Colony – A Cry For Help, A Hint of Anesthesia

The market is giving an initial thumbs down to Colony Northstar’s 4Q17 results.  A few observations:

  • Book value per share of $12.52 ($6.8Bn common equity, 543mm shares)
  • Tangible book value per share of $8.43 ($6.8Bn common equity, $1.5Bn goodwill, $0.9Bn intangibles, -0.2Bn minority interest intangibles, 543mm shares)
  • $300mm repurchase plan was completed in 4Q so no authorization was available ytd 2018.  Average price paid was $12.82 for the year.
  • New $300mm repurchase plan.  Disappointing that it was not increased vs 2017, but the good news is that it can buy more than twice as many shares …
  • Dividend reduced to $0.44/year which is estimated to equal 2018 “net cash flow, excluding gains”.  This implies $239mm of “net cash flow, excluding gains”.  The company reported basic 2017 FFO of -$26mm, gains of $135mm, and “Core FFO” of $665mm.  It’s not clear to me how the 2018 guidance implied in the dividend corresponds to reported 2017 results.
  • Closing of $1.4Bn digital infrastructure fund after year-end
  • $280mm of third party capital raised in 4Q17 bringing the full-year total to $2Bn.  Successful transformational to the co-investment business model will require more outside money.
  • I don’t see any big surprises in the results of the “verticals”: Healthcare, Hospitality, Industrial.

Conference call at 10AM:

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