UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

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

For the quarterly period ended September 30, 2015March 31, 2016

Commission File Number: 333-200617

NORTHSTAR/RXR NEW YORK METRO REAL ESTATE, INC.
(Exact Name of Registrant as Specified in its Charter)
Maryland46-5183321
(State or Other Jurisdiction of(IRS Employer
Incorporation or Organization)Identification No.)
399 Park Avenue, 18th Floor, New York, NY 10022
(Address of Principal Executive Offices, Including Zip Code)

(212) 547-2600
(Registrant’s Telephone Number, Including Area Code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ý   No o

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

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

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

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date:  
The Company has two classes of common stock, $0.01 par value per share, 22,223242,694 Class A shares outstanding and no Class T shares outstanding as of November 11, 2015.May 6, 2016.

 


NORTHSTAR/RXR NEW YORK METRO REAL ESTATE, INC.

FORM 10-Q
TABLE OF CONTENTS


Index Page
   
Part I.
Financial Information
5
Item 1.
Financial Statements
5
 
Consolidated Balance Sheets as of September 30, 2015March 31, 2016 (unaudited) and December 31, 20142015
5
 
Consolidated StatementsStatement of Equity as of September 30, 2015Operations (unaudited) and Decemberfor the three months ended March 31, 20142016
6
Consolidated Statements of Equity for the three months ended March 31, 2016 (unaudited) and for the year ended December 31, 2015
7
Consolidated Statement of Cash Flows (unaudited) for the three months ended March 31, 2016
8
 
Notes to Consolidated Financial Statements (unaudited)
79
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
1620
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
2428
Item 4.
Controls and Procedures
2429
Part II.
Other Information
2630
Item 1.
Legal Proceedings
30
Item 1A.
Risk Factors
30
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
2630
Item 6.
Exhibits
2731
Signatures
 
2832





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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 our ability to successfully complete our continuous, public offering, our ability to pay distributions to our stockholders, our reliance on our advisor entities and our sponsors, the operating performance of our investments, our financing needs, the effects of our current strategies and investment activities and our ability to 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:
adverse economic conditions and the impact on the commercial real estate industry;
our ability to successfully complete a continuous, public offering;
our ability to deploy capital quickly and successfully and achieve a diversified portfolio consistent with our target asset classes;
our dependence on the resources and personnel of our advisor entities, our sponsor and their affiliates, including our advisor entities ability to source and close on attractive investment opportunities on our behalf;
the performance of our advisor entities, our co-sponsor and their affiliates;
our liquidity and access to capital;
our use of leverage;
our ability to make distributions to our stockholders;
the lack of a public trading market for our shares;
the effect of economic conditions on the valuation of our investments;
the effect of paying distributions to our stockholders from sources other than cash flow provided by operations;
the impact of any strategic alternatives taken by NorthStar Asset Management Group Inc., our co-sponsor;
our advisor entities, and itstheir affiliates’ ability to attract and retain sufficient personnel to support our growth and operations;
the impact of market and other conditions influencing the availability of equity and debt investments and 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;
changes in our business or investment strategy;
the impact of fluctuations in interest rates;
the impact of economic conditions on the tenants of the real property that we ownacquire as well as on borrowers of the debt we originate and acquire and the mortgage loans underlying the mortgage backed securities in which we invest;
changes in the value of our target investments and our portfolio;
our ability to realize current and expected returns over the life of our investments;
any failure in our advisor entities and its affiliates’ due diligence to identify relevant facts during our underwriting process or otherwise;


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illiquidity of properties or debt investments in our portfolio;
our ability to finance our assets on terms that are acceptable to us, if at all.

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environmental compliance costs and liabilities;
increased rates of loss or default and decreased recovery on our investments;
the degree and nature of our competition;
the effectiveness of our advisor and sub-advisor’s risk and portfolio management systems;
the potential failure to maintain effective internal controls and disclosure controls and procedures;
regulatory requirements with respect to our business and the related cost of compliance;
legislative and regulatory changes, including changes to laws governing the taxation of real estate investment trusts, or REITs, and changes to laws affecting non-traded REITs and alternative investments generally;
our ability to qualify and maintain our qualification as a REIT for federal income tax purposes and limitations imposed on our business by our status as a REIT;
the loss of our exemption from registration under the Investment Company Act of 1940, as amended;
availability of opportunities to acquire equity, debt and securities investments;
general volatility in capital markets and economies and the New York metropolitan economy specifically;
the adequacy of our cash reserves and working capital;
our ability to raise capital in light of certain regulatory changes, including amendments to NASD Rule 2340 and FINRA Rule 2310 and the U.S. Department of Labor’s recent proposalrule on a fiduciary standard for fiduciary standard for retirement accounts; and
other risks associated with investing in our targeted investments, including changes in our industry, interest rates, the securities markets, the general economy or the capital markets and real estate markets specifically.
The foregoing list of factors is not exhaustive. All forward-looking statements included in this Quarterly Report on Form 10-Q are based on information available to us on the date hereof and we are under no duty to update any of the forward-looking statements after the date of this report to conform these statements to actual results.
Factors that could have a material adverse effect on our operations and future prospects are set forth in our filings with the United States Securities and Exchange Commission, includingor the “Risk Factors” sectionSEC, included in Part I, Item 1A. of our Registration StatementAnnual Report on Form S-11 (File No. 333-200617).10-K for the fiscal year ended December 31, 2015 under the heading “Risk Factors.” The risk factors set forth in our filings with the Risk Factors sectionSEC could cause our actual results to differ significantly from those contained in any forward-looking statement contained in this report.





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PART I.    Financial Information
Item 1.Financial Statements
NORTHSTAR/RXR NEW YORK METRO REAL ESTATE, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
September 30, 2015 (unaudited) December 31, 2014March 31, 2016 (unaudited) December 31, 2015
Assets 
     
Cash$201,007
 $201,007
$2,200,829
 $2,201,007
Total assets$201,007
 $201,007
$2,200,829
 $2,201,007



     
Liabilities   
Due to related party$20,000
 $20,000
Total liabilities20,000
 20,000

  

Equity 
     
NorthStar/RXR New York Metro Real Estate, Inc. Stockholders’ Equity 
     
Preferred stock, $0.01 par value, 50,000,000 shares authorized as of September 30, 2015 and no shares authorized as of December 31, 2014, no shares issued and outstanding as of September 30, 2015 and December 31, 2014$—
 $—
Common stock, $0.01 par value, 400,000,000 shares authorized as of September 30, 2015 and 200,000 shares authorized as of December 31, 2014, 22,223 shares issued and outstanding as of September 30, 2015 and December 31, 2014222
 222
Preferred stock, $0.01 par value, 50,000,000 shares authorized, no shares issued and outstanding as of March 31, 2016 and December 31, 2015—
 —
Class A common stock, $0.01 par value, 120,000,000 shares authorized, 242,003 shares issued and outstanding as of March 31, 2016 and December 31, 20152,420
 2,420
Class T common stock, $0.01 par value, 280,000,000 shares authorized, no shares issued and outstanding as of March 31, 2016 and December 31, 2015—
 —
Additional paid-in capital199,785
 199,785
2,178,587
 2,178,587
Retained earnings (accumulated deficit)(1,177) (999)
Total NorthStar/RXR New York Metro Real Estate, Inc. stockholders’ equity200,007
 200,007
2,179,830
 2,180,008
Non-controlling interests1,000
 1,000
Non-controlling interest999
 999
Total equity$201,007
 $201,007
2,180,829
 2,181,007
Total liabilities and equity$2,200,829
 $2,201,007






















Refer to accompanying notes to consolidated financial statements.


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NORTHSTAR/RXR NEW YORK METRO REAL ESTATE, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)

  Three Months Ended 
 March 31, 2016
Expenses  
General and administrative expenses $178
Total expenses 178
   
Net income (loss) (178)
Net income (loss) attributable to NorthStar/RXR New York Metro Real Estate, Inc. common stockholders $(178)
   
Net income (loss) attributable to NorthStar/RXR New York Metro Real Estate, Inc. common stockholders $(178)
Net income (loss) per share, basic/diluted $—
Weighted average number of shares outstanding, basic/diluted 242,003

































Refer to accompanying notes to consolidated financial statements.

5
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NORTHSTAR/RXR NEW YORK METRO REAL ESTATE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EQUITY
Common Stock
Additional
Paid-in Capital		 Retained Earnings (Accumulated Deficit) Total Company’s
Stockholders’ Equity		 Non-controlling
Interests		 Total
Equity
Common Stock
Additional
Paid-in Capital		 Total Company’s
Stockholders’ Equity		 Non-controlling
Interests		 Total
Equity		Class A 
Shares
Amount
 Shares
Amount
 
Balance as of December 31, 201422,223
 $222
 $199,785
 $200,007
 $1,000
 $201,007
22,223
 $222
 $199,785
 $—
 $200,007
 $1,000
 $201,007

      

 

 

Balance as of September 30, 2015 (unaudited)22,223
 $222
 $199,785
 $200,007
 $1,000
 $201,007
Net proceeds from issuance of common stock219,780
 2,198
 1,978,802
 —
 1,981,000
 —
 1,981,000
Net income (loss)—
 —
 —
 (999) (999) (1) (1,000)
Balance as of December 31, 2015242,003
 $2,420
 $2,178,587
 $(999) $2,180,008
 $999
 $2,181,007
Net income (loss)—
 —
 —
 (178) (178) —
 (178)
Balance as of March 31, 2016 (Unaudited)242,003
 $2,420
 $2,178,587
 $(1,177) $2,179,830
 $999
 $2,180,829







































Refer to accompanying notes to consolidated financial statements.


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NORTHSTAR/RXR NEW YORK METRO REAL ESTATE, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
  Three Months Ended 
 March 31, 2016
Cash flows from operating activities:  
Net income (loss) $(178)
Net cash provided by (used in) operating activities (178)
   
   
Net increase (decrease) in cash (178)
Cash - beginning of period 2,201,007
Cash - end of period $2,200,829










































Refer to accompanying notes to consolidated financial statements.

6
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NORTHSTAR/RXR NEW YORK METRO REAL ESTATE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.Business and Organization
NorthStar/RXR New York Metro Real Estate, Inc. (the “Company”), formerly known as NorthStar/RXR New York Metro Income, Inc., refer to Note 7 Subsequent Events - Name Change, was formed to acquire a high-quality commercial real estate (“CRE”) portfolio concentrated in the New York metropolitan area and, in particular New York City, with a focus on office, mixed-use properties and a lesser emphasis on multifamily properties. The Company intends to complement this strategy by originating and acquiring: (i) CRE debt including, subordinate loans and participations in such loans and preferred equity interests; and (ii) joint ventures and partnership interests in CRE related investments. The Company was formed on March 21, 2014 as a Maryland corporation and intends to make an election to qualify as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), beginningcommencing with the taxable year endedending December 31, of the year in which the Company satisfies the minimum offering requirement.2016.
The Company is externally managed by NSAM J-NS/RXR Ltd (the “Advisor”), a subsidiary of the Company’s co-sponsor NorthStar Asset Management Group Inc. (NYSE: NSAM). NSAM provides asset management and other services to publicly-traded REITs including NorthStar Realty Finance Corp. (NYSE: NRF) (“NorthStar Realty”) and NorthStar Realty Europe Corp. (NYSE: NRE), NSAM’s sponsored non-traded companies that raise capital through the retail market, as well as any future sponsored companies, including funds, joint ventures and partnerships both in the United States and internationally. The Company is sub-advised by RXR NTR Sub-Advisor LLC (the “Sub-Advisor”), a Delaware limited liability company and a subsidiary of the Company’s co-sponsor, RXR Realty LLC (“RXR” or “RXR Realty”). RXR is a leading real estate owner, manager and developer in the New York metropolitan area. The Advisor and Sub-Advisor are collectively referred to as the Advisor Entities. The Company, the Advisor and the Sub-Advisor have entered into a sub-advisory agreement delegating certain investment responsibilities of the Advisor to the Sub-Advisor. NSAM and RXR are collectively referred to as the Co-Sponsors. The Company’s dealer manager for the offering, NorthStar Securities, LLC (the “Dealer Manager”) is an affiliate of the Advisor and a subsidiary of NSAM.
Substantially all business of the Company will be conducted through NorthStar/RXR Operating Partnership, LP (the “Operating Partnership”). The Company is the sole general partner and a limited partner of the Operating Partnership. NorthStar/RXR NTR OP Holdings LLC (the “Special Unit Holder”) (a joint venture between the Co-Sponsors) has invested $1,000 in the Operating Partnership and has been issued a separate class of limited partnership units (the “Special Units”), which is recorded as its non-controlling interestsinterest on the consolidated balance sheets. As the Company accepts subscriptions for shares, it will transfer substantially all of the net proceeds from the continuous, public offering to the Operating Partnership as a capital contribution.
The Company’s charter authorizes the issuance of up to 400,000,000 shares of common stock with a par value of $0.01 per share and up to 50,000,000 shares of preferred stock with a par value of $0.01 per share. Of the total shares of common stock authorized 120,000,000 are classified as Class A shares (“Class A Shares”) and 280,000,000 are classified as Class T shares (“Class T Shares”). The board of directors of the Company is authorized to amend its charter, without the approval of the stockholders, to increase or decrease the aggregate number of authorized shares of capital stock or the number of shares of any class or series that the Company has authority to issue.issue or to classify and reclassify any unissued shares of common stock into one or more classes or series.
On March 28, 2014, as part of its formation, the Company issued 16,667 shares of common stock to NorthStar Realty and 5,556 shares of common stock to a subsidiary of RXR for $0.2 million.million, all of which were subsequently renamed Class A shares. On February 9, 2015, the Company’s registration statement on Form S-11 with the Securities and Exchange Commission (the “SEC”) was declared effective to offer a minimum of 200,000 shares$2,000,000 and a maximum of 201,052,632$2,000,000,000 in shares of common stock in a continuous, public offering, of which up to 180,000,000 shares$1,800,000,000 can be offered pursuant to its primary offering (the “Primary Offering”) at a purchase price of $10.1111 per Class A Share and $9.5538 per Class T Share and up to 21,052,632 shares can be offered$200,000,000 pursuant to its distribution reinvestment plan (the “DRP”), which at a purchase price of $9.81 per Class A Share and $9.27 per Class T Share. The Primary Offering and the DRP are herein collectively referred to as the Offering. At that time, theThe Company retained the Dealer Manager to serve as the dealer manager for the Primary Offering who will beOffering. The Dealer Manager is also responsible for marketing the shares being offered pursuant to the Primary Offering. The board of directors of the Company has the right to reallocate shares between the Primary Offering and the DRP.
As of September 30,On December 23, 2015, the Company had not begun issuing sharescommenced operations by satisfying the minimum offering requirement in itsthe Primary Offering as a result of NorthStar Realty and RXR purchasing $1.5 million and $0.5 million in Class A Shares of common stock, respectively. As of March 31, 2016, neither the Company nor the Operating Partnership had acquired or committed to make any investments.


