Colony Capital, Inc. (NYSE: CLNY) and subsidiaries
(collectively, “Colony Capital,” or the “Company”) today announced
its financial results for the third quarter ended September 30,
2018 and the Company’s Board of Directors declared a fourth quarter
2018 cash dividend of $0.11 per share of Class A and Class B common
stock.
Third Quarter 2018 Financial Results and Highlights
- Third quarter 2018 net loss
attributable to common stockholders of $(70.0) million, or $(0.15)
per share, and Core FFO of $102.2 million, or $0.20 per share
- The Company’s Board of Directors
declared and paid a third quarter 2018 dividend of $0.11 per share
of Class A and B common stock
- During the third quarter 2018, the
Company raised approximately $1.5 billion of third-party capital
(including amounts related to affiliates) from institutional
clients, bringing year-to-date third-party capital raised to $5.2
billion
- Digital Colony, the Company's digital
real estate infrastructure vehicle established in partnership with
Digital Bridge, raised $1.0 billion during the third quarter 2018
and had an aggregate $4.0 billion of committed capital as of
September 30, 2018, inclusive of a $250 million capital commitment
by certain subsidiaries of the Company
- The Company raised $84 million of
third-party capital in the industrial platform resulting in $1.5
billion of total third-party capital under management
- The Company received an additional
commitment of $291 million from a third-party institutional
investor for its investment in AccorInvest bringing total
third-party capital to $760 million
- The Company completed over $590 million
of Other Equity and Debt asset monetizations, with net equity
proceeds of approximately $324 million, which brings year-to-date
asset monetizations to $1.1 billion with net equity proceeds of
approximately $661 million
- The Company invested, or committed to
invest, $166 million in five Strategic Other Equity and Debt
investments, representing immediate GP co-investments or
investments the Company expects to contribute to a future managed
fund, or syndicate to third-party investors
- The Company redeemed all of the shares
of its 8.5% Series D cumulative redeemable perpetual preferred
stock for $200 million with aggregate year-to-date preferred stock
redemptions and common stock repurchases of $519 million
- Subsequent to the third quarter 2018:
- The Company announced a corporate
restructuring and reorganization plan which is expected to generate
$50 to $55 million ($45 to $50 million on a cash basis) of annual
compensation and administrative cost savings over the next 12 to 18
months
- Following a strategic review process,
the Company is implementing this plan to match resources that
further align its increasing focus on the investment management
business and its global workforce is expected to decrease by
approximately 15%, primarily associated with the exiting of
non-core assets and business lines
- The Company invested, or committed to
invest, approximately $130 million, primarily in a Strategic Other
Equity and Debt investment, which the Company expects to contribute
to a future managed fund or syndicate to third-party investors
- As of November 5, 2018, the Company had
approximately $1.0 billion of liquidity through availability under
its revolving credit facility
For more information and a reconciliation of net income/(loss)
to common stockholders to Core FFO, NOI and/or EBITDA, please refer
to the non-GAAP financial measure definitions and tables at the end
of this press release.
Third Quarter 2018 Operating Results and Investment Activity
by Segment
Colony Capital holds investment interests in six reportable
segments: Healthcare Real Estate; Industrial Real Estate;
Hospitality Real Estate; CLNC; Other Equity and Debt; and
Investment Management.
Healthcare Real Estate
As of September 30, 2018, the consolidated healthcare portfolio
consisted of 413 properties: 192 senior housing properties, 108
medical office properties, 99 skilled nursing facilities and 14
hospitals. The Company’s equity interest in the consolidated
Healthcare Real Estate segment was approximately 71% as of
September 30, 2018. 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 (“RIDEA”).
During the third quarter 2018, this segment’s net loss
attributable to common stockholders was $(12.2) million, Core FFO
was $19.7 million and consolidated NOI was $76.5 million. In the
third quarter 2018, healthcare same store portfolio sequential
quarter to quarter comparable revenue and net operating income were
unchanged. Compared to the same period last year, third quarter
2018 same store revenue decreased (4.0)% and net operating income
increased 0.4%. The revenue decrease was primarily attributable to
operators/tenants transitioning from RIDEA to triple-net lease
structures. As a result, the Company no longer records gross
revenues and certain expenses for such properties and now records
net rental revenue. The healthcare same store portfolio is defined
as properties in operation throughout the full periods presented
under the comparison and included 412 properties in the sequential
quarter to quarter and year to year comparisons. Properties
acquired, disposed or held for sale during these periods are
excluded for the same store portfolio and same store results
exclude certain non-recurring bad debt expense.
The following table presents NOI and certain operating metrics
by property types in the Company’s Healthcare Real Estate
segment:
Consolidated CLNY OP
Same Store NOI Share NOI(1) Consolidated
NOI(2) Occupancy %(3) TTM
Lease Coverage(4) ($ in millions) Q3 2018 Q3 2018 Q3 2018
Q2 2018 Q3 2018 Q2 2018 6/30/18
3/31/18 Senior Housing - Operating $ 16.5 $ 11.7 $ 17.4
$ 17.4 87.1 % 86.7 % N/A N/A
Medical Office Buildings 13.4 9.5 13.4 13.7 83.0 % 82.6 % N/A N/A
Triple-Net Lease: Senior Housing 15.3 10.8 15.3 15.5 82.0 % 82.3 %
1.4x 1.4x Skilled Nursing Facilities 26.2 18.6 26.2 26.0 81.9 %
82.2 % 1.2x 1.2x Hospitals 5.1 3.6 5.1
4.8 57.1 % 59.6 % 3.2x 3.3x Healthcare Total $ 76.5
$ 54.2 $ 77.4 $ 77.4
(1) CLNY OP Share NOI represents third quarter
2018 Consolidated NOI multiplied by CLNY OP’s ownership interest as
of September 30, 2018. (2) Same Store Consolidated NOI excludes
$0.9 million and $3.6 million of non-recurring bad debt expense
during the third quarter 2018 and second quarter 2018,
respectively. (3) 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. (4) Represents the ratio of the
tenant’s/operator’s EBITDAR to cash rent payable to the Company’s
Healthcare Real Estate segment on a trailing twelve month basis.
