DBRG filing — read by section

Item 2. Management’s Discussion and Analysis

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 
 The following discussion should be read in conjunction with our unaudited consolidated financial statements and accompanying notes thereto, which are included in Item 1 of this Quarterly Report, as well as information contained in our Annual Report on Form 10-K for the year ended December 31, 2019, which is accessible on the SEC's website at www.sec.gov . 
 
 Overview 
 We are a global investment firm with a focus on becoming the leading digital real estate provider and funding source for the occupancy, infrastructure, equity and credit needs of the world’s mobile communications and data-driven companies. We are headquartered in Los Angeles, with key offices in Boca Raton, New York, Paris and London, and have over 350 employees across 20 locations in 12 countries. 
 We were organized on May 31, 2016 as a Maryland corporation, and were formed through a tri-party merger (the "Merger") among Colony Capital, Inc. ("Colony"), NorthStar Asset Management Group Inc. ("NSAM") and NorthStar Realty Finance Corp. ("NRF"). 
 We elected to be taxed as a real estate investment trust (" REIT") for U.S. federal income tax purposes commencing with its initial taxable year ended December 31, 2017. We conduct our operations as a REIT, and generally are not subject to U.S. federal income taxes on our taxable income to the extent that we annually distribute all of our taxable income to stockholders and maintain qualification as a REIT, although we are subject to U.S. federal income tax on income earned through our taxable subsidiaries. We also operate our business in a manner that will permit us to maintain our exemption from registration as an investment company under the 1940 Act. 
 We conduct substantially all of our activities and hold substantially all of our assets and liabilities through our Operating Company. At June 30, 2020 , we owned 90% of the Operating Company, as its sole managing member. 
 Our Business 
 Our vision is to establish the Company as a leading owner, operator and investment manager of digital infrastructure and real estate. We are 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 . 
 To execute this vision, the Company combined with Digital Bridge Holdings, LLC (“DBH”) in July 2019. DBH is an investment manager dedicated to digital real estate and infrastructure, managing approximately $14 billion of assets under management (“AUM”) and approximately $7 billion of fee earning equity under management (“FEEUM”) across six separately capitalized and managed portfolio companies and the $4 billion Digital Colony Partners fund (“DCP”). 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. Mr. Ganzi is poised to lead the Company’s strategic repositioning in becoming the leading platform for digital infrastructure and real estate. Further, the combination with DBH brings its world-class team of investment professionals and management of the DBH portfolio of high performing assets under the combined Digital Colony franchise. Thomas J. 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. Mark M. 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. (collectively, "DataBank"), a leading provider of enterprise-class data center, cloud, and connectivity services, (b) a 70% interest in a portfolio of 357 healthcare properties, (c) a 97% interest in a portfolio of 157 hospitality properties, (d) a 36.4% interest in Colony Credit Real Estate, Inc. (NYSE: CLNC), and (e) interests in various other equity and debt investments, including general partner (“GP”) interests in funds sponsored by the Company, commercial real estate equity and debt investments and other real estate related securities. The Company also owns and operates an investment management business with $16.3 billion of FEEUM, 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. 
 
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 The Company's six reportable segments are as follows: 
 
 • 
 Digital Real Estate and Investment Management ("Digital")— The Company's digital segment is composed of balance sheet equity interests in digital infrastructure and real estate; and digital infrastructure and real estate investment management business. 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. 
 
 • 
 Healthcare— The Company's healthcare segment is composed of a diverse portfolio of senior housing, skilled nursing facilities, medical office buildings, and hospitals. The Company earns rental income from senior housing, skilled nursing facilities and hospital assets that are under net leases to single tenants/operators and from medical office buildings which are both single tenant and multi-tenant. In addition, certain of the Company's senior housing properties are managed by operators under a RIDEA (REIT Investment Diversification and Empowerment Act) structure, which allows the Company to gain financial exposure to underlying operations of the facility in a tax efficient manner versus receiving contractual rent under a net lease arrangement. 
 
 • 
 Hospitality— The Company's hospitality segment is composed of primarily extended stay and select service hotels located mainly in major metropolitan and high-demand suburban markets in the U.S., with the majority affiliated with top hotel brands such as Marriott and Hilton. 
 
 • 
 CLNC — This segment is composed of our 36% interest in CLNC, an externally managed commercial real estate credit REIT. CLNC is focused on originating, acquiring, financing and managing a diversified commercial real estate portfolio, consisting primarily of senior mortgage loans, mezzanine loans, preferred equity, debt securities and net leased properties predominantly in the United States. 
 
 • 
 Other Equity and Debt— This segment is composed of a diversified group of non-digital real estate and real estate-related debt and equity investments, including investments for which the Company acts as a general partner and/or manager ("GP co-investments") and receives various forms of investment management economics on related third-party capital on such investments, other real estate equity and debt investments and other real estate related securities, among other holdings. 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 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 . 
 
 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. 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. 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 
 
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 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 
 In March 2020, the Company entered into a cooperation agreement with Blackwells Capital LLC ("Blackwells"), a stockholder of the Company. Pursuant to the cooperation agreement, the Company nominated Jeannie Diefenderfer for election to its board of directors (the "Board") at the 2020 Annual Meeting of Stockholders (the “Annual Meeting”) on May 5, 2020, at which Ms. Diefenderfer was elected to the Board. In addition to withdrawing its previously submitted director nominees for election at the Annual Meeting, Blackwells agreed to vote its and its affiliates shares of the Company’s stock in accordance with the Board’s voting recommendations on all proposals (including in favor of the Board’s director nominees), subject to certain limited exceptions, prior to the third anniversary of the agreement. Furthermore, Blackwells agreed to a standstill with respect to the Company until the expiration of the cooperation agreement in March 2030. 
 Contemporaneously, the Company and Blackwells entered into a joint venture arrangement for the purpose of acquiring, holding and disposing of CLNY common stock. 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 March 2020 . The settlement liability is subject to remeasurement at the end of each quarter. Refer to Note 12 of the consolidated financial statements for further description of the settlement liability. 
 
