NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
1. Business
Colony Capital, Inc. (together with its consolidated subsidiaries, the "Company") is a leading global investment firm with a focus on identifying and capitalizing on key secular trends in digital real estate. The Company is currently the only global real estate investment trust ("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.
At March 31, 2021, the Company has $46 billion of total assets under management, including both third party capital and the Company's balance sheet, and $18 billion of fee earning equity under management.
Organization
The Company conducts all of its activities and holds substantially all of its assets and liabilities through its operating subsidiary, Colony Capital Operating Company, LLC (the "Operating Company" or the "OP"). At March 31, 2021, the Company owned 90% of the OP, as its sole managing member. The remaining 10% is owned primarily by certain current and former employees of the Company as noncontrolling interests.
The Company elected to be taxed as a REIT under the Internal Revenue Code for U.S. federal income tax purposes.
Digital Transformation
Significant healthcare and economic challenges arising from the coronavirus disease 2019, or COVID-19 pandemic, reinforced the critical role and the resilience of the digital real estate and infrastructure sector in a global economy that is increasingly reliant on telecommunications and data transmission. Accordingly, in the second quarter of 2020, the Company determined to accelerate its previously announced shift to a digitally-focused strategy in order to better position the Company for growth, which requires a rotation of the Company's traditional non-digital assets into digital-focused investments.
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 other equity and debt ("OED") investments and its non-digital investment management ("Other IM") business, both of which reside in the Other segment. 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 (Note 7) and the related operating results are presented as loss from discontinued operations on the consolidated statements of operations (Note 14).
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 Colony Credit Real Estate, Inc. (NYSE: CLNC). In consideration of a potential monetization and consequently, classification of the assets as held for disposition, 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).
In April 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 on April 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 in May 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 the Hotel Business
In March 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 in September 2020 (as amended in October 2020, February 2021 and March 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 in July 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 the THL 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.
2. Summary of Significant Accounting Policies
The significant accounting policies of the Company are described below. The accounting policies of the Company's unconsolidated ventures are substantially similar to those of the Company.
Basis of Presentation
The accompanying unaudited interim financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements. These statements reflect all normal and recurring adjustments which, in the opinion of management, are necessary to present fairly the financial position, results of operations and cash flows of the Company for the interim periods presented. However, the results of operations for the interim period presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2021, or any other future period. These interim financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in, or presented as exhibits to, the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
The accompanying consolidated financial statements include the accounts of the Company and its controlled subsidiaries. All significant intercompany accounts and transactions have been eliminated. The portions of equity, net income and other comprehensive income of consolidated subsidiaries that are not attributable to the parent are presented separately as amounts attributable to noncontrolling interests in the consolidated financial statements. A substantial portion of noncontrolling interests represents interests held by private investment funds or other investment vehicles managed by the Company and which invest alongside the Company, and membership interests in OP primarily held by certain employees of the Company.
To the extent the Company consolidates a subsidiary that is subject to industry-specific guidance, the Company retains the industry-specific guidance applied by that subsidiary in its consolidated financial statements.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates and assumptions.
Principles of Consolidation
The Company consolidates entities in which it has a controlling financial interest by first considering if an entity meets the definition of a variable interest entity ("VIE") for which the Company is deemed to be the primary beneficiary, or if the Company has the power to control an entity through a majority of voting interest or through other arrangements.
Variable Interest Entities—A VIE is an entity that either (i) lacks sufficient equity to finance its activities without additional subordinated financial support from other parties; (ii) whose equity holders lack the characteristics of a controlling financial interest; or (iii) is established with non-substantive voting rights. A VIE is consolidated by its primary beneficiary, which is defined as the party who has a controlling financial interest in the VIE through (a) power to direct the activities of the VIE that most significantly affect the VIE’s economic performance, and (b) obligation to absorb losses or right to receive benefits of the VIE that could be significant to the VIE. The Company also considers interests held by its
related parties, including de facto agents. The Company assesses whether it is a member of a related party group that collectively meets the power and benefits criteria and, if so, whether the Company is most closely associated with the VIE. In performing the related party analysis, the Company considers both qualitative and quantitative factors, including, but not limited to: the amount and characteristics of its investment relative to the related party; the Company’s and the related party's ability to control or significantly influence key decisions of the VIE including consideration of involvement by de facto agents; the obligation or likelihood for the Company or the related party to fund operating losses of the VIE; and the similarity and significance of the VIE’s business activities to those of the Company and the related party. The determination of whether an entity is a VIE, and whether the Company is the primary beneficiary, may involve significant judgment, including the determination of which activities most significantly affect the entities’ performance, and estimates about the current and future fair values and performance of assets held by the VIE.
Voting Interest Entities—Unlike VIEs, voting interest entities have sufficient equity to finance their activities and equity investors exhibit the characteristics of a controlling financial interest through their voting rights. The Company consolidates such entities when it has the power to control these entities through ownership of a majority of the entities' voting interests or through other arrangements.
At each reporting period, the Company reassesses whether changes in facts and circumstances cause a change in the status of an entity as a VIE or voting interest entity, and/or a change in the Company's consolidation assessment. Changes in consolidation status are applied prospectively. An entity may be consolidated as a result of this reassessment, in which case, the assets, liabilities and noncontrolling interest in the entity are recorded at fair value upon initial consolidation. Any existing equity interest held by the Company in the entity prior to the Company obtaining control will be remeasured at fair value, which may result in a gain or loss recognized upon initial consolidation. However, if the consolidation represents an asset acquisition of a voting interest entity, the Company's existing interest in the acquired assets, if any, is not remeasured to fair value but continues to be carried at historical cost. The Company may also deconsolidate a subsidiary as a result of this reassessment, which may result in a gain or loss recognized upon deconsolidation depending on the carrying values of deconsolidated assets and liabilities compared to the fair value of any interests retained.
Noncontrolling Interests
Redeemable Noncontrolling Interests—This represents noncontrolling interests in the Company's digital investment management business and in consolidated open-end funds sponsored by the Company. The noncontrolling interests either have redemption rights that will be triggered upon the occurrence of certain events (Note 13) or have the ability to withdraw all or a portion of their interests from the consolidated open-end funds in cash with advance notice.
Redeemable noncontrolling interests is presented outside of permanent equity. Allocation of net income or loss to redeemable noncontrolling interests is based upon their ownership percentage during the period. The carrying amount of redeemable noncontrolling interests is adjusted to its redemption value at the end of each reporting period to an amount not less than its initial carrying value, except for amounts contingently redeemable which will be adjusted to redemption value only when redemption is probable. Such adjustments will be recognized in additional paid-in capital.
Noncontrolling Interests in Investment Entities—This represents predominantly interests in consolidated investment entities held by private investment funds managed by the Company or held by third party joint venture partners. Allocation of net income or loss is generally based upon relative ownership interests held by equity owners in each investment entity, or based upon contractual arrangements that may provide for disproportionate allocation of economic returns among equity interests, including using a hypothetical liquidation at book value basis, where applicable and substantive.
Noncontrolling Interests in Operating Company—This represents membership interests in OP held primarily by certain employees of the Company. Noncontrolling interests in OP are allocated a share of net income or loss in OP based on their weighted average ownership interest in OP during the period. Noncontrolling interests in OP have the right to require OP to redeem part or all of such member’s membership units in OP ("OP Units") for cash based on the market value of an equivalent number of shares of class A common stock at the time of redemption, or at the Company's election as managing member of OP, through issuance of shares of class A common stock (registered or unregistered) on a one-for-one basis. At the end of each reporting period, noncontrolling interests in OP is adjusted to reflect their ownership percentage in OP at the end of the period, through a reallocation between controlling and noncontrolling interests in OP, as applicable.
Business Combinations
Definition of a Business—The Company evaluates each purchase transaction to determine whether the acquired assets meet the definition of a business. If substantially all of the fair value of gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, then the set of transferred assets and activities is not a
business. If not, for an acquisition to be considered a business, it would have to include an input and a substantive process that together significantly contribute to the ability to create outputs (i.e., there is a continuation of revenue before and after the transaction). A substantive process is not ancillary or minor, cannot be replaced without significant costs, effort or delay or is otherwise considered unique or scarce. To qualify as a business without outputs, the acquired assets would require an organized workforce with the necessary skills, knowledge and experience that performs a substantive process.
Asset Acquisitions—For acquisitions that are not deemed to be businesses, the assets acquired are recognized based on their cost to the Company as the acquirer and no gain or loss is recognized. The cost of assets acquired in a group is allocated to individual assets within the group based on their relative fair values and does not give rise to goodwill. Transaction costs related to acquisition of assets are included in the cost basis of the assets acquired.
Business Combinations—The Company accounts for acquisitions that qualify as business combinations by applying the acquisition method. Transaction costs related to acquisition of a business are expensed as incurred and excluded from the fair value of consideration transferred. The identifiable assets acquired, liabilities assumed and noncontrolling interests in an acquired entity are recognized and measured at their estimated fair values. The excess of the fair value of consideration transferred over the fair values of identifiable assets acquired, liabilities assumed and noncontrolling interests in an acquired entity, net of fair value of any previously held interest in the acquired entity, is recorded as goodwill. Such valuations require management to make significant estimates and assumptions.
Contingent Consideration—Contingent consideration is classified as a liability or equity, as applicable. Contingent consideration in connection with the acquisition of a business or a VIE is measured at fair value on acquisition date, and unless classified as equity, is remeasured at fair value each reporting period thereafter until the consideration is settled, with changes in fair value included in net income. Contingent consideration in connection with the acquisition of assets (and that is not a VIE) is generally recognized only when the contingency is resolved, as part of the basis of the acquired assets.
Discontinued Operations
If the disposition of a component, being an operating or reportable segment, business unit, subsidiary or asset group, represents a strategic shift that has or will have a major effect on the Company’s operations and financial results, the operating profits or losses of the component when classified as held for sale, and the gain or loss upon disposition of the component, are presented as discontinued operations in the statements of operations.
A business or asset group acquired in connection with a purchase business combination that meets the criteria to be accounted for as held for sale at the date of acquisition is reported as discontinued operations, regardless of whether it meets the strategic shift criteria.
The accelerated monetization of a substantial majority of the Company’s OED investments and Other IM business in the Other segment that is in progress as of March 2021; the disposition of the hotel business, composed of the Hospitality segment and the THL Hotel Portfolio in the Other segment in March 2021; and the disposition of the bulk industrial portfolio in December 2020, all represent strategic shifts that have or will have major effects on the Company’s operations and financial results, and have met the criteria as discontinued operations as of March 2021, September 2020, and June 2019, respectively. Accordingly, for all prior periods presented, the related assets and liabilities are presented as assets and liabilities held for disposition on the consolidated balance sheets (Note 7) and the related operating results are presented as income (loss) from discontinued operations on the consolidated statements of operations (Note 14). Discontinued operations in prior periods include investments in the Other segment that were disposed or otherwise resolved in those periods.
Reclassifications
Reclassifications were made related to discontinued operations as discussed in "—Discontinued Operations" above and to prior period segment reporting presentation as discussed in Note 20. Additionally, costs related to unconsummated transactions that were previously included within investment and servicing expense in prior periods have been reclassified into transaction-related costs on the consolidated statement of operations to conform to current period presentation. These reclassifications did not affect the Company's financial position, results of operations or cash flows.
Adjustment to Accumulated Deficit
On January 1, 2020, upon adoption of Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments—
Credit Losses, the Company recorded a $5.1 million increase to accumulated deficit, composed of: (i) an $8.4 million increase to accumulated deficit, representing the Company's share of the cumulative effect adjustment of adopting the lifetime current expected credit loss model by its equity method investee, CLNC; partially offset by (ii) a $3.3 million
decrease to accumulated deficit, reflecting the cumulative effect adjustment of the Company's election of the fair value option for all of its then outstanding loans receivable.
Accounting Standards Adopted in 2021
Income Tax Accounting
In December 2019, the FASB issued ASU No. 2019-12, Simplifying Accounting for Income Taxes. The ASU simplifies accounting for income taxes by eliminating certain exceptions to the general approach in ASC 740, Income Taxes, and clarifies certain aspects of the guidance for more consistent application. The simplifications relate to intraperiod tax allocations when there is a loss in continuing operations and a gain outside of continuing operations, accounting for tax law or tax rate changes and year-to-date losses in interim periods, recognition of deferred tax liability for outside basis difference when investment ownership changes, and accounting for franchise taxes that are partially based on income. The ASU also provides new guidance that clarifies the accounting for transactions resulting in a step-up in tax basis of goodwill, among other changes. Transition is generally prospective, other than the provision related to outside basis difference which is on a modified retrospective basis with cumulative effect adjusted to retained earnings at the beginning of the period adopted, and franchise tax provision which is on either full or modified retrospective. The Company adopted ASU No. 2019-12 on January 1, 2021, with no resulting effect upon adoption.
Accounting for Certain Equity Investments
In January 2020, the FASB issued ASU No. 2020-01, Clarifying the Interactions between Topic 321 Investments—Equity Securities, Topic 323—Investments Equity Method and Joint Ventures, and Topic 815—Derivatives and Hedging. The ASU clarifies that if as a result of an observable transaction, an equity investment under the measurement alternative is transitioned into equity method and vice versa, an equity method investment is transitioned into measurement alternative, the investment is to be remeasured immediately before and after the transaction, respectively. The ASU also clarifies that certain forward contracts or purchased options to acquire equity securities that are not deemed to be derivatives or in-substance common stock will generally be measured using the fair value principles of ASC 321 before settlement or exercise, and that an entity should not be considering how it will account for the resulting investments upon eventual settlement or exercise. ASU No. 2020-01 is to be applied prospectively. The Company adopted the new guidance on January 1, 2021, with no resulting effect upon adoption.
Accounting for Convertible Instruments and Contracts on Entity's Own Equity
In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The ASU (1) simplifies an issuer’s accounting for convertible instruments as a single unit of account; (2) allows more contracts on an entity’s own equity to qualify for equity classification and more embedded derivatives meeting the derivative scope exception; and (3) simplifies diluted earnings per share ("EPS") computation.
•The guidance eliminates the requirement to separate embedded conversion features in convertible instruments, except for (1) a convertible instrument that contains features requiring bifurcation as a derivative under ASC 815 or (2) a convertible debt instrument that was issued at a substantial premium. Separate accounting for embedded conversion features as an equity component under the cash conversion and beneficial conversion models has been eliminated.
•Under the new guidance, certain conditions under Subtopic ASC 815-40 that may result in contracts being settled in cash rather than shares and therefore preclude (1) equity classification for contracts on an entity’s own equity; and (2) embedded derivatives from qualifying for the derivative scope exception, have been removed; for example, the requirement that equity contracts permit settlement in unregistered shares unless such contracts explicitly require settlement in cash if registered shares are unavailable. The guidance also clarifies that freestanding contracts on an entity’s own equity that do not qualify for equity classification under the indexation criteria (ASC 815-40-15) or settlement criteria (ASC 815-40-25) are to be measured at fair value through earnings, even if they do not meet the definition of a derivative under ASC 815.
•The ASU also amends certain guidance on computation of diluted EPS for convertible instruments and contracts on an entity’s own equity that results in a more dilutive EPS, including (1) requiring the if converted method to be applied for all convertible instruments (the treasury stock method is no longer available), and (2) removing the ability to rebut the presumption of share settlement for contracts that may be settled in cash or stock and that are not liability classified share based payments.
•Expanded disclosures are required, including but not limited to, (1) terms and features of convertible instruments and contracts on entity’s own equity; and (2) information about events, conditions, and circumstances that could affect amount or timing of future cash flows related to these instruments or contracts; and in the period of adoption (3) nature of and reason for the change in accounting principle; and (4) effects of the change on EPS.
Upon adoption, a one-time election may be made to apply the fair value option for any liability-classified convertible securities.
Adoption of the new standard may be made either on a full retrospective approach or a modified retrospective approach, with cumulative effect adjustment recorded to beginning retained earnings. The Company early adopted the new standard on January 1, 2021 using a modified retrospective approach, with no resulting effect upon adoption.
3. Acquisitions
Asset Acquisitions
Vantage SDC Hyperscale Data Centers
In July 2020 and following an additional investment in October 2020, the Company, alongside fee bearing third party capital, invested $1.36 billion for an approximately 90% equity interest in entities that hold Vantage Data Centers Holdings, LLC's ("Vantage") portfolio of 12 stabilized hyperscale data centers in North America and $2.0 billion of secured indebtedness (“Vantage SDC”). The remaining equity interest in Vantage SDC is held by the existing investors of Vantage, and together with the third party capital raised by the Company, represent noncontrolling interests. The Company's balance sheet investment is approximately $200 million or a 13% equity interest in Vantage SDC. Vantage SDC is a carve-out from Vantage's data center business. The acquisition excluded Vantage's remaining portfolio of development-stage data centers and its employees, all of whom were retained by Vantage. The day-to-day operations of Vantage SDC continue to be managed by Vantage's existing management company in exchange for management fees, and subject to certain approval rights held by the Company and the co-investors in connection with material actions.
Additionally, the Company and its co-investors have committed to acquire the future build-out of expansion capacity within the Vantage SDC portfolio, including lease up of the expanded capacity and existing inventory, the costs of which will be borne by the previous owners of Vantage SDC, for estimated payments of approximately $240 million. It is anticipated that all, if not most, of the payments will be funded by Vantage SDC from borrowings under its credit facilities and/or cash from operations. Pursuant to this arrangement, Vantage SDC entered into a lease with a tenant related to a portion of the expansion capacity in the first quarter of 2021, which triggered a payment of $14.8 million to the previous owners of Vantage SDC. The payment was treated as an asset acquisition, which consideration was allocated to data center infrastructure and in-place lease acquired, and as additional consideration for land and building on a relative fair value basis based upon the valuation of the initial acquisition.
zColo Colocation Data Centers
In December 2020, the Company's DataBank subsidiary acquired zColo, the colocation business of Zayo Group Holdings, Inc. ("Zayo"), composed of 39 data centers in the U.S. and U.K., for approximately $1.2 billion through a combination of debt and equity financing, including $0.5 billion of third party co-invest capital raised by the Company. The Company's balance sheet investment is $145 million ($188 million at the time of closing), which maintained the Company's 20% equity interest in DataBank.
Acquisition of zColo's remaining five data centers in France for $33.0 million closed in February 2021. Zayo is an anchor tenant within the zColo facilities and is a significant customer of DataBank.
Allocation of Consideration Transferred
The following table summarizes the consideration and allocation to assets acquired, liabilities assumed and noncontrolling interests at acquisition. Consideration for asset acquisitions incorporates capitalized transaction costs, which includes incentive payments to employees for successful closing of the acquisitions.
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Asset Acquisitions
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2021
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2020
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(In thousands)
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zColo France
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Vantage SDC
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zColo US and UK
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Assets acquired and liabilities assumed
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Cash
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$
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—
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$
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—
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$
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266
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Real estate
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26,083
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2,720,870
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882,327
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Intangible assets
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8,702
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765,137
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303,119
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Lease right-of-use ("ROU") and other assets
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9,536
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181,260
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415,038
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Debt
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—
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(2,060,307)
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—
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Intangible, lease and other liabilities
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(11,303)
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(82,350)
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(419,262)
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Fair value of net assets acquired for cash consideration
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$
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33,018
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$
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1,524,610
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$
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1,181,488
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•Real estate was valued based upon (i) current replacement cost for buildings in an as-vacant state and improvements, estimated using construction cost guidelines; (ii) current replacement cost for data center infrastructure by applying an estimated cost per kilowatt based upon current capacity of each location and also considering the associated indirect costs such as design, engineering, construction and installation; (iii) recent comparable sales or current listings for land; and (iv) contracted price net of estimated selling costs for real estate held for sale. Useful lives of real estate acquired ranges from 30 to 50 years for buildings and improvements, 7 to 21 years for site improvements, 12 to 19 years for data center infrastructure, and 1 to 5 years for furniture, fixtures and equipment.
•Lease related intangibles for real estate acquisitions were composed of the following:
•In-place leases reflect the value of rental income forgone if the properties were acquired vacant, and the leasing commissions, legal and marketing costs that would have been incurred to lease up the properties, with remaining lease terms ranging between 3 and 15 years.
•Above- and below-market leases represent the rent differential for the remaining lease term between contractual rents of acquired leases and market rents at the time of acquisition, discounted at rates between 6% and 8%, with remaining lease terms ranging between 2 and 15 years.
•Tenant relationships represent the estimated net cash flows attributable to the likelihood of lease renewal by an existing tenant relative to the cost of obtaining a new lease, taking into consideration the estimated time it would require to execute a new lease or backfill a vacant space, discounted at rates between 6% and 11.5%, with estimated useful lives between 5 and 15 years.
•Other intangible assets acquired were as follows:
•Customer service contracts were valued based upon estimated net cash flows generated from the zColo customer service contracts that would have been forgone if such contracts were not in place, taking into consideration the time it would require to execute a new contract, with remaining term of the contracts ranging between 3 and 15 years.
