UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 6, 2021
| (Exact Name of Registrant as Specified in Its Charter) | ||||||||
| (State or Other Jurisdiction of Incorporation or Organization) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||||||||||||
(Address of Principal Executive Offices, Including Zip Code)
(561 ) 570-4644
Registrant’s telephone number, including area code:
N/A
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||||
| Securities registered pursuant to Section 12(b) of the Act: | ||||||||||||||
| Title of Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). | |||||||||||
Emerging growth company | |||||||||||
| If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ☐ | ||||||||||
Item 2.02 Results of Operations and Financial Condition.
On May 6, 2021, Colony Capital, Inc. (the “Company”) issued a press release announcing its financial position as of March 31, 2021 and its financial results for the quarter ended March 31, 2021. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
On May 6, 2021, the Company made available a Supplemental Financial Disclosure Presentation for the quarter ended March 31, 2021 on the Company’s website at www.clny.com. A copy of the Supplemental Financial Disclosure Presentation is attached as Exhibit 99.2 to this Current Report on Form 8-K and is incorporated herein by reference.
Item 7.01 Regulation FD Disclosure.
In connection with the earnings call to be held on May 6, 2021 as referenced in the press release, the Company has prepared a presentation, dated May 6, 2021 (the "Earnings Presentation"), a copy of which is attached as Exhibit 99.3 to this Current Report on Form 8-K and incorporated herein by reference.
The information included in this Current Report on Form 8-K (including Exhibits 99.1, 99.2 and 99.3 hereto) shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing made by the Company under the Exchange Act or the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.
Use of Website to Distribute Material Company Information
The Company’s website address is www.clny.com. The Company uses its website as a channel of distribution for important company information. Important information, including press releases, analyst presentations and financial information regarding the Company, is routinely posted on and accessible on the Shareholders subpage of its website, which is accessible by clicking on the tab labeled “Shareholders” on the website home page. The Company also uses its website to expedite public access to time-critical information regarding the Company in advance of or in lieu of distributing a press release or a filing with the U.S. Securities and Exchange Commission disclosing the same information. Therefore, investors should look to the Shareholders subpage of the Company’s website for important and time-critical information. Visitors to the Company’s website can also register to receive automatic e-mail and other notifications alerting them when new information is made available on the Shareholders subpage of the website.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits. The following exhibits are being furnished herewith to this Current Report on Form 8-K.
| Exhibit No. | Description | |||||||
| Press Release dated May 6, 2021 | ||||||||
| Supplemental Financial Disclosure Presentation for the quarter ended March 31, 2021 | ||||||||
| Earnings Presentation dated May 6, 2021 | ||||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: | May 6, 2021 | COLONY CAPITAL, INC. | |||||||||
| By: | /s/ Jacky Wu | ||||||||||
| Jacky Wu | |||||||||||
| Executive Vice President and Chief Financial Officer | |||||||||||
 | ||||||||
Exhibit 99.1
COLONY CAPITAL ANNOUNCES FIRST QUARTER 2021 FINANCIAL RESULTS
Boca Raton, May 6, 2021 - Colony Capital, Inc. (NYSE: CLNY) and subsidiaries (collectively, “Colony Capital,” or the “Company”) today announced financial results for the first quarter ended March 31, 2021. The Company reported first quarter 2021 total revenues of $316 million, GAAP net income attributable to common stockholders of $(265) million, or $(0.56) per share and Core FFO of $4.0 million, or $0.01 per share.
“During the first quarter we made significant progress towards our 2021 goals. Our digital portfolio companies continue to grow and generate strong performance and we are busy deploying fresh capital from DCP II, our new flagship equity offering, into exciting new digital platforms,” said Marc Ganzi, President and Chief Executive Officer. "The growth in our digital businesses combined with key legacy dispositions puts us at 70% rotated currently, already past our target for the year. Our business transformation dovetails with profound governance changes, with Nancy Curtin, our lead independent director, recently agreeing to step into the role of Chairperson and the addition of a new digital board member in Shaka Rasheed, earlier this week at our Annual Meeting."
Q1 2021 HIGHLIGHTS
Momentum at Digital Businesses
•Digital AUM rose to $32 billion, 70% of total AUM as of May 6, 2021.
•Capital formation at Digital Colony Partners II (DCP II) drove strong growth in the Digital IM segment, with revenues and FRE both up over 50% YoY.
•Organic growth and a strong contribution from DataBank’s expanded footprint drove higher revenue and EBITDA in the Digital Operating segment, which exceeded 2021 EBITDA guidance on a run-rate basis during the quarter.
•DataBank, supported by the Digital Colony capital markets team, completed a first-of-its-kind enterprise data center financing, raising over $650 million in securitized notes to extend its debt maturities and provide new capital to fund growth, while lowering its overall cost of debt by over 50%.
Generated Positive Core FFO
•Digital FRE increased by 54% to $15.5 million from $10.1 million in the prior year due to significant FEEUM growth of $5.1 billion in the last twelve months.
•Digital Operating EBITDA increased to $14.4 million from $3.2 million in the prior year led by substantial investments in high quality Digital Operating assets, namely Vantage SDC and DataBank's acquisition of zColo.
•Significant G&A savings through legacy asset sales and corporate cost rationalization efforts also contributed to the positive Core FFO outcome.
| Financial Summary | |||||||||||
| ($ in millions, except per share data and where noted) | |||||||||||
| Revenues | Q1 2021 | Q1 2020 | |||||||||
| Property operating income | $275 | $184 | |||||||||
| Interest income | 3 | 3 | |||||||||
| Fee income | 34 | 25 | |||||||||
| Other income | 4 | 6 | |||||||||
| Total revenues | $316 | $217 | |||||||||
| Adjusted EBITDA | $56 | $36 | |||||||||
| Net income to common stockholders | $(265) | $(362) | |||||||||
| Core FFO | $4 | $(12) | |||||||||
| Core FFO per share | $0.01 | $(0.02) | |||||||||
Digital Fee Related Earnings (“FRE”)(1) | $15 | $10 | |||||||||
| Digital Operating EBITDA | $14 | $3 | |||||||||
Digital Core FFO(2) | $16 | $11 | |||||||||
| Liquidity and Digital AUM | 03/31/21 | 12/31/20 | |||||||||
| Liquidity (cash & undrawn RCF) | $667 | $737 | |||||||||
| Digital AUM (in billions) | $32.0 | $30.0 | |||||||||
________________________________________________
Note: Revenues, Net Income, Adjusted EBITDA and Digital FRE are consolidated while Core FFO, Digital Core FFO, Digital Operating EBITDA, Liquidity and AUM are CLNY OP share.
(1) Reported 1Q21 FRE was $18.2 million, however, the figure above has been adjusted to exclude a $2.7 million benefit from reversing unused portions of the one-time incentive expense recorded in 4Q20.
(2) Includes Digital Investment Management and Digital Operating, excludes Digital Other.
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Harvest Legacy Assets
•Completed the sale of the Company's hospitality portfolios, generating an aggregate $67.5 million of gross proceeds on a consolidated basis. The sale resulted in the reduction of $2.7 billion in consolidated investment-level debt.
•Other Equity & Debt (OED) assets monetized year-to-date generated $131 million of net equity proceeds, including a sale in April of a 74% controlling interest in two high-quality office properties located in Dublin’s city center with $104 million in net equity proceeds to the Company.
•In April 2021, the Company completed the internalization transaction with Colony Credit Real Estate, Inc. (CLNC) and received a termination payment of $102 million, transferred 44 employees to CLNC and executed a transition services agreement to allow for a seamless transition of critical functions.
•In addition to funding future digital investments, these transactions advance the Company’s efforts to streamline the organization and simplify its business profile.
Significant Corporate Governance Advances
•Nancy Curtin, the Company’s lead independent director, was appointed to the position of Chairperson of the Board, effective April 1, 2021. The Company will benefit from Ms. Curtin’s extensive global investment and leadership experience, as well as a deep knowledge of the Company's business.
•On May 4, 2021, Sháka Rasheed was elected to the Company’s Board of Directors. Mr. Rasheed currently serves as an executive of the Microsoft Corporation. As an accomplished leader and advisor currently at the intersection of financial services and technology, Mr. Rasheed brings over 25 years of business development, sales, strategy, and leadership experience to the Board.
Investor Relations
•The Company will host an inaugural Virtual Investor Day on Tuesday, June 22, 2021 as part of its efforts to build greater awareness across the investor community around its strategic plan as it accelerates towards the completion of its digital transformation.
•The Company continues to prioritize simplification as it makes improvements to its financial reporting, most recently condensing its earnings release and supplemental financial reporting packages to reduce complexity and simplify analysis. The Company also expects to issue a new Corporate Overview document in connection with its upcoming investor day.
Digital Snapshot
Tracking to 2021 Guidance
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Common Stock and Operating Company Units
As of May 3, 2021, the Company had 487.2 million shares of Class A and B common stock outstanding and the Company’s operating partnership had 51.1 million operating company units outstanding and held by members other than the Company.
Preferred Dividends
On February 23, 2021, the Company’s Board declared cash dividends with respect to each series of the Company’s cumulative redeemable perpetual preferred stock in accordance with the terms of such series, as follows: with respect to each of the Series G preferred stock: $0.46875 per share; Series H preferred stock: $0.4453125 per share; Series I preferred stock: $0.446875 per share; and Series J preferred stock: $0.4453125 per share, such dividends were paid on April 15, 2021 to the respective stockholders of record on April 12, 2021.
On May 4, 2021, the Company’s Board declared cash dividends with respect to each series of the Company’s cumulative redeemable perpetual preferred stock in accordance with the terms of such series, as follows: with respect to each of the Series G preferred stock: $0.46875 per share; Series H preferred stock: $0.4453125 per share; Series I preferred stock: $0.446875 per share; and Series J preferred stock: $0.4453125 per share, such dividends will be paid on July 15, 2021 to the respective stockholders of record on July 9, 2021.
First Quarter 2021 Conference Call
The Company will conduct an earnings presentation and conference call to discuss the financial results on Thursday, May 6, 2021 at 10:00 a.m. ET. The earnings presentation will be broadcast live over the Internet and can be accessed on the Shareholders section of the Company’s website at ir.clny.com/events. A webcast of the presentation and conference call will be available for 90 days on the Company’s website. To participate in the event by telephone, please dial (877) 407-4018 ten minutes prior to the start time (to allow time for registration). International callers should dial (201) 689-8471.
For those unable to participate during the live call, a replay will be available starting May 6, 2021, at 1:00 p.m. ET, through May 13, 2021, at 11:59 p.m. ET. To access the replay, dial (844) 512-2921 (U.S.), and use passcode 13718365. International callers should dial (412) 317-6671 and enter the same conference ID number.
Earnings Presentation and Supplemental Financial Report
A First Quarter 2021 Earnings Presentation and Supplemental Financial Report is available in the Events & Presentations and Financial Information sections, respectively, of the Shareholders tab on the Company’s website at www.clny.com. This information has also been furnished to the U.S. Securities and Exchange Commission in a Current Report on Form 8-K.
About Colony Capital, Inc.
Colony Capital, Inc. (NYSE: CLNY) is a leading global investment firm with a heritage of identifying and capitalizing on key secular trends in real estate. The Company manages a $46 billion portfolio of real assets on behalf of its shareholders and limited partners, including $32 billion in digital real estate investments through Digital Colony, its digital infrastructure platform. Colony Capital, structured as a REIT, is headquartered in Boca Raton with key offices in Los Angeles, New York, London and Singapore. For more information on Colony Capital, visit www.clny.com.
Cautionary Statement Regarding Forward-Looking Statements
This press release may contain forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions.
Forward-looking statements involve known and unknown risks, uncertainties, assumptions and contingencies, many of which are beyond the Company’s control, and may cause the Company’s actual results to differ significantly from those expressed in any forward-looking statement. Factors that might cause such a difference include, without limitation, the impact of COVID-19 on the global economy, including the Company’s businesses, whether the Company will capitalize on the powerful secular tailwinds supporting the continued growth and investment in digital infrastructure, whether the Company’s wellness infrastructure segment, including contractual rent collections, will continue to perform well despite ongoing impacts of COVID-19, the Company’s ability to continue driving strong growth in its digital business and accelerating its digital transformation, including whether the Company will continue to lower corporate expenses and achieve earnings rotation through divestment of legacy businesses and assets, the impact of the digital transformation on the Company’s earnings profile, the Company’s ability to collaborate with its partner companies and customers to build the next-generation networks connecting enterprises and consumers globally, whether the Company will realize the anticipated benefits of Wafra’s strategic investment in the Company’s digital investment management business, including whether the Wafra investment will become subject to redemption and the amount of commitments Wafra will make to the Company’s digital investment products, the Company’s ability to raise third party capital in its managed funds or co-investment structures and the pace of such fundraising (including as a result of the impact of COVID-19), whether the DCP II fund raising target will be met, in the amounts anticipated or at all, the performance of DataBank, including zColo, the success and
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performance of the Company’s future investment product offerings, including a digital credit investment vehicle, whether the Company will realize the anticipated benefits of its investment in Vantage SDC, including the performance and stability of its portfolio, the pace of growth in the Company’s digital investment management franchise, the Company’s ability to continue to make investments in digital assets onto the balance sheet and the quality and earnings profile of such investments, the resilience and growth in demand for digital infrastructure, whether the Company will realize the anticipated benefits of its securitization transactions, the Company’s ability to simplify its business and continue to monetize legacy businesses/OED assets, including the timing and amount of proceeds to be received by the Company in those monetizations and its impact on the Company’s liquidity, if any, whether warehoused investments will ultimately be transferred to a managed investment vehicle or at all, the impact of impairments, the level of expenses within the wellness infrastructure segment and the impact on performance for the segment, whether the Company will maintain or produce higher Core FFO per share in the coming quarters, or ever, the Company’s FRE and FEEUM and its ability to continue growth at the current pace or at all, whether the Company will continue to pay dividends on its preferred stock, the impact of changes to the Company’s management or board of directors, employee and organizational structure, the Company’s financial flexibility and liquidity, including borrowing capacity under its revolving credit facility (including as a result of the impact of COVID-19), whether the Company will further extend the term of its revolving credit facility, the use of sales proceeds and available liquidity, the performance of the Company’s investment in CLNC (including as a result of the impact of COVID-19), including the CLNC share price as compared to book value and how the Company evaluates the Company’s investment in CLNC, the impact of management changes at CLNC, the Company’s ability to minimize balance sheet commitments to its managed investment vehicles, customer demand for data centers, the Company's portfolio composition, the Company's expected taxable income and net cash flows, excluding the contribution of gains, the Company’s ability to pay or grow the dividend at all in the future, the impact of any changes to the Company’s management agreements with NorthStar Healthcare Income, Inc. and other managed investment vehicles, whether the Company will be able to maintain its qualification as a REIT for U.S. federal income tax purposes, the timing of and ability to deploy available capital, including whether any redeployment of capital will generate higher total returns, the Company’s ability to maintain inclusion and relative performance on the RMZ, the Company’s leverage, including the Company’s ability to reduce debt and the timing and amount of borrowings under its credit facility, increased interest rates and operating costs, adverse economic or real estate developments in the Company’s markets, the Company’s failure to successfully operate or lease acquired properties, decreased rental rates, increased vacancy rates or failure to renew or replace expiring leases, increased costs of capital expenditures, defaults on or non-renewal of leases by tenants, the impact of economic conditions (including the impact of COVID-19 on such conditions) on the borrowers of the Company’s commercial real estate debt investments and the commercial mortgage loans underlying its commercial mortgage backed securities, adverse general and local economic conditions, an unfavorable capital market environment, decreased leasing activity or lease renewals, and other risks and uncertainties, including those detailed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, each under the heading “Risk Factors,” as such factors may be updated from time to time in the Company’s subsequent periodic filings with the U.S. Securities and Exchange Commission (“SEC”). All forward-looking statements reflect the Company’s good faith beliefs, assumptions and expectations, but they are not guarantees of future performance. Additional information about these and other factors can be found in the Company’s reports filed from time to time with the SEC.
the Company cautions investors not to unduly rely on any forward-looking statements. The forward-looking statements speak only as of the date of this press release. The Company is under no duty to update any of these forward-looking statements after the date of this press release, nor to conform prior statements to actual results or revised expectations, and the Company does not intend to do so.
Source: Colony Capital, Inc.
Investor Contacts:
Severin White
Managing Director, Head of Public Investor Relations
212-547-2777
swhite@clny.com
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Non-GAAP Financial Measures and Definitions
Adjusted Earnings before Interest, Taxes, Depreciation and Amortization
The Company calculates Adjusted EBITDA by adjusting Core FFO to exclude interest expense, preferred dividends, tax expense or benefit, earnings from equity method investments, placement fees, and for the Digital Operating segment, restructuring, transaction and integration costs, and revenues and corresponding costs related to the delivery of services that are not ongoing, such as installation services. The Company uses Adjusted EBITDA as a supplemental measure of our performance because they eliminate depreciation, amortization, and the impact of the capital structure from its operating results. However, because Adjusted EBITDA is calculated before recurring cash charges including interest expense and taxes and are not adjusted for capital expenditures or other recurring cash requirements, their utilization as a cash flow measurement is limited.
Assets Under Management (AUM)
Assets owned by the Company’s balance sheet and assets for which the Company and its affiliates provide investment management services, including assets for which the Company may or may not charge management fees and/or performance allocations. Balance sheet AUM is based on the undepreciated carrying value of digital investments and the impaired carrying value of non digital investments as of the report date. Investment management AUM is based on the cost basis of managed investments as reported by each underlying vehicle as of the report date. AUM further includes uncalled capital commitments, but excludes CLNY OP’s share of non wholly-owned real estate investment management platform’s AUM. The Company's calculations of AUM may differ from the calculations of other asset managers, and as a result, this measure may not be comparable to similar measures presented by other asset managers.
CLNY Operating Partnership (CLNY OP)
The operating partnership through which the Company conducts all of its activities and holds substantially all of its assets and liabilities. The Company is the sole managing member of, and directly owns approximately 90% of the common units in, CLNY OP. The remaining common units in CLNY OP are held primarily by current and former employees of the Company. Each common unit is redeemable at the election of the holder for cash equal to the then fair value of one share of the Company’s Class A common stock or, at the Company’s option, one share of the Company’s Class A common stock. CLNY OP share excludes noncontrolling interests in investment entities. Throughout this presentation, consolidated figures represent the interest of both the Company (and its subsidiary Colony Capital Operating Company or the “CLNY OP”) and noncontrolling interests. Figures labeled as CLNY OP share represent the Company’s pro-rata share.
Digital Operating Earnings before Interest, Taxes, Depreciation and Amortization for Real Estate (EBITDAre) and Adjusted EBITDA
The Company calculates EBITDAre in accordance with the standards established by the National Association of Real Estate Investment Trusts, which defines EBITDAre as net income or loss calculated in accordance with GAAP, excluding interest, taxes, depreciation and amortization, gains or losses from the sale of depreciated property, and impairment of depreciated property. The Company calculates Adjusted EBITDA by adjusting EBITDAre for the effects of straight-line rental income/expense adjustments and amortization of acquired above- and below-market lease adjustments to rental income, equity-based compensation expense, restructuring and integration costs, transaction costs from unsuccessful deals and business combinations, litigation expense, the impact of other impairment charges, gains or losses from sales of undepreciated land, and gains or losses on early extinguishment of debt and hedging instruments. Revenues and corresponding costs related to the delivery of services that are not ongoing, such as installation services, are also excluded from Adjusted EBITDA. The Company uses EBITDAre and Adjusted EBITDA as supplemental measures of our performance because they eliminate depreciation, amortization, and the impact of the capital structure from its operating results. However, because EBITDAre and Adjusted EBITDA are calculated before recurring cash charges including interest expense and taxes and are not adjusted for capital expenditures or other recurring cash requirements, their utilization as a cash flow measurement is limited.
Fee-Earning Equity Under Management (FEEUM)
Equity for which the Company and its affiliates provides investment management services and derives management fees and/or performance allocations. FEEUM generally represents the basis used to derive fees, which may be based on invested equity, stockholders’ equity, or fair value pursuant to the terms of each underlying investment management agreement. The Company's calculations of FEEUM may differ materially from the calculations of other asset managers, and as a result, this measure may not be comparable to similar measures presented by other asset managers.
Fee Related Earnings (FRE)
The Company calculates FRE for its investment management business within the digital segment as base management fees, other service fee income, and other income inclusive of cost reimbursements, less compensation expense (excluding equity-based compensation), administrative expenses (excluding fund raising placement agent fee expenses), and other operating expenses related to the investment management business. The Company uses FRE as a supplemental performance measure as it may provide additional insight into the profitability of the overall digital investment management business. FRE is presented prior to the deduction for Wafra's 31.5% interest.
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Funds From Operations (FFO) and Core Funds From Operations (Core FFO)
The Company calculates funds from operations (FFO) in accordance with standards established by the National Association of Real Estate Investment Trusts, which defines FFO as net income or loss calculated in accordance with GAAP, excluding (i) extraordinary items, as defined by GAAP; (ii) gains and losses from sales of depreciable real estate; (iii) impairment write-downs associated with depreciable real estate; (iv) gains and losses from a change in control in connection with interests in depreciable real estate or in-substance real estate, plus (v) real estate-related depreciation and amortization; and (vi) including similar adjustments for equity method investments. Included in FFO are gains and losses from sales of assets which are not depreciable real estate such as loans receivable, equity method investments, as well as equity and debt securities, as applicable.