 Developments in 2020 
 During the six months ended June 30, 2020 and through this filing, significant developments affecting our business and results of operations included the following, in addition to the effects of COVID-19 as discussed throughout this Quarterly Report. 
 Liquidity 
 We addressed near-term corporate maturities and enhanced our long-term capital structure and liquidity profile as follows: 
 
 • 
 Amended our Credit Agreement in June 2020, which reduced aggregate revolving commitments from $750 million to $500 million and increased the interest rate on borrowings from LIBOR plus 2.25% to LIBOR plus 2.5% per annum. The amended terms provide for greater financial covenant flexibility and more borrowing base credit for 
 
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 digital investments. The credit facility is still scheduled to expire in January 2021, with two 6-month extension options. During the extension term(s), the interest rate would increase by 0.25%, and effective March 31, 2021, credit availability would be reduced to $400 million . 
 
 • 
 In July 2020, the OP issued $300.0 million of exchangeable notes maturing in July 2025 and bearing interest at 5.75% per annum. Net proceeds from this issuance of $291.0 million were applied to repurchase $289.7 million of the outstanding principal of the 3.875% convertible notes for total purchase price of $289.2 million , including accrued interest. This substantially addresses the January 2021 maturity of the 3.875% convertible notes, with $112.8 million principal outstanding as of the date of this filing, which we expect to address through cash on hand and/or proceeds from future asset monetizations. 
 
 Path To Digital 
 Strategic Partnership in Our Digital Investment Management Business 
 
 • 
 In July 2020, formed a strategic partnership with affiliates of Wafra, Inc. (collectively, "Wafra") in which Wafra made a minority investment representing an approximate 31.5% interest in our digital investment management business (the “Digital IM Business”). Wafra paid a consideration of $254 million for its investment in the Digital IM Business and for warrants issued by the Company to Wafra (assuming the consideration excludes the warrants, this implies an approximately $805 million valuation of 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 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. Wafra's investment provides us with permanent capital to pursue strategic digital infrastructure investments and grow the Digital IM Business. Refer to Note 24 to the consolidated financial statements for further discussion of the Wafra transaction. 
 
 Investment in Hyperscale Data Centers 
 
 • 
 In July 2020, alongside an approximate $1 billion of fee bearing third party capital that we raised, we 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. Our balance sheet investment is $185 million, which represents a 12.3% interest. This investment is our second significant balance sheet investment in a digital operating business and achieves our transformation goals on two fronts, that is the rotation of our balance sheet to digital assets and growing our digital investment management business. 
 
 Non-Digital Assets 
 
 • 
 In February 2020, sold our equity investment in RXR Realty, LLC for proceeds of $179 million , net of tax, recording a gain of $97 million , net of tax. 
 
 • 
 In April 2020, recapitalized a co-investment venture which holds common equity in the Albertsons supermarket chain, generating $72.7 million of proceeds to us and realizing our share of gain of $29.7 million. 
 
 • 
 Recognized approximately $3.0 billion ($2.4 billion attributable to OP) of impairment charges and unrealized fair value losses on our non-digital assets in the first six months of 2020, recorded in impairment loss, other losses and equity method losses on the statement of operations, primarily: 
 
 • 
 $1.78 billion ( $1.46 billion attributable to OP) impairment on real estate and related asset group, primarily hotel and healthcare properties, to reflect shortened holding periods on the assets, attributed primarily to the Company's accelerated digital transformation and further exacerbated by a decline in property operating performance and market values as a result of the economic effects of COVID-19 ; 
 
 • 
 $594 million impairment on goodwill in the other investment management segment, driven by acceleration of the Company's digital transformation and significant reduction in the value of its non-digital balance sheet assets ; 
 
 • 
 $275 million impairment on our equity investment in CLNC as the shortfall in market value over carrying value of our CLNC investment is not expected to recover in the near term; and 
 
 • 
 $281 million ($54 million attributable to OP) of net unrealized losses on loans receivable carried at fair value as recoverability is affected by increasing uncertainty and deterioration in the economic environment arising from the effects of COVID-19 . 
 
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 Results of Operations 
 The following table summarizes our results from continuing operations by reportable segment. 
 Beginning in 2020, the industrial segment no longer constitutes a reportable segment. In December 2019, the Company completed the sale of the light industrial portfolio and its related management platform, which represented the vast majority of the industrial segment. The Company continues to own the bulk industrial assets which remain held for sale. Current and prior period results of the industrial segment and the industrial investment management business which resides in the other investment management segment are presented as discontinued operations on the consolidated statements of operations (Note 16 ). Discontinued operations generated a net loss attributable to Colony Capital, Inc. of $1.5 million and $1.1 million for the three months ended June 30, 2020 and 2019 , respectively, and $1.3 million for the six months ended June 30, 2020 , while generating net income attributable to Colony Capital, Inc. of $7.3 million for the six months ended June 30, 2019 . 
 
 (In thousands) 
 
 Total Revenues 
 
 Income (Loss) from Continuing Operations 
 
 Net Income (Loss) Attributable to Colony Capital, Inc. from Continuing Operations 
 
 Three Months Ended June 30, 
 
 2020 
 
 2019 
 
 2020 
 
 2019 
 
 2020 
 
 2019 
 
 Digital 
 
 $ 
 63,413 
 
 $ 
 — 
 
 $ 
 (6,546 
 ) 
 
 $ 
 1,957 
 
 $ 
 8,519 
 
 $ 
 1,839 
 
 Healthcare 
 
 142,680 
 
 145,896 
 
 (680,140 
 ) 
 
 (81,520 
 ) 
 
 (434,410 
 ) 
 
 (58,616 
 ) 
 
 Hospitality 
 
 57,143 
 
 227,080 
 
 (741,621 
 ) 
 
 (3,505 
 ) 
 
 (633,863 
 ) 
 
 (3,330 
 ) 
 
 CLNC 
 
 — 
 
 — 
 
 (350,241 
 ) 
 