•Customer relationships were valued as the incremental net cash flows to the zColo business attributable to the in-place customer relationships, discounted at 10%, with estimated useful life of 12 years.
•Trade name of zColo was valued based upon estimated savings from avoided royalty at a rate of 1%, discounted at 11.5%, with useful life of 1 year.
•Assembled workforce was valued based upon the estimated cost of recruiting and training new data center employees for zColo, with a 3 year useful life.
•Other assets acquired and liabilities assumed include primarily lease ROU assets associated with leasehold data centers and corresponding lease liabilities. Lease liabilities were measured based upon the present value of future lease payments over the lease term, discounted at the incremental borrowing rate of the respective acquirees.
•Assumed debt was valued based upon market rates and spreads that prevailed at the time of acquisition for debt with similar terms and remaining maturities.
Other Real Estate Asset Acquisitions
The following table summarizes the Company's other real estate asset acquisitions in 2020 in addition to those discussed above:
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($ in thousands)
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Purchase Price Allocation (1)
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Acquisition Date
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Property Type and Location
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Number of Properties
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Purchase
Price (1)
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Land
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Buildings and Improvements
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Lease-Related Intangible Assets
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Lease ROU and Other Assets
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Debt
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Intangible, Lease and Other Liabilities
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Various
|
|
Hotel—France (2)
|
|
9
|
|
$
|
37,916
|
|
|
$
|
5,243
|
|
|
$
|
34,038
|
|
|
$
|
—
|
|
|
$
|
43,503
|
|
|
$
|
(2,245)
|
|
|
$
|
(42,623)
|
|
|
Various
|
|
Easements—Various in U.S. (3)
|
|
—
|
|
2,586
|
|
|
2,586
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
October
|
|
Office—U.K. and Ireland (4)
|
|
5
|
|
32,975
|
|
|
57,222
|
|
|
67,113
|
|
|
5,383
|
|
|
33,054
|
|
|
(124,981)
|
|
|
(4,816)
|
|
|
December
|
|
Land—U.S
|
|
—
|
|
5,116
|
|
|
5,116
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
$
|
78,593
|
|
|
$
|
70,167
|
|
|
$
|
101,151
|
|
|
$
|
5,383
|
|
|
$
|
76,557
|
|
|
$
|
(127,226)
|
|
|
$
|
(47,439)
|
|
__________
(1) Purchase price includes capitalized transaction costs. Dollar amounts of purchase price and allocation to assets acquired and liabilities assumed are translated using foreign exchange rates as of the respective dates of acquisition, where applicable.
(2) Bids for hotels under receivership were accepted by the French courts in prior years, with the transactions closing in 2020. Amounts include acquisition of hotel operations pursuant to operating leases on real estate owned by third parties.
(3) Transferred to the Company's new sponsored fund, Digital Colony Partners II, LP, or DCP II, in December 2020.
(4) The Company acquired a controlling equity interest in a borrower upon default of an acquisition, development and construction ("ADC") loan, which was previously accounted for as an equity method investment. This resulted in the acquisition of the borrower's real estate assets and assumption of its underlying mortgage debt, some of which is in default.
4. Real Estate
The following table summarizes the Company's real estate held for investment. Real estate held for disposition is presented in Note 7.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
March 31, 2021
|
|
December 31, 2020
|
|
Land
|
|
$
|
511,243
|
|
|
$
|
516,085
|
|
|
Buildings and improvements
|
|
4,203,240
|
|
|
4,295,256
|
|
|
|
|
|
|
|
|
Tenant improvements
|
|
82,320
|
|
|
80,598
|
|
|
Data center infrastructure
|
|
3,444,660
|
|
|
3,396,854
|
|
|
Furniture, fixtures and equipment
|
|
71,404
|
|
|
74,327
|
|
|
Construction in progress
|
|
68,048
|
|
|
49,895
|
|
|
|
|
8,380,915
|
|
|
8,413,015
|
|
|
Less: Accumulated depreciation
|
|
(678,204)
|
|
|
(603,051)
|
|
|
Real estate assets, net
|
|
$
|
7,702,711
|
|
|
$
|
7,809,964
|
|
Real Estate Sales
Results from sales of real estate, including discontinued operations (Note 14), are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
(In thousands)
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
Proceeds from sales of real estate
|
|
|
|
|
|
$
|
64,808
|
|
|
$
|
126,741
|
|
|
|
|
Gain on sale of real estate
|
|
|
|
|
|
45,750
|
|
|
7,932
|
|
|
|
Depreciation and Impairment
The following table summarizes real estate depreciation and impairment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
(In thousands)
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
Depreciation of real estate held for investment
|
|
|
|
|
|
$
|
95,611
|
|
|
$
|
47,919
|
|
|
|
|
Impairment of real estate and related asset group (1)
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
Held for disposition
|
|
|
|
|
|
14,466
|
|
|
204
|
|
|
|
|
Held for investment
|
|
|
|
|
|
766
|
|
|
48,328
|
|
|
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
Held for disposition
|
|
|
|
|
|
104,528
|
|
|
7,372
|
|
|
|
|
Held for investment (2)
|
|
|
|
|
|
—
|
|
|
252,364
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
__________
(1) Includes impairment of real estate intangibles of $63,000 and $7.0 million in the three months ended March 31, 2021 and 2020, respectively, and impairment of ground lease ROU of $6.1 million and $13.0 million in the three months ended March 31, 2021 and 2020, respectively.
(2) Represents impairment recorded in 2020 on properties in the Hospitality and Other segments prior to their reclassification as held for disposition and discontinued operations.
Impairment of Real Estate Held for Disposition
Real estate held for disposition is carried at the lower of amortized cost or fair value less estimated selling costs. Real estate held for disposition that has been written down and carried at fair value totaled $82.7 million and $897.9 million relating to continuing and discontinued operations, respectively, at March 31, 2021 and $1.0 billion relating to discontinued operations at December 31, 2020, generally representing Level 3 fair value.
Real estate held for disposition that was written down in 2021 and in 2020 was valued using either estimated recoverable value, sales price, broker opinions of value, or third-party appraisals, in certain cases, adjusted as deemed appropriate by management to account for the inherent risk associated with specific properties. Impairment on real estate held for disposition in 2020 also factored in the economic effects of COVID-19 on real estate values. Fair value of real estate held for disposition was generally reduced for estimated selling costs, where applicable, ranging from 1% to 3%.
Impairment of Real Estate Held for Investment
Real estate held for investment that was written down to fair value during the three months ended March 31, 2021 had carrying values of $1.1 million relating to continuing operations, and for the year ended December 31, 2020, carrying values of $1.3 billion and $2.4 billion relating to continuing and discontinued operations, respectively, at the time of impairment, representing Level 3 fair value. Real estate carrying values at December 31, 2020 included properties in the Hospitality and Other segments that were impaired in 2020 prior to being classified as held for sale and discontinued operations.
Impairment in 2021 relates to the Wellness Infrastructure segment and was based upon an appraised value of a net leased skilled nursing facility that may be repurposed or sold.
Impairment in 2020 was attributed primarily to shortened hold period assumptions, particularly in the hotel and wellness infrastructure portfolios, driven by the Company's accelerated digital transformation in the second quarter of 2020, and/or to a lesser extent, decline in property operating performance, in part from the economic effects of COVID-19. The Company compared the real estate carrying values to the undiscounted future net cash flows expected to be generated by these properties over their expected hold periods. For properties for which undiscounted expected net cash flows over their respective hold periods fell short of carrying values, the Company expects that the carrying value of these properties would likely not be recoverable. Fair value of impaired real estate held for investment in 2020 was estimated based upon: (i) third party appraisals, (ii) broker opinions of value with discounts applied based upon management judgment, (iii) income capitalization approach, using net operating income for each property and applying capitalization rates between 10.0% and 12.0%; or (iv) discounted cash flow analyses with terminal values determined using terminal capitalization rates between 7.3% and 11.3%, and discount rates between 8.5% and 9.5%. The Company considered the risk characteristics of the properties and adjusted the capitalization rates and/or discount rates as applicable. Impairment was measured as the excess of carrying value over fair value for each of these properties.
As assessment of real estate impairment is subjective and judgmental, actual results may differ if changes occur in the assumptions used and/or in market conditions and accordingly, negative changes to these variables would result in further impairment charge in the future.
Property Operating Income
Components of property operating income are as follows, excluding amounts related to discontinued operations (Note 14).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
(In thousands)
|
|
|
|
|
|
2021
|
|
2020
|
|
Lease income:
|
|
|
|
|
|
|
|
|
|
Fixed lease income
|
|
|
|
|
|
$
|
231,631
|
|
|
$
|
161,896
|
|
|
Variable lease income
|
|
|
|
|
|
28,198
|
|
|
10,084
|
|
|
|
|
|
|
|
|
259,829
|
|
|
171,980
|
|
|
|
|
|
|
|
|
|
|
|
|
Data center service revenue
|
|
|
|
|
|
15,387
|
|
|
11,973
|
|
|
|
|
|
|
|
|
$
|
275,216
|
|
|
$
|
183,953
|
|
For the three months ended March 31, 2021, property operating income from a single tenant accounted for approximately 11% of the Company's total revenues, excluding discontinued operations. The Company's share of property operating income from the tenant is approximately 13%, net of amounts attributable to noncontrolling interests in investment entities. There was no similar tenant concentration in the three months ended March 31, 2020.
5. Equity and Debt Investments
The Company's equity investments and debt securities, excluding investments held for disposition (Note 7), are represented by the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
March 31, 2021
|
|
December 31, 2020
|
|
|
Equity Investments
|
|
|
|
|
|
|
Equity method investments
|
|
|
|
|
|
|
CLNC
|
|
$
|
352,822
|
|
|
$
|
385,193
|
|
|
|
Other investment ventures
|
|
18,641
|
|
|
19,903
|
|
|
|
Private funds
|
|
175,364
|
|
|
173,039
|
|
|
|
Investments under fair value option
|
|
39,342
|
|
|
31,012
|
|
|
|
|
|
586,169
|
|
|
609,147
|
|
|
|
Other equity investments
|
|
|
|
|
|
|
Marketable equity securities
|
|
129,103
|
|
|
218,485
|
|
|
|
|
|
|
|
|
|
|
Non-traded REIT and private funds
|
|
27,828
|
|
|
20,495
|
|
|
|
Total equity investments
|
|
743,100
|
|
|
848,127
|
|
|
|
|
|
|
|
|
|
|
Debt Securities
|
|
|
|
|
|
|
N-Star CDO bonds, available for sale
|
|
34,719
|
|
|
28,576
|
|
|
|
|
|
|
|
|
|
|
Equity and debt investments
|
|
$
|
777,819
|
|
|
$
|
876,703
|
|
|
Equity Investments
The Company's equity investments represent noncontrolling equity interests in various entities, including equity method investments for which the Company has elected the fair value option.
Equity Method Investments
The Company owns a 36.1% interest in CLNC, accounted for under the equity method, as it exercises significant influence over CLNC's operating and financial policies through a combination of its ownership interest, and prior to May 2021, its role as the external manager and its representation on CLNC's board of directors. Other equity method investments, excluding investments held for disposition, are composed primarily of interests in the Company's sponsored digital investment vehicles, and certain investments accounted for under the fair value option (Note 10).
The liabilities of the equity method investment entities may only be settled using the assets of these entities and there is no recourse to the general credit of the Company for the obligations of these investment entities. The Company is not required to provide financial or other support in excess of its capital commitments and its exposure is limited to its investment balance.
Other-Than-Temporary Impairment ("OTTI")—The Company evaluates its equity method investments for OTTI at each reporting period. The Company determined there was no OTTI in the three months ended March 31, 2021.
In the second quarter of 2020, the Company had determined that its investment in CLNC was other-than-temporarily impaired and recorded an impairment charge, included in equity method losses, of $274.7 million, measured as the excess of carrying value of its investment in CLNC over market value of $336.5 million based upon CLNC's closing stock price of $7.02 per share on June 30, 2020. At March 31, 2021, the fair value of the Company's investment in CLNC, based upon its closing stock price of $8.52 per share, was in excess of its carrying value.
Basis Difference—The impairment charges recorded by the Company on its investment in CLNC resulted in a basis difference between the Company's carrying value of its investment in CLNC and the Company's proportionate share of CLNC's book value of equity. The impairment charge was applied to the Company's investment in CLNC as a whole and was not determined based on an impairment assessment of individual assets held by CLNC. In order to address the basis difference, the impairment charge was generally allocated on a relative fair value basis across CLNC's various investments. Accordingly, for any future write-downs taken by CLNC on these investments, the Company's share thereof is applied to reduce the basis difference and is not recorded as an equity method loss until such time the basis difference associated with the respective investments has been fully eliminated. For the three months ended March 31, 2021 and 2020, the Company reduced its share of net loss of CLNC by $24.6 million and $19.2 million, respectively, representing the basis difference allocated to investments that were resolved or impaired by CLNC during these periods. The remaining basis difference at March 31, 2021 was $252.9 million.
Other Equity Investments
Other equity investments consist of the following:
Marketable Equity Securities—These are publicly traded equity securities held by private open-end funds consolidated by the Company and prior to January 2021, equity investment in a third party mutual fund (Note 10). The equity securities of the consolidated funds comprise listed stocks primarily in the U.S. and to a lesser extent, in Europe, and predominantly in the digital real estate and telecommunication sectors.
Non-Traded REIT and Private Funds—These represent interests in a Company-sponsored non-traded REIT, NorthStar Healthcare Income, Inc. ("NorthStar Healthcare"), and a private fund, for which the Company elected the net asset value ("NAV") practical expedient (Note 10), and an investment in a Company-managed sub-account of a third party private fund.
Investment and Lending Commitments
Private Funds—At March 31, 2021, the Company has unfunded commitments of $169.9 million to the Company's sponsored digital funds.
Loans Receivable—The Company has lending commitments to borrowers pursuant to certain loan agreements in which the borrower may submit a request for funding contingent on meeting certain criteria, which must be approved by the Company as lender, such as capital expenditures and construction in progress with an approved budget. At March 31, 2021, total unfunded lending commitments was $39.8 million, of which the Company's share was $15.3 million, net of amounts attributable to noncontrolling interests in investment entities.
Debt Securities
The Company's investment in debt securities is composed of available-for-sale ("AFS") N-Star CDO bonds, which are subordinate bonds retained by a subsidiary of the Company, NRF Holdco, LLC ("NRF Holdco"), from its sponsored collateralized debt obligations ("CDOs"), and CDO bonds originally issued by NRF Holdco that it subsequently repurchased at a discount. These CDOs are collateralized primarily by commercial real estate ("CRE") debt and CRE securities.
The following tables summarize the balance of the N-Star CDO bonds.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized Cost Without Allowance for Credit Loss
|
|
Allowance for Credit Loss
|
|
Gross Cumulative Unrealized
|
|
|
|
(in thousands)
|
|
|
|
Gains
|
|
Losses
|
|
Fair Value
|
|
March 31, 2021
|
|
$
|
56,207
|
|
|
$
|
(24,882)
|
|
|
$
|
3,394
|
|
|
$
|
—
|
|
|
$
|
34,719
|
|
|
December 31, 2020
|
|
46,561
|
|
|
(24,688)
|
|
|
6,703
|
|
|
—
|
|
|
28,576
|
|
There were no sales of N-Star CDO bonds during the three months ended March 31, 2021 and year ended December 31, 2020.
These CDOs have long-dated stated maturities through 2037 and 2041, however, the Company expects the N-Star CDO bonds to have remaining future cash flows up to 3 years from March 31, 2021.
Impairment of AFS Debt Securities
AFS debt securities are considered to be impaired if their fair value is less than their amortized cost basis. If the Company intends to sell or is more likely than not required to sell the debt security before recovery of its amortized cost, the entire impairment amount is recognized in earnings within other gain (loss) as a write-off of the amortized cost basis of the debt security. If the Company does not intend to sell or is not more likely than not required to sell the debt security before recovery of its amortized cost, the credit component of the loss is recognized in earnings within other gain (loss) as an allowance for credit loss, which may be subject to reversal for subsequent recoveries in fair value. The non-credit loss component is recognized in other comprehensive income or loss ("OCI"). The allowance is charged off against the amortized cost basis of the security if in a subsequent period, the Company intends to or is more likely than not required to sell the security, or if the Company deems the security to be uncollectible.
Changes in allowance for credit losses for AFS debt securities are presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
(In thousands)
|
|
2021
|
|
2020
|
|
Beginning balance
|
|
$
|
24,688
|
|
|
$
|
—
|
|
|
Provision for credit losses
|
|
194
|
|
|
816
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
24,882
|
|
|
$
|
816
|
|
Credit losses were determined based upon an analysis of the present value of contractual cash flows expected to be collected from the underlying collateral as compared to the amortized cost basis of the security. At March 31, 2021 and December 31, 2020, there were no AFS debt securities in unrealized loss position without allowance for credit loss.
6. Goodwill, Deferred Leasing Costs and Other Intangibles
Goodwill
Goodwill balance by reportable segment is as follows, excluding goodwill in the Other segment that is held for disposition (Note 7).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
March 31, 2021
|
|
December 31, 2020
|
|
Balance by reportable segment:
|
|
|
|
|
|
Digital Operating
|
|
$
|
463,120
|
|
|
$
|
463,120
|
|
|
Digital Investment Management (1)
|
|
298,248
|
|
|
298,248
|
|
|
|
|
$
|
761,368
|
|
|
$
|
761,368
|
|
__________
(1) Goodwill of $140.5 million is deductible for income tax purposes.
Deferred Leasing Costs, Other Intangible Assets and Intangible Liabilities
Deferred leasing costs and identifiable intangible assets and liabilities, excluding those related to assets held for disposition, are as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
(In thousands)
|
Carrying Amount (Net of Impairment)(1)
|
|
Accumulated Amortization(1)
|
|
Net Carrying Amount(1)
|
|
Carrying Amount (Net of Impairment)(1)
|
|
Accumulated Amortization(1)
|
|
Net Carrying Amount(1)
|
|
Deferred Leasing Costs and Intangible Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred leasing costs and lease related intangible assets (2)
|
$
|
1,251,299
|
|
|
$
|
(230,981)
|
|
|
$
|
1,020,318
|
|
|
$
|
1,245,878
|
|
|
$
|
(180,372)
|
|
|
$
|
1,065,506
|
|
|
Investment management intangibles (3)
|
226,471
|
|
|
(98,219)
|
|
|
128,252
|
|
|
226,471
|
|
|
(90,624)
|
|
|
135,847
|
|
|
Customer relationships and service contracts (4)
|
218,081
|
|
|
(23,275)
|
|
|
194,806
|
|
|
217,809
|
|
|
(13,547)
|
|
|
204,262
|
|
|
Trade names
|
41,900
|
|
|
(16,665)
|
|
|
25,235
|
|
|
41,900
|
|
|
(4,713)
|
|
|
37,187
|
|
|
Other (5)
|
24,596
|
|
|
(679)
|
|
|
23,917
|
|
|
25,574
|
|
|
(651)
|
|
|
24,923
|
|
|
Total deferred leasing costs and intangible assets
|
$
|
1,762,347
|
|
|
$
|
(369,819)
|
|
|
$
|
1,392,528
|
|
|
$
|
1,757,632
|
|
|
$
|
(289,907)
|
|
|
$
|
1,467,725
|
|
|
Intangible Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease intangible liabilities (2)
|
$
|
154,103
|
|
|
$
|
(64,188)
|
|
|
$
|
89,915
|
|
|
$
|
153,808
|
|
|
$
|
(59,956)
|
|
|
$
|
93,852
|
|
__________
(1) For intangible assets and intangible liabilities recognized in connection with business combinations, purchase price allocations may be subject to adjustments during the measurement period, not to exceed 12 months from date of acquisition, based upon new information obtained about facts and circumstances that existed at time of acquisition. Amounts are presented net of impairments and write-offs.
(2) Lease intangible assets are composed of in-place leases, above-market leases, lease incentives and tenant relationships. Lease intangible liabilities are composed of below-market leases.
(3) Composed of investment management contracts and investor relationships.
(4) In connection with data center services provided in the colocation data center business.
(5) Represents primarily assembled workforce acquired in an asset acquisition and certificates of need associated with certain wellness infrastructure portfolios which are not subject to amortization.
Impairment of Identifiable Intangible Assets
During the year ended December 31, 2020, investment management contracts were impaired by $8.2 million to an aggregate fair value of $12.4 million at the time of impairment. Fair value was based upon the revised future net cash flows over the remaining life of the respective contracts, generally discounted at 10%, and represent Level 3 fair values. There was no impairment recorded in the three months ended March 31, 2021.
Real estate related intangible assets are subject to impairment as part of the real estate asset group, as discussed in Note 4.