Asset Acquisition and
Disposition
During the third quarter 2018, the consolidated healthcare
portfolio disposed of one senior housing operating property and
acquired a triple-net lease senior housing property formally
financed under the Company’s U.K. development lending facility,
reducing the facility to $51 million consolidated or $36 million
CLNY OP share carrying value as of September 30, 2018.
Industrial Real Estate
As of September 30, 2018, the consolidated industrial portfolio
consisted of 406 primarily light industrial buildings totaling 48.9
million rentable square feet across 20 major U.S. markets and was
94% leased. During the third quarter 2018, the Company raised $84
million of new third-party capital. As a result, the Company’s
equity interest in the consolidated Industrial Real Estate segment
decreased to approximately 36% as of September 30, 2018 from 37% as
of June 30, 2018. Total third-party capital commitments were
approximately $1.5 billion compared to cumulative balance sheet
contributions of $749 million as of September 30, 2018. 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 generally targeting multi-tenanted
warehouses less than 250,000 square feet.
During the third quarter 2018, this segment’s net income
attributable to common stockholders was $1.0 million, Core FFO was
$12.9 million and consolidated NOI was $49.0 million. In the third
quarter 2018, industrial same store portfolio sequential quarter to
quarter comparable rental revenue decreased (1.0)% and net
operating income decreased (1.5)%. The decrease was primarily
related to vacancies in the quarter, most of which have been
backfilled with leases that have not yet taken occupancy. Compared
to the same period last year, third quarter 2018 same store rental
revenue increased 3.1% and net operating income increased 0.8%. The
Company’s industrial same store portfolio consisted of 259
buildings. The same store portfolio is defined once a year at the
beginning of the current calendar year and includes buildings that
were owned, stabilized and held-for-use throughout the entirety of
both the current and prior calendar years. Properties acquired,
disposed or held-for-sale after the same store portfolio is
determined are excluded. Stabilized properties are defined as
properties owned for more than one year or are greater than 90%
leased. Same store NOI excludes lease termination fee revenue.
The following table presents NOI and certain operating metrics
in the Company’s Industrial Real Estate segment:
Consolidated CLNY OP
Same Store NOI
Share NOI(1)
Consolidated NOI Leased %(2) ($ in millions)
Q3 2018 Q3 2018 Q3 2018 Q2 2018 9/30/18
6/30/18 Industrial $ 49.0 $ 17.7 $ 32.1 $ 32.6 94.9 %
94.1 % (1) CLNY OP Share NOI
represents third quarter 2018 Consolidated NOI multiplied by CLNY
OP’s ownership interest as of September 30, 2018. (2) Leased % as
of the reported date represents square feet under executed leases,
some of which may not have taken occupancy.
Asset Acquisitions and
Dispositions
During the third quarter 2018, the consolidated industrial
portfolio acquired 15 industrial buildings totaling approximately
1.5 million square feet and one land parcel for development for a
total of approximately $134 million and disposed of one non-core
building for approximately $7 million.
Subsequent to the third quarter 2018, the consolidated
industrial portfolio disposed of three non-core buildings for
approximately $4 million.
Hospitality Real Estate
As of September 30, 2018, 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% as of September 30, 2018. The
hospitality portfolio consists primarily of premium branded select
service hotels and extended stay hotels located mostly in major
metropolitan markets, of which a majority are affiliated with top
hotel brands. The select service hospitality portfolio referred to
as the THL Hotel Portfolio, which the Company acquired through
consensual transfer during the third quarter 2017, is not included
in the Hospitality Real Estate segment and is included in the Other
Equity and Debt segment.
During the third quarter 2018, this segment’s net loss
attributable to common stockholders was $(62.9) million, Core FFO
was $34.8 million and consolidated EBITDA was $77.9 million. This
segment's net loss attributable to common stockholders included $62
million of impairments related to certain non-core properties
expected to be sold in the near term. Impairment of real estate is
added back in the calculation of FFO and, as a result, Core FFO.
Compared to the same period last year, third quarter 2018
hospitality same store portfolio revenue increased 1.1% and EBITDA
decreased (1.3)%, primarily due to higher occupancy offset by
increased labor and operating expenses. The Company’s hotels
typically experience seasonal variations in occupancy which may
cause quarterly fluctuations in revenues and therefore sequential
quarter to quarter revenue and EBITDA result comparisons are not
meaningful. The hospitality same store portfolio is defined as
hotels in operation throughout the full periods presented under the
comparison and included 167 hotels in the year to year
comparison.