 (267,912 
 ) 
 
 (315,484 
 ) 
 
 (251,792 
 ) 
 
 Other Equity and Debt 
 
 74,428 
 
 152,066 
 
 (370,305 
 ) 
 
 (128 
 ) 
 
 (141,671 
 ) 
 
 (5,957 
 ) 
 
 Other Investment Management 
 
 30,198 
 
 43,802 
 
 (496,361 
 ) 
 
 17 
 
 (447,068 
 ) 
 
 600 
 
 Amounts not allocated to segments 
 
 4,504 
 
 4,595 
 
 (67,277 
 ) 
 
 (133,051 
 ) 
 
 (58,763 
 ) 
 
 (123,389 
 ) 
 
 $ 
 372,366 
 
 $ 
 573,439 
 
 $ 
 (2,712,491 
 ) 
 
 $ 
 (484,142 
 ) 
 
 $ 
 (2,022,740 
 ) 
 
 $ 
 (440,645 
 ) 
 
 Six Months Ended June 30, 
 
 Digital 
 
 $ 
 127,919 
 
 $ 
 — 
 
 $ 
 (25,766 
 ) 
 
 $ 
 4,973 
 
 $ 
 4,761 
 
 $ 
 4,672 
 
 Healthcare 
 
 281,862 
 
 291,670 
 
 (744,285 
 ) 
 
 (88,726 
 ) 
 
 (482,422 
 ) 
 
 (66,078 
 ) 
 
 Hospitality 
 
 210,669 
 
 423,695 
 
 (1,037,378 
 ) 
 
 (29,582 
 ) 
 
 (875,095 
 ) 
 
 (26,311 
 ) 
 
 CLNC 
 
 — 
 
 — 
 
 (360,310 
 ) 
 
 (262,399 
 ) 
 
 (324,559 
 ) 
 
 (246,614 
 ) 
 
 Other Equity and Debt 
 
 195,547 
 
 314,754 
 
 (340,328 
 ) 
 
 59,400 
 
 (143,123 
 ) 
 
 17,932 
 
 Other Investment Management 
 
 54,497 
 
 83,807 
 
 (477,870 
 ) 
 
 17,674 
 
 (430,709 
 ) 
 
 16,337 
 
 Amounts not allocated to segments 
 
 9,385 
 
 7,572 
 
 (130,724 
 ) 
 
 (241,930 
 ) 
 
 (114,026 
 ) 
 
 (223,998 
 ) 
 
 $ 
 879,879 
 
 $ 
 1,121,498 
 
 $ 
 (3,116,661 
 ) 
 
 $ 
 (540,590 
 ) 
 
 $ 
 (2,365,173 
 ) 
 
 $ 
 (524,060 
 ) 
 
 Selected Balance Sheet Data 
 The following table summarizes key balance sheet data by reportable segment, excluding assets and related liabilities held for sale. 
 
 Real Estate, net 
 
 Loans Receivable (1) 
 
 Equity and Debt Investments 
 
 Debt, net 
 
 (In thousands) 
 
 June 30, 2020 
 
 December 31, 2019 
 
 June 30, 2020 
 
 December 31, 2019 
 
 June 30, 2020 
 
 December 31, 2019 
 
 June 30, 2020 
 
 December 31, 2019 
 
 Digital 
 
 $ 
 845,146 
 
 $ 
 846,393 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 241,535 
 
 $ 
 47,891 
 
 $ 
 515,007 
 
 $ 
 539,155 
 
 Healthcare 
 
 3,638,987 
 
 4,433,825 
 
 48,984 
 
 48,270 
 
 — 
 
 — 
 
 2,884,765 
 
 2,910,032 
 
 Hospitality 
 
 2,635,718 
 
 3,544,264 
 
 — 
 
 — 
 
 — 
 
 — 
 
 2,635,393 
 
 2,623,306 
 
 CLNC 
 
 — 
 
 — 
 
 — 
 
 — 
 
 336,513 
 
 725,443 
 
 — 
 
 — 
 
 Other Equity and Debt 
 
 1,868,051 
 
 2,036,036 
 
 1,349,103 
 
 1,518,058 
 
 1,220,027 
 
 1,396,752 
 
 1,924,639 
 
 2,061,101 
 
 Other Investment Management 
 
 — 
 
 — 
 
 — 
 
 — 
 
 23,631 
 
 139,977 
 
 — 
 
 — 
 
 Amounts not allocated to segments 
 
 — 
 
 — 
 
 — 
 
 — 
 
 3,742 
 
 3,742 
 
 1,251,310 
 
 850,314 
 
 Total 
 
 $ 
 8,987,902 
 
 $ 
 10,860,518 
 
 $ 
 1,398,087 
 
 $ 
 1,566,328 
 
 $ 
 1,825,448 
 
 $ 
 2,313,805 
 
 $ 
 9,211,114 
 
 $ 
 8,983,908 
 
 _________ 
 
 (1) 
 Carried at fair value upon adoption of fair value option on January 1, 2020. 
 
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 Consolidated Results of Operations 
 Comparison of Three Months Ended June 30, 2020 to Three Months Ended June 30, 2019 
 
 Three Months Ended June 30, 
 
 (In thousands) 
 
 2020 
 
 2019 
 
 Change 
 
 Revenues 
 
 Property operating income 
 
 $ 
 293,816 
 
 $ 
 488,788 
 
 $ 
 (194,972 
 ) 
 
 Interest income 
 
 22,376 
 
 35,055 
 
 (12,679 
 ) 
 
 Fee income 
 
 43,540 
 
 35,433 
 
 8,107 
 
 Other income 
 
 12,634 
 
 14,163 
 
 (1,529 
 ) 
 
 Total revenues 
 
 372,366 
 
 573,439 
 
 (201,073 
 ) 
 
 Expenses 
 
 Property operating expense 
 
 193,643 
 
 279,240 
 
 (85,597 
 ) 
 