Amortization of Intangible Assets and Liabilities
The following table summarizes amortization of deferred leasing costs and finite-lived intangible assets and intangible liabilities, excluding amounts related to discontinued operations (Note 14):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
(In thousands)
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) to rental income (1)
|
|
|
|
|
|
$
|
(5,836)
|
|
|
$
|
3,660
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense
|
|
|
|
|
|
|
|
|
|
|
|
Deferred leasing costs and lease related intangibles
|
|
|
|
|
|
$
|
45,475
|
|
|
$
|
15,240
|
|
|
|
|
Investment management intangibles
|
|
|
|
|
|
6,238
|
|
|
6,658
|
|
|
|
|
Customer relationships and service contracts
|
|
|
|
|
|
9,837
|
|
|
3,695
|
|
|
|
|
Trade name
|
|
|
|
|
|
11,951
|
|
|
1,098
|
|
|
|
|
Other
|
|
|
|
|
|
459
|
|
|
74
|
|
|
|
|
|
|
|
|
|
|
$
|
73,960
|
|
|
$
|
26,765
|
|
|
|
__________
(1) Represents the effect of amortizing above- and below-market leases and lease incentives.
The following table presents the future amortization of deferred leasing costs and finite-lived intangible assets and intangible liabilities, excluding those related to assets and liabilities held for disposition.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ending December 31,
|
|
|
|
(In thousands)
|
Remaining 2021
|
|
2022
|
|
2023
|
|
2024
|
|
2025
|
|
2026 and Thereafter
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) to rental income
|
$
|
53
|
|
|
$
|
1,431
|
|
|
$
|
3,111
|
|
|
$
|
2,392
|
|
|
$
|
1,168
|
|
|
$
|
(5,047)
|
|
|
$
|
3,108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense
|
189,235
|
|
|
162,906
|
|
|
141,252
|
|
|
112,248
|
|
|
100,057
|
|
|
581,627
|
|
|
1,287,325
|
|
7. Assets and Related Liabilities Held for Disposition
Total assets and related liabilities held for disposition are summarized below.
Assets and liabilities held for non-sale disposition in all periods presented represent a portfolio of 48 hotels in receivership following the lender's acceleration of the underlying debt that was defaulted in April 2020. Control over the operations and any eventual sale of these properties has been transferred to the receivers, who are acting for the benefit of the lender. The Company has not been released from its debt obligations, however, the debt is non-recourse to the Company.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
(In thousands)
|
Disposition by Sale
|
|
Non-Sale Disposition
|
|
Total Held for Disposition
|
|
Disposition by Sale
|
|
Non-Sale Disposition
|
|
Total Held for Disposition
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted cash
|
$
|
117,548
|
|
|
$
|
2,523
|
|
|
$
|
120,071
|
|
|
$
|
129,817
|
|
|
$
|
14,695
|
|
|
$
|
144,512
|
|
|
Real estate, net
|
1,193,009
|
|
|
736,218
|
|
|
1,929,227
|
|
|
4,077,698
|
|
|
743,227
|
|
|
4,820,925
|
|
|
Loans receivable
|
977,759
|
|
|
—
|
|
|
977,759
|
|
|
1,211,307
|
|
|
—
|
|
|
1,211,307
|
|
|
Equity investments
|
758,953
|
|
|
—
|
|
|
758,953
|
|
|
860,776
|
|
|
—
|
|
|
860,776
|
|
|
Goodwill, deferred leasing costs and other intangible assets, net
|
139,851
|
|
|
436
|
|
|
140,287
|
|
|
148,552
|
|
|
437
|
|
|
148,989
|
|
|
Other assets (1)
|
127,235
|
|
|
26,281
|
|
|
153,516
|
|
|
210,238
|
|
|
15,166
|
|
|
225,404
|
|
|
Due from affiliates
|
14,844
|
|
|
—
|
|
|
14,844
|
|
|
14,355
|
|
|
—
|
|
|
14,355
|
|
|
Total assets held for disposition
|
$
|
3,329,199
|
|
|
$
|
765,458
|
|
|
$
|
4,094,657
|
|
|
$
|
6,652,743
|
|
|
$
|
773,525
|
|
|
$
|
7,426,268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt, net (2)
|
$
|
922,425
|
|
|
$
|
780,000
|
|
|
$
|
1,702,425
|
|
|
$
|
3,631,467
|
|
|
$
|
780,000
|
|
|
$
|
4,411,467
|
|
|
Lease intangibles and other liabilities
|
180,050
|
|
|
54,168
|
|
|
234,218
|
|
|
272,792
|
|
|
47,513
|
|
|
320,305
|
|
|
Total liabilities related to assets held for disposition
|
$
|
1,102,475
|
|
|
$
|
834,168
|
|
|
$
|
1,936,643
|
|
|
$
|
3,904,259
|
|
|
$
|
827,513
|
|
|
$
|
4,731,772
|
|
__________
(1) Included corporate aircraft that was impaired by $11.9 million in the second quarter of 2020 to reflect recoverable value prior to its sale to a third party in January 2021.
(2) Represents debt related to assets held for disposition if the debt is expected to be assumed by the acquirer upon sale or if the debt is expected to be extinguished through lender's assumption of underlying collateral.
Discontinued Operations
The table below presents assets and liabilities held for sale and for non-sale disposition that are related to discontinued operations (Note 14). These assets and liabilities are composed of OED investments and intangible assets of the Other IM business, both of which resided in the Other segment, and, prior to its disposition in March 2021, the Company's hotel business, with one hotel portfolio remaining in receivership, as discussed above.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
(In thousands)
|
|
Other
|
|
Hotel
|
|
Other
|
|
Hotel
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Restricted cash
|
|
$
|
114,074
|
|
|
$
|
2,523
|
|
|
$
|
51,528
|
|
|
$
|
92,870
|
|
|
Real estate, net
|
|
944,730
|
|
|
736,218
|
|
|
1,153,724
|
|
|
3,504,249
|
|
|
Loans receivable
|
|
977,759
|
|
|
—
|
|
|
1,211,307
|
|
|
—
|
|
|
Equity investments
|
|
758,953
|
|
|
—
|
|
|
860,776
|
|
|
—
|
|
|
Goodwill, deferred leasing costs and other intangible assets, net
|
|
133,187
|
|
|
436
|
|
|
143,122
|
|
|
1,851
|
|
|
Other assets
|
|
119,948
|
|
|
26,281
|
|
|
152,871
|
|
|
70,343
|
|
|
Due from affiliates
|
|
14,844
|
|
|
—
|
|
|
14,355
|
|
|
—
|
|
|
Total assets held for disposition—discontinued operations
|
|
$
|
3,063,495
|
|
|
$
|
765,458
|
|
|
$
|
3,587,683
|
|
|
$
|
3,669,313
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Debt, net
|
|
$
|
878,609
|
|
|
$
|
780,000
|
|
|
$
|
917,388
|
|
|
$
|
3,494,079
|
|
|
Lease intangibles and other liabilities
|
|
137,583
|
|
|
54,168
|
|
|
138,265
|
|
|
164,339
|
|
|
Total liabilities related to assets held for disposition—discontinued operations
|
|
$
|
1,016,192
|
|
|
$
|
834,168
|
|
|
$
|
1,055,653
|
|
|
$
|
3,658,418
|
|
Impairment of Assets Classified as Held for Disposition and Discontinued Operations
Real Estate and Related Intangible Assets—Impairment loss was recorded on real estate and related intangible assets classified as held for disposition and discontinued operations totaling $104.5 million and $259.7 million in the three months ended March 31, 2021 and 2020, respectively (Note 14), as discussed in Note 4.
Goodwill—No impairment loss was recorded in the three months ended March 31, 2021 on the Other IM goodwill that is classified as held for disposition and discontinued operations. In 2020, the Company had recognized impairment loss on its Other IM goodwill of $79.0 million in the first quarter and $515.0 million in the second quarter. In light of the economic effects of COVID-19 and the Company's acceleration of its digital transformation in the second quarter of 2020, both of which represented indicators of impairment, the Company's quantitative test in the prior year indicated that the carrying value of the Other IM reporting unit, including goodwill, exceeded its estimated fair value at March 31, 2020 and at June 30, 2020. In valuing the Other IM reporting unit in 2020, no value was ascribed to (a) the future capital raising potential of the non-digital credit and opportunity fund management business as it is no longer part of the Company's long-term strategy; and (b) the hypothetical contract of internally managing the Company's non-digital balance sheet assets following significant decreases in asset values in 2020. The remaining value of the Other IM reporting unit represents principally the CLNC management contract that was valued based upon its contractual termination value, which approximated fair value.
The Other IM goodwill balance of $81.6 million at March 31, 2021 was fully realized in April 2021 upon termination of the CLNC management contract.
Other Intangible Assets—In the three months ended March 31, 2021, investor relationship intangible asset in Other IM was impaired by $4.0 million (Note 14) to a fair value of $5.5 million based upon estimated recoverable value in a potential monetization of the Company's Other IM business. There was no impairment loss recorded on Other IM identifiable intangible assets held for disposition in 2020.
Equity Method Investments—Impairment was recorded on equity method investments classified as held for disposition and discontinued operations totaling $82.9 million and $0.8 million for the three months ended March 31, 2021 and 2020, respectively, included within equity method losses (Note 14). Equity method investments that were impaired and written down to fair value during the three months ended March 31, 2021 and year ended December 31, 2020 had carrying values totaling $479.3 million and $701.8 million, respectively, at the time of impairment. Impairment recorded in 2021 was based upon estimated recoverable values, primarily on ADC loans accounted for as equity method investments. Significant impairment was also recorded on these ADC loans in the fourth quarter of 2020, previously driven by reduced
future cash flow streams expected from these investments, primarily taking into consideration a combination of lower land values, delayed leasing, and/or offer prices in the current market, generally discounted at rates between 10% to 20%. Other impairment charges during 2020 were generally determined using estimated recoverable values for investments resolved or sold, investment values based upon projected exit strategies, or fair values based upon discounted expected future cash flows from the investments.
Assets Carried at Fair Value—For assets classified as held for disposition and discontinued operations that are carried at fair value, unrealized fair value losses were recorded in other loss of $3.1 million for interest in a third party fund and $200.7 million for loans receivable, and in equity method losses of $25.1 million for equity method investments (Note 14). Additional information is included Note 10 under "—Level 3 Recurring Fair Values."
8. Restricted Cash, Other Assets and Other Liabilities
Restricted Cash
The following table summarizes the Company's restricted cash balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
March 31, 2021
|
|
December 31, 2020
|
|
Capital expenditures reserves (1)
|
|
$
|
10,618
|
|
|
$
|
13,516
|
|
|
Real estate escrow reserves (2)
|
|
8,645
|
|
|
10,225
|
|
|
|
|
|
|
|
|
Lender restricted cash (3)
|
|
93,809
|
|
|
82,419
|
|
|
Other (4)
|
|
12,887
|
|
|
8,792
|
|
|
Total restricted cash
|
|
$
|
125,959
|
|
|
$
|
114,952
|
|
__________
(1) Represents primarily cash held by lenders for capital improvements, tenant improvements, lease renewal and replacement reserves related to real estate assets.
(2) Represents primarily insurance, real estate tax, repair and maintenance, tenant security deposits and other escrows related to real estate assets.
(3) Represents cash from the Company's investment properties that is restricted by lenders in accordance with respective debt agreements.
(4) Includes investment sales proceeds held in escrow.
Other Assets
The following table summarizes the Company's other assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
March 31, 2021
|
|
December 31, 2020
|
|
Straight-line rents
|
|
$
|
37,776
|
|
|
$
|
52,136
|
|
|
Investment deposits and pending deal costs
|
|
—
|
|
|
33,977
|
|
|
Prefunded capital expenditures for Vantage SDC
|
|
42,647
|
|
|
48,881
|
|
|
Deferred financing costs, net (1)
|
|
700
|
|
|
1,189
|
|
|
Derivative assets (Note 10)
|
|
4,280
|
|
|
99
|
|
|
Prepaid taxes and deferred tax assets, net
|
|
66,992
|
|
|
59,932
|
|
|
|
|
|
|
|
|
Operating lease right-of-use asset, net (2)
|
|
388,697
|
|
|
391,935
|
|
|
Finance lease right-of-use asset, net
|
|
140,271
|
|
|
143,182
|
|
|
Accounts receivable, net (3)
|
|
88,356
|
|
|
61,693
|
|
|
Prepaid expenses
|
|
30,455
|
|
|
28,563
|
|
|
Other assets
|
|
13,321
|
|
|
43,966
|
|
|
Fixed assets, net
|
|
20,823
|
|
|
21,264
|
|
|
Total other assets
|
|
$
|
834,318
|
|
|
$
|
886,817
|
|
__________
(1) Deferred financing costs relate to revolving credit arrangements.
(2) Net of impairment of $9.4 million at December 31, 2020 for corporate office leases as the Company determined there is a reduced need for office space based upon the Company's current operations and has abandoned certain leased spaces.
(3) Includes primarily receivables from tenants, resident fees, and reimbursable capital expenditures, and is presented net of immaterial allowance for doubtful accounts, where applicable.
Accrued and Other Liabilities
The following table summarizes the Company's accrued and other liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
March 31, 2021
|
|
December 31, 2020
|
|
Tenant security deposits and payable
|
|
$
|
8,761
|
|
|
$
|
9,321
|
|
|
|
|
|
|
|
|
Deferred income (1)
|
|
31,230
|
|
|
36,263
|
|
|
Interest payable
|
|
28,678
|
|
|
24,948
|
|
|
Derivative liabilities (Note 10)
|
|
1,216
|
|
|
103,772
|
|
|
|
|
|
|
|
|
Current and deferred income tax liability
|
|
122,943
|
|
|
153,167
|
|
|
Operating lease liability
|
|
363,594
|
|
|
373,525
|
|
|
Finance lease liability
|
|
146,750
|
|
|
148,974
|
|
|
Accrued compensation
|
|
52,838
|
|
|
78,748
|
|
|
Accrued carried interest and incentive fee compensation
|
|
1,870
|
|
|
1,907
|
|
|
Accrued real estate and other taxes
|
|
20,673
|
|
|
13,248
|
|
|
Accounts payable and accrued expenses
|
|
108,933
|
|
|
147,996
|
|
|
Other liabilities
|
|
148,732
|
|
|
101,732
|
|
|
Accrued and other liabilities
|
|
$
|
1,036,218
|
|
|
$
|
1,193,601
|
|
__________
(1) Represents primarily prepaid rental income, prepaid interest from borrowers held in reserve accounts, and deferred management fees from digital investment vehicles. Deferred management fees totaling $1.8 million at March 31, 2021 and $6.1 million at December 31, 2020 is expected be recognized as fee income over a weighted average period of 4.9 years and 1.9 years, respectively.
9. Debt
The Company's debt balance consists of the following components, excluding debt related to assets held for disposition that is expected to be assumed by the counterparty upon disposition, which is included in liabilities related to assets held for disposition (Note 7).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Corporate Credit Facility(1)
|
|
Convertible and Exchangeable Senior Notes
|
|
Secured Debt(2)
|
|
Junior Subordinated Notes
|
|
Total Debt
|
|
March 31, 2021
|
|
|
|
|
|
|
|
|
|
|
|
Debt at amortized cost
|
|
|
|
|
|
|
|
|
|
|
|
Principal
|
|
$
|
—
|
|
|
$
|
513,605
|
|
|
$
|
6,229,504
|
|
|
$
|
280,117
|
|
|
$
|
7,023,226
|
|
|
Premium (discount), net
|
|
—
|
|
|
(6,180)
|
|
|
20,265
|
|
|
(75,499)
|
|
|
(61,414)
|
|
|
Deferred financing costs
|
|
—
|
|
|
(2,444)
|
|
|
(82,077)
|
|
|
—
|
|
|
(84,521)
|
|
|
|
|
$
|
—
|
|
|
$
|
504,981
|
|
|
$
|
6,167,692
|
|
|
$
|
204,618
|
|
|
$
|
6,877,291
|
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
Debt at amortized cost
|
|
|
|
|
|
|
|
|
|
|
|
Principal
|
|
$
|
—
|
|
|
$
|
545,107
|
|
|
$
|
6,178,579
|
|
|
$
|
280,117
|
|
|
$
|
7,003,803
|
|
|
Premium (discount), net
|
|
—
|
|
|
(6,540)
|
|
|
21,811
|
|
|
(76,269)
|
|
|
(60,998)
|
|
|
Deferred financing costs
|
|
—
|
|
|
(2,670)
|
|
|
(67,785)
|
|
|
—
|
|
|
(70,455)
|
|
|
|
|
$
|
—
|
|
|
$
|
535,897
|
|
|
$
|
6,132,605
|
|
|
$
|
203,848
|
|
|
$
|
6,872,350
|
|
__________
(1) Deferred financing costs related to the corporate credit facility are included in other assets.
(2) Debt principal totaling $253.7 million at March 31, 2021 and $272.5 million at December 31, 2020 relates to financing of assets held for disposition, and is expected to be repaid upon disposition of the respective underlying assets. Debt associated with assets held for disposition that is expected to be assumed by the counterparty is included in liabilities related to assets held for disposition (Note 7).
The following table summarizes certain characteristics of the Company's debt.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate
|
|
Variable Rate
|
|
Total
|
|
($ in thousands)
|
Outstanding Principal
|
|
Weighted Average Interest Rate (Per Annum)(1)
|
|
Weighted Average Years Remaining to Maturity(2)
|
|
Outstanding Principal
|
|
Weighted Average Interest Rate (Per Annum)(1)
|
|
Weighted Average Years Remaining to Maturity(2)
|
|
Outstanding Principal
|
|
Weighted Average Interest Rate (Per Annum)(1)
|
|
Weighted Average Years Remaining to Maturity(2)
|
|
March 31, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recourse
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate credit facility
|
$
|
—
|
|
|
N/A
|
|
N/A
|
|
$
|
—
|
|
|
—
|
%
|
|
0.8
|
|
$
|
—
|
|
|
—
|
%
|
|
0.8
|
|
Convertible and exchangeable senior notes(3)
|
513,605
|
|
|
5.31
|
%
|
|
3.3
|
|
—
|
|
|
N/A
|
|
N/A
|
|
513,605
|
|
|
5.31
|
%
|
|
3.3
|
|
Junior subordinated debt (4)
|
—
|
|
|
N/A
|
|
N/A
|
|
280,117
|
|
|
3.06
|
%
|
|
15.2
|
|
280,117
|
|
|
3.06
|
%
|
|
15.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
513,605
|
|
|
|
|
|
|
280,117
|
|
|
|
|
|
|
793,722
|
|
|
|
|
|
|
Non-recourse (5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Digital Operating
|
2,789,338
|
|
|
2.49
|
%
|
|
4.6
|
|
580,000
|
|
|
5.70
|
%
|
|
4.7
|
|
3,369,338
|
|
|
3.04
|
%
|
|
4.6
|
|
Wellness Infrastructure
|
400,075
|
|
|
4.55
|
%
|
|
3.9
|
|
2,283,458
|
|
|
3.89
|
%
|
|
3.1
|
|
2,683,533
|
|
|
4.02
|
%
|
|
3.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other—Other Equity and Debt
|
21,316
|
|
|
5.63
|
%
|
|
—
|
|
|
155,317
|
|
|
4.85
|
%
|
|
0.8
|
|
176,633
|
|
|
4.94
|
%
|
|
0.7
|
|
|
3,210,729
|
|
|
|
|
|
|
3,018,775
|
|
|
|
|
|
|
6,229,504
|
|
|
|
|
|
|
|
$
|
3,724,334
|
|
|
|
|
|
|
$
|
3,298,892
|
|
|
|
|
|
|
$
|
7,023,226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recourse
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate credit facility
|
$
|
—
|
|
|
N/A
|
|
N/A
|
|
$
|
—
|
|
|
—
|
%
|
|
1.0
|
|
$
|
—
|
|
|
—
|
%
|
|
1.0
|
|
Convertible and exchangeable senior notes(3)
|
545,107
|
|
|
5.36
|
%
|
|
3.6
|
|
—
|
|
|
N/A
|
|
N/A
|
|
545,107
|
|
|
5.36
|
%
|
|
3.6
|
|
Junior subordinated debt (4)
|
—
|
|
|
N/A
|
|
N/A
|
|
280,117
|
|
|
3.10
|
%
|
|
15.4
|
|
280,117
|
|
|
3.10
|
%
|
|
15.4
|
|
Secured debt (6)
|
32,815
|
|
|
5.02
|
%
|
|
—
|
|
|
—
|
|
|
N/A
|
|
N/A
|
|
32,815
|
|
|
5.02
|
%
|
|
—
|
|
|
|
577,922
|
|
|
|
|
|
|
280,117
|
|
|
|
|
|
|
858,039
|
|
|
|
|
|
|
Non-recourse (5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Digital Operating
|
2,132,852
|
|
|
2.54
|
%
|
|
4.8
|
|
1,093,991
|
|
|
5.92
|
%
|
|
4.4
|
|
3,226,843
|
|
|
3.69
|
%
|
|
4.7
|
|
Wellness Infrastructure
|
401,767
|
|
|
4.55
|
%
|
|
4.1
|
|
2,331,366
|
|
|
3.95
|
%
|
|
3.3
|
|
2,733,133
|
|
|
4.04
|
%
|
|
3.4
|
|
Other—Other Equity and Debt
|
21,316
|
|
|
5.63
|
%
|
|
—
|
|
|
164,472
|
|
|
3.85
|
%
|
|
0.1
|
|
185,788
|
|
|
4.05
|
%
|
|
0.1
|
|
|
2,555,935
|
|
|
|
|
|
|
3,589,829
|
|
|
|
|
|
|
6,145,764
|
|
|
|
|
|
|
|
$
|
3,133,857
|
|
|
|
|
|
|
$
|
3,869,946
|
|
|
|
|
|
|
$
|
7,003,803
|
|
|
|
|
|
__________
(1) Calculated based upon outstanding debt principal at balance sheet date. For variable rate debt, weighted average interest rate is calculated based upon the applicable index plus spread at balance sheet date.
