Colony Capital Announces Third Quarter 2019 Financial Results and Strategic Asset Review Update
“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.
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$0.19 per share; and for the nine months endedSeptember 30, 2019 ,U.S. GAAP net loss attributable to common stockholders was$(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 fromColony 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
- Third quarter 2019 U.S. GAAP net loss notably included reductions of goodwill, impairments of real estate and provision for loan losses totaling
- Excluding net losses of
$4.4 million primarily related to net investment losses in Other Equity and Debt offset by the termination fee received fromNorthStar Realty Europe Corp. (“NRE”), Core FFO was$106.0 million , or$0.20 per share; and for the nine months endedSeptember 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 withThomas 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 endedSeptember 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 theGlobal Credit Fund - 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
- Successfully combined with
- 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
- 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
- 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$620 million of liquidity through availability under its revolving credit facility and cash-on-hand
- The Company refinanced a £212 million loan on a
For more information and a reconciliation of net income/(loss) to common stockholders to Core FFO and/or NOI, please refer to the non-GAAP financial measure definitions and tables at the end of this press release.
Strategic Asset Review Update
In
Third Quarter 2019 Operating Results and Investment Activity by Segment
As of
During the third quarter 2019, this segment’s net loss attributable to common stockholders was
The following table presents NOI and certain operating metrics by property types in the Company’s
|
Consolidated |
|
CLNY OP |
|
Same Store |
|||||||||||||||||
|
NOI |
|
Share NOI(1) |
|
Consolidated NOI |
|
Occupancy %(2) |
|
TTM Lease Coverage(3) |
|||||||||||||
($ in millions) |
Q3 2019 |
|
Q3 2019 |
|
Q3 2019 |
Q2 2019 |
|
Q3 2019 |
Q2 2019 |
|
|
|
||||||||||
|
$ |
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: |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
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 |
|
|
|
|
|
|
|
(1) |
CLNY OP Share NOI represents third quarter 2019 Consolidated NOI multiplied by CLNY OP’s ownership interest as of |
|
(2) |
Occupancy % for |
|
(3) |
Represents the ratio of the tenant’s/operator’s EBITDAR to cash rent payable to the Company’s |
Asset Dispositions and Financing
During the third quarter 2019, the
Subsequent to the third quarter 2019, the
The Company's light industrial portfolio and related operating platform are under contract for approximately
As of
As of
As of
During the third quarter 2019, this segment’s net income attributable to common stockholders was
The following table presents NOI and certain operating metrics in the Company’s
Consolidated |
|
CLNY OP |
|
Same Store |
|||||||||||||||
|
NOI |
|
Share NOI (1) |
|
Consolidated NOI |
|
Leased %(2) |
||||||||||||
($ in millions) |
Q3 2019 |
|
Q3 2019 |
|
Q3 2019 |
Q2 2019 |
|
|
|
||||||||||
|
$ |
63.3 |
|
|
$ |
21.2 |
|
|
$ |
43.1 |
|
$ |
42.2 |
|
|
95.0 |
% |
94.5 |
% |
|
3.5 |
|
|
1.8 |
|
|
3.5 |
|
3.0 |
|
|
67.4 |
% |
67.4 |
% |
||||
|
$ |
66.8 |
|
|
$ |
23.0 |
|
|
|
|
|
|
|
(1) |
CLNY OP Share NOI represents third quarter 2019 Consolidated NOI multiplied by CLNY OP’s ownership interest as of |
|
(2) |
Leased % as of the reported date represents square feet under executed leases, some of which may not have taken occupancy. |
As of
During the third quarter 2019, this segment’s net loss attributable to common stockholders was
The following table presents NOI before FF&E Reserve and certain operating metrics by brands in the Company’s
|
|
|
|
Same Store |
|||||||||||||||||||||||||||||
|
Consolidated |
|
CLNY OP Share |
|
Consolidated |
|
|
|
Avg. Daily Rate |
|
RevPAR(3) |
||||||||||||||||||||||
|
NOI before |
|
NOI before |
|
NOI before FF&E |
|
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 |
|
(1) |
Third quarter 2019 consolidated FF&E reserve was |
|
(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 |
|
(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
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
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
On
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
During the third quarter 2019, this segment’s aggregate net loss attributable to common stockholders was
In addition to the
As of
|
CLNY OP Share |
||||||||||||||
|
Undepreciated Carrying Value |
||||||||||||||
|
|
|
|
||||||||||||
($ 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 |
|
||||
|
184 |
|
|
80 |
|
|
184 |
|
|
77 |
|
||||
|
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
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
On
On
NRE Termination
On
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
On
Energy Strategic Joint Venture
During the third quarter 2019, the Company’s energy investment management arm,
Assets Under Management (“AUM”)
As of
|
|
|
|
||||||||||
($ in billions) |
Amount |
|
% of |
|
Amount |
|
% of |
||||||
|
|
|
|
|
|
|
|
||||||
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: |
|
|
|
|
|
|
|
||||||
|
13.8 |
|
|
25.9 |
% |
|
1.9 |
|
|
4.4 |
% |
||
Institutional Funds |
10.6 |
|
|
19.9 |
% |
|
10.2 |
|
|
23.6 |
% |
||
|
3.5 |
|
|
6.6 |
% |
|
3.7 |
|
|
8.5 |
% |
||
Retail Companies |
3.4 |
|
|
6.4 |
% |
|
3.4 |
|
|
7.9 |
% |
||
|
— |
|
|
— |
% |
|
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 |
|
(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 |
|
(4) |
REIM: |
Liquidity and Financing
As of
In connection with the merger among
Common Stock and Operating Company Units
As of
As of
Common and Preferred Dividends
On
On
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
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
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
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
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 usefulness of NOI. NOI may fail to capture significant trends in these components of
NOI should not be considered as an alternative to net income (loss), determined in accordance with
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
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
For those unable to participate during the live call, a replay will be available starting
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
About
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
CONSOLIDATED BALANCE SHEETS (In thousands, except per share data) (Unaudited) |
||||||||
|
|
|
|
|
||||
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 |
|
||
|
|
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, |
|
1,407,495 |
|
|
1,407,495 |
|
||
Common stock, |
|
|
|
|
||||
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 |
|
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 |
|
CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) |
||||||||||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||
|
|
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 |
|
(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 |
FUNDS FROM OPERATIONS AND CORE FUNDS FROM OPERATIONS (In thousands, except per share data) (Unaudited) |
||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
||||
Net loss attributable to common stockholders |
|
$ |
(554,953 |
) |
|
$ |
(1,125,956 |
) |
Adjustments for FFO attributable to common interests in |
|
|
|
|
||||
Net loss attributable to noncontrolling common interests in |
|
(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 |
|
(394,424 |
) |
|
(761,208 |
) |
||
|
|
|
|
|
||||
Additional adjustments for Core FFO attributable to common interests in |
|
|
|
|
||||
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 |
|
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 |
|
$ |
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 |
|
(1) |
For the three months ended |
|
(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 |
|
(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 |
|
(6) |
For the three months ended |
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
|
|
Three Months Ended |
||||||||||
(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 |
|
(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. |
|
|
Three Months Ended |
||||||||||
(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 |
|
(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 |
) |
View source version on businesswire.com: https://www.businesswire.com/news/home/20191108005146/en/
Investor Contacts:
Addo Investor Relations
Source:
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