 Interest expense 
 
 106,786 
 
 141,738 
 
 (34,952 
 ) 
 
 Investment and servicing expense 
 
 11,394 
 
 20,017 
 
 (8,623 
 ) 
 
 Transaction costs 
 
 75 
 
 318 
 
 (243 
 ) 
 
 Depreciation and amortization 
 
 134,905 
 
 109,382 
 
 25,523 
 
 Provision for loan loss 
 
 — 
 
 15,003 
 
 (15,003 
 ) 
 
 Impairment loss 
 
 2,001,557 
 
 84,695 
 
 1,916,862 
 
 Compensation expense—cash and equity-based 
 
 64,513 
 
 42,430 
 
 22,083 
 
 Compensation expense—carried interest and incentive fee 
 
 (1,162 
 ) 
 
 1,146 
 
 (2,308 
 ) 
 
 Administrative expenses 
 
 20,405 
 
 20,146 
 
 259 
 
 Total expenses 
 
 2,532,116 
 
 714,115 
 
 1,818,001 
 
 Other income (loss) 
 
 Gain on sale of real estate 
 
 2,868 
 
 6,077 
 
 (3,209 
 ) 
 
 Other loss, net 
 
 (173,030 
 ) 
 
 (89,506 
 ) 
 
 (83,524 
 ) 
 
 Equity method losses 
 
 (372,535 
 ) 
 
 (259,288 
 ) 
 
 (113,247 
 ) 
 
 Equity method earnings (losses)—carried interest 
 
 (2,324 
 ) 
 
 1,836 
 
 (4,160 
 ) 
 
 Loss before income taxes 
 
 (2,704,771 
 ) 
 
 (481,557 
 ) 
 
 (2,223,214 
 ) 
 
 Income tax expense 
 
 (7,720 
 ) 
 
 (2,585 
 ) 
 
 (5,135 
 ) 
 
 Loss from continuing operations 
 
 (2,712,491 
 ) 
 
 (484,142 
 ) 
 
 (2,228,349 
 ) 
 
 Loss from discontinued operations 
 
 (6,502 
 ) 
 
 (504 
 ) 
 
 (5,998 
 ) 
 
 Net loss 
 
 (2,718,993 
 ) 
 
 (484,646 
 ) 
 
 (2,234,347 
 ) 
 
 Net income (loss) attributable to noncontrolling interests: 
 
 Redeemable noncontrolling interests 
 
 390 
 
 509 
 
 (119 
 ) 
 
 Investment entities 
 
 (470,052 
 ) 
 
 (13,414 
 ) 
 
 (456,638 
 ) 
 
 Operating Company 
 
 (225,057 
 ) 
 
 (29,989 
 ) 
 
 (195,068 
 ) 
 
 Net loss attributable to Colony Capital, Inc. 
 
 (2,024,274 
 ) 
 
 (441,752 
 ) 
 
 (1,582,522 
 ) 
 
 Preferred stock dividends 
 
 18,516 
 
 27,138 
 
 (8,622 
 ) 
 
 Net loss attributable to common stockholders 
 
 $ 
 (2,042,790 
 ) 
 
 $ 
 (468,890 
 ) 
 
 (1,573,900 
 ) 
 
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 Property Operating Income and Property Operating Expenses 
 
 Three Months Ended June 30, 
 
 (In thousands) 
 
 2020 
 
 2019 
 
 Change 
 
 Property operating income: 
 
 Digital 
 
 $ 
 42,017 
 
 $ 
 — 
 
 $ 
 42,017 
 
 Healthcare 
 
 139,983 
 
 144,863 
 
 (4,880 
 ) 
 
 Hospitality 
 
 57,136 
 
 227,016 
 
 (169,880 
 ) 
 
 Other Equity and Debt 
 
 54,680 
 
 116,909 
 
 (62,229 
 ) 
 
 $ 
 293,816 
 
 $ 
 488,788 
 
 (194,972 
 ) 
 
 Property operating expenses: 
 
 Digital 
 
 $ 
 18,055 
 
 $ 
 — 
 
 $ 
 18,055 
 
 Healthcare 
 
 74,752 
 
 63,924 
 
 10,828 
 
 Hospitality 
 
 63,733 
 
 144,691 
 
 (80,958 
 ) 
 
 Other Equity and Debt 
 
 37,103 
 
 70,625 
 
 (33,522 
 ) 
 
 $ 
 193,643 
 
 $ 
 279,240 
 
 (85,597 
 ) 
 
 Digital— Amounts represent income and related operating expenses from our DataBank subsidiary that was acquired in December 2019, primarily in connection with colocation rent and data center services. 
 Healthcare— Property operating income decreased $4.9 million , driven by sales of 25 net lease properties in 2019 and one in the first quarter of 2020 , and to a lesser extent, lower resident fee income as senior housing occupancy declined due to restrictions on new admissions in an effort to contain COVID-19. Property operating expenses increased $10.8 million , primarily due to $7.7 million of incremental costs incurred in our senior housing facilities in response to COVID-19. The incremental costs were abated by $1.6 million of government stimulus funding under the CARES Act Provider Relief Fund , which partially offset the decrease in property operating income. Refer to further discussion in " —Segment Results—Healthcare." 
 Hospitality— Property operating income and expense decreased $169.9 million and $81.0 million , respectively. On a same store basis (excluding the effects of ten select service hotels sold in 2019), property operating income and expense decreased $159.2 million, or 74%, and $73.1 million, or 53%, respectively. The decrease in income reflects the effects of COVID-19 with a significant decline in room demand with an average occupancy of 30.2% , a decrease of 62% compared to the same period last year. This was further compounded by lower average daily rate ("ADR"), resulting in revenue per available room, or RevPAR, falling 72% compared to the same period last year. Although we have taken various steps to minimize non-essential operating expenses during this time, the decrease in operating expenses, as expected, was less pronounced as we continue to incur fixed operating costs. Notwithstanding the overall negative results for the second quarter of 2020, operations have recovered from the trough in April 2020 and have since trended positively through July 2020. Refer to further discussion in " —Segment Results—Hospitality." 
 Other Equity and Debt— Property operating income and expenses decreased $62.2 million and $33.5 million , respectively, driven by sales of limited service hotels in our THL Hotel Portfolio, U.S. multi-tenant offices and other properties in our European portfolio, as well as the effects of COVID-19 on the operating results of our THL Hotel Portfolio and a hotel in Spain. 
 Interest Income 
 Interest income decreased $12.7 million , attributed primarily to loans placed on nonaccrual in the second quarter of 2020 as the COVID-19 crisis has led to increased uncertainty over collectability. 
 Fee Income 
 Fee income is earned from the following sources: 
 
