Colony NorthStar, Inc. (NYSE:CLNS) and subsidiaries
(collectively, “Colony NorthStar,” or the “Company”) today
announced its financial results for the second quarter ended June
30, 2017 and declared a cash dividend of $0.27 per share of Class A
and Class B common stock for the third quarter of 2017.
Second Quarter 2017 Highlights
- Net income attributable to common
stockholders of $38.6 million, or $0.07 per basic share
- Core FFO of $203.6 million, or $0.35
per basic share, and FFO of $130.0 million, or $0.22 per basic
share
- Merger integration substantially
complete and approximately 100% of the originally identified $80
million annualized cash synergies target and 110% of the $115
million annualized total synergies target, which includes stock
compensation savings, achieved to date on a run rate basis
- Declared and paid a second quarter 2017
dividend of $0.27 per share of Class A and B common stock
- Subsequent to the second quarter 2017,
declared a third quarter dividend of $0.27 per share of Class A and
B common stock
- The Company and its share of affiliates
raised approximately $285 million of third-party capital from
institutional clients and retail investors for an aggregate $1.4
billion during the first half of 2017
- The Company completed year-to-date
asset monetizations totaling $3.6 billion of gross asset value,
which includes $384 million in the second quarter primarily from
selling the remainder of the Company’s interest in Colony Starwood
Homes (NYSE:SFR) and $437 million subsequent to the second
quarter
- The Company and funds managed by the
Company invested and agreed to invest $857 million; the Company
invested $670 million and funds managed by the Company invested
$187 million
- The Company has in excess of $1.2
billion of liquidity through cash-on-hand and availability under
its revolving credit facility
- The Company repurchased 8.0 million
shares of its common stock for $102 million and year-to-date,
repurchased an aggregate 12.9 million shares of its common stock
for $168 million
- The Company issued 13.8 million shares
of 7.15% Series I cumulative redeemable perpetual preferred stock,
generating net proceeds of $334 million, and redeemed all of the
shares of its 8.75% Series A cumulative redeemable perpetual
preferred stock and 8.50% Series F cumulative redeemable perpetual
preferred stock
- The Company refinanced over $1.6
billion of consolidated mortgage debt in the Hospitality Real
Estate segment, extending the maturity dates and reducing the
interest rates, and repaid the remaining $77 million of the
original $1.1 billion floating rate acquisition debt in the
Industrial Real Estate segment through the issuance of $188 million
of long-term fixed rate mortgage loans
Second Quarter 2017 Financial Results
For the second quarter 2017, Colony NorthStar reported net
income attributable to common stockholders of $38.6 million, or
$0.07 per basic share. Core FFO was $203.6 million, or $0.35 per
basic share, and FFO was $130.0 million, or $0.22 per basic
share.
For more information and a reconciliation of net income/(loss)
to common stockholders to FFO, Core FFO, NOI and/or EBITDA, please
refer to the non-GAAP financial measure definitions and tables at
the end of this press release.
“We continue to make substantial progress in our transition via
strategic divestitures and balance sheet repositioning including a
potential contribution of a significant portion of our U.S. loan
and credit equity portfolio to a new externally managed, permanent
capital vehicle anticipated to occur within the next few quarters,”
said Richard B. Saltzman, President and Chief Executive Officer.
“Simultaneously, investment management capital formation
initiatives are gaining meaningful traction through both new funds
and specific balance sheet led co-investment opportunities.”
Second Quarter 2017 Operating Results and Investment Activity
by Segment
Colony NorthStar holds investment interests in five reportable
segments: Healthcare Real Estate; Industrial Real Estate;
Hospitality Real Estate; Other Equity and Debt; and Investment
Management.
Healthcare Real Estate
As of June 30, 2017, the consolidated healthcare portfolio
consisted of 425 properties: 113 medical office properties, 191
senior housing properties, 107 skilled nursing facilities and 14
hospitals. The Company’s equity interest in the consolidated
Healthcare Real Estate segment was approximately 71.3% as of June
30, 2017. The healthcare portfolio earns rental and escalation
income from leasing space to various healthcare tenants and
operators. The leases are for fixed terms of varying length and
generally provide for rent and expense reimbursements to be paid in
monthly installments. The healthcare portfolio also generates
operating income from healthcare properties operated through
management agreements with independent third-party operators,
predominantly through structures permitted by the REIT Investment
Diversification and Empowerment Act of 2007, or RIDEA.
