Colony Capital Announces Second Quarter 2018 Financial Results
LOS ANGELES--(BUSINESS WIRE)--Aug 8, 2018--Colony Capital, Inc. (NYSE:CLNY) and subsidiaries (collectively, “Colony Capital,” or the “Company”) today announced its financial results for the second quarter ended June 30, 2018 and the Company’s Board of Directors declared a third quarter 2018 cash dividend of $0.11 per share of Class A and Class B common stock.
Second Quarter 2018 Financial Results and HighlightsSecond quarter 2018 net loss attributable to common stockholders of $(92.8) million, or $(0.19) per share, and Core FFO of $93.5 million, or $0.18 per share The Company’s Board of Directors declared and paid a second quarter 2018 dividend of $0.11 per share of Class A and B common stock During the second quarter 2018, the Company raised approximately $1.8 billion of third-party capital (including amounts related to affiliates) from institutional clients Digital Colony, the Company’s digital real estate infrastructure vehicle established in partnership with Digital Bridge, raised $932 million during the second quarter 2018 and had an aggregate $3.0 billion of committed capital as of June 30, 2018, inclusive of a $229 million capital commitment by certain subsidiaries of the CompanyThe Company raised $469 million of third-party capital for its investment in AccorInvest, the property arm of AccorHotelsThe Company raised $175 million of third-party capital in the industrial platformThe Company raised $95 million of third-party co-investment capital for a Strategic Other Equity and Debt investment The Company completed over $440 million of Other Equity and Debt asset monetizations, with net equity proceeds of approximately $295 million The Company invested $81 million within vehicles that earn investment management economics and are classified as additions to the Strategic Other Equity and Debt segment The Company repurchased approximately 12.5 million shares of its Class A common stock at an average price of $5.80 per share, or $73 million, resulting in aggregate year-to-date 2018 repurchases of approximately 54.8 million shares at an average price of $5.82 per share, or $319 million The Company changed its name from Colony NorthStar, Inc. to Colony Capital, Inc. and its ticker symbol on the New York Stock Exchange from “CLNS” to “CLNY” Subsequent to the second quarter 2018: The Company redeemed all of the shares of its 8.5% Series D cumulative redeemable perpetual preferred stock for $200 million, resulting in year-to-date preferred stock redemptions and common stock repurchases of $519 millionThe Company monetized or was under contract to sell over $500 million of Other Equity and Debt investments with estimated net equity proceeds of $310 million, which would bring year-to-date asset monetizations to $1.0 billion with net equity proceeds of approximately $650 millionThe Company refinanced approximately $500 million of consolidated debt in the Hospitality Real Estate segment extending the fully extended maturity date from 2019 to 2025As of August 6, 2018, Digital Colony had an aggregate $3.3 billion of capital commitments, inclusive of a hard cap limit of $250 million capital commitment by certain subsidiaries of the CompanyThe Company received an additional commitment of €250 million from a third-party institutional investor to increase the investment in AccorInvestAs of August 6, 2018, The Company has approximately $1.1 billion of liquidity through cash-on-hand and 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.
“We made significant progress this quarter in growing our investment management business,” said Richard B. Saltzman, President and Chief Executive Officer. “With a focus on sector specific, compelling strategies in various geographies, we raised approximately $1.8 billion of third-party capital during the quarter thereby increasing investment management AUM to $28.2 billion and total AUM to $43.0 billion. At the same time, accelerating sales of non-core assets is helping us achieve our goals of simplification and becoming more ‘balance sheet-lite.’”