(2) Calculated based upon initial maturity dates, or extended maturity dates if extension criteria are met and extension is available at the Company's option.
(3) Includes the 5.375% exchangeable senior notes which is an obligation of NRF Holdco as the issuer, as described further below.
(4) Represents an obligation of NRF Holdco as the junior subordinated debt was issued by certain of its subsidiaries, as described further below. Accordingly, Colony Capital, Inc. and its operating company, Colony Capital Operating Company, LLC, are not guarantors to the debt.
(5) Investment-level secured debt that is non-recourse to the Company in the Other segment of $21.3 million at March 31, 2021 and December 31, 2020 is in default and has been accelerated by the lender.
(6) The fixed rate recourse debt was secured by the Company's aircraft and was repaid in January 2021 upon sale of the aircraft.
Corporate Credit Facility
On June 29, 2020, the OP entered into the Fourth Amendment (the “Amendment”) to the Second Amended and Restated Credit Agreement, dated as of January 10, 2017 (as amended, supplemented or otherwise modified from time to time prior to the date hereof, the “Credit Agreement”), with JPMorgan Chase Bank, N.A., as administrative agent, and the several lenders from time to time party thereto.
The credit facility provides revolving commitments of $400 million as of March 31, 2021 ($450 million at December 31, 2020) and is scheduled to mature in July 2021, with one remaining 6-month extension option, subject to a fee of 0.10% of the commitment amount upon exercise. Advances under the credit facility accrue interest at a per annum
rate equal to, at the Company’s election, either LIBOR plus a margin of 2.75%, or a base rate determined according to a prime rate or federal funds rate plus a margin of 1.75%. Unused amounts under the credit facility accrue a per annum commitment fee of 0.35%.
The maximum amount available to be drawn at any time under the credit facility is limited by a borrowing base of certain investment assets, with the valuation of such investment assets generally determined according to a percentage of adjusted net book value or a multiple of base management fee EBITDA (as defined in the Credit Agreement). As of the date of this filing, the full $400 million is available to be drawn under the facility.
The Credit Agreement contains various affirmative and negative covenants, including financial covenants that require the Company to maintain minimum tangible net worth, and debt service ratios as well as a maximum leverage ratio, as defined in the Credit Agreement. As of March 31, 2021 and through the date of this filing, the Company was in compliance with all of the financial covenants. The Credit Agreement also provides the Company with the flexibility to determine not to maintain REIT status without requiring lender approval.
During the term of the Credit Agreement, the Company is prohibited from, among other things, (i) making any investments other than (A) investments in digital infrastructure assets and (B) pre-existing obligations and protective investments in existing assets to preserve, administer or otherwise realize on such investment, (ii) repurchasing capital stock of the Company and (iii) paying dividends, other than for (A) paying dividends to maintain the Company’s status as a REIT, (B) reducing the payment of income taxes and (C) paying dividends on the Company’s preferred equity.
Certain of the Company’s subsidiaries guarantee the obligations of the Company under the Credit Agreement. As security for the advances under the Credit Agreement, the Company and some of its affiliates pledged their equity interests in certain subsidiaries through which the Company directly or indirectly owns substantially all of its assets.
The Credit Agreement also includes customary events of default, in certain cases subject to reasonable and customary periods to cure. The occurrence of an event of default may result in the termination of the credit facility, accelerate the Company’s repayment obligations, in certain cases limit the Company’s ability to make distributions, and allow the lenders to exercise all rights and remedies available to them with respect to the collateral. There have been no events of default since the inception of the credit facility.
Convertible and Exchangeable Senior Notes
Convertible and exchangeable senior notes (collectively, the senior notes) outstanding as of March 31, 2021 are as follows, each representing senior unsecured obligations of Colony Capital, Inc. or a subsidiary as the respective issuers of the senior notes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Issuance Date
|
|
Due Date
|
|
Interest Rate (per annum)
|
|
Conversion or Exchange Price (per share of common stock)
|
|
Conversion or Exchange Ratio
(in shares)(1)
|
|
Conversion or Exchange Shares (in thousands)
|
|
Earliest Redemption Date
|
|
Outstanding Principal
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
Issued by Colony Capital, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.00% Convertible Senior Notes
|
|
April 2013
|
|
April 15, 2023
|
|
5.00
|
%
|
|
$
|
15.76
|
|
|
63.4700
|
|
|
12,694
|
|
|
April 22, 2020
|
|
$
|
200,000
|
|
|
$
|
200,000
|
|
|
3.875% Convertible Senior Notes
|
|
January and June 2014
|
|
January 15, 2021
|
|
3.875
|
%
|
|
16.57
|
|
|
60.3431
|
|
|
1,901
|
|
|
January 22, 2019
|
|
—
|
|
|
31,502
|
|
|
Issued by Colony Capital Operating Company, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.75% Exchangeable Senior Notes
|
|
July 2020
|
|
July 15, 2025
|
|
5.750
|
%
|
|
2.30
|
|
|
434.7826
|
|
|
130,435
|
|
|
July 21, 2023
|
|
300,000
|
|
|
300,000
|
|
|
Issued by NRF Holdco, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.375% Exchangeable Senior Notes
|
|
June 2013
|
|
June 15, 2033
|
|
5.375
|
%
|
|
12.04
|
|
|
83.0837
|
|
|
1,130
|
|
|
June 15, 2023
|
|
13,605
|
|
|
13,605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
513,605
|
|
|
$
|
545,107
|
|
__________
(1) The conversion or exchange rate for the senior notes is subject to periodic adjustments to reflect certain carried-forward adjustments relating to common stock splits, reverse stock splits, common stock adjustments in connection with spin-offs and cumulative cash dividends paid on the Company's common stock since the issuances of the respective senior notes. The conversion or exchange ratios are presented in shares of common stock per $1,000 principal of each senior note.
The senior notes mature on their respective due dates, unless earlier redeemed, repurchased, converted or exchanged, as applicable. The outstanding senior notes are convertible or exchangeable at any time by holders of such notes into shares of the Company’s common stock at the applicable conversion or exchange rate, which is subject to adjustment upon occurrence of certain events. In the case of the 5.375% exchangeable senior notes, NRF Holdco may elect to settle a holder’s exchange into cash, the Company’s common stock or a combination thereof.
To the extent certain trading conditions of the Company’s common stock are met, the senior notes are redeemable by the applicable issuer thereof in whole or in part for cash at any time on or after their respective earliest redemption dates at a redemption price equal to 100% of the principal amount of such senior notes being redeemed, plus accrued and unpaid interest (if any) up to, but excluding, the redemption date. In addition, prior to June 15, 2023 and subject to certain trading conditions of the Company’s common stock, NRF Holdco may redeem its 5.375% exchangeable senior notes at a make-whole redemption price.
In the event of certain change in control transactions and, for the 5.375% exchangeable senior notes only, on each of June 15, 2023 and June 15, 2028, holders of the senior notes have the right to require the applicable issuer to purchase all or part of such holder's senior notes for cash in accordance with terms of the governing documents of the respective senior notes.
Repurchase and Repayment of Senior Notes
The 3.875% convertible senior notes were fully extinguished following a $31.5 million repayment upon maturity in January 2021 and a $371.0 million repurchase in the third quarter of 2020, primarily funded by net proceeds from the July 2020 issuance of the 5.75% exchangeable senior notes by the Operating Company.
Secured Debt
These are primarily investment level financing, which are non-recourse to the Company, and secured by underlying commercial real estate and mortgage loans receivable.
In March 2021 and October 2020, DataBank and Vantage SDC, the Company's subsidiaries in the Digital Operating segment, raised $657.9 million and $1.3 billion of securitized notes at blended fixed rates of 2.3% and 1.8%, with 5 years and 6 years maturity, respectively. In both instances, the proceeds were applied principally to refinance outstanding debt, which meaningfully reduced the overall cost of debt and extended debt maturities at DataBank and Vantage SDC.
Junior Subordinated Debt
Trust preferred securities ("TruPS") were previously issued in private placement offerings by subsidiaries of NRF Holdco, LLC (the "Issuer," a subsidiary of Colony Capital, Inc.), which were formed as statutory trusts, NorthStar Realty Finance Trust I through VIII (the “Trusts”). The sole assets of the Trusts consist of a like amount of junior subordinated notes issued by the Issuer at the time of the offerings (the "Junior Notes"). Neither the Company nor the OP is an obligor or guarantor on the Junior Notes or the TruPS.
The Issuer may redeem the Junior Notes at par, in whole or in part, for cash, after five years. To the extent the Issuer redeems the Junior Notes, the Trusts are required to redeem a corresponding amount of TruPS. The ability of the Trusts to pay dividends depends on the receipt of interest payments on the Junior Notes. The Issuer has the right, pursuant to certain qualifications and covenants, to defer payments of interest on the Junior Notes issued to NorthStar Realty Finance Trust I through III for up to six consecutive quarters. If payment of interest on the Junior Notes is deferred, the Trusts will defer the quarterly distributions on the TruPS for a corresponding period. Additional interest accrues on deferred payments at the annual rate payable on the Junior Notes, compounded quarterly.
10. Fair Value
Recurring Fair Values
The table below presents a summary of financial assets and financial liabilities carried at fair value on a recurring basis, including financial instruments for which the fair value option was elected, but excluding financial assets under the NAV practical expedient, categorized into the three tier fair value hierarchy that is prioritized based upon the level of transparency in inputs used in the valuation techniques, as follows:
Level 1—Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2—Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in non-active markets, or valuation techniques utilizing inputs that are derived principally from or corroborated by observable data directly or indirectly for substantially the full term of the financial instrument.
Level 3—At least one assumption or input is unobservable and it is significant to the fair value measurement, requiring significant management judgment or estimate.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement Hierarchy
|
|
(In thousands)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
March 31, 2021
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Marketable equity securities
|
|
$
|
129,103
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
129,103
|
|
|
AFS debt securities
|
|
—
|
|
|
—
|
|
|
34,719
|
|
|
34,719
|
|
|
Other assets—derivative assets
|
|
—
|
|
|
4,280
|
|
|
—
|
|
|
4,280
|
|
|
Fair Value Option:
|
|
|
|
|
|
|
|
|
|
Loans held for investment
|
|
—
|
|
|
—
|
|
|
85,272
|
|
|
85,272
|
|
|
Loans held for disposition
|
|
—
|
|
|
—
|
|
|
977,759
|
|
|
977,759
|
|
|
Equity method investments
|
|
—
|
|
|
—
|
|
|
39,342
|
|
|
39,342
|
|
|
Equity method investments held for disposition
|
|
—
|
|
|
—
|
|
|
115,161
|
|
|
115,161
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Other liabilities—derivative liabilities
|
|
—
|
|
|
1,216
|
|
|
—
|
|
|
1,216
|
|
|
Other liabilities—settlement liability
|
|
—
|
|
|
—
|
|
|
36,939
|
|
|
36,939
|
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Marketable equity securities
|
|
$
|
218,485
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
218,485
|
|
|
AFS debt securities
|
|
—
|
|
|
—
|
|
|
28,576
|
|
|
28,576
|
|
|
Other assets—derivative assets
|
|
—
|
|
|
99
|
|
|
—
|
|
|
99
|
|
|
Fair Value Option:
|
|
|
|
|
|
|
|
|
|
Loans held for investment
|
|
—
|
|
|
—
|
|
|
84,030
|
|
|
84,030
|
|
|
Loans held for disposition
|
|
—
|
|
|
—
|
|
|
1,211,307
|
|
|
1,211,307
|
|
|
Equity method investments
|
|
—
|
|
|
—
|
|
|
31,012
|
|
|
31,012
|
|
|
Equity method investments held for disposition
|
|
—
|
|
|
—
|
|
|
150,787
|
|
|
150,787
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Other liabilities—derivative liabilities
|
|
—
|
|
|
103,772
|
|
|
—
|
|
|
103,772
|
|
|
Other liabilities—settlement liability
|
|
—
|
|
|
—
|
|
|
24,285
|
|
|
24,285
|
|
Marketable Equity Securities
Marketable equity securities consist of publicly traded equity securities held by private open-end funds consolidated by the Company and prior to January 2021, equity investment in a third party mutual fund. These marketable equity securities are valued based upon listed prices in active markets and classified as Level 1 of the fair value hierarchy.
Debt Securities
Fair value of N-Star CDO bonds are determined using an internal price interpolated based upon third party prices of the senior N-Star CDO bonds of the respective CDOs, and applying the Company's knowledge of the underlying collateral and recent trades, if any within the securitizations. All N-Star CDO bonds are classified as Level 3 of the fair value hierarchy.
Derivatives
The Company's derivative instruments generally consist of: (i) foreign currency put options, forward contracts and costless collars to hedge the foreign currency exposure of certain investments in foreign subsidiaries or equity method joint ventures (in EUR and in GBP), with notional amounts and termination dates based upon the anticipated return of capital from these investments; and (ii) interest rate caps to limit the exposure to changes in interest rates on various floating rate debt obligations (indexed primarily to LIBOR and to a lesser extent, EURIBOR and GBP LIBOR). These derivative contracts may be designated as qualifying hedge accounting relationships, specifically as net investment hedges and cash flow hedges, respectively. At March 31, 2021 and December 31, 2020, notional amounts aggregated to the equivalent of $427.1 million and $350.5 million, respectively, for foreign exchange contracts, and the equivalent of $2.8 billion and $4.6 billion, respectively, for interest rate contracts, all of which were composed predominantly of non-designated economic hedges. The derivative instruments are subject to master netting arrangements with counterparties that allow the Company to offset the settlement of derivative assets and liabilities in the same currency by instrument type or, in the event of default by the counterparty, to offset all derivative assets and liabilities with the same counterparty.
Notwithstanding the conditions for right of offset may have been met, the Company presents derivative assets and liabilities with the same counterparty on a gross basis on the consolidated balance sheets.
Realized and unrealized gains and losses on derivative instruments are recorded in other gain (loss) on the consolidated statement of operations, other than interest expense, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
(In thousands)
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
Foreign currency contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain transferred from AOCI to earnings (1)
|
|
|
|
|
|
$
|
—
|
|
|
$
|
1,502
|
|
|
|
|
Unrealized loss in earnings on non-designated contracts
|
|
|
|
|
|
(245)
|
|
|
—
|
|
|
|
|
Interest rate contracts:
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense on designated contracts (2)
|
|
|
|
|
|
20
|
|
|
2
|
|
|
|
|
Unrealized gain (loss) in earnings on non-designated contracts
|
|
|
|
|
|
(16)
|
|
|
179
|
|
|
|
|
Realized loss transferred from AOCI to earnings
|
|
|
|
|
|
(1,292)
|
|
|
—
|
|
|
|
__________
(1) The portion of derivative notional that is in excess of the beginning balance of the foreign denominated net investment is dedesignated upon a reassessment of the effectiveness of net investment hedges at period end.
(2) Represents amortization of the cost of designated interest rate caps to interest expense based upon expected hedged interest payments on variable
rate debt.
Prior to January 2021, the Company had entered into a series of forward contracts on its shares in a third party real estate mutual fund in an aggregate notional amount of $119 million and a series of swap contracts with the same counterparty to pay the return of the Dow Jones U.S. Select REIT Total Return Index. The forward and swap contracts were settled upon expiration in January 2021 through delivery of all of the Company's shares in the mutual fund, realizing an immaterial net loss upon settlement. The forwards and swaps were not designated accounting hedges. At December 31, 2020, the forwards and swaps were in a liability position of $102.7 million and $0.1 million, respectively. During the three months ended March 31, 2020, the forwards and swaps had realized and unrealized fair value gains totaling $34.5 million, which was partially offset by a decrease in the NAV of the mutual fund of $33.1 million, both of which were recorded in other loss on the consolidated statement of operations.
The Company's foreign currency and interest rate contracts are generally traded over-the-counter, and are valued using a third-party service provider. Quotations on over-the-counter derivatives are not adjusted and are generally valued using observable inputs such as contractual cash flows, yield curve, foreign currency rates and credit spreads, and are classified as Level 2 of the fair value hierarchy. Although credit valuation adjustments, such as the risk of default, rely on Level 3 inputs, these inputs are not significant to the overall valuation of the derivatives. As a result, derivative valuations in their entirety are classified as Level 2 of the fair value hierarchy.
Settlement Liability
In March 2020, the Company entered into a cooperation agreement with Blackwells Capital LLC ("Blackwells"), a stockholder of the Company. Pursuant to the cooperation agreement, Blackwells agreed to a standstill in its proxy contest with the Company, and to abide by certain voting commitments, including a standstill with respect to the Company until the expiration of the agreement in March 2030 and voting in favor of the Board of Director’s recommendations until the third anniversary of the agreement.
Contemporaneously, the Company and Blackwells entered into a joint venture arrangement for the purpose of acquiring, holding and disposing of the Company's class A common stock. Pursuant to the arrangement, the Company contributed its class A common stock, valued at $14.7 million by the venture, and Blackwells contributed $1.47 million of cash that was then distributed to the Company, resulting in a net capital contribution of $13.23 million by the Company in the venture. All of the class A common stock held in the venture had been repurchased by the Company in March 2020 (Note 12). Blackwells may cause the arrangement to be dissolved and all underlying assets distributed at any time, and the Company may do the same after three years. Distributions to be made through the joint venture arrangement effectively represent a settlement of the proxy contest with Blackwells. The initial fair value of the arrangement was recorded as a settlement loss on the statement of operations, with a corresponding liability on the balance sheet, subject to remeasurement at each period end.
The settlement liability is a fair value measure of the disproportionate allocation of future profits distribution to Blackwells pursuant to the joint venture arrangement. Such profits will be derived from dividend payments and any appreciation in value of the Company's class A common stock, allocated between the Company and Blackwells based upon specified return hurdles. The profits distribution is payable in cash, the Company's class A common stock or a
combination of both at the Company's election. The initial fair value of the arrangement was recorded as a settlement loss on the statement of operations with a corresponding settlement liability on the consolidated balance sheet. The settlement liability, classified as a Level 3 fair value, is measured using a Monte Carlo simulation under a risk-neutral premise, assuming that the final distribution occurs at the end of the third year in March 2023, and is remeasured at each reporting period. At March 31, 2021, the settlement liability was valued at $36.9 million, applying the following assumptions: (a) expected volatility of the Company's class A common stock of 71.9% based upon a combination of historical and implied volatility of the Company's class A common stock; (b) zero expected dividend yield given the Company's suspension of its common stock dividend beginning the second quarter of 2020; and (c) risk free rate of 0.16% per annum based upon a compounded zero-coupon U.S. Treasury yield. The settlement liability increased approximately $12.7 million in the three months ended March 31, 2021, recorded as other loss on the consolidated statement of operations.
Fair Value Option
Equity Method Investments
Equity method investments for which the fair value option was elected are carried at fair value on a recurring basis. Fair values are determined using either indicative sales price, NAV of the underlying funds, or discounted future cash flows based upon expected income and realization events of the underlying assets. Fair value of equity method investments are classified as Level 3 of the fair value hierarchy. Changes in fair value of equity method investments under the fair value option are recorded in equity method earnings (losses).
Loans Receivable
Loans receivable consist of mortgage loans, mezzanine loans and non-mortgage loans carried at fair value under the fair value option. Loans held for disposition are measured at their selling price. Fair value of loans held for investment is determined by comparing the current yield to the estimated yield of newly originated loans with similar credit risk or the market yield at which a third party might expect to purchase such investment, or based upon discounted cash flow projections of principal and interest expected to be collected, which include, but are not limited to, consideration of the financial standing of the borrower or sponsor as well as operating results and/or value of the underlying collateral.
