What changed in this filing

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Item 1. Financial Statements

2020-08-10 compared with 2020-05-11 · 590 added, 388 removed, 1599 unchanged (38% of the section changed)

3 unchanged sentences

(In thousands, except per share data)

March 31, 2020 (Unaudited)

June 30, 2020 (Unaudited)

December 31, 2019

2 unchanged sentences

Real estate, net

Loans receivable (at fair value at March 31, 2020)

Loans receivable (at fair value at June 30, 2020)

Equity and debt investments ($402,167 and $457,693 at fair value, respectively)

33 unchanged sentences

(In thousands, except per share data)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Property operating income

18 unchanged sentences

Other loss, net

Equity method earnings

Equity method losses

Equity method earnings (losses)—carried interest

2 unchanged sentences

Loss from continuing operations

Income from discontinued operations

Income (loss) from discontinued operations

Net income (loss) attributable to noncontrolling interests:

17 unchanged sentences

(In thousands)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Changes in accumulated other comprehensive income (loss) related to:

4 unchanged sentences

Net investment hedges

Other comprehensive loss

Other comprehensive income (loss)

Comprehensive loss

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Common stock repurchases

Redemption of OP Units for cash and class A common stock

Redemption of OP Units for class A common stock

Equity-based compensation

6 unchanged sentences

Balance at March 31, 2019

Other comprehensive income

Redemption of OP Units for class A common stock

Equity-based compensation

Contributions from noncontrolling interests

Distributions to noncontrolling interests

Preferred stock dividends

Common stock dividends declared ($0.11 per share)

Reallocation of equity (Notes 2 and 15)

Balance at June 30, 2019

The accompanying notes are an integral part of the consolidated financial statements.

COLONY CAPITAL, INC.

CONSOLIDATED STATEMENTS OF EQUITY (Continued)

(In thousands, except per share data)

Preferred Stock

Additional Paid-in Capital

Accumulated Deficit

Accumulated Other Comprehensive Income (Loss)

Total Stockholders’ Equity

Noncontrolling Interests in Investment Entities

Noncontrolling Interests in Operating Company

Balance at December 31, 2019

10 unchanged sentences

Balance at March 31, 2020

Other comprehensive income

Redemption of OP Units for class A common stock

Equity-based compensation

Shares canceled for tax withholdings on vested stock awards

Contributions from noncontrolling interests

Distributions to noncontrolling interests

Preferred stock dividends

Reallocation of equity (Note 2)

Balance at June 30, 2020

The accompanying notes are an integral part of the consolidated financial statements.

2 unchanged sentences

(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash Flows from Operating Activities

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Adjustments to reconcile net loss to net cash provided by operating activities:

Amortization of discount and net origination fees on loans receivable and debt securities

3 unchanged sentences

Amortization of deferred financing costs and debt discount and premium

Equity method earnings

Equity method losses

Distributions of income from equity method investments

8 unchanged sentences

Payment of cash collateral on derivative

Deferred income tax benefit

Deferred income tax expense

Other loss, net

Increase in other assets and due from affiliates

Decrease (increase) in other assets and due from affiliates

Decrease in accrued and other liabilities and due to affiliates

Other adjustments, net

Net cash provided by (used in) operating activities

Net cash provided by operating activities

Cash Flows from Investing Activities

12 unchanged sentences

Net receipts on settlement of derivatives

Payment of deferred purchase price on DBH Acquisition (Note 3)

Other investing activities, net

3 unchanged sentences

(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash Flows from Financing Activities

3 unchanged sentences

Borrowings from corporate credit facility

Repayment of borrowings from corporate credit facility

Borrowings from secured debt

6 unchanged sentences

Other financing activities, net

Net cash provided by financing activities

Net cash (used in) provided by financing activities

Effect of exchange rates on cash, cash equivalents and restricted cash

Net increase (decrease) in cash, cash equivalents and restricted cash

Net decrease in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash, beginning of period

1 unchanged sentence

Reconciliation of cash, cash equivalents and restricted cash to consolidated balance sheets

Three Months Ended March 31,

Six Months Ended June 30,

Beginning of the period

11 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

June 30, 2020

Colony Capital, Inc.

1 unchanged sentence

Following the acquisition in July 2019 of Digital Bridge Holdings, LLC (“DBH”), an investment manager dedicated to digital real estate and infrastructure, the Company is currently the only global REIT that owns, manages, and/or operates across all major infrastructure components of the digital ecosystem including data centers, cell towers, fiber networks and small cells .

As part of the DBH transaction, Marc C.

Ganzi, who co-founded DBH, is slated to become the Chief Executive Officer ("CEO") of the Company effective July 1, 2020 .

Barrack, Jr., the Company's Executive Chairman and CEO, will continue in his position as Executive Chairman.

At March 31, 2020 , the Company has approximately $ 50 billion of assets under management, of which $ 38 billion is capital managed on behalf of third-party investors and the remainder represents investment interests on the Company's own balance sheet managed on behalf of its stockholders .

As previously disclosed, Marc C.

Ganzi, who co-founded DBH, became the Chief Executive Officer ("CEO") of the Company effective July 1, 2020.

In connection with Mr.

Ganzi’s appointment as the Company’s CEO, on June 30, 2020, the Board of Directors of the Company (the "Board") appointed Mr.

Ganzi to the Board and to serve as President of the Company (in addition to his role as CEO), also effective as of July 1, 2020.

Barrack, Jr., who, prior to July 1, 2020, served as the Company’s CEO and President, continues to serve in his role as Executive Chairman of the Company and the Board.

In addition, Jacky Wu was appointed as the Company’s Chief Financial Officer and Treasurer, effective July 1, 2020.

Hedstrom, who prior to July 1, 2020 served as the Company’s Chief Financial Officer and Treasurer, continues to serve in his role as Executive Vice President and Chief Operating Officer of the Company.

At June 30, 2020 , the Company has approximately $ 46 billion of assets under management, of which $ 36 billion is capital managed on behalf of third-party investors and the remainder represents investment interests on the Company's own balance sheet managed on behalf of its stockholders .

With respect to investment interests, the Company owns (a) a 20 % controlling interest in Data Bridge Holdings, LLC and its wholly-owned subsidiary, DataBank Holdings, Ltd.

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The Company also owns and operates an investment management business with $ 16.3 billion of fee earning equity under management, including $ 7.8 billion in digital real estate investments and the remainder in traditional commercial real estate debt and equity investments.

The Company continues to operate its non-digital business units to maximize cash flows and value over time.

The Company was organized in May 2016 as a Maryland corporation and was formed through a tri-party merger (the "Merger") among Colony Capital, Inc.

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The Company conducts all of its activities and holds substantially all of its assets and liabilities through its operating subsidiary, Colony Capital Operating Company, LLC (the "Operating Company" or the "OP") .

At March 31, 2020 , the Company owned 90 % of the OP , as its sole managing member.

At June 30, 2020 , the Company owned 90 % of the OP , as its sole managing member.

The remaining 10 % is owned primarily by certain current and former employees of the Company as noncontrolling interests.

Effects of COVID-19

At the time of preparation of the first quarter 2020 financial statements, the world is facing a global pandemic, the coronavirus disease 2019, or COVID-19.

Acceleration of Digital Transformation and COVID-19 Considerations

The world continues to face significant healthcare and economic challenges arising from the coronavirus disease 2019, or COVID-19, global pandemic.

Efforts to address the pandemic, such as social distancing, closures or reduced capacity of retail and service outlets, hotels, factories and public venues, often mandated by governments, are having a significant impact on the global economy and financial markets across major industries, including many sectors of real estate.

While the Company is transitioning to a digitally-focused strategy that the Company believes is more resilient and better positioned for growth in an increasingly digital reliant economy, currently a significant portion of the Company's assets and revenues continue to be tied to its non-digital real estate business and investments.

In particular, the Company's real estate investments in the hospitality, healthcare and retail sectors either have experienced or anticipate a myriad of challenges, including, but not limited to:

significant declines in operating cash flows at the Company's hotel and healthcare properties which in turn affect their ability to meet debt service and covenant requirements on investment-level debt (non-recourse to the Company) and ability to refinance or extend upcoming maturities (see Note 10);

flexible lease payment terms sought by tenants in our healthcare and retail properties;

In particular, the Company's real estate investments in the hospitality, healthcare and retail sectors have experienced a myriad of challenges, including, but not limited to:

significant declines in operating cash flows at the Company's hotel and healthcare properties, which in turn, affect their ability to meet debt service and covenant requirements on investment-level debt (non-recourse to the Company) and ability to refinance or extend upcoming maturities (Note 10);

flexible lease payment terms sought by tenants;

incremental property operating costs such as labor and supplies in response to COVID-19;

potential payment defaults on the Company's loans receivable;

and a distressed market affecting real estate values in general.

The COVID-19 crisis may also lead to heightened risk of litigation at the investment and corporate level, with an ensuing increase in litigation and related costs.

As the timing of many of the closures and ensuing economic turmoil did not occur until late in the first quarter of 2020, the effects of COVID-19 on the Company's business, other than hotel properties, were not material and adverse in the first

quarter of 2020.

However, the Company anticipates more pronounced and material effects on the Company's financial condition and results of operations in future periods, beginning with the second quarter of 2020.

The sharp decline and volatility in equity and debt markets, and the challenges faced by the Company as a result of the economic fallout from COVID-19 have affected valuation of the Company's financial assets carried at fair value, and also represent indicators of potential impairment on certain non-financial assets at the end of the first quarter of 2020.

The Company's consideration and assessment of fair value and impairment are discussed further in Note 4 on real estate, Note 6 on equity and debt investments, and Note 7 on goodwill.

If a general economic downturn resulting from efforts to contain COVID-19 persists, it could have a prolonged material and negative impact on the Company's financial condition and results of operations.

At this time, as the extent and duration of the increasingly broad effects of COVID-19 on the global economy remain unclear, it is difficult for the Company to assess and estimate the impact on the Company's results of operations with any meaningful precision.

Accordingly, any estimates of the effects of COVID-19 as reflected and/or discussed in these financial statements are based upon the Company's best estimates using information known to the Company at this time, and such estimates may change in the near term, the effects of which could be material.

Such adverse impact may continue well beyond the containment of the COVID-19 pandemic.

Furthermore, the COVID-19 crisis may also lead to heightened risk of litigation at the investment and corporate level, with an ensuing increase in litigation and related costs.

The sharp decline and volatility in equity and debt markets, and the economic recession due to COVID-19 have adversely affected the valuation of certain of the Company's financial assets carried at fair value, and also resulted in impairment on certain non-financial assets.

Such effects include the determination that the Company's equity method investment in CLNC was other-than-temporarily impaired at June 30, 2020 (Note 6), decreases in fair value of debt securities (Note 6) and loans receivable (Note 12), and impairment of real estate assets in the Company's healthcare, hospitality and other equity and debt segments (Note 4).

Additionally, the COVID-19 crisis has reinforced the critical role and the resilience of the digital real estate and infrastructure sector in a global economy that is increasingly reliant on digital infrastructure.

Accordingly, in the second quarter of 2020, the Company determined that it would accelerate its shift to a digitally-focused strategy in order to better position the Company for growth.

This digital transformation would require a rotation of the Company's non-digital assets into digital-focused investments.

As a result, the Company shortened its assumptions of holding periods on its non-digital assets, in particular its hotel and healthcare assets, which significantly reduced the undiscounted future net cash flows to be generated by these assets below their carrying values at June 30, 2020.

The shortfall in estimated future net cash flows from these assets was further exacerbated by the negative effects of COVID-19 on property operations and market values, as noted above.

As a result, significant impairment was recognized in the second quarter of 2020 on the Company's hotel and healthcare assets.

The acceleration of the Company's digital transformation and the overall reduction in value of the Company's non-digital balance sheet also caused a shortfall in the fair value of the Company's other investment management reporting unit over its carrying value, resulting in significant impairment to the other investment management goodwill in the second quarter of 2020 (Note 7).

The various impairment and fair value decreases collectively accounted for $2.6 billion of charges in the second quarter of 2020, in addition to an approximately $0.4 billion charge in the first quarter of 2020, of which $2.1 billion and $0.3 billion, respectively, were attributable to the OP.

These amounts are reflected within impairment loss, other loss and equity method losses on the statement of operations.

The Company believes that it has materially addressed overall recoverability in value across all of its non-digital assets as of June 30, 2020, applying the Company's best estimates and assumptions at this time based upon external factors known to date and the Company's expected digital transformation timeline.

If the extent and duration of the economic effects of COVID-19 negatively affect the Company's financial condition and results of operations beyond the Company's current projections, the estimates and assumptions currently applied by the Company may change, which may lead to further impairment and fair value decreases in its non-digital assets that could be material in the future.

Cooperation Agreement with Blackwells Capital

3 unchanged sentences

Distributions to be made through the joint venture arrangement effectively represent a settlement of the proxy contest with Blackwells.

At the inception of the arrangement, the fair value of future distributions to Blackwells was estimated at $3.9 million, included in other liabilities on the consolidated balance sheet, and as a settlement loss on the consolidated statement of operations, along with $1.2 million reimbursement of legal costs to Blackwells in the first quarter of 2020 .

The settlement liability is remeasured at fair value each quarter until such time final distributions are made to Blackwells.

Refer to Note 12 for further description of the settlement liability.

6 unchanged sentences

These statements reflect all normal and recurring adjustments which, in the opinion of management, are necessary to present fairly the financial position, results of operations and cash flows of the Company for the interim periods presented.

However, the results of operations for the interim period presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2020, or any other future period.

However, the results of operations for the interim period presented are not necessarily indicative of the results that may be

expected for the year ending December 31, 2020, or any other future period.

These interim financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in, or presented as exhibits to, the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

83 unchanged sentences

Under the fair value option, the loans receivable are measured at each reporting period based upon their exit values in an orderly transaction and unrealized gains or losses from changes in fair value are recorded in other gain (loss) on the consolidated statement of operations.

The loans are no longer be subject to evaluation for impairment through an allowance for loan loss as such losses will be captured through fair value changes.

The loans are no longer subject to evaluation for impairment through an allowance for loan loss as such losses are captured through fair value changes.

Additionally, there is no longer an amortization of loan origination fees or discounts on purchased loans as additional interest income.

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The ASU simplifies accounting for income taxes by eliminating certain exceptions to the general approach in ASC 740, Income Taxes, and clarifies certain aspects of the guidance for more consistent application.

The simplifications relate to intraperiod tax allocations when there is a loss in continuing operations and a gain outside of continuing operations, accounting for tax law or tax rate changes and year-to-date losses in interim periods, recognition of deferred tax liability for outside basis difference when investment ownership changes, and accounting for franchise taxes that are partially based on income.

difference when investment ownership changes, and accounting for franchise taxes that are partially based on income.

The ASU also provides new guidance that clarifies the accounting for transactions resulting in a step-up in tax basis of goodwill, among other changes.

6 unchanged sentences

The ASU clarifies that if as a result of an observable transaction, an equity investment under the measurement alternative is transitioned into equity method and vice versa, an equity method investment is transitioned into measurement alternative, the investment is to be remeasured immediately before and after the transaction, respectively.

The ASU also clarifies that certain forward contracts or purchased options to acquire equity securities that are not deemed to be

derivatives or in-substance common stock will generally be measured using the fair value principles of ASC 321 before settlement or exercise, and that an entity should not be considering how it will account for the resulting investments upon eventual settlement or exercise.

The ASU also clarifies that certain forward contracts or purchased options to acquire equity securities that are not deemed to be derivatives or in-substance common stock will generally be measured using the fair value principles of ASC 321 before settlement or exercise, and that an entity should not be considering how it will account for the resulting investments upon eventual settlement or exercise.

2020-01 is to be applied prospectively, effective January 1, 2021, with early adoption permitted in an interim period.

The Company is currently evaluating the impact of this new guidance.

Accounting for Convertible Instruments and Contracts on Entity's Own Equity

In August 2020, the FASB issued ASU No.

2020-06, Debt—Debt With Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity .

The ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity.

With respect to convertible instruments, under the new guidance, a convertible debt instrument will be accounted for wholly as debt, and convertible preferred stock wholly as preferred stock, that is, as a single unit of account, except for (1) a convertible instrument that contains features requiring bifurcation as a derivative under Topic 815 or (2) a convertible debt instrument that was issued at a substantial premium.

