSUs granted to executives in April 2014 to certain employees pursuant to the NSAM Stock Plan. With respect to these grants, the grant date fair value for the Performance RSUs, Absolute RSUs and Relative RSUs was $16.80 , $9.95 and $16.29 per RSU, respectively. The grant date fair value of the Absolute RSUs and Relative RSUs was determined using a risk-free interest rate of 1.29% . In December 2014, the Company determined that the performance hurdles relating to the Performance RSUs were met. On December 31, 2014, the Performance RSUs were settled in shares of the Company’s common stock, of which 25% vested immediately and the remainder (in the form of restricted stock) will vest in equal installments on December 31, 2015, 2016 and 2017, subject to continued employment. On December 31, 2014, the Company retired 392,157 of the vested shares of common stock to satisfy the minimum statutory tax withholding requirements. The common stock retired to satisfy the withholding amounts was recorded as a reduction to additional paid-in capital with an offsetting payable recorded in accounts payable and accrued expenses. On December 31, 2014, the Absolute RSUs and Relative RSUs related to the executives were settled in shares of performance common stock. Upon vesting pursuant to the terms of the Absolute RSUs and Relative RSUs, shares of performance common stock will automatically convert into shares of common stock and the executive will be entitled to receive the distributions that would have been paid with respect to a share of common stock (for each share of performance common stock that vests) on or after the date the shares of performance common stock were initially issued.

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NSAM Bonus Plan

In March 2014, the NorthStar Realty Compensation Committee approved the NSAM Bonus Plan, which was subsequently adopted by the Company’s board of directors and approved by its sole stockholder. The NSAM Bonus Plan establishes the general parameters of the Company’s incentive bonus program for its executive officers. Pursuant to the NSAM Bonus Plan, for each plan year, the administrator will establish two bonus pools (an annual cash bonus pool and a long-term bonus pool), award a bonus pool percentage(s) to each participant with respect to such bonus pools and establish performance goals, vesting requirements and other terms and conditions applicable to such bonuses. The NSAM Bonus Plan was administered by the NorthStar Realty Compensation Committee prior to the spin-off and is administered by the Company’s compensation committee following the spin-off. Prior to the spin-off, the NorthStar Realty Compensation Committee established bonus pools, awarded bonus pool percentages and established the performance goals, vesting requirements and other terms and conditions applicable to bonuses for 2014 under the NSAM Bonus Plan.

Pursuant to an employee matters agreement entered into in connection with the spin-off, NorthStar Realty agreed to make the cash portion of any incentive payment to the Company employees for services performed in 2014 through the date of the spin-off and as a result NorthStar Realty was responsible for paying approximately 50% of the 2014 annual cash and long-term bonuses earned under the NSAM Bonus Plan. Long-term bonuses for 2014 were paid in both Company and NorthStar Realty equity-based awards, subject to performance-based and time-based vesting conditions over the four -year performance period from January 1, 2014 through December 31, 2017. Approximately 31.65% of these long-term bonuses were subject to the achievement of performance-based hurdles relating to CAD of the Company and NorthStar Realty and capital raising of the Sponsored Companies in 2014 to be paid in shares of the Company’s common stock that vest 25% on each of December 31, 2014, 2015, 2016 and 2017, subject to continued employment. 18.35% of these long-term bonuses are performance-based awards to be paid in shares of performance common stock that are subject to vesting based on the achievement of performance-based hurdles relating to the Company’s absolute total stockholder return and continued employment over a four -year period. The remaining approximately 50% of long-term bonuses are being paid by NorthStar Realty.

In connection with the long-term bonuses for 2014, the Company determined that the performance hurdles for the approximately 31.65% of the long-term bonuses to be paid in shares of the Company’s common stock were met. On December 31, 2014 , the Company paid this portion of the long-term bonus by issuing 795,107 shares of common stock, of which 25% vested immediately and the remainder (in the form of restricted stock) will vest in equal installments on December 31, 2015, 2016 and 2017, subject to continued employment. The Company retired 108,198 of the vested shares of common stock to satisfy the minimum statutory withholding requirements. In connection with the remainder of the long-term bonus to be paid by the Company, in February 2015, the Company issued an aggregate of 474,842 shares of performance common stock to executives, which are subject to vesting based on the Company’s absolute total stockholder return and continued employment over the four -year period ending December 31, 2017. With respect to these grants, the grant date fair value was $21.16 per share, which was determined using a risk-free interest rate of 1.00% . Upon vesting, these shares of performance common stock will automatically convert into shares of common stock and the executives will be entitled to receive the distributions that would have been paid with respect to a share of common stock (for each share of performance common stock that vests) on or after January 1, 2015. In February 2015, the Company also granted 641,907 shares of common stock, net of forfeitures, occurring prior to June 30, 2015 to certain non-executive employees, subject to time based vesting conditions through January 29, 2018.

NorthStar Realty Equity Plans

In connection with the spin-off, the Company issued the following related to the NorthStar Realty Equity Plans that remain outstanding as of June 30, 2015 : 198,191 shares of restricted stock, net of forfeitures, which remain subject to vesting; 1,127,696 LTIP Units, net of forfeitures and conversions, of which 759,163 remain subject to vesting; and 1,205,210 RSUs related to executives only and 762,898 RSUs related to executives granted in 2012, which remain subject to vesting based on performance and continued employment. On December 31, 2014, the performance hurdle for an incremental 762,898 of RSUs was met pursuant to NorthStar Realty’s bonus plan for 2011. To settle these RSUs, on January 1, 2015 the Company issued 49,149 shares of common stock, net of the minimum statutory tax withholding requirements and the Company issued 665,747 Deferred LTIP Units, which subsequently settled to LTIP Units with the creation of the Operating Partnership on March 13, 2015.

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Other Issuances

Healthcare Strategic Joint Venture

In connection with entering into the Healthcare Strategic Partnership, NorthStar Realty granted Mr. Flaherty 500,000 RSUs on January 22, 2014, adjusted to reflect NorthStar Realty’s reverse stock split, which vest on January 22, 2019, unless certain conditions are met. In connection with the spin-off, the RSUs granted to Mr. Flaherty were adjusted to also relate to an equal number of shares of the Company’s common stock. The RSUs are entitled to dividend equivalents prior to vesting and may be settled either in shares of common stock of the Company or in cash at the option of the Company. Mr. Flaherty is also entitled to incremental grants of the Company’s common stock subject to certain conditions being met pursuant to a separate contractual arrangement entered into in connection with the Healthcare Strategic Partnership. On February 2, 2015, in connection with the completion of NorthStar Healthcare’s initial public offering and the services Mr. Flaherty provides to the Healthcare Strategic Partnership, the Company issued 20,305 incremental RSUs to Mr. Flaherty, which vest on the third anniversary of the grant date, unless certain conditions are met.

AHI

On December 8, 2014, the Company acquired an interest in AHI for $37.5 million in cash and $20.0 million of common stock, representing 956,462 shares. In connection with this acquisition, the Company required the seller to subject one-half of these shares to forfeiture conditions that lapse based on the continued service to AHI of its three principals, with forfeiture conditions with respect to 50% of these shares lapsing two years after the closing date of the Company’s acquisition and the remaining 50% lapsing five years after the closing date. As a result of this vesting arrangement, $10.0 million of common stock (or 478,231 shares) subject to this arrangement is treated as a contingent consideration arrangement tied to continued employment of the AHI principals as an incentive to remain as employees of AHI. As such, this contingent consideration arrangement is accounted for separately as a compensatory arrangement with amortization of such equity award being recorded by the Company through equity in earnings. The AHI principals are also entitled to incremental grants of the Company’s common stock subject to certain conditions being met pursuant to a separate contractual arrangement entered into in connection with the Company’s AHI investment. For the three and six months ended June 30, 2015 , no incremental awards were issued. The Company will contribute $2.0 million in shares related to equity incentives for AHI’s employees for 2015 and 2016.

Summary

As of June 30, 2015 , an aggregate of 26,358,957 shares of the Company’s common stock were reserved for the issuance of awards under the 2014 NSAM Plan, subject to equitable adjustment upon the occurrence of certain corporate events, provided that this number automatically increases each January 1st by 2% of the outstanding number of shares of the Company’s common stock on the immediately preceding December 31st.

Equity-based compensation expense for the three and six months ended June 30, 2014 includes an expense based on a carve-out attributed to the Company related to NorthStar Realty’s historical asset management business for the three and six months ended June 30, 2014 . The allocation is based on an estimate had the Company’s asset management business been run as an independent entity and was determined principally based on relative head count and management’s knowledge of NorthStar Realty’s operations.

The following table presents equity-based compensation expense for the three and six months ended June 30, 2015 and 2014 (in thousands):



	Three Months Ended June 30,					Six Months Ended June 30,
	2015 ⁽¹⁾		2014			2015 ⁽¹⁾		2014
NSAM spin grants ⁽²⁾	$	7,604	$	—		$	15,091	$	—
NSAM bonus plan	3,282		—			5,217		—
NorthStar Realty bonus plan ⁽³⁾	3,296		8,045		⁽⁴⁾	7,360		13,745		⁽⁴⁾
Other	820		—			952		—
Total	$	15,002	$	8,045		$	28,620	$	13,745

__________________


(1)	The three and six months ended June 30, 2015 include $0.1 million and $0.2 million of dividends associated with non-employees.


(2)	Represents equity-based compensation expense for one-time grants issued related to the successful spin-off of the Company.


(3)	Represents equity-based compensation expense related to annual grants issued by NorthStar Realty prior to the spin-off of the Company.

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(4)	The three and six months ended June 30, 2014 represents an allocation of equity-based compensation expense prior to the spin-off.

The following table presents a summary of LTIP Units and unvested restricted stock. The balance as of June 30, 2015 represents LTIP Units whether vested or not that are outstanding and unvested shares of restricted stock whether vested or not (grants in thousands):



	Six Months Ended June 30, 2015
	Restricted Stock		LTIP Units			Total Grants		Weighted Average Grant Price
January 1, 2015	4,104		1,135		⁽¹⁾	5,239		$	22.12
New grants	687		666			1,353		23.56
Conversions	—		(7	)		(7	)	15.51
Vesting of restricted stock post-spin	(551	)	—			(551	)	13.60
Forfeited or canceled grants	(12	)	—			(12	)	18.17
June 30, 2015	4,228		1,794			6,022		$	23.24

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(1)	Represents Deferred LTIP Units that settled into LTIP Units on March 13, 2015.

As of June 30, 2015 , equity-based compensation expense to be recognized over the remaining vesting period through December 2019 is $124.5 million , provided there are no forfeitures.


8.	Stockholders’ Equity

Spin-off

In connection with the spin-off, NorthStar Realty distributed to its common stockholders all of the common stock of the Company in a pro rata distribution of one share of the Company common stock for each share of NorthStar Realty common stock.

Common Stock

In January 2015, in connection with the Island Interest, the Company issued 208,486 shares of common stock resulting in an increase to additional paid-in capital in 2015 of $4.5 million , subject to certain lock-up and vesting restrictions. The stock vests annually over three years.

In May 2015, the Company issued 33,444 shares of restricted stock with a fair value at the date of grant of $0.7 million to its non-employee directors in connection with their re-election to the Company’s board of directors as part of their annual grants. The stock vested immediately.

Performance Common Stock

The Company is currently authorized to issue 1.6 billion shares of capital stock, of which 500 million is designated as performance common stock, par value $.01 per share. In connection with the performance-based component of the 2014 long-term bonus to be paid by the Company, in February 2015, the Company issued an aggregate of 474,842 shares of performance common stock to executives.

Share Repurchase

In April 2015, the Company’s board of directors authorized the repurchase of up to $400 million of its outstanding common stock. The authorization expires in April 2016, unless otherwise extended by the Company’s board of directors. As of June 30, 2015, the Company repurchased 261,600 shares of its common stock for approximately $5.0 million .

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Earnings Per Share

Basic and diluted earnings per share and the average number of common shares outstanding were calculated using the number of common stock outstanding immediately following the spin-off on June 30, 2014. The Company presents common shares issued in connection with the spin-off as if it had been outstanding for all periods presented, similar to a stock split. The following table presents EPS for the three and six months ended June 30, 2015 and 2014 (dollars and shares in thousands, except per share data):



	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Numerator:
Net income (loss)	$	38,024		$	(22,247	)	$	59,792		$	(30,552	)
Earnings (loss) allocated to unvested participating securities	(1,315		)	—			(2,226		)	—
Numerator for basic income per share	36,709			(22,247		)	57,566			(30,552		)
Participating nonvested shares	497			—			543			—
Net income (loss) attributable to LTIP Units non-controlling interests	188			—			390			—
Numerator for diluted income per share	$	37,394		$	(22,247	)	$	58,499		$	(30,552	)

Denominator:
Weighted average number of shares of common stock	189,599			188,597			189,574			188,597
Incremental diluted shares	4,873			—			3,783			—
Weighted average number of diluted shares ⁽¹⁾	194,472			188,597			193,357			188,597
Earnings (loss) per share:
Basic	$	0.19		$	(0.12	)	$	0.30		$	(0.16	)
Diluted	$	0.19		$	(0.12	)	$	0.30		$	(0.16	)

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(1)	Diluted EPS excludes the effect of equity-based awards issued that were not dilutive for the periods presented. These instruments could potentially impact diluted EPS in future periods, depending on changes in the Company’s stock price and other factors.

Dividends

The following table presents dividends declared (on a per share basis) for the six months ended June 30, 2015 :



Common Stock

Declaration Date	Dividend Per Share
February 25	$	0.10
May 5	$	0.10


9.	Non-controlling Interests

Operating Partnership

Non-controlling interests includes the aggregate LTIP Units held by limited partners (the “Unit Holders”) 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 or LTIP Units changes the percentage ownership of both the Unit Holders and the Company. Since an 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. In connection with the formation of the Operating Partnership, the Company recorded a non-controlling interest of $4.4 million related to LTIP Units. As of June 30, 2015 , 1,793,444 LTIP units were outstanding, representing a 1.0% ownership and non-controlling interest in the Operating Partnership. Income attributable to the Operating Partnership non-controlling interest for the three and six months ended June 30, 2015 was $0.2 million and $0.4 million , respectively.

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(Unaudited)

10. Income Taxes

Subsequent to the spin-off, the Company became subject to both domestic and international income tax, as such, there was no income tax (benefit) expense for the three and six months ended June 30, 2014 . On March 13, 2015, the Company restructured by converting, under Delaware law, an existing limited liability company disregarded as separate from the Company for federal income tax purposes to a Delaware limited partnership and admitting as limited partners LTIP Unit Holders, forming the Company’s new Operating Partnership. The Operating Partnership is treated as a partnership for federal income tax purposes and consequently, its items of income gain, loss, deduction and credit are passed through to, and included in, the taxable income of each of its partners including the Company. For the period prior to March 13, 2015, the Company and its U.S. subsidiaries will file consolidated federal income tax returns.

For the three and six months ended June 30, 2015 , the Company incurred $12.1 million and $20.0 million of income tax expense, respectively, which is based on a full year estimated effective tax rate of approximately 24.0% and 24.9% , respectively. The Company operates internationally and domestically through multiple operating subsidiaries. Each of the jurisdictions in which the Company operates has its own tax law and tax rate and the tax rate outside the United States may be lower than the U.S. federal statutory income tax rate.


11.	Segment Reporting

The Company conducts its asset management business through the following five segments, which are based on how management reviews and manages its business:


•	NorthStar Realty - Provide asset management and other services on a fee basis by managing NorthStar Realty’s day-to-day operations. The Company began earning fees from NorthStar Realty on July 1, 2014.


•	Sponsored Companies - Provide asset management and other services on a fee basis by managing each Sponsored Company’s respective day-to-day operations.


•	Broker-dealer - Raise capital in the retail market through NorthStar Securities and earn dealer manager fees from the Sponsored Companies.


•	Direct Investments - Invest in strategic partnerships and joint ventures with third-parties with expertise in commercial real estate or other sectors and markets, where the Company benefits from the fee stream and potential incentive fee or promote.


•	Corporate/Other - Includes corporate level general and administrative expenses, as well as special servicing on a fee basis in connection with certain securitization transactions.

The consolidated financial statements for the three and six months ended June 30, 2015 represent the Company subsequent to the spin-off of NorthStar Realty’s historical asset management business of managing the Sponsored Companies, owning NorthStar Securities and operating its special servicing business. Periods prior to June 30, 2014 present a carve-out of NorthStar Realty’s historical financial information including revenues and expenses allocated to the Company, related to NorthStar Realty’s historical asset management business. Expenses also included an allocation of indirect expenses from NorthStar Realty, including salaries, equity-based compensation and other general and administrative expenses (primarily occupancy and other costs) based on an estimate had NorthStar Realty’s historical asset management business been run as an independent entity. This allocation method was principally based on relative headcount and management’s knowledge of NorthStar Realty’s operations. Additionally, periods prior to June 30, 2014 did not reflect the management agreement the Company entered into with NorthStar Realty effective July 1, 2014.

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NORTHSTAR ASSET MANAGEMENT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The following tables present segment reporting for the three and six months ended June 30, 2015 and 2014 (dollars in thousands):



Statement of Operations:
Three months ended June 30, 2015	NorthStar Realty ⁽¹⁾		Sponsored Companies		Broker Dealer ⁽²⁾			Direct Investments		Corporate/Other			Total
Asset management and other fees, related parties	$	51,744	$	38,614	$	—		$	—	$	—		$	90,358
Selling commission and dealer manager fees, related parties	—		—		28,337			—		—			28,337
Commission expense	—		—		26,338			—		—			26,338
Salaries and related expense	—		—		1,705			—		16,000			17,705
Equity-based compensation expense	—		—		—			—		15,002			15,002
Other general and administrative expenses	—		—		2,848			—		6,407			9,255
Equity in earnings (losses) of unconsolidated ventures	—		—		—			90		—			90
Income tax benefit (expense)	—		—		—			—		(12,055		)	(12,055		)
Net income (loss)	51,680		38,434		(2,583		)	90		(49,409		)	38,212

_______________


(1)	The Company began earning fees on July 1, 2014, in connection with the management agreement with NorthStar Realty (refer to Note 3).


(2)	Direct general and administrative expenses incurred by the broker dealer.



Statement of Operations:
Three months ended June 30, 2014	NorthStar Realty ⁽¹⁾		Sponsored Companies		Broker Dealer ⁽²⁾			Corporate/Other			Total
Asset management and other fees, related parties	$	—	$	13,110	$	—		$	—		$	13,110
Selling commission and dealer manager fees, related parties	—		—		19,313			—			19,313
Commission expense	—		—		18,138			—			18,138
Salaries and related expense	—		—		1,497			2,897			4,394
Equity-based compensation expense	—		—		—			8,045			8,045
Other general and administrative expenses	—		—		2,319			82			2,401
Net income (loss)	—		13,110		(2,716		)	(32,641		)	(22,247		)

_______________


(1)	The Company began earning fees on July 1, 2014, in connection with the management agreement with NorthStar Realty (refer to Note 3).


(2)	Direct general and administrative expenses incurred by the broker dealer.



Statement of Operations:
Six months ended June 30, 2015	NorthStar Realty ⁽¹⁾		Sponsored Companies		Broker Dealer ⁽²⁾			Direct Investments			Corporate/Other			Total
Asset management and other fees, related parties	$	99,995	$	51,742	$	—		$	—		$	—		$	151,737
Selling commission and dealer manager fees, related parties	—		—		58,260			—			—			58,260
Commission expense	—		—		54,034			—			—			54,034
Salaries and related expense	—		—		3,940			—			25,910			29,850
Equity-based compensation expense	—		—		—			—			28,620			28,620
Other general and administrative expenses	—		—		4,765			—			10,595			15,360
Equity in earnings (losses) of unconsolidated ventures	—		—		—			(781		)	—			(781		)
Income tax benefit (expense)	—		—		—			—			(19,992		)	(19,992		)
Net income (loss)	17,352		50,283		(4,549		)	(781		)	(2,123		)	60,182

_______________


(1)	The Company began earning fees on July 1, 2014, in connection with the management agreement with NorthStar Realty (refer to Note 3).


