NorthStar Realty Europe Corp. (Form: 10-Q, Received: 11/06/2018 16:29:36)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2018



o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-37597

NORTHSTAR REALTY EUROPE CORP.

(Exact Name of Registrant as Specified in its Charter)



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

590 Madison Avenue, 34th Floor, New York, NY 10022

(Address of Principal Executive Offices, Including Zip Code)

(212) 547-2600

(Registrant’s Telephone Number, Including Area Code)

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes x No o

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



Large accelerated filer o	Accelerated filer x	Non-accelerated filer o	Smaller reporting company o Emerging growth company x

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

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

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

The Company has one class of common stock, $0.01 par value per share, 49,817,436 shares outstanding as of November 2, 2018.

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NORTHSTAR REALTY EUROPE CORP.

FORM 10- Q

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Index		Page

Part I.	Financial Information	5
Item 1.	Financial Statements	5
	Consolidated Balance Sheets as of September 30, 2018 (unaudited) and December 31, 2017	5
	Consolidated Statements of Operations (unaudited) for the three and nine months ended September 30, 2018 and 2017	6
	Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three and nine months ended September 30, 2018 and 2017	7
	Consolidated Statements of Equity (unaudited) for the nine months ended September 30, 2018 and 2017	8
	Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2018 and 2017	9
	Notes to Consolidated Financial Statements (unaudited)	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	56
Item 4.	Controls and Procedures	58
Part II.		59
Item 1.	Legal Proceedings	59
Item 1A.	Risk Factors	59
Item 2.	Purchases of Equity Securities by Issuers	59
Item 4.	Mine Safety Disclosures	59
Item 5.	Other Events	60
Item 6.	Exhibits	61
Signatures		62

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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 operating performance of our investments, our liquidity and financing needs, the effects of our current strategies and investment activities, our ability to grow our business, our expected leverage, our expected cost of capital, our ability to divest non-strategic properties, our management’s track record and our ability to raise and effectively deploy capital. Our ability to predict results or the actual effect of plans or strategies is inherently uncertain, particularly given the economic environment. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements and you should not unduly rely on these statements. These forward-looking statements involve risks, uncertainties and other factors that may cause our actual results in future periods to differ materially from those forward-looking statements. These factors include, but are not limited to:


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


•	the effect of the Mergers (as defined in Note 1 to the financial statements included in Part I Item I) on our business;


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


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


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


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


•	volatility, disruption or uncertainty in the financial markets;


•	access to debt and equity capital and our liquidity;


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


•	the impact that rising interest rates may have on our floating rate financing;


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


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


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


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

•

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


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


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


•	our ability to make borrowings under our credit facility;


•	the impact of adverse conditions affecting office properties;


•	illiquidity of properties in our portfolio;


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

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•	tenant defaults or bankruptcy;


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


•	the impact of terrorism or hostilities involving Europe;


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


•	our ability to satisfy and manage our capital requirements;


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


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


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


•	future changes in foreign, federal, state and local tax law that may have an adverse impact on the cash flow and value of our investments;


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


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


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


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


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


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


•	the historical consolidated financial statements included in this Quarterly Report on Form 10-Q not providing an accurate indication of our performance in the future or reflecting what our financial position, results of operations or cash flow would have been had we operated as an independent public company during the periods presented;


•	our status as an emerging growth company; and


•	compliance with the rules governing REITs.

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

Factors that could have a material adverse effect on our operations and future prospects are set forth in our filings with the SEC included in Part I, Item 1A. of our Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, 2017 under “Risk Factors.” The risk factors set forth in our filings with the SEC could cause our actual results to differ significantly from those contained in any forward-looking statement contained in this report.

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PART I

Item 1. Financial Statements

NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

(Unaudited)



	September 30, 2018			December 31, 2017
Assets
Operating real estate, gross	$	1,566,505		$	1,606,890
Less: accumulated depreciation	(119,133		)	(95,356		)
Operating real estate, net	1,447,372			1,511,534
Preferred equity investments	34,137			35,347
Cash and cash equivalents	61,869			64,665
Restricted cash	7,097			6,917
Receivables, net of allowance of $691 and $747 as of September 30, 2018 and December 31, 2017, respectively	8,013			9,048
Assets held for sale	—			169,082
Derivative assets, at fair value	10,941			7,024
Intangible assets, net	100,831			114,185
Other assets, net	28,466			23,115
Total assets	$	1,698,726		$	1,940,917
Liabilities
Mortgage and other notes payable, net	$	1,092,708		$	1,223,443
Accounts payable and accrued expenses	16,954			27,240
Due to affiliates (refer to Note 6)	4,259			3,590
Derivative liabilities, at fair value	426			5,270
Intangible liabilities, net	25,142			28,632
Liabilities related to assets held for sale	—			648
Other liabilities	24,276			25,757
Total liabilities	1,163,765			1,314,580
Commitments and contingencies
Redeemable noncontrolling interest (refer to Note 9)	1,930			1,992
Equity
NorthStar Realty Europe Corp. Stockholders’ Equity
Preferred stock, $0.01 par value, 200,000,000 shares authorized, no shares issued and outstanding as of September 30, 2018 and December 31, 2017	—			—
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 49,726,647 and 55,402,259 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively	498			555
Additional paid-in capital	860,853			940,579
Retained earnings (accumulated deficit)	(333,464		)	(347,053		)
Accumulated other comprehensive income (loss)	1,564			25,618
Total NorthStar Realty Europe Corp. stockholders’ equity	529,451			619,699
Noncontrolling interests	3,580			4,646
Total equity	533,031			624,345
Total liabilities, redeemable noncontrolling interest and equity	$	1,698,726		$	1,940,917

Refer to accompanying notes to consolidated financial statements.

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NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands, Except Per Share Data)

(Unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Revenues
Rental income	$	23,920		$	27,747		$	75,744		$	79,308
Escalation income	4,283			5,641			15,186			16,360
Interest income	708			704			2,143			1,001
Other income	76			171			497			708
Total revenues	28,987			34,263			93,570			97,377
Expenses
Properties - operating expenses	5,690			7,519			19,422			22,521
Interest expense	5,318			6,536			17,280			19,641
Transaction costs	1,129			332			1,986			1,565
Management fee, related party	4,011			3,585			12,391			10,716
Other expenses	1,150			1,996			3,847			6,604
General and administrative expenses	1,952			1,723			5,631			5,875
Compensation expense ⁽¹⁾	1,741			2,839			3,292			20,094
Depreciation and amortization	11,013			14,396			34,640			39,479
Total expenses	32,004			38,926			98,489			126,495
Other income (loss)
Other gain (loss), net	627			(3,510		)	(15		)	(10,833		)
Realized gain on sales, net	2,706			1,719			42,020			7,397
Income (loss) before income tax benefit (expense)	316			(6,454		)	37,086			(32,554		)
Income tax benefit (expense)	240			(352		)	277			(316		)
Net income (loss)	556			(6,806		)	37,363			(32,870		)
Net (income) loss attributable to noncontrolling interests	(4		)	36			(225		)	303
Net income (loss) attributable to NorthStar Realty Europe Corp. common stockholders	$	552		$	(6,770	)	$	37,138		$	(32,567	)
Earnings (loss) per share:
Basic	$	0.01		$	(0.12	)	$	0.70		$	(0.59	)
Diluted	$	0.01		$	(0.12	)	$	0.68		$	(0.59	)
Weighted average number of shares:
Basic	49,991,303			55,155,440			52,125,685			55,004,888
Diluted	51,983,064			55,602,078			53,960,553			55,565,341

____________________________

(1)

For the nine months ended September 30, 2018, compensation expense includes the effects of the adoption of the accounting standard update related to stock compensation accounting (ASU 2018-07) (refer to Note 7). Compensation expense for the three and nine months ended September 30, 2018 and 2017 is comprised of equity-based compensation expenses. For the nine months ended September 30, 2017 , compensation expense includes the impact of substantially all time based and certain performance based awards vesting in connection with the change of control of the Manager (refer to Note 7).

Refer to accompanying notes to consolidated financial statements.

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NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Dollars in Thousands)

(Unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Net income (loss)	$	556		$	(6,806	)	$	37,363		$	(32,870	)
Other comprehensive income (loss):
Foreign currency translation adjustment, net	(4,300		)	20,532			(24,222		)	67,005
Total other comprehensive income (loss)	(4,300		)	20,532			(24,222		)	67,005
Comprehensive income (loss)	(3,744		)	13,726			13,141			34,135
Comprehensive (income) loss attributable to noncontrolling interests
Net income (loss)	(4		)	36			(225		)	303
Foreign currency translation adjustment, net	28			25			168			(300		)
Total comprehensive (income) loss attributable to noncontrolling interests	24			61			(57		)	3
Comprehensive income (loss) attributable to NorthStar Realty Europe Corp. common stockholders	$	(3,720	)	$	13,787		$	13,084		$	34,138

Refer to accompanying notes to consolidated financial statements.

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NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(Dollars and Shares in Thousands)



	Common Stock					Additional Paid-in Capital			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Income (Loss)			Total NorthStar Stockholders’ Equity			Non controlling Interests			Total Equity
	Common Stock
	Shares		Amount
Balance as of December 31, 2016	55,395		$	554		$	925,473		$	(282,769	)	$	(51,424	)	$	591,834		$	8,073		$	599,907
Reallocation of interest in Operating Partnership (refer to Note 9)	—		—			1,817			—			—			1,817			(1,817		)	—
Conversion of Common Units to common stock (refer to Note 9)	263		3			3,054			—			—			3,057			(3,057		)	—
Amortization of equity-based compensation (refer to Note 7)	—		—			17,842			—			—			17,842			2,174			20,016
Issuance and vesting of restricted stock, net of tax withholding	516		6			(6		)	—			—			—			—			—
Tax withholding related to vesting of equity-based compensation	(861	)	(9		)	(10,985		)	—			—			(10,994		)	—			(10,994		)
Other comprehensive income (loss)	—		—			—			—			66,705			66,705			300			67,005
Dividends on common stock and equity-based compensation ⁽¹⁾	—		—			—			(24,862		)	—			(24,862		)	(244		)	(25,106		)
Net income (loss)	—		—			—			(32,567		)	—			(32,567		)	(303		)	(32,870		)
Balance as of September 30, 2017 (Unaudited)	55,313		$	554		$	937,195		$	(340,198	)	$	15,281		$	612,832		$	5,126		$	617,958

Balance as of December 31, 2017	55,402		$	555		$	940,579		$	(347,053	)	$	25,618		$	619,699		$	4,646		$	624,345
Reallocation of interest in Operating Partnership (refer to Note 9)	—		—			28			—			—			28			(28		)	—
Conversion of Common Units to common stock (refer to Note 9)	25		—			216			—			—			216			(216		)	—
Distributions to noncontrolling interest	—		—			—			—			—			—			(131		)	(131		)
Redemption of Common Units	—		—			—			—			—			—			(582		)	(582		)
Amortization of equity-based compensation (refer to Note 7)	—		—			4,168			—			—			4,168			—			4,168
Issuance and vesting of restricted stock, net of tax withholding	375		4			(4		)	—			—			—			—			—
Retirement of shares of common stock	(6,075	)	(61		)	(83,383		)	—			—			(83,444		)	—			(83,444		)
Other comprehensive income (loss)	—		—			—			—			(24,054		)	(24,054		)	(168		)	(24,222		)
Dividends on common stock and equity-based compensation ⁽¹⁾	—		—			—			(23,549		)	—			(23,549		)	(166		)	(23,715		)
Cumulative effect of adoption of new accounting pronouncements (refer to Note 2)	—		—			(751		)	—			—			(751		)	—			(751		)
Net income (loss)	—		—			—			37,138			—			37,138			225			37,363
Balance as of September 30, 2018 (Unaudited)	49,727		$	498		$	860,853		$	(333,464	)	$	1,564		$	529,451		$	3,580		$	533,031

________________


(1)	For the three months ended September 30, 2018 and 2017 , the Company paid $0.15 of dividends per share of common stock, respectively. For the nine months ended September 30, 2018 and 2017 , the Company paid $0.45 of dividends per share of common stock, respectively.

Refer to accompanying notes to consolidated financial statements.

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NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

(Unaudited)



	Nine Months Ended September 30,
	2018			2017
Cash flows from operating activities:
Net income (loss)	$	37,363		$	(32,870	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	34,640			39,479
Amortization of deferred financing costs	2,358			2,340
Amortization of equity-based compensation	3,292			20,016
Allowance for uncollectible accounts	468			403
Other (gain) loss, net	15			10,833
Realized (gain) loss on sales	(42,020		)	(7,397		)
Amortization of capitalized above/below market leases	379			(256		)
Straight line rental income	(6,489		)	(3,864		)
Deferred income taxes, net	(456		)	(141		)
Changes in assets and liabilities:
Receivables	426			(1,380		)
Other assets	(2,872		)	(579		)
Accounts payable and accrued expenses	(5,881		)	(6,412		)
Due to related party	675			(1,507		)
Other liabilities	(1,562		)	875
Net cash provided by (used in) operating activities	20,336			19,540
Cash flows from investing activities:
Improvements of operating real estate	(12,157		)	(10,143		)
Origination of preferred equity investments	—			(35,086		)
Payment relating to sale of operating real estate	204,639			48,622
Escrow receivable	3,260			—
Deferred leasing costs	(1,326		)	(3,813		)
Net cash provided by (used in) investing activities	194,416			(420		)
Cash flows from financing activities:
Repayment of mortgage and other notes payable	(122,412		)	(12,888		)
Borrowings from credit facility	20,000			35,000
Borrowings from mortgage and other notes payable	23,882			5,567
Repayment of credit facility	(20,000		)	(35,000		)
Payment of financing costs	(880		)	(1,888		)
Settlement of derivatives	(4,854		)	1,688
Purchase of derivative instruments	(3,419		)	—
Tax withholding related to vesting of equity-based compensation	—			(10,994		)
Repurchase of common stock	(83,444		)	—
Dividends	(23,715		)	(25,106		)
Redemption of Common Units	(582		)	—
Distributions to noncontrolling interest	(131		)	—
Net cash provided by (used in) financing activities	(215,555		)	(43,621		)
Effect of foreign currency translation on cash and cash equivalents and restricted cash	(1,813		)	6,195
Net increase (decrease) in cash and cash equivalents and restricted cash	(2,616		)	(18,306		)
Cash and cash equivalents and restricted cash—beginning of period	71,582			76,550
Cash and cash equivalents and restricted cash—end of period	$	68,966		$	58,244

Refer to accompanying notes to consolidated financial statements.

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NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands) (Continued)

(Unaudited)



	Nine Months Ended September 30,
	2018		2017
Reconciliation of cash, cash equivalents and restricted cash
Beginning of the period
Cash and cash equivalents	$	64,665	$	66,308
Restricted cash	6,917		10,242
Total cash, cash equivalents and restricted cash, beginning of period	$	71,582	$	76,550

End of period
Cash and cash equivalents	$	61,869	$	49,728
Restricted cash	7,097		8,516
Total cash, cash equivalents and restricted cash, end of period	$	68,966	$	58,244


Supplemental disclosure of non-cash investing and financing activities:
Reclassification of operating real estate to assets held for sale	$	—	$	45,224
Conversion of Common Units to common stock	216		3,057
Reclassification of intangibles to assets and liabilities held for sale	—		25,608
Reclassification of other assets and liabilities to assets held for sale	—		2,856
Reallocation of interest in Operating Partnership	28		1,817
Accrued capital expenditures, deferred assets	1,007		689

Refer to accompanying notes to consolidated financial statements.

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NORTHSTAR REALTY EUROPE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


1.	Formation and Organization

NorthStar Realty Europe Corp. (“NorthStar Europe” or the “Company”) (NYSE: NRE), a publicly-traded real estate investment trust (“REIT”), is a European focused commercial real estate company with predominantly prime office properties in key cities within Germany, the United Kingdom and France. The Company commenced operations on November 1, 2015 following the spin-off by NorthStar Realty Finance Corp. (“NorthStar Realty”) of its European real estate business (excluding its European healthcare properties) into a separate publicly-traded company, NorthStar Realty Europe Corp., a Maryland corporation (the “Spin-off”). The Company’s objective is to provide its stockholders with stable and recurring cash flow supplemented by capital growth over time.

The Company is externally managed and advised by an affiliate of the Manager. References to “the Manager” refer to NorthStar Asset Management Group Inc. (“NSAM”) for the period prior to the Mergers (refer below) and Colony Capital, Inc. (“Colony Capital” or “CLNY”), formerly known as Colony NorthStar, Inc., for the period subsequent to the Mergers.

Substantially all of the Company’s assets, directly or indirectly, are held by, and the Company conducts its operations, directly or indirectly, through NorthStar Realty Europe Limited Partnership, a Delaware limited partnership and the operating partnership of the Company (the “Operating Partnership”). The Company has elected to be taxed, and will continue to conduct its operations so as to continue to qualify, as a REIT for U.S. federal income tax purposes.

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

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

On January 10, 2017, the Company’s external manager, NSAM, completed a tri-party merger with NorthStar Realty and Colony Capital, Inc. (“Legacy Colony”), pursuant to which the companies combined in an all-stock merger (“the Mergers”) of equals transaction to create a diversified real estate and investment management company. Under the terms of the merger agreement, NSAM, Legacy Colony and NorthStar Realty, through a series of transactions, merged with and into NSAM, which was renamed Colony NorthStar, Inc. (NYSE: CLNS). Effective June 25, 2018, Colony NorthStar, Inc. changed its name from Colony NorthStar, Inc. to Colony Capital, Inc. and its ticker symbol on the New York Stock Exchange (“NYSE”) from “CLNS” to “CLNY.”

Amended and Restated Management Agreement

On November 9, 2017, the Company entered into an amended and restated management agreement (the “Amended and Restated Management Agreement”) with an affiliate of the Manager, effective as of January 1, 2018. Refer to Note 6 “Related Party Arrangements” for a description of the terms of the Amended and Restated Management Agreement.


2.	Summary of Significant Accounting Policies

Basis of Quarterly Presentation

The accompanying unaudited consolidated financial statements and related notes of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial reporting and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and note disclosures normally included in the consolidated financial statements prepared under U.S. GAAP have been condensed or omitted. In the opinion of management, all adjustments considered necessary for a fair statement of the Company’s consolidated 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, as amended, for the fiscal year ended December 31, 2017 , which was filed with the U.S. Securities and Exchange Commission (the “SEC”).

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, the Operating Partnership and their consolidated subsidiaries. The Company consolidates variable interest entities (“VIE”) where the Company is the primary beneficiary and voting interest entities which are generally majority owned or otherwise controlled by the Company. All significant intercompany balances are eliminated in consolidation.

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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. Unrealized gain (loss) on derivatives and other has been renamed to other gain (loss), net and realized gain (loss) on sales and other has been renamed to realized gain on sales, net for presentational purposes only. Additionally, the Company has reclassified the gain (loss) on net cash on derivatives from realized gain on sales, net to other gain (loss), net on the consolidated statements of operations for the three and nine months ended September 30, 2018 and 2017 (refer to Note 10).

Intangible Assets and Intangible Liabilities

The Company records acquired identified intangibles, which includes intangible assets (such as value of the above-market leases, in-place leases, below-market ground leases, goodwill and other intangibles) and intangible liabilities (such as the value of below-market leases), based on estimated fair value. The value allocated to the above or below-market leases is amortized net to rental income, the value of above or below-market ground leases is amortized into properties - operating expense and in-place leases is amortized into depreciation and amortization expense, respectively, in the consolidated statements of operations on a straight-line basis over the respective remaining lease term.

Goodwill represents the excess of the purchase price over the fair value of net tangible and intangible assets acquired in a business combination and is not amortized. The Company analyzes goodwill for impairment on an annual basis and whenever events or changes in circumstances indicate that the carrying value of goodwill may not be fully recoverable. The Company assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit, related to such goodwill, is less than the carrying amount. If the carrying amount exceeds fair value an impairment is recorded for the difference.

The following table presents identified intangibles as of September 30, 2018 and December 31, 2017 (dollars in thousands):



	September 30, 2018							December 31, 2017
	Gross Amount		Accumulated Amortization			Net		Gross Amount		Accumulated Amortization			Net
Intangible assets:
In-place lease	$	63,400	$	(31,055	)	$	32,345	$	64,427	$	(24,290	)	$	40,137
Above-market lease	33,956		(12,660		)	21,296		34,882		(9,919		)	24,963
Below-market ground lease	33,348		(1,364		)	31,984		34,497		(1,109		)	33,388
Goodwill ⁽¹⁾	15,206		N/A			15,206		15,697		N/A			15,697
Total	$	145,910	$	(45,079	)	$	100,831	$	149,503	$	(35,318	)	$	114,185

Intangible liabilities:
Below-market lease	$	31,225	$	(11,191	)	$	20,034	$	32,267	$	(8,964	)	$	23,303
Above-market ground lease	5,341		(233		)	5,108		5,513		(184		)	5,329
Total	$	36,566	$	(11,424	)	$	25,142	$	37,780	$	(9,148	)	$	28,632

_____________________________


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

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The following table presents annual amortization of intangible assets and liabilities as of September 30, 2018 (dollars in thousands):



	Intangible Assets						Intangible Liabilities
	In-place Leases, Net		Above-market Leases, Net		Below-market Ground Lease Value, Net		Below-market Leases, Net		Above-market Ground Lease Value, Net
Remaining 2018	$	2,258	$	1,055	$	97	$	677	$	18
Years ending December 31:
2019	8,553		3,927		388		2,708		72
2020	6,898		3,730		388		2,675		72
2021	5,851		3,722		388		2,510		72
2022	4,102		3,722		388		2,503		72
2023 and thereafter	4,683		5,140		30,335		8,961		4,802
Total	$	32,345	$	21,296	$	31,984	$	20,034	$	5,108

Other Assets and Other Liabilities

The following tables present a summary of other assets and other liabilities as of September 30, 2018 and December 31, 2017 (dollars in thousands):



	September 30, 2018		December 31, 2017
Other assets:
Prepaid expenses	$	2,018	$	1,936
Deferred leasing and other costs, net	6,551		6,019
Deferred tax assets, net	1,126		—
Straight-line rent, net	15,800		10,969
Escrow receivable	—		3,286
Other	2,971		905
Total	$	28,466	$	23,115

	September 30, 2018		December 31, 2017
Other liabilities:
Deferred tax liabilities	$	8,951	$	8,548
Prepaid rent received and unearned revenue	7,130		8,406
Tenant security deposits	4,059		4,435
Prepaid escalation and other income	4,023		3,982
Other	113		386
Total	$	24,276	$	25,757

Revenue Recognition

Operating Real Estate

Rental and escalation income from operating real estate is derived from leasing of space to various types of tenants. Rental revenue recognition commences when the tenant takes possession of the leased space and the leased space is substantially ready for its intended use. The leases are for fixed terms of varying length and generally provide for annual rentals, subject to indexation, and expense reimbursements to be paid in quarterly or monthly installments. Rental income from leases is recognized on a straight-line basis over the term of the respective leases. The excess of rents recognized over amounts contractually due pursuant to the underlying leases are included in other assets, net on the consolidated balance sheets. The Company amortizes any tenant inducements as a reduction of revenue utilizing the straight-line method over the term of the lease. Escalation income represents revenue from tenant leases which provide for the recovery of all or a portion of the operating expenses and real estate taxes paid by the Company on behalf of the respective property. This revenue is accrued in the same period as the expenses are incurred.

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

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Preferred Equity Investments

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

Equity-Based Compensation

Equity-classified stock awards granted to non-employees that have a service condition are measured at fair value at date of grant. For time-base awards, fair value is determined based on the closing price of the Company's common stock at date of grant. 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 using a Monte Carlo analysis under a risk-neutral premise using a risk-free interest rate. The Company recognizes compensation expense on a straight-line basis over the requisite service period of the awards, with the amount of compensation expense recognized at the end of a reporting period at least equal to the fair value of the portion of the award that has vested through that date. Compensation expense is adjusted for actual forfeitures upon occurrence.

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 owned by holders other than the Company (“Common Units”) and Common Units which are structured as profits interests (“LTIP Units” collectively referred to as Unit Holders). 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, certain RSUs and LTIP 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.

Foreign Currency

Assets and liabilities denominated in a foreign currency for which the functional currency is a foreign currency are translated using the currency exchange rate in effect at the end of the period presented and the results of operations for such entities are translated into U.S. dollars using the average currency exchange rate in effect during the period. The resulting foreign currency translation adjustment (“CTA”), net, is recorded as a component of accumulated OCI in the consolidated statements of equity. For the three months ended September 30, 2018 and 2017 , the Company reclassified $(0.4) million and $0.1 million , respectively, of CTA to realized gain on sales, net in the consolidated statements of operations due to the sale of certain real estate assets (refer to Note 3). For the nine months ended September 30, 2018 and 2017 , the Company reclassified $7.6 million and $(0.3) million , respectively, of CTA to realized gain on sales, net in the consolidated statements of operations due to the sale of certain real estate assets (refer to Note 3).

Assets and liabilities denominated in a foreign currency for which the functional currency is the U.S. dollar are remeasured using the currency exchange rate in effect at the end of the period presented and the results of operations for such entities are remeasured into U.S. dollars using the average currency exchange rate in effect during the period. The resulting foreign currency remeasurement adjustment is recorded in other gain (loss), net in the consolidated statements of operations.

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Income Taxes

The Company has elected to be taxed as a REIT for U.S. federal income tax purposes with the initial filing of its 2015 U.S. federal tax return and will continue to comply with the related provisions of the Internal Revenue Code of 1986, as amended, the (“Internal Revenue Code”). Accordingly, the Company generally will not be subject to U.S. federal income tax to the extent of its distributions to stockholders and as long as certain asset, income and share ownership tests are met. To maintain its qualification as a REIT, the Company must annually distribute at least 90% of its REIT taxable income to its stockholders and meet certain other requirements. Under certain circumstances, federal income and excise taxes may be due on its undistributed taxable income. The Company distributes to its stockholders 100% of its taxable income and therefore no provision for U.S. federal income taxes has been included in the accompanying consolidated financial statements for the three and nine months ended September 30, 2018 and 2017 .

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

For the Company’s foreign subsidiaries, including the Company’s foreign TRS, deferred tax assets and liabilities are established for temporary differences between the financial reporting basis and the foreign tax basis of assets and liabilities at the enacted tax rates expected to be in effect when the temporary differences reverse. The Company evaluates the realizability of its deferred tax assets (e.g. net operating loss) and recognizes a valuation allowance if, based on the available evidence, it is more likely than not that some portion or all of its deferred tax assets will not be realized. When evaluating the realizability of its deferred tax assets, the Company considers estimates of expected future taxable income, existing and projected book/tax differences, tax planning strategies available and the general and industry specific economic outlook. This realizability analysis is inherently subjective, as it requires the Company to forecast its business and general economic environment in future periods. Due to past and projected losses in certain local jurisdictions where the Company does not have carryback potential and/or cannot sufficiently forecast future taxable income, the Company recognized net cumulative valuation allowances against the Company’s deferred tax assets. The Company will continue to review its deferred tax assets in accordance with U.S. GAAP. The Company recorded an income tax benefit of $0.2 million for the three months ended September 30, 2018 and an income tax expense of $0.4 million for the three months ended September 30, 2017 . The Company recorded an income benefit of $0.3 million for the nine months ended September 30, 2018 and an income tax expense of $0.3 million for the nine months ended September 30, 2017.

Recent Accounting Pronouncements: Accounting Standards Adopted in 2018

Revenue Recognition - In May 2014, FASB issued an accounting update (ASU No. 2014-09) 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 Company has adopted the standard on its required effective date of January 1, 2018 using the modified retrospective approach and has applied the guidance to contracts not yet completed as of the date of adoption. The new revenue standard specifically excludes revenue streams for which specific guidance is stipulated in other sections of the codification and therefore it will not impact rental income or interest income generated on financial instruments such as preferred equity investments. The Company is the lessor for triple net and gross leases classified as operating leases in which rental income and tenant reimbursements are recorded. The revenue from these leases is scoped out of the new revenue recognition guidance. All leases are accounted for under ASC 840 until the adoption of the new leasing guidance within ASC 842. There were no changes as a result of the new revenue recognition standard. In addition, the Company will adopt the practical expedient which allows lessors to consider lease and non-lease components as a single performance obligation to the extent that the timing and pattern of transfer is the same and the lease is classified an operating lease.

Cash Flow Classification - In August 2016, the FASB issued guidance (ASU No. 2016-15) that makes eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. The new guidance requires adoption on a retrospective basis unless it is impracticable to apply, in which case the Company would be required to apply the amendments prospectively as of the earliest date practicable. The Company has adopted this guidance on January 1, 2018 and it did not have a material impact on its consolidated financial statements and related disclosures.

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Restricted Cash - In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows: Restricted Cash, which requires that cash and cash equivalent balances in the statement of cash flows include restricted cash and restricted cash equivalent amounts, and therefore, changes in restricted cash and restricted cash equivalents be presented in the statement of cash flows. This will eliminate the presentation of transfers between cash and cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. When cash, cash equivalents, restricted cash and restricted cash equivalents are presented in more than one line item of the balance sheet, this ASU requires disclosure of a reconciliation between the totals in the statement of cash flows and the related captions on the balance sheet. The new guidance also requires disclosure of the nature of the restricted cash and restricted cash equivalents, similar to the existing requirements under Regulation S-X, however, it does not define restricted cash and restricted cash equivalents. The Company adopted this guidance on January 1, 2018 and the required retrospective application of this new standard resulted in changes to the previously reported statement of cash flows as follows (dollars in thousands):



	As of September 30, 2017
Cash flow provided by (used in):	As Previously Reported			After Adoption of ASU 2016-18
Operating activities	$	21,511		$	19,540
Investing activities	(420		)	(420		)
Financing activities	(43,621		)	(43,621		)

Business Combination - In January 2017, the FASB issued guidance (ASU No. 2017-01) to clarify the definition of a business under ASC 805. This new standard clarifies the definition of a business and provides a screen to determine when an integrated set of assets and activities is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. The Company expects that acquisitions of real estate or in-substance real estate will not meet the revised definition of a business because substantially all of the fair value is concentrated in a single identifiable asset or group of similar identifiable assets (i.e. land, buildings, and related intangible assets). A significant difference between the accounting for an asset acquisition and a business combination is that transaction costs are capitalized for an asset acquisition, rather than expensed for a business combination. The Company adopted the standard on its required effective date of January 1, 2018. This guidance did not have a material impact on its consolidated financial statements and related disclosures.

Derecognition and Partial Sales of Nonfinancial Assets - In February 2017, the FASB issued an accounting update (ASU No. 2017-05) which clarifies the scope of recently established guidance on nonfinancial asset derecognition, which applies to the derecognition of all nonfinancial assets and in-substance nonfinancial assets. In addition, the guidance clarifies the accounting for partial sales of nonfinancial assets and in-substance nonfinancial assets to align with the new revenue recognition standard to be more consistent with the accounting for sale of a business. Specifically, in a partial sale to a noncustomer, when a noncontrolling interest is received or retained, the latter is considered a noncash consideration and measured at fair value, which would result in full gain or loss recognized upon sale. The Company has adopted this guidance on January 1, 2018 and it did not have a material impact on its consolidated financial statements and related disclosures as there were no such sales for the three and nine months ended September 30, 2018 .

Goodwill Impairment - In January 2017, the FASB issued guidance (ASU No. 2017-04) which removes Step 2 from the goodwill impairment test. The Company has adopted this guidance on January 1, 2018 and it did not have a material impact on its consolidated financial statements and related disclosures.

Share-based Payments - In May 2017, the FASB issued guidance (ASU No. 2017-09) clarifying when to account for a change to the terms or conditions of a share-based payment award as a modification. The Company has adopted this guidance on January 1, 2018 and it did not have a material impact on its consolidated financial statements and related disclosures.

In June 2018, the FASB issued guidance (ASU 2018-07) which simplifies the accounting for share-based payments to non-employees by generally aligning it with the accounting for share-based payments to employees, with certain exceptions. The new guidance applies to non-employee awards issued in exchange for goods or services used in an entity’s own operations and to awards granted by an investor to an equity method investee, but does not apply to equity instruments issued to a lender or investor in a financing transaction or equity instruments issued when selling goods or services to customers, which is under the revenue recognition model. Key changes in the guidance include measuring non-employee awards based on fair value of the equity instrument issued, rather than fair value of goods or services received or equity instrument issued, whichever is more reliably measured. In terms of timing, equity-classified non-employee awards that were previously remeasured through performance completion date will now have a fixed measurement on grant date, which will reduce volatility on the income statement. For non-employee awards with performance conditions, compensation cost will be recognized when achievement of the performance

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condition is probable, rather than upon actual achievement of the performance condition. Similar to employee awards, forfeitures may be recognized as they occur or based on an estimate under an accounting policy election, but the guidance allows separate elections for employee and non-employee awards. The accounting model for non-employee awards, however, remains different for attribution of share-based payment costs over the vesting period, in which compensation cost for non-employee awards continues to be recognized in the same period and in the same manner (i.e., capitalize or expense) as if the grantor had paid cash for the goods or services. No changes to disclosure requirements were prescribed. Transition is on a modified retrospective basis, with a remeasurement at fair value as of the adoption date through a cumulative effect adjustment to opening retained earnings, applied to all equity-classified non-employee awards where a measurement date has not been established by the adoption date and unsettled liability-classified non-employee awards. The transition provisions eliminate the need to retrospectively determine fair values at historical grant dates. The Company has early adopted this guidance on July 1, 2018 and the net impact relating to the adoption was a $0.8 million decrease to additional paid in capital.

Recent Accounting Pronouncements: Future Application of Accounting Standards

Leases - In February 2016, the FASB issued an accounting update (ASU No. 2016-02) which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The update requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The update is expected to result in the recognition of a right-to-use asset and related liability to account for the Company’s future obligations under its ground lease arrangements for which it is the lessee. The update will require that lessees and lessors capitalize, as initial direct costs, only those costs that are incurred due to the execution of a lease. Under this guidance, allocated payroll costs and other costs that are incurred regardless of whether the lease is obtained will no longer be capitalized as initial direct costs and instead will be expensed as incurred. Lessors will continue to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. The Company expects to adopt the package of practical expedients under the guidance and the Company will not need to reassess whether any expired or expiring contracts contain leases; will not need to revisit lease classification for any expired or expiring leases; and will not need to reassess initial direct costs for any existing leases. In addition, the Company expects to adopt the practical expedient which allows lessors to consider lease and non-lease components as a single performance obligation to the extent that the timing and pattern of transfer is the same and the lease is classified an operating lease. As of September 30, 2018 , the Company had two ground lease agreements with annual payments of $0.7 million . The new guidance is to be applied using a modified retrospective approach at the beginning of the earliest comparative period in the financial statements and is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is evaluating the impact, if any, that this guidance will have on its consolidated financial statements and related disclosures.

Financial Instruments - In June 2016, the FASB issued guidance (ASU No. 2016-13) that changes the impairment model for most financial instruments by requiring companies to recognize an allowance for expected losses, rather than incurred losses as required currently by the other-than-temporary impairment model. The guidance will apply to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt securities, net investments in leases and off-balance-sheet credit exposures (e.g., loan commitments). The new guidance is effective for reporting periods beginning after December 15, 2019 and will be applied as a cumulative adjustment to retained earnings as of the effective date. Early adoption is permitted for annual and interim periods beginning after December 15, 2018. The Company continues to assess the potential effect the adoption of this guidance will have on its consolidated financial statements and related disclosures.

Fair Value Disclosures - In August 2018, the FASB issued guidance (ASU No. 2018-13) that requires new disclosures of changes in unrealized gains and losses in other comprehensive income for recurring Level 3 fair value of instruments held at balance sheet date, as well as the range and weighted average or other quantitative information, if more relevant, of significant unobservable inputs for recurring and nonrecurring Level 3 fair values. Certain disclosures are now eliminated, specifically around the valuation process required for Level 3 fair values, policy for timing of transfers between levels of the fair value hierarchy, as well as amounts and reason for transfers between Levels 1 and 2. The new guidance is effective for fiscal years and interim periods beginning after December 15, 2019. The adoption of this standard is not expected to have a material effect on the Company's existing disclosures.

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(Unaudited)


3.	Operating Real Estate

The following table presents operating real estate, net as of September 30, 2018 and December 31, 2017 (dollars in thousands):



	September 30, 2018			December 31, 2017
Land	$	381,313		$	393,691
Buildings and improvements	930,770			954,314
Building and leasehold interests	187,191			195,929
Furniture, fixtures and equipment	3,988			1,653
Tenant improvements	63,243			61,303
Operating real estate, gross	1,566,505			1,606,890
Less: accumulated depreciation	(119,133		)	(95,356		)
Operating real estate, net	$	1,447,372		$	1,511,534

Real Estate Sales

The following table summarizes the Company’s real estate sales for the three and nine months ended September 30, 2018 and 2017 (dollars in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Properties	1		2		2		5
Carrying Value ⁽¹⁾	$	12,164	$	9,573	$	168,271	$	36,874
Sales Price ⁽²⁾⁽³⁾	$	15,083	$	11,117	$	203,329	$	44,429
Net Proceeds ⁽⁴⁾	$	14,643	$	10,636	$	200,707	$	42,742
Realized Gain ⁽⁵⁾	$	2,479	$	1,063	$	32,436	$	6,243

_____________________________


(1)	Includes the assets and liabilities related to share sales.


(2)	For the three months ended September 30, 2017, the Company sold two properties for €9.6 million and for the nine months ended September 30, 2017, the Company sold five properties for €40.3 million .


(3)	For the three months ended September 30, 2018, the Company sold one property, located in Portugal in September 2018 for €13.0 million . For the nine months ended September 30, 2018, the Company sold two properties, one located in Portugal in September 2018 for €13.0 million and one located in the Netherlands (the Maastoren property) in April 2018 for €159.3 million .

(4)

Represents proceeds net of sales costs prior to the repayment of the associated property debt. For the three months ended September 30, 2018, the asset sold was not collateralized with any debt. For the nine months ended September 30, 2018, the Company repaid $106.7 million of associated property debt and $15.7 million preferred equity certificates. For the three and nine months ended September 30, 2017, the Company repaid $2.1 million and $10.2 million , respectively, of associated property debt.

(5)

The Company recorded an additional realized gain for the three and nine months ended September 30, 2018 of $0.2 million and $9.6 million , respectively, related to the release of escrow accounts and CTA release, net of subsequent sale costs from prior period disposals. The Company recorded an additional realized gain for the three and nine months ended September 30, 2017 of $0.7 million and $1.2 million , respectively, related to the release of escrow accounts and CTA release, net of subsequent sale costs from prior period disposals

Certain escrow accounts are not held by the Company and are expected to be released within the next 12 months and to the extent this cash has not been released to purchasers to satisfy claims, the Company will recognize an additional gain on the sale at the earlier of the time of the cash receipt or when collection can be reasonably assured. As of September 30, 2018 , there were $0.6 million in certain escrow accounts that were not held by the Company which the Company could potentially record as a realized gain.


