Table of Contents 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 March 31, 2019 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 001-38377 COLONY CREDIT REAL ESTATE, INC. (Exact Name of Registrant as Specified in Its Charter) (State or Other Jurisdiction of Incorporation or Organization ...

[Explanatory Note](index=3&type=section&id=Explanatory%20Note) This report includes financial information for Colony Credit Real Estate, Inc. following a major combination transaction completed on January 31, 2018 - On January 31, 2018, the company completed a major business combination involving CLNY OP, RED REIT, NorthStar I, and NorthStar II[8](index=8&type=chunk)[9](index=9&type=chunk) - The contributions from Colony Capital (CLNY) were treated as a reorganization of entities under common control, leading to the recasting of prior period financial statements to reflect the consolidation of the CLNY Investment Entities[10](index=10&type=chunk) - The company's Class A common stock began trading on the New York Stock Exchange under the ticker "CLNC" on February 1, 2018[9](index=9&type=chunk) - Due to the significant changes from the Combination, period-to-period financial comparisons may not be meaningful, as the pre-combination entity (CLNY Investment Entities) represents only a portion of the post-combination assets and liabilities[11](index=11&type=chunk) [PART I](index=6&type=section&id=PART%20I) [Item 1. Business](index=6&type=section&id=Item%201.%20Business) Colony Credit Real Estate, Inc. is a commercial real estate (CRE) credit REIT, externally managed by a subsidiary of Colony Capital, focusing on a diversified portfolio of CRE loans and properties - The company is a commercial real estate (CRE) credit REIT focused on originating, acquiring, financing, and managing a diversified portfolio of CRE senior mortgage loans, mezzanine loans, preferred equity, debt securities, and net leased properties, mainly in the United States[20](index=20&type=chunk) - It is externally managed by a subsidiary of Colony Capital, a global real estate and investment management firm. Upon completion of the Combination, Colony Capital owned approximately **37% of the company's common equity**[21](index=21&type=chunk) - The company was formed on January 31, 2018, through a combination of portfolios from Colony Capital, NorthStar Real Estate Income Trust, Inc. (NorthStar I), and NorthStar Real Estate Income II, Inc. (NorthStar II)[22](index=22&type=chunk) - The company's investment strategy is dynamic and flexible, aiming to adapt to market conditions and capitalize on inefficiencies across the CRE capital stack to generate attractive risk-adjusted returns[30](index=30&type=chunk) [Our Portfolio](index=9&type=section&id=Our%20Portfolio) As of December 31, 2018, the company's portfolio consisted of 160 investments with a book value of approximately $8.4 billion, diversified across loans, CRE debt securities, and owned real estate Portfolio Composition as of December 31, 2018 (in thousands) | Asset | Count | Book value (in thousands) | Noncontrolling interest (in thousands) | Book value at our share (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Senior mortgage loans | 50 | $2,026,394 | $7,449 | $2,018,945 | | Mezzanine loans | 18 | $437,789 | $161 | $437,628 | | Preferred equity | 8 | $298,500 | — | $298,500 | | CMBS | 53 | $371,227 | — | $371,227 | | Mortgage loans held in securitization trusts | — | $2,973,936 | — | $2,973,936 | | Owned real estate-Net lease | 12 | $1,301,314 | $34,490 | $1,266,824 | | Owned real estate-Other | 13 | $792,444 | $108,127 | $684,317 | | Private equity interests | 6 | $160,851 | — | $160,851 | | **Total** | **160** | **$8,362,455** | **$150,227** | **$8,212,228** | Loan Portfolio Summary as of December 31, 2018 (dollars in thousands) | Asset | Count | Book value (in thousands) | Principal balance (in thousands) | Cash Coupon (2) | All-in unlevered yield (3) | Avg Remaining term (4) | Extended remaining term (5) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Senior loans | 50 | $2,026,394 | $2,041,235 | 6.2% | 7.5% | 1.8 | 3.7 | | Mezzanine loans | 18 | $437,789 | $526,380 | 6.7% | 10.7% | 1.8 | 3.2 | | Preferred equity | 8 | $298,500 | $242,974 | 9.9% | 10.8% | 7.1 | 7.5 | | **Total / Weighted average** | **76** | **$2,762,683** | **$2,810,589** | **6.6%** | **8.3%** | **2.4** | **4.0** | - The company recorded significant provisions for loan losses in 2018, including **$53.9 million** on four NY hospitality loans, **$36.8 million** on four loans cross-collateralized by 28 properties, and **$24.8 million** on three regional mall loans due to defaults, tenant issues, and reassessments of collateral value[53](index=53&type=chunk)[55](index=55&type=chunk)[56](index=56&type=chunk) Owned Real Estate Portfolio Summary as of December 31, 2018 (dollars in thousands) | Property Type | Book value (in thousands) | NCI (in thousands) | Book value at our share (in thousands) | % of total | Number of Properties | Total Square Feet | Weighted average % leased | Total annualized base rent (in thousands) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Net lease** | **$1,301,314** | **$34,490** | **$1,266,824** | **65.0%** | **62** | **14,177,786** | **95%** | **$79,958** | | Industrial | $774,850 | $34,490 | $740,360 | 38.0% | 47 | 11,577,199 | 96% | $47,523 | | Office | $463,097 | — | $463,097 | 24.0% | 5 | 2,132,616 | 93% | $27,036 | | Retail | $63,367 | — | $63,367 | 3.0% | 10 | 467,971 | 100% | $5,398 | | **Other** | **$792,444** | **$108,127** | **$684,317** | **35.0%** | **23** | **1,882,714** | **89%** | **$55,030** | | Office | $421,921 | $50,832 | $371,089 | 19.0% | 14 | 1,882,714 | 87% | $32,163 | | Multifamily | $252,475 | $57,019 | $195,456 | 10.0% | 6 | — | 91% | $22,867 | | Hotel | $118,048 | $276 | $117,772 | 6.0% | 3 | n/a | n/a | n/a | | **Total** | **$2,093,758** | **$142,617** | **$1,951,141** | **100.0%** | **85** | **16,060,500** | **93%** | **$134,988** | [Operating and Regulatory Structure](index=17&type=section&id=Operating%20and%20Regulatory%20Structure) The company intends to elect and maintain its qualification as a REIT for U.S. federal income tax purposes and operates to avoid registration as an investment company - The company plans to be taxed as a REIT starting with the taxable year ended December 31, 2018, which generally means it will not be subject to U.S. federal income tax on REIT taxable income distributed to stockholders[78](index=78&type=chunk) - Operations are structured to avoid registration as an investment company under the Investment Company Act of 1940, primarily by ensuring less than 40% of total assets consist of "investment securities" and by holding assets through subsidiaries that qualify for exclusions, such as Section 3(c)(5)(C) for real estate assets[79](index=79&type=chunk)[80](index=80&type=chunk)[83](index=83&type=chunk) - The company's properties are subject to federal, state, and local environmental laws regarding hazardous substances, asbestos, and mold, and it conducts environmental assessments prior to acquisitions to identify and mitigate potential liabilities[86](index=86&type=chunk)[89](index=89&type=chunk) [Item 1A. Risk Factors](index=21&type=section&id=Item%201A.%20Risk%20Factors) The company faces numerous risks, including dependence on its external Manager, structural limitations, real estate market volatility, financing constraints, and regulatory changes [Risks Related to Our Manager and Conflicts of Interests](index=21&type=section&id=Risks%20Related%20to%20Our%20Manager%20and%20Conflicts%20of%20Interests) The company's success is heavily dependent on its external Manager, Colony Capital, which presents potential conflicts of interest and a difficult, costly termination process for the management agreement - The company's success is substantially dependent on its external Manager, Colony Capital, and its key personnel, where the loss of these professionals could hinder the implementation of the investment strategy[102](index=102&type=chunk)[103](index=103&type=chunk) - Significant conflicts of interest exist because the Manager and its affiliates advise other Managed Companies with similar investment objectives, potentially leading to competition for investment opportunities[107](index=107&type=chunk)[111](index=111&type=chunk) - The base management fee is not based on performance, which could reduce the Manager's incentive to seek the most attractive risk-adjusted returns, while the incentive fee structure may encourage investment in riskier assets to increase short-term earnings[122](index=122&type=chunk)[124](index=124&type=chunk) - Terminating the Management Agreement without cause is difficult and would require payment of a substantial termination fee, equal to three times the sum of the average annual base management and incentive fees earned during the preceding 24-month period[137](index=137&type=chunk) [Risks Related to Our Company and Our Structure](index=25&type=section&id=Risks%20Related%20to%20Our%20Company%20and%20Our%20Structure) The company has a limited operating history post-Combination, and its structure, including ownership