Expanded disclosures are required, including, but not limited to, the terms and features of convertible instruments, and information about events, conditions, and circumstances that could affect assessment of the amount or timing of future cash flows related to those instruments.

With respect to contracts on an entity's own equity, one of the requirements prescribed by the new guidance is to account for freestanding contracts on an entity’s own equity that do not qualify as equity under Subtopic ASC 815-40 at fair value, with changes in fair value recognized in earnings, irrespective of whether such contracts meet the definition of a derivative in Topic 815.

The ASU also amends certain guidance on the computation of earnings per share for convertible instruments and contracts on an entity’s own equity.

In calculating diluted earnings per share, the new guidance (1) requires the if-converted method to be applied for all convertible instruments (the treasury stock method is no longer available), and (2) removes the ability to rebut the presumption of share settlement for contracts that may be settled in cash or stock.

Upon adoption, a one-time election may be made to apply the fair value option for any liability-classified financial instrument that is a convertible security.

In the period of adoption, disclosure is required of (1) the nature of and reason for the change in accounting principle in both the interim and annual period of change, and (2) earnings per share transition information about the effect of the change on affected per-share amounts.

Adoption of the new standard may be made either on a full or modified retrospective approach, with cumulative effect adjustment recorded to beginning retained earnings under the latter.

2020-06 is effective January 1, 2022, with early adoption permitted in interim periods beginning January 1, 2021.

The Company is currently evaluating the impact of this new guidance.

Business Combinations

On July 25, 2019, the Company acquired DBH in a combination of:

(a) cash, a portion of which is deferred until the expiration of certain customary seller indemnification obligations (Note 20 );

(a) cash, a portion of which was deferred until the expiration of certain customary seller indemnification obligations and was paid in full in May 2020 (Note 20 );

and (b) issuance of 21,478,515 OP Units, which were measured based upon the closing price of the Company's class A common stock on July 24, 2019 of $ 5.21 per share.

16 unchanged sentences

Accordingly, these provisional values may be subject to adjustments during the measurement period, not to exceed one year, based upon new information obtained about facts and circumstances that existed at the time of closing.

During the second quarter of 2020, certain measurement period adjustments were made to the purchase price allocation for DataBank, primarily (i) a reallocation of value to data center service contract intangible asset, (ii) changes in valuation and underlying assumptions pertaining to data center construction and market value of existing data center lease contracts, and (iii) the corresponding effect on deferred tax liabilities.

(In thousands)

June 30, 2020

December 20, 2019

Measurement Period Adjustments

June 30, 2020

Consideration

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Real estate and lease intangibles of DataBank were measured based upon recent third party appraised values, allocated to tangible assets of land, building, construction in progress, data center infrastructure, as well as identified intangibles of in-place leases, above- and below-market leases, and tenant relationships.

The remaining intangible assets acquired include customer relationships and trade name.

The remaining intangible assets acquired include data center service contracts, customer relationships and trade name.

The value of data center service contracts was estimated based upon net cash flows generated from these contracts.

Customer relationships were valued as the incremental net income attributable to these relationships considering the projected net cash flows of the business with and without the customer relationships in place.

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Goodwill represents the value of the business acquired not already captured in identifiable assets, such as the potential for future customers, synergies, revenue and profit growth, as well as industry knowledge, experience and relationships that the DataBank management team brings.

The following table summarizes t he Company's real estate held for investment.

The following table summarizes the Company's real estate held for investment.

Real estate held for sale is presented in Note 8 .

(In thousands)

March 31, 2020

June 30, 2020

December 31, 2019

6 unchanged sentences

Real estate assets, net (1)

For real estate acquired in a business combination, the purchase price allocation may be subject to adjustments during the measurement period, not to exceed 12 months from date of acquisition, based upon new information obtained about facts and circumstances that existed at time of acquisition.

Real Estate Sales

Results from sales of real estate, including discontinued operations (Note 16 ), are as follows:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

Proceeds from sales of real estate

Gain on sale of real estate

Gain (Loss) on sale of real estate

Real Estate Acquisitions

There were no real estate acquisitions in the three months ended March 31, 2020 .

The following table summarizes the Company's real estate acquisitions in 2019, excluding real estate acquired as part of business combinations discussed in Note 3 .

The following table summarizes the Company's real estate acquisitions, excluding real estate acquired as part of business combinations discussed in Note 3 .

($ in thousands)

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Lease Intangible Assets

ROU Lease and Other Assets

Lease Intangible Liabilities

Debt, Lease and Other Liabilities

Six Months Ended June 30, 2020

Asset Acquisitions

Hotel—France (2)

Year Ended December 31, 2019

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Dollar amounts of purchase price and allocation to assets acquired and liabilities assumed are translated using foreign exchange rates as of the respective dates of acquisition, where applicable.

Bids for hotels under receivership were accepted by the French courts in prior years, with the transactions closing in 2020.

Amounts include acquisition of hotel operations pursuant to operating leases on real estate owned by third parties.

Useful life of real estate acquired is 40 years for buildings, 15 years for site improvements, 7 years for furniture, fixtures, and equipment, and 6 years for right-of-use ("ROU") lease assets.

The bulk industrial portfolio was classified as held for sale in June 2019.

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The following table summarizes real estate depreciation and impairment.

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

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Held for investment

Includes impairment of real estate intangibles of $ 7.0 million and right-of-use asset on ground leases of $ 13.0 million in the three months ended March 31, 2020 .

Includes impairment of real estate intangibles of $ 2.3 million and $ 9.3 million and right-of-use asset on ground leases of $ 0.8 million and $ 13.9 million in the three and six months ended June 30, 2020 , respectively.

Impairment of Real Estate Held for Sale

Real estate held for sale is carried at the lower of amortized cost or fair value.

Real estate carried at fair value totaled $ 171.1 million at March 31, 2020 and $ 253.4 million at December 31, 2019 based upon impairments recorded during the three months ended March 31, 2020 and year ended December 31, 2019 , respectively, generally representing Level 3 fair values.

Real estate carried at fair value totaled $ 197.8 million at June 30, 2020 and $ 253.4 million at December 31, 2019 based upon impairments recorded during the six months ended June 30, 2020 and year ended December 31, 2019 , respectively, generally representing Level 3 fair values.

Real estate held for sale that was written down was generally valued using either broker opinions of value, or a combination of market information, including third-party appraisals and indicative sale prices, adjusted as deemed appropriate by management to account for the inherent risk associated with specific properties.

In all cases, fair value of real estate held for sale is reduced for estimated selling costs ranging from 1 % to 3 % .

At March 31, 2020 , the Company also considered the impact of a global economic downturn as a result of COVID-19, specifically as it affects real estate values, and where appropriate, factored in a reduction in potential sales prices on certain properties, which resulted in additional impairment on real estate held for sale in the first quarter of 2020.

In 2020, the Company also considered the impact of a global economic downturn as a result of COVID-19, specifically as it affects real estate values, and where appropriate, factored in a reduction in potential sales prices, which resulted in additional impairment on real estate held for sale in 2020.

Impairment of Real Estate Held for Investment

Real estate held for investment that was written down to fair value during the three months ended March 31, 2020 and year ended December 31, 2019 had carrying values totaling $ 990.4 million and $ 355.0 million , respectively, at the time of impairment, representing Level 3 fair values.

Impairment was driven by various factors, primarily:

change in expected holding period assumptions and/or decline in operating performance which decreased the amount of carrying value recoverable from future cash flows, and economic fallout from COVID-19.

Fair value of impaired real estate held for investment was estimated primarily utilizing the income approach, based upon direct income capitalization using capitalization rates between 7.8 % and 12.0 % , or discounted cash flow analyses using terminal capitalization rates between 8.0 % and 8.3 % , and discount rates between 9.8 % and 12.0 % .

In the first quarter of 2020, the Company engaged a third party advisor to evaluate strategic and financial alternatives to maximize the value of its hospitality portfolio while balancing the need to preserve liquidity and prioritize the growth of its digital business.

Based upon preliminary results from the evaluation, certain properties in its hospitality portfolio indicated a low level of financial viability, and sub-optimal returns from the significant amount of capital expenditures and equity support that would be required in the near and intermediate future, indicating potential impairment of such assets.

Accordingly, the Company reassessed and shortened the holding period for those assets and reduced the estimated undiscounted future net cash flows to be generated, which indicated that the carrying value in those assets would not be recoverable.

As a result, the Company recognized an impairment charge on these hotels in the first quarter of 2020.

The Company also considered the likelihood of a lease renewal or tenant replacement and potential effects of COVID-19 on future net operating income of its real estate held for investment, particularly in its healthcare and hotel portfolios, as an indicator of impairment.

The Company applied a combination of the following approaches to estimate revised cash flow projections for these properties to account for an expected decline in future operating performance:

(i) reevaluated property holding periods, in some cases taking into consideration potential defaults on underlying mortgage debt as a result of expected shortfalls in future property operating cash flows;

and/or (ii) applied a range of reductions to near term expected cash flows for individual properties.

For properties for which undiscounted expected net cash flows over their respective holding periods fell short of carrying values, the Company expects that the carrying value of these properties would likely not be recoverable.

Fair values were estimated for the above mentioned properties based upon either:

(i) the income capitalization approach, using net operating income for each property and applying indicative capitalization rates;

or (ii) discounted cash

flow analyses with terminal values determined using indicative capitalization rates.

The Company considered the risk characteristics of each property in determining capitalization rates and where applicable, adjusted capitalization rates or discount rates higher to reflect the inherent stress on real estate values in a deteriorating economic environment.

Real estate held for investment that was written down to fair value during the six months ended June 30, 2020 and year ended December 31, 2019 had carrying values totaling $ 3.7 billion and $ 355.0 million , respectively, at the time of impairment, representing Level 3 fair values.

Impairment was driven by shortened holding period assumptions made in connection with the preparation and review of the financial statements, particularly in the hotel and healthcare portfolios.

The shortened holding period assumption is attributable to both the Company's accelerated digital transformation , and the risk that the Company is unable to obtain accommodation from lenders on non-recourse mortgage debt that is in default or at risk of default .

The Company's assessment considered various strategic and financial alternatives to maximize the value of its non-digital real estate assets, while also balancing the need to preserve liquidity and prioritize the growth of its digital business.

A shortened holding period was an indicator of impairment as it decreased the amount of carrying value recoverable from future cash flows, which was further exacerbated by a decline in property operating performance and market values as a result of the economic effects of COVID-19 .

The Company compared the carrying values to the undiscounted future net cash flows expected to be generated by these properties over their holding periods.

In performing this analysis, the Company considered the likelihood of possible outcomes under various holding period scenarios by applying a probability-weighted approach to different holding periods.

For hotel properties, the Company applied a range of reductions to near term cash flow projections to account for uncertainties due to COVID-19.

For properties for which undiscounted expected net cash flows over their respective

holding periods fell short of carrying values, the Company expects that the carrying value of these properties would likely not be recoverable.

Fair values were estimated for these properties based upon one or a combination of the following:

(i) third party appraisals, (ii) broker opinions of value with discounts applied based upon management judgment, (iii) income capitalization approach, using net operating income for each property and applying capitalization rates between 10.0 % and 12.0 % ;

or (iv) discounted cash flow analyses with terminal values determined using terminal capitalization rates between 7.0 % and 11.25 % , and discount rates between 8.5 % and 12.0 % .

The Company considered the risk characteristics of each property in determining capitalization rates and where applicable, used higher capitalization rates or discount rates to reflect the inherent stress on real estate values in a deteriorating economic environment.

Impairment was measured as the excess of carrying value over fair value for each of these properties.

Due to uncertainties over the severity and duration of the economic fallout from COVID-19 on the Company's real estate operations and its ability to meet its mortgage debt obligations, it is difficult for the Company to assess and estimate the economic effects with meaningful precision.

The Company has applied its best estimate for purposes of its impairment assessment as of March 31, 2020 based upon available information at this time.

Actual impact of COVID-19 will depend upon many factors beyond the Company’s control and knowledge, and may differ materially from the Company's current expectations.

Furthermore, if the Company is unable to restructure or receive forbearance or other accommodations from lenders on defaulted investment-level debt (Note 10 ), and if the Company is unable to repay the debt, the collateral securing the debt could potentially be foreclosed upon, which would significantly shorten the holding period for these assets.

All of these factors may result in further impairment charges in the near future, which could be material.

As of June 30, 2020 , the Company believes that it has materially addressed overall recoverability in the value of its non-digital real estate assets, applying the Company's best estimates and assumptions at this time based upon external factors known to date and the Company's expected digital transformation timeline.

If the extent and duration of the economic effects of COVID-19 negatively affect the Company's real estate operations and its ability to meet its non-recourse mortgage debt obligations beyond the Company's current projections, the estimates and assumptions currently applied by the Company may change, which may lead to further impairment of its non-digital real estate assets, in particular, its healthcare and hospitality assets, that could be material in the future.

Property Operating Income

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and to a lesser extent, installation services that are recognized at a point in time upon completion of the installation and accompanying services.

For the three months ended March 31, 2020 and 2019 , components of property operating income are as follows, excluding amounts related to discontinued operations (Note 16 ).

Three Months Ended March 31,

For the three and six months ended June 30, 2020 and 2019 , components of property operating income are as follows, excluding amounts related to discontinued operations (Note 16 ).

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

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Lease Concessions Related to COVID-19

Beginning in April 2020, some tenants in our healthcare properties have failed to make rent payments, and some have sought more flexible payment terms as a result of the COVID-19 crisis.

Local governments in certain jurisdictions are also implementing programs that permit or require the forbearance of rent payments by tenants affected by COVID-19.

As a result of the COVID-19 crisis, a number of tenants failed to make rent payments or make timely payments, and some sought more flexible payment terms or rent concessions.

Local governments in certain jurisdictions have implemented or are considering implementing programs that permit or require forbearance of rent payments by tenants affected by COVID-19.

The Company is currently engaged with affected tenants on a case-by-case basis to evaluate and respond to the current environment.

For lease concessions resulting directly from the impact of COVID-19 that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee, for example, where total payments required by the modified contract will be substantially the same as or less than the original contract, the Company expects to make a policy election to account for the concessions as though the enforceable rights and obligations for those concessions existed in the lease contracts, under a relief provided by the FASB.

For lease concessions resulting directly from the impact of COVID-19 that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee, for example, where total payments required by the modified contract will be substantially the same as or less than the original contract, the Company made a policy election to account for the concessions as though the enforceable rights and obligations for those concessions existed in the lease contracts, under a relief provided by the FASB.

Under the relief, the concessions will not be treated as lease modifications that are accounted for over the remaining term of the respective leases, as the Company believes this would not accurately reflect the temporary economic effect of the concessions.

Instead, (i) rent deferrals that meet the criteria will be treated as if no changes were made to the lease contract, with continued recognition of lease income and receivable under the original terms of the contract;

Instead, (i) rent deferrals that meet the criteria will be treated as if no changes were made to the lease contract, with continued recognition of lease income and receivable

under the original terms of the contract;

and (ii) rent forgiveness that meets the criteria will be accounted for as variable lease payments in the affected periods.

The Company has agreed to provide the affected tenants primarily with a deferral of full or partial rent for two to three months , generally with deferred rent to be repaid in monthly installments over periods of four to 18 months .

This resulted in an increase in receivables totaling $ 0.7 million as of June 30, 2020 .

All lease income receivable, including straight-line rents, are subject to the Company's policy for evaluation of collectability based upon creditworthiness of the lessee.

In certain instances, the Company has also agreed to rent forgiveness, totaling $ 0.6 million for full year 2020, of which $ 0.2 million relates to the six months ended June 30, 2020 .

Loans Receivable

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Refer to Note 12 for additional disclosures on loans receivable carried at fair value under the fair value option.

Loans receivable carried at fair value at March 31, 2020 are as follows:

March 31, 2020

Loans receivable carried at fair value at June 30, 2020 are as follows:

June 30, 2020

($ in thousands)

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Loans that are 90 days or more past due as to principal or interest, or where reasonable doubt exists as to timely collection, are generally considered nonperforming and placed on nonaccrual status.

The table below presents the fair value and unpaid principal balance by aging of loans receivable at March 31, 2020 for which fair value option was elected.

March 31, 2020

The table below presents the fair value and unpaid principal balance by aging of loans receivable at June 30, 2020 for which fair value option was elected.

