UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02 | Results of Operations and Financial Condition. |
On February 27, 2020, Colony Credit Real Estate, Inc. (the “Company”) issued a press release announcing its financial results for the fourth quarter and full year ended December 31, 2019. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
On February 27, 2020, the Company made available a Supplemental Financial Disclosure Presentation for the fourth quarter and full year ended December 31, 2019 on the Company’s website at www.clncredit.com. A copy of the Supplemental Financial Disclosure Presentation is furnished herewith as Exhibit 99.2 to this Current Report on Form 8-K, which are incorporated herein by reference.
In accordance with General Instructions B.2 and B.6 of Form 8-K, the information included in this Current Report on Form 8-K (including Exhibits 99.1 and 99.2 hereto), shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing made by the Company under the Exchange Act or Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.
| Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits. The following exhibits are being furnished herewith to this Current Report on Form 8-K.
| Exhibit No. |
Description | |||
| 99.1 |
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| 99.2 |
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| 104 |
Cover Page Interactive Data File (embedded within the Inline XBRL Document) | |||
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Dated: February 27, 2020 |
COLONY CREDIT REAL ESTATE, INC. | |||||
| By: |
/s/ David A. Palamé | |||||
| Name: |
David A. Palamé | |||||
| Title: |
General Counsel & Secretary | |||||
Exhibit 99.1
Colony Credit Real Estate, Inc. Announces
Fourth Quarter and Full Year 2019 Financial Results
Andrew E. Witt Appointed Interim Chief Executive Officer and President
LOS ANGELES, February 27, 2020 – Colony Credit Real Estate, Inc. (NYSE: CLNC) (“Colony Credit Real Estate” or the “Company”) today announced its financial results for the fourth quarter and full year ended December 31, 2019. In addition, Andrew E. Witt, Managing Director and Chief Operating Officer of Global Credit at Colony Capital, Inc. (“Colony Capital”), has been appointed Interim Chief Executive Officer and President, effective February 29, 2020. Mr. Witt will succeed Kevin P. Traenkle, who is stepping down from his position as Chief Executive Officer and President.
Kevin P. Traenkle commented, “2019 was a pivotal year for the Company. In the third quarter, we announced and began executing on the Portfolio Bifurcation Plan and are encouraged by the early disposition activity and results. During 2019, we committed approximately $1.6 billion of capital to Core Portfolio investments, which were diversified across asset type and geography, and significantly de-risked the balance sheet with our successful $1 billion managed CLO execution in the third quarter. Lastly, we grew our core earnings by 14% from the prior year and established a go-forward dividend that is 110% covered by Core Earnings from the Company’s Core Portfolio alone.”
Mr. Traenkle concluded, “Now that the Portfolio Bifurcation Plan is in-place and the company is well positioned for future growth, I am going to step down as CEO and President of the Company effective February 29th. I want to thank my team for the tireless work and progress made over the last several quarters.”
Fourth Quarter and Full Year 2019 Significant Developments and Subsequent Events
| • | Fourth quarter 2019 GAAP net income (loss) attributable to common stockholders of $34.0 million, or $0.26 per share. Fiscal year 2019 GAAP net income (loss) attributable to common stockholders of $(414.5) million, or $(3.25) per share |
| • | GAAP net book value of $2.2 billion, or $16.49 per share and undepreciated book value of $2.3 billion, or $17.81 per share, as of December 31, 2019. GAAP net book value per share and undepreciated book value per share represent a premium of 27% and 37% to 30-day VWAP of $12.98 per share, respectively |
Core Portfolio
| • | Fourth quarter 2019 GAAP net income (loss) attributable to common stockholders of $30.3 million, or $0.23 per share, and Core Earnings of $43.0 million, or $0.33 per share. Fiscal year 2019 GAAP net income (loss) attributable to common stockholders of $75.4 million, or $0.57 per share, and Core Earnings of $169.0 million, or $1.29 per share |
| • | GAAP net book value of $1.8 billion, or $13.76 per share and undepreciated book value of $1.9 billion, or $14.40 per share. GAAP net book value per share and undepreciated book value per share represent a 6% and 11% premium to 30-day VWAP of $12.98 per share, respectively |
| • | During the fourth quarter, closed a $1 billion managed Commercial Real Estate Collateralized Loan Obligation (“CLO”). At closing, the CLO accretively financed interests in 21 floating-rate mortgages with an 83.5% advance rate and weighted average coupon at issuance of L+1.59%, before transaction costs, with a structure that features a two-year reinvestment period. CLO proceeds were used primarily to repay approximately $770 million of borrowings under master repurchase facilities |
| • | During the fourth quarter, allocated and initially funded approximately $123 million and $77 million of capital, respectively, across one senior loan and one mezzanine loan with a weighted average Return on Equity (“ROE”) of approximately 12% |
| • | For the full year 2019, allocated approximately $1.6 billion of capital across 27 investments with a weighted average ROE of approximately 12% |
| • | During the fourth quarter, sold largest owned hotel asset from the Core Portfolio for $74 million, a slight premium to 9/30/19 GAAP net book value |
Legacy, Non-Strategic (“LNS”) Portfolio
| • | Fourth quarter 2019 GAAP net income (loss) attributable to common stockholders of $3.7 million, or $0.03 per share, and Legacy, Non-Strategic Earnings (loss) of $5.3 million, or $0.04 per share. Fiscal year 2019 GAAP net income (loss) attributable to common stockholders of $(489.9) million, or $(3.82) per share, and Legacy, Non-Strategic Earnings (loss) of $(217.2) million, or $(1.65) per share. Fiscal year 2019 Legacy, Non-Strategic Earnings (loss) excluding gains and losses of $31.1 million or $0.23 per share |
| • | GAAP net book value of $0.4 billion, or $2.73 per share |
| • | Cumulative Sales: Subsequent to announcing the Portfolio Bifurcation Plan in November 2019: |
| I. | Seven Sold Assets: Seven LNS assets for a total gross sales price of $43 million and a net sales price of $42 million after transaction costs, representing an approximately $10 million gain and a 29% premium to 9/30/19 GAAP net book value |
| II. | Six Assets Under Binding Contract: Six LNS assets for a total gross sales price of $126 million and a net sales price of $75 million after debt repayment and transaction costs, representing an anticipated gain of approximately $27 million and a 58% premium to 9/30/19 GAAP net book value |
| III. | Twenty-seven Assets Listed For Sale or Expected to Payoff: Twenty-seven LNS assets are listed for sale or expected to payoff, which together with assets sold and under contract, represent approximately 75% of the LNS portfolio that is resolved or in active phases of resolution based on 9/30/19 GAAP net book value |
Total Company
| • | Declared and paid a monthly cash dividend of $0.145 per share of Class A common stock “common stock” for October and $0.10 per share for November and December 2019. Subsequent to quarter end, the Company’s Board of Directors declared a monthly cash dividend of $0.10 per share of common stock for January and February 2020 |
| • | During the fourth quarter, the Company’s manager, a subsidiary of Colony Capital, Inc., and the Company revised the terms of the management agreement, which resulted in a reduction to the fee base by accumulated unrealized provisions for loan losses and real estate impairments to date. Such reduction became effective during the fourth quarter 2019 and results in an approximately $13 million decrease of the annual base management fee paid by the Company to its manager |
| • | As of February 24, 2020, total corporate liquidity of approximately $378 million through cash-on-hand and availability under the corporate revolving credit facility. In addition, excess capacity under the Company’s master repurchase facilities of approximately $1.5 billion |
2019 DEPLOYMENT HIGHLIGHTS 27 $1.6B $1.2B $337M 12%+ New Investments Commitments on New Initial Gross Funding on Initial Net Funding on W.A. Return on Closed Investments New Investments New Investments Equity % Other loan Industrial Hotel Southeast 1% 3% us 2% Mezzanine loans 7% 12% Other/Mixed-Use Multifamily 12% 39% West 41% Investment Collateral Geography Type Senior Type mortgage loans 87% ortheast Office 40% 39% 2019 & INCEPTION TO DATE HIGHLIGHTS Growth & Opportunity (S) 14% annualized Total Earnings growth(1) (S) $3.35 per share of total dividends paid since inception(2)(S) $1.20 per share annual dividend; 9.2% dividend yield on 30-day VWAP and 110% dividend coverage on annualized Core Earnings from Core Portfolio alone(3)(S) $16.49 per share GAAP net book value, 27% premium to 30-day VWAP(3)(S) $17.81 per share undepreciated book value, 37% premium to 30-day VWAP(3) Leading Scale & Execution (S) $5.6 billion total at-share assets(4) (S) $1.0 billion CRE CLO financing, fourth largest sponsored CRE CLO in 2019(S) $1.6 billion gross committed capital across 27 investments in 2019(S) $3.8 billion gross committed capital since inception(S) 21% total investment-level asset growth since inception(S) Over $500 million of non-core, legacy, non-strategic assets sold/resolved since inception(5) Notes: 1. Represents Core Earnings excluding gains/losses for the total company (Core + Legacy, Non-Strategic portfolios) for the annualized full three quarter-period following inception ending 12/31/18 vs. full-year 2019 2. Cumulative per share dividends paid from February 2018 (inception) through February 2020 3. 30-day VWAP of $12.98 per share; based on 30-day period up to and including February 24, 2020 4. Represents CLNC share as of December 31, 2019. This includes noncontrolling interests in the Operating Partnership and excludes noncontrolling interests in investment entities 5. Includes other real estate sold, PE secondaries interests sold and retail loans resolved
Portfolio Performance
As of December 31, 2019, the Core Portfolio consisted of 56 loans held by the Company, including senior loans, mezzanine loans and preferred equity interests, and had an average risk rating of 3.1 (average risk), the same level as of September 30, 2019; weighted by total loan exposure on a 1 (Very Low Risk) to 5 (Impaired/Defaulted/Loss Likely) scale. As of December 31, 2019, no loans in the Core Portfolio were rated 5 (Impaired/Defaulted/Loss Likely).
Common Stock and Operating Partnership Units
As of February 24, 2020, the Company had approximately 128.5 million shares of common stock outstanding and the Company’s operating partnership had approximately 3.1 million operating partnership units (“OP units”) outstanding held by members other than the Company or its subsidiaries.
Dividend Announcement
The Company’s Board of Directors declared a monthly cash dividend of $0.145 per share of common stock for the monthly period ended October 31, 2019, which was paid on November 12, 2019 to stockholders of record on October 31, 2019.
