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): November 8, 2019
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Registrant’s telephone number, including area code: (310 ) 282-8820
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Securities registered pursuant to Section 12(b) of the Act: | ||||
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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 November 8, 2019, Colony Capital, Inc. (the “Company”) issued a press release announcing its financial position as of September 30, 2019 and its financial results for the quarter ended September 30, 2019. 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 November 8, 2019, the Company made available a Corporate Overview and Supplemental Financial Disclosure Presentation for the quarter ended September 30, 2019 on the Company’s website at www.clny.com. A copy of the Corporate Overview and Supplemental Financial Disclosure Presentation is attached as Exhibit 99.2 to this Current Report on Form 8-K and is incorporated herein by reference.
The information included in this Current Report on Form 8-K (including Exhibits 99.1 and 99.2 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 Public Shareholders subpage of its website, which is accessible by clicking on the tab labeled “Public 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 Public 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 Public 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.
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: | November 8, 2019 | COLONY CAPITAL, INC. | |
By: | /s/ Mark M. Hedstrom | ||
Mark M. Hedstrom | |||
Chief Financial Officer, Chief Operating Officer and Treasurer | |||
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Exhibit 99.1
COLONY CAPITAL ANNOUNCES THIRD QUARTER 2019 FINANCIAL RESULTS AND
STRATEGIC ASSET REVIEW UPDATE
Los Angeles, CA, November 8, 2019 - Colony Capital, Inc. (NYSE:CLNY) and subsidiaries (collectively, “Colony Capital,” or the “Company”) today announced its financial results for the third quarter ended September 30, 2019 and the Company’s Board of Directors declared a fourth quarter 2019 cash dividend of $0.11 per share to holders of Class A and Class B common stock.
“During the third quarter, we made great progress expanding our digital platform while further simplifying and focusing on harvesting or realigning valuable legacy businesses,” said Thomas. J. Barrack, Jr., Executive Chairman and Chief Executive Officer. “Following our recently completed combination with Digital Bridge Holdings, we are accelerating our transition and sharpening our focus on digital real estate and infrastructure, which will enable Colony Capital to capitalize on compelling, high-return opportunities in a sector positioned for continued strong secular growth. Next month we will provide more detail on our strategic plan and vision as we continue to reap liquidity from monetizations, re-focus legacy businesses into simpler silos and pivot into a hard asset solution provider to valued digital counterparties as we bridge the digital divide.”
Third Quarter 2019 Financial Results and Highlights
• | Third quarter 2019 U.S. GAAP net loss attributable to common stockholders was $(555.0) million, or $(1.16) per share, and Core FFO was $101.6 million, or $0.19 per share; and for the nine months ended September 30, 2019, U.S. GAAP net loss attributable to common stockholders was $(1,126.0) million, or $(2.35) per share, and Core FFO was $218.7 million, or $0.42 per share |
• | Third quarter 2019 U.S. GAAP net loss notably included reductions of goodwill, impairments of real estate and provision for loan losses totaling $540.3 million for the Company's share, of which $387.0 million was attributable to the reduction of goodwill primarily as a result of the pending sale of the Company’s industrial investment management business and related real estate portfolio, and the decrease in management fees from Colony Credit Real Estate, Inc. (NYSE: CLNC) resulting from impairments related to its portfolio bifurcation, both of which are ongoing components of the Company’s strategic repositioning to simplify and establish the leading platform for digital real estate and infrastructure |
• | Excluding net losses of $4.4 million primarily related to net investment losses in Other Equity and Debt offset by the termination fee received from NorthStar Realty Europe Corp. (“NRE”), Core FFO was $106.0 million, or $0.20 per share; and for the nine months ended September 30, 2019, excluding net losses of $30.6 million, Core FFO was $249.3 million, or $0.48 per share |
• | The Company’s Board of Directors declared and paid a third quarter 2019 dividend of $0.11 per share to holders of Class A and B common stock |
• | During the third quarter 2019, the Company: |
• | Successfully combined with Digital Bridge Holdings, LLC ("DBH"), the premier investment manager dedicated to digital real estate and infrastructure for $329 million of cash and OP unit consideration. Marc C. Ganzi, who co-founded DBH and is its Chief Executive Officer, will become the Chief Executive Officer of the Company no sooner than the end of 2020 following a transition period and will lead the Company’s strategic repositioning in becoming the leading platform for digital real estate and infrastructure with Thomas J. Barrack, Jr., who will resume the sole position of Executive Chairman |
• | Completed the sale of NRE for $17.01 per share through which the Company received $96 million for its 11% ownership stake in NRE representing a net cash gain of approximately $22 million, or 30% above the Company’s cost basis, in addition to the remaining $65 million of the $70 million lump sum incentive and termination fee payment |
• | Entered into definitive agreements for the sale of the Company’s light industrial portfolio, including the related operating platform, for an aggregate $5.7 billion, which is anticipated to result in net cash sale proceeds of approximately $1.2 billion representing a net cash gain of approximately $450 million |
• | Completed the planned sales and/or monetization of $272 million of assets and net equity proceeds within the Other Equity and Debt segment, inclusive of the Company’s 11% equity interest in NRE; and for the nine months ended September 30, 2019, $651 million of assets within the Other Equity and Debt segment were sold or monetized resulting in net equity proceeds of $531 million |
• | Held the first closing of its fifth global real estate credit fund (the “Global Credit Fund”) with total capital commitments of $428 million, inclusive of capital commitments of $121 million from certain subsidiaries of the Company, which may decrease to no less than 5% of total commitments from total third party commitments to the Global Credit Fund |
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• | Entered into a series of transactions effectively terminating and settling the Company's $2 billion notional interest rate swap in the aggregate amount of $365 million |
• | Subsequent to the third quarter 2019: |
• | The Company refinanced a £212 million loan on a U.K. portfolio of senior housing assets with an interest rate of LIBOR plus 4.25% with a new £223 million fully extended five-year loan with an interest rate of LIBOR plus 3.75%; this refinancing, along with previously completed refinancing transactions this year, addresses all material near-term healthcare real estate loan maturities |
• | The Company achieved approximately 80% of the expected total $50 to $55 million ($45 to $50 million on a cash basis) of the previously announced annual compensation and administrative cost savings on a run rate basis through various initiatives with the balance expected to be achieved before year-end 2019 |
• | CLNC announced the bifurcation of its assets into a portfolio of core investments (“Core Portfolio”) and a portfolio of legacy, non-strategic investments that will advance its strategic plan to focus on key real estate credit investments and asset management competencies |
• | In conjunction with its focus on its Core Portfolio, CLNC meaningfully reduced the undepreciated book value of its non-strategic assets to better reflect its market value and reset its annualized dividend from $1.74 per share to $1.20 per share, which is now fully covered by in-place Core Earnings from its Core Portfolio alone |
• | Further, the Company amended its management agreement with CLNC to make effective in the beginning of the fourth quarter 2019 the alignment of the fee base with the newly reduced book value, which results in a decrease in annual base management fees from $45 million to $33 million |
• | The liquidation of legacy, non-strategic investments and capital redeployment into the Core Portfolio, combined with the reduced management fee, are expected to increase CLNC’s Core Earnings and narrow the discount between CLNC’s share price and book value, of which the Company’s 36% interest represents approximately $850 million of undepreciated book value |
• | The Company delivered a non-binding letter to the independent directors of CLNC seeking to explore with CLNC the possible internalization of its management agreement and a transfer of the Company’s private credit investment management business to CLNC to (i) further the Company’s strategic repositioning to simplify and establish the leading platform for digital real estate and infrastructure and (ii) position CLNC to become a leading independent real estate credit REIT with a clearly defined strategy positioned for greater growth |
• | As of November 5, 2019, the Company had approximately $620 million of liquidity through availability under its revolving credit facility and cash-on-hand |
For more information and a reconciliation of net income/(loss) to common stockholders to Core FFO and/or NOI, please refer to the non-GAAP financial measure definitions and tables at the end of this press release.
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Strategic Asset Review Update
In September 2019, the Company introduced “Colony Capital 2.0,” which is available on the Company’s website along with the corresponding replay of the webcast presentation. As follow up, we target providing more information about our strategic plan by mid-December 2019. The next set of disclosures regarding our strategic plan is expected to broadly outline topics such as the Company’s asset rotation plan, capital allocation policy, target investment profile and capital structure, and the vision for establishing the leading platform for digital real estate and infrastructure. The strategic plan continues to undergo review by management with the Strategic Asset Review Committee, the Board of Directors and an independent advisor. Critical precursors to our digital transformation have already been executed or are well underway as highlighted above including the sale of the industrial business and NRE, the portfolio bifurcation and repositioning at CLNC and its potential internalization, the stabilization of the healthcare real estate portfolio’s capital structure and significant progress on costs savings related to the corporate restructuring and reorganization plan. While many alternatives have been reviewed and discussed, if the final strategic plan adopted by the Company contemplates a decision to shorten our hold period for the Company’s legacy assets including certain of its real estate holdings and investment management businesses, the Company expects that such a decision, if and when made, may result in a significant impairment in the carrying value of its investments, specifically certain of its healthcare and hospitality assets, in addition to goodwill. As of September 30, 2019, the healthcare and hospitality segments had consolidated net equity carrying values of $1.6 billion and $0.9 billion, respectively, while the consolidated net carrying value of goodwill and intangible assets was $1.6 billion. As of September 30, 2019, the Company owned 71% of its healthcare segment and 94% of its hospitality segment.
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Third Quarter 2019 Operating Results and Investment Activity by Segment
Colony Capital holds investment interests in six reportable segments: Healthcare Real Estate; Industrial Real Estate; Hospitality Real Estate; CLNC; Other Equity and Debt; and Investment Management.
Healthcare Real Estate
As of September 30, 2019, the consolidated healthcare portfolio consisted of 371 properties (404 buildings): 164 senior housing properties, 106 medical office properties, 89 skilled nursing facilities and 12 hospitals. The Company’s equity interest in the consolidated Healthcare Real Estate segment was approximately 71% as of September 30, 2019. The healthcare portfolio earns rental income from our 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, we also earn resident fee income from senior housing properties that are managed by operators under a REIT Investment Diversification and Empowerment Act of 2007 (“RIDEA”) structure.
During the third quarter 2019, this segment’s net loss attributable to common stockholders was $(82.8) million, Core FFO was $16.1 million and consolidated NOI was $71.3 million. Net loss included the Company’s share of impairments of $73.0 million related primarily to assets, which have been or will be marketed for sale in the near term and have fair market values below their prior respective carrying values. Impairments are added back to the Company's net income (loss) to calculate FFO and Core FFO. In the third quarter 2019, healthcare same store portfolio sequential quarter to quarter comparable NOI decreased (7.0)% and compared to the same period last year, third quarter 2019 same store NOI decreased (6.3)%. Third quarter 2019 same store NOI included a $1.6 million consolidated, or $1.2 million CLNY OP share, one-time write-off of a certain tenant rent receivable in the Hospitals portfolio and second quarter 2019 same store NOI included a $0.9 million consolidated, or $0.7 million CLNY OP share, one-time recovery of a certain tenant rent receivable in the Skilled Nursing Facilities portfolio. Excluding these one-time items from same store NOI, the healthcare same store portfolio sequential quarter to quarter comparable NOI would have decreased (3.7)%. This decrease was primarily due to increased wages without offsetting revenue absorption from increased competition in the Senior Housing Operating portfolio and lower rent collections from certain tenants in the Triple-Net Lease Senior Housing and Medical Office Buildings portfolios. The healthcare same store portfolio is defined as properties in operation throughout the full periods presented under the comparison and included 371 properties in the comparisons. Properties acquired or disposed during these periods are excluded for the same store portfolio.
The following table presents NOI and certain operating metrics by property types in the Company’s Healthcare Real Estate segment:
Consolidated | CLNY OP | Same Store | ||||||||||||||||||||
NOI | Share NOI(1) | Consolidated NOI | Occupancy %(2) | TTM Lease Coverage(3) | ||||||||||||||||||
($ in millions) | Q3 2019 | Q3 2019 | Q3 2019 | Q2 2019 | Q3 2019 | Q2 2019 | 6/30/19 | 3/31/19 | ||||||||||||||
Senior Housing - Operating | $ | 15.6 | $ | 11.1 | $ | 15.6 | $ | 16.4 | 85.3 | % | 84.8 | % | N/A | N/A | ||||||||
Medical Office Buildings (MOB) | 12.9 | 9.1 | 12.9 | 13.5 | 82.2 | % | 82.1 | % | N/A | N/A | ||||||||||||
Triple-Net Lease: | ||||||||||||||||||||||
Senior Housing | 14.1 | 10.0 | 14.1 | 15.3 | 80.5 | % | 80.9 | % | 1.2x | 1.3x | ||||||||||||
Skilled Nursing Facilities | 25.5 | 18.1 | 23.4 | 24.2 | 82.5 | % | 83.3 | % | 1.2x | 1.2x | ||||||||||||
Hospitals | 3.2 | 2.3 | 3.2 | 5.0 | 58.3 | % | 63.4 | % | 2.7x | 2.4x | ||||||||||||
Healthcare Total | $ | 71.3 | $ | 50.6 | $ | 69.2 | $ | 74.4 | ||||||||||||||
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(1) | CLNY OP Share NOI represents third quarter 2019 Consolidated NOI multiplied by CLNY OP’s ownership interest as of September 30, 2019. |
(2) | Occupancy % for Senior Housing - Operating represents average during the presented quarter, for MOB’s represents as of last day in the quarter and for other types represents average during the prior quarter. |
(3) | Represents the ratio of the tenant’s/operator’s EBITDAR to cash rent payable to the Company’s Healthcare Real Estate segment on a trailing twelve month basis. |
Asset Dispositions and Financing
During the third quarter 2019, the Healthcare Real Estate segment disposed of nine skilled nursing facilities for $102 million, or $73 million CLNY OP share resulting in net equity proceeds of $36 million, or $26 million CLNY OP share.
Subsequent to the third quarter 2019, the Healthcare Real Estate segment refinanced a £212 million loan on a portfolio of senior housing assets in the United Kingdom with an interest rate of LIBOR plus 4.25% with a new £223 million fully extended five-year loan with an interest rate of LIBOR plus 3.75%. This refinancing, along with previously completed refinancing transactions this year, addresses all material near term healthcare loan maturities.
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Industrial Real Estate
The Company's light industrial portfolio and related operating platform are under contract for approximately $5.7 billion. The sale is anticipated to close in the fourth quarter of 2019, subject to customary closing conditions. Accordingly, for all current and prior periods presented, the related assets and liabilities of the industrial segment are presented as assets and liabilities held for sale on the consolidated balance sheet and the related operating results are presented as income from discontinued operations on the consolidated statement of operations. The portfolio of bulk industrial assets is now excluded from the light industrial sale agreement, but is still held for sale. The Company is in the process of negotiating an agreement to sell the bulk industrial assets with another third party on substantially the same economic terms as the prior agreement; however, there can be no assurances that a sale of the bulk industrial assets will be completed on the terms contemplated or at all.
As of September 30, 2019, the consolidated light industrial portfolio consisted of 450 light industrial buildings totaling 57.4 million rentable square feet across 26 major U.S. markets and was 91% leased. The Company’s equity interest in the consolidated light industrial portfolio was approximately 34% as of September 30, 2019 and June 30, 2019. Total third-party capital commitments in the light industrial portfolio were approximately $1.7 billion compared to cumulative balance sheet contributions of $749 million as of September 30, 2019. The light industrial portfolio is composed of and primarily invests in light industrial properties in infill locations in major U.S. metropolitan markets generally targeting multi-tenanted warehouses less than 250,000 square feet.
As of September 30, 2019, the consolidated bulk industrial portfolio consisted of six bulk industrial buildings totaling 4.2 million rentable square feet across five major U.S. markets and was 67% leased. The Company's equity interest in the consolidated bulk industrial portfolio was approximately 51%, or $72 million, with the other 49% owned by third-party capital, which is managed by the Company's industrial operating platform.
As of September 30, 2019, the Company owned a 100% interest in the related industrial operating platform, which manages both the light and bulk industrial assets.
During the third quarter 2019, this segment’s net income attributable to common stockholders was $10.3 million, Core FFO was $14.3 million and consolidated NOI was $66.8 million. In the third quarter 2019, light industrial same store portfolio sequential quarter to quarter comparable rental revenue increased 0.9% and NOI increased 2.1%. Compared to the same period last year, third quarter 2019 light industrial same store rental revenue increased 3.3% and NOI increased 4.7%. The sequential quarter to quarter and year over year increase in NOI was primarily due to higher contractual rental revenue from new leases and lease renewals at favorable rates. The Company’s light industrial same store portfolio consisted of 311 buildings. The same store light industrial portfolio is defined once a year at the beginning of the current calendar year and includes buildings that were owned and stabilized throughout the entirety of both the current and prior calendar years. Properties acquired or disposed of after the same store portfolio is determined are excluded. Stabilized properties are defined as properties owned for more than one year or are greater than 90% leased. Light industrial same store NOI excludes lease termination fee revenue.
The following table presents NOI and certain operating metrics in the Company’s Industrial Real Estate segment:
Consolidated | CLNY OP | Same Store | |||||||||||||||||
NOI | Share NOI (1) | Consolidated NOI | Leased %(2) | ||||||||||||||||
($ in millions) | Q3 2019 | Q3 2019 | Q3 2019 | Q2 2019 | 9/30/19 | 6/30/19 | |||||||||||||
Light Industrial | $ | 63.3 | $ | 21.2 | $ | 43.1 | $ | 42.2 | 95.0 | % | 94.5 | % | |||||||
Bulk Industrial | 3.5 | 1.8 | 3.5 | 3.0 | 67.4 | % | 67.4 | % | |||||||||||
Total Industrial | $ | 66.8 | $ | 23.0 | |||||||||||||||
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(1) | CLNY OP Share NOI represents third quarter 2019 Consolidated NOI multiplied by CLNY OP’s ownership interest as of September 30, 2019. |
(2) | Leased % as of the reported date represents square feet under executed leases, some of which may not have taken occupancy. |
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Hospitality Real Estate
As of September 30, 2019, the consolidated hospitality portfolio consisted of 158 properties: 88 select service properties, 66 extended stay properties and 4 full service properties. The Company’s equity interest in the consolidated Hospitality Real Estate segment was approximately 94% as of September 30, 2019. The hospitality portfolio consists primarily of premium branded select service hotels and extended stay hotels located mostly in major metropolitan markets, of which a majority are affiliated with top hotel brands. The select service hospitality portfolio referred to as the THL Hotel Portfolio, which the Company acquired through consensual transfer during the third quarter 2017, is not included in the Hospitality Real Estate segment and is included in the Other Equity and Debt segment.
During the third quarter 2019, this segment’s net loss attributable to common stockholders was $(28.4) million, Core FFO was $35.3 million and consolidated NOI before FF&E Reserve was $77.4 million. Net loss included the Company’s share of impairments of $28.1 million related primarily to assets, which have been or will be put up for sale in the near term and have fair market values below their prior respective carrying values. Impairments are added back to the Company's net income (loss) to calculate FFO and Core FFO. Compared to the same period last year, third quarter 2019 hospitality same store portfolio revenue increased 0.4% and NOI before FF&E Reserve increased 2.4%, primarily due to a one-time $1.6 million benefit from the reversal of property taxes that were accrued prior to 2018. Excluding the one-time reversal, third quarter 2019 NOI before FFE Reserve was flat compared to the same period last year. The Company’s hotels typically experience seasonal variations in occupancy which may cause quarterly fluctuations in revenues and therefore sequential quarter to quarter revenue and NOI before FF&E Reserve result comparisons are not meaningful. The hospitality same store portfolio is defined as hotels in operation throughout the full periods presented under the comparison and included 158 hotels.