limits and Maryland law provisions, may deter changes in control - The company has a limited operating history, having been organized in August 2017 and beginning operations in February 2018 after the Combination, with a risk that anticipated benefits and synergies may not be fully realized[143](index=143&type=chunk)[144](index=144&type=chunk) - To maintain REIT status, the company's charter limits stock ownership to **9.8%** by value or number of shares, which could delay or prevent a change in control[156](index=156&type=chunk) - Certain provisions of Maryland law and the company's charter make the removal of directors difficult and may limit the ability of a third party to acquire control of the company[152](index=152&type=chunk)[157](index=157&type=chunk) [Risks Related to Our Business and Our Investments](index=28&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Our%20Investments) The company's investments are subject to inherent real estate risks, including market downturns, tenant defaults, illiquidity, and specific risks from subordinated debt, competition, environmental liabilities, and international operations - The company's CRE debt, equity, and securities investments are subject to typical real estate risks, including tenant defaults, market oversupply, lack of liquidity, and changes in economic conditions[171](index=171&type=chunk)[173](index=173&type=chunk) - Subordinated investments like mezzanine loans, B-Notes, and preferred equity carry a higher risk of loss than senior debt, as they are satisfied only after senior debt is paid in a default or bankruptcy scenario[177](index=177&type=chunk)[180](index=180&type=chunk)[192](index=192&type=chunk) - The company faces significant competition from other REITs, financial institutions, and private funds, which may have a lower cost of funds or higher risk tolerance, potentially limiting attractive investment opportunities[206](index=206&type=chunk) - International investments expose the company to foreign currency risk, political and economic instability, and different legal and tax systems, with uncertainty surrounding Brexit potentially affecting the economies of the UK and EU[246](index=246&type=chunk)[248](index=248&type=chunk)[253](index=253&type=chunk) - Potential environmental liabilities associated with properties, such as contamination from hazardous substances, asbestos, or mold, could impair investment value and expose the company to material cleanup costs and liability[230](index=230&type=chunk)[231](index=231&type=chunk) [Risks Related to Our Financing Strategy](index=39&type=section&id=Risks%20Related%20to%20Our%20Financing%20Strategy) The company's financing strategy involves significant leverage, exposing it to interest rate fluctuations, restrictive covenants, LIBOR discontinuation uncertainty, and margin call risks from short-term financing - The company's use of significant debt could increase vulnerability to adverse economic conditions, and cash flow may be insufficient to make required principal and interest payments[256](index=256&type=chunk)[258](index=258&type=chunk) - Financing agreements, such as master repurchase agreements, impose restrictive covenants that limit operational flexibility, including restrictions on incurring further debt and making distributions[259](index=259&type=chunk)[260](index=260&type=chunk) - The planned discontinuation of LIBOR after 2021 creates uncertainty for the company's floating-rate debt and hedging arrangements, as a consensus alternative reference rate has not yet been established[271](index=271&type=chunk)[272](index=272&type=chunk) - Reliance on short-term financing like repurchase agreements exposes the company to margin call risk, where a decline in the market value of pledged assets could require additional collateral or repayment, potentially forcing asset sales at unfavorable times[275](index=275&type=chunk)[278](index=278&type=chunk) [Risks Related to Regulatory Matters](index=43&type=section&id=Risks%20Related%20to%20Regulatory%20Matters) The company faces regulatory risks from potential changes in laws, increased oversight of non-bank financial companies, and the significant risk of losing its Investment Company Act exclusion - Changes in laws or regulations, particularly those related to non-bank financial companies or "shadow banking," could negatively impact operations, increase costs, or subject the company to increased competition[284](index=284&type=chunk)[288](index=288&type=chunk) - The SEC is reviewing the Section 3(c)(5)(C) exclusion under the Investment Company