Earnings Call: Q1 2021

May 6, 2021

Greetings, ladies and gentlemen, and welcome to Colony Capital's First Quarter twenty twenty one Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. It is now my pleasure to introduce your host, Severin White. Thank you. You may begin. Good morning, everyone, and welcome to Colony Capital's First Quarter twenty twenty one Earnings Conference Call. Speaking on the call today from the company is Mark Ganzi, our President and CEO and Jackie Wu, our CFO. Before I turn the call over to them, I'll quickly cover the Safe Harbor, some of the statements that we make today regarding our business operations and financial performance, including the effect of the COVID-nineteen pandemic on those areas, may be considered forward looking, and such statements involve a number of risks and uncertainties that could cause actual results to differ materially. All information discussed on this call is as of today, 05/06/2021, and Colony Capital does not intend and undertakes no duty to update it for future events or circumstances. For more information, please refer to the risk factors discussed in our most recent Form 10 ks filed with the SEC and in our Form 10 Q for the quarter ended 03/31/2021. With that, I'll turn the call over to Mark Ganzi, our President and CEO. Mark? Thanks, Severin. I'd like to start by thanking everyone for their interest and attention today. It's a quick turnaround from 4Q, and we're happy to be back so soon with all of you. Today, we're going to cover three primary topics that you'll see as part of our quarterly cadence. First, I'll walk you through the high level Q1 highlights and some of the great progress we're already making on our 2021 goals. I'll then turn it over to my partner and CFO, Jackie Wu, who will cover our financial results. Finally, I'll finish today by walking you through our Executing the Digital Colony Playbook section. In this quarter, we'll cover our digital operating businesses where we are seeing solid growth. So let's get started. Finish the mission. Yes, this is our new rallying cry for 2021. And it's centered around these three primary goals for the company. First, tangible progress in harvesting our legacy Colony assets. Second, we will continue to put more high quality digital assets into our funds and on our balance sheet. Lastly, we'll continue to grow our high return digital investment management franchise. This is the cookbook for 2021. First, let's start with progress on legacy monetizations. And we're off to a fast start in 2021, continuing our progress and velocity from 2020. Three key strategic monetizations announced and or closed just in the last few months. That takes us all the way to 70% rotated, ahead of the 67% rotation we targeted for year end 2021. Thanks in particular to the CLNC internalization, which was also ahead of schedule. Speaking of that, I want to talk about the agreement we reached with CLNC internalizing their management contract, which closed earlier this week, freeing them up to continue to execute on their new strategic focus. It's a much simpler, easier to understand CLNC that's focused on originating first mortgages against multifamily real estate in growing parts of The U. S. It's cleaner, more focused, just like the playbook we've been executing for over a year now at Colony Capital. The highly focused and independent version of CLNC puts shareholders first, which will in turn create more shareholder value for our stake and Colony shareholders. We collected a little over $100,000,000 from this transaction and we remain a significant owner and partner with our holdings worth a little over $400,000,000 today. As Mike Mazze and his team execute this year, we think that will trend higher towards book value ultimately. Next, let's talk about our hotel portfolio. The deal closed before quarter end and we ended up generating positive net equity for our shareholders as we had committed to and have reduced debt balances by over $2,500,000,000 in terms of Colony's share of that debt. This was a huge lift by our entire team. I want to give a special thanks and congratulations to David Schwartz and the rest of the lodging team here at Colony Capital. I also want to thank Mahmud Kimji at Highgate and Tom Wagner at Cerberus for being great partners and getting this closed on time. Finally, the combination of the sale of the THL portfolio as part of that hospitality portfolio and the disposition of our ownership in two Irish commercial real estate assets for $100,000,000 in net proceeds further reduced our total legacy OEND asset base by over $800,000,000 I'm really excited about the progress we're making here. This is seminal to finishing the mission and we generated around $250,000,000 in proceeds that we can use to fuel investments in digital. Again, we're ahead of the forecast and the roadmap that we promised to you. Next page. Investing in digital is our second key focus area this year and we've been busy deploying out of DCP two, our new fund, the follow on flagship equity fund to DCP one which is now fully deployed. We've got four new investments or platforms that we've announced so far across the group. This will be 3,000,000,000 to $4,000,000,000 of commitments to acquire and invest in the growth of these platforms. So let's talk a little bit about them. Here in The United States, we're in the process of acquiring Boingo and to take private transaction. This remains subject to shareholder approval, so I won't go too much into detail there other than to tell you this dovetails with our conviction around five gs, investing in our carrier partners to deploy next generation networks here in The United States. In Europe, we were a cornerstone investor in Vodafone's spin out of its European TowerCo assets, committing €500,000,000 in support of their public listing. Vodafone has been a great partner to us and we're excited to help them unlock and highlight the value embedded in their tower assets. I'm looking forward to working with them as they execute a value add BTS program coupled with an aggressive lease up strategy that is very consistent with projects we've successfully executed over the last three decades. I'm very excited about the prospects of this tower portfolio and I know Vivek and his team will unlock these assets as they are now truly independent and open for colocation just in time for five gs across Europe. The Vantage footprint and locations are truly unique and the kind of assets that possess the strategic moat that we look for in acquiring tower portfolios and other digital infrastructure assets. Next up in Asia, we've launched two platforms. First, a cell tower business centered in Southeast Asia and second, a hyperscale data center platform across the Asiana region. Both of these investments leverage our growing presence in the region. We're capitalizing on strong demand growth for their services and are launched in partnership with strong local management teams who successfully executed on similar buildup strategies in the past. This is classic Digital Colony playbook. We partner with the best management teams who have successfully executed on similar buildup strategies, sharing our key learnings, our access to capital, balance sheet transformation, unique customer relationships and strategic M and A capabilities. It's a winning formula that's worked in the past and we're confident it will work in the