The following discussion should be read in conjunction with our unaudited consolidated financial statements and accompanying notes thereto, which are included in Item 1 of this Quarterly Report, as well as information contained in our Annual Report on Form 10-K for the year endedDecember 31, 2020 , which is accessible on theSEC's website at www.sec.gov. Our Organization We are a leading global investment firm with a focus on identifying and capitalizing on key secular trends in digital real estate. We are headquartered inBoca Raton, Florida , with key offices inLos Angeles ,New York ,London andSingapore , and have approximately 300 employees. We have elected to be taxed as a real estate investment trust ("REIT") forU.S. federal income tax purposes. We conduct our operations as a REIT, and generally are not subject toU.S. federal income taxes on our taxable income to the extent that we annually distribute all of our taxable income to stockholders and maintain qualification as a REIT, although we are subject toU.S. federal income tax on income earned through our taxable subsidiaries. In light of our ongoing digital transformation, we will continue to evaluate whether we will maintain REIT status for 2021 or future years. We also operate our business in a manner that will permit us to maintain our exemption from registration as an investment company under the 1940 Act. We conduct substantially all of our activities and hold substantially all of our assets and liabilities through ourOperating Company . AtMarch 31, 2021 , we owned 90% of theOperating Company , as its sole managing member. EffectiveApril 1, 2021 ,Thomas J. Barrack Jr ., our former Executive Chairman, having completed the transformational plan for the Company set in motion two years ago, has transitioned to a Non-Executive member of the Company's Board of Directors, and the position of Executive Chairman has been eliminated. Ms.Nancy Curtin , a long-time member of the Board and most recently the Lead Independent Director, transitioned to independent, non-executive Chairperson of the Board effectiveApril 1, 2021 . Our Business Our vision is to establish the Company as a leading owner, operator and investment manager of digital infrastructure and real estate. We are currently the only global REIT that owns, manages, and/or operates across all major infrastructure components of the digital ecosystem including data centers, cell towers, fiber networks and small cells. AtMarch 31, 2021 , the Company has$46 billion of assets under management ("AUM"), including both third party capital and the Company's balance sheet, of which$32 billion is dedicated to digital real estate and infrastructure. With the Company's ongoing digital transformation, the Company currently conducts business through five reportable segments, as follows: •Digital Investment Management ("Digital IM")-This business encompasses the investment and stewardship of third party capital in digital infrastructure and real estate. The Company's flagship opportunistic strategy is conducted throughDigital Colony Partners ("DCP") and separately capitalized vehicles, while other strategies, including digital credit and public equities, are conducted through other investment vehicles. The Company earns management fees, generally based on the amount of assets or capital managed in investment vehicles, and has the potential to earn carried interest based upon the performance of such investment vehicles subject to achievement of minimum return hurdles. •Digital Operating-This business is composed of balance sheet equity interests in digital infrastructure and real estate operating companies, which generally earn rental income from providing use of digital asset space and/or capacity through leases, services and other agreements. The Company currently owns interests in two companies: DataBank, including zColo, an edge colocation data center business; and Vantage SDC, a stabilized hyperscale data center business. Both DataBank and Vantage are also portfolio companies managed under Digital IM for the equity interests owned by third party capital. •Digital Other-This segment is composed of equity interests in digital investment vehicles, the largest of which is the Company's investment and commitment to the DCP flagship funds. This segment also includes the Company's investment and commitment to the digital liquid strategies and seed investments for future digital investment vehicles. •Wellness Infrastructure-This segment is composed of a diverse portfolio of senior housing, skilled nursing facilities, medical office buildings, and hospitals. The Company earns rental income from senior housing, skilled 57