Loans that are 90 days or more past due as to principal or interest, or where reasonable doubt exists as to timely collection, are generally considered nonperforming and placed on nonaccrual status, as presented in the table below. Such loans include distressed loan portfolios that are held for disposition, previously acquired by the Company at a discount (classified as purchased credit-impaired loans prior to the election of fair value option).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
(In thousands)
|
|
Fair Value
|
|
Unpaid Principal Balance
|
|
Fair Value less Unpaid Principal Balance
|
|
Fair Value
|
|
Unpaid Principal Balance
|
|
Fair Value less Unpaid Principal Balance
|
|
90 days or more past due or nonaccrual
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans held for investment (1)
|
|
$
|
48,449
|
|
|
$
|
43,374
|
|
|
$
|
5,075
|
|
|
$
|
47,233
|
|
|
$
|
43,007
|
|
|
$
|
4,226
|
|
|
Loans held for disposition
|
|
687,944
|
|
|
2,042,026
|
|
|
(1,354,082)
|
|
|
825,972
|
|
|
2,116,531
|
|
|
(1,290,559)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
__________
(1) Fair value includes accrued interest that is currently expected to be collected.
Level 3 Recurring Fair Values
Quantitative information about recurring Level 3 fair value assets are as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation Technique
|
|
Key Unobservable Inputs
|
|
Input Value
|
|
Effect on Fair Value from Increase in Input Value (2)
|
|
Financial Instrument
|
|
Fair Value
(In thousands)
|
|
|
|
Weighted Average(1)
(Range)
|
|
|
March 31, 2021
|
|
|
|
|
|
|
|
|
|
|
|
AFS debt securities
|
|
$
|
34,719
|
|
|
Discounted cash flows
|
|
Discount rate
|
|
29.3%
(18.3% - 57.8%)
|
|
Decrease
|
|
Fair Value Option:
|
|
|
|
|
|
|
|
|
|
|
|
Loans held for investment
|
|
85,272
|
|
|
Discounted cash flows
|
|
Discount rate
|
|
8.3%
(7.2% - 8.8%)
|
|
Decrease
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans held for disposition
|
|
977,759
|
|
|
Transaction price(4)
|
|
N/A
|
|
N/A
|
|
N/A
|
|
Equity method investments—third party private equity funds
|
|
2,542
|
|
|
NAV(3)
|
|
N/A
|
|
N/A
|
|
N/A
|
|
Equity method investments—other
|
|
36,800
|
|
|
Discounted cash flows
|
|
Discount rate
|
|
25.0%
|
|
Decrease
|
|
Equity method investments held for disposition
|
|
115,161
|
|
|
Transaction price(4)
|
|
N/A
|
|
N/A
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
AFS debt securities
|
|
$
|
28,576
|
|
|
Discounted cash flows
|
|
Discount rate
|
|
28.9%
(18.3% - 57.8%)
|
|
Decrease
|
|
Fair Value Option:
|
|
|
|
|
|
|
|
|
|
|
|
Loans held for investment
|
|
84,030
|
|
|
Discounted cash flows
|
|
Discount rate
|
|
7.9%
(6.9% - 8.9%)
|
|
Decrease
|
|
Loans held for disposition
|
|
1,211,307
|
|
|
Discounted cash flows
|
|
Discount rate
|
|
13.7%
(9.0% - 25.7%)
|
|
Decrease
|
|
Equity method investments—third party private equity funds
|
|
2,472
|
|
|
NAV(3)
|
|
N/A
|
|
N/A
|
|
N/A
|
|
Equity method investments—other
|
|
28,540
|
|
|
Discounted cash flows
|
|
Discount rate
|
|
30.0%
|
|
Decrease
|
|
Equity method investments held for disposition
|
|
8,383
|
|
|
Discounted cash flows
|
|
Discount rate
|
|
19.3%
(19.0% - 20.0%)
|
|
Decrease
|
|
Equity method investments held for disposition
|
|
142,404
|
|
|
Transaction price(4)
|
|
N/A
|
|
N/A
|
|
N/A
|
__________
(1) Weighted average discount rates are calculated based upon undiscounted cash flows.
(2) Represents the directional change in fair value that would result from an increase to the corresponding unobservable input. A decrease to the unobservable input would have the reverse effect. Significant increases or decreases in these inputs in isolation could result in significantly higher or lower fair value measures.
(3) Fair value was estimated based upon underlying NAV of the respective funds on a quarter lag, adjusted as deemed appropriate by management, considering the cash flows provided by the general partners of the funds and the implied yields of the funds.
(4) Based upon actual or indicative transaction values of the respective loans, investments or underlying assets of the investee. At December 31, 2020, acquisition price was deemed to approximate fair value for investee engaged in real estate development during the development stage.
The following table presents changes in recurring Level 3 fair value assets. Loans receivable and equity method investments under the fair value option are predominantly held for disposition. Realized and unrealized gains (losses) are included in AOCI for AFS debt securities and in other gain (loss) on the consolidated statement of operations for other assets carried at fair value.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Option
|
|
|
|
(In thousands)
|
|
AFS Debt Securities
|
|
Loans Held for Investment and Held for Disposition
|
|
Equity Method Investments (including Held for Disposition)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value at December 31, 2019
|
|
$
|
54,859
|
|
|
$
|
—
|
|
|
$
|
222,875
|
|
|
|
|
Election of fair value option on January 1, 2020
|
|
—
|
|
|
1,556,131
|
|
|
—
|
|
|
|
|
Reclassification of accrued interest on January 1, 2020
|
|
—
|
|
|
13,504
|
|
|
—
|
|
|
|
|
Purchases, drawdowns, contributions and accretion
|
|
594
|
|
|
74,236
|
|
|
762
|
|
|
|
|
Paydowns, distributions and sales
|
|
(1,651)
|
|
|
(49,133)
|
|
|
(781)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in accrued interest and capitalization of paid-in-kind interest
|
|
—
|
|
|
11,849
|
|
|
—
|
|
|
|
|
Allowance for credit losses
|
|
(816)
|
|
|
—
|
|
|
—
|
|
|
|
|
Realized and unrealized gains (losses) in earnings, net
|
|
—
|
|
|
3,105
|
|
|
(179)
|
|
|
|
|
Other comprehensive income (loss) (1)
|
|
1,488
|
|
|
(21,265)
|
|
|
(4,337)
|
|
|
|
|
Fair value at March 31, 2020
|
|
$
|
54,474
|
|
|
$
|
1,588,427
|
|
|
$
|
218,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gains (losses) on instruments held at March 31, 2020
|
|
|
|
|
|
|
|
|
|
In earnings
|
|
$
|
(816)
|
|
|
$
|
3,105
|
|
|
$
|
(179)
|
|
|
|
|
In other comprehensive income (loss)
|
|
$
|
1,488
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value at December 31, 2020
|
|
$
|
28,576
|
|
|
$
|
1,295,337
|
|
|
$
|
181,799
|
|
|
|
|
Purchases, drawdowns, contributions and accretion
|
|
10,337
|
|
|
3,631
|
|
|
—
|
|
|
|
|
Paydowns, distributions and sales
|
|
(691)
|
|
|
(8,798)
|
|
|
(6,953)
|
|
|
|
|
Change in accrued interest and capitalization of paid-in-kind interest
|
|
—
|
|
|
4,745
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses
|
|
(194)
|
|
|
—
|
|
|
—
|
|
|
|
|
Realized and unrealized gains (losses) in earnings, net
|
|
—
|
|
|
(199,082)
|
|
|
(15,635)
|
|
|
|
|
Other comprehensive income (loss) (1)
|
|
(3,309)
|
|
|
(32,802)
|
|
|
(4,708)
|
|
|
|
|
Fair value at March 31, 2021
|
|
$
|
34,719
|
|
|
$
|
1,063,031
|
|
|
$
|
154,503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gains (losses) on instruments held at March 31, 2021
|
|
|
|
|
|
|
|
|
|
In earnings
|
|
$
|
(194)
|
|
|
$
|
(199,082)
|
|
|
$
|
(16,560)
|
|
|
|
|
In other comprehensive income (loss)
|
|
$
|
(3,309)
|
|
|
N/A
|
|
N/A
|
|
|
__________
(1) Amounts recorded in OCI for loans receivable and equity method investments represent foreign currency translation differences on the Company's foreign subsidiaries that hold the respective foreign currency denominated investments.
Investments Carried at Fair Value Using Net Asset Value
Investments in Company-sponsored private fund and non-traded REIT, and limited partnership interest in a third party real estate private fund that is held for disposition are valued using NAV of the respective vehicles.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
(In thousands)
|
|
Fair Value
|
|
Unfunded Commitments
|
|
Fair Value
|
|
Unfunded Commitments
|
|
Private fund—real estate
|
|
$
|
13,416
|
|
|
$
|
8,026
|
|
|
$
|
15,680
|
|
|
$
|
8,026
|
|
|
Non-traded REIT—real estate
|
|
20,772
|
|
|
—
|
|
|
18,272
|
|
|
—
|
|
|
Private fund—emerging market private equity
|
|
1,909
|
|
|
—
|
|
|
2,224
|
|
|
—
|
|
The Company's interests in the private funds are not subject to redemption, with distributions to be received through liquidation of underlying investments of the funds. The private funds each have eight and ten year lives, respectively, at inception, both of which may be extended in one year increments up to two years.
No secondary market currently exists for shares of the non-traded REIT and the Company does not currently expect to seek liquidity of its shares of the non-traded REIT. Subject to then-existing market conditions, the board of directors of the non-traded REIT, along with the Company, as sponsor, are expected to consider alternatives for providing liquidity to the non-traded REIT shares beginning 2021, five years from completion of the offering stage, but with no definitive date by
which it must do so. In addition, the Company has agreed that any right to have its shares redeemed is subordinated to third party stockholders for so long as its advisory agreement is in effect.
Nonrecurring Fair Values
The Company measures fair value of certain assets on a nonrecurring basis when events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Adjustments to fair value generally result from the application of lower of amortized cost or fair value accounting for assets held for disposition or otherwise, write-down of asset values due to impairment. Impairments are discussed in Note 4 for real estate, Notes 5 and 14 for equity method investments, and Notes 6 and 14 for investment management intangible assets, including goodwill.
Fair Value Information on Financial Instruments Reported at Cost
Carrying amounts and estimated fair value of financial instruments reported at amortized cost are presented below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements
|
|
Carrying Value
|
|
(In thousands)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
March 31, 2021
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Debt at amortized cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible and exchangeable senior notes
|
|
$
|
1,076,175
|
|
|
$
|
13,095
|
|
|
$
|
—
|
|
|
$
|
1,089,270
|
|
|
$
|
504,981
|
|
|
Secured debt
|
|
—
|
|
|
—
|
|
|
6,043,875
|
|
|
6,043,875
|
|
|
6,167,692
|
|
|
Secured debt related to assets held for disposition
|
|
—
|
|
|
—
|
|
|
1,691,130
|
|
|
1,691,130
|
|
|
1,702,425
|
|
|
Junior subordinated debt
|
|
—
|
|
|
—
|
|
|
227,697
|
|
|
227,697
|
|
|
204,618
|
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Debt at amortized cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible and exchangeable senior notes
|
|
$
|
898,231
|
|
|
$
|
13,095
|
|
|
$
|
—
|
|
|
$
|
911,326
|
|
|
$
|
535,897
|
|
|
Secured debt
|
|
—
|
|
|
—
|
|
|
6,003,375
|
|
|
6,003,375
|
|
|
6,132,605
|
|
|
Secured debt related to assets held for disposition
|
|
—
|
|
|
—
|
|
|
4,258,019
|
|
|
4,258,019
|
|
|
4,411,467
|
|
|
Junior subordinated debt
|
|
—
|
|
|
—
|
|
|
201,018
|
|
|
201,018
|
|
|
203,848
|
|
Debt—Senior notes were valued using the last trade price in active markets and unadjusted quoted prices in non-active markets. Fair value of the corporate credit facility and secured debt was estimated by discounting expected future cash outlays at interest rates available to the Company for similar instruments. Junior subordinated debt was valued based upon unadjusted quotations from a third party valuation firm, with such quotes derived using a combination of internal valuation models, comparable trades in non-active markets and other market data.
Other—The carrying values of cash, accounts receivable, due from and to affiliates, interest payable and accounts payable approximate fair value due to their short term nature and credit risk, if any, are negligible.
11. Variable Interest Entities
A VIE is an entity that lacks sufficient equity to finance its activities without additional subordinated financial support from other parties, or whose equity holders lack the characteristics of a controlling financial interest. The following discusses the Company's involvement with VIEs where the Company is the primary beneficiary and consolidates the VIEs or where the Company is not the primary beneficiary and does not consolidate the VIEs.
Operating Subsidiary
The Company's operating subsidiary, OP, is a limited liability company that has governing provisions that are the functional equivalent of a limited partnership. The Company holds the majority of membership interest in OP, acts as the managing member of OP and exercises full responsibility, discretion and control over the day-to-day management of OP. The noncontrolling interests in OP do not have substantive liquidation rights, substantive kick-out rights without cause, or substantive participating rights that could be exercised by a simple majority of noncontrolling interest members (including by such a member unilaterally). The absence of such rights, which represent voting rights in a limited partnership equivalent structure, would render OP to be a VIE. The Company, as managing member, has the power to direct the core activities of OP that most significantly affect OP's performance, and through its majority interest in OP, has both the right to receive benefits from and the obligation to absorb losses of OP. Accordingly, the Company is the primary beneficiary of OP and consolidates OP. As the Company conducts its business and holds its assets and liabilities through OP, the total assets and liabilities of OP represent substantially all of the total consolidated assets and liabilities of the Company.
Company-Sponsored Private Funds
The Company sponsors private funds and other investment vehicles as general partner for the purpose of providing investment management services in exchange for management fees and performance-based fees. These private funds are established as limited partnerships or equivalent structures. Limited partners of the private funds do not have either substantive liquidation rights, or substantive kick-out rights without cause, or substantive participating rights that could be exercised by a simple majority of limited partners or by a single limited partner. Accordingly, the absence of such rights, which represent voting rights in a limited partnership, results in the private funds being considered VIEs. The nature of the Company's involvement with its sponsored funds comprise fee arrangements and equity interests. The fee arrangements are commensurate with the level of management services provided by the Company, and contain terms and conditions that are customary to similar at-market fee arrangements.
Consolidated Company-Sponsored Private Funds—The Company currently consolidates sponsored private funds in which it has more than an insignificant equity interest in the fund as general partner. As a result, the Company is considered to be acting in the capacity of a principal of the sponsored private fund and is therefore the primary beneficiary of the fund. The Company’s exposure is limited to the value of its outstanding investment in the consolidated private funds of $47.1 million at March 31, 2021 and $46.5 million at December 31, 2020. The Company, as general partner, is not obligated to provide any financial support to the consolidated private funds. At March 31, 2021 and December 31, 2020, the consolidated private funds had total assets of $192.2 million and $172.2 million, respectively, and total liabilities of $49.0 million and $41.8 million, respectively, made up primarily of cash, marketable equity securities and unsettled trades.
Unconsolidated Company-Sponsored Private Funds—The Company does not consolidate its sponsored private funds where it has insignificant direct equity interests or capital commitments to these funds as general partner. The Company may invest alongside certain of its sponsored private funds through joint ventures between the Company and these funds, or the Company may have capital commitments to its sponsored private funds that are satisfied directly through the co-investment joint ventures as an affiliate of the general partner. In these instances, the co-investment joint ventures are consolidated by the Company. As the Company's direct equity interests in its sponsored private funds as general partner absorb insignificant variability, the Company is considered to be acting in the capacity of an agent of these funds and is therefore not the primary beneficiary of these funds. The Company accounts for its equity interests in unconsolidated sponsored private funds under the equity method. The Company's maximum exposure to loss is limited to the carrying value of its investment in the unconsolidated sponsored private funds, totaling $221.9 million at March 31, 2021 and $214.4 million at December 31, 2020, included within equity and debt investments.
Securitizations
The Company previously securitized loans receivable and CRE debt securities using VIEs. Upon securitization, the Company had retained beneficial interests in the securitization vehicles, usually in the form of equity tranches or subordinate securities. The Company also acquired securities issued by securitization trusts that are VIEs. The securitization vehicles were structured as pass-through entities that receive principal and interest on the underlying mortgage loans and debt securities and distribute those payments to the holders of the notes, certificates or bonds issued by the securitization vehicles. The loans and debt securities were transferred into securitization vehicles such that these assets are restricted and legally isolated from the creditors of the Company, and therefore are not available to satisfy the Company's obligations but only the obligations of the securitization vehicles. The obligations of the securitization vehicles did not have any recourse to the general credit of the Company and its other subsidiaries.
Unconsolidated Securitizations—The Company does not consolidate the assets and liabilities of CDOs in which the Company has an interest but does not retain the collateral management function. NRF Holdco had previously delegated the collateral management rights for certain sponsored N-Star CDOs and third party-sponsored CDOs to a third party collateral manager or collateral manager delegate who is entitled to a percentage of the senior and subordinate collateral management fees. The Company continues to receive fees as named collateral manager or collateral manager delegate and retained administrative responsibilities. The Company determined that the fees paid to the third party collateral manager or collateral manager delegate represent a variable interest in the CDOs and that the third party is acting as a principal. The Company concluded that it does not have the power to direct the activities that most significantly impact the economic performance of these CDOs, which include but are not limited to, the ability to sell distressed collateral, and therefore the Company is not the primary beneficiary of such CDOs and does not consolidate these CDOs. The Company’s exposure to loss is limited to its investment in these unconsolidated CDOs, comprising CDO bonds, which aggregate to $31.3 million at March 31, 2021 and $21.9 million at December 31, 2020.
Trusts
The Trusts, wholly-owned subsidiaries of NRF Holdco, formed as statutory trusts, previously issued preferred securities and used the proceeds to purchase junior subordinated notes to evidence loans made to NRF Holdco (Note 9). The Company owns all of the common stock of the Trusts but does not consolidate the Trusts as the holders of the preferred securities issued by the Trusts are the primary beneficiaries of the Trusts. The Company accounts for its interest in the Trusts under the equity method and its maximum exposure to loss is limited to its investment carrying value of $3.7 million at March 31, 2021 and December 31, 2020, recorded in investments in unconsolidated ventures on the consolidated balance sheet. The junior subordinated notes are recorded as debt on the consolidated balance sheet.
12. Stockholders’ Equity
The table below summarizes the share activities of the Company's preferred and common stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
(In thousands)
|
|
Preferred Stock
|
|
Class A
Common Stock
|
|
Class B
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares outstanding at December 31, 2019
|
|
41,350
|
|
|
487,044
|
|
|
734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of common stock, net (1)
|
|
—
|
|
|
(12,733)
|
|
|
—
|
|
|
Equity-based compensation, net of forfeitures
|
|
—
|
|
|
7,646
|
|
|
—
|
|
|
Shares canceled for tax withholding on vested stock awards
|
|
—
|
|
|
(1,839)
|
|
|
—
|
|
|
Shares outstanding at March 31, 2020
|
|
41,350
|
|
|
480,118
|
|
|
734
|
|
|
|
|
|
|
|
|
|
|
Shares outstanding at December 31, 2020
|
|
41,350
|
|
|
483,406
|
|
|
734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued upon redemption of OP Units
|
|
—
|
|
|
5
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity-based compensation, net of forfeitures
|
|
—
|
|
|
4,839
|
|
|
—
|
|
|
Shares canceled for tax withholding on vested stock awards
|
|
—
|
|
|
(1,147)
|
|
|
—
|
|
|
Shares outstanding at March 31, 2021
|
|
41,350
|
|
|
487,103
|
|
|
734
|
|
__________
(1) Net of reissuance of 964,160 shares of class A common stock that had been repurchased by the Company during March 2020. Refer to discussion of settlement liability in Note 10.
Preferred Stock
In the event of a liquidation or dissolution of the Company, preferred stockholders have priority over common stockholders for payment of dividends and distribution of net assets.
The table below summarizes the preferred stock issued and outstanding at March 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Dividend Rate Per Annum
|
|
Initial Issuance Date
|
|
Shares Outstanding
(in thousands)
|
|
Par Value
(in thousands)
|
|
Liquidation Preference
(in thousands)
|
|
Earliest Redemption Date
|
|
Series G
|
|
7.5
|
%
|
|
June 2014
|
|
3,450
|
|
|
$
|
35
|
|
|
$
|
86,250
|
|
|
Currently redeemable
|
|
Series H
|
|
7.125
|
%
|
|
April 2015
|
|
11,500
|
|
|
115
|
|
|
287,500
|
|
|
Currently redeemable
|
|
Series I
|
|
7.15
|
%
|
|
June 2017
|
|
13,800
|
|
|
138
|
|
|
345,000
|
|
|
June 5, 2022
|
|
Series J
|
|
7.125
|
%
|
|
September 2017
|
|
12,600
|
|
|
126
|
|
|
315,000
|
|
|
September 22, 2022
|
|
|
|
|
|
|
|
41,350
|
|
|
$
|
414
|
|
|
$
|
1,033,750
|
|
|
|
All series of preferred stock are at parity with respect to dividends and distributions, including distributions upon liquidation, dissolution or winding up of the Company. Dividends on Series G, H, I and J of preferred stock are payable quarterly in arrears in January, April, July and October.