(2)	Direct general and administrative expenses incurred by the broker dealer.

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NORTHSTAR ASSET MANAGEMENT GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)



Statement of Operations:
Six months ended June 30, 2014	NorthStar Realty ⁽¹⁾		Sponsored Companies		Broker Dealer ⁽²⁾			Corporate/Other			Total
Asset management and other fees, related parties	$	—	$	21,779	$	—		$	—		$	21,779
Selling commission and dealer manager fees, related parties	—		—		33,861			—			33,861
Commission expense	—		—		31,698			—			31,698
Salaries and related expense	—		—		3,360			8,964			12,324
Equity-based compensation expense	—		—		—			13,745			13,745
Other general and administrative expenses	—		—		4,081			193			4,274
Net income (loss)	—		21,779		(5,326		)	(47,005		)	(30,552		)

_______________


(1)	The Company began earning fees on July 1, 2014, in connection with the management agreement with NorthStar Realty (refer to Note 3).


(2)	Direct general and administrative expenses incurred by the broker dealer.

The following table presents total assets by segment as of June 30, 2015 and December 31, 2014 (dollars in thousands):



Total Assets	NorthStar Realty ⁽¹⁾		Sponsored Companies ⁽¹⁾		Broker Dealer		Direct Investments		Corporate/Other		Total
June 30, 2015	$	50,234	$	61,490	$	12,169	$	90,695	$	97,509	$	312,097
December 31, 2014	$	60,909	$	27,147	$	17,868	$	54,480	$	103,465	$	263,869

__________________


(1)	Primarily represents the receivable, related parties as of June 30, 2015 and December 31, 2014 , respectively. Subsequent to June 30, 2015 , the Company received $52.5 million of reimbursements from the Managed Companies.


12.	Subsequent Events

Dividends

On August 4, 2015, the Company declared a dividend of $0.10 per share of common stock. The common stock dividend will be paid on August 21, 2015 to stockholders of record as of the close of business on August 17, 2015.

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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 “NSAM,” “we,” “us” or “our” refer to NorthStar Asset Management Group Inc. and its subsidiaries unless the context specifically requires otherwise.

Introduction

We are a global asset management firm focused on strategically managing real estate and other investment platforms in the United States and internationally. We commenced operations on July 1, 2014 upon the spin-off by NorthStar Realty Finance Corp., or NorthStar Realty, of its asset management business into a separate publicly-traded company, NorthStar Asset Management Group Inc. (NYSE: NSAM), a Delaware corporation. The spin-off was in the form of a tax-free distribution to NorthStar Realty’s common stockholders where each NorthStar Realty common stockholder received shares of our common stock on a one-for-one basis. At the same time, NorthStar Realty became externally managed by our affiliate through a management contract with an initial term of 20 years . NorthStar Realty continues to operate its commercial real estate debt origination business. Most of NorthStar Realty’s employees at the time of the spin-off became our employees.

Certain of our affiliates also manage NorthStar Realty’s previously sponsored non-traded companies which raise money through the retail market, as well as any new non-traded company and any future sponsored company, referred to as our Sponsored Companies and together with NorthStar Realty, referred to as our Managed Companies.

We are organized to provide asset management and other services to our Managed Companies, both in the United States and internationally. Our Managed Companies have historically invested in the commercial real estate, or CRE, industry. We seek to expand the scope of our asset management business beyond real estate into new asset classes and geographies by organically creating and managing additional investment vehicles or through acquisitions, strategic partnerships and joint ventures.

We earn asset management, incentive and other fees, directly or indirectly, pursuant to management and other contracts and direct investments. In addition, we own NorthStar Securities, LLC, or NorthStar Securities, a captive broker-dealer platform registered with the Securities and Exchange Commission, or SEC, which raises capital in the retail market for our Sponsored Companies.

As of June 30, 2015 , we had $25 billion of assets under management, adjusted for commitments to acquire certain investments by our Managed Companies. In addition, we invested $99 million in direct investments in entities that manage $9.7 billion across a variety of asset classes.

Proposed Spin-off of European Real Estate Business

On February 26, 2015, NorthStar Realty announced that its board of directors unanimously approved a plan to spin-off its European real estate business, or NRF Proposed European Spin into a newly-formed publicly-traded real estate investment trust, or REIT, NorthStar Realty Europe Corp., or NRE, expected to be listed on the New York Stock Exchange, or NYSE. As of August 5, 2015, NorthStar Realty has acquired approximately $2.6 billion , at cost, of European real estate (excluding NorthStar Realty’s European healthcare properties) comprised of 52 properties spanning across some of Europe’s top markets that will be contributed to NRE upon the completion of the NRF Proposed European Spin. We will manage NRE pursuant to a long-term management agreement, on substantially similar terms as our management agreement with NorthStar Realty. The NRF Proposed European Spin is expected to be completed in the second half of 2015. NRE filed its registration statement on Form S-11 with the SEC in July 2015.

Summary of Business

Our primary business lines are as follows:


•	NorthStar Realty - Provide asset management and other services on a fee basis by managing NorthStar Realty’s day-to-day operations. We began earning fees from NorthStar Realty on July 1, 2014.


•	Sponsored Companies - Provide asset management and other services on a fee basis by managing each Sponsored Company’s respective day-to-day operations.


•	Broker-dealer - Raise capital in the retail market through NorthStar Securities and earn dealer manager fees from our Sponsored Companies.


•	Direct Investments - Invest in strategic partnerships and joint ventures with third-parties with expertise in commercial real estate or other sectors and markets, where we benefit from the fee stream and potential incentive fee or promote.

Our Business

Our primary business objective is to provide asset management and other services by managing NorthStar Realty and our Sponsored Companies, both in the United States and internationally. We earn asset management, incentive and other fees

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pursuant to management and other contracts and direct investments. Our growth will depend upon the ability of NorthStar Realty and our Sponsored Companies to grow by raising capital, which in turn is driven by their investment activities and overall performance. In addition, growth in our assets under management for our Sponsored Companies is impacted by the ability to raise capital in the retail market through our captive broker-dealer platform. Our Managed Companies have historically invested in the CRE industry and have demonstrated the ability to invest and create value through multiple real estate cycles and changing market conditions. We seek to further expand the scope of our asset management business beyond real estate organically by creating and managing additional investment vehicles. For instance, we confidentially submitted a registration statement with the SEC to co-manage a business development company, or BDC, with OZ Institutional Credit Management LP, or OZ Credit Management, an affiliate of Och-Ziff Capital Management Group, LLC, or Och-Ziff, that will invest in senior and subordinate loans to middle-market companies.

As we grow our business, as well as expand into new asset classes and geographies, we seek to enter into strategic partnerships and joint ventures with third parties with expertise in commercial real estate or other sectors and markets to augment our business operations while at the same time benefiting from fee streams generated by such strategic partnerships and joint ventures.

Our management team, located in the United States and internationally, has a proven track record in managing and growing our Managed Companies. We believe our in-place, long-duration fees, substantial growth prospects and scalable operating platform position us as an industry leading asset manager. We have the ability to maintain a competitive advantage through a combination of our deep industry relationships and access to market leading credit underwriting and capital markets expertise which enables us to manage credit risk as well as to structure and finance the assets of our Managed Companies efficiently. Our ability to identify opportunities across a broad spectrum of potential investments for our Managed Companies will continue to create complementary and overlapping sources of investment opportunities based on a common reliance on market fundamentals and application of similar underwriting and asset management skills as we seek to maximize stockholder value.

Assets of our Managed Companies grew significantly over the past several years driven by our ability to raise capital for NorthStar Realty and our Sponsored Companies and in turn effectively deploy such capital. The following table presents the investments of our Managed Companies as of June 30, 2015 and December 31, 2014 (dollars in thousands):



	June 30, 2015 ⁽¹⁾⁽²⁾				December 31, 2014
	Amount		Percentage		Amount		Percentage
NorthStar Realty	$	19,001,760	76.8	%	$	17,871,175	82.3	%
Sponsored Companies:
NorthStar Income	2,032,099		8.2	%	2,183,570		10.1	%
NorthStar Healthcare	2,518,615		10.2	%	1,097,729		5.1	%
NorthStar Income II	1,192,765		4.8	%	533,063		2.5	%
Subtotal Sponsored Companies	5,743,479		23.2	%	3,814,362		17.7	%
Total	$	24,745,239	100.0	%	$	21,685,537	100.0	%

__________________


(1)	Adjusted for acquisitions and commitments to purchase through August 5, 2015.


(2)	Based on investments reported by each Managed Company, except for NorthStar Realty which excludes NorthStar Healthcare’s proportionate interest in healthcare joint ventures.

To date, we also invested in the following businesses that have an aggregate of $9.7 billion assets under management:


•	American Healthcare Investors LLC, or AHI, is a healthcare-focused real estate investment management firm;


•	Island Hospitality Management Inc., or Island, is a leading, independent select service hotel management company; and


•	Distributed Finance Corporation, or Distributed Finance, is a marketplace finance platform company.

In connection with these investments, we earn fees and may be entitled to certain incentive fees. In addition, AHI and Island provide certain asset management, property management and other services to us to assist in managing the current and future assets of our Managed Companies.

NorthStar Realty

NorthStar Realty is a diversified commercial real estate company with 86% of its total assets invested in real estate, of which 77% is invested in direct real estate investments including healthcare, hotel, European, manufactured housing communities, net lease, multifamily and multi-tenant office properties. In addition, NorthStar Realty originates, structures, acquires and manages senior and subordinate debt investments and invests in CRE securities. NorthStar Realty has grown its business by raising capital and deploying such capital effectively. To date in 2015, NorthStar Realty issued aggregate capital of $1.3 billion (including the remaining shares available to be issued under NorthStar Realty’s forward sale agreement for net proceeds of $246 million ). In 2014, NorthStar Realty issued aggregate net capital of $2.6 billion, including $1.3 billion from the issuance

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of common equity (including the remaining shares issued under a forward sale agreement in February 2015 for net proceeds of $122 million), $1.1 billion as part of the consideration for the merger of Griffin-American Healthcare REIT II, Inc., or Griffin-American, and $242 million from the issuance of preferred equity.

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

Base Management Fee

For the three and six months ended June 30, 2015 , we earned $48 million and $94 million , respectively, related to the base management fee. The management contract with NorthStar Realty commenced on July 1, 2014, and as such, there were no management fees earned for the three and six months ended June 30, 2014 . The base management fee from NorthStar Realty will increase subsequent to June 30, 2015 by an amount equal to 1.5% per annum of the sum of:


•	cumulative net proceeds of all future common equity and preferred equity issued by NorthStar Realty, including any shares issued as part of a forward agreement such as the remaining $246.0 million of shares currently available under the NorthStar Realty forward contract;


•	equity issued by NorthStar Realty in exchange or conversion of exchangeable senior notes based on the stock price at the date of issuance;


•	any other issuances by NorthStar Realty 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 equity-based compensation, but including issuances related to an acquisition, investment, joint venture or partnership); and


•	cumulative cash available for distribution, or CAD, of NorthStar Realty in excess of cumulative distributions paid on common stock, LTIP units or other equity awards beginning the first full calendar quarter after the spin-off.

Additionally, NorthStar Realty’s equity interest in RXR Realty LLC, or RXR Realty, and Aerium Group is structured so that we are entitled to the portion of distributable cash flow from each investment in excess of the $10 million minimum annual base amount.

As of August 5, 2015, the annual base management fee, including the remaining shares pursuant to the NorthStar Realty forward sale agreement is $200 million .

Incentive Fee

For the three and six months ended June 30, 2015 , we earned $4 million and $6 million , respectively, related to the incentive fee. The incentive fee is calculated and payable quarterly in arrears in cash, equal to:


•	the product of: (a) 15% and (b) CAD of NorthStar Realty before such incentive fee, divided by the weighted average shares outstanding of NorthStar Realty for the calendar quarter, when such amount is in excess of $0.39 per share of NorthStar Realty but less than $0.45 per share of NorthStar Realty; plus


•	the product of: (a) 25% and (b) CAD of NorthStar Realty before such incentive fee, divided by the weighted average shares outstanding of NorthStar Realty for the calendar quarter, when such amount is equal to or in excess of $0.45 per share of NorthStar Realty;


•	multiplied by the weighted average shares outstanding of NorthStar Realty for the calendar quarter.

In addition, we may also earn an incentive fee from NorthStar Realty’s healthcare investments in connection with our Healthcare Strategic Partnership (refer to Related Party Arrangements).

Additional NorthStar Realty Management Agreement Terms


•	20-year initial term, which will be automatically renewed for additional 20-year terms each anniversary thereafter unless earlier terminated for “cause.”

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•

If NorthStar Realty were to spin-off any asset or business in the future, including the NRF Proposed European Spin, such entity would be managed by us on terms substantially similar to those set forth in the management agreement between us and NorthStar Realty. The management agreement further provides that the aggregate base management fee in place immediately after any future spin-off will not be less than the aggregate base management fee in place at NorthStar Realty immediately prior to such spin-off. Upon completion of the NRF Proposed European Spin, NRE base management fee is expected to be $14 million based on the current investments in NorthStar Realty’s European segment, including an acquisition through August 5, 2015.

Payment of Costs and Expenses and Expense Allocation

NorthStar Realty is responsible for all of its direct costs and expenses and will reimburse us for costs and expenses incurred by us on its behalf. In addition to NorthStar Realty’s costs and expenses, following the spin-off, NorthStar Realty is obligated to reimburse us for additional costs and expenses incurred by us for an amount not to exceed the following: (i) 20% of the combined total of: (a) NorthStar Realty’s general and administrative expenses as reported in its consolidated financial statements excluding: (1) equity-based compensation expense, (2) non-recurring items, (3) fees payable to us under the terms of the management agreement and (4) any allocation of expenses to NorthStar Realty, or NorthStar Realty G&A; and (b) our general and administrative expenses as reported in our consolidated financial statements, excluding equity-based compensation expense and adding back any costs or expenses allocated to any of our Managed Companies, less (ii) the NorthStar Realty G&A.

Sponsored Companies

We raise capital for certain of our effective Sponsored Companies through NorthStar Securities.


•	NorthStar Real Estate Income Trust, Inc., or NorthStar Income - Our first Sponsored Company, NorthStar Income, successfully completed its public offering on July 1, 2013.


•	NorthStar Healthcare Income, Inc., or NorthStar Healthcare - Our second Sponsored Company, NorthStar Healthcare, successfully completed its public offering on February 2, 2015 and began raising capital in a follow-on public offering at the end of February 2015.


•	NorthStar Real Estate Income II, Inc., or NorthStar Income II - Our third Sponsored Company, NorthStar Income II, is currently raising capital.


•	NorthStar/RXR New York Metro Income, Inc., or NorthStar/RXR New York Metro - Our fourth Sponsored Company, NorthStar/RXR New York Metro, expects to begin raising capital in the second half of 2015.

We seek to raise capital for certain of our non-effective Sponsored Companies through NorthStar Securities.

•

NorthStar Corporate Income, Inc., or NorthStar Corporate - Our fifth Sponsored Company, NorthStar Corporate, confidentially submitted its registration statement on Form N-2 to the SEC in December 2014. NorthStar Corporate seeks to raise up to $1 billion in a public offering of common stock. NorthStar Corporate is structured as a non-diversified, closed-end management investment company that intends to elect to be regulated as a BDC under the Investment Company Act of 1940, as amended, or the Investment Company Act. NorthStar Corporate intends to engage OZ Credit Management, an affiliate of Och-Ziff, an alternative asset manager, to serve as the sub-advisor to manage NorthStar Corporate’s investments and oversee operations. Any asset management and other fees incurred by NorthStar Corporate will be shared between us and OZ Credit Management as co-sponsors. NorthStar Corporate intends to invest in senior and subordinate loans to middle-market companies.

•

NorthStar Global Corporate Income Fund, or NorthStar Global - Our sixth Sponsored Company, NorthStar Global, filed its registration statement on Form N-2 with the SEC in July 2015. NorthStar Global seeks to raise up to $3 billion in a public offering of common stock. NorthStar Global is structured as statutory trust under Investment Company Act. NorthStar Global intends to engage OZ Credit Management, an affiliate of Och-Ziff, an alternative asset manager, to serve as the sub-advisor to manage NorthStar Global’s investments and oversee operations. NorthStar Global intends to invest in securities in public and private corporations.

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The following table presents a summary of the fee arrangements with our current Sponsored Companies which are effective:



	NorthStar	NorthStar	NorthStar	NorthStar/RXR
	Income	Healthcare	Income II	New York Metro ⁽⁹⁾
Offering amount ⁽¹⁾	$1.1 billion	$1.8 billion ⁽⁸⁾	$1.65 billion	$2.0 billion
Total raised through August 4, 2015 ⁽²⁾	$1.2 billion	$1.3 billion	$700 million	(10)
Primary strategy	CRE Debt	Healthcare Equity and Debt	CRE Debt	Tri-State CRE Equity and Debt
Primary offering period	Completed July 2013	Ends February 2017 ⁽⁸⁾	Ends May 2016 ⁽¹¹⁾	Ends February 2017 ⁽¹¹⁾
Asset Management and Other Fees:
Asset management fees ⁽³⁾	1.25% of assets	1.00% of assets	1.25% of assets	1.25% of assets
Acquisition fees ⁽⁴⁾	1.00% of investments	2.25% for real estate properties 1.00% of other investments	1.00% of investments	2.25% for real estate properties 1.00% of other investments
Disposition fees ⁽⁵⁾	1.00% of sales price	2.00% for real estate properties 1.00% of sales price for debt investments	1.00% of sales price	2.00% for real estate properties 1.00% of sales price for debt investments
Incentive payments ⁽⁶⁾	15.00% of net cash flows after an 8.00% return	15.00% of net cash flows after a 6.75% return ⁽⁷⁾	15.00% of net cash flows after a 7.00% return	15.00% of net cash flows after a 6.00% return

__________________


(1)	Represents amount of shares registered to offer pursuant to each Sponsored Company’s public offering and includes the follow-on public offering of up to $700 million for NorthStar Healthcare.


(2)	Includes capital raised through dividend reinvestment plans.


(3)	Assets represent principal amount funded or allocated for debt investments originated or acquired and the cost of all other investments, including expenses and any financing attributable to such investments, less any principal received on debt and securities investments (or our proportionate share thereof in the case of an investment made in a joint venture).


(4)	Calculated based on the amount funded or allocated by our Sponsored Companies to originate or acquire investments, including acquisition expenses and any financing attributable to such investments (or the proportionate share thereof in the case of an equity investment made through a joint venture).


(5)	Calculated based on contractual sales price of each investment sold.

(6)

We are entitled to receive distributions equal to 15% of net cash flow of the respective Sponsored Company, whether from continuing operations, repayment of loans, disposition of assets or otherwise, but only after stockholders have received, in the aggregate, cumulative distributions equal to their invested capital plus the respective cumulative, non-compounded annual pre-tax return (as noted in the table above) on such invested capital.


(7)	The Healthcare Strategic Partnership (refer to Related Party Arrangements) is entitled to the incentive fees earned from managing NorthStar Healthcare, of which we earn our proportionate interest.


(8)	NorthStar Healthcare successfully completed its public offering on February 2, 2015 by raising $1.1 billion in capital. We began raising capital for NorthStar Healthcare’s follow-on public offering at the end of February 2015.