Second 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 June 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 June 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 second quarter 2018, this segment’s net loss attributable to common stockholders was $(14.4) million, Core FFO was $18.6 million and consolidated NOI was $73.9 million. In the second quarter 2018, healthcare same store portfolio sequential quarter to quarter comparable revenue decreased (0.8)% and net operating income decreased (0.9)%. Compared to the same period last year, second quarter 2018 same store revenue decreased (3.8)% and net operating income decreased (0.2)%. The revenue decrease was primarily attributable to one operator/tenant transitioning from RIDEA to a triple-net lease structure. As a result, the Company no longer records gross revenues and certain expenses for such properties and now records net rental revenue which is lower than the gross revenues under a RIDEA structure, but similar to the net profits of the RIDEA structure. The healthcare same store portfolio is defined as properties in operation throughout the full periods presented under the comparison and included 413 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 termination fee revenue and 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:
Industrial Real Estate
As of June 30, 2018, the consolidated industrial portfolio consisted of 392 primarily light industrial buildings totaling 47.5 million rentable square feet across 20 major U.S. markets and was 93% leased. During the second quarter 2018, the Company raised $175 million of new third-party capital. As a result, the Company’s equity interest in the consolidated Industrial Real Estate segment decreased to approximately 37% as of June 30, 2018 from 40% as of March 31, 2018. Total third-party capital commitments were approximately $1.4 billion compared to cumulative balance sheet contributions of $749 million as of June 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 second quarter 2018, this segment’s net income attributable to common stockholders was $0.8 million, Core FFO was $14.2 million and consolidated NOI was $49.1 million. In the second quarter 2018, industrial same store portfolio sequential quarter to quarter comparable rental revenue increased 0.2% and net operating income increased 1.0%. Compared to the same period last year, second quarter 2018 same store rental revenue increased 2.0% and net operating income increased 3.8%. The Company’s industrial same store portfolio consisted of 304 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:
Asset Acquisitions, Dispositions and Financing
During the second quarter 2018, the consolidated industrial portfolio acquired 15 industrial buildings totaling approximately 1.9 million square feet and land for development for approximately $258 million and disposed of one non-core building totaling approximately 0.1 million square feet for approximately $3 million.
Subsequent to the second quarter 2018, the consolidated industrial portfolio acquired five industrial buildings totaling approximately 0.5 million square feet for approximately $43 million.
During the second quarter 2018, the consolidated industrial portfolio closed on a $60 million fixed rate loan with an interest rate of 4.21% and term of 15 years; and increased the capacity of its line of credit from $200 million to $400 million.
Hospitality Real Estate
As of June 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 June 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 second quarter 2018, this segment’s net income attributable to common stockholders was $5.8 million, Core FFO was $43.2 million and consolidated EBITDA was $86.0 million. Compared to the same period last year, second quarter 2018 hospitality same store portfolio revenue increased 3.5% and EBITDA increased 5.2%, primarily due to higher occupancy and average daily rates driven by stronger corporate demand and uplift from recent renovations. 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.
Subsequent to the second quarter 2018, the Company refinanced approximately $500 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. As a result, the earliest fully extended maturity in the hospitality portfolio is 2020 and the weighted average remaining years to fully extended maturity is 4.3 years.
The following table presents EBITDA and certain operating metrics by brands in the Company’s Hospitality Real Estate segment:
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 $4.9 billion in assets, excluding securitization trust liabilities, and $3.1 billion in equity value as of June 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 second quarter 2018, this segment’s net income attributable to common stockholders was $5.1 million and Core FFO was $14.8 million. 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 net leased assets; real estate loans; other real estate equity including the THL Hotel Portfolio and the Company’s interest in Albertsons; 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 2018, this segment’s aggregate net income attributable to common stockholders was $31.3 million and Core FFO was $47.8 million.
Other Equity and Debt Segment Asset Acquisitions and Dispositions
During the second quarter 2018, the Company invested approximately $81 million in various strategic investments. During the second quarter 2018, the Company sold or received payoffs in aggregate of over $440 million with net equity proceeds of approximately $295 million from various other real estate debt and equity investments, including $105 million from the Other Real Estate Equity category; $115 million from the Real Estate Debt category; and $75 million in the Real Estate Private Equity and Securities category.
Subsequent to the second quarter 2018, the Company monetized or was under contract to sell over $500 million of investments with estimated net equity proceeds of $310 million, including $122 million from the Net Lease Real Estate Equity category and $133 million from the Real Estate Private Equity category, resulting in year-to-date Other Equity and Debt asset monetizations of $1.0 billion with net equity proceeds of $650 million.
As of June 30, 2018, the undepreciated carrying value of assets and equity within the Other Equity and Debt segment were $3.8 billion and $2.4 billion, respectively, down from $4.3 billion and $2.7 billion, respectively, as of March 31, 2018.
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