The Company computes core funds from operations (Core FFO) by adjusting FFO for the following items, including the Company’s share of these items recognized by its unconsolidated partnerships and joint ventures: (i) equity-based compensation expense; (ii) effects of straight-line rent revenue and expense; (iii) amortization of acquired above- and below-market lease values; (iv) debt prepayment penalties and amortization of deferred financing costs and debt premiums and discounts; (v) non-real estate depreciation, amortization and impairment; (vi) restructuring and transaction-related charges; (vii) non-real estate loss (gain), fair value loss (gain) on interest rate and foreign currency hedges, and foreign currency remeasurements except realized gain and loss from the Digital Other segment; (viii) net unrealized carried interest; and (ix) deferred taxes and the tax effect on certain of the foregoing adjustments. The Company’s Core FFO from its interest in Colony Credit Real Estate (NYSE: CLNC) represented the cash dividends declared in the reported period. The Company excluded results from discontinued operations in its calculation of Core FFO and applied this exclusion to prior periods. Beginning with the first quarter 2021, the Company revised the computation of Core FFO and applied this revised computation methodology to prior periods presented.
FFO and Core FFO should not be considered alternatives to GAAP net income as indications of operating performance, or to cash flows from operating activities as measures of liquidity, nor as indications of the availability of funds for our cash needs, including funds available to make distributions. FFO and Core FFO should not be used as supplements to or substitutes for cash flow from operating activities computed in accordance with GAAP.
The Company uses FFO and Core FFO as supplemental performance measures because, in excluding real estate depreciation and amortization and gains and losses, it provides a performance measure that captures trends in occupancy rates, rental rates, and operating costs, and such a measure is useful to investors as it excludes periodic gains and losses from sales of investments that are not representative of its ongoing operations. The Company also believes that, as widely recognized measures of the performance of REITs, FFO and Core FFO will be used by investors as a basis to compare its operating performance with that of other REITs. However, because FFO and Core FFO exclude depreciation and amortization and capture neither the changes in the value of the Company’s properties that resulted from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of its properties, all of which have real economic effect and could materially impact the Company’s results from operations, the utility of FFO and Core FFO as measures of the Company’s performance is limited. FFO and Core FFO should be considered only as supplements to GAAP net income as a measure of the Company’s performance. Additionally, Core FFO excludes the impact of certain fair value fluctuations, which, if they were to be realized, could have a material impact on the Company’s operating performance.
Net Operating Income (NOI)
NOI for our real estate segments represents total property and related income less property operating expenses, adjusted for the effects of (i) straight-line rental income adjustments; (ii) amortization of acquired above- and below-market lease adjustments to rental income; and (iii) other items such as adjustments for the Company’s share of NOI of unconsolidated ventures.
The Company believes that NOI is a useful measure of operating performance of its respective real estate portfolios as it is more closely linked to the direct results of operations at the property level. NOI also reflects actual rents received during the period after adjusting for the effects of straight-line rents and amortization of above- and below- market leases; therefore, a comparison of NOI across periods better reflects the trend in occupancy rates and rental rates of the Company’s properties.
NOI excludes historical cost depreciation and amortization, which are based on different useful life estimates depending on the age of the properties, as well as adjust for the effects of real estate impairment and gains or losses on sales of depreciated properties, which eliminate differences arising from investment and disposition decisions. This allows for comparability of operating performance of the Company’s properties period over period and also against the results of other equity REITs in the same sectors. Additionally, by excluding corporate level expenses or benefits such as interest expense, any gain or loss on early extinguishment of debt and income taxes, which are incurred by the parent entity and are not directly linked to the operating performance of the Company’s properties, NOI provides a measure of operating performance independent of the Company’s capital structure and indebtedness. However, the exclusion of these items as well as others, such as capital expenditures and leasing costs, which are necessary to maintain the operating performance of the Company’s properties, and transaction costs and administrative costs, may limit the usefulness of NOI. NOI may fail to capture significant trends in these components of U.S. GAAP net income (loss) which further limits its usefulness.
NOI should not be considered as an alternative to net income (loss), determined in accordance with U.S. GAAP, as an indicator of operating performance. In addition, the Company’s methodology for calculating NOI involves subjective judgment and discretion and may differ from the methodologies used by other comparable companies, including other REITs, when calculating the same or similar supplemental financial measures and may not be comparable with other companies.
(FINANCIAL TABLES FOLLOW)
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CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
| March 31, 2021 | December 31, 2020 | |||||||||||||
| (unaudited) | ||||||||||||||
Assets | ||||||||||||||
Cash and cash equivalents | $ | 788,361 | $ | 703,544 | ||||||||||
Restricted cash | 125,959 | 114,952 | ||||||||||||
Real estate, net | 7,702,711 | 7,809,964 | ||||||||||||
| Loans receivable | 85,272 | 84,030 | ||||||||||||
| Equity and debt investments | 777,819 | 876,703 | ||||||||||||
Goodwill | 761,368 | 761,368 | ||||||||||||
Deferred leasing costs and intangible assets, net | 1,392,528 | 1,467,725 | ||||||||||||
| Assets held for disposition | 4,094,657 | 7,426,268 | ||||||||||||
| Other assets | 834,318 | 886,817 | ||||||||||||
Due from affiliates | 62,257 | 69,189 | ||||||||||||
Total assets | $ | 16,625,250 | $ | 20,200,560 | ||||||||||
Liabilities | ||||||||||||||
| Debt, net | $ | 6,877,291 | $ | 6,872,350 | ||||||||||
| Accrued and other liabilities | 1,036,218 | 1,193,601 | ||||||||||||
Intangible liabilities, net | 89,915 | 93,852 | ||||||||||||
| Liabilities related to assets held for disposition | 1,936,643 | 4,731,772 | ||||||||||||
| Due to affiliates | 408 | 601 | ||||||||||||
Dividends and distributions payable | 18,516 | 18,516 | ||||||||||||
Total liabilities | 9,958,991 | 12,910,692 | ||||||||||||
| Commitments and contingencies | ||||||||||||||
Redeemable noncontrolling interests | 315,922 | 305,278 | ||||||||||||
Equity | ||||||||||||||
Stockholders’ equity: | ||||||||||||||
| Preferred stock, $0.01 par value per share; $1,033,750 liquidation preference; 250,000 shares authorized; 41,350 shares issued and outstanding | 999,490 | 999,490 | ||||||||||||
| Common stock, $0.01 par value per share | ||||||||||||||
| Class A, 949,000 shares authorized; 487,103 and 483,406 shares issued and outstanding, respectively | 4,871 | 4,834 | ||||||||||||
| Class B, 1,000 shares authorized; 734 shares issued and outstanding | 7 | 7 | ||||||||||||
Additional paid-in capital | 7,576,873 | 7,570,473 | ||||||||||||
Accumulated deficit | (6,460,262) | (6,195,456) | ||||||||||||
Accumulated other comprehensive income | 101,056 | 122,123 | ||||||||||||
Total stockholders’ equity | 2,222,035 | 2,501,471 | ||||||||||||
Noncontrolling interests in investment entities | 4,003,905 | 4,327,372 | ||||||||||||
Noncontrolling interests in Operating Company | 124,397 | 155,747 | ||||||||||||
Total equity | 6,350,337 | 6,984,590 | ||||||||||||
Total liabilities, redeemable noncontrolling interests and equity | $ | 16,625,250 | $ | 20,200,560 | ||||||||||
7
| ||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
| Three Months Ended March 31, | |||||||||||||||||
| 2021 | 2020 | ||||||||||||||||
| (unaudited) | |||||||||||||||||
| Revenues | |||||||||||||||||
| Property operating income | $ | 275,216 | $ | 183,953 | |||||||||||||
| Interest income | 2,676 | 2,607 | |||||||||||||||
| Fee income | 33,679 | 25,128 | |||||||||||||||
| Other income | 4,133 | 5,525 | |||||||||||||||
| Total revenues | 315,704 | 217,213 | |||||||||||||||
| Expenses | |||||||||||||||||
| Property operating expense | 132,264 | 83,477 | |||||||||||||||
| Interest expense | 72,485 | 63,441 | |||||||||||||||
| Investment and servicing expense | 8,108 | 5,732 | |||||||||||||||
| Transaction costs | 2,685 | 596 | |||||||||||||||
| Depreciation and amortization | 170,967 | 76,236 | |||||||||||||||
| Impairment loss | 15,232 | 48,532 | |||||||||||||||
| Compensation expense | |||||||||||||||||
| Cash and equity-based compensation | 83,419 | 42,737 | |||||||||||||||
| Carried interest and incentive fee compensation | (33) | — | |||||||||||||||
| Administrative expenses | 18,957 | 29,558 | |||||||||||||||
| Settlement loss | — | 5,090 | |||||||||||||||
| Total expenses | 504,084 | 355,399 | |||||||||||||||
| Other income (loss) | |||||||||||||||||
| Other gain (loss), net | (8,714) | (9,703) | |||||||||||||||
| Equity method earnings (losses) | (18,686) | (11,879) | |||||||||||||||
| Equity method earnings (losses) - carried interest | (222) | — | |||||||||||||||
| Income (loss) before income taxes | (216,002) | (159,768) | |||||||||||||||
| Income tax benefit (expense) | 25,825 | 5,569 | |||||||||||||||
| Income (loss) from continuing operations | (190,177) | (154,199) | |||||||||||||||
| Income (loss) from discontinued operations | (437,422) | (249,858) | |||||||||||||||
| Net income (loss) | (627,599) | (404,057) | |||||||||||||||
| Net income (loss) attributable to noncontrolling interests: | |||||||||||||||||
| Redeemable noncontrolling interests | 2,449 | (548) | |||||||||||||||
| Investment entities | (355,862) | (21,749) | |||||||||||||||
| Operating Company | (27,896) | (39,601) | |||||||||||||||
| Net income (loss) attributable to Colony Capital, Inc. | (246,290) | (342,159) | |||||||||||||||
| Preferred stock dividends | 18,516 | 19,474 | |||||||||||||||
| Net income (loss) attributable to common stockholders | $ | (264,806) | $ | (361,633) | |||||||||||||
| Loss per share—basic | |||||||||||||||||
| Loss from continuing operations per share—basic | $ | (0.30) | $ | (0.28) | |||||||||||||
| Net loss attributable to common stockholders per share—basic | $ | (0.56) | $ | (0.76) | |||||||||||||
| Loss per share—diluted | |||||||||||||||||
| Loss from continuing operations per share—diluted | $ | (0.30) | $ | (0.28) | |||||||||||||
| Net loss attributable to common stockholders per share—diluted | $ | (0.56) | $ | (0.76) | |||||||||||||
| Weighted average number of shares | |||||||||||||||||
| Basic | 474,899 | 479,106 | |||||||||||||||
| Diluted | 474,899 | 479,106 | |||||||||||||||
8
| ||||||||
FUNDS FROM OPERATIONS AND CORE FUNDS FROM OPERATIONS
(In thousands, except per share data, unaudited)
| Three Months Ended | ||||||||||||||
| March 31, 2021 | March 31, 2020 | |||||||||||||
| Net loss attributable to common stockholders | $ | (264,806) | $ | (361,633) | ||||||||||
| Adjustments for FFO attributable to common interests in Operating Company and common stockholders: | ||||||||||||||
| Net loss attributable to noncontrolling common interests in Operating Company | (27,896) | (39,601) | ||||||||||||
| Real estate depreciation and amortization | 184,762 | 130,523 | ||||||||||||
| Impairment of real estate | 106,077 | 308,268 | ||||||||||||
| Loss (gain) from sales of real estate | (38,102) | (7,933) | ||||||||||||
| Less: Adjustments attributable to noncontrolling interests in investment entities | (188,496) | (82,329) | ||||||||||||
| FFO attributable to common interests in Operating Company and common stockholders | (228,461) | (52,705) | ||||||||||||
| Additional adjustments for Core FFO attributable to common interests in Operating Company and common stockholders: | ||||||||||||||
| Adjustment to CLNC cash dividend | 55,648 | 42,112 | ||||||||||||
| Equity-based compensation expense | 19,299 | 8,732 | ||||||||||||
| Straight-line rent revenue and expense | 17,225 | (2,025) | ||||||||||||
| Amortization of acquired above- and below-market lease values, net | 6,005 | (3,519) | ||||||||||||
| Debt prepayment penalties and amortization of deferred financing costs and debt premiums and discounts | 45,627 | 15,049 | ||||||||||||
| Non-real estate fixed asset depreciation, amortization and impairment | 20,563 | 92,230 | ||||||||||||
Restructuring and transaction-related charges(1) | 34,482 | 15,568 | ||||||||||||
| Non-real estate (gains) losses, excluding realized gains or losses within the Digital Other segment | 267,812 | (117,739) | ||||||||||||
| Net unrealized carried interest | 189 | 9,230 | ||||||||||||
| Deferred taxes and tax effect on certain of the foregoing adjustments | (34,480) | (2,927) | ||||||||||||
| Less: Adjustments attributable to noncontrolling interests in investment entities | (217,706) | 3,786 | ||||||||||||
| Less: Core FFO from discontinued operations | 17,854 | (19,856) | ||||||||||||
| Core FFO attributable to common interests in Operating Company and common stockholders | $ | 4,057 | $ | (12,064) | ||||||||||
Core FFO per common share / common OP unit(2) | $ | 0.01 | $ | (0.02) | ||||||||||
Core FFO per common share / common OP unit—diluted(2)(3)(4) | $ | 0.01 | $ | (0.02) | ||||||||||
Weighted average number of common OP units outstanding used for Core FFO per common share and OP unit(2) | 537,033 | 540,441 | ||||||||||||
Weighted average number of common OP units outstanding used for Core FFO per common share and OP unit—diluted (2)(3)(4) | 555,141 | 540,441 | ||||||||||||
__________
(1) Transaction-related costs primarily represent costs and charges incurred as a result of corporate restructuring and reorganization to implement the digital evolution. These costs and charges include severance, retention, relocation, transition, shareholder settlement and other related restructuring costs, which are not reflective of the Company’s core operating performance.
(2) Calculated based on weighted average shares outstanding including participating securities and assuming the exchange of all common OP units outstanding for common shares.
(3) For the three ended March 31, 2021 and March 31, 2020, excluded from the calculations of diluted Core FFO per share is the effect of adding back interest expense associated with convertible senior notes and weighted average dilutive common share equivalents for the assumed conversion of the convertible senior notes as the effect of including such interest expense and common share equivalents would be antidilutive.
(4) For the three months ended March 31, 2021, included in the calculation of diluted Core FFO per share are 18.1 million weighted average performance stock units, performance based restricted stock units and Wafra’s warrants, of which the issuance and/or vesting are subject to the performance of the Company's stock price or the achievement of certain Company specific metrics.
9
| ||||||||
ADJUSTED EBITDA
(In thousands, unaudited)
| Three Months Ended March 31, 2021 | |||||
| Core FFO attributable to common interests in Operating Company and common stockholders | $ | 4,057 | |||
| Adjustments: | |||||
| Less: Earnings of equity method investments | (4,794) | ||||
| Plus: Preferred dividends | 18,516 | ||||
| Plus: Core interest expense | 34,351 | ||||
| Plus: Core tax expense | 2,048 | ||||
| Plus: Non pro-rata allocation of income (loss) to NCI | 1,415 | ||||
| Plus: Placement fees | 40 | ||||
| Digital Operating installation services, restructuring, integration, and transaction costs | 499 | ||||
| Adjusted EBITDA (CLNY OP Share) | $ | 56,132 | |||
RECONCILIATION OF NET INCOME (LOSS) TO DIGITAL OPERATING ADJUSTED EBITDA
| (In thousands) | Three Months Ended March 31, 2021 | ||||
| Net income (loss) from continuing operations (Digital Operating) | $ | (62,844) | |||
| Adjustments: | |||||
| Interest expense | 31,133 | ||||
| Income tax (benefit) expense | (12,269) | ||||
| Depreciation and amortization | 122,220 | ||||
| Other (gain) loss | 4 | ||||
| EBITDAre: | 78,244 | ||||
| Straight-line rent expenses and amortization of above- and below-market lease intangibles | (399) | ||||
| Compensation expense—equity-based | 308 | ||||
| Installation services | 880 | ||||
| Transaction, restructuring & integration costs | 1,767 | ||||
| Adjusted EBITDA: | $ | 80,800 | |||
| CLNY ownership | 17.9 | % | |||
| CLNY OP Share of Adjusted EBITDA: | $ | 14,440 | |||
The following table summarizes first quarter 2021 net income (loss) from continuing operations by segment:
| (In thousands) | Net Income (Loss) from Continuing Operations | ||||||||||
| Digital Investment Management | $ | 6,041 | |||||||||
| Digital Operating | (62,844) | ||||||||||
| Digital Other | 7,869 | ||||||||||
| Wellness Infrastructure | (41,210) | ||||||||||
| Other | (32,218) | ||||||||||
| Amounts Not Allocated to Segments | (67,815) | ||||||||||
| Total Consolidated | $ | (190,177) | |||||||||
10
| ||||||||
RECONCILIATION OF NET INCOME (LOSS) TO FRE
| (In thousands) | Three Months Ended March 31, 2021 | ||||
| Net income (loss) | 6,041 | ||||
| Adjustments: | |||||
| Interest income | (1) | ||||
| Fee income eliminated in the Company's consolidated Statement of Operations | 1,622 | ||||
| Investment and servicing expense | 32 | ||||
| Depreciation and amortization | 8,912 | ||||
| Compensation expense—equity-based | 1,533 | ||||
| Compensation expense—carried interest and incentive | (33) | ||||
| Administrative expenses—straight-line rent | (2) | ||||
| Administrative expenses—placement agent fee | 59 | ||||
| Equity method (earnings) losses | 195 | ||||
| Other (gain) loss, net | (165) | ||||
| Income tax (benefit) expense | 7 | ||||
FRE(1) | $ | 18,200 | |||
__________
(1) Includes a $2.7 million benefit from the unused portion of a one-time fourth quarter 2020 outperformance incentive expense.
11
| Cautionary Statement Regarding Forward-Looking Statements | ||
This presentation may contain forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions.
Forward-looking statements involve known and unknown risks, uncertainties, assumptions and contingencies, many of which are beyond the Company’s control, and may cause the Company’s actual results to differ significantly from those expressed in any forward-looking statement. Factors that might cause such a difference include, without limitation, the impact of COVID-19 on the global economy, including the Company’s businesses, whether the Company’s wellness infrastructure segment, including contractual rent collections, will continue to perform well despite ongoing impacts of COVID-19, the Company’s ability to continue driving strong growth in its digital business and accelerating its digital transformation, including whether the Company will continue to lower corporate expenses and achieve earnings rotation through divestment of legacy businesses and assets, whether the Company will realize the anticipated benefits of Wafra’s strategic investment in the Company’s digital investment management business, including whether the Wafra investment will become subject to redemption and the amount of commitments Wafra will make to the Company’s digital investment products, the Company’s ability to raise third party capital in its managed funds or co-investment structures and the pace of such fundraising (including as a result of the impact of COVID-19), whether the DCP II fund raising target will be met, in the amounts anticipated or at all, the performance of DataBank, including zColo, the success and performance of the Company’s future investment product offerings, including a digital credit investment vehicle, whether the Company will realize the anticipated benefits of its investment in Vantage SDC, including the performance and stability of its portfolio, the pace of growth in the Company’s digital investment management franchise, the Company’s ability to continue to make investments in digital assets onto the balance sheet and the quality and earnings profile of such investments, the resilience and growth in demand for digital infrastructure, whether the Company will realize the anticipated benefits of its securitization transactions, the Company’s ability to simplify its business and continue to monetize legacy businesses/OED assets, including the timing and amount of proceeds to be received by the Company, if any, and its impact on the Company’s liquidity, whether warehoused investments will ultimately be transferred to a managed investment vehicle or at all, the impact of impairments, the level of expenses within the wellness infrastructure segment and the impact on performance for the segment, whether the Company will maintain or produce higher Core FFO per share in the coming quarters, or ever, the Company’s FRE and FEEUM and its ability to continue growth at the current pace or at all, whether the Company will continue to pay dividends on its preferred stock, the impact of changes to the Company’s management or board of directors, employee and organizational structure, the Company’s financial flexibility and liquidity, including borrowing capacity under its revolving credit facility (including as a result of the impact of COVID-19), the use of sales proceeds and available liquidity, the performance of the Company’s investment in CLNC (including as a result of the impact of COVID-19), whether the Company will further extend the term of its revolving credit facility, including the CLNC share price as compared to book value and how the Company evaluates the Company’s investment in CLNC, the impact of management changes at CLNC, the Company’s ability to minimize balance sheet commitments to its managed investment vehicles, customer demand for datacenters, the Company's portfolio composition, the Company's expected taxable income and net cash flows, excluding the contribution of gains, the Company’s ability to pay or grow the dividend at all in the future, the impact of any changes to the Company’s management agreements with NorthStar Healthcare Income, Inc. and other managed investment vehicles, whether the Company will be able to maintain its qualification as a REIT for U.S. federal income tax purposes, the timing of and ability to deploy available capital, including whether any redeployment of capital will generate higher total returns, the Company’s ability to maintain inclusion and relative performance on the RMZ, the Company’s leverage, including the Company’s ability to reduce debt and the timing and amount of borrowings under its credit facility, increased interest rates and operating costs, adverse economic or real estate developments in the Company’s markets, the Company’s failure to successfully operate or lease acquired properties, decreased rental rates, increased vacancy rates or failure to renew or replace expiring leases, increased costs of capital expenditures, defaults on or non-renewal of leases by tenants, the impact of economic conditions (including the impact of COVID-19 on such conditions) on the borrowers of the Company’s commercial real estate debt investments and the commercial mortgage loans underlying its commercial mortgage backed securities, adverse general and local economic conditions, an unfavorable capital market environment, decreased leasing activity or lease renewals, and other risks and uncertainties, including those detailed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, each under the heading “Risk Factors,” as such factors may be updated from time to time in our subsequent periodic filings with the U.S. Securities and Exchange Commission (“SEC”).