(9)	Any asset management and other fees incurred by NorthStar/RXR New York Metro will be shared equally between the Company and RXR Realty, as co-sponsors.


(10)	The Company expects to begin raising capital for NorthStar/RXR New York Metro in the second half of 2015.


(11)	Offering period subject to extension as determined by the board of directors of each Sponsored Company.

Pursuant to each of the advisory agreements with our current Sponsored Companies, we may determine, in our sole discretion, to defer or waive, in whole or in part, certain asset management and other fees incurred. In considering whether to defer or waive any such fees, we evaluate the specific facts and circumstances surrounding the incurrence of a particular fee and make our decision on a case by case basis.

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The following table presents a summary of our current Sponsored Companies and their capital raising activity for the six months ended June 30, 2015 , year ended December 31, 2014 and from inception through August 4, 2015:

Capital Raised (in thousands) ⁽¹⁾

Six Months Ended

Year Ended

From inception through

Primary Strategy

Offering Amount

Offering Period

June 30, 2015

December 31, 2014

August 4, 2015

NorthStar Income

CRE Debt

$1.1 billion

Completed July 2013

21,713

42,661

1,225,408

NorthStar Healthcare

Healthcare Equity and Debt

$1.8 billion ⁽²⁾

Ends February 2017 ⁽²⁾

280,381

867,245

1,326,500

NorthStar Income II

CRE Debt

$1.65 billion

Ends May 2016 ⁽³⁾

343,828

280,296

699,600

NorthStar/RXR New York Metro

Tri-State CRE Equity and Debt

$2.0 billion

Ends February 2017 ⁽³⁾

—

__________________


(1)	Includes capital raised through dividend reinvestment plans.


(2)	NorthStar Healthcare successfully completed its public offering on February 2, 2015 by raising $1.1 billion in capital. We began raising capital for NorthStar Healthcare’s follow-on public offering at the end of February 2015.


(3)	Offering period subject to extension as determined by the board of directors of each company.

Distribution Support

NorthStar Realty committed to invest up to $10 million in each of our Sponsored Companies that are in their offering stage. In addition, consistent with its past practices, NorthStar Realty will commit up to $10 million for distribution support in any Sponsored Company that we may sponsor, up to a total of five new companies per year.

The distribution support agreement related to NorthStar/RXR New York Metro is an obligation of both NorthStar Realty and RXR Realty, where each agreed to purchase up to an aggregate of $10 million in Class A common stock during the two-year period following commencement of the offering, with NorthStar Realty and RXR Realty agreeing to purchase 75% and 25% of any shares purchased, respectively.

The distribution support agreement related to NorthStar Global is an obligation of both NorthStar Realty and Och-Ziff, where each agreed to purchase up to an aggregate of $10 million in Class A common stock during the two-year period following commencement of the offering, with NorthStar Realty and Och-Ziff agreeing to equally purchase any shares.

Payment of Costs and Expenses and Expense Allocation

In addition, we are entitled to certain expense allocations for costs paid on behalf of our Sponsored Companies which include: (i) reimbursement for organization and offering costs such as professional fees and other costs associated with the formation and offering of the Sponsored Company; and (ii) reimbursement for direct and indirect operating costs such as certain salaries, equity-based compensation and professional and other costs associated with managing the operations of the Sponsored Company. The following table presents a summary of the expense arrangements with our current Sponsored Companies which are effective:



	NorthStar Income	NorthStar Healthcare	NorthStar Income II	NorthStar/RXR New York Metro
Organization and offering costs ⁽¹⁾	$11.0 million ⁽²⁾	$22.5 million, or 1.5% of the proceeds expected to be raised from the offering ⁽⁴⁾	$24.8 million, or 1.5% of the proceeds expected to be raised from the offering ⁽⁴⁾	$30.0 million, or 1.5% of the proceeds expected to be raised from the offering ⁽⁴⁾
Operating costs ⁽³⁾	Greater of 2.0% of its average invested assets or 25.0% of its net income (net of 1.25% asset management fee)	Greater of 2.0% of its average invested assets or 25.0% of its net income (net of 1.00% asset management fee)	Greater of 2.0% of its average invested assets or 25.0% of its net income (net of 1.25% asset management fee)	Greater of 2.0% of its average invested assets or 25.0% of its net income (net of 1.25% asset management fee)

__________________


(1)	Represents reimbursement for organization and offering costs paid on behalf of our Sponsored Companies in connection with their respective offerings. We are facilitating the payment of organization and offering costs on behalf of our Sponsored Companies.


(2)	Represents the total expense allocation for organization and offering costs through the end of the offering period in July 2013.


(3)	Calculated based on the four preceding fiscal quarters not to exceed the greater of: (i) 2.0% of each Sponsored Company’s average invested assets; or (ii) 25.0% of each Sponsored Company’s net income determined without reduction for any additions to reserves for depreciation, loan losses or other similar non-cash reserves and excluding any gain from the sale of assets for that period.


(4)	Excludes shares being offered pursuant to dividend reinvestment plans.

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Sources of Operating Revenues and Cash Flows

We primarily generate revenue from asset management, incentive and other fee income pursuant to contractual arrangements with our Managed Companies. We also generate revenue from commission income from selling equity in our Sponsored Companies. Effective July 1, 2014, we began generating revenue from asset management, incentive and other fee income from NorthStar Realty in addition to our Sponsored Companies. Additionally, we record equity in earnings and receive distributions from our unconsolidated ventures.

Profitability and Performance Metrics

We calculate certain metrics to evaluate the profitability and performance of our business.


•	CAD is a non-GAAP measure that provides investors and management with a meaningful indicator of operating performance (refer to “Non-GAAP Financial Measure” for a description of this metric); and


•	Our ability to raise capital for our Managed Companies, which in turn grows the assets of our Managed Companies, is a driver of our ability to grow our fee income.

Outlook and Recent Trends

As an asset manager, we and the assets of our Managed Companies are impacted by general market and economic conditions. We have focused to date on strategically managing our real estate investments platform but we may determine to expand the breadth of our business. Historically, we have principally managed U.S. commercial real estate assets and have more recently expanded internationally. Consequently, we expect that global markets and economic conditions will have a greater impact on our business in the future.

Liquidity and capital started to become more available in early 2012 for the commercial real estate markets to stronger sponsors and both Wall Street and commercial banks began to more actively provide credit to real estate borrowers accelerating the pace of investment in real estate. In late 2012, in order to stimulate growth, several of the world’s largest central banks acted in a coordinated effort through massive injections of stimulus in the financial markets, which has facilitated keeping interest rates low since then.

A proxy for the liquidity in the commercial real estate market is non-agency commercial mortgage backed securities, or CMBS, issuance. Approximately $80 billion and $88 billion of non-agency CMBS was issued in the United States in 2013 and 2014, respectively, with industry experts currently predicting approximately $100 billion of non-agency CMBS issuance in 2015. In the first half of 2015, approximately $50 billion of new CMBS issuance occurred in the United States keeping the market on pace for the current projection of $100 billion for 2015. We believe the U.S. economy is on a healthy growth path and that the U.S. Federal Reserve is on track to begin raising rates in 2015. However, there are concerns about low inflation in the United States, a stronger U.S. dollar, slow global growth and international market volatility. Many other global central banks are easing monetary conditions to combat their own problems with low inflation and slow growth.

The European economy has also been steadily recovering. However, regional disparities continue to persist as economies recover at differing speeds. We believe that the European Central Bank’s €1.1 trillion “quantitative easing” program, along with historically low interest rates and the depreciation of the euro, has nonetheless created a compelling long-term investment environment in Europe. Real estate transaction volume in Europe has continued to climb, with office transactions representing over one-third of the volume in 2014. As financial institutions continue to deleverage, we anticipate that there will be further opportunities to acquire portfolios and assets at an attractive long term basis.

Valuations in the commercial real estate markets have generally improved since bottoming out in 2009. Robust investor demand in 2014 for commercial real estate increased transaction activity and prices as rent and vacancy fundamentals improved across most property sectors and are forecasted to continue to improve in 2015. However, global economic and political headwinds remain. For instance, global market instability and the risk that maturing commercial real estate debt may have difficulties being refinanced, among other factors, may continue to cause periodic volatility in the commercial real estate market for some time. It is currently estimated that approximately $1.4 trillion of commercial real estate debt in the United States will mature through 2018. While there is an increased supply of liquidity and improved fundamentals in the commercial real estate market, we still anticipate that certain of these loans will not be able to be refinanced, potentially inhibiting growth and contracting credit.

As an active asset manager in the retail capital raising industry, historically focusing on the non-traded sector, we actively monitor market fundamentals and trends. After showing resiliency during the economic downturn between 2007 and 2010, the non-traded sector experienced strong growth over recent years with approximately $16 billion of equity being raised for programs in this space in 2014 alone. We anticipate that capital raising in 2015 will remain strong as we monitor a variety of trends in this industry including a number of regulatory changes like the implementation of FINRA 15-02 and the Department of Labor’s recent proposal on a fiduciary standard for retirement accounts.

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Due to generally positive market dynamics and our expertise and industry relationships, we continue to see a robust pipeline of investment opportunities that have credit qualities and yield profiles that are consistent with our underwriting standards and that we believe offer the opportunity to meet or exceed our Managed Companies, targeted returns, thereby increasing our assets under management and fee income. We also believe the opportunity exists to accelerate our growth through accretive investments in third party asset managers. While we remain optimistic that we will continue to be able to generate and capitalize on an attractive pipeline of opportunities, there is no assurance that will be the case.

Financing Strategy

Our organizational documents do not limit our capacity to use leverage or the amount we may use. Our financing objective is to manage our capital structure effectively in order to provide sufficient capital to execute our business strategies and in turn create value for stockholders. We may seek to access a wide range of secured and unsecured debt and public and private equity capital sources to fund our investment activities and asset growth. We may borrow on a credit facility and from time to time use derivative instruments primarily to manage interest rate risk. We do not intend to use derivatives to speculate.

Portfolio Management

Credit risk management is our ability to manage our investments and investments of our Managed Companies in a manner that preserves capital and income and minimizes losses that would decrease income. Upon commencement of operations, we perform portfolio management on behalf of our Managed Companies. We maintain a comprehensive portfolio management process that generally includes day-to-day oversight by the portfolio management and servicing team, regular management meetings and an exhaustive quarterly credit review process. These processes are designed to enable management to evaluate and proactively identify asset-specific credit issues and trends on a portfolio-wide basis. Nevertheless, we cannot be certain that such review will identify all issues within the portfolios of our Managed Companies due to, among other things, adverse economic conditions or events adversely affecting specific assets; therefore, potential future losses at our Managed Companies may also stem from investments that are not identified during these credit reviews. We use many methods to actively manage the assets of our Managed Companies such as frequent re-underwriting and dialogue with borrowers/tenants/operators/partners and regular inspections of our Managed Companies’ collateral, modification to debt terms, taking title to collateral or selling assets when we can obtain a price that is attractive relative to its risk. In addition, we seek to utilize services of certain strategic partnerships and joint ventures with third parties with expertise in commercial real estate or other sectors and markets to assist our portfolio management of our Managed Companies. The portfolio management team, under the direction of the Investment Committee, uses many methods to actively manage our asset base to preserve our income and capital.

Critical Accounting Policies

Principles of Consolidation

Our consolidated financial statements include the accounts of NorthStar Asset Management Group Inc. and its consolidated subsidiaries.

Variable Interest Entities

A variable interest entity, or 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. We base the qualitative analysis on our 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.

We reassess the 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. We determine whether we are 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 us 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 our business activities and the other interests. We reassess the determination of whether we are 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.

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We evaluate our Managed Companies, investments in unconsolidated ventures and securitization financing transactions to which we are the special servicer to determine whether they are a VIE.

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 we have a majority voting interest in a voting interest entity, the entity will generally be consolidated. We do not consolidate a voting interest entity if there are substantive participating rights by other parties and/or kick-out rights by a single party.

We perform 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.

Investments in Unconsolidated Ventures

A non-controlling, unconsolidated ownership interest in an entity may be accounted for using the equity method, at fair value or the cost method.

We may account for an investment in an unconsolidated entity at fair value by electing the fair value option. We record the change in fair value for our share of the projected future cash flow of such investments from one period to another in equity in earnings (losses) from unconsolidated ventures in the consolidated statements of operations. Any change in fair value attributed to market related assumptions is considered unrealized gain (loss).

We may account for an investment that does not qualify for equity method accounting or for which the fair value option was not elected using the cost method if we determine the investment in the unconsolidated entity is insignificant. Under the cost method, equity in earnings is recorded as dividends are received to the extent they are not considered a return of capital, which is recorded as a reduction of cost of the investment.

Estimates

Revenue Recognition

Asset Management and Other Fees

Asset management and other fees include asset management, incentive and other fees, such as acquisition and disposition fees, earned from our Managed Companies. Base asset management and other fees are recognized based on contractual terms specified in the underlying governing documents in the periods during which the related services are performed and the amounts have been contractually earned. Incentive fees and payments are recognized subject to the achievement of return hurdles in accordance with the respective terms set forth in the governing documents of our Managed Companies.

Selling Commission and Dealer Manager Fees and Commission Expense

Selling commission and dealer manager fees represent income earned by us for selling equity in our Sponsored Companies through NorthStar Securities. Selling commission and dealer manager fees and commission expense are accrued on a trade date basis.

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Equity-Based Compensation

We account for equity-based compensation awards, including awards granted to co-employees, 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. We recognize compensation expense over the vesting period on a straight-line basis. 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. We recognize 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. We recognize 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, we estimate the fair value as if it were two separate awards. First, we estimate the probability of achieving the performance measure. If it is not probable the performance condition will be met, we recognize 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, we record compensation expense based on the performance-based measure. We would then record a cumulative catch-up adjustment for any additional compensation expense.

Income Taxes

Certain of our subsidiaries are subject to taxation by federal, state, local and foreign authorities for the periods presented. On March 13, 2015, we restructured by converting, under Delaware law, an existing limited liability company disregarded as separate from us for federal income tax purposes to a Delaware limited partnership and admitting as limited partners LTIP Unit Holders, forming our new operating partnership, or Operating Partnership. The Operating Partnership is taxed as a partnership for federal income tax purposes and consequently, its items of income gain, loss, deduction and credit are passed through to, and included in, the taxable income of each of its partners including us. For the period prior to March 13, 2015, we and our U.S. subsidiaries will file consolidated federal income tax returns. Income taxes are accounted for by the asset/liability approach in accordance with U.S. GAAP. Deferred taxes, if any, represent the expected future tax consequences when the reported amounts of assets and liabilities are recovered or paid. Such amounts arise from differences between the financial reporting and tax bases of assets and liabilities and are adjusted for changes in tax laws and tax rates in the period which such changes are enacted. A provision for income tax represents the total of income taxes paid or payable for the current period, plus the change in deferred tax assets and liabilities.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board, or 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. We are in the process of evaluating the impact, if any, of the update on our consolidated financial position, results of operations and financial statement disclosures.

In February 2015, the FASB issued updated guidance that changes the rules regarding consolidation. The pronouncement eliminates specialized guidance for limited partnerships and similar legal entities and removes the indefinite deferral for certain investment funds. The new guidance is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015, with early adoption permitted. We are currently assessing the impact of the guidance on our consolidated financial position, results of operations and financial statement disclosures.

In April 2015, the FASB issued an accounting update changing the presentation of financing costs in financial statements. Under the new guidance, an entity would present these costs in the balance sheet as a direct deduction from the related liability rather than as an asset. Amortization of the costs would continue to be reported as interest expense. The new guidance is effective for annual periods and interim periods beginning after December 15, 2015, with early adoption permitted. We are currently assessing the impact of the guidance on our consolidated financial position, results of operations and financial statement disclosures.

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Results of Operations

Comparison of the Three Months Ended June 30, 2015 to June 30, 2014 (dollars in thousands):

The consolidated financial statements for the three months ended June 30, 2015 represent our results of operations following the spin-off of NorthStar Realty’s historical asset management business on June 30, 2014 . Our historical financial information for the three months ended June 30, 2014 represents a carve-out of revenues and expenses attributable to us related to NorthStar Realty’s historical asset management business. As a result, results of operations for the three months ended June 30, 2015 may not be comparable to our results of operations reported for the prior period presented. The following table represents our results of operations for the three months ended June 30, 2015 and 2014 (dollars in thousands):



	Three Months Ended June 30,						Increase (Decrease)
	2015			2014			Amount			%
Revenues
Asset management and other fees, related parties	$	90,358		$	13,110		$	77,248		NM
Selling commission and dealer manager fees, related parties	28,337			19,313			9,024			46.7	%
Other income	434			260			174			66.9	%
Total revenues	119,129			32,683			86,446			264.5	%
Expenses
Commission expense	26,338			18,138			8,200			45.2	%
Transaction costs	73			21,926			(21,853		)	(99.7	)%
Other expense	642			26			616			NM
General and administrative expenses
Salaries and related expense	17,705			4,394			13,311			NM
Equity-based compensation expense	15,002			8,045			6,957			86.5	%
Other general and administrative expenses	9,255			2,401			6,854			NM
Total general and administrative expenses	41,962			14,840			27,122			NM
Total expenses	69,015			54,930			14,085			25.6	%
Unrealized gain (loss) on foreign exchange	63			—			63			N/A
Income (loss) before equity in earnings (losses) of unconsolidated ventures and income tax benefit (expense)	50,177			(22,247		)	72,424			NM
Equity in earnings (losses) of unconsolidated ventures	90			—			90			N/A
Income (loss) before income tax (benefit) expense	50,267			(22,247		)	72,514			NM
Income tax benefit (expense)	(12,055		)	—			(12,055		)	N/A
Net income (loss)	$	38,212		$	(22,247	)	$	60,459		NM

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Asset Management and Other Fees

Asset management and other fees are comprised of fees from our Managed Companies summarized as follows (dollars in thousands):



	Three Months Ended June 30,
	2015		2014
NorthStar Realty:
Base fee	$	48,244	N/A
Incentive fee	3,500		N/A
Subtotal NorthStar Realty	51,744		N/A		⁽¹⁾
Sponsored Companies:
Asset management fees	11,682		6,349		⁽²⁾
Acquisition fees	26,691		6,129		⁽³⁾
Disposition fees	241		632		⁽⁴⁾
Subtotal Sponsored Companies	38,614		13,110
Total	$	90,358	$	13,110

__________________


(1)	We began earning fees on July 1, 2014, in connection with the management agreement with NorthStar Realty.


(2)	The increase was driven by the growth in assets of our Sponsored Companies. As of June 30, 2015 and 2014 , our Sponsored Companies held aggregate assets of $5.7 billion and $2.5 billion , respectively.


(3)	The increase was due to more investment activity of our Sponsored Companies in the second quarter 2015 compared to 2014, with investment activity of $1.0 billion at NorthStar Healthcare and $0.5 million at NorthStar Income II.


(4)	The decrease was driven by less repayments of debt investments from our Sponsored Companies in the second quarter 2015 compared to the same period in 2014.

Selling Commission and Dealer Manager Fees

We earn net commission income through NorthStar Securities for selling equity in our Sponsored Companies.

Selling commission and dealer manager fees represent fees earned for selling equity in our Sponsored Companies through NorthStar Securities. Pursuant to dealer manager agreements between NorthStar Securities and our Sponsored Companies, we generally receive selling commissions of up to 7% of gross offering proceeds raised, which we reallow to participating broker-dealers. In addition, we also generally receive a dealer manager fee of up to 3% of gross offering proceeds raised, a portion of which is typically also reallowed to participating broker-dealers and paid to certain employees of NorthStar Securities. Selling commission increased due to higher capital raising activity for the three months ended June 30, 2015 as compared to the same period in 2014 .

