##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2010
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number: 333-157688
 NORTHSTAR REAL ESTATE INCOME TRUST, INC.
  Maryland
    
    26-4141646(State or other Jurisdiction of
    
    (I.R.S. Employer Identification No.)Incorporation or Organization)399 Park Avenue, 18th Floor
    
    10022New York, New York
    
    (Zip Code)(Address of Principal Executive Offices)
 (212) 547-2600
    Yes o No þ
 Yes o No þ
 Yes þ No o
 Yes o No o
 þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ




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##### 



INDEX
 PagePART IItem 1. Business
    
    
    4Item 1A. Risk Factors
    
    
    8Item 1B. Unresolved Staff Comments
    
    
    33Item 2. Properties
    
    
    33Item 3. Legal Proceedings
    
    
    33PART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
    
    
    34Item 6. Selected Financial Data
    
    
    36Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    38Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    44Item 8. Financial Statements and Supplementary Data
    
    
    45Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    60Item 9A. Controls and Procedures
    
    
    60Item 9B. Other Information
    
    
    61PART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    61Item 11. Executive Compensation
    
    
    66Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    67Item 13. Certain Relationships and Related Transactions and Director Independence
    
    
    68Item 14. Principal Accountant Fees and Services
    
    
    71PART IVItem 15. Exhibits and Financial Statement Schedules
    
    
    71Exhibit 12.1Exhibit 21.1Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
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FORWARD LOOKING STATEMENTS
    3




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PART I
 
 Item 1.
    
    Business
 Overview
      Market Outlook
    4




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Our Corporate History
    Board
of Directors Review of Our Policies
  Investment Strategy
   Our Targeted Investments
   5




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Underwriting Process
    Carrying
    
    
    EstimatedDecember 31, 2010
    
    Value
    
    
    Fair ValueCMBS
    
    $
    29,539,694
    
    
    $
    31,264,331Total
    
    $
    29,539,694
    
    
    $
    31,264,331
 Operating Policies and Strategies
 Financing Strategy
   Credit Risk Management
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Interest Rate Risk Management
   Equity Capital Policies
  Disposition Policies
  Economic Dependency
  Regulation
    7




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Competition
  Employees
  Management Update
   Financial Information About Industry Segments
  Corporate Governance and Internet Address
  www.northstarreit.com.
 
 Item 1A.
    
    Risk Factors
 RISK FACTORS
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Risks Related to an Investment in Us
 If we pay distributions from sources other than our cash flow from operations, we will have less
funds available for investments and the overall return to our stockholders will be reduced.
  Because no public trading market for our shares currently exists, it will be difficult for our
stockholders to sell their shares and, if they are able to sell their shares, they will likely sell
them at a substantial discount to the public offering price.
  If we are unable to find suitable investments, we may not be able to achieve our investment
objectives or pay distributions.
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Adverse economic and geopolitical conditions and dislocation in the credit markets could continue
which could materially adversely affect our business, financial condition and results of operations
and our ability to make distributions to our stockholders.
  We may suffer from delays in locating suitable investments, which could limit our ability to make
distributions and lower the overall return on our common stock.
  Because our offering is a blind pool offering, our stockholders will not have the opportunity to
evaluate the majority of our investments before we make them, which makes their investments more
speculative.
  Our stockholders may be more likely to sustain a loss on their investment because our Sponsor does
not have as strong an economic incentive to avoid losses as do sponsors who have made significant
equity investments in their companies.
  We eliminated the minimum offering condition to our continuous public offering upon consummation
of our merger with NorthStar Income Opportunity REIT I, Inc. (NSIO REIT). Consequently, we may
immediately use investors funds, and the amount of proceeds we raise in our offering may be
substantially less than the amount we would need to achieve a broadly diversified portfolio.
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Any adverse changes in our Sponsors financial health or our relationship with our Sponsor or its
affiliates could hinder our operating performance and the return on our stockholders investments.
  The loss of or the inability to obtain key real estate and debt finance professionals at our
Sponsor could delay or hinder implementation of our investment strategies, which could limit our
ability to make distributions and decrease the value of our stockholders investments.
  If we internalize our management functions, our stockholders interests in us could be diluted and
we could incur other significant costs associated with being self-managed.
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Our Dealer Manager has a limited operating history and our ability to implement our investment
strategy is dependent, in part, upon the ability of our dealer manager to successfully conduct our
continuous public offering, which makes an investment in us more speculative.
  Our rights and the rights of our stockholders to recover claims against our independent directors
are limited, which could reduce the amounts that we and our stockholders recover against them if
they negligently cause us to incur losses.
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If we do not successfully implement a liquidity transaction, our stockholders may have to hold
their investments for an indefinite period.
  We may change our targeted investments and investment guidelines without stockholder consent.
  Risks Related to Our Financing Strategy
 The commercial real estate finance industry has been and may continue to be adversely affected by
conditions in the global financial markets and economic conditions in the United States generally.
   We may not be able to access financing sources on attractive terms, which could adversely affect
our ability to execute our business plan.
  We have broad authority to incur debt and high debt levels could hinder our ability to make
distributions and decrease the value of our common stock.
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We may use credit facilities to finance our investments, which may require us to provide additional
collateral and significantly impact our liquidity position.
  Risks Related to Conflicts of Interest
 The fees we pay to affiliates in connection with our continuous public offering and in connection
with the acquisition and management of our investments were not determined on an arms length
basis; therefore, we do not have the benefit of arms length negotiations of the type normally
conducted between unrelated parties.
  Our executive officers and our Advisors key real estate and debt finance professionals will face
conflicts of interest caused by their compensation arrangements with us, which could result in
actions that are not in the long-term best interests of our company.
  
    
    the continuation, renewal or enforcement of our agreements with our Advisor and its
affiliates, including the advisory agreement and our Dealer Manager agreement;
 
    
    public offerings of equity by us, which entitle our Dealer Manager to dealer manager fees
and will likely entitle our Advisor to increased acquisition fees and asset management fees;
 
    
    acquisitions of investments and originations of loans, which entitle our Advisor to
acquisition fees and asset management fees and, in the case of acquisitions of investments
from other NorthStar entities, might entitle affiliates of our Advisor to disposition fees
in connection with services for the seller;
 
    
    sales of investments, which entitle our Advisor to disposition fees;
 
    
    borrowings to acquire investments and to originate loans, which borrowings will increase
the acquisition fees and asset management fees payable to our Advisor;
 
    
    whether and when we seek to list our common stock on a national securities exchange,
which listing could entitle NorthStar OP Holdings, LLC, as the holder of special units in
our operating partnership (NorthStar OP Holdings), to have its interest in our operating
partnership redeemed;
 
    
    whether we seek stockholder approval to internalize our management, which may entail
acquiring assets from our Sponsor (such as office space, furnishings and technology costs)
and employing our Sponsors real estate and debt finance professionals performing services
for us on behalf of our Advisor for consideration that would be negotiated at that time and
may result in these real estate and debt finance professionals receiving more compensation
from us than they currently receive from our Sponsor; and
 
    
    whether and when we seek to sell our company or its assets, which would entitle NorthStar
OP Holdings, as holder of the special units, to a subordinated distribution.
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Our Sponsors real estate and debt finance professionals acting on behalf of our Advisor will face
competing demands relating to their time and this may cause our operations and our stockholders
investments to suffer.
  Our executive officers and our Sponsors key real estate and debt finance professionals acting on
behalf of our Advisor face conflicts of interest related to their positions and interests in our
Advisor and its affiliates, including our Dealer Manager, which could hinder our ability to
implement our business strategy and to generate returns to our stockholders.
  Our Sponsor will face conflicts of interest relating to performing services on our behalf and such
conflicts may not be resolved in our favor, meaning that we could invest in less attractive assets,
which could limit our ability to make distributions and reduce the overall investment return to our
stockholders.
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Risks Related to Our Investments
 Our commercial real estate loans, commercial real estate-related debt securities and select
commercial real estate equity investments will be subject to the risks typically associated with
real estate.
   