4.	Preferred Equity Investments

In May 2017, the Company partnered with a property developer in China to acquire 20 Gresham Street, a Class A office building in London, United Kingdom and the Company invested $34.1 million ( £26.2 million ) of preferred equity , which the Company accounts for as a debt investment.

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The following table presents one preferred equity investment as of September 30, 2018 and December 31, 2017 (dollars in thousands):



	September 30, 2018				December 31, 2017
Asset Type	Principal Amount ⁽¹⁾		Carrying Value		Principal Amount		Carrying Value		Fixed Rate		Mandatory Redemption
Preferred equity investment	$	34,137	$	34,137	$	35,347	$	35,347	8.00	%	May 2020

_____________________________


(1)	The Company’s preferred equity investment is denominated in U.K. Pound Sterling, and as such, the principal amount decreased from 2017 to 2018 due to the change in the U.K. Pound Sterling to U.S. dollar exchange rate.

Credit Quality Monitoring

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

As of September 30, 2018 , the Company’s preferred equity investment was performing in accordance with the contractual terms of its governing documents, in all material respects, and was categorized as a performing loan. For the three and nine months ended September 30, 2018 and 2017 , the preferred equity investment contributed all interest income recorded on the consolidated statement of operations.


5.	Borrowings

The following table presents borrowings as of September 30, 2018 and December 31, 2017 (dollars in thousands):



				September 30, 2018				December 31, 2017
	Country	Final Maturity	Contractual Interest Rate ⁽²⁾	Principal Amount		Carrying Value		Principal Amount		Carrying Value
Mortgage and other notes payable: ⁽¹⁾
Trias Portfolio 1 ⁽³⁾⁽⁵⁾	France	Apr-22 ⁽⁹⁾	EURIBOR + 1.65% ⁽⁹⁾	$	76,678	$	75,560	$	55,192	$	53,800
Trias Portfolio 2 ^(3)(5)(7)	Germany	Jun-25 ⁽⁷⁾	EURIBOR + 1.00% ⁽⁷⁾	88,717		88,423		91,577		90,880
Trias Portfolio 4 ⁽³⁾⁽⁵⁾	U.K.	Apr-20	GBP LIBOR + 2.70%	16,732		16,563		17,326		17,123
SEB Portfolio 1 ⁽⁵⁾	Germany/France	Jul-24 ⁽⁸⁾	EURIBOR + 1.55% ⁽⁸⁾	205,752		203,110		317,317		313,153
SEB Portfolio 2 ⁽⁵⁾	U.K.	Jul-24 ⁽⁸⁾	GBP LIBOR + 1.55% ⁽⁸⁾	242,237		239,658		250,825		247,902
SEB Portfolio - Preferred ⁽⁴⁾	Germany/France/U.K.	Apr-60	0.90%	83,900		83,668		102,560		102,271
Trianon Tower ⁽⁵⁾	Germany	Jul-23	EURIBOR + 1.30%	382,952		381,670		395,294		393,763
Other - Preferred ⁽⁶⁾	Germany	Oct-45	1.00%	4,409		4,056		4,551		4,551
Total mortgage and other notes payable				$	1,101,377	$	1,092,708	$	1,234,642	$	1,223,443

_____________________________

(1)

All mortgage notes and other notes payable are denominated in local currencies, and as such, the principal amount generally decreased from December 31, 2017 to September 30, 2018 due to the change in the Euro and U.K. Pound Sterling to U.S. dollar exchange rate and the repayment of $122.4 million offset by additional borrowings of $23.9 million . All borrowings are non-recourse and are interest-only through maturity, subject to compliance with covenants of the respective borrowing, and denominated in the same currency as the assets securing the borrowing.


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


(3)	Trias Portfolio represents the cross-collateralized borrowings among the IVG Portfolio, Internos Portfolio and Deka Portfolio.


(4)	Represents preferred equity certificates with a contractual interest rate of 0.90% through May 2019, which increases to EURIBOR plus 12.0% through May 2022 and subsequently to EURIBOR plus 15.0% through final maturity. Certain prepayments prior to May 2019 are subject to the payment of the unpaid coupon on outstanding principal amount through May 2019.

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(5)	Prepayment provisions include a fee based on principal amount of 0.50% through April 2020 for the Trias Portfolio 1 borrowings, 0.35% to 1.0% through May 2022 for the Trias Portfolio 2 borrowings, 0.5% through July 2019 for the SEB Portfolio borrowings and 0.30% through June 30, 2019 for Trianon Tower borrowings.


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


(7)	In May 2018, the Company entered into a second amended and restated loan agreement, which reduced the margin from 1.55% to 1.00% , extended the maturity date of the loan from December 2020 to June 2025 and eliminated certain covenants limited to portfolio concentration and required capital expenditures.


(8)	In September 2017, the Company amended and restated the agreement to reduce the margin from 1.80% to 1.55% and extended the maturity date from April 1, 2022 to July 20, 2024.


(9)	In August 2018, the Company amended and restated the loan agreement to increase the principal balance to $76.7 million , reduce the blended margin from 1.85% per annum to 1.65% per annum and extend the maturity from April 8, 2020 to April 8, 2022. After the loan amendment, the Company has combined the previously disclosed “Trias 3 Portfolio” into “Trias 1 Portfolio.”

The following table presents a reconciliation of principal amount to carrying value of the Company’s mortgage and other notes payable as of September 30, 2018 and December 31, 2017 (dollars in thousands):



	September 30, 2018			December 31, 2017
Principal amount	$	1,101,377		$	1,234,642
Deferred financing costs, net	(8,669		)	(11,199		)
Carrying value	$	1,092,708		$	1,223,443

The following table presents scheduled principal on borrowings, based on final maturity as of September 30, 2018 (dollars in thousands):



	Mortgage and Other Notes Payable
Remaining 2018	$	—
Years ending December 31:
2019	—
2020	16,732
2021	—
2022	76,678
2023	382,952
2024 and thereafter	625,015
Total	$	1,101,377

As of September 30, 2018 and December 31, 2017 , the Company was in compliance with all of its financial covenants.

Credit Facility

In April 2017, the Company amended and restated corporate revolving credit facility (the “Credit Facility”) with aggregate commitments of $35.0 million and an initial two year term. The Credit Facility no longer contains a limitation on availability based on a borrowing base and the interest rate remains the same. In March 2018, the Company amended the Credit Facility, increasing the size to $70.0 million and extending the term until April 2020 with one year extension option. The Credit Facility includes an accordion feature, providing for the ability to increase the facility to $105.0 million . As of September 30, 2018 , there was no outstanding balance on the Credit Facility.

6. Related Party Arrangements

Colony Capital, Inc.

The Company entered into a management agreement with an affiliate of the Manager in November 2015 (the “Original Management Agreement”). On November 9, 2017, the Company entered into an Amended and Restated Management Agreement with an affiliate of the Manager, effective as of January 1, 2018 (the “Amended and Restated Management Agreement”). As asset manager, the Manager is responsible for the Company’s day-to-day operations, subject to supervision and management of the Company’s board of directors (the “Board”). Through its global network of subsidiaries and branch offices, the Manager performs services and engages in activities relating to, among other things, investments and financing, portfolio management and other administrative services, such as accounting and investor relations, to the Company and its subsidiaries. The management agreement with the Manager provides for a base management fee, incentive fee and expense reimbursement.

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Term: Renewals

The Amended and Restated Management Agreement provides for an initial term (beginning January 1, 2018) of five years (the “Initial Term”), with subsequent automatic renewals for additional three year terms, unless either party provides notice to the other party of its intention to decline to renew the agreement at least six months prior to the expiration of the then-current term. During the Initial Term, the Amended and Restated Management Agreement is terminable only for cause (as described in the Amended and Restated Management Agreement).

If the Company elects not to renew the Amended and Restated Management Agreement at the end of a term, it will be obligated to pay the Manager a termination fee (the “Termination Fee”) equal to three times the amount of the base management fees earned by the Manager over the four most recent quarters immediately preceding the non-renewal. In addition, if at any time after the Initial Term, the Company undergoes a “change of control” (as described in the Amended and Restated Management Agreement), the Company may elect to terminate the agreement but upon any such termination it will be obligated to pay the Termination Fee to the Manager.

Assignment

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

Base Management Fee

Pursuant to the Amended and Restated Management Agreement, beginning January 1, 2018, the Company is obligated to pay quarterly, in arrears, in cash, the Manager a base management fee per annum equal to:


•	1.50% of the Company’s reported EPRA NAV (as described in the Amended and Restated Management Agreement) for EPRA NAV amounts up to and including $2.0 billion ; plus


•	1.25% of the Company’s reported EPRA NAV on any EPRA NAV amount exceeding $2.0 billion .

EPRA NAV is based on a U.S. GAAP balance sheet adjusted based on the Company’s interpretation of the European Public Real Estate Association (“EPRA”) guidelines, and similar as prior practices, including adjustments such as fair value of operating real estate, straight-line rent and deferred taxes and additional adjustments to be determined by the Company in good faith based on any changes to U.S. GAAP, international accounting standards or EPRA guidelines. In calculating EPRA NAV, the liquidation preference of preferred securities outstanding shall not be included as a liability of the Company and shall not reduce EPRA NAV.

For the three and nine months ended September 30, 2018 , the Company incurred $4.0 million and $12.4 million , respectively, related to the base management fee.

Under the Original Management Agreement, for the three and nine months ended September 30, 2017, the Company incurred $3.6 million and $10.7 million , respectively, related to the base management fee. The Original Management Agreement base management fee to the Manager was $14 million subject to increase by an amount equity to 1.5% per annum of the sum of:


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


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


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

Incentive Fee

In addition to the base management fees, the Company is obligated to pay the Manager an incentive fee, if any (the “Incentive Fee”), with respect to each measurement period equal to twenty percent ( 20% ) of: (i) the excess of (a) the Company’s Total Stockholder Return (as defined in the Amended and Restated Management Agreement, which includes stock price appreciation

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and dividends received and is subject to a high watermark price established when a prior incentive fee is realized) for the relevant measurement period above (b) a 10% cumulative annual hurdle rate, multiplied by (ii) the Company’s Weighted Average Shares (as defined in the Amended and Restated Management Agreement) during the measurement period. The first measurement period for the incentive fee began January 1, 2018 (based on an initial price of $13.67 ) and will end on December 31 of the applicable calendar year and subsequent measurement periods will begin on January 1 of the subsequent calendar year. Subject to the conditions set forth in Section 4(d) of the Amended and Restated Management Agreement for common stock payments, the Company may elect to pay the Incentive Fee, if any, in cash or in shares of restricted common stock or shares of unrestricted common stock repurchased by the Company in the open market or a combination thereof. Any shares of common stock delivered by the Company will be subject to lock-up restrictions that will be released in equal one-third increments on each anniversary of the end of the measurement period with respect to which such incentive fee was earned. In calculating the value of the shares of the Company’s common stock paid in satisfaction of the Incentive Fee obligation, the shares of restricted common stock will be valued at the higher of: (i) the volume weighted average trading price per share for the ten consecutive trading days (as defined in the Amended and Restated Management Agreement) ending on the trading day prior to the date the payment is due and (ii) the Company’s EPRA NAV per share, based on the Company’s most recently published EPRA NAV and the Weighted Average Shares as of the end of the period with respect to which such EPRA NAV was published. For the three and nine months ended September 30, 2018 , the Company did not record an incentive fee.

Under the Original Management Agreement, for the three and nine months ended September 30, 2017, the Company did not incur an incentive fee. The incentive fee under the Original Management Agreement was calculated and was payable quarterly in arrears in cash, equal to:


•	the product of: (a) 15.0% and (b) the Company’s CAD before such incentive fee, divided by the weighted average shares outstanding for the calendar quarter, of any amount in excess of $0.30 per share and up to $0.36 per share; plus


•	the product of: (a) 25.0% and (b) the Company’s CAD before such incentive fee, divided by the weighted average shares outstanding for the calendar quarter, of any amount in excess of $0.36 per share;


•	multiplied by the Company’s Weighted Average Shares outstanding for the calendar quarter.

Weighted Average Shares represents the number of shares of the Company’s common stock, LTIP Units or other equity-based awards (with some exclusions), outstanding on a daily weighted average basis. With respect to the base management fee under the Original Management Agreement, all equity issuances are allocated on a daily weighted average basis during the fiscal quarter of issuance. With respect to the incentive fee under the Original Management Agreement, such amounts will be appropriately adjusted from time to time to take into account the effect of any stock split, reverse stock split, stock dividend, reclassification, recapitalization or other similar transaction.

Costs and Expenses

The Company is responsible to pay (or reimburse the Manager) for all of the Company’s direct, out of pocket costs and expenses of the Company as a stand alone company incurred by or on behalf of the Company and its subsidiaries, all of which must be reasonable, customary and documented. Internalized Service Costs (as defined below) are not intended to be covered costs and expenses under this provision and are subject to the limits described in the next paragraph.

The Company is obligated to reimburse the Manager for (i) all direct, reasonable, customary and documented costs and expenses incurred by the Manager for salaries, wages, bonuses, payroll taxes and employee benefits for personnel employed by the Manager: (a) who solely provide services to the Company which prior to January 1, 2018 were provided by unaffiliated third parties, including accounting and treasury services or (b) who were hired by the Manager after January 1, 2018 but who solely provide services to the Company in respect of one of the categories of services previously internalized pursuant to clause (a) and who were not hired in connection with any event which otherwise resulted in an increase to the Company’s net asset value (such costs and expenses set forth in clauses (i) and (ii), the “Internalized Service Costs”), plus (ii) 20% of the amount calculated under clause (i) to cover reasonable overhead charges with respect to such personnel, provided that the Company shall not be obligated to reimburse the Manager for such costs and expenses to the extent they exceed the following quarterly limits:


•	0.0375% of the Company’s aggregate gross asset value as of the end of the prior calendar quarter (excluding cash and cash equivalents and certain other exclusions) as calculated for purposes of determining EPRA NAV (“GAV”), for GAV amounts to and including $2.5 billion , plus


•	0.0313% of GAV amounts between $2.5 billion and $5.0 billion , plus


•	0.025% of GAV amounts exceeding $5.0 billion .

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If the Manager’s actual Internalized Service Costs during any quarter exceed the quarterly limit described in the preceding paragraph (the cumulative excess amounts, if any, in respect of each quarter during a calendar year, the (“Quarterly Cap Excess Amount”), the Company is obligated to reimburse the Manager on an annual basis for an amount equal to the lesser of (i) the Quarterly Cap Excess Amount and (ii) the sum of the amounts, if any, determined for each quarter within such calendar year by which Internalized Services Costs in respect of such quarter were less than the quarterly limits described in the prior paragraph.

For the three and nine months ended September 30, 2018 , the Manager allocated $0.3 million and $0.8 million , respectively, of Internalized Service Costs to the Company, which is recorded in general and administration expenses in the consolidation statements of operations.

Equity Based Compensation

In addition, the Company expects to make annual equity compensation grants to management of the Company and other employees of the Manager, provided that the aggregate annual grant amount, type and other terms of such equity compensation must be approved by the Company’s compensation committee. The Manager will have discretion in allocating the aggregate grant among the Company’s management and other employees of the Manager.

Under the Amended and Restated Management Agreement, beginning with the Company’s 2018 annual stockholders’ meeting, the Manager has the right to nominate one individual to be included in the slate of nominees nominated by the Company’s board of directors for election at each annual meeting. In the third quarter 2018, at the 2018 annual stockholders’ meeting, the Manager nominated one individual to the Company’s board of directors.

Colony Capital Ownership Waiver and Voting Agreement

In connection with the entry into the Amended and Restated Management Agreement, the Company provided Colony Capital with an ownership waiver under the Company’s Articles of Amendment and Restatement, allowing Colony Capital to purchase up to 45% of the Company’s stock. The waiver provides that if the Amended and Restated Management Agreement is terminated, Colony Capital may not purchase any shares of the Company’s common stock to the extent Colony Capital owns (or would own as a result of such purchase) more than 9.8% of the Company’s capital stock. In connection with the waiver, Colony Capital also agreed that for all matters submitted to a vote of the Company’s stockholders, to the extent Colony Capital owns more than 25% of the Company’s common stock (such shares owned by Colony Capital in excess of the 25% threshold, the “Excess Shares”), it will vote the Excess Shares in the same proportion that the remaining shares of the Company not owned by Colony Capital or its affiliates are voted. If the Amended and Restated Management Agreement is terminated, then beginning on the third anniversary of such termination, the threshold described in the prior sentence will be reduced from 25% to 9.8% .

Manager Ownership of Common Stock

As of September 30, 2018 , Colony Capital and its subsidiaries owned 5.6 million shares of the Company’s common stock, or approximately 11.3% of the total outstanding common stock.


7.	Compensation Expense

The following summarizes the equity-based compensation for the three and nine months ended September 30, 2018 and 2017 :

For the three months ended September 30, 2018 and 2017 , the Company recorded $1.7 million and $2.8 million , respectively, of equity-based compensation expense which is recorded in compensation expenses on the consolidated statements of operations. For the nine months ended September 30, 2018 and 2017 , the Company recorded $3.3 million and $20.1 million , respectively, of equity-based compensation expense which is recorded in compensation expenses on the consolidated statements of operations. As of September 30, 2018 , equity-based compensation expense to be recognized over the remaining vesting period through May 2021 is $6.9 million , provided no additional forfeitures.

In the third quarter 2018, the Company adopted ASU 2018-07 which required the Company to retrospectively adjust compensation expense for the three months ended March 31, 2018 and June 30, 2018 by $0.2 million and $1.6 million , respectively (refer to Note 2).

2015 Omnibus Stock Incentive Plan

Pursuant to the NorthStar Realty Europe Corp. 2015 Omnibus Stock Incentive Plan (the “2015 Plan”), the Company may issue equity awards to directors, officers, employees, co-employees, consultants and advisors of the Company, the Manager or of any parent or subsidiary who provides services to the Company. The number of shares that may be issued under the 2015 Plan equals 10 million shares of common stock, plus on January 1, 2017 and each January 1 thereafter, an additional 2% of the number of shares of common stock issued and outstanding on the immediately preceding December 31. In addition, shares of common stock

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underlying any awards that are forfeited, canceled, held back upon exercise of a stock option or settlement of an award to cover the exercise price or tax withholding, reacquired by the Company prior to vesting, satisfied without the issuance of common stock or otherwise terminated (other than by exercise) will be added back to the shares of common stock available for issuance under the 2015 Plan. As of September 30, 2018 , under the 2015 Plan, a total of 1.6 million shares of common stock had been issued (net of forfeitures and shares held back for tax withholding), 1.9 million shares were reserved for issuance pursuant to outstanding equity awards (including 0.4 million reserved for issuance upon conversion of outstanding LTIP Units and Common Units and 1.5 million reserved for issuance pursuant to the outstanding Absolute RSUs and Relative RSUs) and 8.7 million otherwise unreserved shares remained available for issuance.

All of the equity awards issued by the Company since the spin-off from NorthStar Realty on November 1, 2015 have been issued under the 2015 Plan. During the year ended December 31, 2017, the Company issued 500,642 restricted shares of common stock under the 2015 Plan to employees of the Manager or its subsidiaries in accordance with the terms of the management agreement described above in Note 6, of which 379,594 vested in connection with the Mergers.

In March 2016, as contemplated in connection with the Spin-off, the Company granted an aggregate of 995,698 restricted shares of common stock and 1,493,551 RSUs to employees of the Manager or one of its subsidiaries under the 2015 Plan. The restricted shares of common stock were subject to vesting over the approximately four year period ending December 31, 2019, subject to continued employment with the Manager or one of its subsidiaries and the RSUs were market-based awards subject to the achievement of performance-based vesting conditions and continued employment with the Manager or one of its subsidiaries. Approximately one-half of these RSUs are subject to the achievement of performance-based hurdles relating to the Company’s absolute total stockholder return and continued employment with the Manager or one of its subsidiaries over the approximately four year period from the grant date through December 31, 2019 (the “Absolute RSUs”). The other approximately one-half of these RSUs are subject to the achievement of performance-based hurdles based on the Company’s total stockholder return relative to the MSCI US REIT Index and continued employment with the Manager or one of its subsidiaries over the approximately four year period from the grant date through December 31, 2019 (the “Relative RSUs”). Award recipients may earn up to 100% of the Absolute RSUs that were granted and up to 125% of the Relative RSUs that were granted. Upon vesting pursuant to the terms of the Absolute RSUs and Relative RSUs, the RSUs that vest will be settled in shares of common stock and the recipients will be entitled to receive the distributions that would have been paid with respect to a share of common stock (for each share that vests) on or after the date the RSUs were initially granted. In accordance with their terms, all of these restricted shares of common stock that remained outstanding vested in connection with the Mergers. The Absolute and Relative RSUs were not affected by the Mergers and remain outstanding, subject to forfeitures occurring in connection with termination of employment with the Manager or one of its subsidiaries. For the nine months ended September 30, 2018, 171,529 Absolute RSUs and 171,529 Relative RSUs that had previously been granted to key employees of the Manager who are no longer providing services to the Company were forfeited. In May 2018, in order to assist in the retention of employees of the Manager who are continuing to provide services to the Company, the Company’s compensation committee utilized 300,000 of these forfeited RSUs to make retention grants consisting of 150,000 restricted shares of common stock that are subject to vesting based on continued service and established a retention pool consisting of an additional 150,000 shares of common stock or RSUs that will be allocated prior to May 2019 to employees of the Manager who are providing services to the Company as designated by the compensation committee, in its discretion.

In March 2018, as contemplated by the Amended and Restated Management Agreement, the Company established an annual equity compensation pool under the 2015 Plan to be allocated among members of management of the Company and other employees of the Manager consisting of an aggregate of 198,000 restricted shares of common stock and 132,000 performance based RSUs. This annual equity compensation pool was then allocated to individual award recipients by the Manager, and individual grants were made. The restricted shares of common stock are subject to vesting in approximately equal annual installments over the three -year period ending March 1, 2021, subject to the Manager continuing to serve as the Company’s manager and the recipient’s continued employment with the Manager or Colony Capital or one of its subsidiaries. The RSUs are market-based awards subject to the achievement of performance-based vesting conditions. Approximately one-half of these RSUs are subject to the achievement of performance-based hurdles relating to the Company’s absolute total stockholder return over the three -year period from the grant date through February 28, 2021 (the “2018 Absolute RSUs”). The other approximately one-half of these RSUs are subject to the achievement of performance-based hurdles based on the Company’s total stockholder return relative to the MSCI US REIT Index over the three -year period from the grant date through February 28, 2021 (the “2018 Relative RSUs”). Award recipients may earn up to 200% of the 2018 Absolute RSUs and Relative RSUs that were granted. Vesting of the 2018 Absolute and Relative RSUs are also subject to the Manager continuing to serve as the Company’s manager and the recipient’s continued employment with the Manager or Colony Capital or one of its subsidiaries through the end of the performance period. The RSUs that vest will be settled in shares of common stock and the recipients will be entitled to receive the distributions that would have been paid with respect to a share of common stock (for each share that vests) on or after the date the RSUs were initially granted.

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Pre-Spin-off NorthStar Realty Equity Awards

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

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

The following table presents activity related to the issuance, vesting, redemption, conversion and forfeitures of restricted stock, Common Units and performance RSUs. The balance as of September 30, 2018 represents vested Common Units and unvested restricted stock and performance RSUs (grants in thousands):



	Nine Months Ended September 30, 2018
	Restricted Stock ⁽¹⁾		Common Units		Performance RSUs ⁽²⁾		Total Grants		Weighted Average Grant Price
December 31, 2017	121		420		1,453		1,994		$	11.95
Granted	348		—		132		480		13.23
Redeemed	—		(46	)	—		(46	)	12.70
Converted	—		(25	)	—		(25	)	12.05
Forfeited	(1	)	—		(343	)	(344	)	12.60
September 30, 2018	468		349		1,242		2,059		$	12.12

_____________________________


(1)	Represents restricted stock included in common stock.


(2)	As of September 30, 2018 , represented outstanding Spin-off Absolute and Relative RSUs and 2018 Absolute and Relative RSUs.


8.	Stockholders’ Equity

Share Repurchase

In March 2018, the Company’s board of directors authorized the repurchase of up to $100 million of its outstanding common stock. The authorization expires in March 2019, unless otherwise extended by the Company’s board of directors.

The following table presents the number of share repurchased by the Company, the average price paid per share and the gross amount paid for the repurchased shares for the three and nine months ended September 30, 2018 (dollars and shares in thousands, except per share data):

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(Unaudited)



Period	Shares	Average Price Paid per Share		Gross
January 1 - March 31 ⁽¹⁾	1,051	$	12.70	$	13,350
April 1 - June 30	4,018	14.00		56,244
July 1 - September 30	1,006	13.71		13,799
Total	6,075	$	13.73	$	83,393

_____________________________


(1)	The authorization for the repurchases was approved by the Company’s board of directors in March 2018. For the three and nine months ended September 30, 2017 , the Company did not repurchase any shares of its common stock.

Director Grants

In August 2018, the Company issued 27,735 shares of common stock with a fair value at the date of grant of $0.4 million to its independent directors as an annual grants of equity. The shares were fully vested at issuance.

Dividends

The following table presents dividends declared (on a per share basis) with respect to the nine months ended September 30, 2018 and 2017 :



Common Stock
Declaration Date	Dividend Per Share
2018
May 7	$	0.15
August 3	$	0.15
November 2	$	0.15
2017
May 1	$	0.15
August 2	$	0.15
November 6	$	0.15

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Earnings Per Share

The following table presents EPS for the three and nine months ended September 30, 2018 and 2017 (dollars and shares in thousands, except per share data):



	Three Months Ended September 30,							Nine Months Ended September 30,
	2018				2017			2018				2017
Numerator:
Net income (loss)	$	556			$	(6,806	)	$	37,363			$	(32,870	)
Net (income) loss attributable to Unit Holders noncontrolling interest	(4		)		62			(225		)		372
Net income (loss) attributable to common stockholders and Unit Holders ⁽¹⁾	$	552			$	(6,744	)	$	37,138			$	(32,498	)
Net (income) allocated to participating securities	(105		)		—			(442		)		—
Net income (loss) allocated to common stockholders—basic and dilutive	$	447			$	(6,744	)	$	36,696			$	(32,498	)
Denominator:
Weighted average shares of common stock - basic	49,991				55,155			52,126				55,005
Weighted average effect of dilutive shares	1,992			⁽²⁾	447			1,835			⁽²⁾	560
Weighted average shares of common stock - dilutive	51,983				55,602			53,961				55,565
Earnings (loss) per share:
Basic	$	0.01			$	(0.12	)	$	0.70			$	(0.59	)
Diluted	$	0.01			$	(0.12	)	$	0.68			$	(0.59	)

_____________________________


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


(2)	Includes the Absolute and Relative RSUs and 2018 Absolute and Relative RSUs as the performance targets would have been met if the performance period ended on September 30, 2018.


9.	Noncontrolling Interests

Operating Partnership

Noncontrolling interests include the aggregate Unit Holders’ interest in the Operating Partnership. Net income (loss) attributable to the noncontrolling interest is based on the weighted average Unit Holders’ ownership percentage of the Operating Partnership for the respective period. The issuance of additional common stock, Common Units or LTIP Units changes the percentage ownership of both the Unit Holders and the Company. Since a Common Unit or LTIP Unit is generally redeemable for cash or common stock at the option of the Company, it is deemed to be equivalent to common stock. Therefore, such transactions are treated as capital transactions and result in an allocation between stockholders’ equity and noncontrolling interests on the accompanying consolidated balance sheets to account for the change in the ownership of the underlying equity in the Operating Partnership. On a quarterly basis, the carrying value of such noncontrolling interest is reallocated based on the number of Unit Holders in total in proportion to the number of Units Holders plus the number of shares of common stock outstanding. As of September 30, 2018 and December 31, 2017, the Company allocated an immaterial amount and $1.8 million , respectively, from stockholders’ equity to noncontrolling interest on the consolidated balance sheets and consolidated statement of equity.

As of September 30, 2018 , 349,290 Common Units and LTIP Units were outstanding, representing a 0.7% ownership and noncontrolling interest in the Operating Partnership. Net income (loss) attributable to the Operating Partnership noncontrolling interest for the three months ended September 30, 2018 and 2017 was a net income (loss) of an immaterial amount and $(0.1) million , respectively. Net income (loss) attributable to the Operating Partnership noncontrolling interest for the nine months ended September 30, 2018 and 2017 was a net income (loss) of $0.2 million and $(0.4) million , respectively.

Redeemable Noncontrolling Interest

In connection with the acquisition of the Trianon Tower in July 2015, the Company sold a 5.5% noncontrolling interest in certain subsidiaries that own the Trianon Tower for $1.5 million . In conjunction with the sale, the Company entered into a put option whereby the holder may redeem its interest for cash at the greater of fair market value of such noncontrolling interest or €2.1 million beginning in November 2020 through January 2021. The Company recorded the noncontrolling interest at its acquisition date fair value as temporary equity due to the redemption option. The carrying amount of redeemable noncontrolling interests is adjusted to its redemption value at the end of each reporting period, but no less than its initial carrying value, with such adjustments recognized in additional paid-in capital.

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(Unaudited)


10.	Risk Management and Derivative Activities

Derivatives

The Company uses derivative instruments primarily to manage certain interest rate and currency risk and such derivatives are not considered speculative. These derivative instruments are in the form of interest cap agreements where the primary objective is to minimize interest rate risks associated with investment and financing activities and foreign currency forward agreements where the primary objective is to minimize foreign currency exchange rate risks associated with operating activities. The counterparties of these arrangements are major financial institutions with which the Company may also have other financial relationships. The Company is exposed to credit risk in the event of non-performance by these counterparties and it monitors their financial condition; however, the Company currently does not anticipate that any of the counterparties will fail to meet their obligations.

The following tables present derivative instruments that were not designated as hedges under U.S. GAAP as of September 30, 2018 and December 31, 2017 (dollars, UK pound sterling and Euros in thousands):



	Number ⁽¹⁾	Notional Amount	Fair Value Asset (Liability)			Range of Fixed GBP LIBOR / EURIBOR/ Strike Price	Range of Maturity
As of September 30, 2018:
Interest rate caps (EUR)	29	€894,694	$	8,003		3 Month EURIBOR 0.5%	April 2020 - May 2025
Interest rate caps (GBP)	5	£202,645	24			3 Month GBP LIBOR 2.0%	April 2020
Foreign currency forwards ⁽²⁾	6	€58,360	2,488			1.25 EUR/USD ⁽³⁾	November 2018 - November 2019
Total	40		$	10,515

As of December 31, 2017:
Interest rate caps (EUR)	26	€767,718	$	6,917		3 Month EURIBOR 0.5%	April 2020 - July 2023
Interest rate caps (GBP)	5	£202,645	107			3 Month GBP LIBOR 2.0%	April 2020
Foreign currency forwards ⁽²⁾	4	€48,960	(5,270		)	1.12 EUR/USD ⁽³⁾	February 2018 - November 2018
Total	35		$	1,754

_____________________________

(1) Represents number of transactions.

(2) Includes Euro currency forwards.

(3) The strike prices for the foreign currency forwards maturing in 2018 and 2019 represent the average price.

The following table presents the fair value of derivative instruments, as well as their classification on the consolidated balance sheets, as of September 30, 2018 and December 31, 2017 (dollars in thousands):



	Balance Sheet	September 30, 2018		December 31, 2017
	Location	September 30, 2018		December 31, 2017
Interest rate caps	Derivative assets	$	8,027	$	7,024
Foreign currency forwards	Derivative assets	$	2,914	$	—
Foreign currency forwards	Derivative liabilities	$	426	$	5,270

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(Unaudited)

The following table presents the effect of derivative instruments in the consolidated statements of operations for the three and nine months ended September 30, 2018 and 2017 (dollars in thousands):



		Three Months Ended September 30,						Nine Months Ended September 30,
		2018			2017			2018			2017
Amount of gain (loss) recognized in earnings:	Statements of operations location:
Adjustment to fair value of interest rate caps	Other gain (loss), net	$	(80	)	$	(1,235	)	$	(2,079	)	$	(1,949	)
Adjustment to fair value of foreign currency forwards held at the end of the reporting period	Other gain (loss), net	1,264			(2,737		)	7,758			(10,309		)
Net cash receipt (payment) on derivatives	Other gain (loss), net ⁽¹⁾	(483		)	232			(4,854		)	1,688

_____________________________


(1)	Excludes the gain (loss) relating to foreign currency transactions and write-off of deferred financing costs for the three months ended September 30, 2018 and 2017 of $(0.1) million and $0.2 million , respectively and for the nine months ended September 30, 2018 of $(0.8) million and $(0.3) million , respectively.

The Company’s counterparties held no cash margin as collateral against the Company’s derivative contracts as of September 30, 2018 and December 31, 2017 . The Company had no derivative financial instruments that were designated as hedges in qualifying hedging relationships as of September 30, 2018 and December 31, 2017 .


11.	Fair Value

Fair Value Measurement

The fair value of financial instruments is categorized based on the priority of the inputs to the valuation technique and categorized into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

Financial assets and liabilities are recorded at fair value on the consolidated balance sheets and are categorized based on the inputs to the valuation techniques as follows:


Level 1.	Quoted prices for identical assets or liabilities in an active market.


Level 2.	Financial assets and liabilities whose values are based on the following:


(a)	Quoted prices for similar assets or liabilities in active markets.


(b)	Quoted prices for identical or similar assets or liabilities in non-active markets.


(c)	Pricing models whose inputs are observable for substantially the full term of the asset or liability.


(d)	Pricing models whose inputs are derived principally from or corroborated by observable market data for substantially the full term of the asset or liability.


Level 3.	Prices or valuation techniques based on inputs that are both unobservable and significant to the overall fair value measurement.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

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

Derivative Instruments

Derivative instruments consist of interest rate caps and foreign currency exchange contracts that are traded over-the-counter, and are valued using a third-party service provider. These quotations are not adjusted and are generally based on valuation models with observable inputs such as contractual cash flow, yield curve, foreign currency rates and credit spreads and as such, are classified as Level 2 of the fair value hierarchy. Derivative instruments are also assessed for credit valuation adjustments due to the risk of non-performance by the Company and derivative counterparties.

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(Unaudited)

Fair Value of Financial Instruments

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

The following table presents the principal amount, carrying value and fair value of certain financial assets and liabilities as of September 30, 2018 and December 31, 2017 (dollars in thousands):



	September 30, 2018						December 31, 2017
	Principal/Notional Amount		Carrying Value		Fair Value		Principal/Notional Amount		Carrying Value		Fair Value
Financial assets: ⁽¹⁾
Derivative assets	$	1,359,106	$	10,941	$	10,941	$	1,193,012	$	7,024	$	7,024
Preferred equity investment	34,137		34,137		34,558		35,347		35,347		35,783
Financial liabilities: ⁽¹⁾
Mortgage and other notes payable, net	$	1,101,377	$	1,092,708	$	1,097,532	$	1,234,642	$	1,223,443	$	1,231,321
Derivative liabilities	10,908		426		426		58,647		5,270		5,270

_____________________________


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

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

Mortgage and Other Notes Payable

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

Preferred Equity Investments

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


12.	Commitments and Contingencies

The Company is involved in various litigation matters arising in the ordinary course of its business. Although the Company is unable to predict with certainty the eventual outcome of any litigation, in the opinion of management, the current legal proceedings are not expected to have a material adverse effect on the Company’s financial position or results of operations.

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

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(Unaudited)

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

Risk Management

Concentrations of credit risk arise when a number of tenants related to the Company’s investments are engaged in similar business activities or located in the same geographic region to be similarly affected by changes in economic conditions. The Company monitors its portfolios to identify potential concentrations of credit risks. For the three and nine months ended September 30, 2018 , one tenant, DekaBank Deutsche Girozentrale, accounted for more than 10% of the Company’s total revenues. This tenant has 5.8 years remaining on its lease. Otherwise, the Company has no other tenant that generates 10% or more of its total revenues. Additionally, for the three and nine months ended September 30, 2018 , Germany, France and the United Kingdom each accounted for more than 10% of the Company’s total revenues. The Company believes the remainder of its portfolio is well diversified and does not contain any unusual concentrations of credit risks.


13.	Segment Reporting

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


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


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


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

The following tables present segment reporting for the three and nine months ended September 30, 2018 and 2017 (dollars in thousands):



	Three Months Ended September 30, 2018
Statement of Operations:	Real Estate Equity				Preferred Equity		Corporate				Total
Revenues
Rental income	$	23,920			$	—	$	—			$	23,920
Escalation income	4,283				—		—				4,283
Interest income	—				708		—				708
Expenses
Interest expense ⁽¹⁾	5,055				—		263				5,318
Management fee, related party	—				—		4,011				4,011
Transaction costs ⁽²⁾	552				—		577				1,129
Depreciation and amortization	11,013				—		—				11,013
Realized (gain) on sale	(2,706		)		—		—				(2,706		)
Other expense (income)	7,156			⁽³⁾	—		2,674			⁽⁴⁾	9,830
Income (loss) before income tax benefit (expense)	7,133				708		(7,525		)		316
Income tax benefit (expense)	240				—		—				240
Net income (loss)	$	7,373			$	708	$	(7,525	)		$	556

_____________________________


(1)	Includes $0.6 million and $0.2 million of amortization of deferred financing costs in the real estate equity and corporate segments, respectively.


(2)	Represents costs associated with the continual work of the strategic review committee in the corporate segment and costs associated with the refinancing of certain mortgage notes in the real estate equity segment.


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


(4)	Primarily relates to the general and administrative expenses and compensation expense offset by a net gain on foreign currency derivatives.

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(Unaudited)



	Three Months Ended September 30, 2017
Statement of Operations:	Real Estate Equity				Preferred Equity		Corporate				Total
Revenues
Rental income	$	27,747			$	—	$	—			$	27,747
Escalation income	5,641				—		—				5,641
Interest income	—				704		—				704
Expenses
Interest expense ⁽¹⁾	6,325				—		211				6,536
Management fee, related party	—				—		3,585				3,585
Transaction costs ⁽²⁾	—				—		332				332
Depreciation and amortization	14,396				—		—				14,396
Other expense (income)	8,802			⁽³⁾	—		6,895			⁽⁴⁾	15,697
Income (loss) before income tax benefit (expense)	3,865				704		(11,023		)		(6,454		)
Income tax benefit (expense)	(352		)		—		—				(352		)
Net income (loss)	$	3,513			$	704	$	(11,023	)		$	(6,806	)

_____________________________


(1)	Includes $0.6 million and $0.1 million of amortization of deferred financing costs in the real estate equity and corporate segments, respectively.


(2)	Represents costs associated with the continual work of the strategic review committee in the corporate segment.


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


(4)	Primarily relates to general and administrative expenses and net loss on foreign currency derivatives.