During the fourth quarter, the Company elected to modify its dividend policy in furtherance of its Portfolio Bifurcation Plan, to issue a monthly dividend that is fully covered by and positioned for growth based on the Company’s Core Earnings on its Core Portfolio. Therefore, the Company’s Board of Directors declared a monthly cash dividend of $0.10 per share of common stock for: (i) the month ended November 30, 2019, which was paid on December 10, 2019 to stockholders of record on November 30, 2019, and (ii) the month ended December 31, 2019, which was paid on January 10, 2020 to stockholders of record on December 31, 2019.
Subsequent to the end of the fourth quarter, the Company’s Board of Directors declared a monthly cash dividend of $0.10 per share of common stock for: (i) the month ending January 31, 2020, which was paid on February 10, 2020 to stockholders of record on January 31, 2020, and (ii) the month ending February 29, 2020, which will be paid on March 10, 2020 to stockholders of record on February 29, 2020.
Common Stock Repurchase Plan
The Company’s Board of Directors have authorized a stock repurchase program, under which the Company may repurchase up to $300 million of its outstanding Class A common stock until March 31, 2021 (the “Stock Repurchase Program”), replacing the Company’s prior stock repurchase program announced in February 2019. Under the Stock Repurchase Program, the Company may repurchase shares in open market purchases, in privately negotiated transactions or otherwise. The Stock Repurchase Program will be utilized at management’s discretion and in accordance with the requirements of the Securities and Exchange Commission. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate requirements and other conditions.
Special Committee Review Process
On November 6, 2019, Colony Capital sent a letter to the Company’s independent directors proposing to explore the possible internalization of the management of the Company and a transfer of Colony Capital’s credit management business to us. The letter provided that an internalization would be subject to, among other things, the negotiation of terms and definitive documentation and approval of the Company’s Board of Directors and the board of directors of Colony Capital (or an authorized committee thereof in each case). In response, the Board of Directors has formed a special committee consisting exclusively of independent and disinterested directors (the “Special Committee”) to explore this internalization proposal as well as other strategic alternatives.
On February 27, 2020, Colony Capital publicly reported that it plans to take action to enter into an agreement with the Company and/or one or more third parties with respect to a disposition of Colony Capital’s management agreement with the Company, subject to the Company’s consent, whether in the form of an internalization of the Company’s management (including, but not limited to, the possible internalization set forth in the November 6, 2019 letter), a sale of Colony Capital’s management agreement with the Company, or similar transaction the effect of which is to dispose of, in whole or in part, Colony Capital’s management agreement with the Company. The scope of any such transaction is focused on Colony Capital’s management agreement with the Company, and not on Colony Capital’s private credit investment management platform and associated private credit assets.
The Special Committee is committed to taking all appropriate steps to maximize value for the Company and its stockholders, and has been actively engaged in a robust process to explore a range of value-enhancing opportunities, including, but not limited to, the potential transactions proposed by Colony Capital. The Special Committee has engaged both an independent financial advisor and legal advisor. We can give no assurance as to whether the Company and Colony Capital will enter into an agreement with respect to the management of our investments, the terms or scope of such agreement and the timing of closing, or whether we may pursue other strategic alternatives. The Company does not undertake any obligation to provide updates with respect to the Special Committee’s review process or any strategic alternatives it may consider.
Non-GAAP Financial Measures and Definitions
Core Earnings/Legacy, Non-Strategic Earnings
We present Core Earnings/Legacy, Non-Strategic Earnings, which are non-GAAP supplemental financial measures of our performance. Our Core Earnings are generated by the Core Portfolio and Legacy, Non-Strategic Earnings are generated by the Legacy, Non-Strategic Portfolio. We believe that Core Earnings/Legacy, Non-Strategic Earnings provides meaningful information to consider in addition to our net income and cash flow from operating activities determined in accordance with accounting principles generally accepted in the United States (“U.S. GAAP” or “GAAP”). These supplemental financial measures help us to evaluate our performance excluding the effects of certain transactions and U.S. GAAP adjustments that we believe are not necessarily indicative of our current portfolio and operations. For information on the fees we pay our Manager, see Note 11, “Related Party Arrangements” to our consolidated financial statements included in Form 10-K to be filed with the U.S. Securities and Exchange Commission (“SEC”). In addition, we believe that our investors also use Core Earnings/Legacy, Non-Strategic Earnings or a comparable supplemental performance measure to evaluate and compare the performance of us and our peers, and as such, we believe that the disclosure of Core Earnings/Legacy, Non-Strategic Earnings is useful to our investors.
We define Core Earnings/Legacy, Non-Strategic Earnings as U.S. GAAP net income (loss) attributable to our common stockholders (or, without duplication, the owners of the common equity of our direct subsidiaries, such as our operating partnership or “OP”) and excluding (i) non-cash equity compensation expense, (ii) the expenses incurred in connection with our formation or other strategic transactions, (iii) the incentive fee, (iv) acquisition costs from successful acquisitions, (v) gains or losses from sales of real estate property and impairment write-downs of depreciable real estate, including unconsolidated joint ventures and preferred equity investments, (vi) depreciation and amortization, (vii) any unrealized gains or losses or other similar non-cash items that are included in net income for the current quarter, regardless of whether such items are included in other comprehensive income or loss, or in net income, (viii) one-time events pursuant to changes in U.S. GAAP and (ix) certain material non-cash income or expense items that in the judgment of management should not be included in Core Earnings/Legacy, Non-Strategic Earnings. For clauses (viii) and (ix), such exclusions shall only be applied after discussions between our Manager and our independent directors and after approval by a majority of our independent directors. U.S. GAAP net income (loss) attributable to our common stockholders and Core Earnings/Legacy, Non-Strategic Earnings include provisions for loan losses.
Prior to the third quarter of 2019, Core Earnings reflected adjustments to U.S. GAAP net income to exclude impairment of real estate and provision for loan losses. During the third quarter of 2019, we revised our definition of Core Earnings to include the provision for loan losses while excluding realized losses of sales of real estate property and impairment write-downs of preferred equity investments. This was approved by a majority of our independent directors. Core Earnings/Legacy, Non-Strategic Earnings for the year ended December 31, 2019 include revisions to the Core Earnings previously disclosed by us in prior periods.
Core Earnings/Legacy, Non-Strategic Earnings does not represent net income or cash generated from operating activities and should not be considered as an alternative to U.S. GAAP net income or an indication of our cash flows from operating activities determined in accordance with U.S. GAAP, a measure of our liquidity, or an indication of funds available to fund our cash needs, including our ability to make cash distributions. In addition, our methodology for calculating Core Earnings/Legacy, Non-Strategic Earnings may differ from methodologies employed by other companies to calculate the same or similar non-GAAP supplemental financial measures, and accordingly, our reported Core Earnings/Legacy, Non-Strategic Earnings may not be comparable to the Core Earnings/Legacy, Non-Strategic Earnings reported by other companies.
The Company calculates Core Earnings/Legacy, Non-Strategic Earnings per share, which are non-GAAP supplemental financial measures, based on a weighted average number of common shares and operating partnership units (held by members other than the Company or its subsidiaries).
Core Portfolio
We present the Core Portfolio, which consists of four business and reportable segments including senior and mezzanine loans and preferred equity, CRE debt securities, net leased real estate and corporate. Senior and mezzanine loans and preferred equity consists of CRE debt investments including senior mortgage loans, mezzanine loans, and preferred equity interests as well as participations in such loans. The segment also includes acquisition, development and construction loan arrangements accounted for as equity method investments as well as loans and preferred equity interests held through joint ventures with an
affiliate of Colony Capital which were deconsolidated as a result of our formation transaction and subsequently treated as equity method investments. CRE debt securities include both investment grade and non-investment grade rated CMBS bonds (including “B-pieces” of CMBS securitization pools or “B-Piece” investments). Net leased real estate includes direct investments in commercial real estate principally composed of long-term leases to tenants on a net lease basis, where such tenants are generally responsible for property operating expenses such as insurance, utilities, maintenance capital expenditures and real estate taxes. Corporate includes corporate-level asset management and other fees, related party and general and administrative expenses related to the Core Portfolio only.
Legacy, Non-Strategic Portfolio
We present the Legacy, Non-Strategic Portfolio, which is a business and reportable segment that consists of direct investments in operating real estate such as multi-tenant office and multifamily residential assets, real estate acquired in settlement of loans, real estate private equity interests and certain retail and other legacy loans originated prior to the combination that created the Company. This segment includes corporate-level asset management and other fees, related party and general and administrative expenses related to the Legacy, Non-strategic Portfolio.
Loan-to-Value
We present loan-to-value which reflects the initial loan amount divided by the as-is appraised value as of the date the loan was originated, or by the current principal amount divided by the appraisal value as of the date of the most recent as-is appraisal. For construction loans, loan-to-value reflects the total commitment amount of the loan divided by the as-completed appraised value, or the total commitment amount of the loan divided by the projected total cost basis.
Return on Equity
We present Return on Equity (“ROE”), which is a supplemental financial measure that represents the initial net investment-level earnings generated by an investment expressed as a percentage of the net equity capital invested. The Company calculates net investment-level earnings for investments in loans and CRE debt securities as the sum of the stated cash coupon income and any non-cash income (such as payment in-kind income and amortization/accretion of purchase discounts and origination, extension and exit fees) less investment-level financing costs. For investments in net leased real estate, the Company calculates net investment-level earnings by subtracting investment-level financing costs from net operating income. Net equity capital invested is calculated by taking the gross initial invested capital less any financing. With respect to certain loans and investment level financing, the Company assumes the one-month USD LIBOR as of December 31, 2019 when calculating ROE. The Company’s ROE calculation relies on a number of assumptions and estimates that are subject to change, some of which are outside the control of the Company. Actual results may differ materially from the Company’s expectations. As such, there can be no assurance that the actual ROE will be equivalent to the estimated ROE. In addition, the Company’s methodology for calculating ROE may differ from methodologies employed by other companies to calculate the same or similar supplemental financial measures, and accordingly, the presented ROE may not be comparable to the ROE reported by other companies.