The following table presents equity raised by our Sponsored Companies for the periods presented (dollars in thousands):



	Three Months Ended June 30, ⁽¹⁾
	2015		2014
NorthStar Income	$	10,966	$	10,727	⁽²⁾
NorthStar Healthcare	141,874		134,229		⁽³⁾
NorthStar Income II	164,365		63,395		⁽³⁾
Total	$	317,205	$	208,351

_________________


(1)	Includes capital raised through dividend reinvestment plans.


(2)	NorthStar Income successfully completed its primary offering on July 1, 2013.


(3)	Capital raising pace at NorthStar Healthcare and NorthStar Income II accelerated in the 2015 compared to 2014.

Other Income

Other income primarily represents special servicing fees related to certain securitization transactions at the corporate level. We are a rated special servicer by Standard & Poor’s and Fitch Ratings and we receive special servicing fees for services related to certain securitization transactions. The increase is primarily the result of more services performed in 2015 .

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Expenses

Commission Expense

Commission expense represents fees to participating broker-dealers with whom we have selling agreements to raise capital for our Sponsored Companies and commissions to employees of NorthStar Securities. Commission income and expense both increased due to higher capital raising activity for the three months ended June 30, 2015 as compared to the same period in 2014 .

Transaction Costs

For the three months ended June 30, 2015 , we incurred an immaterial amount of transaction costs. For the three months ended June 30, 2014 , transaction costs represent costs such as professional fees associated with the spin-off in 2014.

Other Expense

Other expense primarily represents depreciation expense and foreign exchange gain (loss) at the corporate level.

General and Administrative Expenses

General and administrative expenses are principally incurred at the corporate level except as it relates to direct compensation expense and other costs incurred at our broker-dealer, which is part of our broker-dealer segment.

General and administrative expenses increased $27.1 million primarily attributable to the following:

Salaries and related expense increased $13.3 million primarily due to most employees of NorthStar Realty becoming our employees upon the spin-off as well as hiring additional employees for increased activity, offset by an allocation to our Managed Companies.

Equity-based compensation expense is comprised of (dollars in thousands):



	Three Months Ended June 30,
	2015 ⁽¹⁾		2014
NSAM spin grants ⁽²⁾	$	7,604	$	—
NSAM bonus plan	3,282		—
NorthStar Realty bonus plan ⁽³⁾	3,296		8,045		⁽⁴⁾
Other	820		—
Total	$	15,002	$	8,045

__________________


(1)	Includes $0.1 million of dividends associated with non-employees.


(2)	Represents equity-based compensation expense for one-time grants issued related to the successful spin-off of the Company.


(3)	Represents equity-based compensation expense related to annual grants issued by NorthStar Realty prior to the spin-off of the Company.


(4)	The three months ended June 30, 2014 represents an allocation of equity-based compensation expense prior to the spin-off.

Other general and administrative expenses increased $6.9 million primarily due to the spin-off as the prior period amount only represented an allocation of other general and administrative expense related to NorthStar Realty’s historical asset management business.

Equity in earnings (losses) of unconsolidated ventures

Equity in earnings (losses) of unconsolidated ventures represents interests in two investments that we acquired in 2014 and one that we acquired in 2015. For the three months ended June 30, 2015 , we recognized in equity in earnings, operating income of $2.9 million , which excludes $0.5 million of equity-based compensation expense and $2.3 million of depreciation and amortization expense.

Income Tax Benefit (Expense)

Effective July 1, 2014, we are subject to both domestic and international income tax.

Comparison of the Six Months Ended June 30, 2015 to June 30, 2014 (dollars in thousands):

The consolidated financial statements for the six months ended June 30, 2015 represent our results of operations following the spin-off of NorthStar Realty’s historical asset management business on June 30, 2014 . Our historical financial information for the six months ended June 30, 2014 represents a carve-out of revenues and expenses attributable to us related to NorthStar Realty’s historical asset management business. As a result, results of operations for the six months ended June 30, 2015 may not be comparable to our results of operations reported for the prior period presented.

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The following table represents our results of operations for the six months ended June 30, 2015 and 2014 (dollars in thousands):



	Six Months Ended June 30,						Increase (Decrease)
	2015			2014			Amount			%
Revenues
Asset management and other fees, related parties	$	151,737		$	21,779		$	129,958		NM
Selling commission and dealer manager fees, related parties	58,260			33,861			24,399			72.1	%
Other income	835			381			454			NM
Total revenues	210,832			56,021			154,811			276.3	%
Expenses
Commission expense	54,034			31,698			22,336			70.5	%
Transaction costs	375			24,476			(24,101		)	(98.5	)%
Other expense	1,353			56			1,297			NM
General and administrative expenses
Salaries and related expense	29,850			12,324			17,526			NM
Equity-based compensation expense	28,620			13,745			14,875			NM
Other general and administrative expenses	15,360			4,274			11,086			NM
Total general and administrative expenses	73,830			30,343			43,487			NM
Total expenses	129,592			86,573			43,019			49.7	%
Unrealized gain (loss) on foreign exchange	(285		)	—			(285		)	N/A
Income (loss) before equity in earnings (losses) of unconsolidated ventures and income tax benefit (expense)	80,955			(30,552		)	111,507			NM
Equity in earnings (losses) of unconsolidated ventures	(781		)	—			(781		)	N/A
Income (loss) before income tax (benefit) expense	80,174			(30,552		)	110,726			NM
Income tax benefit (expense)	(19,992		)	—			(19,992		)	N/A
Net income (loss)	$	60,182		$	(30,552	)	$	90,734		NM

Asset Management and Other Fees

Asset management and other fees are comprised of fees from our Managed Companies summarized as follows (dollars in thousands):



	Six Months Ended June 30,
	2015		2014
NorthStar Realty:
Base fee	$	93,552	N/A
Incentive fee	6,443		N/A
Subtotal NorthStar Realty	99,995		N/A		⁽¹⁾
Sponsored Companies:
Asset management fees	22,470		11,559		⁽²⁾
Acquisition fees	27,761		9,413		⁽³⁾
Disposition fees	1,511		807		⁽⁴⁾
Subtotal Sponsored Companies	51,742		21,779
Total	$	151,737	$	21,779

__________________


(1)	We began earning fees on July 1, 2014, in connection with the management agreement with NorthStar Realty.


(2)	The increase was driven by the growth in assets of our Sponsored Companies. As of June 30, 2015 and 2014 , our Sponsored Companies held aggregate assets of $5.7 billion and $2.5 billion, respectively.


(3)	The increase was due to more investment activity of our Sponsored Companies in 2015 compared to 2014, with investment activity of $1.0 billion at NorthStar Healthcare and $0.5 million at NorthStar Income II.


(4)	The increase was driven by increased repayments of debt investments from NorthStar Income and NorthStar Income II in 2015 compared to the same period in 2014.

Selling Commission and Dealer Manager Fees

We earn net commission income through NorthStar Securities for selling equity in our Sponsored Companies.

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participating broker-dealers. In addition, we also generally receive a dealer manager fee of up to 3% of gross offering proceeds raised, a portion of which is typically also reallowed to participating broker-dealers and paid to certain employees of NorthStar Securities. Selling commission increased due to higher capital raising activity for the six months ended June 30, 2015 as compared to the same period in 2014 .

The following table presents equity raised by our Sponsored Companies for the periods presented (dollars in thousands):



	Six Months Ended June 30, ⁽¹⁾
	2015		2014
NorthStar Income	$	21,713	$	20,962	⁽²⁾
NorthStar Healthcare	280,381		235,961		⁽³⁾
NorthStar Income II	343,828		111,643		⁽⁴⁾
Total	$	645,922	$	368,566

_________________


(1)	Includes capital raised through dividend reinvestment plans.


(2)	NorthStar Income successfully completed its primary offering on July 1, 2013.


(3)	Shortly after December 31, 2014 , NorthStar Healthcare completed its initial primary offering and began raising capital for its follow-on offering at the end of the first quarter 2015.


(4)	Capital raising pace at NorthStar Income II accelerated in 2015 compared to 2014.

Other Income

Expenses

Commission Expense

Commission expense represents fees to participating broker-dealers with whom we have selling agreements to raise capital for our Sponsored Companies and commissions to employees of NorthStar Securities. Commission income and expense both increased due to higher capital raising activity for the six months ended June 30, 2015 as compared to the same period in 2014 .

Transaction Costs

For the six months ended June 30, 2015 , transaction costs represent costs associated with the restructure of our holding company to include an operating partnership. For the six months ended June 30, 2014 , transaction costs represent costs such as professional fees associated with the spin-off in 2014.

Other Expense

Other expense primarily represents depreciation expense and foreign exchange gain (loss) at the corporate level.

General and Administrative Expenses

General and administrative expenses increased $43.5 million primarily attributable to the following:

Salaries and related expense increased $17.5 million primarily due to most employees of NorthStar Realty becoming our employees upon the spin-off as well as hiring additional employees for increased activity, offset by an allocation to our Managed Companies.

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Equity-based compensation expense is comprised of (dollars in thousands):



	Six Months Ended June 30,
	2015 ⁽¹⁾		2014
NSAM spin grants ⁽²⁾	$	15,091	$	—
NSAM bonus plan	5,217		—
NorthStar Realty bonus plan ⁽³⁾	7,360		13,745		⁽⁴⁾
Other	952		—
Total	$	28,620	$	13,745

__________________


(1)	Includes $0.2 million of dividends associated with non-employees.


(2)	Represents equity-based compensation expense for one-time grants issued related to the successful spin-off of the Company.


(3)	Represents equity-based compensation expense related to annual grants issued by NorthStar Realty prior to the spin-off of the Company.


(4)	The six months ended June 30, 2014 represents an allocation of equity-based compensation expense prior to the spin-off.

Other general and administrative expenses increased $11.1 million primarily due to the spin-off as the prior period amount only represented an allocation of other general and administrative expense related to NorthStar Realty’s historical asset management business.

Equity in earnings (losses) of unconsolidated ventures

Equity in earnings (losses) of unconsolidated ventures represents interests in two investments that we acquired in 2014 and one that we acquired in 2015. For the six months ended June 30, 2015 , we recognized in equity in earnings, operating income of $5.3 million , which excludes $1.6 million of equity-based compensation expense and $4.5 million of depreciation and amortization expense.

Income Tax Benefit (Expense)

Effective July 1, 2014, we are subject to both domestic and international income tax.

Liquidity and Capital Resources

Our capital sources may include cash flow provided from operating activities, primarily from management and other fee income paid to us from our Managed Companies, as well as borrowings and the issuance of common stock. In addition, in connection with the spin-off, we have available under a revolving credit agreement with NorthStar Realty up to $250 million of financing to us subject to certain conditions (refer to Related Party Arrangements). Our primary uses of liquidity include operating expenses, dividends, acquisitions of direct investments and repurchase of our common stock. On a quarterly basis, our board of directors determines an appropriate common stock dividend based upon numerous factors, including CAD, availability of existing cash balances, general economic conditions and economic conditions that more 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 addition, in April 2015, our board of directors authorized the repurchase of up to $400 million of its outstanding common stock. The authorization expires in April 2016, unless otherwise extended by the Company’s board of directors. As of June 30, 2015, we repurchased 261,600 shares of our common stock for approximately $5 million .

We expect that our cash flow from operating activities and available financing will be sufficient to satisfy our liquidity needs. As of June 30, 2015 , we had a receivable, related parties balance primarily from our Managed Companies of $90 million , of which we received $53 million subsequent to June 30, 2015 .

We currently believe that our existing sources of funds should be adequate for purposes of meeting our short-term liquidity needs. Unrestricted cash as of August 4, 2015, was approximately $137 million .

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Cash Flows

The following presents a summary of our consolidated statements of cash flows for the six months ended June 30, 2015 and 2014 (dollars in thousands):



	Six Months Ended June 30,
Cash flow provided by (used in):	2015			2014
Operating activities	$	75,962		$	(1,207	)
Investing activities	(32,442		)	(4,000		)
Financing activities	(51,782		)	116,398
Effect of foreign exchange rate changes on cash	(285		)	—
Net increase (decrease) in cash	$	(8,547	)	$	111,191

Six Months Ended June 30, 2015 Compared to June 30, 2014

Net cash provided by operating activities was $76 million for the six months ended June 30, 2015 compared to $1 million used in operating activities for the six months ended June 30, 2014 . The increase was due to us beginning to earn fees on July 1, 2014, in connection with the management agreement with NorthStar Realty and an increase in asset management and other fees from our Sponsored Companies due to more investment activity. Six months ended June 30, 2015 excludes $53 million of fees received subsequent to June 30, 2015 .

Net cash used in investing activities represents was $32 million for the six months ended June 30, 2015 compared to $4 million used in investment activities for the six months ended June 30, 2014 . The increase was due to the acquisition of the Island Interest in 2015.

Net cash used in financing activities was $52 million for the six months ended June 30, 2015 compared to $116 million provided by financing activities for the six months ended June 30, 2014 . The decrease was primarily due to $39 million for the payment of dividends and $13 million for withholding tax related to vesting and net settlement of RSUs. Six months ended June 30, 2014 includes our initial capitalization from NorthStar Realty.

Off-Balance Sheet Arrangements

We have certain arrangements which do not meet the definition of off-balance sheet arrangements, but do have some of the characteristics of off-balance sheet arrangements such as our investments in asset management businesses. Refer to Note 4. “ Investments in Unconsolidated Ventures” in Item 1. “Financial Statements” for a discussion of such unconsolidated ventures in our consolidated financial statements. Our exposure to loss is limited to the carrying value of our investment.

Related Party Arrangements

NorthStar Realty

Investment Opportunities

Under the management agreement, NorthStar Realty agreed to make available to us for the benefit of our Managed Companies, including NorthStar Realty, all investment opportunities sourced by NorthStar Realty. We agreed to fairly allocate such opportunities among our Managed Companies, including NorthStar Realty, in accordance with our investment allocation policy. Pursuant to the management agreement, NorthStar Realty is entitled to fair and reasonable compensation for its services in connection with any loan origination opportunities sourced by it, which may include first mortgage loans, subordinate mortgage interests, mezzanine loans and preferred equity interests, in each case relating to commercial real estate.

We provide services with regard to such areas as payroll, human resources and employee benefits, financial systems management, treasury and cash management, accounts payable services, telecommunications services, information technology services, property management services, legal and accounting services and various other corporate services to NorthStar Realty as it relates to its loan origination business for commercial real estate debt.

Credit Agreement

In connection with the spin-off, we entered into a revolving credit agreement with NorthStar Realty pursuant to which NorthStar Realty makes available to us, on an “as available basis,” up to $250 million of financing with a maturity of June 30, 2019 at LIBOR plus 3.50%. The revolving credit facility is unsecured. We expect to use the proceeds for general corporate purposes, including potential future acquisitions. In addition, we may use the proceeds to acquire assets on behalf of our Managed Companies that we intend to allocate to such Managed Company but for which such Managed Company may not then have immediately available funds. The terms of the revolving credit facility contain various representations, warranties, covenants and conditions, including the condition that NorthStar Realty’s obligation to advance proceeds to us is dependent

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upon NorthStar Realty and its affiliates having at least $100 million of either unrestricted cash and cash equivalents or amounts available under committed lines of credit, after taking into account the amount we seek to draw under the facility. As of June 30, 2015 , we had no borrowings outstanding under the credit agreement.

Healthcare Strategic Joint Venture

In January 2014, we entered into a long-term strategic partnership with James F. Flaherty III, former Chief Executive Officer of HCP, Inc., focused on expanding our healthcare business into a preeminent healthcare platform, or the Healthcare Strategic Partnership. In connection with the partnership, Mr. Flaherty oversees and seeks to grow both NorthStar Realty’s healthcare real estate portfolio and the portfolio of NorthStar Healthcare. In connection with entering into the partnership, NorthStar Realty granted Mr. Flaherty certain RSUs, half of which became our RSUs as a result of NorthStar Realty’s reverse stock split and the spin-off. The Healthcare Strategic Partnership is entitled to incentive fees ranging from 20% to 25% above certain hurdles for new and existing healthcare real estate investments held by NorthStar Realty and NorthStar Healthcare. The partnership will also be entitled to any incentive fees earned from NorthStar Healthcare or any future healthcare non-traded vehicles sponsored by us, NorthStar Realty or any affiliates, as well as future healthcare non-traded vehicles sponsored by AHI Ventures. For the three months ended June 30, 2015 and 2014 , we did not earn incentive fees related to the Healthcare Strategic Partnership. On February 2, 2015, in connection with the completion of NorthStar Healthcare’s initial primary offering, we issued 20,305 RSUs to Mr. Flaherty.

AHI Venture

In connection with our 43% interest in American Healthcare Investors LLC, or AHI Interest, AHI Newco, LLC, or AHI Ventures, a direct wholly-owned subsidiary of AHI, provides certain asset management, property management and other services to our affiliates assisting in managing the current and future healthcare assets (excluding any joint venture assets) of NorthStar Realty and other Sponsored Companies, including the assets formerly owned by Griffin-American Healthcare REIT II, Inc., or Griffin-American, and its former operating partnership, Griffin-American Healthcare REIT II Holdings, LP, or Griffin-America OP portfolio. AHI Ventures receives a base management fee of $0.6 million per year plus 0.50% of the equity invested by NorthStar Realty in future healthcare assets (excluding assets in the Griffin-American OP portfolio and other joint ventures) that AHI Ventures may manage. AHI Ventures may also participate in the incentive fees earned by us and our affiliates with respect to new and existing healthcare real estate investments held by NorthStar Realty and NorthStar Healthcare, including the Griffin-American OP portfolio, any future healthcare non-traded vehicles sponsored by us, NorthStar Realty or any affiliates, as well as any future healthcare non-traded vehicles sponsored by AHI Ventures. AHI Ventures would also be entitled to additional base management fees should it manage assets on behalf of any other Managed Companies. AHI Ventures also intends to directly or indirectly sponsor, co-sponsor, form, register, market, advise, manage and/or operate investment vehicles that are intended to invest primarily in healthcare real estate assets. In addition, Mr. Flaherty acquired a 12% interest, as adjusted, in AHI Ventures.

In April 2015, Griffin-American Healthcare REIT III, Inc., a vehicle managed an affiliate of AHI, distributed shares of its common stock to the members of AHI Ventures, of which we received 0.2 million shares in connection with the distribution.

Island Venture

Island is a leading, independent select service hotel management company that currently manages 149 hotel properties, representing $3.7 billion, of which 101 hotel properties are owned by NorthStar Realty. Island provides certain asset management, property management and other services to NorthStar Realty to assist in managing its hotel properties. Island receives a base management fee of 2.5% to 3.0% of the current monthly revenue of the NorthStar Realty hotel properties it manages for NorthStar Realty. For the three and six months ended June 30, 2015 , NorthStar Realty paid $3 million and $6 million , respectively, related to the base management fee to Island.

RXR Realty

In December 2013, NorthStar Realty entered into a strategic transaction with RXR Realty, the co-sponsor of NorthStar/RXR New York Metro. The investment in RXR Realty includes an approximate 27% equity interest. NorthStar Realty’s equity interest in RXR Realty is structured so that we are entitled to certain fees in connection with RXR Realty’s investment management business.

Recent Developments

Dividends

On August 4, 2015, we declared a dividend of $0.10 per share of common stock. The common stock dividend will be paid on August 21, 2015 to stockholders of record as of the close of business on August 17, 2015.