Act, which the company relies on, and losing this exclusion could require registration as an investment company, subjecting it to substantial regulation regarding leverage, portfolio composition, and transactions with affiliates[290](index=290&type=chunk) [Risks Related to Taxation](index=45&type=section&id=Risks%20Related%20to%20Taxation) Maintaining REIT qualification is complex, with failure resulting in corporate-level taxation, potential "taxable mortgage pool" issues, and distribution requirements that may force borrowing or asset sales - Failure to qualify as a REIT would subject the company to U.S. federal income tax at regular corporate rates, eliminating the deduction for dividends paid and reducing cash available for distribution[301](index=301&type=chunk) - The requirement to distribute at least **90%** of REIT taxable income annually could be challenging, especially if the company generates "phantom income" (taxable income without corresponding cash flow), potentially forcing it to borrow or sell assets to meet distribution requirements[308](index=308&type=chunk)[311](index=311&type=chunk) - Certain securitization activities could create "taxable mortgage pools," resulting in "excess inclusion income" that is fully taxable as UBTI to tax-exempt investors and subject to withholding tax for foreign stockholders, without treaty benefits[316](index=316&type=chunk)[317](index=317&type=chunk) - Dividends from REITs generally do not qualify for the preferential tax rates applicable to "qualified dividend income" for individual investors, though a temporary **20%** deduction for ordinary REIT dividends is available for tax years before 2026[307](index=307&type=chunk) [Item 2. Properties](index=51&type=section&id=Item%202.%20Properties) Information regarding the company's investment properties as of December 31, 2018, is detailed in other sections of the annual report - Details about the company's properties are cross-referenced to Item 1 (Business-Our Portfolio) and Item 15 (Schedule III. Real Estate and Accumulated Depreciation)[339](index=339&type=chunk) [Item 3. Legal Proceedings](index=51&type=section&id=Item%203.%20Legal%20Proceedings) As of the report date, neither the company nor its Manager is subject to any material legal proceedings - The Company and its Manager are not currently subject to any material legal proceedings[340](index=340&type=chunk) [PART II](index=52&type=section&id=PART%20II) [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=52&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's Class A common stock began trading on the NYSE in February 2018, and it declared monthly cash dividends in 2018, subject to credit facility restrictions - Class A common stock began trading on the NYSE on February 1, 2018, under the symbol "CLNC"[344](index=344&type=chunk) - In 2018, the company declared 11 monthly cash dividends of **$0.145 per share**, representing an annualized dividend of **$1.74 per share**[347](index=347&type=chunk) - For the year ended December 31, 2018, the tax treatment of dividends paid (**$1.45 per share**) was **$1.08 of ordinary income** and **$0.37 of return of capital per share**[348](index=348&type=chunk) - The company's **$560 million** revolving credit facility limits distributions to the amount required to maintain REIT status unless certain financial covenants are met[349](index=349&type=chunk) [Item 6. Selected Financial Data](index=54&type=section&id=Item%206.%20Selected%20Financial%20Data) This section presents selected historical financial data, with 2018 reflecting the combined company post-merger and prior years representing the accounting predecessor, making year-over-year comparisons not necessarily indicative of trends Selected Annual Financial Information (In thousands, except per share data) | | 2018 (in thousands) | 2017 (in thousands) | 2016 (in thousands) | 2015 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | **Statements of Operations Data:** | | | | | | Total revenues | $477,014 | $164,755 | $142,203 | $112,712 | | Net income (loss) | $(177,353) | $127,880 | $109,021 | $81,608 | | Net income (loss) attributable to common stockholders | $(168,498) | $88,504 | $76,051 | $58,079 | | Net income (loss) per share - basic and diluted | $(1.41) | $1.86 | $1.60 | $1.22 | | Dividends declared per share | $1.60 | $— | $— | $— | | **Balance Sheet Data - at Year End:** | | | | | | Total assets | $8,660,730 | $1,839,402 | $1,802,192 | $2,056,974 | | Total debt | $5,594,245 | $389,661 | $502,413 | $826,132 | | Total equity | $2,845,202 | $1,407,570 | $1,235,564 | $1,117,814 | - Financial data for periods prior to January 31, 2018, represents the pre-merger financial information of the CLNY Investment Entities, the company's accounting predecessor, and is not directly comparable to the post-merger results of 2018[357](index=357&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=56&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, highlighting the impact of the 2018 Combination on financial comparability, liquidity, and capital resources [Significant Developments](index=56&type=section&id=Significant%20Developments) In 2018, the company completed its major combination transaction, listed on the NYSE, allocated over $2.0 billion in new capital, secured expanded financing, and recorded significant provisions for loan losses and real estate impairments - Completed the business combination of CLNY Contributed Portfolio, NorthStar I, and NorthStar II on January 31, 2018, and listed on the NYSE on February 1, 2018[367](index=367&type=chunk) - Allocated over **$2.0 billion** in gross capital through 37 new investments, including originating 13 senior mortgage loans with commitments of **$868.7 million** and purchasing two net lease portfolios for **$618.9 million**[367](index=367&type=chunk) - Secured and expanded financing capacity, including upsizing a corporate revolving credit facility to **$525.0 million** and increasing master repurchase facilities by **$1.0 billion** to **$2.1 billion**[368](index=368&type=chunk) - Recorded significant credit-related charges, including **$113.9 million** in provisions for loan losses on eleven loans and **$31.8 million** in impairments of operating real estate[368](index=368&type=chunk) [Results of Operations](index=60&type=section&id=Results%20of%20Operations) For the year ended December 31, 2018, the company reported a net loss of $177.4 million, primarily driven by significant provisions for loan losses, impairment charges, and transaction expenses related to the Combination, despite increased revenues Results of Operations Summary (in thousands) | | 2018 (in thousands) | 2017 (in thousands) | 2016 (in thousands) | | :--- | :--- | :--- | :--- | | Total revenues | $477,014 | $164,755 | $142,203 | | Total expenses | $460,387 | $37,967 | $21,641 | | **Key Expense Items:** | | | | | Management fee expense | $43,190 | $— | $— | | Transaction, investment and servicing expense | $36,800 | $2,570 | $1,767 | | Provision for loan losses | $113,911 | $518 | $3,386 | | Impairment of operating real estate | $31,813 | $— | $— | | **Net income (loss)** | **$(177,353)** | **$127,880** | **$109,021** | - The significant increase in total revenues in 2018 was primarily due to the acquisition of operating real estate properties from NorthStar I and NorthStar II, which contributed **$120.7 million** to property operating income[385](index=385&type=chunk) - The net loss in 2018 was heavily impacted by a **$113.4 million** increase in provision for loan losses, mainly related to four NY hospitality loans and other troubled retail and office-collateralized loans[392](index=392&type=chunk) - Transaction, investment, and servicing expenses rose by **$34.2 million** in 2018, primarily due to **$31.9 million** in costs associated with the Combination[388](index=388&type=chunk) [Liquidity and Capital Resources](index=65&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is supported by cash and various financing facilities, with its debt-to-equity ratio increasing to 0.9x at year-end 2018 due to increased leverage post-Combination Total Sources of Corporate Liquidity as of December 31, 2018 (in thousands) | Source | Amount (in thousands) | | :--- | :--- | | Cash and cash equivalents | $77,317 | | Bank credit facility availability | $230,000 | | **Total sources of corporate liquidity** | **$307,317** | - The company's financing strategy includes a secured revolving credit facility (increased to **$560.0 million** post-year-end), up to **$2.1 billion** in secured revolving repurchase facilities, non-recourse securitization, and commercial mortgages[421](index=421&type=chunk) Financing Facilities Summary as of December 31, 2018 (in thousands) | Facility Type | Maximum Facility Size (in thousands) | Current Borrowings (in thousands) | | :--- | :--- | :--- | | Master Repurchase Facilities | $2,050,000 | $880,288 | | CMBS Credit Facilities | $190,630 | $190,630 | | Bank Credit Facility | $525,000 | $295,000 | | **Total Facilities** | **$2,765,630** | **$1,365,918** | - The debt-to-equity ratio increased from **0.3x** at the end of 2017 to **0.9x** at the end