The following table presents NOI before FF&E Reserve and certain operating metrics by brands in the Company’s Hospitality Real Estate segment:
Same Store | |||||||||||||||||||||||||||||||||
Consolidated | CLNY OP Share | Consolidated | Avg. Daily Rate | RevPAR(3) | |||||||||||||||||||||||||||||
NOI before FF&E Reserve(1) | NOI before FF&E Reserve(2) | NOI before FF&E Reserve | Occupancy %(4) | (In dollars)(4) | (In dollars)(4) | ||||||||||||||||||||||||||||
($ in millions) | Q3 2019 | Q3 2019 | Q3 2019 | Q3 2018 | Q3 2019 | Q3 2018 | Q3 2019 | Q3 2018 | Q3 2019 | Q3 2018 | |||||||||||||||||||||||
Marriott | $ | 40.1 | $ | 37.7 | $ | 57.0 | $ | 57.2 | 77.4 | % | 77.8 | % | $ | 130 | $ | 130 | $ | 101 | $ | 101 | |||||||||||||
Hilton | 34.2 | 32.1 | 15.4 | 13.6 | 83.7 | % | 84.8 | % | 133 | 132 | 111 | 112 | |||||||||||||||||||||
Other | 3.1 | 2.9 | 4.8 | 4.6 | 86.6 | % | 85.4 | % | 139 | 139 | 120 | 118 | |||||||||||||||||||||
Total/W.A. | $ | 77.4 | $ | 72.7 | $ | 77.2 | $ | 75.4 | 79.0 | % | 79.4 | % | $ | 131 | $ | 131 | $ | 104 | $ | 104 | |||||||||||||
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(1) | Third quarter 2019 consolidated FF&E reserve was $9.4 million. |
(2) | CLNY OP Share NOI before FF&E Reserve represents third quarter 2019 Consolidated NOI before FF&E Reserve multiplied by CLNY OP’s ownership interest as of September 30, 2019. |
(3) | RevPAR, or revenue per available room, represents a hotel's total guestroom revenue divided by the room count and the number of days in the period being measured. |
(4) | For each metric, data represents average during the presented quarter. |
Asset Dispositions
During the third quarter 2019, the Hospitality Real Estate segment disposed of six unencumbered hotels resulting in net proceeds of $47 million.
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Colony Credit Real Estate, Inc. (“CLNC”)
Colony Credit Real Estate, Inc. is a commercial real estate credit REIT, externally managed by the Company, with $5.6 billion in assets and $2.2 billion in GAAP book equity value as of September 30, 2019. The Company owns 48.0 million shares and share equivalents, or 36%, of CLNC and earns an annual base management fee of 1.5% on stockholders’ equity (as defined in the CLNC management agreement, which was recently amended) and an incentive fee of 20% of CLNC’s Core Earnings over a 7% hurdle rate.
CLNC announced the bifurcation of its assets into (i) a Core Portfolio consisting of senior loans, mezzanine loans, preferred equity, CRE debt securities and net lease real estate and (ii) a portfolio of legacy, non-strategic investments consisting of operating real estate, real estate private equity interests and certain retail and other legacy loans originated prior to the formation of CLNC. This bifurcation will allow CLNC to focus on the divestment of its legacy, non-strategic portfolio to redeploy into and grow its Core Portfolio. In conjunction with its focus on its Core Portfolio, CLNC meaningfully reduced the undepreciated book value of its non-strategic assets to better reflect its market value and reset its annualized dividend from $1.74 per share to $1.20 per share, which is now fully covered by in place Core Earnings from its Core Portfolio alone. As a result of the meaningful reduction to CLNC’s book value, the Company amended its management agreement with CLNC to align the fee base with the newly reduced book value, which results in a decrease in annual base management fees from $45 million to $33 million effective in the beginning of the fourth quarter 2019. The liquidation of legacy, non-strategic investments and capital redeployment into the Core Portfolio, combined with the reduced management fee, are expected to increase CLNC’s Core Earnings and narrow the discount between CLNC’s share price and book value, of which the Company’s 36% interest represents approximately $850 million of undepreciated book value.
CLNC also amended its definition of Core Earnings to include provision for loan losses, but exclude realized and unrealized real estate gains and losses (consistent with NAREIT FFO) and earnings related to legacy, non-strategic assets and businesses to focus its results on the earnings of its Core Portfolio and better align comparability to the non-GAAP earnings definitions of its peers. During the third quarter 2019, this segment’s net income attributable to common stockholders was $7.3 million and Core FFO was $16.3 million. CLNY’s Core FFO pickup from CLNC represents a 36% share of CLNC's Core Earnings. Please refer to CLNC's earnings release, portfolio bifurcation plan and financial supplemental furnished on its Form 8-K and its Quarterly Report on its Form 10-Q filed with the SEC for additional details.
On November 6, 2019, Thomas J. Barrack, Jr., the Executive Chairman and Chief Executive Officer of the Company, delivered a non-binding letter to CLNC’s independent directors, seeking to explore with CLNC the possible internalization of its management and a transfer of the Company’s credit management business to CLNC to (i) further the Company’s strategic repositioning to simplify and establish the leading platform for digital real estate and infrastructure and (ii) position CLNC to become a leading independent real estate credit REIT with a clearly defined strategy positioned for greater growth. There can be no assurance that the Company and CLNC will reach an agreement with respect to an internalization or any of the other matters described in the letter, that the nature or terms of an internalization or any such other matters will not differ from the description in the letter, or that an internalization or any such other matters will be completed. Please refer to the Company’s Schedule 13-D/A filed with the SEC with respect to CLNC’s shares of Class A common stock filed with the SEC on November 7, 2019 for additional details.
Other Equity and Debt
The Company owns a diversified group of strategic and non-strategic real estate and real estate-related debt and equity investments. Strategic investments include investments for which the Company acts as a general partner and/or manager (“GP Co-Investments”) and receives various forms of investment management economics on the related third-party capital. Non-strategic investments are composed of those investments the Company does not intend to own for the long term including other real estate equity including the THL Hotel Portfolio and the Company’s interest in Albertsons; real estate debt; net leased assets; and multiple classes of commercial real estate (“CRE”) securities.
During the third quarter 2019, this segment’s aggregate net loss attributable to common stockholders was $(17.0) million and Core FFO was $(11.0) million. Net loss included the Company’s share of real estate impairments of $39.6 million primarily related to a portfolio of three U.S. multi-tenant office properties, which are held for sale and have fair market values lower than their prior respective carrying values, and various other investments including CRE securities, a mixed use asset in the United Kingdom and residential land. $31.6 million of the $39.6 million impairments related to consolidated real estate investments, which are added back to the Company's net loss to calculate FFO and Core FFO. Net loss also included the Company’s share of provision for loan losses of $12.6 million primarily related to a loan encumbered by a retail property. Provisions for loan losses are not added back to the Company's net loss to calculate FFO and Core FFO. In connection with the sale of the Company's 11% ownership position in NRE, the Company received $96 million in net proceeds resulting in a gain of $12 million against its GAAP carrying value and a $22 million Core FFO gain (Core FFO includes an additional $10 million gain, which was recognized in a previous quarter in the Company’s net income (loss), but not for Core FFO).
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In addition to the $8.0 million of impairments in unconsolidated joint ventures, $12.6 million of provision for loan losses and $22 million NRE gain, Core FFO also included $39.2 million of net investment losses primarily related to the sale of a portfolio of U.S. multi-tenant office properties. This loss was anticipated in the fourth quarter of 2018, when the Company recorded a related impairment, which was added back to the Company’s net income (loss) to calculate Core FFO in the fourth quarter of 2018.
As of September 30, 2019, the undepreciated carrying value of assets and equity within the Other Equity and Debt segment were $2.8 billion and $1.6 billion, respectively.
CLNY OP Share | |||||||||||||||
Undepreciated Carrying Value | |||||||||||||||
September 30, 2019 | June 30, 2019 | ||||||||||||||
($ in millions) | Assets | Equity | Assets | Equity | |||||||||||
Strategic: | |||||||||||||||
GP co-investments | $ | 1,145 | $ | 663 | $ | 1,176 | $ | 707 | |||||||
Interest in NRE | — | — | 87 | 87 | |||||||||||
Strategic Subtotal | 1,145 | 663 | 1,263 | 794 | |||||||||||
Non-Strategic: | |||||||||||||||
Other Real Estate Equity & Albertsons | 1,185 | 546 | 1,285 | 596 | |||||||||||
Real Estate Debt | 244 | 244 | 274 | 274 | |||||||||||
Net Lease Real Estate Equity | 184 | 80 | 184 | 77 | |||||||||||
CRE Securities and Real Estate Private Equity Funds | 65 | 65 | 67 | 67 | |||||||||||
Non-Strategic Subtotal | 1,678 | 935 | 1,810 | 1,014 | |||||||||||
Total Other Equity and Debt | $ | 2,823 | $ | 1,598 | $ | 3,073 | $ | 1,808 | |||||||
Other Equity and Debt Segment Asset Dispositions
During the third quarter 2019, the Company completed the planned sales and/or monetization of $272 million of assets and net equity proceeds from various investments, including $96 million from the sale of the Company's 11% equity interest in NRE, $148 million from the GP co-investments category, $24 million from the Other Real Estate Equity category, and $4 million from the Real Estate Debt category.
Investment Management
The Company’s Investment Management segment includes the business and operations of managing capital on behalf of third-party investors through closed and open-end private funds, and traded and non-traded real estate investment trusts. As of September 30, 2019, the Company had $39.3 billion of third-party AUM compared to $28.6 billion as of June 30, 2019. As of September 30, 2019, Fee-Earning Equity Under Management (“FEEUM”) was $22.4 billion compared to $18.0 billion as of June 30, 2019. The increase in FEEUM was primarily attributable to the acquisition of Digital Bridge Holdings partially offset by the sale of NRE and other assets. During the third quarter 2019, this segment’s aggregate net loss attributable to common stockholders was $(287.8) million and Core FFO was $100.2 million. Net loss included a $387.0 million reduction to goodwill as a result of the pending sale of the Industrial platform and real estate portfolio and the decrease in management fees from CLNC resulting from its reduced fee base, in connection with its portfolio bifurcation. The reduction of goodwill is added back to the Company's net loss to calculate Core FFO. Further, net loss included the accelerated amortization of investment management intangibles of $52.6 million and $12.6 million of severance and payroll taxes related to the termination of NRE’s management agreement resulting from its sale, which are added back to the Company's net loss to calculate Core FFO. These were offset by $43.0 million of termination fee income and $21.5 million of realized incentive fee income from NRE, which were subject to taxes and/or incentive fee compensation; $35.6 million of unrealized carried interest income accrual related to the anticipated sale of the industrial portfolio, which had a corresponding incentive fee expense for managements 50% share; and a $51.4 million gain from the remeasurement of our 50% interest in the manager of the $4 billion Digital Colony Partners fund resulting from the acquisition of DBH. The remeasurement gain is excluded in the calculation of Core FFO.
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Digital Bridge Holdings, LLC ("DBH")
On July 25, 2019, the Company completed its combination with DBH for $329 million of cash and OP unit consideration to strategically reposition the Company to become a leading owner and investment manager of assets, businesses, and investment management products in which the digital and real estate frontiers intersect. DBH manages nearly $20 billion of digital infrastructure globally, directly and through Digital Colony Partners (DCP), and pro forma for DCP’ pending Zayo Group Holdings, Inc. acquisition, which has received shareholder approval and is on track to close in the first quarter of 2020. For more information, please refer to the Company's press release announcing the DBH transaction on July 25, 2019 and the Form 8-K filed by the Company with the SEC on July 30, 2019.
On October 1, 2019, DCP completed the acquisition of Beanfield Technologies Inc. in Canada. Beanfield owns and operates a 220 mile dense metro fiber network in Toronto and Montreal and represents a compelling investment for DCP. Beanfield is DCP’s second foray in Canada with Aptum, the first Canadian investment, closing earlier this year. Aptum is a leading provider of colocation, network connectivity, and managed services with a portfolio of 14 data centers across the US and Canada and a metro fiber network of over 2,000 route miles in greater Toronto and Montreal. With the incremental equity investment of $100 million into Beanfield, DCP is now 44% committed (pro forma for the completion of the Zayo acquisition).
NRE Termination
On September 30, 2019, the Company completed the sale of NRE for $17.01 per share. The sale resulted in the termination of the Company’s management agreement with NRE for which the Company received the $65 million balance of the $70 million lump sum incentive and termination fee payment ($5 million was paid to the Company in the second quarter of 2019). The $65 million was split between a $43 million termination fee and $22 million incentive fee income, which were subject to taxes and/or incentive fee compensation expense.
In connection with the sale of NRE and termination of the Company’s management agreement with NRE, for the third quarter 2019, the Company’s Consolidated Statement of Operations included approximately $26 million of one-time compensation costs, which represent the acceleration of NRE equity awards held by certain employees and other cash compensation paid by NRE to certain employees. The full amount of these compensation costs were paid by NRE; as a result, a corresponding $26 million offset was recorded in Other Income. In addition, the Company was responsible for severance and payroll taxes for certain employees dedicated to NRE’s business of $13 million, which was added back to the Company's net loss to calculate Core FFO.
Global Credit Fund
On July 29, 2019, the Company, through wholly-owned subsidiaries of its operating company, Colony Capital Operating Company, LLC (“OP”), held the first closing of its Global Credit Fund, a United States dollar and Euro denominated fund structure primarily focused on opportunistic credit investments in Europe. The Global Credit Fund has total capital commitments of approximately $428 million (€384 million), inclusive of capital commitments of approximately $121 million (€109 million) by certain wholly-owned subsidiaries of the OP (“Sponsor Commitment”). The general partner of the Global Credit Fund may reduce the Sponsor Commitment to no less than 5% of total commitments from total partner commitments to the Global Credit Fund.
Energy Strategic Joint Venture
During the third quarter 2019, the Company’s energy investment management arm, Alpine Energy Capital (formerly known as Colony HB2 Energy) formed a strategic joint venture with California Resources Corporation (NYSE: CRC), to which Alpine has committed to fund $320 million for the development of CRC’s flagship Elk Hills field. Alpine is a joint venture between the Company and Sam Zell’s Equity Group Investments, led by Alpine’s seasoned management team, including Chairman Craig Perry and Chief Investment Officer Bill Wicker, along with Chief Operating Officer Michael McCoy and Chief Exploration Officer Elliott Hough.
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Assets Under Management (“AUM”)
As of September 30, 2019, the Company had $53 billion of AUM:
September 30, 2019 | June 30, 2019 | ||||||||||||
($ in billions) | Amount | % of Grand Total | Amount | % of Grand Total | |||||||||
Balance Sheet (CLNY OP Share): | |||||||||||||
Healthcare | $ | 3.7 | 6.9 | % | $ | 3.9 | 9.0 | % | |||||
Industrial | 1.7 | 3.2 | % | 1.7 | 3.9 | % | |||||||
Hospitality | 3.8 | 7.1 | % | 3.9 | 9.0 | % | |||||||
Other Equity and Debt | 2.8 | 5.3 | % | 3.1 | 7.2 | % | |||||||
CLNC(1) | 2.0 | 3.8 | % | 2.1 | 4.8 | % | |||||||
Balance Sheet Subtotal | 14.0 | 26.3 | % | 14.7 | 33.9 | % | |||||||
Investment Management: | |||||||||||||
Digital Bridge Holdings(2) | 13.8 | 25.9 | % | 1.9 | 4.4 | % | |||||||
Institutional Funds | 10.6 | 19.9 | % | 10.2 | 23.6 | % | |||||||
Colony Credit Real Estate (NYSE:CLNC)(3) | 3.5 | 6.6 | % | 3.7 | 8.5 | % | |||||||
Retail Companies | 3.4 | 6.4 | % | 3.4 | 7.9 | % | |||||||
NorthStar Realty Europe (NYSE:NRE) | — | — | % | 1.5 | 3.5 | % | |||||||
Non-Wholly Owned REIM Platforms(4) | 8.0 | 14.9 | % | 7.9 | 18.2 | % | |||||||
Investment Management Subtotal | 39.3 | 73.7 | % | 28.6 | 66.1 | % | |||||||
Grand Total | $ | 53.3 | 100.0 | % | $ | 43.3 | 100.0 | % | |||||
___________________________________________________
(1) | Represents the Company’s 36% ownership share of CLNC’s total pro-rata share of assets of $5.6 and $5.8 billion as of September 30, 2019 and June 30, 2019, respectively. |
(2) | Second quarter 2019 reflects 50% of Digital Colony Partners AUM which in previous quarters was included in Non-Wholly Owned REIM Platforms. |
(3) | Represents third-party 64% ownership share of CLNC’s total pro-rata share of assets of $5.6 and $5.8 billion as of September 30, 2019 and June 30, 2019, respectively. |
(4) | REIM: Real Estate Investment Management |
Liquidity and Financing
As of November 5, 2019, the Company had an outstanding balance of $185 million on its revolving credit facility, resulting in approximately $620 million of liquidity through availability under its revolving credit facility and cash-on-hand.
$2 Billion Notional Interest Rate Swap
In connection with the merger among NorthStar Asset Management Group Inc., Colony Capital, Inc. and NorthStar Realty Finance Corp., the Company assumed a $2 billion notional forward interest rate swap originally entered into in June 2015 to hedge against potential increases in interest rates upon the December 2019 maturity of certain Healthcare mortgage debt. This debt was recently refinanced at the end of the second quarter 2019 and since the time of the refinancing, the Company, through a series of transactions in the third quarter, effectively unwound the entire swap for an aggregate $365 million, of which $224 million has been paid in cash with the remaining $141 million due to the counterparty in December 2019. As a result, the Company recorded total GAAP loss in the third quarter of $91 million (a loss of $2 million will be recorded in the fourth quarter), which represents the difference between the total settlement value and the fair value of the swap as of June 30, 2019 of $272 million. For Core FFO purposes, the Company has revised the definition of Core FFO to exclude all losses related to the swap because the swap was an economic hedge against the refinancing risk of the maturing debt in the Healthcare portfolio and Core FFO does not recognize any realized gains or losses within our real estate verticals or investment management businesses. Core FFO only includes realized gains and losses from the Other Equity and Debt segment.
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Common Stock and Operating Company Units
As of November 5, 2019, the Company had 487.7 million shares of Class A and B common stock outstanding and the Company’s operating partnership had 52.6 million operating company units outstanding held by members other than the Company or its subsidiaries, which includes 21.5 million operating company units issued on July 25, 2019 as part of the consideration for the acquisition of Digital Bridge Holdings.
As of November 5, 2019, the Company had $247 million remaining under its share repurchase program.
Common and Preferred Dividends
On August 6, 2019, the Company’s Board of Directors declared a quarterly cash dividend of $0.11 per share to holders of Class A and Class B common stock for the third quarter of 2019, which was paid on October 15, 2019 to respective stockholders of record on September 30, 2019. The Board of Directors also declared cash dividends with respect to each series of the Company’s cumulative redeemable perpetual preferred stock each in accordance with terms of such series as follows: (i) with respect to each of the Series B stock - $0.515625 per share and Series E stock - $0.546875 per share, such dividends to be paid on November 15, 2019 to the respective stockholders of record on November 8, 2019 and (ii) with respect to each of the Series G stock - $0.46875 per share, Series H stock - $0.4453125 per share, Series I stock - $0.446875 per share and Series J stock - $0.4453125 per share, such dividends were paid on October 15, 2019 to the respective stockholders of record on October 10, 2019.
On November 6, 2019, the Company’s Board of Directors declared a quarterly cash dividend of $0.11 per share to holders of Class A and Class B common stock for the fourth quarter of 2019, which will be paid on January 15, 2020 to respective stockholders of record on December 31, 2019. The Board of Directors also declared cash dividends with respect to each series of the Company’s cumulative redeemable perpetual preferred stock each in accordance with terms of such series as follows: (i) with respect to each of the Series B stock - $0.515625 per share and Series E stock - $0.546875 per share, such dividends to be paid on February 18, 2020 to the respective stockholders of record on February 10, 2020 and (ii) with respect to each of the Series G stock - $0.46875 per share, Series H stock - $0.4453125 per share, Series I stock - $0.446875 per share and Series J stock - $0.4453125 per share, such dividends to be paid on January 15, 2020 to the respective stockholders of record on January 10, 2020.
Non-GAAP Financial Measures and Definitions
Assets Under Management (“AUM”)
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. AUM is based on reported gross undepreciated carrying value of managed investments as reported by each underlying vehicle at September 30, 2019. AUM further includes a) uncalled capital commitments and b) includes the Company’s pro-rata share of each affiliate non wholly-owned real estate investment management platform’s assets as presented and calculated by the affiliate. Affiliates include RXR Realty LLC, American Healthcare Investors and Hamburg Trust. The Company's calculations of AUM 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.
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 a) 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 and b) the Company’s pro-rata share of fee bearing equity of each affiliate as presented and calculated by the affiliate. Affiliates include RXR Realty LLC, American Healthcare Investors and Hamburg Trust. 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.
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 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.