During the second quarter 2017, this segment’s net loss
attributable to common stockholders was $(8.1) million, Core FFO
was $24.8 million and consolidated NOI was $78.5 million. In the
second quarter 2017, healthcare same store portfolio experienced
sequential quarter-over-quarter revenue growth of 2.4% and net
operating income decline of (1.0)%, primarily attributable to bad
debt expense provision taken on an individual tenant in our skilled
nursing facilities portfolio. Over the same period last year,
second quarter 2017 same store revenue growth was 3.9% and net
operating income declined (5.3)%, of which (1.5)% was related to
fluctuation in currency exchange rates. Healthcare same store
portfolio is defined as properties in operation throughout the full
periods presented under the comparison and included 425 properties
in the sequential quarter-over-quarter and year-over-year
comparisons.
The following table presents NOI and certain operating metrics
by property types in the Company’s Healthcare Real Estate
segment:
Consolidated CLNS OP Same Store NOI Share
NOI(1) Consolidated NOI Occupancy %(2) TTM
Coverage(3) ($ In millions) Q2 2017 Q2 2017 Q2 2017 Q1 2017
Q2 2017 Q1 2017 3/31/2017 12/31/2016 Medical Office
Buildings $ 14.4 $ 10.3 $ 14.4 $ 13.6 84.0 % 85.1 %
N/A N/A Senior Housing - Operating 19.4 13.8 19.4 18.3 86.7
% 86.8 % N/A N/A Triple-Net Lease: Senior Housing 14.4 10.3 14.4
13.5 83.6 % 85.7 % 1.5x 1.5x Skilled Nursing Facilities 24.9 17.8
24.9 28.5 83.4 % 84.2 % 1.3x 1.4x Hospitals 5.4 3.9
5.4 5.4 63.4 % 60.9 % 3.3x 3.7x
Healthcare Total/W.A. $ 78.5 $ 56.1 $ 78.5
$ 79.3 83.0 % 83.6 % 1.6x 1.7x
___________________________________________________
(1) CLNS OP Share NOI represents second quarter 2017
Consolidated NOI multiplied by CLNS OP’s ownership interest as of
June 30, 2017. (2) Occupancy % for Senior Housing - Operating
represents average during the presented quarter, MOB’s is as of
last day in the quarter and for other types represents average
during the prior quarter. (3) Represents the ratio of EBITDAR to
cash rent on a trailing twelve month basis.
Industrial Real Estate
As of June 30, 2017, the consolidated industrial portfolio
consisted of 354 primarily light industrial buildings totaling 39.3
million rentable square feet across 16 major U.S. markets and was
95% leased. The Company’s equity interest in the consolidated
Industrial Real Estate segment was approximately 41.0% as of June
30, 2017, which decreased from the prior quarter due to increased
third-party capital commitments during the second quarter of 2017.
Total third-party capital commitments were in excess of $1 billion
compared to cumulative balance sheet contributions of $700 million
as of June 30, 2017. The Company continues to own a 100% interest
in the related operating platform. The Industrial Real Estate
segment is comprised of and primarily invests in light industrial
properties in infill locations in major U.S. metropolitan markets
targeting multi-tenant buildings of up to 500,000 square feet and
single tenant buildings of up to 250,000 square feet with an office
buildout of less than 20%.
During the second quarter 2017, this segment’s net income
attributable to common stockholders was $3.3 million, Core FFO was
$12.5 million and consolidated NOI was $38.5 million. In the second
quarter 2017, industrial same store portfolio experienced a
sequential quarter-over-quarter revenue decline of (0.4)% but net
operating income grew 1.6%. The sequential quarter-over-quarter
revenue decline of (0.4)% was due to lower expense reimbursement
revenues resulting from lower expenses. Same store net rental
revenues, which excludes reimbursements, increased 1.5% on a
sequential quarter-over-quarter basis. Over the same period last
year, second quarter 2017 same store revenue grew by 3.0% and net
operating income grew 3.6%. Industrial same store portfolio is
defined as buildings in operation throughout the full periods
presented under the comparison and included 337 and 309 buildings
in the sequential quarter-over-quarter and year-over-year
comparisons, respectively.
The following table presents NOI and certain operating metrics
in the Company’s Industrial Real Estate segment:
Consolidated CLNS OP Same Store NOI
Share NOI (1)
Consolidated NOI Leased %(2) ($ In millions) Q2 2017 Q2 2017
Q2 2017 Q1 2017 Q2 2017 Q1 2017 Industrial $ 38.5 $
15.8 $ 37.0 $
36.4
95.6 %
95.9
%
___________________________________________________
(1) CLNS OP Share NOI represents second quarter 2017
Consolidated NOI multiplied by CLNS OP’s ownership interest as of
June 30, 2017. (2) Leased % represents the last day of the
presented quarter.
Asset Acquisitions, Dispositions and
Financing
During the second quarter 2017, the Company acquired ten
industrial buildings totaling approximately 1.6 million square feet
for approximately $117 million and disposed of nine non-core
buildings totaling approximately 1.3 million square feet for $37
million.