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NORTHSTAR/RXR NEW YORK METRO REAL ESTATE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

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”GAAP”) for interim financial reporting

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NORTHSTAR/RXR NEW YORK METRO REAL ESTATE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

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. The Company did not have operations for the nine months ended September 30, 2015 and 2014, and therefore does not present consolidated statements of operations or consolidated statements of cash flows for the applicable periods. In the opinion of management, all adjustments considered necessary for a fair presentation of the Company’s financial position, results of operations and cash flows have been included and are of a normal and recurring nature. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. These consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, which was filed with the SEC.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and the Operating Partnership, which is majority-owned and controlled by the Company. There were no intercompany balances as of September 30, 2015March 31, 2016 and December 31, 2014.2015.
Variable Interest Entities
A variable interest entity (“VIE”) is an entity that lacks one or more of the characteristics of a voting interest entity. A VIE is defined as an entity in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The determination of whether an entity is a VIE includes both a qualitative and quantitative analysis. The Company will base its qualitative analysis on its review of the design of the entity, its organizational structure including decision-making ability and relevant financial agreements and the quantitative analysis on the forecasted cash flow of the entity. The Company will reassess its initial evaluation of an entity as a VIE upon the occurrence of certain reconsideration events.
A VIE must be consolidated only by its primary beneficiary, which is defined as the party who, along with its affiliates and agents has both the: (i) power to direct the activities that most significantly impact the VIE’s economic performance; and (ii) obligation to absorb the losses of the VIE or the right to receive the benefits from the VIE, which could be significant to the VIE. The Company will determine whether it is the primary beneficiary of a VIE by considering qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of its investment; the obligation or likelihood for the Company or other interests to provide financial support; consideration of the VIE’s purpose and design, including the risks the VIE was designed to create and pass through to its variable interest holders and the similarity with and significance to the business activities of the Company and the other interests. The Company will reassess its determination of whether it is the primary beneficiary of a VIE each reporting period. Significant judgments related to these determinations include estimates about the current and future fair value and performance of investments held by these VIEs and general market conditions.
The Company will evaluate its investments and financings, including investments in unconsolidated ventures and securitization financing transactions, if any, to determine whether they are a VIE. The Company will analyze new investments and financings, as well as reconsideration events for existing investments and financings, which vary depending on type of investment or financing.
The Company adopted the new consolidation guidance (refer to Recent Accounting Pronouncements) on January 1, 2016 which resulted in the identification of the Operating Partnership as a VIE as of March 31, 2016. Prior to the adoption of the standard, the Operating Partnership was consolidated under the voting interest model.  The Operating Partnership is a VIE because the non-controlling interests do not have substantive kick-out or participating rights and is consolidated because the Company controls all of its significant business activities.
Voting Interest Entities
A voting interest entity is an entity in which the total equity investment at risk is sufficient to enable it to finance its activities independently and the equity holders have the power to direct the activities of the entity that most significantly impact its economic performance, the obligation to absorb the losses of the entity and the right to receive the residual returns of the entity. The usual condition for a controlling financial interest in a voting interest entity is ownership of a majority voting interest. If the Company has a majority voting interest in a voting interest entity, the entity will generally be consolidated. The Company will not consolidate


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NORTHSTAR/RXR NEW YORK METRO REAL ESTATE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

a voting interest entity if there are substantive participating rights by other parties and/or kick-out rights by a single party or through a simple majority vote.
The Company will perform on-going reassessments of whether entities previously evaluated under the voting interest framework have become VIEs, based on certain events, and therefore subject to the VIE consolidation framework.
Investments in Unconsolidated Ventures
A non-controlling, unconsolidated ownership interest in an entity may be accounted for using the equity method, at fair value or the cost method.
Under the equity method, the investment is adjusted each period for capital contributions and distributions and its share of the entity’s net income (loss). Capital contributions, distributions and net income (loss) of such entities are recorded in accordance with the terms of the governing documents. An allocation of net income (loss) may differ from the stated ownership percentage interest in such entity as a result of preferred returns and allocation formulas, if any, as described in such governing documents. Equity method investments are recognized using a cost accumulation model in which the investment is recognized based on the cost to the investor, which includes acquisition fees. The Company will expense certain acquisition costs and fees associated with consolidated investments deemed to be business combinations and will capitalize these costs for investments deemed to be acquisitions of an asset, including an equity method investment.
The Company may account for an investment in an unconsolidated entity at fair value by electing the fair value option. The Company may account for an investment that does not qualify for equity method accounting or for which the fair value option was not elected using the cost method if the Company determines the investment in the unconsolidated entity is insignificant. Under the cost method, equity in earnings is recorded as dividends are received to the extent they are not considered a return of capital, which is recorded as a reduction of cost of the investment.
Non-controlling Interests
A non-controlling interest in a consolidated subsidiary is defined as the portion of the equity (net assets) in a subsidiary not attributable, directly or indirectly, to the Company. A non-controlling interest is required to be presented as a separate component of equity on the consolidated balance sheets and presented separately as net income (loss) and comprehensive income (loss) attributable to controlling and non-controlling interest. An allocation to a non-controlling interest may differ from the stated ownership percentage interest in such entity as a result of a preferred return and allocation formula, if any, as described in such governing documents.
Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that could affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates and assumptions.
CashComprehensive Income (Loss)
The Company considers all highly-liquid investments withwill report consolidated comprehensive income (loss) in a remaining maturity dateseparate statement following the consolidated statement of three months or less to be cash. Cash, including amounts restricted, may at times exceedoperations. Comprehensive income (loss) is defined as the Federal Deposit Insurance Corporation deposit insurance limit of $250,000 per institution. The Company mitigates credit risk by placing cash with major financial institutions.change in equity resulting from net income (loss) and other comprehensive income (loss) (“OCI”).
Operating Real Estate
The Company will follow the purchase method for an acquisition of operating real estate, where the purchase price is allocated to tangible assets such as land, building, furniture and fixtures, improvements and other identified intangibles.intangibles, such as in-place leases and above/below market leases. Major replacements and betterments which improve or extend the life of the asset will be capitalized and depreciated over their useful life. Ordinary repairs and maintenance will be expensed as incurred. Operating real estate will be carried at historical cost less accumulated depreciation. Operating real estate will be depreciated using the straight-line method over the estimated useful life of the assets. Construction costs incurred in connection with the Company’s investments will be capitalized and included in operating real estate, net on the consolidated balance sheets. Construction or redevelopment in progress will not be depreciated until the development is substantially completed. Costs directly related to an acquisition deemed to be a business combination will be expensed and included in transaction costs in the consolidated statements of operations. The Company will evaluate whether a real estate acquisition constitutes a business and whether business combination accounting is appropriate.


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NORTHSTAR/RXR NEW YORK METRO REAL ESTATE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

Real Estate Debt Investments
CRE debt investments are generally intended to be held to maturity and, accordingly, will be carried at cost, net of unamortized loan fees, premium discount and unfunded commitments.discount. CRE debt investments that are deemed to be impaired will be carried at amortized cost less a loan loss reserve, if deemed appropriate, which approximates fair value. CRE debt investments where the Company does not have the intentintend to hold the loan for the foreseeable future or until its expected payoff will be classified as held for sale and recorded at the lower of cost or estimated value.
Real Estate Securities
The Company will classify its CRE securities investments as available for sale on the acquisition date, which will be carried at fair value. Unrealized gains (losses) will be recorded as a component of accumulated other comprehensive income (“OCI”) in the consolidated statementsstatement of equity. However, the Company may elect the fair value option for certain of its available for sale securities, and as a result, any unrealized gains (losses) on such securities will be recorded in unrealized gain (loss) on investments and other in the consolidated statements of operations.

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NORTHSTAR/RXR NEW YORK METRO REAL ESTATE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

Revenue Recognition
Operating Real Estate
Rental and escalation income from operating real estate will be derived from the 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 will be for fixed terms of varying length and will generally provide for annual rentals and expense reimbursements to be paid in monthly installments. Rental income from leases will be 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 will be included in unbilled rent receivable on the consolidated balance sheets. The Company will amortize 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/operator 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 will be accrued in the same period as the expenses are incurred.
Real Estate Debt Investments
Interest income will be recognized on an accrual basis and any related premium, discount, origination costs and fees will be amortized over the life of the investment using the effective interest method. The amortization will be reflected as an adjustment to interest income in the consolidated statements of operations. The amortization of a premium or accretion of a discount will be discontinued if such loan is reclassified to held for sale.
Real Estate Securities
Interest income will be recognized using the effective interest method with any premium or discount amortized or accreted through earnings based on expected cash flow through the expected maturity date of the security. Changes to expected cash flow may result in a change to the yield which is then applied retrospectively for high-credit quality securities that cannot be prepaid or otherwise settled in such a way that the holder would not recover substantially all of the investment or prospectively for all other securities to recognize interest income.
Credit Losses and Impairment on Investments
Operating Real Estate
The Company’s real estate portfolio will be reviewed on a quarterly basis, or more frequently as necessary, to assess whether there are any indicators that the value of its operating real estate may be impaired or that its carrying value may not be recoverable. A property’s value will be considered impaired if the Company’s estimate of the aggregate expected future undiscounted cash flow generated by the property is less than the carrying value. In conducting this review, the Company will consider U.S. macroeconomic factors, real estate sector, asset specific conditions and other factors. To the extent an impairment has occurred, the loss will be measured as the excess of the carrying value of the property over the estimated fair value and recorded in impairment on operating real estate in the consolidated statements of operations.
An allowance for a doubtful account for a tenant receivable will be established based on a periodic review of aged receivables resulting from estimated losses due to the inability of tenants to make required rent and other payments contractually due.


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Additionally, the Company will establish, on a current basis, an allowance for future tenant credit losses on unbilled rent receivable based on an evaluation of the collectability of such amounts.
Real Estate Debt Investments
Loans will be considered impaired when, based on current information and events, it is probable that the Company will not be able to collect principal and interest amounts due according to the contractual terms. The Company will assess the credit quality of the portfolio and adequacy of loan loss reserves on a quarterly basis, or more frequently as necessary. Significant judgment of the Company will be required in this analysis. The Company will consider the estimated net recoverable value of the loan as well as other factors, including but not limited to the fair value of any collateral, the amount and the status of any senior debt, the quality and financial condition of the borrower and the competitive situation of the area where the underlying collateral is located. Because this determination will be based on projections of future economic events, which are inherently subjective, the amount ultimately realized may differ materially from the carrying value as of the balance sheetssheet date. If upon completion of the assessment, the estimated fair value of the underlying collateral is less than the net carrying value of the loan, a loan loss reserve will be recorded with a corresponding charge to provision for loan losses. The loan loss reserve for each loan will be maintained at a level that is determined to be adequate by managementthe Company to absorb probable losses.

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Income recognition will be suspended for a loan at the earlier of the date at which payments become 90-days past due or when, in the opinion of the Company, a full recovery of income and principal becomes doubtful. When the ultimate collectability of the principal of an impaired loan is in doubt, all payments will be applied to principal under the cost recovery method. When the ultimate collectability of the principal of an impaired loan is not in doubt, contractual interest will be recorded as interest income when received, under the cash basis method until an accrual is resumed when the loan becomes contractually current and performance is demonstrated to be resumed. A loan will be written off when it is no longer realizable and/or legally discharged.
Investments in Unconsolidated Ventures
The Company will review its investments in unconsolidated ventures for which the Company did not elect the fair value option on a quarterly basis, or more frequently as necessary, to assess whether there are any indicators that the value may be impaired or that its carrying value may not be recoverable. An investment is considered impaired if the projected net recoverable amount over the expected holding period is less than the carrying value. In conducting this review, the Company will consider U.S. and global macroeconomic factors, including real estate sector conditions, together with investment specific and other factors. To the extent an impairment has occurred and is considered to be other than temporary, the loss will be measured as the excess of the carrying value of the investment over the estimated fair value and recorded in equity in earnings (losses) of unconsolidated ventures in the consolidated statements of operations.
Real Estate Securities
CRE securities for which the fair value option is elected are not evaluated for other-than-temporary impairment (“OTTI”) as any change in fair value is recorded in the consolidated statements of operations. Realized losses on such securities are reclassified to realized gain (loss) on investments and other as losses occur.
CRE securities for which the fair value option is not elected will be evaluated for OTTI quarterly. Impairment of a security is considered to be other-than-temporary when: (i) the holder has the intent to sell the impaired security; (ii) it is more likely than not the holder will be required to sell the security; or (iii) the holder does not expect to recover the entire amortized cost of the security. When a CRE security has been deemed to be other-than-temporarily impaired due to (i) or (ii), the security is written down to its fair value and an OTTI is recognized in the consolidated statements of operations. In the case of (iii), the security is written down to its fair value and the amount of OTTI is then bifurcated into: (a) the amount related to expected credit losses; and (b) the amount related to fair value adjustments in excess of expected credit losses. The portion of OTTI related to expected credit losses will be recognized in the consolidated statements of operations. The remaining OTTI related to the valuation adjustment will be recognized as a component of accumulated OCI in the consolidated statementsstatement of equity. The portion of OTTI recognized through earnings will be accreted back to the amortized cost basis of the security through interest income, while amounts recognized through OCI are amortized over the life of the security with no impact on earnings. CRE securities which are not high-credit quality will be considered to have an OTTI if the security has an unrealized loss and there has been an adverse change in expected cash flow. The amount of OTTI is then bifurcated as discussed above.
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


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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 recorded at fair value on the consolidated balance sheets 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.
U.S. GAAP requires disclosure of fair value about all financial instruments. As of September 30,March 31, 2016 and 2015, and December 31, 2014, the Company’s only financial instrument was cash and its fair value was estimated to approximate its carrying amount.