Fourth Quarter 2019 Conference Call
The Company will conduct a conference call to discuss the financial results on February 27, 2020 at 2:00 p.m. PT / 5:00 p.m. ET. To participate in the event by telephone, please dial (877) 407-0784 ten minutes prior to the start time (to allow time for registration). International callers should dial (201) 689-8560 and use passcode 13698648. The call will also be broadcast live over the Internet and can be accessed on the Shareholders section of the Company’s website at www.clncredit.com. A webcast of the call will be available for 90 days on the Company’s website.
For those unable to participate during the live call, a replay will be available starting February 27, 2020 at 5:00 p.m. PT / 8:00 p.m. ET, through March 5, 2020, at 8:59 p.m. PT / 11:59 p.m. ET. To access the replay, dial (844) 512-2921 (U.S.), and use passcode 13698648. International callers should dial (412) 317-6671 and enter the same conference ID number.
Supplemental Financial Report
A Fourth Quarter 2019 Supplemental Financial Report will be available on the Company’s website at www.clncredit.com. This information will be furnished to the SEC in a Current Report on Form 8-K.
About Colony Credit Real Estate, Inc.
Colony Credit Real Estate (NYSE: CLNC) is one of the largest publicly traded commercial real estate (CRE) credit REITs, focused on originating, acquiring, financing and managing a diversified portfolio consisting primarily of CRE senior mortgage loans, mezzanine loans, preferred equity, debt securities and net leased properties predominantly in the United States. Colony Credit Real Estate is externally managed by a subsidiary of leading global real estate and investment management firm, Colony Capital, Inc. Colony Credit Real Estate is organized as a Maryland corporation that elected to be taxed as a REIT for U.S. federal income tax purposes commencing with our initial taxable year ended December 31, 2018. For additional information regarding the Company and its management and business, please refer to www.clncredit.com.
Cautionary Statement Regarding Forward-Looking Statements
This press release may contain forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and contingencies, many of which are beyond our control, and may cause actual results to differ significantly from those expressed in any forward-looking statement. Among others, the following uncertainties and other factors could cause actual results to differ from those set forth in the forward-looking statements: operating costs and business disruption may be greater than expected; the Company’s operating results may differ materially from the information presented in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as well as in Colony Credit Real Estate’s other filings with the Securities and Exchange Commission; the fair value of the Company’s investments may be subject to uncertainties; the Company’s use of leverage could hinder its ability to make distributions and may significantly impact its liquidity position; given the Company’s dependence on its external manager, an affiliate of Colony Capital, Inc., any adverse changes in the financial health or otherwise of its manager or Colony Capital, Inc. could hinder the Company’s operating performance and return on stockholder’s investment; the ability to realize substantial efficiencies as well as anticipated strategic and financial benefits, including, but not limited to expected returns on equity and/or yields on investments; adverse impacts on the Company’s liquidity, including its ability to continue to generate liquidity from sales of Legacy, Non-Strategic assets; the Company’s ability to liquidate its Legacy, Non-Strategic assets within the projected timeframe or at the projected values; the timing of and ability to deploy available capital; the Company’s ability to maintain or grow the dividend at all in the future; the timing of and ability to complete repurchases of the Company’s stock; the ability of the Company to refinance certain mortgage debt on similar terms to those currently existing or at all; whether Colony Capital will continue to serve as our external manager or whether we will pursue another strategic transaction; and the impact of legislative, regulatory and competitive changes. The foregoing list of factors is not exhaustive. Additional information about these and other factors can be found in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as well as in Colony Credit Real Estate’s other filings with the Securities and Exchange Commission.
We caution investors not to unduly rely on any forward-looking statements. The forward-looking statements speak only as of the date of this press release. Colony Credit Real Estate is under no duty to update any of these forward-looking statements after the date of this press release, nor to conform prior statements to actual results or revised expectations, and Colony Credit Real Estate does not intend to do so.
Investor Relations
Colony Credit Real Estate, Inc.
Addo Investor Relations
Lasse Glassen
310-829-5400
COLONY CREDIT REAL ESTATE, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
| December 31, 2019 | December 31, 2018 | |||||||
| Assets |
||||||||
| Cash and cash equivalents |
$ | 69,619 | $ | 77,317 | ||||
| Restricted cash |
126,065 | 110,146 | ||||||
| Loans and preferred equity held for investment, net |
2,576,332 | 2,020,497 | ||||||
| Real estate securities, available for sale, at fair value |
252,824 | 228,185 | ||||||
| Real estate, net |
1,484,796 | 1,959,690 | ||||||
| Investments in unconsolidated ventures ($10,283 and $160,851 at fair value, respectively) |
595,305 | 903,037 | ||||||
| Receivables, net |
46,456 | 48,806 | ||||||
| Deferred leasing costs and intangible assets, net |
112,762 | 134,068 | ||||||
| Assets held for sale |
189,470 | — | ||||||
| Other assets |
87,707 | 62,006 | ||||||
| Mortgage loans held in securitization trusts, at fair value |
1,872,970 | 3,116,978 | ||||||
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|
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| Total assets |
$ | 7,414,306 | $ | 8,660,730 | ||||
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| Liabilities |
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| Securitization bonds payable, net |
$ | 833,153 | $ | 81,372 | ||||
| Mortgage and other notes payable, net |
1,256,112 | 1,173,019 | ||||||
| Credit facilities |
1,099,233 | 1,365,918 | ||||||
| Due to related party |
11,016 | 15,019 | ||||||
| Accrued and other liabilities |
140,424 | 106,187 | ||||||
| Intangible liabilities, net |
22,149 | 15,096 | ||||||
| Liabilities related to assets held for sale |
294 | — | ||||||
| Escrow deposits payable |
74,497 | 65,995 | ||||||
| Dividends payable |
13,164 | 18,986 | ||||||
| Mortgage obligations issued by securitization trusts, at fair value |
1,762,914 | 2,973,936 | ||||||
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| Total liabilities |
5,212,956 | 5,815,528 | ||||||
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| Commitments and contingencies |
||||||||
| Equity |
||||||||
| Stockholders’ equity |
||||||||
| Preferred stock, $0.01 par value, 50,000,000 shares authorized, no shares issued and outstanding as of December 31, 2019 and December 31, 2018, respectively |
— | — | ||||||
| Common stock, $0.01 par value per share |
||||||||
| Class A, 950,000,000 and 905,000,000 shares authorized, 128,538,703 and 83,410,376 shares issued and outstanding as of December 31, 2019 and December 31, 2018, respectively |
1,285 | 834 | ||||||
| Class B-3, no shares authorized, issued and outstanding as of December 31, 2019 and 45,000,000 shares authorized and 44,399,444 shares issued and outstanding as of December 31, 2018 |
— | 444 | ||||||
| Additional paid-in capital |
2,909,181 | 2,899,353 | ||||||
| Accumulated deficit |
(819,738 | ) | (193,327 | ) | ||||
| Accumulated other comprehensive income (loss) |
28,294 | (399 | ) | |||||
|
|
|
|
|
|||||
| Total stockholders’ equity |
2,119,022 | 2,706,905 | ||||||
| Noncontrolling interests in investment entities |
31,631 | 72,683 | ||||||
| Noncontrolling interests in the Operating Partnership |
50,697 | 65,614 | ||||||
|
|
|
|
|
|||||
| Total equity |
2,201,350 | 2,845,202 | ||||||
|
|
|
|
|
|||||
| Total liabilities and equity |
$ | 7,414,306 | $ | 8,660,730 | ||||
|
|
|
|
|
|||||
COLONY CREDIT REAL ESTATE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| Net interest income |
||||||||||||||||
| Interest income |
$ | 47,696 | $ | 38,580 | $ | 175,169 | $ | 151,653 | ||||||||
| Interest expense |
(24,225 | ) | (16,808 | ) | (87,730 | ) | (47,074 | ) | ||||||||
| Interest income on mortgage loans held in securitization trusts |
20,485 | 38,749 | 120,203 | 143,371 | ||||||||||||
| Interest expense on mortgage obligations issued by securitization trusts |
(18,274 | ) | (35,380 | ) | (109,964 | ) | (132,411 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net interest income |
25,682 | 25,141 | 97,678 | 115,539 | ||||||||||||
| Property and other income |
||||||||||||||||
| Property operating income |
62,562 | 58,633 | 253,955 | 178,339 | ||||||||||||
| Other income |
902 | 499 | 2,333 | 3,651 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total property and other income |
63,464 | 59,132 | 256,288 | 181,990 | ||||||||||||
| Expenses |
||||||||||||||||
| Management fee expense |
8,320 | 11,522 | 42,390 | 43,190 | ||||||||||||
| Property operating expense |
26,725 | 24,430 | 112,801 | 73,616 | ||||||||||||
| Transaction, investment and servicing expense |
4,178 | (1,412 | ) | 7,191 | 36,800 | |||||||||||
| Interest expense on real estate |
13,629 | 13,990 | 55,415 | 43,437 | ||||||||||||
| Depreciation and amortization |
20,367 | 18,297 | 103,220 | 90,986 | ||||||||||||
| Provision for loan losses |
— | 79,369 | 220,572 | 113,911 | ||||||||||||
| Impairment of operating real estate |
(97 | ) | 2,435 | 282,749 | 31,813 | |||||||||||
| Administrative expense (including $3,344, $3,208, $10,810 and $7,113 of equity-based compensation expense, respectively) |
9,541 | 9,725 | 31,936 | 26,634 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total expenses |
82,663 | 158,356 | 856,274 | 460,387 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Other income (loss) |
||||||||||||||||
| Unrealized gain (loss) on mortgage loans and obligations held in securitization trusts, net |
(512 | ) | 1,749 | 4,090 | 5,003 | |||||||||||
| Realized gain (loss) on mortgage loans and obligations held in securitization trusts, net |
— | (695 | ) | 2,772 | (3,447 | ) | ||||||||||
| Other gain (loss), net |
12,857 | (3,226 | ) | (972 | ) | (2,766 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Income (loss) before equity in earnings of unconsolidated ventures and income taxes |
18,828 | (76,255 | ) | (496,418 | ) | (164,068 | ) | |||||||||
| Equity in earnings (loss) of unconsolidated ventures |