future. One of the key areas here is these deals were all proprietary to Digital Colony. We conceived these deals, we negotiated them and we executed them on behalf of our investors. This is the hallmark of Digital Colony. And when you look at our pipeline, you'll see more of the same, proprietary ideas, deals and execution. In fact, we have a pipeline of over 50 new opportunities and ideas in digital infrastructure across our four core operating regions of North America, Europe, Asia and Latin America. Here's what's even better. We have the capital to deploy and execute on these new ideas. It's a great combination and we're all excited about these new investments as well as the prospects for future platforms and accretive bolt ons that come along with it. Next page. The final ingredient in our Finish the Mission mantra centers around our proven capability of growing our digital I'm franchise by raising additional capital from our investment partners. In the first quarter, we continued to have success here, over $830,000,000 across various strategies, principally in our DCP two flagship fund. This coupled with our very successful co investment program and our new I'm product launches make our digital I'm platform very unique, focused and differentiated. I would tell you that fundraising conditions remain very strong and our team has never been more active on a global basis. Candidly, we're all looking forward to getting back out on the road this summer as investors want to connect in person and we remain on track to meet or beat our targets for the year, where we've guided you to 30% year over year growth, a metric that we've historically beaten. Next page. Before we move on to the financial section, I want to take a step back and recall where we were a year ago at our last annual meeting and some of the amazing progress we've made just in the last twelve months. These changes fall into four broad categories: leadership, governance, ESG, and most importantly alignment. Leadership is a big one. We've completely rotated the C suite economy with Jack and me taking over formally at the June. It's been an incredible amount of work, but very rewarding and our promises made, promises kept approach has started to resonate with the investment community, along with our commitment to transparency and under promising and over delivering for you, our shareholders. Second, governance. When we look back, it's been a wholesale change in our Board composition, which I'll talk a little bit more in the next slide. But the key here is a more focused Board, a more diverse Board and a more digital board. Next up is ESG, and this is very personal for me as most of you have learned. ESG is something we've been committed to for a number of years as an organization, particularly at Digital Colony. And this is showing through as we become one organization. I've recently committed to an industry leading net 02/1930 goal that's centered around reducing, resourcing and removing greenhouse gas emissions from our company and at our portfolio companies. It's imperative we start making a real difference here and we've set up incentives across the organization to make those priorities clear. The commitment of doing better extends beyond the environment and to our community. We're a talent driven business. As most of you've heard me say before, people create the alpha, not the assets. So developing opportunities for all people, starting with education and creating pathways for success is how we've chosen to focus our time and our energy. As corporate leaders, we all must do our part and create equal opportunity for everyone irrespective of race or gender. The new framework I've employed with the help of my incredible DEI committee led by Ramon Marseille does exactly this. Today at Colony, we have aligned promotions, remuneration and career advancement on an equal basis. Everyone at the company can have an opportunity to advance irrespective of titles or their backgrounds. Finally, alignment. With our shareholders and limited partners, this is a critical ingredient to our success. We've made significant personal investments across all of our new digital investment management products and funds, so we are aligned. When we succeed, you succeed. As we continue to improve our compensation frameworks, the metrics we build them around are designed to match shareholder and employee outcomes. This is really key to all of our future successes. Next page. I want to do a little more of a deep dive on governance in particular. Given we've just finished proxy season, I'm pleased to say we've received a lot of terrific feedback on all the changes we've been making at Colony Capital. As you can see, the Board is now 50% digital, catching up to our fast rotation around our AUM, while still retaining strong capital markets expertise that has long been the hallmark of Colony Capital. At the same time, it's more concentrated. We're down to 10 Board members, which facilitates efficient decision making, which is to the benefit of all Colony shareholders. It's not just more concentrated, it's really a refreshed Board. Fifty percent of our members are brand new in the last twelve months, capped off by our most recent changes with Nancy Curtin, our Lead Independent Director, agreeing to step into the role of Board Chair. I'm really proud to be Nancy's partner and I couldn't think of a better independent Board Chair than Nancy Curtin, who has a three decade track record in investment management. Also, Shaka Rashid. Shaka is a rising star at Microsoft. He recently has been appointed to our Board and I'm really looking forward to working with him as well as he has deep experience in cloud computing. The final key here is a Board with more diverse experiences and backgrounds. We know that diversity leads to a more robust and thoughtful exploration of different perspectives and ultimately better decisions that once again benefit all of our stakeholders. We are really proud of all the work that has gone into making these changes and I'm deeply appreciative of our Board's commitment to constantly improving and to helping Colony elevate to a leadership position in these important matters. With that, I'd like to turn it over to my partner, Jackie Wu, to review our financial results. Jackie? Thank you, Mark, and good morning, everyone. As a reminder, in addition to the release of our first quarter earnings, we filed a supplemental financial report this morning, which is available within the shareholder section of our website. Starting with our first quarter results on Page 12, the company has continued to make steady progress in its digital transformation. Digital AUM increased to 69% of total AUM at the end of the first quarter and increased to 70% of total AUM as of today, including the CLNC management contract internalization transaction that occurred after the end of the quarter. For the first quarter, reported total consolidated revenues were $316,000,000 which represents a 45% increase from the same period last year. Adjusted EBITDA was $56,000,000 on a pro rata basis, which represents a 56% increase from the same period last year, primarily as a result of the company scaling our core digital segments, which can be seen at the bottom of the page. I will walk through this in more detail later in the presentation. GAAP net loss attributable to common stockholders was $265,000,000 or $0.56 per share. This net loss is primarily due to the losses in our legacy non digital businesses that we now classify as discontinued operations. Total company core FFO was $4,000,000 with the increases from prior periods driven by outperformance within the digital segment and lower corporate expenses. Note that beginning in the first quarter, we have moved OAND and the CLNC investment management contract to discontinued operations, which would have contributed an additional $10,000,000 to core FFO without this change. During the first quarter, we returned net equity proceeds of $96,000,000 from legacy asset monetizations and $3.00 $2,000,000 year to date including transactions that closed after the end of the quarter. These legacy monetizations included $104,000,000 from the sale of Dublin office properties, 102,000,000 from the internalization of CLNC's management contract and $67,000,000 from the sale of the hospitality portfolio. This is already more than halfway towards our 2021 full year guidance of $400,000,000 to $600,000,000 Moving to the next page, consolidated digital revenues increased to $219,000,000 a 44% increase from last quarter, driven by the company's increased investment in DataBank for the acquisition of Z colo and new management fees from the successful first closing of DCP two. Looking at the right side of the page, consolidated digital fee related earnings and adjusted EBITDA increased to $96,000,000 during the first quarter, which is a 36% increase sequentially. On Page 14, we provide an update on the corporate cost savings plan announced in the first quarter twenty twenty. Since initiation of the plan, the company has outperformed our original $40,000,000 cost savings through various initiatives including the reduction of almost 50% of the company's non digital workforce and rightsizing of the company's office footprint reducing from 22 offices at the end of twenty nineteen to 11 offices today. As part of the digital transformation, the company has completed strategic divestitures and undergone cost rationalization efforts that significantly decreased G and A to operate more efficiently. The G and A savings related to the legacy non digital business was partially offset by additional investments into our digital platform in order to support future and sustained growth for the near and long term. We continue to expect the total company cash G and A of $100,000,000 to $120,000,000 after the digital transformation is complete. And through the first quarter, we are ahead of the plan at approximately $150,000,000 of cash G and A from continuing operations, which is what we had previously targeted by the end of twenty twenty one. Turning to Page 15, we have seen continued growth in Investment Management and operating segments. Our annualized digital fee revenues increased from $76,000,000 to $124,000,000 and digital FRE has increased from $40,000,000 to $62,000,000 accounting for a full year of fees from the $4,200,000,000 first closing of DCP two. The strong growth in digital operating segment revenues and earnings are the result of our continued rotation of the company's balance sheet with Vantage stabilized data centers in July 2020 and ZCOLO in December 2020. We continue to grow digital revenues and earnings through our rotation of the company's balance sheet into high quality digital assets. Moving to slide 16, the company is in a strong position to meet or exceed our original 2021 guidance for the key drivers of our digital transformation. We are targeting digital management fee revenues of $140,000,000 to $150,000,000 in 2021 and digital fee related earnings of $80,000,000 to $85,000,000 These are driven by our anticipated 3,500,000,000.0 to $4,000,000,000 of capital raise throughout 2021, including additional fundraising in DCP 2. For our Digital Offering segment, as of now, we are continuing to target $125,000,000 to $135,000,000 of revenues and $53,000,000 to $58,000,000 of EBITDA in 2021, driven by organic growth and bolt on acquisitions on our existing investments. It is important to note that this guidance excludes any new balance sheet investments that will be partially funded by an anticipated $400,000,000 to $600,000,000 of monetizations during 2021. In addition to the 2021 guidance, we are reiterating our 2023 digital operating targets that we originally laid out as part of our digital roadmap in the second quarter of twenty twenty with increases at the midpoint to our digital investment management ranges due to our recent successes. We are increasing our target digital fee revenues of $160,000,000 to $200,000,000 by 2023 and digital fee related earnings of $90,000,000 to $110,000,000 This 2023 target is anticipated to be achieved through final closing of DCP two and expansion of other products and scope of Colony's investment offerings. In addition, we continue to expect to achieve 175,000,000 to $225,000,000 of digital operating EBITDA. As you can see, the company based on existing first quarter run rate earnings is tracking well on target to meet or exceed guidance. We have a strong pipeline of potential acquisitions to rotate proceeds received from our monetization. We are very excited for the rest of 2021 as our fundraising and M and A pipeline continues to be robust And we look forward to seeing all of you at our upcoming Investor Day on June 22, where we will share additional details on our digital platform and our portfolio companies and update our 2021 and 2023 guidance. And with that, I'd like to turn it back to Mark where he will lay out further details on our digital playbook. Terrific. Thanks, Jackie. We're really excited about the progress we're making towards those important 2023 targets, which we'll explore in greater detail at our Investor Day next month, which we hope you'll all join us for. A key bedrock to our operating plan as we guide you towards 2023 is understanding what we're doing at digital operating. This quarter in executing the Digital Accounting Playbook, I wanted to spend some time talking about our Digital Operating segment and how those businesses are doing today. As you may know, we've got two primary businesses that comprise digital operating so far. Both are really unique data center stories. First, DataBank in the edge colo space and secondly, Vantage stabilized data center portfolio, which serves our hyperscale customers. They're both large multibillion dollar businesses where we maintain day to day operational control with minority ownership stakes that are supplemented by third party capital where I've told you in the past we earn fee and carry. This is a unique structure and we really think produces great results for Colony shareholders. This slide is just a reminder of some of the key attributes of these investments. More importantly, how are they doing? For that, let's turn to the next slide. The short answer is they're doing really well. That starts with powerful secular tailwinds that drive strong demand for their services. The significant capabilities that these businesses and their management teams possess and the solid customer relationships that they built out over a long time all create an environment for long term sustainable growth. All these factors are the key ingredients for that growth. Strong secular tailwinds, scalable extensible platforms and increasing cloud demand ultimately fuels lease up, low customer churn and stable