June 30, 2020

(In thousands)

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90 days or more past due or nonaccrual

For the Three Months Ended March 31, 2019 and as of December 31, 2019

For the Three and Six Months Ended June 30, 2019 and as of December 31, 2019

Troubled Debt Restructuring

During the three months ended March 31, 2019 , there were no loans modified in a troubled debt restructuring ("TDR"), in which the Company provided borrowers, who are experiencing financial difficulties, with concessions in interest rates, payment terms or default waivers.

During the three and six months ended June 30, 2019 , there were no loans modified in a troubled debt restructuring ("TDR"), in which the Company provided borrowers, who are experiencing financial difficulties, with concessions in interest rates, payment terms or default waivers.

At December 31, 2019 , the Company had one existing TDR loan that was in maturity default with a carrying value before allowance for loan loss and interest receivable of $ 37.8 million and an allowance for loan loss of $ 37.8 million .

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December 31, 2019

The average carrying value and interest income recognized on non-PCI impaired loans for the three months ended March 31, 2019 were as follows.

The average carrying value and interest income recognized on non-PCI impaired loans for the three and six months ended June 30, 2019 were as follows.

(In thousands)

Three Months Ended March 31, 2019

Three Months Ended June 30, 2019

Six Months Ended June 30, 2019

Average carrying value before allowance for loan losses and interest receivable

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and (iv) changes in interest rates on variable rate loans.

There were no PCI loans acquired in the three months ended March 31, 2019 .

Changes in accretable yield of PCI loans for the three months ended March 31, 2019 were as follows:

There were no PCI loans acquired in the six months ended June 30, 2019 .

Changes in accretable yield of PCI loans for the six months ended June 30, 2019 were as follows:

(In thousands)

Three Months Ended March 31, 2019

Six Months Ended June 30, 2019

Beginning accretable yield

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Non-PCI loans

Changes in allowance for loan losses for the three months ended March 31, 2019 are presented below.

All provision for loan losses for the period related to PCI loans.

Changes in allowance for loan losses for the six months ended June 30, 2019 are presented below.

(In thousands)

Three Months Ended March 31, 2019

Six Months Ended June 30, 2019

Allowance for loan losses at January 1

Provision for loan losses, net

Allowance for loan losses at March 31

Allowance for loan losses at June 30

Provision for loan losses by loan type was as follows:

(In thousands)

Three Months Ended June 30, 2019

Six Months Ended June 30, 2019

Non-PCI loans

Total provision for loan losses, net

Lending Commitments

The Company has lending commitments to borrowers pursuant to certain loan agreements in which the borrower may submit a request for funding contingent on achieving certain criteria, which must be approved by the Company as lender, such as leasing, performance of capital expenditures and construction in progress with an approved budget.

At March 31, 2020 , total unfunded lending commitments was $ 220.8 million , of which the Company's share was $ 85.3 million , net of amounts attributable to noncontrolling interests.

At June 30, 2020 , total unfunded lending commitments was $ 140.6 million , of which the Company's share was $ 37.9 million , net of amounts attributable to noncontrolling interests.

Equity and Debt Investments

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(In thousands)

March 31, 2020

June 30, 2020

December 31, 2019

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Equity Investments

The Company's equity investments represent noncontrolling equity interests in various entities, including investments for which fair value option was elected.

The Company's equity investments represent noncontrolling equity interests in various entities, including investments for which the Company has elected the fair value option.

Equity Method Investments

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The Company’s exposure to the investment entities is limited to its equity method investment balance.

The Company’s investments accounted for under the equity method are summarized below, excluding investments classified as held for sale (Note 8 ):

The Company’s investments accounted for under the equity method are summarized below:

($ in thousands)

Ownership Interest at

March 31, 2020 (1)

Carrying Value at

March 31, 2020

Investments (1)

June 30, 2020

December 31, 2019

Colony Credit Real Estate, Inc.

Common equity in publicly traded commercial real estate credit REIT managed by the Company and membership units in its operating subsidiary

Common equity in publicly traded commercial real estate credit REIT managed by the Company and membership units in its operating subsidiary (36.4% ownership)

RXR Realty, LLC

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Other investment ventures

Interests in 12 investments at March 31, 2020

Interests in 11 investments at June 30, 2020

Fair value option

Interests in initial stage, real estate development and hotel ventures and limited partnership interests in private equity funds

The Company's ownership interest represents capital contributed to date and may not be reflective of the Company's economic interest in the entity because of provisions in operating agreements governing various matters, such as classes of partner or member interests, allocations of profits and losses, preferential returns and guaranty of debt.

Each equity method investment has been determined to be either a VIE for which the Company was not deemed to be the primary beneficiary or a voting interest entity in which the Company does not have the power to control through a majority of voting interest or through other arrangements.

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The Company's role as manager is under the supervision and direction of CLNC's board of directors, which includes representatives from the Company but the majority of whom are independent directors.

Some preferred equity investments may not have a stated ownership interest.

The Company owns varying levels of stated equity interests in certain acquisition, development and construction ("ADC") arrangements as well as profit participation interests without a stated ownership interest in other ADC arrangements.

Significant Sales of Equity Method Investments

In February 2020, the Company sold its equity investment in RXR Realty, LLC for net proceeds after taxes of $ 179.1 million , recording a gain of $ 106.1 million , included in equity method earnings.

In February 2020, the Company sold its equity investment in RXR Realty, LLC for net proceeds after taxes of $ 179.1 million , recording a gain of $ 106.1 million , which is included in equity method earnings.

Impairment of Equity Method Investments

The Company evaluates its equity method investments for OTTI at each reporting period and recorded impairment of $ 0.8 million and $ 2.6 million for the three months ended March 31, 2020 and 2019 , respectively.

Equity method investments that were written down to fair value during the year ended December 31, 2019 had carrying values totaling $ 745.3 million at the time of their respective impairment.

The investment impaired during the three months ended March 31, 2020 was fully resolved during the quarter.

Impairment charges were generally driven by write-downs to respective offer prices on investments sold, other than for CLNC in 2019 as discussed below.

Other-Than-Temporary Impairment Assessment —In the second quarter of 2019, the Company determined that its investment in CLNC was other-than-temporarily impaired given the prolonged period of time that the carrying value of the Company's investment in CLNC had exceeded its market value.

The Company recorded an impairment charge, included in equity method loss, of $ 227.9 million , measured as the excess of carrying value over market value of its investment in CLNC based upon CLNC's closing stock price of $ 15.50 per share on June 30, 2019.

At March 31, 2020 , the Company's investment in CLNC had a carrying value of $ 666.1 million , which was in excess of its fair value of $ 188.9 million based upon the closing stock price of $ 3.94 per share on March 31, 2020 .

determined that its investment in CLNC as of March 31, 2020 was not other-than-temporarily impaired.

There was a notable decrease in CLNC's stock price in March 2020, which was reflective of the significant volatility in equity markets and significant decline in equity prices as a whole in response to the COVID-19 crisis.

There was no large disparity, however, between the Company's carrying value in CLNC and CLNC's internal estimated NAV as of March 31, 2020.

The Company believes that, over the long term, the equity markets at large as well as CLNC's stock will not sustain the losses experienced in March 2020.

The Company considered that at this time, it has both the intent and the ability to hold its investment in CLNC for a period of time that it believes would be sufficient to allow for an anticipated recovery in market value.

Given the uncertainty over how prolonged the economic fallout from COVID-19 will affect financial markets and global economies, the Company will continue to reassess the recoverability of its investment in CLNC as circumstances evolve, which may result in the recognition of an other-than-temporary impairment in the future.

The Company evaluates its equity method investments for OTTI at each reporting period and recorded impairment of $ 297.0 million and $ 247.8 million for the three months ended June 30, 2020 and 2019 , respectively, and $ 297.8 million and $ 250.4 million for the six months ended June 30, 2020 and 2019 , respectively.

Equity method investments that were written down to fair value during the six months ended June 30, 2020 and year ended December 31, 2019 had carrying values totaling $ 388.8 million and $ 745.3 million , respectively, at the time of impairment.

Impairment charges were generally determined using recoverable values for investments resolved or sold, or investment values based upon projected exit strategies, other than for CLNC as discussed below.

Other-Than-Temporary Impairment ("OTTI") —In the second quarter of 2020 and 2019, the Company determined that its investment in CLNC was other-than-temporarily impaired and recorded an impairment charge, included in equity method losses, of $ 274.7 million and $ 227.9 million , respectively.

In each case, the OTTI charge was measured as the excess of carrying value over market value of its investment in CLNC based upon CLNC's closing stock price on the last trading day of the quarter of $ 7.02 per share on June 30, 2020 and $ 15.50 per share on June 28, 2019.

At June 30, 2020 , the Company's investment in CLNC had a carrying value of $ 611.2 million prior to the OTTI charge, which was in excess of its market value of $ 336.5 million .

In March and April 2020, there was a significant decrease in CLNC's stock price, which reflected the significant volatility in equity markets and the significant decline in equity prices, for mortgage REITs and across industries, due to the COVID-19 crisis.

Along with other publicly traded mortgage REITs, CLNC has seen a rebound in its stock price in May and June 2020, but its stock continues to trade below pre-COVID-19 levels.

As of June 30, 2020, there was not a large disparity between the Company's carrying value in CLNC and CLNC's internal estimated NAV.

Nevertheless, with increasing uncertainty over the extent and duration of the COVID-19 crisis, and the timeline for a recovery in the U.S economy, the Company believes that it is unlikely that the CLNC stock will recover and trade closer to its NAV in the near term.

Accordingly, the Company also believes that it would be unlikely that the shortfall in market value relative to carrying value of its investment in CLNC would recover in the near term.

As a result, the Company recognized an other-than-temporary impairment on its investment in CLNC.

Basis Difference —The impairment charge in June 2019 resulted in a basis difference between the Company's carrying value of its investment in CLNC and the Company's proportionate share of CLNC's book value of equity.

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Accordingly, for any future impairment charges taken by CLNC on these non-strategic assets, the Company's share thereof will be applied to reduce the basis difference and will not be recorded as an equity method loss until such time the basis difference associated with the respective underlying investments has been fully eliminated.

For the three months ended March 31, 2020 , the Company reduced its share of loss from CLNC by $ 19.2 million , representing the basis difference allocated to non-strategic assets realized by CLNC during the three months ended March 31, 2020 .

The remaining basis difference at March 31, 2020 was $ 67.5 million .

For the three and six months ended June 30, 2020 , the Company reduced its share of net loss from CLNC by $ 8.7 million and $ 27.9 million , respectively, representing the basis difference allocated to non-strategic assets realized by CLNC during these periods.

The remaining basis difference at June 30, 2020 was $ 58.9 million .

The impairment charge on its investment in CLNC in June 2020 will establish additional basis difference moving forward.

Other Equity Investments

Other equity investments that are not accounted for under the equity method consist of the following:

Other equity investments consist of the following:

Marketable Equity Securities —These are primarily equity investment in a third party managed mutual fund and publicly traded equity securities held by a consolidated private open-end fund.

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and to a lesser extent, in Europe, and predominantly in the digital real estate and telecommunication sectors.

Investment Ventures —This represents primarily common equity in the Albertsons/Safeway supermarket chain (with 50 % ownership by a co-investment partner).

There were no adjustments for any impairment or observable price changes as of March 31, 2020 .

Investment Ventures —In April 2020, the Company recapitalized its co-investment venture, which holds common equity in the Albertsons supermarket chain, and reduced its interest in the venture from 50 % to 2 % , generating total proceeds of $ 148.5 million and realizing a gain of $ 60.7 million to the venture, of which the Company's share is 50 % .

The interest recapitalized by the venture entitles the Company and its original co-investors to potential future profit allocation, which takes the form of an allocation of returns from the venture in excess of a minimum return threshold achieved by the new venture partner.

The potential future profit allocation, of which the Company shares in 49 % , is assigned a fair value each reporting period assuming a liquidation of the venture as of the reporting date.

Such fair value may fluctuate over time based upon achievement of the minimum return threshold.

Additionally, a portion of the venture's interest in Albertsons was monetized in conjunction with Albertsons' recapitalization and subsequent initial public offering in June 2020.

The Company's remaining equity interest in the venture is valued based upon the publicly traded stock price of Albertsons Companies, Inc.

("ACI"), adjusted for liquidity restrictions attributable to lock-up provisions on the venture's holdings in ACI.

Private Funds and Non-Traded REIT —This represents interests in a Company-sponsored private fund and a non-traded REIT, NorthStar Healthcare Income, Inc.

("NorthStar Healthcare"), and limited partnership interest in a third party private fund sponsored by an equity method investee, for which the Company elected the NAV practical expedient (see Note 12 ).

("NorthStar Healthcare"), and limited partnership interest in a third party private fund sponsored by an equity method investee, for which the Company elected the NAV practical expedient (Note 12 ).

Investment Commitments

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The Company also has lending commitments under ADC arrangements which are accounted for as equity method investments.

At March 31, 2020 , the Company’s share of these commitments was $ 58.2 million .

Private Funds— At March 31, 2020 , the Company has unfunded commitments of $ 244.3 million to funds sponsored by the Company that are accounted for as equity method investments.

At June 30, 2020 , the Company’s share of these commitments was $ 49.7 million .

Private Funds— At June 30, 2020 , the Company has unfunded commitments of $ 228.6 million to Company sponsored and third party sponsored funds.

Debt Securities

The Company's investment in debt securities is composed of N-Star CDO Bonds, classified as AFS, and commercial mortgage-backed securities (“CMBS”) held by a consolidated sponsored investment company that is currently in liquidation, accounted for at fair value through earnings.

The Company's investment in debt securities is composed of available-for-sale N-Star CDO bonds and commercial mortgage-backed securities (“CMBS”) held by a consolidated sponsored investment company which is currently in liquidation.

The CMBS held by the sponsored investment company were sold and liquidating distributions were made subsequent to June 30, 2020 .

AFS Debt Securities

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(in thousands)

March 31, 2020

June 30, 2020

December 31, 2019

There were no sales of N-Star CDO bonds during the three months ended March 31, 2020 and year ended December 31, 2019 .

At March 31, 2020 , the contractual maturities of N-Star CDO bonds ranged from 17 to 21 years.

The expected maturity, on a weighted average basis, was 1.8 years.

There were no sales of N-Star CDO bonds during the six months ended June 30, 2020 and year ended December 31, 2019 .

At June 30, 2020 , the N-Star CDO bonds have contractual maturity ranging from approximately 17 to 21 years, and expected maturity of 7 months to 3.5 years based upon expected cash flows.

Impairment of AFS Debt Securities

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If the impairment is not other-than-temporary, the entire unrealized loss is recognized in OCI.

For the three months ended March 31, 2020 , the Company recorded an allowance for credit loss in other gain (loss) of $ 0.8 million .

For the three and six months ended June 30, 2020 , the Company recorded allowance for credit loss in other loss of $ 21.4 million and $ 22.2 million , respectively.

The credit loss was determined based upon an analysis of the present value of contractual cash flows expected to be collected from the underlying collateral as compared to the amortized cost basis of the security.

At March 31, 2020 , there were no AFS debt securities in unrealized loss positions without allowance for credit loss.

For the three months ended March 31, 2019 , the Company recorded OTTI loss on AFS debt securities of $ 0.7 million in other gain (loss).

At June 30, 2020 , there were no AFS debt securities in unrealized loss positions without allowance for credit loss.

For both three and six months ended June 30, 2019 , the Company recorded OTTI loss on AFS debt securities of $ 0.7 million in other loss.

The losses were due to an adverse change in expected cash flows on N-Star CDO bonds.

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Goodwill, Deferred Leasing Costs and Other Intangibles

During the three months ended March 31, 2020 , $ 51.0 million of goodwill was reassigned from the other investment management segment to the digital reportable segment to reflect the value associated with certain existing investment vehicles that were repurposed to execute an investment strategy focused on the digital sector, as well as a team of professionals dedicated to the strategy.

The following table presents changes in the carrying value of goodwill.

Six Months Ended June 30,

(In thousands)

Beginning balance

Business combination (Note 3) (1)

Ending balance

Includes the effects of measurement period adjustments within a one year period following the consummation of a business combination.

In the first quarter of 2020, $ 51.0 million of goodwill was reassigned from the other investment management segment to the digital reportable segment to reflect the value associated with certain existing investment vehicles that were repurposed to execute an investment strategy focused on the digital sector, as well as a team of professionals dedicated to the strategy.