Organization and Offering Costs
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TableThe Advisor Entities, or their affiliates, are entitled to receive reimbursement for organization and offering costs paid on behalf of Contentsthe Company in connection with the Offering. The Company is obligated to reimburse the Advisor Entities, or their affiliates, as applicable, for organization and offering costs to the extent the aggregate of selling commissions, dealer manager fees, distribution fees and other organization and offering costs do not exceed 15% of gross proceeds from the Offering. The Advisor Entities do not expect reimbursable organization and offering costs, excluding selling commissions, dealer manager fees and distribution fees, to exceed $18.0 million, or approximately 1.0% of the total proceeds available to be raised from the Offering. The Company records organization and offering costs each period based on an allocation of expected total organization and offering costs to be reimbursed. Organization costs are recorded as an expense in general and administrative expenses in the consolidated statements of operations and offering costs are recorded as a reduction to equity.
NORTHSTAR/RXR NEW YORK METRO REAL ESTATE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

Equity BasedEquity-Based Compensation
The Company adopted a long-term incentive plan (the “Plan”), which it may use to attract and retain qualified officers, directors, employees and consultants, as well as an independent directors compensation plan, which is a component of the Plan. All stock issued under the Plan will consist of Class A common stock unless the board of directors of the Company determines otherwise. The Company currently intends to issue awards only to its independent directors under the Plan. The Company will account for its equity-based compensation awards using the fair value method, which requires an estimate of fair value of the award at the time of grant. All fixed equity-based awards to directors, which have no vesting conditions other than time of service, will be amortized to compensation expense over the award’s vesting period on a straight-line basis. Equity-based compensation will be recorded in general and administrative expenses in the consolidated statements of operations.
Income Taxes
The Company intends to elect to be taxed as a REIT under the Internal Revenue Code and intends to operate as such, commencing with the taxable year in which the Company satisfies the minimum offering requirement. The Company expects to have little or no taxable income prior to electing REIT status. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of the Company’s annual REIT taxable income to its stockholders (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with U.S. GAAP). As a REIT, the Company generally will not be subject to federal income tax to the extent it distributes qualifying dividends to its stockholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during


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which qualification is lost unless the Internal Revenue Service grants the Company relief under certain statutory provisions. Such an event could materially adversely affect the Company’s net income and net cash available for distribution to stockholders. However, the Company intends to organize and operate in such a manner as to qualify for treatment as a REIT.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued an accounting update requiring a company to recognize as revenue the amount of consideration it expects to be entitled to in connection with the transfer of promised goods or services to customers. The accounting standard update will replace most of the existing revenue recognition guidance currently promulgated by U.S. GAAP. In July 2015, the FASB decided to delay the effective date of the new revenue standard by one year. The effective date of the new revenue standard for the Company will be January 1, 2018. The Company is in the process of evaluating the impact, if any, of the update on its consolidated financial position, results of operations and financial statement disclosures.
In February 2015, the FASB issued updated guidance that changes the rules regarding consolidation. The pronouncement eliminates specialized guidance for limited partnerships and similar legal entities and removes the indefinite deferral for certain investment funds. The new guidance is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015, with early adoption permitted. The Company adopted this guidance in the first quarter 2016 and determined the Company’s Operating Partnership is considered a VIE. The Company is the primary beneficiary of the VIE, the VIE’s assets can be used for purposes other than the settlement of the VIE’s obligations and the Company’s partnership interest is considered a majority voting interest. As such, this standard did not have a material impact on the Company’s consolidated financial position or results of operations.
In January 2016, the FASB issued an accounting update that addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The new guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. The Company is currently assessing the impact of the guidance on the Company’s consolidated financial position, results of operations and financial statement disclosures.
In February 2016, the FASB issued an accounting update that requires lessees to present right-of-use assets and lease liabilities on the balance sheet. 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. Early adoption is permitted. The Company is evaluating the impact that this guidance will have on its consolidated financial position, results of operations and financial statement disclosures.
In March 2016, the FASB issued guidance clarifying that an assessment of whether an embedded contingent put or call option is clearly and closely related to a borrowing requires only an analysis of the four-step decision sequence.  Additionally, entities are not required to separately assess whether the contingency itself is clearly and closely related.  Entities are required to apply the guidance to existing instruments in scope using a  modified retrospective transition method as of the period of adoption.  The guidance is effective for fiscal years beginning after December 15, 2016 and interim periods within those years.  Early adoption is permitted.  The Company is evaluating the impact, if any, that this guidance will have on its consolidated financial position, results of operations and financial statement disclosures.
In March 2016, the FASB issued guidance which eliminates the requirement for an investor to retroactively apply the equity method when its increase in ownership interest (or degree of influence) in an investee triggers equity method accounting.  The update requires that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment become qualified for equity method accounting. The update should be applied prospectively upon their effective date to increases in the level of ownership interests or degree of influence that results in the adoption of the equity method.  The guidance is effective for fiscal years beginning after December 15, 2016 and interim periods within those fiscal years.  Early adoption is permitted.  The Company is evaluating the impact, if any, that this guidance will have on its consolidated financial position, results of operations and financial statement disclosures.
In March 2016, the FASB issued guidance which amends several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.  The guidance is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2017.  The Company is evaluating the impact, if any, that this guidance will have on its consolidated financial position, results of operations and financial statement disclosures.


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3.Related Party Arrangements
NSAM J-NS/RXR Ltd. and RXR NTR Sub-Advisor LLCAdvisor Entities
Subject to certain restrictions and limitations, the Advisor Entities are responsible for managing the Company’s affairs on a day-to-day basis and for identifying, acquiring, originating and asset managing investments on behalf of the Company. The Advisor Entities may delegate certain of their obligations to affiliated entities, which may be organized under the laws of the United States or foreign jurisdictions. For such services, to the extent permitted by law and regulations, the Advisor Entities will receive fees and reimbursements from the Company, of which the Sub-Advisor generally will receivereceives 50% of all fees and up to 25% of all reimbursements.
The Company will paypays the Sub-Advisor, or its affiliates, development, leasing, property management and construction related service fees that are usual and customary for owners and operators in the geographic area of the property.
Fees to Advisor Entities
Asset Management Fee
The Advisor Entities, or their affiliates, will receive a monthly asset management fee equal to one-twelfth of 1.25% of the sum of the amount funded or allocated for CRE investments, including expenses and any financing attributable to such investments, less any principal received on debt and securities investments (or the proportionate share thereof in the case of an investment made through a joint venture).
Incentive Fee
The Advisor, or its affiliates, is entitled to receive distributions equal to 15.0% of net cash flows of the Company, whether from continuing operations, repayment of loans, disposition of assets or otherwise, but only after stockholders have received, in the aggregate, cumulative distributions equal to their invested capital plus a 6.0% cumulative, non-compounded annual pre-tax return on such invested capital.
Acquisition Fee
The Advisor Entities, or their affiliates, will also receive an acquisition fee equal to 2.25% of each real estate property acquired by the Company, including acquisition costs and any financing attributable to an equity investment (or the proportionate share thereof in the case of an equity investment made through a joint venture) and 1.0% of the amount funded or allocated by the Company to acquire or originate CRE debt investments, including acquisition costs and any financing attributable to such investments (or the proportionate share thereof in the case of an investment made through a joint venture). An acquisition fee incurred related to an equity investment willis generally be expensed as incurred. An acquisition fee paid to the Advisor Entities related to the acquisition of an equity or CRE debt investment in an unconsolidated joint venture is included in investments in unconsolidated ventures on the consolidated balance sheets. An acquisition fee paid to the Advisor Entities related to the

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origination or acquisition of CRE debt investments will beis included in CRE debt investments, net on the consolidated balance sheets and will beis amortized to interest income over the life of the investment using the effective interest method. The Company records as an expense certain acquisition costs and fees associated with transactions deemed to be business combinations in which it consolidates the asset and capitalizes the costs for transactions deemed to be acquisitions of an asset, including an equity investment.
Disposition Fee
For substantial assistance in connection with the sale of investments and based on the services provided, the Advisor Entities, or their affiliates, will receive a disposition fee equal to 2.0% of the contract sales price of each property sold and 1.0% of the contract sales price of each CRE debt investment sold or syndicated. The Company willdoes not pay a disposition fee upon the maturity, prepayment, workout, modification or extension of a CRE debt investment unless there is a corresponding fee paid by the borrower, in which case the disposition fee is the lesser of: (i) 1.0% of the principal amount of the CRE debt investment prior to such transaction; or (ii) the amount of the fee paid by the borrower in connection with such transaction. If the Company takes ownership of a property as a result of a workout or foreclosure of a CRE debt investment, the Company will pay a disposition fee upon the sale of such property. A disposition fee from the sale of an investment is generally expensed and will be included in asset management and other fees - related party in the Company’s consolidated statements of operations. A disposition fee for a CRE debt investment incurred in a transaction other than a sale will beis included in CRE debt investments, net on the consolidated balance sheets and will beis amortized to interest income over the life of the investment using the effective interest method.
For the three months ended March 31, 2016, the Company did not incur any fees to the Advisor Entities.


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Reimbursements to Advisor Entities
Operating Costs
The Advisor Entities, or their affiliates, are entitled to receive reimbursement for direct and indirect operating costs incurred by the Advisor Entities in connection with administrative services provided to the Company. The Advisor Entities allocate, in good faith, indirect costs to the Company related to the Advisor Entities and their affiliates’ employees, occupancy and other general and administrative costs and expenses in accordance with the terms of, and subject to the limitations contained in, the advisory agreement with the Advisor Entities. The indirect costs include the Company’s allocable share of the Advisor Entities compensation and benefit costs associated with dedicated or partially dedicated personnel who spend all or a portion of their time managing the Company’s affairs, based upon the percentage of time devoted by such personnel to the Company’s affairs. The indirect costs also include rental and occupancy, technology, office supplies, travel and entertainment and other general and administrative costs and expenses.expenses also allocated based on the percentage of time devoted by personnel to the Company’s affairs. However, there will beis no reimbursement for personnel costs related to executive officers (although there may be reimbursement for certain executive officers of the Advisor) and other personnel involved in activities for which the Advisor Entities receive an acquisition fee or a disposition fee. The Advisor Entities allocate these costs to the Company relative to its and its affiliates’ other managed companies in good faith and has reviewed the allocation with the Company’s board of directors, including its independent directors. The Advisor Entities will update the board of directors on a quarterly basis of any material changes to the expense allocation and will provide a detailed review to the board of directors, at least annually, and as otherwise requested by the board of directors. The Company will reimbursereimburses the Advisor Entities quarterly for operating costs (including the asset management fee) based on a calculation for the four preceding fiscal quarters not to exceed the greater of: (i) 2.0% of its average invested assets; or (ii) 25.0% of its net income determined without reduction for any additions to reserves for depreciation, loan losses or other similar non-cash reserves and excluding any gain from the sale of assets for that period. Notwithstanding the above, the Company may reimburse the Advisor Entities for expenses in excess of this limitation if a majority of the Company’s independent directors determines that such excess expenses are justified based on unusual and non-recurring factors. The Company will calculate the expense reimbursement quarterly based upon the trailing twelve-month period. From inception through March 31, 2016, the Advisor Entities incurred $6.9 million of operating costs on behalf of the Company. Operating costs incurred by the Advisor Entities are not recorded in the consolidated statement of operations because there is no allocation of operating costs until the Company has net income or invested assets.
Organization and Offering Costs
The Advisor Entities, or their affiliates, will beare entitled to receive reimbursement for organization and offering costs paid on behalf of the Company in connection with the Offering. The Company will beis obligated to reimburse the Advisor Entities, or their affiliates, as applicable, for organization and offering costs to the extent the aggregate of selling commissions, dealer manager fees, distribution fees and other organization and offering costs do not exceed 15% of gross proceeds from the Offering. The Advisor Entities do not expect reimbursable organization and offering costs, excluding selling commissions, and dealer manager fees, and distribution fees, to exceed $30.0$18.0 million, or 1.5%approximately 1.0% of the total proceeds available to be raised from the Offering. The Company shallwill not reimburse the Advisor Entities for any organization and offering costs that the Company’s independent directors determine are not fair and commercially reasonable to the Company. The Company will recordrecords organization and offering costs each period based on an allocation of expected total organization and offering costs to be reimbursed. Organization costs will bewere recorded in general and administrative expenses in the consolidated statements of operations and offering costs were recorded as a reduction to equity. From inception through March 31, 2016 and for the year then ended, the Advisor Entities incurred organization and offering costs of $4.4 million and $0.5 million, respectively, on behalf of the Company of which $20,000 was allocated and recorded in due to related party on the consolidated balance sheets. For the three months ended March 31, 2016, the ratio of offering costs to total capital raised was approximately 1.0%.
Dealer Manager
Selling Commissions, Dealer Manager Fees and Distribution Fees
Pursuant to a dealer manager agreement, the Company pays the Dealer Manager selling commissions of up to 7.0% of gross proceeds from the sale of Class A Shares and up to 2.0% of the gross proceeds from the sale of Class T Shares issued in the Primary Offering, all of which are reallowed to participating broker-dealers. The Company pays the Dealer Manager a dealer manager fee of up to 3.0% of gross proceeds from the sale of Class A Shares and up to 2.75% of the gross proceeds from the sale of Class T Shares issued in the Primary Offering, a portion of which is typically reallowed to participating broker-dealers and paid to certain employees of the Dealer Manager.

