Colony NorthStar, Inc. (NYSE:CLNS) and subsidiaries
(collectively, “Colony NorthStar,” or the “Company”) today
announced its financial results for the first quarter ended March
31, 2018 and the Company’s Board of Directors declared a second
quarter 2018 cash dividend of $0.11 per share of Class A and Class
B common stock.
First Quarter 2018 Financial Results and Highlights
- First quarter 2018 net loss
attributable to common stockholders of $(72.7) million, or $(0.14)
per share, and Core FFO of $115.1 million, or $0.20 per share
- The Company’s Board of Directors
declared and paid a first quarter 2018 dividend of $0.11 per share
of Class A and B common stock
- During the first quarter 2018, the
Company raised approximately $2.0 billion of third-party capital
(including amounts representing its share related to affiliates)
from institutional clients
- The Company, in partnership with
Digital Bridge, established a digital real estate infrastructure
vehicle with $1.95 billion of capital raised as of March 31, 2018,
inclusive of a $162 million capital commitment by certain
subsidiaries of the Company
- During the first quarter 2018, the
Company completed $60 million of Other Equity and Debt asset
monetizations
- During the first quarter 2018, the
Company invested and agreed to invest $113 million in Other Equity
and Debt primarily with an objective of creating investment
management structures around these investments
- The Company repurchased approximately
48.2 million shares of its Class A common stock at an average price
of $5.79 per share, or $279 million, year-to-date 2018
- Listed Colony NorthStar Credit Real
Estate, Inc. (NYSE: CLNC), one of the largest commercial real
estate credit REITs, creating a new permanent capital vehicle
externally managed by the Company
- Subsequent to the first quarter 2018:
- The Company completed the combination
of its broker-dealer business with S2K Financial creating an
enhanced retail investor distribution platform, Colony S2K
- 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.
"After resetting our baseline at the beginning of this year, we
are pleased to report Colony NorthStar’s first quarter results and
concurrent strategic progress,” said Richard B. Saltzman, President
and Chief Executive Officer. “For example, the formation and public
listing of Colony NorthStar Credit Real Estate during the quarter
is a prime example of leveraging our institutional expertise and
balance sheet assets to create a new permanent capital vehicle
under our management. In addition, liquidity generated by more
accelerated sales of non-core assets and businesses is being
utilized to repurchase our common shares, reduce debt, and sponsor
compelling new investment opportunities under a predominantly third
party capital model such as the recently announced Digital Colony
Partners vehicle focused on digital real estate infrastructure. All
of these endeavors represent progress towards the goal of
strengthening our global investment management franchise and
becoming more balance sheet-lite as we focus on maximizing
shareholder value from a total return perspective.”
First Quarter 2018 Operating Results and Investment Activity
by Segment
Colony NorthStar 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 March 31, 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 March
31, 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 first quarter 2018, this segment’s net loss
attributable to common stockholders was $(10.4) million, Core FFO
was $23.1 million and consolidated NOI was $81.3 million. In the
first quarter 2018, healthcare same store portfolio sequential
quarter to quarter comparable revenue increased 2.0% and net
operating income increased 6.5% primarily attributed to an
approximately $3 million early lease termination fee received from
a former medical office building tenant and approximately $1
million of hurricane Harvey expenses not covered by insurance that
was incurred in senior housing properties during the fourth quarter
2017. Compared to the same period last year, first quarter 2018
same store revenue grew 1.2% and net operating income increased
5.5% primarily attributable to the previously referenced early
lease termination fee and changes in foreign currency exchange
rates. The healthcare same store portfolio is defined as properties
in operation throughout the full periods presented under the
comparison and included 413 properties in the sequential quarter to
quarter and year to year comparisons.