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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) gains and losses from sales of depreciable real estate within the Other Equity and Debt segment, net of depreciation, amortization and impairment previously adjusted for FFO; (ii) gains and losses from sales of businesses within the Investment Management segment and impairment write-downs associated with the Investment Management segment; (iii) equity-based compensation expense; (iv) effects of straight-line rent revenue and expense; (v) amortization of acquired above- and below-market lease values; (vi) amortization of deferred financing costs and debt premiums and discounts; (vii) unrealized fair value gains or losses on interest rate and foreign currency hedges, and foreign currency remeasurements and realized gains and losses on interest rate hedging instruments existing at the time of the January 2017 merger with remaining terms greater than one year that served as economic hedges for any financing or refinancing of the Company's real estate verticals; (viii) acquisition and merger related transaction costs; (ix) restructuring and merger integration costs; (x) amortization and impairment of finite-lived intangibles related to investment management contracts and customer relationships; (xi) gain on remeasurement of consolidated investment entities and the effect of amortization thereof; (xii) non-real estate depreciation and amortization; (xiii) change in fair value of contingent consideration; and (xiv) tax effect on certain of the foregoing adjustments. Beginning with the first quarter of 2018, the Company’s Core FFO from its interest in Colony Credit Real Estate (NYSE: CLNC) and NorthStar Realty Europe (NYSE: NRE) represented its percentage interest multiplied by CLNC’s Core Earnings and NRE’s Cash Available for Distribution (“CAD”), respectively. Refer to CLNC’s and NRE's respective filings with the SEC for the definition and calculation of Core Earnings and CAD.
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. The Company also presents Core FFO excluding gains and losses from sales of certain investments as well as its share of similar adjustments for CLNC. The Company believes that 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.
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
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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.
NOI before Reserve for Furniture, Fixtures and Equipment Expenditures (“NOI before FF&E Reserve”)
For our hospitality real estate segment, NOI before FF&E Reserve represents NOI before the deduction of reserve contributions for the repair, replacement and refurbishment of furniture, fixtures, and equipment ("FF&E"), which are typically 4% to 5% of revenues, and required under certain debt agreements and/or franchise and brand-managed hotel agreements.
Earnings Before Interest, Tax, Depreciation, Amortization and Rent (“EBITDAR”)
Represents earnings before interest, taxes, depreciation, amortization and rent for facilities accruing to the tenant/operator of the property (not the Company) for the period presented. The Company uses EBITDAR in determining TTM Lease Coverage for triple-net lease properties in its Healthcare Real Estate segment. EBITDAR has limitations as an analytical tool. EBITDAR does not reflect historical cash expenditures or future cash requirements for facility capital expenditures or contractual commitments. In addition, EBITDAR does not represent a property's net income or cash flow from operations and should not be considered an alternative to those indicators. The Company utilizes EBITDAR as a supplemental measure of the ability of the Company's operators/tenants to generate sufficient liquidity to meet related obligations to the Company.
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.
The information related to the Company’s tenants/operators that is provided in this press release 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.
Third Quarter 2019 Conference Call
The Company will conduct a conference call to discuss the financial results on Friday, November 8, 2019 at 7:00 a.m. PT / 10:00 a.m. ET. 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. The call will also be broadcast live over the Internet and can be accessed on the Public Shareholders section of the Company’s website at www.clny.com. A webcast of the call will be available for 90 days on the Company’s website.
For those unable to participate during the live call, a replay will be available starting November 8, 2019, at 10:00 a.m. PT / 1:00 p.m. ET, through November 15, 2019, at 8:59 p.m. PT / 11:59 p.m. ET. To access the replay, dial (844) 512-2921 (U.S.), and use passcode 13695201. International callers should dial (412) 317-6671 and enter the same conference ID number.
Corporate Overview and Supplemental Financial Report
A Third Quarter 2019 Corporate Overview and Supplemental Financial Report is available 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 management firm with assets under management of $53 billion, which includes approximately $14 billion of assets under management from Digital Bridge, a leading global investment manager of digital infrastructure assets including cell towers, small cells, fiber and data centers. The Company manages capital on behalf of its stockholders, as well as institutional and retail investors in private funds, and traded and non-traded real estate investment trusts. The Company has significant holdings in: (a) the healthcare, industrial and hospitality property sectors; (b) Colony Credit Real Estate, Inc. (NYSE: CLNC), which is externally managed by a subsidiary of the Company; and (c) various other equity and debt investments. The Company is headquartered in Los Angeles with key offices in Boca Raton, New York, Paris and London, and has over 450 employees across 21 locations in 13 countries including employees assumed in the July 2019 business combination with Digital Bridge. For additional information regarding the Company and its management and business, please refer to www.clny.com.
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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 timing and content of the Company’s strategic plan, including the Company’s ability to continue executing on all or any of the Company’s related initiatives and whether the Company and its stockholders will realize any benefits from such initiatives, whether the Company will enter into a definitive agreement with CLNC to internalize its management and transfer the Company’s credit management business to CLNC, our ability to achieve anticipated compensation and administrative cost savings pursuant to our corporate restructuring and reorganization plan, in the timeframe expected or at all, the Company’s ability to realize anticipated benefits from its strategic initiatives, including the acquisition of DBH, the potential sale of our industrial platform, the acquisition of a Latin American private equity platform, and the formation of certain other investment management platforms, including any impact of such initiatives on our company’s growth and earnings profile, potential impairments, the impact of changes to the Company’s management, employee and organizational structure, including the implementation and timing of CEO succession plans, the Company’s ability to complete a sale of its industrial portfolio, including the related management platform within the timeframe contemplated, or at all, the Company’s use of any proceeds received from a sale of its industrial portfolio if completed, Digital Colony’s ability to complete the pending acquisition of Zayo Group Holdings, Inc. on the terms contemplated or at all, the Company’s financial flexibility, including borrowing capacity under its revolving credit facility, the Company's ability to grow its investment management business, the timing, pace of growth and performance of the Company's industrial platform, the performance of the Company’s investment in CLNC, the Company’s ability to maintain or create future permanent capital vehicles under its management, the level of the Company’s commitments to its managed vehicles, whether the Company will realize any anticipated benefits from the CRC strategic joint venture, including the Company’s ability to syndicate its investment to third parties through its Alpine Energy platform, the Company’s ability to complete certain anticipated sales of healthcare assets, the Company's portfolio composition, Colony Capital’s liquidity, including its ability to continue to generate liquidity by additional sales of assets in its Other Equity and Debt segment, the Company's expected taxable income and net cash flows, excluding the contribution of gains, whether the Company will maintain or produce higher Core FFO per share (including or excluding gains and losses from sales of certain investments) in the coming quarters, or ever, the Company’s ability to maintain 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 companies, whether Colony Capital 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 timing of and ability to complete repurchases of Colony Capital’s stock, Colony Capital’s ability to maintain inclusion and relative performance on the RMZ, Colony Capital’s leverage, including the Company’s ability to reduce debt and the timing and amount of borrowings under its credit facility, the ability of the Company to refinance certain mortgage debt on similar terms to those currently existing or at all, whether the Company will benefit from the combination of its broker-dealer business with S2K Financial, increased interest rates and operating costs, adverse economic or real estate developments in Colony Capital’s markets, Colony Capital’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 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 detailed in our 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 Colony Capital’s reports filed from time to time with the SEC.
Colony Capital 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. Colony Capital 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 Colony Capital does not intend to do so.
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Source: Colony Capital, Inc.
Investor Contacts:
Addo Investor Relations
Lasse Glassen
310-829-5400
(FINANCIAL TABLES FOLLOW)
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COLONY CAPITAL, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
September 30, 2019 | December 31, 2018 | |||||||
Assets | ||||||||
Cash and cash equivalents | $ | 455,330 | $ | 461,912 | ||||
Restricted cash | 257,435 | 364,605 | ||||||
Real estate, net | 9,722,420 | 10,826,010 | ||||||
Loans receivable, net | 1,454,199 | 1,659,217 | ||||||
Equity and debt investments | 2,291,121 | 2,529,747 | ||||||
Goodwill | 1,374,809 | 1,514,561 | ||||||
Deferred leasing costs and intangible assets, net | 438,365 | 445,930 | ||||||
Assets held for sale | 5,560,203 | 3,967,345 | ||||||
Other assets | 516,964 | 400,143 | ||||||
Due from affiliates | 53,148 | 45,779 | ||||||
Total assets | $ | 22,123,994 | $ | 22,215,249 | ||||
Liabilities | ||||||||
Debt, net | $ | 8,666,108 | $ | 8,975,372 | ||||
Accrued and other liabilities | 923,432 | 634,144 | ||||||
Intangible liabilities, net | 95,502 | 147,470 | ||||||
Liabilities related to assets held for sale | 2,334,643 | 1,218,495 | ||||||
Due to affiliates | 36,285 | — | ||||||
Dividends and distributions payable | 86,588 | 84,013 | ||||||
Total liabilities | 12,142,558 | 11,059,494 | ||||||
Commitments and contingencies | ||||||||
Redeemable noncontrolling interests | 5,987 | 9,385 | ||||||
Equity | ||||||||
Stockholders’ equity: | ||||||||
Preferred stock, $0.01 par value per share; $1,436,605 liquidation preference; 250,000 shares authorized; 57,464 shares issued and outstanding | 1,407,495 | 1,407,495 | ||||||
Common stock, $0.01 par value per share | ||||||||
Class A, 949,000 shares authorized; 487,018 and 483,347 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 | 7,538,356 | 7,598,019 | ||||||
Distributions in excess of earnings | (3,307,886 | ) | (2,018,302 | ) | ||||
Accumulated other comprehensive income | 20,888 | 13,999 | ||||||
Total stockholders’ equity | 5,663,731 | 7,006,052 | ||||||
Noncontrolling interests in investment entities | 3,855,334 | 3,779,728 | ||||||
Noncontrolling interests in Operating Company | 456,384 | 360,590 | ||||||
Total equity | 9,975,449 | 11,146,370 | ||||||
Total liabilities, redeemable noncontrolling interests and equity | $ | 22,123,994 | $ | 22,215,249 | ||||
16
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COLONY CAPITAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Revenues | ||||||||||||||||
Property operating income | $ | 462,155 | $ | 494,945 | $ | 1,409,841 | $ | 1,500,991 | ||||||||
Interest income | 40,237 | 59,883 | 121,362 | 167,326 | ||||||||||||
Fee income | 111,854 | 32,915 | 178,315 | 106,733 | ||||||||||||
Other income | 38,249 | 10,984 | 64,475 | 35,762 | ||||||||||||
Total revenues | 652,495 | 598,727 | 1,773,993 | 1,810,812 | ||||||||||||
Expenses | ||||||||||||||||
Property operating expense | 274,351 | 286,386 | 824,333 | 871,536 | ||||||||||||
Interest expense | 130,034 | 134,245 | 406,661 | 415,397 | ||||||||||||
Investment and servicing expense | 13,096 | 11,076 | 51,562 | 55,546 | ||||||||||||
Transaction costs | 100 | 228 | 2,922 | 3,585 | ||||||||||||
Placement fees | 64 | 5,184 | 373 | 6,477 | ||||||||||||
Depreciation and amortization | 159,005 | 111,807 | 379,739 | 331,981 | ||||||||||||
Provision for loan loss | 17,233 | 7,825 | 35,847 | 27,133 | ||||||||||||
Impairment loss | 564,899 | 75,723 | 675,216 | 298,781 | ||||||||||||
Compensation expense | ||||||||||||||||
Cash and equity-based compensation | 87,043 | 44,469 | 160,990 | 144,085 | ||||||||||||
Carried interest and incentive fee compensation | 10,846 | 1,535 | 13,264 | 1,535 | ||||||||||||
Administrative expenses | 22,013 | 22,421 | 64,544 | 69,390 | ||||||||||||
Total expenses | 1,278,684 | 700,899 | 2,615,451 | 2,225,446 | ||||||||||||
Other income (loss) | ||||||||||||||||
Gain on sale of real estate assets | 8,224 | 33,016 | 43,754 | 91,869 | ||||||||||||
Other gain (loss), net | (44,562 | ) | 29,677 | (183,137 | ) | 133,731 | ||||||||||
Equity method earnings (losses) | 46,777 | 5,031 | (178,448 | ) | 34,338 | |||||||||||
Equity method earnings (losses)—carried interest | (474 | ) | 3,837 | 6,258 | 3,837 | |||||||||||
Loss before income taxes | (616,224 | ) | (30,611 | ) | (1,153,031 | ) | (150,859 | ) | ||||||||
Income tax benefit (expense) | (9,968 | ) | 1,955 | (13,751 | ) | 35,279 | ||||||||||
Loss from continuing operations | (626,192 | ) | (28,656 | ) | (1,166,782 | ) | (115,580 | ) | ||||||||
Income from discontinued operations | 60,350 | 11,242 | 86,139 | 28,100 | ||||||||||||
Net loss | (565,842 | ) | (17,414 | ) | (1,080,643 | ) | (87,480 | ) | ||||||||
Net income (loss) attributable to noncontrolling interests: | ||||||||||||||||
Redeemable noncontrolling interests | 364 | 865 | 2,317 | 2,042 | ||||||||||||
Investment entities | 15,170 | 28,914 | 51,744 | 74,517 | ||||||||||||
Operating Company | (53,560 | ) | (4,403 | ) | (90,160 | ) | (14,509 | ) | ||||||||
Net loss attributable to Colony Capital, Inc. | (527,816 | ) | (42,790 | ) | (1,044,544 | ) | (149,530 | ) | ||||||||
Preferred stock redemption | — | — | — | (3,995 | ) | |||||||||||
Preferred stock dividends | 27,137 | 27,185 | 81,412 | 89,960 | ||||||||||||
Net loss attributable to common stockholders | $ | (554,953 | ) | $ | (69,975 | ) | $ | (1,125,956 | ) | $ | (235,495 | ) | ||||
Basic loss per share | ||||||||||||||||
Loss from continuing operations per basic common share | $ | (1.22 | ) | $ | (0.16 | ) | $ | (2.43 | ) | $ | (0.50 | ) | ||||
Net loss per basic common share | $ | (1.16 | ) | $ | (0.15 | ) | $ | (2.35 | ) | $ | (0.47 | ) | ||||
Diluted loss per share | ||||||||||||||||
Loss from continuing operations per diluted common share | $ | (1.22 | ) | $ | (0.16 | ) | $ | (2.43 | ) | $ | (0.50 | ) | ||||
Net loss per diluted common share | $ | (1.16 | ) | $ | (0.15 | ) | $ | (2.35 | ) | $ | (0.47 | ) | ||||
Weighted average number of shares | ||||||||||||||||
Basic | 479,776 | 484,754 | 479,412 | 501,202 | ||||||||||||
Diluted | 479,776 | 484,754 | 479,412 | 501,202 | ||||||||||||
17
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COLONY CAPITAL, INC.
FUNDS FROM OPERATIONS AND CORE FUNDS FROM OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended September 30, 2019 | Nine Months Ended September 30, 2019 | |||||||
Net loss attributable to common stockholders | $ | (554,953 | ) | $ | (1,125,956 | ) | ||
Adjustments for FFO attributable to common interests in Operating Company and common stockholders: | ||||||||
Net loss attributable to noncontrolling common interests in Operating Company | (53,560 | ) | (90,160 | ) | ||||
Real estate depreciation and amortization | 116,615 | 430,513 | ||||||
Impairment of real estate | 177,900 | 291,122 | ||||||
Gain from sales of real estate | (12,928 | ) | (75,250 | ) | ||||
Less: Adjustments attributable to noncontrolling interests in investment entities | (67,498 | ) | (191,477 | ) | ||||
FFO attributable to common interests in Operating Company and common stockholders | (394,424 | ) | (761,208 | ) | ||||
Additional adjustments for Core FFO attributable to common interests in Operating Company and common stockholders: | ||||||||
Gains and losses from sales of depreciable real estate within the Other Equity and Debt segment, net of depreciation, amortization and impairment previously adjusted for FFO (1) | (39,959 | ) | (47,809 | ) | ||||
Gains and losses from sales of businesses within the Investment Management segment and impairment write-downs associated with the Investment Management segment | 387,000 | 409,420 | ||||||
CLNC Core Earnings & NRE Cash Available for Distribution adjustments (2) | 5,063 | 269,108 | ||||||
Equity-based compensation expense | 11,590 | 28,328 | ||||||
Straight-line rent revenue and expense | (466 | ) | (12,727 | ) | ||||
Amortization of acquired above- and below-market lease values, net | (3,569 | ) | (10,893 | ) | ||||
Amortization of deferred financing costs and debt premiums and discounts | 16,158 | 59,156 | ||||||
Unrealized fair value losses on interest rate and foreign currency hedges, and foreign currency remeasurements and realized gains and losses on interest rate hedging instruments existing at the time of the January 2017 merger with remaining terms greater than one year that served as economic hedges for any financing or refinancing of the Company's real estate verticals | 93,322 | 240,598 | ||||||
Acquisition and merger-related transaction costs | 101 | 4,279 | ||||||
Restructuring and merger integration costs (3) | 18,592 | 19,722 | ||||||
Amortization and impairment of investment management intangibles | 65,158 | 80,731 | ||||||
Non-real estate depreciation and amortization | 1,588 | 4,730 | ||||||
Gain on consolidation of equity method investment | (51,400 | ) | (51,400 | ) | ||||
Amortization of gain on remeasurement of consolidated investment entities | — | 3,807 | ||||||
Tax effect of Core FFO adjustments, net | (5,500 | ) | (10,367 | ) | ||||
Less: Adjustments attributable to noncontrolling interests in investment entities | (1,653 | ) | (6,787 | ) | ||||
Core FFO attributable to common interests in Operating Company and common stockholders | $ | 101,601 | $ | 218,688 | ||||
FFO per common share / common OP unit (4) | $ | (0.74 | ) | $ | (1.46 | ) | ||
FFO per common share / common OP unit—diluted (4)(5) | $ | (0.74 | ) | $ | (1.46 | ) | ||
Core FFO per common share / common OP unit (4) | $ | 0.19 | $ | 0.42 | ||||
Core FFO per common share / common OP unit—diluted (4)(5)(6) | $ | 0.19 | $ | 0.42 | ||||
Weighted average number of common OP units outstanding used for FFO and Core FFO per common share and OP unit (4) | 534,772 | 522,650 | ||||||
Weighted average number of common OP units outstanding used for FFO per common share and OP unit—diluted (4)(5) | 534,772 | 522,650 | ||||||
Weighted average number of common OP units outstanding used for Core FFO per common share and OP unit—diluted (4)(5)(6) | 562,709 | 525,200 | ||||||
18
| ||
__________
(1) | For the three months ended September 30, 2019, net of $47.4 million consolidated or $41.8 million CLNY OP share and for the nine months ended September 30, 2019, net of $93.9 million consolidated or $67.1 million CLNY OP share of depreciation, amortization and impairment charges previously adjusted to calculate FFO. |
(2) | Represents adjustments to align the Company’s Core FFO with CLNC’s definition of Core Earnings and NRE’s definition of Cash Available for Distribution (“CAD”) to reflect the Company’s percentage interest in the respective company’s earnings. |
(3) | Restructuring and merger integration costs primarily represent costs and charges incurred as a result of the corporate restructuring and reorganization plan announced in November 2018. Also included to a lesser degree are costs and charges related to the implementation of our strategic plan including the sale of the Industrial business. These integration and restructuring costs 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 corporate restructuring and reorganization plan and the strategic plan. The majority of these costs consist of severance, employee costs of those separated or scheduled for separation, system integration and lease terminations. |
(4) | Calculated based on weighted average shares outstanding including participating securities and assuming the exchange of all common OP units outstanding for common shares. |
(5) | For the three months ended September 30, 2019, included in the calculation of diluted Core FFO per share is the effect of adding back $4.4 million of interest expense associated with convertible senior notes and 25.4 million of weighted average dilutive common share equivalents for the assumed conversion of the convertible senior notes. For the nine months ended September 30, 2019, included in the calculation of diluted Core FFO per share is the effect of adding back $0.5 million of interest expense associated with convertible senior notes and 1.1 million of weighted average dilutive common share equivalents for the assumed conversion of the convertible senior notes. For the three months and nine months ended September 30, 2019, such interest expense and weighted average dilutive common share equivalents are excluded for the calculation of diluted FFO as the effect would be antidilutive. |
(6) | For the three months ended September 30, 2019, included in the calculation of diluted Core FFO per share are 2,451,400 weighted average performance stock units, which are subject to both a service condition and market condition, and 67,300 weighted average shares of non-participating restricted stock. For the nine months ended September 30, 2019, included in the calculation of diluted Core FFO per share are 1,320,900 weighted average performance stock units, which are subject to both a service condition and market condition, and 99,100 weighted average shares of non-participating restricted stock. |
COLONY CAPTITAL, INC.