All forward-looking statements reflect the Company’s good faith beliefs, assumptions and expectations, but they are not guarantees of future performance. Additional information about these and other factors can be found in the Company’s reports filed from time to time with the SEC. The Company cautions investors not to unduly rely on any forward-looking statements. The forward-looking statements speak only as of the date of this presentation. The Company is under no duty to update any of these forward-looking statements after the date of this presentation, nor to conform prior statements to actual results or revised expectations, and the Company does not intend to do so.
This presentation may contain statistics and other data that has been obtained or compiled from information made available by third-party service providers. The Company has not independently verified such statistics or data.
This presentation is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any securities of the Company. This information is not intended to be indicative of future results. Actual performance of the Company may vary materially.
The appendices herein contain important information that is material to an understanding of this presentation and you should read this presentation only with and in context of the appendices.
Colony Capital | Supplemental Financial Report | ||||||||
| Important Note Regarding Non-GAAP Financial Measures | ||
This supplemental package includes certain “non-GAAP” supplemental measures that are not defined by generally accepted accounting principles, or GAAP, including the financial metrics defined below, of which the calculations may from methodologies utilized by other REITs for similar performance measurements, and accordingly, may not be comparable to those of other REITs.
Adjusted Earnings before Interest, Taxes, Depreciation and Amortization: The Company calculates Adjusted EBITDA by adjusting Core FFO to exclude interest expense, preferred dividends, tax expense or benefit, earnings from equity method investments, placement fees, and for the Digital Operating segment, restructuring, transaction and integration costs, and revenues and corresponding costs related to the delivery of services that are not ongoing, such as installation services. The Company uses Adjusted EBITDA as a supplemental measure of our performance because they eliminate depreciation, amortization, and the impact of the capital structure from its operating results. However, because Adjusted EBITDA is calculated before recurring cash charges including interest expense and taxes and are not adjusted for capital expenditures or other recurring cash requirements, their utilization as a cash flow measurement is limited.
FFO: The Company calculates funds from operations (“FFO”) in accordance with standards established by the Board of Governors of the National Association of Real Estate Investment Trusts, which defines FFO as net income or loss calculated in accordance with GAAP, excluding (i) extraordinary items, as defined by GAAP; (ii) gains and losses from sales of depreciable real estate; (iii) impairment write-downs associated with depreciable real estate; (iv) gains and losses from a change in control in connection with interests in depreciable real estate or in-substance real estate, plus (v) real estate-related depreciation and amortization; and (vi) including similar adjustments for equity method investments. Included in FFO are gains and losses from sales of assets which are not depreciable real estate such as loans receivable, equity method investments, as well as equity and debt securities, as applicable.
Core FFO: The Company computes core funds from operations (Core FFO) by adjusting FFO for the following items, including the Company’s share of these items recognized by its unconsolidated partnerships and joint ventures: (i) equity-based compensation expense; (ii) effects of straight-line rent revenue and expense; (iii) amortization of acquired above- and below-market lease values; (iv) debt prepayment penalties and amortization of deferred financing costs and debt premiums and discounts; (v) non-real estate depreciation, amortization and impairment; (vi) restructuring and transaction-related charges; (vii) non-real estate loss (gain), fair value loss (gain) on interest rate and foreign currency hedges, and foreign currency remeasurements except realized gain and loss from the Digital Other segment; (viii) net unrealized carried interest; and (ix) deferred taxes and the tax effect on certain of the foregoing adjustments. The Company’s Core FFO from its interest in Colony Credit Real Estate (NYSE: CLNC) represented the cash dividends declared in the reported period. The Company excluded results from discontinued operations in its calculation of Core FFO and applied this exclusion to prior periods. Beginning with the first quarter 2021, the Company revised the computation of Core FFO and and applied this revised computation methodology to prior periods presented.
FFO and Core FFO should not be considered alternatives to GAAP net income as indications of operating performance, or to cash flows from operating activities as measures of liquidity, nor as indications of the availability of funds for our cash needs, including funds available to make distributions. FFO and Core FFO should not be used as supplements to or substitutes for cash flow from operating activities computed in accordance with GAAP.
The Company uses FFO and Core FFO as supplemental performance measures because, in excluding real estate depreciation and amortization and gains and losses, it provides a performance measure that captures trends in occupancy rates, rental rates, and operating costs, and such a measure is useful to investors as it excludes periodic gains and losses from sales of investments that are not representative of its ongoing operations. The Company also believes that, as widely recognized measures of the performance of REITs, FFO and Core FFO will be used by investors as a basis to compare its operating performance with that of other REITs. However, because FFO and Core FFO exclude depreciation and amortization and capture neither the changes in the value of the Company’s properties that resulted from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of its properties, all of which have real economic effect and could materially impact the Company’s results from operations, the utility of FFO and Core FFO as measures of the Company’s performance is limited. FFO and Core FFO should be considered only as supplements to GAAP net income as a measure of the Company’s performance. Additionally, Core FFO excludes the impact of certain fair value fluctuations, which, if they were to be realized, could have a material impact on the Company’s operating performance.
Colony Capital | Supplemental Financial Report | ||||||||
| Important Note Regarding Non-GAAP Financial Measures | ||
Digital Operating Earnings before Interest, Taxes, Depreciation and Amortization for Real Estate (EBITDAre) and Adjusted EBITDA: The Company calculates EBITDAre in accordance with the standards established by the National Association of Real Estate Investment Trusts, which defines EBITDAre as net income or loss calculated in accordance with GAAP, excluding interest, taxes, depreciation and amortization, gains or losses from the sale of depreciated property, and impairment of depreciated property. The Company calculates Adjusted EBITDA by adjusting EBITDAre for the effects of straight-line rental income/expense adjustments and amortization of acquired above- and below-market lease adjustments to rental income, equity-based compensation expense, restructuring and integration costs, transaction costs from unsuccessful deals and business combinations, litigation expense, the impact of other impairment charges, gains or losses from sales of undepreciated land, and gains or losses on early extinguishment of debt and hedging instruments. Revenues and corresponding costs related to the delivery of services that are not ongoing, such as installation services, are also excluded from Adjusted EBITDA. The Company uses EBITDAre and Adjusted EBITDA as supplemental measures of our performance because they eliminate depreciation, amortization, and the impact of the capital structure from its operating results. However, because EBITDAre and Adjusted EBITDA are calculated before recurring cash charges including interest expense and taxes and are not adjusted for capital expenditures or other recurring cash requirements, their utilization as a cash flow measurement is limited.
Fee Related Earnings (“FRE”): The Company calculates FRE for its investment management business within the digital segment as base management fees, other service fee income, and other income inclusive of cost reimbursements, less compensation expense (excluding equity-based compensation), administrative expenses (excluding fund raising placement agent fee expenses), and other operating expenses related to the investment management business. The Company uses FRE as a supplemental performance measure as it may provide additional insight into the profitability of the overall digital investment management business. FRE is presented prior to the deduction for Wafra's 31.5% interest.
NOI: NOI for our real estate segments represents total property and related income less property operating expenses, adjusted for the effects of (i) straight-line rental income adjustments; (ii) amortization of acquired above- and below-market lease adjustments to rental income; and (iii) other items such as adjustments for the Company’s share of NOI of unconsolidated ventures.
The Company believes that NOI is a useful measure of operating performance of its respective real estate portfolios as it is more closely linked to the direct results of operations at the property level. NOI also reflects actual rents received during the period after adjusting for the effects of straight-line rents and amortization of above- and below- market leases; therefore, a comparison of NOI across periods better reflects the trend in occupancy rates and rental rates of the Company’s properties.
NOI excludes historical cost depreciation and amortization, which are based on different useful life estimates depending on the age of the properties, as well as adjust for the effects of real estate impairment and gains or losses on sales of depreciated properties, which eliminate differences arising from investment and disposition decisions. This allows for comparability of operating performance of the Company’s properties period over period and also against the results of other equity REITs in the same sectors. Additionally, by excluding corporate level expenses or benefits such as interest expense, any gain or loss on early extinguishment of debt and income taxes, which are incurred by the parent entity and are not directly linked to the operating performance of the Company’s properties, NOI provides a measure of operating performance independent of the Company’s capital structure and indebtedness. However, the exclusion of these items as well as others, such as capital expenditures and leasing costs, which are necessary to maintain the operating performance of the Company’s properties, and transaction costs and administrative costs, may limit the usefulness of NOI. NOI may fail to capture significant trends in these components of U.S. GAAP net income (loss) which further limits its usefulness. NOI should not be considered as an alternative to net income (loss), determined in accordance with U.S. GAAP, as an indicator of operating performance.
Tenant/operator provided information: The information related to the Company’s tenants/operators that is provided in this presentation has been provided by, or derived from information provided by, such tenants/operators. The Company has not independently verified this information and has no reason to believe that such information is inaccurate in any material respect. The Company is providing this data for informational purposes only.
Colony Capital | Supplemental Financial Report | ||||||||
| Note Regarding CLNY Reportable Segments / Consolidated and OP Share of Consolidated Amounts | ||
This presentation includes supplemental financial information for the following segments: Digital Investment Management, Digital Operating, Digital Other, Wellness Infrastructure and Other.
Digital Investment Management
This business encompasses the investment and stewardship of third party capital in digital infrastructure and real estate. The Company's flagship opportunistic strategy is conducted through DCP I, DCP II and separately capitalized vehicles while other strategies, including digital credit and public equities, will be or are conducted through other investment vehicles. The Company earns management fees, generally based on the amount of assets or capital managed in investment vehicles, and have the potential to earn carried interest based on the performance of such investment vehicles subject to achievement of minimum return hurdles.
Digital Operating
This business is composed of balance sheet equity interests in digital infrastructure and real estate operating companies, which generally earns rental income from providing use of space and/or capacity in or on digital assets through leases, services and other agreements. The Company currently owns interests in two companies, DataBank's enterprise data centers, including zColo, and Vantage stabilized hyperscale data centers, which are also portfolio companies under Digital IM for the equity interests owned by third party capital.
Digital Other
This segment is composed of equity interests in digital investment vehicles, the largest of which is the Company’s investments and commitments to DCP I and DCP II. This segment also includes the Company’s investment and commitment to the digital liquid strategies and seed investments for future digital investment vehicles.
Wellness Infrastructure
This segment is composed of a diverse portfolio of senior housing, skilled nursing facilities, medical office buildings, and hospitals. The Company earns rental income from senior housing, skilled nursing facilities and hospital assets that are under net leases to single tenants/operators and from medical office buildings which are both single tenant and multi-tenant. In addition, certain of the Company's senior housing properties are managed by operators under a RIDEA (REIT Investment Diversification and Empowerment Act) structure, which allows the Company to gain financial exposure to underlying operations of the facility in a tax efficient manner versus receiving contractual rent under a net lease arrangement. In connection with accelerating the monetization of substantially all of the assets in the Company's Other segment in the first quarter of 2021, the Company reorganized its Wellness Infrastructure segment to retrospectively include other healthcare related assets and obligations. These assets and obligations encompass: (i) the Company's management contract and equity interests in NorthStar Healthcare Income, equity investment in a healthcare asset manager, and N-Star CDO bonds collateralized largely by certain debt and preferred equity within the capital structure of Wellness Infrastructure, all of which previously resided in the Other segment; as well as (ii) the 5.375% exchangeable senior notes, trust preferred securities and corresponding junior subordinated debt that were not previously allocated to reportable segments, all of which were issued by NRF Holdco, which holds the Wellness Infrastructure portfolio as its primary asset and acts as guarantor.
Other
This segment is primarily composed of the shares in Colony Credit Real Estate, Inc ("CLNC") among a few other holdings.
Discontinued Operations
The Company has shifted its efforts to accelerating the monetization of its other equity and debt (“OED”) investments and Other IM business and is pursuing a potential monetization of a substantial majority of such assets. This acceleration and the successful disposition of the Company’s hotel business represent strategic shifts in the Company's business that are expected to have a significant effect on the Company’s operations and financial results, and accordingly, have met the criteria as discontinued operations. Accordingly, for all prior periods presented, the related assets and liabilities are presented as assets and liabilities held for disposition on the consolidated balance sheets and the related operating results are presented as income (loss) from discontinued operations on the consolidated statements of operations.
Throughout this presentation, consolidated figures represent the interest of both the Company (and its subsidiary Colony Capital Operating Company or the “CLNY OP”) and noncontrolling interests. Figures labeled as CLNY OP share represent the Company’s pro-rata share.
Colony Capital | Supplemental Financial Report | ||||||||
| Table of Contents | ||
Page | |||||||||||
| I. | Financial Overview | ||||||||||
a. | 6 | ||||||||||
b. | 7-8 | ||||||||||
| II. | Financial Results | ||||||||||
a. | 9 | ||||||||||
b. | 10 | ||||||||||
c. | 11 | ||||||||||
d. | 12 | ||||||||||
e. | Segment Reconciliation of Net Income to FFO & Core FFO & Adjusted EBITDA | 13 | |||||||||
| III. | Capitalization | ||||||||||
a. | 14 | ||||||||||
b. | Revolving Credit Facility | 15 | |||||||||
c. | Convertible/Exchangeable Notes & Perpetual Preferred Stock | 16 | |||||||||
d. | Debt Maturity and Amortization Schedules | 17 | |||||||||
e. | Structure | 18 | |||||||||
| IV. | Digital Investment Management | 19 | |||||||||
| V. | Digital Operating | 20 | |||||||||
| VI. | Digital Other | 21 | |||||||||
Page | |||||||||||
| VII. | Wellness Infrastructure | ||||||||||
a. | Summary Metrics and Operating Results | 22 | |||||||||
b. | Portfolio & Other Overview | 23-25 | |||||||||
| VIII. | Other | ||||||||||
a. | Other Equity and Debt | 26-27 | |||||||||
b. | Other Investment Management | 28 | |||||||||
| IX. | Total Company Assets Under Management | 29 | |||||||||
| X. | Appendices | ||||||||||
a. | 31 | ||||||||||
b. | 32 | ||||||||||
c. | Reconciliations of Net Income (Loss) to Digital Investment Management FRE and Digital Operating Adjusted EBITDA | 33 | |||||||||
Colony Capital | Supplemental Financial Report | 5 | ||||||||||
| Ia. Financial Overview - Summary Metrics | ||
| ($ and shares in thousands, except per share data and as noted; as of or for the three months ended March 31, 2021, unless otherwise noted) (Unaudited) | |||||
| Financial Data | |||||
| Net income (loss) attributable to common stockholders | $ | (264,806) | |||
| Net income (loss) attributable to common stockholders per basic share | (0.56) | ||||
| Core FFO | 4,057 | ||||
| Core FFO per basic share | 0.01 | ||||
| Adjusted EBITDA | 56,132 | ||||
| Balance Sheet, Capitalization and Trading Statistics | |||||
| Total consolidated assets | $ | 16,625,250 | |||
| CLNY OP share of consolidated assets | 7,324,784 | ||||
Total consolidated debt(1) | 7,023,226 | ||||
CLNY OP share of consolidated debt(1) | 3,392,620 | ||||
Basic shares and OP units outstanding as of March 31, 2021(2) | 538,908 | ||||
Basic shares and OP units outstanding as of May 3, 2021(2) | 538,227 | ||||
| Liquidation preference of perpetual preferred equity | 1,033,750 | ||||
| Insider ownership of shares and OP units as of May 3, 2021 | 9.4% | ||||
| Digital Assets Under Management ("AUM") | $32.0 billion | ||||
| % of total company AUM | 69.4% | ||||
| Digital Fee Earning Equity Under Management ("FEEUM") | $12.9 billion | ||||
| % of total company FEEUM | 71.6% | ||||
Notes:
In evaluating the information presented throughout this presentation see the appendices to this presentation for definitions and reconciliations of non-GAAP financial measures to GAAP measures.
(1) Represents principal balance and excludes debt issuance costs, discounts and premiums. Excluded from above presentation is debt of assets which are presented under discontinued operations for the first quarter 2021, including, one hospitality portfolio under receivership, with related $780 million consolidated, or $702 million CLNY OP share, of debt, and substantially all of Other OED assets with related $884 million consolidated, or $331 million CLNY OP share, of debt.
(2) Shares and OP units outstanding include all vested and unvested restricted stock, but excludes LTIP units, performance stock units, performance based restricted stock units and Wafra’s warrants, of which the issuance and/or vesting are subject to the performance of the Company's stock price or the achievement of certain Company-specific metrics.
Colony Capital | Supplemental Financial Report | 6 | ||||||||||
| Ib. Financial Overview - Summary of Segments | ||
| ($ in thousands; as of or for the three months ended March 31, 2021, unless otherwise noted) | Consolidated amount | CLNY OP share of consolidated amount | |||||||||
Digital Investment Management(1) | |||||||||||
| Third-party AUM ($ in millions) | $ | 30,711 | |||||||||
| FEEUM ($ in millions) | 12,853 | ||||||||||
Q1 2021 fee related earnings (FRE)(2)(3) | 18,200 | ||||||||||
| Digital Operating | |||||||||||
Q1 2021 Adjusted EBITDA(4) | 80,800 | 14,440 | |||||||||
Investment-level non-recourse financing(5)(6) | 3,369,338 | 527,520 | |||||||||
| Digital Other | |||||||||||
| Net carrying value | 353,776 | 243,726 | |||||||||
Notes:
(1) In July 2020, the Company closed on a strategic investment from Wafra for a 31.5% ownership stake in the Digital Investment Management business.
(2) For a reconciliation of net income/(loss) to FRE, please refer to the appendix to this presentation.
(3) Includes a $2.7 million benefit from the unused portion of a one-time fourth quarter 2020 outperformance incentive expense.
(4) For a reconciliation of net income/(loss) to Adjusted EBITDA, please refer to the appendix to this presentation.
(5) Represents unpaid principal balance.
(6) In addition to debt presented, the Digital operating segment has $149 million consolidated, or $30 million CLNY OP share, of finance lease obligations, which represents the present value of payments on leases classified as finance leases, in the Other Liabilities line item on the Company’s Balance Sheet.
Colony Capital | Supplemental Financial Report | 7 | ||||||||||
| Ib. Financial Overview - Summary of Segments (cont’d) | ||
| ($ in thousands except as noted; as of or for the three months ended March 31, 2021, unless otherwise noted) | Consolidated amount | CLNY OP share of consolidated amount | ||||||||||||
| Wellness Infrastructure | ||||||||||||||
Q1 2021 net operating income(1)(2) | $ | 60,784 | $ | 43,104 | ||||||||||
Other net carrying value(3) | 101,528 | 101,528 | ||||||||||||
Investment-level non-recourse financing(4) | 2,683,533 | 1,894,745 | ||||||||||||
5.375% Exchangeable senior notes and TruPS(4) | 293,722 | 293,722 | ||||||||||||
Other(5) | ||||||||||||||
| Other Equity & Debt ("OED") | ||||||||||||||
Assets(6) | $ | 3,331,696 | $ | 1,605,373 | ||||||||||
Debt(4) | 1,060,687 | 507,824 | ||||||||||||
| Equity | $ | 2,271,009 | $ | 1,097,549 | ||||||||||
| Other Investment Management | ||||||||||||||
| Third-party AUM ($ in millions) | 9,871 | |||||||||||||
| FEEUM ($ in millions) | 5,093 | |||||||||||||
| Unallocated Segment & Corporate Net Assets | ||||||||||||||
| Cash and cash equivalents, restricted cash and other assets | $ | 360,318 | $ | 360,318 | ||||||||||
| Accrued and other liabilities and dividends payable | 167,411 | 167,411 | ||||||||||||
| Net assets | $ | 192,907 | $ | 192,907 | ||||||||||
Notes:
(1) NOI includes $0.8 million consolidated or $0.6 million CLNY OP share of interest earned related to $48 million consolidated or $34 million CLNY OP share carrying value of Wellness Infrastructure real estate loans. This interest income is in the Interest Income line item on the Company’s Statement of Operations.
(2) For a reconciliation of net income/(loss) from continuing operations to NOI, please refer to the appendix to this presentation.