The following table presents NOI and certain operating metrics
by property types in the Company’s Healthcare Real Estate
segment:
Consolidated CLNS OP Same Store NOI
Share NOI(1) Consolidated NOI Occupancy %(2) TTM
Lease Coverage(3) ($ In millions) Q1 2018 Q1 2018 Q1 2018 Q4
2017 Q1 2018 Q4 2017 12/31/17 9/30/17 Senior Housing
- Operating $ 17.5 $ 12.6 $ 17.5 $ 15.8 86.4 % 87.4 %
N/A N/A Medical Office Buildings 16.6 11.5 16.5 13.4 83.2 %
83.4 % N/A N/A Triple-Net Lease: Senior Housing 15.5 11.0 15.5 15.2
83.2 % 82.9 % 1.4x 1.4x Skilled Nursing Facilities 26.8 19.3 26.9
26.8 82.7 % 82.6 % 1.2x 1.2x Hospitals 4.9 3.4
4.9 5.2 55.3 % 58.4 % 3.5x 2.5x
Healthcare Total/W.A. $ 81.3 $ 57.8 $ 81.3 $ 76.4 82.8 %
83.1 % 1.5x 1.4x
___________________________________________________ (1) CLNS
OP Share NOI represents first quarter 2018 Consolidated NOI
multiplied by CLNS OP’s ownership interest as of March 31, 2018.
(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 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 Dispositions and
Financing
During the first quarter 2018, the consolidated healthcare
portfolio disposed of three non-core skilled nursing facilities for
an aggregate $14 million and one medical office building, which was
encumbered by a $3 million mortgage and consensually transferred to
the respective lender.
Industrial Real Estate
As of March 31, 2018, the consolidated industrial portfolio
consisted of 378 primarily light industrial buildings totaling 45.6
million rentable square feet across 18 major U.S. markets and was
94% leased. During the first quarter 2018, the Company closed on
$70 million of new third-party capital. As a result, the Company’s
equity interest in the consolidated Industrial Real Estate segment
decreased to approximately 40% as of March 31, 2018 from 41% as of
December 31, 2017. Total third-party capital commitments were
approximately $1.2 billion compared to cumulative balance sheet
contributions of $750 million as of March 31, 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 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 first quarter 2018, this segment’s net income
attributable to common stockholders was $1.3 million, Core FFO was
$12.5 million and consolidated NOI was $44.6 million. In the first
quarter 2018, industrial same store portfolio sequential quarter to
quarter comparable revenue grew 4.5% and net operating income
decreased (1.1)%, primarily due to higher snow removal expense.
Compared to the same period last year, first quarter 2018 same
store revenue grew by 5.4% and net operating income grew 3.5%. The
Company’s industrial same store portfolio consisted of the same 305
buildings that were stabilized during the three months ended March
31, 2018 and March 31, 2017. Properties acquired, disposed or held
for sale during these periods are excluded. Stabilized properties
are defined as properties owned for more than one year or are
greater than 90% leased as of the beginning of the January 1,
2017.
The following table presents NOI and certain operating metrics
in the Company’s Industrial Real Estate segment:
Consolidated CLNS OP Same Store NOI
Share NOI (1) Consolidated NOI Leased %(2) ($ In millions)
Q1 2018 Q1 2018 Q1 2018 Q4 2017 Q1 2018 Q4 2017
Industrial $ 44.6 $ 17.9 $ 35.3 $ 35.7 95.1 % 95.7 %
___________________________________________________ (1) CLNS
OP Share NOI represents first quarter 2018 Consolidated NOI
multiplied by CLNS OP’s ownership interest as of March 31, 2018.
(2) Leased % represents the last day of the presented quarter.
Asset Acquisitions and
Dispositions
During the first quarter 2018, the consolidated industrial
portfolio acquired ten industrial buildings totaling approximately
2.4 million square feet and land for development for approximately
$179 million and disposed of one non-core building totaling
approximately 0.2 million square feet for approximately $11
million.
Subsequent to the first quarter 2018, the consolidated
industrial portfolio acquired four industrial buildings totaling
approximately 1.0 million square feet for approximately $138
million.