of 2018, reflecting the increased use of leverage following the Combination[423](index=423&type=chunk) [Critical Accounting Policies](index=70&type=section&id=Critical%20Accounting%20Policies) The company's critical accounting policies involve significant management judgment and estimates, particularly in consolidation, fair value measurement, business combinations, and impairment assessments for loans and real estate - The company consolidates entities where it has a controlling financial interest, assessing them as either Variable Interest Entities (VIEs) where it is the primary beneficiary, or as voting interest entities[459](index=459&type=chunk)[461](index=461&type=chunk)[462](index=462&type=chunk) - Loans and preferred equity are considered impaired when it is probable that all amounts due will not be collected, with the allowance for loan losses measured as the difference between carrying value and the present value of expected cash flows or collateral value[481](index=481&type=chunk) - Operating real estate is evaluated for impairment when events indicate carrying amounts may not be recoverable, with an impairment loss recognized if the carrying value exceeds undiscounted future net cash flows, measured as the excess of carrying value over fair value[488](index=488&type=chunk) - The acquisitions of NorthStar I and NorthStar II were accounted for as a business combination using the acquisition method, with assets and liabilities recorded at their estimated fair values on the closing date[473](index=473&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=77&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks include interest rate, credit, real estate market, and foreign currency risk, with interest rate fluctuations impacting net interest income and foreign currency risk managed through hedging - The company's main market risks are interest rate, prepayment, extension, credit, real estate market, capital market, and foreign currency risk[511](index=511&type=chunk) - A hypothetical **100 basis point** increase in the applicable interest rate benchmark on the loan portfolio would increase annual net interest income by **$7.1 million** as of December 31, 2018[515](index=515&type=chunk) - The company is exposed to foreign currency risk from its net investments in European subsidiaries, totaling **$336.1 million** (denominated in NOK and EUR), where a **1.0%** change in these foreign currency rates would result in a **$3.4 million** change in translation gain or loss[523](index=523&type=chunk)[524](index=524&type=chunk) - Credit risk is managed through a rigorous underwriting process for loans and credit evaluation of tenants in owned properties[518](index=518&type=chunk)[519](index=519&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=79&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section contains the company's audited consolidated financial statements for 2018, 2017, and 2016, along with accompanying notes and supplementary schedules - This item includes the company's audited consolidated financial statements and supplementary data, which are located in Item 6 and Item 15 of the report[527](index=527&type=chunk) [Consolidated Financial Statements](index=111&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements present the company's financial position and results of operations, reflecting the significant impact of the 2018 Combination on assets, revenues, and the reported net loss Consolidated Balance Sheet Highlights (in thousands) | | Dec 31, 2018 (in thousands) | Dec 31, 2017 (in thousands) | | :--- | :--- | :--- | | Total assets | $8,660,730 | $1,839,402 | | Total liabilities | $5,815,528 | $431,832 | | Total stockholders' equity | $2,706,905 | $1,079,808 | | **Total liabilities and equity** | **$8,660,730** | **$1,839,402** | Consolidated Statement of Operations Highlights (in thousands) | | Year Ended Dec 31, 2018 (in thousands) | Year Ended Dec 31, 2017 (in thousands) | | :--- | :--- | :--- | | Total revenues | $477,014 | $164,755 | | Total expenses | $460,387 | $37,967 | | Net income (loss) | $(177,353) | $127,880 | | Net income (loss) attributable to common stockholders | $(168,498) | $88,504 | | Net income (loss) per common share | $(1.41) | $1.86 | [Notes to Consolidated Financial Statements](index=119&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed explanations of accounting policies, including the 2018 business combination, loan portfolio details, debt structure, management fees, and the company's five operating segments - The Combination on January 31, 2018, was