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and administrative expenses in the consolidated statements of operations and offering costs will be recorded as a reduction to equity.
NorthStar Securities, LLC
Selling Commissions and Dealer Manager Fees
Pursuant to a dealer manager agreement,In addition, the Company will paypays the Dealer Manager an affiliatea distribution fee of up to 1.0% annually of gross proceeds from the Sponsor, selling commissions,sale of Class T Shares issued in the Primary Offering, all of which will beare reallowed to participating broker-dealers. In addition,The Dealer Manager will cease receiving distribution fees with respect to each Class T Share upon the Company will payearliest of the following to occur: (i) a listing of the Company’s shares of common stock on a national securities exchange; (ii) such Class T Share is no longer being outstanding; (iii) the Dealer Manager a dealer manager fee, a portionManager’s determination that total underwriting compensation, with respect to all Class A Shares and Class T Shares would be in excess of which is typically reallowed to participating broker-dealers and paid to certain employees10% of the Dealer Manager, refergross proceeds of the Primary Offering; or (iv) the end of the month in which total underwriting compensation, with respect to Note 7 Subsequent Events - ReclassificationClass T Shares held by a stockholder within his or her particular account would be in excess of 10% of the stockholder’s total gross investment amount at the time of purchase of the primary Class T Shares and Related Amendments. held in such account.
No selling commissions or dealer manager fees will beare paid for sales pursuant to the DRP. DRP or the Company’s distribution support agreement.
As of September 30, 2015,March 31, 2016, no selling commissions, or dealer manager or distribution fees were paid pursuant to the dealer manager agreement.
Distribution Support Agreement
Pursuant to a distribution support agreement, NorthStar Realty and RXR agreed to purchase 75% and 25%, respectively, of any shares, up to an aggregate of $10.0 million in sharesClass A Shares of the Company’s common stock (which will include any sharesat a price of $9.10 per share (reduced by $1.5 million and $0.5 million Class A Shares of common stock purchased by NorthStar Realty and RXR, may purchase in orderrespectively, to satisfy the minimum offering requirement)requirement on December 23, 2015) during the two year period following commencement of the Offering, in certain circumstances in order to provide additional funds to support distributions to stockholders, if necessary.
NorthStar Realty and RXR
In December 2013, NorthStar Realty entered into a strategic transaction with RXR. The investment in RXR Realty includes an approximate 27% equity interest. NorthStar Realty’s equity interest in RXR Realty is structured so that NSAM may be entitled to certain fees in connection with RXR’s investment management business.
4.Equity-Based Compensation
The Company adopted the Plan, which it may use to attract and retain qualified officers, directors, employees and consultants, as well as an independent directors compensation plan, which is a component of the Plan. Pursuant to the Plan, each of the Company’s three independent directors will be granted 5,000 Class A Shares of restricted common stock upon the Company making its first investment, as may be resolved by the board of directors of the Company. The restricted common stock granted will vest quarterly over two years. However, the stock will become fully vested on the earlier occurrence of: (i) the termination of the independent director’s service as a director due to his or her death or disability; or (ii) a change in control of the Company. The Company currently intends to issue awards only to its independent directors under the Plan. The Company will accountaccounts for its equity-based compensation awards using the fair value method, which requires an estimate of fair value of the award at the time of grant. All fixed equity-based awards to directors, which have no vesting conditions other than time of service, will beare amortized to compensation expense over the award’s vesting period on a straight-line basis. Equity-based compensation will be recorded in general and administrative expenses in the consolidated statements of operations. Each of the Company’s three independent directors will be granted 5,000 shares of restricted stock upon the Company raising the minimum amount of $2.0 million in gross offering proceeds.
5.Stockholders’ Equity
Common Stock
As of September 30, 2015 andFor the three months ended March 31, 2016, the Company issued no Class A Shares or Class T Shares, generating no gross proceeds. For the year ended December 31, 2014,2015, the Company had 22,223 shares outstanding.issued 219,780 Class A Shares generating gross proceeds of $2.0 million. From inception through March 31, 2016, the Company issued no Class T Shares and 242,003 Class A Shares of common stock generating gross proceeds of $2.2 million pursuant to the Primary Offering.
Distribution Reinvestment Plan
The Company adopted athe DRP through which common stockholders may elect to reinvest an amount equal to the distributions declared on their shares in additional shares of the Company’s common stocksame class, in lieu of receiving cash distributions. The initial purchasedistributions, at a price equal to $9.81 per share pursuant to the DRP is $9.50. OnceClass A Share and $9.27 per Class T Share until the Company establishes an estimated value per share for each class of share. Once established, shares issued pursuant to the DRP will be priced at 95.0%97% of the estimated value per share for each class of the Company’s common stock, as determined by the Advisor Entities or another firmother firms chosen for that purpose. Pursuant to amended FINRA Rule 2310, which is expected to be effective in 2016, the Company expects to establish an estimated value per share for each class of share from and after 150 days following the second anniversary of breaking escrow in the offering and annually thereafter. No selling commissions, or dealer manager fees are paid on shares issued pursuant to the DRP. The board of directors of the Company may amend, suspend or terminate the DRP for any reason upon ten-days’ notice to participants, except that the Company may not amend the DRP to eliminate a participant’s ability to withdraw from the DRP.

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distribution fees are paid on shares issued pursuant to the DRP. The amount available for distributions on all Class T shares will be reduced by the amount of distribution fees payable with respect to the Class T shares issued in the Primary Offering. The board of directors of the Company may amend, suspend or terminate the DRP for any reason upon ten-days’ notice to participants, except that the Company may not amend the DRP to eliminate a participant’s ability to withdraw from the DRP.
As of March 31, 2016, the Company had not begun issuing shares pursuant to the DRP.
Share Repurchase Program
The Company adopted a share repurchase program that may enable stockholders to sell their shares to the Company in limited circumstances (the “Share Repurchase Program”). The Company may not repurchase shares unless a stockholder has held shares for one year. However, the Company may repurchase shares held less than one year in connection with a stockholder’s death or disability (as disability is defined in the Internal Revenue Code) and after receiving written notice from the stockholder or the stockholder’s estate. The Company is not obligated to repurchase shares underpursuant to the Share Repurchase Program. The Company may amend, suspend or terminate the Share Repurchase Program at its discretion at any time, subject to certain notice requirements.
6.Non-controlling InterestsInterest
Operating Partnership
Non-controlling interests includeinterest includes the aggregatespecial limited partnership interestsinterest in the Operating Partnership held by limited partners, other than the Company. Income (loss) attributable to the non-controlling interests will be based on the limited partners’ ownership percentage of the Operating Partnership. The Special Unit Holder has invested $1,000 in the Operating Partnership and has been issued Special Units, which is recorded as its non-controlling interestsinterest on the consolidated balance sheets as of September 30, 2015March 31, 2016 and December 31, 2014.2015. Income (loss) attributable to the non-controlling interest is based on the Special Unit Holder’s share of the Operating Partnership’s income (loss) and was an immaterial amount for the three months ended March 31, 2016.
7.Subsequent Events
Reclassification of Shares and Related AmendmentsStock Distribution
On October 6, 2015,April 14, 2016, the board of directors of the Company filed a post-effective amendmentapproved special stock dividends to its registration statement in order to offer Class A shares and Class T sharesall common stockholders of common stock (the “Class A Shares” and “Class T Shares”, respectively). In connection withrecord on the offeringclose of Class T Shares and reclassification ofbusiness on the Company’s shares of common stock into Class A Shares and Class T Shares, on November 3, 2015,earlier of: (a) the date by which the Company filed articles of amendmentraises $100 million pursuant to this offering and restatement (the “Second Articles of Amendment and Restatement”) with the state of Maryland.(b) December 31, 2016. The terms of the Class A Shares are identical to the shares of commonspecial stock issued prior to November 3, 2015. The SEC declared the post-effective amendment effective on November 12, 2015, at which time the Company began offering for sale in its Primary Offering up to $1,800,000,000 in shares of common stock at a price of $10.11 per Class A Share and $9.55 per Class T Share. The following table presents the differences in fees and selling commissions between the classes of the Company’s common stock:
 Class A Class T
Initial Offering Price$10.11
 $9.55
Selling Commission (per share)7.00% 2.00%
Dealer Manager Fee (per share)3.00% 2.75%
Annual Distribution Fee (per share)None
 1.00%

The distribution fee is calculated on outstanding Class T Shares issued in the Primary Offeringdividend will be in an amount equal in value to 1.0% per annum5.0% of the current gross offering price per share (or, if the Company is no longer offering shares in a public offering, the most recent gross offering price per share or the estimated per share value of each issued and outstanding Class T Shares, if any has been disclosed). The Company will cease paying distribution fees with respect to eachA and Class T Share on the earliest to occur of the following: (i) a listing of shares of the Company’s commonrecord date. The special stock on a national securities exchange; (ii) such Class T Share is no longer outstanding; (iii) the dealer manager’s determination that total underwriting compensation from all sources, including dealer manager fees, selling commissions, distribution fees and any other underwriting compensation paid to participating broker dealers with respect to all Class A Shares and Class T Shares woulddividends will be issued in excess of 10% of the gross proceeds of the Primary Offering; or (iv) the end of the month in which the transfer agent, on the Company’s behalf, determines that total underwriting compensation with respect to the Class T primary shares held by a stockholder within his or her particular account, including dealer manager fees, selling commissions, and distribution fees, would be in excess of 10% of the total gross offering price at the time of the investment in the Class T Shares held in such account.

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NORTHSTAR/RXR NEW YORK METRO REAL ESTATE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

Other than the differing fees, as described above, the Class A Shares and Class T Shares have identical rights and privileges, such as identical voting rights.
In connection with the foregoing, effective November 12, 2015, the Company has amended its dealer manager agreement, the participating dealer agreement, and the distribution support agreement. In addition, the Company has amended its DRP to enable participating stockholders to automatically reinvest in additional shares of the same class at a price equal to $9.81 per Class A Share and $9.27 per Class T Share untilas the Company establishes an estimated value per share. Onceshares on which the Company establishes an estimate value per share, shares issued pursuant tostock dividends are being made within 90 days following the DRPrecord date. No selling commissions or dealer manager fees will be reinvested at a price equal to 97%paid in connection with the issuance of the estimated per share value for such classspecial stock dividend.
Distributions
On May 11, 2016, the board of shares. The Company has also amended the Share Repurchase Program. Pursuant to the amended Share Repurchase Program, shares will be repurchased at a price equal to customer account statement value as determined in accordance with FINRA Rule 15-02.
Name Change
The Company’s Second Articles of Amendment and Restatement also provide for the change of the namedirectors of the Company from NorthStar/RXR New York Metro Income, Inc.approved a daily cash distribution of $0.000273224 per share of common stock subject to, NorthStar/RXR New York Metro Real Estate, Inc., which emphasizesand commencing on, the Company’s primary focusfirst day the Company issues Class T shares in its Offering (the “Cash Distribution Commencement Date”) through August 31, 2016. Following the Cash Distribution Commencement Date, distributions on office, mixed useClass A and multifamily real estate equity investments concentrated inClass T shares will generally be paid to all stockholders of record on the New York metropolitan area. The changefirst business day of the Company’s namemonth following the month for which the distribution was effective as of November 3, 2015, the date of the filing of the Company’s Second Articles of Amendment and Restatement.accrued.


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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our unaudited consolidated financial statements and notes thereto included in Item 1. “Financial Statements” of this report. References to “we,” “us” or “our” refer to NorthStar/RXR New York Metro Real Estate, Inc. and its subsidiaries unless the context specifically requires otherwise.
Introduction
We were formed to acquire a high-quality commercial real estate, or CRE portfolio, concentrated in the New York metropolitan area and, in particular New York City, with a focus on office, mixed-use properties and a lesser emphasis on multifamily properties. We intend to complement this strategy by originating and acquiring: (i) CRE debt including, subordinate loans and participations in such loans and preferred equity interests; and (ii) joint ventures and partnership interests in CRE related investments. We were formed on March 21, 2014 as a Maryland corporation and intend to make an election to qualify as a real estate investment trust or REIT, under the Internal Revenue Code, of 1986, as amended, beginningcommencing with theour taxable year endedending December 31, of the year in which we satisfy the minimum offering requirement.2016.
We are externally managed by NSAM J-NS/RXR Ltd or our Advisor,(our “Advisor”), a subsidiary of our co-sponsor NorthStar Asset Management Group Inc. (NYSE: NSAM). NSAM provides asset management and other services to publicly-traded REITs, including NorthStar Realty Finance Corp. (NYSE: NRF), or (“NorthStar Realty”) and NorthStar Realty Europe Corp. (NYSE: NRE), NSAM’s sponsored non-traded companies that raise capital through the retail market, as well as any future sponsored companies, including funds, joint ventures and partnerships both in the United States and internationally.internationally, collectively the NSAM Managed Companies. As of September 30, 2015,March 31, 2016, NSAM has an aggregate of $38.0$35.0 billion of assets under management, adjusted for commitments to acquire or sell certain investments by NSAM and NSAM managed companies. We are sub-advised by RXR NTR Sub-Advisor LLC or our Sub-Advisor,(our “Sub-Advisor”), a Delaware limited liability company and a subsidiary of our co-sponsor, RXR Realty LLC or RXR or RXR Realty.(“RXR”). RXR is a leading real estate owner, manager and developer in the New York metropolitan area. As of September 30, 2015March 31, 2016, RXR’s operating platform managed 8887 commercial real estate properties and investments containing 23.123.2 million square feet with an aggregate gross asset value of $12.2$12.7 billion. In addition, RXR has a residential development pipeline of approximately 3,000 multifamily and for sale units. Our Advisor and Sub-Advisor are collectively referred to asWe, our Advisor Entities. Our Advisor and our Sub-Advisor, entered into a sub-advisory agreement delegating certain investment responsibilities of our Advisor to our Sub-Advisor. NSAM and RXR are collectively referred to as our Co-Sponsors. Our dealer manager for the offering, NorthStar Securities, LLC, or our Dealer Manager,Offering is an affiliate of our Advisor and a subsidiary of NSAM.
Our primary investment types arewill be as follows:
Commercial Real Estate Equity - Our CRE equity investments will primarily be high-quality commercial real estate concentrated in the New York metropolitan area with a focus on office and mixed use properties and a lesser emphasis on multifamily properties. These investments may include direct and indirect ownership in real estate and real estate assets that may or may not be structurally senior to a third-party partner’s equity.
Commercial Real Estate Debt - Our CRE debt investments may include subordinate loans and participations in such loans and preferred equity interests.
Commercial Real Estate Securities - Our CRE securities investments may include commercial mortgage-backedmortgage backed securities, or CMBS backed by real estate in the New York metropolitan area and may include collateralized debt obligation, or CDO notes and other securities.
We believe that our targeted investment types are complementary to each other due to their overlapping sources of investment opportunities, common reliance on real estate fundamentals and ability to apply similar portfolio management and servicing skills to maximize value and to protect shareholder capital.
We registered to offer up to $1,800,000,000 in shares pursuant toOn March 28, 2014, as part of our primary offering, or our Primary Offering, to the public. Ourformation, we issued 16,667 shares of common stock mayto NorthStar Realty and 5,556 shares of common stock to a subsidiary of RXR for $0.2 million, all of which were subsequently renamed Class A shares. On February 9, 2015, our registration statement on Form S-11 with the U.S. Securities and Exchange Commission, or SEC was declared effective to offer a minimum of $2,000,000 and a maximum of $2,000,000,000 in shares of common stock in a continuous, public offering, of which up to $1,800,000,000 can be offered in any combination of the two classes of shares ofpursuant to our common stock: Class A shares and Class T shares, or our Class A Shares and Class T Shares, respectively. The offering price for the shares in the Primary Offering is $10.11at a purchase price of $10.1111 per Class A Share and $9.55$9.5538 per Class T Share. We are also offeringShare and up to $200,000,000 in any combination of Class A Shares and Class T Shares pursuant to ourour distribution reinvestment plan, or our DRP, at a purchase price of $9.81 per Class A Share and $9.27 per Class T Share, referShare. We retained our Dealer Manager to Recent Developments - Reclassification of Shares and Related Amendments. Ourserve as the dealer manager for our Primary Offering and our DRP are herein collectively referred to as our Offering. Our Dealer Manager will beis also responsible for marketing theour shares being offered pursuant to our Primary Offering.
The Securities and Exchange Commission, or SEC, declaredOur board of directors has the right to reallocate shares between our initial registration statement effective on February 9, 2015Primary Offering and our amended registration statement effective November 12, 2015.DRP.
On December 23, 2015, we commenced operations by satisfying our minimum offering requirement in our Primary Offering as a result of NorthStar Realty and RXR purchasing $1.5 million and $0.5 million in Class A Shares of common stock, respectively.