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nursing facilities and hospital assets that are under net leases to single tenants/operators and from medical office buildings which are both single tenant and multi-tenant. In addition, certain of the Company's senior housing properties are managed by operators under a RIDEA (REIT Investment Diversification and Empowerment Act) structure, which allows the Company to gain financial exposure to underlying operations of the facility in a tax efficient manner versus receiving contractual rent under a net lease arrangement. This segment also holds other wellness infrastructure-related assets, principally equity interests in and the management contract of NorthStar Healthcare, Inc. ("NorthStar Healthcare "), a non-traded REIT sponsored by the Company. •Other-This segment is primarily composed of the Company's interest in CLNC. The Company expects to monetize the remaining assets in its Other segment as it completes its digital evolution. Digital Transformation During the first quarter of 2021, the Company successfully exited its hotel business, and continues its process of actively monetizing a substantial majority of its OED investments and its Other IM business, both of which reside in its Other segment, as discussed further below. The disposition of the Company's hotel business and the continued efforts to monetize the Company's OED investments and Other IM business represent strategic shifts in the Company's business that are expected to have a significant effect on the Company's operations and financial results, and accordingly, have met the criteria as discontinued operations. For all current and prior periods presented, the related assets and liabilities, to the extent they have not been disposed at the respective balance sheet dates, are presented as assets and liabilities held for disposition on the consolidated balance sheets and the related operating results are presented as loss from discontinued operations on the consolidated statements of operations (refer to Item 1. "Financial Statements" of this Quarterly Report). Accelerating the Monetization of OED and Other IM Having successfully exited its hotel business in the first quarter of 2021, the Company is continuing its efforts to accelerate the monetization of a substantial majority of its OED investments and Other IM business. These assets consist of non-digital real estate, real estate-related equity and debt investments, and management of the Company's private real estate credit funds and CLNC. In consideration of a potential monetization, the Company reassessed the carrying value of these assets based upon estimated recoverable values. As a result, the Company recognized an aggregate write-down in asset values of$420.3 million , of which$121.2 million was attributable to the OP, recorded within impairment loss, equity method loss and other loss in discontinued operations (Note 7 to the consolidated financial statements). InApril 2021 , the Company and CLNC agreed to terminate the management agreement for a one-time termination fee of$102.3 million in cash. The transaction closed onApril 30, 2021 , resulting in the internalization of CLNC's management and operating functions (the "CLNC Internalization"), with certain employees previously dedicated wholly or substantially to CLNC becoming employees of CLNC. In connection with the CLNC Internalization, CLNC's board of directors ceased to include Company-affiliated directors on CLNC's board of directors upon expiration of their terms inMay 2021 . The Company also entered into a new stockholders agreement, pursuant to which the Company agreed, for so long as the Company owns at least 10% of CLNC's outstanding common shares, to vote in CLNC director elections as recommended by CLNC's board of directors at any stockholders' meeting that occurs prior to CLNC's 2023 annual stockholders' meeting. In addition, the Company is subject to customary standstill restrictions, including an obligation not to initiate or make stockholder proposals, nominate directors or participate in proxy solicitations, until the beginning of the advance notice window for CLNC's 2023 annual meeting. The Company currently holds a 36.1% equity ownership in CLNC and is prohibited from acquiring additional CLNC shares. Exit of theHotel Business InMarch 2021 , the Company completed the previously announced exit of its hotel business, which represents a key milestone in the Company's digital transformation. Pursuant to an agreement entered into with a third party inSeptember 2020 (as amended inOctober 2020 ,February 2021 andMarch 2021 ), the Company sold five of the six hotel portfolios in its Hospitality segment and its 55.6% interest in a portfolio of limited service hotels that was acquired through a consensual foreclosure inJuly 2017 (the "THL Hotel Portfolio ") in its Other segment, composed of 197 hotel properties in aggregate. The remaining portfolio in the Hospitality segment is in receivership and the remaining interests in theTHL Hotel Portfolio will continue to be held by investment vehicles currently managed by the Company. Two of the hotel portfolios that were sold in the Hospitality segment were held through joint ventures in which the Company held a 90% and a 97.5% interest, respectively. The aggregate selling price of$67.5 million , represented a transaction value of approximately$2.8 billion , with the acquirer's assumption of$2.7 billion of investment-level debt. 58