The following table presents EBITDA and certain operating
metrics by brands in the Company’s Hospitality Real Estate
segment:
Same
Store Consolidated CLNY OP Share
Avg. Daily Rate RevPAR(3)
EBITDA(1)
EBITDA(2)
Consolidated
EBITDA
Occupancy %(4)
(In dollars)(4) (In dollars)(4) ($ in millions) Q3 2018 Q3 2018 Q3
2018 Q3 2017 Q3 2018 Q3 2017 Q3 2018
Q3 2017 Q3 2018 Q3 2017 Marriott $ 59.6
$ 56.3 $ 59.6 $ 60.8 77.0 % 76.6 % $
129 $ 129 $ 99 $ 99 Hilton 13.6 12.8
13.6 13.2 84.8 % 82.6 % 132 131 112 108 Other 4.7 4.4
4.7 4.9 85.4 % 86.3 % 139
139 118 120
Total/W.A. $ 77.9 $ 73.5 $ 77.9
$ 78.9 78.7 % 78.1 % $ 130
$ 130 $ 102 $ 102 (1)
Third quarter 2018 Consolidated EBITDA excludes a
FF&E reserve contribution amount of $9.8 million. (2) CLNY OP
Share EBITDA represents third quarter 2018 Consolidated EBITDA
multiplied by CLNY OP’s ownership interest as of September 30,
2018. (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 Financing
During the third quarter 2018, the Company refinanced
approximately $550 million of consolidated and CLNY OP share of
debt in the Hospitality Real Estate segment, extending the fully
extended maturity date from 2019 to 2025.
Colony Credit Real Estate, Inc.
(“CLNC”)
On February 1, 2018, Colony Credit Real Estate, Inc., a leading
commercial real estate credit REIT, announced the completion of the
combination of a select portfolio of the Company’s assets and
liabilities from the Other Equity and Debt segment with NorthStar
Real Estate Income Trust, Inc. (“NorthStar I”) and NorthStar Real
Estate Income II, Inc. (“NorthStar II”) in an all-stock
transaction. In connection with the closing, CLNC completed the
listing of its Class A common stock on the New York Stock Exchange
under the ticker symbol “CLNC.” The combination created a permanent
capital vehicle, externally managed by the Company, with
approximately $5.5 billion in assets, excluding securitization
trust liabilities, and $3.0 billion in equity value as of September
30, 2018. The Company owns 48.0 million shares, or 37%, of CLNC and
earns an annual base management fee of 1.5% on stockholders’ equity
and an incentive fee of 20% of CLNC’s Core Earnings over a 7%
hurdle rate. During the third quarter 2018, this segment’s net loss
attributable to common stockholders was $(18.3) million and Core
FFO was $14.2 million. This segment's net loss attributable to
common stockholders included $22 million CLNY OP share of CLNC
impairments and provisions for loan losses, which are added back in
the calculation of CLNC's Core Earnings and, as a result, the
Company’s Core FFO. Please refer to the CLNC's earnings release and
financial supplemental furnished on Form 8-K filed with the SEC and
its Quarterly Report on Form 10-Q to be filed with the SEC for
additional detail.
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 our 11% interest in
NorthStar Realty Europe Corp. (NYSE: NRE) and other investments for
which the Company acts as a general partner or manager (“GP
Co-Investments”) and receives various forms of investment
management economics on the related third-party capital.
Non-strategic investments are composed of those investments the
Company does not intend to own for the long term including other
real estate equity including the THL Hotel Portfolio and the
Company’s interest in Albertsons; real estate loans; net leased
assets; and multiple classes of commercial real estate (“CRE”)
securities. During the third quarter 2018, this segment’s aggregate
net income attributable to common stockholders was $57.7 million
and Core FFO was $56.5 million.
Other Equity and Debt Segment Asset
Acquisitions and Dispositions
During the third quarter 2018, the Company invested, or
committed to invest, $166 million in five Strategic Other Equity
and Debt investments, representing immediate GP co-investments, or
investments the Company expects to contribute to a future managed
fund or syndicate to third-party investors. During the third
quarter 2018, the Company sold or received payoffs in aggregate of
over $590 million with net equity proceeds of approximately $324
million from various other real estate debt and equity investments,
including $122 million from the Net Lease Real Estate Equity
category; $45 million from the Real Estate Debt category; and $157
million in the Real Estate Private Equity and CRE Securities
category. Since the beginning of 2018, the Company has reduced its
CRE securities and real estate private equity investments by
approximately 60% and 95%, respectively.
As of September 30, 2018, the undepreciated carrying value of
assets and equity within the Other Equity and Debt segment were
$3.4 billion and $2.1 billion, respectively, down from $3.9 billion
and $2.4 billion, respectively, as of June 30, 2018.
CLNY OP Share Undepreciated Carrying Value
September 30, 2018 June 30, 2018 ($ in
millions) Assets Equity Assets
Equity
Strategic:
GP co-investments $ 855 $ 528 $ 843 $ 422 Interest in NRE 74
74 75 75
Strategic Subtotal 929 602 918
497
Non-Strategic:
Other Real Estate Equity & Albertsons 1,742 956 1,749 968 Real
Estate Debt 399 376 443 419 Net Lease Real Estate Equity 245 108
585 250 CRE Securities and Real Estate Private Equity Funds 71
71 221 221
Non-Strategic
Subtotal 2,457 1,511 2,998 1,858
Total Other Equity and Debt $ 3,386 $ 2,113 $
3,916 $ 2,355
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,
non-traded and traded real estate investment trusts and registered
investment companies. As of September 30, 2018, the Company had
$28.9 billion of third-party AUM compared to $28.0 billion as of
June 30, 2018. As of September 30, 2018, Fee-Earning Equity Under
Management (“FEEUM”) was $17.7 billion compared to $17.0 billion as
of June 30, 2018. The increase was primarily attributable to
capital raised in Digital Colony, the industrial platform, and an
increase in the Company's share of AccorInvest, partially offset by
asset sales. During the third quarter 2018, this segment’s
aggregate net income attributable to common stockholders was $19.2
million and Core FFO was $38.5 million. This segment’s net income
included an aggregate $5 million of unrealized carried interest
from the industrial platform and the Company's investment in
AccorInvest. This segment’s net income was also negatively impacted
by an aggregate $7 million of placement fees related to third-party
capital raised in AccorInvest and Digital Colony, which must be
expensed upfront although payments are made over time, and $12
million of impairments, net of a gain, to interests in non-wholly
owned Real Estate Investment Management platforms and to
intangibles on an investment management contract. The impairments
and gain are reversed in the calculation of Core FFO.