18,980 | (15,999 | ) | 36,942 | 23,774 | |||||||||||
| Income tax expense |
(2,628 | ) | (39,906 | ) | (3,172 | ) | (37,059 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income (loss) |
35,180 | (132,160 | ) | (462,648 | ) | (177,353 | ) | |||||||||
| Net (income) loss attributable to noncontrolling interests: |
||||||||||||||||
| Investment entities |
(415 | ) | 1,983 | 38,208 | 4,771 | |||||||||||
| Operating Partnership |
(813 | ) | 3,088 | 9,928 | 4,084 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income (loss) attributable to Colony Credit Real Estate, Inc. common stockholders |
$ | 33,952 | $ | (127,089 | ) | $ | (414,512 | ) | $ | (168,498 | ) | |||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income (loss) per common share – basic and diluted |
$ | 0.26 | $ | (1.00 | ) | $ | (3.25 | ) | $ | (1.41 | ) | |||||
|
|
|
|
|
|
|
|
|
|||||||||
| Weighted average shares of common stock outstanding – basic and diluted |
128,539 | 127,887 | 128,391 | 120,677 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
COLONY CREDIT REAL ESTATE, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
(In thousands, except per share data) (Unaudited)
GAAP Net Income (Loss) to Core Earnings (Loss) / Legacy, Non-Strategic Earnings (Loss)
| Three Months Ended December 31, 2019 | ||||||||||||
| Total | Legacy, Non- Strategic Portfolio |
Core Portfolio | ||||||||||
| Net income attributable to Colony Credit Real Estate, Inc. common stockholders |
$ | 33,952 | $ | 3,681 | $ | 30,271 | ||||||
| Adjustments: |
||||||||||||
| Net income attributable to noncontrolling interest of the Operating Partnership |
813 | 91 | 722 | |||||||||
| Non-cash equity compensation expense |
3,344 | 1,672 | 1,672 | |||||||||
| Transaction costs |
977 | 489 | 488 | |||||||||
| Depreciation and amortization |
20,653 | 8,499 | 12,154 | |||||||||
| Net unrealized gain: |
||||||||||||
| Impairment of operating real estate and preferred equity |
(97 | ) | (97 | ) | — | |||||||
| Other unrealized gain |
(1,967 | ) | (4 | ) | (1,963 | ) | ||||||
| Gains on sale of real estate |
(8,598 | ) | (8,487 | ) | (111 | ) | ||||||
| Adjustments related to noncontrolling interests in investment entities |
(744 | ) | (517 | ) | (227 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Core Earnings / Legacy, Non-Strategic Earnings attributable to Colony Credit Real Estate, Inc. common stockholders and noncontrolling interest of the Operating Partnership |
$ | 48,333 | $ | 5,327 | $ | 43,006 | ||||||
|
|
|
|
|
|
|
|||||||
| Core Earnings / Legacy, Non-Strategic Earnings per share(1) |
$ | 0.37 | $ | 0.04 | $ | 0.33 | ||||||
|
|
|
|
|
|
|
|||||||
| Weighted average number of common shares and OP units(1) |
131,614 | 131,614 | 131,614 | |||||||||
|
|
|
|
|
|
|
|||||||
| (1) | The Company calculates Core Earnings / Legacy, Non-Strategic Earnings per share, which are non-GAAP financial measures, based on a weighted average number of common shares and OP units (held by members other than the Company or its subsidiaries). For the fourth quarter 2019, the weighted average number of common shares and OP units was approximately 131.6 million; includes 3.1 million of OP units |
| Year Ended December 31, 2019 | ||||||||||||
| Total | Legacy, Non- Strategic Portfolio |
Core Portfolio | ||||||||||
| Net income (loss) attributable to Colony Credit Real Estate, Inc. common stockholders |
$ | (414,512 | ) | $ | (489,906 | ) | $ | 75,394 | ||||
| Adjustments: |
||||||||||||
| Net income (loss) attributable to noncontrolling interest of the Operating Partnership |
(9,928 | ) | (11,715 | ) | 1,787 | |||||||
| Non-cash equity compensation expense |
10,808 | 5,404 | 5,404 | |||||||||
| Transaction costs |
1,651 | 751 | 900 | |||||||||
| Depreciation and amortization |
104,020 | 51,963 | 52,057 | |||||||||
| Net unrealized loss: |
||||||||||||
| Impairment of operating real estate and preferred equity(1) |
304,704 | 263,193 | 41,511 | |||||||||
| Other unrealized loss |
4,554 | 48 | 4,506 | |||||||||
| Gains on sale of real estate |
(8,598 | ) | (8,487 | ) | (111 | ) | ||||||
| Adjustments related to noncontrolling interests in investment entities |
(40,858 | ) | (28,428 | ) | (12,430 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Core Earnings (Loss) / Legacy, Non-Strategic Earnings (Loss) attributable to Colony Credit Real Estate, Inc. common stockholders and noncontrolling interest of the Operating Partnership |
$ | (48,159 | ) | $ | (217,177 | ) | $ | 169,018 | ||||
|
|
|
|
|
|
|
|||||||
| Core Earnings (Loss) / Legacy, Non-Strategic Earnings (Loss) per share(2) |
$ | (0.36 | ) | $ | (1.65 | ) | $ | 1.29 | ||||
|
|
|
|
|
|
|
|||||||
| Weighted average number of common shares and OP units(2) |
131,467 | 131,467 | 131,467 | |||||||||
|
|
|
|
|
|
|
|||||||
| (1) | Includes our $30.8 million proportionate share of impairment losses recorded on equity participations held in joint ventures. This is recorded in equity in earnings of unconsolidated ventures on our consolidated statements of operations |
| (2) | The Company calculates Core Earnings (Loss) / Legacy, Non-Strategic Earnings (Loss) per share, which are non-GAAP financial measures, based on a weighted average number of common shares and OP units (held by members other than the Company or its subsidiaries). For the year ended December 31, 2019, the weighted average number of common shares and OP units was approximately 131.5 million; includes 3.1 million of OP units |
GAAP Net Book Value to Undepreciated Book Value
| As of December 31, 2019 | ||||||||||||
| Total | Legacy, Non- Strategic Portfolio |
Core Portfolio | ||||||||||
| GAAP net book value (excl. noncontrolling interests in investment entities) |
$ | 2,169,719 | $ | 358,972 | $ | 1,810,747 | ||||||
| Accumulated depreciation and amortization(1) |
174,382 | 90,387 | 83,995 | |||||||||
|
|
|
|
|
|
|
|||||||
| Undepreciated book value |
$ | 2,344,101 | $ | 449,359 | $ | 1,894,742 | ||||||
|
|
|
|
|
|
|
|||||||
| GAAP net book value per share (excl. noncontrolling interests in investment entities) |
$ | 16.49 | $ | 2.73 | $ | 13.76 | ||||||
| Accumulated depreciation and amortization per share(1) |
1.32 | 0.68 | 0.64 | |||||||||
|
|
|
|
|
|
|
|||||||
| Undepreciated book value per share |
$ | 17.81 | $ | 3.41 | $ | 14.40 | ||||||
|
|
|
|
|
|
|
|||||||
| Total common shares and OP units outstanding(2) |
131,614 | 131,614 | 131,614 | |||||||||
|
|
|
|
|
|
|
|||||||
| (1) | Represents at-share net accumulated depreciation and amortization on real estate investments, including related intangible assets and liabilities |
| (2) | The Company calculates GAAP net book value (excluding noncontrolling interests in investment entities) per share and undepreciated book value per share, a non-GAAP financial measure, based on the total number of common shares and OP units (held by members other than the Company or its subsidiaries) outstanding at the end of the reporting period. As of December 31, 2019, the total number of common shares and OP units outstanding was approximately 131.6 million |
Cumulative Legacy, Non-Strategic Resolutions Since Announcing Portfolio Bifurcation Plan (November 2019)
| Number | Investment | As of September 30, 2019, GAAP | Gross | Net | ||||||||||||||||||||
| ($ in millions; at CLNC share) |
of Assets | Count | Carrying Value | Net Carrying Value | Sales Price | Sales Price (1) | ||||||||||||||||||
| Sold |
7 | 7 | $ | 32 | $ | 32 | $ | 43 | $ | 42 | ||||||||||||||
| Under Contract |
6 | 9 | 97 | 48 | 126 | 75 | ||||||||||||||||||
| Expected Loan Payoff |
1 | 1 | 40 | 12 | n/a | n/a | ||||||||||||||||||
| Listed for Sale |
26 | 32 | 344 | 216 | n/a | n/a | ||||||||||||||||||
| Preparing for Sale |
14 | 21 | 331 | 105 | n/a | n/a | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
54 | 70 | $ | 845 | $ | 413 | n/a | n/a | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| (1) | Net sales price represents gross sales price net of any in-place investment-level financing and transaction costs |
Supplemental Financial Report Fourth Quarter 2019 February 27, 2020 Exhibit 99.2
Cautionary Statement Regarding Forward-Looking Statements This presentation may contain forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and contingencies, many of which are beyond our control, and may cause actual results to differ significantly from those expressed in any forward-looking statement. Among others, the following uncertainties and other factors could cause actual results to differ from those set forth in the forward-looking statements: operating costs and business disruption may be greater than expected; the Company's operating results may differ materially from the information presented in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as well as in Colony Credit Real Estate’s other filings with the Securities and Exchange Commission; the fair value of the Company's investments may be subject to uncertainties; the Company's use of leverage could hinder its ability to make distributions and may significantly impact its liquidity position; given the Company's dependence on its external manager, an affiliate of Colony Capital, Inc., any adverse changes in the financial health or otherwise of its manager or Colony Capital, Inc. could hinder the Company's operating performance and return on stockholder's investment; the ability to realize substantial efficiencies as well as anticipated strategic and financial benefits, including, but not limited to expected returns on equity and/or yields on investments; adverse impacts on the Company's liquidity, including its ability to continue to generate liquidity from sales of Legacy, Non-Strategic assets; the Company’s ability to liquidate its Legacy, Non-Strategic assets within the projected timeframe or at the projected values; the timing of and ability to deploy available capital; the Company’s ability to maintain or grow the dividend at all in the future; the timing of and ability to complete repurchases of the Company’s stock; the ability of the Company to refinance certain mortgage debt on similar terms to those currently existing or at all; whether Colony Capital will continue to serve as our external manager or whether we will pursue another strategic transaction; and the impact of legislative, regulatory and competitive changes. The foregoing list of factors is not exhaustive. Additional information about these and other factors can be found in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as well as in Colony Credit Real Estate’s other filings with the Securities and Exchange Commission. We caution investors not to unduly rely on any forward-looking statements. The forward-looking statements speak only as of the date of this presentation. Colony Credit Real Estate is under no duty to update any of these forward-looking statements after the date of this presentation, nor to conform prior statements to actual results or revised expectations, and Colony Credit Real Estate does not intend to do so.