Each series of preferred stock is redeemable on or after the earliest redemption date for that series at $25.00 per share plus accrued and unpaid dividends (whether or not declared) exclusively at the Company’s option. The redemption period for each series of preferred stock is subject to the Company’s right under limited circumstances to redeem the preferred stock earlier in order to preserve its qualification as a REIT or upon the occurrence of a change of control (as defined in the articles supplementary relating to each series of preferred stock).
Preferred stock generally does not have any voting rights, except if the Company fails to pay the preferred dividends for six or more quarterly periods (whether or not consecutive). Under such circumstances, the preferred stock will be entitled to vote, together as a single class with any other series of parity stock upon which like voting rights have been conferred and are exercisable, to elect two additional directors to the Company’s board of directors, until all unpaid dividends have been paid or declared and set aside for payment. In addition, certain changes to the terms of any series of
preferred stock cannot be made without the affirmative vote of holders of at least two-thirds of the outstanding shares of each such series of preferred stock voting separately as a class for each series of preferred stock.
Redemption of Preferred Stock
In January 2020, the Company settled the December 2019 redemption of its outstanding Series B and Series E preferred stock for $402.9 million. All preferred stock redemptions were at $25.00 per share liquidation preference plus accrued and unpaid dividends prorated to their respective redemption dates. The excess or deficit of the $25.00 per share liquidation preference over the carrying value of the respective preferred stock redeemed results in a decrease or increase to net income attributable to common stockholders, respectively.
Common Stock
Except with respect to voting rights, class A common stock and class B common stock have the same rights and privileges and rank equally, share ratably in dividends and distributions, and are identical in all respects as to all matters. Class A common stock has one vote per share and class B common stock has thirty-six and one-half votes per share. This gives the holders of class B common stock a right to vote that reflects the aggregate outstanding non-voting economic interest in the Company (in the form of OP Units) attributable to class B common stock holders and therefore, does not provide any disproportionate voting rights. Class B common stock was issued as consideration in the Company's acquisition in April 2015 of the investment management business and operations of its former manager, which was previously controlled by the Company's former Executive Chairman. Each share of class B common stock shall convert automatically into one share of class A common stock if the former Executive Chairman or his beneficiaries directly or indirectly transfer beneficial ownership of class B common stock or OP Units held by them, other than to certain qualified transferees, which generally includes affiliates and employees. In addition, each holder of class B common stock has the right, at the holder’s option, to convert all or a portion of such holder’s class B common stock into an equal number of shares of class A common stock.
The Company suspended dividends on its class A common stock beginning with the second quarter of 2020. Under the terms of the Company's amended credit facility, the Company is restricted from paying common dividends other than to maintain the Company’s status as a REIT or to reduce income tax payments. The Company will continue to monitor its financial performance and liquidity position, and as economic conditions improve, the Company will reevaluate its dividend policy in consultation with its revolver lending group.
Common Stock Repurchases
During the first quarter of 2020, the Company repurchased 12,733,204 shares of its class A common stock at an aggregate cost of $24.6 million, or a weighted average price of $1.93 per share, pursuant to a $300 million share repurchase program that expired in May 2020. Effective June 29, 2020, the Company is restricted from repurchasing additional common shares, subject to certain exceptions, under the terms of its Credit Agreement (Note 9).
Dividend Reinvestment and Direct Stock Purchase Plan
The Company's Dividend Reinvestment and Direct Stock Purchase Plan (the “DRIP Plan”) provides existing common stockholders and other investors the opportunity to purchase shares (or additional shares, as applicable) of the Company's class A common stock by reinvesting some or all of the cash dividends received on their shares of the Company's class A common stock or making optional cash purchases within specified parameters. The DRIP Plan involves the acquisition of the Company's class A common stock either in the open market, directly from the Company as newly issued common stock, or in privately negotiated transactions with third parties. There were no shares of class A common stock acquired under the DRIP Plan in the form of new issuances in 2021 and 2020.
Accumulated Other Comprehensive Income (Loss)
The following tables present the changes in each component of AOCI attributable to stockholders and noncontrolling interests in investment entities, net of immaterial tax effect. AOCI attributable to noncontrolling interests in Operating Company is immaterial.
Changes in Components of AOCI—Stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Company's Share in AOCI of Equity Method Investments
|
|
Unrealized Gain (Loss) on AFS Debt Securities
|
|
Unrealized Gain (Loss) on Cash Flow Hedges
|
|
Foreign Currency Translation Gain (Loss)
|
|
Unrealized Gain (Loss) on Net Investment Hedges
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AOCI at December 31, 2019
|
|
$
|
9,281
|
|
|
$
|
7,823
|
|
|
$
|
(226)
|
|
|
$
|
139
|
|
|
$
|
30,651
|
|
|
$
|
47,668
|
|
|
Other comprehensive income (loss) before reclassifications
|
|
(23,850)
|
|
|
1,330
|
|
|
7
|
|
|
(24,929)
|
|
|
16,384
|
|
|
(31,058)
|
|
|
Amounts reclassified from AOCI
|
|
—
|
|
|
—
|
|
|
—
|
|
|
246
|
|
|
(634)
|
|
|
(388)
|
|
|
AOCI at March 31, 2020
|
|
$
|
(14,569)
|
|
|
$
|
9,153
|
|
|
$
|
(219)
|
|
|
$
|
(24,544)
|
|
|
$
|
46,401
|
|
|
$
|
16,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AOCI at December 31, 2020
|
|
$
|
17,718
|
|
|
$
|
6,072
|
|
|
$
|
(233)
|
|
|
$
|
52,832
|
|
|
$
|
45,734
|
|
|
$
|
122,123
|
|
|
Other comprehensive income (loss) before reclassifications
|
|
(2,438)
|
|
|
(2,992)
|
|
|
—
|
|
|
(19,631)
|
|
|
3,761
|
|
|
(21,300)
|
|
|
Amounts reclassified from AOCI
|
|
—
|
|
|
—
|
|
|
233
|
|
|
—
|
|
|
—
|
|
|
233
|
|
|
AOCI at March 31, 2021
|
|
$
|
15,280
|
|
|
$
|
3,080
|
|
|
$
|
—
|
|
|
$
|
33,201
|
|
|
$
|
49,495
|
|
|
$
|
101,056
|
|
Changes in Components of AOCI—Noncontrolling Interests in Investment Entities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Unrealized Gain (Loss) on Cash Flow Hedges
|
|
Foreign Currency Translation Gain (Loss)
|
|
Unrealized Gain (Loss) on Net Investment Hedges
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AOCI at December 31, 2019
|
|
$
|
(1,005)
|
|
|
$
|
(17,913)
|
|
|
$
|
10,659
|
|
|
$
|
(8,259)
|
|
|
Other comprehensive income (loss) before reclassifications
|
|
33
|
|
|
(32,958)
|
|
|
4,865
|
|
|
(28,060)
|
|
|
Amounts reclassified from AOCI
|
|
—
|
|
|
—
|
|
|
(799)
|
|
|
(799)
|
|
|
AOCI at March 31, 2020
|
|
$
|
(972)
|
|
|
$
|
(50,871)
|
|
|
$
|
14,725
|
|
|
$
|
(37,118)
|
|
|
|
|
|
|
|
|
|
|
|
|
AOCI at December 31, 2020
|
|
$
|
(1,030)
|
|
|
$
|
83,845
|
|
|
$
|
15,099
|
|
|
$
|
97,914
|
|
|
Other comprehensive income (loss) before reclassifications
|
|
—
|
|
|
(37,686)
|
|
|
—
|
|
|
(37,686)
|
|
|
Amounts reclassified from AOCI
|
|
1,030
|
|
|
—
|
|
|
—
|
|
|
1,030
|
|
|
AOCI at March 31, 2021
|
|
$
|
—
|
|
|
$
|
46,159
|
|
|
$
|
15,099
|
|
|
$
|
61,258
|
|
Reclassifications out of AOCI—Stockholders
Information about amounts reclassified out of AOCI attributable to stockholders by component is presented below. On the consolidated statement of operations, such amounts are included in other gain (loss) for continuing and discontinued operations, as applicable, except for amounts related to equity method investments, where applicable, are included in equity method losses in discontinued operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
Three Months Ended March 31,
|
|
|
|
Component of AOCI reclassified into earnings
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Release of foreign currency cumulative translation adjustments
|
|
|
|
|
|
$
|
—
|
|
|
$
|
(246)
|
|
|
|
|
|
|
Unrealized gain on dedesignated net investment hedges
|
|
|
|
|
|
—
|
|
|
634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized loss on cash flow hedges
|
|
|
|
|
|
(233)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13. Noncontrolling Interests
Redeemable Noncontrolling Interests
The following table presents the activity in redeemable noncontrolling interests in the Company's digital investment management business, as discussed below, and in open-end funds sponsored and consolidated by the Company.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
(In thousands)
|
|
2021
|
|
2020
|
|
|
|
Beginning balance
|
|
$
|
305,278
|
|
|
$
|
6,107
|
|
|
|
|
Contributions
|
|
10,640
|
|
|
250
|
|
|
|
|
Distributions and redemptions
|
|
(2,445)
|
|
|
(2,647)
|
|
|
|
|
Net income (loss)
|
|
2,449
|
|
|
(548)
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
315,922
|
|
|
$
|
3,162
|
|
|
|
Strategic Partnership in the Company's Digital Investment Management Business
In July 2020, the Company formed a strategic partnership with affiliates of Wafra, Inc. (collectively, "Wafra"), a private investment firm and a global partner for alternative asset managers, in which Wafra made a minority investment in substantially all of the Company's digital investment management business (as defined for purposes of this transaction, the "Digital IM Business"). The investment entitles Wafra to participate in approximately 31.5% of the net management fees and carried interest generated by the Digital IM Business.
Pursuant to this strategic partnership, Wafra has assumed directly and also indirectly through a participation interest $77.0 million of the Company's commitments to DCP I, and has committed $40.0 million to DCP II. Wafra has also agreed to make commitments to the Company's future digital funds and investment vehicles on a pro rata basis with the Company based on Wafra's percentage interest in the Digital IM Business, subject to certain caps.
In addition, the Company issued Wafra five warrants to purchase up to an aggregate of 5% (on a fully-diluted, post-transaction basis) of the Company’s class A common stock. Each warrant entitles Wafra to purchase up to 5,352,000 shares of the Company's class A common stock, with staggered strike prices between $2.43 and $6.00 for each warrant, exercisable until July 17, 2026. No warrants have been exercised to-date.
Wafra paid cash consideration of $253.6 million at closing in exchange for its investment in the Digital IM Business and for the warrants. As previously agreed, Wafra paid additional consideration of $29.9 million in the Digital IM Business in April 2021 based upon the Digital IM Business having achieved a minimum run-rate of earnings before interest, tax, depreciation and amortization ("EBITDA") of $72.0 million as of December 31, 2020.
Under certain circumstances following such time as the Digital IM Business comprises 90% or more of the Company's assets, the Company has agreed to use commercially reasonable efforts to facilitate the conversion of Wafra's interest into shares of the Company's class A common stock. There can be no assurances that such conversion would occur or on what terms and conditions such conversion would occur, including whether such conversion, if it did occur in the future, would have any adverse impact on the Company, the Company’s stock price, governance and other matters.
Wafra has customary minority rights and certain other structural protections designed to protect its interests, including redemption rights with respect to its investment in the Digital IM Business and its funded commitments in certain digital funds. Wafra's redemption rights will be triggered upon the occurrence of certain events, including key person or cause events under the governing documents of certain digital funds and for a limited period, upon Marc Ganzi, the Company's Chief Executive Officer, and Ben Jenkins, Chief Investment Officer of the Company's digital real estate and infrastructure platform, ceasing to fulfill certain time and attention commitments to the Digital IM business.
To further enhance the alignment of interests, the Company entered into an amended and restated restrictive covenant agreement with each of Mr. Ganzi and Mr. Jenkins, pursuant to which they agreed to certain enhanced non-solicitation provisions and extension of the term of existing non-competition agreements.
Wafra’s investment provides the Company with permanent capital to pursue strategic digital infrastructure investments and further grow the Digital IM Business.
Noncontrolling Interests in Operating Company
Certain current and former employees of the Company directly or indirectly own interests in OP, presented as noncontrolling interests in the Operating Company. Noncontrolling interests in OP have the right to require OP to redeem part or all of such member’s OP Units for cash based on the market value of an equivalent number of shares of class A common stock at the time of redemption, or at the Company's election as managing member of OP, through issuance of shares of class A common stock (registered or unregistered) on a one-for-one basis. At the end of each period, noncontrolling interests in OP is adjusted to reflect their ownership percentage in OP at the end of the period, through a reallocation between controlling and noncontrolling interests in OP.
Redemption of OP Units—The Company redeemed 5,147 OP Units during the three months ended March 31, 2021 and 2,184,395 OP Units during the year ended December 31, 2020, with the issuance of an equal number of shares of class A common stock on a one-for-one basis.
14. Discontinued Operations
Discontinued operations represent the following:
•Other—operations of substantially all of the OED investments and Other IM business in the Other segment, composed of non-digital real estate, real estate-related equity and debt investments, fee income from CLNC and the Company's private real estate credit funds and co-investment vehicles, and underlying compensation and administrative costs for managing these non-digital investments and investment vehicles.
•Hotel—operations of the Company's Hospitality segment and the THL Hotel Portfolio in the Other segment. In March 2021, the Company sold five of the six portfolios in the Hospitality segment and the Company's 55.6% interest in the THL Hotel Portfolio which was deconsolidated upon sale. One hotel portfolio remains in receivership.
•Industrial—operations of the bulk industrial portfolio prior to its sale in December 2020.
Income (loss) from discontinued operations is presented below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2021
|
|
Three Months Ended March 31, 2020
|
|
|
|
(In thousands)
|
|
Other
|
|
Hotel
|
|
Total
|
|
Other
|
|
Hotel
|
|
Industrial
|
|
Total
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating income
|
|
$
|
21,169
|
|
|
$
|
122,106
|
|
|
$
|
143,275
|
|
|
$
|
28,352
|
|
|
$
|
213,111
|
|
|
$
|
5,379
|
|
|
$
|
246,842
|
|
|
|
|
|
|
|
|
Interest income
|
|
4,132
|
|
|
—
|
|
|
4,132
|
|
|
30,262
|
|
|
—
|
|
|
17
|
|
|
30,279
|
|
|
|
|
|
|
|
|
Fee income
|
|
15,962
|
|
|
—
|
|
|
15,962
|
|
|
18,377
|
|
|
—
|
|
|
—
|
|
|
18,377
|
|
|
|
|
|
|
|
|
Other income
|
|
8,260
|
|
|
22
|
|
|
8,282
|
|
|
136
|
|
|
62
|
|
|
—
|
|
|
198
|
|
|
|
|
|
|
|
|
Revenues from discontinued operations
|
|
49,523
|
|
|
122,128
|
|
|
171,651
|
|
|
77,127
|
|
|
213,173
|
|
|
5,396
|
|
|
295,696
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating expense
|
|
13,253
|
|
|
112,829
|
|
|
126,082
|
|
|
12,612
|
|
|
167,543
|
|
|
1,473
|
|
|
181,628
|
|
|
|
|
|
|
|
|
Interest expense
|
|
15,700
|
|
|
62,318
|
|
|
78,018
|
|
|
10,002
|
|
|
49,971
|
|
|
2,406
|
|
|
62,379
|
|
|
|
|
|
|
|
|
Transaction-related, investment and servicing costs
|
|
5,894
|
|
|
1,794
|
|
|
7,688
|
|
|
4,711
|
|
|
1,560
|
|
|
—
|
|
|
6,271
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
11,670
|
|
|
7,668
|
|
|
19,338
|
|
|
13,062
|
|
|
47,561
|
|
|
633
|
|
|
61,256
|
|
|
|
|
|
|
|
|
Impairment loss
|
|
108,528
|
|
|
—
|
|
|
108,528
|
|
|
86,373
|
|
|
252,363
|
|
|
—
|
|
|
338,736
|
|
|
|
|
|
|
|
|
Compensation, including carried interest, and administrative expense (1)
|
|
20,557
|
|
|
2,410
|
|
|
22,967
|
|
|
2,282
|
|
|
2,033
|
|
|
414
|
|
|
4,729
|
|
|
|
|
|
|
|
|
Expenses from discontinued operations
|
|
175,602
|
|
|
187,019
|
|
|
362,621
|
|
|
129,042
|
|
|
521,031
|
|
|
4,926
|
|
|
654,999
|
|
|
|
|
|
|
|
|
Other income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of real estate
|
|
391
|
|
|
45,359
|
|
|
45,750
|
|
|
7,932
|
|
|
—
|
|
|
—
|
|
|
7,932
|
|
|
|
|
|
|
|
|
Other gain (loss), net
|
|
(200,683)
|
|
|
3
|
|
|
(200,680)
|
|
|
3,375
|
|
|
2,857
|
|
|
4
|
|
|
6,236
|
|
|
|
|
|
|
|
|
Equity method earnings (losses), including carried interest
|
|
(92,611)
|
|
|
—
|
|
|
(92,611)
|
|
|
109,170
|
|
|
—
|
|
|
—
|
|
|
109,170
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations before income taxes
|
|
(418,982)
|
|
|
(19,529)
|
|
|
(438,511)
|
|
|
68,562
|
|
|
(305,001)
|
|
|
474
|
|
|
(235,965)
|
|
|
|
|
|
|
|
|
Income tax benefit (expense)
|
|
2,613
|
|
|
(1,524)
|
|
|
1,089
|
|
|
(16,482)
|
|
|
2,589
|
|
|
—
|
|
|
(13,893)
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations
|
|
(416,369)
|
|
|
(21,053)
|
|
|
(437,422)
|
|
|
52,080
|
|
|
(302,412)
|
|
|
474
|
|
|
(249,858)
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interests in investment entities
|
|
(302,387)
|
|
|
3,370
|
|
|
(299,017)
|
|
|
35,116
|
|
|
(31,655)
|
|
|
170
|
|
|
3,631
|
|
|
|
|
|
|
|
|
Noncontrolling interests in Operating Company
|
|
(10,863)
|
|
|
(2,328)
|
|
|
(13,191)
|
|
|
1,674
|
|
|
(26,726)
|
|
|
30
|
|
|
(25,022)
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations attributable to Colony Capital, Inc.
|
|
$
|
(103,119)
|
|
|
$
|
(22,095)
|
|
|
$
|
(125,214)
|
|
|
$
|
15,290
|
|
|
$
|
(244,031)
|
|
|
$
|
274
|
|
|
$
|
(228,467)
|
|
|
|
|
|
|
|
__________
(1) Includes equity-based compensation of $7.3 million and a reversal of $0.4 million for the three months ended March 31, 2021 and 2020, respectively, of which $4.6 million and a reversal of $3.4 million, respectively, relates to CLNC awards that is grossed up in other income and compensation expense. Reversal was due to a decline in CLNC stock price (Note 17).
15. Earnings per Share
The following table provides the basic and diluted earnings per common share computations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
(In thousands, except per share data)
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
Net loss allocated to common stockholders
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
$
|
(190,177)
|
|
|
$
|
(154,199)
|
|
|
|
|
|
|
|
|
Loss from continuing operations attributable to noncontrolling interests
|
|
69,101
|
|
|
40,507
|
|
|
|
|
|
|
|
|
Loss from continuing operations attributable to Colony Capital, Inc.
|
|
(121,076)
|
|
|
(113,692)
|
|
|
|
|
|
|
|
|
Loss from discontinued operations attributable to Colony Capital, Inc.
|
|
(125,214)
|
|
|
(228,467)
|
|
|
|
|
|
|
|
|
Net loss attributable to Colony Capital, Inc.
|
|
(246,290)
|
|
|
(342,159)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred dividends
|
|
(18,516)
|
|
|
(19,474)
|
|
|
|
|
|
|
|
|
Net loss attributable to common stockholders
|
|
(264,806)
|
|
|
(361,633)
|
|
|
|
|
|
|
|
|
Net income allocated to participating securities
|
|
—
|
|
|
(1,250)
|
|
|
|
|
|
|
|
|
Net loss allocated to common stockholders—basic
|
|
(264,806)
|
|
|
(362,883)
|
|
|
|
|
|
|
|
|
Interest expense attributable to convertible and exchangeable notes (1)
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
Net loss allocated to common stockholders—diluted
|
|
$
|
(264,806)
|
|
|
$
|
(362,883)
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding—basic
|
|
474,899
|
|
|
479,106
|
|
|
|
|
|
|
|
|
Weighted average effect of dilutive shares (1)(2)(3)
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding—diluted
|
|
474,899
|
|
|
479,106
|
|
|
|
|
|
|
|
|
Loss per share—basic
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
$
|
(0.30)
|
|
|
$
|
(0.28)
|
|
|
|
|
|
|
|
|
Loss from discontinued operations
|
|
(0.26)
|
|
|
(0.48)
|
|
|
|
|
|
|
|
|
Net loss attributable to common stockholders per common share—basic
|
|
$
|
(0.56)
|
|
|
$
|
(0.76)
|
|
|
|
|
|
|
|
|
Loss per share—diluted
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
$
|
(0.30)
|
|
|
$
|
(0.28)
|
|
|
|
|
|
|
|
|
Loss from discontinued operations
|
|
(0.26)
|
|
|
(0.48)
|
|
|
|
|
|
|
|
|
Net loss attributable to common stockholders per common share—diluted
|
|
$
|
(0.56)
|
|
|
$
|
(0.76)
|
|
|
|
|
|
|
|
__________
(1) For the three months ended March 31, 2021 and 2020, excluded from the calculation of diluted earnings per share is the effect of adding back $7.7 million and $7.1 million of interest expense, respectively, and 144,576,000 and 38,112,100 of weighted average dilutive common share equivalents, respectively, for the assumed conversion or exchange of the Company's outstanding convertible and exchangeable notes, as their inclusion would be antidilutive.