RECONCILIATION OF NET INCOME (LOSS) TO NOI
The following tables present: (1) a reconciliation of property and other related revenues less property operating expenses for properties in our Healthcare, Industrial, and Hospitality segments to NOI and (2) a reconciliation of such segments' net income (loss) for the three months ended September 30, 2019 to NOI:
Three Months Ended September 30, 2019 | ||||||||||||
(In thousands) | Healthcare | Industrial(1) | Hospitality | |||||||||
Total revenues | $ | 136,091 | $ | 98,642 | $ | 218,378 | ||||||
Straight-line rent revenue and amortization of above- and below-market lease intangibles | 1,235 | (4,518 | ) | 314 | ||||||||
Interest income | — | (240 | ) | — | ||||||||
Other income | — | — | (69 | ) | ||||||||
Property operating expenses (2) | (66,042 | ) | (26,051 | ) | (141,235 | ) | ||||||
Compensation and administrative expense (2) | — | (1,042 | ) | — | ||||||||
NOI(3) | $ | 71,284 | $ | 66,791 | $ | 77,388 | ||||||
_________
(1) | Industrial financial results are classified as discontinued operations on the Company's consolidated statement of operations for the three months ended September 30, 2019. |
(2) | For healthcare and hospitality, property operating expenses include property management fees paid to third parties. For industrial, there are direct costs of managing the portfolio which are included in compensation expense. |
(3) | For hospitality, NOI is before FF&E Reserve. |
19
| ||
Three Months Ended September 30, 2019 | ||||||||||||
(In thousands) | Healthcare | Industrial(1) | Hospitality | |||||||||
Net income (loss) | $ | (112,554 | ) | $ | 38,981 | $ | (34,365 | ) | ||||
Adjustments: | ||||||||||||
Straight-line rent revenue and amortization of above- and below-market lease intangibles | 1,235 | (4,518 | ) | 314 | ||||||||
Interest income | — | (240 | ) | — | ||||||||
Interest expense | 46,029 | 21,130 | 40,641 | |||||||||
Transaction, investment and servicing costs | 1,009 | 54 | 1,728 | |||||||||
Depreciation and amortization | 38,998 | 12,342 | 36,133 | |||||||||
Impairment loss | 92,885 | — | 31,555 | |||||||||
Compensation and administrative expense | 2,537 | 3,832 | 1,658 | |||||||||
Gain on sale of real estate | (833 | ) | (4,675 | ) | — | |||||||
Other (gain) loss, net | 2,544 | 12 | 37 | |||||||||
Other income | — | — | (69 | ) | ||||||||
Income tax (benefit) expense | (566 | ) | (127 | ) | (244 | ) | ||||||
NOI(2) | $ | 71,284 | $ | 66,791 | $ | 77,388 | ||||||
_________
(1) | Industrial financial results are classified as discontinued operations on the Company's consolidated statement of operations for the three months ended September 30, 2019. |
(2) | For hospitality, NOI is before FF&E Reserve. |
The following table summarizes third quarter 2019 net income (loss) by segment:
(In thousands) | Net Income (Loss) | ||||
Healthcare | $ | (112,554 | ) | ||
Industrial | 38,981 | ||||
Hospitality | (34,365 | ) | |||
CLNC | 7,979 | ||||
Other Equity and Debt | (5,160 | ) | |||
Investment Management | (316,302 | ) | |||
Amounts Not Allocated to Segments | (144,421 | ) | |||
Total Consolidated | $ | (565,842 | ) | ||
20
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 timing and content of Colony Capital’s strategic plan, including Colony Capital’s ability to continue executing on all or any of Colony Capital’s related initiatives and whether Colony Capital and its stockholders will realize any benefits from such initiatives, whether Colony Capital will enter into a definitive agreement with Colony Credit Real Estate, Inc. (“CLNC”) to internalize its management and transfer Colony Capital’s credit management business to CLNC, our ability to achieve anticipated compensation and administrative cost savings pursuant to the Company’s corporate restructuring and reorganization plan, in the timeframe expected or at all, the Company’s ability to realize anticipated benefits from its strategic initiatives, including the acquisition of DBH, the potential sale of our industrial platform, the acquisition of a Latin American private equity platform, and the formation of certain other investment management platforms, including any impact of such initiatives on our company’s growth and earnings profile, potential impairments, the impact of changes to the Company’s management, employee and organizational structure, including the implementation and timing of CEO succession plans, the Company’s ability to complete a sale of its industrial portfolio, including the related management platform within the timeframe contemplated, or at all, the Company’s use of any proceeds received from a sale of its industrial portfolio if completed, Digital Colony’s ability to complete the pending acquisition of Zayo Group Holdings, Inc. on the terms contemplated or at all, Colony Capital’s liquidity, including its ability to complete sales of non-core investments, whether Colony Capital will be able to maintain its qualification as a real estate investment trust, or REIT, for U.S. federal income tax purposes, the timing of and ability to deploy available capital, the Company’s financial flexibility, including borrowing capacity under its revolving credit facility, Colony Capital's ability to grow its investment management business, the timing, pace of growth and performance of the Company's industrial platform, the performance of the Company's investment in CLNC, Colony Capital’s ability to maintain or create future permanent capital vehicles under its management, the level of the Company’s commitments to its managed vehicles, the timing of and ability to complete additional repurchases of Colony Capital’s stock, Colony Capital’s ability to maintain inclusion and relative performance on the RMZ, Colony Capital’s leverage, including the ability to reduce debt and the timing and amount of borrowings under its credit facility, the ability of the Company to refinance certain mortgage debt on similar terms to those currently existing or at all, increased interest rates and operating costs, whether the Company will maintain or produce higher Core FFO per share (including or excluding gains and losses from sales of certain investments) in the coming quarters, or ever, the impact of any changes to the Company’s management agreements with NorthStar Healthcare Income, Inc. and other managed companies, adverse economic or real estate developments in Colony Capital’s markets, Colony Capital’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 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 detailed in our filings with the U.S. Securities and Exchange Commission (“SEC”).
Statements regarding the following subjects, among others, may constitute forward-looking statements: the market, economic and environmental conditions in the Company’s real estate investment sectors; the Company’s business and investment strategy; the Company’s ability to dispose of its real estate investments; the performance of the real estate in which the Company owns an interest; market trends in the Company’s industry, interest rates, real estate values, the debt securities markets or the general economy; actions, initiatives and policies of the U.S. government and changes to U.S. government policies and the execution and impact of these actions, initiatives and policies; the state of the U.S. and global economy generally or in specific geographic regions; the Company’s ability to obtain and maintain financing arrangements, including securitizations; the amount and value of commercial mortgage loans requiring refinancing in future periods; the availability of attractive investment opportunities; the general volatility of the securities markets in which the Company participates; changes in the value of the Company’s assets; the impact of and changes in governmental regulations, tax law and rates, accounting guidance and similar matters; the Company’s ability to maintain its qualification as a real estate investment trust, or REIT, for U.S. federal income tax purposes; and the Company’s ability to maintain its exemption from registration as an investment company under the Investment Company Act of 1940, as amended.
All forward-looking statements reflect Colony Capital’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 Colony Capital’s reports filed from time to time with the SEC. Colony Capital cautions investors not to unduly rely on any forward-looking statements. The forward-looking statements speak only as of the date of this presentation. Colony Capital 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 Colony Capital 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. Colony Capital 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 Colony Capital. This information is not intended to be indicative of future results. Actual performance of Colony Capital 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; funds from operations, or FFO; core funds from operations, or Core FFO; net operating income (“NOI”); and pro rata financial information.
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) gains and losses from sales of depreciable real estate within the Other Equity and Debt segment, net of depreciation, amortization and impairment previously adjusted for FFO; (ii) gains and losses from sales of businesses within the Investment Management segment and impairment write-downs associated with the Investment Management segment; (iii) equity-based compensation expense; (iv) effects of straight-line rent revenue and expense; (v) amortization of acquired above- and below-market lease values; (vi) amortization of deferred financing costs and debt premiums and discounts; (vii) unrealized fair value gains or losses on interest rate and foreign currency hedges, and foreign currency remeasurements and realized gains and losses on interest rate hedging instruments existing at the time of the January 2017 merger with remaining terms greater than one year that served as economic hedges for any financing or refinancing of the Company's real estate verticals; (viii) acquisition and merger related transaction costs; (ix) restructuring and merger integration costs; (x) amortization and impairment of finite-lived intangibles related to investment management contracts and customer relationships; (xi) gain on remeasurement of consolidated investment entities and the effect of amortization thereof; (xii) non-real estate depreciation and amortization; (xiii) change in fair value of contingent consideration; and (xiv) tax effect on certain of the foregoing adjustments. Beginning with the first quarter of 2018, the Company’s Core FFO from its interest in Colony Credit Real Estate (NYSE: CLNC) and NorthStar Realty Europe (NYSE: NRE) represented its percentage interest multiplied by CLNC’s Core Earnings and NRE’s Cash Available for Distribution (“CAD”), respectively. Refer to CLNC’s and NRE's respective filings with the SEC for the definition and calculation of Core Earnings and CAD.
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. The Company also presents Core FFO excluding gains and losses from sales of certain investments as well as its share of similar adjustments for CLNC. The Company believes that 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.
Colony Capital | Supplemental Financial Report | ||
Important Note Regarding Non-GAAP Financial Measures |
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.
NOI before Reserve for Furniture, Fixtures and Equipment Expenditures (“NOI before FF&E Reserve”): For our hospitality real estate segment, NOI before FF&E Reserve represents NOI before the deduction of reserve contributions for the repair, replacement and refurbishment of furniture, fixtures, and equipment ("FF&E"), which are typically 4% to 5% of revenues, and required under certain debt agreements and/or franchise and brand-managed hotel agreements.
Pro-rata: The Company presents pro-rata financial information, which is not, and is not intended to be, a presentation in accordance with GAAP. The Company computes pro-rata financial information by applying its economic interest to each financial statement line item on an investment-by-investment basis. Similarly, noncontrolling interests’ share of assets, liabilities, profits and losses was computed by applying noncontrolling interests’ economic interest to each financial statement line item. The Company provides pro-rata financial information because it may assist investors and analysts in estimating the Company’s economic interest in its investments. However, pro-rata financial information as an analytical tool has limitations. Other equity REITs may not calculate their pro-rata information in the same methodology, and accordingly, the Company’s pro-rata information may not be comparable to such other REITs' pro-rata information. As such, the pro-rata financial information should not be considered in isolation or as a substitute for our financial statements as reported under GAAP, but may be used as a supplement to financial information as reported under GAAP.
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 |
Colony Capital holds investment interests in six reportable segments: Healthcare Real Estate; Industrial Real Estate; Hospitality Real Estate; CLNC; Other Equity and Debt; and Investment Management.
Healthcare Real Estate
As of September 30, 2019, the consolidated healthcare portfolio consisted of 371 properties (404 buildings): 164 senior housing properties, 106 medical office properties, 89 skilled nursing facilities and 12 hospitals. The Company’s equity interest in the consolidated Healthcare Real Estate segment was approximately 71% as of September 30, 2019. The healthcare portfolio earns rental income from our 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, we also earn resident fee income from senior housing properties that are managed by operators under a REIT Investment Diversification and Empowerment Act of 2007 (“RIDEA”) structure.
Industrial Real Estate
As of September 30, 2019, the Company's light industrial portfolio and related operating platform are under contract for approximately $5.7 billion. The sale is anticipated to close in the fourth quarter of 2019, subject to customary closing conditions. Accordingly, for all current and prior periods presented, the related assets and liabilities of the industrial segment are presented as assets and liabilities held for sale on the consolidated balance sheet and the related operating results are presented as income from discontinued operations on the consolidated statement of operations. The portfolio of bulk industrial assets is excluded from the light industrial sale agreement, but is still held for sale.
As of September 30, 2019, the consolidated light industrial portfolio consisted of 450 light industrial buildings totaling 57.4 million rentable square feet across 26 major U.S. markets and was 91% leased. The Company’s equity interest in the consolidated light industrial portfolio was approximately 34% as of September 30, 2019 and June 30, 2019. Total third-party capital commitments in the light industrial portfolio were approximately $1.7 billion compared to cumulative balance sheet contributions of $749 million as of September 30, 2019. The light industrial portfolio is composed of and primarily invests in light industrial properties in infill locations in major U.S. metropolitan markets generally targeting multi-tenanted warehouses less than 250,000 square feet.
As of September 30, 2019, the consolidated bulk industrial portfolio consisted of six bulk industrial buildings totaling 4.2 million rentable square feet across five major U.S. markets and was 67% leased. The Company's equity interest in the consolidated bulk industrial portfolio was approximately 51%, or $72 million, with the other 49% owned by third-party capital, which is managed by the Company's industrial operating platform.
Hospitality Real Estate
As of September 30, 2019, the consolidated hospitality portfolio consisted of 158 properties: 88 select service properties, 66 extended stay properties and 4 full service properties. The Company’s equity interest in the consolidated Hospitality Real Estate segment was approximately 94% as of September 30, 2019. The hospitality portfolio consists primarily of premium branded select service hotels and extended stay hotels located mostly in major metropolitan markets, of which a majority are affiliated with top hotel brands. The select service hospitality portfolio referred to as the THL Hotel Portfolio, which the Company acquired through consensual transfer during the third quarter 2017, is not included in the Hospitality Real Estate segment and is included in the Other Equity and Debt segment.
Colony Credit Real Estate, Inc. (“CLNC”)
Colony Credit Real Estate, Inc. is a commercial real estate credit REIT, externally managed by the Company, with $5.6 billion in assets and $2.2 billion in GAAP book equity value as of September 30, 2019. The Company owns 48.0 million shares and share equivalents, or 36%, of CLNC and earns an annual base management fee of 1.5% on stockholders’ equity (as defined in the CLNC management agreement, which was recently amended) and an incentive fee of 20% of CLNC’s Core Earnings over a 7% hurdle rate.
Other Equity and Debt
The Company owns a diversified group of strategic and non-strategic real estate and real estate-related debt and equity investments. Strategic investments include investments for which the Company acts as a general partner and/or manager (“GP Co-Investments”) and receives various forms of investment management economics on the related third-party capital. Non-strategic investments are composed of those investments the Company does not intend to own for the long term including other real estate equity including the THL Hotel Portfolio and the Company’s interest in Albertsons; real estate debt; net leased assets; and multiple classes of commercial real estate (“CRE”) securities.
Investment Management
The Company’s Investment Management segment includes the business and operations of managing capital on behalf of third-party investors through closed and open-end private funds, traded and non-traded real estate investment trusts and registered investment companies.
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. | 6-15 | ||
II. | Financial Overview | ||
a. | 16 | ||
b. | 17-18 | ||
III. | Financial Results | ||
a. | 19 | ||
b. | 20 | ||
c. | 21 | ||
d. | 22 | ||
e. | 23 | ||
IV. | Capitalization | ||
a. | 24 | ||
b. | 25 | ||
c. | 26 | ||
d. | 27 | ||
e. | 28 | ||
V. | Healthcare Real Estate | ||
a. | 29 | ||
b. | 30-31 | ||
VI. | Industrial Real Estate | ||
a. | 32 | ||
b. | 33 | ||
Page | |||
VII. | Hospitality Real Estate | ||
a. | 34 | ||
b. | 35 | ||
VIII. | CLNC | ||
a. | 36 | ||
IX. | 37 | ||
a. | 38 | ||
b. | 39 | ||
c. | 40-42 | ||
d. | 43 | ||
X. | Investment Management | ||
a. | 44-45 | ||
b. | 46 | ||
XI. | Appendices | ||
a. | 48-49 | ||
b. | 50-51 | ||
c. | Industrial Real Estate - Held for Sale and Discontinued Operations | 52-53 | |
Colony Capital | Supplemental Financial Report | 5 | ||
Colony Capital | Supplemental Financial Report | 6 | ||
Colony Capital | Supplemental Financial Report | 7 | ||
Colony Capital | Supplemental Financial Report | 8 | ||
Colony Capital | Supplemental Financial Report | 9 | ||
Colony Capital | Supplemental Financial Report | 10 | ||
Colony Capital | Supplemental Financial Report | 11 | ||
Colony Capital | Supplemental Financial Report | 12 | ||
Colony Capital | Supplemental Financial Report | 13 | ||
Colony Capital | Supplemental Financial Report | 14 | ||
Colony Capital | Supplemental Financial Report | 15 | ||
IIa. Financial Overview - Summary Metrics |
($ and shares in thousands, except per share data and as noted; as of or for the three months ended September 30, 2019, unless otherwise noted) (Unaudited) | |||
Financial Data | |||
Net income (loss) attributable to common stockholders | $ | (554,953 | ) |
Net income (loss) attributable to common stockholders per basic share | (1.16 | ) | |
Core FFO(1) | 101,601 | ||
Core FFO per basic share | 0.19 | ||
Q4 2019 dividend per share | 0.11 | ||
Annualized Q4 2019 dividend per share | 0.44 | ||
Balance Sheet, Capitalization and Trading Statistics | |||
Total consolidated assets | $ | 22,123,994 | |
CLNY OP share of consolidated assets | 14,618,345 | ||
Total consolidated debt(2) | 10,998,210 | ||
CLNY OP share of consolidated debt(2) | 7,580,173 | ||
Shares and OP units outstanding as of September 30, 2019(3) | 540,401 | ||
Shares and OP units outstanding as of November 5, 2019(3) | 540,398 | ||
Share price as of November 5, 2019 | 5.48 | ||
Market value of common equity & OP units as of November 5, 2019 | 2,961,381 | ||
Liquidation preference of perpetual preferred equity | 1,436,605 | ||
Insider ownership of shares and OP units as of November 5, 2019 | 9.4 | % | |
Total Assets Under Management ("AUM") | $ 53.3 billion | ||
Fee Earning Equity Under Management ("FEEUM") | $ 22.4 billion | ||
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) | Third quarter 2019 Core FFO included net losses of $4.4 million. |
(2) | Represents principal balance and excludes debt issuance costs, discounts and premiums. |
(3) | Includes 21.5 million operating company units issued on July 25, 2019 for the acquisition of Digital Bridge Holdings. |
Colony Capital | Supplemental Financial Report | 16 | ||
IIb. Financial Overview - Summary of Segments |
($ in thousands; as of or for the three months ended September 30, 2019, unless otherwise noted) | Consolidated amount | CLNY OP share of consolidated amount | |||||