Subsequent to the second quarter 2017, the Company acquired 20
industrial buildings totaling approximately 2.8 million square feet
for approximately $201 million and disposed of one non-core
building totaling approximately 0.1 million square feet for $4
million.
During the second quarter 2017, the Company paid off the
remaining $77 million of the original $1.1 billion variable rate
acquisition financing debt and closed on two fixed rate mortgage
loans totaling $188 million with a weighted average interest rate
and original term of 3.99% and 11.4 years, respectively.
Hospitality Real Estate
As of June 30, 2017, the consolidated hospitality portfolio
consisted of 167 properties: 97 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 94.3% as of June 30, 2017. The
hospitality portfolio is geographically diverse, consisting
primarily of extended stay hotels and premium branded select
service hotels located mostly in major metropolitan markets, of
which a majority are affiliated with top hotel brands.
During the second quarter 2017, this segment’s net income
attributable to common stockholders was $4.8 million, Core FFO was
$42.7 million and consolidated EBITDA was $81.7 million. Over the
same period last year, second quarter 2017 hospitality same store
portfolio revenue was essentially flat and EBITDA declined (1.7)%,
primarily due to increases in property taxes and wages. The
Company’s hotels typically experience seasonal variations in
occupancy which may cause quarterly fluctuations in revenues and
therefore sequential quarter-over-quarter revenue and EBITDA result
comparisons are not meaningful. Hospitality same store portfolio is
defined as hotels in operation throughout the full periods
presented under the comparison and included 167 hotels in the
year-over-year comparison.
The following table presents EBITDA and certain operating
metrics by brands in the Company’s Hospitality Real Estate
segment:
Same Store Consolidated CLNS OP Share
Avg. Daily Rate RevPAR Consolidated
EBITDA (1)
EBITDA(2)
EBITDA
Occupancy %(3)
(In dollars)(3)
(In dollars)(3)
($ In millions) Q2 2017 Q2 2017 Q2 2017 Q2 2016 Q2 2017
Q2 2016 Q2 2017 Q2 2016 Q2 2017 Q2 2016
Marriott $ 62.8 $ 59.2 $ 62.8 $ 65.5 77.0 % 78.8 % $
129 $ 128 $ 99 $ 101 Hilton 13.9 13.1 13.9 13.0 82.0
% 81.5 % 131 127 108 103 Other 5.0 4.7 5.0
4.6 84.2 % 77.9 % 139 142
117 110 Total/W.A. $ 81.7 $ 77.0 $ 81.7
$ 83.1 78.2 % 79.2 % $ 130
$ 129 $ 102 $ 102
___________________________________________________
(1) Q2 2017 Consolidated EBITDA excludes FF&E reserve
amounts of $9.7 million. (2) CLNS OP Share EBITDA represents second
quarter 2017 Consolidated EBITDA multiplied by CLNS OP’s ownership
interest as of June 30, 2017. (3) For each metric, data represents
average during the presented quarter.
Asset Financing
During the second quarter 2017, the Company refinanced over $1.6
billion of consolidated debt in the Hospitality Real Estate
segment, extending the fully extended maturity dates from 2019 to
2022 and reducing our blended spread over one-month LIBOR by 40 bps
from 3.44% to 3.04%.
Other Equity and Debt
In addition to the aforementioned real estate equity segments,
the Company also holds investments in other real estate equity and
debt. These other investments include direct interests and
interests held through unconsolidated joint ventures in net lease
real estate assets; other real estate equity & debt
investments; limited partnership interests in third-party sponsored
real estate private equity funds; and multiple classes of
commercial real estate (“CRE”) securities. During the second
quarter 2017, this segment’s aggregate net income attributable to
common stockholders was $156.0 million and Core FFO was $157.1
million.
The following table presents undepreciated carrying value by
investment type in the Company’s Other Equity and Debt segment:
CLNS OP Share June 30, 2017 Undepreciated Carrying Value ($
In millions) Assets Equity Net Lease Real Estate Equity $
961 $ 405 Other Real Estate Equity
1,531
853
Real Estate Debt
2,996
2,148
Real Estate Private Equity Funds and CRE Securities 542 542
Special Situations (NRE, CAF, Albertsons
and Other GP Co-investments)
222 222 Other Equity and Debt Total $ 6,252 $ 4,170
Other Equity and Debt Segment Asset
Acquisitions and Dispositions
During the second quarter 2017, the Company invested and agreed
to invest approximately $620 million in other real estate equity
and debt investments, which included the acquisition of a Class A
office building in Southern California for approximately $460
million, the acquisition of 4.7 million shares of NRE’s common
stock for approximately $59 million and the origination of an $84
million preferred equity investment, among other investments. As of
June 30, 2017, the Company’s interest in NRE represented an
approximate 8.9% ownership based on the total common shares and OP
units outstanding at NRE as of June 30, 2017.