	Nine Months Ended September 30, 2018
Statement of Operations:	Real Estate Equity				Preferred Equity		Corporate				Total
Revenues
Rental income	$	75,744			$	—	$	—			$	75,744
Escalation income	15,186				—		—				15,186
Interest income	—				2,143		—				2,143
Expenses
Interest expense ⁽¹⁾	16,611				—		669				17,280
Management fee, related party	—				—		12,391				12,391
Transaction costs ⁽²⁾	594				—		1,392				1,986
Depreciation and amortization	34,640				—		—				34,640
Realized (gain) on sale	(42,020		)		—		—				(42,020		)
Other expense (income)	26,757			⁽³⁾	—		4,953			⁽⁴⁾	31,710
Income (loss) before income tax benefit (expense)	54,348				2,143		(19,405		)		37,086
Income tax benefit (expense)	277				—		—				277
Net income (loss)	$	54,625			$	2,143	$	(19,405	)		$	37,363

_____________________________


(1)	Includes $1.9 million and $0.4 million of amortization of deferred financing costs in the real estate equity and corporate segments, respectively.


(2)	Represents costs associated with the continual work of the strategic review committee in the corporate segment and costs associated with the refinancing of certain mortgage notes in the real estate equity segment.


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


(4)	Primarily relates to general and administrative expenses and compensation expense offset by a net gain on foreign currency derivatives.

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(Unaudited)



	Nine Months Ended September 30, 2017
Statement of Operations:	Real Estate Equity				Preferred Equity		Corporate				Total
Revenues
Rental income	$	79,308			$	—	$	—			$	79,308
Escalation income	16,360				—		—				16,360
Interest income	—				1,001		—				1,001
Expenses
Interest expense ⁽¹⁾	18,896				—		745				19,641
Management fee, related party	—				—		10,716				10,716
Transaction costs ⁽²⁾	—				538		1,027				1,565
Depreciation and amortization	39,479				—		—				39,479
Other expense (income)	23,575			⁽³⁾	—		34,247			⁽⁴⁾	57,822
Income (loss) before income tax benefit (expense)	13,718				463		(46,735		)		(32,554		)
Income tax benefit (expense)	(316		)		—		—				(316		)
Net income (loss)	$	13,402			$	463	$	(46,735	)		$	(32,870	)

_____________________________


(1)	Includes $2.0 million and $0.3 million of amortization of deferred financing costs in the real estate equity and corporate segments, respectively.


(2)	Represents costs associated with the continual work of the strategic review committee in the corporate segment and costs associated with acquiring the Company’s preferred equity investment in the preferred equity segment.


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


(4)	Primarily relates to general and administrative expenses, loss on foreign currency derivatives and compensation expense relating to the impact of substantially all time based and certain performance based awards vesting in connection with the change of control of the Manager.

The following table presents total assets by segment as of September 30, 2018 and December 31, 2017 (dollars in thousands):



Total Assets	Real Estate Equity		Preferred Equity		Corporate		Total
September 30, 2018	$	1,652,308	$	34,914	$	11,504	$	1,698,726
December 31, 2017	1,901,282		37,133		2,502		1,940,917

Geography

The following table presents geographic information about the Company’s total rental income for the three and nine months ended September 30, 2018 and 2017 (in thousands):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Properties ⁽¹⁾	23			26			23			26
Office
Germany	$	11,803		$	10,929		$	35,517		$	30,897
United Kingdom	5,809			8,383			17,952			22,158
France	4,630			4,677			14,127			13,290
Other office	199		⁽²⁾	2,565		⁽³⁾	4,143		⁽²⁾	9,599		⁽³⁾
Subtotal	22,441			26,554			71,739			75,944
Other Property Types
France/Germany ⁽⁴⁾	1,479			1,193		⁽³⁾	4,005			3,364		⁽³⁾
Total	$	23,920		$	27,747		$	75,744		$	79,308

_____________________________


(1)	Represents the number of properties owned as of September 30, 2018 and 2017 , respectively.


(2)	Includes partial period rental income from a property in the Netherlands (the Maastoren property) which was sold in April 2018 and a property in Portugal which was sold in September 2018.


(3)	Includes an asset in the U.K. which was classified as held-for-sale as of September 30, 2017 and partial period rental income for the assets sold during the three and nine months ended September 30, 2017 .


(4)	Represents five assets including two retail in Germany, one industrial in France and two hotel (net lease) assets in Germany.

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(Unaudited)


14.	Subsequent Events

Dividends

On November 2, 2018 , the Company declared a dividend of $0.15 per share of common stock. The common stock dividend is expected be paid on November 16, 2018 to stockholders of record as of the close of business on November 12, 2018 .

Trianon

On November 6, 2018, the Company executed a definitive sale and purchase agreement to sell the Trianon Tower in Frankfurt, Germany, the Company’s largest asset, for €670 million , or approximately $762 million . The Company expects to release approximately $360 million of net equity after repayment of financing and transaction costs. Completion is subject to customary conditions, including the Purchasers’ closing on a €390 million mortgage facility.

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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 consolidated financial statements and notes thereto included in Item 1. “Financial Statements” of this report. References to “NorthStar Europe,” “we,” “us” or “our” refer to NorthStar Realty Europe Corp. and its subsidiaries unless the context specifically requires otherwise. References to “our Manager” refer to NorthStar Asset Management Group Inc., or NSAM, for the period prior to the Mergers (refer below) and Colony Capital, Inc., formerly known as Colony NorthStar Inc., for the period subsequent to the Mergers.

NorthStar Realty Europe Corp., a publicly-traded real estate investment trust, or REIT, (NYSE: NRE) is a European focused commercial real estate company with predominantly prime office properties in key cities within Germany, the United Kingdom and France. We commenced operations on November 1, 2015 following the spin-off by NorthStar Realty Finance Corp., or NorthStar Realty, of its European real estate business (excluding its European healthcare properties) into a separate publicly-traded company, NorthStar Realty Europe Corp., a Maryland corporation, or the Spin-off. Our objective is to provide our stockholders with stable and recurring cash flow supplemented by capital growth over time.

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

Significant Developments

Leasing

For the nine months ended September 30, 2018, we signed new leases or lease extensions relating to 49,000 square meters. These leases included a nine year lease extension for 11,200 square meters with BNP Paribas SA on a property on Boulevard MacDonald, in Paris, France, increasing the weighted average lease term of the asset by five years and a new 32,800 square meters lease on a property at Marly, in Greater Paris, France, increasing the asset’s occupancy from 45% to 100%. As a result, together with other leases signed during the year, portfolio occupancy increased from 86% as of December 31, 2017 to 97% as of September 30, 2018.

Refinancing

In May 2018, we entered into a second amendment and restatement loan agreement on the loan with Trias Germany, which reduced the margin from 1.55% to 1.00% , extended the maturity date of the loan from December 2020 to June 2025 and eliminated certain covenants limited to portfolio concentration and required capital expenditures.

In August 2018, we amended and restated its loan agreement on the loans related to the Trias France portfolio, increasing the principal balance to $77 million , reducing the blended margin from 1.85% per annum to 1.65% per annum and extending the maturity by two years from April 8, 2020 to April 8, 2022.

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

On January 10, 2017, our external manager, NSAM completed a tri-party merger with NorthStar Realty and Colony NorthStar, Inc., or Legacy Colony, pursuant to which the companies combined in an all-stock merger, or the Mergers, of equals transaction to create a diversified real estate and investment management company. Under the terms of the merger agreement, NSAM, Legacy Colony and NorthStar Realty, through a series of transactions, merged with and into NSAM, which was renamed Colony NorthStar. On June 25, 2018, Colony NorthStar Inc., changed its name to Colony Capital, Inc., and its trading symbol on the NYSE was correspondingly changed from “CLNS” to “CLNY.” Colony Capital is a leading global real estate and investment management firm.

Amended and Restated Management Agreement

On November 9, 2017, we entered into an amended and restated management agreement, or the Amended and Restated Management Agreement with an affiliate of our Manager, effective as of January 1, 2018. Refer to Note 6 “Related Party Arrangements” in our accompanying consolidated financial statements included in Part I “Financial Statements” for a description of the terms of the Amended and Restated Management Agreement.

Repurchases

Our Investments

Our primary business line is investing in European real estate. We are predominantly focused on real estate equity and preferred equity, refer to Note 13, “Segment Reporting” in Part I, Item 1. “Financial Statements” for further disclosure.

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Real Estate Equity

Overview

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

Our Portfolio

The following presents a summary of our portfolio as of September 30, 2018 :



		Portfolio by Geographic Location
		September 30, 2018 ⁽⁵⁾	September 30, 2017 ⁽⁵⁾
Gross Book Value ⁽¹⁾	$1.7 billion
Number of properties	23
Number of countries	3
Total square meters ⁽²⁾	281,636
Weighted average occupancy	97%
Weighted average occupancy - Office	96%
Weighted average lease term	6.1 years
In-place rental income: ⁽³⁾
Office portfolio	93%
Other ⁽⁴⁾	7%

_____________________________


(1)	Represents gross operating real estate and intangibles as of September 30, 2018 .


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


(3)	In-place rental income represents contractual rent adjusted for vacancies based on the rent roll as of September 30, 2018 and is translated using foreign exchange rates as of September 30, 2018 .


(4)	Other represents five assets including two retail in Germany, one industrial in France and two hotel (net lease) assets in Germany.


(5)	Based on rental income for 23 assets owned as of September 30, 2018 .

The following table presents significant tenants in our portfolio, based on in-place rental income as of September 30, 2018 :



Significant tenants:	Asset (Location)	Square Meters ⁽¹⁾	Percentage of In-Place Rental Income	Weighted Average Lease Term (in years)
DekaBank Deutsche Girozentrale	Trianon (Frankfurt, Germany)	36,524	22.2%	5.8
BNP PARIBAS RE	Berges de Seine (Paris, France)	15,406	9.9%	1.3
Deutsche Bundesbank	Trianon (Frankfurt, Germany)	22,303	9.1%	8.3
Invesco UK Limited	Portman Square (London, UK)	4,406	5.7%	8.9
BNP PARIBAS SA	Boulevard Macdonald (Paris, France)	11,210	5.5%	7.9
Cushman & Wakefield LLP	Portman Square (London, UK)	5,150	5.2%	6.5
Morgan Lewis & Bockius LLP	Condor House (London, UK)	4,848	4.1%	7.0
PAREXEL International GmbH	Parexel (Berlin, Germany)	18,254	3.5%	15.7
Moelis & Co UK LLP	Condor House (London, UK)	3,366	2.8%	6.5
Bigpoint GmbH	Drehbahn (Hamburg, Germany)	11,916	2.8%	2.7
		133,383	70.8%	6.4

_____________________________


(1)	Based on contractual rentable area.

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The following table presents gross book value, percentage of net operating income, or NOI, square meters and weighted average lease term concentration by country and type for our portfolio as of September 30, 2018 (dollars in thousands):



Country	Number of Properties	Gross Book Value ⁽¹⁾		Percentage of NOI ⁽²⁾	Square Meters ⁽³⁾	Weighted Average Lease Term (in years)
Office
Germany	9	$	877,530	51%	143,404	6.5
United Kingdom	5	391,982		24%	28,893	6.9
France	4	312,355		19%	32,089	4.1
Subtotal	18	1,581,867		94%	204,386	6.1
Other Property Types
France/Germany ⁽⁴⁾	5	93,434		6%	77,250	6.7
Total	23	$	1,675,301	100%	281,636	6.1

_____________________________


(1)	Represents gross operating real estate and intangibles as of September 30, 2018 .


(2)	Based on annualized NOI, for the quarter ended September 30, 2018 (refer to “Non-GAAP Financial Measures” for a description of this metric).


(3)	Based on contractual rentable area.


(4)	Other represents five assets including two retail in Germany, one industrial in France and two hotel (net lease) assets in Germany.

Preferred Equity

In May 2017, we partnered with a leading property developer in China to acquire a Class A office building in London United Kingdom with 22,557 square meters, 100% occupancy and a 6.0 year weighted average lease term to expiry. We invested approximately $34.1 million ( £26.2 million ) of preferred equity with a base yield of 8% plus equity participation rights.

Sources of Operating Revenues and Cash Flows

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

Profitability and Performance Metrics

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

Outlook and Recent Trends

The pace of economic growth across Europe seemingly slowed during the third quarter with Gross Domestic Product, or GDP, in the European Union, or EU, and the Eurozone growing by 0.3% and 0.2%, respectively. In October 2018, the International Monetary Fund revised its 2018 GDP forecast for the Eurozone down by 0.2% to 2.0%, citing a greater than anticipated softening of the German and French economies in the first half of 2018.

Unemployment in the EU was 6.7% in September 2018, down from 7.5% a year earlier and the lowest level recorded since January 2000. Eurozone inflation was up to 2.2% in October 2018, compared to 1.5% a year earlier, exceeding the European Central Bank, or ECB’s, medium-term target of 2.0%.

On October 25, 2018, the ECB reaffirmed its intention to maintain interest rates at zero percent at least through the summer of 2019 while confirming that its asset purchase program of €15 billion per month is likely to conclude at the end of 2018.

According to a report issued by the Office for National Statistics in October, the U.K. economy rebounded following a slow start to the year, growing by 0.7% in the three months to August. However, uncertainty surrounding Brexit negotiations continues to weigh on business sentiment and the general outlook for the U.K. economy with recent data indicating a sharp drop in the U.K. services sector following a strong summer of activity. In October 2018, the IMF confirmed its 2018 UK GDP growth projection of 1.4%.

On August 2, 2018, in an effort to contain inflation which stood at 2.7%, (above the Bank of England, BOE’s, 2.0% target), the BoE raised the U.K. base interest rate from 0.50% to 0.75%, its highest level since 2009. The BoE cited low unemployment and improving economic conditions following a slow start to the year, but noted continued uncertainty regarding the UK’s departure from the EU as a potential downside risk to the economy.

European commercial real estate investment volume totaled €216 billion in the first nine months of 2018, in line with 2017. The U.K., France and Germany represented 60% of total 2018 investment volume. Prime property yields in most asset classes and markets were broadly stable during the third quarter and continued to remain at a significant premium to sovereign yields, with

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the exception of Italy, where the yield on the Italian 10 year bond has risen by 24% since June 30, 2018 to approximately 330bps with seemingly little or no impact on property yields.

European office take-up increased by 4% year over year in the third quarter of 2018, demonstrating the continued strength across European occupier markets. Driven by a combination of robust leasing activity and a subdued new supply pipeline, European office vacancy decreased by 30bps to 6.5% during the quarter, the lowest level since 2002. Office rents in Europe grew by 2.4% in the third quarter, or 6.0% year-over-year, continuing to exceed the 10-year average growth rate.

German real estate investment volume totaled €56 billion in the first nine months of 2018, 12% above the same period last year. Strong investment appetite and limited supply of core assets continued to put pressure on prime office yields that compressed by a further 10bps during the quarter (17bps compared to the same period last year). The vacancy rate in the top 6 cities was 4.6%, 20bps below the second quarter, while average office rents grew by 1.2% during the quarter.

French investment volume totaled €19 billion in the first nine months of 2018, 18% above the same period last year as investors continue to focus on large transactions exceeding €100 million. Paris office take up slowed following a strong start to 2018 (down 3% compared to the second quarter), but remained above 2017 levels. A constrained new supply pipeline continues to place pressure on rents, which grew by 4% year over year on average (9% in case of prime rents).

Total U.K. investment volume reached £49 billion in the first nine months of 2018, 5% below the same period last year. Take up across Central London stands 9% above the long term average, reflecting the resilience of the occupier market despite headwinds in the wider macroeconomic environment.

Source: CBRE, Savills, Cushman & Wakefield, JLL, Eurostat, International Monetary Fund, Bank of England

Investing Strategy

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

Financing Strategy

We pursue a variety of financing arrangements such as mortgage notes and bank loans available from the commercial mortgage-backed securities market, finance companies and banks. However, we generally seek to limit our reliance on recourse borrowings. We target overall leverage of 40% to 50% over time, although there is no assurance that this will be the case. Borrowing levels for our investments may be dependent upon the nature of the investments and the related financing that is available.

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

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

In March 2018, we amended the Credit Facility, increasing the size to $70 million and extending the term until April 2020 with one year extension option. The Credit Facility includes an accordion feature, providing for the ability to increase the facility to $105 million.

In May 2018, we entered into a second amendment and restatement loan agreement on a loan related to the Trias Germany portfolio with a principal balance of $89 million , which reduced the margin from 1.55% to 1.00% , extended the maturity date of the loan from December 2020 to June 2025 and eliminated certain covenants limited to portfolio concentration and required capital expenditures.

Risk Management

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

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risk, financing risk, foreign currency risk and market risk, and the steps that management has taken to monitor and control such risks. The audit committee of the Board maintains oversight of financial reporting risk matters.

Underwriting

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

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

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

Portfolio Management

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

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

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

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

Interest Rate and Foreign Currency Hedging

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

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

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

Critical Accounting Policies

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP, which requires the use of estimates and assumptions that involve the exercise of judgment and that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Our significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies” in our accompanying consolidated financial statements included in Part I Item 1. “Financial Statements.”

Recent Accounting Pronouncements

For recent accounting pronouncements that may potentially impact our business, refer to Note 2, “Summary of Significant Accounting Policies” in our accompanying consolidated financial statements included in Item 1. “Financial Statements.”

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Results of Operations

Comparison of the Three Months Ended September 30, 2018 to September 30, 2017 (dollars in thousands):



	Three Months Ended September 30,					Increase (Decrease)
	2018		2017			Amount
Revenues
Rental income	$	23,920	$	27,747		$	(3,827	)
Escalation income	4,283		5,641			(1,358		)
Interest income	708		704			4
Other income	76		171			(95		)
Total revenues	28,987		34,263			(5,276		)
Expenses
Properties - operating expenses	5,690		7,519			(1,829		)
Interest expense	5,318		6,536			(1,218		)
Transaction costs	1,129		332			797
Management fee, related party	4,011		3,585			426
Other expenses	1,150		1,996			(846		)
General and administrative expenses	1,952		1,723			229
Compensation expense	1,741		2,839			(1,098		)
Depreciation and amortization	11,013		14,396			(3,383		)
Total expenses	32,004		38,926			(6,922		)
Other income (loss)
Other gain (loss), net	627		(3,554		)	4,181
Realized gain on sales, net	2,706		1,763			943
Income (loss) before income tax benefit (expense)	316		(6,454		)	6,770
Income tax benefit (expense)	240		(352		)	592
Net income (loss)	$	556	$	(6,806	)	$	7,362

Revenues

Rental Income

Rental income consists of rental revenue in our real estate equity segment. Rental income decreased $3.8 million , primarily due to the disposal of six properties during 2017, the Maastoren property in April 2018 and a property in Portugal in September 2018 partially offset by leasing activity, such as the completion of the Deutsche Bundesbank lease in the Trianon Tower in the fourth quarter 2017.

Escalation Income

Escalation income consists of tenant recoveries in our real estate equity segment. Escalation income decreased $1.4 million primarily due to the disposal of six properties during 2017, the Maastoren property in April 2018 and a property in Portugal in September 2018 offset by increased recoverability in connection with higher occupancy from 86% as of September 30, 2017 to 97% as of September 30, 2018.

Interest Income

Interest income relates to our preferred equity investment originated in May 2017 in our preferred equity segment.

Other Income

Other income is principally related to insurance refunds and fees from vacating tenants in our real estate equity segment. Other income for the three months ended September 30, 2018 predominantly reflects amounts received from vacating tenants for the demise of the premise. Other income for the three months ended September 30, 2017 predominantly relates to a one-time insurance refund relating to a repair in the third quarter of 2017.

Expenses

Properties - Operating Expenses

Properties - operating expenses decreased $1.8 million due to the disposal of six properties during 2017, the Maastoren property in April 2018 and a property in Portugal in September 2018 and a reduction in non-recoverable operating costs in our portfolio in our real estate equity segment.

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Interest Expense

Interest expense decreased $1.2 million due to the repayments of certain mortgage notes in connection with the disposal of six properties during 2017 and the Maastoren property in April 2018 and the margin reduction associated with the refinancing of certain mortgage notes in our real estate equity segment in the second half of 2017 and in 2018.

Transaction Costs

Transaction costs for the three months ended September 30, 2018 were primarily related to costs associated with the continual work of the strategic review committee, or the Strategic Review Committee, which was established in 2017 and has continued to work to evaluate opportunities to enhance stockholder value in our corporate segment and costs associated with the refinancing of certain mortgage notes in our real estate equity segment. Transaction costs for the three months ended September 30, 2017 were primarily related to the Strategic Review Committee and costs associated with amending the management agreement in our corporate segment.

Management Fee, Related Party

Management fee, related party relates to the management fee incurred to our Manager in our corporate segment. Effective as of January 1, 2018, we entered into a new management agreement which restructured the base management fee to be calculated as a percentage of reported EPRA NAV (refer to “Related Party Arrangements” below for more information).

Other Expenses

Other expenses primarily represent third-party service provider fees such as asset management, accounting, tax, legal fees and other compliance related fees related to portfolio management of our real estate equity segment. The decrease of $0.8 million is due to the internalization of certain third-party accounting, tax and asset management services.

General and Administrative Expenses

General and administrative expenses including external and internal audit, legal fees, public company costs and other corporate expenses are incurred in our corporate segment. General and administrative expenses increased $0.3 million due to the Internalized Service Cost allocated to us from our Manager.

Compensation Expense

Compensation expense is comprised of non-cash amortization of time-based, market-based and performance-based awards in our corporate segment. The decrease for the three months ended September 30, 2018 , is mainly due to the adoption of accounting standard update related to stock compensation accounting (ASU 2018-07) which simplified the guidance around share-based payments to recognize compensation expense at fair value at the date of grant rather than revaluing the fair value at the end of each period. Refer to Note 7 “Compensation Expense” and Note 8 “Stockholders’ Equity” in our accompanying consolidated financial statements included in Part I Item 1. “Financial Statements” for further information.

Depreciation and Amortization

Depreciation and amortization expense decreased due to the disposal of six properties during 2017, the Maastoren property in April 2018 and a property in Portugal in September 2018 in our real estate equity segment.

Other Income (Loss)

Other Gain (Loss), net

Other gain (loss), net is primarily related to derivative instruments. The gain on the non-cash change in fair value related to foreign currency forwards used to hedge projected net property level cash flows in our corporate segment was primarily due to the weakening of the Euro against the U.S. dollar. The loss on the non-cash change in fair value related to the interest rate caps in our real estate equity segment is due to the movement in European interest rates in 2018 compared to 2017.

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The following table presents a summary of other gain (loss), net for the three months ended September 30, 2018 and 2017 (dollars in thousands):



	Three Months Ended September 30,
	2018									2017
	Real Estate Equity			Corporate			Total			Real Estate Equity			Corporate			Total
Change in fair value: derivatives, at fair value
Interest rate caps	$	(80	)	$	—		$	(80	)	$	(1,235	)	$	—		$	(1,235	)
Foreign currency forwards	—			1,264			1,264			—			(2,737		)	(2,737		)
Subtotal	(80		)	1,264			1,184			(1,235		)	(2,737		)	(3,972		)
Net cash (payments) receipts on derivatives	—			(483		)	(483		)	—			232			232
Foreign currency translations	(29		)	(45		)	(74		)	203			44			247
Write-off of deferred financing costs ⁽¹⁾	—			—			—			(17		)	—			(17		)
Total other gain (loss), net	$	(109	)	$	736		$	627		$	(1,049	)	$	(2,461	)	$	(3,510	)

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(1)	Due to the repayment of certain mortgage and other notes payable.

Realized Gain on Sales, net

Realized gain on sales, net is primarily related to the sales of operating real estate including the subsequent sale costs relating to prior period sales, receipt of escrow arrangements entered into for specific indemnification obligations in relation to prior period sales and the reclassification of the currency translation adjustment, or CTA, from a component of accumulated other comprehensive income, or OCI, to realized gain on sales, net, in our real estate equity segment.

The following table presents a summary of realized gain on sales, net for the three months ended September 30, 2018 and 2017 (dollars in thousands):



	Three Months Ended September 30,
	2018			2017
Gain (loss):
Sale of operating real estate	$	2,479		$	1,063
Receipt of escrows	541			597
Prior period sale adjustments	52			15
CTA release	(366		)	44
Total realized gain on sales, net	$	2,706		$	1,719

Income Tax Benefit (Expense)

The income tax benefit for the three months ended September 30, 2018 reflects a net benefit of $0.2 million related to our real estate equity segment. The income tax expense for the three months ended September 30, 2017 reflects a net expense of $0.4 million related to our real estate equity segment.

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Same Store Analysis

The following table presents our same store analysis for the real estate equity and preferred equity segments which comprises 23 properties ( 281,636 square meters) and our preferred equity investment adjusted for currency movement and excludes properties that were acquired or sold at any time during the three months ended September 30, 2018 and 2017 (dollars in thousands):



	Same Store ⁽⁴⁾
	Three Months Ended September 30,						Increase (Decrease)
	2018			2017 ⁽¹⁾			Amount			%
Occupancy (end of period)	97		%	83		%
Same store
Rental income ⁽²⁾	$	23,841		$	22,645		$	1,196
Escalation income	4,532			4,258			274
Interest income	708			688			20
Other income	105			170			(65		)
Total revenues	29,186			27,761			1,425			5.1	%
Utilities	1,262			1,192			70
Real estate taxes and insurance	1,280			1,166			114
Management fees	481			438			43
Repairs and maintenance	1,954			2,195			(241		)
Other ⁽²⁾⁽³⁾	540			1,094			(554		)
Properties - operating expenses	5,517			6,085			(568		)	(9.3	)%
Same store net operating income	$	23,669		$	21,676		$	1,993		9.2	%

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(1)	Three months ended September 30, 2017 is translated using the average exchange rate for the three months ended September 30, 2018 .


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


(3)	Includes non-recoverable VAT, bad debt expense, ground rent, administrative costs and other non-reimbursable expenses.

(4)

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

Same Store Revenue

Same store rental income increased driven primarily due to leases that commenced in the fourth quarter 2017 and early 2018. Same store escalation income increased due the increased recoverability of operating expenses due to leasing.

Same Store Expense

Same store properties - operating expenses decreased due to timing of certain repairs and maintenance and non-recoverable operating expenses such as bad debt expense and non-recoverable VAT.

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Reconciliation of Net Income to Same Store NOI

The following table presents a reconciliation from net income (loss) to same store net operating income for the real estate equity and preferred equity segments for the three months ended September 30, 2018 and 2017 (dollars in thousands):



	Same Store Reconciliation
	Three Months Ended September 30,
	2018		2017
Net income (loss)	$	556	$	(6,806	)
Corporate segment net (income) loss ⁽¹⁾	7,525		11,023
Other (income) loss ⁽²⁾	15,416		21,738
Net operating income	23,497		25,955
Sale of real estate investments and other ⁽³⁾⁽⁴⁾	172		(4,279		)
Same store net operating income	$	23,669	$	21,676

_____________________________


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


(2)	Includes realized gain on sales offset by depreciation and amortization expense, loss on interest rate caps, and other expenses in the real estate equity segment.


(3)	Primarily reflects the impact of net operating income of sold assets.


(4)	Three months ended September 30, 2017 is translated using the average exchange rate for the three months ended September 30, 2018 .

Comparison of the Nine Months Ended September 30, 2018 to September 30, 2017 (dollars in thousands):



	Nine Months Ended September 30,						Increase (Decrease)
	2018			2017			Amount
Revenues
Rental income	$	75,744		$	79,308		$	(3,564	)
Escalation income	15,186			16,360			(1,174		)
Interest income	2,143			1,001			1,142
Other income	497			708			(211		)
Total revenues	93,570			97,377			(3,807		)
Expenses
Properties - operating expenses	19,422			22,521			(3,099		)
Interest expense	17,280			19,641			(2,361		)
Transaction costs	1,986			1,565			421
Management fee, related party	12,391			10,716			1,675
Other expenses	3,847			6,604			(2,757		)
General and administrative expenses	5,631			5,875			(244		)
Compensation expense	3,292			20,094			(16,802		)
Depreciation and amortization	34,640			39,479			(4,839		)
Total expenses	98,489			126,495			(28,006		)
Other income (loss)
Other gain (loss), net	(15		)	(10,833		)	10,818
Realized gain on sales, net	42,020			7,397			34,623
Income (loss) before income tax benefit (expense)	37,086			(32,554		)	69,640
Income tax benefit (expense)	277			(316		)	593
Net income (loss)	$	37,363		$	(32,870	)	$	70,233

Revenues

Rental Income

Rental income consists of rental revenue in our real estate equity segment. Rental income decreased $3.6 million , primarily due to the disposal of six properties during 2017, the Maastoren property in April 2018 and a property in Portugal in September 2018 offset by leasing activity such as the completion of the Deutsche Bundesbank lease in the Trianon Tower in the fourth quarter of 2017 and the increase in foreign currency movements.

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Escalation Income

Escalation income consists of tenant recoveries in our real estate equity segment. Escalation income decreased $1.2 million due to the disposal of six properties during 2017, the Maastoren property in April 2018 and a property in Portugal in September 2018 offset by increased recoverability in connection with higher occupancy.

Interest Income

Interest income relates to our preferred equity investment originated in May 2017 in our preferred equity segment.

Other Income

Other income is principally related to insurance refunds and fees from vacating tenants in our real estate equity segment. Other income for the nine months ended September 30, 2018 predominantly reflects amounts received from vacating tenants for the demise of the premise. Other income for the nine months ended September 30, 2017 predominantly relates to a one-time insurance refund relating to a repair in the third quarter of 2017 and other dilapidation income received from vacating tenants.

Expenses

Properties - Operating Expenses

Properties - operating expenses decreased $3.1 million due to the disposal of six properties during 2017, the Maastoren property in April 2018 and a property in Portugal in September 2018 and a reduction in non-recoverable operating costs in our portfolio in our real estate equity segment.

Interest Expense

Interest expense decreased $2.4 million due to the repayments of certain mortgage notes in connection with the disposal of six properties during 2017 and the disposal of the Maastoren property in April 2018 and the margin reduction associated with the refinancing of certain mortgage notes in our real estate equity segment in the second half of 2017 and in 2018.

Transaction Costs

Transaction costs for the nine months ended September 30, 2018 were primarily related to costs associated with the continual work of the Strategic Review Committee which was established in 2017 and continues to work to evaluate opportunities to enhance stockholder value in our corporate segment and costs associated with the refinancing of certain mortgage notes in our real estate equity segment. Transaction costs for the nine months ended September 30, 2017 were primarily related to the Strategic Review Committee and costs associated with amending the management agreement in our corporate segment and transaction fees related to our preferred equity investment.

Management Fee, Related Party

Other Expenses

Other expenses primarily represent third-party service provider fees such as asset management, accounting, tax, legal fees and other compliance related fees related to portfolio management of our real estate equity segment. The decrease of $2.8 million is due to the internalization of certain third-party accounting, tax and asset management services.

General and Administrative Expenses

General and administrative expenses including external and internal audit, legal fees, public company costs and other corporate expenses incurred in our corporate segment. General and administrative expenses decreased $0.2 million due to the one-time payroll tax in the first quarter 2017 associated with the acceleration of substantially all of our equity awards due to the Mergers and lower audit and other corporate expenses in 2018 partially offset by the Internalized Service Cost allocated to us from our Manager.

Compensation Expense

Compensation expense is comprised of non-cash amortization of time-based, market-based and performance-based awards in our corporate segment. The decrease for the nine months ended September 30, 2018 , is mainly due to the acceleration of a material portion of our time-based equity awards due to the Mergers, which occurred in the first quarter of 2017. Refer to Note 7 “Compensation Expense” and Note 8 “Stockholders’ Equity” in our accompanying consolidated financial statements included in Part I Item 1. “Financial Statements” for further information.

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Depreciation and Amortization

Other Income (Loss)

Other Gain (Loss), Net

Other gain (loss), net is primarily related to the derivative instruments. The gain on the non-cash change in fair value related to foreign currency forwards used to hedge projected net property level cash flows in our corporate segment was primarily due to the weakening of the Euro against the U.S. dollar. The loss on the non-cash change in fair value related to the interest rate caps in our real estate equity segment is due to the movement in European interest rates in 2018 compared to 2017.

The following table presents a summary of other gain (loss), net for the nine months ended September 30, 2018 and 2017 (dollars in thousands):



	Nine Months Ended September 30,
	2018									2017
	Real Estate Equity			Corporate			Total			Real Estate Equity			Corporate			Total
Change in fair value: derivatives, at fair value
Interest rate caps	$	(2,079	)	$	—		$	(2,079	)	$	(1,949	)	$	—		$	(1,949	)
Foreign currency forwards	—			7,758			7,758			—			(10,309		)	(10,309		)
Subtotal	(2,079		)	7,758			5,679			(1,949		)	(10,309		)	(12,258		)
Net cash (payments) receipts on derivatives	—			(4,854		)	(4,854		)	—			1,688			1,688
Foreign currency translations	17			75			92			(205		)	(13		)	(218		)
Write-off of deferred financing costs ⁽¹⁾	(932		)	—			(932		)	(45		)	—			(45		)
Total other gain (loss), net	$	(2,994	)	$	2,979		$	(15	)	$	(2,199	)	$	(8,634	)	$	(10,833	)

_____________________________


(1)	Due to the repayment of certain mortgage and other notes payable.

Realized Gain on Sales, net

The following table presents a summary of realized gain on sales, net for the nine months ended September 30, 2018 and 2017 (dollars in thousands):



	Nine Months Ended September 30,
	2018		2017
Gain (loss):
Sale of operating real estate	$	32,439	$	6,243
Receipt of escrows	1,644		581
Prior period sale adjustments	321		937
CTA release	7,616		(364		)
Total realized gain on sales, net	$	42,020	$	7,397

Income Tax Benefit (Expense)

The income tax expense for the nine months ended September 30, 2018 reflects a net benefit of $0.3 million related to our real estate equity segment. The income tax expense for the nine months ended September 30, 2017 reflects a net expense of $0.3 million related to our real estate equity segment.

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Same Store Analysis

The following table presents our same store analysis for the real estate equity segment which comprises 23 properties ( 281,636 square meters) adjusted for currency movement and excludes properties that were acquired or sold at any time during the nine months ended September 30, 2018 and 2017 (dollars in thousands):



	Same Store ⁽⁴⁾
	Nine Months Ended September 30,				Increase (Decrease)
	2018		2017 ⁽¹⁾		Amount			%
Occupancy (end of period)	97%		83%
Same store
Rental income ⁽²⁾	$	71,981	$	69,346	$	2,635
Escalation income	14,548		13,027		1,521
Other income	404		457		(53		)
Total revenues	86,933		82,830		4,103			5.0	%
Utilities	3,872		4,024		(152		)
Real estate taxes and insurance	3,999		3,702		297
Management fees	1,511		1,392		119
Repairs and maintenance	6,204		6,459		(255		)
Other ⁽²⁾⁽³⁾	2,253		3,922		(1,669		)
Properties - operating expenses	17,839		19,499		(1,660		)	(8.5	)%
Same store net operating income	$	69,094	$	63,331	$	5,763		9.1	%

_____________________________


(1)	Nine months ended September 30, 2017 is translated using the average exchange rate for the nine months ended September 30, 2018 .


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


(3)	Includes non-recoverable VAT, bad debt expense, ground rent, administrative costs and other non-reimbursable expenses.

(4)

Same Store Revenue

Same store rental income increased driven primarily due to leases commenced during the second half of 2017 and early 2018. Same store escalation income increased due the increased recoverability of operating expenses due to leasing.

Same Store Expense

Same store properties - operating expenses decreased due to timing of certain non-recoverable operating expenses such as bad debt expense and non-recoverable VAT.

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Reconciliation of Net Income to Same Store NOI

The following table presents a reconciliation from net income (loss) to same store net operating income for the real estate equity segment for the nine months ended September 30, 2018 and 2017 (dollars in thousands):



	Same Store Reconciliation
	Nine Months Ended September 30,
	2018			2017
Net income (loss)	$	37,363		$	(32,870	)
Corporate segment net (income) loss ⁽¹⁾	19,405			46,735
Other (income) loss ⁽²⁾	18,152			60,734
Net operating income	74,920			74,599
Sale of real estate investments and other ⁽³⁾⁽⁵⁾	(7,969		)	(12,269		)
Interest income ⁽⁴⁾	2,143			1,001
Same store net operating income	$	69,094		$	63,331

_____________________________


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


(2)	Includes realized gain on sales offset by depreciation and amortization expense, loss on interest rate caps, and other expenses in the real estate equity segment.


(3)	Primarily reflects the impact of net operating income of sold assets.


(4)	Reflects interest income earned in the preferred equity segment.


(5)	Nine months ended September 30, 2017 is translated using the average exchange rate for the nine months ended September 30, 2018 .

Liquidity and Capital Resources

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

Our current primary liquidity needs are to fund:


•	our operating expenses and investment activities;


•	acquisitions of our target assets and related ongoing commitments;


•	capital improvements


•	distributions to our stockholders;


•	principal and interest payments on our borrowings; and


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

Our current primary sources of liquidity are:


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


•	net proceeds from asset disposals;


•	financings secured by our assets such as mortgage notes, longer term senior and subordinate corporate capital such as revolving credit facilities; and


•	cash on hand.

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

As a REIT, we are required to distribute at least 90% of our annual REIT taxable income to our stockholders, including taxable income where we do not receive corresponding cash, and we intend to distribute all or substantially all of our REIT taxable income in order to comply with the REIT distribution requirements of the Internal Revenue Code and to avoid federal income tax and the

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non-deductible excise tax. On a quarterly basis, our Board determines an appropriate common stock dividend based upon numerous factors, including CAD, REIT qualification requirements, availability of existing cash balances, borrowing capacity under existing credit agreements, access to cash in the capital markets and other financing sources, our view of our ability to realize gains in the future through appreciation in the value of our assets, general economic conditions and economic conditions that more 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 may, from time-to-time, deem relevant to consider when determining an appropriate common stock dividend.

In March 2018, our board of directors authorized the repurchase of up to $100 million of our outstanding common stock. The authorization expires in March 2019, unless otherwise extended by our board of directors. For the three months ended September 30, 2018 , we repurchased 1.0 million shares of our common stock for approximately $13.8 million . From the authorization in March 2018 through September 30, 2018, we repurchased 6.1 million shares of our common stock for approximately $83.4 million . We did not repurchase any shares subsequent to September 30, 2018.

In August 2018, we amended and restated its loan agreement on the loans related to the Trias France portfolio, increasing the principal balance to $77 million, reducing the blended margin from 1.85% per annum to 1.65% per annum and extending the maturity by two years from April 8, 2020 to April 8, 2022.

We believe that our existing sources of funds should be adequate for purposes of meeting our short-term liquidity needs. We expect our contractual rental income to be sufficient to meet our expected capital expenditures, interest expense, property operating and general and administrative expenses as well as common dividends declared by us. We may seek to raise additional capital in order to finance new acquisitions. As of November 2, 2018, total liquidity was $135 million, comprised of $65 million of unrestricted cash and $70 million of availability under our Credit Facility.

Cash Flows

The following presents a summary of our activity for the nine months ended September 30, 2018 and 2017 :



	Nine Months Ended September 30,
Cash flow provided by (used in):	2018			2017
Operating activities	$	20,336		$	19,540
Investing activities	194,416			(420		)
Financing activities	(215,555		)	(43,621		)
Effect of foreign currency translation on cash and cash equivalents and restricted cash	(1,813		)	6,195
Net increase (decrease) in cash and cash equivalents and restricted cash	$	(2,616	)	$	(18,306	)

Nine Months Ended September 30, 2018 Compared to September 30, 2017

Net cash provided by operating activities was $20.3 million for the nine months ended September 30, 2018 compared to $19.5 million for the nine months ended September 30, 2017 . The increase was primarily due to a decrease in the change in operating assets and liabilities due to the timing of payments and collection of receivables.