Healthcare Real Estate | |||||||
Q3 2019 net operating income(1)(2) | $ | 71,284 | $ | 50,586 | |||
Annualized net operating income | 285,136 | 202,161 | |||||
Investment-level non-recourse financing(3) | 2,953,705 | 2,108,463 | |||||
Industrial Real Estate | |||||||
Q3 2019 net operating income(2) | 66,791 | 23,018 | |||||
Annualized net operating income | 267,164 | 92,072 | |||||
Investment-level non-recourse financing(3) | 2,149,494 | 762,316 | |||||
Hospitality Real Estate | |||||||
Q3 2019 NOI before FF&E Reserve(2) | 77,388 | 72,667 | |||||
TTM NOI before FF&E Reserve(4) | 283,035 | 266,593 | |||||
Investment-level non-recourse financing(3) | 2,659,615 | 2,488,740 | |||||
Notes:
(1) | NOI includes $1.0 million consolidated or $0.7 million CLNY OP share of interest earned related to $54 million consolidated or $38 million CLNY OP share carrying value of healthcare real estate development loans. This interest income is in the Interest Income line item on the Company’s Statement of Operations for the three months ended September 30, 2019. |
(2) | For a reconciliation of net income/(loss) attributable to common stockholders to NOI, please refer to the appendix to this presentation. |
(3) | Represents unpaid principal balance. |
(4) | TTM = trailing twelve month. |
Colony Capital | Supplemental Financial Report | 17 | ||
IIb. Financial Overview - Summary of Segments (cont’d) |
($ in thousands except as noted; as of or for the three months ended September 30, 2019, unless otherwise noted) | Consolidated amount | CLNY OP share of consolidated amount | ||||||
CLNC | ||||||||
Net carrying value of 36% interest | $ | 731,306 | $ | 731,306 | ||||
Other Equity and Debt (1) | ||||||||
1) Strategic Investments | ||||||||
a) GP co-investments - net carrying value | 1,909,472 | 662,808 | ||||||
2) Net lease real estate equity | ||||||||
a) Q3 2019 net operating income | 1,092 | 1,088 | ||||||
b) Investment-level non-recourse financing(2) | 104,821 | 104,198 | ||||||
3) Other real estate equity | ||||||||
a) Undepreciated carrying value of real estate assets(3) | 1,889,675 | 946,562 | ||||||
b) Investment-level non-recourse financing(2) | 1,278,448 | 638,835 | ||||||
c) Carrying value - equity method investments (including Albertsons) | 317,465 | 238,031 | ||||||
4) Real estate debt | ||||||||
a) Carrying value - consolidated(4) | 290,547 | 207,626 | ||||||
b) Investment-level non-recourse financing(2) | — | — | ||||||
c) Carrying value - equity method investments | 15,130 | 10,061 | ||||||
d) Carrying value - real estate assets (REO within debt portfolio) and other(3) | 45,397 | 26,029 | ||||||
5) CRE securities and real estate PE fund investments | ||||||||
a) Carrying value | 65,387 | |||||||
Investment Management | ||||||||
Third-party AUM ($ in millions) | 39,311 | |||||||
FEEUM ($ in millions)(5) | 22,411 | |||||||
Q3 2019 fee revenue and REIM platform equity method earnings(6) | 116,393 | |||||||
Net Assets | ||||||||
Cash and cash equivalents, restricted cash and other assets(7) | 1,239,317 | 985,125 | ||||||
Accrued and other liabilities and dividends payable(8) | 852,330 | 716,974 | ||||||
Net assets | $ | 386,987 | $ | 268,151 | ||||
Notes:
(1) | Includes assets classified as held for sale on the Company’s financial statements. |
(2) | Represents unpaid principal balance. |
(3) | Includes all components related to real estate assets, including tangible real estate and lease-related intangibles, and excludes accumulated depreciation. |
(4) | Excludes $54 million consolidated or $38 million CLNY OP share carrying value of healthcare real estate development loans. |
(5) | Subsequent to the third quarter 2019, the Company and CLNC revised the terms of the management agreement in connection with CLNC's portfolio bifurcation and related impairments, which will result in the reduction of the fee base by accumulated unrealized provisions for loan losses and real estate impairments. Such reduction will be effective during the fourth quarter 2019 and result in the decrease of the Company's FEEUM to $2.2 billion. |
(6) | The Company acquired Digital Bridge Holdings on July 25, 2019 and recognized incremental fee revenue of $14 million for the period between July 26, 2019 through September 30, 2019. Fee revenue also includes a $43 million termination fee and $22 million incentive fee resulting from the termination of the Company’s management agreement with NRE. Refer to page 44 for additional details. |
(7) | Other assets excludes $4 million consolidated and CLNY OP share of deferred financing costs and $40 million consolidated or $22 million CLNY OP share of restricted cash which is included in the undepreciated carrying value of the hotel portfolio in Other Real Estate Equity shown on page 39. |
(8) | Accrued and other liabilities exclude $37 million consolidated and CLNY OP share of deferred tax liabilities and other liabilities which are not due in cash and $121 million of derivative liability which is included in the debt of Other GP Co-investments shown on page 38. |
Colony Capital | Supplemental Financial Report | 18 | ||
IIIa. Financial Results - Consolidated Balance Sheet |
($ in thousands, except per share data) (unaudited) | As of September 30, 2019 | |||
Assets | ||||
Cash and cash equivalents | $ | 455,330 | ||
Restricted cash | 257,435 | |||
Real estate, net | 9,722,420 | |||
Loans receivable, net | 1,454,199 | |||
Equity and debt investments | 2,291,121 | |||
Goodwill | 1,374,809 | |||
Deferred leasing costs and intangible assets, net | 438,365 | |||
Assets held for sale | 5,560,203 | |||
Other assets | 516,964 | |||
Due from affiliates | 53,148 | |||
Total assets | $ | 22,123,994 | ||
Liabilities | ||||
Debt, net | $ | 8,666,108 | ||
Accrued and other liabilities | 923,432 | |||
Intangible liabilities, net | 95,502 | |||
Liabilities related to assets held for sale | 2,334,643 | |||
Due to affiliates | 36,285 | |||
Dividends and distributions payable | 86,588 | |||
Total liabilities | 12,142,558 | |||
Commitments and contingencies | ||||
Redeemable noncontrolling interests | 5,987 | |||
Equity | ||||
Stockholders’ equity: | ||||
Preferred stock, $0.01 par value per share; $1,436,605 liquidation preference; 250,000 shares authorized; 57,464 shares issued and outstanding | 1,407,495 | |||
Common stock, $0.01 par value per share | ||||
Class A, 949,000 shares authorized; 487,018 shares issued and outstanding | 4,871 | |||
Class B, 1,000 shares authorized; 734 shares issued and outstanding | 7 | |||
Additional paid-in capital | 7,538,356 | |||
Distributions in excess of earnings | (3,307,886 | ) | ||
Accumulated other comprehensive income | 20,888 | |||
Total stockholders’ equity | 5,663,731 | |||
Noncontrolling interests in investment entities | 3,855,334 | |||
Noncontrolling interests in Operating Company | 456,384 | |||
Total equity | 9,975,449 | |||
Total liabilities, redeemable noncontrolling interests and equity | $ | 22,123,994 | ||
Colony Capital | Supplemental Financial Report | 19 | ||
IIIb. Financial Results - Noncontrolling Interests’ Share Balance Sheet |
($ in thousands, except per share data) (unaudited) | As of September 30, 2019 | |||
Assets | ||||
Cash and cash equivalents | $ | 123,988 | ||
Restricted cash | 56,965 | |||
Real estate, net | 2,385,067 | |||
Loans receivable, net | 700,377 | |||
Equity and debt investments | 606,469 | |||
Deferred leasing costs and intangible assets, net | 68,770 | |||
Assets held for sale | 3,472,738 | |||
Other assets | 91,275 | |||
Total assets | $ | 7,505,649 | ||
Liabilities | ||||
Debt, net | $ | 1,998,072 | ||
Accrued and other liabilities | 135,356 | |||
Intangible liabilities, net | 29,100 | |||
Liabilities related to assets held for sale | 1,481,800 | |||
Total liabilities | 3,644,328 | |||
Commitments and contingencies | ||||
Redeemable noncontrolling interests | 5,987 | |||
Equity | ||||
Stockholders’ equity: | ||||
Preferred stock, $0.01 par value per share; $1,436,605 liquidation preference; 250,000 shares authorized; 57,464 shares issued and outstanding | — | |||
Common stock, $0.01 par value per share | ||||
Class A, 949,000 shares authorized; 487,018 shares issued and outstanding | — | |||
Class B, 1,000 shares authorized; 734 shares issued and outstanding | — | |||
Additional paid-in capital | — | |||
Distributions in excess of earnings | — | |||
Accumulated other comprehensive income | — | |||
Total stockholders’ equity | — | |||
Noncontrolling interests in investment entities | 3,855,334 | |||
Noncontrolling interests in Operating Company | — | |||
Total equity | 3,855,334 | |||
Total liabilities, redeemable noncontrolling interests and equity | $ | 7,505,649 | ||
Colony Capital | Supplemental Financial Report | 20 | ||
IIIc. Financial Results - Consolidated Segment Operating Results |
Three Months Ended September 30, 2019 | ||||||||||||||||||||||||||||||||
($ in thousands) (unaudited) | Healthcare | Industrial | Hospitality | CLNC | Other Equity and Debt | Investment Management | Amounts not allocated to segments | Total | ||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||||||
Property operating income | $ | 135,017 | $ | — | $ | 218,265 | $ | — | $ | 108,873 | $ | — | $ | — | $ | 462,155 | ||||||||||||||||
Interest income | 956 | — | — | — | 38,734 | 101 | 446 | 40,237 | ||||||||||||||||||||||||
Fee income | — | — | — | — | — | 111,854 | — | 111,854 | ||||||||||||||||||||||||
Other income | 118 | — | 113 | — | 3,530 | 32,248 | 2,240 | 38,249 | ||||||||||||||||||||||||
Total revenues | 136,091 | — | 218,378 | — | 151,137 | 144,203 | 2,686 | 652,495 | ||||||||||||||||||||||||
Expenses | ||||||||||||||||||||||||||||||||
Property operating expense | 66,042 | — | 141,235 | — | 67,074 | — | — | 274,351 | ||||||||||||||||||||||||
Interest expense | 46,029 | — | 40,641 | — | 27,428 | 1,585 | 14,351 | 130,034 | ||||||||||||||||||||||||
Investment and servicing expense | 1,009 | — | 1,728 | — | 8,211 | 259 | 1,889 | 13,096 | ||||||||||||||||||||||||
Transaction costs | — | — | — | — | — | 100 | — | 100 | ||||||||||||||||||||||||
Placement fees | — | — | — | — | — | 64 | — | 64 | ||||||||||||||||||||||||
Depreciation and amortization | 38,998 | — | 36,133 | — | 17,152 | 65,219 | 1,503 | 159,005 | ||||||||||||||||||||||||
Provision for loan loss | — | — | — | — | 17,233 | — | — | 17,233 | ||||||||||||||||||||||||
Impairment loss | 92,885 | — | 31,555 | — | 53,459 | 387,000 | — | 564,899 | ||||||||||||||||||||||||
Compensation expense | ||||||||||||||||||||||||||||||||
Cash and equity-based compensation | 1,753 | — | 1,643 | — | 3,330 | 58,337 | 21,980 | 87,043 | ||||||||||||||||||||||||
Carried interest and incentive compensation | — | — | — | — | — | 10,846 | — | 10,846 | ||||||||||||||||||||||||
Administrative expenses | 784 | — | 15 | — | 2,574 | 3,163 | 15,477 | 22,013 | ||||||||||||||||||||||||
Total expenses | 247,500 | — | 252,950 | — | 196,461 | 526,573 | 55,200 | 1,278,684 | ||||||||||||||||||||||||
Other income (loss) | ||||||||||||||||||||||||||||||||
Gain on sale of real estate assets | 833 | — | — | — | 7,391 | — | — | 8,224 | ||||||||||||||||||||||||
Other gain (loss), net | (2,544 | ) | — | (37 | ) | — | (1,709 | ) | 51,346 | (91,618 | ) | (44,562 | ) | |||||||||||||||||||
Equity method earnings | — | — | — | 7,979 | 35,587 | 3,211 | — | 46,777 | ||||||||||||||||||||||||
Equity method earnings—carried interest | — | — | — | — | — | (474 | ) | — | (474 | ) | ||||||||||||||||||||||
Income (loss) before income taxes | (113,120 | ) | — | (34,609 | ) | 7,979 | (4,055 | ) | (328,287 | ) | (144,132 | ) | (616,224 | ) | ||||||||||||||||||
Income tax benefit (expense) | 566 | — | 244 | — | (1,105 | ) | (9,384 | ) | (289 | ) | (9,968 | ) | ||||||||||||||||||||
Income (loss) from continuing operations | (112,554 | ) | — | (34,365 | ) | 7,979 | (5,160 | ) | (337,671 | ) | (144,421 | ) | (626,192 | ) | ||||||||||||||||||
Income (loss) from discontinued operations | — | 38,981 | — | — | — | 21,369 | — | 60,350 | ||||||||||||||||||||||||
Net income (loss) | (112,554 | ) | 38,981 | (34,365 | ) | 7,979 | (5,160 | ) | (316,302 | ) | (144,421 | ) | (565,842 | ) | ||||||||||||||||||
Net income (loss) attributable to noncontrolling interests: | ||||||||||||||||||||||||||||||||
Redeemable noncontrolling interests | — | — | — | — | 364 | — | — | 364 | ||||||||||||||||||||||||
Investment entities | (21,790 | ) | 27,728 | (3,194 | ) | — | 13,108 | (682 | ) | — | 15,170 | |||||||||||||||||||||
Operating Company | (8,001 | ) | 990 | (2,812 | ) | 702 | (1,640 | ) | (27,787 | ) | (15,012 | ) | (53,560 | ) | ||||||||||||||||||
Net income (loss) attributable to Colony Capital, Inc. | (82,763 | ) | 10,263 | (28,359 | ) | 7,277 | (16,992 | ) | (287,833 | ) | (129,409 | ) | (527,816 | ) | ||||||||||||||||||
Preferred stock dividends | — | — | — | — | — | — | 27,137 | 27,137 | ||||||||||||||||||||||||
Net income (loss) attributable to common stockholders | $ | (82,763 | ) | $ | 10,263 | $ | (28,359 | ) | $ | 7,277 | $ | (16,992 | ) | $ | (287,833 | ) | $ | (156,546 | ) | $ | (554,953 | ) | ||||||||||
Colony Capital | Supplemental Financial Report | 21 | ||
IIId. Financial Results - Noncontrolling Interests’ Share Segment Operating Results |
Three Months Ended September 30, 2019 | |||||||||||||||||||||||||||||||||
($ in thousands) (unaudited) | Healthcare | Industrial | Hospitality | CLNC | Other Equity and Debt | Investment Management | Amounts not allocated to segments | Total | |||||||||||||||||||||||||
Revenues | — | ||||||||||||||||||||||||||||||||
Property operating income | $ | 37,999 | $ | — | $ | 14,174 | $ | — | $ | 54,276 | $ | — | $ | — | $ | 106,449 | |||||||||||||||||
Interest income | 290 | — | — | — | 24,893 | — | — | 25,183 | |||||||||||||||||||||||||
Fee income | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
Other income | 35 | — | 4 | — | 1,968 | — | — | 2,007 | |||||||||||||||||||||||||
Total revenues | 38,324 | — | 14,178 | — | 81,137 | — | — | 133,639 | |||||||||||||||||||||||||
Expenses | |||||||||||||||||||||||||||||||||
Property operating expense | 18,229 | — | 8,905 | — | 31,994 | — | — | 59,128 | |||||||||||||||||||||||||
Interest expense | 13,108 | — | 2,576 | — | 13,014 | — | — | 28,698 | |||||||||||||||||||||||||
Investment and servicing expense | 287 | — | 95 | — | 3,681 | — | — | 4,063 | |||||||||||||||||||||||||
Transaction costs | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
Placement fees | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
Depreciation and amortization | 11,235 | — | 2,351 | — | 9,860 | — | — | 23,446 | |||||||||||||||||||||||||
Provision for loan loss | — | — | — | — | 4,648 | — | — | 4,648 | |||||||||||||||||||||||||
Impairment loss | 19,898 | — | 3,444 | — | 21,849 | — | — | 45,191 | |||||||||||||||||||||||||
Compensation expense | |||||||||||||||||||||||||||||||||
Cash and equity-based compensation | 32 | — | — | — | 1,364 | — | — | 1,396 | |||||||||||||||||||||||||
Carried interest and incentive compensation | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
Administrative expenses | 218 | — | — | — | 1,391 | 1 | — | 1,610 | |||||||||||||||||||||||||
Total expenses | 63,007 | — | 17,371 | — | 87,801 | 1 | — | 168,180 | |||||||||||||||||||||||||
Other income (loss) | |||||||||||||||||||||||||||||||||
Gain on sale of real estate assets | 248 | — | — | — | 4,956 | — | — | 5,204 | |||||||||||||||||||||||||
Other gain (loss), net | (772 | ) | — | (1 | ) | — | 1,518 | — | — | 745 | |||||||||||||||||||||||
Equity method earnings (losses) | — | — | — | — | 14,837 | 81 | 14,918 | ||||||||||||||||||||||||||
Equity method earnings—carried interest | — | — | — | — | — | (351 | ) | — | (351 | ) | |||||||||||||||||||||||
Income (loss) before income taxes | (25,207 | ) | — | (3,194 | ) | — | 14,647 | (271 | ) | — | (14,025 | ) | |||||||||||||||||||||
Income tax benefit (expense) | 178 | — | — | — | (1,175 | ) | — | — | (997 | ) | |||||||||||||||||||||||
Net income (loss) | (25,029 | ) | — | (3,194 | ) | — | 13,472 | (271 | ) | — | (15,022 | ) | |||||||||||||||||||||
Income (loss) from discontinued operations | — | 27,728 | — | — | — | — | — | 27,728 | |||||||||||||||||||||||||
Non-pro rata allocation of income (loss) to NCI | 3,239 | — | — | — | — | (411 | ) | — | 2,828 | ||||||||||||||||||||||||
Net income (loss) attributable to noncontrolling interests | $ | (21,790 | ) | $ | 27,728 | $ | (3,194 | ) | $ | — | $ | 13,472 | $ | (682 | ) | $ | — | $ | 15,534 | ||||||||||||||
Colony Capital | Supplemental Financial Report | 22 | ||
IIIe. Financial Results - Segment Reconciliation of Net Income to FFO & Core FFO |
Three Months Ended September 30, 2019 | ||||||||||||||||||||||||||||||||||||||||
OP pro rata share by segment | Amounts attributable to noncontrolling interests | CLNY consolidated as reported | ||||||||||||||||||||||||||||||||||||||
($ in thousands) (Unaudited) | Healthcare | Industrial | Hospitality | CLNC | Other Equity and Debt | Investment Management | Amounts not allocated to segments | Total OP pro rata share | ||||||||||||||||||||||||||||||||
Net income (loss) attributable to common stockholders | $ | (82,763 | ) | $ | 10,263 | $ | (28,359 | ) | $ | 7,277 | $ | (16,992 | ) | $ | (287,833 | ) | $ | (156,546 | ) | $ | (554,953 | ) | $ | — | $ | (554,953 | ) | |||||||||||||
Net income (loss) attributable to noncontrolling common interests in Operating Company | (8,001 | ) | 990 | (2,812 | ) | 702 | (1,640 | ) | (27,787 | ) | (15,012 | ) | (53,560 | ) | — | (53,560 | ) | |||||||||||||||||||||||
Net income (loss) attributable to common interests in Operating Company and common stockholders | (90,764 | ) | 11,253 | (31,171 | ) | 7,979 | (18,632 | ) | (315,620 | ) | (171,558 | ) | (608,513 | ) | — | (608,513 | ) | |||||||||||||||||||||||
Adjustments for FFO: | ||||||||||||||||||||||||||||||||||||||||
Real estate depreciation and amortization | 28,758 | 4,212 | 33,782 | 9,298 | 8,226 | 1,722 | — | 85,998 | 30,617 | 116,615 | ||||||||||||||||||||||||||||||
Impairment of real estate | 72,987 | — | 28,111 | — | 31,610 | — | — | 132,708 | 45,192 | 177,900 | ||||||||||||||||||||||||||||||
Gain from sales of real estate | (585 | ) | (1,569 | ) | — | — | (2,463 | ) | — | — | (4,617 | ) | (8,311 | ) | (12,928 | ) | ||||||||||||||||||||||||
Less: Adjustments attributable to noncontrolling interests in investment entities | — | — | — | — | — | — | — | — | (67,498 | ) | (67,498 | ) | ||||||||||||||||||||||||||||
FFO | $ | 10,396 | $ | 13,896 | $ | 30,722 | $ | 17,277 | $ | 18,741 | $ | (313,898 | ) | $ | (171,558 | ) | $ | (394,424 | ) | $ | — | $ | (394,424 | ) | ||||||||||||||||
Additional adjustments for Core FFO: | ||||||||||||||||||||||||||||||||||||||||
(Gains) and losses from sales of depreciable real estate within the Other Equity and Debt segment, net of depreciation, amortization and impairment previously adjusted for FFO(1) | — | — | — | — | (39,299 | ) | — | — | (39,299 | ) | (660 | ) | (39,959 | ) | ||||||||||||||||||||||||||
(Gains) and losses from sales of businesses within the Investment Management segment and impairment write-downs associated with the Investment Management segment | — | — | — | — | — | 387,000 | — | 387,000 | — | 387,000 | ||||||||||||||||||||||||||||||
CLNC Core Earnings & NRE Cash Available for Distribution adjustments(2) | — | — | — | (2,804 | ) | 7,867 | — | — | 5,063 | — | 5,063 | |||||||||||||||||||||||||||||
Equity-based compensation expense | 607 | 696 | 606 | 1,058 | 684 | 3,815 | 4,124 | 11,590 | — | 11,590 | ||||||||||||||||||||||||||||||
Straight-line rent revenue and expense | 2,451 | (1,227 | ) | 280 | — | (901 | ) | 278 | (107 | ) | 774 | (1,240 | ) | (466 | ) | |||||||||||||||||||||||||
Amortization of acquired above- and below-market lease values, net | (1,562 | ) | (358 | ) | — | (261 | ) | (58 | ) | — | — | (2,239 | ) | (1,330 | ) | (3,569 | ) | |||||||||||||||||||||||
Amortization of deferred financing costs and debt premiums and discounts | 2,412 | 519 | 3,646 | 120 | 2,508 | 92 | 1,740 | 11,037 | 5,121 | 16,158 | ||||||||||||||||||||||||||||||
Unrealized fair value losses on interest rate and foreign currency hedges, and foreign currency remeasurements and realized gains and losses on interest rate hedging instruments existing at the time of the January 2017 merger with remaining terms greater than one year that served as economic hedges for any financing or refinancing of the Company's real estate verticals | 1,797 | — | — | 894 | (587 | ) | 8 | 91,487 | 93,599 | (277 | ) | 93,322 | ||||||||||||||||||||||||||||
Acquisition and merger-related transaction costs | — | — | — | — | — | 101 | — | 101 | — | 101 | ||||||||||||||||||||||||||||||
Restructuring and merger integration costs(3) | — | 1,021 | — | — | 10 | 13,297 | 4,222 | 18,550 | 42 | 18,592 | ||||||||||||||||||||||||||||||
Amortization and impairment of investment management intangibles | — | — | — | — | — | 65,158 | — | 65,158 | — | 65,158 | ||||||||||||||||||||||||||||||
Non-real estate depreciation and amortization | — | 30 | — | — | 3 | 45 | 1,503 | 1,581 | 7 | 1,588 | ||||||||||||||||||||||||||||||
Gain on consolidation of equity method investment | — | — | — | — | — | (51,400 | ) | — | (51,400 | ) | — | (51,400 | ) | |||||||||||||||||||||||||||
Tax effect of Core FFO adjustments, net | — | (234 | ) | — | — | (2 | ) | (4,286 | ) | (968 | ) | (5,490 | ) | (10 | ) | (5,500 | ) | |||||||||||||||||||||||
Less: Adjustments attributable to noncontrolling interests in investment entities | — | — | — | — | — | — | — | — | (1,653 | ) | (1,653 | ) | ||||||||||||||||||||||||||||