and robust revenue growth and they are growing. Last quarter, we really had a strong uplift in bookings as you can see. Dollars 23,000,000 of MMR across DataBank and Vantage. Vantage continues to have steady success leasing up their nearly fully stabilized data centers, which are now at an astounding 95% utilization. Once they're fully leased up, the cash flow yields kick up even further. So we're really pleased with the progress that Suriel and the team are making at Vantage Stabilized Co. DataBank was really the standout performer this quarter. They grew ahead of their public peers on an organic basis and their strong booking results drove the uptick we saw there. Another interesting outcome was that the newly acquired Z colo business, which as you know tripled the size of DataBank's footprint when we closed that deal late last year. We were able to put another $145,000,000 from our balance sheet to work in that transformative transaction for DataBank. Our business plan there baked in a few quarters of de growth as we integrated the business into DataBank and reversed its booking trends. I'm pleased to say we're seeing signs of that inflection point sooner as opposed to later. Z colo clients have responded well to the new customer focused approach and Raul and his team's focus on culture is already generating tangible results as we realize cost synergies sooner from accelerated integration. We also like the trends we've seen on churn, which continue to remain industry low. That's pretty structural advantage stabilized Data Center Co, whose contracts are very long dated. For DataBank, it's further testament to the team and their attention to the customers and their growing needs. So let's summarize. Strong lease up, low churn, combined with continued investment, we are making these businesses as a recipe for continued strong growth. Built in escalators, long weighted average contract durations add stability to that equation and underpin our steady progress in our digital operating segment. Next page. When you've got businesses with such strong underlying demand drivers run by such accomplished management teams that are performing well, it's easy to justify continuing to deploy additional capital into those opportunities, which is just what we've been up to in our Digital Operating segment. First, it was Vantage SDC portfolio of our hyperscale data centers and more recently it was supporting the growth of DataBank with the Zcolo acquisition late last year. These acquisitions and their continued organic growth have been transformative to our EBITDA. The number of data centers we operate and the total square footage available at those facilities has grown 3x. 3x growth in new locations, 76 total facilities now. 3x growth in rentable square footage just in one year, an incredible increase in the total amount of available square footage we can offer to our customers. What's also very interesting to me is maintenance CapEx as the share of EBITDA has declined to 2.4% given how stabilized the Vantage SDC portfolio is in particular. What that allows us to do is receive one, distributions, generate yield on our investments and gives us the excess free cash flow to redeploy back into growth CapEx into these great assets. Later this year, we expect to exercise our rights to acquire another of one of Vantage's prize data centers in the Santa Clara market. That probably results in about an 8% project uplift in revenue and earnings to the Vantage SDC business aside from the escalators and the continued great lease up that we're seeing. So building scalable, extensible digital infrastructure platforms where we can continue to deploy capital efficiently, delivering 5% to 6% organic growth, generating strong returns for Colony shareholders is a key priority and as we've demonstrated one of our core skill sets. Next page. And speaking of skill sets, I'd like to talk about the impact of strategic financings. This is one of our core capabilities at Colony Capital and really demonstrates how we're creating tangible value for shareholders in our digital operating segment. I've spoken to you in the past about our pioneering work in the digital infrastructure securitization space and on the right side of the page you can see this on display. We've closed 14 seconduritizations totaling over $6,000,000,000 in value. Many of these are first of their kind transactions, which started many years ago when I was at GTP where I led the first private TowerCo, ABS and CMBS transactions. These are not easy processes to prepare for and execute, but they can deliver significant impact and results if you put in the work. And putting in the work is critical. Understanding the details, managing the details and making sure that you not only have the correct collateral, but you have the correct control of your fee and making sure you have strong command of your leases and most importantly controlling all of the key metrics that drive and underpin these cash flows in these businesses. The second part of that is having great relationships with the rating agencies, which we've had a two decade dialogue with Moody's, Kroll, Fitch and S and P. And then the third layer to that is having great relationships with our bondholders. Once again, a multi decade relationship with over 200 bondholders over the last twenty years has created a really unique relationship that's built on trust, performance and execution. In the case of DataBank Advantage, in the past year we've completed two important securitizations totaling $2,000,000,000 in total value. Those securitizations have driven down average borrowing costs by around two fifty basis points from where they were previously, which creates over $300,000,000 in incremental five year cash flows between lower borrowing costs and reduced amortizations. Ultimately, that flows through to you, Colony shareholders. Just these two financings will generate $50,000,000 in incremental five year cash flows to Colony and boost our IRRs against original underwriting by over 130 basis points. Dollars 2,000,000,000, dollars 2 50 bps, dollars 300,000,000 in cash, dollars 50,000,000 to you and 130 bps in increased IRRs. These are great metrics. This is exactly the kind of incremental value add that you build returns on and that allows us to compound value for our shareholders over time. Next page. Finally, I'd like to walk you through a key slide here and how we plan to continue to grow our digital operating segment, which is the key growth vector for our business in 2021, '20 '20 '2 and 2023. It starts with the companies we've just discussed, DataBank and Vantage. Organic growth at those companies, which we think is realistically mid single digits, as I mentioned earlier, 4% to 6% combined with new builds like CA22 in a market like Santa Clara should allow us to get around one third of our 2023 targets with that we own today. That's the key, controlling our destiny and having great platforms where we can continue to grow those assets, grow the cash flows through a proven playbook. Now, the next part of this is really critical. In addition to core organic growth and the new builds that I've just discussed, we expect to grow by adding new platforms and doing additional M and A funded by the $1,500,000,000 of dry powder that we are in the process of harvesting from our legacy assets. When you make very reasonable assumptions about our ability to