Net cash provided by investing activities was $194.4 million for the nine months ended September 30, 2018 compared to net cash used in $0.4 million for the nine months ended September 30, 2017 . Cash flow provided by investing activities for the nine months ended September 30, 2018 was primarily due to proceeds from the sale of real estate $204.6 million offset by and improvements of our operating real estate $12.2 million. Cash flow used in by the nine months ended September 30, 2017 was primarily due to the origination of our preferred equity investment $35.1 million and improvements of our operating real estate $10.1 million offset by proceeds from the sale of real estate $48.6 million.

Net cash used in financing activities was $215.6 million for the nine months ended September 30, 2018 compared to $43.6 million for the nine months ended September 30, 2017 . Cash flow used in financing activities for the nine months ended September 30, 2018 was primarily due to repayment of mortgage notes and other notes payable of $122.4 million, retirement of shares of common stock of $83.4 million , and dividend payments of $23.7 million offset by borrowings of mortgage notes of $23.9 million. Net cash flow used in financing activities for the nine months ended September 30, 2017 was primarily due to the net cash payment

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on tax withholding of $11.0 million, repayment of mortgage notes and other notes payable of $12.9 million and dividend payments of $25.1 million offset $5.6 million from the borrowing from mortgage and other notes payable.

Off-Balance Sheet Arrangements

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

Related Party Arrangements

Colony Capital Inc.

We entered into a management agreement with an affiliate of the Manager in November 2015, or the Original Management Agreement. On November 9, 2017, we entered into an amended and restated management agreement, or the Amended and Restated Management Agreement, with an affiliate of Colony Capital, effective as of January 1, 2018. As asset manager, the Manager is responsible for our day-to-day operations, subject to the supervision and management of our Board. Through its global network of subsidiaries and branch offices, the Manager performs services and engages in activities relating to, among other things, investments and financing, portfolio management and other administrative services, such as accounting and investor relations, to us and our subsidiaries. The management agreement with the Manager provides for a base management fee, incentive fee and expense reimbursement.

Term: Renewals

The Amended and Restated Management Agreement provides for an initial term (beginning January 1, 2018) of five years, or the Initial Term, with subsequent automatic renewals for additional three-year terms, unless either party provides notice to the other party of its intention to decline to renew the agreement at least six months prior to the expiration of the then-current term. During the Initial Term, the Amended and Restated Management Agreement is terminable only for cause (as defined in the Amended and Restated Management Agreement).

If we elect not to renew the Amended and Restated Management Agreement at the end of a term, we will be obligated to pay the Manager a termination fee, or the Termination Fee, equal to three times the amount of the base management fees earned by the Manager over the four most recent quarters immediately preceding the non-renewal. In addition, if at any time after the Initial Term, we undergo a “change of control” (as defined in the Amended and Restated Management Agreement), we may elect to terminate the agreement but upon any such termination it will be obligated to pay the Termination Fee to the Manager.

Assignment

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

Base Management Fee

Pursuant to the Amended and Restated Management Agreement, beginning January 1, 2018, we are obligated to pay, quarterly, in arrears, in cash, the Manager a base management fee per annum equal to:


•	1.50% of our reported EPRA NAV (as defined in the Amended and Restated Management Agreement) for EPRA NAV amounts up to and including $2.0 billion; plus


•	1.25% of our reported EPRA NAV on any EPRA NAV amount exceeding $2.0 billion.

EPRA NAV is based on a U.S. GAAP balance sheet adjusted based on our interpretation of the European Public Real Estate Association, or EPRA, guidelines, and similar as prior practices, including adjustments such as fair value of operating real estate, straight-line rent and deferred taxes and additional adjustments to be determined by us in good faith based on any changes to U.S. GAAP, international accounting standards or EPRA guidelines. In calculating EPRA NAV, the liquidation preference of preferred securities outstanding shall not be included as a liability of us and shall not reduce EPRA NAV.

For the three and nine months ended September 30, 2018 , we incurred $4.0 million and $12.4 million , respectively, related to the base management fee.

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Incentive Fee

In addition to the base management fees, we are obligated to pay the Manager an incentive fee, if any, or the Incentive Fee, with respect to each measurement period equal to twenty percent (20%) of: (i) the excess of (a) our Total Stockholder Return (as defined in the Amended and Restated Management Agreement, which includes stock price appreciation and dividends received and is subject to a high watermark price established when a prior incentive fee is realized) for the relevant measurement period above (b) a 10% cumulative annual hurdle rate, multiplied by (ii) our Weighted Average Shares (as defined in the Amended and Restated Management Agreement) during the measurement period. The first measurement period for the incentive fee began January 1, 2018 (based on an initial price of $13.67) and will end on December 31 of the applicable calendar year and subsequent measurement periods will begin on January 1 of the subsequent calendar year. Subject to the conditions set forth in Section 4(d) of the Amended and Restated Management Agreement for common stock payments, we may elect to pay the Incentive Fee, if any, in cash or in shares of restricted common stock or shares of unrestricted common stock repurchased by us in the open market or a combination thereof. Any shares of common stock delivered by us will be subject to lock-up restrictions that will be released in equal one-third increments on each anniversary of the end of the measurement period with respect to which such incentive fee was earned. In calculating the value of the shares of our common stock paid in satisfaction of the Incentive Fee obligation, the shares of restricted common stock will be valued at the higher of: (i) the volume weighted average trading price per share for the ten consecutive trading days (as defined in the Amended and Restated Management Agreement) ending on the trading day prior to the date the payment is due and (ii) our EPRA NAV per share, based on our most recently published EPRA NAV and the Weighted Average Shares as of the end of the period with respect to which such EPRA NAV was published.

For the three and nine months ended September 30, 2018 , we did not record an incentive fee.

Costs and Expenses

We are responsible to pay (or reimburse the Manager) for all of our direct, out of pocket costs and expenses as a stand alone company incurred by or on behalf of us and our subsidiaries, all of which must be reasonable, customary and documented. Internalized Service Costs (as defined below) are not intended to be covered costs and expenses under this provision and are subject to the limits described in the next paragraph.

We are obligated to reimburse the Manager for (i) all direct, reasonable, customary and documented costs and expenses incurred by the Manager for salaries, wages, bonuses, payroll taxes and employee benefits for personnel employed by the Manager: (a) who solely provide services to us which prior to January 1, 2018 were provided by unaffiliated third parties, including accounting and treasury services or (b) who were hired by the Manager after January 1, 2018 but who solely provide services to us in respect of one of the categories of services previously internalized pursuant to clause (a) and who were not hired in connection with any event which otherwise resulted in an increase to our net asset value (such costs and expenses set forth in clauses (i) and (ii), the “Internalized Service Costs”), plus (ii) 20% of the amount calculated under clause (i) to cover reasonable overhead charges with respect to such personnel, provided that we shall not be obligated to reimburse the Manager for such costs and expenses to the extent they exceed the following quarterly limits:


•	0.0375% of our aggregate gross asset value as of the end of the prior calendar quarter (excluding cash and cash equivalents and certain other exclusions) as calculated for purposes of determining EPRA NAV, or GAV, for GAV amounts to and including $2.5 billion, plus


•	0.0313% of GAV amounts between $2.5 billion and $5.0 billion, plus


•	0.025% of GAV amounts exceeding $5.0 billion.

If the Manager’s actual Internalized Service Costs during any quarter exceed the quarterly limit described in the preceding paragraph (the cumulative excess amounts, if any, in respect of each quarter during a calendar year, is referred to as the Quarterly Cap Excess Amount we are obligated to reimburse the Manager on an annual basis for an amount equal to the lesser of (i) the Quarterly Cap Excess Amount and (ii) the sum of the amounts, if any, determined for each quarter within such calendar year by which Internalized Services Costs in respect of such quarter were less than the quarterly limits described in the prior paragraph.

For the three and nine months ended September 30, 2018 , the Manager allocated $0.3 million and $0.8 million , respectively, of Internalized Service Costs to us.

Equity Based Compensation

In addition, we expect to make annual equity compensation grants to our management and other employees of the Manager, provided that the aggregate annual grant amount, type and other terms of such equity compensation must be approved by our compensation committee. The Manager will have discretion in allocating the aggregate grant among our management and other employees of the Manager.

Under the Amended and Restated Management Agreement, beginning with our 2018 annual stockholders’ meeting, the Manager has the right to nominate one individual to be included in the slate of nominees nominated by our board of directors for election at each annual meeting.

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Colony Capital Ownership Waiver and Voting Agreement

In connection with the entry into the Amended and Restated Management Agreement, we provided Colony Capital with an ownership waiver under our Articles of Amendment and Restatement, allowing Colony Capital to purchase up to 45% of our stock. The waiver provides that if the Amended and Restated Management Agreement is terminated, Colony Capital may not purchase any shares of our common stock to the extent Colony Capital owns (or would own as a result of such purchase) more than 9.8% of our capital stock. In connection with the waiver, Colony Capital also agreed that for all matters submitted to a vote of our stockholders, to the extent Colony Capital owns more than 25% of our common stock (such shares owned by Colony Capital in excess of the 25% threshold, refer to as the Excess Shares, it will vote the Excess Shares in the same proportion that our remaining shares not owned by Colony Capital or its affiliates are voted. If the Amended and Restated Management Agreement is terminated, then beginning on the third anniversary of such termination, the threshold described in the prior sentence will be reduced from 25% to 9.8%.

Manager Ownership of Common Stock

As of September 30, 2018 , Colony Capital and its subsidiaries owned 5.6 million shares of our common stock, or approximately 11.3% of the total outstanding common stock.

Recent Developments

Dividends

On November 2, 2018 , we declared a dividend of $0.15 per share of common stock. The common stock dividend will be paid on November 16, 2018 to stockholders of record as of the close of business on November 12, 2018 .

Trianon

On November 6, 2018, we executed a definitive sale and purchase agreement to sell the Trianon Tower in Frankfurt, Germany, our largest asset, for €670 million , or approximately $762 million . We expect to release approximately $360 million of net equity after repayment of financing and transaction costs. Completion is subject to customary conditions, including the Purchasers’ closing on a €390 million mortgage facility.

Inflation

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

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

Non-GAAP Financial Measures

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

Cash Available for Distribution

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

We calculate CAD by subtracting from or adding to net income (loss) attributable to common stockholders, noncontrolling interests and the following items: depreciation and amortization items including straight-line rental income or expense (excluding amortization of rent free periods), amortization of above/below market leases, amortization of deferred financing costs, amortization of discount on financings and other and equity-based compensation; other gain (loss), net (excluding any realized gain (loss) on the settlement on foreign currency derivatives); realized gain on sales, net; impairment on depreciable property; acquisition gains

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or losses; transaction costs; foreign currency gains (losses) related to sales; impairment on goodwill and other intangible assets; the incentive fee relating to the Amended and Restated Management Agreement and one-time events pursuant to changes in U.S. GAAP and certain other non-recurring items. These items, if applicable, include any adjustments for unconsolidated ventures.

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

The following table presents a reconciliation of net income (loss) attributable to common stockholders to CAD for the three and nine months ended September 30, 2018 and 2017 (dollars in thousands):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Net income (loss) attributable to common stockholders	$	552		$	(6,770	)	$	37,138		$	(32,567	)
Noncontrolling interests	4			(36		)	225			(303		)

Adjustments:
Depreciation and amortization items ⁽¹⁾⁽²⁾	13,719			17,096			40,914			61,656
Other (gain) loss, net ⁽³⁾⁽⁴⁾	(1,110		)	3,742			(2,895		)	12,521
Realized (gain) on sales, net	(2,706		)	(1,719		)	(42,020		)	(7,397		)
Transaction costs and other ⁽⁵⁾⁽⁶⁾	1,068			438			2,396			2,480
CAD	$	11,527		$	12,751		$	35,758		$	36,390

_____________________________

(1)

Three months ended September 30, 2018 reflects an adjustment to exclude depreciation and amortization of $11.0 million , amortization expense of capitalized above/below market leases of $0.2 million , amortization of deferred financing costs of $0.8 million and amortization of equity-based compensation of $1.7 million . Three months ended September 30, 2017 reflects an adjustment to exclude depreciation and amortization of $14.4 million , amortization of above/below market leases of $(0.8) million , amortization of deferred financing costs of $0.7 million and amortization of equity-based compensation of $2.8 million .

(2)

Nine months ended September 30, 2018 reflects an adjustment to exclude depreciation and amortization of $34.6 million , amortization expense of capitalized above/below market leases of $0.6 million , amortization of deferred financing costs of $2.4 million and amortization of equity-based compensation of $3.3 million . Nine months ended September 30, 2017 reflects an adjustment to exclude depreciation and amortization of $39.5 million, amortization expense of capitalized above/below market leases of $(0.3) million, amortization of deferred financing costs of $2.3 million and amortization of equity-based compensation of $20.1 million.


(3)	Three months ended September 30, 2018 CAD includes a $0.5 million net loss related to the settlement of foreign currency derivatives. Three months ended September 30, 2017 CAD includes a $0.2 million net gain related to the settlement of foreign currency derivatives.


(4)	Nine months ended September 30, 2018 CAD includes a $2.9 million net loss related to the settlement of foreign currency derivatives. Nine months ended September 30, 2017 CAD includes a $1.7 million net gain related to the settlement of foreign currency derivatives.


(5)	Three months ended September 30, 2018 reflects an adjustment to exclude $1.1 million of transaction costs. Three months ended September 30, 2017 reflects an adjustment to exclude $0.4 million of transaction costs.


(6)	Nine months ended September 30, 2018 reflects an adjustment to exclude $2.0 million of transaction costs and $0.4 million taxes related to sales and other one-time items. Nine months ended September 30, 2017 reflects an adjustment to exclude $1.6 million of transaction costs and $0.9 million of payroll taxes associated with the acceleration of equity awards due to the Mergers.

Net Operating Income (NOI)

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

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

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The following table presents a reconciliation of NOI of our real estate equity and preferred equity segments to property and other related revenues less property operating expenses for the three and nine months ended September 30, 2018 and 2017 (dollars in thousands):



	Three Months Ended September 30,					Nine Months Ended September 30,
	2018		2017			2018		2017
Rental income	$	23,920	$	27,747		$	75,744	$	79,308
Escalation income	4,283		5,641			15,186		16,360
Other income	76		171			497		708
Total property and other income	28,279		33,559			91,427		96,376
Properties - operating expenses	5,690		7,519			19,422		22,521
Adjustments:
Interest income	708		704			2,143		1,001
Amortization and other items ⁽¹⁾⁽²⁾	200		(789		)	772		(257		)
NOI ⁽³⁾	$	23,497	$	25,955		$	74,920	$	74,599

_____________________________


(1)	Three months ended September 30, 2018 primarily excludes $0.2 million of amortization of above/below market leases. Three months ended September 30, 2017 primarily excludes $(0.8) million of amortization of above/below market leases.


(2)	Nine months ended September 30, 2018 primarily excludes $0.6 million of amortization of above/below market leases and $0.1 million of other one-time items. Nine months ended September 30, 2017 primarily excludes $(0.3) million of amortization of above/below market leases.


(3)	The following table presents a reconciliation of net income (loss) to NOI of our real estate equity and preferred equity segment for the three and nine months ended September 30, 2018 and 2017 (dollars in thousands):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Net income (loss)	$	556		$	(6,806	)	$	37,363		$	(32,870	)
Remaining segments ⁽ⁱ⁾	7,525			11,023			19,405			46,735
Real estate equity and preferred equity segment adjustments:
Interest expense	5,055			6,325			16,611			18,896
Other expenses	1,150			1,996			3,847			6,604
Depreciation and amortization	11,013			14,396			34,640			39,479
Other (gain) loss, net	109			1,049			2,994			2,199
Realized (gain) on sales, net	(2,706		)	(1,719		)	(42,020		)	(7,397		)
Income tax (benefit) expense	(240		)	352			(277		)	316
Other items	1,035			(661		)	2,357			637
Total adjustments	15,416			21,738			18,152			60,734
NOI	$	23,497		$	25,955		$	74,920		$	74,599

_____________________________


(i)	Reflects the net (income) loss in our corporate segment to reconcile to net operating income.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

Interest Rate Risk

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

Substantially all of our investments are financed with non-recourse mortgage notes. We predominately use floating rate financing and we seek to generally mitigate the risk of interest rates rising through derivative instruments including interest rate caps. As of September 30, 2018 , a hypothetical 100 basis point increase in GBP LIBOR and EURIBOR applied to our liabilities would result in a decrease in net income of approximately $6.4 million annually.

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

As of September 30, 2018 , none of our derivatives qualified for hedge accounting treatment, therefore, gains (losses) resulting from their fair value measurement at the end of each reporting period are recognized as an increase or decrease in other gain (loss), net in our consolidated statements of operations. In addition, we are, and may in the future be, subject to additional expense based on the notional amount of the derivative and a specified spread over the applicable index. Because the fair value of these instruments can vary significantly between periods, we may experience significant fluctuations in the amount of our unrealized gain (loss) in any given period.

The objective of our interest rate management strategy is to minimize or eliminate the effects of interest rate changes on the value of our assets, to improve risk-adjusted returns and, where possible, to lock in, on a long-term basis, a favorable spread between the yield on our assets and the cost of financing such assets.

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

Credit Risk

We are subject to the credit risk of the tenants of our properties. We seek to undertake a credit evaluation of each tenant prior to acquiring properties. This analysis includes due diligence of each tenant’s business as well as an assessment of the strategic importance of the underlying real estate to the tenant’s core business operations. Where appropriate, we may seek to augment the tenant’s commitment to the property by structuring various credit enhancement mechanisms into the underlying leases. These mechanisms could include security deposit requirements, letters of credit or guarantees from entities we deem creditworthy. Additionally, we perform ongoing monitoring of creditworthiness of our tenants which is an important component of our portfolio management process. Such monitoring may include, to the extent available, a review of financial statements and operating statistics, delinquencies, third party ratings and market data. In addition, our preferred equity investment is subject to credit risk based on the borrower’s ability to make required interest payments on scheduled due dates and value of collateral. We seek to manage credit risk through our Manager’s comprehensive credit analysis prior to making an investment, actively monitoring our investment and the underlying credit quality, including subordination and diversification of our investment. Our analysis is based on a broad range of real estate, financial, economic and borrower-related factors, which we believe are critical to the evaluation of credit risk inherent in a transaction. For the nine months ended September 30, 2018 , our preferred equity investment contributed all of our interest income.

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

Foreign Currency Exchange Rate Risk

We are subject to risks related to changes in foreign currency exchange rates as a result of our ownership of, or commitments to acquire, properties within Europe, predominantly the U.S. dollar/Euro and U.S. dollar/U.K. Pounds Sterling exchange rate. As a result, changes in exchange rate fluctuations may positively or negatively affect our consolidated revenues and expenses (as expressed in U.S. dollars) from our business.

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The following chart represents the change in the Euro/U.S. dollar and U.K. Pounds Sterling/U.S. dollar exchange rate during the nine months ended September 30, 2018 and 2017 :

Source: Oanda

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

In an effort to mitigate the risk of fluctuations in foreign currency exchange rates, we, and our Operating Partnership, seek to actively manage our revenues and expenses so that we incur a significant portion of our expenses, including our operating costs and borrowings, in the same local currencies in which we receive our revenues. In addition, subject to satisfying the requirements for qualification as a REIT, we engage in various hedging strategies, which may include currency futures, swaps, forwards and options. We expect that these strategies and instruments may allow us to reduce, but not eliminate, the risk of fluctuations in foreign currency exchange rates. The counterparties to these arrangements are major financial institutions with which we may also have other financial relationships. In January 2018, we entered into additional foreign currency forwards with respect to the projected net property level cash flows which are hedged for the Euro through November 2019.

Based on our portfolio, a hypothetical 10% appreciation or depreciation in the applicable exchange rate to the U.S dollar, adjusting for our foreign currency forwards, applied to our assets and liabilities would result in an increase or decrease of stockholders’ equity of approximately $51.1 million , respectively. Such amount would be recorded in OCI. In addition, we enter into derivative instruments to manage foreign currency exposure of our operating income. A hypothetical 10% increase or decrease in applicable exchange rate to the U.S dollar applied to our assets and liabilities, adjusting for foreign currency forwards would result in an increase or decrease of net operating income adjusted for interest and other expenses of approximately $2.4 million annually, respectively.

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

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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.

Our Manager has substantially completed the process of integrating the systems, processes and internal controls of Colony Capital, NSAM and NorthStar Realty Finance. The Company leverages these systems, processes and internal controls to conduct its operations. We will continue to review our internal control practices, in conjunction with our Manager, in consideration of future integration and post merger activities.

Except as described above in the preceding paragraph, during the quarter ended September 30, 2018 , there was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

There have been no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, 2017 .

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

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

Item 2. Purchases of Equity Securities by Issuer

The following table provides the information with respect to purchases made by us of our common stock during the three months ended September 30, 2018 :



Period ⁽¹⁾⁽²⁾	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs ⁽¹⁾
July 1 - July 31	789,408	$	13.69	789,408	$	19,598,732
August 1 - August 31	216,995	$	13.78	216,995	$	16,609,126

_____________________________


(1)	In March 2018, we announced that our board of directors authorized the repurchase of up to $100 million of our outstanding common stock. The authorization expires in March 2019, unless otherwise extended by our board of directors.


(2)	There were no repurchases made during September 2018.

Item 4. Mine Safety Disclosures

None.

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Item 5. Other Events

On November 6, 2018, Symbol I - T S.à r.l., Symbol II - T S.à r.l., Symbol III - T S.à r.l., Symbol IV - T S.à r.l., Symbol Holdco C-T S.à.r.l., and Symbol V - T S.à r.l., each indirect subsidiaries of the Company entered into a definitive Share Sale and Purchase Agreement (the “Purchase Agreement”) with Platin 1680 GmbH and Luxembourg Investment Company 271 S.á r.l. (the “Purchasers”) with respect to the sale of the Company’s Trianon Tower property located at Mainzer Landstraße 16, Frankfurt, Germany, for a gross sales price of approximately $762 million (based on the November 5, 2018 exchange rate). Since acquiring the asset in July 2015, the Company has completed numerous of value enhancing initiatives including a 10 year lease with Deutsche Bundesbank and obtaining a LEED Platinum certification following an extensive refurbishment program.

Closing is expected to occur prior to December 31, 2018 and is subject to customary closing conditions, including the Purchasers’ closing on a €390 million (or $445 million based on the November 5, 2018 exchange rate) mortgage facility. The Agreement contains representations, warranties and covenants that are customary and typical for an agreement and transaction of this nature. The Company plans to repay a $383 million first mortgage loan that is secured by the property upon closing. The Company expects to release approximately $360 million of net equity from the sale after the repayment of financing and transaction costs and a $6 million retained interest in Symbol Holdco C-T S.à. r.l in the form of preferred equity certificates with a 7% yield.

The foregoing description of the Purchase Agreement does not purport to describe all of the terms of such agreement and is qualified by reference to the Purchase Agreement, which is filed as Exhibit 10.1 hereto, and is incorporated herein by reference.

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Item 6. Exhibits



Exhibit Number		Description of Exhibit
3.1		Articles of Amendment, dated August 3, 2018 (incorporated by reference to Exhibit 3.1 to NorthStar Realty Europe’s Current Report on Form 8-K filed on August 6, 2018)
3.2		Amended and Restated Bylaws, effective as of August 3, 2018 (incorporated by reference to Exhibit 3.2 to NorthStar Realty Europe’s Current Report on Form 8-K filed on August 6, 2018)
10.1	*	Share Sale and Purchase Agreement dated November 5, 2018 by and among Symbol I - T S.á r.l., Symbol II - T S.á r.l., Symbol III - T S.á r.l., Symbol IV - T S.á r.l., Symbol Holdco C-T S.á r.l., and Symbol V - T S.á r.l., Platin 1680 GmbH and Luxembourg Investment Company 271 S.á r.l.
31.1	*	Certification by the Chief Executive Officer pursuant to 17 CFR 240.13a-14(a)/15(d)-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	*	Certification by the Chief Financial Officer pursuant to 17 CFR 240.13a-14(a)/15(d)-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	*	Certification by the Chief Executive Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	*	Certification by the Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.0	*	The following materials from the NorthStar Realty Europe Corp. Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of September 30, 2018 (unaudited) and December 31, 2017; (ii) Consolidated Statements of Operations (unaudited) for the three and nine months ended September 30, 2018 and 2017; (iii) Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three and nine months ended September 30, 2018 and 2017; (iv) Consolidated Statements of Equity (unaudited) for the nine months ended September 30, 2018 and 2017; (v) Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2018 and 2017; and (vi) Notes to Consolidated Financial Statements (unaudited)

_____________________________

* Filed herewith.

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SIGNATURES

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



		NorthStar Realty Europe Corp.
Date:	November 6, 2018		By:	/s/ MAHBOD NIA
				Mahbod Nia
				Chief Executive Officer and President

			By:	/s/ KEITH A. FELDMAN
				Keith A. Feldman
				Chief Financial Officer and Treasurer

Exhibit 10.1

No. 123 of the Roll of Deeds for 2018

Recorded

in Frankfurt am Main on 5/6 November 2018

before the undersigned notary

in the district of the Higher Regional Court ( Oberlandesgericht ) of Frankfurt am Main

Dr. Georg A. Frowein

with official seat at

Bockenheimer Landstraße 24, 60323 Frankfurt am Main

appeared today


1.	Dr. Philipp Stoecker , born on 24 March 1983, with business address at Clifford Chance Deutschland LLP, Mainzer Landstr. 46, 60325 Frankfurt am Main, who is personally known to the notary,

hereinafter not acting in his own name but – excluding any personal liability – for and on behalf of

(a)

Symbol I – T S.à r.l. , a private limited liability company ( société à responsabilité limitée ) incorporated and existing under the laws of the Grand Duchy of Luxembourg, having its registered office at 6A route de Trèves, Senningerberg, L-2633 Luxembourg, registered in the Luxembourg Register of Trade and Companies ( Registre de Commerce et des Sociétés de Luxembourg ) under no. B 197720,

- " Seller 1 " -,

(b)

Symbol II – T S.à r.l. , a private limited liability company ( société à responsabilité limitée ) incorporated and existing under the laws of the Grand Duchy of Luxembourg, having its registered office at 6A route de Trèves, Senningerberg, L-2633 Luxembourg, registered in the Luxembourg Register of Trade and Companies ( Registre de Commerce et des Sociétés de Luxembourg ) under no. B 197726,

- " Seller 2 " -,

(c)

Symbol III – T S.à r.l. , a private limited liability company ( société à responsabilité limitée ) incorporated and existing under the laws of the Grand Duchy of Luxembourg, having its registered office at 6A route de Trèves, Senningerberg, L-2633 Luxembourg, registered in the Luxembourg Register of Trade and Companies ( Registre de Commerce et des Sociétés de Luxembourg ) under no. B 197732,

- " Seller 3 " -,

(d)

Symbol IV – T S.à r.l. , a private limited liability company ( société à responsabilité limitée ) incorporated and existing under the laws of the Grand Duchy of Luxembourg, having its registered office at 6A route de Trèves, Senningerberg, L-2633 Luxembourg, registered in the Luxembourg Register of Trade and Companies ( Registre de Commerce et des Sociétés de Luxembourg ) under no. B 197738,

- " Seller 4 " -,

- Seller 1 through 4 individually " PropCo Seller "
and together " PropCo Sellers "-,

(e)

Symbol Holdco C-T S.à r.l. , a private limited liability company ( société à responsabilité limitée ) incorporated and existing under the laws of the Grand Duchy of Luxembourg, having its registered office at 6A route de Trèves, Senningerberg, L-2633 Luxembourg, registered in the Luxembourg Register of Trade and Companies ( Registre de Commerce et des Sociétés de Luxembourg ) under no. B 197687,

- " OpCo Seller "-,

- Seller 1 through 4 and OpCo Seller individually " Seller " and together " Sellers "-,

(f)

Symbol V – T S.à r.l. , a private limited liability company ( société à responsabilité limitée ) incorporated and existing under the laws of the Grand Duchy of Luxembourg, having its registered office at 6A route de Trèves, Senningerberg, L-2633 Luxembourg, registered in the Luxembourg Register of Trade and Companies ( Registre de Commerce et des Sociétés de Luxembourg ) under no. B 197753,

- " Symbol V " -



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for (a) through (f) based on notarially legalized, apostilled powers of attorney, with notarial certificates of representation, copies of which were presented at the notarization with the promise (without assuming any personal liability) to deliver the originals in due course, certified copies of which shall then be attached to this deed.


2.	Dr. Jochen Scheel , born on 16 December 1965, with business address at Allen & Overy LLP, Bockenheimer Landstraße 2, 60306 Frankfurt am Main, who is personally known to the notary,

hereinafter acting not in his own name but – excluding any personal liability – for and on behalf of

(a)

Platin 1680. GmbH (in the future: Yolk Paragon GmbH) , a private limited liability company ( Gesellschaft mit beschränkter Haftung ) incorporated and existing under the laws of Germany, having its business office at An der Welle 4, 60322 Frankfurt am Main, Germany, registered with the commercial register ( Handelsregister ) of the local court of Frankfurt am Main under registration no. HRB 112859,

- " Buyer 1 " -,

(b)

Luxembourg Investment Company 271 S.à r.l. , a private limited liability company ( société à responsabilité limitée ) incorporated and existing under the laws of the Grand Duchy of Luxembourg, having its registered office at 6, rue Eugène Ruppert, L-2453 Luxembourg, Luxembourg, registered in the Luxembourg Register of Trade and Companies ( Registre de Commerce et des Sociétés de Luxembourg ) under no. B 224025,

- " Buyer 2 " -,

- Buyer 1 and 2 individually " Buyer " and together " Buyers "-,

for (a) based on a certified power of attorney, the original of which was presented at the notarization and a hereby certified copy of which shall be attached to this deed, and for (b) based on a written power of attorney, a copy of which was presented at the notarization with the promise (without assuming personal liability) to deliver a legalized and apostilled original of the power of attorney presented, a certified copy of which shall then be attached to this deed.

Upon inspection of the commercial register of the local court ( Amtsgericht ) of Frankfurt am Main on 5 November 2018, the Notary hereby certifies ( bescheinigt ) that Platin 1680. GmbH is registered under registration number 112859 with its registered office in Frankfurt am Main. The Notary hereby confirms ( bestätigt ) that the sole shareholder of Platin 1680. GmbH, registered with the local court ( Amtsgericht ) of Frankfurt am Main under registration number 112859 and with its registered office in Frankfurt am Main, resolved, among other things, in a notarial deed dated 2 November 2018 (roll of deeds no. 115/2018 of the acting Notary) to change the company's name to Yolk Paragon GmbH and to appoint Andreas Grundhöfer, who is named as signatory in the power of attorney, as managing director with sole power of representation, and that those resolutions were filed with the commercial register on 2 November 2018 (roll of deeds no. 118/2018 of



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the acting Notary); the acting Notary instructed the persons appearing that such confirmation does not constitute a certificate of representation within the meaning of sec. 21 of the German Federal Notary Act ( Bundesnotarordnung ), a party may only rely bona fides on the registration in the commercial register from the date of such registration, and such registration has no retroactive effect.

Further, upon inspection of the commercial register of Luxembourg on 5 November 2018, the Notary certifies ( bescheinigt ) that (i) the entry under register number B224025 shows Luxembourg Investment Company 271 S.à r.l., with its registered office in Luxembourg, Luxembourg, and lists RCS Management (Luxembourg) S.à r.l., with its registered office in Luxembourg, Luxembourg, registered with the commercial register of Luxembourg under register number B103337 as the sole representative of Luxembourg Investment Company 271 S.à r.l. with sole power of representation and (ii) the entry under register number B103337 shows RCS Management (Luxembourg) S.à r.l., with its registered office in Luxembourg, Luxembourg, and lists Virginie Dohogne and Douwe Terpstra, who are named as signatories in the power of attorney, as managing directors with joint power of representation.

The Notary pointed out that, under German law, powers of attorney can only effect deemed representative powers ( Rechtsscheinwirkungen ) if presented in the original or as engrossment ( Ausfertigung ) and that in case of written, uncertified powers of attorney the identity of the signatory as well as of the person represented cannot be verified.

The Sellers and the Buyers are hereinafter individually referred to as a " Party " and together the " Parties ".

The acting notary is hereinafter referred to as " Notary ".

The persons appearing do not assume any liability as to the validity and/or the scope of the powers of attorney presented.

The Notary asked the persons appearing regarding a prior involvement according to section 3 para. 1 sentence 1 no. 7 of the German Notarisation Act ( Beurkundungsgesetz ). After having been instructed by the Notary the persons appearing and the Notary declared that there had been no such prior involvement.

The Notary inspected the commercial registers of the companies involved and the land register excerpts as well as the list of pending registrations ( Markentabelle ) on 5 November 2018. For purposes of this Agreement, 6 November 2018 shall be the " Signing Date ".

The persons appearing requested this deed to be recorded in the English and regarding German translations of legal terms partly in the German language. The acting Notary who is in sufficient command of the English language ascertained that the persons appearing are also in adequate command of the English and the German language. After having been instructed by the Notary, the persons appearing waived the right to obtain the assistance of a sworn interpreter and to obtain a certified translation of this deed.

All references to annexes in this deed are references to annexes to the notarial deed of the notary Dr. Thomas Lang dated 2 through 6 November 2018 (no. 27 of the roll of deeds for 2018), hereinafter referred to as " Reference Deed 1 ". The persons appearing further make reference



	4

to the notarial deed of the acting Notary dated 6 November 2018 (no. 122 of the roll of deeds for 2018), hereinafter referred to as " Reference Deed 2 " and together with Reference Deed 1, the " Reference Deeds ". Formal reference ( Verweisung ) is herewith made to the Reference Deeds pursuant to section 13a of the German Notarisation Act ( Beurkundungsgesetz ) and the contents of the Reference Deeds shall be part of this agreement. The originals of the Reference Deeds were available ( lagen vor ) during the present notarisation. The persons appearing confirmed that they are fully aware of the contents of the Reference Deeds. Acting for and on behalf of the parties which they represent, the persons appearing hereby authorise ( genehmigen ) all declarations made in the Reference Deeds. After having been instructed by the acting Notary about the meaning of their declarations, the persons appearing waived their right to have the Reference Deeds read aloud to them and that the Reference Deeds be attached to this notarial protocol. After having been instructed by the acting Notary, the persons appearing waived their right to obtain the assistance of a sworn interpreter and to obtain a certified translation of the Reference Deeds including the annexes thereto.

With regard to clause 17.8 of Annex 7.3.1(j) to the Reference Deed 1, the Parties undertake to agree in good faith until the Closing of this Agreement on provisions regarding the Performance Fee in termination scenarios along the following lines:

If the Asset Manager terminates early, the Performance Fee calculated based on the valuation at the time of termination will be paid at the time of divestment by the Client, but only to the extent there is no financial loss to the Client. For example, if 10 million in performance fee is due upon early termination, and the Client at divestment has 9 million to pay without incurring loss, the Asset Manager would only receive 9 million. For the purpose of calculating whether there will be loss on the investment, any performance fee due to the replacement asset manager would be excluded. In other words, the Asset Manager’s fee would be paid regardless of any fee due to the replacement asset manager, as long as such payment (without taking into consideration any performance fee due to the replacement asset manager) would not result in loss on investment.


B.	If the Client terminates early for gross negligence, willful misconduct or fraud, no Performance Fee would be paid. If the Client terminates without cause, the Performance Fee calculated based on the valuation at the time of termination will be paid at the time of divestment by the Client without regard to whether such payment would result in loss on the investment.

All approvals, consents and similar declarations that may still be required shall take effect for and against all parties upon receipt by the Notary.

The Notary is entitled to issue complete or partial executed as well as certified copies of this deed and of the schedules hereto ( Ausfertigungen oder Teilausfertigungen ).