Core FFO | $ | 16,101 | $ | 14,343 | $ | 35,254 | $ | 16,284 | $ | (11,034 | ) | $ | 100,210 | $ | (69,557 | ) | $ | 101,601 | $ | — | $ | 101,601 | ||||||||||||||||||
Notes:
(1) | Net of $47.4 million consolidated or $41.8 million CLNY OP share of depreciation, amortization and impairment charges previously adjusted to calculate FFO. |
(2) | Represents adjustments to align the Company’s Core FFO with CLNC’s definition of Core Earnings and NRE’s definition of Cash Available for Distribution (“CAD”) to reflect the Company’s percentage interest in the respective company’s earnings. |
(3) | Restructuring and merger integration costs primarily represent costs and charges incurred as a result of the corporate restructuring and reorganization plan announced in November 2018. Also included to a lesser degree are costs and charges related to the implementation of our strategic plan including the sale of the Industrial business. These integration and restructuring costs are not reflective of the Company’s core operating performance and the Company does not expect to incur these costs subsequent to the completion of the corporate restructuring and reorganization plan and the strategic plan. The majority of these costs consist of severance, employee costs of those separated or scheduled for separation, system integration and lease terminations. |
Colony Capital | Supplemental Financial Report | 23 | ||
IVa. Capitalization - Overview |
($ in thousands; except per share data; as of September 30, 2019, unless otherwise noted) | Consolidated amount | CLNY OP share of consolidated amount | |||||||||
Debt (UPB) | |||||||||||
$750,000 Revolving credit facility | $ | 184,200 | $ | 184,200 | |||||||
Convertible/exchangeable senior notes | 616,105 | 616,105 | |||||||||
Corporate aircraft promissory note | 35,622 | 35,622 | |||||||||
Trust Preferred Securities ("TruPS") | 280,117 | 280,117 | |||||||||
Investment-level debt: | |||||||||||
Healthcare | 2,953,705 | 2,108,463 | |||||||||
Industrial | 2,149,494 | 762,316 | |||||||||
Hospitality | 2,659,615 | 2,488,740 | |||||||||
Other Equity and Debt | 2,119,352 | 1,104,610 | |||||||||
Total investment-level debt | 9,882,166 | 6,464,129 | |||||||||
Total debt | $ | 10,998,210 | $ | 7,580,173 | |||||||
Perpetual preferred equity, redemption value | |||||||||||
Total perpetual preferred equity | $ | 1,436,605 | |||||||||
Common equity as of November 5, 2019 | Price per share | Shares / Units | |||||||||
Class A and B common stock | $ | 5.48 | 487,749 | $ | 2,672,865 | ||||||
OP units(1) | 5.48 | 52,649 | 288,517 | ||||||||
Total market value of common equity | $ | 2,961,382 | |||||||||
Total market capitalization | $ | 11,978,160 | |||||||||
Notes:
(1) | Includes 21.5 million operating company units issued on July 25, 2019 for the acquisition of Digital Bridge Holdings. |
Colony Capital | Supplemental Financial Report | 24 | ||
IVb. Capitalization - Investment-Level Debt Overview |
($ in thousands; as of or for the three months ended September 30, 2019, unless otherwise noted) | ||||||||||||||||
Non-recourse investment-level debt overview | ||||||||||||||||
Consolidated | CLNY OP share of consolidated amount | |||||||||||||||
Fixed / Floating | Unpaid principal balance | Unpaid principal balance | Wtd. avg. years remaining to maturity | Wtd. avg. interest rate(1) | ||||||||||||
Healthcare | Fixed | $ | 405,980 | $ | 285,039 | 5.4 | 4.5 | % | ||||||||
Healthcare | Floating | 2,547,725 | 1,823,424 | 3.9 | 5.6 | % | ||||||||||
Light Industrial(2) | Fixed | 1,588,045 | 532,917 | 8.8 | 3.8 | % | ||||||||||
Light Industrial(2) | Floating | 326,449 | 109,549 | 4.4 | 3.4 | % | ||||||||||
Bulk Industrial | Floating | 235,000 | 119,850 | 4.4 | 4.0 | % | ||||||||||
Hospitality | Fixed | 13,388 | 13,054 | 1.9 | 12.7 | % | ||||||||||
Hospitality | Floating | 2,646,227 | 2,475,686 | 3.3 | 5.1 | % | ||||||||||
Other Equity and Debt | ||||||||||||||||
Net lease real estate equity | Fixed | 104,821 | 104,198 | 3.7 | 5.0 | % | ||||||||||
Other real estate equity | Fixed | 55,831 | 15,979 | 3.4 | 2.6 | % | ||||||||||
Other real estate equity | Floating | 1,222,617 | 622,856 | 3.0 | 4.6 | % | ||||||||||
GP Co-investments | Floating | 734,864 | 361,334 | 2.2 | 3.7 | % | ||||||||||
GP Co-investments | Fixed | 1,219 | 243 | 3.8 | 2.4 | % | ||||||||||
Total investment-level debt | $ | 9,882,166 | $ | 6,464,129 | 4.0 | 5.0 | % | |||||||||
Fixed / Floating Summary | ||||||||||||||||
Fixed | $ | 2,169,284 | $ | 951,430 | ||||||||||||
Floating | 7,712,882 | 5,512,699 | ||||||||||||||
Total investment-level debt | $ | 9,882,166 | $ | 6,464,129 | ||||||||||||
Notes:
(1) | Based on 1-month LIBOR of 2.02% and 3-month LIBOR of 2.09% for floating rate debt. |
(2) | $300 million consolidated or $101 million CLNY OP share of Light Industrial floating rate (LIBOR plus 135bps) term debt is categorized as fixed rate debt to reflect interest rate swaps resulting in an effective fixed rate of 3.50%. |
Colony Capital | Supplemental Financial Report | 25 | ||
IVc. Capitalization - Revolving Credit Facility Overview |
($ in thousands, except as noted; as of September 30, 2019) | ||||
Revolving credit facility | ||||
Maximum principal amount | $ | 750,000 | ||
Amount outstanding | 184,200 | |||
Initial maturity | January 11, 2021 | |||
Fully-extended maturity | January 10, 2022 | |||
Interest rate | LIBOR + 2.25% | |||
Financial covenants as defined in the Credit Agreement: | Covenant level | |||
Consolidated Tangible Net Worth | Minimum $4,550 million | |||
Consolidated Fixed Charge Coverage Ratio(1) | Minimum 1.30 to 1.00 | |||
Interest Coverage Ratio(2) | Minimum 3.00 to 1.00 | |||
Consolidated Leverage Ratio | Maximum 0.65 to 1.00 | |||
Company status: As of September 30, 2019, CLNY is meeting all required covenant threshold levels | ||||
Notes:
(1) | In the event the Fixed Charge Coverage Ratio is between 1.50 and 1.30 to 1.00, the borrowing base formula will be discounted by 10%. |
(2) | Interest Coverage Ratio represents the ratio of the sum of (1) earnings from borrowing base assets and (2) certain investment management earnings divided by the greater of (a) actual interest expense on the revolving credit facility and (b) the average balance of the facility multiplied by 7.0% for the applicable quarter. |
Colony Capital | Supplemental Financial Report | 26 | ||
IVd. Capitalization - Corporate Securities Overview |
($ in thousands; except per share data; as of September 30, 2019, 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 | ||||||||||||
5.0% Convertible senior notes | $ | 200,000 | April 15, 2023 | 5.00% fixed | $ | 15.76 | 63.4700 | 12,694 | ||||||||||
3.875% Convertible senior notes | 402,500 | January 15, 2021 | 3.875% fixed | 16.57 | 60.3431 | 24,288 | ||||||||||||
5.375% Exchangeable senior notes | 13,605 | June 15, 2033 | 5.375% fixed | 12.04 | 83.0837 | 1,130 | ||||||||||||
Total convertible debt | $ | 616,105 | ||||||||||||||||
TruPS | ||||||||
Description | Outstanding principal | Final due date | Interest rate | |||||
Trust I | $ | 41,240 | March 30, 2035 | 3M L + 3.25% | ||||
Trust II | 25,780 | June 30, 2035 | 3M L + 3.25% | |||||
Trust III | 41,238 | January 30, 2036 | 3M L + 2.83% | |||||
Trust IV | 50,100 | June 30, 2036 | 3M L + 2.80% | |||||
Trust V | 30,100 | September 30, 2036 | 3M L + 2.70% | |||||
Trust VI | 25,100 | December 30, 2036 | 3M L + 2.90% | |||||
Trust VII | 31,459 | April 30, 2037 | 3M L + 2.50% | |||||
Trust VIII | 35,100 | July 30, 2037 | 3M L + 2.70% | |||||
Total TruPS | $ | 280,117 | ||||||
Perpetual preferred stock | |||||||||
Description | Liquidation preference | Shares outstanding (In thousands) | Callable period | ||||||
Series B 8.25% cumulative redeemable perpetual preferred stock | $ | 152,855 | 6,114 | Callable | |||||
Series E 8.75% cumulative redeemable perpetual preferred stock | 250,000 | 10,000 | Callable | ||||||
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 | On or after April 13, 2020 | ||||||
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 | $ | 1,436,605 | 57,464 | ||||||
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 April 22, 2020, for the 5.0% convertible senior notes; on or after January 22, 2019, for the 3.875% convertible senior notes; and on or after on or after June 15, 2020, for the 5.375% exchangeable senior notes. |
Colony Capital | Supplemental Financial Report | 27 | ||
IVe. Capitalization - Debt Maturity and Amortization Schedules |
($ in thousands; as of September 30, 2019) | Payments due by period(1) | |||||||||||||||||||||||
Consolidated debt | Fixed / Floating | 2019 | 2020 | 2021 | 2022 | 2023 and after | Total | |||||||||||||||||
$750,000 Revolving credit facility | Floating | $ | — | $ | — | $ | — | $ | 184,200 | $ | — | $ | 184,200 | |||||||||||
Convertible/exchangeable senior notes | Fixed | — | — | 402,500 | — | 213,605 | 616,105 | |||||||||||||||||
Corporate aircraft promissory note | Fixed | 549 | 2,243 | 2,359 | 2,480 | 27,991 | 35,622 | |||||||||||||||||
TruPS | Floating | — | — | — | — | 280,117 | 280,117 | |||||||||||||||||
Investment-level debt: | ||||||||||||||||||||||||
Healthcare | Fixed | — | 6,809 | 8,083 | 9,068 | 382,020 | 405,980 | |||||||||||||||||
Healthcare(2) | Floating | 32,323 | 97,396 | 280,202 | 3,504 | 2,134,300 | 2,547,725 | |||||||||||||||||
Light Industrial(3) | Fixed | 213 | 5,825 | 2,690 | 6,735 | 1,572,582 | 1,588,045 | |||||||||||||||||
Light Industrial(3) | Floating | — | — | — | 1 | 326,448 | 326,449 | |||||||||||||||||
Bulk Industrial | Floating | — | — | — | — | 235,000 | 235,000 | |||||||||||||||||
Hospitality | Fixed | — | — | 13,388 | — | — | 13,388 | |||||||||||||||||
Hospitality | Floating | — | 132,250 | 207,177 | 1,630,000 | 676,800 | 2,646,227 | |||||||||||||||||
Other Equity and Debt | Fixed | 11,615 | 13,134 | 35,106 | 19,114 | 82,902 | 161,871 | |||||||||||||||||
Other Equity and Debt | Floating | 6,919 | 244,210 | 253,407 | 1,020,298 | 432,647 | 1,957,481 | |||||||||||||||||
Total consolidated debt | $ | 51,619 | $ | 501,867 | $ | 1,204,912 | $ | 2,875,400 | $ | 6,364,412 | $ | 10,998,210 | ||||||||||||
Pro rata debt | Fixed / Floating | 2019 | 2020 | 2021 | 2022 | 2023 and after | Total | |||||||||||||||||
$750,000 Revolving credit facility | Floating | $ | — | $ | — | $ | — | $ | 184,200 | $ | — | $ | 184,200 | |||||||||||
Convertible/exchangeable senior notes | Fixed | — | — | 402,500 | — | 213,605 | 616,105 | |||||||||||||||||
Corporate aircraft promissory note | Fixed | 549 | 2,243 | 2,359 | 2,480 | 27,991 | 35,622 | |||||||||||||||||
TruPS | Floating | — | — | — | — | 280,117 | 280,117 | |||||||||||||||||
Investment-level debt: | ||||||||||||||||||||||||
Healthcare | Fixed | — | 4,781 | 5,675 | 6,366 | 268,217 | 285,039 | |||||||||||||||||
Healthcare(2) | Floating | 26,239 | 74,020 | 224,827 | 2,451 | 1,495,887 | 1,823,424 | |||||||||||||||||
Light Industrial(3) | Fixed | 72 | 1,955 | 903 | 2,260 | 527,727 | 532,917 | |||||||||||||||||
Light Industrial(3) | Floating | — | — | — | — | 109,549 | 109,549 | |||||||||||||||||
Bulk Industrial | Floating | — | — | — | — | 119,850 | 119,850 | |||||||||||||||||
Hospitality | Fixed | — | — | 13,054 | — | — | 13,054 | |||||||||||||||||
Hospitality | Floating | — | 132,250 | 201,998 | 1,464,639 | 676,799 | 2,475,686 | |||||||||||||||||
Other Equity and Debt | Fixed | 3,538 | 4,808 | 26,736 | 6,610 | 78,728 | 120,420 | |||||||||||||||||
Other Equity and Debt | Floating | 2,306 | 82,965 | 228,038 | 523,108 | 147,773 | 984,190 | |||||||||||||||||
Total pro rata debt | $ | 32,704 | $ | 303,022 | $ | 1,106,090 | $ | 2,192,114 | $ | 3,946,243 | $ | 7,580,173 | ||||||||||||
Notes:
(1) | Based on initial maturity dates or extended maturity dates to the extent criteria are met and the extension option is at the borrower’s discretion. |
(2) | Proforma for refinancing of a £212 million healthcare loan with a fully extended five-year term subsequent to the third quarter 2019. |
(3) | $300 million consolidated or $101 million CLNY OP share of Light Industrial floating rate (LIBOR plus 135bps) term debt is categorized as fixed rate debt to reflect interest rate swaps resulting in an effective fixed rate of 3.50%. |
Colony Capital | Supplemental Financial Report | 28 | ||
Va. Healthcare Real Estate - Summary Metrics and Operating Results |
($ in thousands; as of or for the three months ended September 30, 2019, unless otherwise noted) | Consolidated amount | CLNY OP share of consolidated amount(1) | ||||||
Net operating income | ||||||||
Net operating income: | ||||||||
Senior Housing - Operating | $ | 15,612 | $ | 11,085 | ||||
Medical Office Buildings | 12,923 | 9,149 | ||||||
Triple-Net Lease: | ||||||||
Senior Housing(2) | 14,103 | 10,013 | ||||||
Skilled Nursing Facilities | 25,477 | 18,089 | ||||||
Hospitals | 3,169 | 2,250 | ||||||
Total net operating income | $ | 71,284 | $ | 50,586 | ||||
Portfolio overview | Total number of properties | Capacity | % Occupied(3) | TTM Lease Coverage(4) | WA Remaining Lease Term | ||||||||
Senior Housing - Operating | 83 | 6,388 units | 85.3 | % | N/A | N/A | |||||||
Medical Office Buildings | 106 | 3.8 million sq. ft. | 82.2 | % | N/A | 4.6 | |||||||
Triple-Net Lease: | |||||||||||||
Senior Housing | 81 | 4,231 units | 80.5 | % | 1.2x | 11.0 | |||||||
Skilled Nursing Facilities | 89 | 10,601 beds | 82.5 | % | 1.2x | 5.7 | |||||||
Hospitals | 12 | 872 beds | 58.3 | % | 2.7x | 9.4 | |||||||
Total | 371 | ||||||||||||
Same store financial/operating results related to the segment | ||||||||||||||||||||||
% Occupied(3) | TTM Lease Coverage(4) | NOI(5) | ||||||||||||||||||||
Q3 2019 | Q2 2019 | 6/30/2019 | 3/31/2019 | Q3 2019 | Q2 2019 | % Change | ||||||||||||||||
Senior Housing - Operating | 85.3 | % | 84.8 | % | N/A | N/A | $ | 15,611 | $ | 16,469 | (5.2 | )% | ||||||||||
Medical Office Buildings | 82.2 | % | 82.1 | % | N/A | N/A | 12,923 | 13,481 | (4.1 | )% | ||||||||||||
Triple-Net Lease: | ||||||||||||||||||||||
Senior Housing | 80.5 | % | 80.9 | % | 1.2x | 1.3x | 14,097 | 15,284 | (7.8 | )% | ||||||||||||
Skilled Nursing Facilities | 82.5 | % | 83.3 | % | 1.2x | 1.2x | 23,398 | 24,219 | (3.4 | )% | (5) | |||||||||||
Hospitals | 58.3 | % | 63.4 | % | 2.7x | 2.4x | 3,169 | 4,984 | (36.4 | )% | (5) | |||||||||||
Total | $ | 69,198 | $ | 74,437 | (7.0 | )% | ||||||||||||||||
Notes:
(1) | CLNY OP Share represents Consolidated NOI multiplied by CLNY OP's interest of 71% as of September 30, 2019. |
(2) | NOI includes $1.0 million consolidated or $0.7 million CLNY OP share of interest earned related to $54 million consolidated or $38 million CLNY OP share carrying value of healthcare real estate development loans. This interest income is in the Interest Income line item on the Company’s Statement of Operations for the three months ended September 30, 2019. For a reconciliation of net income/(loss) attributable to common stockholders to NOI, please refer to the appendix to this presentation. |
(3) | Occupancy % for Senior Housing - Operating represents average of the presented quarter, MOB’s is as of last day in the quarter and for Triple-Net Lease represents average of the prior quarter. Occupancy represents real estate property operator’s patient occupancy for all types except MOB. |
(4) | Represents the ratio of the tenant's/operator's EBITDAR to cash rent payable to the Company's Healthcare Real Estate segment on a trailing twelve month basis. 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. |
(5) | Third quarter 2019 same store net operating income included a $1.6 million consolidated, or $1.2 million CLNY OP share, one-time write-off of a certain tenant rent receivable in the Hospitals portfolio and second quarter 2019 same store net operating income included a $0.9 million consolidated, or $0.7 million CLNY OP share, one-time recovery of a certain tenant rent receivable in the Skilled Nursing Facilities portfolio. Excluding these one-time items from same store NOI, the healthcare same store portfolio sequential quarter to quarter comparable net operating income would have decreased (3.7)%. |
Colony Capital | Supplemental Financial Report | 29 | ||
Vb. Healthcare Real Estate - Portfolio Overview |
(As of or for the three months ended September 30, 2019, unless otherwise noted) | |||||||||||||||
Triple-Net Lease Coverage(1) | % of Triple-Net Lease TTM NOI as of June 30, 2019 | ||||||||||||||
June 30, 2019 TTM Lease Coverage | # of Leases | Senior Housing | Skilled Nursing Facilities & Hospitals | % Triple-Net Lease NOI | WA Remaining Lease Term | ||||||||||
Less than 0.99x | 6 | 6 | % | 14 | % | 20 | % | 6 yrs | |||||||
1.00x - 1.09x | 1 | — | % | 11 | % | 11 | % | 7 yrs | |||||||
1.10x - 1.19x | 1 | 4 | % | — | % | 4 | % | 8 yrs | |||||||
1.20x - 1.29x | 1 | — | % | 12 | % | 12 | % | 9 yrs | |||||||
1.30x - 1.39x | 3 | 22 | % | 9 | % | 31 | % | 11 yrs | |||||||
1.40x - 1.49x | — | — | % | — | % | — | % | — | |||||||
1.50x and greater | 4 | 2 | % | 20 | % | 22 | % | 4 yrs | |||||||
Total / W.A. | 16 | 34 | % | 66 | % | 100 | % | 8 yrs | |||||||
Revenue Mix(2) | June 30, 2019 TTM | ||||||||
Private Pay | Medicare | Medicaid | |||||||
Senior Housing - Operating | 86 | % | 4 | % | 10 | % | |||
Medical Office Buildings | 100 | % | — | % | — | % | |||
Triple-Net Lease: | |||||||||
Senior Housing | 63 | % | — | % | 37 | % | |||
Skilled Nursing Facilities | 27 | % | 20 | % | 53 | % | |||
Hospitals | 14 | % | 42 | % | 44 | % | |||
W.A. | 61 | % | 9 | % | 30 | % | |||
Notes:
(1) | Represents the ratio of the tenant's/operator's EBITDAR to cash rent payable to the Company's Healthcare Real Estate segment on a trailing twelve month basis. 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 and hospital types. Caring Homes (U.K.) lease (EBITDAR) coverage includes additional collateral provided by the operator. |
(2) | Revenue mix represents percentage of revenues derived from private, Medicare and Medicaid payor sources. The payor source percentages for the hospital category excludes two operating partners, whom 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 | 30 | ||
Vb. Healthcare Real Estate - Portfolio Overview (cont’d) |
($ in thousands; as of or for the three months ended September 30, 2019, unless otherwise noted) | |||||||
Top 10 Geographic Locations by NOI | |||||||
Number of properties | NOI | ||||||
United Kingdom | 45 | $ | 9,596 | ||||
Indiana | 55 | 7,186 | |||||
Illinois | 35 | 6,764 | |||||
Florida | 25 | 6,450 | |||||
Pennsylvania | 8 | 5,022 | |||||
Texas | 29 | 4,546 | |||||
Oregon | 31 | 4,413 | |||||
Georgia | 21 | 4,188 | |||||
Ohio | 14 | 4,158 | |||||
California | 12 | 3,689 | |||||
Total | 275 | $ | 56,012 | ||||
Top 10 Operators/Tenants by NOI | ||||||||||||||||
Property Type/Primary Segment | Number of properties | NOI | % Occupied | TTM Lease Coverage | WA Remaining Lease Term | |||||||||||
Senior Lifestyle | Sr. Housing / RIDEA | 60 | $ | 12,589 | 87.0 | % | N/A | N/A | ||||||||
Caring Homes (U.K.)(1) | Sr. Housing / NNN | 45 | 9,596 | 86.0 | % | 1.4x | 14 yrs | |||||||||
Sentosa | SNF / NNN | 8 | 5,022 | 83.0 | % | 1.2x | 9 yrs | |||||||||
Wellington Healthcare | SNF / NNN | 10 | 4,236 | 90.0 | % | 1.0x | 7 yrs | |||||||||
Millers | SNF / NNN | 28 | 3,990 | 70.0 | % | 1.8x | N/A | |||||||||
Frontier | Sr. Housing / RIDEA / NNN | 20 | 3,432 | 81.0 | % | N/A | N/A | |||||||||
Opis | SNF / NNN | 11 | 2,880 | 92.0 | % | 1.4x | 4 yrs | |||||||||
Consulate | SNF / NNN | 10 | 2,377 | 90.0 | % | 1.1x | 8 yrs | |||||||||
Avanti Hospital Systems | Hospital | 3 | 2,361 | 55.0 | % | 4.5x | 8 yrs | |||||||||
Carillon | Sr. Housing / NNN | 6 | 2,085 | 50.0 | % | 0.9x | 8 yrs | |||||||||
Total | 201 | $ | 48,568 | |||||||||||||
Notes:
(1) | Caring Homes (U.K.) lease (EBITDAR) coverage includes additional collateral provided by the operator. |
Colony Capital | Supplemental Financial Report | 31 | ||
VIa. Industrial Real Estate - Summary Metrics and Operating Results |
($ in thousands; as of or for the three months ended September 30, 2019, unless otherwise noted) | Consolidated amount(1) | CLNY OP share of consolidated amount(1) | ||||||
Net operating income | ||||||||
Light Industrial | $ | 63,326 | $ | 21,251 | ||||
Bulk Industrial | 3,465 | 1,767 | ||||||
Total Industrial | $ | 66,791 | $ | 23,018 | ||||
Portfolio overview | Light | Bulk | Total | ||||||
Total number of buildings | 450 | 6 | 456 | ||||||
Rentable square feet (thousands) | 57,403 | 4,183 | 61,586 | ||||||
% leased at end of period | 90.9 | % | 67.4 | % | |||||
Average remaining lease term | 3.9 | 11.5 | |||||||
Light industrial same store financial/operating results | Q3 2019 | Q2 2019 | % Change | ||||||||
Same store number of buildings | 311 | 311 | — | ||||||||
% leased at end of period | 95.0 | % | 94.5 | % | 0.5 | % | |||||
NOI | $ | 43,110 | $ | 42,217 | 2.1 | % | |||||
Notes:
* As of September 30, 2019, the Company's light industrial portfolio and related operating platform are under contract for approximately $5.7 billion. The sale is anticipated to close in the fourth quarter of 2019, subject to customary closing conditions. Accordingly, for all current and prior periods presented, the related assets and liabilities of the industrial segment are presented as assets and liabilities held for sale on the consolidated balance sheet and the related operating results are presented as income from discontinued operations on the consolidated statement of operations. The portfolio of bulk industrial assets is excluded from the light industrial sale agreement, but is still held for sale.