deploy that capital in the high teens to low 20s borrowing at a 40% to 50% loan to value ratio that gets you right in the range of the incremental EBITDA necessary to achieve and exceed our 2023 guidance. Hopefully, we can do better on all fronts. We love under promising and over delivering as we said earlier. One of the key contributors here will be continuing to apply the Digital Colony playbook at existing and new digital operating businesses that we plan to acquire over the next couple of years. With that, I'd like to conclude our earnings presentation and transition to the Q and A section of the earnings call. Once again, as always, I want to thank you for your time and I want to thank you for your trust. We appreciate your support and we're looking forward to building long term value for you, our shareholders. Operator, if you could please initiate the Q and A period. Thank you all. Thank you. Our first question comes from the line of Randy Binner with B. Riley. Please proceed with your question. Okay, great. Good morning. Thank you. I would like to talk about where Mark just ended, the $1,500,000,000 of dry powder. So just to understand that, that's basically all of legacy LED and investment management that does not include CLNC. And then that would be harvested over the course of 2021 and 2022. Is that the right way to think of that 1.5? Yes. I think the way you should look at it is on Page 22 of the slide deck, we actually have total dry powder of about $2,000,000,000 What we're saying, Randy, and that would include the CLNC shares as well and certainly where they're trading. And if what we're just saying though is we have sensitized it to only deploy $1,500,000,000 of that in our math for the $125,000,000 of EBITDA to $175,000,000 of EBITDA incrementally. So just to give you a little one layer deeper to that Randy, what I think Jackie and I are suggesting to you is, we want to have $500,000,000 of incremental firepower to continue to commit to new fund products that are coming down the transom in our Digital I'm business. So $1,500,000,000 dedicated to digital operating, dollars 500,000,000 dedicated to Digital I'm as we continue to raise capital around new investment management ideas and products. Okay, understood. Then just maybe a little bit of color on and I apologize if I'm creating feedback on the line, but hopefully you all can hear me okay. On the market for selling the legacy assets, obviously, you've done a great job so far and have gotten at or above carrying value. But as you work through what's in there, is there stuff that's going to be harder to dispose of when you're going to market with this? Are you talking to multiple parties? I'd love to hear a little bit of texture on how that market is receiving your moves to move away from these legacy items. Well, think the market has received them well. What I would tell you is there is a lot of capital today chasing a lot of different opportunities. We have seen a lot of interest from various parties around all facets of our businesses. And as I got here over a year ago and Jackie did as well, we made a promise to shareholders that we would be thoughtful in terms of how we would ultimately realize value for the legacy assets. We would take our time and we would do them in sequential order. And that's the playbook that we laid out for you over a year ago and that's the playbook that we've been able to implement so far. I think the moves that we made in this quarter were important. The internalization of CLNC really gives that business the independence that it needs to continue to execute its plan. And the reason we did that transaction is because we put an independent management team in place that is doing a very good job of executing a playbook actually very similar to ours, which is very focused, very disciplined and about restoring trust with investors and creating a narrative that creates value for shareholders. So once we achieve that level of confidence, it was important to get that management team independent. We got great value for the management contract. The shares are going to trade up, we believe, closer to book. And ultimately, we think that carrying value of those shares is a bit undervalued today. So we'll take our time. We want to be supportive of CLNC. We like Mike. We like the management team there. And we have the benefit of being patient on that asset. I would say the other two buckets of value that you pointed out, our wellness infrastructure portfolio continues to perform extremely well. I think that's attributable, Randy, to this current government that sits in Washington, D. C. Today understands the importance of health care and understands the importance of health care infrastructure. And so we believe that the support that we've gotten from the federal government and the support we're going to get from the federal government has helped turn around this portfolio. And we're going to continue to see improving metrics across every facet of that business. We have a lot of optimism around Healthcare. We're in the midst of a strategic review there. We actually really like the business. We like how it performed in the first quarter, and we like what we see so far in the second quarter. So once again, it's an asset that it's in the midst of a strategic review. I can tell you we get many phone calls every day about either a single asset or the whole portfolio. There's a great deal of interest in life sciences real estate today. I think you've heard other investment managers and other real estate funds and other REITs talk about the importance of life sciences infrastructure. And we have one of the biggest and most scalable portfolios in The U. S. So we can afford to be patient and get good value. And I believe we will get good value for those assets. And then on the O and D assets, we've continued to hit our guidance in terms of the disposition of those assets. We had another good quarter. We returned about $250,000,000 of cash back to the balance sheet. We continue to get a number of inbounds on those assets. And we've pruned that portfolio by more than 50% in the last year. The velocity is working for us. We're returning cash, and we're able to repatriate that cash into higher growth digital opportunities as you saw this quarter. The rotation is way ahead of schedule. So I think the playbook that we've outlined is one of prudence, thoughtfulness, but most importantly making sure that we get fair value for these assets. A year and a half ago people would call us and offer us, oh, we'll give you $0.50 down the dollar. We just would laugh at them and say, look, we don't need to do that. We have the financial wherewithal to be patient we have a fiduciary responsibility to our investors to make sure that we get fair value. Yes. Only thing I would add Randy is that we did move OED that segment into discontinued operations. And that's our reasonable belief that we will sell a substantial majority of that segment at the values that we've marked them at through threethirty one. And as you can see in our supplemental package that we've disclosed this morning, that's over 1,100,000,000 So that's roughly where we've been at for quite some time. So that's our reasonable belief we'll dispose of a substantial majority within the next twelve months, and we feel good about it. All right. That's helpful. And then just one other one, Ken, just to