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Our Investments
The following describes the major CRE asset classes in which we may invest and actively manage to maximize stockholder value and to preserve our capital.
Commercial Real Estate Equity
Our CRE equity investments will primarily be high-quality commercial real estate concentrated in the New York metropolitan area with a focus on office and mixed use properties and a lesser emphasis on multifamily properties. These investments may include direct and indirect ownership in real estate and real estate assets that may or may not be structurally senior to a third-party partner’s equity.
Commercial Real Estate Debt
Our CRE debt investments may include subordinate loans and participations in such loans and preferred equity interests.
Commercial Real Estate Securities
Our CRE securities investments may include CMBS, backed by real estate in the New York metropolitan area and may include CDO notes and other securities.
Sources of Operating Revenues and Cash Flows
We will generate revenue from rental income and interest income. Rental and escalation income will be generated from our operating real estate for the leasing of space to various tenants. The leases will be for fixed terms of varying length and generally provide for annual rentals and expense reimbursements to be paid in monthly installments. Rental income from leases will be recognized on a straight-line basis over the term of the respective leases. Interest income will be generated from our CRE debt and securities investments. Additionally, we will report our proportionate interest of revenues and expenses from CRE investments which we may own through unconsolidated ventures.
Profitability and Performance Metrics
We will calculate Funds from Operations, or FFO, as defined by the National Association of Real Estate Investment Trusts, or NAREIT, and Modified Funds from Operations, or MFFO, as defined by Investment Program Association, or IPA, to evaluate the profitability and performance of our business.
Outlook and Recent Trends
The New York City economy posted a strong first quarter to begin 2016. In the first quarter of 2016, total non-farm employment increased by 45,200 jobs, a robust increase following continued strength in the labor market. In the twelve month period ending March 2016, total employment in New York City increased by 100,400 jobs, or 2.4%, 40 basis points above the United States growth rate and 80 basis points above the New York State growth rate. New York City’s unemployment rate, at 5.0%, recorded its lowest level since the Great Recession. According to New York City’s Office of Management and Budget, private-sector employment rose in excess of two percent for the fifth consecutive year through 2015 and is on track to extend this record of growth through 2016.
At the national level, the Federal Reserve’s decision to raise the federal funds rate for the first time in almost a decade reflected a consensus that the economic foundation driving the current expansion is solid, as well as the belief that the labor market is close to or already at full employment. While some believe that higher interest rates could potentially reduce investor demand in the broader commercial real estate market, we expect real estate prices and returns to remain attractive. We anticipate the United States will continue to be a safe haven for capital flows from around the world, as job growth is expected to be steady, which may drive leasing activity leading to a relatively stable to declining vacancy rate.
We believe the New York metropolitan area remainswill remain one of the strongest markets for CRE investing in the United States. States, despite the fact that investment sales activity slowed in the first quarter with 120 sales totaling $12.3 billion, a decrease of nearly 20.0% year-over-year. 2015 was a record-breaking year for investment sales with 589 sales totaling $60.3 billion. The activity in 2015 represented a 50.0% increase in volume year-over-year. While all primary U.S. markets garnered 70% of total international capital invested in commercial real estate in 2015, New York City alone captured over 25% of total international capital. By way of comparison, the next most heavily invested U.S. market is San Francisco/San Jose, with 6.6% of total international capital.
The combination of institutional and foreign investor interest and expanding growth in the media and technology sectors continuescontinue to support robust transaction volume and valuations. DuringThe recovery of the nine monthsManhattan office market has been driven largely by growth in the creative industries-tech, advertising, media and information, or TAMI, and nonbanking financial services, including


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asset management and private equity. Financial and legal services employment, traditionally the two largest drivers of Class A demand, still remains below pre-recession levels.
Manhattan overall asking rents increased to $75.69 per square foot, or PSF, in the first quarter of 2016, due to an influx of premium-priced space in Midtown as well as strong rental growth in Midtown South and Downtown. Asking rents were up from year-end 2015 and ended September 30,the first quarter of 2016 above the previous market peak of $72.17 PSF in 2008 according to Newmark Grubb Knight Frank.
The Manhattan office market leased 9.4 million square feet in the first quarter, a slight decrease from the 9.9 million square feet leased in the previous quarter, but still in line with the 10-year historical average of 9.2 million square feet. In 2015, 430 institutional real estatethe Manhattan office market leased a total of 36.2 million square feet, down 13% from 2014, which is mainly due to a dip in transactions totaling over $42.5 billion closedgreater than 400,000 square feet; three occurred in 2015 compared to seven in 2014. These totals were still the third highest in a decade behind 2011 and 2014. Manhattan began the year with negative absorption in the first quarter primarily driven by mid-sized blocks of space reaching the market in Midtown South. Manhattan did experience positive absorption in 2015 and for the sixth consecutive year, even if at significantly lower levels than in 2014. According to Colliers, Manhattan’s availability rate increased slightly to 9.9% in the first quarter, compared to 9.6% at year end 2015, less than the 10.7% rate one year earlier. Despite a slower rate of annual absorption, availability is at a historically low level since 2008 and well below the Great Recession high of 12.8% in the first quarter of 2009.
In terms of square footage, the size of Manhattan’s office market is larger than the next five U.S. office markets combined. Furthermore, we believe that the three main various submarkets within Manhattan (Midtown, Midtown South and Downtown) are dynamic and may operate independently. In Midtown, there are at least 12 previously built Class A office buildings that already are, or in the next five years will become more than 75% vacant due to relocations west and south. Companies such as Time Warner, Conde Nast, L’Oréal and KKR are relinquishing contiguous blocks of space in prestigious buildings throughout Midtown’s more traditional submarkets and decamping to new product. Large blocks of previously constructed space in Midtown South and Downtown have been backfilled by Midtown tenants. Tenants that have relocated Downtown now typically pay rent in the $40 to $60 PSF range as opposed to $70 to $90 PSF in Midtown. Class A asking rents in Downtown Manhattan have increased 34.8% in the past three years, but remain 27.7% below the Midtown average per Newmark Grubb Knight Frank.
While Midtown may be facing upcoming vacancies, in Midtown South, landlords have already begun to adjust assets in an attempt to attract rapidly expanding TAMI tenants from increasingly narrow confines of Midtown South. TAMI tenants have focused on Midtown South for its many side-core buildings that sometimes present better opportunities for open-seated floor plans versus Midtown’s center-core assets that may be more conducive to large, private offices. However, several high-profile tech and creative tenants migrated north and west in 2015 to take advantage of the larger floor plates as TAMI employment in New York City is up 5.4% over the highest year-to-date total since 2007. In addition, overall Manhattan office vacancies have reached their lowest levels since 2008, indicatingpast year, dramatically surpassing the growth rate of the financial industry. Landlords targeting these tenants are adopting modern amenities aimed to please millennials, the core of the industry’s employment base. Plus, TAMI tenants are favorable as those that demandendure are likely to expand, with 71% more expansions for commercial and other spacethese tenants in 2015 than one year prior. The TAMI sector accounted for 35% of leasing in the region remains strong. Office leasing activity remains strong as well, although large corporate headquarter relocationsfirst quarter.
Still, we expect that buildings that are not likelyamenity-laden have modern infrastructures and/or hold a certain cache will continue to be as common as smaller leases from startups, which scale up gradually prior to taking larger spaces. For example, while there were 30 office leases over 100,000 square feet in Manhattan just incatch the third quarterattention of 2014, there have been only 18 such transactions year-to-date through October 2015.
Underlying this strong real estate market is a diverse and dynamic economy, as the New York metropolitan area continuestenants. We believe that midtown buildings seeking to attract leading media, high-tech and creative companies, in addition to traditional corporate and financial services firms. In 2014, technology, advertising and media companies accounted for the largest share of new leasing activity in the area, outpacing both financial and legal services firms. Leasing activity in the third quarter 2015 was also driven primarily by such firms, which accounted for 36% of the total square footage leased. While office rents and occupancy rates within Manhattan remain strong, emerging areas in the outer boroughs and outlying suburbs will also present compelling investment opportunities as companies seek lower-cost alternatives to more expensive markets.
New York City’s growing economy has drawn new residents to the area, with New York City’s population reaching an all-time high of approximately 8.5 million residents as of July 2014, with more recent college graduates than any other major metropolitan area in the United States. New York City’s employment growth has outperformed the national average for each of the past five years, illustrating the area’s competitive advantage for companies and as a residential choice relative to other markets. New York City tourism, which is a key driver of local economic activity, has also increased 42% since 2003. The New York metropolitan area’s real estate market stands to benefit from these developments, with strong real estate fundamentals and demographics driving increased demand for both commercial and residential space.
On a macro level, we believe the U.S. economy as a whole is on a healthy growth path and as a result the U.S. Federal Reserve should begin raising ratestenants over the next several quarters,years will have to be flexible and creative; the buildings will have to adapt to a sign that economic growth and employment are achieving targeted levels. The New York metropolitan areachanging world. Employment space has increased in density as the amount of square feet per employee is dropping for tenants across industries. Certain industries reserve more usable square feet to provide amenities to employees as a means of motivation.
We have observed building owners planning to market large amounts of available space in the coming years begin taking measures to reposition assets, renaming buildings, seeking non-traditional office occupying tenants, offering distinctive amenities, approving lobby renovations and/or infrastructure changes, as well as completely reimagining their structures.
Urban Suburban Markets
RXR has traditionally been a direct beneficiary of these positive macroeconomic trends. Companies recognize the importance of having a presence in this market to tap its attractive workforce and gain exposure for their global brands. This has resulted in New York City hitting an all-time high in total employment, recording approximately 4.2 million jobs through September 2015, recovering over 380% of the jobs lost during the recent credit crisis and subsequent recession from December 2007 to June 2009. More impressively, New York was able to achieve this at a time when the financial service sector, its traditional economic engine, underperformed. This highlights the growing diversity of the New York economy, including the continued expansion of the media and technology sectors.
Overall valuations in the CRE markets continue to improve since bottoming out in 2009. Robust investor demand in 2014 and 2015 for CRE assets increased transaction activity and prices as rent and vacancy improved across most property sectors and are forecasted to continue to improve in 2016. However, global economic, financial and political headwinds remain. For instance, global market instability and the risk that maturing CRE debt may have difficulties being refinanced, among other factors, may continue to cause periodic volatility in the CRE markets for some time. These maturing loans could negatively impact CRE lending markets and slow overall transaction volumes. In addition, there are concerns about low inflation in the United States, a stronger U.S. dollar, slow global growth and international market volatility. Many other global central banks are easing monetary conditions to combat low inflation and slow growth, which may have negative effects to their markets and beyond over the long-term. A changing New York City political landscape may also negatively impact the ability to effectively conduct our business and the macroeconomic conditions discussed above may also impact the creditworthiness of our tenants, operators, borrowers and us, which could result in the inability to meet the terms of leases and borrowings while additionally impacting the implementation of redevelopment and repositioning strategies.
Large investments in office construction, including approximately 9.3 million square feet of office space currently under construction as of the third quarter 2015, may negatively impact future occupancy levels and market rental rates. A low interest rate environment has contributed to increased demand for high-quality real estate assets in desirable markets as investors search for both yield and safety. A near-term interest rate increase may reverse these trends. In addition, international market volatility, including in the euro area, may impact international demand for CRE assetssignificant player in the New York City suburbs, and we continue to expect to find two main types of attractive investment opportunities in these markets. First, we expect that traditional residential and commercial suburban assets may see increased demand, as the broader economy recovers and employment improves resulting in the growth of small- and medium-sized service businesses inherent to the suburban markets. In addition, we expect that demand may increase as individuals and companies find themselves priced out of core New York City markets (and, potentially, certain outer borough locations), but continue to desire proximity to the many strengths of the metropolitan arearegion. We believe that this trend could create a new “suburban moment” after several years of retrenchment. This dynamic would be created by the very success of New York City in contrast to the last half-century when suburbs largely expanded as a result of urban dysfunction.
Second, we believe that a new type low-density suburban product may prove increasingly desirable to both young people, who seek an urban lifestyle yet appreciate the benefits of the suburbs, and depress overall CRE liquidityretiring baby boomers, who no longer have the financial and valuations. All these factors