(3) In connection with accelerating the monetization of substantially all of the assets in the Company's Other segment in the first quarter of 2021, the Company reorganized its Wellness Infrastructure segment to retrospectively include other healthcare related assets and obligations. These assets and obligations encompass: (i) the Company's management contract and equity interests in NorthStar Healthcare Income, equity investment in a healthcare asset manager, and N-Star CDO bonds collateralized largely by certain debt and preferred equity within the capital structure of Wellness Infrastructure, all of which previously resided in the Other segment; as well as (ii) the 5.375% exchangeable senior notes, trust preferred securities and corresponding junior subordinated debt that were not previously allocated to reportable segments, all of which were issued by NRF Holdco, which holds the Wellness Infrastructure portfolio as its primary asset and acts as guarantor.
(4) Represents unpaid principal balance.
(5) The Company is pursuing a potential monetization of a substantial majority of the assets in its Other segment and has classified $2.9 billion of consolidated assets ($1.2 billion CLNY OP share) and $884 million of consolidated debt ($331 million CLNY OP share) within OED as discontinued operations. These assets and related debt are included in the figures above to account for the related carrying values. Within Other Investment Management, $5.8 billion of third-party AUM and $4.0 billion of FEEUM are related to assets and businesses classified as discontinued operations and are included in the figures above; however, the third-party AUM and FEEUM related to the CLNC management contract, which is also classified as discontinued operations, are not included in the figures as the contract was terminated on April 30, 2021 and the Company received $102.3 million of consideration. The Company's management contract with NorthStar Healthcare Income is included in the Wellness Infrastructure segment.
(6) Includes all components related to real estate assets, including tangible real estate and lease-related intangibles.
Colony Capital | Supplemental Financial Report | 8 | ||||||||||
| IIa. Financial Results - Consolidated Balance Sheet | ||
| ($ in thousands, except per share data) (unaudited) | As of March 31, 2021 | |||||||
| Assets | ||||||||
| Cash and cash equivalents | $ | 788,361 | ||||||
| Restricted cash | 125,959 | |||||||
| Real estate, net | 7,702,711 | |||||||
| Loans receivable | 85,272 | |||||||
| Equity and debt investments | 777,819 | |||||||
| Goodwill | 761,368 | |||||||
| Deferred leasing costs and intangible assets, net | 1,392,528 | |||||||
| Assets held for disposition | 4,094,657 | |||||||
| Other assets | 834,318 | |||||||
| Due from affiliates | 62,257 | |||||||
| Total assets | $ | 16,625,250 | ||||||
| Liabilities | ||||||||
| Debt, net | $ | 6,877,291 | ||||||
| Accrued and other liabilities | 1,036,218 | |||||||
| Intangible liabilities, net | 89,915 | |||||||
| Liabilities related to assets held for disposition | 1,936,643 | |||||||
| Due to affiliates | 408 | |||||||
| Dividends and distributions payable | 18,516 | |||||||
| Total liabilities | 9,958,991 | |||||||
| Commitments and contingencies | ||||||||
| Redeemable noncontrolling interests | 315,922 | |||||||
| Equity | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, $0.01 par value per share; $1,033,750 liquidation preference; 250,000 shares authorized; 41,350 shares issued and outstanding | 999,490 | |||||||
| Common stock, $0.01 par value per share | ||||||||
| Class A, 949,000 shares authorized; 487,103 shares issued and outstanding | 4,871 | |||||||
| Class B, 1,000 shares authorized; 734 shares issued and outstanding | 7 | |||||||
| Additional paid-in capital | 7,576,873 | |||||||
| Accumulated deficit | (6,460,262) | |||||||
| Accumulated other comprehensive income | 101,056 | |||||||
| Total stockholders’ equity | 2,222,035 | |||||||
| Noncontrolling interests in investment entities | 4,003,905 | |||||||
| Noncontrolling interests in Operating Company | 124,397 | |||||||
| Total equity | 6,350,337 | |||||||
| Total liabilities, redeemable noncontrolling interests and equity | $ | 16,625,250 | ||||||
Colony Capital | Supplemental Financial Report | 9 | ||||||||||
| IIb. Financial Results - Noncontrolling Interests’ Share Balance Sheet | ||
| ($ in thousands, except per share data) (unaudited) | As of March 31, 2021 | |||||||
| Assets | ||||||||
| Cash and cash equivalents | $ | 269,946 | ||||||
| Restricted cash | 86,844 | |||||||
| Real estate, net | 4,685,687 | |||||||
| Loans receivable | 168,934 | |||||||
| Equity and debt investments | 472,794 | |||||||
| Goodwill | 456,477 | |||||||
| Deferred leasing costs and intangible assets, net | 1,118,191 | |||||||
| Assets held for disposition | 1,375,544 | |||||||
| Other assets | 659,071 | |||||||
| Due from affiliates | 6,978 | |||||||
| Total assets | $ | 9,300,466 | ||||||
| Liabilities | ||||||||
| Debt, net | $ | 3,596,208 | ||||||
| Accrued and other liabilities | 614,438 | |||||||
| Intangible liabilities, net | 47,787 | |||||||
| Liabilities related to assets held for disposition | 722,206 | |||||||
| Total liabilities | 4,980,639 | |||||||
| Commitments and contingencies | ||||||||
| Redeemable noncontrolling interests | 315,922 | |||||||
| Equity | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, $0.01 par value per share; $1,033,750 liquidation preference; 250,000 shares authorized; 41,350 shares issued and outstanding | — | |||||||
| Common stock, $0.01 par value per share | ||||||||
| Class A, 949,000 shares authorized; 487,103 shares issued and outstanding | — | |||||||
| Class B, 1,000 shares authorized; 734 shares issued and outstanding | — | |||||||
| Additional paid-in capital | — | |||||||
| Accumulated deficit | — | |||||||
| Accumulated other comprehensive income | — | |||||||
| Total stockholders’ equity | — | |||||||
| Noncontrolling interests in investment entities | 4,003,905 | |||||||
| Noncontrolling interests in Operating Company | — | |||||||
| Total equity | 4,003,905 | |||||||
| Total liabilities, redeemable noncontrolling interests and equity | $ | 9,300,466 | ||||||
Colony Capital | Supplemental Financial Report | 10 | ||||||||||
| IIc. Financial Results - Consolidated Segment Operating Results | ||
| Three Months Ended March 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) (unaudited) | Digital Investment Management | Digital Operating | Digital Other | Wellness Infrastructure | Other | Discontinued Operations | Amounts not allocated to segments | Total | |||||||||||||||||||||||||||||||||||||||
| Revenues | |||||||||||||||||||||||||||||||||||||||||||||||
| Property operating income | $ | — | $ | 189,002 | $ | — | $ | 86,214 | $ | — | $ | — | $ | — | $ | 275,216 | |||||||||||||||||||||||||||||||
| Interest income | 1 | 104 | 690 | 1,815 | 7 | — | 59 | 2,676 | |||||||||||||||||||||||||||||||||||||||
| Fee income | 29,443 | — | — | 2,769 | 1,467 | — | — | 33,679 | |||||||||||||||||||||||||||||||||||||||
| Other income | 54 | 96 | 450 | 2,745 | 106 | — | 682 | 4,133 | |||||||||||||||||||||||||||||||||||||||
| Total revenues | 29,498 | 189,202 | 1,140 | 93,543 | 1,580 | — | 741 | 315,704 | |||||||||||||||||||||||||||||||||||||||
| Expenses | |||||||||||||||||||||||||||||||||||||||||||||||
| Property operating expense | — | 79,862 | — | 52,400 | 2 | — | — | 132,264 | |||||||||||||||||||||||||||||||||||||||
| Interest expense | — | 31,132 | — | 32,705 | — | — | 8,648 | 72,485 | |||||||||||||||||||||||||||||||||||||||
| Investment and servicing expense | 32 | 6,445 | 136 | 1,096 | 156 | — | 243 | 8,108 | |||||||||||||||||||||||||||||||||||||||
| Transaction costs | — | — | — | 1,067 | — | — | 1,618 | 2,685 | |||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | 6,267 | 122,221 | — | 31,418 | 10,457 | — | 604 | 170,967 | |||||||||||||||||||||||||||||||||||||||
| Impairment loss | — | — | — | 15,232 | — | — | — | 15,232 | |||||||||||||||||||||||||||||||||||||||
| Compensation expense | |||||||||||||||||||||||||||||||||||||||||||||||
| Cash and equity-based compensation | 12,385 | 18,029 | — | 3,199 | 1,434 | — | 48,372 | 83,419 | |||||||||||||||||||||||||||||||||||||||
| Carried interest and incentive compensation | (33) | — | — | — | — | — | — | (33) | |||||||||||||||||||||||||||||||||||||||
| Administrative expenses | 2,131 | 6,622 | 189 | 714 | 447 | — | 8,854 | 18,957 | |||||||||||||||||||||||||||||||||||||||
| Total expenses | 20,782 | 264,311 | 325 | 137,831 | 12,496 | — | 68,339 | 504,084 | |||||||||||||||||||||||||||||||||||||||
| Other income (loss) | |||||||||||||||||||||||||||||||||||||||||||||||
| Other gain (loss), net | 165 | (3) | 3,188 | 657 | (21) | — | (12,700) | (8,714) | |||||||||||||||||||||||||||||||||||||||
| Equity method earnings (loss) | 27 | — | 2,776 | — | (21,489) | — | — | (18,686) | |||||||||||||||||||||||||||||||||||||||
| Equity method earnings (loss) - carried interest | (222) | — | — | — | — | — | — | (222) | |||||||||||||||||||||||||||||||||||||||
| Income (loss) before income taxes | 8,686 | (75,112) | 6,779 | (43,631) | (32,426) | — | (80,298) | (216,002) | |||||||||||||||||||||||||||||||||||||||
| Income tax benefit (expense) | (2,645) | 12,268 | 1,090 | 2,421 | 208 | — | 12,483 | 25,825 | |||||||||||||||||||||||||||||||||||||||
| Income (loss) from continuing operations | 6,041 | (62,844) | 7,869 | (41,210) | (32,218) | — | (67,815) | (190,177) | |||||||||||||||||||||||||||||||||||||||
| Income (loss) from discontinued operations | — | — | — | — | — | (437,422) | — | (437,422) | |||||||||||||||||||||||||||||||||||||||
| Net income (loss) | 6,041 | (62,844) | 7,869 | (41,210) | (32,218) | (437,422) | (67,815) | (627,599) | |||||||||||||||||||||||||||||||||||||||
| Net income (loss) attributable to noncontrolling interests: | |||||||||||||||||||||||||||||||||||||||||||||||
| Redeemable noncontrolling interests | (96) | — | 2,545 | — | — | — | — | 2,449 | |||||||||||||||||||||||||||||||||||||||
| Investment entities | 155 | (53,125) | 959 | (4,834) | — | (299,017) | — | (355,862) | |||||||||||||||||||||||||||||||||||||||
| Operating Company | 570 | (926) | 416 | (3,470) | (3,073) | (13,191) | (8,222) | (27,896) | |||||||||||||||||||||||||||||||||||||||
| Net income (loss) attributable to Colony Capital, Inc. | 5,412 | (8,793) | 3,949 | (32,906) | (29,145) | (125,214) | (59,593) | (246,290) | |||||||||||||||||||||||||||||||||||||||
| Preferred stock dividends | — | — | — | — | — | — | 18,516 | 18,516 | |||||||||||||||||||||||||||||||||||||||
| Net income (loss) attributable to common stockholders | $ | 5,412 | $ | (8,793) | $ | 3,949 | $ | (32,906) | $ | (29,145) | $ | (125,214) | $ | (78,109) | $ | (264,806) | |||||||||||||||||||||||||||||||
Colony Capital | Supplemental Financial Report | 11 | ||||||||||
| IId. Financial Results - Noncontrolling Interests’ Share Segment Operating Results | ||
| Three Months Ended March 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) (unaudited) | Digital Investment Management | Digital Operating | Digital Other | Wellness Infrastructure | Other | Discontinued Operations | Amounts not allocated to segments | Total | |||||||||||||||||||||||||||||||||||||||
| Revenues | |||||||||||||||||||||||||||||||||||||||||||||||
| Property operating income | $ | — | $ | 156,295 | $ | — | $ | 25,251 | $ | — | $ | — | $ | — | $ | 181,546 | |||||||||||||||||||||||||||||||
| Interest income | — | 82 | 9 | 257 | — | — | — | 348 | |||||||||||||||||||||||||||||||||||||||
| Fee income | 9,625 | — | — | — | — | — | — | 9,625 | |||||||||||||||||||||||||||||||||||||||
| Other income | 19 | 81 | 238 | 473 | — | — | — | 811 | |||||||||||||||||||||||||||||||||||||||
| Total revenues | 9,644 | 156,458 | 247 | 25,981 | — | — | — | 192,330 | |||||||||||||||||||||||||||||||||||||||
| Expenses | |||||||||||||||||||||||||||||||||||||||||||||||
| Property operating expense | — | 65,687 | — | 15,740 | — | — | — | 81,427 | |||||||||||||||||||||||||||||||||||||||
| Interest expense | — | 25,812 | — | 8,521 | — | — | — | 34,333 | |||||||||||||||||||||||||||||||||||||||
| Investment and servicing expense | 10 | 5,474 | 29 | 423 | — | — | — | 5,936 | |||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | 1,971 | 101,697 | — | 9,237 | — | — | — | 112,905 | |||||||||||||||||||||||||||||||||||||||
| Impairment loss | — | — | — | 4,021 | — | — | — | 4,021 | |||||||||||||||||||||||||||||||||||||||
| Compensation expense | |||||||||||||||||||||||||||||||||||||||||||||||
| Cash and equity-based compensation | 2,647 | 14,422 | — | — | — | — | — | 17,069 | |||||||||||||||||||||||||||||||||||||||
| Carried interest and incentive compensation | (10) | — | — | — | — | — | — | (10) | |||||||||||||||||||||||||||||||||||||||
| Administrative expenses | 629 | 6,302 | 189 | 132 | — | — | — | 7,252 | |||||||||||||||||||||||||||||||||||||||
| Total expenses | 5,247 | 219,394 | 218 | 38,074 | — | — | — | 262,933 | |||||||||||||||||||||||||||||||||||||||
| Other income (loss) | |||||||||||||||||||||||||||||||||||||||||||||||
| Other gain (loss), net | 33 | (3) | 2,516 | 244 | — | — | — | 2,790 | |||||||||||||||||||||||||||||||||||||||
| Equity method earnings (loss) | 7 | — | 959 | — | — | — | — | 966 | |||||||||||||||||||||||||||||||||||||||
| Equity method earnings (loss) - carried interest | (176) | — | — | — | — | — | — | (176) | |||||||||||||||||||||||||||||||||||||||
| Income (loss) before income taxes | 4,261 | (62,939) | 3,504 | (11,849) | — | — | — | (67,023) | |||||||||||||||||||||||||||||||||||||||
| Income tax benefit (expense) | (75) | 9,814 | — | 998 | — | — | — | 10,737 | |||||||||||||||||||||||||||||||||||||||
| Net income (loss) | 4,186 | (53,125) | 3,504 | (10,851) | — | — | — | (56,286) | |||||||||||||||||||||||||||||||||||||||
| Income (loss) from discontinued operations | — | — | — | — | — | (299,017) | — | (299,017) | |||||||||||||||||||||||||||||||||||||||
| Non-pro rata allocation of income (loss) to NCI | (4,127) | — | — | 6,017 | — | — | — | 1,890 | |||||||||||||||||||||||||||||||||||||||
| Net income (loss) attributable to noncontrolling interests | $ | 59 | $ | (53,125) | $ | 3,504 | $ | (4,834) | $ | — | $ | (299,017) | $ | — | $ | (353,413) | |||||||||||||||||||||||||||||||
Colony Capital | Supplemental Financial Report | 12 | ||||||||||
IIe. Financial Results - Segment Reconciliation of Net Income to FFO & Core FFO & Adjusted EBITDA | ||
| OP pro rata share by segment | Amounts attributable to noncontrolling interests | CLNY consolidated as reported | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands; for the three months ended March 31, 2021; and unaudited) | Digital IM | Digital Operating | Digital Other | Wellness Infrastructure | Other | Discontinued Operations | Amounts not allocated to segments | Total OP pro rata share | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) attributable to common stockholders | $ | 5,412 | $ | (8,793) | $ | 3,949 | $ | (32,906) | $ | (29,145) | $ | (125,214) | $ | (78,109) | $ | (264,806) | $ | — | $ | (264,806) | |||||||||||||||||||||||||||||||||||||||
| Net income (loss) attributable to noncontrolling common interests in Operating Company | 570 | (926) | 416 | (3,470) | (3,073) | (13,191) | (8,222) | (27,896) | — | (27,896) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) attributable to common interests in Operating Company and common stockholders | 5,982 | (9,719) | 4,365 | (36,376) | (32,218) | (138,405) | (86,331) | (292,702) | — | (292,702) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Adjustments for FFO: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Real estate depreciation and amortization | — | 20,168 | — | 26,973 | 3,440 | 16,900 | — | 67,481 | 117,281 | 184,762 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Impairment of real estate | — | — | — | 11,211 | — | 23,715 | — | 34,926 | 71,151 | 106,077 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Gain from sales of real estate | — | — | — | — | — | (38,166) | — | (38,166) | 64 | (38,102) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Less: Adjustments attributable to noncontrolling interests in investment entities | — | — | — | — | — | — | — | — | (188,496) | (188,496) | |||||||||||||||||||||||||||||||||||||||||||||||||
| FFO | $ | 5,982 | $ | 10,449 | $ | 4,365 | $ | 1,808 | $ | (28,778) | $ | (135,956) | $ | (86,331) | $ | (228,461) | $ | — | $ | (228,461) | |||||||||||||||||||||||||||||||||||||||
| Additional adjustments for Core FFO: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjustment to CLNC cash dividend | — | — | — | — | 55,648 | — | — | 55,648 | — | 55,648 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Equity-based compensation expense | 1,375 | 62 | — | 700 | — | 2,693 | 14,065 | 18,895 | 404 | 19,299 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Straight-line rent revenue and expense | (2) | 129 | — | 13,420 | — | (158) | (591) | 12,798 | 4,427 | 17,225 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Amortization of acquired above- and below-market lease values, net | — | 79 | — | 3,684 | — | (2) | — | 3,761 | 2,244 | 6,005 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Debt prepayment penalties and amortization of deferred financing costs and debt premiums and discounts | — | 398 | — | 2,220 | — | 35,278 | 1,223 | 39,119 | 6,508 | 45,627 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Non-real estate fixed asset depreciation, amortization and impairment | 41 | 356 | — | — | 10,457 | 5,637 | 604 | 17,095 | 3,468 | 20,563 | |||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and transaction-related charges(1) | — | — | — | 1,104 | 667 | 1,450 | 31,244 | 34,465 | 17 | 34,482 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Non-real estate (gains) losses, excluding realized gains or losses within the Digital Other segment | (222) | — | (2,490) | (413) | (32,784) | 80,113 | 12,700 | 56,904 | 210,908 | 267,812 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net unrealized carried interest | 23 | — | — | — | — | — | — | 23 | 166 | 189 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Deferred taxes and tax effect on certain of the foregoing adjustments | (629) | (2,481) | (1,090) | (3,296) | (208) | (6,909) | (9,431) | (24,044) | (10,436) | (34,480) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Less: Adjustments attributable to noncontrolling interests in investment entities | — | — | — | — | — | — | — | — | (217,706) | (217,706) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Less: Core FFO from discontinued operations | — | — | — | — | — | 17,854 | — | 17,854 | — | 17,854 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Core FFO | $ | 6,568 | $ | 8,992 | $ | 785 | $ | 19,227 | $ | 5,002 | $ | — | $ | (36,517) | $ | 4,057 | $ | — | $ | 4,057 | |||||||||||||||||||||||||||||||||||||||
| Less: Earnings of equity method investments | — | — | — | — | (4,794) | — | — | (4,794) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Plus: Preferred dividends | — | — | — | — | — | — | 18,516 | 18,516 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Plus: Core interest expense | 4 | 4,922 | 35 | 21,964 | — | — | 7,426 | 34,351 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Plus: Core tax expense | 3,199 | 27 | — | 1,873 | — | — | (3,051) | 2,048 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Plus: Non pro-rata allocation of income (loss) to NCI | 201 | — | — | 1,214 | — | — | — | 1,415 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Plus: Placement fees | 40 | — | — | — | — | — | — | 40 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Digital Operating installation services, restructuring, integration, and transaction costs | — | 499 | — | — | — | — | — | 499 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjusted EBITDA (CLNY OP Share) | $ | 10,012 | $ | 14,440 | $ | 820 | $ | 44,278 | $ | 208 | $ | — | $ | (13,626) | $ | 56,132 | |||||||||||||||||||||||||||||||||||||||||||
Notes:
(1) Restructuring and non-recurring items primarily represent costs and charges incurred as a result of corporate restructuring and reorganization to implement the digital evolution. These costs and charges include severance, retention, relocation, transition, shareholder settlement and other related restructuring costs, which are not reflective of the Company’s core operating performance.
