Colony Northstar 1Q18 results (press release and supplement). A few points:
- $279mm shares repurchased (average price of $5.79). I estimate accretion of $0.33 to adjusted equity per share (after removal of Northstar goodwill). This is bigger than earnings.
- Industrial and Hospitality results look like they are below the pace of guidance and weaker than peers. Hotels had higher utility costs due to cold weather.
- Healthcare results include $2.2mm benefit from early lease termination
- Other Equity and Debt is 68% of Core FFO and Unallocated is -60% of Core FFO. CLNS is still too complex for investors.
- NRE results look good with NAV up to $20.5 (press release). NRE repurchased 3.5mm shares ytd.
- CLNC had a strong conference call yesterday with participation from major sector analysts.
Disclosures:
The author is a shareholder of CLNS CLNC and NRE. The author does not make any recommendation regarding any investment in any company mentioned in this article. Investors are encouraged to check all of the key facts cited here from SEC filings prior to making their own investment decisions.
Koneko Research 
Thanks for all the great work you’ve done on this name. If you had to distill your long thesis down to just one just sentence, what would you say? That the company is just too cheap? At a high level when I look at the company it looks very cheap, but the more I dig into the assets the more I think the market has it basically right. The 0.15 – 0.16 per quarter core FFO run rate guidance was disappointing.
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Thanks. If you cannot see a clear recommendation about investment in CLNS in my posts then you have understood them correctly. I am not making any recommendation. I was optimistic about the company last year and I was obviously wrong.
My thesis is “long” in the sense that I wrote many words about it, but at this point my personal CLNS position is at a small level where I can wait and watch. I believe the co-investment business model is appealing. I expected that it would be applied to the assets acquired from NRF, but instead almost all of the assets will be sold and a substantial part of the asset mgmt function acquired from NSAM is gone (Townsend + retail). I believe that a real estate asset management conglomerate (similar to BAM) is appealing, but CLNS is far from that level of simplicity and transparency. The company’s largest business unit is “Other”.
I think they did a much better job on this conference call than the last one and strategy seems much clearer. But it’s going to take time before improvements appear in FFO and dividend.
In contrast, I think NRE is performing really well, CLNC is likely to perform well, and both of those stocks are still at discounted valuations.
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