Hospitality Real Estate
As of March 31, 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 March 31, 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 first quarter 2018, this segment’s net loss
attributable to common stockholders was $(10.1) million, Core FFO
was $25.9 million and consolidated EBITDA was $59.2 million.
Compared to the same period last year, first quarter 2018
hospitality same store portfolio revenue increased 1.6% and EBITDA
decreased (3.3)%, primarily due to increased utility costs related
to a colder first quarter 2018 and increased wages. The Company’s
hotels typically experience seasonal variations in occupancy which
may cause quarterly fluctuations in revenues and therefore
sequential quarter to quarter revenue and EBITDA result comparisons
are not meaningful. The hospitality same store portfolio is defined
as hotels in operation throughout the full periods presented under
the comparison and included 167 hotels in the year to year
comparison.
The following table presents EBITDA and certain operating
metrics by brands in the Company’s Hospitality Real Estate
segment:
Same Store Consolidated CLNS OP Share
Avg. Daily Rate RevPAR(3)
EBITDA(1)
EBITDA(2)
ConsolidatedEBITDA
Occupancy %(4) (In dollars)(4) (In dollars)(4) ($ In millions) Q1
2018 Q1 2018 Q1 2018 Q1 2017 Q1 2018 Q1 2017 Q1 2018
Q1 2017 Q1 2018 Q1 2017 Marriott $ 46.8 $ 44.2 $ 46.8
$ 48.1 69.3 % 68.8 % $ 129 $ 129 $ 90 $ 89 Hilton 8.9
8.3 8.9 9.7 73.8 % 72.8 % 124 123 91 90 Other 3.5 3.3
3.5 3.4 78.2 % 72.5 % 127
129 99 93 Total/W.A. $ 59.2 $ 55.8 $
59.2 $ 61.2 70.5 % 69.7 % $ 128 $ 128 $ 90
$ 89 ___________________________________________________ (1)
Q1 2018 Consolidated EBITDA excludes a FF&E reserve
contribution amount of $8.6 million. (2) CLNS OP Share EBITDA
represents first quarter 2018 Consolidated EBITDA multiplied by
CLNS OP’s ownership interest as of March 31, 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.
Colony NorthStar Credit Real Estate,
Inc. (“CLNC”)
On February 1, 2018, Colony NorthStar 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
creates 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 March 31, 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 first quarter 2018, this
segment’s net loss attributable to common stockholders was $(3.4)
million and Core FFO was $13.4 million, which reflects two months
of the Company’s 37% share of CLNC’s net loss and Core Earnings.
The financial results related to the assets and liabilities
contributed to CLNC for the period January 1, 2018 to January 31,
2018 are included in the Other Equity and Debt segment.
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 10% interest in
NorthStar Realty Europe (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 first quarter
2018, this segment’s aggregate net income attributable to common
stockholders was $49.1 million and Core FFO was $77.8 million.
During the first quarter 2018, this segment’s net income, FFO and
Core FFO included financial results related to assets and
liabilities contributed to CLNC for the period January 1, 2018 to
January 31, 2018. First quarter 2018 Core FFO included gains on
sale, net of losses and provisions, of approximately $12 million,
including a $9.9 million fair value gain related to the
contribution of net assets to CLNC.
Other Equity and Debt Segment Asset
Acquisitions and Dispositions
During the first quarter 2018, the Company invested and agreed
to invest approximately $113 million in three investments, one real
estate debt investment and two equity investments.
As of March 31, 2018, the undepreciated carrying value of assets
and equity within the Other Equity and Debt segment were $4.3
billion and $2.7 billion, respectively.
CLNS OP Share March 31, 2018 Undepreciated Carrying
Value(1) ($ In millions) Assets Equity
Strategic:
GP co-investments $ 293 $ 254 Interest in NRE 74 74
Strategic Subtotal 367 328
Non-Strategic:
Other Real Estate Equity & Albertsons 2,039 1,104 Real Estate
Debt 1,032 761 Net Lease Real Estate Equity 583 239 Real Estate
Private Equity Funds and CRE Securities 304 304
Non-Strategic Subtotal 3,958 2,408
Total
Other Equity and Debt $ 4,325 $ 2,736
___________________________________________________ (1)
Includes investment-level cash and net other assets.