The amount that was reassigned to the digital segment was determined based upon the fair value of this digital strategy platform relative to the overall other investment management goodwill balance prior to the reassignment.

The remaining goodwill balance assigned to the other investment management reportable segment was impaired by $ 79.0 million in the first quarter of 2020, as discussed further below.

Goodwill balance by reportable segment is as follows.

(In thousands)

March 31, 2020

June 30, 2020

December 31, 2019

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Other investment management

At March 31, 2020 and December 31, 2019 , goodwill of $ 140.5 million related to the DBH acquisition was deductible for income tax purposes.

At June 30, 2020 and December 31, 2019 , goodwill of $ 140.5 million related to the DBH acquisition was deductible for income tax purposes.

Impairment of Goodwill

In the first quarter of 2020, the Company considered whether changes in the current economic environment as a result of COVID-19 and the impact thereof on the Company's real estate and investment management business represent indicators of potential impairment to goodwill.

Digital —The Company believes that the current shift and increased reliance on a digital economy positions the Company's digital real estate and digital investment management business for further growth.

Therefore, the Company determined that there were no indicators of impairment on goodwill in the digital reportable segment.

Other Investment Management —The Company determined that the prevailing deterioration in current economic conditions, particularly i) the recent decline in the Company's stock price which in turn resulted in a decline in the Company's market capitalization;

ii) the potential effects of a global economic downturn on future capital raising assumptions and exit strategies;

and iii) a distressed market affecting asset values on the Company's balance sheet, represent indicators of impairment of goodwill assigned to other investment management.

Accordingly, the Company updated its quantitative test of the other investment management goodwill, which indicated that the carrying value of the other investment management reporting unit including goodwill at March 31, 2020 exceeded its estimated fair value.

As a result, the Company recognized an impairment charge to its other investment management goodwill of $ 79.0 million in the first quarter of 2020.

Similar to the last valuation in the fourth quarter of 2019, the fair value of the investment management reporting unit was generally estimated using the income approach.

Projections of discounted net cash flows were based upon various factors, including, but not limited to, assumptions around forecasted capital raising for existing and future investment vehicles, fee related earnings multiples, operating profit margins and discount rates, adjusted for certain risk characteristics such as the predictability of fee streams and the estimated life of managed investment vehicles.

The Company applied terminal year residual multiples on fee related earnings ranging from 16x to 20x , and discount rates between 10 % and 15 % for fee related earnings and 20 % for carried interest.

The Company considered a range of fee related earnings multiples and discount rates for a peer group of alternative asset managers as indicators to assess for reasonableness, noting that direct comparison generally cannot be drawn due to differences that exist between the Company's business and those of other asset managers.

As it relates to the CLNC management contract that was previously valued based upon a potential sale of the contract, the valuation was updated with a reduced sales price, taking into account bids received by the Company.

At this time, the Company has delayed any sale transaction until such time that market conditions improve.

The Company also considered the hypothetical value of its non-digital investment management business in a spinoff that would result in the Company becoming externally managed, and assigned a value to internally managing the Company's non-digital balance sheet assets based on market terms of management contracts of externally-managed REITs that otherwise engage in similar real estate operations.

The valuation of the hypothetical contract contemplated a gradually diminishing balance sheet in non-digital assets, as the Company anticipates a redeployment of available capital into its digital business over time.

Due to the inherently judgmental nature of capital raising projections, exit strategies and various other assumptions used in the goodwill valuation, which are further exacerbated by uncertainties over the extent and duration of economic instability resulting from COVID-19, actual results may differ from current expectations which may lead to further decline in fair value of the other investment management reporting unit and further impairment to the other investment management goodwill in the future.

Other Investment Management —In connection with the review and preparation of the financial statements, the Company determined that the deterioration in economic conditions as a result of COVID-19 and the Company's acceleration of its digital transformation in the second quarter of 2020 represent indicators of impairment to its other investment management goodwill.

As a result, the Company recognized impairment loss on its other investment management goodwill of $ 79.0 million and $ 515.0 million in the first and second quarters of 2020, respectively.

Valuation of the other investment management reporting unit contemplated a transition from certain of the Company's non-digital management business to a digitally-focused investment management business beginning in the fourth quarter of 2019.

As discussed in Note 1, the Company determined in the second quarter of 2020 that it would accelerate the transition and focus on growing its digital investment management business.

Consequently, as of June 30, 2020 , the Company did not ascribe any value to future capital raising potential of the other investment management reporting unit, which represents the credit and opportunity fund management business, as it is no longer part of the Company's long-term strategy.

Regarding the CLNC management contract, the COVID-19 crisis has caused the Company to postpone its plan to sell the contract.

At June 30, 2020 , the contract is valued based upon its contractual termination value, which the Company believes approximates fair value.

As previously discussed, the acceleration of a digital strategy, combined with the negative economic effects of COVID-19 on property operations and market values in 2020, resulted in significant reduction in value of the Company's non-digital balance sheet.

Such reduction in turn translated into a significant decrease in value of the other investment management reporting unit.

The Company had previously considered the hypothetical value of its non-digital investment management business in a spinoff that would result in the Company becoming externally managed, and assigned a value

to internally managing the Company's non-digital balance sheet assets.

Under current circumstances, the Company determined that as of June 30, 2020 , the hypothetical contract would have inconsequential, if any, remaining value to a market participant, and wrote off the value of internally managing its non-digital balance sheet.

The remaining balance of the goodwill in the other investment management segment of $ 81.6 million as of June 30, 2020 is expected to be fully written off in the near future when a runoff of the credit management business is substantially completed.

Deferred Leasing Costs, Other Intangible Assets and Intangible Liabilities

Deferred leasing costs and identifiable intangible assets and liabilities, excluding those related to assets held for sale, are as follows.

March 31, 2020

June 30, 2020

December 31, 2019

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Lease intangible liabilities (2)

For intangible assets and intangible liabilities recognized in connection with business combinations, purchase price allocations may be subject to adjustments during the measurement period, not to exceed 12 months from date of acquisition, based upon new information obtained about facts and circumstances that existed at time of acquisition.

Amounts are presented net of impairments and write-offs.

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The Colony trade name with a carrying value of $ 15.5 million is determined to have an indefinite useful life and is not currently subject to amortization.

Represents primarily the value of certificates of need associated with certain healthcare portfolios which are not amortized and franchise agreements associated with hotel properties which are subject to amortization over the term of the respective agreements .

Represents primarily DataBank data center service contracts and hotel franchise agreements which are amortized over the term of the respective contracts or agreements, and value of certificates of need associated with certain healthcare portfolios which are not amortized.

Impairment of Identifiable Intangible Assets

An investment management contract that was written down to fair value during the year ended December 31, 2019 had a carrying value of $ 62.4 million at the time of impairment.

The fair value of the intangible asset was based upon revised future net cash flows to be generated over the remaining life of the contract, representing Level 3 inputs.

Other than real estate intangibles which were impaired as part of the real estate asset group as discussed in Note 4 , there were no impairments on other identifiable intangible assets in the three months ended March 31, 2020 and 2019 .

The fair value of the intangible asset was based upon revised future net cash flows to be generated over the remaining life of the contract, representing Level 3 fair value.

Other than real estate intangibles which were impaired as part of the real estate asset group as discussed in Note 4 , there were no impairments of identifiable intangible assets in the three and six months ended June 30, 2020 and 2019 .

Amortization of Intangible Assets and Liabilities

The following table summarizes amortization of deferred leasing costs and finite-lived intangible assets and intangible liabilities, excluding amounts related to discontinued operations (Note 16 ):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

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(In thousands)

March 31, 2020

June 30, 2020

December 31, 2019

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Assets and Liabilities Related to Discontinued Operations

At March 31, 2020 and December 31, 2019 , the bulk industrial portfolio remained held for sale, with assets consisting primarily of real estate and related intangibles totaling $ 0.4 billion , and liabilities consisting primarily of debt totaling $ 0.2 billion .

At June 30, 2020 and December 31, 2019 , the bulk industrial portfolio remained held for sale, with assets consisting primarily of real estate and related intangibles totaling $ 370.0 million and $ 372.0 million , respectively, and liabilities consisting primarily of debt totaling $ 235.6 million and $ 235.0 million , respectively.

Restricted Cash, Other Assets and Other Liabilities

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(In thousands)

March 31, 2020

June 30, 2020

December 31, 2019

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(In thousands)

March 31, 2020

June 30, 2020

December 31, 2019

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Represents proceeds from loan repayments and real estate sales held in escrow, and sales of equity investments pending settlement.

Includes receivables from tenants, hotel operating income, resident fees, property level insurance, and asset management fees, net of allowance for doubtful accounts, where applicable, of $ 3.0 million at March 31, 2020 and $ 2.8 million at December 31, 2019 .

Impact of CARES Act on Deferred Tax Asset

The Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was enacted on March 27, 2020.

Includes receivables from tenants, hotel operating income, resident fees, property level insurance, and asset management fees, net of allowance for doubtful accounts, where applicable, of $ 6.4 million at June 30, 2020 and $ 2.8 million at December 31, 2019 .

Reflects impairment of $ 12.3 million on the corporate aircraft in the second quarter of 2020 to estimated recoverable value based upon a shortened holding period.

Deferred Tax Asset

Valuation Allowance —During the six months ended June 30, 2020 , there was a net increase in valuation allowance of $ 42.4 million , primarily as a result of uncertainties in future realization of tax benefit on net operating losses in the hospitality and healthcare segments, taking into consideration the impairment of assets in these segments.

At June 30, 2020 , total valuation allowance was $ 70.3 million .

Impact of CARES Act —The Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was enacted on March 27, 2020.

Among other things, the CARES Act temporarily removed the 80% limitation on the amount of taxable income that can be offset with a net operating loss (“NOL”) for 2019 and 2020, and allowed for a carryback of NOL generated in years 2018 through 2020 to the five taxable years preceding the taxable year of loss.

The Company estimates that it has approximately $ 26.5 million of NOL available for carryback under the CARES Act and recorded $ 3.3 million of income tax benefit during the quarter ended March 31, 2020 to reflect the carryback.

The Company also reclassified approximately $ 8.6 million of deferred tax asset to current tax receivable in anticipation of refunds expected to be received in the next twelve months as a result of the carryback.

The Company has approximately $ 28.1 million of NOL available for carryback under the CARES Act and recorded $ 3.3 million of income tax benefit to reflect the carryback.

The Company also reclassified $ 8.8 million of deferred tax asset to current tax receivable

as of June 30, 2020 , which reflects refunds received in July 2020 or expected to be received in the next twelve months as a result of the carryback.

Accrued and Other Liabilities

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(In thousands)

March 31, 2020

June 30, 2020

December 31, 2019

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Total accrued and other liabilities

Represents primarily prepaid rental income, prepaid interest from borrowers held in reserve accounts, deferred asset management fees from private funds, and deferred base management fees assumed in the DBH acquisition.

Deferred management fees totaling $ 22.1 million at March 31, 2020 and $ 18.3 million at December 31, 2019 will be recognized as fee income over a weighted average period of 1.5 years and 1.2 years , respectively.

Represents primarily prepaid rental income, prepaid interest from borrowers held in reserve accounts, and deferred management fees, primarily from digital investment vehicles.

Deferred management fees totaling $ 17.7 million at June 30, 2020 and $ 18.3 million at December 31, 2019 will be recognized as fee income over a weighted average period of 1.5 years and 1.2 years , respectively.

Deferred management fees recognized as income of $ 6.6 million and $ 0.4 million in the three months ended June 30, 2020 and 2019 , respectively, and $ 8.7 million and $ 0.7 million in the six months ended June 30, 2020 and 2019 , respectively, pertain to the deferred management fee balance at the beginning of each respective period.

The Company's debt consists of the following components, excluding debt associated with the industrial segment, which is included in liabilities related to assets held for sale (Note 8 ).

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Junior Subordinated Notes

March 31, 2020

June 30, 2020

Debt at amortized cost

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Deferred financing costs related to the corporate credit facility are included in other assets.

Debt principal totaling $ 474.1 million at March 31, 2020 and $ 515.6 million at December 31, 2019 relates to financing on assets held for sale.

Debt principal totaling $ 449.7 million at June 30, 2020 and $ 515.6 million at December 31, 2019 relates to financing on assets held for sale.

Debt associated with assets held for sale that is expected to be assumed by the buyer is included in liabilities related to assets held for sale (Note 8 ).

The following table summarizes certain information about debt carried at amortized cost.

For information as of March 31, 2020 , weighted average years remaining to maturity is based on initial maturity dates or extended maturity dates if the criteria to extend have been met as of the date of this filing, and the extension option is at the Company’s discretion.

The Company is providing the updated information even if extension criteria had been met as of March 31, 2020 given the post period defaults as described below.

For information as of June 30, 2020 , weighted average years remaining to maturity is based on initial maturity dates or extended maturity dates if the criteria to extend have been met as of the date of this filing, and the extension option is at the Company’s discretion.

The Company is providing the updated information even if extension criteria had been met as of June 30, 2020 given the post period defaults as described below.

For information as of December 31, 2019, weighted average years remaining to maturity is based on initial maturity dates or extended maturity dates if the criteria to extend have been met as of December 31, 2019 and the extension option is at the Company’s discretion.

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Weighted Average Years Remaining to Maturity (5)

March 31, 2020

June 30, 2020

Corporate credit facility

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Real Estate Debt

The 5.375 % exchangeable senior notes represent an obligation of a subsidiary of NRF as the issuer.

The exchangeable notes may be exchanged for cash, Colony Capital, Inc.'s common stock or a combination thereof, at the issuer's election, as described further below.

Represents an obligation of NRF as the junior subordinated debt was issued by certain subsidiaries of NRF, as described further below.

Accordingly, Colony Capital, Inc.

and its operating company, Colony Capital Operating Company, LLC, are not guarantors on the junior subordinated debt.

The fixed rate recourse debt is secured by the Company's aircraft.

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Calculated based upon initial maturity dates of the respective debt, or extended maturity dates if extension criteria are met and extension option is at the Company's discretion as described above.

Investment-Level Debt in Default

Non-recourse mortgage debt in the hospitality, healthcare and other real estate equity segments with aggregate outstanding principal of $ 3.54 billion through the date of this filing ( $ 234.1 million at March 31, 2020 and $ 235.6 million at December 31, 2019 in healthcare and other equity and debt segments) was either in payment default or was not in compliance with certain debt and/or lease covenants.

A combined $ 3.16 billion of the defaulted debt related to the hospitality segment and the THL Hotel Portfolio (Note 12) in the other equity and debt segment as a result of the economic fallout from COVID-19.

In May 2020, the Company received a notice of acceleration with respect to $780.0 million of defaulted debt in the hospitality segment.

The Company is in active negotiations with the respective lenders to execute or extend forbearances, execute debt modifications, including extension of upcoming maturities in 2020, or seek

other accommodations.

The remaining $ 346.7 million of outstanding debt principal in the hospitality segment was not in default.

With respect to other defaulted debt, the Company is negotiating with its lenders and tenants to restructure the debt and/or leases, as applicable.

There can be no assurance that the Company will be successful in any of the negotiations with its lenders or tenants.

Non-Recourse Investment-Level Debt in Default

The Company has investment-level debt, which is non-recourse to the Company, with aggregate outstanding principal of $ 7.5 billion in the hospitality, healthcare and other equity and debt segments at June 30, 2020 .

Of this amount, $ 3.28 billion , based on outstanding balance at June 30, 2020 , was in default as of the date of this filing.

The majority of the defaulted debt was in the hospitality segment and the THL Hotel Portfolio in the other equity and debt segment for a combined total of $ 3.03 billion as a result of the economic fallout from COVID-19.

The Company received notices of acceleration with respect to defaulted debt of $ 780.0 million in the hospitality segment and $ 842.7 million related to the THL Hotel Portfolio.

The $ 780.0 million accelerated debt in the hospitality segment is secured by a portfolio of 48 hotels, and receivers have been or are expected to be appointed for all of these assets.

In connection with the remaining defaulted hotel debt, the Company continues to be in active negotiations with the respective lenders or servicers to execute or extend forbearances, execute debt modifications, including extension of upcoming maturities in 2020, or make other arrangements, as appropriate.