accounted for as a business combination, with the CLNY Investment Entities as the accounting acquirer, and the assets and liabilities of NorthStar I and NorthStar II recorded at their fair values[918](index=918&type=chunk) - As of Dec 31, 2018, the loan portfolio had a carrying value of **$2.02 billion**, net of a **$109.3 million** allowance for loan losses, with impaired loans having an unpaid principal balance of **$456.7 million**[939](index=939&type=chunk)[950](index=950&type=chunk) - The company operates through five segments: Loan Portfolio, CRE Debt Securities, Net Leased Real Estate, Other, and Corporate, with the Loan Portfolio and CRE Debt Securities segments holding the largest share of total assets[1088](index=1088&type=chunk)[1089](index=1089&type=chunk)[1090](index=1090&type=chunk)[1091](index=1091&type=chunk) - Under the Management Agreement, the company pays the Manager a base management fee of **1.5%** of stockholders' equity per annum and a potential incentive fee; for 2018, the base management fee was **$43.2 million**, and no incentive fee was incurred[1011](index=1011&type=chunk)[1012](index=1012&type=chunk)[1014](index=1014&type=chunk) [Item 9A. Controls and Procedures](index=79&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2018, a conclusion affirmed by the independent registered public accounting firm - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2018[530](index=530&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2018, based on the COSO framework[532](index=532&type=chunk) - The independent registered public accounting firm, Ernst & Young LLP, issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2018[534](index=534&type=chunk)[539](index=539&type=chunk) [Item 9B. Other Information](index=81&type=section&id=Item%209B.%20Other%20Information) This section details material U.S. federal income tax considerations for the company and its stockholders, covering REIT qualification requirements, tax treatment of distributions, and implications of tax law changes - The company intends to elect to be taxed as a REIT commencing with its taxable year ended December 31, 2018[556](index=556&type=chunk) - To qualify as a REIT, the company must satisfy numerous requirements, including two gross income tests (**75%** and **95%** from real estate-related sources), various asset tests, and distributing at least **90%** of its REIT taxable income annually[568](index=568&type=chunk)[590](index=590&type=chunk)[633](index=633&type=chunk)[650](index=650&type=chunk) - For taxable years before 2026, U.S. holders who are individuals, trusts, or estates may generally deduct **20%** of ordinary dividends received from a REIT[562](index=562&type=chunk)[670](index=670&type=chunk) - Distributions to non-U.S. holders are generally subject to a **30%** withholding tax, unless reduced by a treaty, with distributions attributable to gains from the sale of U.S. real property interests taxed under FIRPTA rules[685](index=685&type=chunk)[690](index=690&type=chunk) [PART III](index=108&type=section&id=PART%20III) [Items 10-14](index=108&type=section&id=Item%2010%2C%2011%2C%2012%2C%2013%2C%2014) Information required for Items 10 through 14, covering Directors, Executive Officers, Corporate Governance, Executive Compensation, Security Ownership, Certain Relationships, and Principal Accounting Fees, is incorporated by reference from the company's definitive proxy statement - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the company's definitive proxy statement for its 2019 Annual Meeting of Stockholders[728](index=728&type=chunk)[729](index=729&type=chunk)[730](index=730&type=chunk)[731](index=731&type=chunk)[732](index=732&type=chunk) [PART IV](index=109&type=section&id=PART%20IV) [Item 15. Exhibits and Financial Statement Schedules](index=109&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section includes the company's consolidated financial statements, the report of the independent registered public accounting firm, supplementary financial schedules, and an index of all exhibits filed with the Form 10-K - This part contains the full audited consolidated financial statements, notes, and supplementary schedules (Schedule III - Real Estate and Accumulated Depreciation; Schedule IV - Mortgage Loans on Real Estate)[735](index=735&type=chunk) - An exhibit index lists all agreements and documents filed with or incorporated by reference into the Form 10-K, including governance documents, major contracts, and certifications[1125](index=1125&type=chunk)[1126](index=1126&type=chunk)[1127](index=1127&type=chunk)