Digital Real Estate
Infrastructure
During the third quarter 2018, Digital Colony raised $1.0
billion and had an aggregate $4.0 billion of committed capital as
of September 30, 2018, inclusive of a $250 million capital
commitment by certain subsidiaries of the Company.
Assets Under Management (“AUM”)
As of September 30, 2018, the Company had $44 billion of AUM
compared to $43 billion as of June 30, 2018:
September 30, 2018 June
30, 2018 ($ in billions) Amount % of
Grand Total
Amount % ofGrand Total Balance Sheet
(CLNY OP Share): Healthcare $ 4.1 9.4 % $ 4.1 9.4 % Industrial 1.2
2.8 % 1.2 2.8 % Hospitality 4.0 9.2 % 3.9 9.1 % Other Equity and
Debt 3.4 7.8 % 3.9 9.2 % CLNC: Investments contributed to CLNC(1)
2.0 4.5 % 1.8 4.2 % Balance Sheet Subtotal
14.7 33.7 % 14.9 34.7 % Investment Management: Institutional
Funds 9.8 22.5 % 9.8 22.9 % Retail Companies 3.6 8.3 % 3.6 8.4 %
Colony Credit Real Estate (NYSE:CLNC)(2) 3.5 8.0 % 3.1 7.2 %
NorthStar Realty Europe (NYSE:NRE) 2.0 4.6 % 2.1 4.9 % Non-Wholly
Owned REIM Platforms(3) 10.0 22.9 % 9.4 21.9 %
Investment Management Subtotal 28.9 66.3 % 28.0 65.3 %
Grand Total $ 43.6 100.0 % $
42.9 100.0 % (1) Represents the
Company’s 37% ownership share of CLNC’s total pro-rata share of
assets, excluding securitization trust liabilities, of $5.5 billion
as of September 30, 2018 and $4.9 billion as of June 30, 2018. (2)
Represents 3rd party 63% ownership share of CLNC’s total pro-rata
share of assets, excluding securitization trust liabilities, of
$5.5 billion as of September 30, 2018 and $4.9 billion as of June
30, 2018. (3) REIM: Real Estate Investment Management
Corporate Restructuring and Cost Reduction Plan
Following a strategic review process, the Company announced that
it is implementing a corporate restructuring and reorganization
plan to match resources that further align its increasing focus on
the investment management business under an ‘asset-light’ business
model while exiting certain non-core businesses and assets. The
plan is expected to deliver $50 to $55 million ($45 to $50 million
on a cash basis) of annual compensation and administrative cost
savings on a run-rate basis by year-end 2019 and will result in a
reduction of the Company’s global workforce by approximately 15%.
The majority of the benefit of the restructuring efforts will be
seen in 2019 and early 2020, although some benefits may be realized
in the fourth quarter of 2018.
Liquidity and Financing
As of November 5, 2018, the Company had approximately $1.0
billion of liquidity through availability under its revolving
credit facility.
Common Stock and Operating Company Units
As of November 5, 2018, the Company had approximately 491.0
million shares of Class A and B common stock outstanding and the
Company’s operating partnership had approximately 31.4 million
operating company units outstanding held by members other than the
Company or its subsidiaries.
As of November 5, 2018, the Company had $282 million remaining
under its share repurchase program.
Contingent Consideration
During the third quarter 2018, the Company issued 2.0 million
common shares and operating company units with an estimated value
of $12.5 million to senior management personnel as contingent
consideration related to the internalization transaction of Colony
Capital, LLC in April 2015.
Common and Preferred Dividends
The Company redeemed in its entirety the outstanding Series D
cumulative redeemable perpetual preferred stock and paid all
accrued cash dividends, in accordance of the terms of the
redemption, related to the Series D cumulative redeemable perpetual
preferred stock on July 2, 2018.
On August 2, 2018, the Company’s Board of Directors declared a
quarterly cash dividend of $0.11 per share of Class A and Class B
common stock for the third quarter of 2018, which was paid on
October 15, 2018 to respective stockholders of record on September
28, 2018. The Board of Directors also declared cash dividends with
respect to each series of the Company’s cumulative redeemable
perpetual preferred stock each in accordance with terms of such
series as follows: (i) with respect to each of the Series B stock -
$0.515625 per share and Series E stock - $0.546875 per share, such
dividends to be paid on November 15, 2018 to the respective
stockholders of record on November 9, 2018 and (ii) with respect to
each of the Series G stock - $0.46875 per share, Series H stock -
$0.4453125 per share, Series I stock - $0.446875 per share and
Series J stock - $0.4453125 per share, such dividends were paid on
October 15, 2018 to the respective stockholders of record on
October 10, 2018.