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 March 31, 2018, the Company had $27.5
billion of third-party AUM compared to $26.9 billion as of December
31, 2017. The increase was primarily due to the capital raised in
the co-sponsored digital real estate infrastructure vehicle,
capital raised in the industrial open-end fund and the successful
syndication of an approximately 30% interest in an Irish
non-performing loan portfolio acquired in 2017. As of March 31,
2018, Fee-Earning Equity Under Management (“FEEUM”) was $16.2
billion compared to $15.4 billion as of December 31, 2017. During
the first quarter 2018, this segment’s aggregate net loss
attributable to common stockholders was $(80.5) million and Core
FFO was $31.4 million. During the first quarter 2018, this
segment’s net loss and Core FFO included one month of asset
management, acquisition and disposition fees related to NorthStar I
and NorthStar II; two months of CLNC management fees; approximately
$3 million of realized carried interest from a Non-Wholly Owned
Real Estate Investment Management Platform; and approximately $1
million of unrealized carried interest from the industrial open-end
fund. This segment’s net loss also included a $139 million
impairment loss to write down the carrying value of management
contract intangible assets related to NorthStar I and NorthStar II,
which ceased to exist upon closing of CLNC.
During the first quarter 2018, the Company raised $67 million
from an institutional investor for a 30% interest in an Irish
non-performing loan portfolio acquired by the Company in 2017.
Digital Real Estate
Infrastructure
During the first quarter 2018, the Company, in partnership with
Digital Bridge, established a digital real estate infrastructure
vehicle with $1.95 billion of capital raised, inclusive of a $162
million capital commitment by certain subsidiaries of the
Company.
During the first quarter 2018, the Company’s interest in Andean
Tower Partners, a South American cell tower owner and operator was
contributed to the digital real estate infrastructure vehicle for
$146 million, which included approximately $3 million of realized
preferred return in the Company’s Other Equity and Debt
segment.
Combination of S2K Financial and NorthStar
Securities
Subsequent to the first quarter 2018, the Company completed the
previously announced combination of S2K Financial Holdings, LLC
("S2K Financial”) with the Company’s broker-dealer, NorthStar
Securities creating a stronger broker-dealer retail distribution
business that will distribute the current product slate of the
Company, S2K Financial and future investment products to be
developed by the new joint company. The new company is known as
Colony S2K Holdings LLC (“Colony S2K”).
Assets Under Management (“AUM”)
As of March 31, 2018, the Company had $43 billion of AUM:
($ In billions) Amount
% ofGrand Total
Balance Sheet (CLNS OP Share): Healthcare $ 4.1 9.5 %
Industrial 1.3 3.0 % Hospitality 3.9 9.3 % Other Equity and Debt
4.3 10.0 % CLNC: Investments contributed to CLNC(1) 1.8 4.2
% Balance Sheet Subtotal 15.4 36.0 % Investment Management:
Institutional Funds 9.8 22.8 % Retail Companies 3.7 8.6 % Colony
NorthStar Credit Real Estate (NYSE:CLNC)(2) 3.1 7.2 % NorthStar
Realty Europe (NYSE:NRE) 2.2 5.1 % Non-Wholly Owned REIM
Platforms(3) 8.7 20.3 % Investment Management Subtotal 27.5
64.0 % Grand Total $ 42.9 100.0 %
___________________________________________________ (1)
Represents the Company’s 37% ownership share of CLNC’s March 31,
2018 total pro-rata share of assets, excluding securitization trust
liabilities, of $4.9 billion. (2) Represents 3rd party 63%
ownership share of CLNC’s March 31, 2018 total pro-rata share of
assets, excluding securitization trust liabilities, of $4.9
billion. (3) REIM: Real Estate Investment Management
Liquidity and Financing
As of May 7, 2018, the Company had approximately $1.1 billion of
liquidity through cash-on-hand and availability under its revolving
credit facility.