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physical wherewithal to maintain large suburban residences and uncertainties could adversely impact our abilitywho likely find car-dependent lifestyles more challenging. This product may additionally addresses a challenge facing many suburban communities in a need to implement our investment objectives.grow their tax bases to cover increasing legacy costs with limited land available for development.
New York Metropolitan Area Residential Market
Finally,According to Douglas Elliman’s first quarter 2016 Manhattan Sales and Manhattan, Brooklyn and Queens Rentals report, Manhattan housing prices pushed higher, reaching a new record with limited re-sale inventory and additional closings of luxury new development sales. Manhattan median rental prices leveled off and slightly declined in certain instances for the first time in two years. Key market drivers include employment gains, a booming techftersector, tight credit conditions and low inventory and mortgage rates.
The amount of supply and construction at the ultra-luxury end of the residential market may be cause for concern, but there is a continued lack of supply and inventory growth for renters and buyers seeking to access more affordable housing. Brooklyn markets moved higher relative to prior year levels while Queens showed weaker results as overall price indicators moved lower. Sales activity in Manhattan remained below the records set last year, but was higher than the long-term average and are expected to stay above average in coming quarters. With the high costs of Manhattan housing and $36 billion of transportation infrastructure development planned in the next two to three years, we believe there will be a significant increase in demand in the surrounding housing markets including Brooklyn, Long Island and Westchester. Brooklyn, New York’s most populous borough with 2.7 million residents, has seen a migration of renters along transportation corridors, raising rents by 10.2% in 2015. Long Island is faced with an aging supply of multifamily homes with 78% of all inventory constructed prior to 1990. Further, rental residential demand continues to increase as the aging population and millennials, comprising 40% of the Long Island’s population, search for new housing options. Westchester also suffers from a limited supply of rental apartments, as the percentage of renter-occupied housing units is 38%, among the lowest in the metropolitan area.
After showing considerable resiliency during the economic downturn between 2007 and 2010, the non-traded REIT sector experienced strong growth over recent years peaking in 2013 with approximately $16$20 billion of equity being raised for programs in this space in 2014

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alone. Althoughdue to favorable capital markets conditions. Non-traded REIT capital raising has decreasedwas down 20% in 2014 (with approximately $16 billion dollars in equity sales) and 2015 with total sales through September 2015were down 38% from36% compared to 2014, levels, we anticipate that sales will remain strong as we monitordue to a variety of trends in this industry. Regulatory changes likefactors including a reduced number of liquidity events and an expanding regulatory environment. In the second quarter of 2015, the implementation of FINRARegulatory Notice 15-02 issued by the Financial Industry Regulatory Authority, related to broker-dealer account statements went into effect and the U.S. Department of Labor’s recent proposalLabor issued its final rule on a fiduciary standard for retirement accounts, for example, may impede capital formation and overall sales in the sector. However, due to generally positive market dynamics for New York metro area real estate investing, and our Advisor Entities and their affiliates’ expertise and industry relationships, we continue to see a robust pipeline of investment opportunities that have credit qualities and yield profiles that are consistent with our underwriting standards and that we believe offer the opportunity to meet or exceed our targeted returns. While we remain optimistic that we will continue to be able to generate and capitalize on an attractive pipeline of opportunities, there is no assurance that this will be the case.accounts.
Our Strategy
Our primary business objectives areobjective is to acquire high-quality commercial real estate, including value-add real estate investment opportunities in the New York metropolitan area and New York City which will allow us to generate consistent current returns, optimize the risk-return dynamic for our stockholders and realize appreciation opportunities in the portfolio. We may also originate real estate-relatedand acquire a diversified portfolio of CRE debt and securities, respectively, secured primarily by collateral in the same geographic area. We will focus on investments that we expect will generate attractive risk-adjusted returns, stable cash flow for distributions and provide downside protection to our stockholders. Some of our investments may be considered transitional in nature because the owner or borrower may have a business plan to improve the collateral and, as a result we may require the borrower to fund interest or other reserves, whether through loan proceeds or otherwise, to support debt service paymentswhich emphasize both current income and capital expenditures.appreciation, seeking to provide a balanced portfolio that leverages our Advisor Entities’ local expertise and maximizes our ability to pursue a range of opportunities throughout the real estate capital structure. We will also require the owner or borrower and possibly a guarantor,intend to refill these reserves should they become deficient during the applicable period for any reason. We will also seek to realize growth in the value ofprudently leverage our real estate equityassets and other CRE investments through appreciation and/or by timing their salein order to maximize value.diversify our capital and enhance returns. We believe that our Advisor Entities have a platform that derives a potential competitive advantage from the combination of deep industry relationships, market leading CRE credit underwriting and capital markets expertise which enables us to manage credit risk across our investments as well as to structure and finance our assets efficiently. Wealso believe that our targeted investment types are complementary to each other due to their overlapping sources of investment opportunities, common reliance on CRE fundamentals and ability to apply similar portfolio management and servicing skills to maximize value and to protect shareholder capital.
We willexpect to use the net proceeds from our Offeringcontinuous, public offering of a maximum of $2.0 billion in shares of common stock, in any combination of Class A Shares and Class T Shares, and proceeds from other financing sources to carry out our primary business objectives of acquiring, originating and acquiring real estate-related investments.managing our investment portfolio.
Financing Strategy
We will use asset-level financing as part of our investment strategy and we seek to match-fundprudently leverage our assets and liabilities by having similar lease terms or maturities and like-kind interest rate benchmarks (fixed or floating) to manageinvestments while managing refinancing and interest rate risk and utilize non-recourse liabilities whenever possible.risk. Our Advisor Entities are responsible for managing such financing and interest rate risk on our behalf. Borrowing levels for commercial real estate investments may change depending upon the nature of the assets and the related financing. Our financing strategy for our real estate will typically use long-term, non-recourse mortgage loans. We intend to pursue a variety of financing arrangements such as mortgage notes, credit facilities, securitization financing transactions and other term borrowings. We will seek and prefer long-term, non-recourse financing, including non mark-to-market financing that may be available through securitization. We may, as circumstances warrant, need to use some levelprudent levels of recourse financing.
Although we will have a limitation on the maximum leverage for our portfolio, which approximates 75% of the aggregate cost of our investments, including cash and excludingassets (excluding indirect leverage held through our unconsolidated joint venture investments,investments), other than intangibles, before deducting loan loss reserves, other non-cash reserves and depreciation, we do not have a targeted debt-to-equity ratio on an asset-by-asset basis, as we believe the appropriate leverage for the particular assets we finance depends on the specific credit


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characteristics of each asset. We will use leverage for the sole purpose of financing our investments and diversifying our equity and we will not employ leverage to speculate on changes in interest rates. We also will seek assignable financing when available. Once we have fully invested the proceeds of our Offering, we expect that our financing may approximate 50% of the cost of our investments, excluding indirect leverage held through our unconsolidated joint venture investments, although it may exceed this level during our organization and offering stage.
Borrowing levels for commercial real estate investments may change depending upon the nature of the assets and the related financing. Our financing strategy for our real estate will typically use long-term, non-recourse mortgage loans. Our financing strategy for our debt and securities investments will be dependent on our ability to obtain match-funded borrowings at rates that provide a positive net spread, generally using credit facilities and securitization financing transactions.
Portfolio Management
Our Advisor Entities maintain a comprehensive portfolio management process that generally includes day-to-day oversight by the portfolio management and servicing team, regular management meetings and an exhaustive quarterly credit review process. These processes are designed to enable management to evaluate and proactively identify asset-specific credit issues and trends on a portfolio-wide basis. For our joint venture investments, we intend to rely on affiliates of our Sub-Advisor to provide certain asset management, property management and/or other services in managing our joint investments. Nevertheless, we

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cannot be certain that our Advisor Entities review will identify all issues within our portfolio due to, among other things, adverse economic conditions or events adversely affecting specific assets; therefore, potential future losses may also stem from investments that are not identified during these credit reviews. Our Advisor Entities, under the direction of the Investment Committee,investment committee, use many methods to actively manage our asset base to preserve our income and capital. Credit risk management is the ability of our Advisor Entities to manage our assets in a manner that preserves principal/cost and income and minimizes credit losses that could decrease income and portfolio value. For real estate equity and CRE debt investments, frequent re-underwriting and dialogue with borrowers/partners and regular inspections of our collateral and owned properties have proven to be an effective process for identifying issues early. During the quarterly credit review, or more frequently as necessary, investments are put on highly-monitored status and identified for possible loan loss reserves/asset impairment, as appropriate, based upon several factors, including missed or late contractual payments, significant declines in collateral performance and other data which may indicate a potential issue in our ability to recover our invested capital from an investment. Our Advisor Entities use an experienced portfolio management and servicing team that monitors these factors on our behalf.
Our investments will be reviewed on a quarterly basis, or more frequently as necessary, to assess whether there are any indicators that the value of our investments may be impaired or that its carrying value may not be recoverable. In conducting these reviews, we consider macroeconomic factors, including real estate sector conditions, together with asset and market specific circumstances among other factors.
Each of our CRE debt investments will be secured by commercial real estate collateral and requires customized portfolio management and servicing strategies for dealing with potential credit situations. The complexity of each situation depends on many factors, including the number of properties, the type of property, macro and local market conditions impacting supply/demand, cash flow and the financial condition of our collateral and our borrowers’/operators’ ability to further support the collateral. Further, some of our investments will be considered transitional in nature because the business plan is to re-position, re-develop or otherwise lease-up the property in order to improve the collateral. At the time of acquisition or origination, the underlying property revenues may not be sufficient to support lease payments, debt service or generate positive net operating income. The business plan may necessitate a lease reserve or interest or other reserves, whether through proceeds from our loans, borrowings, offering proceeds or otherwise, to support lease payments or debt service and capital expenditures during the implementation of the business plan. There may also be a requirement for the borrower, tenant/operator, guarantor or us, to refill these reserves should they become deficient during the applicable period for any reason.
Critical Accounting Policies
Below is a discussion of the accounting policies that management believes will be critical once we commence operations. We consider these policies critical because we believe that understanding these policies is critical to understanding and evaluating our reported financial results. Additionally, these policies may involve significant management judgment and assumptions or require estimates about matters that are inherently uncertain. These judgments will affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of our consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our consolidated financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses.
Operating Real Estate
We will follow the purchase method for an acquisition of operating real estate, where the purchase price is allocated to tangible assets such as land, building, furniture and fixtures, improvements and other identified intangibles. Major replacements and betterments which improve or extend the life of the asset will be capitalized and depreciated over their useful life. Ordinary repairs and maintenance will be expensed as incurred. Operating real estate will be carried at historical cost less accumulated depreciation. Operating real estate will be depreciated using the straight-line method over the estimated useful life of the assets. Construction costs incurred in connection with our investments will be capitalized and included in operating real estate, net on our consolidated balance sheets. Construction or redevelopment in progress will not be depreciated until the development is substantially completed. Costs directly related to an acquisition deemed to be a business combination will be expensed and included in transaction costs in our consolidated statements of operations. We will evaluate whether a real estate acquisition constitutes a business and whether business combination accounting is appropriate.
Real Estate Debt Investments
CRE debt investments are generally intended to be held to maturity and, accordingly, will be carried at cost, net of unamortized loan fees, premium, discount and unfunded commitments. CRE debt investments that are deemed to be impaired will be carried at amortized cost less a loan loss reserve, if deemed appropriate, which approximates fair value. CRE debt investments where we do not intend to hold the loan for the foreseeable future or until its expected payoff will be classified as held for sale and recorded at the lower of cost or estimated value.

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Real Estate Securities
We will classify our CRE securities investments as available for sale on the acquisition date, which will be carried at fair value. Unrealized gains (losses) will be recorded as a component of accumulated other comprehensive income, or OCI, in our consolidated statements of equity. However, we may elect the fair value option for certain of our available for sale securities, and as a result, any unrealized gains (losses) on such securities will be recorded in unrealized gain (loss) on investments and other in our consolidated statements of operations.
Revenue Recognition
Operating Real Estate
Rental and escalation income from operating real estate will be derived from the leasing of space to various types of tenants. The leases will be for fixed terms of varying length and will generally provide for annual rentals to be paid in monthly installments. Rental income from leases will be recognized on a straight-line basis over the term of the respective leases.
Real Estate Debt Investments
Interest income will be recognized on an accrual basis and any related premium, discount, origination costs and fees will be amortized over the life of the investment using the effective interest method. The amortization will be reflected as an adjustment to interest income in our consolidated statements of operations. The amortization of a premium or accretion of a discount will be discontinued if such loan is reclassified to held for sale.
Real Estate Securities
Interest income will be recognized using the effective interest method with any premium or discount amortized or accreted through earnings based on expected cash flow through the expected maturity date of the security. Changes to expected cash flow may result in a change to the yield which is then applied retrospectively for high-credit quality securities that cannot be prepaid or otherwise settled in such a way that the holder would not recover substantially all of the investment or prospectively for all other securities to recognize interest income.
Credit Losses and Impairment on Investments
Operating Real Estate
Our real estate portfolio will be reviewed on a quarterly basis, or more frequently as necessary, to assess whether there are any indicators that the value of our operating real estate may be impaired or that its carrying value may not be recoverable. A property’s value will be considered impaired if management’s estimate of the aggregate expected future undiscounted cash flow generated by the property is less than the carrying value. In conducting this review, management will consider U.S. macroeconomic factors, real estate sector, asset specific conditions and other factors. To the extent an impairment has occurred, the loss will be measured as the excess of the carrying value of the property over the estimated fair value and recorded in impairment on operating real estate in our consolidated statements of operations.
An allowance for a doubtful account for a tenant receivable will be established based on a periodic review of aged receivables resulting from estimated losses due to the inability of tenants to make required rent and other payments contractually due. Additionally, we will establish, on a current basis, an allowance for future tenant credit losses on unbilled rent receivables based on an evaluation of the collectability of such amounts.
Real Estate Debt Investments
Loans will be considered impaired when, based on current information and events, it is probable that we will not be able to collect principal and interest amounts due according to the contractual terms. We will assess the credit quality of the portfolio and adequacy of loan loss reserves on a quarterly basis, or more frequently as necessary. Significant judgment of management will be required in this analysis. We will consider the estimated net recoverable value of the loan as well as other factors, including but not limited to the fair value of any collateral, the amount and the status of any senior debt, the quality and financial condition of the borrower and the competitive situation of the area where the underlying collateral is located. Because this determination will be based on projections of future economic events, which are inherently subjective, the amount ultimately realized may differ materially from the carrying value as of the balance sheets date. If upon completion of the assessment, the estimated fair value of the underlying collateral is less than the net carrying value of the loan, a loan loss reserve will be recorded with a corresponding charge to provision for loan losses. The loan loss reserve for each loan will be maintained at a level that is determined to be adequate by management to absorb probable losses.
Income recognition will be suspended for a loan at the earlier of the date at which payments become 90-days past due or when, in the opinion of management, a full recovery of income and principal becomes doubtful. When the ultimate collectability of