understand slide 14, deck that talks about g and a streamlining. Yep. So so the you know, so you you initially estimated to be 40,000,000 of of saves. And then that kind of progression moves from $232,000,000 to 151,000,000 so kind of like double that, like $80,000,000 Are those numbers comparable? Like, did you do 80,000,000 instead of 40,000,000 over the course of this progression? Or are those different measurements? Yes, sure. So if you look at it, discontinued operations adds about $46,000,000 of moves out for G and A. So as we dispose of those assets, those will go away. 21,000,000 of it has already been realized. If you look at the CLNC internalization that closed at the beginning of this month as well as the hotels transaction that closed at the end of the first quarter, that's already been realized. And then the rest is the OED segment, which we've moved to held for sale discontinued operations. So that's a big piece of it along with the $40,000,000 it's in the already off and see what's in the initial $40 I got it. Okay. Well, thanks for everything. Appreciate it. Great. Thank you, Randy. Thank you. Our next question comes from the line of Colby Synesael with Cowen. Please proceed with your question. Great. Thank you. Just I guess a continuation of some of the questions that you just had. So you moved OED into discontinued operations and you mentioned that you're pursuing monetizations. Then Jackie just in response, mentioned that you think you could sell that within the next twelve months. I just wanted to confirm that's the expectation that you'll be able to sell all those assets that you just moved to discontinued operations within the next twelve months, in terms of timeline. And then as it relates to wellness, I think the expectation had been that you would sell that or at least announce the sale at some point this year based on the trajectory of the conversations which you've been having. I'm just curious if that's still the expectation. And the reason I just asked all this is the stock has done pretty well. It seems like the stock is now reflecting more what I described as the carrying value of your various assets. But really to take it to the next level, you really do need to monetize the remaining OED and as part of that, I guess, also wellness and then redeploy that capital. So I'm just trying to get a sense of the timeline. And then secondly and separately, I'm curious if you're planning to call your preferreds, particularly G and H. It seems like there'd be some pretty meaningful interest rate savings if you're able to do that. Thank you. So three awesome questions, and three really quick sharp answers for you. First on O and D, there's a reason why we've moved it into discontinued ops. We can't go into further detail. You can infer with what you wish. But there is an accelerated timeline for divesting of the OE and D assets and we have a lot of conviction and confidence, Colby, that we'll be able to execute that this year. So that's one. And a little bit ahead of where we thought we'd be. We thought OEND would be perhaps a little bit of a slower burn and that's why we built the ninetyten buffer on the AUM rotation. But we've had really strong continued success in moving that segment. With respect to wellness, one, the improvement in performance has been good. The combination of government support and getting our healthcare facilities fully vaccinated and getting new move ins in this quarter, We've seen a significant rebound in performance. So we're being very thoughtful about how we enter into strategic discussions on that asset. So right now, we've not put that into discontinued ops. We are having a strategic review of that asset. And what I can tell you is the activity is very robust and we continue to have an intention of monetizing that asset this year. That is the intention. So all the work and effort that we're putting in place right now from an operations perspective and from a strategic review perspective give us confidence that we'll be able to get that done. And then lastly, what was your last question? On preferred dividend. On the preferred, yes, sorry. We agree with you. We're in violent agreement. I think we have a lot of levers that we can pull to get our total weighted average cost of capital The classes that you mentioned are roughly about $320,000,000 which are three which we can get done this year. We have a lot of flexibility and a lot of new free cash flow being generated from various aspects of our digital business. So in terms of the free cash flow generation and the earnings that we're driving from digital, we're ahead. So that gives us a lot of flexibility on how we can ultimately finance the business. And we believe that we'll be able to finance this business up here at ParentCo level at a very, very, very much lower cost of capital. So we're in the process of looking through that. We're working very hard with our entire finance team and our financial advisers. But you are on the right topic. And I think we can we'll dive into that a little bit more in our Investor Day. And you're going to see some results on this later in the year. Yes. Only thing I would just add is through in our press release, we disclosed liquidity of $667,000,000 and obviously we had two major transactions that would add on top of that liquidity about $2.00 $7,000,000 from both the CLNC managers as well as the Tolka asset sales. So we've got a lot of firepower. We're obviously we would work through and transform our revolver facility towards much more of a digitally based revolver. And those that along with the preferred redemptions, I would expect there to be more fulsome disclosures over the course of the next couple of months. Thank you. Thank you. Our next question comes from the line of Jade Rahmani with KBW. Please proceed with your question. Thanks very much. Could you give your updated thoughts on the digital landscape? Yes, sure. I would say the landscape continues to be very robust. Let me start out Jade from wanted to ask you Jade, I think you're Jade, you're cutting out, buddy. Sorry. Jade? Jade, your line is live. So Jade, me try to answer your question as you get your audio reconnected. The digital landscape at the highest level, we continue to be encouraged by CapEx spending by our customers. So last year, we had projected about a $487,000,000,000 CapEx spend. This year, we're projecting that number increases to about $495 to $496,000,000,000 across fiber small cells, towers and data centers. The leasing results coming out of the portfolio companies in the first quarter were very strong. We gave you granular detail around Vantage StabilizeCo and DataBank both of which exceeded their leasing forecast. In fact, DataBank exceeded their leasing forecast in the first quarter by 157% largely driven by edge compute lease loads with some of the webscalers. So we're seeing this across all of our businesses, great demand, great organic growth. And we believe that will continue as we build out five gs, as we migrate workloads to the edge, IoT networks continue to proliferate and densify. And then last but not least, cloud adaptation, where we're seeing a pronounced amount of CapEx spending. CapEx spending by the cloud players, Jade, will go up about 14% to 15% between 2020 and 2021. In our hyperscale leasing business Vantage, which obviously the balance sheet has exposure to through Vantage Stabilized