On November 5, 2018, the Company’s Board of Directors declared a
quarterly cash dividend of $0.11 per share of Class A and Class B
common stock for the fourth quarter of 2018, which will be paid on
January 15, 2019 to respective stockholders of record on December
31, 2018. The Board of Directors also declared cash dividends with
respect to each series of the Company’s cumulative redeemable
perpetual preferred stock each in accordance with terms of such
series as follows: (i) with respect to each of the Series B stock -
$0.515625 per share and Series E stock - $0.546875 per share, such
dividends to be paid on February 15, 2019 to the respective
stockholders of record on February 8, 2019 and (ii) with respect to
each of the Series G stock - $0.46875 per share, Series H stock -
$0.4453125 per share, Series I stock - $0.446875 per share and
Series J stock - $0.4453125 per share, such dividends to be paid on
January 15, 2019 to the respective stockholders of record on
January 10, 2019.
Non-GAAP Financial Measures and Definitions
Assets Under Management
(“AUM”)
Assets for which the Company and its affiliates provide
investment management services, including assets for which the
Company may or may not charge management fees and/or performance
allocations. AUM is based on reported gross undepreciated carrying
value of managed investments as reported by each underlying vehicle
at September 30, 2018. AUM further includes a) uncalled capital
commitments and b) includes the Company’s pro-rata share of each
affiliate non wholly-owned real estate investment management
platform’s assets as presented and calculated by the affiliate.
Affiliates include the co-sponsored digital real estate
infrastructure vehicle, 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.
CLNY OP
The operating partnership through which the Company conducts all
of its activities and holds substantially all of its assets and
liabilities. CLNY OP share excludes noncontrolling interests in
investment entities.
Fee-Earning Equity Under Management
(“FEEUM”)
Equity for which the Company and its affiliates provides
investment management services and derives management fees and/or
performance allocations. FEEUM generally represents a) the basis
used to derive fees, which may be based on invested equity,
stockholders’ equity, or fair value pursuant to the terms of each
underlying investment management agreement and b) the Company’s
pro-rata share of fee bearing equity of each affiliate as presented
and calculated by the affiliate. Affiliates include the
co-sponsored digital real estate infrastructure vehicle, RXR Realty
LLC, SteelWave, LLC, American Healthcare Investors and Hamburg
Trust. The Company's calculations of FEEUM may differ materially
from the calculations of other asset managers, and as a result,
this measure may not be comparable to similar measures presented by
other asset managers.
Funds From Operations (“FFO”) and Core
Funds From Operations (“Core FFO”)
The Company calculates funds from operations (“FFO”) in
accordance with standards established by the Board of Governors of
the National Association of Real Estate Investment Trusts, which
defines FFO as net income or loss calculated in accordance with
GAAP, excluding 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) 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 and foreign currency remeasurements; (viii)
acquisition-related expenses, merger and integration costs; (ix)
amortization and impairment of finite-lived intangibles related to
investment management contracts and customer relationships; (x)
gain on remeasurement of consolidated investment entities and the
effect of amortization thereof; (xi) non-real estate depreciation
and amortization; (xii) change in fair value of contingent
consideration; and (xiii) tax effect on certain of the foregoing
adjustments. Beginning with the first quarter of 2018, the
Company’s Core FFO from its interest in Colony Credit Real Estate
(NYSE: CLNC) and NorthStar Realty Europe (NYSE: NRE) represented
its percentage interest multiplied by CLNC’s Core Earnings and
NRE’s Cash Available for Distribution (“CAD”), respectively. CLNC’s
Core Earnings reflect adjustments to GAAP net income to exclude
impairment of real estate and provision for loan losses. Such
impairment and losses may ultimately be realized, in part or in
full, upon a sale or monetization of the related asset or loan and
such realized loss would be reflected in CLNC’s Core Earnings and,
as a result, the Company’s Core FFO. Refer to CLNC’s and NRE's
respective filings with the SEC for the definition and calculation
of Core Earnings and CAD.
FFO and Core FFO should not be considered alternatives to GAAP
net income as indications of operating performance, or to cash
flows from operating activities as measures of liquidity, nor as
indications of the availability of funds for our cash needs,
including funds available to make distributions. FFO and Core FFO
should not be used as supplements to or substitutes for cash flow
from operating activities computed in accordance with GAAP. The
Company’s calculations of FFO and Core FFO may differ from
methodologies utilized by other REITs for similar performance
measurements, and, accordingly, may not be comparable to those of
other REITs.
The Company uses FFO and Core FFO as supplemental performance
measures because, in excluding real estate depreciation and
amortization and gains and losses from property dispositions, it
provides a performance measure that captures trends in occupancy
rates, rental rates, and operating costs. The Company also believes
that, as widely recognized measures of the performance of REITs,
FFO and Core FFO will be used by investors as a basis to compare
its operating performance with that of other REITs. However,
because FFO and Core FFO exclude depreciation and amortization and
capture neither the changes in the value of the Company’s
properties that resulted from use or market conditions nor the
level of capital expenditures and leasing commissions necessary to
maintain the operating performance of its properties, all of which
have real economic effect and could materially impact the Company’s
results from operations, the utility of FFO and Core FFO as
measures of the Company’s performance is limited. FFO and Core FFO
should be considered only as supplements to GAAP net income as a
measure of the Company’s performance.
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.
Earnings Before Interest, Tax,
Depreciation, Amortization and Rent (“EBITDAR”)
Represents earnings before interest, taxes, depreciation,
amortization and rent for facilities accruing to the
tenant/operator of the property (not the Company) for the period
presented. The Company uses EBITDAR in determining TTM Lease
Coverage for triple-net lease properties in its Healthcare Real
Estate segment. EBITDAR has limitations as an analytical tool.