During the second quarter 2017, the Company sold its entire
remaining interest in SFR, or approximately 7.6 million shares,
resulting in net proceeds of $261 million; a net lease property
located in Phoenix, Arizona, resulting in net proceeds of $22
million; and a real estate debt investment, resulting in net
proceeds of $64 million.
Subsequent to the second quarter 2017, the Company sold a
portfolio of net lease properties located in Switzerland and its
entire interest in Colony American Finance resulting in aggregate
net proceeds of $184 million.
On July 1, 2017, the Company and certain investment vehicles
managed by affiliates of the Company acquired ownership of an
approximately $1.3 billion limited service hospitality portfolio of
148 assets primarily located across the Southwest and Midwest
United States. The acquisition took place through a consensual
foreclosure following a maturity default on an approximately $289
million junior mezzanine loan. As of July 1, 2017, the Company's
equity ownership in the portfolio is approximately 55%. The Company
will consolidate the gross assets and liabilities of the portfolio
at fair value during the third quarter 2017 and expects that the
net asset value will be equal to the unpaid principal balance of
the prior junior mezzanine loan position.
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 funds, non-traded
and traded real estate investment trusts and registered investment
companies. As of June 30, 2017, the Company had $40.3 billion of
third-party AUM, which decreased from $40.7 billion as of March 31,
2017. The decrease in AUM was driven primarily by asset sales.
During the second quarter 2017, this segment’s aggregate net income
attributable to common stockholders was $24.0 million and Core FFO
was $41.6 million.
Capital Raising and Investment
Activity
During the second quarter 2017, the Company and its share of
affiliates raised approximately $285 million of third-party capital
from institutional clients and retail investors for an aggregate
$1.4 billion during the first half of 2017.
During the second quarter 2017, institutional funds and retail
companies managed by the Company, excluding the industrial open-end
fund, invested and agreed to invest approximately $120 million in
real estate equity and debt investments and $309 million subsequent
to the second quarter 2017.
Assets Under Management (“AUM”)
As of June 30, 2017, the Company had $56 billion of AUM:
% of ($ In billions) Amount Grand Total
Balance Sheet (CLNS OP Share): Healthcare $ 4.1 7.4 % Industrial
1.1 2.0 % Hospitality 3.9 7.0 % Other Equity and Debt 6.3 11.2 %
Balance Sheet Subtotal 15.4 27.6 % Investment Management:
Institutional Funds 10.0 18.0 % Retail Companies 6.9 12.4 %
NorthStar Realty Europe (NYSE:NRE) 2.1 3.8 % Townsend 14.2 25.5 %
Pro Rata Corporate Investments 7.1 12.7 % Investment Management
Subtotal 40.3 72.4 % Grand Total $ 55.7 100.0 %
Liquidity and Financing
As of August 4, 2017, the Company had in excess of $1.2 billion
of liquidity through cash-on-hand and availability under its
revolving credit facility.
On June 5, 2017, the Company issued 13.8 million shares of 7.15%
Series I cumulative redeemable perpetual preferred stock,
generating net proceeds of $334 million, of which the majority of
these proceeds were used to redeem all of the shares of its 8.75%
Series A cumulative redeemable perpetual preferred stock and 8.50%
Series F cumulative redeemable perpetual preferred stock on June
23, 2017.
Common Stock and Operating Company Units
As of August 4, 2017, the Company had approximately 553.0
million Class A and B common stock and restricted stock units
outstanding and the Company’s operating partnership had
approximately 32.4 million operating company units outstanding held
by members other than the Company or its subsidiaries.
During the second quarter 2017, the Company repurchased 8.0
million shares of its common stock for $102 million. Since the
February 2017 authorization of the Company’s common stock
repurchase plan through August 4, 2017, the Company has repurchased
12.9 million shares of its common stock for approximately $168
million.