Co, we had a fantastic first quarter of leasing. Vantage Europe, Vantage USA and Vantage Yield Co all had record breaking leasing results for the first quarter, well above our estimates. So as long as our customers continue to stay healthy and they continue to invest in their infrastructure, we believe the entire ecosystem will perform quite well. So that really is around organic growth in Greenfield. I would say in Brownfield, we continue to see pricing at sort of all time highs in private market and public market transactions. Everybody wants to be invested in digital infrastructure. We get that. So what we've tried to do is steer clear of overheated auctions. And so in that basis, what we did in the quarter is we focused on proprietary deal flow. And I outlined some of those proprietary deals that we did in the quarter. And we're really happy with the things that we're doing. I think from a brownfield to greenfield mix, we see where we're devoting our energy today is probably about 35% to 40% in greenfield and 60% to 65% in brownfield. And that's one of the great pivots that we have at Colony Capital today. We can deploy capital into greenfield opportunities where we secure land, we secure entitlements and we enter into long term leases with our web scale customers, our mobile telephony customers or some of the telcos that we provide wholesale dark fiber for. So that's the uniqueness of our platform is we have the ability to respond to brownfield. But at the same time, we can pivot like we've done, for example, at DataBank Advantage and engage in really unique and proprietary and accretive greenfield opportunities as well. Thank you. Our next question comes from the line of Rick Prentiss with Raymond James. Please proceed with your question. Hey, good morning everybody. Good morning, Rick. Michael, we're getting a lot of questions these days on managing international risk. When you think about achieving the returns you guys are targeting with a global digital infrastructure company, we tell people it's really probably too expensive and probably possible to hedge operations. But how do you get comfortable managing international operations to then also achieve the total growth in like real cash returns instead of FX adjusted type things? Yes. Thanks, difficult question. It's something we've been doing for over twenty five years when we entered Mexico back in the late 1990s. And I've had a three decade track record of investing in foreign markets and particularly also in emerging markets as well. And my experience on hedging, Rick, is that it's expensive. We've done limited hedging in the past. In a former life when I was at Deutsche Bank, we hedged all of our investments down in Latin America, and it was about a 600 to 700 basis point punishment to returns. So you have to weigh hedging against ultimately where you think the FX curve is going to go in those countries. You have to look at political risk. You have to look at regulatory risk. And then you have to ultimately have strong investment grade customers or investment grade like customers that you can enter into long term contracts where you get CPI like adjustments to hedge against inflation and to hedge against steeper borrowing costs. So what you'll see, for example, just to give you an example, Rick, we had a very, very strong quarter in our Brazilian tower business. Our year over year growth in that business was about 22.7%. So that would be well north of what our U. S. Tower co achieved and what our European tower co's have achieved. Now how did we get there? Well, we got there because our escalators were about 9.5% because we have strong master lease agreements that protect us against inflation and protect us against some of the currency movements that you just suggested. So by you and I have had this dialogue, Rick, for almost thirty years. If you've got strong paper with your customers, you can really debug a lot of the challenges with this business. So long term contracts, good escalators. And then of course buying the right assets certainly helps. We had 13% core organic growth in leasing at Highline in this quarter. So the combination of a strong escalator plus strong lease up, buying good assets and working with strong customers really puts you in a good place. And sometimes, Rick, you got to say no to some geographies. And we've done that. For example, we've stayed out of a place we've stayed out of India. We could have done a lot of activity in India, but we made a conscious decision that we didn't like the macro setup there. We also didn't like the system by which you get fee and how you ultimately take title of property in India is based on a system that's not consistent with how we underwrite deals. We've stayed out of places like Argentina, by example, that sometimes looks sexy and seductive because you can buy stuff at a cheap price. But when the currency is devaluing at 200 to 300% per year, that's not a good setup for investors. So a lot of this is making sure that you have a great framework. And so what we've put in place, Rick, for the last two decades is we have an investment framework. And what we do is we look very much, as you know, I have a high attention to detail on asset quality, quality of contracts, quality of the customer, quality of the fee, making sure we've gotten a place like Brazil, we have all the permits. These are things these details ultimately matter. And you've got to have the right business plan. You've got to have great management teams that have a zero tolerance for FC for being, of course, congruent with our FCPA training and of all of our senior executives and our employees. So this stuff takes a lot of energy. We've traditionally have not hedged. What we have done though is put the right mechanisms in place to make sure that part of the capital structure is financed in local currency. We get paid in local currency, but we get escalators. And we think that's been the right architecture for us. In fact, our foreign investments have performed exceptionally well this year, largely because we've been very cautious, very selective and we've picked the right management teams, the right assets in the right geographies. Makes sense. One other question for you. In the past you've also sold some minority stakes in some of your different units. You obviously saw transaction announced by a peer in the international infrastructure space with Casa Dupuis. How do you think about when is it right to sell minority interests? And what kind of appetite is there to bring in even more capital for you to buy majority stakes? So we sort of created that cookbook. And we did the first type transaction like that with Case Depot many years ago with Vertical Bridge. And they're a great partner and we applaud AMT. They're going be very happy with that partner. So congratulations to my friend, Tom Bartlett. Look, it's making those decisions is tough. We just completed a transaction by example with XNet working closely with John Hancock to sell a minority stake in that business. And ultimately for us, when we do sell a minority stake, Rick, we're trying to achieve a couple of objectives. One, we want to have the right long term partner that wants to stay in these businesses, not just for three years or five years, but we're looking to form long term ten, twenty year capital so we can sit across the table from our customers and say, look, we're