EBITDAR does not reflect historical cash expenditures or future
cash requirements for facility capital expenditures or contractual
commitments. In addition, EBITDAR does not represent a property's
net income or cash flow from operations and should not be
considered an alternative to those indicators. The Company utilizes
EBITDAR as a supplemental measure of the ability of the Company's
operators/tenants to generate sufficient liquidity to meet related
obligations to the Company.
TTM Lease Coverage
Represents the ratio of EBITDAR to recognized cash rent for
owned facilities on a trailing twelve month basis. TTM Lease
Coverage is a supplemental measure of a tenant’s/operator’s ability
to meet their cash rent obligations to the Company. However, its
usefulness is limited by, among other things, the same factors that
limit the usefulness of EBITDAR.
The information related to the Company’s tenants/operators that
is provided in this press release has been provided by, or derived
from information provided by, such tenants/operators. The Company
has not independently verified this information and has no reason
to believe that such information is inaccurate in any material
respect. The Company is providing this data for informational
purposes only.
Third Quarter 2018 Conference Call
The Company will conduct a conference call to discuss the
financial results on Wednesday, November 7, 2018 at 7:00 a.m. PT /
10:00 a.m. ET. To participate in the event by telephone, please
dial (877) 407-4018 ten minutes prior to the start time (to allow
time for registration). International callers should dial (201)
689-8471. The call will also be broadcast live over the Internet
and can be accessed on the Public Shareholders section of the
Company’s website at www.clny.com. A webcast of the call will be
available for 90 days on the Company’s website.
For those unable to participate during the live call, a replay
will be available starting November 7, 2018, at 10:00 a.m. PT /
1:00 p.m. ET, through November 14, 2018, at 8:59 p.m. PT / 11:59
p.m. ET. To access the replay, dial (844) 512-2921 (U.S.), and use
passcode 13683876. International callers should dial (412) 317-6671
and enter the same conference ID number.
Corporate Overview and Supplemental Financial Report
A Third Quarter 2018 Corporate Overview and Supplemental
Financial Report is available on the Company’s website at
www.clny.com. This information has also been furnished to the U.S.
Securities and Exchange Commission in a Current Report on Form
8-K.
About Colony Capital, Inc.
Colony Capital, Inc. (NYSE: CLNY) is a leading global investment
management firm with assets under management of $44 billion. The
Company 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. The Company has significant holdings in: (a) the
healthcare, industrial and hospitality property sectors; (b) Colony
Credit Real Estate, Inc. (NYSE: CLNC) and NorthStar Realty Europe
Corp. (NYSE: NRE), which are both externally managed by
subsidiaries of the Company; and (c) various other equity and debt
investments. The Company is headquartered in Los Angeles with key
offices in New York, Paris and London, and has over 400 employees
across 17 locations in ten countries. For additional information
regarding the Company and its management and business, please refer
to www.clny.com.
Cautionary Statement Regarding Forward-Looking
Statements
This press release may contain forward-looking statements within
the meaning of the federal securities laws. Forward-looking
statements relate to expectations, beliefs, projections, future
plans and strategies, anticipated events or trends and similar
expressions concerning matters that are not historical facts. In
some cases, you can identify forward-looking statements by the use
of forward-looking terminology such as “may,” “will,” “should,”
“expects,” “intends,” “plans,” “anticipates,” “believes,”
“estimates,” “predicts,” or “potential” or the negative of these
words and phrases or similar words or phrases which are predictions
of or indicate future events or trends and which do not relate
solely to historical matters. You can also identify forward-looking
statements by discussions of strategy, plans or intentions.
Forward-looking statements involve known and unknown risks,
uncertainties, assumptions and contingencies, many of which are
beyond the Company’s control, and may cause the Company’s actual
results to differ significantly from those expressed in any
forward-looking statement. Factors that might cause such a
difference include, without limitation, 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., the impact of changes to the
Company’s management, employee and organizational structure, the
amount, timing and impact of cost reductions, including whether any
anticipated benefits of such reductions will be realized, the
Company’s financial flexibility, the Company's ability to grow its
investment management business, the timing and pace of growth of
the Company's Industrial platform, the performance of the Company’s
investment in Colony Credit Real Estate, Inc., the Company’s
ability to maintain or create future permanent capital vehicles
under its management, whether the Company will realize any
anticipated benefits from the Digital Bridge partnership, the
Company’s ability to simplify its business and become more balance
sheet-light, the Company's portfolio composition, Colony Capital’s
liquidity, including its ability to continue to generate liquidity
by more accelerated sales of non-core assets and businesses,
whether the Company will complete or sponsor any compelling
investment opportunities under a predominantly third-party capital
model, the Company's expected taxable income and net cash flows,
excluding the contribution of gains, the Company’s ability to grow
the dividend at all in the future; the impact to the Company of the
management agreement amendments with NorthStar Healthcare Income,
Inc. and NorthStar Realty Europe Corp., whether Colony Capital will
be able to maintain its qualification as a REIT for U.S. federal
income tax purposes, the timing of and ability to deploy available
capital, the timing of and ability to complete repurchases of
Colony Capital’s stock, Colony Capital’s ability to maintain
inclusion and relative performance on the RMZ, Colony Capital’s
leverage, including the Company’s ability to reduce debt and the
timing and amount of borrowings under its credit facility, whether
the Company will benefit from the combination of its broker-dealer
business with S2K Financial, increased interest rates and operating
costs, adverse economic or real estate developments in Colony
Capital’s markets, Colony Capital’s failure to successfully operate
or lease acquired properties, decreased rental rates, increased
vacancy rates or failure to renew or replace expiring leases,
defaults on or non-renewal of leases by tenants, the impact of
economic conditions on the borrowers of Colony Capital’s commercial
real estate debt investments and the commercial mortgage loans
underlying its commercial mortgage backed securities, adverse
general and local economic conditions, an unfavorable capital
market environment, decreased leasing activity or lease renewals,
and other risks and uncertainties detailed in our filings with the
U.S. Securities and Exchange Commission (“SEC”). All
forward-looking statements reflect the Company’s good faith
beliefs, assumptions and expectations, but they are not guarantees
of future performance. Additional information about these and other
factors can be found in Colony Capital’s reports filed from time to
time with the SEC.