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the principal of an impaired loan is in doubt, all payments will be applied to principal under the cost recovery method. When the ultimate collectability of the principal of an impaired loan is not in doubt, contractual interest will be recorded as interest income when received, under the cash basis method until an accrual is resumed when the loan becomes contractually current and performance is demonstrated to be resumed. A loan will be written off when it is no longer realizable and/or legally discharged.
Real Estate Securities
CRE securities for which the fair value option is elected are not evaluated for other-than-temporary impairment, or OTTI, as any change in fair value is recorded in our consolidated statements of operations. Realized losses on such securities are reclassified to realized gain (loss) on investments and other as losses occur.
CRE securities for which the fair value option is not elected will be evaluated for OTTI quarterly. Impairment of a security is considered to be other-than-temporary when: (i) the holder has the intent to sell the impaired security; (ii) it is more likely than not the holder will be required to sell the security; or (iii) the holder does not expect to recover the entire amortized cost of the security. When a CRE security has been deemed to be other-than-temporarily impaired due to (i) or (ii), the security is written down to its fair value and an OTTI is recognized in the consolidated statements of operations. In the case of (iii), the security is written down to its fair value and the amount of OTTI is then bifurcated into: (a) the amount related to expected credit losses; and (b) the amount related to fair value adjustments in excess of expected credit losses. The portion of OTTI related to expected credit losses will be recognized in our consolidated statements of operations. The remaining OTTI related to the valuation adjustment will be recognized as a component of accumulated OCI in our consolidated statements of equity. The portion of OTTI recognized through earnings will be accreted back to the amortized cost basis of the security through interest income, while amounts recognized through OCI are amortized over the life of the security with no impact on earnings. CRE securities which are not high-credit quality will be considered to have an OTTI if the security has an unrealized loss and there has been an adverse change in expected cash flow. The amount of OTTI is then bifurcated as discussed above.
Liquidity and Capital Resources
We will require capitalare dependent upon the net proceeds from our Offering to fundconduct our investment activities, operating expenses and to make distributions.operations. We will obtain the capital required to acquire and manage our CRE portfolio and conduct our operations from the proceeds of our Offering and any future offerings we may conduct. We willmay access additional capital from secured or unsecured financings from banks and other lenders and from any undistributed funds from our operations. As of September 30, 2015,March 31, 2016, we havedid not mademake any investments and our total assets consistsconsist of $0.2$2.2 million of cash.
If we are unable to raise substantially more funds in our Offering than the minimum offering requirement, we will make fewer investments resulting in less diversification in terms of the type, number and size of investments we make and the value of an investment in us will fluctuate with the performance of the specific assets we acquire. Further, we have certain fixed direct and indirect operating expenses, including certain expenses as a publicly offered REIT, regardless of whether we are able to raise substantial funds in our Offering. Our inability to raise substantial funds would increase our fixed operating expenses as a percentage of gross income, reducing our net income and limiting our ability to make distributions.
We currently have no outstanding borrowings. Once we have fully invested the proceeds of our Offering, we expect that our financing will not exceed 50% of the greater of the cost or fair value of our investments, although it may exceed this level during our organizationborrowings and offering stage.no commitments from any lender to provide us with financing. Our charter limits us from incurring borrowings that would exceed 300% of our net assets. We cannot exceed this limit unless any excess in borrowing over such level is approved by a majority of our independent directors. We would need to disclose any such approval to our stockholders in our next quarterly report along with the justification for such excess. An approximation of this leverage calculation, excluding indirect leverage held through our unconsolidated joint venture investments, is 75% of our assets, other than intangibles, before deducting loan loss reserves, other non-cash reserves and depreciation. Once we have fully invested the


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proceeds of our Offering, we expect that our financing will not exceed 50% of the greater of the cost or fair value of our investments, including cash.excluding indirect leverage held through our unconsolidated joint venture investments, although it may exceed this level during our organization and offering stage.
In addition to making investments in accordance with our investment objectives, we will use our capital resources to make certain payments to our Advisor Entities and our Dealer Manager. During our organization and offering stage, these payments will include payments to our Dealer Manager for selling commissions, and dealer manager fees and distribution fees and payments to our Dealer Manager and our Advisor Entities, or their affiliates, as applicable, for reimbursement of certain organization and offering costs. However, we will not be obligated to reimburse our Advisor Entities, or their affiliates, as applicable, to the extent that the aggregate of selling commissions, dealer manager fees, distribution fees and other organization and offering costs incurred by us exceed 15% of gross proceeds from our Offering. During our acquisition and development stage, we expect to make payments to our Advisor Entities, or their affiliates, as applicable, in connection with the selection and origination or acquisition of investments, the management of our assets and costs incurred by our Advisor Entities in providing services to us. We entered into advisory and sub-advisory agreements with our Advisor Entities, which have a one-year term but may be renewed for an unlimited number of successive one-year periods upon the mutual consent of our Advisor Entities and our board of directors, including a majority of our independent directors.

21We intend to elect to be taxed as a REIT and to operate as a REIT commencing with our taxable year ending December 31, 2016. To maintain our qualification as a REIT, we will be required to make aggregate annual distributions to our stockholders of at least 90% of our REIT taxable income (computed without regard to the dividends paid deduction and excluding net capital gain). Our board of directors may authorize distributions in excess of those required for us to maintain REIT status depending on our financial condition and such other factors as our board of directors deems relevant. Provided we have sufficient available cash flow, we intend to authorize and declare daily distributions and pay distributions on a monthly basis. We have not established a minimum distribution level.
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Cash Flows
The following presents our consolidated statement of cash flows for the three months ended March 31, 2016:

 Three Months Ended 
 March 31, 2016
Cash flow provided by (used in): 
    Operating activities$(178)
Three Months Ended March 31, 2016
Net cash used in operating activities was $178 resulting from bank fees charged on our Operating Partnership bank account.
Off-Balance Sheet Arrangements
As of September 30, 2015,March 31, 2016, we had no off-balance sheet arrangements.
Related Party Arrangements
NSAM J-NS/RXR Ltd. and RXR NTR Sub-Advisor LLCAdvisor Entities
Subject to certain restrictions and limitations, our Advisor Entities are responsible for managing our affairs on a day-to-day basis and for identifying, acquiring, originating and asset managing investments on our behalf. Our Advisor Entities may delegate certain of their obligations to affiliated entities, which may be organized under the laws of the United States or foreign jurisdictions. For such services, to the extent permitted by law and regulations, our Advisor Entities will receive fees and reimbursements from us, of which theour Sub-Advisor generally will receivereceives 50% of all fees and up to 25% of all reimbursements.
We will pay theour Sub-Advisor, or its affiliates, development, leasing, property management and construction related service fees that are usual and customary for owners and operators in the geographic area of the property.
Fees to Advisor Entities
Asset Management Fee
Our Advisor Entities, or their affiliates, will receive a monthly asset management fee equal to one-twelfth of 1.25% of the sum of the amount funded or allocated for CRE investments, including expenses and any financing attributable to such investments, less any principal received on debt and securities investments (or our proportionate share thereof in the case of an investment made through a joint venture).


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Incentive Fee
Our Advisor, or its affiliates, is entitled to receive distributions equal to 15.0% of our net cash flows, whether from continuing operations, repayment of loans, disposition of assets or otherwise, but only after stockholders have received, in the aggregate, cumulative distributions equal to their invested capital plus a 6.0% cumulative, non-compounded annual pre-tax return on such invested capital.
Acquisition Fee
Our Advisor Entities, or their affiliates, will also receive an acquisition fee equal to 2.25% of each real estate property acquired by us, including acquisition costs and any financing attributable to an equity investment (or our proportionate share thereof in the case of an equity investment made through a joint venture) and 1.0% of the amount funded or allocated by us to acquire or originate CRE debt investments, including acquisition costs and any financing attributable to such investments (or our proportionate share thereof in the case of an investment made through a joint venture). An acquisition fee incurred related to an equity investment willis generally be expensed as incurred. An acquisition fee paid to our Advisor Entities related to the acquisition of an equity or CRE debt investment in an unconsolidated joint venture is included in investments in unconsolidated ventures on our consolidated balance sheets. An acquisition fee paid to our Advisor Entities related to the origination or acquisition of CRE debt investments will beis included in CRE debt investments, net on our consolidated balance sheets and will beis amortized to interest income over the life of the investment using the effective interest method. We will record as an expense certain acquisition costs and fees associated with transactions deemed to be business combinations in which we consolidate the asset and capitalizes the costs for transactions deemed to be acquisitions of an asset, including an equity investment.
Disposition Fee
For substantial assistance in connection with the sale of investments and based on the services provided, our Advisor Entities, or their affiliates, will receive a disposition fee equal to 2.0% of the contract sales price of each property sold and 1.0% of the contract sales price of each CRE debt investment sold or syndicated. We willdo not pay a disposition fee upon the maturity, prepayment, workout, modification or extension of a CRE debt investment unless there is a corresponding fee paid by our borrower, in which case the disposition fee is the lesser of: (i) 1.0% of the principal amount of the CRE debt investment prior to such transaction; or (ii) the amount of the fee paid by our borrower in connection with such transaction. If we take ownership of a property as a result of a workout or foreclosure of a CRE debt investment, we will pay a disposition fee upon the sale of such property. A disposition fee from the sale of an investment is generally expensed and included in asset management and other fees - related party in our consolidated statements of operations. A disposition fee for a CRE debt investment incurred in a transaction other than a sale will beis included in CRE debt investments, net on our consolidated balance sheets and will beis amortized to interest income over the life of the investment using the effective interest method.
For the three months ended March 31, 2016, we did not incur any fees to our Advisor Entities.
Reimbursements to Advisor Entities
Operating Costs
Our Advisor Entities, or their affiliates, will beare entitled to receive reimbursement for direct and indirect operating costs incurred by our Advisor Entities in connection with administrative services provided to us. Our Advisor Entities allocates,allocate, in good faith, indirect costs to us related to our Advisor Entities and their affiliates’ employees, occupancy and other general and administrative costs and expenses in accordance with the terms of, and subject to the limitations contained in, the advisory

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agreement with our Advisor Entities. The indirect costs include our allocable share of our Advisor Entities compensation and benefit costs associated with dedicated or partially dedicated personnel who spend all or a portion of their time managing our affairs, based upon the percentage of time devoted by such personnel to our affairs. The indirect costs also include rental and occupancy, technology, office supplies, travel and entertainment and other general and administrative costs and expenses.expenses also allocated based on the percentage of time devoted by personnel to our affairs. However, there will beis no reimbursement for personnel costs related to executive officers (although there may be reimbursement for certain executive officers of our Advisor) and other personnel involved in activities for which our Advisor Entities receive an acquisition fee or a disposition fee. Our Advisor Entities allocate these costs to us relative to itstheir and itstheir affiliates’ other managed companies in good faith and hashave reviewed the allocation with our board of directors, including itsour independent directors. Our Advisor Entities will update the board of directors on a quarterly basis of any material changes to the expense allocation and will provide a detailed review to the board of directors, at least annually, and as otherwise requested by the board of directors. We will reimburse our Advisor Entities quarterly for operating costs (including the asset management fee) based on a calculation for the four preceding fiscal quarters not to exceed the greater of: (i) 2.0% of our average invested assets; or (ii) 25.0% of our net income determined without reduction for any additions to reserves for depreciation, loan losses or other similar non-cash reserves and excluding any gain from the sale of assets for that period. Notwithstanding the above, we may reimburse our Advisor Entities for expenses in excess of this limitation if a majority of our independent directors determines that such excess expenses are justified based on unusual and non-recurring factors. We calculate the expense reimbursement quarterly based upon the trailing twelve-month period. From inception through March 31, 2016, our Advisor Entities incurred $6.9 million of operating