(1) | CLNY OP Share represents Consolidated NOI multiplied by CLNY OP's light industrial portfolio interest of 34% and bulk industrial portfolio interest of 51% as of September 30, 2019. For a reconciliation of net income/(loss) attributable to common stockholders to NOI, please refer to the appendix to this presentation. |
Colony Capital | Supplemental Financial Report | 32 | ||
VIb. Industrial Real Estate - Portfolio Overview |
($ in thousands; as of or for the three months ended September 30, 2019, unless otherwise noted) | |||||||||||||
Top 10 Geographic Locations by NOI - Light Industrial Portfolio | Number of buildings | Rentable square feet (thousands) | NOI | % leased at end of period | |||||||||
Atlanta | 54 | 6,979 | $ | 7,722 | 98.5 | % | |||||||
Dallas | 63 | 6,982 | 7,611 | 96.9 | % | ||||||||
Chicago | 37 | 5,128 | 4,536 | 88.9 | % | ||||||||
Northern New Jersey | 41 | 2,261 | 4,404 | 97.9 | % | ||||||||
Orlando | 23 | 3,575 | 3,760 | 81.6 | % | ||||||||
Minneapolis | 18 | 2,814 | 3,545 | 96.2 | % | ||||||||
Phoenix | 24 | 2,988 | 3,828 | 98.6 | % | ||||||||
Baltimore | 23 | 2,956 | 3,428 | 95.1 | % | ||||||||
Philadelphia | 24 | 3,109 | 3,194 | 89.3 | % | ||||||||
Jacksonville | 13 | 2,305 | 1,974 | 92.0 | % | ||||||||
Total / W.A. | 320 | 39,097 | $ | 44,002 | 93.9 | % | |||||||
Top 10 Tenant Base by Industry - Light Industrial Portfolio | ||||||
Industry | Total leased square feet (thousands) | % of total | ||||
Warehousing & Transportation | 22,689 | 43.6 | % | |||
Manufacturing | 9,009 | 17.3 | % | |||
Professional, Scientific & Technical Services | 4,864 | 9.3 | % | |||
Wholesale Trade | 4,776 | 9.2 | % | |||
Health & Science | 3,563 | 6.8 | % | |||
Media & Information | 2,612 | 5.0 | % | |||
Construction & Contractors | 2,192 | 4.2 | % | |||
Retail Trade | 1,610 | 3.1 | % | |||
Entertainment & Recreation | 686 | 1.3 | % | |||
Public Administration & Government | 84 | 0.2 | % | |||
Total | 52,085 | 100.0 | % | |||
Notes:
* As of September 30, 2019, the Company's light industrial portfolio and related operating platform are under contract for approximately $5.7 billion. The sale is anticipated to close in the fourth quarter of 2019, subject to customary closing conditions. Accordingly, for all current and prior periods presented, the related assets and liabilities of the industrial segment are presented as assets and liabilities held for sale on the consolidated balance sheet and the related operating results are presented as income from discontinued operations on the consolidated statement of operations. The portfolio of bulk industrial assets is excluded from the light industrial sale agreement, but is still held for sale.
Colony Capital | Supplemental Financial Report | 33 | ||
VIIa. Hospitality Real Estate - Summary Metrics and Operating Results |
($ in thousands; as of or for the three months ended September 30, 2019, unless otherwise noted) | CLNY OP share of consolidated amount(1) | |||||||
NOI before FF&E Reserve | Consolidated amount | |||||||
NOI before FF&E Reserve: | ||||||||
Select Service | $ | 40,143 | $ | 37,694 | ||||
Extended Stay | 34,195 | 32,109 | ||||||
Full Service | 3,050 | 2,864 | ||||||
Total NOI before FF&E Reserve(2) | $ | 77,388 | $ | 72,667 | ||||
Portfolio overview by type | ||||||||||||||||||||||||
Number of hotels | Number of rooms | Avg. qtr. % occupancy | Avg. daily rate (ADR) | RevPAR | Q3 2019 NOI before FF&E Reserve | NOI before FF&E Reserve margin | ||||||||||||||||||
Select service | 88 | 11,886 | 76.2 | % | $ | 124 | $ | 95 | $ | 40,143 | 34.1 | % | ||||||||||||
Extended stay | 66 | 7,936 | 83.5 | % | 137 | 114 | 34,195 | 39.6 | % | |||||||||||||||
Full service | 4 | 966 | 74.1 | % | 159 | 118 | 3,050 | 21.2 | % | |||||||||||||||
Total / W.A. | 158 | 20,788 | 78.8 | % | $ | 131 | $ | 103 | $ | 77,388 | 35.4 | % | ||||||||||||
Same store financial/operating results related to the segment by brand | ||||||||||||||||||||||||||||||||||
Avg. qtr. % occupancy | Avg. daily rate (ADR) | RevPAR | NOI before FF&E Reserve | |||||||||||||||||||||||||||||||
Brand | Q3 2019 | Q3 2018 | Q3 2019 | Q3 2018 | Q3 2019 | Q3 2018 | Q3 2019 | Q3 2018 | % Change | |||||||||||||||||||||||||
Marriott | 77.4 | % | 77.8 | % | $ | 130 | $ | 130 | $ | 101 | $ | 101 | $ | 57,006 | $ | 57,238 | (0.4 | )% | ||||||||||||||||
Hilton | 83.7 | % | 84.8 | % | 133 | 132 | 111 | 112 | 15,380 | 13,587 | 13.2 | % | (3) | |||||||||||||||||||||
Other | 86.6 | % | 85.4 | % | 139 | 139 | 120 | 118 | 4,835 | 4,614 | 4.8 | % | ||||||||||||||||||||||
Total / W.A. | 79.0 | % | 79.4 | % | $ | 131 | $ | 131 | $ | 104 | $ | 104 | $ | 77,221 | $ | 75,439 | 2.4 | % | ||||||||||||||||
Notes:
(1) | CLNY OP Share represents Consolidated NOI before FF&E Reserve multiplied by CLNY OP's interest of 94% as of September 30, 2019. |
(2) | Q3 2019 FF&E reserve was $9.4 million consolidated or $8.8 million CLNY OP share. For a reconciliation of net income/(loss) attributable to common stockholders to NOI please refer to the appendix to this presentation. |
(3) | Third quarter 2019 NOI included a one-time $1.6 million benefit from the reversal of property taxes that were accrued prior to 2018. |
Colony Capital | Supplemental Financial Report | 34 | ||
VIIb. Hospitality Real Estate - Portfolio Overview |
($ in thousands; as of September 30, 2019, unless otherwise noted) | |||||||||||||||||||
Top 10 Geographic Locations by NOI before FF&E Reserve | Number of hotels | Number of rooms | Number of rooms-select service | Number of rooms-extended stay | Number of rooms-full service | NOI before FF&E Reserve | |||||||||||||
California | 18 | 2,254 | 1,243 | 1,011 | — | $ | 13,011 | ||||||||||||
Texas | 26 | 2,939 | 1,661 | 1,278 | — | 7,335 | |||||||||||||
New Jersey | 12 | 1,884 | 718 | 942 | 224 | 6,527 | |||||||||||||
New York | 8 | 1,010 | 710 | 300 | — | 5,977 | |||||||||||||
Washington | 5 | 664 | 160 | 504 | — | 4,792 | |||||||||||||
Florida | 12 | 2,065 | 1,187 | 291 | 587 | 4,420 | |||||||||||||
New Hampshire | 6 | 662 | 339 | 323 | — | 3,747 | |||||||||||||
North Carolina | 7 | 981 | 831 | 150 | — | 3,505 | |||||||||||||
Virginia | 9 | 1,183 | 920 | 263 | — | 3,444 | |||||||||||||
Michigan | 6 | 809 | 601 | 208 | — | 3,300 | |||||||||||||
Total / W.A. | 109 | 14,451 | 8,370 | 5,270 | 811 | $ | 56,058 | ||||||||||||
Colony Capital | Supplemental Financial Report | 35 | ||
VIIIa. CLNC |
($ in thousands, except as noted and per share data; as of September 30, 2019, unless otherwise noted) | Consolidated amount | CLNY OP share of consolidated amount | ||||||
Colony Credit Real Estate, Inc. (NYSE: CLNC) | ||||||||
CLNY OP interest in CLNC as of November 5, 2019 | 36.4 | % | 36.4 | % | ||||
CLNC shares beneficially owned by OP and common stockholders | 48.0 million | 48.0 million | ||||||
CLNC share price as of November 5, 2019 | $ | 14.20 | $ | 14.20 | ||||
Total market value of CLNC shares | $ | 680,705 | $ | 680,705 | ||||
Net carrying value - CLNC | $ | 731,306 | $ | 731,306 | ||||
Colony Capital | Supplemental Financial Report | 36 | ||
IX. Other Equity and Debt Summary |
($ in thousands; as of September 30, 2019) | Consolidated amount | CLNY OP share of consolidated amount | |||||||||||||
Assets | Equity | Assets | Equity | ||||||||||||
Strategic GP co-investments(1) | $ | 2,766,121 | $ | 1,909,472 | $ | 1,144,949 | $ | 662,808 | |||||||
Non-Strategic(1) | |||||||||||||||
Other real estate equity | 2,207,140 | 928,693 | 1,184,593 | 545,757 | |||||||||||
Net lease real estate equity | 185,148 | 80,326 | 184,126 | 79,928 | |||||||||||
Real estate debt | 351,074 | 351,074 | 243,716 | 243,716 | |||||||||||
CRE securities and real estate PE fund investments | 65,387 | 65,387 | 65,387 | 65,387 | |||||||||||
Non-Strategic Subtotal | 2,808,749 | 1,425,480 | 1,677,822 | 934,788 | |||||||||||
Other Equity and Debt Total | $ | 5,574,870 | $ | 3,334,952 | $ | 2,822,771 | $ | 1,597,596 | |||||||
Notes:
(1) | For consolidated real estate equity assets, amounts include all components related to real estate assets, including tangible real estate and lease-related intangibles, and excludes accumulated depreciation, and for all other assets, amounts represent carrying value of investments. |
Colony Capital | Supplemental Financial Report | 37 | ||
IXa. Other Equity and Debt - Strategic Investments |
($ in thousands, except as noted and per share data; as of September 30, 2019, unless otherwise noted) | Consolidated amount | CLNY OP share of consolidated amount | ||||||
CLNY's GP Co-investments in CDCF IV and CDCF V Investments | ||||||||
Assets - carrying value(1) | $ | 1,985,428 | $ | 374,424 | ||||
Debt - UPB | 494,628 | 120,120 | ||||||
Net carrying value | $ | 1,490,800 | $ | 254,304 | ||||
NBV by Geography: | ||||||||
U.S. | 28.3 | % | 20.7 | % | ||||
Europe | 71.7 | % | 79.3 | % | ||||
Total | 100.0 | % | 100.0 | % | ||||
Other GP Co-investments (2) | ||||||||
Assets - carrying value(3)(4) | $ | 780,693 | $ | 770,525 | ||||
Debt - UPB(4) | 362,021 | 362,021 | ||||||
Net carrying value | $ | 418,672 | $ | 408,504 | ||||
Notes:
(1) | $741 million consolidated or $116 million CLNY OP share of assets are classified as Loans Receivable on the Company's balance sheet. |
(2) | Other GP co-investments represents: i) seed investments in certain registered investment companies sponsored by the Company, ii) investments in the general partnership of third party real estate operators primarily to seed investment commitments with their limited partners for which the Company will receive its share of earnings and incentive fees, or iii) general partnership capital in a fund or investment. |
(3) | $360 million consolidated and CLNY OP share of assets are classified as Loans Receivable on the Company's balance sheet. |
(4) | Debt includes $121 million of derivative liability with a corresponding derivative asset in Other GP Co-investments Assets above. |
Colony Capital | Supplemental Financial Report | 38 | ||
IXb. Other Equity and Debt - Net Lease and Other Real Estate Equity |
($ in thousands; as of September 30, 2019, unless otherwise noted) | ||||||||||||||||||||
Net Lease Real Estate Equity | Number of buildings | Rentable square feet (thousands) | Consolidated amount | CLNY OP share of consolidated amount | % leased at end of period | Weighted average remaining lease term | ||||||||||||||
NOI | NOI | |||||||||||||||||||
U.S. office | 3 | 674 | $ | 1,092 | $ | 1,088 | 85.7 | % | 5.1 | |||||||||||
Total / W.A. | 3 | 674 | $ | 1,092 | $ | 1,088 | 85.7 | % | 5.1 | |||||||||||
Other Real Estate Equity | Number of buildings | Rentable square feet (thousands) | Consolidated amount | CLNY OP share of consolidated amount | % leased at end of period | Weighted average remaining lease term | ||||||||||||||
Undepreciated carrying value | Undepreciated carrying value | |||||||||||||||||||
U.S.: | ||||||||||||||||||||
Office | 3 | 366 | $ | 64,453 | $ | 61,362 | 67.1 | % | 4.6 | |||||||||||
Hotel(1) | 89 | N/A | 1,213,864 | 669,101 | 73.0 | % | N/A | |||||||||||||
Europe: | ||||||||||||||||||||
Office | 15 | 533 | 72,235 | 36,117 | 76.1 | % | 11.8 | |||||||||||||
Mixed / Retail | 115 | 3,381 | 539,123 | 179,982 | 51.4 | % | 4.5 | |||||||||||||
Total / W.A. | 222 | 4,280 | $ | 1,889,675 | $ | 946,562 | 55.8 | % | 5.4 | |||||||||||
Unconsolidated joint ventures (Other RE Equity) | ||||||||||||||||||||
Preferred equity: | ||||||||||||||||||||
Multifamily | $ | 128,894 | $ | 128,894 | ||||||||||||||||
Equity & Other: | ||||||||||||||||||||
Albertsons | 89,129 | 44,565 | ||||||||||||||||||
Residential Land | 70,700 | 35,830 | ||||||||||||||||||
Other | 28,742 | 28,742 | ||||||||||||||||||
Total | $ | 317,465 | $ | 238,031 | ||||||||||||||||
Notes:
(1) | Includes $40 million consolidated or $22 million CLNY OP share of restricted cash. |
Colony Capital | Supplemental Financial Report | 39 | ||
IXc. Other Equity and Debt - Real Estate Debt |
($ in thousands, except as noted; as of September 30, 2019, unless otherwise noted) | ||||||||
Portfolio Overview(1) | ||||||||
Consolidated amount | CLNY OP share of consolidated amount | |||||||
Non-PCI loans(2) | ||||||||
Carrying value - consolidated | $ | 290,547 | $ | 207,626 | ||||
Carrying value - equity method investments | 14,156 | 9,087 | ||||||
. | ||||||||
PCI loans(2) | ||||||||
Carrying value - consolidated | — | — | ||||||
Carrying value - equity method investments | 974 | 974 | ||||||
Other | ||||||||
Carrying value - real estate assets (REO) | 45,397 | 26,029 | ||||||
Total Portfolio | ||||||||
Carrying value - consolidated | 290,547 | 207,626 | ||||||
Carrying value - equity method investments | 15,130 | 10,061 | ||||||
Carrying value - real estate assets (REO) | 45,397 | 26,029 | ||||||
Non-recourse investment-level financing (UPB) | — | — | ||||||
Notes:
(1) | Excludes $54 million consolidated or $38 million CLNY OP share carrying value of healthcare real estate development loans. |
(2) | Strategic Non-PCI and PCI loans that are classified as Loans Receivable on the Company's balance sheet are categorized within GP co-investments in this supplemental financial presentation. |
Colony Capital | Supplemental Financial Report | 40 | ||
IXc. Other Equity and Debt - Real Estate Debt (cont’d) |
($ in thousands; as of or for the three months ended September 30, 2019, unless otherwise noted) | ||||||||||||||
Non-strategic real estate debt by loan type(1) | ||||||||||||||
Consolidated amount | CLNY OP share of consolidated amount | |||||||||||||
Net carrying amount | Net carrying amount | Weighted average yield | Weighted average maturity in years | |||||||||||
Non-PCI loans(2) | ||||||||||||||
Fixed rate | ||||||||||||||
First mortgage loans | $ | 33,988 | $ | 16,994 | — | % | 0.7 | |||||||
Second mortgage loans / B-notes | 174,878 | 98,240 | 9.4 | % | 1.9 | |||||||||
Mezzanine loans | 59,819 | 57,256 | — | % | 1.7 | |||||||||
Corporate | 27,618 | 27,618 | 8.1 | % | 7.3 | |||||||||
Total fixed rate non-PCI loans | 296,303 | 200,108 | 5.8 | % | 2.5 | |||||||||
Variable rate | ||||||||||||||
First mortgage loans | 42,394 | 42,394 | 8.9 | % | 1.2 | |||||||||
Total variable rate non-PCI loans | 42,394 | 42,394 | 8.9 | % | 1.2 | |||||||||
Total non-PCI loans | 338,697 | 242,502 | ||||||||||||
Allowance for loan losses | (48,150 | ) | (34,876 | ) | ||||||||||
Total non-PCI loans, net of allowance for loan losses | 290,547 | 207,626 | ||||||||||||
PCI loans(2) | ||||||||||||||
Mezzanine loans | 3,671 | 3,671 | ||||||||||||
Total PCI loans | 3,671 | 3,671 | ||||||||||||
Allowance for loan losses | (3,671 | ) | (3,671 | ) | ||||||||||
Total PCI loans, net of allowance for loan losses | — | — | ||||||||||||
Total loans receivable, net of allowance for loan losses | $ | 290,547 | $ | 207,626 | ||||||||||
Notes:
(1) | Excludes $54 million consolidated or $38 million CLNY OP share carrying value of healthcare real estate development loans. |
(2) | Strategic Non-PCI and PCI loans that are classified as Loans Receivable on the Company's balance sheet are categorized within GP co-investments in this supplemental financial presentation. |
Colony Capital | Supplemental Financial Report | 41 | ||
IXc. Other Equity and Debt - Real Estate Debt (cont’d) |
($ in thousands; as of or for the three months ended September 30, 2019, unless otherwise noted) | ||||||||||||||
Non-strategic real estate debt by collateral type(1) | ||||||||||||||
Consolidated amount | CLNY OP share of consolidated amount | |||||||||||||
Net carrying amount | Net carrying amount | Weighted average yield | Weighted average maturity in years | |||||||||||
Non-PCI Loans(2) | ||||||||||||||
Retail | $ | 102,213 | $ | 99,650 | 3.8 | % | 1.5 | |||||||
Office | 137,112 | 68,556 | 13.5 | % | 2.3 | |||||||||
Land | 23,604 | 11,802 | — | % | 0.7 | |||||||||
Corporate | 27,618 | 27,618 | 8.1 | % | 7.3 | |||||||||
Total non-PCI loans, net of allowance for loan losses | 290,547 | 207,626 | 7.4 | % | 2.5 | |||||||||
Total loans receivable, net of allowance for loan losses | $ | 290,547 | $ | 207,626 | ||||||||||
Notes:
(1) | Excludes $54 million consolidated or $38 million CLNY OP share carrying value of healthcare real estate development loans. |
(2) | Strategic Non-PCI and PCI loans that are classified as Loans Receivable on the Company's balance sheet are categorized within GP co-investments in this supplemental financial presentation. |
Colony Capital | Supplemental Financial Report | 42 | ||
IXd. Other Equity and Debt - CRE Securities and Real Estate PE Fund Interests |
($ in thousands; as of September 30, 2019) | |||||
Portfolio Overview | Carrying Value | ||||
Deconsolidated CDO bonds | $ | 59,953 | |||
Real estate PE fund interests | 5,434 | ||||
Colony Capital | Supplemental Financial Report | 43 | ||
Xa. Investment Management - Summary Metrics |
($ in thousands, except as noted; as of September 30, 2019) | ||||
Fee Revenue | CLNY OP Share | |||
Digital Bridge Holdings(1) | $ | 13,434 | ||