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Non-GAAP Financial Measure

We believe that CAD provides investors and management with a meaningful indicator of operating performance. Management also uses CAD, among other measures, to evaluate profitability. In addition, the incentive fees to which we are entitled pursuant to our management agreement with NorthStar Realty are determined using NorthStar Realty’s CAD as a performance metric. We believe that CAD is useful because it adjusts net income (loss) for a variety of non-cash, one-time and certain non-recurring items.

We calculate CAD by subtracting from or adding to net income (loss) attributable to common stockholders, non-controlling interests attributable to the Operating Partnership, and the following items: equity-based compensation, depreciation related items, foreign currency gains (losses), straight-line rent, adjustments for joint ventures, deferred tax (benefit) expense related to timing differences that will not reverse in the current year and transaction and other costs. In future periods, such adjustments may include amortization of deferred financing costs, impairment on goodwill and other intangible assets and other 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. 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.

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 may differ from the methodologies used by other comparable companies when calculating the same or similar supplemental financial measures and may not be comparable with these companies.

The following table presents a reconciliation of CAD to net income (loss) attributable to common stockholders for the three and six months ended June 30, 2015 (dollars in thousands):



	June 30, 2015
	Three Months Ended			Six Months Ended
Net income (loss) attributable to common stockholders	$	38,024		$	59,792
Non-controlling interests attributable to the Operating Partnership	188			390
Adjustments:
Equity-based compensation ⁽¹⁾	15,002			28,620
Deferred tax (benefit) expense	561			(733		)
Adjustment related to joint ventures	2,806		⁽²⁾	6,092			⁽³⁾
Other	961		⁽⁴⁾	2,148			⁽⁵⁾
CAD	$	57,542		$	96,309

_______________


(1)	Includes equity-based compensation expense related to grants of NorthStar Realty stock issued in years prior to July 1, 2014 that were split in connection with the spin-off, one-time grants of our stock issued in connection with the spin-off and annual grants of our stock to certain employees.


(2)	The three months ended June 30, 2015 includes $0.5 million of equity-based compensation expense and $2.3 million of depreciation and amortization expense related to an unconsolidated venture.


(3)	The six months ended June 30, 2015 includes $1.6 million of equity-based compensation expense and $4.5 million of depreciation and amortization expense related to an unconsolidated venture.


(4)	The three months ended June 30, 2015 includes $0.4 million of depreciation and amortization expense, $0.3 million of straight-line rental expense, $0.3 million of one-time expenses and transaction costs and an immaterial amount foreign currency related adjustments.


(5)	The six months ended June 30, 2015 includes $0.9 million of depreciation and amortization expense, $0.4 million of straight-line rental expense, $0.6 million of one-time expenses and transaction costs and $0.3 million of foreign currency related adjustments.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our exposure to market risk is primarily related to our role providing asset management and other services to our Managed Companies, both in the United States and internationally, and its effect on the asset management, incentive and other fees we earn. Our exposure to market risk will increase as we expand into new asset classes and geographies, and as a result, we will seek to enter into strategic partnerships and joint ventures with third parties with expertise in commercial real estate or other sectors and markets to augment our business operations while at the same time benefiting from the fee streams generated by such strategic partnerships and joint ventures. Our asset management, incentive and other fees are primarily driven by the ability of our Managed Companies to grow by raising capital, which will in turn be driven by their investment activities, overall performance and various factors beyond our control, including but not limited to, monetary and fiscal policies, domestic and international economic conditions and political considerations. The effect of such risks on our asset management, incentive and other fee agreements vary based on the management contract with the respective Managed Company.

The NorthStar Realty management agreement consists of a base management fee which increases as equity is raised and an incentive fee which is based on the performance of NorthStar Realty using CAD as an operating metric. The base management fee currently represents the majority of the fee. The ability of NorthStar Realty to grow is dependent on access to the capital markets to raise equity and/or debt capital. To the extent that general capital markets activity slows down or comes to a halt (as was the case during the recession that began in 2008), NorthStar Realty may have difficulty growing. This risk is based on micro and macro-economic market factors including but not limited to disruptions in the equity and debt capital markets and institutional lending market, including the lack of access to capital or prohibitively high costs of obtaining or replacing capital. Despite recent improvements, the markets could suffer another severe downturn and another liquidity crisis could emerge.

Our Sponsored Companies’ ability to sell equity is highly dependent upon the market and the efforts of our broker-dealer, NorthStar Securities. The retail business has experienced rapid growth, is highly competitive and has faced increased scrutiny in recent years. The number of entrants in the retail market space has grown significantly over the last several years and as a result, we are subject to significant competition from these and other companies seeking to raise capital in this market. Additionally, as a result of increased scrutiny, and accompanying media attention and a rapidly changing regulatory environment, our retail businesses may face increased difficulties in raising capital in their offerings due to market perception. These factors may affect our ability to raise capital for our retail businesses and make investments on their behalf, both of which could materially adversely affect our asset management, incentive and other fee income and the net commission income generated by our broker-dealer.

To a lesser extent, we are indirectly exposed to credit risk through the performance of our Managed Companies and direct investments. Credit risk relates to the ability of the individual investments to perform, for instance the ability for the borrowers’ underlying debt or securities investments to make required interest and principal payments on scheduled due dates. We seek to manage credit risk through a comprehensive credit analysis prior to making an investment, actively monitoring our portfolio and the underlying credit quality, including subordination and diversification of our portfolio. 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.

Foreign Currency Exchange Rate Risk

We are subject to risks related to changes in foreign currency exchange rates as a result of our international operations. As a result, changes in exchange rates may either positively or negatively affect our consolidated revenues and expenses (as expressed in U.S. dollars). We may use several strategies to mitigate our exposure through a combination of foreign currency derivative instruments and use non-U.S. denominated borrowings, where appropriate.

Non-U.S. Operations

We conduct business internationally, with a current focus on Europe. We currently have foreign offices in the United Kingdom, Luxembourg and Bermuda. We are subject to various risks, including, social instability, changes in governmental policies or policies of central banks, tax laws and policies, expropriation, nationalization, unfavorable political and diplomatic developments and changes in legislation relating to non-U.S. ownership. As we continue to expand internationally, we will continue to focus on monitoring and managing these risk factors as they relate to specific international investments.

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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

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 may be 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, any legal proceedings are not expected to have a material adverse effect on our financial position or results of operations.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides the information with respect to purchases made by us of our common stock during the three months ended June 30, 2015:



Period	Total Number of Shares Repurchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program ⁽¹⁾
June 1- June 30	261,600	$	19.10	261,600	$	395,004,420

__________________


(1)	On April 20, 2015, we announced that our board of directors authorized the repurchase of up to $400 million of its outstanding common stock. The authorization expires on April 19, 2016, unless otherwise extended by our board of directors. There were no repurchases made during April or May 2015.

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Item 5. Other Information

Effective on August 5, 2015, the board of directors (the “Board”) of NorthStar Asset Management Group Inc. (“NSAM”) appointed David T. Hamamoto as Executive Chairman of NSAM. Mr. Hamamoto will continue to serve as Chairman of NorthStar Realty Finance Corp. (“NorthStar Realty”). Concurrently with Mr. Hamamoto’s appointment on August 5, 2015, Albert Tylis was appointed as NSAM’s Chief Executive Officer and a member of the Board. Mr. Tylis was also appointed as a member of the board of directors of NorthStar Realty, effective on August 11, 2015.

In connection with the foregoing appointments, Messrs. Hamamoto and Tylis entered into amended and restated employment agreements with NSAM (the “A&R Employment Agreements”). The A&R Employment Agreements were primarily amended to address the executives’ new respective roles and otherwise remained substantially the same as the executives’ prior employment agreements with NSAM, dated as of June 30, 2014, as described more fully in the A&R Employment Agreements.

Concurrent with the foregoing appointments, NSAM hired Jonathan A. Langer as an Executive Vice President of NSAM. Mr. Langer will also serve as Chief Executive Officer and President of NorthStar Realty, effective on August 11, 2015. To facilitate these changes, on August 5, 2015, Mr. Hamamoto resigned as Chief Executive Officer of NSAM, effective immediately, and Messrs. Hamamoto and Tylis resigned as Chief Executive Officer and President, respectively, of NorthStar Realty, effective on August 11, 2015.

The foregoing descriptions of the A&R Employment Agreements are qualified in their entirety by reference to such agreements filed as Exhibits 10.11 and 10.13 to this Quarterly Report on Form 10-Q.

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Item 6. Exhibits

(a) 3. Exhibit Index:



Exhibit Number		Description of Exhibit
3.1		Amended and Restated Certificate of Incorporation of NorthStar Asset Management Group Inc. (incorporated by reference to Exhibit 4.1 to NorthStar Asset Management Group Inc.’s Registration Statement on Form S-8 (File No. 333-197104))
3.2		Amended and Restated Bylaws of NorthStar Asset Management Group Inc. (incorporated by reference to Exhibit 4.2 to NorthStar Asset Management Group Inc.’s Registration Statement on Form S-8 (File No. 333-197104))
10.1		Asset Management Agreement, dated as of June 30, 2014, between NSAM J-NRF Ltd and NorthStar Realty Finance Corp. (incorporated by reference to Exhibit 10.1 to NorthStar Asset Management Group Inc.’s Current Report on Form 8-K filed on July 1, 2014)
10.2		Separation Agreement, dated as of June 30, 2014, between NorthStar Asset Management Group Inc. and NorthStar Realty Finance Corp. (incorporated by reference to Exhibit 10.2 to NorthStar Asset Management Group Inc.’s Current Report on Form 8-K filed on July 1, 2014)
10.3		Contribution Agreement, dated as of June 30, 2014, between NorthStar Asset Management Group Inc. and NRFC Sub-REIT Corp. (incorporated by reference to Exhibit 10.3 to NorthStar Asset Management Group Inc.’s Current Report on Form 8-K filed on July 1, 2014)
10.4		Loan Origination Services Agreement, dated as of June 30, 2014, between NSAM US LLC and NorthStar Realty Finance Corp. (incorporated by reference to Exhibit 10.4 to NorthStar Asset Management Group Inc.’s Current Report on Form 8-K filed on July 1, 2014)
10.5		Tax Disaffiliation Agreement, dated as of June 30, 2014, between NorthStar Asset Management Group Inc. and NorthStar Realty Finance Corp. (incorporated by reference to Exhibit 10.5 to NorthStar Asset Management Group Inc.’s Current Report on Form 8-K filed on July 1, 2014)
10.6		Employee Matters Agreement, dated as of June 30, 2014, between NorthStar Asset Management Group Inc. and NorthStar Realty Finance Corp. (incorporated by reference to Exhibit 10.6 to NorthStar Asset Management Group Inc.’s Current Report on Form 8-K filed on July 1, 2014)
10.7		Advisory Agreement, dated as of June 30, 2014, by and among NSAM J-NSI Ltd, NorthStar Real Estate Income Trust, Inc., NorthStar Real Estate Income Trust Operating Partnership, LP and NorthStar Asset Management Group Inc. (incorporated by reference to Exhibit 10.7 to NorthStar Asset Management Group Inc.’s Current Report on Form 8-K filed on July 1, 2014)
10.8		Advisory Agreement, dated as of June 30, 2014, by and among NSAM J-NSHC Ltd, NorthStar Healthcare Income, Inc., NorthStar Healthcare Income Operating Partnership, LP and NorthStar Asset Management Group Inc. (incorporated by reference to Exhibit 10.8 to NorthStar Asset Management Group Inc.’s Current Report on Form 8-K filed on July 1, 2014)
10.9		Advisory Agreement, dated as of June 30, 2014, by and among NSAM J- NSII Ltd, NorthStar Real Estate Income II, Inc., NorthStar Real Estate Income Operating Partnership II, LP and NorthStar Asset Management Group Inc. (incorporated by reference to Exhibit 10.9 to NorthStar Asset Management Group Inc.’s Current Report on Form 8-K filed on July 1, 2014)
10.10		Credit Agreement, dated as of June 30, 2014, by and between NorthStar Asset Management Group Inc. and NorthStar Realty Finance Corp. (incorporated by reference to Exhibit 10.10 to NorthStar Asset Management Group Inc.’s Current Report on Form 8-K filed on July 1, 2014)
10.11†*		Amended and Restated Executive Employment Agreement, dated as of August 5, 2015, by and between NorthStar Asset Management Group Inc. and David T. Hamamoto
10.12†		Executive Employment Agreement and Agreement with Foreign Executive Officer, dated as of June 30, 2014, by and between NorthStar Asset Management Group, Ltd and Daniel R. Gilbert (incorporated by reference to Exhibit 10.12 to NorthStar Asset Management Group Inc.’s Current Report on Form 8-K filed on July 1, 2014)
10.13†*		Amended and Restated Executive Employment Agreement, dated as of August 5, 2015, by and between NorthStar Asset Management Group Inc. and Albert Tylis
10.14†		Executive Employment Agreement, dated as of June 30, 2014, by and between NorthStar Asset Management Group Inc. and Debra A. Hess (incorporated by reference to Exhibit 10.14 to NorthStar Asset Management Group Inc.’s Current Report on Form 8-K filed on July 1, 2014)
10.15†		Executive Employment Agreement, dated as of June 30, 2014, by and between NorthStar Asset Management Group Inc. and Ronald J. Lieberman (incorporated by reference to Exhibit 10.15 to NorthStar Asset Management Group Inc.’s Current Report on Form 8-K filed on July 1, 2014)
10.16†		NorthStar Asset Management Group Inc. 2014 Omnibus Stock Incentive Plan. (incorporated by reference to Exhibit 10.12 to Amendment No. 1 to NorthStar Asset Management Group Inc.’s Registration Statement on Form 10 (File No. 001-36301))
10.17†		NorthStar Asset Management Group Inc. Executive Incentive Bonus Plan. (incorporated by reference to Exhibit 10.13 to Amendment No. 1 to NorthStar Asset Management Group Inc.’s Registration Statement on Form 10 (File No. 001-36301))
10.18†		Form of Indemnification Agreement between NorthStar Asset Management Group Inc. and its directors and officers (incorporated by reference to Exhibit 10.20 to Amendment No. 3 to NorthStar Asset Management Group Inc.’s Registration Statement on Form 10 (File No. 001-36301))
10.19		Unit Purchase Agreement, dated as of November 5, 2014, by and among American Healthcare Investors LLC, HC AHI Holding Company, LLC, AHI Newco, LLC, Platform HealthCare Investor T-II, LLC, NorthStar Asset Management Group Inc. and Jeffrey T. Hanson, Danny Prosky and Mathieu B. Streiff (incorporated by reference to Exhibit 10.19 to NorthStar Asset Management Group Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014)
10.20		Amended and Restated Limited Liability Company Agreement of AHI Newco, LLC, dated as of December 8, 2014, by and among Platform Healthcare Investor T-II, LLC, American Healthcare Investors LLC, Flaherty Trust, NorthStar Asset Management Group Inc. and Jeffrey T. Hanson, Danny Prosky and Mathieu B. Streiff (incorporated by reference to Exhibit 10.20 to NorthStar Asset Management Group Inc.’s Annual Report on Form 10-K for the year ended December 31, 2014)
10.21		Unit Purchase Agreement, dated as of January 9, 2015, by and between Platform Hospitality Investor T-II, LLC and Island JV Member Inc. (incorporated by reference to Exhibit 10.1 to NorthStar Asset Management Group Inc.’s Current Report on Form 8-K filed on January 15, 2015)

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Exhibit Number		Description of Exhibit
10.22		Limited Liability Company Agreement of Island Hospitality Joint Venture, LLC, dated as of January 9, 2015, by and between Platform Hospitality Investor T-II, LLC and Island JV Member Inc. (incorporated by reference to Exhibit 10.2 to NorthStar Asset Management Group Inc.’s Current Report on Form 8-K filed on January 15, 2015)
10.23		Agreement of Limited Partnership of NSAM LP, dated as of March 13, 2015, by and among NorthStar Asset Management Group Inc., as the General Partner and Limited Partner and the limited partners party thereto from time to time (incorporated by reference to Exhibit 10.1 to NorthStar Asset Management Group Inc.’s Current Report on Form 8-K filed on March 19, 2015)
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*		The following materials from the NorthStar Asset Management Group Inc. Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of June 30, 2015 (unaudited) and December 31, 2014; (ii) Consolidated Statements of Operations (unaudited) for the three and six months ended June 30, 2015 and 2014; (iii) Consolidated Statements of Equity for the six months ended June 30, 2015 (unaudited) and year ended December 31, 2014; (iv) Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2015 and 2014; and (v) Notes to Consolidated Financial Statements (unaudited)


†	Denotes a management contract or compensatory plan or arrangement.


*	Filed herewith.

Table of Contents

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 ASSET MANAGEMENT GROUP INC.

Date:	August 10, 2015	By:	/s/ ALBERT TYLIS
				Albert Tylis
				Chief Executive Officer and President

		By:	/s/ DEBRA A. HESS
				Debra A. Hess
				Chief Financial Officer

EXHIBIT 10.11

AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT

This Amended and Restated Executive Employment Agreement (the “ Agreement ”) by and between David T. Hamamoto (“ Executive ”) and NorthStar Asset Management Group Inc. (the “ Company ”), dated August 5, 2015, shall be effective as of August 5, 2015 (the “ Amendment Effective Date ”), and shall amend and restate the Executive Employment Agreement by and among Executive, the Company and NorthStar Realty Finance Corp. (“ NRF ”) dated June 30, 2014 (the “ Prior Agreement ”), which was effective as of June 30, 2014 (the “ Effective Date ”).

WHEREAS , Executive and the Company desire to memorialize the terms and conditions related to Executive’s employment by the Company herein.

NOW THEREFORE , in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. Agreements Between the Parties . This Agreement is intended to memorialize all of the terms and conditions of Executive’s employment by the Company.

2. Employment .

(a) Term . The Company shall employ Executive, and Executive agrees to be employed with the Company, upon the terms and conditions set forth in this Agreement, for the period beginning on the Effective Date and ending on the third anniversary of the Effective Date (the “ Employment Period ”); provided , however , that commencing on the third anniversary of the Effective Date and on each subsequent anniversary of the Effective Date (each such anniversary, a “ Renewal Date ”), the Employment Period shall automatically be extended for one additional year unless, not later than ninety (90) days prior to such Renewal Date, the Company or Executive shall have given written notice not to extend the Employment Period; provided , further , however , that the Employment Period shall be subject to earlier termination as provided in Section 5(b) hereof (the “ Term ”).

(b) Base Salary . Executive’s initial base salary shall be $1,050,000 per annum (pro-rated for partial calendar years), payable in accordance with the Company’s usual payroll practices for senior executives (as in effect from time to time, the “ Base Salary ”); provided that the Base Salary for any year shall be reduced, but not below $0, by the amount of any cash compensation paid to Executive by NRF or its subsidiaries as base salary during such year for services directly provided to such entities by Executive as an employee of such entities following the Effective Date. In subsequent years of the Term, the Base Salary shall be subject to annual review and adjustment from time to time by the compensation committee of the Company’s board of directors (the “ Compensation Committee ”), taking into account such factors as the Compensation Committee deems appropriate, including but not limited to the salaries of executive officers having similar titles and performing similar functions at comparable companies.

(c) Annual Cash Bonus . For fiscal years during Executive’s employment with the Company, Executive shall participate in an annual cash incentive compensation plan as adopted and approved by the board of directors of the Company or a committee thereof acting pursuant to the authority of the board of directors of the Company (the “ Board ”) from time to time, with applicable corporate and individual performance targets and maximum award amounts determined by the Compensation Committee (the “ Annual Cash Bonus ”). Executive agrees that the Annual Cash Bonus for any year (including, without limitation, the amount of any Annual Bonus otherwise due pursuant to the Company’s Executive Incentive Bonus Plan (the “ Bonus Plan ”) for the 2014 Plan Year) shall be reduced, but not below $0, by the amount of any cash compensation paid to Executive by NRF or its subsidiaries as annual cash bonus for such year for services directly provided to such entities by Executive as an employee of such entities following the Effective Date.