(2) No unvested non-participating restricted shares were outstanding during the three months ended March 31, 2021 and 2020. The calculation of diluted earnings per share excludes the effect of class A common stock that are contingently issuable in relation to performance stock units (Note 17) with weighted average shares of 10,395,900 and 1,520,700 for the three months ended March 31, 2021 and 2020, respectively, as the effect would be antidilutive. Also excluded from the calculation of diluted earnings per share is the effect of class A common stock that are issuable to net settle the exercise of warrants (Note 13) with weighted average shares of 7,680,900 for the three months ended March 31, 2021 as the effect would be antidilutive.
(3) OP Units may be redeemed for registered or unregistered class A common stock on a one-for-one basis. At March 31, 2021 and 2020 there were 51,072,000 and 53,261,100 OP Units, respectively. OP Units would not be dilutive and were not included in the computation of diluted earnings per share for all periods presented.
16. Fee Income
The Company's real estate investment management platform manages capital on behalf of institutional and retail investors in private funds, non-traded REIT, and other investment vehicles for which the Company earns fee income.
Fee income, as presented below, excludes base management fees from CLNC (which was based upon 1.5% per annum of CLNC's stockholders' equity) and the Company's private real estate credit funds and co-investment vehicles, all of which are included in discontinued operations (Note 14).
The Company earns fee income from the following sources:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
(In thousands)
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
Institutional funds and other investment vehicles
|
|
|
|
|
|
$
|
30,200
|
|
|
$
|
20,562
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-traded REIT
|
|
|
|
|
|
2,769
|
|
|
4,431
|
|
|
|
|
Other
|
|
|
|
|
|
710
|
|
|
135
|
|
|
|
|
|
|
|
|
|
|
$
|
33,679
|
|
|
$
|
25,128
|
|
|
|
The following table presents the Company's fee income by type:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
(In thousands)
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
Management fees ($32,096 and $24,116 from affiliates, respectively)
|
|
|
|
|
|
$
|
32,096
|
|
|
$
|
24,116
|
|
|
|
|
Incentive fees
|
|
|
|
|
|
594
|
|
|
—
|
|
|
|
|
Other fee income—affiliates
|
|
|
|
|
|
989
|
|
|
1,012
|
|
|
|
|
Total fee income
|
|
|
|
|
|
$
|
33,679
|
|
|
$
|
25,128
|
|
|
|
Management Fees—The Company earns management fees for the day-to-day operations and administration of its managed private funds, non-traded REIT, and other investment vehicles, calculated as follows:
•Private Funds and similar investment vehicles—generally 0.45% to 1.50% per annum of investors' committed capital during commitment or investment period and thereafter, of contributed or invested capital; and
•Non-Traded REIT—1.5% per annum of most recently published NAV (as may be subsequently adjusted for any special distribution) for NorthStar Healthcare. $2.5 million per quarter of base management fee for NorthStar Healthcare is paid in shares of NorthStar Healthcare common stock at a price per share equal to its most recently published NAV per share (as may be subsequently adjusted for any special distribution).
Incentive Fees—Pursuant to the terms of a sub-advisory agreement, the Company manages a sub-account of a third party private fund and earns an incentive fee, but not management fees, based upon the returns of the sub-account, measured on a monthly basis, and subject to the recovery of any initial losses in the account that are allocated to the Company.
Other Fee Income—Other fees include primarily service fees for information technology, facilities and operational support provided to portfolio companies.
17. Equity-Based Compensation
The Colony Capital, Inc. 2014 Omnibus Stock Incentive Plan (the "Equity Incentive Plan") provides for the grant of restricted stock, performance stock units ("PSUs"), Long Term Incentive Plan ("LTIP") units, restricted stock units ("RSUs"), deferred stock units ("DSUs"), options, warrants or rights to purchase shares of the Company's common stock, cash incentives and other equity-based awards to the Company's officers, directors (including non-employee directors), employees, co-employees, consultants or advisors of the Company or of any parent or subsidiary who provides services to the Company. Shares reserved for the issuance of awards under the Equity Incentive Plan are subject to equitable adjustment upon the occurrence of certain corporate events, provided that this number automatically increases each January 1st by 2% of the outstanding number of shares of the Company’s class A common stock on the immediately preceding December 31st. At March 31, 2021, an aggregate 73.8 million shares of the Company's class A common stock were reserved for the issuance of awards under the Equity Incentive Plan.
Restricted Stock—Restricted stock awards in the Company's class A common stock are granted to senior executives, directors and certain employees, generally subject to a service condition only, with annual time-based vesting in equal tranches over a three-year period. Restricted stock is entitled to dividends declared and paid on the Company's class A common stock and such dividends are not forfeitable prior to vesting of the award. Restricted stock awards are valued based on the Company's class A common stock price on grant date and equity-based compensation expense is recognized on a straight-line basis over the requisite service period.
Restricted Stock Units ("RSUs")—RSUs in the Company's class A common stock are subject to a performance condition. Vesting of performance-based RSUs occur upon achievement of certain Company-specific metrics over a performance measurement period. Only vested RSUs are entitled to accrued dividends declared and paid on the Company's class A common stock during the time period the RSUs are outstanding. Fair value of RSUs are based on the
Company's class A common stock price on grant date. Equity-based compensation expense is recognized when it becomes probable that the performance condition will be met.
Performance Stock Units ("PSUs")—PSUs are granted to senior executives and certain employees, and are subject to both a service condition and a market condition. Following the end of the measurement period, the recipients of PSUs who remain employed will vest in, and be issued a number of shares of the Company's class A common stock, generally ranging from 0% to 200% of the number of PSUs granted and determined based upon the performance of the Company's class A common stock relative to that of a specified peer group over a three-year measurement period (such measurement metric the "total shareholder return"). In addition, recipients of PSUs whose employment is terminated after the first anniversary of their PSU grant are eligible to vest in a portion of the PSU award following the end of the measurement period based upon achievement of the total shareholder return metric applicable to the award. PSUs also contain dividend equivalent rights which entitle the recipients to a payment equal to the amount of dividends that would have been paid on the shares that are ultimately issued at the end of the measurement period.
Fair value of PSUs, including dividend equivalent rights, was determined using a Monte Carlo simulation under a risk-neutral premise, with the following assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 PSU Grants
|
|
2020 PSU Grants
|
|
2019 PSU Grants
|
|
Expected volatility of the Company's class A common stock (1)
|
|
35.4%
|
|
34.1%
|
|
26.2%
|
|
Expected annual dividend yield (2)
|
|
0.0%
|
|
9.3%
|
|
8.5% - 8.7%
|
|
Risk-free rate (per annum) (3)
|
|
0.3%
|
|
0.4%
|
|
2.2% - 2.4%
|
__________
(1) Based upon the historical volatility of the Company's stock and those of a specified peer group.
(2) Based upon the Company's expected annualized dividends. Expected dividend yield is zero for the 2021 PSU award as the Company suspended common dividends beginning with the second quarter of 2020.
(3) Based upon the continuously compounded zero-coupon U.S. Treasury yield for the term coinciding with the remaining measurement period of the award as of valuation date.
Fair value of PSU awards, excluding dividend equivalent rights, is recognized on a straight-line basis over their measurement period as compensation expense, and is not subject to reversal even if the market condition is not achieved. The dividend equivalent right is accounted for as a liability-classified award. The fair value of the dividend equivalent right is recognized as compensation expense on a straight-line basis over the measurement period, and is subject to adjustment to fair value at each reporting period.
LTIP Units—LTIP units are units in the Operating Company that are designated as profits interests for federal income tax purposes. Unvested LTIP units that are subject to market conditions do not accrue distributions. Each vested LTIP unit is convertible, at the election of the holder (subject to capital account limitation), into one common OP Unit and upon conversion, subject to the redemption terms of OP Units (Note 12).
LTIP units issued have either (1) a service condition only, valued based upon the Company's class A common stock price on grant date; or (2) both a service condition and a market condition based upon the Company's class A common stock achieving target prices over predetermined measurement periods, subject to continuous employment to the time of vesting, and valued using a Monte Carlo simulation.
The following assumptions were applied in the Monte Carlo model under a risk-neutral premise:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020 LTIP Grant
|
|
2019 LTIP Grant (1)
|
|
Expected volatility of the Company's class A common stock (2)
|
|
43.1%
|
|
28.3%
|
|
Expected dividend yield (3)
|
|
0.0%
|
|
8.1%
|
|
Risk-free rate (per annum) (4)
|
|
0.2%
|
|
1.8%
|
__________
(1) Represents 10 million LTIP units granted to Marc Ganzi in connection with the Company's acquisition of Digital Bridge Holdings, LLC in July 2019, with vesting based upon achievement of the Company's class A common stock price closing at or above $10 over any 90 consecutive trading days prior to the fifth anniversary of the grant date.
(2) Based upon historical volatility of the Company's stock and those of a specified peer group.
(3) Based upon the Company's most recently issued dividend prior to grant date and closing price of the Company's class A common stock on grant date. Expected dividend yield is zero for the 2020 LTIP award as the Company suspended common dividends beginning with the second quarter of 2020.
(4) Based upon the continuously compounded zero-coupon US Treasury yield for the term coinciding with the measurement period of the award as of valuation date.
Equity-based compensation cost on LTIP units is recognized on a straight-line basis either over (1) the service period for awards with a service condition only; or (2) the derived service period for awards with both a service condition and a market condition, irrespective of whether the market condition is satisfied. The derived service period is a service period that is inferred from the application of the simulation technique used in the valuation of the award, and represents the median of the terms in the simulation in which the market condition is satisfied.
Deferred Stock Units—Certain non-employee directors may elect to defer the receipt of annual base fees and/or restricted stock awards, and in lieu, receive awards of DSUs. DSUs awarded in lieu of annual base fees are fully vested on their grant date, while DSUs awarded in lieu of restricted stock awards vest one year from their grant date. DSUs are entitled to a dividend equivalent, in the form of additional DSUs based on dividends declared and paid on the Company's class A common stock, subject to the same restrictions and vesting conditions, where applicable. Upon separation of service from the Company, vested DSUs will be settled in shares of the Company’s class A common stock. Fair value of DSUs are determined based on the price of the Company's class A common stock on grant date and recognized immediately if fully vested upon grant, or on a straight-line basis over the vesting period as equity based compensation expense and equity.
Equity-based compensation expense, excluding amounts related to businesses presented as discontinued operations (Note 14), is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
(In thousands)
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
Compensation expense (including $1,064 and $283 amortization of fair value of dividend equivalent rights, respectively)
|
|
|
|
|
|
$
|
16,606
|
|
|
$
|
5,185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in the Company’s unvested equity awards are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
Grant Date Fair Value
|
|
|
|
Restricted Stock
|
|
LTIP Units (1)
|
|
DSUs
|
|
RSUs (2)
|
|
PSUs (3)
|
|
Total
|
|
PSUs
|
|
All Other Awards
|
|
Unvested shares and units at December 31, 2020
|
|
10,728,712
|
|
|
11,845,018
|
|
|
324,877
|
|
|
9,589,564
|
|
|
9,935,891
|
|
|
42,424,062
|
|
|
$
|
2.78
|
|
|
$
|
2.10
|
|
|
Granted
|
|
3,604,777
|
|
|
—
|
|
|
9,465
|
|
|
—
|
|
|
2,611,989
|
|
|
6,226,231
|
|
|
7.46
|
|
|
6.72
|
|
|
Vested
|
|
(2,996,951)
|
|
|
(461,254)
|
|
|
(9,465)
|
|
|
—
|
|
|
(1,175,333)
|
|
|
(4,643,003)
|
|
|
5.09
|
|
|
3.33
|
|
|
Forfeited
|
|
(67,047)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(832,981)
|
|
|
(900,028)
|
|
|
4.89
|
|
|
2.86
|
|
|
Unvested shares and units at March 31, 2021
|
|
11,269,491
|
|
|
11,383,764
|
|
|
324,877
|
|
|
9,589,564
|
|
|
10,539,566
|
|
|
43,107,262
|
|
|
3.52
|
|
|
2.48
|
|
__________
(1) Represents the number of LTIP units granted subject to vesting upon achievement of market condition. LTIP units that do not meet the market condition within the measurement period will be forfeited.
(2) Represents the number of RSUs granted subject to vesting upon achievement of performance condition. RSUs that do not meet the performance condition at the end of the measurement period will be forfeited.
(3) Number of PSUs granted does not reflect potential increases or decreases that could result from the final outcome of the total shareholder return measured at the end of the performance period. PSUs for which the total shareholder return was not met at the end of the performance period are forfeited.
Fair value of equity awards that vested, determined based upon their respective fair values at vesting date, was $27.5 million and $10.1 million for the three months ended March 31, 2021 and 2020, respectively.
At March 31, 2021, aggregate unrecognized compensation cost for all unvested equity awards was $92.0 million, which is expected to be recognized over a weighted average period of 2.6 years.
Awards Granted by Managed Companies
Prior to the termination of the Company’s management agreement with CLNC on April 30, 2021, CLNC granted restricted stock to the Company and certain of the Company's employees ("managed company awards") that typically vest over a three-year period, subject to a service condition. Generally, the Company granted the managed company awards that it received in its capacity as manager to its employees with substantially the same terms and service requirements. Such grants were made at the discretion of the Company, and the Company may consult with the board of directors or compensation committee of CLNC as to final allocation of awards to its employees.
Managed company awards granted to the Company, pending grant by the Company to its employees, are recognized based upon their fair value at grant date as other assets and other liabilities on the consolidated balance sheet. The deferred revenue liability is amortized into other income as the awards vest to the Company.
Managed company awards granted to employees, either directly or through the Company, are recorded as other asset and other liability, and amortized on a straight-line basis as equity-based compensation expense and as other income, respectively, as the awards vest to the employees. The other asset and other liability associated with managed company awards granted to employees are subject to adjustment to fair value at each reporting period, with changes reflected in equity-based compensation and other income, respectively.
Equity-based compensation related to CLNC awards granted by the Company to its employees was accelerated in 2021 as the awards fully vest upon termination of the CLNC management contract in April 2021. For the three months ended March 31, 2021, equity-based compensation of $4.6 million was recognized, with a corresponding amount recorded in other income. For the three months ended March 31, 2020, an expense reversal of $3.4 million was recognized based upon a remeasurement of the awards at CLNC's stock price on March 31, 2020. Amounts recorded in both years are reflected within discontinued operations (Note 14).
18. Transactions with Affiliates
Affiliates include (i) private funds, traded and non-traded REITs and other investment vehicles that the Company manages or sponsors, and in which the Company may have an equity interest or co-invests with; (ii) the Company's investments in unconsolidated ventures; and (iii) directors, senior executives and employees of the Company (collectively, "employees").
Amounts due from and due to affiliates consist of the following, excluding amounts related to discontinued operations that are presented as assets held for sale (Note 7):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
March 31, 2021
|
|
December 31, 2020
|
|
Due from Affiliates
|
|
|
|
|
|
Investment vehicles, portfolio companies and unconsolidated ventures
|
|
|
|
|
|
Fee income
|
|
$
|
21,944
|
|
|
$
|
20,605
|
|
|
Cost reimbursements and recoverable expenses
|
|
5,091
|
|
|
12,954
|
|
|
Loan and interest receivable
|
|
35,088
|
|
|
35,089
|
|
|
Employees and other affiliates
|
|
134
|
|
|
541
|
|
|
|
|
$
|
62,257
|
|
|
$
|
69,189
|
|
|
Due to Affiliates
|
|
|
|
|
|
|
|
|
|
|
|
Employees and other affiliates
|
|
$
|
408
|
|
|
$
|
601
|
|
|
|
|
|
|
|
Transactions with affiliates include the following:
Fee Income—Fee income earned from investment vehicles that the Company manages and/or sponsors, and may have an equity interest or co-investment, are presented in Note 16, except for fee income and fee receivable from CLNC and the Company's private real estate credit funds and co-investment vehicles that are included within discontinued operations (Note 14) and assets held for sale (Note 7).
Cost Reimbursements—The Company received cost reimbursement income related largely to the following arrangements.
•Direct and indirect operating costs, including but not limited to compensation, overhead and other administrative costs, for managing the operations of NorthStar Healthcare, with reimbursements limited to the greater of 2% of average invested assets or 25% of net income (net of management fees);
•Costs incurred in performing investment due diligence for NorthStar Healthcare and private funds managed by the Company; and
•Services provided to the Company's unconsolidated investment ventures for servicing and managing their loan portfolios, including foreclosed properties.
Such cost reimbursements, included in other income, totaled $1.5 million and $4.2 million for the three months ended March 31, 2021 and 2020, respectively.
Reimbursements of direct and indirect operating costs for managing the operations of CLNC is reflected in other income within discontinued operations (Note 14) and related receivable is reflected as amount due from affiliates within assets held for sale (Note 7).
Recoverable Expenses—The Company pays organization and offering costs associated with the formation and capital raising of investment vehicles sponsored by the Company, for which the Company recovers from these investment vehicles up to specified thresholds, as applicable.
NorthStar Healthcare Credit Facility—The Company has committed to provide NorthStar Healthcare with an unsecured revolving credit facility at market terms with a maximum principal amount of $35.0 million. The credit facility matures in December 2022, with a six-month extension option. Advances under the credit facility accrue interest at LIBOR plus 3.5%. There is no commitment fee for the unused portion of the facility. The credit facility is intended to provide additional liquidity to NorthStar Healthcare on an as needed basis. In April 2020, the credit facility was drawn for the full amount of $35.0 million and remained outstanding at March 31, 2021.
Digital Real Estate Acquisitions—In connection with acquisition of Vantage SDC in July 2020 (Note 3), the Company entered into a series of agreements with Messrs. Ganzi and Jenkins, and their respective affiliates, pursuant to which Messrs. Ganzi and Jenkins invested $8.7 million and $2.1 million, respectively, in Vantage SDC alongside the Company and the co-investors on the same economic terms. Such amounts invested represented 40% of carried interest payments received by each of Messrs. Ganzi and Jenkins in connection with the Vantage SDC acquisition as a result of their respective personal investments in Vantage made prior to the Company’s acquisition of DBH. Payments to be made by the Company and its co-investors to the previous owners of Vantage SDC for future build-out of expansion capacity within the portfolio, including lease up of the expanded capacity and existing inventory, will trigger additional carried interest payments to Messrs. Ganzi and Jenkins. Additionally, the day-to-day operations of Vantage SDC will continue to be managed by the existing management company of Vantage, in which Messrs. Ganzi and Jenkins own a 50% interest in the aggregate. Fees paid to the Vantage management company for Vantage SDC was $3.0 million for the three months ended March 31, 2021.
DataBank acquired all of zColo's colocation business in December 2020 and February 2021 from Zayo, which is a portfolio company of DCP I and other co-invest vehicles sponsored and managed by the Company.
In the aforementioned transactions, the Company took a series of steps to mitigate conflicts in the transactions, including receiving fairness opinions on the purchase price from a nationally recognized third party valuation firm. Additionally, the transactions, specifically the related party aspects of the transactions, were subject to the approval of either the Company's board of directors or the audit committee of the board of directors.
Arrangements with Company-Sponsored Private Funds—The Company co-invests alongside its sponsored private funds through joint ventures between the Company and the sponsored private fund. These co-investment joint ventures are consolidated by the Company. The Company has capital commitments, as general partner, directly into the private funds and as an affiliate of the general partner, capital commitments satisfied through co-investment joint ventures. In connection with the Company's commitments as an affiliate of the general partner, the Company is allocated a proportionate share of the costs of the private funds such as financing and administrative costs. Such costs expensed in the periods presented were immaterial and relate primarily to the Company's share of the funds' operating costs and deferred financing costs on borrowings of the funds.
Equity Awards of CLNC—As discussed in Note 17, prior to termination of the Company’s management agreement with CLNC on April 30, 2021, CLNC granted equity awards to the Company and certain of the Company's employees, either directly or indirectly through the Company, are recognized as a gross-up of equity-based compensation expense over the vesting period with a corresponding amount in other income.