Requesting its notarisation, the persons appearing then declared the following:

PROJECT PARAGON

SHARE SALE AND PURCHASE AGREEMENT

(" Agreement ")



	5



CONTENTS
Clause	Page

1. Preamble 6

2. Symbol V 9

3. Sale of the Sold Shares and Remaining Symbol V Shareholder Loans 11

4. Shareholders' Approval 13

5. Repayment of Helaba Loan 13

6. Purchase Price; Payments 15

7. Closing; Termination Rights, Deposit 23

8. Closing Date Accounts 30

9. Buyers' Refinancing of Target Companies 33

10. Sellers' Guarantees; No other Remedies 35

11. Remedies for Breach of Sellers' Guarantees 43

12. Tax 47

13. Period between Signing Date and Closing Date 53

14. Indemnifications 56

15. Pass-Through Items 57

16. Mutual Guarantees, Covenants and Indemnity 59

17. Confidentiality and Announcements 63

18. Assignment of Rights and Obligations 64

19. Transfer Taxes and Costs 64

20. Notices 64

21. SEC and Korean Capital Market Filings 66

22. Miscellaneous 67



	1

INDEX OF DEFINITIONS



0.5% Shareholder Loan		8
1.1% Shareholder Loan		8
2.2% Shareholder Loan		8
Account Setup Period		30
Acquisition Agreement		57
Additional Upstream Loans		8
Adjusting Events		19
Adjustment Statement		30
Affiliate		68
Agent		60
Agreement		5
Annex		69
Anti-Corruption Laws		60
Approved Lender		33
BGB		7
Bring Down Declaration		43
Business Day		68
Buyer		3
Buyer 1		3
Buyer 2		3
Buyer Account		21
Buyers		3
Buyers’ Knowledge		45
Capital Market Filings		67
Clause		69
Closing		24
Closing Condition		23
Closing Date		24
Closing Date Accounts		30
Closing Date Calculation		31
Closing Date Notice		24
Completion Documents		59
Confidential Matters		63
Contractual Auditor		30
Cut-Off Date		45
Cut-Off Time		32
Data Room		42
DEKA		57
Deposit		27
Dietz		9
Dietz Group		9
Dietz SPA		10
Directive		61
Discussion Period		32



Effective Time		30
Environmental Pollution		41
Escrow Account		27
Estimated Purchase Prices		20
Excluded Tax Claims		53
Existing Upstream Loans		8
Expert		32
Fairly Disclosed		45
Financing CP		23
Fixed GMS Asset Value		7
Fixed Property Value		7
FLS Remediation Works		57
Fundamental Warranties		46
Ground Rent		17
GWB		53
Helaba		7
Helaba Account		14
Helaba Land Charges		7
Helaba Loan		7
Helaba Loan Agreement		7
Helaba Release Amount		14
Helaba Release Amount Notification		14
Helaba Release Letter		14
Helaba Security		7
Helaba TBA Land Charge		13
Indemnifiable Tax		49
Interest Cap		15
Knowledge Persons		43
Land Charge Cancellation Documents		13
Lease		39
Lease Agreements		39
Liability Cap		44
Listed Company		66
Long Stop Date		26
Notary		4
Notices		64
OFAC		60
Old Claims		16
OpCo		6
OpCo Seller		2
OpCo Seller Account		21
OpCo Value		19
Order		22
Over-Accrual		50



	2



Over-Indemnification		50
Parties		4
Party		4
PECs		8
Pre-Acquisition Periods		35
Pre-Closing Date Period		47
Pre-Closing Date Tax		47
Pre-Closing Date Tax Refund		47
Preliminary Closing Date Accounts		31
PropCo		6
PropCo Letter		14
PropCo Seller		2
PropCo Sellers		2
PropCo Value		15
Public REF		67
Purchase Price		15
Real Property		7
Reference Deed 1		5
Reference Deed 2		5
Reference Deeds		5
Refinancing Documentation		34
Relevant Claim		43
Relevant Party		59
Relevant Tax Proceeding		47
Remaining Symbol V Shareholder Loans		12
Replacement Financing		33
Representatives		63
Review Period		32
Sanctions		60
Scheduled Closing Date		23
SEC Filings		66
Seller		2
Seller 1		2
Seller 1 Account		21
Seller 2		2
Seller 2 Account		21
Seller 3		2
Seller 3 Account		21
Seller 4		2
Seller 4 Account		21
Seller Account		21
Sellers		2
Sellers' Guarantee		35
Sellers' Knowledge		42
Sellers' Tax Guarantee		48
Settlement Agreement		57



Settlement Backstop Date		57
Signing Date		4
Sold OpCo Shares		7
Sold PropCo Shares		6
Sold Shares		7
Sold Shares 1		6
Sold Shares 2		6
Sold Shares 3		6
Sold Shares 4		6
Sold Symbol V Shares		10
Symbol V		2
Symbol V Buyer PECs		11
Symbol V Seller PECs		10
Symbol V Shareholder Loan Amount		10
Symbol V Shareholder Loans		8
Symbol V Shares		9
Target Companies		6
Tax		47
Tax Asset		47
Tax Authority		47
Tax Credit		48
Tax Proceeding		48
Tax Refund		48
Tax Return		48
Tax Withholding		22
Trianon Highrise		7
Upstream Loan Amount		8
Upstream Loans		8
VAT		22
W&I Insurance Policy		43



	3

INDEX OF ANNEXES



Annex 1.1.2	Shareholder Lists of PropCo and OpCo
Annex 1.3.1	Real Property (land register excerpts)
Annex 1.4	Finance Documents
Annex 1.5.1	Symbol V Shareholder Loan Agreements
Annex 2.3.2	Terms and conditions of Symbol V Seller PECs
Annex 4.2	Approval of board managers of Symbol V
Annex 5.1.2	Helaba Release Letter
Annex 6.2.1(c)(v)	Disputed loss carry forwards
Annex 6.2.3(c)	Tax accruals
Annex 6.3.1	Pro-Forma Balance Sheets as of 30 November 2018
Annex 6.3.2	Estimated Purchase Prices
Annex 7.3.1(j)	Draft Asset Management Agreement
Annex 7.3.4	Closing Memorandum
Annex 9.4	Power of attorney for Buyers' financing
Annex 10.2.1(b)	Commercial Register Excerpts and Articles of Association of the Target Companies
Annex 10.2.3(d)	Excerpts from the building encumbrances register ( Baulastenverzeichnis )
Annex 10.2.3(i)	Public Subsidies
Annex 10.2.4(a)	Lease Agreements
Annex 10.2.4(b)	Rent Roll
Annex 10.2.4(d)	Rent Securities under the Lease Agreements
Annex 10.2.4(f)	Notices of Termination of Lease
Annex 10.2.4(g)	Rent and service charge arrears
Annex 10.2.4(i)	Tenant objections
Annex 10.2.6(a)	Insurance contracts of the Target Companies
Annex 10.2.6(b)	Insurance events



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Annex 10.2.8	Law Suits and Proceedings with Authorities
Annex 10.2.9(b)	Third party contracts
Annex 10.2.9(c)	Target Companies' bank accounts
Annex 10.2.11	List of fixtures
Annex 10.4	Sellers' Knowledge – List of Individuals
Annex 11.2.2	Insurance Company Letter
Annex 11.2.3	Bring Down Declaration
Annex 11.4.3	Buyers' Knowledge – List of Individuals
Annex 12.8.3	Excluded Tax Claims
Annex 15.1.1a	FLS Remediation Works
Annex 15.1.1b	Excerpt of Acquisition Agreement regarding FLS works and escrow
Annex 15.1.2	Draft Settlement Agreement



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1.	PREAMBLE


1.1	Target Companies


1.1.1	The Sellers and Symbol V hold, as set out in more detail in sub-clause 1.2, all shares in the following companies (" Target Companies "):


(a)	Geschäftshaus am Gendarmenmarkt GmbH , having its registered office at c/o HauckSchuchardt, Pollux, Platz der Einheit 2, 60327 Frankfurt am Main, registered with the commercial register of the local court of Frankfurt am Main under registration no. HRB 82647 (" PropCo "), and


(b)	GMS Gebäudemanagement und Service GmbH , having its registered office at c/o HauckSchuchardt, Pollux, Platz der Einheit 2, 60327 Frankfurt am Main, registered with the commercial register of the local court of Frankfurt am Main under registration no. HRB 36774 (" OpCo "). OpCo operates the canteen and the parking garage of the Trianon Highrise (as defined below).

1.1.2

Most recent shareholder lists of PropCo and OpCo included in the commercial register dated 15 July 2015 were available as a print out of the electronic commercial register at the notarisation and are attached as Annex 1.1.2 . A new shareholder list reflecting the transfer of one additional share in PropCo from Seller 4 to Symbol V has been signed by the Notary and submitted today to the commercial register; a copy thereof is attached as part of Annex 1.1.2 .


1.2	The PropCo and OpCo Shares


1.2.1	The Seller 1 holds 5,760 shares (i.e. 22.5% of the shares in PropCo) with a nominal value of EUR1.00 each (serial numbers 4 – 2,591, 11,504 -14,383 and 24,304 – 24,595) in PropCo (" Sold Shares 1 ").


1.2.2	The Seller 2 holds 5,760 shares (i.e. 22.5% of the shares in PropCo) with a nominal value of EUR1.00 each (serial numbers 2,592 -5,179, 14,384 – 17,263 and 24,596 – 24,887) in PropCo (" Sold Shares 2 ").


1.2.3	The Seller 3 holds 5,760 shares (i.e. 22.5% of the shares in PropCo) with a nominal value of EUR1.00 each (serial numbers 5,180 – 7,766, 17,264 – 20,143 and 24,888 – 25,180) in PropCo (" Sold Shares 3 ").


1.2.4	The Seller 4 holds 5,759 shares (i.e. 22.4960% of the shares in PropCo) with a nominal value of EUR1.00 each (serial numbers 7,767 – 10,353, 20,144 – 23,023 and 25,181 – 25,472) in PropCo (" Sold Shares 4 ").


1.2.5	The aforementioned shares held by the Sellers 1 through 4 in PropCo are herein collectively referred to as the " Sold PropCo Shares ".


1.2.6	2,561 shares (i.e. 10.0039% of the shares in PropCo) with a nominal value of EUR1.00 each (serial numbers 10,354 – 11,503, 23,024 – 24,303 and 25,473 –25,603) in PropCo are held by Symbol V.



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1.2.7	Furthermore, OpCo Seller holds two shares (i.e. 100% of the shares in OpCo) with a nominal value of EUR13,000.00 each in OpCo (" Sold OpCo Shares ").


1.2.8	The Sold PropCo Shares and the Sold OpCo Shares are herein collectively referred to as the " Sold Shares ".


1.3	Real Property


1.3.1	PropCo is the owner of or, as indicated in Annex 1.3.1 , holder of a ground lease ( Erbbaurecht ) for the real property shown in the land register excerpts attached as Annex 1.3.1 (collectively " Real Property ").


1.3.2	The Real Property comprises the Trianon high-rise building located Mainzer Landstraße 16, Frankfurt am Main (" Trianon Highrise "), and two adjoining residential properties located Klüberstraße 6-10 and Zimmerweg 8, Frankfurt am Main.


1.3.3	The term Real Property also includes the properties' constituent parts ( wesentliche Bestandteile ) and, to the extent owned by the Target Companies on the Closing Date, its equipment ( Zubehör ) in the meaning of section 97 of the German Civil Code (" BGB ").

1.3.4

The Buyers shall (indirectly through the acquisition of the Sold Shares and the Sold Symbol V Shares) acquire and assume the Real Property with all registered and unregistered encumbrances and restrictions to which it is subject on the Closing Date (other than the Helaba Land Charges) as well as all registered and unregistered entitlements (provided that, with regard to encumbrances capable of registration in the land register, this shall only apply to those encumbrances that exist at the Signing Date, are permitted under this Agreement or to which the Buyers have granted their written consent).


1.3.5	The Parties have, for the purposes of this Agreement, agreed on a debt free fixed value of the Real Property of EUR669,392,218.67 (" Fixed Property Value ") and a fixed value of OpCo's fixed assets and contracts of EUR607,781.33 (" Fixed GMS Asset Value ") (totalling an amount of EUR670,000,000).


1.4	Helaba Loan

The PropCo is the borrower under an up to EUR330,000,000 bank loan agreement dated 25 September 2014 as amended by an amendment and restatement agreement dated 20 July 2015 with Landesbank Hessen-Thüringen Girozentrale as lender (together with all associated security and other finance documents as set out in Annex 1.4 , " Helaba Loan Agreement "; the lenders and agents and any other finance party thereunder together, " Helaba ") (" Helaba Loan "). The Helaba Loan is, inter alia, secured by land charges in favour of Helaba that encumber the Real Property (" Helaba Land Charges "; together with all other in rem or in personam security granted in connection with the Helaba Loan Agreement, " Helaba Security "). The Helaba Loan shall be repaid by the PropCo on the Closing Date as further set out in Clause 5.



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1.5	Symbol V Shareholder Loans

1.5.1

OpCo Seller is the lender and Symbol V is the borrower under that certain (i) shareholder loan dated 30 June 2016 with an original principal amount of EUR17,563,206 bearing interest at a rate of 2.2% per annum (" 2.2% Shareholder Loan "), (ii) shareholder loan dated 30 June 2016 with an original principal amount of EUR1,672,686 bearing interest at a rate of 0.5% per annum (" 0.5% Shareholder Loan ") and (iii) shareholder loan dated 30 June 2016 with an original principal amount of EUR 1,672,686 bearing interest at a rate of 1.1% per annum (" 1.1% Shareholder Loan ") (the 1.1% Shareholder Loan, the 0.5% Shareholder Loan and the 2.2% Shareholder Loan collectively the " Symbol V Shareholder Loans "). Copies of the Symbol V Shareholder Loans are attached as Annex 1.5.1 .

1.5.2

A portion of the outstanding amount of the 2.2% Shareholder Loan (in an amount of EUR5,000,000) shall be replaced on Closing with (and converted in) preferred equity certificates (" PECs ") pursuant to sub-clause 2.3.2. The PECs shall be retained by OpCo Seller. The Symbol V Shareholder Loans, to the extent not converted into PECs, shall be sold to Buyer 2, as set out in more detail in sub-clauses 2.3 and 3.3 on the Closing Date, and shall be converted to Symbol V Buyer PECs (as defined below) on the same date as set out in sub-clause 2.3.4.


1.6	Upstream Loans


1.6.1	PropCo is the lender under certain upstream loans to Seller 1, Seller 2, Seller 3 and Seller 4 dated 5 November 2018 with a total original principal amount of EUR18,828,522.76 bearing interest at a rate of 1.5 % per annum (" Existing Upstream Loans ").


1.6.2	The Sellers shall procure that the Existing Upstream Loans be increased or new upstream loans be granted by PropCo to some or all of the Sellers:


(a)	in the amount of the proceeds from the sale of the Interest Cap pursuant to sub-clause 5.5; and


(b)	in order to distribute cash in excess of the targeted cash amount (c.f. sub-clause 6.2.1(b)(vii) of PropCo to the Sellers

(" Additional Upstream Loans "; the Existing Upstream Loans and the Additional Upstream Loans collectively the " Upstream Loans "). The Buyers agree to such increases and the creation of Additional Upstream Loans pursuant to this sub-clause 1.6.2.

1.6.3

PropCo shall notify the Buyers by email no later than on the Scheduled Closing Date of the total repayment amount outstanding under the Upstream Loans (including, for the avoidance of doubt, any Additional Upstream Loans granted pursuant to sub-clause 1.6.2) as at the Scheduled Closing Date, and shall state the daily interest amount from the Scheduled Closing Date onwards (" Upstream Loan Amount ").



	8

1.6.4

With effect from the Closing, Buyer 2 shall assume any and all liabilities under the Upstream Loans (other than any liabilities of Symbol V under the Upstream Loans, if any) whereby Seller 1, Seller 2, Seller 3 and Seller 4 shall be released from all their obligations under the Upstream Loans ( befreiende Schuldübernahme ). For the avoidance of doubt, the compensation for the Upstream Loans shall not be paid in cash but in lieu of performance ( an Erfüllungs Statt ) by way of assumption of liabilities by Buyer 2 in accordance with the preceding sentence.


1.7	Relation of the Sellers


1.7.1	The Sellers are joint and several debtors ( Gesamtschuldner ) for their obligations under this Agreement.


1.7.2	The Sellers are jointly and severally entitled creditors ( Gesamtgläubiger ) with regard to payment and other claims of the Sellers under this Agreement.


1.7.3	All termination, withdrawal and election rights of the Sellers under or in connection with this Agreement may only be exercised by the Sellers jointly.


1.7.4	The Sellers herewith authorise ( bevollmächtigen ) each other to give and receive all declarations under this Agreement for and on behalf of the relevant other Seller.


1.7.5	The knowledge of any individual listed in Annex 10.4 shall be attributed to all Sellers.


1.8	Relation of Buyers


1.8.1	The Buyers are always joint and several debtors ( Gesamtschuldner ) for their obligations under this Agreement.


1.8.2	All termination, withdrawal and election rights of the Buyers under or in connection with this Agreement may only be exercised by the Buyers jointly.


1.8.3	The Buyers authorise ( bevollmächtigen ) each other to give and receive all declarations under this Agreement for and on behalf of the relevant other Buyer.


1.8.4	The knowledge of any individual listed in Annex 11.4.3 shall be attributed to both Buyers.


2.	SYMBOL V


2.1	Current shareholding in Symbol V

Dietz Holding GmbH (" Dietz ") holds 11,249 (i.e. 89.992% of the shares in Symbol V) and Mr. Wolfgang Dietz holds 1,251 (i.e. 10.008% of the shares in Symbol V) shares with a nominal value of EUR1.00 each in Symbol V (" Symbol V Shares "). Dietz and Mr Wolfgang Dietz are hereinafter referred to as " Dietz Group ".



	9


2.2	Sale and Transfer of Sold Symbol V Shares

Buyer 2 undertakes:


2.2.1	Without undue delay after the fulfilment of the condition precedent pursuant to sub clause 7.1.4 to conclude with Dietz a share sale and transfer agreement by accepting the binding offer of Dietz (UR-no. 122/2018 of the Notary dated 6 November 2018 (" Dietz SPA ")) pursuant to which, with effect of Closing:


(a)	1,249 (i.e. 9.992% of the shares in Symbol V) with a nominal value of EUR1.00 each in Symbol V (" Sold Symbol V Shares ") shall be sold and transferred by Dietz to Buyer 2; and


(b)	Dietz Group and Buyer 2 shall agree on new articles of association of Symbol V and PropCo as attached to the Dietz SPA and shall hold on the Closing Date an extraordinary shareholders’ meeting resolving inter alia upon the full amendment and restatement of such articles of association;


(c)	Dietz Group and Buyer 2 shall agree on the put and call options in respect of the remaining 90.008% of the shares in Symbol V that are (initially) retained by Dietz Group pursuant to the draft agreements as attached to the Dietz SPA; and


2.2.2	To pay the respective purchase price payable to Dietz under the Dietz SPA when due (whereby the closing under the Dietz SPA shall occur at the same time as the Closing under this Agreement).


2.3	Symbol V Shareholder Loans and transformation into PECs


2.3.1	No later than three (3) Business Day prior to the Scheduled Closing Date OpCo Seller shall notify the Buyers by email of the total amount outstanding under the Symbol V Shareholder Loans as at the Scheduled Closing Date, and shall state the daily interest amount from the Scheduled Closing Date onwards (" Symbol V Shareholder Loan Amount ").

2.3.2

On the Closing Date, Symbol V, as issuer, and OpCo Seller, as holder, shall enter into a subscription agreement for the issuance of a certain number of preferred equity certificates (" Symbol V Seller PECs "), such Symbol V Seller PECs having the terms and conditions set out in Annex 2.3.2 for an aggregate amount of EUR5,000,000, in partial replacement in an equal amount of the existing 2.2% Shareholder Loan between OpCo Seller, as lender, and Symbol V, as borrower.

2.3.3

The subscription price for such Symbol V Seller PECs shall be paid by way of a payment in kind consisting of a partial replacement of the outstanding principal amount due under the 2.2% Shareholder Loan in the amount of EUR5,000,000. For the avoidance of doubt, the Parties agree that, on the Closing Date and with effect as of Closing, the Symbol V Shareholder Loans, to the extent not converted into Symbol V Seller PECs pursuant to this sub-clause 2.3, shall be sold to Buyer 2 in accordance with sub-clause 3.3.



	10

2.3.4

On the Closing Date, immediately following Closing, Symbol V as issuer and Buyer 2 as holder shall enter into a subscription agreement for the issuance of preferred equity certificates for an aggregate amount equal to the Symbol V Shareholder Loan Amount less EUR 5,000,000 governed on the same terms and conditions set out in Annex 2.3.2 (" Symbol V Buyer PECs "), in replacement of the Remaining Symbol V Shareholder Loans (as defined below) which are to be transferred to the Buyer 2 as set out in more detail in sub-clause 3.3. The subscription price for such Symbol V Buyers PECs shall be paid by way of a payment in kind consisting of any outstanding amount (including principal and interest), corresponding to Symbol V Shareholder Loan Amount less EUR5,000,000. Such Symbol V Buyer PECs and the Symbol V Seller PECs shall rank pari passu .

2.3.5

To the extent Symbol V issues any further preferred equity certificates or any other similar instruments are put in place at the level of Symbol V, such further preferred equity certificates or similar instruments shall at all times (and Symbol V and the Buyers shall procure that such additional preferred equity certificates or similar instruments shall at all times) be subordinated to and shall rank junior to both the Symbol V Seller PECs and the Symbol V Buyer PECs. Symbol V and the Buyers shall (and shall procure that any beneficiary of such preferred equity certificates or similar instruments shall) execute such documents and perform such acts as shall be reasonably required by the Sellers to give effect to the subordination of such preferred equity certificates or similar instruments to the Symbol V Seller PECs and the Symbol V Buyer PECs. The preceding sentence shall apply mutatis mutatis to shareholder debt instruments in Symbol V, if any.


2.3.6	Following Closing of this Agreement, the Buyers shall establish a structure designed for the distribution of dividends to the shareholders in the PropCo it being understood that such dividends shall be distributed proportionately to all shareholders in the PropCo.


3.	SALE OF THE SOLD SHARES AND REMAINING SYMBOL V SHAREHOLDER LOANS


3.1	Sale and transfer of the Sold Shares


3.1.1	Seller 1 hereby sells and, subject to the satisfaction of the condition precedent set out in sub-clause 3.4, transfers the Sold Shares 1 to Buyer 1, who accepts such sale and transfer.


3.1.2	Seller 2 hereby sells and, subject to the satisfaction of the condition precedent set out in sub-clause 3.4, transfers the Sold Shares 2 to Buyer 1, who accepts such sale and transfer.


3.1.3	Seller 3 hereby sells and, subject to the satisfaction of the condition precedent set out in sub-clause 3.4, transfers the Sold Shares 3 to Buyer 1, who accepts such sale and transfer.



	11


3.1.4	Seller 4 hereby sells and, subject to the satisfaction of the condition precedent set out in sub-clause 3.4, transfers the Sold Shares 4 to Buyer 1, who accepts such sale and transfer.


3.1.5	OpCo Seller hereby sells and, subject to the satisfaction of the condition precedent set out in sub-clause 3.4, transfers the Sold OpCo Shares to Buyer 2, who accepts such sale and transfer.


3.2	Right to profits

The sale of the Sold Shares shall include any and all rights pertaining to the Sold Shares on and from the Closing Date, including the rights to receive profits of the Target Companies that have not been distributed prior to the Closing Date, it being understood that this shall be without prejudice to any other provision of this Agreement commercially allocating assets and liabilities of the Target Companies and Symbol V between the Parties which shall remain unaffected.


3.3	Sale and Transfer of the Remaining Symbol V Shareholder Loans

Symbol V, Buyer 2 and OpCo Seller agree that OpCo Seller, as initial lender, hereby sells and, subject to the satisfaction of the condition precedent set out in sub-clause 3.4, transfers with effect as at the Closing Date, the remainder of the Symbol V Shareholder Loans (being the Symbol V Shareholder Loans less the EUR5,000,000 that will be converted into Symbol V Seller PECs pursuant to sub-clause 2.3.2; " Remaining Symbol V Shareholder Loans ")) to Buyer 2, as new lender, who accepts such assignment and transfer. Further to (i) the assignment of the Remaining Symbol V Shareholder Loans and (ii) the issuance of the Symbol V Seller PECs, (A) Symbol V shall be discharged from any obligations and liabilities whatsoever towards the OpCo Seller under the Symbol V Shareholder Loans and (B) the Buyer shall be bound, as new lender, by the terms of the Remaining Symbol V Shareholder Loans (in place of the OpCo Seller). The Buyer shall be free to convert the acquired remaining portion of the Symbol V Shareholder Loans on or promptly following Closing into Symbol V Buyer PECs.


3.4	Condition precedent

Each of the assignments of the Sold Shares pursuant to sub-clause 3.1, and the transfer of the remainder of the Symbol V Shareholder Loans is made strictly subject to the satisfaction of the condition precedent ( aufschiebend bedingt ) that all relevant recipients have received in cleared funds all amounts payable by the Buyers at Closing pursuant to sub-clauses 7.3.1(a), 7.3.1(b) and 7.3.1(c).

The Sellers shall at Closing, after receipt in cleared funds of the amounts pursuant sub-clause 7.3.1, confirm to the Buyers in writing (in the form of the closing memorandum as referred to in sub-clause 7.3.4, and with a copy to the Notary) that the amounts payable by the Buyers pursuant sub-clause 7.3.1(b), were fully received.

In any event upon the Notary's receipt of an executed PDF copy of the closing memorandum pursuant to sub-clause 7.3.4 (transmission via email or facsimile shall suffice), any and all conditions precedent to the transfer of the Sold Shares shall be irrefutably ( unwiderleglich ) deemed fulfilled irrespective of their factual, timely and



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proper fulfilment and the transfer of the Sold Shares shall be effective. The Notary shall at the same time be released from any investigation obligation as regards the factual fulfilment of the conditions precedent for the transfer of the Sold Shares.


4.	SHAREHOLDERS' APPROVAL


4.1	Approval of shareholders in PropCo

The PropCo Sellers and Symbol V– waiving all requirements of time and form – hereby hold an extraordinary shareholders' meeting of PropCo and resolve as follows:

“We hereby approve the sale and transfer of the Sold PropCo Shares to Buyer 1 pursuant to this Agreement, and waive any pre-emption right on the Sold PropCo Shares.”

No further resolutions are made. The shareholders' meeting is adjourned.


4.2	Approval of the board of managers of Symbol V

All necessary approvals and resolutions for the restructuring measures relating to Symbol V pursuant to Clause 2 have been granted or passed, respectively, and copies of such approvals and resolutions are attached hereto as Annex 4.2 .


5.	REPAYMENT OF HELABA LOAN

The Helaba Loan shall be fully repaid on the Scheduled Closing Date. The PropCo Sellers and Buyer 1 agree on the following in this respect:


5.1	Release documents

The Sellers shall contact Helaba and request that Helaba issues without undue delay:


5.1.1	To the Notary, all documents in due form ( grundbuchmäßige Form ) that are required for

(a)

the cancellation of the Helaba Land Charges other than the Helaba Land Charge registered at the local court of Frankfurt am Main, register for heritable building rights of Frankfurt Bezirk 10, folio 1741, seq. no. 1 in division III of the land registry in favour of Landesbank Hessen-Thüringen Girozentrale in the amount of EUR1,000,000 (the " Helaba TBA Land Charge ") in the land register (" Land Charge Cancellation Documents ")


(b)	the assignment of the Helaba TBA Land Charge together with the original of the land charge certificate ( Grundschuldbrief ) and the enforceable copy pertaining to the Helaba TBA Land Charge,

in each case together only with the escrow instruction ( Treuhandanweisung ) that the Notary shall file these documents with the land registry once the Helaba Release Amount (as defined below) has been paid in full;



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5.1.2

To PropCo, a release letter or release agreement in relation to the Helaba Loan providing for the release of all other Helaba Security and any other obligation or liability (including any indemnity, joint debtorship or guarantee) in relation to the Helaba Loan Agreement and any other finance document, subject only to the payment of the Helaba Release Amount, a work-in-progress draft of which is attached hereto as Annex 5.1.2 based on which the Sellers and the Buyers undertake to agree in good faith the final version (" Helaba Release Letter ") by 9 November 2018; and

5.1.3

To PropCo, a statement (" Helaba Release Amount Notification ") setting out the outstanding loan funds, including any accrued daily interest and any and all prepayment or termination fees, breakage costs and ancillary costs, as well as all hedging costs, if any, and costs associated with the repayment of the Helaba Loan as at the Scheduled Closing Date, and stating the daily interest amount from the Scheduled Closing Date onwards (together " Helaba Release Amount "), and details of the account to which such payment shall be made (" Helaba Account ");

it being understood that the Helaba Release Letter pursuant to sub-clause 5.1.2 and the Helaba Release Amount Notification pursuant to sub-clause 5.1.3 can be combined in one document. The Sellers shall procure that the PropCo issues no later than on the Scheduled Closing Date a letter confirming that Helaba has not in writing notified an event of default under the Helaba Loan (" PropCo Letter ").


5.2	Notary instruction

The Notary is hereby instructed by the Parties to provide the Parties with a copy of the Land Charge Cancellation Documents and trust instructions made by Helaba without undue delay (email with pdf copies of these documents being sufficient).


5.3	Payment of Helaba Release Amount

Buyer 1 shall procure the payment of the Helaba Release Amount into the Helaba Account by no later than on the Scheduled Closing Date. The payment will, at the Buyer 1's sole discretion, be made as a third party loan which shall become a shareholder loan to the PropCo or a preferred equity certificate or a contribution into the reserves with immediate effect upon Closing.

In case Helaba requests a higher release amount than provided for in the calculation of the Preliminary Purchase Price, the Sellers shall be entitled to instruct PropCo to cover the exceeding amount from liquid funds available to PropCo.


5.4	Receipt of payment of Helaba Release Amount

The Sellers shall request that, at Closing, Helaba shall immediately after receipt of the Helaba Release Amount confirm to PropCo in writing (email being sufficient) that the Helaba Release Amount payable by Buyer 1 pursuant to sub-clause 5.3 has been received in full and in cleared funds, and shall request that Helaba immediately provide a copy of such confirmation to the Buyers, the Sellers and the Notary.

PropCo consents to ( bewilligt ) and applies for ( beantragt ) the deletion of all encumbrances in the land registers set forth in Annex 1.3.1 . The Notary is hereby



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instructed to file the deletion application together with all required deletion documents with the land registry as soon as he has received a copy of the closing memorandum pursuant to sub-clause 7.3.4 and has been released from the trust instructions by Helaba.


5.5	Interest Cap


5.5.1	In the context of the Helaba Loan, PropCo has concluded certain derivative instruments (" Interest Cap "). The Parties agree, and the Sellers shall procure that PropCo sells the Interest Cap on or before the Closing Date.

5.5.2

The purchase price received by PropCo prior to Closing shall be distributed to the Sellers by way of an Additional Upstream Loan, and to the extent necessary the Buyers hereby approve and authorise any such Additional Upstream Loan to enable the purchase price for the Interest Cap to be distributed to the Sellers prior to Closing. For the avoidance of doubt, sub-clause 1.6 shall also apply to any such Additional Upstream Loans.


6.	PURCHASE PRICE; PAYMENTS


6.1	Purchase Prices


6.1.1	The purchase price for:


(a)	The Sold Shares 1 shall amount to 25% of the PropCo Value;


(b)	The Sold Shares 2 shall amount to 25% of the PropCo Value;


(c)	The Sold Shares 3 shall amount to 25% of the PropCo Value;


(d)	The Sold Shares 4 shall amount to 25% of the PropCo Value;


(e)	The Sold OpCo Shares shall amount to 100% of the OpCo Value; and


(f)	The Remaining Symbol V Shareholder Loans shall be equal to 100% of the Symbol V Shareholder Loan Amount as notified pursuant to sub-clause 2.3.1 less EUR5,000,000.


6.1.2	Each of the purchase prices referred to under sub-clause 6.1.1 is referred to as a " Purchase Price ".


6.2	Definitions and calculations


6.2.1	The " PropCo Value " shall amount to and be calculated as follows:


(a)	the Fixed Property Value,


(b)	plus, as at the Effective Time, the following assets:


(i)	PropCo's current assets (including cash on bank accounts) and Tax receivables, excluding (A) rent securities or rent deposits ( Mietsicherheiten ) received from and by tenants (including



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interest); and (B) any other collateral provided to or for the benefit of PropCo;

(ii)

Prepaid expenses: An asset for prepaid expenses shall be included in the Closing Date Accounts in respect of amounts paid or accrued by the Target Companies as at the Effective Time only in relation to goods and services to be supplied to the Target Companies after the Effective Time, to the extent the benefit of which will be available to the Target Companies following Closing, except for assets for fees under the Helaba Loan Agreement or any other capitalised debt issue costs;


(iii)	Any reasonable out of pocket costs (including professional fees), subject to being agreed with the Buyers, which have been incurred by the Sellers or PropCo in connection with any new financing arranged by or for the Buyers or the Target Companies except, for the avoidance of doubt, any expenses related to the Helaba Loan or the Helaba Release Amount;

(iv)

Insurance claim receivables relating to damage or destruction to the Real Property prior to Closing that has not been remedied by Closing, shall be disregarded, except to the extent that the PropCo has made payments to reinstate the damage prior to the Closing Date or a liability has been included in the Closing Date Accounts in respect of the issue or damage to which the insurance claim receivable relates, in which case such insurance claim receivable shall be valued at the lower of (A) the actual amount of the receivable and (B) the amount of the payments made in reinstating or repairing the damage plus the liability incurred prior to the Closing Date included in the Closing Date Accounts,

it being understood that the following items shall not be included as an asset:


(v)	Claims of the PropCo against tenants for arrears (in particular rent and service charge payments, payment claims under settlement agreements etc.) which have been due for more than 60 calendar days (" Old Claims ");


(vi)	Rent free periods already granted, rent prepayments, tenant loans, fit-out contributions already made, on-going construction works, as well as payments for vacant space;


(vii)	Cash on bank accounts for the PropCo and the OpCo taken together shall only be included up to a maximum amount of EUR 2,000,000 except in relation to PropCo for restricted cash for FLS payables of EUR 2,500,000;


(viii)	Claims against Sellers, Symbol V or an Affiliate of the Sellers/Symbol V (except for the Upstream Loans);


(c)	less, as at the Effective Time, the following liabilities:



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(i)	All liabilities in the meaning of section 266 para. 3 C. HGB of the PropCo including Tax liabilities, but


(A)	excluding the obligation to return rent securities or rent deposits received from tenants ( Mietsicherheiten ) provided that such rent securities have not been lost or used up; and liabilities under any new financing arranged by or for the Buyers (see Clause 9), and

(B)

provided that all obligations of the PropCo under and in connection with the Helaba Loan Agreement shall be reflected at an amount equal to the Helaba Release Amount (and in addition, all notary and land register fees associated with the repayment of the Helaba Loan or the release of the Helaba Land Charge and other collateral granted under the Helaba Loan shall for the avoidance of doubt be included as a liability);


(ii)	All accruals ( Rückstellungen ) in the meaning of section 266 para. 3 B HGB which must be formed (or have been formed in accordance with past practice) pursuant to the HGB shall be included as a liability; except for accruals that


(A)	are made in connection with the condition of the fixed assets (in particular the Real Property and the buildings), e.g. accruals for outstanding maintenance, vacancy, and impending losses, or

(B)

relate to regular payments as currently registered in the land register in relation to the ground lease referred to in sub-clause 1.3.1 and Annex 1.3.1 (" Ground Rent ") and the payments pursuant to the pension right ( Reallast ) in favour of Sonderhausen von Gläsernthal'sche Stiftung encumbering parts of the Real Property as set out in Annex 1.3.1 ), other than unpaid Ground Rent or pension right payments relating to periods prior to the Effective Time


(iii)	Deferred income in the meaning of section 266 para (3) D HGB for prepaid rents; and


(iv)	A provision ( Rückstellung ) shall be made for all costs for preparation and audit of the annual financial statements and the preparation of tax returns for time periods prior to Closing, other than the Closing Date Accounts.



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The liabilities, at the Effective Time, shall for the avoidance of doubt include in particular, without limitation, the following actual and contingent liabilities and obligations of the PropCo:


(v)	Latent capital gains tax; Latent capital gains tax means 25% of the difference between:


(A)	the Fixed Property Value and


(B)	the continued tax book values of PropCo's assets plus PropCo's carry forwards in each case as of the Closing Date

multiplied by a tax rate of 15.825%;

it being understood that disputed loss carry forwards shall be considered in the above calculation up to an amount of EUR14,676,781.36 and all remaining disputed loss carry forwards shall be disregarded; for the avoidance of doubt, there shall be no subsequent purchase price adjustment in respect of the disputed loss carry forwards (a sample calculation is attached as Annex 6.2.1(c)(v) ;


(vi)	Future rent-free periods, unpaid landlord subsidies, unpaid tenant fit-out costs committed by the landlord, reverse premiums, tenant improvements and other monetary obligations of the landlord under a lease agreement;


(vii)	Costs payable in respect of the termination of contracts which shall be terminated in accordance with this Agreement (or on-going payments under such contracts after the Closing until the earliest effective date of termination);


(viii)	Obligations of Target Companies to pay advisory, notary, register, brokerage fees or similar fees (excluding, for the avoidance of doubt fees related to the re-financing of the PropCo).


(d)	Less the following deduction amounts:


(i)	50% of the gross insurance premium for the W&I Insurance (net insurance premium including review fee, 20% insurance brokerage fee and insurance tax), which shall be set for purposes of the Estimated Purchase Price at an amount of EUR 400,000.00;


(ii)	Agreed CAPEX in an amount of EUR 1,589,245.00;


(iii)	VAT correction amount pursuant to section 15a German VAT Code as of the Closing Date in an amount of EUR 882,531.06.


(e)	Different from the above, the following topics shall not be dealt with as assets and liabilities in the Closing Date Accounts but rather as neutral, "pass-through" items to be dealt with as part of the adjustment mechanism



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post Closing in accordance with Clause 15 unless they have been determined prior to the end of the Account Set-Up Period:


(i)	FLS Remediation Works (as defined below) and the Settlement Agreement (as defined below) with DEKA (as defined below) currently under negotiation and all other receivables to DEKA which are withheld by DEKA in connection with FLS; and


(ii)	Service charge reconciliations: all receivables or other assets to tenants and provisions or liabilities from tenants in connection with service charge settlements or estimations.


(f)	less, at the Effective Time, the Symbol V Shareholder Loan Amount.


6.2.2	The " OpCo Value " shall amount to and be calculated on a mutatis mutandis basis, i.e. shall be based on the Fixed GMS Asset Value instead of the Fixed Property Value applying the increases and decreases as per OpCo's balance sheet as at the Effective Time mutatis mutandis in accordance with the principles set out in sub-clauses 6.2.1(b), 6.2.1(c) and 6.2.1(e).


6.2.3	In addition and for the avoidance of doubt, the following principles shall apply:


(a)	The items referred to in sub-clauses 6.2.1(b), 6.2.1(c) and 6.2.1(e) must, for the calculation of the Purchase Price pursuant to Clause 8, each be set at the amounts at which they are shown in the Closing Date Accounts.


(b)	If any of the items referred to in sub-clauses 6.2.1 and 6.2.2 falls under more than one of the categories set out therein, it shall nevertheless only be counted once (no double counting).


(c)	Annex 6.2.3(c) shows the current provisions or accruals for Taxes ( Steuerrückstellungen ) of the Target Companies as of signing of this Agreement, which have been prepared in accordance with past practice and applicable law.


(d)	Any obligation of the Target Companies (and any accruals made with regard to such obligations) (i) for which the Sellers shall indemnify the Buyers pursuant to other provisions of this Agreement, as well as (ii) the respective reimbursement claims of the Target Companies shall be ignored and excluded from the Closing Date Accounts.


(e)	The Closing Date Accounts shall take into account information after the Effective Time that provides further evidence of conditions that existed at the Effective Time (" Adjusting Events ") up until the end of the Review Period (as hereinafter defined).


(f)	No balances classified as non-current or fixed assets in the audited accounts of the PropCo at 31 December 2017 (or assets acquired after 31 December 2017 of a similar nature to such assets) shall be reclassified as current assets in the Closing Date Accounts.



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(g)	The calculation of any Tax receivables and Tax liabilities for the purposes of the Closing Date Accounts shall be made in line with the definitions in sub-clause 12.1 of "Pre-Closing Date Tax" and "Pre-Closing Date Tax Refund" .


6.2.4	Further guidelines for the calculation of the Purchase Price are set out in sub-clause 8.2.


6.3	Estimated Purchase Prices


6.3.1	Based on the pro-forma balance sheets as of 30 November 2018 (for PropCo) and 31 August 2018 (for OpCo) attached as Annex 6.3.1 , the Parties estimate the PropCo Value to amount to EUR 321,709,458.63, the OpCo Value to amount to EUR 51,155.79, the Symbol V Shareholder Loan Amount to amount to EUR 20,908,578.00 as at the Scheduled Closing Date (as hereinafter defined).

6.3.2

On that basis, the Buyers shall at the Scheduled Closing Date pay the estimated purchase prices as set out in Annex 6.3.2 (" Estimated Purchase Prices ") to the Sellers minus the Deposit (or any part thereof) which will be transferred by the Notary pursuant to sub-clause 7.5.6(a) and minus the Upstream Loan Amount which is discharged by way of assumption of debt in lieu of performance ( an Erfüllungs Statt ) by Buyer 2 to the Sellers, as set out in Clause 7.3.1(b).


6.4	Purchase Price Adjustment

In the event that any of the Purchase Prices as finally determined pursuant to Clause 8 (i) exceeds or (ii) falls short of the respective Estimated Purchase Prices pursuant to sub-clause 6.3.2, the difference shall be paid within ten (10) Business Days after the Closing Date Calculation (as defined in sub-clause 8.1.2) becomes binding with regard to the relevant portion of the Purchase Price, in the event of "(i)" by the Buyers to the respective Seller and in the event of "(ii)" by the respective Seller to the Buyers, and plus in case of "(i)" and "(ii)" 5% per annum interest calculated from the date of payment.