Any Annual Cash Bonus payable to Executive will be paid at the time set forth in the applicable bonus plan, or if no such plan exists, at the time the Company otherwise pays such bonuses to its senior executives, but in no event later than 75 days following the end of the applicable fiscal year, and will be subject to the terms and conditions of the applicable annual cash incentive compensation plan.

(d) Long Term Incentive Awards . During Executive’s employment with the Company, Executive shall be eligible to receive long term equity incentive compensation awards (which may consist of restricted stock, stock options, stock appreciation rights, or other types of equity or cash bonus awards, including equity awards denominated in or relating to shares of NRF common stock or equity of any other NSAM Managed Company (as defined below), as determined by the Compensation Committee in its discretion) pursuant to the Company’s equity incentive compensation plans and programs in effect from time to time, including, without limitation, the Bonus Plan. These awards shall be granted in the discretion of the Board and shall include such terms and conditions (including performance objectives) as the Board deems appropriate.

(e) Vacation . Executive shall be eligible for four weeks of annual vacation to be accrued and payable in accordance with the Company’s policy with respect to senior executives.

(f) Indemnification . To the fullest extent permitted by law, the Company will indemnify Executive against any actual or threatened action, suit or proceeding, whether civil, criminal, administrative or investigative, arising by reason of Executive’s status as a current or former director, officer, employee and/or agent of the Company, any subsidiary or affiliate of the Company or any other entity to which the Company appoints Executive to serve as a director or officer. Executive shall be covered under any director and officer insurance policy obtained by the Company, if any, and shall be entitled to benefit from any officer indemnification arrangements adopted by the Company, if any, to the same extent as other directors or senior executive officers of the Company (including the right to such coverage or benefit following Executive’s employment to the extent liability continues to exist). However, Executive agrees to repay any expenses paid or reimbursed by the Company for Executive’s indemnification expenses if it is ultimately determined by a final non-appealable court decision that Executive is not legally entitled to be indemnified by the Company.

(g) Other Benefits . In addition, Executive will be eligible to participate in all fringe benefit plans and retirement plans of the Company, as are generally available to the other senior management employees of the Company, such as health insurance plans, disability insurance plans, life insurance plans, expense reimbursement and the Company’s 401(k) retirement plan.

(h) Clawback Policy . Executive acknowledges that Executive will be subject to the Company’s clawback policy, dated as of June 26, 2014, which is in effect as of the date hereof.

3. Duties of Executive .

(a) Duties of Position . During the Employment Period, from and after the Amendment Effective Date, Executive shall serve as Founder and Executive Chairman of the Company. Executive shall perform such duties and responsibilities, consistent with Executive’s title, training and experience, as are from time to time reasonably assigned to Executive by the Board, to the extent consistent with Executive’s responsibilities as Founder and Executive Chairman of the Company. Executive shall report directly to the Board. It is anticipated that during the Employment Period, Executive shall also provide services directly to NRF and/or its subsidiaries, as well as to other entities with which the Company or its subsidiaries may have entered into or may enter into management agreements following the Effective Date (such entities, “ NSAM Managed Companies ”). Executive agrees to devote not less than a majority of Executive’s business time, attention and energies to the performance of the duties assigned to Executive hereunder and his services to NRF and, if applicable, any other NSAM Managed Companies and their subsidiaries, and to perform his duties hereunder faithfully, diligently and to the best of Executive’s abilities and subject to such laws, rules, regulations and policies from time to time applicable to the Company’s employees. Notwithstanding the above, nothing in this Agreement shall preclude Executive from devoting a portion of Executive’s business time, attention and energies to other business endeavors. The Company may assign all or a portion of its rights and obligations under this agreement to any of its affiliates or enter into an agreement with any of its affiliates that provides that Executive will perform services on behalf of such affiliate and Executive agrees to provide such services, as directed by the Company, in each case, to the extent consistent with Executive’s responsibilities as Founder and Executive Chairman of the Company.

(b) Confidential Information . Executive shall hold in confidence for the benefit of the Company all of the information (other than information concerning corporate opportunities) and business secrets in respect of the Company and all of its affiliates, including, but not limited to, all information and data relating to or concerned with the legal, business, finances, pending transactions and other affairs of the Company and all of its affiliates, and Executive shall not at any time before or after Executive’s employment by the Company is terminated for any reason, or Executive resigns for any reason, willfully use or disclose or divulge any such information or data to any other Person (as defined below) except (i) with the prior written consent of the Company, (ii) to the extent necessary to comply with applicable law or the valid order of a court of competent jurisdiction, in which event Executive shall notify the Company as promptly as reasonably practicable (and, if possible, prior to making such disclosure), or to enforce or defend his rights under this Agreement or any other agreements with the Company or any affiliate, and (iii) in the performance of Executive’s duties hereunder. With respect to information concerning corporate opportunities of the Company and all of its affiliates that are developed, initiated or become known to Executive during Executive’s employment with the Company, Executive shall hold in confidence for the benefit of the Company all of such information in respect of the Company and all of its affiliates, including, but not limited to, all information and data relating to or concerned with such opportunities of the Company and all of its affiliates, and Executive shall not at any time before or within one (1) year after Executive’s employment by the Company is terminated for any reason, or Executive resigns for any reason, willfully use or disclose or divulge any information relating to any such corporate opportunities to or for the benefit of Executive or any other Person (as defined below) except (i) with the prior written consent of the Company, (ii) to the extent necessary to comply with applicable law or the valid order of a court of competent jurisdiction, in which event Executive shall notify the Company as promptly as reasonably practicable (and, if possible, prior to making such disclosure) and (iii) in the performance of Executive’s duties hereunder. The foregoing provisions of this Section 3(b) shall not apply to any information or data which has been previously disclosed to the public or is otherwise in the public domain in each case other than as a result of the breach by Executive of Executive’s obligations under this Section 3(b) . In addition, nothing in this Agreement shall be interpreted or applied to prohibit Executive from making any good faith report to any governmental agency or other governmental entity concerning any acts or omissions that Executive may believe to constitute a possible violation of federal or state law or making other disclosures that are protected under the whistleblower provisions of applicable federal or state law or regulation. For purposes of this Agreement, “ Person ” means an individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization, other entity or “group” (as defined in the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”)).

4. Termination of Employment . Executive’s employment hereunder may be terminated in accordance with this Section 4 .

(a) Death . Executive’s employment hereunder shall terminate upon Executive’s death.

(b) Disability . If, as a result of Executive’s incapacity due to physical or mental illness, Executive shall have been absent from the full-time performance of Executive’s duties hereunder for the entire period of six consecutive months, and within thirty (30) days after written Notice of Termination (as defined in Section 5(a) ) is given shall not have returned to the performance of Executive's duties hereunder on a full-time basis, the Company may terminate Executive’s employment hereunder for “Disability.”

(c) Cause . The Company may terminate Executive’s employment hereunder for Cause. For purposes of this Agreement, the Company shall have “Cause” to terminate Executive’s employment hereunder upon the occurrence of any of the following events:

(i) the conviction of, or a plea of nolo contendere by, Executive for the commission of a felony;

(ii) continuing willful failure for ten (10) business days to substantially perform Executive’s duties hereunder (other than such failure resulting from Executive’s incapacity due to physical or mental illness or subsequent to the issuance of a Notice of Termination by Executive for Good Reason) after demand for substantial performance is delivered by the Company in writing that specifically identifies the manner in which the Company believes Executive has not substantially performed Executive’s duties; or

(iii) willful misconduct by Executive (including, but not limited to, breach by Executive of the provisions of Section 7 ) that is demonstrably and materially injurious to the Company or its subsidiaries.

(d) Good Reason . Executive may terminate Executive’s employment hereunder for “Good Reason” by providing to the Company a Notice of Termination within thirty (30) days after the occurrence, without Executive’s written consent, of one of the following events that has not been cured within ten (10) business days after written notice thereof has been given by Executive to the Company:

(i) the assignment to Executive of duties materially inconsistent with Executive’s status as Executive Chairman of the Company, a change by the Company in Executive’s title that results in the Executive ceasing to hold the title of Executive Chairman of the Company or Executive is directed to directly report to other than the Board (or the board of directors of the Successor Person following a Change of Control pursuant to clause (i), (ii) or (iv) of the definition thereof);

(ii) following a Change of Control, the assignment to Executive of duties with the Company or the Successor Person, as applicable, inconsistent with Executive’s title, position, status, reporting relationships, authority, duties or responsibilities to the Company as contemplated by Section 3(a) (including, without limitation, if Executive is not the Executive Chairman of the Successor Person), or any other action by the Successor Person which results in a diminution in Executive’s title, position, status, reporting relationships, authority, duties or responsibilities, other than insubstantial or inadvertent actions not taken in bad faith which are remedied by the Successor Person or the Company promptly after receipt of notice thereof given by Executive;

(iii) a reduction by the Company in Executive’s Base Salary or a failure by the Company to pay any Base Salary or contractually committed cash bonus payment amounts when due (other than a reduction or failure to pay resulting from Executive’s receipt of cash compensation from NRF or its subsidiaries for services directly provided to such entities by Executive as an employee of such entities in accordance with Section 2(b) or 2(c) );

(iv) following a Change of Control, the requirement by the Successor Person or the Company that the principal place of performance of Executive’s services be at a location more than fifty (50) miles from either (x) the greater New York City metropolitan area or (y) the metropolitan area where Executive principally performed Executive’s services immediately prior to such Change of Control or, if earlier, the entry into a definitive agreement contemplating a Change of Control;

(v) any purported termination of Executive’s employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 5(a) ; or

(vi) a material failure by the Company to comply with any other material provision of this Agreement, including, without limitation, a breach of Section 11 .

(e) Change of Control . For the purposes hereof, a “Change of Control” of the Company shall be deemed to have occurred if an event set forth in any one of the following paragraphs (i) - (v) shall have occurred:

(i) any Person is or becomes Beneficial Owner (as defined below), directly or indirectly, of securities of the Company representing thirty-five percent (35%) or more of the combined voting power of the then outstanding securities of the Company, excluding (A) any Person who becomes such a Beneficial Owner in connection with a transaction described in clause (x) of paragraph (ii) below, and (B) any Person who becomes such a Beneficial Owner through the issuance of such securities with respect to purchases made directly from the Company; or

(ii) the consummation of a merger or consolidation of the Company with any other Person or the issuance of voting securities of the Company in connection with a merger or consolidation of the Company (or any direct or indirect subsidiary of the Company), other than (x) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) fifty percent (50%) or more of the combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or (y) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing thirty-five percent (35%) or more of the combined voting power of the then outstanding securities of the Company;

(iii) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company;

(iv) the consummation of the sale or disposition by the Company of all or substantially all of the assets of the Company; or

(v) individuals who, on the Effective Date, constitute the Board (the “ Incumbent Directors ”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the Effective Date, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided , however , that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to directors or as a result of any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director.

For purposes of this Agreement, (1) “ Beneficial Owner ” shall have the meaning set forth in Rule 13d-3 under the Exchange Act and (2) “ Successor Person ” shall mean (A) the Person who is or becomes Beneficial Owner of securities of the Company representing thirty-five percent (35%) or more of the combined voting power of the then outstanding securities of the Company as a result of a Change of Control pursuant to clause (i) of the definition thereof; (B) in the event of a Change of Control pursuant to clause (ii) of the definition thereof resulting from the consummation of a merger or consolidation of the Company with any other Person, the ultimate parent entity controlling the Person surviving or resulting from such merger or consolidation or, if the Person surviving or resulting from such merger or consolidation is not a subsidiary of another entity, such Person, (C) in the event of a Change of Control pursuant to clause (iv) of the definition thereof, the ultimate parent entity of the Person that is the purchaser or other transferee of all or substantially all of the assets of the Company or, if such Person is not a subsidiary of another entity, such Person, or (D) in the event of all other circumstances resulting in a Change of Control, the Company.

(f) The Company may terminate Executive’s employment at any time without Cause. Executive may terminate Executive’s employment at any time without Good Reason upon thirty (30) days’ advance written notice to the Company.

(g) The Company shall not be required to make the payments and provide the benefits specified in Section 6 below (other than the Accrued Benefits (as defined below) or payments and benefits to be made or provided in connection with a termination of Executive’s employment on account of death (other than on account of death after delivery of a valid Notice of Termination for Cause or by Executive without Good Reason)) unless Executive executes and delivers to the Company an agreement releasing the Company, its affiliates and its officers, directors and employees from all liability (other than the payments and benefits under this Agreement and certain other entitlements set forth therein) attached hereto as Exhibit A (the “ Release Agreement ”) and the Release Agreement becomes irrevocable within thirty (30) days after the Date of Termination; provided , however , that the effectiveness of the Release Agreement will be subject to the Company releasing Executive from all liability to the Company and its affiliates that any Board members (other than Executive) have actual knowledge of on the Date of Termination under the Release Agreement. The Release Agreement shall constitute the Release required by any equity or bonus award agreement.

(h) Unless the Company and Executive agree in writing to waive this requirement, upon the termination of Executive’s employment for any reason, Executive agrees to promptly resign from (i) office as a director of the Company, any subsidiary or affiliate of the Company and any other entity to which the Company appoints Executive to serve as a director, including, without limitation, NRF and all NSAM Managed Companies, (ii) from all offices held by Executive in any or all of such entities in clause (i) above, and (iii) all fiduciary positions (including as trustee) held by Executive with respect to any pension plans or trusts established by any such entities in clause (i) above. For the avoidance of doubt, the reason for Executive’s termination of employment under this Agreement shall be deemed to be the same reason Executive’s employment terminates with respect to any Company subsidiary or affiliate, NRF or any NSAM Managed Companies.

5. Termination Procedure .

(a) Notice of Termination . Any termination of Executive’s employment by the Company or by Executive (other than termination pursuant to Sections 4(a) and 6(a)(i) hereof) shall be communicated by written “Notice of Termination” to the other party hereto in accordance with Section 12 . In connection with a termination pursuant to Section 4(b) , 4(c) or 4(d) , such “Notice of Termination” shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated.

(b) Effect of Date of Termination . “Date of Termination” of Executive’s employment and this Agreement shall mean (i) if the Term of this Agreement expires without renewal as of the third anniversary of the Effective Date or any subsequent Renewal Date, the date of such expiration, (ii) if Executive’s employment is terminated pursuant to Section 4(a) above, the date of Executive’s death, (iii) if Executive’s employment is terminated pursuant to Section 4(b) above, thirty (30) days after delivery to Executive of Notice of Termination (provided that Executive shall not have returned to the performance of Executive’s duties on a full-time basis during such thirty (30) day period), (iv) if Executive’s employment is terminated pursuant to Sections 4(c) and 4(f) above, the date specified in the Notice of Termination (which date shall be at least thirty (30) days after delivery to Company of Notice of Termination in the case of a termination by Executive pursuant to Section 4(f) ), and (v) if Executive’s employment is terminated pursuant to Section 4(d) above, the date on which a Notice of Termination is given or any later date (within thirty (30) days) set forth in such Notice of Termination; provided that the Company shall not have cured the event giving rise to the Notice of Termination within ten (10) business days following delivery of such Notice. Upon the Date of Termination, the Term of this Agreement shall expire and the Company shall have no further obligation to Executive except to the extent Executive is otherwise entitled to any unpaid salary or benefits hereunder and insurance coverage in accordance with applicable law; provided that the provisions set forth in Sections 2(f) , 3(b) , 6 , 7 , 13 , 14 and 15 hereof and this Section 5(b) shall remain in full force and effect after the termination of Executive’s employment, notwithstanding the expiration of the Term of or termination of this Agreement.

6. Obligations of the Company Upon Termination of Employment .

(a) Expiration of Term and Nonrenewal by Executive, By the Company for Cause or by Executive without Good Reason . If Executive’s employment shall be terminated (i) due to and upon expiration of the Term of this Agreement because Executive shall have given written notice not to extend the Employment Period pursuant to Section 2(a) , (ii) by the Company for Cause or (iii) by Executive without Good Reason, then the Company shall pay Executive Executive’s Base Salary (at the rate in effect at the time Notice of Termination is given) through the Date of Termination on or before the time required by law but in no event more than 30 days after the Executive’s Date of Termination, and any accrued or vested benefits or entitlements the Executive may have under any employee benefit, equity or bonus plan or award agreement of the Company or any affiliate through the Date of Termination, which accrued or vested benefits or entitlements shall be paid and/or provided in accordance with the terms of such employee benefit, equity or bonus plans or award agreements (collectively, the “ Accrued Benefits ”) and, except as provided in Section 2(f) , the Company shall have no additional obligations to Executive under this Agreement.

(b) Death; Disability . If, during the Employment Period, Executive’s employment shall terminate on account of death (other than on account of death after delivery of a valid Notice of Termination for Cause or by Executive without Good Reason, in which case the provisions of Section 6(a) shall apply) or Disability, except as provided in Section 2(f) , the Company shall have no further obligations to Executive other than to provide Executive (or Executive’s estate):

(vii) the Accrued Benefits;

(viii) 1.0 times Executive’s Base Salary at the rate in effect at the Date of Termination without taking into account any reduction in Base Salary in accordance with Section 2(b) resulting from Executive’s receipt of cash compensation from NRF or its subsidiaries as base salary for services directly provided to such entities by Executive as an employee of such entities;

(ix) a pro-rated bonus based upon the number of days in the year of termination through the Date of Termination relative to 365 and the target Annual Cash Bonus in the year the Date of Termination occurs; provided that (x) no amount shall be payable pursuant to this Section 6(b)(iii) if (i) Executive was a Participant in the Bonus Plan and received an Annual Bonus Pool Percentage for the Plan Year (as such terms are defined in the Bonus Plan) in which the Date of Termination occurs or (ii) Executive was a participant in an annual bonus plan or program of the Company, other than the Bonus Plan, during the year in which the Date of Termination occurs that specifically provides for a method of determining the pro-rated annual bonus to be received by the Executive for the year in which the Date of Termination occurs and (y) if a target Annual Cash Bonus has not yet been established for Executive (or Executive’s Annual Bonus Pool Percentage for such Plan Year or the basis upon which Executive is to participate in an alternative annual bonus plan or program has not yet been determined) for the year in which the Date of Termination occurs, Executive’s target Annual Cash Bonus shall be deemed to be Executive’s actual Annual Cash Bonus for the prior year;

(x) the health benefits set forth under Other Benefits in Section 2(g) for a one-year period from the Date of Termination;

(xi) full vesting of all Company or any affiliate’s equity awards as of the Date of Termination, except to the extent otherwise provided in the plan governing particular equity awards, as in effect at the time such equity awards were granted, or an award agreement governing a particular equity award or as otherwise consented to by Executive in writing;

(xii) continuing exercisability of all stock options and stock appreciation rights for the lesser of (x) twelve (12) months after the Date of Termination or (y) the remainder of their term; and

(xiii) any restrictions prohibiting the transfer or other disposition of vested shares of the Company’s common stock, LTIP Units (or similar units) of the Company’s operating partnership subsidiary, or equity interests of NRF or any other NSAM Managed Company (including any subsidiary of NRF or any such NSAM Managed Company) shall lapse on the date that is thirty (30) days after the Date of Termination notwithstanding any provisions to the contrary contained in the award agreements or plans governing such vested shares, LTIP Units (or similar units) or equity interests.

The amounts set forth in Section 6(b)(ii) and (iii) will be paid in a lump sum in cash within thirty (30) days after the Date of Termination; provided that if the 30-day period begins in one calendar year and ends in a second calendar year, such amounts shall be paid in the second calendar year by the last day of such 30-day period.

