Business context and reporting period
Colony Capital, Inc. (the registrant in this 10-Q, later known as DigitalBridge Group, Inc.) reported for the quarter ended March 31, 2021. The company was transitioning toward digital infrastructure, including data centers, while exiting hotels and seeking to monetize most non-digital equity and debt investments and its non-digital investment-management business. It reported $46.2 billion of assets under management, including $32.0 billion dedicated to digital infrastructure and real estate.
Financial performance and position
| Metric | Q1 2021 | Q1 2020 or prior date |
|---|---|---|
| Total revenue | $315.7 million | $217.2 million |
| Loss from continuing operations | $190.2 million | $154.2 million |
| Loss from discontinued operations | $437.4 million | $249.9 million |
| Net loss attributable to common stockholders | $264.8 million; $0.56 per share | $361.6 million; $0.76 per share |
| Operating cash flow | $(23.9) million | $(59.7) million |
| Cash, cash equivalents and restricted cash | $1,034.4 million | $963.0 million at year-end 2020 |
| Debt, net, excluding debt in liabilities held for disposition | $6,877.3 million | $6,872.4 million at year-end 2020 |
Revenue increased 45% year over year, primarily reflecting the 2020 acquisitions of Vantage SDC and zColo and higher digital investment-management fees. Higher depreciation and amortization, compensation, property operating costs and interest expense contributed to the continuing-operations loss. The common-stockholder loss narrowed despite a larger consolidated net loss, in part because of the allocation of losses to noncontrolling interests. The filing does not provide a consolidated operating margin or a forward earnings outlook.
At March 31, total assets were $16.6 billion and total liabilities were $10.0 billion; assets and liabilities held for disposition were $4.1 billion and $1.9 billion, respectively. Management reported $667 million of liquidity, comprising corporate cash and availability under the corporate revolver. The $400 million revolver was undrawn and fully available at filing, but scheduled to mature in July 2021; management expected to extend it or replace it. The company reported compliance with its financial covenants. Common dividends were suspended; preferred dividends were $18.5 million for the quarter.
Material changes, outlook and risks
- The company completed the sale of five hotel portfolios and its 55.6% interest in the THL Hotel Portfolio in March. The transaction had a stated value of about $2.8 billion, including the buyer’s assumption of approximately $2.7 billion of investment-level debt; the company reported $45.6 million of net proceeds.
- In connection with planned monetizations, the company recorded $420.3 million of aggregate asset write-downs in discontinued operations, of which $121.2 million was attributable to the Operating Company. Discontinued operations generated a $437.4 million loss.
- In April, the company terminated its CLNC management agreement for a $102.3 million cash fee; the transaction closed April 30. It also reported $103.5 million of its share of excess net proceeds from an Irish loan-portfolio asset sale in April, after repayment of $265 million of loan principal and $155 million of related financing.
- Digital IM fees benefited from DCP II’s first closing, with $4.2 billion of callable commitments, including the company’s $120 million commitment. DataBank refinanced debt through a $658 million securitization at a 2.3% blended fixed rate.
- Digital Operating revenue was $189.2 million versus $45.2 million, and segment EBITDAre was $78.2 million versus $15.4 million; the filing attributes much of the increase to Vantage and zColo acquisitions. Digital data-center utilization was 79.4%, compared with 80.6% at year-end.
- Wellness Infrastructure remained exposed to COVID-19 effects, including reduced senior-housing occupancy, higher operating costs and tenant credit risk. Segment NOI declined 11.4% to $60.8 million. A $22.4 million UK straight-line rent receivable was written off amid lease restructuring discussions.
- Other stated risks include execution and timing of asset monetizations, refinancing the corporate revolver, interest-rate and foreign-currency exposure, valuation uncertainty for Level 3 assets, and maintaining REIT status. Management gave no quantitative full-year guidance in the provided filing text.
Investor verification priorities
- Confirm completion, proceeds and debt treatment for planned non-digital asset sales, including the April Irish portfolio sale and CLNC termination.
- Track revolver extension or replacement, covenant headroom, and liquidity after transaction proceeds and required commitments.
- Review assumptions supporting the $420.3 million write-down and the valuation and collectability of remaining held-for-disposition loans and investments.
- Assess digital segment performance excluding acquisitions, including utilization, leasing, leverage and cash generation.
- Monitor wellness occupancy, rent collections, operator liquidity and any further lease restructuring or impairment.
- Verify the effects of suspended common dividends, preferred-dividend obligations and the company’s REIT-status decisions.