Common and Preferred Dividends
On May 4, 2017, the Company’s Board of Directors declared a
quarterly cash dividend of $0.27 per share of Class A and Class B
common stock for the second quarter of 2017, which was paid on July
17, 2017 to respective stockholders of record on June 30, 2017. 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 A stock - $0.54688
per share, Series B stock - $0.51563 per share, Series C stock -
$0.55469 per share, Series D stock - $0.53125 per share and Series
E stock - $0.54688 per share, such dividends to be paid on August
15, 2017 to the respective stockholders of record on August 10,
2017, except where noted below, and (ii) with respect to each of
the Series F stock - $0.53125 per share, Series G stock - $0.46875
per share and Series H stock - $0.4453 per share, such dividends
were paid on July 17, 2017 to the respective stockholders of record
on June 30, 2017, except where noted below. The Company redeemed in
its entirety the outstanding Series A and Series F cumulative
redeemable perpetual preferred stock and paid all accrued cash
dividends, in accordance of the terms of the redemption, related to
the Series A and Series F cumulative redeemable perpetual preferred
stock on June 23, 2017. The Company paid a cash dividend to
stockholders of $0.1986 per share of its newly issued Series I
cumulative redeemable perpetual preferred stock on July 17, 2017,
for the period from the date of issuance through July 15, 2017.
On August 3, 2017, the Company’s Board of Directors declared a
quarterly cash dividend of $0.27 per share of Class A and Class B
common stock for the third quarter of 2017, which will be paid on
October 16, 2017 to respective stockholders of record on September
30, 2017. 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, Series C stock - $0.5546875 per share, Series
D stock - $0.53125 per share and Series E stock - $0.546875 per
share, such dividends to be paid on November 15, 2017 to the
respective stockholders of record on November 10, 2017 and (ii)
with respect to each of the Series G stock - $0.46875 per share,
Series H stock - $0.4453125 per share and Series I stock -
$0.446875 per share, such dividends to be paid on October 16, 2017
to the respective stockholders of record on October 10, 2017.
Non-GAAP Financial Measures and Definitions
Assets Under Management
(“AUM”)
Refers to assets 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 generally based on reported gross undepreciated
carrying value of managed investments as reported by each
underlying vehicle at June 30, 2017, while retail companies and
NorthStar Realty Europe are presented as of August 4, 2017. AUM
further includes a) uncalled capital commitments and b) for
corporate investments in affiliates with asset and investment
management functions, includes the Company’s pro-rata share assets
of each affiliate as presented and calculated by the affiliate.
Affiliates include RXR Realty LLC, SteelWave, 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.
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 extraordinary items, as defined by GAAP, gains and
losses from sales of depreciable real estate and impairment
write-downs associated with depreciable real estate, plus real
estate-related depreciation and amortization, and after similar
adjustments for unconsolidated partnerships and joint ventures.
Included in FFO are gains and losses from sales of assets which are
not depreciable real estate such as loans receivable, investments
in unconsolidated joint ventures as well as investments in debt and
other equity securities, as applicable.
The Company computes core funds from operations ("Core FFO") by
adjusting FFO for the following items, including the Company’s
share of these items recognized by its unconsolidated partnerships
and joint ventures: (i) 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) equity-based compensation expense; (iii) effects of
straight-line rent revenue and straight-line rent expense on ground
leases; (iv) amortization of acquired above- and below-market lease
values; (v) amortization of deferred financing costs and debt
premiums and discounts; (vi) unrealized fair value gains or losses
and foreign currency remeasurements; (vii) acquisition-related
expenses, merger and integration costs; (viii) amortization and
impairment of finite-lived intangibles related to investment
management contracts and customer relationships; (ix) gain on
remeasurement of consolidated investment entities and the effect of
amortization thereof; (x) non-real estate depreciation and
amortization; (xi) change in fair value of contingent
consideration; and (xii) tax effect on certain of the foregoing
adjustments. Also, beginning with the first quarter of 2016, the
Company’s share of Core FFO from its interest in SFR represented
its percentage interest multiplied by SFR's reported Core FFO,
which may differ from the Company’s calculation of Core FFO. Refer
to SFR's filings for its definition and calculation of Core
FFO.
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 net income as a measure
of the Company’s performance.
Net Operating Income (“NOI”) / Earnings
Before Interest, Tax, Depreciation and Amortization
(“EBITDA”)
NOI for healthcare and industrial 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.
EBITDA for the hospitality real estate segment represents net
income from continuing operations of that segment excluding the
impact of interest expense, income tax expense or benefit, and
depreciation and amortization.
The Company believes that NOI and EBITDA are useful measures of
operating performance of its respective real estate portfolios as
they are 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 and EBITDA exclude 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 and EBITDA provide 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 and EBITDA. 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.
Second Quarter 2017 Conference Call
The Company will conduct a conference call to discuss the
financial results on Wednesday, August 9, 2017 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 http://www.clns.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 August 9, 2017, at 10:00 a.m. PT / 1:00
p.m. ET, through August 16, 2017, at 8:59 p.m. PT / 11:59 p.m. ET.
To access the replay, dial (844) 512-2921 (U.S.), and use passcode
13665881. International callers should dial (412) 317-6671 and
enter the same conference ID number.