Colony Capital | Supplemental Financial Report | 13 | ||||||||||
| IIIa. Capitalization - Overview | ||
| ($ in thousands; as of March 31, 2021, unless otherwise noted) | Consolidated amount | CLNY OP share of consolidated amount | Wtd. avg. years remaining to maturity(1) | Wtd. avg. interest rate(2) | ||||||||||||||||||||||
| Debt (UPB) | ||||||||||||||||||||||||||
| Investment-level debt: | ||||||||||||||||||||||||||
| Digital Operating | $ | 3,369,338 | $ | 527,520 | 4.7 | 3.2 | % | |||||||||||||||||||
| Wellness Infrastructure | 2,683,533 | 1,894,745 | 3.3 | 4.0 | % | |||||||||||||||||||||
| Other | 176,633 | 176,633 | 0.7 | 4.9 | % | |||||||||||||||||||||
5.375% Exchangeable senior notes(3) | 13,605 | 13,605 | 12.2 | 5.4 | % | |||||||||||||||||||||
TruPS(3) | 280,117 | 280,117 | 15.2 | 3.1 | % | (4) | ||||||||||||||||||||
Total investment-level debt(5) | 6,523,226 | 2,892,620 | ||||||||||||||||||||||||
| Corporate debt: | ||||||||||||||||||||||||||
| $400 million revolving credit facility | — | — | N/A | N/A | ||||||||||||||||||||||
| Convertible/exchangeable senior notes | 500,000 | 500,000 | 3.4 | 5.5 | % | |||||||||||||||||||||
Total corporate debt | 500,000 | 500,000 | ||||||||||||||||||||||||
Total debt(5) | $ | 7,023,226 | $ | 3,392,620 | ||||||||||||||||||||||
| Total debt - Fixed / Floating summary | ||||||||||||||||||||||||||
| Fixed | $ | 3,724,333 | $ | 1,227,383 | ||||||||||||||||||||||
| Floating | 3,298,893 | 2,165,237 | ||||||||||||||||||||||||
| Total debt | $ | 7,023,226 | $ | 3,392,620 | ||||||||||||||||||||||
| Perpetual preferred stock, redemption value | ||||||||||||||||||||||||||
| Total perpetual preferred stock | $ | 1,033,750 | ||||||||||||||||||||||||
Notes:
(1) Weighted Average Years Remaining to Maturity is based on initial maturity dates or extended maturity dates if the criteria to extend have been met as of May 3, 2021, the latest practicable date that the information was available, and the extension option is at the Company’s discretion.
(2) Based on 1-month LIBOR of 0.11% and 3-month LIBOR of 0.19% for floating rate debt.
(3) These obligations were issued by NRF Holdco, which holds the Wellness Infrastructure portfolio as its primary asset and acts as guarantor. The Company is neither an obligor nor guarantor on the TruPS and 5.375% exchangeable notes.
(4) Based on 3-month LIBOR plus rates between 2.50% to 3.25%.
(5) Excluded from above presentation is debt of assets which are presented under discontinued operations for the first quarter 2021, including, one hospitality portfolio under receivership, with related $780 million consolidated, or $702 million CLNY OP share, of debt, and substantially all of Other OED assets with related $884 million consolidated, or $331 million CLNY OP share, of debt.
Colony Capital | Supplemental Financial Report | 14 | ||||||||||
| IIIb. Capitalization - Revolving Credit Facility | ||
| ($ in thousands, except as noted; as of March 31, 2021) | ||||||||
| Revolving credit facility | ||||||||
| Maximum principal amount | $ | 400,000 | ||||||
| Amount outstanding | — | |||||||
| Current maturity | July 11, 2021 | |||||||
| Fully-extended maturity | January 10, 2022 | |||||||
| Interest rate | LIBOR + 2.75% | |||||||
Financial covenants as defined in the Credit Agreement(1): | Covenant level | |||||||
Consolidated Tangible Net Worth | Minimum $1,740 million | |||||||
Consolidated Fixed Charge Coverage Ratio(2) | Minimum 1.30 to 1.00 | |||||||
Interest Coverage Ratio(3) | Minimum 3.00 to 1.00 | |||||||
Consolidated Leverage Ratio | Maximum 0.65 to 1.00 | |||||||
| Company status: As of March 31, 2021, CLNY is meeting all required covenant threshold levels. | ||||||||
Notes:
(1) The Company's credit agreement allows for the exclusion of the assets, debt, fixed charges and earnings of investments with non-recourse debt at the Company's election.
(2) The borrowing base is discounted by 10% at a Fixed Charge Coverage Ratio between 1.30 and 1.50 to 1.00.
(3) Interest Coverage Ratio represents the ratio of the sum of (1) earnings from borrowing base assets and (2) certain investment management earnings divided by the greater of (a) actual interest expense on the revolving credit facility and (b) the average balance of the facility multiplied by 7.0% for the applicable quarter.
Colony Capital | Supplemental Financial Report | 15 | ||||||||||
| IIIc. Capitalization - Convertible/Exchangeable Notes & Perpetual Preferred Stock | ||
| ($ in thousands; except per share data; as of March 31, 2021, unless otherwise noted) | ||||||||||||||||||||||||||||||||||||||
| Convertible/exchangeable debt | ||||||||||||||||||||||||||||||||||||||
| Description | Outstanding principal | Final due date(1) | Interest rate | Conversion price (per share of common stock) | Conversion ratio | Conversion shares | ||||||||||||||||||||||||||||||||
| 5.75% Exchangeable senior notes | $ | 300,000 | July 15, 2025 | 5.75% fixed | $ | 2.30 | 434.7826 | 130,435 | ||||||||||||||||||||||||||||||
| 5.0% Convertible senior notes | 200,000 | April 15, 2023 | 5.00% fixed | 15.76 | 63.4700 | 12,694 | ||||||||||||||||||||||||||||||||
| 5.375% Exchangeable senior notes | 13,605 | June 15, 2033 | 5.375% fixed | 12.04 | 83.0837 | 1,130 | ||||||||||||||||||||||||||||||||
| Total convertible debt | $ | 513,605 | ||||||||||||||||||||||||||||||||||||
| Perpetual preferred stock | ||||||||||||||||||||
| Description | Liquidation preference | Shares outstanding (In thousands) | Callable period | |||||||||||||||||
| Series G 7.5% cumulative redeemable perpetual preferred stock | $ | 86,250 | 3,450 | Callable | ||||||||||||||||
| Series H 7.125% cumulative redeemable perpetual preferred stock | 287,500 | 11,500 | Callable | |||||||||||||||||
| Series I 7.15% cumulative redeemable perpetual preferred stock | 345,000 | 13,800 | On or after June 5, 2022 | |||||||||||||||||
| Series J 7.125% cumulative redeemable perpetual preferred stock | 315,000 | 12,600 | On or after September 22, 2022 | |||||||||||||||||
| Total preferred stock | $ | 1,033,750 | 41,350 | |||||||||||||||||
Notes:
(1) Callable at principal amount only if CLNY common stock has traded at least 130% of the conversion price for 20 of 30 consecutive trading days: on or after July 21, 2023, for the 5.75% exchangeable senior notes; on or after January 22, 2019, for the 3.875% convertible senior notes; on or after April 22, 2020, for the 5.0% convertible senior notes; and on or after June 15, 2020, for the 5.375% exchangeable senior notes.
Colony Capital | Supplemental Financial Report | 16 | ||||||||||
| IIId. Capitalization - Debt Maturity and Amortization Schedules | ||
| ($ in thousands; as of March 31, 2021) | Payments due by period(1) | |||||||||||||||||||||||||||||||||||||
| Consolidated debt | 2021 | 2022 | 2023 | 2024 | 2025 and after | Total | ||||||||||||||||||||||||||||||||
| Investment-level debt: | ||||||||||||||||||||||||||||||||||||||
| Digital Operating | $ | 4,723 | $ | 6,830 | $ | 258,143 | $ | 616,503 | $ | 2,483,139 | $ | 3,369,338 | ||||||||||||||||||||||||||
| Wellness Infrastructure | 10,066 | 423,411 | 10,859 | 2,109,878 | 129,319 | 2,683,533 | ||||||||||||||||||||||||||||||||
Other | 21,316 | 155,317 | — | — | — | 176,633 | ||||||||||||||||||||||||||||||||
5.375% Exchangeable senior notes(2) | — | — | — | — | 13,605 | 13,605 | ||||||||||||||||||||||||||||||||
TruPS(2) | — | — | — | — | 280,117 | 280,117 | ||||||||||||||||||||||||||||||||
| Corporate debt: | ||||||||||||||||||||||||||||||||||||||
| $400 million revolving credit facility | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
| Convertible/exchangeable senior notes | — | — | 200,000 | — | 300,000 | 500,000 | ||||||||||||||||||||||||||||||||
Total consolidated debt(3) | $ | 36,105 | $ | 585,558 | $ | 469,002 | $ | 2,726,381 | $ | 3,206,180 | $ | 7,023,226 | ||||||||||||||||||||||||||
| Pro rata debt | 2021 | 2022 | 2023 | 2024 | 2025 and after | Total | ||||||||||||||||||||||||||||||||
| Investment-level debt: | ||||||||||||||||||||||||||||||||||||||
| Digital Operating | $ | 624 | $ | 938 | $ | 36,534 | $ | 82,027 | $ | 407,397 | $ | 527,520 | ||||||||||||||||||||||||||
| Wellness Infrastructure | 7,045 | 309,000 | 7,614 | 1,471,996 | 99,090 | 1,894,745 | ||||||||||||||||||||||||||||||||
Other | 21,316 | 155,317 | — | — | — | 176,633 | ||||||||||||||||||||||||||||||||
5.375% Exchangeable senior notes(2) | — | — | — | — | 13,605 | 13,605 | ||||||||||||||||||||||||||||||||
TruPS(2) | — | — | — | — | 280,117 | 280,117 | ||||||||||||||||||||||||||||||||
| Corporate debt: | ||||||||||||||||||||||||||||||||||||||
| $400 million revolving credit facility | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
| Convertible/exchangeable senior notes | — | — | 200,000 | — | 300,000 | 500,000 | ||||||||||||||||||||||||||||||||
Total pro rata debt(3) | $ | 28,985 | $ | 465,255 | $ | 244,148 | $ | 1,554,023 | $ | 1,100,209 | $ | 3,392,620 | ||||||||||||||||||||||||||
Notes:
(1) Weighted Average Years Remaining to Maturity is based on initial maturity dates or extended maturity dates if the criteria to extend have been met as of May 3, 2021, the latest practicable date that the information was available, and the extension option is at the Company’s discretion.
(2) These obligations were issued by NRF Holdco, which holds the Wellness Infrastructure portfolio as its primary asset and acts as guarantor. The Company is neither an obligor nor guarantor on the TruPS and 5.375% exchangeable notes.
(3) Excluded from above presentation is debt of assets which are presented under discontinued operations for the first quarter 2021, including, one hospitality portfolio under receivership, with related $780 million consolidated, or $702 million CLNY OP share, of debt, and substantially all of Other OED assets with related $884 million consolidated, or $331 million CLNY OP share, of debt.
Colony Capital | Supplemental Financial Report | 17 | ||||||||||
| IIIe. Capitalization - Structure | ||
Colony Capital | Supplemental Financial Report | 18 | ||||||||||
| IV. Digital Investment Management | ||
| Digital Third-party AUM & FEEUM | ||||||||||||||||||||
| ($ in millions, as of March 31, 2021, unless otherwise noted) | AUM CLNY OP Share | FEEUM CLNY OP Share | Fee Rate | |||||||||||||||||
| Digital Colony Partners I | $ | 5,931 | $ | 3,179 | (1) | 1.2 | % | |||||||||||||
| Digital Colony Partners II | $ | 4,775 | $ | 3,964 | 1.2 | % | ||||||||||||||
| Separately Capitalized Portfolio Companies | $ | 9,619 | $ | 2,476 | 0.9 | % | ||||||||||||||
| Co-Investment (Sidecar) Capital | $ | 9,865 | $ | 2,802 | 0.5 | % | ||||||||||||||
| Liquid Strategies | $ | 521 | $ | 432 | 0.5 | % | ||||||||||||||
| Digital Investment Management Total | $ | 30,711 | $ | 12,853 | 0.9 | % | ||||||||||||||
FRE(2) | ||||||||||||||||||||
| ($ in thousands, unless otherwise noted) | Q1 2021 | |||||||||||||||||||
Fee income(3) | $ | 31,065 | ||||||||||||||||||
| Other income | 54 | |||||||||||||||||||
Compensation expense—cash(4) | (10,852) | |||||||||||||||||||
| Administrative expenses | (2,067) | |||||||||||||||||||
| FRE Total | $ | 18,200 | ||||||||||||||||||
Notes:
(1) Due to the first closing of Digital Colony Partners II, Digital Colony Partners I FEEUM changed from committed capital to invested equity. Committed capital which has not been invested will generate fees once this capital is invested.
(2) For a reconciliation of net income/(loss) to FRE, please refer to the appendix to this presentation.
(3) Includes $1.6 million of fee income, which is eliminated because the Company consolidates certain limited partner interest in its Statement of Operations.
(4) Includes a $2.7 million benefit from the unused portion of a one-time fourth quarter 2020 outperformance incentive expense.
Colony Capital | Supplemental Financial Report | 19 | ||||||||||
| V. Digital Operating | ||
| Portfolio Overview | Consolidated amount | CLNY OP share of consolidated amount | |||||||||||||||
| ($ in thousand, as of March 31, 2021, unless otherwise noted) | |||||||||||||||||
Asset(1) | $ | 6,633,245 | $ | 1,073,366 | |||||||||||||
Debt(2)(3) | 3,369,338 | 527,520 | |||||||||||||||
Net Carrying Value(4) | $ | 3,263,907 | $ | 545,846 | |||||||||||||
Adjusted EBITDA(4) | Q1 2021 | ||||||||||||||||
| ($ in thousands, unless otherwise noted) | Consolidated amount | CLNY OP share of consolidated amount | |||||||||||||||
| Total revenues | $ | 189,202 | $ | 32,744 | |||||||||||||
| Property operating expenses | (79,862) | (14,175) | |||||||||||||||
| Compensation and administrative expenses | (24,651) | (3,927) | |||||||||||||||
| Investment, servicing and commission expenses | (6,445) | (971) | |||||||||||||||
| EBITDAre: | $ | 78,244 | 13,671 | ||||||||||||||
| Straight-line rent expenses and amortization of above- and below-market lease intangibles | (399) | 192 | |||||||||||||||
| Compensation expense—equity-based | 308 | 62 | |||||||||||||||
| Installation services | 880 | 176 | |||||||||||||||
| Transaction, restructuring & integration costs | 1,767 | 339 | |||||||||||||||
| Adjusted EBITDA: | $ | 80,800 | $ | 14,440 | |||||||||||||
| Operating Metrics | |||||||||||||||||
| ($ in millions, unless otherwise noted) | 3/31/21 | 3/31/20(5) | |||||||||||||||
| Number of Data Centers | 76 | 76 | |||||||||||||||
| Max Critical I.T. Square Feet | 1,791,781 | 1,738,686 | |||||||||||||||
| Leased Square Feet | 1,423,322 | 1,393,008 | |||||||||||||||
| % Utilization Rate | 79.4% | 80.1 | % | ||||||||||||||
| MRR (Annualized) | $ | 743.0 | $ | 720.0 | |||||||||||||
| Bookings (Annualized) | $ | 23.0 | $ | 26.0 | |||||||||||||
| Quarterly Churn (% of Prior Quarter MRR) | 1.3% | 2.0 | % | ||||||||||||||
Notes:
(1) Includes all components related to real estate assets, including tangible real estate and lease-related intangibles.
(2) Represents unpaid principal balance.
(3) In addition to debt presented, the Digital operating segment has $149 million consolidated, or $30 million CLNY OP share, of finance lease obligations, which represents the present value of payments on leases classified as finance leases, in the Other Liabilities line item on the Company’s Balance Sheet.
(4) For a reconciliation of net income/(loss) to adjusted EBITDA, please refer to the appendix to this presentation.
(5) The Company did not have interest in Vantage SDC or zColo in the first quarter 2020, however, presented Operating Metrics include data for Vantage SDC and zColo for the prior year period for comparative purposes.
Colony Capital | Supplemental Financial Report | 20 | ||||||||||
| VI. Digital Other | ||
| Portfolio Overview | ||||||||||||||
| ($ in thousand, as of March 31, 2021, unless otherwise noted) | Consolidated amount | CLNY OP share of consolidated amount | ||||||||||||
| CLNY's GP Co-investment in DCP I Investments | $ | 173,831 | $ | 160,342 | ||||||||||
Equity interests in digital investment vehicles | 179,945 | 83,384 | ||||||||||||
| Net carrying value | $ | 353,776 | $ | 243,726 | ||||||||||
Colony Capital | Supplemental Financial Report | 21 | ||||||||||
| VIIa. Wellness Infrastructure - Summary Metrics and Operating Results | ||
| ($ in thousands; as of or for the three months ended March 31, 2021, unless otherwise noted) | Consolidated amount | CLNY OP share of consolidated amount | ||||||||||||
| Net operating income | ||||||||||||||
| Net operating income: | ||||||||||||||
| Senior Housing - Operating | $ | 8,654 | $ | 6,068 | ||||||||||
| Medical Office Buildings | 13,574 | 9,453 | ||||||||||||
| Triple-Net Lease: | ||||||||||||||
Senior Housing(1) | 14,066 | 9,900 | ||||||||||||
| Skilled Nursing Facilities | 22,037 | 15,975 | ||||||||||||
| Hospitals | 2,453 | 1,708 | ||||||||||||
| Total net operating income | $ | 60,784 | $ | 43,104 | ||||||||||
| Portfolio overview | Total number of properties | Capacity | % Occupied(2) | TTM Lease Coverage(3) | WA Remaining Lease Term | |||||||||||||||||||||||||||
| Senior Housing - Operating | 53 | 4,756 units | 69.4 | % | N/A | N/A | ||||||||||||||||||||||||||
| Medical Office Buildings | 106 | 3.8 million sq. ft. | 82.6 | % | N/A | 4.5 | ||||||||||||||||||||||||||
| Triple-Net Lease: | ||||||||||||||||||||||||||||||||
| Senior Housing | 65 | 3,534 units | 70.8 | % | 0.9x | 11.2 | ||||||||||||||||||||||||||
| Skilled Nursing Facilities | 83 | 9,723 beds | 68.2 | % | 1.2x | 5.0 | ||||||||||||||||||||||||||
| Hospitals | 9 | 456 beds | 62.8 | % | 4.0x | 9.1 | ||||||||||||||||||||||||||
| Total | 316 | |||||||||||||||||||||||||||||||
| Same store financial/operating results related to the segment | |||||||||||||||||||||||||||||||||||||||||||||||
% Occupied(2) | TTM Lease Coverage(3) | NOI | |||||||||||||||||||||||||||||||||||||||||||||
| Q1 2021 | Q1 2020 | 12/31/2020 | 12/31/2019 | Q1 2021 | Q1 2020 | % Change | |||||||||||||||||||||||||||||||||||||||||
| Senior Housing - Operating | 69.4 | % | 81.4 | % | N/A | N/A | $ | 8,708 | $ | 14,154 | (38.5) | % | |||||||||||||||||||||||||||||||||||
| Medical Office Buildings | 82.6 | % | 82.2 | % | N/A | N/A | 13,511 | 12,991 | 4.0 | % | |||||||||||||||||||||||||||||||||||||
| Triple-Net Lease: | |||||||||||||||||||||||||||||||||||||||||||||||
| Senior Housing | 70.8 | % | 84.5 | % | 0.9x | 1.4x | 14,060 | 13,036 | 7.9 | % | |||||||||||||||||||||||||||||||||||||
| Skilled Nursing Facilities | 68.2 | % | 82.5 | % | 1.2x | 1.2x | 22,045 | 21,850 | 0.9 | % | |||||||||||||||||||||||||||||||||||||
| Hospitals | 62.8 | % | 59.2 | % | 4.0x | 1.9x | 3,263 | 1,952 | 67.2 | % | |||||||||||||||||||||||||||||||||||||
| Total | $ | 61,587 | $ | 63,983 | (3.7) | % | |||||||||||||||||||||||||||||||||||||||||
Notes:
(1) NOI includes $0.8 million consolidated or $0.6 million CLNY OP share of interest earned related to $48 million consolidated or $34 million CLNY OP share carrying value of Wellness Infrastructure real estate loans. This interest income is in the Interest Income line item on the Company’s Statement of Operations. For a reconciliation of net income/(loss) attributable to common stockholders to NOI, please refer to the appendix to this presentation.
(2) Occupancy % for Senior Housing - Operating represents average of the presented quarter, MOB’s is as of last day in the quarter and Triple-Net Lease represents average of the prior quarter. Occupancy represents real estate property operator’s patient/resident occupancy for all types except MOB.
(3) Represents the ratio of the tenant's/operator's EBITDAR to cash rent payable to the Company's Wellness Infrastructure segment on a trailing twelve month basis and as of the prior quarter due to timing of data availability from tenant/operators. Refer to Important Notes Regarding Non-GAAP Financial Measures and Definitions pages in this presentation for additional information regarding the use of tenant/operator EBITDAR.