Institutional funds | 13,602 | |||
Colony Credit Real Estate (NYSE:CLNC) | 11,269 | |||
NorthStar Realty Europe (NYSE:NRE)(2) | 68,364 | |||
Retail companies | 5,185 | |||
Non-wholly owned REIM platforms (equity method earnings) | 4,539 | |||
Total reported fee revenue and REIM platform equity method earnings | $ | 116,393 | ||
Operating Results | ||||
Revenues | ||||
Total fee revenue and REIM earnings of investments in unconsolidated ventures | $ | 116,393 | ||
Interest Income and Other Income(3) | 32,349 | |||
Expenses | ||||
Interest expense | 1,585 | |||
Investment and servicing expense | 259 | |||
Transaction costs | 100 | |||
Placement fees | 64 | |||
Depreciation and amortization(4) | 65,219 | |||
(Recovery of) impairment loss(5) | 387,000 | |||
Compensation expense | ||||
Cash and equity-based compensation(3) | 58,337 | |||
Carried interest and incentive compensation | 10,846 | |||
Administrative expenses | 3,162 | |||
Total expenses | 526,572 | |||
Other gain (loss), net(6) | 51,346 | |||
Equity method earnings | (1,409 | ) | ||
Equity method earnings—carried interest | (123 | ) | ||
Income tax benefit (expense) | (9,384 | ) | ||
Income (loss) from discontinued operations(7) | 21,369 | |||
Non-pro rata allocation of income (loss) to NCI | 411 | |||
Net income attributable to common interests in OP and common stockholders | (315,620 | ) | ||
Real estate depreciation and amortization | 1,722 | |||
(Gains) and losses from sales of businesses and impairment write-downs associated with the Investment Management segment(5) | 387,000 | |||
Equity-based compensation expense | 3,815 | |||
Straight-line rent revenue and expense | 278 | |||
Amortization of deferred financing costs and debt premiums and discounts | 92 | |||
Unrealized fair value losses on interest rate and foreign currency hedges, and foreign currency remeasurements | 8 | |||
Acquisition and merger-related transaction costs | 101 | |||
Restructuring and merger integration costs(3) | 13,297 | |||
Amortization and impairment of investment management intangibles(4) | 65,158 | |||
Non-real estate depreciation and amortization | 45 | |||
Gain on consolidation of equity method investment(6) | (51,400 | ) | ||
Tax effect of Core FFO adjustments, net | (4,286 | ) | ||
Core FFO | $ | 100,210 | ||
Colony Capital | Supplemental Financial Report | 44 | ||
Xa. Investment Management - Summary Metrics |
Notes:
(1) | The Company acquired Digital Bridge Holdings on July 25, 2019 and recognized fee revenue for the period between July 26, 2019 through September 30, 2019. |
(2) | Includes $3.8 million of quarterly base management fees plus a $43 million termination fee and $22 million incentive fee resulting from the termination of the Company’s management agreement with NRE. |
(3) | During the third quarter 2019, the Company’s Consolidated Statement of Operations included approximately $26 million of one-time compensation costs, which represent the acceleration of NRE equity awards held by certain employees and other cash compensation paid by NRE to certain employees. The full amount of these compensation costs were paid by NRE; as a result, a corresponding $26 million offset was recorded in Other Income. In addition, the Company was responsible for severance payments to certain employees dedicated to NRE’s business of $13 million, which was added back to the Company's net loss to calculate Core FFO. |
(4) | Net loss included $53 million of accelerated amortization of investment management intangibles related to the termination of NRE’s management agreement which is added back to the Company's net loss to calculate Core FFO. |
(5) | Represents a $387 million reduction to goodwill as a result of the pending sale of the Industrial platform and real estate portfolio and the decrease in management fees from CLNC resulting from its reduced fee base, in connection with its portfolio bifurcation. The reduction of goodwill is added back to the Company's net loss to calculate Core FFO. |
(6) | Net loss included a $51 million gain from the remeasurement of our 50% interest in the manager of the $4 billion Digital Colony Partners fund resulting from the acquisition of DBH. The remeasurement gain is excluded in the calculation of Core FFO. |
(7) | As of September 30, 2019, the Company's light industrial portfolio and related operating platform were under contract for sale. Accordingly, for all current and prior periods presented, the related operating results are presented as income from discontinued operations on the consolidated statement of operations. During the third quarter 2019, the Company recognized a net $18 million of unrealized carried interest accrual related to the anticipated sale of the industrial portfolio. |
Colony Capital | Supplemental Financial Report | 45 | ||
Xb. Investment Management – Assets Under Management |
($ in millions, except as noted; as of September 30, 2019, unless otherwise noted) | |||||||||||||||
Segment | Products (FEEUM) | Description | AUM CLNY OP Share | FEEUM CLNY OP Share | Fee Rate | ||||||||||
Digital Infrastructure | • Digital Bridge Holdings ($7.1 billion) | • Leading global investment manager of digital infrastructure assets including cell towers, small cells, fiber and data centers • Manages and operates nine global portfolio companies | $ | 13,796 | $ | 7,082 | 1.0 | % | |||||||
Institutional Funds | • Credit ($2.4 billion) • Core plus / value-added ($0.1 billion) • Opportunistic ($0.5 billion) • Colony Industrial ($2.1 billion) • Colony Latam Partners ($0.5 billion) • Other co-investment vehicles ($1.4 billion) | • 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 • Colony Industrial Open-End Fund | 10,601 | 7,021 | .8 | % | |||||||||
Public Company | • Colony Credit Real Estate, Inc. ($3.0 billion) | • NYSE-listed credit focused REIT • Contract with base management fees with potential for incentive fees | 3,522 | 3,010 | (1) | 1.5 | % | ||||||||
Retail Companies | • NorthStar Healthcare ($1.3 billion)(2) • CC Real Estate Income Funds(3)(4) | • Manage public non-traded vehicles earning asset management and performance fees | 3,440 | 1,364 | (2) | 1.5 | % | ||||||||
Non-Wholly Owned REIM Platforms | • RXR Realty • American Healthcare Investors • Hamburg Trust | • CLNY recognizes at-share earnings from underlying non-wholly owned REIM platforms • 27% investment in RXR Realty, a real estate owner, developer and investment management company with $20 billion of AUM • 43% investment in American Healthcare Investors, a healthcare investment management firm and sponsor of non-traded vehicles with $3 billion of AUM | 7,952 | 3,934 | N/A | ||||||||||
Total | $ | 39,311 | $ | 22,411 | |||||||||||
Notes:
(1) | Subsequent to the third quarter 2019, the Company and CLNC revised the terms of the management agreement in connection with CLNC's portfolio bifurcation and related impairments, which will result in the reduction of the fee base by accumulated unrealized provisions for loan losses and real estate impairments. Such reduction will be effective during the fourth quarter 2019 and result in the decrease of the Company's FEEUM to $2.2 billion. |
(2) | FEEUM of NorthStar Healthcare Income represents its most recently published Net Asset Value. |
(3) | CC Real Estate Income Funds represents a master/feeder structure and pools investor capital raised through three feeder funds. |
(4) | In February 2019, the board of directors of CC Real Estate Income Fund approved a plan to dissolve, liquidate and terminate CCREIF and distribute the net proceeds of such liquidation to its shareholders. There is no assurances to the timing or completion of the liquidation. |
Colony Capital | Supplemental Financial Report | 46 | ||
APPENDICES
Colony Capital | Supplemental Financial Report | 47 | ||
XIa. Appendices - Definitions |
Assets Under Management (“AUM”)
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. AUM is based on reported gross undepreciated carrying value of managed investments as reported by each underlying vehicle at September 30, 2019. AUM further includes a) uncalled capital commitments and b) includes the Company’s pro-rata share of each affiliate non wholly-owned real estate investment management platform’s assets as presented and calculated by the affiliate. Affiliates include RXR Realty LLC, American Healthcare Investors and Hamburg Trust. The Company's calculations of AUM 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.
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 a) 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 and b) the Company’s pro-rata share of fee bearing equity of each affiliate as presented and calculated by the affiliate. Affiliates include RXR Realty LLC, American Healthcare Investors and Hamburg Trust. 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.
Healthcare same store portfolio: defined as properties in operation throughout the full periods presented under the comparison and included 371 properties in the comparisons. Properties acquired or disposed during these periods are excluded for the same store portfolio.
Light Industrial same store portfolio: consisted of 311 buildings. The same store light industrial portfolio is defined once a year at the beginning of the current calendar year and includes buildings that were owned and stabilized throughout the entirety of both the current and prior calendar years. Properties acquired or disposed of after the same store portfolio is determined are excluded. Stabilized properties are defined as properties owned for more than one year or are greater than 90% leased. Light industrial same store NOI excludes lease termination fee revenue.
Hospitality same store portfolio: defined as hotels in operation throughout the full periods presented under the comparison and included 158 hotels.
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.
NOI before FF&E Reserve: For our hospitality real estate segment, NOI before FF&E Reserve represents NOI before the deduction of reserve contributions for the repair, replacement and refurbishment of furniture, fixtures, and equipment ("FF&E"), which are typically 4% to 5% of revenues, and required under certain debt agreements and/or franchise and brand-managed hotel agreements.
Colony Capital | Supplemental Financial Report | 48 | ||
XIa. Appendices - Definitions |
Earnings Before Interest, Tax, Depreciation, Amortization and Rent (“EBITDAR”)
Represents earnings before interest, taxes, depreciation, amortization and rent for facilities accruing to the tenant/operator of the property (not the Company) for the period presented. The Company uses EBITDAR in determining TTM Lease Coverage for triple-net lease properties in its Healthcare Real Estate segment. EBITDAR has limitations as an analytical tool. EBITDAR does not reflect historical cash expenditures or future cash requirements for facility capital expenditures or contractual commitments. In addition, EBITDAR does not represent a property's net income or cash flow from operations and should not be considered an alternative to those indicators. The Company utilizes EBITDAR as a supplemental measure of the ability of the Company's operators/tenants to generate sufficient liquidity to meet related obligations to the Company.
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.
ADR: Average Daily Rate
RevPAR: Revenue per Available Room
UPB: Unpaid Principal Balance
PCI: Purchased Credit-Impaired
REIM: Real Estate Investment Management
Colony Capital | Supplemental Financial Report | 49 | ||
XIb. Appendices - Reconciliation of Net Income (Loss) to NOI |
($ in thousands; for the three months ended September 30, 2019) | ||||||||||||||||
NOI Determined as Follows | Healthcare | Industrial | Hospitality | Other Equity and Debt—Net Lease Properties | ||||||||||||
Total revenues | $ | 136,091 | $ | 98,642 | $ | 218,378 | $ | 3,286 | ||||||||
Straight-line rent revenue and amortization of above- and below-market lease intangibles | 1,235 | (4,518 | ) | 314 | (885 | ) | ||||||||||
Interest income | — | (240 | ) | — | — | |||||||||||
Other income | — | — | (69 | ) | — | |||||||||||
Property operating expenses(1) | (66,042 | ) | (26,051 | ) | (141,235 | ) | (1,309 | ) | ||||||||
Compensation and administrative expense(1) | — | (1,042 | ) | — | — | |||||||||||
NOI(2) | $ | 71,284 | $ | 66,791 | $ | 77,388 | $ | 1,092 | ||||||||
Reconciliation of Net Income (Loss) from Continuing Operations to NOI | ||||||||||||||||
Healthcare | Industrial | Hospitality | ||||||||||||||
Income (loss) | $ | (112,554 | ) | $ | 38,981 | $ | (34,365 | ) | ||||||||
Adjustments: | ||||||||||||||||
Straight-line rent revenue and amortization of above- and below-market lease intangibles | 1,235 | (4,518 | ) | 314 | ||||||||||||
Interest income | — | (240 | ) | — | ||||||||||||
Interest expense | 46,029 | 21,130 | 40,641 | |||||||||||||
Transaction, investment and servicing costs | 1,009 | 54 | 1,728 | |||||||||||||
Depreciation and amortization | 38,998 | 12,342 | 36,133 | |||||||||||||
Impairment loss | 92,885 | — | 31,555 | |||||||||||||
Compensation and administrative expense | 2,537 | 3,832 | 1,658 | |||||||||||||
Gain on sale of real estate | (833 | ) | (4,675 | ) | — | |||||||||||
Other (gain) loss, net | 2,544 | 12 | 37 | |||||||||||||
Other income | — | — | (69 | ) | ||||||||||||
Income tax (benefit) expense | (566 | ) | (127 | ) | (244 | ) | ||||||||||
NOI(2) | $ | 71,284 | $ | 66,791 | $ | 77,388 | ||||||||||
Notes:
(1) | For healthcare and hospitality, property operating expenses includes property management fees paid to third parties. For industrial, there are direct costs of managing the portfolio which are included in compensation expense. |
(2) | For hospitality, NOI is before FF&E Reserve. |
Colony Capital | Supplemental Financial Report | 50 | ||
XIb. Appendices - Reconciliation of Net Income (Loss) to NOI (cont’d) |
($ in thousands; for the three months ended September 30, 2019) | ||||
Reconciliation of Net Income from Continuing Operations of Other Equity and Debt Segment to NOI of Net Lease Real Estate Equity | ||||
Other Equity and Debt | ||||
Income from continuing operations | $ | (5,160 | ) | |
Adjustments: | ||||
Property operating income of other real estate equity | (105,587 | ) | ||
Straight-line rent revenue and amortization of above- and below-market lease intangibles for net lease real estate equity | (885 | ) | ||
Interest income | (38,734 | ) | ||
Fee and other income | (3,530 | ) | ||
Property operating expense of other real estate equity | 65,765 | |||
Interest expense | 27,428 | |||
Transaction, investment and servicing costs | 8,211 | |||
Depreciation and amortization | 17,152 | |||
Provision for loan loss | 17,233 | |||
Impairment loss | 53,459 | |||
Compensation and administrative expense | 5,904 | |||
Gain on sale of real estate assets | (7,391 | ) | ||
Other loss, net | 1,709 | |||
Earnings of investments in unconsolidated ventures | (35,587 | ) | ||
Income tax expense | 1,105 | |||
NOI of net lease real estate equity | $ | 1,092 | ||
Colony Capital | Supplemental Financial Report | 51 | ||
XIc. Appendices - Industrial Real Estate Segment Held For Sale |
($ in thousands, except per share data) (unaudited) | As of September 30, 2019 | |||
Assets | ||||
Restricted cash | 3,267 | |||
Real estate, net | 4,240,742 | |||
Goodwill | 20,000 | |||
Deferred leasing costs and intangible assets, net | 148,518 | |||
Other assets | 75,015 | |||
Total assets | $ | 4,487,542 | ||
Liabilities | ||||
Debt, net | $ | 2,131,497 | ||
Accrued and other liabilities | 108,041 | |||
Intangible liabilities, net | 12,577 | |||
Total liabilities | 2,252,115 | |||
Colony Capital | Supplemental Financial Report | 52 | ||
XIc. Appendices - Industrial Real Estate Segment Discontinued Operations |
($ in thousands) (unaudited) | Three Months Ended September 30, 2019 | |||
Revenues | ||||
Property operating income | $ | 97,188 | ||
Interest income | 240 | |||
Other income | 1,214 | |||
Total revenues | 98,642 | |||
Expenses | ||||
Property operating expense | 26,051 | |||
Interest expense | 21,130 | |||
Investment and servicing expense | 54 | |||
Depreciation and amortization | 12,342 | |||
Compensation expense | ||||
Cash and equity-based compensation | 3,914 | |||
Administrative expenses | 960 | |||
Total expenses | 64,451 | |||
Other income (loss) | ||||
Gain on sale of real estate assets | 4,675 | |||
Other gain (loss), net | (12 | ) | ||
Income (loss) before income taxes | 38,854 | |||
Income tax benefit (expense) | 127 | |||
Income (loss) from continuing operations | 38,981 | |||
Net income (loss) | 38,981 | |||
Net income (loss) attributable to noncontrolling interests: | ||||
Investment entities | 27,728 | |||
Operating Company | 990 | |||
Net income (loss) attributable to Colony Capital, Inc. | 10,263 | |||
Net income (loss) attributable to common stockholders | $ | 10,263 | ||
Colony Capital | Supplemental Financial Report | 53 | ||