(c) For any other reason . If, during the Employment Period, Executive’s employment shall terminate for any reason other than those provided in Section 6(a) or 6(b) above (including due to and upon expiration of the Term of this Agreement because the Company shall have given written notice not to extend the Employment Period pursuant to Section 2(a) ), except as provided in Section 2(f) , the Company shall have no further obligations to Executive other than to provide Executive:

(vi) the Accrued Benefits;

(vii) an amount equal to 2.25 times (or 3.0 times in the event such termination occurs in connection with (i.e., after a definitive agreement is executed which results in a Change of Control or within 70 days prior to a Change of Control where substantial steps have been taken by the Company (or of which the Company is aware) to negotiate or effectuate such Change of Control prior to such termination) or within 12 months following a Change of Control) Executive’s total compensation in effect prior to the Date of Termination (using for this purpose, (x) Executive’s Base Salary at the rate in effect on the Date of Termination without taking into account any reduction in Base Salary in accordance with Section 2(b) resulting from Executive’s receipt of cash compensation from NRF or its subsidiaries as base salary for services directly provided to such entities by Executive as an employee of such entities, and (y) the average of the annual bonuses (including, to the extent paid by the Company, NRF, any other NSAM Managed Company or any of their subsidiaries, Annual Cash Bonuses and annual bonuses paid in LTIP Units or other securities of the Company, NRF, any other NSAM Managed Company or any of their subsidiaries and excluding annual bonuses paid in LTIP Units or such other securities that are earned based on multi-year performance criteria) earned for the three (3) years prior to the year in which the Date of Termination occurs; provided that if the Date of Termination occurs before annual bonuses for Executive have been earned for at least three (3) years from and including the year in which the Effective Date occurs, the average for purposes of clause (y) shall be computed based on (i) each full calendar year from and including the year in which the Effective Date occurs or (ii) if the Date of Termination occurs before the end of the year in which the Effective Date occurs, the average of the annual bonuses (including annual cash bonuses and annual bonuses paid in shares of common stock or other securities of NRF or its operating partnership) earned from NRF for the three (3) years prior to the year in which the Date of Termination occurs (or such lesser number of full years as Executive was employed by NRF);

(viii) a pro-rated bonus based upon the number of days in the year of termination through the Date of Termination relative to 365 and the target Annual Cash Bonus in the year the Date of Termination occurs; provided that (x) no amount shall be payable pursuant to this Section 6(c)(iii) if (i) Executive was a Participant in the Bonus Plan and received an Annual Bonus Pool Percentage for the Plan Year (as such terms are defined in the Bonus Plan) in which the Date of Termination occurs or (ii) Executive was a participant in an annual bonus plan or program of the Company, other than the Bonus Plan, during the year in which the Date of Termination occurs that specifically provides for a method of determining the pro-rated annual bonus to be received by the Executive for the year in which the Date of Termination occurs and (y) if a target Annual Cash Bonus has not yet been established for Executive (or Executive’s Annual Bonus Pool Percentage for such Plan Year or the basis upon which Executive is to participate in an alternative annual bonus plan or program has not yet been determined) for the year in which the Date of Termination occurs, Executive’s target Annual Cash Bonus shall be deemed to be Executive’s actual Annual Cash Bonus for the prior year;

(ix) the health benefits set forth under Other Benefits in Section 2(g) until the earlier of (x) the one-year anniversary of the Date of Termination and (y) the date upon which executive receives similar health benefits from another Person;

(x) full vesting of all Company or any affiliate’s equity awards as of the Date of Termination, except to the extent otherwise provided in the plan governing particular equity awards, as in effect at the time such equity awards were granted, or an award agreement governing a particular equity award or as otherwise consented to by Executive in writing;

(xi) continuing exercisability of all stock options and stock appreciation rights for the lesser of (x) twelve (12) months after the Date of Termination or (y) the remainder of their term; and

(xii) any restrictions prohibiting the transfer or other disposition of vested shares of the Company’s common stock, LTIP Units (or similar units) of the Company’s operating partnership subsidiary, or equity interests of NRF or any other NSAM Managed Company (including any subsidiary of NRF or any such NSAM Managed Company) shall lapse on the date that is thirty (30) days after the Date of Termination notwithstanding any provisions to the contrary contained in the award agreements or plans governing such vested shares, LTIP Units (or similar units) or equity interests.

The amounts set forth in Section 6(c)(ii) and (iii) will be paid in a lump sum in cash within thirty (30) days after the Date of Termination; provided that if the 30-day period begins in one calendar year and ends in a second calendar year, such amounts shall be paid in the second calendar year by the last day of such 30-day period and in the case of a termination prior to and in connection with a Change in Control, the additional 0.75 times severance payment under Section 6(c)(ii) shall be paid upon the later of such date or the date of the Change of Control.

(d) Additional Limitation .

(i) Anything in this Agreement to the contrary notwithstanding, in the event that the amount of any compensation, payment, benefit or distribution by the Company, NRF, any NSAM Managed Company or any affiliate or successor thereto or any entity which effectuates a transaction described in Section 280G(b)(2)(A)(i) of the Internal Revenue Code of 1986, as amended (the “ Code ”), and any regulations or Treasury guidance promulgated thereunder, to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise and whether paid upon termination of employment or otherwise, calculated in a manner consistent with Section 280G of the Code and the applicable regulations thereunder (the “ Compensatory Payments ”), would be subject to the excise tax imposed by Section 4999 of the Code (or any successor provision), then the Compensatory Payments shall be reduced (but not below zero) so that the sum of all of the Compensatory Payments shall be $1.00 less than the amount at which Executive becomes subject to the excise tax imposed by Section 4999 of the Code (or any successor provision); provided that such reduction shall only occur if it would result in Executive receiving a higher After Tax Amount (as defined below) than Executive would receive if the Compensatory Payments were not subject to such reduction. In such event, the Compensatory Payments shall be reduced in the following order, in each case, in reverse chronological order beginning with the Compensatory Payments that are to be paid the furthest in time from consummation of the transaction that is subject to Section 280G of the Code: (1) cash payments not subject to Section 409A of the Code; (2) cash payments subject to Section 409A of the Code; (3) equity-based payments and acceleration; and (4) non-cash forms of benefits; provided that in the case of all the foregoing Compensatory Payments all amounts or payments that are not subject to calculation under Treas. Reg. §1.280G-1, Q&A-24(b) or (c) shall be reduced before any amounts that are subject to calculation under Treas. Reg. §1.280G-1, Q&A-24(b) or (c).

(ii) For purposes of this Section 6(d), the “ After Tax Amount ” means the amount of the Compensatory Payments less all federal, state, and local income, excise and employment taxes imposed on Executive as a result of Executive’s receipt of the Compensatory Payments. For purposes of determining the After Tax Amount, Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation applicable to individuals for the calendar year in which the determination is to be made, and state and local income taxes at the highest marginal rates of individual taxation in each applicable state and locality, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes.

(iii) The determination as to whether a reduction in the Compensatory Payments shall be made pursuant to Section 6(d)(i) shall be made by a nationally recognized accounting firm selected by the Company (the “ Accounting Firm ”), which shall provide detailed supporting calculations both to the Company and Executive within fifteen (15) business days of the Date of Termination, if applicable, or at such earlier time as is reasonably requested by the Company or Executive. Any determination by the Accounting Firm shall be binding upon the Company and Executive.

7. Prohibited Activities .

(a) Non-Solicitation and Business Relationships . Executive agrees that during Executive’s employment by the Company and for one (1) year following Executive’s Date of Termination (the “ Non-Solicitation Period ”), Executive shall not, directly or indirectly, solicit, induce, or attempt to solicit or induce any officer, director, employee, consultant, agent or joint venture partner of the Company or any of its affiliates (including, without limitation, NRF or any NSAM Managed Company or their subsidiaries) to terminate his, her or its employment or other relationship with the Company or any of its affiliates for the purpose of associating with any competitor of the Company or any of its affiliates, or otherwise encourage any such person to leave or sever his, her or its employment or other relationship with the Company or any of its affiliates for any other reason, or authorize the taking of such actions by any other person or entity, or assist or participate with any such person or entity in taking such action. For purposes of clarity, Executive’s provision of services to NRF, any other NSAM Managed Entity and/or any of their subsidiaries during the Executive’s employment by the Company pursuant to the terms of a management agreement between the Company (or any of its subsidiaries) and such entity (or as a direct employee of NRF and/or its subsidiaries) shall not constitute a breach of this Section 7(a) .

(b) Non-Competition . Executive acknowledges that the services to be rendered by Executive to the Company are of a special and unique character. In consideration of Executive’s employment hereunder, Executive agrees that during Executive’s employment by the Company and for the one-year period following the termination of Executive’s employment hereunder by either party for any reason (other than (i) due to and upon expiration of the Term of this Agreement because the Company has provided written notice not to extend the Employment Period pursuant to Section 2(a) , (ii) termination by Executive with Good Reason provided that a Change of Control shall not have occurred prior to the Date of Termination, or (iii) termination by the Company of Executive without Cause), Executive will not engage, directly or indirectly, whether as principal, agent, representative, consultant, employee, partner, stockholder, limited partner, other investor or otherwise (other than a passive investment of not more than five percent (5%) of the stock, equity or other ownership interest of any corporation, partnership or other entity), within the United States of America, in any business that competes directly with the principal businesses conducted by the Company as of the Executive’s Date of Termination. For purposes of clarity, Executive’s provision of services to NRF, any other NSAM Managed Entity and/or any of their subsidiaries during the Executive’s employment by the Company pursuant to the terms of a management agreement between the Company (or any of its subsidiaries) and such entity (or as a direct employee of NRF and/or its subsidiaries) shall not constitute a breach of this Section 7(b) and, for purposes of the scope of this non-competition provision applying following a termination in connection with or within 12 months following a Change of Control, the principal businesses conducted by the Company shall be deemed to mean only such businesses conducted by the Company immediately prior to the Change of Control.

8. Confidentiality . Each party to this Agreement shall keep strictly confidential the terms of this Agreement, provided , that (i) either party to this Agreement may disclose the terms of this Agreement with the prior written consent of the other party, (ii) either party to this Agreement may disclose the terms of this Agreement to the extent necessary to comply with law or legal process, in which event the disclosing party shall notify the other party to this Agreement as promptly as practicable (and, if possible, prior to making such disclosure), (iii) either party to this Agreement may disclose the terms of this Agreement to outside counsel, underwriters and accountants and (iv) the Company may disclose the terms of this Agreement in public filings with the Securities and Exchange Commission or other regulatory agencies, without notice to Executive, to the extent that it believes such disclosure to be prudent, necessary or required by applicable law in connection with the operation of the business of the Company and shall have the right to file a copy of this Agreement with such regulating agencies, it being understood that if this Agreement is so disclosed or filed, Executive shall thereafter be released from his obligation in respect of this Section 8 .

9. No Waiver . No failure or delay on the part of the Company or Executive in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to the Company or Executive at law or in equity. No waiver of or consent to any departure by either the Company or Executive from any provision of this Agreement shall be effective unless signed in writing by the party entitled to the benefit thereof. No amendment, modification or termination of any provision of this Agreement shall be effective unless signed in writing by all parties hereto. Any waiver of any provision of this Agreement, and any consent to any departure from the terms of any provision of this Agreement, shall be effective only in the specific instance and for the specific purpose for which made or given.

10. Severability of Provisions . Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. Moreover, if any one or more of the provisions contained in this Agreement shall be held to be excessively broad as to duration, activity or subject, such provision shall be construed by limiting and reducing it so as to be enforceable to the maximum extent allowed by applicable law.

11. Non-Assignability ; Binding Nature . The rights and obligations of Executive under this Agreement are personal to Executive and may not be assigned or delegated to any other Person; provided , however , that nothing in this Agreement shall preclude Executive from designating any of Executive’s beneficiaries to receive any benefits payable hereunder upon Executive’s death, or Executive’s executors, administrators or other legal representatives from assigning any rights hereunder to the person or persons entitled thereto. Upon Executive’s death, any payments or entitlements due to Executive hereunder or otherwise shall be paid or provided to Executive’s designated beneficiaries (or if there are no such beneficiaries, his estate). Except as otherwise provided in Section 3(a), no rights or obligations of the Company under this Agreement may be assigned or transferred by the Company except that such rights and obligations may be assigned or transferred pursuant to a merger, consolidation or other combination in which the Company is not the continuing entity, or a sale or liquidation of all or substantially all of the business and assets of the Company; provided that the assignee or transferee is the successor to all or substantially all of the business and assets of the Company and such assignee or transferee expressly assumes the liabilities, obligations and duties of the Company as set forth in this Agreement. This Agreement shall be binding upon and inure to the benefit of the Company and Executive and their respective successors, heirs (in the case of Executive) and assigns.

12. Notices . Any notice given hereunder shall be in writing and shall be deemed to have been given when delivered by messenger or courier service (against appropriate receipt), or mailed by registered or certified mail (return receipt requested), addressed as follows:


If to the Company:	NorthStar Asset Management Group Inc. 399 Park Avenue, 18th Floor New York, NY 10022 Attention: General Counsel


If to Executive:	David T. Hamamoto c/o NorthStar Asset Management Group Inc. 399 Park Avenue, 18 ^th Floor New York, NY 10022

or at such other address as shall be indicated to the parties hereto in writing. Notice of change of address shall be effective only upon receipt.

13. Governing Law . This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York applicable to contracts made and to be entirely performed within such State.

14. Dispute Resolution .

(a) Subject to the provisions of Section 14(b) , any dispute, controversy or claim arising between the parties relating to this Agreement, or otherwise relating in any way to Executive’s employment by or interest in the Company or any of its affiliate (whether such dispute arises under any federal, state or local statute or regulation, or at common law), shall be resolved by final and binding arbitration in New York, New York, before a single arbitrator, selected by the American Arbitration Association in accordance with its rules pertaining at the time the dispute arises. In such arbitration proceedings, the arbitrator shall have the discretion, to be exercised in accordance with applicable law, to allocate among the parties the arbitrator’s fees, tribunal and other administrative costs. If Executive prevails on at least one material issue in dispute, the Company shall reimburse Executive for the reasonable fees and costs of Executive’s counsel (and the arbitrator shall be requested to rule on whether Executive has so prevailed). The award of the arbitrator may be confirmed before and entered as a judgment of any court having jurisdiction over the parties.

(b) The provisions of Section 14(a) shall not apply with respect to any application made by the Company for injunctive relief under this Agreement.

15. Section 409A .

(a) Anything in this Agreement to the contrary notwithstanding, if at the time of Executive’s separation from service within the meaning of Section 409A of the Code, the Company determines that Executive is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, then to the extent any payment or benefit that Executive becomes entitled to under this Agreement on account of Executive’s separation from service would be considered deferred compensation otherwise subject to the 20 percent additional tax imposed pursuant to Section 409A(a) of the Code as a result of the application of Section 409A(a)(2)(B)(i) of the Code, such payment shall not be payable and such benefit shall not be provided until the date that is the earlier of (A) six months and one day after the Executive’s separation from service, or (B) Executive’s death. If any such delayed cash payment is otherwise payable on an installment basis, the first payment shall include a catch-up payment covering amounts that would otherwise have been paid during the six-month period but for the application of this provision, and the balance of the installments shall be payable in accordance with their original schedule. Any such delayed cash payment shall earn interest at an annual rate equal to the applicable federal short-term rate published by the Internal Revenue Service for the month in which the date of separation from service occurs, from such date of separation from service until the payment.

(b) All in-kind benefits provided and expenses eligible for reimbursement under this Agreement shall be provided by the Company or incurred by Executive during the time periods set forth in this Agreement. All reimbursements shall be paid as soon as administratively practicable, but in no event shall any reimbursement be paid after the last day of the taxable year following the taxable year in which the expense was incurred. The amount of in-kind benefits provided or reimbursable expenses incurred in one taxable year shall not affect the in-kind benefits to be provided or the expenses eligible for reimbursement in any other taxable year (except for any lifetime or other aggregate limitation applicable to medical expenses). Such right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.

(c) To the extent that any payment or benefit described in this Agreement constitutes “non-qualified deferred compensation” under Section 409A of the Code, and to the extent that such payment or benefit is payable upon Executive’s termination of employment, then such payments or benefits shall be payable only upon Executive’s “separation from service.” The determination of whether and when a separation from service has occurred shall be made in accordance with the presumptions set forth in Treasury Regulation Section 1.409A‑1(h).

(d) The parties intend that this Agreement will be administered in accordance with Section 409A of the Code. To the extent that any provision of this Agreement is ambiguous as to its compliance with Section 409A of the Code, the provision shall be read in such a manner so that all payments hereunder comply with Section 409A of the Code. Each payment pursuant to this Agreement is intended to constitute a separate payment for purposes of Treasury Regulation Section 1.409A‑2(b)(2). The parties agree that this Agreement may be amended, as reasonably requested by either party, and as may be necessary to fully comply with Section 409A of the Code and all related rules and regulations in order to preserve the payments and benefits provided hereunder without additional cost to either party.

(e) The Company makes no representation or warranty and shall have no liability to Executive or any other person if any provisions of this Agreement are determined to constitute deferred compensation subject to Section 409A of the Code but do not satisfy an exemption from, or the conditions of, such Section. For avoidance of doubt, the foregoing shall not limit the Company’s liability to Executive in the event that Executive is subject to taxes, interest or penalties under Section 409A of the Code as a result of the Company’s breach of this Agreement.

16. Headings . The paragraph headings used or contained in this Agreement are for convenience of reference only and shall not affect the construction of this Agreement.

17. Entire Agreement . This Agreement and any agreements executed contemporaneously herewith constitute the entire agreement between the parties with respect to the matters set forth herein, and there are no promises or undertakings with respect thereto relative to the subject matter hereof not expressly set forth or referred to herein or therein. With the exception of Section 17 of the Prior Agreement, this Agreement expressly supersedes and replaces as of the Amendment Effective Date the Prior Agreement. For the avoidance of doubt, Executive’s outstanding equity, bonus and/or LTIP awards and his indemnification agreement with NRF or any affiliate remain in full force and effect.

18. Execution in Counterparts . This Agreement may be executed in any number of counterparts and by different parties hereto on separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same Agreement.

IN WITNESS WHEREOF , the parties hereto have executed this Agreement on the date first set forth above.

/s/ David T. Hamamoto

David T. Hamamoto

NORTHSTAR ASSET MANAGEMENT GROUP INC.

By: /s/ Albert Tylis

Name: Albert Tylis

Title: Chief Executive Officer

Exhibit A

This General Release of Claims (this “ Agreement ”) is executed as of the date listed below by David T. Hamamoto (“ Executive ”) and NorthStar Asset Management Group Inc. (the “ Company ”).