Common Stock and Operating Company Units
As of May 7, 2018, the Company had approximately 496.8 million
shares of Class A and B common stock outstanding and the Company’s
operating partnership had approximately 30.6 million operating
company units outstanding held by members other than the Company or
its subsidiaries.
On February 26, 2018, the Company’s Board of Directors provided
authorization for the Company to purchase up to $300 million of its
outstanding common stock.
During the first quarter 2018, the Company repurchased
approximately 42.3 million shares of its Class A common stock at an
average price of $5.82 per share, or $246 million, and another
approximately 5.9 million shares at an average price of $5.65 per
share, or $33 million, subsequent to the first quarter 2018
resulting in aggregate year-to-date 2018 repurchases of
approximately 48.2 million shares at an average price of $5.79 per
share, or $279 million.
Common and Preferred Dividends
On February 26, 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 first quarter of 2018, which was paid on April
16, 2018 to respective stockholders of record on March 29, 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, Series D stock - $0.53125 per share and Series E stock -
$0.546875 per share, such dividends to be paid on May 15, 2018 to
the respective stockholders of record on May 10, 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 April 16, 2018 to the respective stockholders of
record on April 10, 2018.
On May 8, 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 second quarter of 2018, which will be paid on
July 16, 2018 to respective stockholders of record on June 29,
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, Series D stock - $0.53125 per share and Series
E stock - $0.546875 per share, such dividends to be paid on August
15, 2018 to the respective stockholders of record on August 10,
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 to be paid on July 16, 2018 to the respective
stockholders of record on July 10, 2018.
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 March 31, 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.
CLNS OP
The operating partnership through which the Company conducts all
of its activities and holds substantially all of its assets and
liabilities. CLNS 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 straight-line rent expense on ground leases; (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 NorthStar 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. Refer to CLNC’s and NRE's respective filings 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.
First Quarter 2018 Conference Call
The Company will conduct a conference call to discuss the
financial results on Thursday, May 10, 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 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 May 10, 2018, at 10:00 a.m. PT / 1:00
p.m. ET, through May 18, 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
13678906. International callers should dial (412) 317-6671 and
enter the same conference ID number.
Supplemental Financial Report
A First Quarter 2018 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 $43 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. The firm maintains principal
offices in Los Angeles and New York, with approximately 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., the impact of changes to
organizational structure and employee composition, the timing and
pace of growth of the Company's Industrial platform, the
performance of the Company’s investment in Colony NorthStar Credit
Real Estate, Inc., our ability to create future permanent capital
vehicles under our management, whether the Company will realize any
anticipated benefits from the Digital Bridge partnership, the
Company’s ability to become more balance sheet-light, including its
availability to maximize shareholder value from a total return
perspective, the Company's portfolio composition, Colony
NorthStar’s liquidity, including its ability 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 ability to strengthen its global investment
management franchise, the Company's expected taxable income and net
cash flows, excluding the contribution of gains, our 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
NorthStar 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 NorthStar’s stock, Colony NorthStar’s ability
to maintain inclusion and relative performance on the RMZ, Colony
NorthStar’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 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)
March 31,
2018(unaudited)
December 31, 2017
Assets Cash and cash equivalents $ 484,827 $ 921,822
Restricted cash 453,366 471,078 Real estate, net 14,100,874
14,464,258 Loans receivable, net ($44,330 and $45,423 at fair
value, respectively) 1,972,179 3,223,762 Investments in
unconsolidated ventures ($247,983 and $363,901 at fair value,
respectively) 2,549,630 1,655,239 Securities, at fair value 288,900
383,942 Goodwill 1,534,561 1,534,561 Deferred leasing costs and
intangible assets, net 691,896 852,872 Assets held for sale
($215,162 and $49,498 at fair value, respectively) 1,002,838
781,630 Other assets ($7,267 and $10,150 at fair value,
respectively) 441,839 444,968 Due from affiliates 43,582
51,518
Total assets $ 23,564,492
$ 24,785,650
Liabilities Debt, net ($44,103 and
$44,542 at fair value, respectively) $ 10,495,429 $ 10,827,810
Accrued and other liabilities ($158,558 and $212,267 at fair value,
respectively) 791,439 898,161 Intangible liabilities, net 187,864
191,109 Liabilities related to assets held for sale 273,778 273,298
Due to affiliates ($10,170 and $20,650 at fair value, respectively)
13,105 23,534 Dividends and distributions payable 90,791
188,202
Total liabilities
11,852,406 12,402,114 Commitments and
contingencies
Redeemable noncontrolling interests 31,648
34,144
Equity Stockholders’ equity: Preferred stock, $0.01
par value per share; $1,636,605 liquidation preference; 250,000
shares authorized; 65,464 shares issued and outstanding 1,606,966
1,606,966 Common stock, $0.01 par value per share Class A, 949,000
shares authorized; 500,643 and 542,599 shares issued and
outstanding 5,007 5,426 Class B, 1,000 shares authorized; 736
shares issued and outstanding 7 7 Additional paid-in capital
7,634,952 7,913,622 Distributions in excess of earnings (1,294,996
) (1,165,412 ) Accumulated other comprehensive income 49,037
47,316 Total stockholders’ equity 8,000,973
8,407,925 Noncontrolling interests in investment entities 3,267,834
3,539,072 Noncontrolling interests in Operating Company
411,631 402,395 Total equity 11,680,438
12,349,392
Total liabilities, redeemable
noncontrolling interests and equity $ 23,564,492 $
24,785,650
COLONY NORTHSTAR,
INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In
thousands, except per share data) (unaudited)
Three Months Ended March 31, 2018
2017 Revenues Property operating
income $ 554,730 $ 426,854 Interest income 63,854 115,544 Fee
income 36,842 53,250 Other income 11,238
11,517
Total revenues 666,664
607,165
Expenses Property operating expense 305,770
216,349 Interest expense 148,889 126,278 Investment, servicing and
commission expense 18,653 11,807 Transaction costs 716 87,340
Depreciation and amortization 144,705 137,420 Provision for loan
loss 5,375 6,724 Impairment loss 153,398 8,519 Compensation expense
49,484 91,818 Administrative expenses 24,863
25,914
Total expenses 851,853
712,169
Other income Gain on sale of real estate
assets 18,444 8,970 Other gain, net 75,256 25,381 Earnings from
investments in unconsolidated ventures 32,265
113,992
Income (loss) before income taxes (59,224 )
43,339 Income tax benefit (expense) 32,808
(3,709 )
Net income (loss) from continuing operations
(26,416 ) 39,630 Income from discontinued operations 117
12,560
Net income (loss) (26,299 )
52,190 Net income (loss) attributable to noncontrolling interests:
Redeemable noncontrolling interests (696 ) 617 Investment entities
20,102 27,059 Operating Company (4,378 ) (1,083 )
Net income (loss) attributable to Colony NorthStar, Inc.