 Three Months Ended June 30, 
 
 (In thousands) 
 
 2020 
 
 2019 
 
 Change 
 
 Institutional funds and other investment vehicles 
 
 $ 
 31,337 
 
 $ 
 13,033 
 
 $ 
 18,304 
 
 Public companies (CLNC, NRE prior to its sale in September 2019) 
 
 7,223 
 
 15,038 
 
 (7,815 
 ) 
 
 Non-traded REITs 
 
 4,431 
 
 4,989 
 
 (558 
 ) 
 
 Other 
 
 549 
 
 2,373 
 
 (1,824 
 ) 
 
 $ 
 43,540 
 
 $ 
 35,433 
 
 8,107 
 
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 Total fee income increased $8.1 million resulting from: 
 
 • 
 net increase of $18.3 million in fees from institutional funds and investment vehicles, driven by $19.9 million of fees from DBH (50% of fees from DCP was recognized as equity method income prior to acquisition of DBH), which was acquired in July 2019, partially offset by decreases in fees from liquidating funds. 
 
 The increase in fees from institutional funds and investment vehicles was partially offset by: 
 
 • 
 $3.2 million decrease in fees from Colony Credit due to a lower stockholders' equity fee base; 
 
 • 
 $3.8 million of fees from NorthStar Realty Europe ("NRE") in 2019 prior to its sale in September 2019; and 
 
 • 
 $0.6 million decrease in fees from NorthStar Healthcare Income, Inc. ("NorthStar Healthcare") following a decrease in its NAV fee basis effective December 2019; and 
 
 • 
 $1.8 million decrease in other fees related to advisory fees and higher asset management fees in the second quarter of 2019. 
 
 Other Income 
 Other income was $1.5 million lower, attributed primarily to lower cost reimbursement from affiliates. 
 Interest Expense 
 
 Three Months Ended June 30, 
 
 (In thousands) 
 
 2020 
 
 2019 
 
 Change 
 
 Investment-level financing: 
 
 Digital 
 
 $ 
 8,184 
 
 $ 
 — 
 
 $ 
 8,184 
 
 Healthcare 
 
 34,699 
 
 57,135 
 
 (22,436 
 ) 
 
 Hospitality 
 
 29,889 
 
 41,591 
 
 (11,702 
 ) 
 
 Other Equity and Debt 
 
 17,683 
 
 29,216 
 
 (11,533 
 ) 
 
 Corporate-level debt 
 
 16,331 
 
 13,796 
 
 2,535 
 
 $ 
 106,786 
 
 $ 
 141,738 
 
 (34,952 
 ) 
 
 Net decrease in interest expense of $35.0 million is attributed to the following: 
 Digital— Amount represents interest expense on debt assumed from our DataBank subsidiary that was acquired in December 2019. 
 Healthcare— Interest expense was $22.4 million lower as a result of: (i) decrease in LIBOR on predominantly variable rate debt; (ii) interest expense recognized in the second quarter of 2019 from the write-off of debt discount in connection with a June 2019 refinancing; and (iii) debt repayment upon sale of non-core properties in 2019. These decreases were partially offset by interest expense recognized from amortization of deferred financing costs incurred in connection with the June 2019 refinancing. 
 Hospitality— Interest expense decreased $11.7 million , driven by a decline in LIBOR on predominantly variable rate debt on our hotel portfolio. 
 Other Equity and Debt— Interest expense decreased $11.5 million due to a decline in LIBOR and debt payoffs from sale of properties and resolution of loans receivable. 
 Corporate-level Debt— Interest expense increased $2.5 million as a result of writing off a portion of deferred financing costs on our corporate credit facility to reflect a reduction in the facility amount in June 2020, along with a higher average outstanding balance on the facility in 2020. This increase was partially offset by the effect of a decline in LIBOR on our junior subordinated debt and lower unused fees on our credit facility. 
 Investment and Servicing Expense 
 Investment and servicing costs were lower by $8.6 million , attributed primarily to costs related to refinancing of our healthcare debt in 2019 and lower hotel asset management and incentive fees in 2020, which corresponds to the decline in hotel revenues, partially offset by additional bad debt allowance on property level insurance receivable. 
 Depreciation and Amortization 
 Higher depreciation and amortization expense is attributed to real estate and intangible assets acquired from DataBank in December 2019 and DBH in July 2019, as well as capital improvements and fixed asset additions to our hotel properties that were completed throughout 2019 and beginning of 2020. These increases were partially offset by 
 
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 sales of non-core properties, lower real estate basis after impairment charges in 2019, termination of NRE management contract in September 2019 and write-down of NorthStar Healthcare management contract in December 2019. 
 Impairment Loss 
 
 Three Months Ended June 30, 
 
 (In thousands) 
 
 2020 
 
 2019 
 
 Change 
 
 Healthcare 
 
 $ 
 661,255 
 
 $ 
 51,324 
 
 $ 
 609,931 
 
 Hospitality 
 
 660,751 
 
 420 
 
 660,331 
 
 Other Equity and Debt 
 
 152,254 
 
 32,302 
 
 119,952 
 
 Other Investment Management 
 
 515,000 
 
 — 
 
 515,000 
 
 Unallocated 
 
 12,297 
 
 649 
 
 11,648 
 
 $ 
 2,001,557 
 
 $ 
 84,695 
 
 1,916,862 
 
 Impairment loss attributable to noncontrolling interests in investment entities 
 
 $ 
 279,840 
 
 $ 
 37,195 
 
 Impairment loss on real estate and goodwill are discussed further in Notes 4 and 7 , respectively, to the consolidated financial statements. 
 Healthcare and Hospitality— In 2020, we recognized impairment of $661.3 million on healthcare assets and $660.8 million on hotel assets, resulting from shortened holding period assumptions, 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 . This resulted in a shortfall in projected 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 , such that the carrying value of these assets would not be recoverable. 
 In 2019, impairment of (i) $51.3 million on healthcare assets was based upon a negotiated purchase option exercised by a tenant on three hospitals and preliminary offers received on certain net lease properties, all of which have since been sold; and (ii) $0.4 million on a hotel was based upon final net proceeds from sale. 
 Other Equity and Debt— Impairment was $120.0 million higher, primarily on the THL Hotel Portfolio, various office properties, and a hotel in Spain. The higher impairment was driven by shortened holding period assumptions due to the Company's accelerated digital transformation or risk of default on non-recourse investment level debt; and/or the economic effects of COVID-19 on property operating cash flows and market values . 
 Other Investment Management— Goodwill in the other investment management segment was written down by $515.0 million , driven by acceleration of the Company's digital transformation and significant reduction in the value of its non-digital balance sheet assets . 
 Unallocated— Impairment was recorded on the corporate aircraft in 2020 to reflect recoverable value based upon a shortened holding period and on an office operating lease asset in 2019. 
 Compensation Expense 
 The following table provides the components of compensation expense: 
 
 Three Months Ended June 30, 
 
 (In thousands) 
 
 2020 
 
 2019 
 
 Change 
 
 Cash compensation and benefits 
 
 $ 
 51,050 
 
 $ 
 31,294 
 
 $ 
 19,756 
 
 Equity-based compensation 
 
 10,422 
 
 7,577 
 
 2,845 
 
 Incentive and carried interest compensation 
 
 (1,162 
 ) 
 
 1,146 
 
 (2,308 
 ) 
 
 60,310 
 
 40,017 
 
 20,293 
 
 Compensation grossed up in income and expense 
 
 Equity-based compensation—CLNC and NRE (prior to September 2019) awards 
 
 3,041 
 
 3,559 
 
 (518 
 ) 
 
 Total compensation expense 
 
 $ 
 63,351 
 
 $ 
 43,576 
 
 19,775 
 
 Total compensation expense increased $19.8 million , attributed primarily to (i) additional compensation cost following the consolidation of DBH and DataBank, acquired in July and December 2019, respectively; and (ii) $6.6 million of severance related costs incurred in the second quarter of 2020 in connection with our new cost reduction initiative. These increases were partially offset by a decrease in compensation cost following the cost reduction initiative, sales of NRE in September 2019 and our industrial business in December 2019, and reversal of carried interest compensation in 2020. 
 
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 Administrative Expenses 
 There was a marginal increase in administrative expense of $0.3 million as higher professional service costs and additional expenses in connection with businesses acquired in 2019 were largely offset by savings in business travel and office costs resulting from efforts to reduce the spread of COVID-19. 
 Gain on Sale of Real Estate 
 The higher gains in 2019 were from sales of our European properties. The pace of dispositions has slowed considerably in 2020 given the current global economic downturn resulting from efforts to contain COVID-19. 
 Equity Method Earnings (Losses) 
 
 Three Months Ended June 30, 
 
 (In thousands) 
 
 2020 
 
 2019 
 
 Change 
 
 Digital 
 
 $ 
 7,940 
 
 $ 
 3,147 
 
 $ 
 4,793 
 
 CLNC 
 
 (350,241 
 ) 
 
 (267,912 
 ) 
 
 (82,329 
 ) 
 
 Other Equity and Debt 
 
 (28,525 
 ) 
 
 25,633 
 
 (54,158 
 ) 
 
 Other Investment Management (including carried interest reversal of $2,324 and income of $1,836, respectively) 
 
 (4,033 
 ) 
 
 (18,320 
 ) 
 
 14,287 
 
 $ 
 (374,859 
 ) 
 
 $ 
 (257,452 
 ) 
 
 (117,407 
 ) 
 
 Digital— Amounts represent net earnings from interests in (i) our sponsored DCP fund; (ii) through July 2019, Digital Colony Manager, the manager of DCP, prior to its consolidation upon acquisition of DBH; and beginning March 31, 2020, existing Colony investment vehicles that were repurposed to execute an investment strategy focused around the digital sector. 
 CLNC— We recorded an other-than-temporary impairment on our investment in CLNC of $274.7 million in 2020 and $227.9 million in 2019. Our interest in CLNC also generated net loss of $75.6 million in 2020 (inclusive of $8.7 million adjustment to reduce the basis difference allocated to non-strategic assets resolved during the second quarter of 2020) and net loss of $40.0 million in 2019. CLNC's net losses were driven by allowance for loan losses, impairment or unrealized fair value losses on investments, and realized losses from sale of investments and unwinding of hedge positions, further affected by COVID-19 in 2020 . Refer to Note 6 to the consolidated financial statements for further discussion of the CLNC impairment and basis adjustment. 
 Other Equity and Debt— Equity method losses in 2020 compared to earnings in 2019, resulting in a decrease of $54.2 million , arose from impairment of an investee based upon projected exit strategy, decrease in fair value of investments under the fair value option and our share of investee net losses, all of which reflect the economic effects of COVID-19. 
 Other Investment Management— Equity method net loss was $14.3 million lower due to an impairment charge recorded in 2019 on an investee which has since been sold, partially offset by reversal of unrealized carried interest allocation in 2020. 
 Other Loss, Net 
 We recorded other net loss of $173.0 million in 2020 and $89.5 million in 2019, driven primarily by the following: 
 Three Months Ended June 30, 2020 
 
 • 
 $284.4 million ($230.3 million attributable to noncontrolling interests in investment entities) of net unrealized losses on loans receivable carried at fair value as recoverability is affected by increasing uncertainty and deterioration in the economic environment arising from the effects of COVID-19 (fair value option was elected on loans receivable beginning 2020); 
 
 • 
 $21.4 million of unrealized credit losses on commercial real estate ("CRE") debt securities; 
 
 • 
 realized gain of $60.7 million , of which the Company's share is 50% , and recognition of future profit allocation at fair value of $66.0 million ( $33.7 million attributable to noncontrolling interests in investment entities) from recapitalization of our co-investment venture which holds common stock in Albertsons Companies, Inc. (refer to Note 6 to the consolidated financial statements). 
 
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 Three Months Ended June 30, 2019 
 
 • 
 unrealized loss of $86.9 million on a non-designated interest rate swap assumed through the Merger that was intended to hedge future refinancing on certain healthcare mortgage debt. Such debt was refinanced in June 2019 and the swap was terminated at the end of 2019. 
 
 Income Tax Expense 
 Income tax expense was higher by $5.1 million , attributed primarily to (i) valuation allowances established against deferred tax assets in the hospitality and healthcare segments as a result of uncertainties in future realization of tax benefit on net operating losses, taking into consideration the impairment of assets in these segments; partially offset by (ii) deferred tax benefit recognized on taxable losses in the other investment management segment. 
 Income (Loss) from Discontinued Operations 
 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 . Refer to Note 16 to the consolidated financial statements. 
 
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 Consolidated Results of Operations 
 Comparison of Six Months Ended June 30, 2020 to Six Months Ended June 30, 2019 
 
 Six Months Ended June 30, 
 
 (In thousands) 
 
 2020 
 
 2019 
 
 Change 
 
 Revenues 
 
 Property operating income 
 
 $ 
 719,232 
 
 $ 
 947,686 
 
 $ 
 (228,454 
 ) 
 
 Interest income 
 
 55,244 
 
 81,125 
 
 (25,881 
 ) 
 
 Fee income 
 
 87,045 
 
 66,461 
 
 20,584 
 
 Other income 
 
 18,358 
 
 26,226 
 
 (7,868 
 ) 
 
 Total revenues 
 
 879,879 
 
 1,121,498 
 
 (241,619 
 ) 
 
 Expenses 
 
 Property operating expense 
 
 457,276 
 
 549,982 
 
 (92,706 
 ) 
 
 Interest expense 
 
 230,199 
 
 276,627 
 
 (46,428 
 ) 
 
 Investment and servicing expense 
 
 23,572 
 
 38,466 
 
 (14,894 
 ) 
 
 Transaction costs 
 
 496 
 
 2,822 
 
 (2,326 
 ) 
 
 Depreciation and amortization 
 
 271,763 
 
 220,734 
 
 51,029 
 
 Provision for loan loss 
 
 — 
 
 18,614 
 
 (18,614 
 ) 
 
 Impairment loss 
 
 2,388,825 
 
 110,317 
 
 2,278,508 
 
 Compensation expense—cash and equity-based 
 
 117,547 
 
 73,947 
 
 43,600 
 
 Compensation expense—carried interest and incentive fee 
 
 (10,343 
 ) 
 
 2,418 
 
 (12,761 
 ) 
 
 Administrative expenses 
 
 53,163 
 
 42,840 
 
 10,323 
 
 Settlement loss 
 
 5,090 
 
 — 
 
 5,090 
 
 Total expenses 
 
 3,537,588 
 
 1,336,767 
 
 2,200,821 
 
 Other income (loss) 
 
 Gain on sale of real estate 
 
 10,800 
 
 35,530 
 
 (24,730 
 ) 
 
 Other loss, net 
 
 (176,501 
 ) 
 
 (138,575 
 ) 
 
 (37,926 
 ) 
 
 Equity method losses 
 
 (256,833 
 ) 
 
 (225,225 
 ) 
 
 (31,608 
 ) 
 
 Equity method earnings (losses)—carried interest 
 
 (20,735 
 ) 
 
 6,732 
 
 (27,467 
 ) 
 
 Loss before income taxes 
 
 (3,100,978 
 ) 
 
 (536,807 
 ) 
 
 (2,564,171 
 ) 
 
 Income tax expense 
 
 (16,044 
 ) 
 
 (3,783 
 ) 
 
 (12,261 
 ) 
 
 Loss from continuing operations 
 
 (3,117,022 
 ) 
 
 (540,590 
 ) 
 
 (2,576,432 
 ) 
 
 Income (loss) from discontinued operations 
 
 (6,028 
 ) 
 
 25,789 
 
 (31,817 
 ) 
 
 Net loss 
 
 (3,123,050 
 ) 
 
 (514,801 
 ) 
 
 (2,608,249 
 ) 
 
 Net income (loss) attributable to noncontrolling interests: 
 
 Redeemable noncontrolling interests 
 
 (158 
 ) 
 
 1,953 
 
 (2,111 
 ) 
 
 Investment entities 
 
 (491,801 
 ) 
 
 36,574 
 
 (528,375 
 ) 
 
 Operating Company 
 
 (264,658 
 ) 
 
 (36,600 
 ) 
 
 (228,058 
 ) 
 
 Net loss attributable to Colony Capital, Inc. 
 