6.5	Default interest; Interest Calculation

6.5.1

If any Party fails to make a payment owed by it under this Agreement (other than under sub-clause 6.4) when due (in each case the receipt of payment in cleared funds is decisive), it shall be in default without further notice from the other relevant Party(ies) being required and interest at a rate of 9% per annum shall be charged on the outstanding amount for the period beginning on the day following the due date and ending on and including the date of its payment.


6.5.2	Interest owed under this Agreement shall be calculated on the basis of actual days elapsed and a calendar year with 365 days.



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6.6	Payment Procedures


6.6.1	Payments by the Buyers under this Agreement must, except as otherwise provided in this Agreement, be paid by the Buyers in euros via bank transfer, free of charges and fees, with same day value


(a)	to the Seller 1 to the following account of the Seller 1 (" Seller 1 Account "):

IBAN: GB20 BOFA 1650 5080 0150 11


BIC:	BOFAGB22


Bank:	Bank of America Merrill Lynch.


(b)	to the Seller 2 to the following account of the Seller 2 (" Seller 2 Account "):

IBAN: GB62 BOFA 1650 5080 0060 10


BIC:	BOFAGB22


Bank:	Bank of America Merrill Lynch.


(c)	to the Seller 3 to the following account of the Seller 3 (" Seller 3 Account "):

IBAN: GB06 BOFA 1650 5080 0070 18


BIC:	BOFAGB22


Bank:	Bank of America Merrill Lynch.


(d)	to the Seller 4 to the following account of the Seller 4 (" Seller 4 Account "):

IBAN: GB26 BOFA 1650 5080 0080 16


BIC:	BOFAGB22


Bank:	Bank of America Merrill Lynch.


(e)	to the OpCo Seller to the following account of the OpCo Seller (" OpCo Seller Account "):

IBAN: GB97 BOFA 1650 5080 0140 13


BIC:	BOFAGB22


Bank:	Bank of America Merrill Lynch.

(each of the aforementioned accounts, a " Seller Account ")

6.6.2

Payments by a Seller to a Buyer under this Agreement must, except as otherwise provided in this Agreement, be paid by such Seller in euros via bank transfer, free of charges and fees, with same day value, on a bank account the details of which shall be given by the Buyer to the Sellers in writing by no later than five (5) Business days prior to the relevant payment becoming due for payment (each such account, a " Buyer Account ").



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6.7	Value Added Tax

The Parties assume that no value-added tax (" VAT ") shall accrue for the transactions provided for in this Agreement, and the Sellers undertake not to waive any VAT exemption.


6.8	Withholding tax deduction

In the event that the tax authorities order (" Order ") that a deduction from a Purchase Price be made (" Tax Withholding ") pursuant to section 50a para 7 Income Tax Act ( Einkommensteuergesetz ) for tax payable by the Sellers on the profits from the transfer of the Sold Shares, the following shall apply:


6.8.1	The Party that receives such an Order shall notify the other Party in writing without undue delay of the fact that the Order was issued and shall send a true copy of the Order to the other Party.


6.8.2	The Parties shall use their best endeavours to cooperate, consistent with the instructions, and to exchange all requisite information for the purpose of filing a timely objection against the Order, for achieving suspension of its enforcement or for commencing proceedings to effect the lifting of the Order or the reduction of the Tax Withholding required by the Order.

6.8.3

In the event the Purchase Price is due for payment, such payment by the Buyers to the tax authorities shall satisfy the Sellers' claim for payment of the relevant portion of the Purchase Price. The Buyers shall promptly provide evidence to the Sellers of the above payments having been made by means of a written confirmation issued by the tax authorities or by the bank which handled the bank transfer for the Buyers. In the event that the tax authorities reimburse the Buyers for all or part of a Tax Withholding previously remitted, the Buyers shall be obliged to pay the reimbursement amount to the Sellers immediately.


6.9	No Set-Off

Any right of the Parties to set-off and/or to withhold any payments due to the other Parties under this Agreement is hereby expressly waived and excluded except for claims which are undisputed or finally determined by a court of competent jurisdiction with no right to appeal or by arbitration in accordance with sub-clause 22.2.


6.10	Treatment of Payments

Any payment of a Seller to a Buyer pursuant to this Agreement shall be considered a reduction of the Purchase Price in the relationship between the relevant Seller and the relevant Buyer, and any payment of a Buyer to a Seller pursuant to sub-clause 6.4 shall be considered an increase of the Purchase Price in the relationship between the relevant Seller and the relevant Buyer.


6.11	Treatment of Old Claims


6.11.1	If and to the extent that Old Claims have not been reflected in the Completion Accounts or in the calculation of the Purchase Prices (pursuant to sub-clause 6.2.1(b)(v)), the Buyers shall on and from Closing procure that the Target



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Companies use their best efforts to enforce the Old Claims and seek to recover the Old Claims from the relevant debtors and not waive, amend or otherwise impair any Old Claims without the Sellers' prior written consent; provided that such best efforts shall not require the initiation of litigation proceedings against the debtors. If and when any of the Target Companies (or the Buyers) receive payment of the Old Claims or any part thereof within two years from Closing, they shall procure that the respective amounts are paid by the respective recipient to the Sellers without undue delay and in any event within five (5) Business Days of receipt. If, against the Parties' expectation, at the end of the two-years-period Old Claims owed by DEKA have not yet been paid, but pursuant to a reasonable assessment of the Parties, there is ground to believe that such Old Claims will still be paid by DEKA, the Buyers shall agree to a reasonable extension of the two-years-period for such Old Claims.


6.11.2	FLS Remediation Works and the Settlement Agreement with DEKA shall be exclusively governed by sub-clause 15.2.


7.	CLOSING; TERMINATION RIGHTS, DEPOSIT


7.1	Closing Conditions

" Closing Condition " means each of the following:


7.1.1	Dietz Immobilien GmbH has transferred to Wolfgang Dietz 1,251 shares in Symbol V, and Dietz Immobilien GmbH has irrevocably offered to Buyer 2 to enter into the Dietz SPA; this condition precedent is already fulfilled;


7.1.2	The Buyers have received the Notary's confirmation that the Notary has received the Land Charge Cancellation Documents pursuant to sub-clause 5.1.1;


7.1.3	The Buyers have received a copy of (i) the Helaba Release Letter pursuant to sub-clause 5.1.2 and (ii) the Helaba Release Amount Notification pursuant to sub-clause 5.1.3 and (iii) the PropCo Letter pursuant to sub-clause 5.1;


7.1.4	Buyer 1 and PropCo as borrowers, Buyer 1, PropCo and OpCo as guarantors have entered into a binding loan agreement for the Replacement Financing pursuant to sub-clause 9.1 in the amount of at least EUR390 million (" Financing CP ").

The Buyers are entitled to waive any or all Closing Conditions (email with PDF-Scan sufficient) to the Notary (copied to the Sellers by email). The Sellers cannot waive any Closing Condition.


7.2	Scheduled Closing Date and Closing Date


7.2.1	" Scheduled Closing Date " means the twelfth (12th) Business Day following the day on which all Closing Conditions (including for the avoidance of doubt the Financing CP) are satisfied, or if not satisfied, have legitimately been waived by the Buyers by email (with a copy to the Notary) but in no event prior to 30 November 2018.



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7.2.2	The Parties are obliged to inform the Notary without undue delay of the date of the Scheduled Closing Date in writing (email being sufficient), once the Scheduled Closing Date is known (" Closing Date Notice "). A period of up to 3 (three) Business Days shall not qualify as an undue delay.


7.2.3	The Parties shall perform the closing actions set forth in sub-clause 7.3.1 (" Closing ") on the Scheduled Closing Date.


7.2.4	The Closing shall take place at the offices of Clifford Chance Deutschland LLP in Frankfurt am Main on the Scheduled Closing Date at 9:00 a.m. CET, unless the Parties agree in writing (email being sufficient) on a different location and/or different time.


7.2.5	The day on which the Closing actually takes place shall be referred to as the " Closing Date ".


7.3	Closing


7.3.1	On the Scheduled Closing Date, the Parties shall undertake the following actions in the following order:


(a)	The Buyers shall pay the Helaba Release Amount to the Helaba Account; and the Sellers shall instruct Helaba to confirm receipt of these funds by email without undue delay;

(b)

The Buyers shall pay the Estimated Purchase Prices – less the Deposit (or any part thereof) which will be transferred by the Notary pursuant to sub-clause 7.5.6(a) and minus the Upstream Loan Amount which is discharged by way of assumption of debt in lieu of performance ( an Erfüllungs Statt ) by Buyer 2 without further action required other than the consent of the Sellers – to the respective Seller Account as set out in sub-clause 6.6.1; and the Sellers shall promptly confirm receipt of these funds by email;


(c)	The Buyers shall pay the purchase price payable to Dietz under the Dietz SPA in accordance with sub-clause 2.2.2 and the Buyers shall undertake the closing steps and shall comply with their closing obligations under the Dietz SPA;

(d)

The Buyers shall hold an extraordinary shareholders' meeting of both Target Companies, with the Sellers confirming the right of the Buyers to hold that meeting, for discharging the resigned management from all liability ( entlasten ) and appointing new managing directors to the Target Companies to be nominated by the Buyers in writing at least three (3) Business Days prior to the Scheduled Closing Date, and moving the business address of each Target Company away from its current location to a location nominated by the Buyers in writing at least three (3) Business Days prior to the Scheduled Closing Date, and amending the articles of association of the Target Companies as requested by the Buyers;


(e)	The Sellers shall deliver to the Buyers written declarations of the existing managing directors and general representatives ( Prokuristen ) of the



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Target Companies by means of which, subject to a complete release pursuant to sub-clause 7.3.1(d), they resign from their offices of the Target Company by no later than the Scheduled Closing Date.

(f)

The Sellers shall hand over to the Buyers bank documents and forms duly signed by the previous managers and/or other signatories, by which with respect to all bank accounts of the Target Companies (i) all signature rights of the current signatories are revoked and (ii) new signatories are notified to the respective banks, such signatories to be nominated by the Buyers at least three (3) Business Days prior to the Scheduled Closing Date in writing (email being sufficient);


(g)	The Sellers shall hand over to the Buyers a resolution by the managers of the Target Companies concerning (i) the revocation of any powers of attorney which were granted by the Target Companies to third parties which will no longer be engaged by the Target Company after Closing, and (ii) the revocation of any proxy holders, each with effect as of the Closing Date;


(h)	If so requested by the Buyers five (5) Business Days before the Scheduled Closing Date, the Sellers shall hand over originals of all lease agreements and rent collateral (other than cash deposits) in possession of the Sellers to the Buyers;


(i)	The Sellers shall hand over to the Buyers the declaration of PropCo pursuant to which PropCo consents to the assumption of liabilities by Buyer 1 pursuant sub-clause 1.6.4;


(j)	PropCo and CNI NRE CHGP Manager LLC shall execute and hand over executed originals of the asset management agreement, materially in the form and content of the draft set out in Annex 7.3.1(j) ;


(k)	Symbol V and OpCo Seller shall execute and hand over executed originals of the subscription agreement for the issuance the Symbol V Seller PECs having the terms and conditions as set out in Annex 2.3.2 ; and OpCo Seller shall enter into the pledge agreement with Buyer 2 as described in Clause 11.9.

(l)

The Sellers shall hand over the (i) original shareholder register of the Symbol V to the Buyers and (ii) the original of Symbol V's preferred equity certificates register, and the Parties agree to have (i) the transfer of the Sold Shares registered in the shareholders register of Symbol V and (ii) the issuance of the Symbol V Seller PECs registered in Symbol V's preferred equity certificates register, and to grant corresponding powers of attorney to each manager of Symbol V from time to time and to each lawyer or employee of Allen & Overy, société en commandite simple , each acting alone and with full power of substitution, to implement such registrations. Furthermore, the Parties agree to grant respective powers of attorney to the aforementioned to proceed with the relevant filings with the Luxembourg Trade and Companies' Register for



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purposes of publication in the Recueil Electronique des Sociétés et Associations .


7.3.2	Each of Seller 1, Seller 2, Seller 3, Seller 4, OpCo Seller and Symbol V herewith grants a power of attorney to Buyer 1 and Buyer 2 to attend shareholders' meetings and to pass resolutions of PropCo and OpCo until the new shareholders' lists have been filed with ( aufgenommen ) the commercial register.


7.3.3	The Buyers shall procure that the persons that have resigned from their offices in the Target Companies pursuant to sub-clause 7.3.1(e) are discharged from all liability ( entlastet ), and that their resignation is submitted for registration in the commercial register as soon as possible and in any event no later than three (3) Business Days after the Closing Date.


7.3.4	All Closing actions shall be recorded by the Parties in a closing memorandum substantially in the form as set out in Annex 7.3.4 . A copy of the signed closing memorandum shall be forwarded to the Notary by email without undue delay.


7.4	Termination rights

7.4.1

The Parties are entitled to terminate ( zurücktreten ) this Agreement if one or more Closing Conditions according to sub-clauses 7.1.1, 7.1.2, 7.1.3 or 7.1.4 have not been satisfied or waived in accordance with the terms of this Agreement by 31 December 2018 (" Long Stop Date "). No such right of termination shall exist (i) for the Buyers if a Buyer, or (ii) for the Sellers if a Seller, has hindered (either by way of action or inaction) the satisfaction of the relevant Closing Condition in bad faith ( wider Treu und Glauben ).


7.4.2	If the Buyers do (or one of them does):


(a)	Not issue the Closing Date Notice pursuant to sub-clause 7.2.2 without undue delay once the Scheduled Closing Date is known; or


(b)	Not make the payments pursuant to sub-clauses 7.3.1(a), 7.3.1(b) and/or 7.3.1(c) in full on the Scheduled Closing Date,

the Seller shall set a grace period for the Buyers to remedy the default of five (5) Business Days by written notice to the Buyers (email being sufficient). If the Buyers do not remedy the default by the expiration of the five (5) Business Days grace period, the Sellers shall be entitled in their absolute discretion to terminate ( zurücktreten ) this Agreement.


7.4.3	Any termination of this Agreement must be effected by written notice to the Notary who is herewith authorized for receipt. The Notary is instructed to forward such termination notice to the counterparty without undue delay.


7.4.4	Any termination of this Agreement pursuant to sub-clause 7.4.1 shall be valid only if the other Parties received the written notice of termination prior to the day on which the last Closing Condition has occurred or been waived.


7.4.5	For the avoidance of doubt, the termination rights pursuant to sub-clauses 7.4.1 and 7.4.2 shall not apply anymore once Closing has occurred.



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7.4.6

In the event of any termination of this Agreement, all obligations between the Parties under this Agreement, with the exception of the obligations resulting from the unwinding of this Agreement ( Rückabwicklungsschuldverhältnis ) and under Clauses 17 ( Confidentiality and Announcements ), 19 ( Transfer Taxes and Costs ), 20 ( Notices ) and 22 ( Miscellaneous ), shall lapse, provided that any obligations due to a breach of this Agreement prior to the termination shall remain unaffected.


7.4.7	Any termination rights of the Parties that are not agreed and specifically set out in this Agreement shall be excluded.


7.5	Escrow Account; Deposit; Contractual Penalty


7.5.1	Prior to the signing of this Agreement, the Notary has set up the following escrow account (" Escrow Account "):

Account holder: Dr. Georg Frowein

IBAN: IBAN DE09 5007 0010 0092 4803 02

BIC: DEUTDEFFXXX


7.5.2	As security for the claims of the Sellers against the Buyers under this Agreement, the Buyers shall transfer a sum by way of a deposit in the amount of EUR33,500,000 (in words: thirty-three million five hundred thousand Euros) (" Deposit ") within ten (10) Business Days from the Signing Date.


7.5.3	The Notary is hereby instructed to confirm receipt of the Deposit (indicating the date of receipt), once the Deposit has been paid to the Escrow Account (pdf sufficient).


7.5.4	If (i) the Deposit has not been received by the Notary within ten (10) Business Days from the Signing Date, the Sellers shall be entitled:


(a)	To terminate this Agreement by written notice to the Notary with a copy to the Buyers; and


(b)	In the event of termination, to contractual damages equal to the amount of the Deposit. In such case, any further claims under or in connection with this Agreement, in particular claims for default interest ( Verzugszinsen ) or damages for non-performance ( Schadensersatz statt der Leistung ), shall be excluded.

The termination right can only be exercised within thirty (30) Business Days from the Signing Date, and the provisions of sub-clauses 7.4.3 and 7.4.6 shall apply to this termination right.


7.5.5	The Deposit shall, as set out in sub-clause 7.5.6, be credited against the Purchase Prices or, as the case may be, against the Contractual Penalty pursuant to sub-clause 7.5.8.



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7.5.6	The Deposit shall be released by the Notary in accordance with the following unanimous escrow instructions:


(a)	If the Notary has received the Closing Date Notice pursuant to sub-clause 7.2.2 from each of the Parties, the Notary shall release on the Scheduled Closing Date (whereas written payment instructions to the bank shall be given by the Notary by no later than 9:00 a.m. CET on the Scheduled Closing Date):


(i)	Partial amounts of EUR8,325,000 each to each of Sellers 1 through 4 into each of Seller Account 1 through 4 respectively, and


(ii)	A partial amount of EUR200,000 to OpCo Seller into the OpCo Seller Account;

each such payment shall then, once it has been received in cleared funds by the respective Seller, be credited against the respective Purchase Prices payable to the respective Seller pursuant to sub-clause 6.1.1; or


(b)	If:


(i)	The Sellers terminate this Agreement pursuant to sub-clause 7.4.2; and


(ii)	The Notary has notified the Buyers of the receipt of such termination notice pursuant to sub-clause 7.4.3; and


(iii)	The Buyers have not evidenced to the Notary within fifteen (15) Business Days from receipt of the Notary’s notification pursuant to sub-clause (ii) that they have initiated an arbitration or preliminary court proceeding ( vorläufiges Rechtsschutzverfahren ) seeking confirmation that the Sellers were not entitled to terminate the Agreement pursuant to sub-clause 7.4.2,

the Notary shall release (A) partial amounts of EUR8,325,000 each to each of Sellers 1 through 4 into each of Seller Account 1 through 4 respectively, and (B) a partial amount of EUR200,000 to OpCo Seller into the OpCo Seller Account;

If, by contrast, the Buyers have evidenced to the Notary within fifteen (15) Business Days from receipt of the Notary’s notification pursuant to sub-clause (ii) that they have initiated an arbitration or preliminary court proceeding, the Notary shall hold the Deposit and release it only in accordance with the decision of the arbitration panel or the court; or


(c)	If the Sellers terminate this Agreement pursuant to sub-clause 7.4.1, sub-clause 13.3.4 or sub-clause 16.4.2, the Notary shall release partial amounts equal to 50% of the Deposit to each of the Buyers’ Accounts; or



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(d)	If:


(i)	The Buyers terminate this Agreement pursuant to sub-clause 7.4.1, sub-clause 13.3.4 or sub-clause 16.4.3; and


(ii)	The Notary has notified the Sellers of the receipt of such termination notice pursuant to sub-clause 7.4.3; and

(iii)

The Sellers have not evidenced to the Notary within twenty (20) Business Days from receipt of the Notary’s notification pursuant to sub-clause (b)(ii) that they have initiated an arbitration or preliminary court proceeding ( vorläufiges Rechtsschutzverfahren ) seeking confirmation that the Buyers were not entitled to terminate the Agreement pursuant to sub-clause 7.4.1, sub-clause 13.3.4 or sub-clause 16.4.3, as the case may be,

the Notary shall release partial amounts equal to 50% of the Deposit to each of the Buyers’ Accounts.

If, by contrast, the Sellers have evidenced to the Notary within twenty (20) Business Days from receipt of the Notary’s notification pursuant to sub-clause (ii) that they have initiated an arbitration or preliminary court proceeding, the Notary shall hold the Deposit and release it only in accordance with the decision of the arbitration panel or the court.


(e)	The Parties shall at all times remain entitled to give different unanimous instructions to the Notary which shall always prevail over the above instructions.


7.5.7	The Parties agree the following with regard to the Escrow Account and hereby give the following instructions to the Notary:


(a)	The Notary shall inform the Parties in writing (email being sufficient) and without undue delay of any payments made to or from the Escrow Account.


(b)	Payment on the Escrow Account ( Einzahlungen ) shall not have a releasing effect for the Buyer's obligations to pay the Estimated Purchase Prices. The Sellers' claims for payment of the Estimated Purchase Prices shall only be satisfied by receipt of payment in cleared funds on the respective Seller Account.


(c)	The Parties undertake to instruct the Notary without undue delay by email to disburse the Deposit to the relevant Party or Parties as soon as one of the Parties is entitled to it pursuant to the provisions of this Agreement.


(d)	Any positive interest on the Escrow Account shall be for the account of the Buyers and shall be disbursed to the Buyers when the last portion of the Deposit is paid out from the Escrow Account; except in cases of termination pursuant to sub-clause 7.4.2 in which cases positive interest on the Escrow Account shall be paid to the Sellers (pro rata).



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(e)

Any negative interest on the Escrow Account shall be paid by the Buyers. If the Deposit is to be disbursed to the Sellers in accordance with sub-clause 7.5.6(a) as part of the Estimated Purchase Prices and if negative interest is deducted from such payments, the respective Estimated Purchase Prices shall be reduced by an amount equal to the respective negative interest. However, for the avoidance of doubt, such deduction shall not be made with respect to the (final) Purchase Prices.


(f)	All costs, liabilities, obligations, taxes and expenses incurred in connection with the Escrow Account (including without limitation the set-up, maintenance or closure of the Escrow Account) shall be borne by the Sellers at 50% and the Buyers at 50%.

7.5.8

The Sellers may claim from the Buyers a contractual penalty ( Vertragsstrafe ) in an amount equal to the Deposit if the Sellers validly terminate this Agreement pursuant to sub-clause 7.4.2. The Deposit shall then, once it has been received in cleared funds by the Sellers, credited against such claim. Any further claims under or in connection with this Agreement, in particular claims for default interest ( Verzugszinsen ) or damages for non-performance, shall be excluded.


8.	CLOSING DATE ACCOUNTS

The Parties agree that for purposes of determining the final Purchase Price, the Sellers shall provide draft closing date accounts (sub-clause 8.1) pursuant to and in accordance with the accounting principles set out in sub-clauses 8.2, 6.2, which will then be reviewed by an auditor agreed between the Parties (sub-clause 8.3). Should the Parties disagree on the results of the auditor's review, the disputed items shall be referred to an arbitration expert (sub-clause 8.4).


8.1	Closing Date; Establishment of Closing Date Accounts

8.1.1

The Sellers shall with the support of the Buyers and the Target Companies (which support shall be procured by the Buyers) prepare, within forty (40) Business Days after the Closing Date (" Account Setup Period ") pursuant to the terms of this Agreement, balance sheets for each of the Target Companies as of 24:00 hours CET (at the start of the Closing Date) (" Effective Time ") and, on the basis of such balance sheets (" Closing Date Accounts "), a calculation of the items relevant for the calculation of the PropCo Value and the OpCo Value pursuant to sub-clauses 6.2.1(b), 6.2.1(c), and 6.2.2 through 6.2.4. Any item of sub-clauses 6.2.1(b) and 6.2.1(c) that refers to the Closing Date shall be balanced as per the Effective Time. However, the steps as set out in sub-clause 7.3 and their consequences shall not affect and shall be ignored for the purposes of the Closing Date Accounts. Based on these Closing Date Accounts, the Sellers shall also calculate the positive or negative difference between the Estimated Purchase Price already received in cleared funds by the Sellers and the final Purchase Price (" Adjustment Statement ").


8.1.2	Before the beginning of the Account Setup Period, the Sellers and the Buyers shall instruct PWC (" Contractual Auditor ") to audit the Closing Date Accounts according to German GAAP taking into account the accounting principles and calculation methods pursuant to sub-clauses 6.2 through 6.5 and 8.2 subject to a materiality threshold of EUR20,000 in each case and the Adjustment Statement



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within the Account Setup Period. The Contractual Auditor shall be instructed by the Parties to summarize the result of its review of the Closing Date Accounts and the Adjustment Statement in a professional audit report in line with international auditing standards (in particular IDW PS 480) (the Closing Date Accounts and the Adjustment Statements, as reviewed and, if applicable corrected, and the audit report hereinafter the " Closing Date Calculation ").


8.1.3	It is agreed that the version of the Closing Date Accounts existing before becoming binding pursuant to sub-clauses 8.3.2, 8.3.3 and/or 8.4.4, are referred to as " Preliminary Closing Date Accounts ".


8.1.4	The costs to prepare the Closing Date Calculation shall be borne by the Sellers at 50% and the Buyers at 50% (subject always to the respective costs to be borne by the Sellers being netted against the reimbursement by the Buyers pursuant to sub-clause 19.3). The costs for the review by the Contractual Auditor shall be borne by the Buyers.


8.2	Accounting Principles


8.2.1	The Parties agree that the Closing Date Accounts must be prepared


(a)	in accordance with the specific accounting principles, practices, rules, estimation techniques and procedures set out in sub-clauses 6.2.1, 6.2.2 and 6.2.3; and


(b)	subject to (a), complying with the accounting principles, practices, rules, estimation techniques and procedures actually applied in the financial statements of the Target Companies for the fiscal year 2017 as long as in compliance with German GAAP (HGB);


(c)	subject to (a) and (b), in accordance with the applicable provisions of German law (generally accepted principles of accounting under the HGB ( Grundsätze ordnungsgemäßer Buchführung )) as at 31 December 2017.

For the avoidance of doubt, (a) shall take precedence over (b) and (c), and (b) shall take precedence over (c).


8.2.2	The Closing Date Accounts will be prepared in the same format as the balance sheets set out in Annex 6.3.1 (but not the amounts shown therein) and subject always that the inclusion or exclusion of a line item or an amount shall be governed by the requirements of sub-clauses 6.2.1 and 8.2.1.


8.3	Review of the Closing Date Calculation


8.3.1	After submission of the Closing Date Calculation including the relevant documents necessary to review, the Buyers shall be entitled to review the Closing Date Calculation within a period of twenty (20) Business Days following the date of receipt (" Review Period "). The expiry date of the Review Period shall be the " Cut-Off Time ".



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8.3.2

Should the Buyers object to any calculations or figures in the Closing Date Calculation, the Buyers shall notify the Sellers of such objections in writing (email sufficient) specifying in reasonable detail the items which are the subject of their objection, the relevant amounts affected by the objection, the basis for such objection and any alternative calculation on or before the expiration of the Review Period. To the extent the Buyers do not notify the Sellers of any objections in writing (email being sufficient) in accordance with the foregoing provisions, the Closing Date Calculation shall become final and binding on the Parties.


8.3.3	To the extent the Buyers notify the Sellers of any objections in accordance with sub-clause 8.3.2 on or before the expiration of the Review Period, the Sellers and the Buyers shall within fifteen (15) Business Days following the end of the Review Period attempt to agree on the items of objection (" Discussion Period "). Any such agreement shall be final and binding on all Parties.


8.4	Expert Proceedings


8.4.1	If and to the extent the Sellers and the Buyers do not agree on items of objection by the expiration of the Discussion Period, the Parties shall appoint


(a)	Deloitte, or


(b)	if Deloitte is not willing or able to accept the mandate, an auditor of international repute with ten years' experience of auditing accounts in respect of companies and entities and properties similar to the entities, companies and properties relating to this Agreement other than Ernst & Young and PWC as an arbitration expert ( Schiedsgutachter ) with respect to the items in dispute

(" Expert ").

8.4.2

If in case of sub-clause 8.4.1(b), the Parties cannot agree on the nomination of an Expert within five (5) Business Days after the expiration of the fifteen (15) Business Days period pursuant to sub-clause 8.3.3, the Expert shall, at the written request of the Sellers and/or the Buyers, be appointed by the chairman of the management board of the Institute of Public Auditors in Germany ( Vorsitzender des Vorstands des Instituts der Wirtschaftsprüfer in Deutschland e.V. ) in Düsseldorf; provided always that the Expert so appointed shall be independent of all the Parties.

8.4.3

The Sellers and the Buyers shall cooperate with the Expert and provide the Expert with all necessary documents and information as soon as possible following any request by the Expert. The Sellers and Buyers shall jointly instruct the Expert to render its decision as soon as practicable but no later than another twenty (20) Business Days after the Expert's appointment. The decision of the Expert shall be within the boundaries of the respective calculations and calculated in accordance with the provisions in this Agreement for drawing up the Closing Date Accounts.



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8.4.4

The Expert shall grant the Parties reasonable opportunity to present their views in writing and, if so requested by a Party, orally in a hearing of the Parties. The entire procedure shall be carried out in the English language. The Expert must – but only on the remaining matters that are in dispute between the Parties – prepare a written expert's opinion ( Schiedsgutachten ) in his/her reasonable discretion ( billiges Ermessen ) in this regard in the English language within twenty (20) Business Days after receipt of the required supporting information from the Sellers and the Buyers. The Expert shall specify the grounds for his/her decision with respect to all points of contention between the Sellers and the Buyers. The results of the Expert's opinion shall be transferred to the Preliminary Closing Date Accounts and the Preliminary Purchase Price Calculation, which shall then become binding on the Parties. The Expert's determinations shall be final and binding upon the Parties without the right of appeal, except in circumstances of manifest error or fraud.


8.4.5	The fees, costs, disbursements and expenses for the Expert shall be initially advanced and borne by the Sellers (50%) and the Buyers (50%) in equal shares, if the Expert requests an advance payment.


8.4.6	The fees, costs, disbursements and expenses of the Expert and the costs of the expert proceedings, including reasonable fees and expenditures of the Parties for their advisors, shall ultimately be allocated based on the determination by the Expert in accordance with Sec. 91 et seq. of the German Civil Procedure Act (ZPO).


8.5	Access to Information

Each Party shall ensure that the respective other Party, their advisors involved pursuant to sub-clause 8.3 and any expert involved pursuant to sub-clause 8.4 receives, after the Closing Date, all available information and documentation reasonably required by them for all purposes under this Clause 8.


9.	BUYERS' REFINANCING OF TARGET COMPANIES

The provisions of this Clause 9 apply to the period prior to Closing.


9.1	The Buyers intend to refinance the Helaba Loan through a new loan facility (" Replacement Financing ") with Standard Chartered Bank or any of its affiliates or any other lender which is subject to supervision of the European Union's European Banking Authority (each an " Approved Lender ").


9.2	The Buyers shall use their best efforts and take all reasonably acceptable ( zumutbare ) actions to procure that the loan agreement for the Replacement Financing is negotiated and signed without undue delay and in any event by no later than the Long Stop Date, and shall inform the Sellers and the Notary immediately (email being sufficient) once this loan agreement has been signed.


9.3	Without undue delay upon the written request of the Buyers (email being sufficient):


9.3.1	The Target Companies shall – and the Sellers shall procure that the Target Companies will – sign a new loan agreement and any other finance documents



	33

relating thereto (including without limitation any security documents, subordination agreements and fee letters) with an Approved Lender and/or any other finance party under such new loan agreement appointed by the Buyers if and to the extent presented by the Buyers for signature on or prior to the Closing Date; and

9.3.2

The Target Companies and the Sellers shall – and the Sellers shall procure that the Target Companies will – use their best efforts and take all reasonably acceptable ( zumutbare ) actions to assist the Buyers in satisfying all conditions precedent required for the funding of such loan (including the execution of management board resolutions, shareholders’ resolutions and management certificates and delivery of constitutional documents).

A period of up to three (3) Business Days from written request of the Buyers shall not qualify as an undue delay.

9.4

The Target Companies will grant to the Buyers and Symbol V in a form accepted by German land registers ( grundbuchtaugliche Form ) two powers of attorney only for the purposes of the entering into such new loan agreement, the related security agreements and other related finance documents and the provision of security, including a land charge encumbering the Real Property, in the form as attached as Annex 9.4 (together the " Refinancing Documentation ").


9.5	The obligations pursuant to sub-clauses 9.3 and 9.4 only apply if:

9.5.1

Any deed by which a lien over the Real Property is created or any related security purpose agreement provides that the secured creditor may only hold or realise the real property lien or other security created thereunder if all amounts payable by the Buyers at Closing pursuant to sub-clauses 7.3.1(a), 7.3.1(b) and/or 7.3.1(c) excluding default interest, if any, have been paid in full in cleared funds in accordance with the terms of this Agreement;

9.5.2

All Refinancing Documentation provides that (i) none of the Sellers, Symbol V and (until Closing) the Target Companies, and their respective officers, directors and representatives shall be liable for any liabilities, costs, damages, losses, undertakings, covenants, representations, warranties, penalties, fees, payments (incurred, borne or made) and expenses under or in connection with the Replacement Financing and the Refinancing Documentation; (ii) all respective persons have a direct right of action to enforce the provisions under this sub-clause ( echter Vertrag zugunsten Dritter ).

9.6

The Buyers hereby undertake to fully and upon first demand indemnify and hold harmless the Sellers, Symbol V and (until Closing) the Target Companies, and their respective officers, directors and representatives from and against any liabilities, costs, damages, losses, undertakings, penalties, fees, payments (incurred, borne or made) and expenses, including internal administrative and other reasonable costs, incurred by any of them in connection with the Replacement Financing, the Refinancing Documentation and otherwise complying with, or arising out of (in any way whatsoever), the terms of this Clause 9 (including for the avoidance of doubt sub-clause 9.7). All respective persons



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have a direct right of action to enforce the provisions under this sub-clause ( echter Vertrag zugunsten Dritter ).

9.7

In the event that this Agreement is not consummated ( nicht durchgeführt ) the Buyers shall procure that (i) any real property liens which might already be registered with respect to the Real Property are deleted without undue delay ( unverzüglich ) and (ii) any agreement or document entered into in connection with the Replacement Financing will be rescinded or otherwise unwound at no cost to the Target Companies or the Sellers. The Sellers shall procure that the Target Companies will cooperate with the Buyers in order to delete land charges already registered and to rescind or unwind the Replacement Financing.


10.	SELLERS' GUARANTEES; NO OTHER REMEDIES


10.1	Form and scope of Sellers' Guarantees

10.1.1

The Sellers hereby guarantee to the Buyers, subject to the requirements and limitations provided for in Clauses 10 and 11 below, by way of an independent promise of guarantee ( selbständiges Garantieversprechen ) within the meaning of section 311 para. 1 BGB that the statements made in sub-clause 10.2 (each a " Sellers' Guarantee ") are correct on the Signing Date and the Closing Date (or such other date explicitly so provided in sub-clause 10.2).

10.1.2

The Sellers and the Buyers agree and explicitly confirm that the Sellers' Guarantees in sub-clause 10.2 shall be qualified and construed as neither quality guarantees concerning the object of the purchase ( Garantien für die Beschaffenheit der Sache ) within the meaning of sections 443, 444 BGB nor quality agreements ( Beschaffenheitsvereinbarungen ) within the meaning of section 434 para. 1 sentence 1 BGB and that section 444 BGB shall not and does not apply to the guarantees contained herein.


10.2	Sellers' Guarantees


10.2.1	Corporate Matters

(a)

Subject to the changes provided for in this Agreement, the statements made in sub-clauses 1.1 and 1.2 regarding the Target Companies and the Sold Shares are correct on the Signing Date and the Closing Date. The Target Companies have been duly established under German law and are validly existing and have not been terminated, nor is there an agreement to terminate either of them as at a future date.

(b)

The excerpts from the commercial register as well as the Articles of Association of the Target Companies attached hereto in Annex 10.2.1(b) are true and correct. All facts that must be registered in the commercial register are actually registered in the commercial register excerpts attached hereto as Annex 10.2.1(b) ; for the period before the acquisition of the Target Companies by the Sellers (" Pre-Acquisition Periods ") this shall only apply to the Sellers' Knowledge. There are no pending filing requests made to the commercial register by the Sellers or the Target Companies.



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(c)	No resolutions that change the terms of the Target Companies' Articles of Association as attached hereto in Annex 10.2.1(b) have been passed by the Sellers. On the Closing Date, there are no other agreements (e.g. shareholder agreements) that could confer rights over the Sold Shares to third parties or obligations in relation to the Sold Shares onto the Buyers.


(d)	The Target Companies are not engaged in any other commercial or operative business other than as permitted under their respective articles of association.

(e)

The Sold Shares have been validly issued to the respective Sellers in compliance with the laws of the Federal Republic of Germany. They have been fully paid up and have not been repaid irrespective of whether openly or by way of hidden distribution; for the Pre-Acquisition Periods this shall only apply to the Sellers' Knowledge. To the Sellers' Knowledge, there are no outstanding contributions and no obligations for a subsequent contribution ( keine Nachschusspflicht ).

(f)

The shareholder lists showing the participations of the Sellers in the Target Companies are accurate. The Sellers are the sole and unrestricted legal and beneficial owners of the Sold Shares. The Sold Shares are on the Closing Date free from any rights of third parties ( Rechte Dritter ), in particular pledges, liens, usufructu rights, except for such rights granted with the consent of the Buyers or to be released pursuant to this Agreement; and there are, on the Closing Date, neither pre-emptive, acquisition or option rights nor other rights of third parties to acquire the Sold Shares or to have them encumbered; with respect to pre-emptive, acquisition or option rights and other rights of third parties to acquire the Sold Shares or to have them encumbered which might have been created during Pre-Acquisition Periods this shall only apply to the Sellers' Knowledge.

(g)

The Target Companies are not insolvent. No insolvency proceedings concerning the Target Companies have been applied for by the Target Companies. To the Sellers' Knowledge, as at the Signing Date, no order has been made and no petition presented for the winding-up or liquidation of the Target Companies and no third party applications for insolvency proceedings have been filed in relation to the Target Companies' assets.


(h)	On the Signing Date and the Closing Date, the Target Companies do not hold, directly or indirectly, legally or beneficially, any shares, participation or interest in any other entity and have no other branch or businesses.


(i)	As of the Closing Date, neither of the Target Companies is a party to any enterprise agreement ( Unternehmensvertrag ) within the meaning of Secs. 291 et seq. German Stock Corporation Act ( Aktiengesetz ) or to similar agreements subordinating its management to a third party or providing



	36

for the transfer of profits, and there are no profit participation rights granted to any third party by the Target Companies.


(j)	On the Signing Date and the Closing Date, the Target Companies are not obliged to acquire or dispose of (aa) any interest in any other entity or (bb) any real property including the Real Property or any other assets.

(k)

On the Closing Date, there are no outstanding claims of the Sellers and their Affiliates (other than the Target Companies) against the Target Companies which will not be included in the Closing Date Accounts; for the avoidance of doubt, the Sellers herewith waive, and shall procure that any Affiliate waives with effect as of the Closing Date, any such claims which will not be included in the Closing Date Accounts.

(l)

On the Closing Date, the Target Companies (i) have not issued any bonds, guarantees, joint liability declarations, suretyships or other collateral, and (ii) do not have any liabilities from derivatives in both cases (i) and (ii) other than disclosed in the Data Room or this Agreement; for bonds, guarantees, joint liability declarations, suretyships or other collateral that might have been issued or liabilities that might have been caused in Pre-Acquisition Periods this sub-clause 10.2.1(l) shall only apply to the Sellers' Knowledge.