We present Core Earnings/Legacy, Non-Strategic Earnings, which are non-GAAP supplemental financial measures of our performance. Our Core Earnings are generated by the Core Portfolio and Legacy, Non-Strategic Earnings are generated by the Legacy, Non-Strategic Portfolio. We believe that Core Earnings/Legacy, Non-Strategic Earnings provides meaningful information to consider in addition to our net income and cash flow from operating activities determined in accordance with accounting principles generally accepted in the United States (“U.S. GAAP” or “GAAP”). These supplemental financial measures help us to evaluate our performance excluding the effects of certain transactions and U.S. GAAP adjustments that we believe are not necessarily indicative of our current portfolio and operations. For information on the fees we pay our Manager, see Note 11, “Related Party Arrangements” to our consolidated financial statements included in Form 10-K to be filed with the U.S. Securities and Exchange Commission (“SEC”). In addition, we believe that our investors also use Core Earnings/Legacy, Non-Strategic Earnings or a comparable supplemental performance measure to evaluate and compare the performance of us and our peers, and as such, we believe that the disclosure of Core Earnings/Legacy, Non-Strategic Earnings is useful to our investors. We define Core Earnings/Legacy, Non-Strategic Earnings as U.S. GAAP net income (loss) attributable to our common stockholders (or, without duplication, the owners of the common equity of our direct subsidiaries, such as our operating partnership or “OP”) and excluding (i) non-cash equity compensation expense, (ii) the expenses incurred in connection with our formation or other strategic transactions, (iii) the incentive fee, (iv) acquisition costs from successful acquisitions, (v) gains or losses from sales of real estate property and impairment write-downs of depreciable real estate, including unconsolidated joint ventures and preferred equity investments, (vi) depreciation and amortization, (vii) any unrealized gains or losses or other similar non-cash items that are included in net income for the current quarter, regardless of whether such items are included in other comprehensive income or loss, or in net income, (viii) one-time events pursuant to changes in U.S. GAAP and (ix) certain material non-cash income or expense items that in the judgment of management should not be included in Core Earnings/Legacy, Non-Strategic Earnings. For clauses (viii) and (ix), such exclusions shall only be applied after discussions between our Manager and our independent directors and after approval by a majority of our independent directors. U.S. GAAP net income (loss) attributable to our common stockholders and Core Earnings/Legacy, Non-Strategic Earnings include provisions for loan losses. Prior to the third quarter of 2019, Core Earnings reflected adjustments to U.S. GAAP net income to exclude impairment of real estate and provision for loan losses. During the third quarter of 2019, we revised our definition of Core Earnings to include the provision for loan losses while excluding realized losses of sales of real estate property and impairment write-downs of preferred equity investments. This was approved by a majority of our independent directors. Core Earnings/Legacy, Non-Strategic Earnings for the year ended December 31, 2019 include revisions to the Core Earnings previously disclosed by us in prior periods. Core Earnings/Legacy, Non-Strategic Earnings does not represent net income or cash generated from operating activities and should not be considered as an alternative to U.S. GAAP net income or an indication of our cash flows from operating activities determined in accordance with U.S. GAAP, a measure of our liquidity, or an indication of funds available to fund our cash needs, including our ability to make cash distributions. In addition, our methodology for calculating Core Earnings/Legacy, Non-Strategic Earnings may differ from methodologies employed by other companies to calculate the same or similar non-GAAP supplemental financial measures, and accordingly, our reported Core Earnings/Legacy, Non-Strategic Earnings may not be comparable to the Core Earnings/Legacy, Non-Strategic Earnings reported by other companies. The Company calculates Core Earnings/Legacy, Non-Strategic Earnings per share, which are non-GAAP supplemental financial measures, based on a weighted average number of common shares and operating partnership units (held by members other than the Company or its subsidiaries). We believe net operating income (“NOI”) and earnings before interest, tax, depreciation and amortization (“EBITDA”) are useful measures of operating performance of our net leased and other real estate portfolios as they are more closely linked to the direct results of operations at the property level. NOI and EBITDA excludes historical cost depreciation and amortization, which are based on different useful life estimates depending on the age of the properties, as well as adjusts for the effects of real estate impairment and gains or losses on sales of depreciated properties, which eliminate differences arising from investment and disposition decisions. Additionally, by excluding corporate level expenses or benefits such as interest expense, any gain or loss on early extinguishment of debt and income taxes, which are incurred by the parent entity and are not directly linked to the operating performance of the Company’s properties, NOI and EBITDA provide a measure of operating performance independent of the Company’s capital structure and indebtedness. However, the exclusion of these items as well as others, such as capital expenditures and leasing costs, which are necessary to maintain the operating performance of the Company’s properties, and transaction costs and administrative costs, may limit the usefulness of NOI and EBITDA. NOI and EBITDA may fail to capture significant trends in these components of U.S. GAAP net income (loss) which further limits its usefulness. NOI and EBITDA should not be considered as an alternative to net income (loss), determined in accordance with U.S. GAAP, as an indicator of operating performance. In addition, the Company’s methodology for calculating NOI involves subjective judgment and discretion and may differ from the methodologies used by other companies, when calculating the same or similar supplemental financial measures and may not be comparable with other companies. Important Note Regarding Non-GAAP Financial Measures and definitions
The Company presents pro rata (“at share” or “at CLNC share”) financial information, which is not, and is not intended to be, a presentation in accordance with GAAP. The Company computes pro rata financial information by applying its economic interest to each financial statement line item on an investment-by-investment basis. Similarly, noncontrolling interests’ (“NCI”) share of assets, liabilities, profits and losses was computed by applying noncontrolling interests’ economic interest to each financial statement line item. The Company provides pro rata financial information because it may assist investors and analysts in estimating the Company’s economic interest in its investments. However, pro rata financial information as an analytical tool has limitations. Other companies may not calculate their pro rata information in the same methodology, and accordingly, the Company’s pro rata information may not be comparable to other companies pro rata information. As such, the pro rata financial information should not be considered in isolation or as a substitute for our financial statements as reported under GAAP, but may be used as a supplement to financial information as reported under GAAP. We present loan-to-value which reflects the initial loan amount divided by the as-is appraised value as of the date the loan was originated, or by the current principal amount divided by the appraisal value as of the date of the most recent as-is appraisal. For construction loans, loan-to-value reflects the total commitment amount of the loan divided by the as-completed appraised value, or the total commitment amount of the loan divided by the projected total cost basis. We present Return on Equity (“ROE”), which is a supplemental financial measure that represents the initial net investment-level earnings generated by an investment expressed as a percentage of the net equity capital invested. The Company calculates net investment-level earnings for investments in loans and CRE debt securities as the sum of the stated cash coupon income and any non-cash income (such as payment in-kind income and amortization/accretion of purchase discounts and origination, extension and exit fees) less investment-level financing costs. For investments in net leased real estate, the Company calculates net investment-level earnings by subtracting investment-level financing costs from net operating income. Net equity capital invested is calculated by taking the gross initial invested capital less any financing. With respect to certain loans and investment level financing, the Company assumes the one-month USD LIBOR as of December 31, 2019 when calculating ROE. The Company’s ROE calculation relies on a number of assumptions and estimates that are subject to change, some of which are outside the control of the Company. Actual results may differ materially from the Company’s expectations. As such, there can be no assurance that the actual ROE will be equivalent to the estimated ROE. In addition, the Company’s methodology for calculating ROE may differ from methodologies employed by other companies to calculate the same or similar supplemental financial measures, and accordingly, the presented ROE may not be comparable to the ROE reported by other companies. We present risk rankings, which is a supplemental financial disclosure, for loans and preferred equity investments within the Core Portfolio. In addition to reviewing loans and preferred equity for impairments on a quarterly basis, the Company evaluates loans and preferred equity to determine if an allowance for loan loss should be established. In conjunction with this review, the Company assesses the risk factors of each loan and preferred equity investment and assigns a risk rating based on a variety of factors, including, without limitation, underlying real estate performance and asset value, values of comparable properties, durability and quality of property cash flows, sponsor experience and financial wherewithal, and the existence of a risk-mitigating loan structure. Additional key considerations include loan-to-value ratios, debt service coverage ratios, loan structure, real estate and credit market dynamics, and risk of default or principal loss. Based on a five-point scale, the Company’s loans and preferred equity investments are rated “1” through “5,” from less risk to greater risk. At the time of origination or purchase, loans and preferred equity investments are ranked as a “3” and will move accordingly going forward. Important Note Regarding Non-GAAP Financial Measures and definitions (Cont’d)