In consideration of the promises set forth in the Employment Agreement between Executive and the Company (the “ Employment Agreement ”), the Executive and the Company agree as follows:

1. Executive’s General Release and Waiver of Claims .

(a) Release . In consideration of the payments and benefits provided to Executive under the Employment Agreement, Executive and each of the Executive’s respective heirs, executors, administrators, representatives, agents, successors and assigns (collectively, the “ Executive Releasors ”) hereby irrevocably and unconditionally release and forever discharge the Company, NorthStar Realty Finance Corp. (“ NRF ”), any NSAM Managed Company (as defined in the Employment Agreement) and their respective subsidiaries, affiliates, predecessors and successors (collectively, the “ Company Group ”) and their respective officers, employees, directors, shareholders and agents (“ Company Releasees ”) from any and all claims, actions, causes of action, rights, judgments, obligations, damages, demands, accountings or liabilities of whatever kind or character (collectively, “ Claims ”), including, without limitation, any Claims under any federal, state, local or foreign law, regardless of whether based on any statute or the common law, including without limitation Claims of breach of contract, Claims based on tortious conduct, statutory or common law employment discrimination Claims, Claims for payment of salary or wages and Claims for attorney’s fees, regardless of whether known or unknown to Executive or any of the other Executive Releasors, that any of the Executive Releasors may have, or in the future may possess, arising out (i) of Executive’s employment relationship with and service as an employee, officer or director of any member of the Company Group, and the termination of such relationship or service and (ii) any other event, condition, circumstance or obligation that occurred, existed or arose on or prior to the date hereof; provided , however , that notwithstanding anything else herein to the contrary, Executive is not releasing any Claims with respect to: (i) the payments and entitlements due to him under Section 6 of the Employment Agreement, (ii) any rights pursuant to any bonus, stock, equity-based compensation or LTIP or partnership awards awarded or granted by any member of the Company Group, (iii) his right to be reimbursed for unreimbursed business expenses incurred through his termination date, (iv) his rights to be indemnified and covered under directors’ and officers’ liability insurance policies as set forth in Section 2.7 of the Employment Agreement as well as any indemnification agreement entered into between Executive and any member of the Company Group, (v) his rights to be indemnified pursuant to the bylaws or other corporate governance documents of any member of the Company Group or to be covered under any applicable directors’ and officers’ liability insurance policies, or (vi) his rights as a shareholder of any member of the Company Group.

(b) Specific Release of ADEA Claims . In further consideration of the payments and benefits provided to Executive under the Employment Agreement, Executive, on his behalf and on behalf of the Executive Releasors, hereby unconditionally releases and forever discharges the Company Releasees from any and all Claims that the Executive or any Executive Releasor may have as of the date the Executive signs this Agreement arising under the Federal Age Discrimination in Employment Act of 1967, as amended, and the applicable rules and regulations promulgated thereunder (“ ADEA ”). By signing this Agreement, Executive hereby acknowledges and confirms the following: (i) Executive was advised by the Company in connection with his termination to consult with an attorney of his choice prior to signing this Agreement and to have such attorney explain to Executive the terms of this Agreement, including, without limitation, the terms relating to Executive’s release of claims arising under ADEA, and Executive has in fact consulted with an attorney or chosen not to do so; (ii) Executive was given a period of 21 days following his termination date to consider the terms of this Agreement and to consult with an attorney of his choosing with respect thereto; and (iii) Executive knowingly and voluntarily accepts the terms of this Agreement. Executive also understands that he has seven (7) days following the date on which he signs this Agreement within which to revoke the release contained in this paragraph, by providing the Company a written notice of his revocation of the release and waiver contained in this paragraph.

(c) No Assignment . The Executive represents and warrants that he has not assigned any of the Claims being released by Executive under this Agreement.

2. Company’s Release of Claims and Waiver of Known Claims .

(a) Release . In consideration of Executive’s release of claims herein and other good and valuation consideration, the Company, on behalf itself and any Company Releasees that it has the capacity to bind, hereby irrevocably and unconditionally release and forever discharge Executive and each of Executive’s respective heirs, executors, administrators, representatives, agents, successors and assigns from any and all Claims, including, without limitation, any Claims under any federal, state, local or foreign law that the Company and/or any Company Releasee may have, or in the future may possess arising out (i) of the Executive’s employment relationship with and service as an employee, officer or director of the Company and any other member of the Company Group, and the termination of such relationship or service and (ii) any event, condition, circumstance or obligation that occurred, existed or arose on or prior to the date hereof; provided that , in each case, such claim was known by a member (other than Executive) of the board of directors or similar governing body of the Company as of the date of Executive’s termination of employment. Notwithstanding the foregoing, nothing in this Agreement shall be construed to affect Executive’s continued obligations under the Employment Agreement or any other agreement between Executive and the Company or any Company Releasee that was executed contemporaneous with or after the execution of the Employment Agreement.

(b) No Assignment . The Company, on its behalf and that of any other Company Releasee that it has the capacity to bind, represents and warrants that it (or they) has not assigned any of the Claims being released by the Company or any Company Releasee under this Agreement.

1. Proceedings . As of the date he executes this Agreement, Executive acknowledges that he has not filed, and agrees not to initiate or cause to be initiated on his behalf, any complaint, charge, claim or proceeding against the Company Releasees before any local, state or federal agency, court or other body, other than with respect to the obligations of the Company to the Executive under the Employment Agreement or in respect of any other matter described in the proviso to Section 1(a) (each, individually, a “ Proceeding ”) and agrees not to participate voluntarily in any Proceeding; provided that the foregoing shall not affect Executive’s right to file a charge with the Equal Employment Opportunity Commission or any state fair employment practices agency, except that notwithstanding this proviso Executive waives any right he may have to benefit in any manner from any relief (whether monetary or otherwise) arising out of any Proceeding. As of the date it executes this Agreement, the Company acknowledges that it has not filed, and is not aware of any other member of the Company Group or any Company Releasee filing, and agrees not to initiate or cause to be initiated on its or any Company Releasee’s behalf, any complaint, charge, claim or proceeding against the Executive or his heirs, executors, administrators, representatives, agents, successors and assigns before any local, state or federal agency, court or other body, which has been released by the Company or any other Company Releasee under Section 2 hereof and agrees not to participate voluntarily in any such proceeding and waives any relief (whether monetary or otherwise) arising out of any such proceeding.

2. Remedies . In the event Executive initiates or voluntarily participates in any Proceeding following his receipt of written notice from the Company and a failure to cease such participation within 30 days following receipt of such notice, or if he revokes the ADEA release contained in Paragraph 1(b) of this Agreement within the seven-day period provided under Paragraph 1(b), the Company may, in addition to any other remedies it may have, reclaim any amounts paid to him under the termination provisions of the Employment Agreement or terminate any benefits or payments that are subsequently due under the Employment Agreement, other than benefits or payments that would be due in the absence of this Agreement. Executive understands that by entering into this Agreement he will be limiting the availability of certain remedies that he may have against the Company and any other member of the Company Group and limiting also his ability to pursue certain claims against the Company or any other member of the Company Group.

3. Effectiveness . For avoidance of doubt, this Agreement shall only be effective if the Company executes and delivers an executed copy of this Agreement to Executive within 30 days following the later of the date Executive executes and delivers an executed copy of this Agreement to the Company and the termination of Executive’s employment with the Company.

4. Severability Clause . In the event any provision or part of this Agreement is found to be invalid or unenforceable, only that particular provision or part so found, and not the entire Agreement, will be inoperative.

5. Nonadmission . Nothing contained in this Agreement will be deemed or construed as an admission of wrongdoing or liability on the part of the Company or Executive.

6. Governing Law . All matters affecting this Agreement, including the validity thereof, are to be governed by, and interpreted and construed in accordance with, the laws of the State of New York applicable to contracts made and to be entirely performed within such State.

7. Notices . All notices or communications hereunder shall be in writing, addressed as provided in Section 12 of the Employment Agreement.

EXECUTIVE ACKNOWLEDGES THAT HE HAS READ THIS AGREEMENT AND THAT HE FULLY KNOWS, UNDERSTANDS AND APPRECIATES ITS CONTENTS, AND THAT HE HEREBY EXECUTES THE SAME AND MAKES THIS AGREEMENT AND THE RELEASE AND AGREEMENTS PROVIDED FOR HEREIN VOLUNTARILY AND OF HIS OWN FREE WILL .

[Remainder of page intentionally left blank]

IN WITNESS WHEREOF, Executive and the Company have executed this Agreement on the date first set forth below for such party.

EXECUTIVE

___________________________________
David T. Hamamoto

Date of Execution:____________________

NORTHSTAR ASSET MANAGEMENT GROUP INC.

By:

Name:

Title:

Date of Execution:____________________

EXHIBIT 10.13

AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT

This Amended and Restated Executive Employment Agreement (the “ Agreement ”) by and between Albert Tylis (“ Executive ”) and NorthStar Asset Management Group Inc. (the “ Company ”), dated August 5, 2015, shall be effective as of August 5, 2015 (the “ Amendment Effective Date ”), and shall amend and restate the Executive Employment Agreement by and among Executive, the Company and NorthStar Realty Finance Corp. (“ NRF ”) dated June 30, 2014 (the “ Prior Agreement ”), which was effective as of June 30, 2014 (the “ Effective Date ”).

WHEREAS , Executive and the Company desire to memorialize the terms and conditions related to Executive’s employment by the Company herein.

1. Agreements Between the Parties . This Agreement is intended to memorialize all of the terms and conditions of Executive’s employment by the Company.

2. Employment .

(b) Base Salary . Executive’s initial base salary shall be $600,000 per annum (pro-rated for partial calendar years), payable in accordance with the Company’s usual payroll practices for senior executives (as in effect from time to time, the “ Base Salary ”); provided that the Base Salary for any year shall be reduced, but not below $0, by the amount of any cash compensation paid to Executive by NRF or its subsidiaries as base salary during such year for services directly provided to such entities by Executive as an employee of such entities following the Effective Date. In subsequent years of the Term, the Base Salary shall be subject to annual review and adjustment from time to time by the compensation committee of the Company’s board of directors (the “ Compensation Committee ”), taking into account such factors as the Compensation Committee deems appropriate, including but not limited to the salaries of executive officers having similar titles and performing similar functions at comparable companies.

(e) Vacation . Executive shall be eligible for four weeks of annual vacation to be accrued and payable in accordance with the Company’s policy with respect to senior executives.

(h) Clawback Policy . Executive acknowledges that Executive will be subject to the Company’s clawback policy, dated as of June 26, 2014, which is in effect as of the date hereof.

3. Duties of Executive .

(a) Duties of Position . During the Employment Period, from and after the Amendment Effective Date, Executive shall serve as Chief Executive Officer of the Company. Executive shall perform such duties and responsibilities, consistent with Executive’s title, training and experience, as are from time to time reasonably assigned to Executive by the Board, to the extent consistent with Executive’s responsibilities as Chief Executive Officer of the Company. Executive shall report directly to the Board. It is anticipated that during the Employment Period, Executive shall also provide services directly to NRF and/or its subsidiaries, as well as to other entities with which the Company or its subsidiaries may have entered into or may enter into management agreements following the Effective Date (such entities, “ NSAM Managed Companies ”). Except for Executive’s direct services to NRF and, if applicable, any NSAM Managed Companies and their subsidiaries, Executive agrees to devote all of Executive’s business time, attention and energies to the performance of the duties assigned to Executive hereunder, and to perform such duties faithfully, diligently and to the best of Executive’s abilities and subject to such laws, rules, regulations and policies from time to time applicable to the Company’s employees. The Company may assign all or a portion of its rights and obligations under this agreement to any of its affiliates or enter into an agreement with any of its affiliates that provides that Executive will perform services on behalf of such affiliate and Executive agrees to provide such services, as directed by the Company, in each case, to the extent consistent with Executive’s responsibilities as Chief Executive Officer of the Company.

4. Termination of Employment . Executive’s employment hereunder may be terminated in accordance with this Section 4 .

(a) Death . Executive’s employment hereunder shall terminate upon Executive’s death.

(i) the conviction of, or a plea of nolo contendere by, Executive for the commission of a felony;

(i) the assignment to Executive of duties materially inconsistent with Executive’s status as Chief Executive Officer of the Company, a change by the Company in Executive’s title that results in the Executive ceasing to hold the title of Chief Executive Officer of the Company or Executive is directed to directly report to other than the Board (or the board of directors of the Successor Person following a Change of Control pursuant to clause (i), (ii) or (iv) of the definition thereof);

(ii) following a Change of Control, the assignment to Executive of duties with the Company or the Successor Person, as applicable, inconsistent with Executive’s title, position, status, reporting relationships, authority, duties or responsibilities to the Company as contemplated by Section 3(a) (including, without limitation, if Executive is not the Chief Executive Officer of the Successor Person), or any other action by the Successor Person which results in a diminution in Executive’s title, position, status, reporting relationships, authority, duties or responsibilities, other than insubstantial or inadvertent actions not taken in bad faith which are remedied by the Successor Person or the Company promptly after receipt of notice thereof given by Executive;

(v) any purported termination of Executive’s employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 5(a) ; or

(vi) a material failure by the Company to comply with any other material provision of this Agreement , including, without limitation, a breach of Section 11 .

(iii) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company;

(iv) the consummation of the sale or disposition by the Company of all or substantially all of the assets of the Company; or

5. Termination Procedure .

6. Obligations of the Company Upon Termination of Employment .

(vii) the Accrued Benefits;

(x) the health benefits set forth under Other Benefits in Section 2(g) for a one-year period from the Date of Termination;

(xii) continuing exercisability of all stock options and stock appreciation rights for the lesser of (x) twelve (12) months after the Date of Termination or (y) the remainder of their term; and

(vi) the Accrued Benefits;

(vii) an amount equal to 1.875 times (or 2.5 times in the event such termination occurs in connection with (i.e., after a definitive agreement is executed which results in a Change of Control or within 70 days prior to a Change of Control where substantial steps have been taken by the Company (or of which the Company is aware) to negotiate or effectuate such Change of Control prior to such termination) or within 12 months following a Change of Control) Executive’s total compensation in effect prior to the Date of Termination (using for this purpose, (x) Executive’s Base Salary at the rate in effect on the Date of Termination without taking into account any reduction in Base Salary in accordance with Section 2(b) resulting from Executive’s receipt of cash compensation from NRF or its subsidiaries as base salary for services directly provided to such entities by Executive as an employee of such entities, and (y) the average of the annual bonuses (including, to the extent paid by the Company, NRF, any other NSAM Managed Company or any of their subsidiaries, Annual Cash Bonuses and annual bonuses paid in LTIP Units or other securities of the Company, NRF, any other NSAM Managed Company or any of their subsidiaries and excluding annual bonuses paid in LTIP Units or such other securities that are earned based on multi-year performance criteria) earned for the three (3) years prior to the year in which the Date of Termination occurs; provided that if the Date of Termination occurs before annual bonuses for Executive have been earned for at least three (3) years from and including the year in which the Effective Date occurs, the average for purposes of clause (y) shall be computed based on (i) each full calendar year from and including the year in which the Effective Date occurs or (ii) if the Date of Termination occurs before the end of the year in which the Effective Date occurs, the average of the annual bonuses (including annual cash bonuses and annual bonuses paid in shares of common stock or other securities of NRF or its operating partnership) earned from NRF for the three (3) years prior to the year in which the Date of Termination occurs (or such lesser number of full years as Executive was employed by NRF);

(xi) continuing exercisability of all stock options and stock appreciation rights for the lesser of (x) twelve (12) months after the Date of Termination or (y) the remainder of their term; and

The amounts set forth in Section 6(c)(ii) and (iii) will be paid in a lump sum in cash within thirty (30) days after the Date of Termination; provided that if the 30-day period begins in one calendar year and ends in a second calendar year, such amounts shall be paid in the second calendar year by the last day of such 30-day period and in the case of a termination prior to and in connection with a Change in Control, the additional 0.625 times severance payment under Section 6(c)(ii) shall be paid upon the later of such date or the date of the Change of Control.

(d) Additional Limitation .

7. Prohibited Activities .

11. Non-Assignability; Binding Nature . The rights and obligations of Executive under this Agreement are personal to Executive and may not be assigned or delegated to any other Person; provided , however , that nothing in this Agreement shall preclude Executive from designating any of Executive’s beneficiaries to receive any benefits payable hereunder upon Executive’s death, or Executive’s executors, administrators or other legal representatives from assigning any rights hereunder to the person or persons entitled thereto. Upon Executive’s death, any payments or entitlements due to Executive hereunder or otherwise shall be paid or provided to Executive’s designated beneficiaries (or if there are no such beneficiaries, his estate). Except as otherwise provided in Section 3(a), no rights or obligations of the Company under this Agreement may be assigned or transferred by the Company except that such rights and obligations may be assigned or transferred pursuant to a merger, consolidation or other combination in which the Company is not the continuing entity, or a sale or liquidation of all or substantially all of the business and assets of the Company; provided that the assignee or transferee is the successor to all or substantially all of the business and assets of the Company and such assignee or transferee expressly assumes the liabilities, obligations and duties of the Company as set forth in this Agreement. This Agreement shall be binding upon and inure to the benefit of the Company and Executive and their respective successors, heirs (in the case of Executive) and assigns.


If to the Company:	NorthStar Asset Management Group Inc. 399 Park Avenue, 18th Floor New York, NY 10022 Attention: General Counsel


If to Executive:	Albert Tylis c/o NorthStar Asset Management Group Inc. 399 Park Avenue, 18 ^th Floor New York, NY 10022

or at such other address as shall be indicated to the parties hereto in writing. Notice of change of address shall be effective only upon receipt.

14. Dispute Resolution .

(b) The provisions of Section 14(a) shall not apply with respect to any application made by the Company for injunctive relief under this Agreement.

15. Section 409A .

16. Headings . The paragraph headings used or contained in this Agreement are for convenience of reference only and shall not affect the construction of this Agreement.

IN WITNESS WHEREOF , the parties hereto have executed this Agreement on the date first set forth above.

/s/ Albert Tylis

Albert Tylis

NORTHSTAR ASSET MANAGEMENT GROUP INC.

By: /s/ David T. Hamamoto

Name: David T. Hamamoto

Title: Executive Chairman

Exhibit A

This General Release of Claims (this “ Agreement ”) is executed as of the date listed below by Albert Tylis (“ Executive ”) and NorthStar Asset Management Group Inc. (the “ Company ”).

In consideration of the promises set forth in the Employment Agreement between Executive and the Company (the “ Employment Agreement ”), the Executive and the Company agree as follows:

1. Executive’s General Release and Waiver of Claims .

(c) No Assignment . The Executive represents and warrants that he has not assigned any of the Claims being released by Executive under this Agreement.

2. Company’s Release of Claims and Waiver of Known Claims .

5. Nonadmission . Nothing contained in this Agreement will be deemed or construed as an admission of wrongdoing or liability on the part of the Company or Executive.

7. Notices . All notices or communications hereunder shall be in writing, addressed as provided in Section 12 of the Employment Agreement.

[Remainder of page intentionally left blank]

IN WITNESS WHEREOF, Executive and the Company have executed this Agreement on the date first set forth below for such party.

EXECUTIVE

___________________________________
Albert Tylis

Date of Execution:____________________

NORTHSTAR ASSET MANAGEMENT GROUP INC.

By:

Name:

Title:

Date of Execution:____________________

EXHIBIT 31.1

CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER PURSUANT TO

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

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Albert Tylis, certify that:


1.	I have reviewed this quarterly report on Form 10-Q of NorthStar Asset Management Group Inc.;


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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	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


(d)	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 10, 2015	By:	/s/ ALBERT TYLIS
			Albert Tylis
			Chief Executive Officer

EXHIBIT 31.2

CERTIFICATION BY THE CHIEF FINANCIAL OFFICER PURSUANT TO

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

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Debra A. Hess, certify that:


1.	I have reviewed this quarterly report on Form 10-Q of NorthStar Asset Management Group Inc.;


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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	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


(d)	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 10, 2015	By:	/s/ DEBRA A. HESS
			Debra A. Hess
			Chief Financial Officer

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 Asset Management Group Inc. (the “Company”) for the quarterly period ended June 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Albert Tylis, 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 10, 2015	By:	/s/ ALBERT TYLIS
			Albert Tylis
			Chief Executive 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.

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 Asset Management Group Inc. (the “Company”) for the quarterly period ended June 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Debra A. Hess, 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 her 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 10, 2015	By:	/s/ DEBRA A. HESS
			Debra A. Hess
			Chief Financial Officer