(41,327 ) 25,597 Preferred stock dividends 31,387
30,813
Net loss attributable to common
stockholders $ (72,714 ) $ (5,216 )
Basic loss per share
(1) Loss from continuing operations per basic common share $
(0.14 ) $ (0.03 ) Net loss per basic common share $ (0.14 ) $ (0.01
)
Diluted earnings per share (1) Loss from continuing
operations per diluted common share $ (0.14 ) $ (0.03 ) Net loss
per diluted common share $ (0.14 ) $ (0.01 )
Weighted average
number of shares (1) Basic 530,680
506,405 Diluted 530,680 506,405
__________ (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 EndedMarch 31,
2018
Net loss attributable to common stockholders $ (72,714 )
Adjustments for FFO attributable to common interests in Operating
Company: Net loss attributable to noncontrolling common interests
in Operating Company (4,378 ) Real estate depreciation and
amortization 143,906 Impairment write-downs associated with
depreciable real estate 14,940 Gain from sales of depreciable real
estate (22,925 ) Less: Adjustments attributable to noncontrolling
interests in investment entities (40,763 ) FFO attributable
to common interests in Operating Company and common stockholders
18,066 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) 13,142 Gains and losses from sales of businesses within the
Investment Management segment and impairment write-downs associated
with the Investment Management segment 5,431 Equity-based
compensation expense (2) 12,470 Straight-line rent revenue and
straight-line rent expense on ground leases (5,268 ) Change in fair
value of contingent consideration (10,480 ) Amortization of
acquired above- and below-market lease values (1,976 ) Amortization
of deferred financing costs and debt premiums and discounts 20,623
Unrealized fair value gains and foreign currency remeasurements
(55,603 ) Acquisition and merger-related transaction costs 11,812
Merger integration costs (3) 6,129 Amortization and impairment of
investment management intangibles 147,912 Non-real estate
depreciation and amortization 2,277 Gain on remeasurement of
consolidated investment entities and the effect of amortization
thereof 2,848 Deferred tax benefit, net (39,901 ) Less: Adjustments
attributable to noncontrolling interests in investment entities
(12,403 ) Core FFO attributable to common interests in
Operating Company and common stockholders $ 115,079
FFO per common share / common OP unit (4) $ 0.03 FFO per
common share / common OP unit—diluted (5) $ 0.03 Core FFO
per common share / common OP unit (4) $ 0.20 Core FFO per
common share / common OP unit—diluted (5) $ 0.20 Weighted
average number of common OP units outstanding used for FFO and Core
FFO per common share and OP unit (4) 567,432 Weighted
average number of common OP units outstanding used for FFO per
common share and OP unit—diluted (4)(5) 568,095
Weighted average number of common OP units outstanding used for
Core FFO per common share and OP unit—diluted (4)(5) 593,513
__________ (1) Net of $1.7 million CLNS 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 $3.3 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) Calculated based on
weighted average shares outstanding including participating
securities 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. (5) For
the three months ended March 31, 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 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 March 31, 2018 to NOI or
EBITDA:
NOI and EBITDA were determined as follows:
Three Months Ended March 31, 2018
(In
thousands)
Healthcare Industrial
Hospitality Total revenues $152,595 $68,753 $195,782
Straight-line rent revenue and amortization of above- and
below-market lease intangibles (4,319) (2,297) (7) Interest income
— (532) — Other income — — (488) Property operating expenses (1)
(66,966) (20,811) (136,095) Compensation expense (1) — (480) — NOI
or EBITDA $81,310 $44,633 $59,192 _________ (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 March 31, 2018
(In
thousands)
Healthcare Industrial
Hospitality Net income (loss) from continuing operations $
(12,534 ) $ 6,321 $ (11,886 ) Adjustments: Straight-line rent
revenue and amortization of above- and below-market lease
intangibles (4,319 ) (2,297 ) (7 ) Interest income — (532 ) —
Interest expense 50,941 10,190 34,361 Transaction, investment and
servicing costs 2,310 74 1,542 Depreciation and amortization 41,127
29,945 35,457 Impairment loss 3,780 — — Compensation and
administrative expense 1,933 3,222 2,017 Gain on sale of real
estate — (2,293 ) — Other (gain) loss, net (2,926 ) — (323 ) Other
income — — (488 ) Income tax benefit 998 3
(1,481 ) NOI or EBITDA $ 81,310 $ 44,633
$ 59,192
The following table summarizes Q1 2018 net income (loss) from
continuing operations by segment:
(In
thousands)
Net income (Loss)From
ContinuingOperations
Healthcare $ (12,534 ) Industrial 6,321 Hospitality (11,886 ) CLNC
(3,654 ) Other Equity and Debt 68,431 Investment Management (84,624
) Amounts Not Allocated to Segments 11,530 Total
Consolidated $ (26,416 )
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180510005455/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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