Colony Credit Real Estate, Inc. (“CLNC”, “Colony Credit Real Estate”, the “Company” or “We”) currently holds investment interests through the reportable segments below, which are based on how management reviews and manages its business. Each segment also includes corporate-level asset management and other fees, related party and general and administrative expenses related to its respective portfolio. Core Portfolio Loans & Preferred Equity Portfolio (or “Loan Portfolio”) As of December 31, 2019, the Company’s Loan Portfolio included senior mortgage loans, mezzanine loans and preferred equity interests (“preferred equity”) as well as participations in such loans. The Loan Portfolio also includes acquisition, development and construction loan arrangements accounted for as equity method investments as well as loans and preferred equity interests held through joint ventures with an affiliate of Colony Capital which were deconsolidated as a result of the merger and subsequently treated as equity method investments. Senior mortgage loans may include junior participations in our originated senior mortgage loans for which we have syndicated the senior participations to other investors and retained the junior participations for our portfolio and contiguous mezzanine loans where we own both the senior and junior loan positions. We believe these investments are more similar to the senior mortgage loans we originate than other loan types given their credit quality and risk profile Mezzanine loans include other subordinated loans Preferred equity interests include related equity participation interests CRE Debt Securities As of December 31, 2019, the Company’s Commercial Real Estate (“CRE”) Debt Securities included both investment grade and non-investment grade rated CMBS bonds (including “B-pieces” of CMBS securitization pools or “B-Piece” investments). Net Leased Real Estate (“Net Lease”) As of December 31, 2019, the Company’s Net Lease investments included direct investments in commercial real estate principally composed of long-term leases to tenants on a net lease basis, where such tenants are generally responsible for property operating expenses such as insurance, utilities, maintenance capital expenditures and real estate taxes. Legacy, Non-Strategic Portfolio (“LNS Portfolio” or “LNS”) Legacy, Non-Strategic Investments As of December 31, 2019, the Company’s Legacy, Non-Strategic Portfolio included direct investments in operating real estate such as multi-tenant office and multifamily residential assets, real estate acquired in settlement of loans (“REO”), real estate private equity interests (“Private Equity Interests” or “PE Interests”) and certain retail and other legacy loans originated prior to the combination that created the Company. Notes regarding reportable segments
Table of contents Business Developments & Portfolio Highlights Core Portfolio Portfolio Overview Loan & Preferred Equity Portfolio CRE Debt Securities Net Lease Real Estate Investment Detail Legacy, Non-Strategic Portfolio Capitalization Appendix Page 7 11 12 13 15 16 17 19 28 31
I. Business Developments & Portfolio Highlights
I. Business Developments & Highlights Total Company Core Portfolio Andrew E. Witt, Managing Director & Chief Operating Officer of Global Credit at Colony Capital, Inc., Appointed Interim Chief Executive Officer & President Operating Results Q4’19 GAAP net income of $34.0 million, or $0.26 per share FY’19 GAAP net loss of $(414.5) million, or $(3.25) per share Book Value GAAP net book value of $2.2 billion, or $16.49 per share Undepreciated book value of $2.3 billion, or $17.81 per share Dividend: Monthly dividend of $0.145/share for October and new dividend of $0.10/share in November and December Liquidity: As of February 24, 2020, total corporate liquidity of approximately $378 million through cash-on-hand and availability under the corporate revolving credit facility. In addition, excess capacity under the Company’s master repurchase facilities of approximately $1.5 billion Operating Results Q4’19 GAAP net income of $30.3 million, or $0.23 per share and Core Earnings of $43.0 million, or $0.33 per share FY’19 GAAP net income of $75.4 million, or $0.57 per share, and Core Earnings of $169.0 million, or $1.29 per share Book Value GAAP net book value of $1.8 billion, or $13.76 per share Undepreciated book value of $1.9 billion, or $14.40 per share GAAP net book value per share and undepreciated book value per share represent a 6% and 11% premium to 30-day VWAP of $12.98 per share as of February 24, 2020, respectively Capitalization Closed a $1 billion managed Commercial Real Estate Collateralized Loan Obligation (“CLO”) At closing, the CLO accretively financed interests in 21 floating-rate mortgages with an 83.5% advance rate and weighted average coupon at issuance of L+1.59%, before transaction costs, with a structure that features a two-year reinvestment period. CLO proceeds were used primarily to repay approximately $770 million of borrowings under master repurchase facilities Investments Q4’19: Allocated and initially funded approximately $123 million and $77 million of capital, respectively, across one senior loan and one mezzanine loan with a weighted average ROE of approximately 12% FY’19: Allocated approximately $1.6 billion of capital across 27 investments with a weighted average ROE of approximately 12% Sales: During the fourth quarter, sold largest owned hotel asset from the Core Portfolio for $74 million, a slight premium to GAAP net book value
Operating Results Q4’19 GAAP net income of $3.7 million, or $0.03 per share and Legacy, Non-Strategic Earnings of $5.3 million, or $0.04 per share FY’19 GAAP net loss of $(489.9) million, or $(3.82) per share and Legacy, Non-Strategic Earnings (loss) of $(217.2) million, or $(1.65) per share. FY’19 Legacy, Non-Strategic Earnings excluding gains and losses of $31.1 million or $0.23 per share Book Value GAAP net book value of $0.4 billion, or $2.73 per share Cumulative Sales: Subsequent to announcing the Portfolio Bifurcation Plan in November 2019: Seven Sold Assets: Seven LNS assets for a total gross sales price of $43 million and a net sales price of $42 million after transaction costs, representing an approximately $10 million gain and a 29% premium to 9/30/19 GAAP net book value Six Assets Under Binding Contract: Six LNS assets for a total gross sales price of $126 million and a net sales price of $75 million after debt repayment and transaction costs, representing an anticipated gain of approximately $27 million and a 58% premium to 9/30/19 GAAP net book value Twenty-Seven Assets Listed For Sale or Expected to Payoff: Twenty-seven LNS assets are listed for sale or expected to payoff, which together with assets sold and under contract, represent approximately 75% of the LNS portfolio that is resolved or in active phases of resolution based on 9/30/19 GAAP net book value Cumulative LNS Resolutions Since Announcing Portfolio Bifurcation Plan (November 2019): I. Business Developments & Highlights (Cont’d) LNS Portfolio See footnotes in the appendix
I. Company snapshot Company overview ($ in thousands, unless otherwise stated; as of December 31, 2019; at CLNC share) See footnotes in the appendix $5.6 billion Total at-share assets(1) 57% Debt-to-asset ratio(2) 1.4x Net-debt-to-equity ratio(3) $2.2 billion / $16.49 per share GAAP net book value(1) $2.3 billion / $17.81 per share Undepreciated book value(1) $1.20 Annual dividend per share (Based on February 2020 declared monthly dividend of $0.10 per share) 9.2% Annual dividend yield (Based on 30-day VWAP of $12.98 as of 2/24/20 and annualized Feb-20 dividend) Portfolio overview
II. Core Portfolio
II. Core Portfolio – Overview (As of December 31, 2019; at CLNC share) See footnotes in the appendix Select Underlying Assets Northern California Luxury Hotel Los Angeles Mixed-Used Development Southwest Multifamily Property NNN Dublin Office Campus Investment type(3) Property type(3) Portfolio summary 113 Total number of investments $4.6 billion Total at-share assets(1) $1.8 billion GAAP net book value(1) $13.76 GAAP net book value per share 9.3% FY 2019 Core Earnings yield(2)
II. Core Portfolio – Loans & Preferred Equity Portfolio Overview Overview Investment type(5) (As of December 31, 2019; at CLNC share) $2.9 billion Total loans & preferred equity(1) 56 Total number of investments $52 million Average investment size 93% % Senior loans floating rate (All floating rate senior loans have LIBOR floors in-place) 2.0 years W.A. remaining term(2) 4.3 years W.A. extended remaining term(3) 7.7% W.A. unlevered all-in yield(4) 70% W.A. loan-to-value (senior loans only) 3.1 W.A. risk ranking Property type(5) Geography(5) See footnotes in the appendix
II. Core Portfolio – Loans & Preferred Equity Portfolio Overview (Cont’d) ($ in thousands; as of December 31, 2019; at CLNC share) See footnotes in the appendix
II. Core portfolio – CRE Debt securities Ratings Category(6) Vintage(6) (As of December 31, 2019, unless otherwise stated; at CLNC share) Overview $469 million Principal value(1) $363 million Carrying value(1) $157 million Net carrying value(2) 51 Total number of investments(3) 6.1 years W.A. remaining term(4) 7.3% W.A. unlevered all-in yield(5) See footnotes in the appendix % of Portfolio Vintage Year
II. Core Portfolio – Net lease real estate Property type(7) ($ and square feet in thousands; as of December 31, 2019, unless otherwise stated; at CLNC share) Geography(7) W.A. remaining lease term(6)(7) * 100% is related to industrial net lease properties See footnotes in the appendix
Core Portfolio – loans & preferred equity portfolio II. Core Portfolio – Investment Detail ($ in millions; as of December 31, 2019; at CLNC share) See footnotes in the appendix * Reflects loans and preferred equity interests in which the underlying collateral is related to construction/development projects * *
II. Core Portfolio – Investment Detail (Cont’d) ($ in millions; rentable square feet in thousands; as of December 31, 2019; at CLNC share) Core Portfolio – loans & preferred equity portfolio (cont’d) Core Portfolio – net lease real estate * Reflects loans and preferred equity interests in which the underlying collateral is related to construction/development projects ** Represents an equity participation interest ** *,** ** See footnotes in the appendix * * * * * * * *
III. Legacy, Non-Strategic Portfolio
III. Legacy, Non-Strategic – Portfolio Overview ($ in thousands, unless otherwise stated; as of December 31, 2019; at CLNC share) See footnotes in the appendix Portfolio Activity Investment type(3) Property type(3) Portfolio summary Portfolio Overview FY 2019 Legacy, Non-Strategic Earnings excluding gains / (losses) of approximately $31.1 million, or $0.23 per share; FY 2019 Legacy, Non-Strategic Earnings yield of approximately 8.7% GAAP net book value of $0.4 billion, or $2.73 per share During the fourth quarter 2019, sold five LNS assets totaling $22 million of gross proceeds Subsequent to the fourth quarter 2019, sold two LNS assets totaling $21 million of gross proceeds 65 Total number of investments $1.0 billion Total at-share assets(1) $0.4 billion GAAP net book value(1) $2.73 GAAP net book value per share 8.7% FY 2019 Legacy, Non-Strategic Earnings yield ex. gains / (losses)(2)
III. Legacy, Non-Strategic – Loans & Preferred Equity Portfolio Overview Overview Investment type(5) (As of December 31, 2019; at CLNC share) $235 million Total loans & preferred equity(1) 17 Total number of investments $14 million Average investment size 85% % Senior loans floating rate 1.3 years W.A. remaining term(2) 1.9 years W.A. extended remaining term(3) 3.8% W.A. unlevered all-in yield(4) Property type(5) Geography(5) See footnotes in the appendix
* During the fourth quarter 2019, placed two mezzanine loans (or three investments) and one preferred equity interest on non-accrual ** Represents an equity participation interest *,** III. Legacy, Non-Strategic – Loans & Preferred Equity Portfolio Overview (Cont’d) ($ in thousands; as of December 31, 2019; at CLNC share) See footnotes in the appendix *
III. Legacy, Non-Strategic – net lease real estate Property type(7) ($ and square feet in thousands; as of December 31, 2019, unless otherwise stated; at CLNC share) Geography(7) W.A. remaining lease term(6)(7) See footnotes in the appendix
Property type(8) III. Legacy, Non-Strategic – Other real estate ($ and square feet in thousands; as of December 31, 2019, unless otherwise stated; at CLNC share) Geography(8) W.A. remaining lease term(6)(8) See footnotes in the appendix *During the fourth quarter 2019, the Company sold five Legacy, Non-Strategic assets; four retail assets and one office asset. As a result of the sales, financial results in the above table exclude approximately $0.6 million and $2.6 million from Q4 NOI / EBITDA and Annualized Q4 NOI / EBITDA, respectively, related to these assets