The remaining $ 482.4 million of debt in the hospitality segment was not in default.

Other defaulted debt is composed of $ 203.0 million in the healthcare segment and $ 51.7 million in the other equity and debt segment based on outstanding balance at June 30, 2020 ( $ 235.6 million in total across both segments at December 31, 2019 ), the majority of which was in default prior to the COVID-19 crisis.

In August 2020, the Company indirectly conveyed the equity of certain of its healthcare borrower subsidiaries, comprising 36 assets in its senior housing operating portfolio and $ 157.9 million of the aforementioned defaulted healthcare debt (based on outstanding balance at June 30, 2020 ), to an affiliate of the lender, which released the Company from all rights and obligations with respect to those healthcare assets and corresponding debt.

In connection with the remaining defaulted debt in the healthcare segment of $ 45.1 million and also in the other equity and debt segment, the Company is negotiating with its lenders to restructure the debt or make other arrangements, as appropriate.

There can be no assurance that the Company will be successful in any of the negotiations with its lenders or servicers with respect to the aforementioned non-recourse investment level debt that is in default.

Corporate Credit Facility

On January 10, 2017, the OP entered into an amended and restated credit agreement (the “Credit Agreement”) with several lenders and JPMorgan Chase Bank, N.A.

as administrative agent, and Bank of America, N.A.

as syndication agent, as amended from time to time (as amended, the “Credit Agreement”).

The Credit Agreement provides a secured revolving credit facility in the maximum principal amount of $ 750 million , with an option to increase up to $ 1.25 billion , subject to agreement by existing or substitute lenders and satisfaction of customary closing conditions.

The credit facility is scheduled to mature in January 2021 , with two 6 -month extension options, each subject to a fee of 0.10 % of the commitment amount upon exercise.

The maximum amount available at any time is limited by a borrowing base of certain investment assets, with the valuation of such investment assets generally determined according to a percentage of adjusted net book value or a multiple of base management fee EBITDA (as defined in the Credit Agreement).

As of March 31, 2020 , the Company had drawn $ 600 million of the approximately $ 700 million available under the credit facility.

Advances under the Credit Agreement accrue interest at a per annum rate equal to the sum of one-month LIBOR plus 2.25 % or a base rate determined according to a prime rate or federal funds rate plus a margin of 1.25 % .

The Company pays a commitment fee of 0.25 % or 0.35 % per annum of the unused amount ( 0.25 % at March 31, 2020 ), depending upon the amount of facility utilization.

Some of the Company’s subsidiaries guarantee the obligations of the Company under the Credit Agreement.

On June 29, 2020, the OP entered into the Fourth Amendment (the “Amendment”) to the Second Amended and Restated Credit Agreement, dated as of January 10, 2017 (as amended, supplemented or otherwise modified from time to time prior to the date hereof, the “Credit Agreement”), with JPMorgan Chase Bank, N.A., as administrative agent, and the several lenders from time to time party thereto.

The Amendment modified the aggregate amount of revolving commitments available under the Credit Agreement to $ 500 million (previously $ 750 million ).

The credit facility is scheduled to mature in January 2021 , with two 6 -month extension options (representing no change to the overall term due to the Amendment), each subject to a fee of 0.10 % of the commitment amount upon exercise.

In the event that the Company exercises its first extension option, the aggregate amount of revolving commitments available under the Credit Agreement will be reduced to $ 400 million on March 31, 2021.

Pursuant to the Amendment, advances under the Credit Agreement accrue interest at a per annum rate equal to, at the Company’s election, either LIBOR plus a margin of 2.50 % (previously 2.25 % ), or a base rate determined according to a prime rate or federal funds rate plus a margin of 1.50 % (previously 1.25 % ).

In the event that the OP exercises the first extension option, the foregoing rates will be permanently increased by 0.25 % for periods from and after January 11, 2021.

Unused amounts under the credit facility accrue a per annum commitment fee of 0.35 % .

The maximum amount available to be drawn at any time under the credit facility is limited by a borrowing base of certain investment assets, with the valuation of such investment assets generally determined according to a percentage of adjusted net book value or a multiple of base management fee EBITDA (as defined in the Credit Agreement).

In connection with the Amendment, the Company paid down $ 200 million of the $ 600 million previously drawn and outstanding on the credit facility and in July 2020, fully repaid all outstanding amounts.

As of the date of this filing, the full $ 500 million is available to be drawn under the facility.

The Amendment provided for modifications to the financial covenants and the borrowing base including, among other things:

exclusion of certain non-recourse debt and related assets in the calculation of certain financial ratios (such assets, the “Specified Excluded Assets”), exclusion of EBITDA and fixed charges of Specified Excluded Assets in the calculation of the OP’s fixed charge coverage ratio, which must exceed 1.3 to 1.0 , reduction of the minimum tangible net worth covenant from $ 4.55 billion to $ 1.74 billion , which must exclude the net worth of Specified Excluded Assets, and modification to the borrowing base to increase capacity for digital investment management and include digital infrastructure investments.

As of June 30, 2020 and through the date of this filing, the Company was in compliance with all of the financial covenants.

The Credit Agreement also contains various additional affirmative and negative covenants, including financial covenants that require the Company to maintain minimum tangible net worth, liquidity levels and financial ratios, as defined in the Credit Agreement.

Further, as a result of modifications to the permitted investments and restricted payment provisions in the Amendment, during the term of the Credit Agreement, the Company is prohibited from, among other things, (i) making any investments other than (A) investments in digital infrastructure assets and (B) pre-existing obligations and protective investments in existing assets to preserve, administer or otherwise realize on such investment, (ii) repurchasing capital stock of the Company and (iii) paying dividends, other than for (A) paying dividends to maintain the Company’s status as a REIT, (B) reducing the payment of income taxes and (C) paying dividends on the Company’s preferred equity.

Certain of the Company’s subsidiaries guarantee the obligations of the Company under the Credit Agreement.

As security for the advances under the Credit Agreement, the Company and some of its affiliates pledged their equity interests in certain subsidiaries through which the Company directly or indirectly owns substantially all of its assets.

The Credit Agreement contains various affirmative and negative covenants, including financial covenants that require the Company to maintain minimum tangible net worth, liquidity levels and financial ratios, as defined in the Credit Agreement.

As of March 31, 2020 and through the date of this filing, the Company was in compliance with all of the financial covenants.

The Credit Agreement also includes customary events of default, in certain cases subject to reasonable and customary periods to cure.

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Convertible and Exchangeable Senior Notes

Convertible senior notes and exchangeable senior notes are senior unsecured obligations of the Company and are guaranteed by the Company on a senior unsecured basis.

Convertible and exchangeable senior notes issued by the Company and outstanding are as follows:

The convertible senior notes and the 5.375 % exchangeable senior notes were issued by Colony Capital, Inc.

and by a subsidiary of NRF, respectively, representing senior unsecured obligations that are guaranteed on a senior unsecured basis by their respective issuers.

Convertible and exchangeable senior notes issued by the Company and outstanding as of June 30, 2020 are as follows:

Issuance Date

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Outstanding Principal

March 31, 2020

June 30, 2020

December 31, 2019

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The Company may redeem the convertible notes for cash at its option at any time on or after their respective redemption dates if the last reported sale price of the Company's common stock has been at least 130 % of the conversion price of the convertible notes then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption.

The exchangeable notes may be exchanged for cash, common stock or a combination thereof, at the Company's election, upon the occurrence of specified events, and at any time on or after their respective redemption dates, and on the second business day immediately preceding their maturity dates.

The holders of the exchangeable notes have the right, at their option, to require the Company to repurchase the exchangeable notes for cash on certain specific dates in accordance with the terms of their respective governing documents.

These are primarily investment level financing, which are generally subject to customary non-recourse carve-outs, secured by underlying commercial real estate and mortgage loans receivable.

The exchangeable notes may be exchanged for cash, Colony Capital, Inc's common stock or a combination thereof, at the issuer's election, upon the occurrence of specified events, and at any time on or after their respective redemption dates, and on the second business day immediately preceding their maturity dates.

The holders of the exchangeable notes have the right, at their option, to require the issuer to repurchase the exchangeable notes for cash on certain specific dates in accordance with the terms of their respective governing documents.

Issuance of Exchangeable Notes and Repurchase of Convertible Notes

In July 2020, the OP issued $ 300.0 million of exchangeable notes with maturity in July 2025, bearing interest at 5.75 % per annum, and exchangeable into shares of the Company's class A common stock at an initial exchange rate

equal to 434.7826 shares of common stock per $1,000 principal amount of notes, equivalent to an exchange price of approximately $ 2.30 per share.

The initial exchange rate is subject to adjustment upon the occurrence of certain events, but will not be adjusted for any accrued and unpaid interest.

Net proceeds from this issuance, after deducting underwriting discounts, commissions and offering expenses, were $ 291.0 million , which were applied to partially repurchase $ 289.7 million of the outstanding principal of the 3.875 % convertible notes for total purchase price of $ 289.2 million , including accrued and unpaid interest.

These are primarily investment level financing, which are non-recourse to the Company, and secured by underlying commercial real estate and mortgage loans receivable.

Junior Subordinated Debt

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The sole assets of the Trusts consist of a like amount of junior subordinated notes issued by NRF at the time of the offerings (the "Junior Notes").

As Colony Capital, Inc.

and its operating company, Colony Capital Operating Company, LLC, are not issuers of the junior subordinated debt, neither are obligors nor guarantors on the junior subordinated debt and TruPS.

The Issuer may redeem the Junior Notes at par, in whole or in part, for cash, after five years .

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Fair value of derivative assets and derivative liabilities are as follows:

March 31, 2020

June 30, 2020

December 31, 2019

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Certain counterparties to the derivative instruments require the Company to deposit cash or other eligible collateral.

The Company had cash collateral on deposit, included in other assets, of $ 16.6 million and $ 10.0 million at March 31, 2020 and December 31, 2019 , respectively, all of which related to the forward contracts and performance swaps discussed below.

The Company had cash collateral on deposit, included in other assets, of $ 12.8 million and $ 10.0 million at June 30, 2020 and December 31, 2019 , respectively, all of which related to the forward contracts and performance swaps discussed below.

Foreign Exchange Contracts

The following table summarizes the aggregate notional amounts of designated and non-designated foreign exchange contracts in place at March 31, 2020 , along with certain key terms:

The following table summarizes the aggregate notional amounts and certain key terms of non-designated foreign exchange contracts in place at June 30, 2020 :

Hedged Currency

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Range of Expiration Dates

Non-Designated

Min $0.95 / Max $1.00

May 2020 to November 2020

Min $1.08 / Max $1.38

April 2020 to February 2024

November 2020 to May 2022

Min $1.05 / Max $1.10

May 2020 to December 2020

November 2020 to May 2021

The Company’s foreign denominated net investments in subsidiaries or joint ventures were € 491.8 million and £ 267.6 million , or a total of $ 0.9 billion at June 30, 2020 , and € 517.9 million and £ 275.5 million , or a total of $ 0.9 billion at December 31, 2019 .

The Company enters into foreign exchange contracts to hedge the foreign currency exposure of certain investments in foreign subsidiaries or equity method joint ventures, with notional amounts and termination dates based upon the anticipated return of capital from the investments.

Prior to the second quarter of 2020, the Company utilized primarily (i) forward contracts whereby the Company agreed to sell an amount of foreign currency for an agreed upon amount of U.S.

dollars and (ii) costless collars consisting of caps and floors, which consisted of a combination of currency options with single date expirations.

Both types of hedging strategies were designated as net investment hedges.

During the second quarter of 2020, the Company unwound all of its existing foreign currency hedges and entered into foreign currency put options with upfront premiums whereby the Company gains protection against foreign currency weakening below a specified level.

The put options are set to expire in increments according to the Company's expected monetization timeframe of the hedged investments, but the notional amounts are not identifiable to specific investments.

Accordingly, the put options are not designated for hedge accounting purposes.

Designated Net Investment Hedges

The Company’s foreign denominated net investments in subsidiaries or joint ventures were € 497.0 million and £ 272.8 million , or a total of $ 0.9 billion at March 31, 2020 , and € 517.9 million and £ 275.5 million , or a total of $ 0.9 billion at December 31, 2019 .

The Company entered into foreign exchange contracts to hedge the foreign currency exposure of certain investments in foreign subsidiaries or equity method joint ventures, designated as net investment hedges, as follows:

forward contracts whereby the Company agrees to sell an amount of foreign currency for an agreed upon amount of U.S.

foreign exchange collars (caps and floors) without upfront premium costs, which consist of a combination of currency options with single date expirations, whereby the Company gains protection against foreign currency weakening below a specified level and pays for that protection by giving up gains from foreign currency appreciation above a specified level.

Foreign exchange contracts are used to protect the Company’s foreign denominated investments from adverse foreign currency fluctuations, with notional amounts and termination dates based upon the anticipated return of capital from the investments.

Release of AOCI related to net investment hedges occurs upon losing a controlling financial interest in an investment or obtaining control over an equity method investment.

Upon sale, complete or substantially complete liquidation of an investment in a foreign subsidiary, or partial sale of an equity method investment, the gain or loss on the related net investment hedge is reclassified from AOCI to other gain (loss) as summarized below.

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

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At the end of each quarter, the Company reassesses the effectiveness of its net investment hedges and as appropriate, dedesignates the portion of the derivative notional amount that is in excess of the beginning balance of its net investments.

Any unrealized gain or loss on the dedesignated portion of net investment hedges is recorded in other gain (loss).

Three Months Ended March 31,

Any unrealized gain or loss on the dedesignated portion of net investment hedges and on non-designated foreign exchange contracts are recorded in other gain (loss).

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

Non-designated net investment hedges:

Dedesignated net investment hedges:

Unrealized gain (loss) transferred from AOCI to earnings

Non-designated foreign exchange contracts:

Unrealized gain (loss) in earnings

Interest Rate Contracts

The Company uses various interest rate contracts, some of which may be designated as cash flows hedges, to limit its exposure to changes in interest rates on various floating rate debt obligations.

The following table summarizes the interest rate contracts held by the Company at March 31, 2020 .

The following table summarizes the interest rate contracts held by the Company at June 30, 2020 .

Notional Amount

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1-Month LIBOR

June 2020 to November 2021

July 2020 to November 2021

Interest rate caps

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The following table summarizes amounts recorded in the income statements related to interest rate contracts.

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

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Represents amortization of the cost of designated interest rate caps to interest expense based upon expected hedged interest payments on variable rate debt.

For the three months ended March 31, 2019 , amount includes unrealized loss of $ 59.2 million on a $ 2.0 billion notional forward starting swap assumed through the Merger, which was settled at the end of 2019.

For the three and six months ended June 30, 2019 , amounts include unrealized loss of $ 86.9 million and $ 146.1 million , respectively, on a $ 2.0 billion notional forward starting swap assumed through the Merger, which was settled at the end of 2019.

Forward Contracts and Performance Swaps

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In January 2020, the Company entered into another series of forward and swap contracts with similar terms to the previous transaction.

The forward contracts have a combined notional of $ 119 million and expire in January 2021, to be settled in cash or through delivery of the mutual fund shares at the election of the Company.

The forward contracts have a combined notional amount of $ 119 million and expire in January 2021, to be settled in cash or through delivery of the mutual fund shares at the election of the Company.

The new forward and swap transactions required an initial combined collateral deposit of $ 14.3 million , subject to daily net settlements in net fair value changes in excess of a predetermined threshold.

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All realized and unrealized gains (losses) are recorded in other gain (loss) as follows:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

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Cash Collateral Pledged

March 31, 2020

June 30, 2020

Derivative Assets

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Derivative Liabilities

Foreign exchange contracts

Forward contracts

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(In thousands)

March 31, 2020

June 30, 2020

Marketable equity securities

Debt securities available for sale — N-Star CDO bonds

AFS debt securities

CMBS of consolidated fund

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Equity method investments

Other liabilities — derivative liabilities

Other liabilities—contingent consideration for THL Hotel Portfolio

Other liabilities—settlement liability

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Marketable equity securities

Debt securities available for sale—N-Star CDO bonds

AFS debt securities

CMBS of consolidated fund

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In connection with the consensual foreclosure in July 2017 of a portfolio of limited service hotels ("THL Hotel Portfolio"), contingent consideration is payable to the former preferred equity holder of the borrower in an amount up to $ 13.0 million based upon the performance of the THL Hotel Portfolio, subject to meeting certain repayment and return thresholds to the Company and certain investment vehicles managed by the Company.