Colony Capital cautions investors not to unduly rely on any
forward-looking statements. The forward-looking statements speak
only as of the date of this press release. Colony Capital is under
no duty to update any of these forward-looking statements after the
date of this press release, nor to conform prior statements to
actual results or revised expectations, and Colony Capital does not
intend to do so.
COLONY CAPITAL, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share
data)
September 30, 2018
(unaudited)
December 31, 2017 Assets Cash and cash equivalents $
416,795 $ 921,822 Restricted cash 413,803 471,078 Real estate, net
13,958,524 14,464,258 Loans receivable, net ($0 and $45,423 at fair
value, respectively) 1,784,491 3,223,762 Investments in
unconsolidated ventures ($110,365 and $363,901 at fair value,
respectively) 2,330,847 1,655,239 Securities, at fair value 139,028
383,942 Goodwill 1,534,561 1,534,561 Deferred leasing costs and
intangible assets, net 563,712 852,872 Assets held for sale
($76,683 and $49,498 at fair value, respectively) 638,151 781,630
Other assets ($22,358 and $10,152 at fair value, respectively)
483,519 444,968 Due from affiliates 41,849 51,518
Total assets $ 22,305,280 $ 24,785,650
Liabilities Debt, net ($0 and $44,542 at fair value,
respectively) $ 9,867,976 $ 10,827,810 Accrued and other
liabilities ($77,990 and $212,267 at fair value, respectively)
642,902 898,161 Intangible liabilities, net 167,270 191,109
Liabilities related to assets held for sale 50,625 273,298 Due to
affiliates ($0 and $20,650 at fair value, respectively) — 23,534
Dividends and distributions payable 84,604 188,202
Total liabilities 10,813,377 12,402,114
Commitments and contingencies
Redeemable noncontrolling
interests 34,389 34,144
Equity Stockholders’ equity:
Preferred stock, $0.01 par value per share; $1,436,605 and
$1,636,605 liquidation preference, respectively; 250,000 shares
authorized; 57,464 and 65,464 shares issued and outstanding,
respectively 1,407,495 1,606,966 Common stock, $0.01 par value per
share Class A, 949,000 shares authorized; 490,319 and 542,599
shares issued and outstanding, respectively 4,904 5,426 Class B,
1,000 shares authorized; 734 and 736 shares issued and outstanding,
respectively 7 7 Additional paid-in capital 7,618,518 7,913,622
Distributions in excess of earnings (1,567,662 ) (1,165,412 )
Accumulated other comprehensive income 17,732 47,316
Total stockholders’ equity 7,480,994 8,407,925 Noncontrolling
interests in investment entities 3,590,546 3,539,072 Noncontrolling
interests in Operating Company 385,974 402,395 Total
equity 11,457,514 12,349,392
Total liabilities,
redeemable noncontrolling interests and equity $ 22,305,280
$ 24,785,650
COLONY CAPITAL, INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(In thousands, except per share
data)
(unaudited)
Three Months Ended September 30, 2018
2017 Revenues Property
operating income $ 567,981 $ 613,665 Interest income 59,990 106,479
Fee income 35,055 59,693 Other income 11,743 10,016
Total revenues 674,769 789,853
Expenses
Property operating expense 307,795 332,006 Interest expense 145,117
152,054 Investment and servicing expense 11,117 18,421 Transaction
costs 228 4,636 Placement fees 5,184 — Depreciation and
amortization 145,310 162,694 Provision for loan loss 7,825 5,116
Impairment loss 76,497 24,073 Compensation expense 46,726 85,022
Administrative expenses 23,278 26,502
Total
expenses 769,077 810,524
Other income
(loss) Gain on sale of real estate assets 35,120 72,541 Other
gain (loss), net 29,677 (8,822 ) Earnings from investments in
unconsolidated ventures 13,798 17,447
Income
(loss) before income taxes (15,713 ) 60,495 Income tax benefit
1,767 10,613
Net income (loss) from continuing
operations (13,946 ) 71,108 Income from discontinued operations
— 1,481
Net income (loss) (13,946 ) 72,589 Net
income (loss) attributable to noncontrolling interests: Redeemable
noncontrolling interests 865 1,678 Investment entities 32,382
36,906 Operating Company (4,403 ) 97
Net income (loss)
attributable to Colony Capital, Inc. (42,790 ) 33,908 Preferred
stock redemption — (918 ) Preferred stock dividends 27,185
33,176
Net income (loss) attributable to common
stockholders $ (69,975 ) $ 1,650
Basic earnings
(loss) per share Income (loss) from continuing operations per
basic common share $ (0.15 ) $ — Net income (loss) per basic
common share $ (0.15 ) $ —
Diluted earnings (loss) per
share Income (loss) from continuing operations per diluted
common share $ (0.15 ) $ — Net income (loss) per diluted
common share $ (0.15 ) $ —
Weighted average number of
shares Basic 484,754 542,855 Diluted 484,754
542,855
COLONY CAPITAL, INC.