Supplemental Financial Report
A Second Quarter 2017 Supplemental Financial Report is available
on the Company’s website at www.clns.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 NorthStar, Inc.
Colony NorthStar, Inc. (NYSE:CLNS) is a leading global real
estate and investment management firm. The Company resulted from
the January 2017 merger between Colony Capital, Inc., NorthStar
Asset Management Group Inc. and NorthStar Realty Finance Corp. The
Company has significant property holdings in the healthcare,
industrial and hospitality sectors, other equity and debt
investments and an embedded institutional and retail investment
management business. The Company currently has assets under
management of $56 billion and manages capital on behalf of its
stockholders, as well as institutional and retail investors in
private funds, non-traded and traded real estate investment trusts
and registered investment companies. In addition, the Company owns
NorthStar Securities, LLC, a captive broker-dealer platform which
raises capital in the retail market. The firm maintains principal
offices in Los Angeles and New York, with more than 500 employees
in offices located across 18 cities in ten countries. The Company
will elect to be taxed as a REIT for U.S. federal income tax
purposes. For additional information regarding the Company and its
management and business, please refer to www.clns.com.
Cautionary Statement Regarding Forward-Looking
Statements
This press release may contain forward-looking statements within
the meaning of the federal securities laws. Forward-looking
statements relate to expectations, beliefs, projections, future
plans and strategies, anticipated events or trends and similar
expressions concerning matters that are not historical facts. In
some cases, you can identify forward-looking statements by the use
of forward-looking terminology such as “may,” “will,” “should,”
“expects,” “intends,” “plans,” “anticipates,” “believes,”
“estimates,” “predicts,” or “potential” or the negative of these
words and phrases or similar words or phrases which are predictions
of or indicate future events or trends and which do not relate
solely to historical matters. You can also identify forward-looking
statements by discussions of strategy, plans or intentions.
Forward-looking statements involve known and unknown risks,
uncertainties, assumptions and contingencies, many of which are
beyond the Company’s control, and may cause the Company’s actual
results to differ significantly from those expressed in any
forward-looking statement. Factors that might cause such a
difference include, without limitation, our failure to achieve
anticipated synergies in and benefits of the completed merger among
NorthStar Asset Management Group Inc., Colony Capital, Inc. and
NorthStar Realty Finance Corp., Colony NorthStar’s liquidity,
including its ability to complete identified monetization
transactions and other potential sales of investments, whether
Colony NorthStar 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 timing of and ability to complete repurchases of Colony
NorthStar’s stock, Colony NorthStar’s ability to maintain inclusion
and relative performance on the RMZ, Colony NorthStar’s leverage,
including the timing and amount of borrowings under its credit
facility, increased interest rates and operating costs, adverse
economic or real estate developments in Colony NorthStar’s markets,
Colony NorthStar’s failure to successfully operate or lease
acquired properties, decreased rental rates, increased vacancy
rates or failure to renew or replace expiring leases, defaults on
or non-renewal of leases by tenants, the impact of economic
conditions on the borrowers of Colony NorthStar’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 NorthStar’s reports filed from time
to time with the SEC.
Colony NorthStar 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 NorthStar 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
NorthStar does not intend to do so.
COLONY NORTHSTAR, INC. CONSOLIDATED BALANCE
SHEETS (In thousands, except per share data)
June 30, 2017 December 31,
(Unaudited) 2016 Assets Cash and cash
equivalents $ 599,920 $ 376,005 Restricted cash 300,680 111,959
Real estate, net 13,884,204 3,243,631 Loans receivable, net
4,009,089 3,430,608 Investments in unconsolidated ventures
($365,050 and $0 at fair value) 1,526,807 1,052,995 Securities
available for sale, at fair value 409,871 23,446 Goodwill 1,808,393
680,127 Deferred leasing costs and intangible assets, net 1,035,767
278,741 Assets held for sale ($96,807 and $67,033 at fair value)
1,190,122 292,924 Other assets ($18,809 and $36,101 at fair value)
459,702 260,585 Due from affiliates 63,777 9,971
Total assets $ 25,288,332 $ 9,760,992
Liabilities Debt, net $ 10,418,978 $ 3,715,618 Accrued and
other liabilities ($179,221 and $5,448 at fair value) 968,868
286,952 Intangible liabilities, net 221,853 19,977 Liabilities
related to assets held for sale 203,548 14,296 Due to affiliates
34,945 41,250 Dividends and distributions payable 186,990
65,972
Total liabilities 12,035,182 4,144,065
Commitments and contingencies
Redeemable noncontrolling
interests 79,504 —
Equity Stockholders’ equity:
Preferred stock, $0.01 par value per share; $1,643,723 and $625,750
liquidation preference; 250,000 and 50,000 shares authorized;
65,749 and 25,030 shares issued and outstanding 1,624,444 607,200
Common stock, $0.01 par value per share Class A, 949,000 and
658,369 shares authorized; 551,190 and 166,440 shares issued and
outstanding (1) 5,512 1,664 Class B, 1,000 shares authorized; 742
and 770 shares issued and outstanding (1) 7 8 Additional paid-in
capital 7,958,872 2,443,100 Distributions in excess of earnings
(505,554 ) (246,064 ) Accumulated other comprehensive income (loss)
6,884 (32,109 ) Total stockholders’ equity 9,090,165
2,773,799 Noncontrolling interests in investment entities 3,643,836
2,453,938 Noncontrolling interests in Operating Company 439,645
389,190 Total equity 13,173,646 5,616,927
Total liabilities, redeemable noncontrolling interests
and equity $ 25,288,332 $ 9,760,992
__________
(1) As a result of the Merger, each outstanding share of
common stock of Colony Capital, Inc. was exchanged for the right to
receive 1.4663 of Class A common stock of Colony NorthStar. All
historical share counts and per share amounts have been adjusted to
reflect the exchange ratio.