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Significant Developments In the first quarter of 2021 and through the date of this filing, significant developments affecting our business and results of operations included the following. Digital Business •We completed the add-on acquisition of zColo's remaining five data centers inFrance for$33 million inFebruary 2021 . •InFebruary 2021 , we held a first closing of DCP II, our second digital opportunistic fund, with total callable commitments of$4.2 billion , inclusive of$120 million of our commitments as general partner and limited partner. Non-Digital Assets •In the first quarter of 2021, we are accelerating the monetization of our OED investments and Other IM business. This included termination of the CLNC management contract onApril 30, 2021 , for which we received a one-time termination fee of$102.3 million at closing. •In consideration of potential monetization of the OED investments and Other IM business, these assets were written down by$420 million in aggregate across our loan portfolio, equity investments and real estate assets, of which$121 million was attributable to the OP. For all current and prior periods presented, these assets and corresponding liabilities are presented as held for disposition, and the related operating results are presented as discontinued operations (Notes 7 and 14 to the consolidated financial statements). •InMarch 2021 , we sold five of the six hotel portfolios in our Hospitality segment and our 55.6% interest in theTHL Hotel Portfolio in the Other segment, generating net proceeds of$45.6 million . The transaction was valued at$2.8 billion , including aggregate selling price of$67.5 million and the buyer's assumption of$2.7 billion of investment-level debt. •InApril 2021 , we received proceeds from a sale of the two largest assets securing our Irish loan portfolio, which were applied to repay$265 million of outstanding principal on our loan receivable and extinguish the full$155 million of debt financing the portfolio. This removed all encumbrances on the remaining assets in the portfolio. Our share of excess net proceeds was$103.5 million . The Irish loan portfolio is composed of distressed loans that were previously acquired at a discount. Results of Operations The following table summarizes our results from continuing operations by reportable segment. Excluded are discontinued operations (Note 14 to the consolidated financial statements) which generated loss from discontinued operations attributable toColony Capital, Inc. of$125.2 million and$228.5 million in the three months endedMarch 31, 2021 and 2020, respectively. Income (Loss) Attributable to Colony Income (Loss) from Capital, Inc. from (In thousands) Total Revenues Continuing Operations Continuing Operations Three Months Ended March 31, 2021 2020 2021 2020 2021 2020 Digital Operating$ 189,202 $ 45,167 $ (62,844) $ (18,295) $ (8,793) $
(3,418)
Digital Investment Management 29,498 19,179 6,041 2,110 5,412 1,902 Digital Other 1,140 160 7,869 (3,035) 3,949 (2,242) Wellness Infrastructure 93,543 144,679 (41,210) (66,288) (32,906) (49,938) Other 1,580 3,198 (32,218) (11,295) (29,145) (10,179) Amounts not allocated to segments 741 4,830 (67,815) (57,396) (59,593) (49,817)$ 315,704 $ 217,213 $ (190,177) $ (154,199) $ (121,076) $ (113,692) 59
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Selected Balance Sheet Data The following table summarizes key balance sheet data by reportable segment, excluding balances held for disposition (Note 7 to the consolidated financial statements). Real Estate, net Loans Receivable Equity and Debt
Investments Debt, netDecember 31 ,March 31 ,December 31 ,December 31 ,December 31 , (In thousands)March 31, 2021 2020 2021 2020March 31, 2021 2020March 31, 2021 2020 Digital Operating$ 4,459,123 $ 4,451,865 $ 5,160 $ 5,070 $ - $ -$ 3,337,342 $ 3,213,240 Digital Investment Management - - - - 24,151 19,167 - - Digital Other - - 31,663 31,727 290,165 377,048 - - Wellness Infrastructure 3,223,574 3,338,085 48,449 47,233 69,359
61,790 2,873,579 2,920,030 Other 20,014 20,014 - - 394,144 418,698 176,727 185,743 Amounts not allocated to segments - - - - - - 489,643 553,337 Total$ 7,702,711 $ 7,809,964 $ 85,272 $ 84,030 $ 777,819 $ 876,703 $ 6,877,291 $ 6,872,350 60
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