Fair value of the contingent consideration is measured based upon the probability of the former preferred equity holder receiving such payment, with

cash flows discounted at 12 % , classified as Level 3 fair value.

The contingent consideration liability decreased $ 2.7 million to $ 6.6 million for the three months ended March 31, 2020 , and increased $ 0.4 million to $ 9.3 million for the year ended December 31, 2019 .

Changes in fair value of the contingent consideration liability are recorded in other gain (loss) on the consolidated statements of operations.

The contingent consideration is measured based upon the probability of the former preferred equity holder receiving such payment, classified as Level 3 fair value.

At June 30, 2020 , the contingent consideration liability was determined to have zero value as it was no longer probable that such payment would be made following the adverse effect of COVID-19 on the operations and performance

of the THL Hotel Portfolio.

The liability, valued at $ 9.3 million at December 31, 2019 , was written off in the second quarter of 2020 as a gain, recorded in other gain (loss) on the consolidated statements of operations.

Other Liabilities — Settlement Liability

As discussed in Note 1 , in connection with the cooperation agreement entered into with Blackwells in March 2020, the Company and Blackwells contemporaneously entered into a joint venture arrangement for the purpose of acquiring, holding and disposing of the Company's class A common stock.

Pursuant to the arrangement, the Company contributed its class A common stock, valued at $ 14.7 million by the venture, and Blackwells contributed $ 1.47 million of cash that was then distributed to the Company, resulting in a net capital contribution of $ 13.23 million held by the Company in the venture.

All of the class A common stock held in the venture had been repurchased by the Company in March 2020 (Note 14 ).

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Distributions to be made through the joint venture arrangement effectively represent a settlement of the proxy contest with Blackwells.

The settlement liability is a fair value measurement of the disproportionate allocation of future profits distribution to Blackwells pursuant to the joint venture arrangement.

The settlement liability is a fair value measure of the disproportionate allocation of future profits distribution to Blackwells pursuant to the joint venture arrangement.

Such profits will be derived from dividend payments and any appreciation in value of the Company's class A common stock, allocated between the Company and Blackwells based upon specified return hurdles.

The profits distribution is payable in cash, the Company's class A common stock or a combination of both at the Company's election.

The settlement liability is a Level 3 fair value using a Monte Carlo simulation under a risk-neutral premise, assuming that the final distribution occurs at the end of the third year in March 2023, and is remeasured at each reporting period.

At March 31, 2020 , the settlement liability was valued at $ 4.9 million , applying the following assumptions:

The settlement liability, classified as a Level 3 fair value, is measured using a Monte Carlo simulation under a risk-neutral premise, assuming that the final distribution occurs at the end of the third year in March 2023, and is remeasured at each reporting period.

At June 30, 2020 , the settlement liability was valued at $ 9.1 million , applying the following assumptions:

(a) expected volatility of the Company's class A common stock of 72.6 % based upon a combination of historical and implied volatility of the Company's class A common stock;

(b) average historical dividend yield on the Company's class A common stock of 9.6 % ;

and (c) risk free rate of 1.97 % based upon a compounded zero-coupon U.S.

(b) zero expected dividend yield given the Company's suspension of its common stock dividend for the second quarter of 2020;

and (c) risk free rate of 0.17 % per annum based upon a compounded zero-coupon U.S.

Treasury yield.

The $ 1.0 million increase in liability from inception was recorded as other loss on the consolidated statement of operations.

The settlement liability increased $ 5.3 million from inception to June 30, 2020 , recorded as other loss on the consolidated statement of operations.

Fair Value Option

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Weighted Average (1)

March 31, 2020

N-Star CDO bonds

June 30, 2020

AFS debt securities

Discounted cash flows

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December 31, 2019

N-Star CDO bonds

AFS debt securities

Discounted cash flows

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(In thousands)

AFS Debt Securities

Loans Receivable

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Other comprehensive income

Fair value at March 31, 2019

Net unrealized gains (losses) in earnings on instruments held at March 31, 2019

Fair value at June 30, 2019

Net unrealized gains (losses) in earnings on instruments held at June 30, 2019

Fair value at December 31, 2019

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Other comprehensive income (loss) (1)

Fair value at March 31, 2020

Net unrealized gains (losses) on instruments held at March 31, 2020:

Fair value at June 30, 2020

Net unrealized gains (losses) on instruments held at June 30, 2020:

In other comprehensive income (loss)

Amounts recorded in OCI for loans receivable and equity investments represent foreign currency translation differences on the Company's foreign subsidiaries that hold the respective foreign currency denominated investments.

Amounts recorded in OCI for loans receivable and equity method investments represent foreign currency translation differences on the Company's foreign subsidiaries that hold the respective foreign currency denominated investments.

Investments Carried at Fair Value Using Net Asset Value

Investments in a Company-sponsored private fund and a non-traded REIT, and limited partnership interest in a third party private fund are valued using NAV of the respective vehicles.

March 31, 2020

June 30, 2020

December 31, 2019

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(In thousands)

March 31, 2020

June 30, 2020

Debt at amortized cost

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As a reaction to the COVID-19 crisis, the credit market has generally stalled refinancing for most product types except at the lowest leverage levels.

While it is difficult to gauge market rates across the Company's portfolio for specific assets, fair value of debt associated with hospitality and healthcare assets presented as of March 31, 2020 incorporate a premium to nominal contractual rates to reflect the increased risk and lack of available financing in the current environment.

Other —The carrying values of cash, due from and to affiliates, other receivables and other payables generally approximate fair value due to their short term nature, and credit risk, if any, are negligible.

While it is difficult to gauge market rates across the Company's portfolio for specific assets, fair value of debt associated with hospitality and healthcare assets presented as of June 30, 2020 incorporate a premium to nominal contractual rates to reflect the increased risk and lack of available financing in the current environment.

Other —Carrying values of cash, due from and to affiliates, other receivables and other payables generally approximate fair value due to their short term nature, and credit risk, if any, are negligible.

Variable Interest Entities

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As a result, the Company is considered to be acting in the capacity of a principal of the sponsored private fund and is therefore the primary beneficiary of the fund.

The Company’s exposure is limited to the value of its outstanding investment in the consolidated private fund of $ 15.7 million at March 31, 2020 and $ 18.5 million at December 31, 2019 .

The Company’s exposure is limited to the value of its outstanding investment in the consolidated private fund of $ 17.4 million at June 30, 2020 and $ 18.5 million at December 31, 2019 .

The Company, as general partner, is not obligated to provide any financial support to the consolidated private fund.

At March 31, 2020 and December 31, 2019 , the consolidated private fund had total assets of $ 19.5 million and $ 24.7 million , respectively, and total liabilities of $ 0.6 million and $ 0.1 million , respectively.

At June 30, 2020 and December 31, 2019 , the consolidated private fund had total assets of $ 47.0 million and $ 24.7 million , respectively, and total liabilities of $ 0.6 million and $ 0.1 million , respectively.

Assets and liabilities were made up primarily of marketable equity securities and unsettled trades.

4 unchanged sentences

The Company accounts for its equity interests in unconsolidated sponsored private funds under the equity method.

The Company's maximum exposure to loss is limited to the carrying value of its investment in the unconsolidated sponsored private funds, totaling $ 178.5 million at March 31, 2020 and $ 137.0 million at December 31, 2019 , included within equity and debt investments and where applicable, assets held for sale, on the consolidated balance sheets.

The Company's maximum exposure to loss is limited to the carrying value of its investment in the unconsolidated sponsored private funds, totaling $ 179.7 million at June 30, 2020 and $ 137.0 million at December 31, 2019 , included within equity and debt investments and additionally at December 31, 2019 , within assets held for sale, on the consolidated balance sheets.

Securitizations

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The Company concluded that it does not have the power to direct the activities that most significantly impact the economic performance of these CDOs, which include but are not limited to, the ability to sell distressed collateral, and therefore the Company is not the primary beneficiary of such CDOs and does not consolidate these CDOs.

The Company’s exposure to loss is limited to its investment in these unconsolidated CDOs, comprising CDO bonds, which aggregate to $ 44.1 million at March 31, 2020 and $ 46.0 million at December 31, 2019 .

The Company’s exposure to loss is limited to its investment in these unconsolidated CDOs, comprising CDO bonds, which aggregate to $ 24.7 million at June 30, 2020 and $ 46.0 million at December 31, 2019 .

The Company, through the Merger, acquired the Trusts, wholly-owned subsidiaries of NRF formed as statutory trusts.

1 unchanged sentence

The Company owns all of the common stock of the Trusts but does not consolidate the Trusts as the holders of the preferred securities issued by the Trusts are the primary beneficiaries of the Trusts.

The Company accounts for its interest in the Trusts under the equity method and its maximum exposure to loss is limited to its investment carrying value of $ 3.7 million at March 31, 2020 and December 31, 2019 , recorded in investments in unconsolidated ventures on the consolidated balance sheet.

The Company accounts for its interest in the Trusts under the equity method and its maximum exposure to loss is limited to its investment carrying value of $ 3.7 million at June 30, 2020 and December 31, 2019 , recorded in investments in unconsolidated ventures on the consolidated balance sheet.

The junior subordinated notes are recorded as debt on the consolidated balance sheet.

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Shares canceled for tax withholding on vested stock awards

Shares outstanding at March 31, 2019

Shares outstanding at June 30, 2019

Shares outstanding at December 31, 2019

Shares issued upon redemption of OP Units

Repurchase of common stock, net (1)

1 unchanged sentence

Shares canceled for tax withholding on vested stock awards

Shares outstanding at March 31, 2020

Shares outstanding at June 30, 2020

Net of reissuance of 964,160 shares of class A common stock that had been repurchased by the Company during March 2020.

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In the event of a liquidation or dissolution of the Company, preferred stockholders have priority over common stockholders for payment of dividends and distribution of net assets.

The table below summarizes the preferred stock issued and outstanding at March 31, 2020 :

The table below summarizes the preferred stock issued and outstanding at June 30, 2020 :

Dividend Rate Per Annum

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Currently redeemable

April 13, 2020

Currently redeemable

September 2017

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In addition, certain changes to the terms of any series of preferred stock cannot be made without the affirmative vote of holders of at least two-thirds of the outstanding shares of each such series of preferred stock voting separately as a class for each series of preferred stock.

In May 2020, the Company's board of directors elected to defer the declaration of a dividend on its preferred stock until June 30, 2020, subject to its assessment of the effects of COVID-19 .

In June 2020, the Board declared dividends on all series of preferred stock for the second quarter of 2020, which was paid in July 2020.

In August 2020, the Board declared dividends on all series of preferred stock for the third quarter of 2020.

Redemption of Preferred Stock

The Company issued notices of redemption for remaining outstanding shares of Series B preferred stock and all outstanding shares of Series E preferred stock in December 2019, with redemption settled in January 2020.

The Company redeemed the remaining outstanding shares of Series B preferred stock and all outstanding shares of Series E preferred stock in December 2019, with settlement in January 2020, for $ 402.9 million , applying proceeds from the sale of its light industrial business.

All preferred stock redemptions were at $ 25.00 per share liquidation preference plus accrued and unpaid dividends prorated to their respective redemption dates.

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This gives the holders of class B common stock a right to vote that reflects the aggregate outstanding non-voting economic interest in the Company (in the form of OP Units) attributable to class B common stock holders and therefore, does not provide any disproportionate voting rights.

Class B common stock was issued as consideration in the Company's acquisition in April 2015 of the investment management business and operations of its former manager, which was previously controlled by the Company's Chief Executive Officer.

Each share of class B common stock shall convert automatically into one share of class A common stock if the Chief Executive Officer or his beneficiaries directly or indirectly transfer beneficial ownership of class B common stock or OP Units held by them, other than to certain qualified transferees, which generally includes affiliates and employees.

Each share of class B common stock shall convert automatically into one share of class A common stock if the Executive Chairman or his beneficiaries directly or indirectly transfer beneficial ownership of class B common stock or OP Units held by them, other than to certain qualified transferees, which generally includes affiliates and employees.

In addition, each holder of class B common stock has the right, at the holder’s option, to convert all or a portion of such holder’s class B common stock into an equal number of shares of class A common stock.

The Company is suspending the dividend on its class A common stock for the second quarter of 2020 as the board of directors and management believe it is prudent to conserve cash during the current period of uncertainty.

The Company suspended dividends on its class A common stock beginning with the second quarter of 2020.

Under the terms of the Company's amended credit facility, the Company is restricted from paying common dividends other than

to maintain the Company’s status as a REIT or to reduce income tax payments.

The Company will continue to monitor its financial performance and liquidity position, and as economic conditions improve, the Company will reevaluate its dividend policy in consultation with its revolver lending group.

Common Stock Repurchases

During the three months ended March 31, 2020 and for the year ended December 31, 2019 , the Company repurchased its class A common stock totaling 12,733,204 shares at a cost of $ 24.6 million and 652,311 shares at a cost of $ 3.2 million , respectively, or a weighted average price of $ 1.93 and $ 4.84 per share, respectively.

All share repurchases were made pursuant to a $ 300 million share repurchase program authorized by the Company's board of directors in May 2018, and extended in May 2019 for an additional one year term.

During the six months ended June 30, 2020 and for the year ended December 31, 2019 , the Company repurchased its class A common stock totaling 12,733,204 shares at a cost of $ 24.6 million and 652,311 shares at a cost of $ 3.2 million , respectively, or a weighted average price of $ 1.93 and $ 4.84 per share, respectively.

All share repurchases were made pursuant to a $ 300 million share repurchase program which expired in May 2020.

The Company is restricted from repurchasing additional common shares, subject to certain exceptions, under the terms of the amended credit facility.

Dividend Reinvestment and Direct Stock Purchase Plan

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The DRIP Plan involves the acquisition of the Company's class A common stock either in the open market, directly from the Company as newly issued common stock, or in privately negotiated transactions with third parties.

There were no shares of class A common stock acquired under the DRIP Plan in the form of new issuances during the three months ended March 31, 2020 and 2019 .

There were no shares of class A common stock acquired under the DRIP Plan in the form of new issuances in 2020 and 2019 .

Accumulated Other Comprehensive Income (Loss)

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Company's Share in AOCI of Equity Method Investments

Unrealized Gain (Loss) on Securities

Unrealized Gain (Loss) on AFS Debt Securities

Unrealized Gain (Loss) on Cash Flow Hedges

4 unchanged sentences

Amounts reclassified from AOCI

AOCI at March 31, 2019

AOCI at June 30, 2019

AOCI at December 31, 2019

1 unchanged sentence

Amounts reclassified from AOCI

AOCI at March 31, 2020

AOCI at June 30, 2020

Changes in Components of AOCI—Noncontrolling Interests in Investment Entities

4 unchanged sentences

AOCI at December 31, 2018

Other comprehensive loss before reclassifications

Other comprehensive income (loss) before reclassifications

Amounts reclassified from AOCI

AOCI at March 31, 2019

AOCI at June 30, 2019

AOCI at December 31, 2019

1 unchanged sentence

Amounts reclassified from AOCI

AOCI at March 31, 2020

AOCI at June 30, 2020

Reclassifications out of AOCI—Stockholders

1 unchanged sentence

(In thousands)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Affected Line Item in the

1 unchanged sentence

Component of AOCI reclassified into earnings

Relief of basis of AFS debt securities

Other gain (loss), net

Other-than-temporary impairment

Other gain (loss), net

Release of cumulative translation adjustments

Release of foreign currency cumulative translation adjustments

Other gain (loss), net

Unrealized gain on dedesignated net investment hedges

Unrealized gain (loss) on dedesignated net investment hedges

Other gain (loss), net

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The following table presents the activity in redeemable noncontrolling interests in a consolidated open-end fund sponsored by the Company.

Three Months Ended March 31,

Six Months Ended June 30,

(In thousands)

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Issuance of OP Units —The Company issued 21,478,515 OP Units in July 2019 and 612,072 OP Units in December 2019 as part of the consideration for the acquisitions of DBH, valued at $ 111.9 million , and DataBank, valued at $ 3.0 million , based upon the closing price of the Company's class A common stock on July 24, 2019 and December 20, 2019, respectively (Note 3 ).

There were no OP Units issued in the three months ended March 31, 2020 .