10.2.2	Shareholder Loans (partially to be converted into PECs)


(a)	There are no outstanding loan obligations of the PropCo to the Sellers, Symbol V or any affiliate of the Sellers and/or Symbol V.

(b)

OpCo Seller is the sole holder of the Symbol V Shareholder Loans. The Symbol V Shareholder Loans are outstanding as of the Signing Date in the amounts set forth in sub-clause 1.5.1, and on the Closing Date will be free of any pledge, lien or other encumbrances. The documentation regarding the Symbol V Shareholder Loans as attached in Annex 1.5.1 contains as of the Signing Date the entire agreements between OpCo Seller and Symbol V with respect to the Symbol V Shareholder Loans.


10.2.3	Real Property


(a)	The Real Property is owned ( Eigentum ), or held on the basis of a ground lease ( Erbbaurecht ), by the PropCo as the sole owner ( Alleineigentümer ) as set out in Annex 1.3.1 .

(b)

The statements in the land register with respect to ownership (Sec. I of the land register) are complete and accurate and there are no encumbrances regarding the Real Property other than those registered in Sec. II and III of the land register. The Sellers and the Target Companies have not made and, to the Sellers' Knowledge, also no third party has made any pending registration requests ( Eintragungsanträge ) or consent declarations ( Bewilligungen ) with respect to the Real Property. The PropCo has also not granted a not yet submitted encumbrance of the Real



	37

Property or is obliged to grant such encumbrance; for the Pre-Acquisition Periods this shall only apply to the Sellers' Knowledge.


(c)	No disposal ( Verfügung ) of the Real Property has been made by the PropCo. PropCo has not granted any contractual claims to third parties for the acquisition of title or for encumbering the Real Property (or parts thereof) which are unfulfilled; for any claims which might have been granted during the Pre-Acquisition Periods this shall only apply to the Sellers' Knowledge.


(d)	Except as set out in Annex 10.2.3(d) , no entries in the building encumbrances register (Baulastenverzeichnis ) have been consented to and/or applied for by PropCo, and to the Sellers' Knowledge, PropCo is not obliged to consent to or make such disposals or consent to or apply for such entries.


(e)	To the Seller’s Knowledge, there are no outstanding contractual payment obligations ( vertraglich begründete Zahlungsverpflichtungen ) of the PropCo in connection with the use or the obligation to maintain and repair parcels immediately adjacent to the Real Property which are owned by third parties.

(f)

To the Sellers' Knowledge, PropCo is not a party to any written agreements with any adjoining land owners (nachbarrechtliche Vereinbarungen ) or the City of Frankfurt (städtebauliche Vereinbarungen ) pertaining to the Real Property (except as disclosed in the Data Room). To the Sellers' Knowledge, no old easements ( altrechtliche Beschränkungen und Belastungen ) exist that are not registered in the land register.

(g)

As of the Signing Date, all material public law permits required to be obtained by the Target Companies as owners (excluding permits to be obtained by other parties, such as tenants or by DEKA in context of the FLS Remediation Works) for the construction and use of the Real Property and the buildings and installations have been granted and have not been revoked or withdrawn ( widerrufen or zurückgenommen ) in writing, other than disclosed in the Data Room; for the Pre-Acquisition Periods this shall only apply to the Sellers' Knowledge.

(h)

As of the Signing Date, the Target Companies have not received any public orders issued in writing with respect to the Real Property or the fixtures requiring constructional changes, changes of use of the Real Property or repair works or confirmations from authorities that have not been fulfilled as of the Signing Date (other than the fire life safety deficiencies and other matters that are subject to the on-going works at the Real Property as disclosed in the Data Room); for the Pre-Acquisition Periods this shall only apply to the Sellers' Knowledge.


(i)	Except as set out in Annex 10.2.3(i) , to the Sellers' Knowledge, no public subsidies have been granted to a Target Company with respect to the Real



	38

Property, and no restrictions are applicable based on any such public subsidies with respect to the Real Property.


10.2.4	Lease Agreements


(a)	Annex 10.2.4(a) contains a complete and correct list of all lease agreements and amendments to such lease agreements existing with respect to the Real Property (each of them a " Lease ", together the " Lease Agreements ").


(b)	The statements contained in the Rent Roll attached as Annex 10.2.4(b) are true and correct in all material aspects.


(c)	To the Sellers’ Knowledge, apart from the Lease Agreements (including amendments) listed in Annex 10.2.4(a) , no oral or written side agreements to a Lease exist.


(d)	Annex 10.2.4(d) contains a list of all rent securities provided by the tenants under the Lease Agreements that are in the possession of PropCo. Originals of all rental security listed in Annex 10.2.4(d) are available in the original (unless otherwise stated in Annex 10.2.4(d) ). No rental security has been used up (unless otherwise stated in Annex 10.2.4(d) ).


(e)	To the Sellers' Knowledge, no anticipatory disposals of rent and/or service charges (except for service charge prepayments) have been made which would have an effect on PropCo beyond the Closing Date, except for such disposals in connection with the Helaba Loan Agreement.

(f)

Except as disclosed in Annex 10.2.4(f) , no tenant under a Lease Agreement has as of the Signing Date given written notice of termination of a Lease to PropCo or threatened in writing to do so. To the Sellers' Knowledge, in the past six months prior to the Signing Date, no tenant has indicated to PropCo in writing that a Lease Agreement could be ineffective ( unwirksam ) or breach statutory form requirements.


(g)	As at the Signing Date, no objections have been raised by the tenants in writing against the service charge reconciliations for the periods from 1 January 2016 which are unresolved on the Signing Date. There are no arrears with respect to rent or ancillary costs (including on advance payments), except as set out in Annex 10.2.4(g) .


(h)	To the Sellers' Knowledge, the PropCo has materially complied with all main performance obligations ( Hauptleistungspflichten ) under the Lease Agreements and has not been notified in writing by a tenant of (alleged) non-compliance with such obligations – other than those which lead to the arrears set out in Annex 10.2.4(g) .



	39

(i)

Other than set out in Annex 10.2.4(i) , in the last six months prior to the Signing Date the tenants under the Lease Agreements have (i) not notified PropCo in writing of any damage claims or claims for recovery of any expenses, rent reduction rights, set-off rights or retention rights or other objections regarding rents or service charges, and (ii) not made any rental or service charge payments with the reservation of repayment claims in writing to PropCo, and (iii) have not threatened such claims or objections in writing vis-à-vis PropCo.


10.2.5	Annual Accounts

To the Sellers' Knowledge, the annual accounts of the Target Companies for the calendar years 2016 and for PropCo for the calendar year 2017, consisting of the balance sheet, profit and loss account and exhibit ( Anhang ) have been prepared in accordance with the previous accounting practice of the Target Companies and otherwise in accordance with the respective applicable legal provisions and, generally accepted accounting principles in Germany, and they properly reflect in all material respects the financial situation of the Target Companies as of 31 December 2016 and of PropCo as of the end of the calendar year 2017, respectively.


10.2.6	Insurance


(a)	All insurance contracts of the Target Companies are listed in Annex 10.2.6(a) . On the Signing Date no insurance premiums are unpaid.


(b)	There have been no insurance claims in the last year prior to the Signing Date, except as listed in Annex 10.2.6(b) .


10.2.7	Employment Matters

Target Companies do not have any employees.


10.2.8	Litigation

Except as set out in Annex 10.2.8 , the Target Companies are as of the Signing Date not party to any pending ( rechtshängig ) lawsuit or proceeding before a court of justice or an arbitration panel, and they are not subject to pending objection proceedings ( Widerspruchsverfahren ) with public or fiscal authorities.


10.2.9	Agreements


(a)	No contractual relationships between any of the Target Companies on the one hand and the Sellers or their affiliated companies on the other hand exist which may not be terminated by the Closing Date, save for the asset management agreement to be concluded pursuant to sub-clause 7.3.1(j).


(b)	Annex 10.2.9(b) contains a list of all contracts between third parties and one of the Target Companies (excluding utilities contracts and utility related services contracts and Lease Agreements) that (i) oblige the



	40

respective Target Company to pay a fee or other remuneration of more than EUR50,000 p. a. and (ii) have no right to terminate or a termination right after the date being twelve (12) months from the Closing Date.


(c)	Annex 10.2.9(c) contains a complete list of the Target Companies' bank accounts.


10.2.10	Notifications regarding contamination

To the Seller’s Knowledge, the PropCo has in the last three years before the Signing Date not been notified by public authorities in writing of any Environmental Pollution with respect to the Real Property or been ordered to investigate or abate such Environmental Pollution; whereas " Environmental Pollution " shall mean any pollution of the soil, soil air, leachate, ground water or any surface water, waste or harmful substances on or in buildings or other structures ( e.g. asbestos), any unused underground structures or technical facilities or any parts thereof, warfare agents or warfare materials. Environmental Damage shall include, without limitation, any contamination of the soil, any residual pollution as defined in section 2 Federal Soil Protection Act ( Bundesbodenschutzgesetz ) or section 2 Federal Environmental Damage Act ( Umweltschadensgesetz ), and any substances or combinations of substances, as defined in section 3a Federal Chemicals Act ( Chemikaliengesetz ), that may exist in or on the building and that may be hazardous or potentially harmful to the environment, in each case as specified in more detail in any ministerial or administrative regulations or technical standards.


10.2.11	Assets and Contractual Relationships of OpCo

The OpCo is the sole owner of the fixtures specified in Annex 10.2.11 . At the Effective Time, the fixtures are not subject to any rights of third parties, and to the Sellers' Knowledge, OpCo has not granted any contractual claims to third parties for the acquisition of title in these objects which would not be fulfilled by the Closing Date.


10.2.12	Intellectual Property Rights

PropCo is registered in the register of the Deutsches Marken- und Patentamt as holder of the trademark "Trianon". PropCo is further registered as holder of the domains of their current websites www.trianon-frankfurt.de and www.trianon-frankfurt.com. To the Sellers' Knowledge, the PropCo has not received a challenge in writing from a third party in respect of the trademark or the domain.


10.3	No other Remedies of the Buyers

10.3.1

The Sellers' Guarantees set out in Clause 10 are exhaustive. The Parties do not agree on any other (express or implied) guarantees, representations or warranties, and, subject to sub-clause 11.8, the Buyers have not relied and shall not have any claims against the Sellers based on any representation or warranty except as expressly set forth in this Agreement. Except as expressly set forth in this Agreement, the Buyers acquire the Sold Shares, the Target Companies, the



	41

business of the Target Companies and the Real Property in the condition they are in on the date hereof and on the Closing Date, based upon their own inspection, examination and determination in this respect and without reliance upon any (expressly or implicitly) agreed features, guarantees, representations or warranties of any nature whatsoever. Otherwise, rights and claims of Buyer 1 and Buyer 2, in particular further-reaching claims due to defects or equalisation claims, claims under pre-contractual fault ( vorvertragliche Pflichtverletzung ), breach of contract ( Pflichtverletzung aus dem Schuldverhältnis ), rights of rescission ( Anfechtung ) and termination ( Rücktritt ), are excluded to the extent permitted by law. The exclusion of liability pursuant to this sub-clause 10.3.1 also applies to the extent the Sellers' Guarantees given exclusively as per the Signing Date become incorrect after the Signing Date. In this context, Buyer 1 and Buyer 2 confirm that they have had access to detailed information from and about the Target Companies and have carried out on the basis of the documents provided by the Sellers an in-depth review of the Sold Shares, the Target Companies, the business of the Target Companies and the Real Property, including on commercial, financial, technical, environmental, legal and other aspects that a sophisticated buyer typically performs, prior to the signing of this Agreement.


10.3.2	Without limiting the generality of the foregoing, Buyer 1 and Buyer 2 acknowledge and agree that the Sellers make no guarantee, representation or warranty and shall have no liability and waive all rights whatsoever with respect to

(a)

any projections, reports, estimates, budgets or forecasts by the Sellers or any third party delivered to or made available to Buyer 1 and Buyer 2, its representatives or advisers of future revenues, the likelihood of any lease renewals, future results of operations (or any component thereof), future cash flows or future financial condition (or any component thereof) or the future business and operations of the Target Companies; and


(b)	the environmental, technical status or physical condition of the Real Property as such; and


(c)	the accuracy and completeness of the information, reports, documents and records received by the Buyers from the Sellers or their agents or advisers or third parties prior to the conclusion of this Agreement (including the information made available in the Q&A process and the electronic data room operated by Imprima (Deutschland) GmbH (together " Data Room ")); and


(d)	any tax matter whatsoever including in relation to the Target Companies, the Sellers or the Real Property, except as otherwise provided for in this Agreement.


10.4	Sellers' Knowledge

In this Agreement, references to the " Sellers' Knowledge " or similar phrases shall mean solely the actual knowledge ( positive Kenntnis ) of the individuals listed in Annex 10.4



	42

as of the Signing Date (" Knowledge Persons ") and neither the Sellers nor the Knowledge Persons shall be required to make any enquiry of any other person nor shall the Sellers be deemed to have knowledge of any matter not within the actual knowledge of the Knowledge Persons. For the avoidance of doubt, to the extent Annex 10.4 includes persons that are not employed by the Sellers, their knowledge shall only be attributed to the Sellers where a Sellers' Guarantee pursuant to sub-clause 10.2 explicitly refers to the "Sellers' Knowledge", but not for any other purpose.


11.	REMEDIES FOR BREACH OF SELLERS' GUARANTEES


11.1	General

In the event of a breach of a warranty or a Tax Warranty or in case a Tax Indemnity is triggered pursuant to Clauses 10 and 12, the Sellers shall, at the Sellers’ sole discretion, either (i) within a period of one month put the Purchaser into the same position it would have been in if the breach (or in case of a Tax Indemnity, the trigger event) had not occurred ( Naturalrestitution ); or (ii) compensate the Buyers for the damages within the meaning of Section 249 et seq. BGB incurred by the Buyers or by a Target Company in accordance with the provisions contained in this Agreement.

The Buyers shall be entitled to bring a claim under or in connection with Clauses 10, 11, and 12 (including for breach) (" Relevant Claim ") and Clause 13 only if and to the extent the subject matter underlying the Relevant Claim has not been taken into account in the Closing Date Accounts within the framework of the adjustment of the Estimated Purchase Prices according to Clause 8.


11.2	W&I Insurance


11.2.1	The Buyers have signed or intend to sign a warranty and indemnity liability policy of insurance with extended coverage for the warranties regarding title of the Sellers in the Sold Shares and of the PropCo in the Real Property dated on or about the date of this Agreement in favour of the Buyers (" W&I Insurance Policy ").

11.2.2

By letter attached for reference purposes at Annex 11.2.2 hereto, the insurance company Ambridge has confirmed that in case the insurance company is held liable under the W&I Insurance Policy it waives any and all recourse claims and rights of subrogation against the Sellers (also in connection with the Bring Down Declaration (as defined below)), except in cases of fraud ( Betrug ), malicious deceit ( arglistige Täuschung ) or intentional misconduct ( Vorsatz ) of a Seller.

11.2.3

The Sellers shall provide to the Buyers for forwarding to the W&I insurer on the Business Day prior to the Closing Date, 11.00 a.m. CET, a declaration signed by one of the Knowledge Persons on behalf of all Knowledge Persons in the form of the template set out in Annex 11.2.3 pursuant to which on or before the Business Day prior to issuance of such declaration, the Knowledge Persons have or have not become aware that any of the Sellers' Guarantees, to the extent they refer to the Closing Date, turned out to be inaccurate in any material respect after the Signing Date (" Bring Down Declaration "). For the avoidance of doubt, the Bring Down Declaration shall not affect the rights and obligations of the Sellers



	43

in any way whatsoever hereunder and it shall, in particular, not create any additional liability or extend any existing liability of the Sellers nor shall it create any liability of the Knowledge Person in question. The liability of the Sellers to the Buyers or any subrogee shall be governed exclusively by the provisions of this Agreement.


11.3	Limitation of Sellers' Liability

11.3.1

Subject to sub-clauses 11.8 and 12.8.1, the Sellers' total liability in respect of any and all Relevant Claims (including all costs, fees and expenses incurred by the Buyers in seeking to enforce their rights) shall not exceed an aggregate amount of EUR1.00 (one euro) (" Liability Cap "), and the Buyers agree and accept that their only recourse (if any) in respect of any and all such Relevant Claim shall be under the W&I Insurance Policy.

11.3.2

The Buyers acknowledge and agree that the Liability Cap referred to in sub-clause 11.3.1 shall apply notwithstanding any subsequent non-payment under the W&I Insurance policy including without limitation due to the insolvency of the underwriters of that policy, the policy exclusions or exceptions, or the invalidity of the policy due to the breach or default of any person or for any other reason (save in respect of fraud ( Betrug ), malicious deceit ( arglistige Täuschung ) or intentional misconduct ( Vorsatz ) of a Seller).


11.3.3	In order to enable the Sellers to assess the merits of a claim, the Buyers shall notify the Sellers of the Relevant Claim stating in reasonable detail the nature of the Relevant Claim and the amount claimed (detailing to the extent possible the Buyers' calculation of the loss thereby alleged to have been suffered).

11.3.4

In respect of a Relevant Claim, the Buyers shall not be entitled to claim against the Sellers any punitive damage, loss of profit ( entgangener Gewinn ) other than rental income, unforeseeable consequential damages or internal administrative costs (overhead), frustrated expenses ( vergebliche Aufwendungen ), loss of opportunity ( entgangene Geschäftschancen ), loss of reputation and loss of future earnings (other than rental income) and provided that the calculation of damages shall not be based on multipliers applied for a calculation of the Purchase Price or any other arguments that the Purchase Price was calculated on incorrect assumptions.


11.3.5	The Buyers undertake to take, so far as within their control, reasonable steps to avoid or mitigate any damages or losses which in the absence of mitigation are reasonably likely to give rise to a liability in respect of any Relevant Claim. Further obligations of the Buyers under section 254 BGB shall remain unaffected.

11.3.6

The Sellers shall not be liable to the extent the Buyers (or one of them) have caused or contributed to causing by an act or an omission of the Buyers (or any of them) – in a culpable and imputable manner ( schuldhaft zu vertreten ) – the relevant damage or losses or have failed to avoid or mitigate – in a culpable and imputable manner ( schuldhaft zu vertreten ) – such losses and such failure has affected the ability of the Sellers to avoid or mitigate damages, losses or claims.



	44

11.3.7

The Buyers are not entitled to recover more than once in respect of the same loss arising from any one matter giving rise to a Relevant Claim. In particular, the Sellers shall not be liable for, and the Buyers shall not be entitled to claim for, any damages of the Buyers under or in connection with this Agreement if and to the extent that the matter to which the claim relates is included as liability, provision, or asset correction ( aktivistische Wertberichtigung ) in the Closing Date Accounts and has thus been reflected in the Purchase Prices.


11.4	Exclusion of Claims due to Buyers' Knowledge


11.4.1	The Buyers shall not be entitled to bring any Relevant Claim that is a result of facts or circumstances of which (i) the Buyers (or either of them) had Buyers’ Knowledge on the Signing Date after having made due and diligent enquiries of its advisers or which (ii):

(a)

Have been Fairly Disclosed in the Data Room prior to 5 November 2018 (" Cut-Off-Date "), the Q&A process, this Agreement or an Annex to it. " Fairly Disclosed " shall mean any disclosure in the Data Room enabling a sophisticated purchaser and its sophisticated advisors with experience in the acquisition of commercial real estate investments to find such information with reasonable efforts to reasonably understand the nature and scope of the relevant matter; or


(b)	Was or would have been identifiable ( erkennbar ) during site visits that the Buyers were allowed to undertake with their service providers, professional advisers or investors; or


(c)	Have been disclosed during telephone discussions with the Buyers' advisors prior to the Signing Date; or

it being confirmed by the Buyers that they had been given the opportunity to undertake a thorough due diligence with regard to the Target Companies and its business, assets (including the Real Property) and liabilities.

11.4.2

The information provided to the Buyers in the Data Room and the Q&A process up to the Cut-Off-Date have been saved on a DVD, a copy of which was handed over to each of the Sellers, the Buyers and the Notary together with a letter of the Data Room Provider confirming that the DVD contains an identical copy of the information provided in the Data Room as of the Cut-Off-Date. The Notary will take his copy of the DVD into custody until 31 December 2020. Thereafter, the Notary shall destroy the DVD. The Notary shall only release the DVD upon the unanimous request of all Parties, but each Party may at its own cost request at any time before, copies of such DVD.


11.4.3	In this Agreement, references to the " Buyers’ Knowledge " or similar phrases shall mean solely the actual knowledge ( positive Kenntnis ) and/or the negligent non-knowledge ( fahrlässige Unkenntnis ) of the individuals listed in Annex 11.4.3 as of the Signing Date.



	45


11.5	Limitation Periods

Subject to sub-clauses 11.8 and 12.8.2, all Relevant Claims of the Buyers shall automatically become time-barred ( verjähren ) on the expiration of two (2) years from the Closing Date for Fundamental Warranties and the expiration of one (1) year from the Closing Date for all other Relevant Claims. " Fundamental Warranties " shall mean the warranties set out in sub-clauses 10.2.1(a) to 10.2.1(f) and sub-clauses 10.2.3(a), 10.2.3(b) and 10.2.3(c).


11.6	Exclusion of Further Remedies

To the extent permitted by law, any further claims and remedies of the Buyers in connection with a Relevant Claim (including all termination and withdrawal rights) other than explicitly provided for in this Agreement are hereby expressly waived and excluded.


11.7	Exclusion or reduction of Buyers' Claims

Any payments actually made by the Sellers in order to discharge a liability, which is or becomes excluded or reduced under this Agreement, shall be refunded by the Buyers to the Sellers without undue delay ( ohne schuldhaftes Zögern ), but in any event within ten (10) Business Days after the Buyers or any entity affiliated with the Buyers pursuant to sections 15 et seq. AktG becoming aware of the exclusion or reduction of the Relevant Claim. The Buyers undertake to inform the Sellers, without undue delay ( ohne schuldhaftes Zögern ), about any event which may trigger an exclusion of liability, or a refunding obligation, under this Agreement.


11.8	Limitation of exclusion of liability

11.8.1

If and to the extent that an exclusion of liability is agreed under this Agreement (including in particular the provisions set out in sub-clauses 11.3, 11.4, 11.5 and 11.8.2 sentence 2), the exclusion of liability shall not apply to damage resulting from an injury to life, limb or health the Sellers or any of its legal representatives or a person employed in performing an obligation ( Erfüllungsgehilfe ) is responsible for, nor shall such exclusion of liability apply to any obligation to provide compensation for damage caused through a wilful or grossly negligent breach of duty by the Sellers or any of their legal representatives or persons employed in performing an obligation.

11.8.2

If and to the extent that an exclusion of liability is agreed under this Agreement (including in particular the provisions set out in sub-clauses 11.3, 11.4, 11.5 and 11.8.2 sentence 2), such exclusion of liability shall not apply to any liability for damage resulting from a breach of a material contractual duty. However, the Sellers may only be held liable for damage which is typical and foreseeable at the time this Agreement is concluded. Material contractual duties are duties on the performance of which the Buyers may rely as essential.


11.9	Security for certain claims

In order to secure Buyers' claims against the Sellers



	46


11.9.1	for uninsurable Tax Warranties and Tax Indemnities in accordance with sub-clause 12.8.3; and


11.9.2	for breaching the obligations under sub-clauses 15.1.5(b) and 15.1.5(c),

the OpCo Seller and the Buyers undertake to agree on the terms of a pledge in relation to the Symbol V Seller PECs (which for this purpose shall always be valued at face value of EUR 5,000,000) to be executed as a closing action to the Buyer 1 and the Buyer 2 as joint and several creditors. The details of the pledge agreement, which shall be subject to Luxembourg law, shall be negotiated by the Parties in good faith (taking into account the requirements of the W&I insurance, if applicable) without undue delay after the Signing Date.


12.	TAX


12.1	Definitions

For the purposes of this Agreement

" Pre-Closing Date Period " means any time period until and including the Effective Time.

" Pre-Closing Date Tax " means any Tax imposed on any Target Group Company for, or with respect to any taxable event having occurred in the Pre-Closing Date Period. For purposes of calculating Pre-Closing Date Taxes attributable to a time period (e.g. a fiscal year ( Wirtschaftsjahr ) or a calendar year) starting before and ending after the Closing Date any such time period will be deemed to have ended on and including the Effective Time.

" Pre-Closing Date Tax Refund " means any Tax Refund attributable to the Pre-Closing Date Period. For purposes of calculating Pre-Closing Date Tax Refunds attributable to a time period (e.g. a fiscal year ( Wirtschaftsjahr ) or a calendar year) starting before and ending after the Closing Date any such time period will be deemed to have ended on and including the Effective Time.

" Relevant Tax Proceeding " means any Tax Proceeding (i) relating fully or partly to Pre-Closing Date Taxes or Pre-Closing Date Periods or (ii) which could give rise to rights or obligations of any party to this Agreement under this Clause 12.

" Tax " means (i) any tax and ancillary charges ( Steuer und steuerliche Nebenleistungen ; for the avoidance of doubt including but not limited to interest and penalties) within the meaning of section 3 of the German Tax Code ( AO ) or any equivalent tax under the laws of any other jurisdiction, including, but not limited to (ii) any taxes to be withheld or paid for the account of a third party ( Steuerabzugsbeträge ), such as (in particular but not limited to) capital withholding or wage taxes ( Kapitalertrag- und Lohnsteuer ) and any taxes imposed as a contractual or secondary liability ( Steuerhaftungsbeträge ), (iii) Real Property transfer taxes ( Grunderwerbsteuer ) and (iv) social security contributions ( Sozialversicherungsbeiträge ), but excluding in any case, for the avoidance of doubt, deferred taxes.

" Tax Asset " means any Tax Refund and Tax Credit.



	47

" Tax Authority " means any competent German or non-German authority responsible for the collection, audit or assessment of Taxes or for the assessment of the Tax base or elements thereof.

" Tax Credit " means an amount of money which could be subtracted from the amount of Tax owed to a Tax Authority.

" Tax Proceeding " means any administrative and judicial proceeding or action relating to Taxes including preparatory measures e.g. preparation of Tax Returns, Tax assessments, Tax audits, objections, appeals, meeting and correspondence with any Tax Authority and courts.

" Tax Refund " means any actually received repayment of any Tax (including – but not limited to – by way of set-off or deduction) and any other claim for a Tax payment from the Tax Authority.

" Tax Return " means any return, declaration or similar document relating to any Tax and to be submitted to any Tax Authority, including any schedule or attachment thereto as well as any supporting documentation and calculation which needs to be maintained by the relevant Tax payer.


12.2	Tax Warranties

12.2.1

The Sellers hereby represent and warrant to the Buyers, subject to the limitations provided for in this Clause 12, by way of an independent promise of guarantee ( selbständiges Garantieversprechen ) within the meaning of section 311 para. 1 BGB that the statements made in sub-clause 12.2 (each a " Sellers' Tax Guarantee ") are true and correct on the Closing Date or such other date explicitly so provided in sub-clause 12.2, respectively:


(a)	The Target Companies have made all Tax Return filings that they are obliged to make until the Closing Date (considering all deadline extension granted, if any) with the Tax Authorities; and


(b)	All Taxes payable by any Target Company relating to the Pre-Closing Date Period have been paid by the respective Target Company or have been fully accrued for in the Closing Account.

12.2.2

If, and to the extent that a statement under any of the Sellers' Tax Guaranty is untrue, the Buyers shall have the right to attempt to put Buyers or the Target Companies (at the discretion of the Buyers) in such position as the Buyers or Target Companies would have been in, had the Sellers' Tax Guaranty given by the Sellers' been correct. Upon the Buyers election the Sellers shall pay to the Buyers the amount which is necessary to indemnify the Buyers from any Taxes and cost triggered by the breach of the relevant Sellers' Tax Guarantee.


12.3	Tax Indemnification


12.3.1	The Sellers shall pay to the Buyers or, at the Buyers' discretion, to the respective Target Company, an amount equal to any Pre-Closing Date Tax payable by any



	48

of the Target Companies after the Effective Time. The Buyers shall not be entitled to an indemnification against a Pre-Closing Date Tax if and to the extent that Pre-Closing Date Taxes


(a)	have been paid on or before the Effective Time;


(b)	reduced the Purchase Price;


(c)	are caused by a measure initiated or executed by the Buyers or – after the Closing Date – by any of the Target Companies unless such measures are mandatorily required by applicable law or a compulsory consequence of an action of the Target Companies made on or prior to Closing;


(d)	have been or could be recovered by the Target Companies from a party other than a Target Company; or

(e)

correspond to or can be offset against (i) a Tax Asset or (ii) other Tax related benefit in each case which can also arise at a different type of Tax and which is based on a circumstance having triggered the Pre-Closing Date Tax, including but not limited to reciprocal effects ( Wechselwirkungen ) resulting e.g. from the extension of depreciation periods or higher depreciation allowances ( Phasenverschiebung ) or from transfer of items relevant for Taxes (e.g. turnover, income, expenses, VAT payable corresponding with a VAT refund etc.) into another calendar year or transfer of Tax items from one entity to another entity any such reciprocal effects after the Effective Time shall also be taken into account; the respective tax benefit shall be calculated independently from the actual tax savings on a pro forma basis taking into account the future reductions in Tax (based on the applicable Tax rates as known at the time of calculation) for a period in which the tax benefit materializes, at maximum 6 years following Closing Date and discounted with an interest rate of 5.5% p.a.

12.3.2

Any payment to be made by the Sellers pursuant to sub-clause 12.3.1 (" Indemnifiable Tax ") is due ten (10) Business Days after the Sellers have been notified in writing by the Buyers about the payment obligation and the corresponding payment date and have received a copy of the underlying Tax assessment or payment order and the bank account details of the competent Tax Authority, but in any case no later than two (2) Business Days before the date at which the Tax to be indemnified is due and payable to the Tax Authority.

On written request of the Sellers the Buyers shall procure that the respective Target Company makes its reasonable efforts to achieve a deferred payment date, in particular but not limited to the application for a suspension of enforcement of tax payment obligation ( Aussetzung der Vollziehung ) or equivalent application in foreign jurisdictions provided that the Sellers undertake to reimburse any costs and all interest related thereto occurred by the respective Target Company relating to such deferred payment.



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12.4	Understated Tax refund claims, over-accruals and over-indemnification


12.4.1	The Buyers shall – unless and not to the extent that the amount has already excluded or reduced the indemnification pursuant to sub-clause 12.3.1 – pay to the Sellers an amount equal to


(a)	any Pre-Closing Date Tax Refund actually received (including by way of deduction or set-off) by any Target Company after the Effective Time unless and not to the extent that the Pre-Closing Date Tax Refund has increased the Purchase Price in accordance with sub-clauses 6.1 or 6.2; and

(b)

any accrual or liability in respect of a Pre-Closing Date Tax that has been dissolved or must have been dissolved under the respective German GAAP (other than for reasons of payment or discharging the related claim to such Tax) to the extent that the accrual or liability has reduced the Purchase Price in accordance with sub-clause 6.1 or 6.2 but has not reduced Sellers' payment obligation pursuant to sub-clause 12.3.1 (" Over-Accrual "); and


(c)	the Indemnifiable Tax paid by the Sellers to the Buyers pursuant to sub-clause 12.3.1 to the extent that the relevant Tax is subsequently assessed at a lower amount (" Over-Indemnification ");

including all interest related thereto.

12.4.2

The Buyers shall, and shall procure that the Target Companies shall, no later than five (5) Business Days notify the Sellers in writing (for the avoidance of doubt including by email) about any Pre-Closing Date Tax Refund, Over-Accrual and Over-Indemnification. The Sellers are entitled to appoint certified accounting firm at their own expense – to have the tax assessments regarding any Pre-Closing Date Tax Refund, Over-Accrual and Over-Indemnification reviewed and to report the results to the Sellers. If the Sellers have reason to believe that there is a claim under this sub-clause 12.4 and if the review discloses a breach of the obligation of the Buyers under this sub-clause 12.4.2 sentence 1 then the Buyers shall bear the reasonable costs for the review and the report.

12.4.3

Any amount payable to the Sellers pursuant to this sub-clause 12.4 shall be due and payable ten (10) Business Days after (i) the Pre-Closing Date Tax Refund has been actually refunded (including – but not limited to – by way of set-off or deduction) to the Buyers or one of the Target Companies, (ii) any Overprovision has been or must have been dissolved according to German GAAP or (iii) any amended Tax assessment giving rise to the Over-Indemnification has become final and binding.


12.5	Tax Returns


12.5.1	In the period between the date hereof and the Closing Date, the Sellers will procure that (i) Tax Returns of the Target Companies shall be prepared and filed within the time limitation provided by law (considering all deadline extensions



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granted) and (ii) all Taxes payable under such Tax Returns are paid within the time limitation provided by law.

12.5.2

After the Closing Date, the Buyers shall procure that the Target Companies prepare and file when due all their Tax Returns in line with past practice unless mandatory tax law or administrative guidance provides otherwise. Any Tax Returns relating to any Relevant Tax Proceeding shall be subject to the review and written consent of Sellers. The Buyers shall procure that no such Tax Return is submitted to any Tax Authority without written approval of the Sellers which shall not be unreasonably withheld. The Buyers shall ensure that any Tax Return to be reviewed and approved by the Sellers will be sent to the Sellers not later than thirty (30) Business Days prior to the due filing date of the relevant Tax Return and that all Taxes payable under such Tax Returns shall be paid in a timely manner.


12.6	Tax Proceedings after Closing

12.6.1

The Buyers shall notify the Sellers of any announcement and commencement of any Relevant Tax Proceeding. The notification shall be made in writing (for the avoidance of doubt e.g. by email) no later than five (5) Business Days after the Buyers or any Target Company became aware of such event and shall include copies of any assessment, notice or other document received from any Tax Authority related to the respective Relevant Tax Proceeding.

12.6.2

The Buyers shall, and shall procure that the relevant Target Company shall, (i) give the Sellers the opportunity to reasonably participate from the beginning on in all Relevant Tax Proceedings from their commencement onwards, (ii) upon the Sellers' request and at their own costs and risk, challenge and litigate any Tax assessment or other decision of any Tax Authority or court if and to the extent it is related to a Tax to be indemnified or a Tax Asset of the Seller and (iii) comply with any lawful instructions given by the Sellers in relation to the conduct of the Tax Proceedings referred in (i) and (ii) above. If the Sellers elect by a written request to lead the Relevant Tax Proceedings through a professional German counsel (international law or accounting firm) of their choice and at their expense, then the Buyers shall, to the extent legally possible, authorize, and shall cause the respective Target Companies to authorize, (by power-of-attorney) such a designated representative of the Sellers to represent the respective Target Companies in the Relevant Tax Proceeding and to release such representative from any confidentiality obligations in respect of the Relevant Tax Proceeding so that it can share any information in respect of the Relevant Tax Proceeding with the Sellers. In any case the Buyers shall procure that after the Closing Date, with respect to a Tax audit unless the Sellers have elected not to lead the relevant Tax proceeding, (i) no document or information related to Pre-Closing Date Taxes or Relevant Tax Proceedings is submitted to any Tax Authority or court without the prior written consent of the Sellers, which shall not be unreasonably withheld, and that (ii) no Relevant Tax Proceeding is settled or becomes time-barred without the prior written consent of the Sellers.


12.6.3	For the avoidance of doubt, the rights of the Sellers and any of its representative pursuant to sub-clause 12.6.2 shall be limited to the taxation of business



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transactions ( Geschäftsvorfälle ) occurred in a Pre-Closing Date Period for which the Sellers can be liable pursuant to sub-clause 12.2. In any case the Sellers shall procure that after the Closing Date (i) no document or information related to solely to Taxes or Relevant Tax Proceedings after the Closing Date is submitted to any Tax Authority or court without the prior written consent of the Buyers, which shall not be unreasonably withheld, and that (ii) no Relevant Tax Proceeding relating to the calendar year in which Closing occurs is settled or becomes time-barred without the prior written consent of the Buyers.

12.6.4

Subject to the limitation under sub-clause 12.6.2, the Parties shall reasonably cooperate with each other, and the Buyers shall cause the Target Companies and their representatives to reasonably cooperate with the Sellers and the Sellers shall reasonably cooperate with the Buyers and their representatives and the Target Companies, each with respect to all Relevant Tax Proceedings. Upon request of the Sellers, the Buyers shall in particular procure that the Sellers obtain any document or information which is reasonably required for the Seller to avoid or reduce any Tax which creates a liability under this Clause 12, to protect a Tax Asset of one of the Sellers provided that the respective document or information is reasonably accessible for one of the Target Companies or the Buyers or can be procured by them with reasonable efforts on the costs of the Sellers. Any reasonable out of pockets costs caused by such information procurement on request of the Sellers will be borne by Sellers. The Buyers or the respective Target Company shall store all records, documents and information relating to Relevant Tax Proceedings until the expiration of any applicable statute of limitations.

12.6.5

On request and at the expense of Seller 1 the Buyers shall procure that the Target Companies provide any reasonable information and document to Seller 1 required for US tax or accounting purposes not later than thirty (30) Business Days after such a request. The Buyer and/or the Target Companies are free to consult advisors, at reasonable costs to be borne by the Sellers, bound by professional obligations of confidentiality in the context of fulfilling any of its obligations under this sub-clause 12.6.5.


12.7	Non-compliance of Buyers

If and to the extent the Buyers fail to comply with an obligations under this Clause 12 or if and to the extent the Buyers or – after Closing – a Target Company breach an obligation to mitigate damages in accordance with section 254 BGB, the Sellers shall not be liable under this Clause 12.


12.8	Limitations


12.8.1	For the avoidance of doubt, Clause 11 shall also be applicable to claims of the Buyers, subject, however, to sub-clauses 12.8.2 and 12.8.3.


12.8.2	Any claim under this Clause 12 (including for the avoidance of doubt also any claim pursuant to sub-clause 12.3.2) shall become time-barred ( verjähren ) the earlier of (i) six (6) months after the relevant Tax assessment became binding and non-amendable (taking into account any suspension provision ( Anlauf- und



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Ablaufhemmungen )), (ii) six (6) months after the Sellers have been notified in writing by the Buyers that they have a specific claim under this Clause 12 and (iii) four (4) years after the Closing Date and (iv) the closing of a potential on-sale of the shares in the PropCo or the Real Property.

12.8.3

The Parties understand that certain Tax Warranties and Tax Indemnities may not be covered by the Buyers’ W&I Insurance. Against this background the Parties agree the limitation pursuant to sub-clause 11.3.1 shall apply to all claims under Clause 12 other than to those Taxes and periods which are listed in Annex 12.8.3 (" Excluded Tax Claims "). The Sellers’ aggregate total liability in respect of the Excluded Tax Claims shall be the lower of the amount of the available Symbol V Seller PECs (i.e. the Symbol V Seller PECs, which for this purpose shall be valued at face value of EUR5,000,000.00, minus any Symbol V Seller PECs already enforced as security under this Agreement if applicable) and an amount of EUR5,000,000.00.