    
    natural disasters such as hurricanes, earthquakes and floods;
 
    
    acts of war or terrorism, including the consequences of terrorist attacks, such as those
that occurred on September 11, 2001;
 
    
    adverse changes in national and local economic and real estate conditions;
 
    
    an oversupply of (or a reduction in demand for) space in the areas where particular
properties are located and the attractiveness of particular properties to prospective
tenants;
 
    
    changes in governmental laws and regulations, fiscal policies and zoning ordinances and
the related costs of compliance therewith and the potential for liability under applicable
laws;
 
    
    costs of remediation and liabilities associated with environmental conditions affecting
properties; and
 
    
    the potential for uninsured or underinsured property losses.
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The commercial real estate loans we originate and invest in and the commercial real estate loans
underlying the commercial real estate-related debt securities we invest in could be subject to
delinquency, foreclosure and loss, which could result in losses to us.
     Delays in liquidating defaulted commercial real estate loans could reduce our investment returns.
  The B-Notes in which we may invest may be subject to additional risks relating to the privately
negotiated structure and terms of the transaction, which may result in losses to us.
  The mezzanine loans in which we may invest involve greater risks of loss than senior loans secured
by the same properties.
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Our investments in subordinated commercial real estate loans and subordinated commercial real
estate-related debt securities may be subject to losses.
   Risks of cost overruns and non-completion of the construction or renovation of the properties
underlying loans we make or acquire or the loans underlying our commercial real estate-related debt
securities may materially adversely affect our investment.
  Jurisdictions with one action or security first rules or anti-deficiency legislation may limit the
ability to foreclose on the property or to realize the
obligation secured by the property.
  Our investments in commercial real estate loans and commercial real estate-related debt securities
are subject to changes in credit spreads.
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Investments in non-conforming or non-investment grade rated loans or securities involve greater
risk of loss.
  Investments that are not insured involve greater risk of loss than insured investments.
  The mortgage-backed securities in which we may invest are subject to the risks of the mortgage
securities market as a whole and risks of the securitization process.
  We may invest in CMBS, including subordinate securities, which entail certain risks.
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We may not control the special servicing of the mortgage loans included in the CMBS in which we
invest and, in such cases, the special servicer may take actions that could adversely affect our
interests.
  With respect to certain mortgage loans included in our CMBS investments, the properties that secure
the mortgage loan backing the securitized pool may also secure one or more related mortgage loans
that are not in the securitized pool, which may conflict with our interests.
  We may invest in collateralized debt obligations (CDOs) and such investments involve significant
risks.
  We have no established investment criteria limiting the geographic concentration of our investments
in commercial real estate loans, commercial real estate-related debt securities and select
commercial real estate equity investments. If our investments are concentrated in an area that
experiences adverse economic conditions, our investments may lose value and we may experience
losses.
  Adjustable rate commercial mortgage loans may entail greater risks of default to lenders than fixed
rate mortgage loans.
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Changes in interest rates could negatively affect the value of our investments, which could result
in reduced earnings or losses and negatively affect the cash available for distribution to our
stockholders.
  Prepayments can adversely affect the yields on our investments.
  Hedging against interest rate exposure may adversely affect our earnings, limit our gains or result
in losses, which could adversely affect cash available for distribution to our stockholders.
  
    
    interest rate hedging can be expensive, particularly during periods of rising and
volatile interest rates;
 
    
    available interest rate hedging may not correspond directly with the interest rate risk
for which protection is sought;
 
    
    the duration of the hedge may not match the duration of the related liability or asset;
 
    
    our hedging opportunities may be limited by the treatment of income from hedging
transactions under the rules determining REIT qualification;
 
    
    the credit quality of the party owing money on the hedge may be downgraded to such an
extent that it impairs our ability to sell or assign our side of the hedging transaction;
 
    
    the party owing money in the hedging transaction may default on its obligation to pay;
and
 
    
    we may purchase a hedge that turns out not to be necessary, i.e., a hedge that is out of
the money.
  Complying with REIT requirements may limit our ability to hedge effectively.
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Hedging instruments often are not traded on regulated exchanges, guaranteed by an exchange or its
clearing house, or regulated by any U.S. or foreign governmental authorities and involve risks and
costs.
  Our investments in debt securities and preferred and common equity securities will be subject to
the specific risks relating to the particular issuer of the securities and may involve greater risk
of loss than secured debt financings.
  Many of our investments are illiquid and we may not be able to vary our portfolio in response to
changes in economic and other conditions.
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Declines in the market values of our investments may adversely affect periodic reported results of
operations and credit availability, which may reduce earnings and, in turn, cash available for
distribution to our stockholders.
     Some of our portfolio investments will be carried at estimated fair value as determined by us and,
as a result, there may be uncertainty as to the value of these investments.
  Competition with third parties in acquiring and originating investments may reduce our
profitability and the return on our common stock.
  Our joint venture partners could take actions that decrease the value of an investment to us and
lower our overall return.
  
    
    that our co-venturer or partner in an investment could become insolvent or bankrupt;
 
    
    that such co-venturer or partner may at any time have economic or business interests or
goals that are or that become inconsistent with our business interests or goals; or
 
    
    that such co-venturer or partner may be in a position to take action contrary to our
instructions or requests or contrary to our policies or objectives.
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A prolonged economic slowdown, a lengthy or severe recession or declining real estate values could
harm our operations.
  Insurance may not cover all potential losses on mortgaged commercial properties which may impair
our security and harm the value of our assets.
  With respect to mortgaged commercial properties, options and other purchase rights may affect value
or hinder recovery.
  If we overestimate the value or income-producing ability or incorrectly price the risks of our
investments, we may experience losses.
  The leases on the properties underlying our investments may not be renewed on favorable terms.
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A borrowers form of entity may cause special risks or hinder our recovery.
  We are exposed to environmental liabilities with respect to properties to which we take title.
  Risks Related to Our Offering and Our Corporate Structure
 Our charter limits the number of shares a person may own, which may discourage a takeover that
could otherwise result in a premium price to our stockholders.
  Our charter permits our board of directors to issue stock with terms that may subordinate the
rights of our common stockholders or discourage a third party from acquiring us in a manner that
could result in a premium price to our stockholders.
  Our UPREIT structure may result in potential conflicts of interest with limited partners in our
operating partnership whose interests may not be aligned with those of our stockholders.
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The investment return of our stockholders may be reduced if we are required to register as an
investment company under the Investment Company Act of 1940, as amended (the Investment Company
Act); if we become an unregistered investment company, we could not continue our business.
  
    
    limitations on capital structure;
 
    
    restrictions on specified investments;
 
    
    prohibitions on transactions with affiliates; and
 
    
    compliance with reporting, record keeping, voting, proxy disclosure and other rules and
regulations that would significantly increase our operating expenses.
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Our stockholders will have limited control over changes in our policies and operations, which
increases the uncertainty and risks they face as stockholders.
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Our stockholders are limited in their ability to sell their shares of common stock pursuant to our
share repurchase program. Our stockholders may not be able to sell any of their shares of common
stock back to us, and if they do sell their shares, they may not receive the price they paid upon
subscription.
  The offering price of our shares in our continuous public offering was not established on an
independent basis; the actual value of our stockholders investments may be substantially less than
what they pay. Until 18 months after we have completed our offering stage, we expect to use the
price paid to acquire a share in our offering as the estimated value of our shares. Even when
determining the estimated value of our shares from and after 18 months after completion of our
offering stage, the value of our shares will be based upon a number of assumptions that may not be
accurate or complete.
    Because our Dealer Manager is one of our affiliates, our stockholders will not have the benefit of
an independent due diligence review of us, which is customarily performed in underwritten
offerings; the absence of an independent due diligence review increases the risks and uncertainty
our stockholders face.
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The interest of our stockholders in us will be diluted if we issue additional shares, which could
reduce the overall value of their investment.
  Payment of fees to our Advisor and its affiliates will reduce cash available for investment and
distribution and increases the risk that our stockholders will not be able to recover the amount of
their investment in our shares.
    Failure to procure adequate capital and funding would negatively impact our results and may, in
turn, negatively affect our ability to make distributions to our stockholders.
  Although we will not currently be afforded the protection of certain provisions of the MGCL
relating to deterring or defending hostile takeovers, our board of directors could opt into these
provisions of Maryland law in the future, which may discourage others from trying to acquire
control of us and may prevent our stockholders from receiving a premium price for their stock in
connection with a business combination.
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Our charter includes an anti-takeover provision that may discourage a person from launching a
mini-tender offer for our shares.
  Federal Income Tax Risks
 Failure to qualify as a REIT would subject us to federal income tax and reduce our net earnings
available for investment or distribution.
    Stockholders may have current tax liability on distributions they elect to reinvest in our common
stock.
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Even if we qualify as a REIT for federal income tax purposes, we may be subject to other tax
liabilities that reduce our cash flow and our ability to make distributions to our stockholders.
  
    
    In order to qualify as a REIT, we must distribute annually at least 90% of our REIT
taxable income (which is determined without regard to the dividends paid deduction or net
capital gain for this purpose) to our stockholders. To the extent that we satisfy the
distribution requirement but distribute less than 100% of our REIT taxable income, we will
be subject to federal corporate income tax on the undistributed income.
 
    
    We will be subject to a 4% nondeductible excise tax on the amount, if any, by which
distributions we pay in any calendar year are less than the sum of 85% of our ordinary
income, 95% of our capital gain net income and 100% of our undistributed income from prior
years.
 
    
    If we have net income from the sale of foreclosure property that we hold primarily for
sale to customers in the ordinary course of business or other non-qualifying income from
foreclosure property, we must pay a tax on that income at the highest corporate income tax
rate.
 
    
    If we sell an asset, other than foreclosure property, that we hold primarily for sale to
customers in the ordinary course of business, our gain would be subject to the 100%
prohibited transaction tax unless such sale were made by one of our taxable REIT
subsidiaries.
 REIT distribution requirements could adversely affect our ability to execute our business plan.
  To maintain our REIT status, we may be forced to forgo otherwise attractive opportunities, which
may delay or hinder our ability to meet our investment objectives and reduce the overall return to
our stockholders.
  The tax on prohibited transactions will limit our ability to engage in transactions, including
certain methods of securitizing mortgage loans that would be treated as sales for federal income
tax purposes.
    Complying with REIT requirements may force us to liquidate otherwise attractive investments.
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Liquidation of assets may jeopardize our REIT qualification.
  Our investments in debt instruments may cause us to recognize phantom income for federal income
tax purposes even though no cash payments have been received on the debt instruments.
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The failure of a mezzanine loan to qualify as a real estate asset could adversely affect our
ability to qualify as a REIT.
  
 Item 1B.
    
    Unresolved Staff Comments
  
 Item 2.
    
    Properties
  
 Item 3.
    
    Legal Proceedings
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PART II
 
 Item 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
 Market Information
   Stockholders
  Distributions
   Distribution Reinvestment Plan
  Share Repurchase Program
  Recent Sales of Unregistered Securities
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Use of Proceeds from Registered Securities
   
    
    274,506 shares, equal to $2,697,040 in aggregate gross offering proceeds, in our best
efforts offering; and
    
    6,214 shares, equal to $59,032 in aggregate gross offering proceeds, pursuant to the DRP.
   Type of Costs
    
    AmountOffering costs to related
parties
    
    $
    260,678
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Item 6.
    
    Selected Financial Data
 Form 10-K.
 Period fromJanuary 26, 2009Year Ended
    
    
    (inception) toDecember 31, 2010
    
    
    December 31, 2009Statements of Operations Data:Revenues:Interest income
    
    $
    1,484,691
    
    
    $
    94,795Total revenues
    
    
    1,484,691
    
    
    
    94,795Expenses:Interest expense
    
    
    799,911
    
    
    
    Advisory fees  related party
    
    
    53,760
    
    
    
    Auditing and professional fees
    
    
    238,059
    
    
    
    General and administrative expenses
    
    
    687,282
    
    
    
    Total expenses
    
    
    1,779,012
    
    
    
    (Loss)/income from operations
    
    
    (294,321)
    
    
    
    94,795Realized gain on investments
    
    
    199,604
    
    
    
    Unrealized gain on investments
    
    
    1,724,637
    
    
    
    587,096Consolidated net income
    
    
    1,629,920
    
    
    
    681,891Net income attributable to the non-controlling interest
    
    
    328
    
    
    
    1,361Net income attributable to NorthStar Real Estate Income Trust, Inc. common stockholders
    
    $
    1,629,592
    
    
    $
    680,530Net income per share of common stock, basic / diluted
    
    $
    0.77
    
    
    $
    5.98Common stock distributions declared per share
    
    $
    0.44
    
    
    $
    Weighted average number of shares of common stock outstanding:
    
    
    2,104,915
    
    
    
    113,828
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December 31,2010
    
    
    2009Balance Sheet DataCash
    
    $
    20,404,832
    
    
    $
    55,630Restricted cash
    
    
    
    
    
    
    1,815,023Available for sale securities, at fair value
    
    
    31,264,331
    
    
    
    1,620,000Total assets
    
    
    52,077,933
    
    
    
    3,498,914Secured term loans
    
    
    24,061,212
    
    
    
    Distribution payable
    
    
    208,594
    
    
    
    Related party payable
    
    
    162,075
    
    
    
    Other liabilities
    
    
    
    
    
    
    1,815,023Non-controlling interests
    
    
    4,234
    
    
    
    3,361Total equity
    
    
    27,552,253
    
    
    
    1,683,891Total liabilities and equity
    
    $
    52,077,933
    
    
    $
    3,498,914
 Period fromJanuary 26, 2009Year Ended
    
    
    (inception) toDecember 31, 2010
    
    
    December 31, 2009Other Data:Cash Flow from:Operating activities
    
    $
    1,423,328
    
    
    $
    53,630Investing activities
    
    
    (27,763,765
    )
    
    
    (1,000,000
    )Financing activities
    
    
    46,689,639
    
    
    
    1,002,000
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Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
  Organization and Overview
  
    
    originate, acquire, and asset manage;
 (i)
    
    commercial real estate loans, including senior mortgage loans,
subordinate mortgage loans (or B-Notes), mezzanine loans, and participations in
such loans;(ii)
    
    commercial real estate-related debt securities, such as CMBS,
CDOs and REIT senior unsecured debt; and(iii)
    
    select commercial real estate equity investments.
   Sources of Operating Revenues
  Profitability and Performance Metrics
  Outlook and Recent Trends
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Critical Accounting Policies
  Valuation of Financial Instruments
    Level 1:
 
    
    Financial assets and liabilities whose values are based on unadjusted quoted
prices for identical assets or liabilities in an active market (examples include active
exchange-traded equity securities, listed derivatives, most U.S. Government and agency
securities, and certain other sovereign government obligations).
 Level 2:
 
    
    Financial assets and liabilities whose values are based on the following:
 
    
    quoted prices for similar assets or liabilities in active markets (for example,
restricted stock);
 
    
    quoted prices for identical or similar assets or liabilities in non-active
markets (examples include corporate and municipal bonds, which trade infrequently);
 
    
    pricing models whose inputs are observable for substantially the full term of
the asset or liability (examples include most over-the-counter derivatives, including
interest rate and currency swaps); and
 
    
    pricing models whose inputs are derived principally from or corroborated by
observable market data through correlation or other means for substantially the full
term of the asset or liability (for example, certain mortgage loans).
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Level 3:
 
    
    Financial assets and liabilities whose values are based on prices or valuation
techniques that require inputs that are both unobservable and significant to the
overall fair value measurement. These inputs reflect managements own assumptions about
the assumptions a market participant would use in pricing the asset or liability
(examples include private equity investments, commercial mortgage backed securities,
and long-dated or complex derivatives including certain foreign exchange options and
long dated options on gas and power).
  Fair Value Option
  Available for Sale Securities
  Revenue Recognition
  Basis of Presentation
  Comparison of the Year Ended December 31, 2010 to the Year Ended December 31, 2009.
 Revenues
 Interest Income
   40




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##### Table of Contents



Expenses
 Interest Expense
  Advisory Fees  Related Party
  Audit and Professional Fees
  General and Administrative
  Realized Gain on Investments
  Unrealized Gain on Investments
  Liquidity and Capital Resources
     41




---



##### Table of Contents



Cash flow Analysis
     Recent Developments
    Off-Balance Sheet Arrangements
  Non-GAAP Financial Measures
 Funds from Operations and Adjusted Funds from Operations
   42




---



##### Table of Contents




    
    the amortization or accrual of various deferred costs including equity based
compensation; and
 
    
    an adjustment to reverse the effects of unrealized gains/(losses).
    Period fromJanuary 26, 2009Year Ended
    
    
    (inception) toDecember 31, 2010
    
    
    December 31, 2009Funds from Operations:Consolidated net income
    
    $
    1,629,920
    
    
    $
    681,891Funds from Operations
    
    $
    1,629,920
    
    
    $
    681,891Adjusted Funds from Operations:Funds from Operations
    
    
    1,629,920
    
    
    
    681,891Amortization of equity-based compensation
    
    
    8,439
    
    
    
    Unrealized (gains)/losses from mark-to-market
adjustments
    
    
    (1,724,637
    )
    
    
    (587,096
    )Adjusted Funds from Operations
    
    $
    (86,278
    )
    
    $
    94,795
  43




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##### Table of Contents



Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
   44




---



##### Table of Contents



Item 8.
    
    Financial Statements and Supplementary Data
  INDEX TO FINANCIAL STATEMENTS
NORTHSTAR REAL ESTATE INCOME TRUST, INC. AND SUBSIDIARIES
 PageReports of Independent Registered Public Accounting Firm
    
    
    46Consolidated Balance Sheets as of December 31, 2010 and 2009
    
    
    47Consolidated Statements of Operations for the year ended December
31, 2010 and for the period from January 26, 2009 (inception) to
December 31, 2009
    
    
    48Consolidated Statements
of Stockholders Equity for the year
ended December 31, 2010 and for the period from January 26, 2009
(inception) to December 31, 2009
    
    
    49Consolidated
Statements of Cash Flows for the year ended
December 31, 2010 and for the period from January 26, 2009
(inception) to December 31, 2009
    
    
    50Notes to Consolidated Financial Statements
    
    
    51
  45




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders
NorthStar Real Estate Income Trust, Inc. We have audited the accompanying consolidated balance sheets of
NorthStar Real Estate Income Trust, Inc. and subsidiaries (the Company) as of December 31, 2010 and 2009,
and the related consolidated statements of operations, stockholders equity, and cash flows for the year ended
December 31, 2010 and for the period January 26, 2009 through December 31, 2009. These financial statements
are the responsibility of the Companys management.  Our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.
The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of NorthStar Real Estate Income Trust, Inc. and
subsidiaries as of December 31, 2010 and 2009, and the results of its operations and its cash flows for the year
ended December 31, 2010 and for the period January 26, 2009 through December 31, 2009, in conformity with accounting
principles generally accepted in the United States of America. /s/ GRANT THORNTON LLP New York, New York 
March 28,
2011  46




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##### Table of Contents



NORTHSTAR REAL ESTATE INCOME
TRUST, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 December 31,
    
    
    December 31,2010
    
    
    2009AssetsCash
    
    $
    20,404,832
    
    
    $
    55,630Restricted cash
    
    
    
    
    
    
    1,815,023Available for sale securities, at fair value
    
    
    31,264,331
    
    
    
    1,620,000Receivables
    
    
    128,287
    
    
    
    8,261Deferred financing costs, net
    
    
    46,216
    
    
    
    Other assets
    
    
    234,267
    
    
    
    Total Assets
    
    
    52,077,933
    
    
    
    3,498,914Liabilities:Secured term loans
    
    
    24,061,212
    
    
    
    Accounts payable and accrued expenses
    
    
    93,799
    
    
    
    Distribution payable
    
    
    208,594
    
    
    
    Related party payable
    
    
    162,075
    
    
    
    Other liabilities
    
    
    
    
    
    
    1,815,023Total Liabilities
    
    
    24,525,680
    
    
    
    1,815,023Equity:NorthStar Real Estate Income Trust, Inc. stockholders equityPreferred stock, $0.01 par value per share; 50,000,000 shares
authorized, no shares issued and outstanding at December 31, 2010
and December 31, 2009
    
    
    
    
    
    
    Common stock, $0.01 par value per share; 400,000,000 shares
authorized, 3,193,414 and 113,828 shares issued and outstanding at
December 31, 2010 and December 31, 2009, respectively
    
    
    31,934
    
    
    
    1,138Additional paid-in capital
    
    
    26,775,538
    
    
    
    998,862Retained earnings
    
    
    740,547
    
    
    
    680,530Total NorthStar Real Estate Income Trust, Inc. stockholders equity
    
    
    27,548,019
    
    
    
    1,680,530Non-controlling interest
    
    
    4,234
    
    
    
    3,361Total equity
    
    
    27,552,253
    
    
    
    1,683,891Total liabilities and equity
    
    $
    52,077,933
    
    
    $
    3,498,914
   47




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##### Table of Contents



NORTHSTAR REAL ESTATE INCOME
TRUST, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Period from January 26,Year Ended
    
    
    2009 (inception) toDecember 31, 2010
    
    
    December 31, 2009Revenues and other income:Interest income
    
    $
    1,484,691
    
    
    $
    94,795Total revenues
    
    
    1,484,691
    
    
    
    94,795Expenses:Interest expense
    
    
    799,911
    
    
    
    Advisory fees  related party
    
    
    53,760
    
    
    
    Auditing and professional fees
    
    
    238,059General and administrative expenses
    
    
    687,282
    
    
    
    Total expenses
    
    
    1,779,012
    
    
    
    (Loss)/income from operations
    
    
    (294,321)
    
    
    
    94,795Realized gain on investments
    
    
    199,604
    
    
    
    Unrealized gain on investments
    
    
    1,724,637
    
    
    
    587,096Consolidated net income
    
    
    1,629,920
    
    
    
    681,891Net income attributable to the non-controlling interests
    
    
    328
    
    
    
    1,361Net income attributable to NorthStar Real Estate Income
Trust, Inc. common stockholders
    
    $
    1,629,592
    
    
    $
    680,530Net income per share of common stock, basic / diluted
    
    $
    0.77
    
    
    $
    5.98Weighted-average number of shares of common stock
outstanding, basic / diluted
    
    
    2,104,915
    
    
    
    113,828
   48




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##### Table of Contents



NORTHSTAR REAL ESTATE INCOME
TRUST, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 Common StockAdditional
    
    
    
    
    
    
    Total Company's
    
    
    
    
    
    
    TotalCommon
    
    
    
    
    
    
    Paid-in
    
    
    Retained
    
    
    Stockholders'
    
    
    Non-Controlling
    
    
    Stockholders'Stock
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Equity
    
    
    Interest
    
    
    EquityBalance, January 26, 2009 (Date of Inception)
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Proceeds from issuance of common stock
    
    
    113,828
    
    
    
    1,138
    
    
    
    998,862
    
    
    
    
    
    
    
    1,000,000
    
    
    
    
    
    
    
    1,000,000Non-controlling interest contributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,000
    
    
    
    2,000Consolidated net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    680,530
    
    
    
    680,530
    
    
    
    1,361
    
    
    
    681,891Balance, December 31, 2009
    
    
    113,828
    
    
    $
    1,138
    
    
    $
    998,862
    
    
    $
    680,530
    
    
    $
    1,680,530
    
    
    $
    3,361
    
    
    $
    1,683,891Activity prior to the merger:Proceeds from issuance of common stock
    
    
    3,669,919
    
    
    
    36,699
    
    
    
    35,032,407
    
    
    
    
    
    
    
    35,069,106
    
    
    
    
    
    
    
    35,069,106Cost of capital
    
    
    
    
    
    
    
    
    
    
    (3,459,410
    )
    
    
    
    
    
    
    (3,459,410
    )
    
    
    
    
    
    
    (3,459,410
    )Stock distribution reinvestment
    
    
    7,915
    
    
    
    79
    
    
    
    74,262
    
    
    
    
    
    
    
    74,341
    
    
    
    
    
    
    
    74,341Distribution paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,075,268
    )
    
    
    (1,075,268
    )
    
    
    
    
    
    
    (1,075,268
    )Shares redeemed for cash
    
    
    (893,968
    )
    
    
    (8,939
    )
    
    
    (8,233,445
    )
    
    
    
    
    
    
    (8,242,384
    )
    
    
    
    
    
    
    (8,242,384
    )Balance as of October 18, 2010
    
    
    2,897,694
    
    
    $
    28,977
    
    
    $
    24,412,676
    
    
    $
    (394,738
    )
    
    $
    24,046,915
    
    
    $
    3,361
    
    
    $
    24,050,276Shares of the accounting acquiree*
    
    
    39,039
    
    
    
    390
    
    
    
    62,326
    
    
    
    
    
    
    
    62,716
    
    
    
    545
    
    
    
    63,261Proceeds from issuance of common stock
    
    
    250,467
    
    
    
    2,505
    
    
    
    2,493,805
    
    
    
    
    
    
    
    2,496,310
    
    
    
    
    
    
    
    2,496,310Cost of capital
    
    
    
    
    
    
    
    
    
    
    (260,678
    )
    
    
    
    
    
    
    (260,678
    )
    
    
    
    
    
    
    (260,678
    )Stock distribution reinvestment
    
    
    6,214
    
    
    
    62
    
    
    
    58,970
    
    
    
    
    
    
    
    59,032
    
    
    
    
    
    
    
    59,032Distribution paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (285,713
    )
    
    
    (285,713
    )
    
    
    
    
    
    
    (285,713
    )Distribution declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (208,594
    )
    
    
    (208,594
    )
    
    
    
    
    
    
    (208,594
    )Amortization of equity based compensation
    
    
    
    
    
    
    
    
    
    
    8,439
    
    
    
    
    
    
    
    8,439
    
    
    
    
    
    
    
    8,439Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,629,592
    
    
    
    1,629,592
    
    
    
    328
    
    
    
    1,629,920Balance, December 31, 2010
    
    
    3,193,414
    
    
    $
    31,934
    
    
    $
    26,775,538
    
    
    $
    740,547
    
    
    $
    27,548,019
    
    
    $
    4,234
    
    
    $
    27,552,253
 *
    
    Northstar Real Estate Income Trust, Inc.
the surviving legal entity issued 24,039
shares for its initial capitalization and
15,000 shares to its Board of Directors
prior to the merger with NSIO REIT.
   49




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##### Table of Contents



NORTHSTAR REAL ESTATE INCOME
TRUST, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Period from January 26,Year Ended
    
    
    2009 (inception) toDecember 31, 2010
    
    
    December 31, 2009Cash flows from operating activities:Consolidated net income
    
    $
    1,629,920
    
    
    $
    681,891Adjustments to reconcile net income to net cash used in operating activitiesAmortization of premium (discount) on securities
    
    
    43,675
    
    
    
    (32,904
    )Amortization of deferred financing costs
    
    
    9,071
    
    
    
    Realized gain on investment
    
    
    (199,604
    )
    
    
    Unrealized gain on investments
    
    
    (1,724,637
    )
    
    
    (587,096
    )Equity based compensation
    
    
    8,439
    
    
    
    Changes in assets and liabilitiesRestricted cash
    
    
    1,815,023
    
    
    
    (1,815,023
    )Receivables
    
    
    (120,026
    )
    
    
    (8,261
    )Other assets
    
    
    (234,267
    )
    
    
    Accounts payable and accrued expenses
    
    
    51,506
    
    
    
    Related party payables
    
    
    144,228
    
    
    
    Other liabilities
    
    
    
    
    
    
    1,815,023Net cash provided by operating activities:
    
    
    1,423,328
    
    
    
    53,630Cash
flows from investing activities:Acquisition of available for sale securities
    
    
    (29,616,265
    )
    
    
    (1,000,000
    )Disposition of available for sale securities
    
    
    1,852,500
    
    
    
    Net cash used in investing activities
    
    
    (27,763,765
    )
    
    
    (1,000,000
    )Cash flows from financing activities:Non-controlling interest
    
    
    
    
    
    
    2,000Proceeds from issuance of common stock
    
    
    35,855,949
    
    
    
    1,000,000Cost of capital
    
    
    (3,702,241
    )
    
    
    Distributions paid on common stock
    
    
    (1,227,609
    )
    
    
    Redemption of common stock
    
    
    (8,242,385
    )
    
    
    Financing of secured term debt
    
    
    24,089,417
    
    
    
    Repayment of
secured term debt
    
    
    (28,205
    )
    
    
    Payment of deferred financing costs
    
    
    (55,287
    )
    
    
    Net cash provided by financing activities
    
    
    46,689,639
    
    
    
    1,002,000Net increase in cash
    
    
    20,349,202
    
    
    
    55,630Cash, beginning of period
    
    
    55,630
    
    
    
    Cash, end of period
    
    $
    20,404,832
    
    
    $
    55,630Supplemental disclosure of cash flow information:Cash paid for interest
    
    $
    749,267
    
    
    $
    Supplemental
disclosure of non-cash investing and financing activities:Distributions payable
    
    $
    208,594
    
    
    $
    Accrued cost of capital
    
    $
    17,847
    
    
    $
    See accompanying notes to consolidated financial statements.
  50




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##### Table of Contents



NORTHSTAR REAL ESTATE INCOME
TRUST, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. Formation and Organization
        51




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##### Table of Contents



NORTHSTAR REAL ESTATE INCOME
TRUST, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  2. Summary of Significant Accounting Policies
 Basis of Presentation
   Principles of Consolidation
  Estimates
  Cash
  Fair Value Measurements
  Fair Value Option
  Available for Sale Securities
   52




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##### Table of Contents



NORTHSTAR REAL ESTATE INCOME
TRUST, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Revenue Recognition
  Stock Based Compensation
  Organization, Offering and Related Costs
   Income Taxes
  Recent Accounting Pronouncements
   53




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##### Table of Contents



NORTHSTAR REAL ESTATE INCOME
TRUST, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  3. Fair Value of Financial Instruments
 Fair Value Measurements
 Fair Value Hierarchy
   Level 1.
    
    Financial assets and liabilities whose values are based on unadjusted quoted
prices for identical assets or liabilities in an active market (examples
include active exchange-traded equity securities, listed derivatives, most U.S.
government and agency securities, and certain other sovereign government
obligations).Level 2.
    
    Financial assets and liabilities whose values are based on the following:a)
    
    Quoted prices for similar assets or
liabilities in active markets (for
example, restricted stock);b)
    
    Quoted prices for identical or
similar assets or liabilities in
non-active markets (examples include
corporate and municipal bonds, which
trade infrequently);c)
    
    Pricing models whose inputs are
observable for substantially the
full term of the asset or liability
(examples include most
over-the-counter derivatives,
including interest rate and currency
swaps); andd)
    
    Pricing models whose inputs are
derived principally from or
corroborated by observable market
data through correlation or other
means for substantially the full
term of the asset or liability (for
example, certain mortgage loans).Level 3.
    
    Financial assets and liabilities whose values are based on prices or valuation
techniques that require inputs that are both unobservable and significant to
the overall fair value measurement. These inputs reflect managements own
assumptions about the assumptions a market participant would use in pricing the
asset or liability (examples include private equity investments, beneficial
interest in securitizations and long-dated or complex derivatives, including
certain foreign exchange options and long-dated options on gas and power).
  54




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##### Table of Contents



NORTHSTAR REAL ESTATE INCOME
TRUST, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Available for sale securities
   Assets at Fair ValueLevel 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalAvailable for sale securities  CMBS
    
    $
    
    
    
    $
    31,264,331
    
    
    $
    
    
    
    $
    31,264,331
   Availablefor SaleSecuritiesBeginning balance:
    
    $
    1,620,000Total net transfers into/out of Level 3
    
    
    Purchases, sales, issuance and settlements, net
    
    
    (1,819,604
    )Less: total losses and premium/discount amortization (realized
or unrealized):Included in earnings
    
    
    Included in other comprehensive loss
    
    
    Plus: total gains and premium/discount amortization (realized
or unrealized):Included in earnings
    
    
    199,604Included in other comprehensive loss
    
    
    Ending balance
    
    $
    The amount of total gains for the period included in earnings
attributable to the change in unrealized gains or losses
relating to assets or liabilities still held at the reporting
date
    
    $
    
  Fair Value Option
   55




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##### Table of Contents



NORTHSTAR REAL ESTATE INCOME
TRUST, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Financial Instruments, at Fair ValueAvailable for sale securities
    
    $
    31,264,331
  AmountFair Value at
    
    
    Due UponDecember 31, 2010
    
    
    Maturity
    
    
    DifferenceAvailable for sale securities  CMBS
    
    $
    31,264,331
    
    
    $
    28,856,000
    
    
    $
    2,408,331
  4. Term Asset-Backed Loan Facilities
   5. Related Party Arrangements
 NS Real Estate Income Trust Advisor, LLC
       56




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##### Table of Contents



NORTHSTAR REAL ESTATE INCOME
TRUST, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    NRF Capital Markets, LLC
  6. Stockholders Equity
 Common Stock
    57




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##### Table of Contents



NORTHSTAR REAL ESTATE INCOME
TRUST, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Distributions
   Distribution Reinvestment Plan
  Preferred Shares
  Share Repurchase Program
  7. Equity-Based Compensation
 Directors
Shares
  Long-Term Incentive Plan
   58




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##### Table of Contents



NORTHSTAR REAL ESTATE INCOME
TRUST, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    8. Commitments and Contingencies
 Advisor and Dealer Manager Services
  9. Fair Value of Financial Instruments
     59




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##### Table of Contents



NORTHSTAR REAL ESTATE INCOME
TRUST, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 10. Non-controlling Interest
 Operating Partnership
  11. Pro Forma Information
  Period FromYear
    
    
    January 26, 2009Ended
    
    
    (inception) toDecember 31,
    
    
    December 31,2010
    
    
    2009Pro Forma revenues
    
    $
    1,484,281
    
    
    $
    94,795Pro Forma gains
    
    
    1,924,421
    
    
    
    587,096Pro Forma net income
    
    
    1,483,635
    
    
    
    680,530Pro Forma net income per common
sharebasic/diluted
    
    $
    0.72
    
    
    $
    6.12
   12. Subsequent Events
    
  60




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##### Table of Contents



Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A.
    
    Controls and Procedures
 Disclosure Controls and Procedures
   Internal Control over Financial Reporting
  
 Item 9B.
    
    Other Information
  
 PART III
 
 Item 10.
    
    Directors and Executive Officers and Corporate Governance
 General
    Current Directors Who are Nominees for Re-election
 Name
    
    AgeDavid T. Hamamoto
    
    
    51Jonathan T. Albro
    
    
    48Charles W. Schoenherr
    
    
    51Jack F. Smith, Jr.
    
    
    59
 David T. Hamamoto
  61




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##### Table of Contents



Consideration for Recommendation
 Jonathan T. Albro
 Consideration for Recommendation
 Charles W. Schoenherr
 Consideration for Recommendation
 Jack F. Smith, Jr.
  62




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##### Table of Contents



Consideration for Recommendation
 Corporate Governance Profile
  Code of Ethics
 www.northstarreit.com
 Corporate Governance Guidelines
 www.northstarreit.com
 The Audit Committee
  www.northstarreit.com
  Compensation Committee Interlocks and Insider Participation
   63




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##### Table of Contents



Director Independence
  www.northstarreit.com
 Board Leadership Structure; Meetings of Independent Directors
   Stockholder Communications with our Board
  Section 16(a) Beneficial Ownership Reporting Compliance
  Director Nomination Procedures
   64




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##### Table of Contents



Risk Oversight
  Director Attendance at Annual Meeting
  Directors Offer of Resignation Policy
  Chief Executive Officer Succession Plan
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EXECUTIVE OFFICERS
  Name
    
    Age
    
    PositionDavid T. Hamamoto*
    
    51
    
    Chairman and Chief Executive OfficerDaniel R. Gilbert
    
    41
    
    President and Chief Investment OfficerLisa Meyer
    
    46
    
    Chief Financial Officer and TreasurerAlbert Tylis
    
    37
    
    Chief Operating Officer, General Counsel and Secretary
 
 *
    
    Biographical information is provided above under Board of Directors.  Daniel R. Gilbert
 Lisa Meyer
 Albert Tylis
 
 Item 11.
    
    Executive Compensation
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DIRECTOR COMPENSATION
 Non-Employee Directors
   Director Compensation for 2010
  Fees Earned orName
    
    Paid in Cash ($)(1)
    
    
    Stock Awards ($)(2)
    
    
    Total ($)Jonathan T. Albro
    
    
    49,250
    
    
    
    45,000
    
    
    
    94,250Charles W. Schoenherr
    
    
    49,250
    
    
    
    45,000
    
    
    
    94,250Jack F. Smith, Jr.
    
    
    58,410
    
    
    
    45,000
    
    
    
    103,410Total
    
    
    156,910
    
    
    
    135,000
    
    
    
    291,910
 
 (1)
    
    The amounts shown in this column include cash payments for
attendance at Board and Audit Committee meetings and annual cash
retainers.(2)
    
    On July 19, 2010, each of our independent directors received 5,000
shares of restricted stock, which will vest quarterly over a
four-year period that began on October 1, 2010. As of December 31,
each of our independent directors held 312.50 vested shares and
4687.50 unvested shares of restricted stock. Director Compensation for 2011
  
 Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
 ,
 
    
    each of our directors and each nominee for director;
    
    each of our named executive officers; and
    
    all of our directors and executive officers as a group.
  Amount and Nature of Beneficial Ownership(1)Name and Address of Beneficial Owner
    
    Number(1)
    
    
    Percentage(1)NRFC Sub-REIT Corp.
    
    
    137,867
    
    
    
    3.42
    %Directors and Executive Officers(2):David T. Hamamoto
    
    
    
    
    
    
    Daniel R. Gilbert
    
    
    
    
    
    
    Lisa Meyer
    
    
    
    
    
    
    Albert Tylis
    
    
    
    
    
    
    Jonathan T. Albro(3)
    
    
    5,000
    
    
    
    *Charles W. Schoenherr(3)
    
    
    5,000
    
    
    
    *Jack F. Smith, Jr.(3)
    
    
    5,000
    
    
    
    *All directors and officers as a group (8)
    
    
    15,000
    
    
    
    *
 
 *
    
    Less than one percent.  67




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(1)
    
    Under SEC rules, a person is deemed to be a beneficial owner of a security if that person has or shares (i) voting power,
which includes the power to vote or to direct the voting of such security, or (ii) investment power, which includes the power
to dispose of or direct the disposition of such security. A person also is deemed to be a beneficial owner of any securities
which that person has a right to acquire within 60 days. Under these rules, more than one person may be deemed to be a
beneficial owner of securities as to which he or she has no economic or pecuniary interest.(2)
    
    The address of each of the directors and executive officers is 399 Park Avenue, New York, NY 10022.(3)
    
    Includes 5,000 shares of restricted stock that were granted under our independent director stock plan in connection with the
commencement of our initial public offering. The restricted stock will generally vest over four years; provided, however that
the restricted 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 the Company. 
 Item 13.
    
    Certain Relationships and Related Transactions and Directors Independence
  Ownership Interests
    Advisor
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
    
    We will reimburse organization and offering expenses up to 15.0% of the gross
proceeds from our primary offering (not to exceed actual expenses incurred by NS REIT
Advisor). These expenses include all expenses (other than selling commissions and the
dealer manager fee) to be paid by us in connection with the offering, including our
legal, accounting, printing, mailing and filing fees, charges of our escrow agent and
transfer agent, charges of our advisor for administrative services related to our
formation and the offering, reimbursement of bona fidedue diligence expenses of
broker-dealers, reimbursement of our advisor for costs in connection with preparing
supplemental sales materials, the cost of bona fide training and education meetings
held by us (primarily the travel, meal and lodging costs of registered representatives
of broker-dealers), attendance and sponsorship fees and travel, meal and lodging costs
for registered persons associated with our dealer manager and officers and employees of
our affiliates to attend retail seminars conducted by broker-dealers and, in special
cases, reimbursement to participating broker-dealers for technology costs associated
with the offering, costs and expenses related to such technology costs, and costs and
expenses associated with the facilitation of the marketing of our shares and the
ownership of our shares by such broker-dealers customers. For the year ended December
31, 2010, NS REIT Advisor had incurred $2,773,580 of organization and offering
costs on our behalf, of which $2,713,580 have not been reimbursed.
    
    We will reimburse NS REIT Advisor for all expenses paid or incurred by the Advisor in
connection with the services provided to the us, subject to the limitation that the we will not
reimburse the NS REIT Advisor for any amount by which its operating expenses (including the asset
management fee) at the end of the four preceding fiscal quarters exceeds the greater of: (i) 2%
of its average invested assets or (ii) 25% of its net income determined without reduction for any
additions to reserves for depreciation, bad debts or other similar non-cash reserves and excluding
any gain from the sale of the assets for that period. Notwithstanding the above, the we may
reimburse the NS REIT Advisor for expenses in excess of this limitation if a majority of the
independent directors determines that such excess expenses are justified based on unusual and
non-recurring factors. The Company calculates the expense reimbursement quarterly and will
true-up the calculation at the end of the twelve month period. As of
December 31, 2010, NS REIT Advisor has incurred operating expenses of $588,549 on our behalf.
Based upon the quarterly calculation we reimbursed NS REIT Advisor $92,898 of these costs.
    
    We will reimburse NS REIT Advisor for acquisition expenses actually incurred in
connection with the selection, acquisition or origination of an investment, whether or
not we ultimately acquire or originate the investment. For the year ended December 31,
2010, NS REIT Advisor had not incurred any acquisition expenses on our behalf.
    
    We will pay NS REIT Advisor an acquisition fee of 1% of the amount funded by us
to acquire or originate commercial real estate loans or the amount invested in the case
of other real estate investments including any acquisition and origination expenses and
any debt attributable to such investments. For the year ended December 31, 2010, we had not
incurred any acquisition fees to NS REIT Advisor.
    
    We will pay NS REIT Advisor monthly asset management fees equal to one-twelfth
of 1.25% of the sum of the cost of all investments made and of our investments in joint
ventures, including acquisition fees, acquisition and origination expenses and any debt
attributable to such investments, less any principal repaid by borrowers on our debt
investments (or our proportionate share thereof in the case of debt investments made
through joint ventures). For the year ended December 31, 2010, we had incurred
$14,051 of asset management fees to NS REIT Advisor.
  69




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Dealer Manager
   
    
    Selling Commissions7.0% of gross offering proceeds from the sale of our
shares in the primary offering, all of which may be reallowed to participating
broker-dealers. From July 19, 2010, the date the SEC declared our offering effective,
through December 31, 2010, we incurred selling commissions of $167,722 to NRF
Capital.
    
    Dealer Manager Fee3.0% of gross offering proceeds from the sale of our shares
in the primary offering, a portion of which may be reallowed to participating
broker-dealers. From July 19, 2010, the date the SEC declared our offering effective,
through December 31, 2010, we incurred dealer manager fees of $75,107 to NRF
Capital.
 Borrowing Policies
  Policies Governing Related Person Transactions
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www.northstarreit.com
 
 Item 14.
    
    Principal Accountant Fees and Services
 Fees Paid to Independent Registered Public Accounting Firm
  Type of Fee
    
    2009
    
    
    2010Audit Fees
    
    $
    130,750
    
    
    $
    159,600Audit-Related Fees
    
    
    
    
    
    
    Tax Fees
    
    
    
    
    
    
    All Other Fees
    
    
    
    
    
    
    Total
    
    $
    130,750
    
    
    $
    159,600
  
 PART IV
 
 Item 15.
    
    Exhibits and Financial Statement Schedules
 (a)
    
    and (c) Financial Statement and Schedulessee Index to Financial Statements
and Schedules included in Item 8.
 (b)
    
    Exhibits
  71




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##### Table of Contents



ExhibitNumber
    
    Description3.1
    
    
    Second Articles of Amendment and Restatement of NorthStar Real Estate Income Trust, Inc. (filed as
Exhibit 3.1 to the Companys Current Report on Form 8-K filed on August 26, 2010 and incorporated
herein by reference)3.2
    
    
    Bylaws of NorthStar Real Estate Income Trust, Inc. (filed as Exhibit 3.2 to the Companys
Registration Statement on Form S-11 (File No. 333-157688) and incorporated herein by reference)4.1
    
    
    Form of Subscription Agreement (filed as Exhibit 4.1 to Pre-Effective Amendment No. 6 to the
Companys Registration Statement on Form S-11 (File No. 333-157688) and incorporated herein by
reference)4.2
    
    
    Form of Distribution Reinvestment Plan (filed as Exhibit 4.2 to Pre-Effective Amendment No. 6 to the
Companys Registration Statement on Form S-11 (File No. 333-157688) and incorporated herein by
reference)10.1
    
    
    Escrow Agreement (filed as Exhibit 10.1 to Pre-Effective Amendment No. 6 to the Companys
Registration Statement on Form S-11 (File No. 333-157688) and incorporated herein by reference)10.2
    
    
    Advisory Agreement (filed as Exhibit 10.2 to Pre-Effective Amendment No. 5 to the Companys
Registration Statement on Form S-11 (File No. 333-157688) and incorporated herein by reference)10.3
    
    
    Limited Partnership Agreement of NorthStar Real Estate Income Trust Operating Partnership, LP (filed
as Exhibit 10.3 to Pre-Effective Amendment No. 5 to the Companys Registration Statement on Form S-11
(File No. 333-157688) and incorporated herein by reference)10.4
    
    
    NorthStar Real Estate Income Trust, Inc. Long-Term Incentive Plan (filed as Exhibit 10.4 to
Pre-Effective Amendment No. 5 to the Companys Registration Statement on Form S-11 (File No.
333-157688) and incorporated herein by reference)10.5
    
    
    NorthStar Real Estate Income Trust, Inc. Independent Directors Compensation Plan (filed as Exhibit
10.5 to Pre-Effective Amendment No. 5 to the Companys Registration Statement on Form S-11 (File No.
333-157688) and incorporated herein by reference)10.6
    
    
    Amendment to the NorthStar Real Estate Income Trust, Inc. Independent Directors Compensation Plan
(filed as Exhibit 10.6 to the Companys Quarterly Report on Form 10-Q filed on August 26, 2010 and
incorporated herein by reference)10.7
    
    
    Distribution Support Agreement (filed as Exhibit 10.6 to Pre-Effective Amendment No. 5 to the
Companys Registration Statement on Form S-11 (File No. 333-157688) and incorporated herein by
reference)10.8
    
    
    Form of Indemnification Agreement (filed as Exhibit 10.7 to Pre-Effective Amendment No. 3 to the
Companys Registration Statement on Form S-11 (File No. 333-157688) and incorporated herein by
reference)10.9
    
    
    Form of Restricted Stock Award (filed as Exhibit 10.8 to Pre-Effective Amendment No. 5 to the
Companys Registration Statement on Form S-11 (File No. 333-157688) and incorporated herein by
reference)10.10
    
    
    Agreement and Plan of Merger Between NorthStar Real Estate Income Trust, Inc. and NorthStar Income
Opportunity REIT I, Inc. (filed as Exhibit 10.1 to the Companys Current Report on Form 8-K filed on
September 9, 2010 and incorporated herein by reference)10.11
    
    
    Amendment No. 1 to Advisory Agreement, dated February 24, 2011, by and among NorthStar Real Estate
Income Trust, Inc., NorthStar Real Estate Income Trust Operating Partnership, LP, NS Real Estate
Income Trust Advisor, LLC and NorthStar Realty Finance Corp (filed as Exhibit 10.1 to the Companys
Current Report on form 8-K filed on March 2, 2011 and incorporated herein by reference)12.1
    
    
    Ratio of Earnings to Combined Fixed Charges21.1
    
    
    Significant Subsidiaries of NorthStar Real Estate Income Trust, Inc.24.1
    
    
    Power of Attorney (included in signature page)31.1
    *
    
    Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    *
    
    Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    *
    
    Certification by the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    *
    
    Certification by the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 *
    
    Filed herewith  72




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SIGNATURES
  NorthStar Real Estate Income Trust, Inc.By:
    /s/ David T. HamamotoName:
    David T. HamamotoTitle:
    Chairman and Chief Executive Officer POWER OF ATTORNEY
  Signature
    
    Title
    
    Date/s/ David T. Hamamoto
    
    Chairman and Chief Executive Officer
    

March 29, 2011David T. Hamamoto
    
    (Principal Executive Officer)/s/ Lisa Meyer
    
    Chief Financial Officer and Treasurer
    
    March 29, 2011Lisa Meyer
    
    (Principal Financial Officer and
Principal Accounting Officer)/s/ Jonathan Albro
    
    Director
    
    March 29, 2011Jonathan Albro/s/ charles w. schoenherr
    
    Director
    
    March 29, 2011Charles W. Schoenherr/s/ Jack f. smith, jr.
    
    Director
    
    March 29, 2011Jack F. Smith, Jr.
  73