Redemption of OP Units —For the year ended December 31, 2019 , the Company redeemed 187,995 OP Units, with the issuance of an equal number of shares of class A common stock on a one -for-one basis.

There were no OP Units redeemed in the three months ended March 31, 2020 .

There were no OP Units issued in the six months ended June 30, 2020 .

Redemption of OP Units —The Company redeemed 184,395 OP Units during the six months ended June 30, 2020 and 187,995 OP Units during the year ended December 31, 2019 , with the issuance of an equal number of shares of class A common stock on a one -for-one basis.

Discontinued Operations

For the three months ended March 31, 2020, discontinued operations represent the results of operations of the bulk industrial portfolio.

For the three months ended March 31, 2019, discontinued operations also included results of the light

industrial portfolio and management platform in 2019 prior to their sale in December 2019.

Discontinued operations in 2019 included (i) direct compensation and administrative expenses of the industrial business, and (ii) associated fee income, equity method earnings from the Company's general partner interest in the industrial open-end fund, predominantly carried interest, and compensation related to carried interest sharing, which were previously reported under the investment management segment, prior to the sale of the light industrial business, including the interests of all limited partners in the industrial closed-end and open-end funds.

Income from discontinued operations is presented below.

Three Months Ended March 31,

In 2020, discontinued operations represent (i) results of operations of the bulk industrial portfolio;

and (ii) in the second quarter of 2020, final adjustments to proceeds from the December 2019 sale of the light industrial portfolio upon release of escrowed funds, which resulted in a net loss of $7.4 million, including a corresponding effect on carried interest and related compensation.

In 2019, discontinued operations encompassed predominantly results of the light industrial portfolio and the related management platform prior to its sale in December 2019 , and included (i) direct compensation and administrative expenses of the industrial business, and (ii) associated fee income, equity method earnings from general partner interest in the industrial open-end fund, predominantly carried interest, and compensation related to carried interest sharing, all of which were previously reported under the investment management segment.

Noncontrolling interests in investment entities in 2019 also included the interests of all limited partners in the industrial closed-end and open-end funds.

Income (loss) from discontinued operations is presented below.

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

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Other income (loss)

Gain on sale of real estate

Other gain, net

Equity method earnings (losses), including carried interest

Income from discontinued operations before income taxes

Income tax benefit

Income from discontinued operations

Income from discontinued operations attributable to:

Gain (loss) on sale of real estate

Other gain (loss), net

Equity method losses, including carried interest

Income (loss) from discontinued operations before income taxes

Income tax expense

Income (loss) from discontinued operations

Income (loss) from discontinued operations attributable to:

Noncontrolling interests in investment entities

Noncontrolling interests in Operating Company

Income from discontinued operations attributable to Colony Capital, Inc.

Includes equity-based compensation of $ 0.7 million for the three months ended March 31, 2019 .

Income (loss) from discontinued operations attributable to Colony Capital, Inc.

Included equity-based compensation of $ 0.7 million and $ 1.4 million for the three and six months ended June 30, 2019 , respectively.

Earnings per Share

The following table provides the basic and diluted earnings per common share computations:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands, except per share data)

1 unchanged sentence

Loss from continuing operations

(Income) loss from continuing operations attributable to noncontrolling interests

Loss from continuing operations attributable to noncontrolling interests

Loss from continuing operations attributable to Colony Capital, Inc.

Income from discontinued operations attributable to Colony Capital, Inc.

Income (loss) from discontinued operations attributable to Colony Capital, Inc.

Net loss attributable to Colony Capital, Inc.

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Net loss allocated to common stockholders—basic

Interest expense attributable to convertible notes (1)

Interest expense attributable to convertible and exchangeable notes (1)

Net loss allocated to common stockholders—diluted

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Net loss attributable to common stockholders per diluted common share

For both the three months ended March 31, 2020 and 2019 , excluded from the calculation of diluted earnings per share is the effect of adding back $ 7.1 million of interest expense and 38,112,100 weighted average dilutive common share equivalents for the assumed conversion or exchange of the Company's outstanding convertible and exchangeable notes, as their inclusion would be antidilutive.

The calculation of diluted earnings per share excludes the effect of weighted average unvested non-participating restricted shares of 137,900 for the three months ended March 31, 2019 as the effect would be antidilutive.

No unvested non-participating restricted shares were outstanding during the three months ended March 31, 2020 .

The calculation of diluted earnings per share also excludes the effect of weighted average shares of class A common stock that are contingently issuable in relation to PSUs (Note 19 ) of 1,520,659 and 3,814,300 for the three months ended March 31, 2020 and 2019 , respectively.

For both the three months ended June 30, 2020 and 2019 , excluded from the calculation of diluted earnings per share is the effect of adding back $ 7.1 million of interest expense and 38,112,100 weighted average dilutive common share equivalents for the assumed conversion or exchange of the Company's outstanding convertible and exchangeable notes, as their inclusion would be antidilutive.

For the six months ended June 30, 2020 and 2019 , excluded from the calculation of diluted earnings per share is the effect of adding back $ 14.2 million and $ 14.3 million , respectively, and 38,112,100 weighted average dilutive common share equivalents for the assumed conversion or exchange of the Company's outstanding convertible and exchangeable notes, as their inclusion would be antidilutive.

The calculation of diluted earnings per share excludes the effect of weighted average unvested non-participating restricted shares of 92,700 and 115,200 for the three and six months ended June 30, 2019 , respectively, as the effect would be antidilutive.

No unvested non-participating restricted shares were outstanding during the six months ended June 30, 2020 .

The calculation of diluted earnings per share also excludes the effect of weighted average shares of class A common stock that are contingently issuable in relation to PSUs (Note 19 ) of 6,047,300 and 459,800 for the three months ended June 30, 2020 and 2019 , respectively, and 3,784,000 and 755,700 for the six months ended June 30, 2020 and 2019 , respectively.

OP Units, subject to lock-up agreements, may be redeemed for registered or unregistered class A common stock on a one -for-one basis.

At March 31, 2020 and 2019 there were 53,261,100 and 31,355,700 redeemable OP Units, respectively.

At June 30, 2020 and 2019 there were 53,076,700 and 31,171,300 redeemable OP Units, respectively.

These OP Units would not be dilutive and were not included in the computation of diluted earnings per share for all periods presented.

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The Company's fee income is earned from the following sources:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

3 unchanged sentences

The following table presents the Company's fee income by type:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

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A portion of the incentive fees earned by the Company (generally 40 % to 50 % ) is allocable to senior management, investment professionals and certain other employees of the Company, included in carried interest and incentive fee compensation expense.

There were no incentive fees earned in the three months ended March 31, 2020 and 2019 .

There were no incentive fees earned in the three and six months ended June 30, 2020 and 2019 .

Other Fee Income —Other fees include service fees for information technology and operational support services and facilities to portfolio companies, advisory fees, and licensing fee on the Company's proprietary real estate index, a rules-based strategy that invests in common stock of U.S.

1 unchanged sentence

The Colony Capital, Inc.

2014 Omnibus Stock Incentive Plan (the "Equity Incentive Plan") provides for the grant of restricted stock, performance stock units ("PSUs"), Long Term Incentive Plan ("LTIP") units, RSUs, deferred stock units ("DSUs"), options, warrants or rights to purchase shares of the Company's common stock, cash incentives and other equity-based awards to the Company's officers, directors (including non-employee directors), employees, co-employees,

consultants or advisors of the Company or of any parent or subsidiary who provides services to the Company.

Shares reserved for the issuance of awards under the Equity Incentive Plan are subject to equitable adjustment upon the occurrence of certain corporate events, provided that this number automatically increases each January 1st by 2 % of the outstanding number of shares of the Company’s class A common stock on the immediately preceding December 31st.

At March 31, 2020 , an aggregate 64.1 million shares of the Company's class A common stock were reserved for the issuance of awards under the Equity Incentive Plan.

At June 30, 2020 , an aggregate 64.1 million shares of the Company's class A common stock were reserved for the issuance of awards under the Equity Incentive Plan.

Restricted Stock — Restricted stock awards relating to the Company's class A common stock are granted to senior executives, directors and certain employees, with a service condition only and are generally subject to annual time-based vesting in equal tranches over a three -year period.

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Restricted stock awards are valued based on the Company's class A common stock price on grant date and equity-based compensation expense is recognized on a straight-line basis over the requisite three -year service period.

Restricted Stock Units ("RSUs") — RSUs relating to the Company's class A common stock are subject to a performance condition.

Vesting of performance-based RSUs occur upon achievement of certain Company-specific metrics over a performance measurement period.

Only vested RSUs are entitled to dividends declared and paid on the Company's class A common stock.

Fair value of RSUs are based on the Company's class A common stock price on grant date.

Equity-based compensation expense is recognized when it becomes probable that the performance condition will be met.

Performance Stock Units ("PSUs") — PSUs are granted to senior executives and certain employees, and are subject to both a service condition and market condition.

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Unvested LTIP units do not accrue distributions.

Each vested LTIP unit is convertible, at the election of the holder (subject to capital account limitation), into one common OP Unit and upon conversion, subject to the redemption terms of OP Units (Note 15 ).

Each vested LTIP unit is convertible, at the election of the

holder (subject to capital account limitation), into one common OP Unit and upon conversion, subject to the redemption terms of OP Units (Note 15 ).

LTIP units issued to certain employees have a service condition only, and are valued based upon the Company's class A common stock price on grant date.

In connection with the acquisition of DBH in July 2019, the Company granted 10 million LTIP units to Marc C.

Ganzi, co-founder and Chief Executive Officer ("CEO") of DBH and CEO-elect of the Company, subject to both a service condition and a market condition.

In connection with the acquisition of DBH in July 2019, the Company granted 10 million LTIP units to Mr.

Ganzi, co-founder and CEO of DBH and CEO of the Company, subject to both a service condition and a market condition.

The LTIP units will vest based upon achievement of the Company's class A common stock price closing at or above $ 10.00 over any 90 consecutive trading days prior to the fifth anniversary of the grant date, subject to Mr.

Ganzi's continuous employment to the time of such vesting.

Fair value of these LTIP units was determined

using a Monte Carlo simulation under a risk-neutral premise, with the following assumptions:

Fair value of these LTIP units was determined using a Monte Carlo simulation under a risk-neutral premise, with the following assumptions:

Expected volatility of the Company's class A common stock (1)

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Equity-based compensation expense, excluding amounts related to the industrial segment in 2019 which is presented as discontinued operations (Note 16 ), is as follows:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

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Unvested shares and units at December 31, 2019

Unvested shares and units at March 31, 2020

Unvested shares and units at June 30, 2020

Represents the number of RSUs granted that are subject to vesting only upon achievement of performance condition.

RSUs that do not meet the performance condition at the end of the measurement period will be forfeited.

Represents the number of PSUs granted, which does not reflect potential increases or decreases that could result from the final outcome of the total shareholder return measured at the end of the performance period.

Fair value of equity awards that vested, determined based on their respective fair values at vesting date, was $ 10.1 million and $ 8.5 million for the three months ended March 31, 2020 and 2019 , respectively.

At March 31, 2020 , aggregate unrecognized compensation cost for all unvested equity awards was $ 52.8 million , which is expected to be recognized over a weighted average period of 2.2 years .

Fair value of equity awards that vested, determined based on their respective fair values at vesting date, was $ 3.3 million and $ 1.3 million for the three months ended June 30, 2020 and 2019 , respectively, and $ 13.4 million and $ 9.8 million for the six months ended June 30, 2020 and 2019 , respectively.

At June 30, 2020 , aggregate unrecognized compensation cost for all unvested equity awards was $ 58.9 million , which is expected to be recognized over a weighted average period of 2.5 years .

Awards Granted by Managed Companies

CLNC and NRE, both managed by the Company prior to termination of NRE's management agreement concurrent with the sale of NRE in September 2019, issued restricted stock and performance stock units to the Company and certain of the Company's employees (collectively, "managed company awards").

CLNC awards are primarily restricted stock

grants that typically vest over a three -year period, subject to service conditions.

CLNC awards are primarily restricted stock grants that typically vest over a three -year period, subject to service conditions.

NRE awards generally had similar terms as the Company's stock awards, except that the NRE performance stock units measured NRE's stock performance against either an absolute total shareholder return threshold or relative to the performance of a specified market index.

2 unchanged sentences

Such grants are made at the discretion of the Company, and the Company may consult with the board of directors or compensation committees of the respective managed companies as to final allocation of awards to its employees.

Managed company awards granted to the Company, pending grant by the Company to its employees, are recognized based upon their fair value at grant date as an equity investment and other liabilities on the consolidated balance sheet.

Managed company awards granted to the Company, pending grant by the Company to its employees, are recognized based upon their fair value at grant date as other assets and other liabilities on the consolidated balance sheet.

The deferred revenue liability is amortized into other income as the awards vest to the Company.

1 unchanged sentence

The other asset and other liability associated with managed company awards granted to employees are subject to adjustment to fair value at each reporting period, with changes reflected in equity-based compensation and other income, respectively.

Equity-based compensation recognized related to managed company awards was an expense reversal of $ 3.4 million and an expense of $ 2.8 million for the three months ended March 31, 2020 and 2019 , respectively.

Equity-based compensation recognized related to managed company awards was $ 3.0 million and $ 3.6 million for the three months ended June 30, 2020 and 2019 , respectively, and an expense reversal of $ 0.4 million and an expense of $ 6.4 million for the six months ended June 30, 2020 and 2019 , respectively.

A corresponding amount is recognized in other income for managed company awards granted to employees (Note 20 ).

At March 31, 2020 , aggregate unrecognized compensation cost for unvested managed company awards of CLNC was $ 3.2 million , which is expected to be recognized over a weighted average period of 1.6 years .

At June 30, 2020 , aggregate unrecognized compensation cost for unvested managed company awards of CLNC was $ 4.3 million , which is expected to be recognized over a weighted average period of 1.3 years .

Transactions with Affiliates

4 unchanged sentences

(In thousands)

March 31, 2020

June 30, 2020

December 31, 2019

2 unchanged sentences

Cost reimbursements and recoverable expenses

Loan and interest receivable

Employees and other affiliates

11 unchanged sentences

Cost reimbursements, included in other income, are as follows.

Amounts related to NRE pertain to periods prior to its sale in September 2019.

Three Months Ended March 31,

Amounts related to NRE pertain to periods prior to termination of its management agreement in September 2019.

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

5 unchanged sentences

NorthStar Healthcare Credit Facility— The Company has committed to provide NorthStar Healthcare with an unsecured revolving credit facility at market terms with a maximum principal amount of $ 35.0 million .

The credit facility matures in December 2020, with a six -month extension option.

The credit facility matures in December 2021 (extended to December 2022 in July 2020), with a six -month extension option.

Advances under the credit facility accrue interest at LIBOR plus 3.5 % .

1 unchanged sentence

The credit facility is intended to provide additional liquidity to NorthStar Healthcare on an as needed basis.

At March 31, 2020 and December 31, 2019 , there were no outstanding advances under the revolving credit facility.

In April 2020, the credit facility was drawn for the full amount of $ 35.0 million .

In April 2020, the credit facility was drawn for the full amount of $ 35.0 million and remained outstanding a t June 30, 2020 .

There were no amounts outstanding at December 31, 2019 .

Liquidating Trust— As contemplated in the combination agreement, a certain loan receivable previously held by NorthStar I was not transferred to CLNC, for which the Company acquired a senior participation interest at par, and the remaining junior participation interest ("NorthStar I Retained Asset") was transferred to a liquidating trust.

1 unchanged sentence

Such fee amount is immaterial.

Acquisition of DBH and DataBank— In connection with the acquisition of DBH in July 2019, payment of a portion of the cash consideration was deferred until the expiration of certain customary seller indemnification obligations (Note 3 ).

The deferred consideration of $ 32.5 million remaining at March 31, 2020 is payable to principals of DBH, including Mr.

Ganzi, who became employees or affiliate of the Company post-acquisition.

Acquisition of DBH and DataBank— In connection with the acquisition of DBH in July 2019, payment of a portion of the cash consideration to the principals of DBH, including Mr.

Ganzi, who became employees or affiliate of the Company post-acquisition, was deferred until the expiration of certain customary seller indemnification obligations (Note 3 ).

The entire deferred consideration of $ 32.5 million was paid in May 2020.