13.	PERIOD BETWEEN SIGNING DATE AND CLOSING DATE


13.1	Merger control


13.1.1	The Buyers have informed the Sellers that the Buyers are subsidiaries of a newly established fund which is not controlled by a third party and that currently does not hold any other fund or subsidiary, and that as a consequence, no turnover (which would be relevant for the merger control thresholds) can be attributed to the Buyers for the time prior to Closing.

13.1.2

Based on this factual information, the Sellers share the Buyers' assessment that there is no necessity to institute merger control proceedings for clearance of the acquisition of all Sold Shares and the Sold Symbol V Shares by the Buyers under section 35 et seq. Act Against Restraints on Competition ( Gesetz gegen Wettbewerbsbeschränkungen , " GWB ") or any applicable European merger control provisions.

13.1.3

The Sellers have relied on the factual information given by the Buyers (see sub-clause 13.1.1) in this respect. The Buyers shall indemnify, defend and hold harmless the Sellers and their affiliates and their respective officers, directors, representatives and investors from and against any liabilities, costs, penalties, fees and payments incurred in relation to sanctions imposed because of a failure to comply with applicable merger clearance requirements resulting from the inaccuracy of the above factual information. Section 254 BGB shall apply mutatis mutandis.


13.2	Other undertakings


13.2.1	Between the Signing Date and the Closing Date, the Sellers shall procure, to the extent permissible under applicable law, that the Target Companies conduct their respective business operations and conduct and undertake the management of the Real Property in the ordinary course consistent with past practice.



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13.2.2	In particular, the Sellers shall not during that time with effect beyond the Closing Date (unless permitted pursuant to this Agreement):


(a)	Issue any share capital or similar interest to any third party or make any other changes to the Target Companies' capital structure;


(b)	Amend the articles of association of the Target Companies or enter into a domination/profit and loss transfer agreement;


(c)	Liquidate, unwind, or merge the Target Companies.


13.2.3	The Sellers shall procure that the Target Companies do not during that period and with consequential effect beyond the Closing Date (unless allowed pursuant to this Agreement):


(a)	Enter into any agreements with the Sellers and their Affiliates (other than expressly provided for in this Agreement);


(b)	Acquire, dispose of, or encumber any fixed assets outside the ordinary course of business or other than on arm's length conditions, in particular any sale, disposal or encumbering of the Real Property or any agreement to do so;


(c)	Take out any loans or comparable instruments from third parties;


(d)	Extend any loan to any third party outside the ordinary course of business;


(e)	Conclude, terminate or amend any Lease Agreement or new lease;


(f)	Acquire (in any manner whatsoever) any shares or other securities in any corporation, company or partnership;


(g)	Give any guarantee or other security to secure any liability of any third party;


(h)	Distribute profits, repay share capital, other payments or other benefits to the Sellers or affiliated companies of the Sellers (except the Target Companies), save in the case of the Symbol V Shareholder Loan and Upstream Loans or otherwise provided for in this Agreement;


(i)	Enter into agreements with the Sellers or with affiliated companies of the Sellers other than as contemplated by this Agreement; and


(j)	Enter into any agreement or commitment to do any of the above;

in each case unless reasonably required due to an emergency situation or carried out with the prior written consent (email being sufficient) of the Buyers (not to be unreasonably withheld or delayed) or in line with the other provisions of this Agreement.



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13.2.4	Notwithstanding anything in this Agreement, the Sellers shall be entitled, but not obliged (unless otherwise expressly set out herein) to take all emergency action which in its reasonable opinion is required to be taken in case damage occurs on the Real Property between the Signing Date and the Closing Date.

13.2.5

To the extent permitted under the relevant insurance contracts, the Sellers will cause the Target Companies to terminate, with effect as at the Closing Date, the insurance contracts entered into by them and listed in Annex 10.2.6(a) . The Buyers shall, prior to the Closing Date, provide suitable written evidence to the Sellers that the Target Companies are properly insured as from the Closing Date.


13.3	Deterioration

13.3.1

If any deterioration in the condition of the Real Property should occur between the Signing Date and the Closing Date which either (i) falls within the limits of normal wear and tear, or (ii) is only discovered later than three (3) weeks after the Closing Date or (iii) does not trigger remediation costs in excess of EUR1,000,000, the Sellers shall not be held liable for such deterioration and no liabilities or any other deductions in relation to such deterioration (including the corresponding insurance claims) shall be reflected in the Closing Date Accounts and shall instead be ignored.

13.3.2

If any deterioration in the condition of the Real Property should occur between the Signing Date and the Closing Date which is (i) beyond the limits of normal wear and tear, and (ii) is discovered within three (3) weeks after the Closing Date and (iii) triggers remediation costs in excess of EUR1,000,000, the Sellers shall, subject to sub-clause 13.3.3 below, be obliged in their absolute discretion to either


(a)	Remediate the deterioration in a way consistent with past practice by using reputable firms without undue delay after the deterioration is discovered; or


(b)	Agree to compensate for the reasonably expected costs of remediation of such deterioration by the inclusion of corresponding liabilities or other appropriate deductions in relation to such deterioration in the Closing Date Accounts (leading to a corresponding Purchase Price reduction).


13.3.3	If and to the extent any deterioration in the condition of the Real Property is covered by insurance:


(a)	In the event of sub-clause 13.3.2(a), the Buyers shall ensure that the respective insurance proceeds are paid to the Sellers up to the amount that they incur for the remediation; or


(b)	In the event of sub-clause 13.3.2(b), no liabilities or other deductions in relation to such deterioration shall be made in the Closing Date Accounts and shall be ignored.



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13.3.4

If, according to reasonable expert assessment ( nach vernünftiger sachverständiger Einschätzung ), the amount for which the Sellers are liable pursuant to sub-clause 13.3.2 exceeds an amount of 7.5% of the Fixed Property Value, either Party shall be entitled to terminate this Agreement by written notice to the other Parties. The termination right can only be exercised within twenty (20) Business Days following the damaging event. The Sellers shall be entitled to prevent the termination if they notify the Buyers in writing within twenty (20) Business Days of receipt of the termination notice from the Buyers that they will remedy or compensate for the damage as set out in sub-clause 13.3.1. Sub-clauses 7.4.3 and 7.4.6 shall apply to this termination right.


14.	INDEMNIFICATIONS


14.1	Indemnification

To the extent that after the Closing Date a Target Company (including an insolvency administrator appointed over the assets of the relevant Target Company) raises a claim against one of the Sellers, their affiliates and/or their respective officers, directors, representatives and/or investors which is due to action taken prior to the Closing Date and has not been activated in the Closing Date Accounts or otherwise been agreed for compensation by the Sellers in this Agreement, the Buyers shall hold harmless and indemnify the Sellers and their affiliates and their respective officers, directors, representatives and investors from any such claim as well as any costs, damages, losses, undertakings, liabilities, penalties, fees, payments (incurred, borne or made) and expenses incurred in connection therewith. The Parties agree by way of an agreement in favour of third parties ( echter Vertrag zu Gunsten Dritter ) in the meaning of section 328 of the BGB that sentence 1 of this sub-clause 14.1 shall apply mutatis mutandis in the event that a Target Company raises a claim against any Affiliate of the Sellers or any director, manager or officer of any of the Sellers or its Affiliates.


14.2	No Claims by Sellers

Unless activated or reflected in the Closing Date Accounts or otherwise agreed or referred to in this Agreement, the Sellers hereby undertake to waive or instruct their Affiliates or their managers, directors or officers to waive, upon the Buyers’ respective written request, any and all claims they or their Affiliates or their managers, directors or officers might have against the Target Companies which relate to any circumstances prior to the Closing Date.


14.3	Access to Financial Information

The Buyers shall procure that after the Closing Date the Sellers and their representatives are given access to, and are allowed to make copies of:


14.3.1	The books of accounts of the Target Companies for any fiscal years and parts of fiscal years until the end of the month following the Closing Date;


14.3.2	Any other financial information of the Target Companies required to achieve the deconsolidation on the Closing Date or the end of the month following the Closing Date, as the case may be; and



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14.3.3	Any books and records of the Target Companies as the Sellers may reasonably require for their own auditing, tax and other reasonable purposes in connection with the tax or regulatory requirements of the Sellers.


15.	PASS-THROUGH ITEMS


15.1	FLS Remediation Works/Settlement Agreement

15.1.1

The former owner of the PropCo, DekaBank Deutsche Girozentrale (" DEKA "), undertook to remedy certain fire, life and safety shortfalls as set out in more detail in Annex 15.1.1a (" FLS Remediation Works "). Prior to the purchase by the PropCo Sellers, in order to carry out and supervise the FLS Remediation Works, PropCo and DEKA entered into an implementation agreement whereby Deka Immobilien GmbH assumed the role of a general contractor with full responsibility for success ( Generalübernehmer ). Between the former sellers of the shares in PropCo and inter alia the PropCo Sellers and Symbol V in the sale and purchase agreement dated 11/12 June 2015, roll of deeds no. 519/2015W of notary Christian Wicker, Frankfurt a. M. (" Acquisition Agreement "), an escrow account was established to secure compensation claims against the former sellers for any claims by contractors against PropCo for the FLS Remediation Works. An excerpt of the regulations under the Acquisition Agreement governing the FLS Remediation Works and the escrow mechanism is attached as Annex 15.1.1b . Substantially all FLS Remediation Works have meanwhile been completed but not yet fully accepted ( abgenommen ), as set out in more detail in Annex 15.1.1a .

15.1.2

The PropCo Sellers and Symbol V are currently in negotiations of a settlement agreement on behalf of PropCo with DEKA and Deka Immobilien GmbH providing for a final settlement of all rights, obligations and liabilities in connection with the FLS Remediation Works and the release of the escrow amounts by the Sellers to DEKA or the sub-contractors (" Settlement Agreement "). The current draft of the Settlement Agreement is attached as Annex 15.1.2 . The Sellers confirm that the other constructional matters (modernization of elevators and fit-out works for Deutsche Bundesbank have been finalized and all related rights and claims been settled).

15.1.3

The PropCo Sellers and Symbol V undertake to make all reasonable ( zumutbare ) efforts to finalize the negotiations of the Settlement Agreement with DEKA and Deka Immobilien GmbH and the FLS Remediation Works on behalf of the Target Companies at its own costs by 30 June 2019 (" Settlement Backstop Date ”) materially in accordance with the draft Settlement Agreement set out in Annex 15.1.2 . In doing so, the Buyers shall be entitled to inspect all correspondence between the Sellers and DEKA and attend all meetings regarding the negotiation of the Settlement Agreement. The Target Companies herewith authorize ( bevollmächtigen ) each of the Sellers to conclude, in the name and for the account of the Target Companies, the Settlement Agreement whereby the Sellers shall obtain the Buyers' consent (email being sufficient) before signing the Settlement Agreement (which consent shall not be unreasonably withheld or delayed).



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15.1.4

Should the Settlement Agreement not have become effective by the Settlement Backstop Date or should the on-going negotiations of the PropCo Sellers and Symbol V with DEKA in the reasonable assessment of the Buyers adversely affect the relationship between the Target Companies and DEKA, the Buyers shall be entitled to terminate the Sellers’ mandate for finalizing the negotiations on the Settlement Agreement and to conclude the Settlement Agreement without further involvement of the Sellers.


15.1.5	Irrespective of whether and when the Settlement Agreement is signed, the following rules shall apply:


(a)	The Parties agree that all rights, obligations, payments to be made and payments to be received in connection with the FLS Remediation Works and/or the subject matter of the Settlement Agreement, shall not be reflected as part of the Purchase Price calculation but rather be passed through between the Parties.

(b)

Accordingly, the PropCo Sellers and Symbol V shall exercise (as an obligation also vis-à-vis the Buyers) their rights and obligations under the Acquisition Agreement with respect to the FLS Remediation Works in a way to secure the due payments of any costs of PropCo with respect to the FLS Remediation Works and the receipt of all reimbursement claims of PropCo against DEKA, in each case as amended under the Settlement Agreement (if applicable). The Sellers shall reimburse PropCo without undue delay all reasonable and proven costs and expenses not reimbursed by DEKA in connection with the FLS Remediation Works or their completion and/or the Settlement Agreement. Section 254 BGB shall apply.


(c)	Conversely, the Sellers, and after Closing the Buyers, undertake to procure that PropCo assigns all claims under the Settlement Agreement (once concluded) and forward all payments received under the Settlement Agreement to the Sellers within ten (10) Business Days from receipt unless the Settlement Agreement determines a different recipient for such payments.


(d)	Upon completion of the Settlement Agreement and release of the escrow, there will be, in the Buyers’ opinion, expectedly a remaining asset in the accounting of PropCo and/or OpCo. The Parties hereby agree that Buyer 1 shall without further compensation to the Sellers assume the respective liability vis-à-vis PropCo or OpCo.


15.2	Service charge reconciliations


15.2.1	The Sellers undertake to procure the service charge reconciliation for the calendar year 2017 no later than 31 December 2018 at their own cost.


15.2.2	To the extent a tenant will be entitled to claim the recharge of over-paid ancillary costs prepayments ( Nebenkostenvorauszahlungen ) for 2017 and for 2018 (up to the Closing Date), the Sellers shall reimburse PropCo for the recharge amount



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(for 2018 only pro rata temporis ). The payment shall be due within ten (10) Business Days following the issuance of the respective service charge reconciliation.


15.2.3	To the extent a tenant owes the payment of underpaid ancillary costs, the Buyers shall procure that the Target Companies use all reasonable endeavours to collect such claims and forward such payment to the Sellers within ten (10) Business Days of receipt from the tenant.


15.2.4	The pass-through mechanism pursuant to sub-clause 15.2.2 and 15.2.3 shall not apply to service charges relating to calendar years up to (and including) 2017 which shall remain for the account of the PropCo.


15.2.5	For the avoidance of doubt, service charge reconciliations shall not in any event be included or reflected in the Closing Date Accounts. Service charge reconciliations include all receivables or other assets to tenants and provisions or liabilities from tenants in connection with service charge settlements or estimations.


16.	MUTUAL GUARANTEES, COVENANTS AND INDEMNITY


16.1	Mutual Guarantees

The Buyers hereby guarantee to the Sellers, and the Sellers hereby guarantee to the Buyers, respectively, (each for purposes of this Clause a " Relevant Party ") by way of an independent promise of guarantee ( selbstständiges Garantieversprechen ) that the statements set forth in this sub-clause 16.1 are true and correct as of the Signing Date and the Closing Date.


16.1.1	The Relevant Parties have the right, full corporate power and authority, and have taken all action necessary, to execute, deliver and exercise their rights and perform their obligations under this Agreement and each document to be executed at or before Closing to which it is expressed to be a Party (" Completion Documents ").


16.1.2	The Relevant Parties' obligations under this Agreement and the Relevant Parties' Completion Documents are, or when the Relevant Parties' Completion Document is executed will be, enforceable against the Relevant Parties in accordance with their respective terms and constitute legal valid and binding obligations on the Relevant Parties in accordance with the Relevant Parties' Completion Document.


16.1.3	There is no action, suit, investigation or proceeding pending against, or threatened against or affecting the Relevant Parties before any court or arbitrator or any governmental body, agency, official or other third party which in any manner challenges or seeks to prevent the transactions contemplated by this Agreement.



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16.1.4	The execution and delivery of, and the performance by the Relevant Parties of this Agreement and the Relevant Parties' Completion Documents, and the consummation of the transactions contemplated hereby will not:


(a)	Result in a breach of any provision of the memorandum or articles of association or by-laws or equivalent constitutional documents of the Relevant Parties;


(b)	Result in a breach of, or constitute a default under, any instrument to which a Relevant Party is a party or by which a Relevant Party is bound and which is material in the context of the transactions contemplated by this Agreement;


(c)	Result in a breach of any order, judgment or decree of any court or governmental agency to which a Relevant Party is a party or by which a Relevant Party is bound or submits and which is material in the context of the transactions contemplated by this Agreement; or


(d)	Require the Relevant Parties to obtain any consent or approval of, or give any notice to or make any registration with, any governmental or other authority which has not been obtained or made at the date hereof both on an unconditional basis and on a basis which cannot be revoked.

16.1.5

The Relevant Parties and their Affiliates and any Relevant Parties' affiliate in terms of the Anti-Corruption Laws have conducted their businesses in compliance with applicable Anti-Corruption Laws and have instituted and maintained policies and procedures reasonably designed to promote and achieve compliance with such laws. " Anti-Corruption Laws " means (as applicable): (a) the US Foreign Corrupt Practices Act; (b) the UK Bribery Act 2010; and (c) any other anti-corruption law or measure applicable to any of the Sellers including, without limitation, any law or measure that implements the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. In connection with the transactions contemplated in this Agreement, neither the Relevant Parties nor any director, officer, employee or other representative of a Relevant Party, any person for whose acts a Relevant Party may be vicariously liable, and any other person that acts for or on behalf of, or provides services for or on behalf of, a Relevant Party, in each case, whilst acting in his capacity as such (" Agent ") has at any time taken or will take any action, directly or indirectly, in violation of Anti-Corruption Laws.

16.1.6

Neither the Relevant Parties nor any of their respective subsidiaries nor any Agent, Affiliate, any affiliate in terms of the Sanctions or any representative of a Relevant Party or other person acting on behalf of a Relevant Party or an Affiliate of the Relevant Party or any Relevant Party's affiliate in terms of the Sanctions, is an individual or entity that is, or is owned or controlled by an individual or entity that is, (i) the subject to or the target of any sanctions administered or imposed by the U.S. Government (including, without limitation, the Office of Foreign Assets Control of the U.S. Treasury Department (" OFAC "), the U.S. Department of Commerce, or the U.S. Department of State), the United Nations



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Security Council, the European Union or Her Majesty's Treasury (collectively, " Sanctions "), nor (ii) located, organised or resident in a country or territory that is the subject of Sanctions (including, without limitation, Cuba, Iran, North Korea, Sudan and Syria).

16.1.7

In the performance of this Agreement, the Relevant Parties and their respective shareholders, Affiliates, and Agents, if any, will comply strictly with, and maintain policies and procedures which comply with, all applicable anti-money laundering and counter terrorism financing laws, rules and regulations including (i) the Directive 2005/60/EC of the European Parliament and of the Council of 26 October 2005 on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing as amended from time to time (" Directive "), and (ii) regulations which contain provisions at least equivalent to those required by the Directive.


16.1.8	The Relevant Parties, in compliance with the laws, rules and regulations referred to in sub-clause 16.1.7, shall perform procedures to verify the source of funds to be used for the fulfilment of their obligations under this Agreement and the Relevant Parties' Completion Documents.


16.1.9	The Relevant Parties are not subject of any action or proceeding by or before any court or governmental agency, authority or body or any arbitrator, involving the Relevant Party with respect to any anti-money laundering and counter terrorism financing laws, rules and regulations as referred to under sub-clause 16.1.7.


16.1.10	The Buyers, with the assistance of their advisors, have carried out comprehensive legal, tax, technical, environmental and commercial due diligence in respect of the Real Property, the Target Companies and their business and have examined and analysed all information in the Data Room and Q&A and have made other investigations as they deemed appropriate.


16.2	Additional Buyers' Guarantees

The Buyers hereby guarantee to the Sellers by way of an independent promise of guarantee ( selbstständiges Garantieversprechen ) that the statements set forth in this sub-clause 16.2 are true and correct as of the Signing Date and the Closing Date.


16.2.1	Subject to the fulfilment of the Financing CP, the Buyers have immediately available on an unconditional basis the necessary cash resources to meet their obligations under this Agreement and the Relevant Parties' Completion Documents.


16.2.2	The Buyers are not insolvent or over-indebted and no insolvency proceedings have been initiated or opened, or rejected because of a lack of assets, and no circumstances exist which would justify the initiation or opening of such insolvency proceedings.


16.2.3	The Buyers have not entered into this Agreement in reliance on any representation or warranty except the Sellers’ Guarantees set out in sub-clause 10.2 of this Agreement.



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16.3	KYC/AML

16.3.1

The Buyers undertake to provide without undue delay upon request of the Sellers (email being sufficient) any and all documents reasonably requested by the Sellers or their Affiliates to complete the Sellers' or their Affiliates' so-called " KYC/AML " procedures, including in particular and without limitation, any information and documentation required to identify the ultimate beneficial owners of the Buyers and the sources of funding of any payments to be made under this Agreement and the Completion Documents.

16.3.2

The Sellers undertake to provide without undue delay upon request of the Buyers (email being sufficient) any and all documents reasonably requested by the Buyers or their Affiliates to satisfy and complete the Buyers' or their Affiliates' so-called " KYC/AML " procedures, including in particular and without limitation, any information and documentation required to identify the ultimate beneficial owners of the Sellers and the sources of funding of any payments to be made under this Agreement and the Sellers' Completion Documents.


16.4	Remedies for a Breach of Mutual Guarantees


16.4.1	In case of a breach of a guarantee by a Relevant Party pursuant to sub-clause 16.1 or by the Buyers pursuant to sub-clause 16.2 or a violation by the Sellers or Buyers of the undertakings pursuant sub-clause 16.3, the relevant counterparty shall be entitled to claim monetary compensation of damages within statutory scope ( Schadensersatz in Geld im gesetzlichen Umfang ).

16.4.2

If the Buyers are (or one of them is) in material breach of either the guarantees pursuant to sub-clauses 16.1.6 or 16.1.7 or the undertaking pursuant to sub-clause 16.3 and such breach is not remedied or capable of being remedied within twenty (20) Business Days, the Sellers shall be entitled to terminate ( zurücktreten ) this Agreement with immediate effect by notice in writing. Sub-clauses 7.4.3 and 7.4.6 shall apply to this termination right.

16.4.3

If the Sellers are (or either of them is) in material breach of either the guarantees pursuant to sub-clauses 16.1.6 or 16.1.7 or the undertaking pursuant sub-clause 16.3 and such breach is not remedied or capable of being remedied within twenty (20) Business Days, the Buyers shall be entitled to terminate ( zurücktreten ) this Agreement with immediate effect by notice in writing. Sub-clauses 7.4.3 and 7.4.6 shall apply to this termination right.


16.5	Indemnity

The Buyers hereby undertake to fully and upon first demand indemnify, defend and hold harmless the Sellers and their affiliates and their respective officers, directors, representatives and investors from and against any claims of third parties, liabilities, costs, damages, losses, undertakings, liabilities, penalties, fees, payments (incurred, borne or made) and expenses incurred by any of them in relation to the sale of securities or any other form of equity syndication by any Buyer or affiliate of a Buyer in connection with their formation or capitalization necessary to perform their obligations under this



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Agreement. All respective persons are directly entitled under this sub-clause ( echter Vertrag zugunsten Dritter ).


17.	CONFIDENTIALITY AND ANNOUNCEMENTS


17.1	No Disclosure of Confidential Information

Each Party agrees not to disclose to any third party the economic terms contained in this Agreement, information and data furnished or made available by Sellers, their agents or representatives in connection with Buyers' investigation of the Target Companies or the Real Property or the Sold Shares or the transactions contemplated by this Agreement (collectively, the " Confidential Matters "); provided however, that each Party, its agents and representatives may disclose such information and data (i) to such Party's Affiliates and their respective direct and indirect accountants, attorneys, prospective lenders, investment bankers, underwriters, partners, members, investors (prospective and current), employees, officers, directors, consultants and advisors (collectively, " Representatives "), in each case, solely (i) to the extent that such Representatives reasonably need to know such information in connection with assisting the respective Party in connection with the transactions contemplated herein or incidental or related hereto; (ii) to the extent required by an applicable statute, law, regulation, legal process, governmental authority or securities exchange; (iii) to the extent required by the Party's reporting requirements under the rules and regulations of the Securities and Exchange Commission, including, without limitation, any necessary Form 8-K disclosure with respect to the transactions contemplated hereby or as required by any securities exchange, (iv) if in the opinion of counsel to the disclosing Party, disclosure is required to comply with any mandatory provision of law, or any directive from a government recognized stock exchange, or of a binding decision from a court or another government body, (v) with respect to generic disclosures about business of a Party or any Affiliate of a Party made in the ordinary course of business that would not reasonably be expected to identify the other Parties with the specific transaction contemplated hereby; or (vi) if required by subpoena issued in connection with any litigation or proceeding.

Confidential Matters shall not include information or data which (i) becomes public or is generally available to the public through no fault of a Buyer or its Representatives, (ii) is received by the Parties or their Representatives from a third party not known by the Parties to be subject to written or other legal restrictions of confidentiality, after making reasonable inquiry, or (iii) is independently developed by the Parties or their Representatives according to its documented records without reference to the Confidential Matters of the disclosing Party.


17.2	Announcements

Subject to Clause 21, each Party shall use reasonable efforts to notify the other of impending press releases or public announcements regarding the execution of this Agreement and Closing respectively and to obtain the approval (not to be unreasonably withheld or delayed) of the other Party prior to such press release or public announcement; provided that substantially similar press-releases shall not require additional notification or approvals. The Parties shall so far as reasonably practicable, coordinate with each other on a timely basis to achieve consistency in the factual content of any press releases.



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18.	ASSIGNMENT OF RIGHTS AND OBLIGATIONS

This Agreement and any rights and obligations hereunder may not be assigned or transferred or disposed of, in whole or in part, without the prior written consent of the other Parties hereto except for assignments and transfers to an Approved Lender or any other finance party (including any security agent or security trustee) under the Replacement Financing.


19.	TRANSFER TAXES AND COSTS


19.1	Transfer Taxes and Costs


19.1.1	Unless otherwise provided in this Agreement, all transfer taxes, including Real Property transfer taxes ( Grunderwerbsteuer ) (if any) and costs for the notarisation of this Agreement shall be borne by the Buyers, except for:


(a)	Notary fees associated with the Deposit which are covered by sub-clause 7.5.7(f) above; and


(b)	Notary and land register fees associated with the release and assignment of the Helaba Land Charges and other collateral for Helaba which are to be borne by the Sellers if and to the extent that they are not reflected in the Closing Date Accounts.


19.1.2	Each Party bears the costs for its own legal representation.


19.2	Costs of Advisors

Subject always to sub-clause 19.1 and sub-clause 19.3, each Party shall bear its own costs and expenses incurred in connection with the preparation, execution and consummation of this Agreement, including, without limitation, any professional fees, charges and expenses of its advisors.


19.3	Reimbursement

Irrespective of whether Closing occurs, the Buyers shall reimburse to the Sellers all costs and expenses incurred by the Sellers and their affiliates in connection with the preparation, execution and consummation of this Agreement, including, without limitation, any professional fees, charges, disbursements and expenses of its advisors, up to an amount of EUR2,000,000. This payment shall be due within fifteen (15) Business Days of receipt by the Buyers of written notice from the Sellers specifying the amount, but no earlier than fifteen (15) Business Days from Closing or termination of this Agreement, as the case may be. For the avoidance of doubt, payment obligations under this Clause shall not be considered as an asset in the Closing Date Accounts.


20.	NOTICES


20.1	Form of Notices

Any legal statements and other notices in connection with this Agreement (collectively " Notices ") shall be made in writing ( Schriftform ) unless notarisation or any other specific



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form is required by mandatory law. The written form shall include transmission by fax (but no other transmission by way of telecommunication) and exchange of letters. Any electronic transmission (such as by email) shall not be sufficient to satisfy the requirement that Notices must be made in writing, unless otherwise stated in this Agreement.


20.2	Notices to the Buyers

Any Notices to be delivered to the Buyers hereunder shall be addressed as follows:

Luxembourg Investment Company 271 S.à r.l.

Karoline Willot

6, rue Eugène Ruppert,

L-2453 Luxembourg

Grand Duchy of Luxembourg

Email: karoline.willot@intertrustgroup.com

and

Yolk Paragon GmbH

Andreas Grundhöfer

An der Welle 4

60322 Frankfurt am Main

Email: andreas.grundhoefer@intertrustgroup.com

with a copy to (for information purposes only):

LeeKo

Attn. Nelson Ahn/Geen Kim

Hanjin Building

63 Namdaemun-ro, Jung-gu,

Seoul 04532,

Korea

Fax: +82.2.772.4001

Email: nelson.ahn@leeko.com/Geen.kim@leeko.com

and

Allen & Overy LLP,

Attn. Dr. Jochen Scheel/Dr. Michael Ehret

Haus am OpernTurm,

Bockenheimer Landstraße 2

60306 Frankfurt am Main, Germany,

Fax: +49 (0)69 26485051

Email: jochen.scheel@allenovery.com/michael.ehret@allenovery.com



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20.3	Notices to the Sellers

Any Notices to be delivered to the Sellers hereunder shall be addressed as follows:

Colony Capital Luxembourg S.à r.l.

Attn. General Counsel Europe

6-A, route de Trèves

L-2633 Senningerberg, Grand-Duché de Luxembourg

Email: legal@clny.com / mnia@clny.com

with a copy to (for information purposes only):

Clifford Chance Deutschland LLP,

Attn. Dr. Christian Keilich/Thomas Reischauer/Dr. Philipp Stoecker

Mainzer Landstraße 46,

60325 Frankfurt am Main, Germany,

Fax: +49 (0)69 7199 4000

Email: christian.keilich@cliffordchance.com/

thomas.reischauer@cliffordchance.com/

philipp.stoecker@cliffordchance.com

and

Clifford Chance LLP,

Attn. Alis Pay

10 Upper Bank Street,

London E14 5JJ, UK,

Fax: +44 (0)20 7006 5555

Email: alisavou.pay@cliffordchance.com


20.4	Change of Address

The respective Parties shall promptly notify the other Parties in writing of any changes in any of the addresses set forth in sub-clauses 20.2 or 20.3. In the absence of such notification, the address stated above shall remain in place.


20.5	Copies to Advisors

The receipt of copies of Notices hereunder by the Parties' advisors shall not constitute or substitute the receipt of such notification by the Parties themselves, irrespective of whether the delivery of such copy was mandated by this Agreement.


21.	SEC AND KOREAN CAPITAL MARKET FILINGS


21.1	Filings and disclosure


21.1.1	The Buyers acknowledge that they have been advised that the Sellers are subsidiaries of a publicly registered company (" Listed Company "). The Buyers further acknowledge that, as a publicly registered company, the Listed Company or any subsidiary may be required to make certain filings with the Securities and



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Exchange Commission and/or public disclosures to their stockholders (collectively, " SEC Filings "). Accordingly, and notwithstanding any provision of this Agreement or the provisions of any other existing agreement between the Parties hereto to the contrary, the Sellers may publically file, disclose, report or publish any and all information related to the transactions contemplated by this Agreement that may be reasonably interpreted as being required by applicable law or regulation.

21.1.2

The Sellers acknowledge that they have been advised that the Buyers are subsidiaries of a publicly offered real estate investment vehicle (" Public REF "). The Sellers further acknowledge that, as a publicly offered real estate investment vehicle and to be listed on an exchange, the Public REF or its asset manager may be required to make (i) certain filings with the regulatory authorities and stock exchange and/or (ii) public disclosures to their investors (collectively, " Capital Market Filings "). Accordingly, and notwithstanding any provision of this Agreement or the provisions of any other existing agreement between the Parties hereto to the contrary, the Buyers and their related parties may publically file, disclose, report or publish any and all information related to the transactions contemplated by this Agreement that may be reasonably interpreted as being required by applicable law or regulation.


21.2	Cooperation

21.2.1

The Buyers agree that if after Closing the Sellers, Listed Company or any Affiliate are required to provide any financial or other information regarding the Target Companies or their assets, in each case relating to the time period up to Closing, to the SEC, the Buyers will fully cooperate with the Sellers, Listed Company or respective Affiliate in connection with the preparation of such information. Further, the Buyers agree that if the Sellers are required by applicable securities laws to provide additional items related to such information, the Buyers shall fully cooperate with the Sellers to deliver such related items. The provisions of this sub-clause 21.2.1 shall survive the Closing.

21.2.2

The Sellers agree that if after Closing the Buyers or their Affiliates are required to provide any financial or other information regarding the Target Companies or their assets, in each case relating to the time period until Closing, to the Korean regulatory authorities, the Sellers will to the extent reasonably possible after the Closing of the transaction – fully cooperate with the Buyers or their Affiliates in connection with the preparation of such information. Further, the Buyers agree that if the Sellers are required by applicable securities laws to provide additional items related to such information, the Buyers shall to the extent reasonably possible after Closing of the transaction under this Agreement fully cooperate with the Sellers to deliver such related items. The provisions of this sub-clause 21.2.2 shall survive the Closing.


22.	MISCELLANEOUS


22.1	Governing Law

This Agreement shall be governed by, and construed in accordance with, the laws of Germany but excluding the private international laws of Germany that would point to the laws of another jurisdiction and excluding the CISG.


22.2	Arbitration

Any dispute arising out of or in connection with this Agreement (except for legal disputes in connection with releases of the Deposit pursuant to sub-clause 7.5.6), including any question regarding its existence, validity or termination, or any non-contractual obligation arising out or in connection with this Agreement shall be referred to and finally resolved by arbitration under the Rules of Arbitration of the International Chamber of Commerce, which are deemed to be incorporated by reference into this Clause.

The tribunal shall consist of three arbitrators. The claimant(s) and the respondent(s) shall nominate an arbitrator respectively. The third arbitrator, who shall be the chairman of the tribunal, shall be nominated by the two party-nominated arbitrators within thirty (30) days of the last of their appointments. If the third arbitrator has not been appointed in that time (or such longer period agreed between the Parties), the third arbitrator shall be appointed by the International Court of Arbitration of the International Chamber of Commerce. The arbitrators shall be lawyers of at least 10 years' standing.

The seat of the arbitration shall be Frankfurt am Main, Germany.

The language of the arbitration shall be English.

Any award of the tribunal shall be binding from the day it is made.

Nothing in this Clause shall be construed as preventing either party from seeking conservatory or similar interim relief in any court of competent jurisdiction.


22.3	Place of Jurisdiction

The place of exclusive jurisdiction for all judicial acts relating to arbitration proceedings in accordance with section 1062 para 1 no 1 to 4 Civil Procedure Code ( Zivilprozessordnung ) is Frankfurt am Main.


22.4	Certain definitions


22.4.1	" Business Day " means a day (other than a Saturday or Sunday) on which banks are open for business in Frankfurt am Main, Luxembourg, London and New York.


22.4.2	" Affiliate " in the meaning of this Agreement shall be an affiliate within the meaning of section 15 of the German Stock Corporation Act ( AktG ).


22.5	Amendments to this Agreement



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Any amendment, supplement ( Ergänzung) or termination ( Aufhebung ) of this Agreement, including this provision, shall be valid only if made in writing, except where notarisation or any other stricter form is required by law. Sub-clause 20.1 sentences 2 and 3 shall apply mutatis mutandis .


22.6	Headings; References to German Legal Terms; Interpretation; References to Clauses


22.6.1	The headings and sub-headings of the Clauses and paragraphs contained in this Agreement are for convenience and reference purposes only. They shall be disregarded for purposes of interpretation of this Agreement.

22.6.2

Where a set of facts is to be analysed by reference to the laws of a foreign jurisdiction, any reference in this Agreement to any German legal term shall be deemed to include a reference to the equivalent ( funktionsgleich ) legal term under the laws of such jurisdiction. Where foreign law does not provide for any corresponding legal term, such legal term as functionally comes closest to the German legal term shall be used instead.


22.6.3	Where the English wording of this Agreement is followed by a German legal term set in parenthesis and in italics, the German legal term shall prevail.


22.6.4	Unless the context requires otherwise, the phrases "including", "including, in particular" and "in particular" shall be interpreted to be non-restrictive and without limitation.


22.6.5	Any reference made in this Agreement to any " Clause " or sub-clause without further indication of a law or an agreement shall mean a clause of this Agreement.


22.7	Annexes

All annexes to this Agreement (each one an " Annex ") form an integral part of this Agreement.


22.8	Entire Agreement

This Agreement constitutes the entire agreement between the Parties with respect to the subject matter covered thereby and supersedes all previous agreements and understandings, whether written or verbal, between the Parties with respect to the subject matter of this Agreement or parts thereof. There are no side agreements to this Agreement.


22.9	Severability

Should any provision of this Agreement be or become, in whole or in part, void ( nichtig ), ineffective ( unwirksam ) or unenforceable ( undurchsetzbar ), the validity, effectiveness and enforceability of the remaining provisions of this Agreement shall not be affected. Any such invalid, ineffective or unenforceable provision shall be deemed replaced by such valid, effective and enforceable provision as comes closest to the economic intent and purpose of the invalid, ineffective or unenforceable provision as regards the subject-matter, extent ( Maß ), time, place and scope ( Geltungsbereich ) of the relevant provision.



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The aforesaid shall apply mutatis mutandis to any gap ( Lücke ) that may be found to exist in this Agreement.

***

The Notary advised the persons appearing


-	that this Deed and the Reference Deed must contain all agreements of the parties with respect to the subject matter thereof, and that otherwise the agreements contained in this Deed may be null and void,


-	that any amendments to this Deed and the Reference Deed made prior to completion of the transactions contemplated under the SPA may require notarial form to be valid and binding on the Parties,


-	that he cannot give any advice on foreign law,


-	that this Deed may be subject to real estate transfer tax if real estate is sold by way of this Deed or any of the company sold by way of this Deed or a subsidiary thereof owns real estate,


-	that he was not instructed to review any tax implications of this Deed and that, therefore, no tax advice has been rendered by the Notary in connection with this Deed,


-	of his duty to provide information under § 54 German Income Tax Implementation Regulation ( EStDV ),


-	of the potential consequences of a list of shareholders that is incorrect in substance, and in particular the possibility and legal requirements of a bona fide acquisition of shares from a person who is listed in the list of shareholders, but does not hold ownership in the relevant shares,


-	that the transferor and the transferee of shares in a German limited liability company ( GmbH ) are jointly liable for unpaid contributions upon the capital of the company, and


-	that the parties to this Deed will be liable as joint and several debtors for all notarial fees by operation of law, irrespective of whatever internal agreement has been made in that respect.

***



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This notarial deed was read to the persons appearing by the Notary, was presented to the persons appearing for inspection, approved by them and signed by them and the Notary as follows:



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EXHIBIT 31.1

CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER PURSUANT TO

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

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Mahbod Nia, certify that:


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


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


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


4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) 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:	November 6, 2018	By:	/s/ MAHBOD NIA
			Mahbod Nia
			Chief Executive Officer and President

EXHIBIT 31.2

CERTIFICATION BY THE CHIEF FINANCIAL OFFICER PURSUANT TO

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

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Keith A. Feldman, certify that:


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


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


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


4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) 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:	November 6, 2018	By:	/s/ KEITH A. FELDMAN
			KEITH A. FELDMAN
			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 Realty Europe Corp. (the “Company”) for the quarterly period ended September 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mahbod Nia, as Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:


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


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



Date:	November 6, 2018	By:	/s/ MAHBOD NIA
			Mahbod Nia
			Chief Executive Officer and President

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

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

EXHIBIT 32.2

CERTIFICATION BY THE CHIEF FINANCIAL OFFICER PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of NorthStar Realty Europe Corp. (the “Company”) for the quarterly period ended September 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Keith A. Feldman, as Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:


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


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



Date:	November 6, 2018	By:	/s/ KEITH A. FELDMAN
			Keith A. Feldman
			Chief Financial Officer