III. Legacy, Non-Strategic – Investment Detail ($ in millions; as of December 31, 2019; at CLNC share) Legacy, Non-Strategic Portfolio – loans & preferred equity portfolio * Represents loans on nonaccrual status ** Reflects loans and preferred equity interests in which the underlying collateral is related to construction/development projects *** Represents an equity participation interest *,**,*** * * * * See footnotes in the appendix Legacy, Non-Strategic Portfolio – loans & preferred equity portfolio summary ** *,** *,** *
III. Legacy, non-Strategic – Investment Detail (Cont’d) ($ in millions; rentable square feet in thousands; as of December 31, 2019; at CLNC share) Legacy, Non-Strategic Portfolio – net lease & other real estate See footnotes in the appendix
III. Legacy, non-Strategic – Investment Detail (Cont’d) ($ in millions; rentable square feet in thousands; as of December 31, 2019; at CLNC share) Legacy, Non-Strategic Portfolio – net lease & other real estate (cont’d) See footnotes in the appendix Legacy, Non-Strategic Portfolio – net lease & other real estate summary
IV. Capitalization
IV. Capitalization Highlights (As of December 31, 2019, unless otherwise stated; at CLNC share) Overview $5.3 billion Total capitalization (excluding cash) $3.1 billion Total outstanding debt(1) $340 million ($453 million maximum facility availability) Corporate revolving credit facility availability As of December 31, 2019 $1.5 billion ($2.3 billion maximum facilities availability) Master repurchase facilities availability As of December 31, 2019 1.4x Net debt-to-equity ratio(2) 3.89% Blended cost of financing(3) Capital structure(4) Total capitalization $5.3 billion See footnotes in the appendix
IV. Capitalization overview ($ in thousands; as of December 31, 2019; at CLNC share) See footnotes in the appendix
V. Appendix
V. Appendix – Consolidated Balance sheet (In thousands, except share and per share data; as of December 31, 2019 unless otherwise stated)
V. Appendix – Consolidated Statements of operations (In thousands, except per share data; as of December 31, 2019, unless otherwise stated)
V. Appendix – Consolidated Statements of operations By Segment ($ in thousands; as of December 31, 2019)
V. Appendix – Consolidated Statements of operations By Segment (Cont’d) ($ in thousands; as of December 31, 2019)
V. Appendix – Outstanding common shares and Op units
V. Appendix – reconciliation of gaap to non-gaap financial information (In thousands, except per share data; as of December 31, 2019) (Unaudited) Reconciliation of consolidated balance sheet to at CLNC share balance sheet See footnotes in the appendix
Reconciliation of GAAP net book value to undepreciated book value V. Appendix – reconciliation of gaap to non-gaap financial information (Cont’d) (In thousands, except per share data; as of December 31, 2019) (Unaudited) See footnotes in the appendix
V. Appendix – Reconciliation of GAAP to Non-gaap financial information (Cont’d) (In thousands, except per share data; as of December 31, 2019) (Unaudited) Reconciliation of GAAP net income (loss) to Core Earnings (Loss)/Legacy, Non-Strategic Earnings (Loss) See footnotes in the appendix
Reconciliation of GAAP net income (loss) to NOI/EBITDA V. Appendix – Reconciliation of GAAP to Non-gaap financial information (Cont’d) ($ in thousands; as of December 31, 2019) (Unaudited)
V. Appendix – Footnotes Page 9 Net sales price represents gross sales price net of any in-place investment-level financing and transaction costs Page 10 Represents CLNC share as of December 31, 2019. This includes noncontrolling interests in the Operating Partnership and excludes noncontrolling interests in investment entities Debt-to-asset ratio based on total outstanding secured debt agreements (unpaid principal balance or “UPB”) at CLNC share divided by total assets at CLNC share as of December 31, 2019 Represents CLNC’s share of total outstanding secured debt agreements (UPB) less unrestricted cash at CLNC’s share divided by total stockholders’ equity as of December 31, 2019; stockholders’ equity includes noncontrolling interests in the Operating Partnership and excludes noncontrolling interests in investment entities Represents carrying values net of any in-place investment-level financing at CLNC share as of December 31, 2019 Preferred equity includes $27.3 million related to equity participation interests Includes securitization assets which are presented net of the impact from consolidation Net lease real estate includes deferred leasing costs and other net intangibles and includes the impact of accumulated depreciation and amortization Represents Core Portfolio’s and LNS Portfolio’s proportionate share of outstanding debt related to the corporate revolving credit facility as well as other balance sheet assets and liabilities (including cash, restricted cash, net receivables, other assets, due to related party, accrued and other liabilities, escrow deposits payable and dividends payable) Represents net accumulated depreciation and amortization on real estate investments, including related intangible assets and liabilities Page 12 Represents CLNC share as of December 31, 2019. This includes noncontrolling interests in the Operating Partnership and excludes noncontrolling interests in investment entities Based on the fiscal year ended December 31, 2019 Core Earnings at CLNC share divided by GAAP net book value at CLNC share as of December 31, 2019 Based on carrying values at CLNC share as of December 31, 2019. Property type excludes CMBS and mortgage loans held in securitization trusts Preferred equity includes $27.3 million related to equity participation interests Other includes: (i) commercial and residential development and predevelopment and (ii) mixed-use assets Page 13 Represents carrying values at CLNC share as of December 31, 2019 Represents the remaining loan term based on the current contractual maturity date of loans and is weighted by carrying value at CLNC share as of December 31, 2019 Represents the remaining loan term based on maximum maturity date assuming all extension options on loans are exercised by the borrower and is weighted by carrying value at CLNC share as of December 31, 2019 In addition to the stated cash coupon rate, unlevered all-in yield includes non-cash payment in-kind interest income and the accrual of origination, extension and exit fees. Unlevered all-in yield for the loan portfolio assumes the applicable floating benchmark rate as of December 31, 2019 for W.A. calculations Based on carrying values at CLNC share as of December 31, 2019 Other includes: (i) commercial and residential development and predevelopment and (ii) mixed-use assets Page 14 Represents carrying values at CLNC share as of December 31, 2019 Represents carrying values net of any in-place investment-level financing at CLNC share as of December 31, 2019 In addition to the stated cash coupon rate, unlevered all-in yield includes non-cash payment in-kind interest income and the accrual of origination, extension and exit fees. Unlevered all-in yield for the loan portfolio assumes the applicable floating benchmark rate as of December 31, 2019 for W.A. calculations Represents the remaining loan term based on the current contractual maturity date of loans and is weighted by carrying value at CLNC share as of December 31, 2019 Represents the remaining loan term based on maximum maturity date assuming all extension options on loans are exercised by the borrower and is weighted by carrying value at CLNC share as of December 31, 2019 Page 15 Represents principal amounts and carrying values at CLNC share as of December 31, 2019; for securitization assets, carrying values at CLNC share are presented net of the impact from consolidation Represents carrying values net of any in-place investment-level financing at CLNC share as of December 31, 2019 Investment count represents total number of tranches acquired; two total “B-piece” transactions W.A. calculation based on carrying value at CLNC share as of December 31, 2019 In addition to the stated cash coupon rate, unlevered all-in yield includes non-cash interest income related to the accretion of purchase discounts and are loss-adjusted for the non-rated CRE debt securities. W.A. calculation based on carrying value at CLNC share as of December 31, 2019 Based on carrying values at CLNC share as of December 31, 2019
V. Appendix – Footnotes (cont’d) Page 16 Represents carrying values at CLNC share as of December 31, 2019; includes deferred leasing costs and other net intangibles; includes the impact of accumulated depreciation and amortization Represents carrying values net of any in-place investment-level financing at CLNC share as of December 31, 2019 Represents reported NOI for the fourth quarter 2019 at CLNC share Represents reported NOI for the fiscal year ended December 31, 2019 at CLNC share Represents the percent leased as of December 31, 2019 and is weighted by carrying value at CLNC share as of December 31, 2019 Based on in-place leases (defined as occupied and paying leases) as of December 31, 2019 and assumes that no renewal options are exercised. W.A. calculation based on carrying value at CLNC share as of December 31, 2019 Based on carrying values at CLNC share as of December 31, 2019 Page 17 Represents carrying values at CLNC share as of December 31, 2019 In addition to the stated cash coupon rate, unlevered all-in yield includes non-cash payment in-kind interest income and the accrual of origination, extension and exit fees. Unlevered all-in yield for the loan portfolio assumes the applicable floating benchmark rate as of December 31, 2019 for W.A. calculations Represents the remaining loan term based on maximum maturity date assuming all extension options on loans are exercised by the borrower and is weighted by carrying value at CLNC share as of December 31, 2019 Senior loans reflect the initial loan amount divided by the as-is value as of the date the loan was originated, or the principal amount divided by the appraised value as of the date of the most recent as-is appraisal. Construction senior loans’ loan-to-value reflect the total commitment amount of the loan divided by the as completed appraised value, or the total commitment amount of the loan divided by the projected total cost basis Page 18 Represents carrying values at CLNC share as of December 31, 2019 In addition to the stated cash coupon rate, unlevered all-in yield includes non-cash payment in-kind interest income and the accrual of origination, extension and exit fees. Unlevered all-in yield for the loan portfolio assumes the applicable floating benchmark rate as of December 31, 2019 for W.A. calculations Represents the remaining loan term based on maximum maturity date assuming all extension options on loans are exercised by the borrower and is weighted by carrying value at CLNC share as of December 31, 2019 Mezzanine loans include attachment loan-to-value and detachment loan-to-value, respectively. Attachment loan-to-value reflects initial funding of loans senior to our position divided by the as-is value as of the date the loan was originated, or the principal amount divided by the appraised value as of the date of the most recent appraisal. Detachment loan-to-value reflects the cumulative initial funding of our loan and the loans senior to our position divided by the as-is value as of the date the loan was originated, or the cumulative principal amount divided by the appraised value as of the date of the most recent appraisal. Construction mezzanine loans include attachment loan-to-value and detachment loan-to-value, respectively. Attachment loan-to-value reflects the total commitment amount of loans senior to our position divided by as-completed appraised value, or the total commitment amount of loans senior to our position divided by projected total cost basis. Detachment loan-to-value reflect the cumulative commitment amount of our loan and the loans senior to our position divided by as-completed appraised value, or the cumulative commitment