In connection with the Company's acquisition in December 2019 of interests in DataBank from third parties (Note 3 ) , Mr.

11 unchanged sentences

The Company has capital commitments, as general partner, directly into the private funds and as an affiliate of the general partner, capital commitments satisfied through co-investment joint ventures.

In connection with the Company's commitments as an affiliate of the general partner, the Company is allocated a

proportionate share of the costs of the private funds such as financing and administrative costs.

Such costs expensed during the three months ended March 31, 2020 and 2019 were immaterial and relate primarily to the Company's share of the fund's operating costs and deferred financing costs on borrowings of the fund.

In connection with the Company's commitments as an affiliate of the general partner, the Company is allocated a proportionate share of the costs of the private funds such as financing and administrative costs.

Such costs expensed during the three and six months ended June 30, 2020 and 2019 were immaterial and relate primarily to the Company's share of the fund's operating costs and deferred financing costs on borrowings of the fund.

Equity Awards of CLNC and NRE —As discussed in Note 19 , CLNC and NRE (prior to termination of the NRE management agreement) grant equity awards to the Company and certain of the Company's employees, either directly or indirectly through the Company, are recognized as a gross-up of equity-based compensation expense over the vesting period with a corresponding amount in other income.

1 unchanged sentence

These investments are generally not subject to management fees, but otherwise bear their proportionate share of other operating expenses of the investment vehicles.

At March 31, 2020 and December 31, 2019 , such investments in consolidated investment vehicles and general partner entities totaled $ 6.5 million and $ 4.0 million , respectively, reflected in redeemable noncontrolling interests and noncontrolling interests on the balance sheet.

Their share of net income was $ 0.7 million and $ 0.5 million for the three months ended March 31, 2020 and 2019 , respectively.

At June 30, 2020 and December 31, 2019 , such investments in consolidated investment vehicles and general partner entities totaled $ 7.9 million and $ 4.0 million , respectively, reflected in redeemable noncontrolling interests and noncontrolling interests on the balance sheet.

For the three months ended June 30, 2020 and 2019 , their share of net income was $ 0.3 million and $ 0.5 million , respectively.

For the six months ended June 30, 2020 and 2019 , their share was a net loss of $ 0.2 million and net income of $ 1.0 million , respectively.

Corporate Aircraft— The Company, through its subsidiary, Colony Capital Advisors, LLC, has entered into a time sharing agreement with Thomas J.

Barrack, Jr., the Company's Executive Chairman and Chief Executive Officer, under which Mr.

Barrack, Jr., the Company's Executive Chairman, under which Mr.

Barrack may use the Company’s aircraft for personal travel.

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Barrack pays the Company for personal usage based on the incremental cost to the Company, including direct and indirect variable costs, but in no case more than the maximum reimbursement permitted by the Federal Aviation Regulations under the agreement.

Barrack has reimbursed the Company $ 0.4 million and $ 0.2 million for personal flights taken during the three months ended March 31, 2020 and 2019 , respectively.

Barrack has reimbursed the Company $ 0.4 million during the three months ended June 30, 2019 , and $ 0.4 million and $ 0.6 million for the six months ended June 30, 2020 and 2019 , respectively.

There were no reimbursements in the three months ended June 30, 2020 .

Commitments and Contingencies

Contingent Consideration

In connection with a consensual foreclosure of the THL Hotel Portfolio, contingent consideration is payable to a preferred equity holder in an amount up to $ 13.0 million (Note 12 ), subject to the Company achieving certain agreed upon returns.

Litigation and Claims

The Company may be involved in litigation and claims in the ordinary course of business.

As of March 31, 2020 , the Company was not involved in any legal proceedings that are expected to have a material adverse effect on the Company’s results of operations, financial position or liquidity.

As of June 30, 2020 , the Company was not involved in any legal proceedings that are expected to have a material adverse effect on the Company’s results of operations, financial position or liquidity.

Segment Reporting

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For digital investments on our balance sheet, these assets earn rental income from providing use of space and/or capacity in or on our digital assets through long-term leases, services and other agreements .

In the digital investment management business, we earn management fees, generally based on the amount of assets or capital managed in investment vehicles, and have the potential to earn carried interest based on the performance of such investment vehicles subject to the achievement of minimum return hurdles.

In the digital investment management business, we earn management fees, generally based on the

amount of assets or capital managed in investment vehicles, and have the potential to earn carried interest based on the performance of such investment vehicles subject to the achievement of minimum return hurdles.

Healthcare— The Company's healthcare segment is composed of a diverse portfolio of senior housing, skilled nursing facilities, medical office buildings, and hospitals.

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Over time, the Company expects to monetize the bulk of its existing portfolio as it completes its digital evolution.

Other Investment Management— This segment, which is separate from the digital investment management business that resides in the digital segment, encompasses the Company’s management of private real estate credit funds and related co-investment vehicles, CLNC, a public non-traded healthcare REIT and interests in other investment management platforms, among other smaller investment funds.

Other Investment Management— This segment, which is separate from the digital investment management business that resides in the digital segment, encompasses primarily the Company’s management of private real estate credit funds and related co-investment vehicles, CLNC, and NorthStar Healthcare, a public non-traded healthcare REIT.

The Company earns management fees, generally based on the amount of assets or capital managed, and contractual incentive fees or potential carried interest based on the performance of the investment vehicles managed subject to the achievement of minimum return hurdles .

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The results of operations of the Company's digital reportable segment is derived from its equity method investments in the DCP fund and its manager beginning in 2018, the DBH investment management business beginning in July 2019 and the DataBank data center business beginning in December 2019.

Effective March 31, 2020, the digital segment also includes operating results from interests in certain existing Colony investment vehicles that were repurposed to execute an investment strategy focused around the digital sector.

Beginning in 2020, the industrial segment no longer constitutes a reportable segment.

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Amounts Not Allocated to Segments

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

Total revenues

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Equity method earnings (losses)

Equity method losses—carried interest

Income tax benefit (expense)

Loss from continuing operations

Net income (loss) attributable to Colony Capital, Inc.

from continuing operations

Net loss attributable to Colony Capital, Inc.

from discontinued operations

Net loss attributable to Colony Capital, Inc.

Three Months Ended June 30, 2019

Total revenues

Property operating expenses

Interest expense

Depreciation and amortization

Provision for loan losses

Impairment loss

Gain on sale of real estate

Equity method earnings (losses)

Equity method earnings—carried interest

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from continuing operations

Net income attributable to Colony Capital, Inc.

Net loss attributable to Colony Capital, Inc.

from discontinued operations

Net loss attributable to Colony Capital, Inc.

(In thousands)

Other Equity and Debt

Other Investment Management

Amounts Not Allocated to Segments

Six Months Ended June 30, 2020

Total revenues

Property operating expenses

Interest expense

Depreciation and amortization

Impairment loss

Gain on sale of real estate

Equity method earnings (losses)

Equity method losses—carried interest

Income tax benefit (expense)

Loss from continuing operations

Net income (loss) attributable to Colony Capital, Inc.

Three Months Ended March 31, 2019

from continuing operations

Net loss attributable to Colony Capital, Inc.

from discontinued operations

Net loss attributable to Colony Capital, Inc.

Six Months Ended June 30, 2019

Total revenues

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Gain on sale of real estate

Equity method earnings

Equity method earnings (losses)

Equity method earnings—carried interest

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from discontinued operations

Net income (loss) attributable to Colony Capital, Inc.

Net loss attributable to Colony Capital, Inc.

Total assets and equity method investments excluding investments held for sale (Note 8 ) of the reportable segments are summarized as follows:

March 31, 2020

June 30, 2020

December 31, 2019

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Geography is generally presented as the location in which the income producing assets reside or the location in which income generating services are performed.

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

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(In thousands)

March 31, 2020

June 30, 2020

December 31, 2019

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United States

Total income includes equity method earnings (loss), and excludes cost reimbursement income from affiliates and income from discontinued operations.

All income from discontinued operations are sourced in the United States.

Total income includes the Company's share of earnings (loss) from its equity method investments (but excludes the Company's impairment of its equity method investments of $ 297.0 million and $ 247.8 million for the three months ended June 30, 2020 and 2019 , respectively, and $ 297.8 million and $ 250.4 million for the six months ended June 30, 2020 and 2019 , respectively);

and excludes cost reimbursement income from affiliates and income from discontinued operations.

All income from discontinued operations is generated in the United States.

Long-lived assets comprise real estate held for investment, real estate related intangible assets, operating lease right-of-use assets and fixed assets, and exclude financial instruments, assets held for sale and investment management related intangible assets.

Long-lived assets that are held for sale at March 31, 2020 and December 31, 2019 included $ 463 million and $ 522 million located in the United States, respectively, and $ 266 million and $ 283 million located in Europe, respectively.

Long-lived assets that are held for sale at June 30, 2020 and December 31, 2019 included $ 431 million and $ 522 million located in the United States, respectively, and $ 252 million and $ 283 million located in Europe, respectively.

Supplemental Disclosure of Cash Flow Information

Three Months Ended March 31,

Six Months Ended June 30,

(In thousands)

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Cash paid for interest, net of amounts capitalized of $428 and $1,588

Cash received for income tax refunds (paid for income taxes), net

Cash received (paid) for income tax refunds (liabilities), net

Cash paid for operating leases

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Net cash provided by (used in) financing activities of discontinued operations

Three Months Ended March 31,

(In thousands)

Supplemental Disclosure of Cash Flows from Investing and Financing Activities

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Proceeds from loan repayments and asset sales held in escrow

Right-of-use assets and operating lease liabilities

Contributions receivable from noncontrolling interests

Securities acquired, subject to forward contract deliverable, net of cash collateral

Distributions payable to noncontrolling interests included in other liabilities

Right-of-use assets and operating lease liabilities established

Redemption of OP Units for common stock

Subsequent Events

Other than as disclosed elsewhere, no subsequent events have occurred that would require recognition in the consolidated financial statements or disclosure in the accompanying notes.

Path To Digital

Strategic Partnership in the Company's Digital Investment Management Business

On July 17, 2020, the Company formed a strategic partnership with affiliates of Wafra, Inc.

(collectively, "Wafra"), a private investment firm and a global partner for alternative asset managers, in which Wafra made a minority investment in the Company's digital investment management business (the "Digital IM Business").

Wafra, through its investment, will participate in approximately 31.5 % of the net management fees and carried interest generated by the Digital IM Business.

Wafra has agreed to assume certain of the Company's existing commitments made to DCP and to make commitments to the successor fund to DCP and to the Company’s initial digital credit fund, in an aggregate amount of up to $ 150.0 million .

Wafra has also agreed to make commitments to the Company's future digital funds and investment vehicles on a pro rata basis with the Company based on Wafra's percentage interest in the Digital IM Business, subject to certain caps.

In addition, the Company issued Wafra five warrants to purchase up to an aggregate of 5 % (on a fully-diluted, post-transaction basis) of the Company’s class A common stock.

Each warrant entitles Wafra to purchase up to 5,352,000 shares of the Company's class A common stock, with staggered strike prices between $ 2.43 and $ 6.00 for each warrant, exercisable until July 17, 2026.

Consideration paid by Wafra in exchange for its investment in the Digital IM Business and for the warrants is composed of:

(i) cash consideration of $ 253.6 million paid at closing;

and (ii) contingent consideration of approximately $ 29.9 million to be paid if the run-rate of earnings before interest, tax, depreciation and amortization ("EBITDA") of the digital investment management business, as defined, is equal to or greater than $ 72.0 million as of December 31, 2020.

Under certain circumstances following such time as the Digital IM Business comprises 90 % or more of the Company's assets, the Company agreed to use commercially reasonable efforts to facilitate the conversion of Wafra's interest into shares of the Company's class A common stock.

There can be no assurances that such conversion would occur or on what terms and conditions such conversion would occur, including whether such conversion, if it did occur in the future, would have any adverse impact on the Company, the Company’s stock price, governance and other matters.

In connection with Wafra's investment, the Company also entered into an amended and restated restrictive covenant agreement with each of Marc Ganzi, the Company’s CEO, and Ben Jenkins, the chairman and chief investment officer of the Company’s digital segment, pursuant to which each of Messrs.

Ganzi and Jenkins agreed to certain enhanced non-solicitation provisions and the extension of the term of existing non-competition agreements.

In the event that certain post-closing regulatory approvals are not received within 12 months following the consummation of Wafra's investment (which period may be extended for up to an additional three months under certain circumstances), the Company has the right to cause Wafra’s investment in the Digital IM Business to be redeemed, in which case Wafra's carried interest participation rights will terminate and the warrants will be canceled.

If such redemption right is exercised, Wafra will have a redemption right with respect to limited partnership commitments previously made in any of the digital funds or investment vehicles.

Wafra’s investment provides the Company with permanent capital to pursue strategic digital infrastructure investments and grow the Digital IM Business.

Investment in Hyperscale Data Centers

On July 22, 2020, the Company, alongside an approximate $ 1 billion of fee bearing third party capital that the Company raised, invested $ 1.21 billion for an approximate 80 % equity stake in Vantage Data Center Holdings, LLC's ("Vantage") portfolio of 12 stabilized hyperscale data centers in North America (the “Stabilized VDC” and the related transactions, the “Investment Transactions”).

The Company's balance sheet investment is $ 185.1 million , representing a 12.3 % interest.

The management team of Vantage will continue to manage the day-to-day operations of these data centers in exchange for management fees, and subject to certain approval rights held by the Company and the investor group in connection with material actions.

In connection with the Investment Transactions, the Company entered into a series of agreements with Marc Ganzi, the Company’s CEO, and Ben Jenkins, the Chairman and Chief Investment Officer of the Company’s digital segment, and their respective affiliates, pursuant to which Messrs.

Ganzi and Jenkins invested approximately $ 8 million and $ 2 million , respectively, in the Stabilized VDC alongside the Company and the co-investors on the same economic terms.

Such amounts invested represented 40 % of carried interest payments received by each of Messrs.

Ganzi and Jenkins as a result of the Investment Transactions.

FORWARD-LOOKING STATEMENTS

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the impact of COVID-19 on the Company's operating cash flows, debt service obligations and covenants, liquidity position and valuations of its real estate investments, as well as the increased risk of claims, litigation and regulatory proceedings and uncertainty that may adversely affect the Company;

whether we will successfully execute our strategic transition to become a digital real estate and infrastructure focused company within the timeframe contemplated or at all, and the impact of such transition on the Company's legacy portfolios and assets, including whether such transition will result in significant further impairments to certain of our investments, including healthcare and hospitality assets;

our ability to obtain and maintain financing arrangements, including securitizations, on favorable or comparable terms or at all, including our ability to obtain forbearances and/or debt modifications on our corporate credit facility and our non-recourse mortgage debt;

the Company's ability to complete anticipated monetizations of non-core assets within the timeframe and on the terms contemplated, if at all;

the impact of completed or anticipated initiatives related to our strategic shift to the digital industry, including the acquisitions of Digital Bridge Holdings, LLC and an ownership interest in Data Bridge Holdings, LLC, and the formation of certain other investment management platforms, on our company's growth and earnings profile;

the impact of completed or anticipated initiatives related to our strategic shift to the digital industry, including the acquisitions of Digital Bridge Holdings, LLC and an ownership interest in Data Bridge Holdings, LLC, the strategic investment by Wafra, and the formation of certain other investment management platforms, on our company's growth and earnings profile;

whether we will realize any of the anticipated benefits of our strategic partnership with Wafra, including whether Wafra will make additional investments to our digital investment management business;

our ability to integrate and maintain consistent standards and controls, including our ability to manage our acquisitions in the digital industry effectively (such as Digital Bridge Holdings, LLC and Data Bridge Holdings, LLC);

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Moreover, because we operate in a very competitive and rapidly changing environment, new risk factors are likely to emerge from time to time.

We caution investors not to place undue reliance on these forward-looking statements and urge you to carefully review the disclosures we make concerning risks in Part II, Item 1A.

“Risk Factors” and Part I, Item 2.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report.

We caution investors not to place undue reliance on these forward-looking statements and urge you to carefully review the disclosures we make concerning risks in Part I, Item 1A.

"Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and in Part I, Item 2.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II, Item 1A.

“Risk Factors” in this

Quarterly Report.

Readers of this Quarterly Report should also read our other periodic filings made with the Securities and Exchange Commission and other publicly filed documents for further discussion regarding such factors.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements