Colony Capital Announces Fourth Quarter and Full Year 2019 Financial Results and Affirms Full Year 2020 Dividend

LOS ANGELES–(BUSINESS WIRE)–Colony Capital, Inc. (NYSE:CLNY) and subsidiaries (collectively, “Colony Capital,” or the “Company”) today announced financial results for the fourth quarter and full year ended December 31, 2019. The Company’s Board of Directors declared a first quarter 2020 dividend of $0.11 per share and the Company expects to maintain a $0.44 per share regular dividend on its Class A and B common stock for the full year 2020. Underlying this expectation is the Company’s full year 2020 outlook for (i) Core FFO excluding gains and losses of $0.35 to $0.40 per share and (ii) significant anticipated 2020 net cash gains, including $106 million, or $0.20 per share of realized gain through the sale of our interest in RXR Realty earlier this month.

“Having built a strong foundation over the past year, we are now well on our way to becoming the leading platform for digital real estate and infrastructure,” said Thomas. J. Barrack, Jr., Executive Chairman and Chief Executive Officer. “We made significant progress in 2019 simplifying, segregating and revaluing certain non-digital businesses to set up the Company for its digital evolution. 2020 will be a transformative, transitional year that positions Colony Capital to take advantage of the significant global opportunities in the digital ecosystem and deliver value for shareholders.”

Key 2019 foundational transactions included the:

  • Highly profitable sale of our industrial real estate portfolio for $5.7 billion
  • Closing of our inaugural $4.1 billion digital infrastructure fund, which substantially surpassed its initial fundraising target
  • Combination with Digital Bridge, the leading global investment management firm focused on digital infrastructure
  • $185 million controlling investment in DataBank, an owner of edge data centers serving fast growing markets

Fourth Quarter and Full Year 2019 Financial Results and Highlights

  • Net loss attributable to common stockholders was $(26.3) million, or $(0.06) per share, for the fourth quarter and $(1.15) billion, or $(2.41) per share, for the full year

    • As part of the Company’s ongoing transition and rotation to an investment management and operating business focused on digital real estate and infrastructure, the Company continues to pivot away from certain of its non-digital investment management businesses and, as such, the Company recorded impairments to the intangible carrying value of certain of its non-digital investment management businesses in the amount of $411 million in the fourth quarter of 2019
  • Core FFO was $47.6 million, or $0.09 per share, for the fourth quarter and $266.3 million, or $0.50 per share, for the full year

    • For fourth quarter 2019, excluding net losses of $21.4 million primarily related to net investment losses in Other Equity and Debt, Core FFO was $69.0 million, or $0.13 per share; for full year 2019, excluding net investment losses of $52.0 million, Core FFO was $318.3 million, or $0.60 per share
  • The Company’s Board of Directors declared and paid a fourth quarter 2019 dividend of $0.11 per share to holders of Class A and B common stock

During the fourth quarter 2019, the Company:

Digital Infrastructure

  • Acquired a 20.4% controlling interest in DataBank, a leading private owner and manager of edge data centers in the U.S., for approximately $185 million, representing the Company’s inaugural direct balance sheet investment in digital real estate
  • Increased digital assets under management (“AUM”) to $13.8 billion as of December 31, 2019, which represents approximately 29% of the Company’s overall AUM and is a significant transformation from $1.9 billion of Digital AUM as of December 31, 2018
  • Completed the acquisitions of Beanfield Technologies Inc., a Canadian fiber network owner and operator, and Highline do Brasil, a telecommunications infrastructure provider in Brazil, by Digital Colony Partners (“DCP”), the Company’s $4.1 billion digital real estate and infrastructure private equity fund

Dispositions

  • Completed the sale of the Company’s light industrial portfolio, including the related operating platform, for $5.7 billion, which resulted in a net cash gain and incentive fees of approximately $475 million and net cash proceeds of approximately $1.25 billion for the Company’s share
  • Completed the planned sales and/or monetization of $66 million of assets, with net equity proceeds of $35 million within the Other Equity and Debt segment, and for full year 2019, sold $717 million of assets with net equity proceeds of $566 million
  • Completed the sale of three unencumbered hospitals resulting in net proceeds to the Company of $82 million; in June 2019 the Company had initially contributed $175 million to refinance its share of $1.725 billion of healthcare debt and removed these assets from the collateral pool at that time, such that these sale proceeds effectively decrease the equity contribution required to complete the refinancing to a net amount of $93 million

Financing and Other

  • Announced and completed the redemption of all its outstanding 8.25% Series B and 8.75% Series E cumulative redeemable perpetual preferred stock for $408 million, including accrued dividends of $5 million, which was settled in January 2020 eliminating $34 million of annualized preferred dividends
  • Refinanced a £212 million loan on a U.K. portfolio of senior housing assets and a $48 million loan on skilled nursing facilities portfolios, which, together with previously completed refinancing transactions in 2019, addresses all material near-term healthcare real estate loan maturities
  • Refinanced an aggregate $982 million of debt on two hospitality portfolios significantly extending the outside maturity dates to 2026 at slightly lower interest rates on average
  • Raised additional third-party capital of €115 million for AccorInvest bringing total third-party capital raised to €717 million alongside the Company’s investment of €46 million
  • Successfully closed a $125 million senior financing and $60 million co-invest equity syndication of Alpine Energy Capital, LLC’s (“Alpine”) $320 million commitment to an energy development joint venture with California Resources Corporation (NYSE:CRC)

Subsequent to the fourth quarter 2019:

Digital Infrastructure

  • DCP invested and committed to three digital real estate and infrastructure investments and is now 73% committed (pro forma for the completion of the Zayo acquisition)

Dispositions

  • Completed the sale of the Company’s 27.2% ownership interest in RXR Realty, a non-wholly owned real estate investment management platform, for approximately $200 million resulting in a realized pre-tax gain of $106 million
  • Announced that the Company is pursuing a disposition of its management contract with Colony Credit Real Estate, Inc. (NYSE:CLNC), which may include a potential internalization of the Company’s management contract with CLNC, a sale of the CLNC management contract to a third party or another transaction that would result in the disposal of the CLNC management contract

Corporate

  • Achieved well over 100% of the expected total $50 to $55 million, or $45 to $50 million on a cash basis, of the previously announced annual compensation and administrative cost savings in the fourth quarter of 2018 on a run rate basis
  • In connection with CLNC’s recent announcement that Kevin Traenkle has resigned as CLNC’s Chief Executive Officer and President, the Company announced that Mr. Traenkle will be stepping down as the Colony Capital’s Chief Investment Officer, effective February 29, 2020
  • Announced that Justin Metz has stepped down as a member of the Company’s Board of Directors (including its committees, as applicable), effective February 25, 2020. Separately, in furtherance of the previously announced process undertaken by the Nominating and Corporate Governance Committee (“NCG Committee”) of the Company’s Board, the Company also announced that it has engaged an executive search firm to assist the Company’s Board, including the NCG Committee, in its ongoing process to evaluate board composition, governance and refreshment matters, with a focus on identifying potential director candidates with appropriate digital experience to join the Company’s Board as the Company continues to execute on its digital evolution
  • As of February 25, 2020, the Company had significant liquidity of $1.3 billion including $520 million cash-on-hand and through availability under its revolving credit facility

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.

Digital Evolution

In December 2019, the Company publicly filed a presentation and held a conference call to provide an update on its digital evolution. The presentation highlighted the completion of the highly profitable sale of the industrial portfolio and related investment management platform, which resulted in approximately $1.25 billion of net proceeds to the Company, and the immediate allocation of those proceeds to:

  1. accelerate the expansion into digital real estate with the acquisition of a 20% interest in DataBank for approximately $185 million;
  2. fund the remaining approximately $200 million commitment to DCP; and
  3. redeem $403 million of high cost preferred equity to improve the Company’s capital structure.

The presentation also provided details of the Digital Colony playbook to establish the leading platform for digital real estate and infrastructure, which has been approved and supported by the Company’s Board and management team.

To execute on its digital evolution, the Company continues to operate its non-digital business units to maximize cash flows and value over time.

  • With respect to the healthcare and hospitality units, the Company successfully addressed all material near-term debt maturities allowing the respective business unit leaders to focus on improving cash flows through operational management and capital expenditures.
  • With respect to Other Equity and Debt (“OED”), the Company has a 2020 asset sale and monetization target of $300 to $500 million with the goal to ultimately monetize the entire OED portfolio, except for Digital related investments, such as the Company’s investment in DataBank and GP co-investment in DCP.
  • With respect to the Company’s 48 million shares in CLNC, the Company will evaluate sales in a responsible manner, but believes the current CLNC share price represents an excessive discount to book value.
  • In addition, the Company is pursuing a disposition of its management contract with CLNC, but there can be no assurance that the Company will consummate any transaction.
  • Further, with respect to other non-digital investment management businesses, the Company is exploring all potential opportunities to maximize value of the credit and opportunity fund investment management business, while minimizing balance sheet commitments, including, but not limited to, joint ventures with third party capital providers, sales and/or realignment of operational management.

Fourth Quarter and Full Year 2019 Operating Results

($ in thousands, except per share data)

Fourth quarter 2019

 

Full Year 2019

 

 

 

 

Net loss attributable to common stockholders

$

(26,251

)

 

$

(1,152,207

)

Net loss attributable to common stockholders per share

(0.06

)

 

(2.41

)

Core FFO

47,590

 

 

266,278

 

Core FFO per share

0.09

 

 

0.50

 

Core FFO excluding net investment losses

68,972

 

 

318,257

 

Core FFO excluding net investment losses per share

0.13

 

 

0.60

 

Fourth quarter 2019 net loss attributable to common stockholders was $(26.3) million, or $(0.06) per share. As part of the Company’s ongoing transition and rotation to an investment management and operating business focused on digital real estate and infrastructure, the Company continues to pivot away from certain of its non-digital investment management businesses. As a result, fourth quarter 2019 net loss included $484 million of consolidated impairments ($470 million CLNY OP share), with $401 million related to a reduction of goodwill associated with businesses to be sold or resolved.

Fourth Quarter 2019 Impairments Summary

($ in millions)

Consolidated

 

CLNY OP Share

 

 

 

 

Goodwill and $10 million related to Investment Management Intangibles

$

411.0

 

 

$

411.0

 

Healthcare

43.1

 

 

33.3

 

Hospitality

14.6

 

 

13.4

 

Other Equity and Debt

2.5

 

 

(1.1

)

Sub-total impairments

471.2

 

 

456.6

 

CRE Securities other-than-temporary-impairments (OTTI) and unconsolidated investments Equity Method impairments in Other Equity and Debt

13.2

 

 

13.2

 

Grand total impairments

$

484.4

 

 

$

469.8

 

Fourth Quarter 2019 Operating Results and Investment Activity by Segment

The Company is providing operating results and investment activity for the following segments: Investment Management (including Digital Investment Management), Healthcare Real Estate; Industrial Real Estate; Hospitality Real Estate; CLNC; and Other Equity and Debt.

Investment Management

The Company’s Investment Management segment includes the management of digital real estate and infrastructure assets through Digital Colony and traditional commercial real estate investments through private real estate credit funds and related co-investment vehicles, CLNC, a public non-traded healthcare REIT, and interests in other investment management platforms, among other smaller investment vehicles. This segment included the industrial investment management business, which was sold with the light industrial portfolio in December 2019, and is presented as discontinued operations on the consolidated statements of operations. As of December 31, 2019, the Company had $36.3 billion of third-party AUM compared to $39.3 billion as of September 30, 2019. As of December 31, 2019, Fee-Earning Equity Under Management (“FEEUM”) was $19.4 billion compared to $22.4 billion as of September 30, 2019. The decrease in FEEUM was primarily attributable to the sale of the light industrial investment management platform and to a lesser degree the sales of our interest in Hamburg Trust (a non-wholly owned real estate investment management platform) and assets underlying managed funds, which were partially offset by capital raised in AccorInvest.

During the fourth quarter 2019, this segment’s aggregate net loss attributable to common stockholders was $(335.7) million and Core FFO was $48.9 million. Net loss included a $401 million write-down of goodwill resulting from a reduction in value of the non-digital investment management business and a $10 million write-down of contract intangibles. Reduction of goodwill and contract intangibles are added back to the Company’s net loss to calculate Core FFO. In addition, this segment’s net loss and Core FFO included $17 million of realized incentive fees from the sale of the light industrial portfolio and $2.8 million of unrealized carried interest from the Company’s investment in AccorInvest, both of which were net of related compensation expense. Further, this segment’s net loss and Core FFO included a $1.4 million placement fee related to third-party capital raised in AccorInvest, which is fully expensed upfront although payments are made ratably over the next four years.

Digital Investment Management

During the fourth quarter 2019, DCP completed the acquisition of Beanfield Technologies Inc., a leading enterprise and residential fiber connectivity provider with over 700 on-net locations in Toronto and Montreal. Also, DCP completed the acquisition of Highline do Brasil, an independent infrastructure solutions provider for the telecommunications industry with a portfolio of wireless infrastructure assets, including macro towers, which span all the major urban, suburban, and rural areas of Brazil.

Subsequent to the fourth quarter 2019, DCP invested and committed to three digital real estate and infrastructure investments and is now 73% committed (pro forma for the completion of the Zayo acquisition).

Other Investment Management

During the fourth quarter 2019, the Company raised additional third-party capital of €115 million for AccorInvest, bringing total third-party capital commitments raised to €717 million alongside the Company’s investment of €46 million. In addition, the Company successfully closed a $125 million senior financing and $60 million co-invest equity syndication of Alpine’s $320 million commitment to an energy development joint venture with CRC. Alpine is the Company’s upstream energy investment management platform, jointly owned in partnership with Equity Group Investments.

During the fourth quarter 2019, the Company completed the sale of its ownership interest in Hamburg Trust, a non-wholly owned real estate investment management platform, for approximately $19 million of net proceeds after tax. The carrying value of the investment was $17 million as of September 30, 2019.

Subsequent to the fourth quarter 2019, the Company completed the sale of its 27.2% ownership interest in RXR Realty, a non-wholly owned real estate investment management platform, for approximately $200 million. The carrying value of the investment was $93 million as of December 31, 2019.

Digital Balance Sheet Investment

In addition to GP fundings into DCP made in prior quarters, the Company acquired a 20.4% controlling interest in DataBank for approximately $185 million in the fourth quarter 2019. DataBank is a leading provider of enterprise-class data center, connectivity and managed services operating in Dallas, Minneapolis, Kansas City, Cleveland, Pittsburgh, Salt Lake City, Baltimore, Atlanta, and Indianapolis. The Company’s investment represents the balance sheet’s first step in investing in the edge/colocation data center sector and supporting future growth opportunities through potential add-on acquisitions and greenfield edge data center developments.

Assets Under Management (“AUM”)

As of December 31, 2019, the Company had $49 billion of AUM:

 

December 31, 2019

 

September 30, 2019

($ in billions)

Amount

 

% of

Grand Total

 

Amount

 

% of

Grand Total

 

 

 

 

 

 

 

 

Balance Sheet (CLNY OP Share):

 

 

 

 

 

 

 

Healthcare

$

3.6

 

 

7.3

%

 

$

3.7

 

 

6.9

%

Industrial

0.2

 

 

0.4

%

 

1.7

 

 

3.2

%

Hospitality

3.8

 

 

7.8

%

 

3.8

 

 

7.1

%

Other Equity and Debt(1)

3.1

 

 

6.3

%

 

2.8

 

 

5.3

%

CLNC(2)

2.0

 

 

4.1

%

 

2.0

 

 

3.8

%

Balance Sheet Subtotal

12.7

 

 

25.9

%

 

14.0

 

 

26.3

%

 

 

 

 

 

 

 

 

Investment Management:

 

 

 

 

 

 

 

Digital(3)

13.5

 

 

27.7

%

 

13.8

 

 

25.9

%

Other Institutional Funds

8.5

 

 

17.3

%

 

10.6

 

 

19.9

%

Colony Credit Real Estate (NYSE:CLNC)(4)

3.5

 

 

7.1

%

 

3.5

 

 

6.6

%

Retail Companies

3.4

 

 

6.9

%

 

3.4

 

 

6.4

%

Non-Wholly Owned REIM Platforms(5)

7.4

 

 

15.1

%

 

8.0

 

 

14.9

%

Investment Management Subtotal

36.3

 

 

74.1

%

 

39.3

 

 

73.7

%

 

 

 

 

 

 

 

 

Grand Total

$

49.0

 

 

100.0

%

 

$

53.3

 

 

100.0

%

______________________________________

(1)

Includes approximately $0.3 billion and $0.05 billion, as of December 31, 2019 and September 30, 2019, respectively of digital investments.

(2)

Represents the Company’s 36% ownership share of CLNC’s total pro-rata share of assets of $5.6 billion as of December 31, 2019 and September 30, 2019.

(3)

Approximately $0.2 billion transferred to Other Equity and Debt as a result of acquisition of a 20.4% interest in DataBank from existing third-party investors.

(4)

Represents third-party 64% ownership share of CLNC’s total pro-rata share of assets of $5.6 billion as of December 31, 2019 and September 30, 2019.

(5)

REIM: Real Estate Investment Management (RXR Realty LLC, Alpine Energy LLC and American Healthcare Investors)

Healthcare Real Estate

As of December 31, 2019, the consolidated healthcare portfolio consisted of 358 properties: 154 senior housing properties, 106 medical office properties, 89 skilled nursing facilities and 9 hospitals. The Company’s equity interest in the consolidated Healthcare Real Estate segment was approximately 71% as of December 31, 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 fourth quarter 2019, this segment’s net loss attributable to common stockholders was $(31.1) million, Core FFO was $19.6 million and consolidated NOI was $76.6 million. Net loss included the Company’s share of impairments of $33.3 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 fourth quarter 2019, healthcare same store portfolio sequential quarter to quarter comparable NOI increased 11.1% and compared to the same period last year, fourth quarter 2019 same store NOI increased 8.4%. Fourth quarter 2019 NOI included an aggregate $5.6 million consolidated, or $4.0 million CLNY OP share, of one-time recovery of tenant rent receivables from certain tenants in the Skilled Nursing Facilities, Triple-Net Lease Senior Housing Properties and Hospitals portfolios and termination fees in the Medical Office Buildings portfolio. Also, third quarter 2019 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. Excluding these one-time items from same store NOI, the healthcare same store portfolio sequential quarter to quarter comparable NOI would have been flat. Healthcare same store portfolio full year 2019 NOI was flat compared to 2018. The healthcare same store portfolio is defined as properties in operation throughout the full periods presented under the comparison and included 358 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)

Q4 2019

 

Q4 2019

 

Q4 2019

Q3 2019

 

Q4 2019

Q3 2019

 

9/30/19

6/30/19

Senior Housing – Operating

$

15.7

 

 

$

11.1

 

 

$

15.7

 

$

15.6

 

 

86.5

%

86.2

%

 

N/A

N/A

Medical Office Buildings (MOB)

13.8

 

 

9.8

 

 

13.8

 

12.9

 

 

82.2

%

82.2

%

 

N/A

N/A

Triple-Net Lease:

 

 

 

 

 

 

 

 

 

 

 

 

Senior Housing

16.1

 

 

11.4

 

 

15.8

 

13.8

 

 

79.7

%

79.8

%

 

1.3x

1.3x

Skilled Nursing Facilities

24.4

 

 

17.3

 

 

24.4

 

23.4

 

 

82.7

%

82.5

%

 

1.2x

1.2x

Hospitals

6.6

 

 

4.7

 

 

4.3

 

0.8

 

 

65.3

%

61.3

%

 

1.3x

1.3x

Healthcare Total

$

76.6

 

 

$

54.3

 

 

$

74.0

 

$

66.5

 

 

 

 

 

 

 

______________________________________

(1)

CLNY OP Share NOI represents fourth quarter 2019 Consolidated NOI multiplied by CLNY OP’s ownership interest as of December 31, 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 Acquisition, Dispositions and Financing

During the fourth quarter 2019, the Company sold three unencumbered hospitals and 11 triple-net lease senior housing properties for aggregate consideration of $151 million, or $107 million CLNY OP share, resulting in net proceeds of $118 million, or $82 million CLNY OP share.

Contacts

Investor Contacts:
Addo Investor Relations

Lasse Glassen

310-829-5400

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