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costs on our behalf. Operating costs incurred by our Advisor Entities are not recorded in our consolidated statement of operations because there is no allocation of operating costs until we have net income or invested assets.
Organization and Offering Costs
Our Advisor Entities, or their affiliates, will beare entitled to receive reimbursement for organization and offering costs paid on our behalf of us in connection with our Offering. We are obligated to reimburse our Advisor Entities, or their affiliates, as applicable, for organization and offering costs to the extent the aggregate of selling commissions, dealer manager fees, distribution fees and other organization and offering costs do not exceed 15% of gross proceeds from our Offering. Our Advisor Entities do not expect reimbursable organization and offering costs, excluding selling commissions, and dealer manager fees and distribution fees, to exceed $30.0$18.0 million, or 1.5%approximately 1.0% of the total proceeds available to be raised from our Offering. We will not reimburse our Advisor Entities for any organization and offering costs that our independent directors determine are not fair and commercially reasonable to us. We will record organization and offering costs each period based on an allocation of expected total organization and offering costs to be reimbursed. Organization costs will bewere recorded in general and administrative expenses in theour consolidated statements of operations and offering costs will bewere recorded as a reduction to equity. From inception through March 31, 2016 and for the year then ended, our Advisor Entities incurred organization and offering costs of $4.4 million and $0.5 million, respectively, on our behalf of which $20,000 was allocated and recorded in due to related party on our consolidated balance sheets. For the three months ended March 31, 2016, the ratio of offering costs to total capital raised was approximately 1.0%.
NorthStar Securities, LLCDealer Manager
Selling Commissions, and Dealer Manager Fees and Distribution Fees
Pursuant to a dealer manager agreement, we will pay our Dealer Manager an affiliateselling commissions of up to 7.0% of gross proceeds from the sale of Class A Shares and up to 2.0% of the Sponsor, selling commissions,gross proceeds from the sale of Class T Shares issued in our Primary Offering, all of which will beare reallowed to participating broker-dealers. In addition, we willWe pay our Dealer Manager a dealer manager fee of up to 3.0% of gross proceeds from the sale of Class A Shares and up to 2.75% of the gross proceeds from the sale of Class T Shares issued in our Primary Offering, a portion of which is typically reallowed to participating broker-dealers and paid to certain employees of our Dealer Manager.
In addition, we pay our Dealer Manager refera distribution fee of up to Note 7 Subsequent Events - Reclassification1.0% annually of gross proceeds from the sale of Class T Shares issued in our Primary Offering, all of which are reallowed to participating broker-dealers. Our Dealer Manager will cease receiving distribution fees with respect to each Class T Share upon the earliest of the following to occur: (i) a listing of our shares of common stock on a national securities exchange; (ii) such Class T Share is no longer being outstanding; (iii) our Dealer Manager’s determination that total underwriting compensation, with respect to all Class A Shares and Related Amendments. Class T Shares would be in excess of 10% of the gross proceeds of our Primary Offering; or (iv) the end of the month in which total underwriting compensation, with respect to Class T Shares held by a stockholder within his or her particular account would be in excess of 10% of the stockholder’s total gross investment amount at the time of purchase of the primary Class T Shares held in such account.
No selling commissions or dealer manager fees will beare paid for sales pursuant to our DRP. DRP or our distribution support agreement.
As of September 30, 2015,March 31, 2016, no selling commissions, or dealer manager or distribution fees were paid pursuant to our dealer manager agreement.
Distribution Support Agreement
Pursuant to a distribution support agreement, NorthStar Realty and RXR agreed to purchase 75% and 25%, respectively, of any shares, up to an aggregate of $10.0 million in sharesClass A Shares of our common stock (which will include any sharesat a price of $9.10 per share (reduced by $1.5 million and $0.5 million Class A Shares of common stock purchased by NorthStar Realty and RXR, may purchase in orderrespectively, to satisfy theour minimum offering requirement)requirement on December 23, 2015) during the two year period following commencement of our Offering, in certain circumstances in order to provide additional funds to support distributions to stockholders, if necessary.
NorthStar Realty and RXR
In December 2013, NorthStar Realty entered into a strategic transaction with RXR. The investment in RXR Realty includes an approximate 27% equity interest. NorthStar Realty’s equity interest in RXR Realty is structured so that NSAM may be entitled to certain fees in connection with RXR’s investment management business.
Recent Developments
Reclassification of Shares and Related AmendmentsStock Distribution
On October 6, 2015,April 14, 2016, our board of directors approved special stock dividends to all common stockholders of record on the close of business on the earlier of: (a) the date by which we filed a post-effective amendmentraise $100 million pursuant to our registration statement in order to offer Class A Sharesoffering and Class T Shares of our common stock. In connection with the offering of Class T Shares and reclassification of our shares of common stock into Class A Shares and Class T Shares, on November 3, 2015, we filed articles of amendment and restatement, or our Second Articles of Amendment and Restatement, with the state of Maryland.(b) December 31, 2016. The terms of the Class A Shares are

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identical to the shares of commonspecial stock issued prior to November 3, 2015. The SEC declared the post-effective amendment effective on November 12, 2015, at which time we began offering for sale in our Primary Offering up to $1,800,000,000 in shares of common stock at a price of $10.11 per Class A Share and $9.55 per Class T Share. The following table presents the differences in fees and selling commissions between the classes of our common stock:
 Class A Class T
Initial Offering Price$10.11
 $9.55
Selling Commission (per share)7.00% 2.00%
Dealer Manager Fee (per share)3.00% 2.75%
Annual Distribution Fee (per share)None
 1.00%
The distribution fee is calculated on outstanding Class T Shares issued in our Primary Offeringdividend will be in an amount equal in value to 1.0% per annum5.0% of the current gross offering price per share (or, if we are no longer offering shares in a public offering, the most recent gross offering price per share or the estimated per share value of each issued and outstanding Class T Shares, if any has been disclosed). We will cease paying distribution fees with respect to eachA and Class T Share on the earliest to occur of the following: (i) a listing of shares of our commonrecord date. The special stock on a national securities exchange; (ii) such Class T Share is no longer outstanding; (iii) the dealer manager’s determination that total underwriting compensation from all sources, including dealer manager fees, selling commissions, distribution fees and any other underwriting compensation paid to participating broker dealers with respect to all Class A Shares and Class T Shares woulddividends will be issued in excess of 10% of the gross proceeds of our Primary Offering; or (iv) the end of the month in which the transfer agent, on our behalf, determines that total underwriting compensation with respect to the Class T primary shares held by a stockholder within his or her particular account, including dealer manager fees, selling commissions, and distribution fees, would be in excess of 10% of the total gross offering price at the time of the investment in the Class T Shares held in such account.
Other than the differing fees, as described above, the Class A Shares and Class T Shares have identical rights and privileges, such as identical voting rights.
In connection with the foregoing, effective November 12, 2015, we have amended our dealer manager agreement, the participating dealer agreement, and the distribution support agreement. In addition, we have amended our DRP to enable participating stockholders to automatically reinvest in additional shares of the same class atas the shares on which the stock dividends are being made within 90 days following the record date. No selling commissions or dealer manager fees will be paid in connection with the issuance of the special stock dividend.
Distributions
On May 11, 2016, our board of directors approved a price equaldaily cash distribution of $0.000273224 per share of common stock subject to, $9.81 perand commencing on, the first day we issue Class T shares in our Offering (the “Cash Distribution Commencement Date”) through August 31, 2016. Following the Cash Distribution Commencement Date, distributions on Class A Share and $9.27 per Class T Share until we establish an estimated value per share. Once we establish an estimated value per share, shares issued pursuantwill generally be paid to our DRP will be reinvested at a price equal to 97%all stockholders of record on the first business day of the estimated per share valuemonth following the month for such class of shares. We have also amended our share repurchase program, or our Share Repurchase Program. Pursuant to our amended Share Repurchase Program, shares will be repurchased at a price equal to customer account statement value as determined in accordance with FINRA Rule 15-02.which the distribution was accrued.
Name Change
Our Second Articles of Amendment and Restatement also provide for the changeInflation
Some of our name from NorthStar/RXR New York Metro Income, Inc.assets and liabilities may be exposed to NorthStar/RXR New York Metro Real Estate, Inc., which emphasizesinflation risk. We expect that substantially all of our primary focusleases will allow for annual rent increases based on the relevant consumer price index or other lease provisions and will include operating expense reimbursements. Such leases generally minimize the risks of inflation on our office, mixed usemixed-use and multifamily real estate equity investments concentratedproperties. Interest rates and other factors may influence our performance. A change in interest rates may correlate with the New York metropolitan area. The change of our name was effective as of November 3, 2015, the date of the filing of our Second Articles of Amendmentinflation rate.
Refer to Item 3. “Quantitative and Restatement.Qualitative Disclosures About Market Risk” for additional details.
Item 3.Quantitative and Qualitative Disclosures About Market Risk
We will be primarily subject to interest rate risk and credit risk. These risks will be 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 will be held for investment and not for trading purposes.
As of September 30, 2015,March 31, 2016, our only asset was cash, which was held in a non-interest bearing account, so any change in interest rates would have no impact on our earnings.


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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

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participation of the Company’s Chief Executive Officer and Chief Financial Officer of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act).
Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures are effective. Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures to disclose material information otherwise required to be set forth in the Company’s periodic reports.

Internal Control over Financial Reporting
Changes in Internal Control over Financial Reporting.
There have not been any changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.


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PART II.    Other Information
Item 1.Legal Proceedings
We may be involved in various litigation matters arising in the ordinary course of our business. Although we are unable to predict with certainty the eventual outcome of any litigation, in the opinion of management, any legal proceedings are not expected to have a material adverse effect on our financial position or results of operations.
Item 1A.Risk Factors
There are no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as filed with the SEC on March 8, 2016.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Use of Proceeds from Registered Securities
During the period covered by this Form 10-Q, we did not issue any equity securities that were not registered under the
Securities Act of 1933, as amended, or Securities Act.
On February 9, 2015, ourOur registration statement on Form S-11 (File No. 333-200617), covering our Offering of up to $1,800,000,000$1,800,000,000 in shares of common stock offered pursuant to our Primary Offering and up to $200,000,000$200,000,000 in shares of common stock offered pursuant to our DRP was declared effective under Securities Act of 1933, as amended, or the Securities Act.Act on February 9, 2015. Our shares of common stock are being offered in any combination of the two classes of shares of our common stock: Class A shares and Class T shares. The offering price for the shares in our Primary Offering is $10.1111 per Class A Share and $9.5538 per Class T Share. Our DRP shares are being offered at $9.81 per Class A Share and $9.27 per Class T Share. We expect to sell the shares registered in our Offering over a two-year period ending February 9, 2017, unless extended by our board of directors. As of September 30, 2015,From inception through March 31, 2016, our Advisor Entities incurred organization and offering costs of $3.3$4.4 million on our behalf. These costs are not recorded
On December 23, 2015, we satisfied the minimum offering amount in our consolidated financial statementsPrimary Offering as a result of September 30, 2015 because such costs are not a liability of ours until the minimum amount of $2.0NorthStar Realty and RXR purchasing $1.5 million and $0.5 million in gross offering proceeds is raised and such costs will only become a liabilityClass A Shares of ours tocommon stock, respectively, at $9.10 per share.
From the extent the aggregatecommencement of our Offering through March 31, 2016, we incurred no selling commissions, dealer manager fees or distribution fees and $19,000 in other organization and offering costs do not exceed 15.0%in connection with the issuance and distribution of gross proceeds raised from our Offering. We will record organizationregistered securities and offeringnone of these costs each period based on an allocation determined by the expectation of total organization and offering costswere reallowed to be reimbursed.third parties.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
We adopted our Share Repurchase Program effective February 9, 2015, which may enable stockholders to sell their shares to us in limited circumstances. We may not repurchase shares unless a stockholder has held shares for at least one year. However, we may repurchase shares held for less than one year in connection with a stockholder’s death or qualifying disability, if the disability is deemed qualifying by our board of directors in their sole discretion and after receiving written notice from the stockholder or the stockholder’s estate. We are not obligated to repurchase shares underpursuant to our Share Repurchase Program. We fund repurchase requests received during a quarter with proceeds set aside for that purpose which are not expected to exceed proceeds received from our DRP. However, to the extent that the aggregate DRP proceeds are not sufficient to fund repurchase requests, our board of directors may, in its sole discretion, choose to use other sources of funds. Our board of directors may, in its sole discretion, amend, suspend or terminate our Share Repurchase Program at any time upon ten days’ notice except that changes in the number of shares that can be repurchased during any calendar year will take effect only upon ten business days’ prior written notice. In addition, our Share Repurchase Program will terminate in the event a secondary market develops for our shares or until our shares are listed on a national exchange or included for quotation in a national securities market.
As of September 30, 2015,March 31, 2016, we have not issued any shares of common stock in our Offering and we have not repurchased any shares pursuant to our Share Repurchase Program.had no unfulfilled repurchase requests.


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Item 6.    Exhibits
Exhibit
Number
 Description of Exhibit
3.1 Second Articles of Amendment and Restatement of NorthStar/RXR New York Metro Real Estate, Inc. (filed as Exhibit 3.1 to Pre-Effective Amendment No.1 to Post-Effective Amendment No. 2 to the Company’s Registration Statement on Form S-11 (File No. 333-200617) filed with the SEC on November 3,5, 2015, and incorporated herein by reference)
3.2 Amended and Restated Bylaws of NorthStar/RXR New York Metro Real Estate, Inc. (filed as Exhibit 3.2 to Pre-Effective Amendment No. 1 and No. 1 and Post-Effective Amendment No. 1 and No. 1 the Company’s Registration Statement on Form S-11 (File No. 333-200617) filed with the SEC on November 26, 2014,5, 2015, and incorporated herein by reference)
4.1 Form of Subscription Agreement (included as Appendix BExhibit A to Post-Effective Amendmentsupplement No. 1 to the Company’s Registration Statement on Form S-11 (File No. 333-200617)2 filed with the SEC pursuant to Rule 424(b)(3) on October 6,December 24, 2015 and incorporated herein by reference)
4.2 Distribution Reinvestment Plan (included as Appendix C to Post-Effective Amendment No. 1 to the Company’s Registration Statement on Form S-11 (File No. 333-200617) filed with the SEC on October 6, 2015 and incorporated herein by reference)
31.1* Certification by the Chief Executive Officer pursuant to 17 CFR 240.13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2* Certification by the Chief Financial Officer pursuant to 17 CFR 240.13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1* Certification by the Chief Executive Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2* Certification by the Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101* The following materials from the NorthStar/RXR New York Metro Real Estate, Inc. Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2015,March 31, 2016, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of September 30, 2015March 31, 2016 (unaudited) and December 31, 2014;2015; (ii) Consolidated StatementsStatement of Operations (unaudited) for the three months ended March 31, 2016; (iii) Consolidated Statement of Equity for the ninethree months ended September 30, 2015March 31, 2016 (unaudited) and year ended December 31, 2014;2015; (iv) Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2016; and (iii)(v) 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/RXR New York Metro Real Estate, Inc.
Date:November 13, 2015May 11, 2016By:  /s/ DANIEL R. GILBERT  



Name:  Daniel R. Gilbert 



Title:  
Co-Chairman, Chief Executive Officerand President







By:  /s/ FRANK V. SARACINO



Name:  Frank V. Saracino



Title:  Chief Financial Officer and Treasurer





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