Investment in Managed Investment Vehicles—Subject to the Company's related party policies and procedures, senior management, investment professionals and certain other employees may invest on a discretionary basis in investment vehicles sponsored by the Company, either directly in the vehicle or indirectly through the general partner entity. These investments are generally not subject to management fees, but otherwise bear their proportionate share of other operating expenses of the investment vehicles. At March 31, 2021 and December 31, 2020, such investments in consolidated investment vehicles and general partner entities totaled $27.3 million and $19.1 million, respectively, reflected in redeemable noncontrolling interests and noncontrolling interests on the balance sheet. Their share was a net income of $0.3 million and a net loss of $0.5 million for the three months ended March 31, 2021 and 2020, respectively.
Aircraft—Pursuant to Mr. Ganzi’s employment agreement, as amended, the Company has agreed to reimburse Mr. Ganzi for certain variable operational costs of business travel on a chartered or private jet (including any aircraft that Mr. Ganzi may partially or fully own); provided that the Company will not reimburse the allocable share (based on the number of passengers) of variable operational costs for any passenger on such flight who is not traveling on Company business. Additionally, the Company has also agreed to reimburse Mr. Ganzi for certain defined fixed costs of any aircraft owned by Mr. Ganzi. The fixed cost reimbursements will be made based on an allocable portion of an aircraft’s annual budgeted cash fixed operating costs, based on the number of hours the aircraft will be used for business purposes. At least once a
year, the Company will reconcile the budgeted fixed operating costs with the actual fixed operating costs of the aircraft, and the Company or Mr. Ganzi, as applicable, will make a true-up payment for any difference. The Company reimbursed Mr. Ganzi $1.1 million and $0.3 million for the three months ended March 31, 2021 and 2020, respectively.
Separately, based upon an agreement between Colony Capital Advisors, LLC, a subsidiary of the Company, and Thomas J. Barrack, Jr., the Company's former Executive Chairman, Mr. Barrack was previously provided use of the Company’s aircraft for personal travel. Under this arrangement, Mr. Barrack paid the Company for personal usage based on the incremental cost to the Company, including direct and indirect variable costs, but in no case more than the maximum reimbursement permitted by the Federal Aviation Regulations under the agreement. Mr. Barrack reimbursed the Company $0.4 million for the three months ended March 31, 2020. The Company's aircraft was sold in January 2021.
19. Commitments and Contingencies
Litigation
The Company may be involved in litigation in the ordinary course of business. As of March 31, 2021, the Company was not involved in any legal proceedings that are expected to have a material adverse effect on the Company’s results of operations, financial position or liquidity.
20. Segment Reporting
The Company currently conducts its 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 through Digital 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 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.
•Other—This segment 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.
Amounts not allocated to specific segments generally include corporate level cash and corresponding interest income, fixed assets for administrative use, corporate level financing and related interest expense, costs in connection with unconsummated investments, compensation expense not directly attributable to reportable segments, corporate level administrative and overhead costs as well as corporate level transaction costs. Costs which are directly attributable, or otherwise can be subjected to a reasonable and systematic allocation, have been allocated to each of the reportable segments.
In connection with accelerating the monetization of a substantial majority of the assets in the Company's Other segment in the first quarter of 2021, the Company reorganized its Wellness Infrastructure segment to retrospectively include other healthcare related assets and obligations. These assets and obligations encompass: (i) the Company's equity interests in and the management contract of NorthStar Healthcare, equity investment in a healthcare asset manager, and N-Star CDOs collateralized largely by certain debt and preferred equity within the capital structure of Wellness Infrastructure, all of which previously resided in the Other segment; as well as (ii) the 5.375% exchangeable senior notes, trust preferred securities and corresponding junior subordinated debt that were not previously allocated to reportable segments, all of which were issued by NRF Holdco, which holds the Wellness Infrastructure portfolio as its primary asset and acts as guarantor.
Segment Results of Operations
The following table presents results of operations of the Company's reportable segments. Refer to Note 14 for further details on discontinued operations.
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|
|
|
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|
|
|
|
(In thousands)
|
|
Digital Operating
|
|
Digital Investment Management
|
|
Digital Other
|
|
Wellness Infrastructure
|
|
Other
|
|
Amounts Not Allocated to Segments
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2021
|
|
Total revenues
|
|
$
|
189,202
|
|
|
$
|
29,498
|
|
|
$
|
1,140
|
|
|
$
|
93,543
|
|
|
$
|
1,580
|
|
|
$
|
741
|
|
|
$
|
315,704
|
|
|
Income (loss) from continuing operations
|
|
(62,844)
|
|
|
6,041
|
|
|
7,869
|
|
|
(41,210)
|
|
|
(32,218)
|
|
|
(67,815)
|
|
|
(190,177)
|
|
|
Income (loss) from continuing operations attributable to Colony Capital, Inc.
|
|
(8,793)
|
|
|
5,412
|
|
|
3,949
|
|
|
(32,906)
|
|
|
(29,145)
|
|
|
(59,593)
|
|
|
(121,076)
|
|
|
Loss from discontinued operations attributable to Colony Capital, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(125,214)
|
|
|
Net loss attributable to Colony Capital, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(246,290)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2020
|
|
Total revenues
|
|
$
|
45,167
|
|
|
$
|
19,179
|
|
|
$
|
160
|
|
|
$
|
144,679
|
|
|
$
|
3,198
|
|
|
$
|
4,830
|
|
|
$
|
217,213
|
|
|
Income (loss) from continuing operations
|
|
(18,295)
|
|
|
2,110
|
|
|
(3,035)
|
|
|
(66,288)
|
|
|
(11,295)
|
|
|
(57,396)
|
|
|
(154,199)
|
|
|
Income (loss) from continuing operations attributable to Colony Capital, Inc.
|
|
(3,418)
|
|
|
1,902
|
|
|
(2,242)
|
|
|
(49,938)
|
|
|
(10,179)
|
|
|
(49,817)
|
|
|
(113,692)
|
|
|
Loss from discontinued operations attributable to Colony Capital, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(228,467)
|
|
|
Net loss attributable to Colony Capital, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(342,159)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents selected income and expense items of reportable segments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Digital Operating
|
|
Digital Investment Management
|
|
Digital Other
|
|
Wellness Infrastructure
|
|
Other
|
|
Amounts Not Allocated to Segments
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
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|
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|
|
|
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|
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|
|
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|
|
|
|
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|
|
|
|
|
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|
|
|
|
|
|
|
|
|
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|
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|
|
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|
|
|
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|
|
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|
|
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|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2021
|
|
Property operating income
|
|
$
|
189,002
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
86,214
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
275,216
|
|
|
Interest income
|
|
104
|
|
|
1
|
|
|
690
|
|
|
1,815
|
|
|
7
|
|
|
59
|
|
|
2,676
|
|
|
Fee income
|
|
—
|
|
|
29,443
|
|
|
—
|
|
|
2,769
|
|
|
1,467
|
|
|
—
|
|
|
33,679
|
|
|
Property operating expense
|
|
79,862
|
|
|
—
|
|
|
—
|
|
|
52,400
|
|
|
2
|
|
|
—
|
|
|
132,264
|
|
|
Interest expense
|
|
31,132
|
|
|
—
|
|
|
—
|
|
|
32,705
|
|
|
—
|
|
|
8,648
|
|
|
72,485
|
|
|
Depreciation and amortization
|
|
122,221
|
|
|
6,267
|
|
|
—
|
|
|
31,418
|
|
|
10,457
|
|
|
604
|
|
|
170,967
|
|
|
Impairment loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15,232
|
|
|
—
|
|
|
—
|
|
|
15,232
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity method earnings (losses), including carried interest
|
|
—
|
|
|
(195)
|
|
|
2,776
|
|
|
—
|
|
|
(21,489)
|
|
|
—
|
|
|
(18,908)
|
|
|
Income tax benefit (expense)
|
|
12,268
|
|
|
(2,645)
|
|
|
1,090
|
|
|
2,421
|
|
|
208
|
|
|
12,483
|
|
|
25,825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2020
|
|
Property operating income
|
|
$
|
45,149
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
138,249
|
|
|
$
|
555
|
|
|
$
|
—
|
|
|
$
|
183,953
|
|
|
Interest income
|
|
—
|
|
|
30
|
|
|
7
|
|
|
792
|
|
|
54
|
|
|
1,724
|
|
|
2,607
|
|
|
Fee income
|
|
—
|
|
|
18,944
|
|
|
—
|
|
|
4,431
|
|
|
1,753
|
|
|
—
|
|
|
25,128
|
|
|
Property operating expense
|
|
16,906
|
|
|
—
|
|
|
—
|
|
|
66,567
|
|
|
4
|
|
|
—
|
|
|
83,477
|
|
|
Interest expense
|
|
9,402
|
|
|
—
|
|
|
—
|
|
|
43,952
|
|
|
405
|
|
|
9,682
|
|
|
63,441
|
|
|
Depreciation and amortization
|
|
30,030
|
|
|
6,603
|
|
|
—
|
|
|
37,460
|
|
|
633
|
|
|
1,510
|
|
|
76,236
|
|
|
Impairment loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
48,532
|
|
|
—
|
|
|
—
|
|
|
48,532
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity method earnings (losses), including carried interest
|
|
—
|
|
|
3
|
|
|
465
|
|
|
—
|
|
|
(12,347)
|
|
|
—
|
|
|
(11,879)
|
|
|
Income tax benefit (expense)
|
|
5,730
|
|
|
(393)
|
|
|
—
|
|
|
129
|
|
|
(52)
|
|
|
155
|
|
|
5,569
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Total assets and equity method investments of the reportable segments are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
(In thousands)
|
|
Total Assets
|
|
Equity Method Investments
|
|
Total Assets
|
|
Equity Method Investments
|
|
Digital Operating
|
|
$
|
6,973,585
|
|
|
$
|
—
|
|
|
$
|
6,926,634
|
|
|
$
|
—
|
|
|
Digital Investment Management
|
|
489,517
|
|
|
19,004
|
|
|
490,632
|
|
|
19,167
|
|
|
Digital Other
|
|
387,560
|
|
|
161,062
|
|
|
482,464
|
|
|
158,564
|
|
|
Wellness Infrastructure
|
|
4,006,161
|
|
|
13,868
|
|
|
4,025,743
|
|
|
14,941
|
|
|
Other
|
|
550,348
|
|
|
392,235
|
|
|
663,139
|
|
|
416,475
|
|
|
Amounts not allocated to segments
|
|
389,126
|
|
|
—
|
|
|
354,952
|
|
|
—
|
|
|
Assets held for disposition related to discontinued operations
|
|
3,828,953
|
|
|
745,538
|
|
|
7,256,996
|
|
|
845,094
|
|
|
|
|
$
|
16,625,250
|
|
|
$
|
1,331,707
|
|
|
$
|
20,200,560
|
|
|
$
|
1,454,241
|
|
|
|
|
|
|
|
|
|
|
|
Geography
Geographic information about the Company's total income and long-lived assets are as follows. Geography is generally presented as the location in which the income producing assets reside or the location in which income generating services are performed.
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
(In thousands)
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
Total income by geography:
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
|
|
|
$
|
289,933
|
|
|
$
|
188,753
|
|
|
|
|
Europe
|
|
|
|
|
|
(5,946)
|
|
|
11,522
|
|
|
|
|
Other
|
|
|
|
|
|
11,324
|
|
|
877
|
|
|
|
|
Total (1)
|
|
|
|
|
|
$
|
295,311
|
|
|
$
|
201,152
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
March 31, 2021
|
|
December 31, 2020
|
|
Long-lived assets by geography:
|
|
|
|
|
|
United States
|
|
$
|
7,912,752
|
|
|
$
|
8,139,565
|
|
|
Europe
|
|
771,768
|
|
|
730,358
|
|
|
Other
|
|
631,039
|
|
|
624,680
|
|
|
Total (2)
|
|
$
|
9,315,559
|
|
|
$
|
9,494,603
|
|
__________
(1) Total income includes the Company's share of earnings (loss) from its equity method investments (but excludes the Company's impairment of its equity method investments of $0.8 million for the three months ended March 31, 2020); and excludes cost reimbursement income from affiliates (Note 18) and income from discontinued operations (Note 14). Income (loss) from discontinued operations for the three months ended March 31, 2021 and 2020 is composed of $143.8 million and $369.8 million from United States, respectively, and ($2.3 million) and $32.8 million from Europe, respectively. The negative income attributed to Europe for the three months ended March 31, 2021 for continuing operations reflects a reversal of straight-line rent receivable based upon current assessment of collectability, and for discontinued operations, due to losses from equity method investments.
(2) Long-lived assets comprise real estate held for investment, lease related intangible assets, lease right-of-use assets and fixed assets, and exclude financial instruments, assets held for disposition and non-lease related intangible assets. Long-lived assets that are held for disposition at March 31, 2021 and December 31, 2020 included $1.1 billion and $3.8 billion located in the United States, respectively, and $1.0 billion and $1.2 billion located in Europe, respectively.
21. Supplemental Disclosure of Cash Flow Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
(In thousands)
|
|
2021
|
|
2020
|
|
|
|
Supplemental Disclosure of Cash Flow Information
|
|
|
|
|
|
|
|
Cash paid for interest, net of amounts capitalized of $204 and $214
|
|
$
|
126,892
|
|
|
$
|
112,278
|
|
|
|
|
Cash paid for income taxes, net of refunds
|
|
2,123
|
|
|
1,272
|
|
|
|
|
Cash paid for operating lease liabilities
|
|
16,781
|
|
|
7,096
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Cash Flows from Discontinued Operations
|
|
|
|
|
|
|
|
Hotel:
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities of discontinued operations
|
|
$
|
(34,154)
|
|
|
$
|
(8,535)
|
|
|
|
|
Net cash provided by (used in) investing activities of discontinued operations
|
|
(20,243)
|
|
|
(43,020)
|
|
|
|
|
Net cash provided by (used in) financing activities of discontinued operations
|
|
(3,416)
|
|
|
(920)
|
|
|
|
|
Industrial:
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities of discontinued operations
|
|
—
|
|
|
(38,822)
|
|
|
|
|
Net cash provided by (used in) investing activities of discontinued operations
|
|
—
|
|
|
4,534
|
|
|
|
|
Net cash provided by (used in) financing activities of discontinued operations
|
|
—
|
|
|
(3,886)
|
|
|
|
|
Other:
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities of discontinued operations
|
|
(640)
|
|
|
22,954
|
|
|
|
|
Net cash provided by (used in) investing activities of discontinued operations
|
|
52,907
|
|
|
27,465
|
|
|
|
|
Net cash provided by (used in) financing activities of discontinued operations
|
|
(1,563)
|
|
|
(57,627)
|
|
|
|
|
Supplemental Disclosure of Noncash Investing and Financing Activities
|
|
|
|
|
|
|
|
Dividends and distributions payable
|
|
$
|
18,516
|
|
|
$
|
77,228
|
|
|
|
|
Improvements in operating real estate in accrued and other liabilities
|
|
6,268
|
|
|
12,282
|
|
|
|
|
Proceeds from loan repayments and asset sales held in escrow
|
|
—
|
|
|
47,702
|
|
|
|
|
Operating lease right-of-use assets and lease liabilities established
|
|
7,170
|
|
|
2,408
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance lease payments accrued in accounts payable
|
|
2,224
|
|
|
—
|
|
|
|
|
Redemption of OP Units for common stock
|
|
16
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets of investment entities deconsolidated, net of cash and restricted cash contributed (Note 14)
|
|
2,814,793
|
|
|
—
|
|
|
|
|
Liabilities of investment entities deconsolidated (Note 14)
|
|
2,840,065
|
|
|
—
|
|
|
|
|
Noncontrolling interests of investment entities deconsolidated (Note 14)
|
|
22,413
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22. Subsequent Events
Other than as disclosed elsewhere, and in particular, termination of the CLNC management contract as discussed in Note 1, no subsequent events have occurred that would require recognition in the consolidated financial statements or disclosure in the accompanying notes.
FORWARD-LOOKING STATEMENTS
Some of the statements contained in this Quarterly Report on Form 10-Q (this "Quarterly Report") constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and we intend such statements to be covered by the safe harbor provisions contained therein. 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.
The forward-looking statements contained in this Quarterly Report reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause our actual results to differ significantly from those expressed in any forward-looking statement. The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:
•the duration and severity of the current novel coronavirus (COVID-19) pandemic, and its impact on the global market, economic and environmental conditions generally and in the digital and communications technology, wellness infrastructure and hospitality real estate, other commercial real estate equity and debt, and investment management sectors;
•the effect of COVID-19 on the Company's operating cash flows, debt service obligations and covenants, liquidity position and valuations of its real estate investments, as well as the increased risk of claims, litigation and regulatory proceedings and uncertainty that may adversely affect the Company;
•whether we will successfully execute our strategic transformation to become a digital infrastructure and real estate focused company within the timeframe contemplated or at all, and the impact of such transformation on the Company's legacy portfolios and assets, including whether such transformation will be consistent with the Company’s REIT status;
•our ability to obtain and maintain financing arrangements, including securitizations, on favorable or comparable terms or at all, including our ability to extend and/or replace our corporate credit facility;
•the Company's ability to complete anticipated monetizations of non-core assets within the timeframe and on the terms contemplated, if at all;
•the impact of the completion of the sale of the Company's hospitality portfolios in connection with its strategic transformation and whether we will realize the anticipated benefits of our exit from our hospitality business;
•the impact of completed or anticipated initiatives related to our digital transformation, including the strategic investment by Wafra and the formation of certain other investment management platforms, on our company's growth and earnings profile;
•whether we will realize any of the anticipated benefits of our strategic partnership with Wafra, including whether Wafra will make additional investments in our Digital Other and Digital Operating segments;
•our ability to integrate and maintain consistent standards and controls, including our ability to manage our acquisitions in the digital industry effectively;
•the ability to realize efficiencies, as well as anticipated strategic and financial benefits from terminating the management agreement with Colony Credit Real Estate, Inc. (NYSE:CLNC)
•the impact to our business operations and financial condition of realized or anticipated compensation and administrative savings through cost reduction programs;
•our ability to redeploy any proceeds received from the sale of our non-digital or other legacy assets within the timeframe and manner contemplated or at all;
•our business and investment strategy, including the ability of the businesses in which we have a significant investment (such as CLNC) to execute their business strategies, particularly in light of the current COVID-19 pandemic;
•CLNC's trading price and its impact on the carrying value of the Company's investment in CLNC, including whether the Company will recognize further other-than-temporary impairments on such CLNC investment;
•performance of our investments relative to our expectations and the impact on our actual return on invested equity, as well as the cash provided by these investments and available for distribution;
•our ability to grow our business by raising capital for the companies that we manage;
•our ability to deploy capital into new investments consistent with our digital business strategies, including the earnings profile of such new investments;
•the impact of adverse conditions affecting a specific asset class in which we have investments;
•the availability of, and competition for, attractive investment opportunities;
•our ability to achieve any of the anticipated benefits of certain joint ventures, including any ability for such ventures to create and/or distribute new investment products;
•our ability to satisfy and manage our capital requirements;
•our expected hold period for our assets and the impact of any changes in our expectations on the carrying value of such assets;
•the general volatility of the securities markets in which we participate;
•stability of the capital structure of our wellness infrastructure portfolio and remaining hospitality portfolio;
•changes in interest rates and the market value of our assets;
•interest rate mismatches between our assets and any borrowings used to fund such assets;
•effects of hedging instruments on our assets;
•the impact of economic conditions on third parties on which we rely;
•any litigation and contractual claims against us and our affiliates, including potential settlement and litigation of such claims;
•our levels of leverage;
•adverse domestic or international economic conditions, including those resulting from the COVID-19 pandemic, and the impact on the commercial real estate or real-estate related sectors;
•the impact of legislative, regulatory and competitive changes;
•actions, initiatives and policies of the U.S. and non-U.S. governments and changes to U.S. or non-U.S. government policies and the execution and impact of these actions, initiatives and policies, including regulations permitting or requiring forbearance of rent obligations and inhibiting the ability to pursue evictions and obtain late fees from non-paying tenants;
•whether we will maintain our qualification as a real estate investment trust for U.S. federal income tax purposes and our ability to do so;
•our ability to maintain our exemption from registration as an investment company under the Investment Company Act of 1940, as amended (the “1940 Act”);
•changes in our board of directors or management team, and availability of qualified personnel;
•our ability to make or maintain distributions to our stockholders; and
•our understanding of our competition.
While forward-looking statements reflect our good faith beliefs, assumptions and expectations, they are not guarantees of future performance. Furthermore, we disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. Moreover, because we operate in a very competitive and rapidly changing environment, new risk factors are likely to emerge from time to time. We caution investors not to place undue reliance on these forward-looking statements and urge you to carefully review the disclosures we make concerning risks in Part I, Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and in Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report. Readers of this
Quarterly Report should also read our other periodic filings made with the Securities and Exchange Commission and other publicly filed documents for further discussion regarding such factors.