COLONY NORTHSTAR,
INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In
thousands, except per share data) (Unaudited)
Three Months Ended June 30, 2017
2016 Revenues Property operating income $ 500,531 $
95,348 Interest income 111,263 103,860 Fee income 54,319 15,505
Other income 13,259 2,815
Total revenues
679,372 217,528
Expenses Property operating
expense 253,717 29,780 Interest expense 140,260 42,568 Investment,
servicing and commission expense 13,740 5,402 Transaction costs
2,440 7,958 Depreciation and amortization 153,111 39,541 Provision
for loan loss 1,067 6,213 Impairment loss 12,761 2,441 Compensation
expense 80,759 24,240 Administrative expenses 30,145 13,098
Total expenses 688,000 171,241
Other
income Gain on sale of real estate assets 15,190 5,844 Other
loss, net (23,850 ) (348 ) Earnings from investments in
unconsolidated ventures 122,394 53,113
Income
before income taxes 105,106 104,896 Income tax benefit
(expense) 86 (1,760 )
Net income from continuing
operations 105,192 103,136 Income from discontinued operations
— —
Net income 105,192 103,136 Net income
attributable to noncontrolling interests: Redeemable noncontrolling
interests 720 — Investment entities 23,800 40,169 Operating Company
2,330 7,918
Net income attributable to Colony
NorthStar, Inc. 78,342 55,049 Preferred stock redemption 5,448
— Preferred stock dividends 34,339 12,093
Net
income attributable to common stockholders $ 38,555 $
42,956
Basic earnings per share (1) Net income
from continuing operations per basic common share $ 0.07 $
0.26 Net income per basic common share $ 0.07 $ 0.26
Diluted earnings per share (1) Net income from
continuing operations per diluted common share $ 0.07 $ 0.24
Net income per diluted common share $ 0.07 $ 0.24
Weighted average number of shares (1) Basic
544,023 164,674 Diluted 544,023 201,257
__________
(1) As a result of the Merger, each outstanding share of
common stock of Colony Capital, Inc. was exchanged for the right to
receive 1.4663 of Class A common stock of Colony NorthStar. All
historical share counts and per share amounts have been adjusted to
reflect the exchange ratio.
COLONY NORTHSTAR,
INC. FUNDS FROM OPERATIONS AND CORE FUNDS FROM
OPERATIONS (In thousands, except per share data)
(Unaudited) Three Months Ended June
30, 2017 Net loss attributable to common stockholders $ 38,555
Adjustments for FFO attributable to common interests in Operating
Company: Net loss attributable to noncontrolling common interests
in Operating Company 2,330 Real estate depreciation and
amortization 135,421 Impairment of real estate 12,816 Gain on sales
of real estate (15,112 ) Less: Adjustments attributable to
noncontrolling interests in investment entities (44,048 ) FFO
attributable to common interests in Operating Company and common
stockholders 129,962 Additional adjustments for Core
FFO attributable to common interests in Operating Company and
common stockholders: Gain on sales of real estate, net of
depreciation, amortization and impairment previously adjusted for
FFO (1) (31,183 ) Noncash equity compensation expense (2) 38,945
Straight-line rent revenue (7,994 ) Gain on change in fair value of
contingent consideration (4,850 ) Amortization of acquired above-
and below-market lease intangibles, net (3,520 ) Amortization of
deferred financing costs and debt premiums and discounts 20,791
Unrealized loss on derivatives and foreign currency remeasurements
26,834 Acquisition and merger-related transaction costs 2,498
Merger integration costs (3) 7,555 Preferred shares redemption
costs 5,448 Amortization and impairment of investment management
intangibles 15,666 Non-real estate depreciation and amortization
6,482 Amortization of gain on remeasurement of consolidated
investment entities, net 3,837
Tax benefit, net (4)
(809 ) Less: Adjustments attributable to noncontrolling interests
in investment entities (6,074 ) Core FFO attributable to common
interests in Operating Company and common stockholders $ 203,588
FFO per common share / common OP unit
(5)
$ 0.22
FFO per common share / common OP
unit—diluted (6)
$ 0.22
Core FFO per common share / common OP unit
(5)
$ 0.35 Core FFO per common share / common OP unit—diluted
(6) $ 0.34
Weighted average number of common OP units
outstanding used for FFO and Core FFO per common share and OP unit
(5)
585,110
Weighted average number of common OP units
outstanding used for FFO and Core FFO per common share and OP
unit—diluted (5)(6)
623,455
__________
(1) Includes $36.7 million of depreciation, amortization and
impairment charges previously adjusted to calculate FFO and Core
Earnings, a non-GAAP measure used by Colony Capital, Inc. prior to
its internalization of the manager. (2) Includes $30.0 million of
replacement award amortization. (3) Merger integration costs
represent costs and charges incurred during the integration of
Colony, NSAM and NRF. These integration 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
merger integration. The majority of integration costs consist of
severance, employee costs of those separated or scheduled for
separation, system integration and lease terminations. (4)
Adjustment represents the impact of taxes on amortization and
impairment of investment management intangibles assumed in business
combinations and gain on sale of property. (5) Calculated based on
weighted average shares outstanding including participating
securities (unvested shares) and assuming the exchange of all
common OP units outstanding for common shares. As a result of the
Merger, each outstanding share of common stock of Colony Capital,
Inc. was exchanged for the right to receive 1.4663 of Class A
common stock of Colony NorthStar. All historical share counts and
per share amounts have been adjusted to reflect the exchange ratio.
(6) For the three months ended June 30, 2017, included in the
calculation of diluted FFO and Core FFO per share is the effect of
adding back $7.2 million and $7.2 million of interest expense,
respectively, associated with convertible senior notes and 38.3
million and 38.3 million weighted average dilutive common share
equivalents, respectively, for the assumed conversion of the
convertible senior notes.
COLONY NORTHSTAR, INC.RECONCILIATION
OF NET INCOME (LOSS) TO NOI/EBITDA
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 or EBITDA and (2) a reconciliation of such segments net
income (loss) for the three months ended June 30, 2017 to NOI or
EBITDA:
NOI and EBITDA were determined as follows:
Three Months Ended June 30, 2017
(In
thousands)
Healthcare Industrial
Hospitality Total revenues $ 159,357 $ 56,125 $ 221,522
Straight-line rent revenue and amortization of above- and
below-market lease intangibles (8,385 ) (1,150 ) (13 ) Property
operating expenses (1) (72,460 ) (16,195 ) (139,818 ) Compensation
expense (1) — (310 ) — NOI or EBITDA $ 78,512
$ 38,470 $ 81,691
_________
(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.
The following table presents a reconciliation of net income
(loss) from continuing operations of the healthcare, industrial and
hospitality segments to NOI or EBITDA of the respective
segments.
Three Months Ended June 30, 2017 (In
thousands) Healthcare Industrial
Hospitality Net income (loss) from continuing
operations $ (11,394 ) $ 9,100 $ 5,750 Adjustments: Straight-line
rent revenue and amortization of above- and below-market lease
intangibles (8,385 ) (1,150 ) (13 ) Interest expense 47,844 7,934
35,884 Transaction, investment and servicing costs 1,566 26 3,049
Depreciation and amortization 49,577 25,804 33,508 Compensation and
administrative expense 2,003 2,733 2,385 Gain on sale of real
estate assets — (8,695 ) — Other (gain) loss, net (2,489 ) — 219
Earnings from investments in unconsolidated ventures — (28 ) —
Income tax (benefit) expense (210 ) 2,746 909 NOI or
EBITDA $ 78,512 $ 38,470 $ 81,691
The following table summarizes Q2 2017 net income (loss) from
continuing operations by segment:
Net income (Loss) From
Continuing
(In
thousands)
Operations Healthcare $ (11,394 ) Industrial 9,100
Hospitality 5,750 Other Equity and Debt 185,630 Investment
Management 26,084 Amounts Not Allocated to Segments (109,978 )
Total Consolidated $ 105,192
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170808006469/en/
Investor Contacts:Colony NorthStar, Inc.Darren J.
TangenExecutive Vice President and Chief Financial
Officer310-552-7230orAddo Investor RelationsLasse
Glassen310-829-5400
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