amount of our loan and loans senior to our position divided by projected total cost basis Represents reported NOI for the fiscal year ended December 31, 2019 at CLNC share Represents the percent leased as of December 31, 2019 and is weighted by carrying value at CLNC share as of December 31, 2019 Based on in-place leases (defined as occupied and paying leases) as of December 31, 2019 and assumes that no renewal options are exercised. W.A. calculation based on carrying value at CLNC share as of December 31, 2019 Page 20 Represents CLNC share as of December 31, 2019. This includes noncontrolling interests in the Operating Partnership and excludes noncontrolling interests in investment entities Based on the fiscal year ended December 31, 2019 Legacy, Non-Strategic Earnings excluding gains/(losses) at CLNC share divided by GAAP net book value at CLNC share as of December 31, 2019 Based on carrying values at CLNC share as of December 31, 2019. Property type excludes private equity interests Related to an equity participation interest Multifamily includes: (i) apartments, (ii) student housing and (iii) manufactured housing communities Other includes: (i) commercial and residential development and predevelopment and (ii) mixed-use assets Represents carrying values at CLNC share as of December 31, 2019 Represents carrying values net of any in-place investment-level financing at CLNC share as of December 31, 2019 Represents Core Portfolio’s and LNS Portfolio’s proportionate share of outstanding debt related to the corporate revolving credit facility as well as other balance sheet assets and liabilities (including cash, restricted cash, net receivables, other assets, due to related party, accrued and other liabilities, escrow deposits payable and dividends payable) Represents net accumulated depreciation and amortization on real estate investments, including related intangible assets and liabilities
V. Appendix – Footnotes (cont’d) Page 21 Represents carrying values at CLNC share as of December 31, 2019 Represents the remaining loan term based on the current contractual maturity date of loans and is weighted by carrying value at CLNC share as of December 31, 2019 Represents the remaining loan term based on maximum maturity date assuming all extension options on loans are exercised by the borrower and is weighted by carrying value at CLNC share as of December 31, 2019 In addition to the stated cash coupon rate, unlevered all-in yield includes non-cash payment in-kind interest income and the accrual of origination, extension and exit fees. Unlevered all-in yield for the loan portfolio assumes the applicable floating benchmark rate as of December 31, 2019 for W.A. calculations Based on carrying values at CLNC share as of December 31, 2019 Other includes: (i) commercial and residential development and predevelopment and (ii) mixed-use assets Page 22 Represents carrying values at CLNC share as of December 31, 2019 Represents carrying values net of any in-place investment-level financing at CLNC share as of December 31, 2019 In addition to the stated cash coupon rate, unlevered all-in yield includes non-cash payment in-kind interest income and the accrual of origination, extension and exit fees. Unlevered all-in yield for the loan portfolio assumes the applicable floating benchmark rate as of December 31, 2019 for W.A. calculations Represents the remaining loan term based on the current contractual maturity date of loans and is weighted by carrying value at CLNC share as of December 31, 2019 Represents the remaining loan term based on maximum maturity date assuming all extension options on loans are exercised by the borrower and is weighted by carrying value at CLNC share as of December 31, 2019 Page 23 Represents carrying values at CLNC share as of December 31, 2019; includes deferred leasing costs and other net intangibles; includes the impact of accumulated depreciation and amortization Represents carrying values net of any in-place investment-level financing at CLNC share as of December 31, 2019 Represents reported NOI for the fourth quarter 2019 at CLNC share Annualized NOI is calculated by annualizing reported NOI for the fourth quarter 2019 at CLNC share Represents the percent leased as of December 31, 2019 and is weighted by carrying value at CLNC share as of December 31, 2019 Based on in-place leases (defined as occupied and paying leases) as of December 31, 2019 and assumes that no renewal options are exercised. W.A. calculation based on carrying value at CLNC share as of December 31, 2019 Based on carrying values at CLNC share as of December 31, 2019 Page 24 Represents carrying values at CLNC share as of December 31, 2019; includes deferred leasing costs and other net intangibles; includes the impact of accumulated depreciation and amortization Represents carrying values net of any in-place investment-level financing at CLNC share as of December 31, 2019 Represents reported NOI/EBITDA for the fourth quarter 2019 at CLNC share Annualized NOI/EBITDA is calculated by annualizing reported NOI/EBITDA for the fourth quarter 2019 at CLNC share Represents the percent leased as of December 31, 2019. W.A. calculation based on carrying value at CLNC share as of December 31, 2019. Excludes hotel properties Based on in-place leases (defined as occupied and paying leases) as of December 31, 2019 and assumes that no renewal options are exercised. W.A. calculation based on carrying value at CLNC share as of December 31, 2019. Includes office and retail properties only Multifamily includes: (i) apartments, (ii) student housing and (iii) manufactured housing communities Based on carrying values at CLNC share as of December 31, 2019 Page 25 In addition to the stated cash coupon rate, unlevered all-in yield includes non-cash payment in-kind interest income and the accrual of origination, extension and exit fees. Unlevered all-in yield for the loan portfolio assumes the applicable floating benchmark rate as of December 31, 2019 for W.A. calculations Represents the remaining loan term based on maximum maturity date assuming all extension options on loans are exercised by the borrower and is weighted by carrying value at CLNC share as of December 31, 2019 Represents carrying values at CLNC share as of December 31, 2019 Page 26 Represents the percent leased as of December 31, 2019 and is weighted by carrying value at CLNC share as of December 31, 2019. Excludes hotel properties Based on in-place leases (defined as occupied and paying leases) as of December 31, 2019 and assumes that no renewal options are exercised. W.A. calculation based on carrying value at CLNC share as of December 31, 2019. Includes office and retail properties only
V. Appendix – Footnotes (cont’d) Page 27 Represents the percent leased as of December 31, 2019 and is weighted by carrying value at CLNC share as of December 31, 2019. Excludes hotel properties Based on in-place leases (defined as occupied and paying leases) as of December 31, 2019 and assumes that no renewal options are exercised. W.A. calculation based on carrying value at CLNC share as of December 31, 2019. Includes office and retail properties only Represents carrying values at CLNC share as of December 31, 2019 Annualized NOI/EBITDA is calculated by annualizing reported NOI/EBITDA for the fourth quarter 2019 at CLNC share Page 29 Represents UPB at CLNC share as of December 31, 2019 Represents CLNC’s share of total outstanding secured debt agreements (UPB) less unrestricted cash at CLNC’s share divided by total stockholders’ equity as of December 31, 2019; stockholders’ equity includes noncontrolling interests in the Operating Partnership and excludes noncontrolling interests in investment entities Assumes the applicable floating benchmark rate as of December 31, 2019 for W.A. calculations and is weighted on outstanding debt (UPB) at CLNC share as of December 31, 2019 Outstanding debt based on UPB at CLNC share as of December 31, 2019 Includes noncontrolling interests in the Operating Partnership and excludes noncontrolling interests in investment entities as of December 31, 2019 Represents financing on one senior loan investment in the Core Portfolio Page 30 Subject to customary non-recourse carve-outs W.A. calculation based on outstanding debt (UPB) at CLNC share as of December 31, 2019. W.A. extended maturity excludes CMBS facilities Assumes the applicable floating benchmark rate as of December 31, 2019 for W.A. calculations Represents UPB at CLNC share as of December 31, 2019 Maturity dates are dependent on asset type and typically range from one to two month rolling periods Represents financing on one senior loan investment in the Core Portfolio Page 37 Represents interests in assets held by third party partners Represents the proportionate share attributed to CLNC based on CLNC’s ownership % by asset Reflects the net impact of securitization assets and related obligations which are consolidated for accounting purposes Page 38 Represents net accumulated depreciation and amortization on real estate investments, including related intangible assets and liabilities The Company calculates GAAP net book value (excluding noncontrolling interests in investment entities) per share and undepreciated book value per share, a non-GAAP financial measure, based on the total number of common shares and OP units (held by members other than the Company or its subsidiaries) outstanding at the end of the reporting period. As of December 31, 2019, the total number of common shares and OP units outstanding was approximately 131.6 million Page 39 The Company calculates Core Earnings / Legacy, Non-Strategic Earnings per share, which are non-GAAP financial measures, based on a weighted average number of common shares and OP units (held by members other than the Company or its subsidiaries). For the fourth quarter 2019, the weighted average number of common shares and OP units was approximately 131.6 million; includes 3.1 million of OP units Includes our $30.8 million proportionate share of impairment losses recorded on equity participations held in joint ventures. This is recorded in equity in earnings of unconsolidated ventures on our consolidated statements of operations The Company calculates Core Earnings (Loss) / Legacy, Non-Strategic Earnings (Loss) per share, which are non-GAAP financial measures, based on a weighted average number of common shares and OP units (held by members other than the Company or its subsidiaries). For the twelve months ended December 31, 2019, the weighted average number of common shares and OP units was approximately 131.5 million; includes 3.1 million of OP units
Company Website: www.clncredit.com V. Company information Colony Credit Real Estate, Inc. (NYSE: CLNC) is one of the largest publicly traded commercial real estate credit REITs, focused on originating, acquiring, financing and managing a diversified portfolio consisting primarily of CRE senior mortgage loans, mezzanine loans, preferred equity, debt securities and net leased properties predominantly in the United States. Colony Credit Real Estate is externally managed by a subsidiary of leading global real estate and investment management firm, Colony Capital, Inc. Colony Credit Real Estate is organized as a Maryland corporation that elected to be taxed as a REIT for U.S. federal income tax purposes commencing with our initial taxable year ended December 31, 2018. For additional information regarding the Company and its management and business, please refer to www.clncredit.com. Analyst Coverage: Raymond James Stephen Laws 901-579-4868 B. Riley FBR Randy Binner 703-312-1890 Headquarters: Los Angeles 515 South Flower Street 44th Floor Los Angeles, CA 90071 310-282-8220 Investor Relations: ADDO Investor Relations Lasse Glassen 310-829-5400 lglassen@addoir.com Press & Media: Owen Blicksilver P.R., Inc. Caroline Luz 203-656-2829 caroline@blicksilverpr.com Stock & Transfer Agent: American Stock & Transfer Trust Company (AST) 866-751-6317 help@astfinancial.com NYSE Ticker: CLNC Shareholder information