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Thursday, May 19, 2022

Colony Capital Sells $400 Million Industrial Portfolio

Downtown-based real estate investment firm Colony Capital Inc. has closed the sale of its 51% ownership stake in a $400 million industrial bulk distribution portfolio. 

The sale generated $85 million in net proceeds for Colony, according to the company — a significant premium on the portfolio’s net equity value of $69 million as of Sept. 30.

“We’re very pleased to announce the sale of our bulk industrial portfolio today,” said Colony President and Chief Executive Marc Ganzi in a statement. “The sale keeps us on track to hit our 2020 (organization and employee development) monetization targets and adds valuable fuel to power our digital transformation.”

The deal’s close marks Colony’s final exit from the industrial real estate market. The firm first entered the space in 2014 through its acquisition of industrial property investor Cobalt Capital Partners. Although Colony has said the portfolio experienced significant growth under its ownership, the firm nevertheless decided to move away from the space as part of its broader pivot to digital real estate.

The formal divestiture was announced more than a year ago with Colony’s $5.9 billion sale of its entire industrial platform to an affiliate of private equity titan Blackstone Group Inc. 

At the time, Colony’s then-President Darren Tangen cited both returns for investors and liquid capital for the digital real estate push as key factors driving the sale.

Colony Capital has been attempting to transition its business toward digital property investments, such as data centers and communication towers, for the last several years. That shift has become even more urgent during the Covid-19 pandemic, which has hammered many of Colony’s legacy real estate holdings.

The company defaulted on $3.2 billion worth of loans backing its hotel and health care properties earlier this year. 

It sold the majority of its struggling hotel portfolio to Highgate Hotels in May for $67.5 million, plus the assumption of $2.7 billion in debt.

Colony reported losses of $206 million, or 44 cents per share, in its third quarter earnings. But its reported funds from operations of $4.8 million — a key metric in the sector — were up significantly from a more than $19 million loss in the second quarter. 

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