Colony Capital | Supplemental Financial Report | 22 | ||||||||||
| VIIb. Wellness Infrastructure - Portfolio Overview | ||
| (As of or for the three months ended March 31, 2021, unless otherwise noted) | ||||||||||||||||||||||||||||||||
Triple-Net Lease Coverage(1) | % of Triple-Net Lease TTM NOI as of December 31, 2020 | |||||||||||||||||||||||||||||||
| TTM Lease Coverage | # of Leases | Senior Housing | Skilled Nursing Facilities & Hospitals | % Triple-Net Lease NOI | WA Remaining Lease Term | |||||||||||||||||||||||||||
| Less than 0.99x | 5 | 31 | % | 30 | % | 61 | % | 9 yrs | ||||||||||||||||||||||||
| 1.00x - 1.09x | 2 | 1 | % | 10 | % | 11 | % | 6 yrs | ||||||||||||||||||||||||
| 1.10x - 1.19x | 1 | 4 | % | — | % | 4 | % | 2 yrs | ||||||||||||||||||||||||
| 1.20x - 1.29x | — | — | % | — | % | — | % | — | ||||||||||||||||||||||||
| 1.30x - 1.39x | — | — | % | — | % | — | % | — | ||||||||||||||||||||||||
| 1.40x - 1.49x | 1 | — | % | 3 | % | 3 | % | 9 yrs | ||||||||||||||||||||||||
| 1.50x and greater | 9 | — | % | 21 | % | 21 | % | 2 yrs | ||||||||||||||||||||||||
| Total / W.A. | 18 | 36 | % | 64 | % | 100 | % | 8 yrs | ||||||||||||||||||||||||
Revenue Mix(2) | December 31, 2020 TTM | |||||||||||||||||||
| Private Pay | Medicare | Medicaid | ||||||||||||||||||
| Senior Housing - Operating | 82 | % | 3 | % | 15 | % | ||||||||||||||
| Medical Office Buildings | 100 | % | — | % | — | % | ||||||||||||||
| Triple-Net Lease: | ||||||||||||||||||||
| Senior Housing | 59 | % | — | % | 41 | % | ||||||||||||||
| Skilled Nursing Facilities | 25 | % | 23 | % | 52 | % | ||||||||||||||
| Hospitals | 34 | % | 53 | % | 13 | % | ||||||||||||||
| W.A. | 58 | % | 11 | % | 31 | % | ||||||||||||||
Notes:
(1) Represents the ratio of the tenant's/operator's EBITDAR to cash rent payable to the Company's Wellness Infrastructure segment on a trailing twelve month basis and due to timing of availability of data tenants/operators provide information from prior quarter. Refer to Important Notes Regarding Non-GAAP Financial Measures and Definitions pages in this presentation for additional information regarding the use of tenant/operator EBITDAR. Represents leases with EBITDAR coverage in each listed range. Excludes interest income associated with triple-net lease senior housing type and rental income from certain hospital properties.
(2) Revenue mix represents percentage of revenues derived from private, Medicare and Medicaid payor sources and as of the prior quarter due to timing of data availability from tenant/operators. The payor source percentages for the hospital category excludes two operating partners, who do not track or report payor source data and totals approximately one-third of NOI in the hospital category. Overall percentages are weighted by NOI exposure in each category.
Colony Capital | Supplemental Financial Report | 23 | ||||||||||
| VIIb. Wellness Infrastructure - Portfolio Overview (cont’d) | ||
| ($ in thousands; as of or for the three months ended March 31, 2021, unless otherwise noted) | ||||||||||||||
| Top 10 Geographic Locations by NOI | ||||||||||||||
| Number of properties | NOI | |||||||||||||
| United Kingdom | 46 | $ | 11,316 | |||||||||||
| Indiana | 55 | 7,412 | ||||||||||||
| Florida | 25 | 6,390 | ||||||||||||
| Pennsylvania | 8 | 5,063 | ||||||||||||
| Georgia | 20 | 4,502 | ||||||||||||
| Oregon | 31 | 3,965 | ||||||||||||
| Texas | 28 | 3,436 | ||||||||||||
| Ohio | 8 | 2,580 | ||||||||||||
| Illinois | 14 | 2,304 | ||||||||||||
| Louisiana | 6 | 2,056 | ||||||||||||
| Total | 241 | $ | 49,024 | |||||||||||
| Top 10 Operators/Tenants by NOI | ||||||||||||||||||||||||||||||||||||||
| Property Type/Primary Segment | Number of properties | NOI | % Occupied | TTM Lease Coverage | WA Remaining Lease Term | |||||||||||||||||||||||||||||||||
| Caring Homes (U.K.) | Sr. Housing / NNN | 46 | $ | 11,316 | 67.9 | % | 0.9x | 14 yrs | ||||||||||||||||||||||||||||||
| Senior Lifestyle | Sr. Housing / RIDEA | 30 | 7,479 | 68.8 | % | N/A | N/A | |||||||||||||||||||||||||||||||
| Sentosa | SNF / NNN | 8 | 5,063 | 68.3 | % | 0.4x | 7 yrs | |||||||||||||||||||||||||||||||
| Wellington Healthcare | SNF / NNN | 10 | 4,008 | 75.9 | % | 1.1x | 6 yrs | |||||||||||||||||||||||||||||||
| Millers | SNF / NNN | 28 | 3,990 | 58.3 | % | 2.1x | N/A | |||||||||||||||||||||||||||||||
| Citadel Care Centers, LLC | SNF / NNN | 11 | 3,026 | 59.8 | % | 0.3x | 3 yrs | |||||||||||||||||||||||||||||||
| Consulate | SNF / NNN | 10 | 2,678 | 79.2 | % | 1.0x | 7 yrs | |||||||||||||||||||||||||||||||
Frontier(1) | Sr. Housing / NNN / RIDEA | 20 | 2,623 | 91.2 | % | 1.1x | 2 yrs | |||||||||||||||||||||||||||||||
| Landmark | Hospital | 5 | 1,759 | 68.2 | % | 4.8x | 13 yrs | |||||||||||||||||||||||||||||||
| WW Healthcare | SNF / NNN | 5 | 1,347 | 63.7 | % | 1.4x | 9 yrs | |||||||||||||||||||||||||||||||
| Total | 173 | $ | 43,289 | |||||||||||||||||||||||||||||||||||
(1) NNN primary segment operating metrics presented, RIDEA segment % occupied was 72.4%.
Colony Capital | Supplemental Financial Report | 24 | ||||||||||
VIIb. Wellness Infrastructure - Other(1) | ||
| ($ in thousand, as of March 31, 2021, unless otherwise noted) | Consolidated amount | CLNY OP share of consolidated amount | ||||||||||||
| N-Star CDO bonds | $ | 36,434 | $ | 36,434 | ||||||||||
Management contract and equity interests in NorthStar Healthcare Income (NHI), equity investment in American Healthcare Investors, a healthcare asset manager, and the outstanding balance of a line of credit to NHI | 61,352 | 61,352 | ||||||||||||
Other | 3,742 | 3,742 | ||||||||||||
| Net carrying value | $ | 101,528 | $ | 101,528 | ||||||||||
Notes:
(1) In connection with accelerating the monetization of substantially all of the assets in the Company's Other segment in the first quarter of 2021, the Company reorganized its Wellness Infrastructure segment to retrospectively include other healthcare related assets and obligations. These assets encompass the Company's management contract and equity interests in NorthStar Healthcare Income, equity investment in a healthcare asset manager, and N-Star CDO bonds collateralized largely by certain debt and preferred equity within the capital structure of Wellness Infrastructure, all of which previously resided in the Other segment.
Colony Capital | Supplemental Financial Report | 25 | ||||||||||
| VIIIa. Other Equity and Debt | ||
| CLNY OP Share | ||||||||||||||||||||||||||
| Depreciated Carrying Value | ||||||||||||||||||||||||||
| ($ in millions) | 3/31/2021 | |||||||||||||||||||||||||
| Investment | Investment Type | Property Type | Geography | CLNY Ownership %(1) | Assets(2) | Equity(2)(3) | % of Total Equity | |||||||||||||||||||
| Colony Credit Real Estate, Inc. (CLNC) | Public Company Common Shares | Various | Various | 36% | $ | 352.8 | $ | 352.8 | 32 | % | ||||||||||||||||
Tolka Irish NPL Portfolio(4) | Non-Performing First Mortgage Loans | Primarily Office | Ireland | 100% | 382.5 | 163.3 | 15 | % | ||||||||||||||||||
| Spencer Dock Loan | Mezzanine Loan with Profit Participation | Office, Hospitality & Residential | Ireland | 20% | 50.4 | 50.4 | 5 | % | ||||||||||||||||||
| Ronan CRE Portfolio Loan | Mezzanine Loan | Office, Residential, Mixed-Use | Ireland / France | 50% | 49.2 | 49.2 | 4 | % | ||||||||||||||||||
| Albertsons | Equity | Grocery Stores | Nationwide | n/a | 48.0 | 48.0 | 4 | % | ||||||||||||||||||
| AccorInvest | Real Estate Equity | Hospitality | Primarily Europe | 1% | 42.8 | 42.8 | 4 | % | ||||||||||||||||||
| McKillin Portfolio Loan | Debt Financing | Office and Personal Guarantee | Primarily US and UK | 96% | 42.3 | 42.3 | 4 | % | ||||||||||||||||||
| Blade | Equity | Air Mobility Platform | US | 17% | 36.8 | 36.8 | 3 | % | ||||||||||||||||||
| Maranatha French Hotel Portfolio | Real Estate Equity | Hospitality | France | 44% | 36.8 | 36.1 | 3 | % | ||||||||||||||||||
| France & Spain CRE Portfolio | Real Estate Equity | Primarily Office & Hospitality | France & Spain | 33% | 104.8 | 34.7 | 3 | % | ||||||||||||||||||
| Remaining OED (>30 Investments) | Various | Various | Various | Various | 459.0 | 241.1 | 22 | % | ||||||||||||||||||
| Total Other Equity and Debt | $ | 1,605.4 | $ | 1,097.5 | 100 | % | ||||||||||||||||||||
(1) Ownership % represents CLNY OP’s share of the entire investment accounting for all non-controlling interests including interests managed by the Company and other third parties.
(2) The Company is pursuing a potential monetization of a substantial majority of the assets in its Other segment and has classified $2.9 billion of consolidated assets ($1.2 billion CLNY OP share) and $884 million of consolidated debt ($331 million CLNY OP share) within OED as discontinued operations. These assets and related debt are included in the figures to account for the related carrying values.
(3) Beginning in the fourth quarter of 2020, the Company included the net assets of investments, which includes cash and cash equivalents, restricted cash, other assets, and accrued and other liabilities of each investment. For prior periods, net assets of investments were included in the total net assets of the Company presented in the Financial Overview - Summary of Segments section.
(4) In April 2021, the Company sold a 74% controlling interest in two high-quality office properties located in Dublin’s city center with $104 million in net equity proceeds.
Colony Capital | Supplemental Financial Report | 26 | ||||||||||
| VIIIa. Other Equity and Debt | ||
| 3/31/2021 CLNY OP Share | |||||||||||||||||
| ($ in millions) | Depreciated Carrying Value | ||||||||||||||||
| Investment | CLNY Ownership %(1) | Assets(2) | Equity(2)(3) | % of Total Equity | Description | ||||||||||||
| Colony Credit Real Estate, Inc. (CLNC) | 36% | $ | 352.8 | $ | 352.8 | 32 | % | The Company owns approximately 48.0 million shares and share equivalents, or 36%, of CLNC, a commercial real estate credit REIT. | |||||||||
Tolka Irish NPL Portfolio(4) | 100% | 382.5 | 163.3 | 15 | % | NPL portfolio backed by six remaining assets primarily composed of high quality mixed-use buildings in prime Irish locations in Greater Dublin. In April 2021, the Company sold two high-quality office properties located in Dublin’s city center with $104 million in net equity proceeds. Following the sale, asset carrying value is $81 million and equity is $52 million. | |||||||||||
| Spencer Dock Loan | 20% | 50.4 | 50.4 | 5 | % | EUR 222.6 million whole loan (EUR 200.8 million funded to date) with 71% profit participation in a Dublin mixed-use development of approximately 1 million square feet. The South Site (accounting for 60.7% of total NIA) is entirely pre-let to SalesForce and Dalata, while the North Site (accounting for 39.3% of total NIA) is currently under planning review. | |||||||||||
| Ronan CRE Portfolio Loan | 50% | 49.2 | 49.2 | 4 | % | EUR 93.8 million junior loan with an 11% coupon (4.5% cash interest and 6.5% PIK interest) and maturity in Jan-22 collateralized by a portfolio of 12 income-producing mixed-use assets and 5 residential and mixed-use development sites primarily in Ireland. | |||||||||||
| Albertsons | n/a | 48.0 | 48.0 | 4 | % | 2% ownership in a JV that owns an approximate 4% stake in the public shares of Albertsons Companies Inc. (NYSE: ACI). CLNY receives an annual management fee on $148.5 million third-party JV equity. Additionally, CLNY holds an interest in a profit share vehicle that following expiration of lockouts on share sales and repayment of JV hurdles, CLNY may receive additional consideration. | |||||||||||
| AccorInvest | 1% | 42.8 | 42.8 | 4 | % | Ownership of a diversified portfolio of approximately 900 hotels located primarily in Europe and mostly within the economy and midscale segments managed by Accor. The Company’s position sits alongside EUR 840 million of third-party capital managed by the Company, which combine to own approximately 21% of AccorInvest. | |||||||||||
| McKillin Portfolio Loan | 96% | 42.3 | 42.3 | 4 | % | GBP 49 million note secured by (i) pledge of borrower’s equity interest in a Boston office tower, (ii) other commercial real estate collateral and (iii) borrower’s personal guarantee, which is capped in amount. | |||||||||||
| Blade | 17% | 36.8 | 36.8 | 3 | % | A minority interest in an urban air mobility platform servicing scheduled and chartered routes predominantly in the northeast and west coast United States. In December 2020, Blade and a special purpose acquisition company, Experience Investment (NASDAQ:EXPC), announced a plan to merge, effectively creating the very first publicly traded global air mobility firm. | |||||||||||
| Maranatha French Hotel Portfolio | 44% | 36.8 | 36.1 | 3 | % | Equity financing investment for restructuring and repositioning of the Maranatha Group, France’s third-largest hotel group, which went to bankruptcy. Initial portfolio perimeter constituted by 37 hotels across France along with a management company. | |||||||||||
| France & Spain CRE Portfolio | 33% | 104.8 | 34.7 | 3 | % | Portfolio constituted of 26 office properties located in France and 1 hotel in Spain. | |||||||||||
| Remaining OED (>30 Investments) | Various | 459.0 | 241.1 | 22 | % | ||||||||||||
| Total Other Equity and Debt | $ | 1,605.4 | $ | 1,097.5 | 100 | % | |||||||||||
(1) Ownership % represents CLNY OP’s share of the entire investment accounting for all non-controlling interests including interests managed by the Company and other third parties.
(2) The Company is pursuing a potential monetization of a substantial majority of the assets in its Other segment and has classified $2.9 billion of consolidated assets ($1.2 billion CLNY OP share) and $884 million of consolidated debt ($331 million CLNY OP share) within OED as discontinued operations. These assets and related debt are included in the figures to account for the related carrying values.
(3) Beginning in the fourth quarter of 2020, the Company included the net assets of investments, which includes cash and cash equivalents, restricted cash, other assets, and accrued and other liabilities of each investment. For prior periods, net assets of investments were included in the total net assets of the Company presented in the Financial Overview - Summary of Segments section.
(4) In April 2021, the Company sold a 74% controlling interest in two high-quality office properties located in Dublin’s city center with $104 million in net equity proceeds.
Colony Capital | Supplemental Financial Report | 27 | ||||||||||
| VIIIb. Other Investment Management | ||
| ($ in millions, except as noted; as of March 31, 2021, unless otherwise noted) | CLNY OP Share | |||||||||||||||||||||||||||||||
| Segment | Products | Description | AUM(1) | FEEUM(1) | Fee Rate | |||||||||||||||||||||||||||
| Other Institutional Funds | • Credit • Opportunistic • Other co-investment vehicles | • 27 years of institutional investment management experience • Sponsorship of private equity funds and vehicles earning asset management fees and performance fees • More than 300 investor relationships | $ | 6,573 | $ | 4,355 | .8 | % | ||||||||||||||||||||||||
| Retail Companies | • NorthStar Healthcare Income | • Manage public non-traded vehicles earning asset management and performance fees | 3,298 | $ | 738 | (2) | 1.5 | % | ||||||||||||||||||||||||
| Total | $ | 9,871 | $ | 5,093 | ||||||||||||||||||||||||||||
Notes:
(1) The Company is pursuing a potential monetization of a substantial majority of the assets in its Other segment. Within Other Investment Management, $5.8 billion of third-party AUM and $4.0 billion of FEEUM are related to assets and businesses classified as discontinued operations and are included in the figures; however, the third-party AUM and FEEUM related to the CLNC management contract, which is also classified as discontinued operations, are not included in the figures as the contract was terminated on April 30, 2021 and the Company received $102.3 million of consideration. The Company's management contract with NorthStar Healthcare Income is included in the Wellness Infrastructure segment.
(2) FEEUM of NorthStar Healthcare Income represents its most recently published Net Asset Value.
Colony Capital | Supplemental Financial Report | 28 | ||||||||||
| IX. Total Company Assets Under Management | ||
| ($ in millions) | CLNY OP Share | |||||||||||||||||||
| Segment | 3/31/21 | % of Grand Total | 3/31/20 | % of Grand Total | ||||||||||||||||
| Digital Investment Management | $ | 30,711 | 66.5 | % | $ | 20,107 | 41.8 | % | ||||||||||||
| Digital Balance Sheet: | ||||||||||||||||||||
| Digital operating | 1,073 | 290 | ||||||||||||||||||
| Digital other | 244 | 230 | ||||||||||||||||||
| Digital Balance Sheet | 1,317 | 2.9 | % | 520 | 1.1 | % | ||||||||||||||
| Digital Total AUM | 32,028 | 69.4 | % | 20,627 | 42.9 | % | ||||||||||||||
Legacy Investment Management(1) | 9,871 | 21.4 | % | 15,612 | 32.4 | % | ||||||||||||||
| Legacy Balance Sheet: | ||||||||||||||||||||
Wellness Infrastructure(2) | 2,676 | 3,606 | ||||||||||||||||||
| Hospitality | — | 3,601 | ||||||||||||||||||
| Other - OED | 1,606 | 4,666 | ||||||||||||||||||
| Legacy Balance Sheet | 4,282 | 9.3 | % | 11,873 | 24.7 | % | ||||||||||||||
| Legacy Total AUM | 14,153 | 30.6 | % | 27,485 | 57.1 | % | ||||||||||||||
| Grand Total AUM | $ | 46,181 | 100.0 | % | $ | 48,112 | 100.0 | % | ||||||||||||
Notes:
(1) Legacy Investment Management: 3/31/21 includes $6.4 million Institutional AUM and $3.3 billion NorthStar Healthcare Income AUM, and 3/31/20 includes $7.7 million Institutional AUM, $3.4 billion CLNC AUM and $3.4 billion NorthStar Healthcare Income AUM.
(2) In connection with accelerating the monetization of substantially all of the assets in the Company's Other segment in the first quarter of 2021, the Company reorganized its Wellness Infrastructure segment to retrospectively include other healthcare related assets and obligations. These assets encompass the Company's management contract and equity interests in NorthStar Healthcare Income, equity investment in a healthcare asset manager, and N-Star CDO bonds collateralized largely by certain debt and preferred equity within the capital structure of Wellness Infrastructure, all of which previously resided in the Other segment. The details of these assets are outlined on page 25.
Colony Capital | Supplemental Financial Report | 29 | ||||||||||
APPENDICES
Colony Capital | Supplemental Financial Report | 30 | ||||||||||
| Xa. Appendices - Definitions | ||
Assets Under Management (“AUM”)
Assets owned by the Company’s balance sheet and assets for which the Company and its affiliates provide investment management services, including assets for which the Company may or may not charge management fees and/or performance allocations. Balance sheet AUM is based on the undepreciated carrying value of digital investments and the impaired carrying value of non digital investments as of the report date. Investment management AUM is based on the cost basis of managed investments as reported by each underlying vehicle as of the report date. AUM further includes uncalled capital commitments, but excludes CLNY OP’s share of non wholly-owned real estate investment management platform’s AUM. The Company's calculations of AUM may differ from the calculations of other asset managers, and as a result, this measure may not be comparable to similar measures presented by other asset managers.
Contracted Revenue Growth (“Bookings”)
The Company defines Bookings as either (1) a new data center customer contract for new or additional services over and above any services already being provided as well as (2) an increase in contracted rates on the same services when a contract renews. In both instances a booking is considered to be generated when a new contract is signed with the recognition of new revenue to occur when the new contract begins billing.
Churn
The Company calculates Churn as the percentage of MRR lost during the period divided by the prior period’s MRR. Churn is intended to represent data center customer contracts which are terminated during the period, not renewed or are renewed at a lower rate.