going to be there for you when we sign a twenty year lease commitment because we have long term capital that can ultimately align with your interest around building your network long term. And the customers want to know that. They want to know that they've got a long term partner in infrastructure. And I think that provides a lot of comfort for our customers. Secondly, as some of our capital sources mature and they need return of capital, this is a great way to do that. So it's a good way for us. Some of the original partners and companies like Exonet and Vertical Bridge, they do want to get returns and we want to get capital back to them so they can mark those investments and get to the right returns. But more importantly, when we bring a new partner in, we want to make sure that they've got deep pockets, like a Case to Pope, like a John Hancock. You saw the move that we made with Vantage stabilized data centers last year, Rick, where we worked hand in hand with NPS, the largest pension fund in Korea CBRE, Caledon, which is a great partner of ours out of Toronto, everyone knows CBR Richard Ellis and some of our other pension fund clients. We had 12 amazing data centers. We used our balance sheet. We matched our balance sheet with long term pension capital that understood the value of those thirteen, fourteen, fifteen year contracts with investment grade cloud players. And most importantly, could achieve not only return of capital to our private LPs, but we kept that asset we kept those assets in the family. They're producing a 6% current cash yield, which is great. We're getting management fees and carry on that third party capital. So when you do find the right third party source of capital, what it allows us to do, Rick, is it allows us to build a lot of capital, form really good ideas like Vantage Stabilize Co or XNET or Vertical Bridge. And investors know when they work with us, they're going to see a lot of opportunity for co investment. And that's the key buzzword today in investment management is people that come into our funds like DCP2 are getting the opportunity to also co invest and go deeper into opportunities like an XNet, like a Vertical Bridge, like Advantage. These are great logos, great management teams. And so having that access to capital, that long term access to capital is part of our business model going forward. And we congratulate American Tower for taking advantage of that dynamic as well. It just makes a lot of sense, Rick. Great. Thanks for the insights. Stay well. And we'll see you virtually at NAREIT and live in Park City this summer. Looking forward to that live piece, Thank you. You. Our next question is a follow-up from Jade Rahmani with KBW. Please proceed with your question. Thank you and apologize for the audio issue earlier. Just noting the databank securitization, are there other financings that you expect to execute that could be near term accretive? And could you put any color around what kinds of strategies those would be? Would that be securitization or there's other financing tools available? There are a whole host of financing tools available, but what we like to do is execute on ABS facilities frankly. I mean, that's the great part about our digital operating REIT type of businesses. They're all long term leases with fixed escalations with good solid core organic growth rates. So all great tenants for our low coupon asset backed securities market. And that frankly does also include, if you think about it, our investment management fees and that type of structure as well for the Colony Capital corporate side. So and we will have more fulsome disclosures on strategic financing opportunities over the course of next couple of months, sorry. And I think what's really the subtext to this is one other point to this is we now have cash flows that are a lot more long term and a lot more predictable. I think one of the things that investors caught on to quickly was that not only in our digital operating business, we have long term leases with investment grade customers, but we now have long term funds with ten, eleven, twelve year fund lives, where we're taking in income streams from investment grade pension funds and sovereign wealth funds. And so the stability of those cash flows in I'm are a lot like signing a tower lease, Jackie, if you think about it. Five year term, ten year term, investment grade counterparty and bringing Moody's and Fitch and S and P along for that journey so that they understand this new digitally converged REIT and where we get those cash flows, that's an education process. We've started with that education process just like we did when we taught them about cell tower securitizations in 02/2004 when we did small cell securitizations, the first cell tower securitization in Mexico, the first hyperscale data center securitization three years ago, Advantage, and now of course, our first edge securitization with DataBank. So having this dialogue and having the trust of the rating agencies and being a long time issuer is a big strategic weapon for us. Thanks very much. Thank you. Ladies and gentlemen, at this time, there are no further questions. I would like to turn the floor back to management for closing comments. Well, look, thank you, everyone. It's been a great quarter. I want to thank a couple of people as we end our call today. I want to thank our hospitality team, the sort of unsung heroes of that. And David Schwartz and Kian, Brent Tonks, the whole team just did a great job there, delivering a great result for our shareholders. I want to thank our friends at Cerberus and at Highgate. They were great partners in getting that transaction done. It was not easy. Also want to thank the entire team at CLNC and those employees that have gone from Colony over to CLNC. We'll miss you. Appreciate the hard work. We're going to be your biggest fans from the sidelines, and we've really enjoyed that journey. And then I'll just close in saying, we are absolutely making the progress that we thought we'd make and perhaps even slightly ahead of plan. And I think what you can expect from us over the coming year is we're going to continue to form new capital around great ideas. We're very excited about what we're doing in our digital investment management platform. And we're really looking forward to hosting everybody for our first Investor Day. Severin White has done an incredible job being our voice in corporate communications and our outreach within public investors. So we're very excited to share our deeper thoughts. And we hope that all of you will sign up and join us for Investor Day. We're going to have not only the senior leadership team, but we're going to have many members of our ecosystem of companies, a lot of our great CEOs presenting around the digital infrastructure world, deeper insights into what's happening in towers and small cells, fiber, data centers, everything that's happening in that ecosystem. It'll give you the investor a chance to have a little bit of a closer look at what we're doing. And then also I'd close in saying, unpacking how we're building those great digital earnings. So we look forward to seeing all of you at Investor Day. And once again, thank you for your continued support and trust. We're looking forward to a great year here at Colony Capital. Take care. Have a great day. Thank you. Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.