FUNDS FROM OPERATIONS AND CORE FUNDS
FROM OPERATIONS
(In thousands, except per share
data)
(Unaudited)
Three Months Ended
September 30, 2018
Net loss attributable to common stockholders $ (69,975 )
Adjustments for FFO attributable to common interests in Operating
Company and common stockholders: Net loss attributable to
noncontrolling common interests in Operating Company (4,403 ) Real
estate depreciation and amortization 153,303 Impairment of real
estate 78,595 Gain from sales of real estate (38,432 ) Less:
Adjustments attributable to noncontrolling interests in investment
entities (46,959 ) FFO attributable to common interests in
Operating Company and common stockholders 72,129
Additional adjustments for Core FFO attributable to common
interests in Operating Company and common stockholders:
Gains and losses from sales of depreciable
real estate within the Other Equity and Debt segment, net of
depreciation, amortization and impairment previously adjusted for
FFO(1)
5,903 Gains and losses from sales of businesses within the
Investment Management segment and impairment write-downs associated
with the Investment Management segment 5,221 Equity-based
compensation expense 9,425 Straight-line rent revenue and expense
(6,017 ) Amortization of acquired above- and below-market lease
values, net (2,840 ) Amortization of deferred financing costs and
debt premiums and discounts 20,040
Unrealized fair value gains and foreign
currency remeasurements(2)
(16,291 ) Acquisition and merger-related transaction costs 418
Merger integration costs(3)
2,180 Amortization and impairment of investment management
intangibles 12,088 Non-real estate depreciation and amortization
2,390 Amortization of gain on remeasurement of consolidated
investment entities 1,120 Deferred tax benefit, net (3,281 )
Less: Adjustments attributable to
noncontrolling interests in investment entities(1)
(254 ) Core FFO attributable to common interests in Operating
Company and common stockholders $ 102,231
FFO per common share / common OP
unit(4)
$ 0.14
FFO per common share / common OP
unit—diluted(5)
$ 0.14
Core FFO per common share / common OP
unit(4)
$ 0.20
Core FFO per common share / common OP
unit—diluted(6)
$ 0.19
Weighted average number of common OP units
outstanding used for FFO and Core FFO per common share and OP
unit(4)
522,120
Weighted average number of common OP units
outstanding used for FFO per common share and OP
unit—diluted(4)(5)(6)
522,693
Weighted average number of common OP units
outstanding used for Core FFO per common share and OP
unit—diluted(4)(6)
548,111 (1) Net of $27.1 million
consolidated or $22.8 million CLNY OP share 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 an adjustment to exclude CLNY OP's share of provision for
loan loss recognized by CLNC, which is excluded for CLNC's
calculation of its Core Earnings. (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)
Calculated based on weighted average shares outstanding including
participating securities and assuming the exchange of all common OP
units outstanding for common shares. (5) For the three months ended
September 30, 2018, included in the calculation of diluted FFO is
the effect of 573,100 weighted average shares of non-participating
restricted stock. (6) For the three months ended September 30,
2018, included in the calculation of diluted Core FFO per share is
the effect of adding back $4.5 million of interest expense
associated with convertible senior notes and 25.4 million weighted
average dilutive common share equivalents for the assumed
conversion of the convertible senior notes. Such interest expense
and weighted average dilutive common share equivalents are excluded
for the calculation of diluted FFO as the effect would be
antidilutive.
COLONY CAPITAL, 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 September 30, 2018 to NOI
or EBITDA:
NOI and EBITDA were determined as follows:
Three Months Ended September 30, 2018
(In
thousands)
Healthcare
Industrial
Hospitality Total revenues $ 147,907 $ 73,902 $ 224,384
Straight-line rent revenue and amortization of above- and
below-market lease intangibles (5,140 ) (3,012 ) (6 ) Interest
income — (107 ) —
Property operating expenses(1)
(66,298 ) (21,409 ) (146,440 )
Compensation and administrative
expense(1)
— (387 ) — NOI or EBITDA $ 76,469 $ 48,987
$ 77,938 (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 September 30, 2018
(In
thousands)
Healthcare
Industrial
Hospitality Net income (loss) from continuing operations $
(15,051 ) $ 6,296 $ (66,620 ) Adjustments: Straight-line rent
revenue and amortization of above- and below-market lease
intangibles (5,140 ) (3,012 ) (6 ) Interest income — (107 ) —
Interest expense 47,620 10,872 41,646 Transaction, investment and
servicing costs 1,556 41 1,938 Depreciation and amortization 43,697
33,503 36,503 (Recovery of) impairment loss (274 ) 774 61,865
Compensation and administrative expense 1,696 2,727 1,579 Other
loss, net 1,122 — 178 Income tax (benefit) expense 1,030 (3
) 855 NOI or EBITDA $ 76,469 $ 48,987 $ 77,938
The following table summarizes third quarter 2018 net income
(loss) from continuing operations by segment:
(In
thousands)
Net income (Loss)
From Continuing
Operations
Healthcare $ (15,051 ) Industrial 6,296 Hospitality (66,620 ) CLNC
(19,480 ) Other Equity and Debt 88,053 Investment Management 23,509
Amounts Not Allocated to Segments (30,653 ) Total Consolidated $
(13,946 )
View source
version on businesswire.com: https://www.businesswire.com/news/home/20181107005304/en/
Investor Contacts:Addo Investor RelationsLasse
Glassen310-829-5400
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