CLNY Operating Partnership (“CLNY OP”)
The operating partnership through which the Company conducts all of its activities and holds substantially all of its assets and liabilities. CLNY OP share excludes noncontrolling interests in investment entities.
Fee-Earning Equity Under Management (“FEEUM”)
Equity for which the Company and its affiliates provides investment management services and derives management fees and/or performance allocations. FEEUM generally represents the basis used to derive fees, which may be based on invested equity, stockholders’ equity, or fair value pursuant to the terms of each underlying investment management agreement. The Company's calculations of FEEUM may differ materially from the calculations of other asset managers, and as a result, this measure may not be comparable to similar measures presented by other asset managers.
Wellness Infrastructure same store portfolio: defined as properties in operation throughout the full periods presented under the comparison. Properties acquired or disposed during these periods are excluded for the same store portfolio.
Max Critical I.T. Square Feet
Amount of total rentable square footage.
Monthly Recurring Revenue (“MRR”)
The Company defines MRR as revenue from ongoing services that is generally fixed in price and contracted for longer than 30 days.
NOI: Net Operating Income. NOI for the Company's real estate segments represents total property and related income less property operating expenses, adjusted for the effects of (i) straight-line rental income adjustments; (ii) amortization of acquired above- and below-market lease adjustments to rental income; and (iii) other items such as adjustments for the Company’s share of NOI of unconsolidated ventures.
TTM Lease Coverage
Represents the ratio of EBITDAR to recognized cash rent for owned facilities on a trailing twelve month basis. TTM Lease Coverage is a supplemental measure of a tenant’s/operator’s ability to meet their cash rent obligations to the Company. However, its usefulness is limited by, among other things, the same factors that limit the usefulness of EBITDAR.
UPB: Unpaid Principal Balance
% Utilization Rate: Amount of leased square feet divided by max critical I.T. square feet.
Colony Capital | Supplemental Financial Report | 31 | ||||||||||
| Xb. Appendices - Reconciliation of Net Income (Loss) to NOI | ||
| ($ in thousands; for the three months ended March 31, 2021) | |||||||||||
| NOI Determined as Follows | Wellness Infrastructure | ||||||||||
| Total revenues | $ | 88,666 | |||||||||
| Straight-line rent revenue and amortization of above- and below-market lease intangibles | 24,571 | ||||||||||
| Interest income | (53) | ||||||||||
Property operating expenses(1) | (52,400) | ||||||||||
| NOI | $ | 60,784 | |||||||||
| Reconciliation of Net Income (Loss) from Continuing Operations to NOI | |||||||||||
| Wellness Infrastructure | |||||||||||
| Income (loss) | $ | (41,210) | |||||||||
| Adjustments: | |||||||||||
| Straight-line rent revenue and amortization of above- and below-market lease intangibles | 24,571 | ||||||||||
| Interest income | (999) | ||||||||||
| Fee income | (2,769) | ||||||||||
| Other income | (1,162) | ||||||||||
| Interest expense | 32,705 | ||||||||||
| Transaction, investment and servicing costs | 2,163 | ||||||||||
| Depreciation and amortization | 31,418 | ||||||||||
| Impairment loss | 15,232 | ||||||||||
| Compensation and administrative expense | 3,913 | ||||||||||
| Other (gain) loss, net | (657) | ||||||||||
| Income tax (benefit) expense | (2,421) | ||||||||||
| NOI | $ | 60,784 | |||||||||
Notes:
(1) Property operating expenses includes property management fees paid to third parties.
Colony Capital | Supplemental Financial Report | 32 | ||||||||||
| Xc. Appendices - Reconciliations of Net Income (Loss) to Digital IM FRE and Digital Operating Adjusted EBITDA | ||
| ($ in thousands; for the three months ended March 31, 2021) | |||||||||||
| Digital Investment Management FRE Determined as Follows | |||||||||||
| Digital Investment Management Net income (loss) | $ | 6,041 | |||||||||
| Adjustments: | |||||||||||
| Interest income | (1) | ||||||||||
| Fee income eliminated in the Company's consolidated Statement of Operations | 1,622 | ||||||||||
| Investment and servicing expense | 32 | ||||||||||
| Depreciation and amortization | 8,912 | ||||||||||
| Compensation expense—equity-based | 1,533 | ||||||||||
| Compensation expense—carried interest and incentive | (33) | ||||||||||
| Administrative expenses—straight-line rent | (2) | ||||||||||
| Administrative expenses—placement agent fee | 59 | ||||||||||
| Equity method (earnings) losses | 195 | ||||||||||
| Other (gain) loss, net | (165) | ||||||||||
| Income tax (benefit) expense | 7 | ||||||||||
FRE(1) | $ | 18,200 | |||||||||
| Digital Operating Adjusted EBITDA Determined as Follows | |||||||||||
| Net income (loss) from continuing operations | $ | (62,844) | |||||||||
| Adjustments: | |||||||||||
| Interest expense | 31,133 | ||||||||||
| Income tax (benefit) expense | (12,269) | ||||||||||
| Depreciation and amortization | 122,220 | ||||||||||
| Other gain loss | 4 | ||||||||||
| EBITDAre: | 78,244 | ||||||||||
| Straight-line rent expenses and amortization of above- and below-market lease intangibles | (399) | ||||||||||
| Compensation expense—equity-based | 308 | ||||||||||
| Installation services | 880 | ||||||||||
| Transaction, restructuring & integration costs | 1,767 | ||||||||||
| Adjusted EBITDA: | $ | 80,800 | |||||||||
Notes:
(1) Includes a $2.7 million benefit from the unused portion of a one-time fourth quarter 2020 outperformance incentive expense.
Colony Capital | Supplemental Financial Report | 33 | ||||||||||
1 FIRST QUARTER 2021 EARNINGS PRESENTATION May 6, 2021
2 Disclaimer This presentation may contain forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and contingencies, many of which are beyond the Company’s control, and may cause the Company’s actual results to differ significantly from those expressed in any forward- looking statement. Factors that might cause such a difference include, without limitation, the impact of COVID-19 on the global economy, including the Company’s businesses, the Company’s common stock price, the Company’s ability to meet 2023 targets in the amounts expected or at all, whether the Company will capitalize on the powerful secular tailwinds supporting the continued growth and investment in digital infrastructure, whether the Company’s wellness infrastructure segment, including contractual rent collections, will continue to perform well despite ongoing impacts of COVID-19, the Company’s ability to continue driving strong growth in its digital business and accelerating its digital transformation, including whether the Company will continue to lower corporate expenses and achieve earnings rotation through divestment of legacy businesses and assets, the impact of the digital transformation on the Company’s earnings profile, the Company’s ability to collaborate with its partner companies and customers to build the next-generation networks connecting enterprises and consumers globally, whether the Company will realize the anticipated benefits of Wafra’s strategic investment in the Company’s digital investment management business, including whether the Wafra investment will become subject to redemption and the amount of commitments Wafra will make to the Company’s digital investment products, the Company’s ability to raise third party capital in its managed funds or co-investment structures and the pace of such fundraising (including as a result of the impact of COVID-19), whether the DCP II fund raising target will be met, in the amounts anticipated or at all, the performance of DataBank, including zColo, the success and performance of the Company’s future investment product offerings, including a digital credit investment vehicle, whether the Company will realize the anticipated benefits of its investment in Vantage SDC, including the performance and stability of its portfolio, the pace of growth in the Company’s digital investment management franchise, the Company’s ability to continue to make investments in digital assets onto the balance sheet and the quality and earnings profile of such investments, the resilience and growth in demand for digital infrastructure, whether the Company will realize the anticipated benefits of its securitization transactions, the Company’s ability to simplify its business and continue to monetize legacy businesses/OED assets, including the timing and amount of proceeds to be received by the Company, if any, and its impact on the Company’s liquidity, whether warehoused investments will ultimately be transferred to a managed investment vehicle or at all, the impact of impairments, the level of expenses within the wellness infrastructure segment and the impact on performance for the segment, the ability to and timing of an exit from the Company’s wellness infrastructure segment and CLNC, whether the Company will maintain or produce higher Core FFO per share in the coming quarters, or ever, the Company’s FRE and FEEUM and its ability to continue growth at the current pace or at all, whether the Company will continue to pay dividends on its preferred stock, the impact of changes to the Company’s management or board of directors, employee and organizational structure, the Company’s financial flexibility and liquidity, including borrowing capacity under its revolving credit facility (including as a result of the impact of COVID-19), the use of sales proceeds and available liquidity, the performance of the Company’s investment in CLNC (including as a result of the impact of COVID-19), whether the Company will further extend the term of its revolving credit facility, including the CLNC share price as compared to book value and how the Company evaluates the Company’s investment in CLNC, the impact of management changes at CLNC, the Company’s ability to minimize balance sheet commitments to its managed investment vehicles, customer demand for datacenters, the Company's portfolio composition, the Company's expected taxable income and net cash flows, excluding the contribution of gains, the Company’s ability to pay or grow the dividend at all in the future, the impact of any changes to the Company’s management agreements with NorthStar Healthcare Income, Inc. and other managed investment vehicles, whether the Company will be able to maintain its qualification as a REIT for U.S. federal income tax purposes, the timing of and ability to deploy available capital, including whether any redeployment of capital will generate higher total returns, the Company’s ability to maintain inclusion and relative performance on the RMZ, the Company’s leverage, including the Company’s ability to reduce debt and the timing and amount of borrowings under its credit facility, increased interest rates and operating costs, adverse economic or real estate developments in the Company’s markets, the Company’s failure to successfully operate or lease acquired properties, decreased rental rates, increased vacancy rates or failure to renew or replace expiring leases, increased costs of capital expenditures, defaults on or non-renewal of leases by tenants, the impact of economic conditions (including the impact of COVID-19 on such conditions) on the borrowers of Colony Capital’s commercial real estate debt investments and the commercial mortgage loans underlying its commercial mortgage backed securities, adverse general and local economic conditions, an unfavorable capital market environment, decreased leasing activity or lease renewals, and other risks and uncertainties, including those detailed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, each under the heading “Risk Factors,” as such factors may be updated from time to time in our subsequent periodic filings with the U.S. Securities and Exchange Commission (“SEC”). All forward-looking statements reflect the Company’s good faith beliefs, assumptions and expectations, but they are not guarantees of future performance. Additional information about these and other factors can be found in the Company’s reports filed from time to time with the SEC. The Company cautions investors not to unduly rely on any forward-looking statements. The forward-looking statements speak only as of the date of this presentation. The Company is under no duty to update any of these forward-looking statements after the date of this presentation, nor to conform prior statements to actual results or revised expectations, and the Company does not intend to do so. This presentation may contain statistics and other data that has been obtained or compiled from information made available by third-party service providers. The Company has not independently verified such statistics or data. This presentation is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any securities of the Company. This information is not intended to be indicative of future results. Actual performance of the Company may vary materially.
3 Agenda # Section 1 Q1 Highlights 2 Financial Results 3 Executing the Digital Playbook 4 Q&A
4 1 1Q 2021 Highlights
5 2021 Finish the Mission Harvest Legacy & Streamline Organization Continue Investing in High-Quality Digital Assets Further Expand Digital Investment Management Last year, we stabilized the base and delivered on our commitments. In 2021, we are focused on “Finishing The Mission” as we enter the final stages of our digital transformation.
6 Harvest Legacy & Streamline Organization CLNY has already made significant progress towards its 2021 targets with Digital AUM now at 70% of total AUM as key strategic legacy monetizations have been executed CLNC Management Contract Internalized Tolka Irish NPL Portfolio $350m sale, $100M net proceeds THL Portfolio Hotels Portfolios Closed Mar 30 Wellness CLNC Legacy OED / IM Digital As of May 6, 2021 70% Digital Wellness CLNC Hotel Legacy OED / IM Digital 58% Digital 4Q20 Actual Net AUM Reduction (Stock ownership) $3.7B $2.5B $0.8B
7 Mexico United States, CanadaUnited States 2021 Head Start: Investing in High-Quality Digital Four significant investments already in-flight out of DCP II with projected commitments of $3 to $4 billion, leveraging Digital Colony’s deep operating expertise and global presence 5 Colombia, Peru & Chile Finland Canada, U.S. and U.K. U.K. Europe U.K. Canada United StatesUnited States North America, Europe Brazil Brazil (1) Dollar amounts represent projected equity requirements per platform inclusive of co-investments and joint venture equity needs United States Small Cells / DAS Leading US indoor/venue wireless solutions provider DCP II take-private investment at $14/share, $840M TEV Leveraged to emerging demand for converged indoor wireless solutions (5G, Wifi6, CBRS) Vodafone European towerco spin-out DCP II €500M cornerstone investment, with potential follow-on Deal unlocks/highlights embedded value in VOD Lease up opportunity as European networks densify with 5G Europe Cell Towers Asia Cell Towers Asia Hyperscale Data Centers Asian tower platform Partnering with established mgmt team to build Asean tower platform Leveraged to strong regional growth dynamics Ability to apply Digital Colony playbook from other markets and prior investment cycles Asia Pacific hyperscale platform Backing experienced mgmt team to capitalize on persistent, strong growth in cloud infrastructure demand across AsiaPac region Opportunity to deploy significant capital over time Deal Pending Shareholder Approval
8 Continuing to Grow Our Digital IM Franchise Long-term contracted fee streams drive stable, predictable earnings that compound over time, similar to our digital operating revenues Q1 Update +$830M New Capital Formation +30% YOY Note: Individual components of graph are not to scale
9 Complete transformation of the business formerly known as Colony Capital Significant Changes Since Last May Annual Meeting AlignmentESGLeadership Governance Wholesale change in board composition …more focused …more diverse …more digital Refresh - 50% of Board new in past year First independent director, Nancy Curtin, named Board Chairperson in April 2021 Complete rotation in executive leadership CLNY now led by Marc Ganzi, track record of success and deep expertise investing and operating digital infrastructure assets ‘Promises Made/Promises Kept’ mantra. Accelerating to complete the digital pivot, delivering ahead of plan Significant personal investments across team creates meaningful alignment with investors 75% of incentive comp tied to achieving corporate financial metrics Long term incentives increasingly performance- based CLNY commits to industry- leading Net Zero 2030 initiative Introduction of compensation and incentive structures partially tied to new ESG initiatives Cultural refresh with entrepreneurial meritocracy that embraces diversity, equity and inclusion
10 2019 Profound Governance Changes In the past year, the board has been refreshed to be more diverse, right-sized and more focused on the new digital mission Focused board reduced from 12 to 10 members Significant increase in digital expertise, 50% of board with tech/telco backgrounds, augments strong financial markets experience 2021 5 new members, newly appointed Board Chair Board is transforming along with company's rotation to digital Composition and refreshment is a key focus driving the transformation J. Braxton Carter CFO, T-Mobile (Retired) Gregory J. McCray CEO, FDH Infrastructure Services Jeannie H. Diefenderfer CEO, courageNpurpose, Verizon (Prior) Shaka Rasheed Managing Director, Microsoft Marc Ganzi CEO, Colony Capital Nancy Curtin CIO, Alvarium Investments Female 2021 Board Diversity 2019 Board Diversity Male Female/ Ethnic Minorities Male Focused Digital Expertise Board Refreshment Diverse Experience and Background NEW BOARD CHAIR
11 2020 Financial Results2
12 1Q21 Summary Results Note: Historical comparative figures have been recast to exclude the results of discontinued operations except for AUM and legacy monetizations. (1) Core FFO has been redefined to better align with our digital transformation and notably excludes realized gains or losses (except in the Digital Other segment), fair value gains and losses and unrealized carried interest (refer to the enclosed detailed definition); Comparative periods have been recast with the new definition. (2) Includes Digital Operating and Digital Investment Management segments. Excludes Digital Other segment. ($ millions except per share & AUM) 1Q20 4Q20 1Q21 Y/Y% Total Company Consolidated Revenues $217.2 $284.2 $315.7 +45% Adjusted EBITDA (CLNY OP Share) $36.0 $43.7 $56.1 +56% Core FFO ($12.1) ($17.6) $4.1 N/M per share ($0.02) ($0.03) $0.01 $0.03 Net Income (CLNY Shareholder) ($361.6) ($140.6) ($264.8) per share ($0.76) ($0.30) ($0.56) AUM ($B) $48.1 $52.0 $46.1 (4%) % Digital 43% 58% 69% +26% Legacy Monetizations $243 $311 $96 N/M Core Digital Segments(1) Consolidated Revenues $64.3 $151.9 $218.7 +240% CLNY share of Revenues $28.1 $37.6 $52.6 +87% Consolidated FRE / Adjusted EBITDA $26.2 $65.1 $99.0 +278% CLNY Share of FRE / Adjusted EBITDA $13.3 $11.9 $26.1 +96% Core FFO $10.7 $4.5 $15.6 +45% AUM ($B) $20.6 $30.0 $32.0 +55% N/M
13 $45.1 $127.5 $189.2 $19.2 $24.4 $29.5 $64.3 $151.9 $218.7 1Q20 4Q20 1Q21 Digital Operating Digital IM Consolidated Digital Adjusted FRE + EBITDA(1)Core Digital Revenues(1) Digital Earnings Summary Consolidated Digital Revenues increased to $219M in 1Q21, driven primarily the zColo acquisition in 4Q20 for Digital Operating and new fees from the first closing of DCP II(2) The growth in revenues drove the increase in Consolidated Digital Adjusted FRE and Digital Operating Adjusted EBITDA to $96M(1) in 1Q21 while margins remained stable (1) Includes Digital Operating and Digital Investment Management segments. Excludes Digital Other segment. (2) Staged over 4Q20 and 1Q21. (3) 4Q20 FRE has been adjusted to add back a $5.7M one-time outperformance incentive expense for the successful DCP II first closing; 1Q21 FRE has been adjusted to remove a $2.7M benefit from reversing unused portions of the one-time incentive in 4Q20. ($ in millions) ($ in millions) 100% 69% 69% 20% 16% 17% CLNY % Digital IM Digital Operating 100% 69% 69% 20% 16% 18% Q/Q $16.1 $60.5 $80.8 $10.1 $10.3 $15.5 $26.2 $70.8 $96.3 41% 47% 45% 1Q20 4Q20 1Q21 Digital Operating Digital Adjusted FRE Combined Margin Q/Q 3 3 3 3
14 As part of the Digital Transformation, the Company has completed strategic divestitures and undergone cost rationalization efforts that have significantly decreased G&A to operate more efficiently Simplification of Cost Structure and G&A Total G&A(1) Non-Digital, $205 Non-Digital, $169 Non-Digital, $88 Digital, $27 Digital, $49 Digital, $63 $232 $219 $151 2019 G&A 2020 G&A 1Q21 Annualized G&A ($s in millions) (1) Digital G&A is presented on a consolidated basis inclusive of Wafra’s share, but excludes Digital Operating G&A given it is not a direct cost incurred by the Company. Digital Bridge was acquired in July 2019, as such, 2019 Digital G&A is presented on an annualized basis for comparability. 1Q21 annualized G&A excludes G&A related to divested segments (Hospitality and CLNC’s investment management) and discontinued operations (the majority of the Other segment). 376 300 201 2019 EOY 2020 EOY 1Q-2021 (ex. DiscOps) Non-Digital & Corporate Headcount Rotation 22 16 11 2019 EOY 2020 EOY 1Q-2021 (ex. DiscOps) # of Offices Right-Sizing the CLNY Footprint
15 $40M $38M $40M $41M $62M 1Q20 2Q20 3Q20 4Q20 1Q21 $76M $79M $85M $100M $124M 1Q20 2Q20 3Q20 4Q20 1Q21 $36M $34M $62M $84M $131M 1Q20 2Q20 3Q20 4Q20 1Q21 $13M $13M $28M $39M $58M 1Q20 2Q20 3Q20 4Q20 1Q21 Increased FEEUM by $6B during 2020, with the majority raised in 4Q20; this success in capital raising driven by the investment in professionals and G&A made throughout 2020 As such, FRE has been stable during 2020 with significant growth manifesting in 1Q21 Significant growth in revenues and earnings due to continued rotation of CLNY’s balance sheet into high quality digital assets, notably Vantage SDC in July 2020 and zColo in December 2020 as well strong performance from DataBank, which was acquired in December 2019 Annualized Digital Fee Revenues Annualized Digital IM FRE1 Annualized Digital Operating Revenues Annualized Digital Operating EBITDA Investment Management Digital Operating (CLNY OP) (1) Annualization of quarterly results are adjusted for certain one-time items including those noted in footnote 2. (2) 4Q20 FRE has been adjusted to add back a $5.7M one-time outperformance incentive expense for the successful DCP II first closing; 1Q21 FRE has been adjusted to remove a $2.7M benefit from reversing unused portions of the one-time incentive in 4Q20. 2 Stable to Significant Growth… 2
16 $39M $62M $80M $90M $85M $110M 2020 Actual 1Q21 Run-Rate 2021 Guidance 2023 Targets 1 1 $84M $124M $140M $160M $150M $200M 2020 Actual 1Q21 Run-Rate 2021 Guidance 2023 Targets $23M $58M $53M $175M $58M $225M 2020 Actual 1Q21 Run-Rate 2021 Guidance 2023 Targets $54M $131M $125M $400M $135M $500M 2020 Actual 1Q21 Run-Rate 2021 Guidance 2023 Targets 1Q21 annualized run-rate results are tracking to 2021 guidance as we continue to forecast $3.5 to $4.0B of capital raising during 2021 Based on our longer-term view of product offerings and fundraising expectations, we have lifted the bottom end of the 2023 FRE Target from $80M to $90M 1Q21 annualized run-rate results are in line with the 2021 guidance range with room for significant improvement upon a potential new acquisition, which would be funded by $400 to $600M of monetizations targeted during 2021 Anticipate achieving 2023 Targets through organic growth, bolt-on acquisitions and new investments 20-30% Projected Annual Growth Annualized Digital Fee Revenues Annualized Digital IM FRE R A N G E R A N G E R A N G E R A N G E Investment Management Digital Operating (CLNY OP) (1) 2020 has been adjusted to add back $5.7M one-time outperformance incentive for successful DCP II capital raising. 1Q21 Run-Rate has been adjusted to remove a $2.7M benefit from reversing unused portions of the one-time incentive in 4Q20. (2) Represents solely full year contributions of existing investments without consideration of new deployment. The company will look to update guidance at the June 2021 Investor Day. 30-40% Projected Annual Growth Organic growth and acquisitions to drive significant growth Annualized Digital Operating Revenues Annualized Digital Operating EBITDA Organic growth and acquisitions to drive significant growth 22 …Tracking to 2021 Guidance and 2023 Targets
17 Executing the Digital Playbook3
18 Digital Operating – Overview Colony is experiencing strong momentum at its two primary digital operating businesses DataBank and Vantage SDC • Dec 2020, $1.4 billion acquisition of zColo led by Colony Capital, portfolio of 44 data centers from Zayo • Oct 2020, $30 million strategic investment in EdgePresence • Feb 2021, $658 million offering of securitized notes - first of its kind in the enterprise data center sector • Oct 2020, Vantage SDC raised $1.3 billion in securitized notes at a blended interest rate of 1.8% primarily to refinance existing debt, extending its debt maturities and lowering its overall cost of debt Key perspectives/milestones: Key perspectives/milestones: Premier edge/colocation data center platform with nationwide US footprint Overview North American portfolio of stabilized hyperscale data centers 65 data centers / 29 edge markets served Portfolio 12 data centers / 6 hyperscale markets ~$3.0B Initial Acquisition Value Initial Acquisition Value ~$3.7B Initial Acquisition Value $334 million balance sheet investment, Dec 2019/Dec 2020 Investment $200 million balance sheet investment, Jul/Oct 2020 'Minority Control' structure; 20% interest Ownership ‘Minority Control’ structure; 13% interest
19 1.3% 1Q'20 2Q'20 3Q'20 4Q'20 1Q'21 Churn % $23m 1Q'20 2Q'20 3Q'20 4Q'20 1Q'21 Bookings Strong Digital Operating Performance Note: Please reference the supplemental financial disclosures for the definition of Bookings and Quarterly Churn Strong Secular Tailwinds Increasing Cloud DemandScalable Extensible Platforms Strong Lease Up Low Turnover Stable and Robust Revenue Growth Contracted Escalation % Target Avg New Lease Term (years) Monthly Recurring Revenue (annualized) 2020 2021 2% 7.5yrs $171m $743m ++ United States Hyperscale Data Centers Premier Edge Data Centers Dec 2019/Dec 2020Jul/Oct 2020 AI / Big Data IoT AR / VR Cloud 280 MW of Total Compute Power
20 Growth Capex 67% Maintenance Capex 4% Distributions 29% Performance Drives Capital Deployment Note: Please reference the supplemental financial disclosures for the definition of Adjusted EBITDA Number of Datacenters Total Rentable Square Footage (k) 19 76 1Q'20 2Q'20 3Q'20 4Q'20 1Q'21 411 1,792 1Q'20 2Q'20 3Q'20 4Q'20 1Q'21 Digital Operating Consolidated Adjusted EBITDA & Capital Deployment $16.1 $80.8 5.6% 2.4% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% $- $10.0 $20.0 $30.0 $40.0 $50.0 $60.0 $70.0 $80.0 $90.0 1Q'20 1Q'21 Adjusted EBITDA Maintenance CAPEX % EBITDA $52.3M Deployed Strong Secular Tailwinds driving stable and strong growth in Datacenters Stable and contracted economics generate high cash yield characteristics Scalable and extensible platforms drive continued capital deployments YoY Growth YoY Growth
21 Pioneering Digital Infrastructure Financings Flow Through to CLNY Shareholders Digital Operating – Impact of Strategic Finance Key pillar of Digital Colony Playbook, Strategic Finance, adding tangible value to DataBank and Vantage Stabilized Data Centers +$50M CLNY Share of Incremental 5Yr Cash Flow +130bps Increase in estimated IRR Highlight First ever enterprise data center securitization Upsized deal from $925M to $1.3B due to significant demand Size $658 million $1,300 million Rating Primarily A- A- Rate / Tenor 2.3% / 5 years 1.8% / 5 & 7 year tranches Issuance February 2021 September 2020 ~$2.0B New DataBank and Vantage Bonds +250bps Blended Reduction in Borrowing Cost +$300M 5-Yr Incremental Cash Flows Digital Colony has executed securitizations totaling approximately14 ~$6B to-date First of its kind… Hyperscale Data Center Securitization (Vantage) Enterprise Data Center Securitization (DataBank) Small Cell Securitization (ExteNet)
22 $53m-$58m 2021 Guidance Core Organic Growth New Builds New Platforms, M&A 2023 Guidance 4-6% YoY 2-3% YoY $175m-$225m Cash Revolver OED Wellness CLNC +$2.0B Dry Powder THE DIGITAL COLONY PLAYBOOK Deal Underwriting Strategic Finance Asset Management Proprietary Deal Flow 17.5-20x Entry Multiple Top Investment Team Digital Operators 40% to 50% LTV Opportunistic ABS Improved Cost of Debt Improved FCF Yield Customer Relationships Low Churn <1.5% 4%-6% Organic Growth Expansive DCP Footprint Deploy $1.5B Dry Powder Implement DCP Playbook Deploy CLNY Dry Powder ($B) $1.5 Loan to Value 40% 50% Total Fire Power ($B) $2.5 3.0 Avg. Site CF Multiple 17.5x - 20x Incremental EBITDA $125 - $175 3 1 2 3 Digital Operating 2023 Build Up Incremental EBITDA Math
23 4 Q&A Session
24 Non-GAAP Reconciliations Total CLNY Core Digital Segments(3) for the Three Months Ended for the Three Months Ended Core Funds from Operations (in thousands, except per share) March 31, 2021 December 31, 2020 March 31, 2020 March 31, 2021 December 31, 2020 March 31, 2020 Net income (loss) attributable to common stockholders $ (264,806) $ (140,575) $ (361,633) $ (3,381) $ (3,801) $ (1,040) Adjustments for FFO attributable to common interests in Operating Company and common stockholders: Net income (loss) attributable to noncontrolling common interests in Operating Company (27,896) (15,411) (39,601) (356) (413) (114) Real estate depreciation and amortization 184,762 136,245 130,523 120,414 75,389 27,590 Impairment of real estate 106,077 31,365 308,268 – – – Gain from sales of real estate (38,102) (26,566) (7,933) – – – Less: Adjustments attributable to noncontrolling interests in investment entities (188,496) (79,874) (82,329) (100,245) (63,359) (21,944) FFO attributable to common interests in Operating Company and common stockholders (228,461) (94,816) (52,705) 16,432 7,816 4,492 Adjustments for Core FFO attributable to common interests in Operating Company and common stockholders: Non-real estate (gains) losses, excluding realized gains or losses within the Digital Other segment 267,812 144,060 (117,739) (255) (1,013) (47) CLNC dividend adjustments 55,648 16,071 42,112 – – – Equity-based compensation expense 19,299 8,289 8,732 1,841 1,378 589 Straight-line rent revenue and expense 17,225 (6,403) (2,025) (1,018) (3,504) 1,300 Amortization of acquired above- and below-market lease values, net 6,005 (1,229) (3,519) 695 974 (1,500) Debt prepayment penalties and amortization of deferred financing costs and debt premiums and discounts 45,627 25,034 15,049 1,703 16,797 – Restructuring and transaction-related charges(1) 34,482 21,887 15,568 – 5 – Non-real estate fixed asset depreciation, amortization and impairment 20,563 14,950 92,230 3,813 3,350 9,043 Tax effect of Core FFO adjustments, net (34,480) (13,110) (2,927) (13,034) (8,382) (5,989) Net unrealized carried interest 189 (5,734) 9,230 189 (5,632) – Less: Adjustments attributable to noncontrolling interests in investment entities (217,706) (141,791) 3,786 5,194 (7,251) 2,816 Less: CFFO from discontinued operations 17,854 15,148 (19,856) – – – Core FFO attributable to common interests in Operating Company and common stockholders $ 4,057 $ (17,644) $ (12,064) $ 15,560 $ 4,538 $ 10,704 W.A. number of common OP units outstanding used for Core FFO per common share and OP unit(2) 537,033 536,694 536,516 Core FFO per common share / common OP unit $ 0.01 $ (0.03) $ (0.02) 4Q20 Core FFO, as recast (17,644) OED & Other Investment Management moved to discontinued operations 9,852 CLNC revised from share of Distributable Earnings to declared dividends 8,573 Deferred taxes 5,594 Non-real estate gains (losses), excluding realized gains or losses within the Digital Other segment & unrealized carried interest 11,821 4Q20 Core FFO, ex-losses, as previously reported $ 18,197 (1) Transaction-related costs primarily represent costs and charges incurred as a result of corporate restructuring and reorganization to implement the digital evolution. These costs and charges include severance, retention, relocation, transition, shareholder settlement and other related restructuring costs, which are not reflective of the Company’s core operating performance and the Company does not expect to incur these costs subsequent to the completion of the digital evolution. (2) Calculated based on weighted average shares outstanding including participating securities and assuming the exchange of all common OP units outstanding for common shares. (3) Includes Digital Operating and Digital Investment Management segments; excludes Digital Other.
25 Non-GAAP Reconciliations Three Months Ended (In thousands) March 31, 2021 December 31, 2020 March 31, 2020 CLNY Share of Core Digital Revenues Total Revenues $218,700 $151,921 $64,506 Less: Non-controlling interest (166,102) (114,360) (35,942) CLNY pro-rata share of Revenues $52,598 $37,561 $28,564 Digital Net Income (Loss) Digital Investment Management $6,041 $1,840 $2,534 Digital Operating (62,844) (52,902) (18,295) Digital Other 7,869 19,788 (3,459) Digital Net Income (Loss) ($48,934) ($31,274) ($19,220) Digital Investment Management FRE Determined as Follows Net income (loss) $6,041 $1,840 $2,534 Adjustments: Interest income (1) (1) (30) Depreciation and amortization 8,912 6,421 6,603 Compensation expense—equity-based & incentive 1,500 1,649 589 Administrative expenses—straight-line rent (2) (1) 16 Fee Income — intercompany 1,622 862 – Investment and services expense 32 204 – Placement fee 59 1,202 – Equity method earnings (losses) 195 (6,744) (3) Other gain (loss), net (165) (102) (44) Income tax expense (benefit) 7 (757) 394 Fee related earnings $18,200 $4,573 $10,059 (Deduct) Add one-time incentive (2,744) 5,701 – Fee related earnings (adjusted) $15,456 $10,274 $10,059 Fee income $29,443 $24,191 $18,944 Fee Income — intercompany 1,622 862 – Other income 54 183 204 Compensation expense—cash (10,852) (18,353) (6,964) Administrative expenses (2,067) (2,310) (2,125) Fee related earnings 18,200 4,573 10,059 CLNY ownership 64.0% 44.8% 100.0% CLNY pro-rata share of FRE 11,645 2,051 10,059 Three Months Ended (In thousands) March 31, 2021 December 31, 2020 March 31, 2020 Digital Operating Adjusted EBITDA Determined as Follows Net income (loss) from continuing operations ($62,845) ($52,902) ($18,295) Adjustments: Interest expense 31,133 41,815 9,402 Income tax (benefit) expense (12,268) (6,967) (5,730) Depreciation and amortization 122,220 78,554 30,031 Other (gain) loss 4 200 – EBITDAre 78,244 60,700 15,408 Straight-line rent expenses and amortization of above- and below-market lease intangibles (399) (2,607) (338) Interest income – (80) – Compensation expense—equity-based 308 728 – Installation services 880 429 289 Transaction, restructuring & integration costs 1,767 1,367 748 Adjusted EBITDA $80,800 $60,537 $16,107 CLNY ownership 17.9% 16.2% 20.0% CLNY pro-rata share of Adjusted EBITDA $14,440 $9,800 $3,225 Three Months Ended (In thousands) March 31, 2021 December 31, 2020 March 31, 2020 Adjusted EBITDA (CLNY OP Share) Core FFO $4,057 ($17,644) ($12,064) Adjustments: Less: Earnings of equity method investments (4,794) – (19,175) Plus: Preferred dividends 18,516 18,516 19,474 Plus: Core interest expense 34,351 34,767 40,798 Plus: Core tax expense 2,048 4,795 2,935 Plus: Non pro-rata allocation of income (loss) to NCI 1,415 1,904 2,973 Plus: Placement fees 40 823 – Digital Operating installation services, restructuring, integration, and transactions costs 499 511 1,100 Adjusted EBITDA (CLNY OP Share) $56,132 $43,672 $36,041
26 Important Note Regarding Non-GAAP Financial Measures This presentation includes certain “non-GAAP” supplemental measures that are not defined by generally accepted accounting principles, or GAAP, including the financial metrics defined below, of which the calculations may from methodologies utilized by other REITs for similar performance measurements, and accordingly, may not be comparable to those of other REITs. FFO: The Company calculates funds from operations (“FFO”) in accordance with standards established by the Board of Governors of the National Association of Real Estate Investment Trusts, which defines FFO as net income or loss calculated in accordance with GAAP, excluding (i) extraordinary items, as defined by GAAP; (ii) gains and losses from sales of depreciable real estate; (iii) impairment write-downs associated with depreciable real estate; (iv) gains and losses from a change in control in connection with interests in depreciable real estate or in-substance real estate, plus (v) real estate-related depreciation and amortization; and (vi) including similar adjustments for equity method investments. Included in FFO are gains and losses from sales of assets which are not depreciable real estate such as loans receivable, equity method investments, as well as equity and debt securities, as applicable. Core FFO: The Company computes core funds from operations (Core FFO) by adjusting FFO for the following items, including the Company’s share of these items recognized by its unconsolidated partnerships and joint ventures: (i) equity-based compensation expense; (ii) effects of straight-line rent revenue and expense; (iii) amortization of acquired above- and below-market lease values; (iv) debt prepayment penalties and amortization of deferred financing costs and debt premiums and discounts; (v) non-real estate depreciation, amortization and impairment; (vi) restructuring and transaction- related charges; (vii) non-real estate loss (gain), fair value loss (gain) on interest rate and foreign currency hedges, and foreign currency remeasurements except realized gain and loss from the Digital Other segment; (viii) net unrealized carried interest; and (ix) deferred taxes and the tax effect on certain of the foregoing adjustments. The Company’s Core FFO from its interest in Colony Credit Real Estate (NYSE: CLNC) represented the cash dividends declared in the reported period. The Company excluded results from discontinued operations in its calculation of Core FFO and applied this exclusion to prior periods. Beginning with the first quarter 2021, the Company revised the computation of Core FFO and applied this revised computation methodology to prior periods presented. FFO and Core FFO should not be considered alternatives to GAAP net income as indications of operating performance, or to cash flows from operating activities as measures of liquidity, nor as indications of the availability of funds for our cash needs, including funds available to make distributions. FFO and Core FFO should not be used as supplements to or substitutes for cash flow from operating activities computed in accordance with GAAP. The Company’s calculations of FFO and Core FFO may differ from methodologies utilized by other REITs for similar performance measurements, and, accordingly, may not be comparable to those of other REITs. The Company uses FFO and Core FFO as supplemental performance measures because, in excluding real estate depreciation and amortization and gains and losses from property dispositions, it provides a performance measure that captures trends in occupancy rates, rental rates, and operating costs. The Company also believes that, as widely recognized measures of the performance of REITs, FFO and Core FFO will be used by investors as a basis to compare its operating performance with that of other REITs. However, because FFO and Core FFO exclude depreciation and amortization and capture neither the changes in the value of the Company’s properties that resulted from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of its properties, all of which have real economic effect and could materially impact the Company’s results from operations, the utility of FFO and Core FFO as measures of the Company’s performance is limited. FFO and Core FFO should be considered only as supplements to GAAP net income as a measure of the Company’s performance. Additionally, Core FFO excludes the impact of certain fair value fluctuations, which, if they were to be realized, could have a material impact on the Company’s operating performance. CLNY Operating Partnership (CLNY OP): The operating partnership through which the Company conducts all of its activities and holds substantially all of its assets and liabilities. The Company is the sole managing member of, and directly owns approximately 90% of the common units in, CLNY OP. The remaining common units in CLNY OP are held primarily by current and former employees of the Company. Each common unit is redeemable at the election of the holder for cash equal to the then fair value of one share of the Company’s Class A common stock or, at the Company’s option, one share of the Company’s Class A common stock. CLNY OP share excludes noncontrolling interests in investment entities. Throughout this presentation, consolidated figures represent the interest of both the Company (and its subsidiary Colony Capital Operating Company or the “CLNY OP”) and noncontrolling interests. Figures labeled as CLNY OP share represent the Company’s pro-rata share. Adjusted Earnings before Interest, Taxes, Depreciation and Amortization: The Company calculates Adjusted EBITDA by adjusting Core FFO to exclude interest expense, preferred dividends, tax expense or benefit, earnings from equity method investments, placement fees, and for the Digital Operating segment, restructuring, transaction and integration costs, and revenues and corresponding costs related to the delivery of services that are not ongoing, such as installation services. The Company uses Adjusted EBITDA as a supplemental measure of our performance because they eliminate depreciation, amortization, and the impact of the capital structure from its operating results. However, because Adjusted EBITDA is calculated before recurring cash charges including interest expense and taxes and are not adjusted for capital expenditures or other recurring cash requirements, their utilization as a cash flow measurement is limited. Digital Operating Earnings before Interest, Taxes, Depreciation and Amortization for Real Estate (EBITDAre) and Adjusted EBITDA: The Company calculates EBITDAre in accordance with the standards established by the National Association of Real Estate Investment Trusts, which defines EBITDAre as net income or loss calculated in accordance with GAAP, excluding interest, taxes, depreciation and amortization, gains or losses from the sale of depreciated property, and impairment of depreciated property. The Company calculates Adjusted EBITDA by adjusting EBITDAre for the effects of straight-line rental income/expense adjustments and amortization of acquired above- and below-market lease adjustments to rental income, equity-based compensation expense, restructuring and integration costs, transaction costs from unsuccessful deals and business combinations, litigation expense, the impact of other impairment charges, gains or losses from sales of undepreciated land, and gains or losses on early extinguishment of debt and hedging instruments. Revenues and corresponding costs related to the delivery of services that are not ongoing, such as installation services, are also excluded from Adjusted EBITDA. The Company uses EBITDAre and Adjusted EBITDA as supplemental measures of our performance because they eliminate depreciation, amortization, and the impact of the capital structure from its operating results. However, because EBITDAre and Adjusted EBITDA are calculated before recurring cash charges including interest expense and taxes and are not adjusted for capital expenditures or other recurring cash requirements, their utilization as a cash flow measurement is limited. Fee Related Earnings (“FRE”): The Company calculates FRE for its investment management business within the digital segment as base management fees, other service fee income, and other income inclusive of cost reimbursements, less compensation expense (excluding equity-based compensation), administrative expenses (excluding fund raising placement agent fee expenses), and other operating expenses related to the investment management business. The Company uses FRE as a supplemental performance measure as it may provide additional insight into the profitability of the overall digital investment management business. FRE is presented prior to the deduction for Wafra's 31.5% interest. Assets Under Management (AUM): Assets owned by the Company’s balance sheet and assets for which the Company and its affiliates provide investment management services, including assets for which the Company may or may not charge management fees and/or performance allocations. Balance sheet AUM is based on the undepreciated carrying value of digital investments and the impaired carrying value of non-digital investments as of the report date. Investment management AUM is based on the cost basis of managed investments as reported by each underlying vehicle as of the report date. AUM further includes uncalled capital commitments, but excludes CLNY OP’s share of non wholly-owned real estate investment management platform’s AUM. The Company's calculations of AUM may differ from the calculations of other asset managers, and as a result, this measure may not be comparable to similar measures presented by other asset managers. Fee-Earning Equity Under Management (FEEUM): Equity for which the Company provides investment management services and derives management fees and/or performance allocations. FEEUM generally represents the basis used to derive fees, which may be based on invested equity, stockholders’ equity, or fair value pursuant to the terms of each underlying investment management agreement. The Company's calculations of FEEUM may differ materially from the calculations of other asset managers, and as a result, this measure may not be comparable to similar measures presented by other asset managers.
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