 (2,366,433 
 ) 
 
 (516,728 
 ) 
 
 (1,849,705 
 ) 
 
 Preferred stock dividends 
 
 37,990 
 
 54,275 
 
 (16,285 
 ) 
 
 Net loss attributable to common stockholders 
 
 $ 
 (2,404,423 
 ) 
 
 $ 
 (571,003 
 ) 
 
 (1,833,420 
 ) 
 
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 Property Operating Income and Property Operating Expenses 
 
 Six Months Ended June 30, 
 
 (In thousands) 
 
 2020 
 
 2019 
 
 Change 
 
 Property operating income: 
 
 Digital 
 
 $ 
 87,166 
 
 $ 
 — 
 
 $ 
 87,166 
 
 Healthcare 
 
 278,232 
 
 289,553 
 
 (11,321 
 ) 
 
 Hospitality 
 
 210,632 
 
 423,571 
 
 (212,939 
 ) 
 
 Other Equity and Debt 
 
 143,202 
 
 234,562 
 
 (91,360 
 ) 
 
 $ 
 719,232 
 
 $ 
 947,686 
 
 (228,454 
 ) 
 
 Property operating expenses: 
 
 Digital 
 
 $ 
 34,961 
 
 $ 
 — 
 
 $ 
 34,961 
 
 Healthcare 
 
 141,319 
 
 128,226 
 
 13,093 
 
 Hospitality 
 
 184,728 
 
 281,036 
 
 (96,308 
 ) 
 
 Other Equity and Debt 
 
 96,268 
 
 140,720 
 
 (44,452 
 ) 
 
 $ 
 457,276 
 
 $ 
 549,982 
 
 (92,706 
 ) 
 
 Digital— Amounts represent income and related operating expenses from our DataBank subsidiary that was acquired in December 2019, primarily in connection with colocation rent and data center services. 
 Healthcare— Property operating income decreased $11.3 million , driven by sales of 25 net lease properties in 2019 and one in the first quarter of 2020 , and to a lesser extent, lower rental income from lease restructurings on certain net leased senior housing and skilled nursing facilities . Property operating expenses increased $13.1 million , primarily due to incremental costs incurred in our senior housing facilities in response to COVID-19, and to a lesser extent, higher insurance premiums. A small portion of the incremental costs were abated by government stimulus funding under the CARES Act Provider Relief Fund , which partially offset the decrease in property operating income. Refer to further discussion in " —Segment Results—Healthcare." 
 Hospitality— Property operating income and expense decreased $212.9 million and $96.3 million , respectively. On a same store basis (excluding the effects of ten select service hotels sold in 2019), property operating income and expense decreased $193.8 million or 48% and $81.2 million or 31%, respectively. The decrease in income reflects the effects of COVID-19 with significant declines in room demand with an average occupancy of 44.4% , a decrease of 40% compared to the same period last year. This was further compounded by lower ADR resulting in RevPAR falling 47% compared to the same period last year. Although we have taken various steps to minimize non-essential operating expenses during this time, the decrease in operating expenses, as expected, was less pronounced as we continue to incur fixed operating costs. Notwithstanding the overall negative results for the second quarter of 2020, operations have recovered from the trough in April 2020 and have since trended positively through July 2020. Refer to further discussion in " —Segment Results—Hospitality." 
 Other Equity and Debt— Property operating income and expenses decreased $91.4 million and $44.5 million , respectively, driven by sales of limited service hotels in our THL Hotel Portfolio, U.S. multi-tenant offices and other properties in our European portfolio, as well as the effects of COVID-19 on the operating results of our THL Hotel Portfolio and a hotel in Spain. 
 Interest Income 
 Interest income decreased $25.9 million , attributed to loan payoffs and sales in 2019 and loans placed on nonaccrual in the second quarter of 2020 as the COVID-19 crisis has led to increased uncertainty over collectability. 
 Fee Income 
 Fee income is earned from the following sources: 
 
 Six Months Ended June 30, 
 
 (In thousands) 
 
 2020 
 
 2019 
 
 Change 
 
 Institutional funds and other investment vehicles 
 
 $ 
 61,813 
 
 $ 
 23,671 
 
 $ 
 38,142 
 
 Public companies (CLNC, and NRE prior to its sale in September 2019) 
 
 15,281 
 
 30,144 
 
 (14,863 
 ) 
 
 Non-traded REIT 
 
 8,862 
 
 10,095 
 
 (1,233 
 ) 
 
 Other 
 
 1,089 
 
 2,551 
 
 (1,462 
 ) 
 
 $ 
 87,045 
 
 $ 
 66,461 
 
 20,584 
 
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 Total fee income increased $20.6 million resulting from: 
 
 • 
 net increase of $38.1 million in fees from institutional funds and investment vehicles, driven by $40.2 million of fees from DBH (50% of fees from DCP was recognized as equity method income prior to acquisition of DBH) and Colony Latam, which were acquired in July 2019 and April 2019, respectively, partially offset by decreases in fees from liquidating funds; 
 
 The increase in fees from institutional funds and investment vehicles was partially offset by: 
 
 • 
 $6.4 million decrease in fees from Colony Credit due to a lower stockholders' equity fee base; 
 
 • 
 $7.7 million of fees from NRE in 2019 prior to its sale in September 2019; 
 
 • 
 $1.1 million decrease in fees from NorthStar Healthcare following a decrease in its NAV fee basis effective December 2019; and 
 
 • 
 $1.5 million decrease in other fees related primarily to advisory fees earned in the second quarter of 2019. 
 
 Other Income 
 Other income decreased $7.9 million , attributed primarily to (i) lower other income in connection with CLNC equity awards that were remeasured at fair value based upon CLNC's stock price at period end, and other income recognized in 2019 in relation to NRE equity awards, with such amounts correspondingly recognized in equity-based compensation, as a gross-up of income and expense (refer to Note 19 to the consolidated financial statements for a description of the accounting treatment of managed company awards); and (ii) lower cost reimbursement from affiliates. These decreases were partially offset by hotel management fee income in the first quarter of 2020 from our acquisition of a distressed hotel manager in France in July 2019 within our other equity and debt segment. 
 Interest Expense 
 
 Six Months Ended June 30, 
 
 (In thousands) 
 
 2020 
 
 2019 
 
 Change 
 
 Investment-level financing: 
 
 Digital 
 
 $ 
 17,586 
 
 $ 
 — 
 
 $ 
 17,586 
 
 Healthcare 
 
 74,565 
 
 104,662 
 
 (30,097 
 ) 
 
 Hospitality 
 
 69,678 
 
 83,656 
 
 (13,978 
 ) 
 
 Other Equity and Debt 
 
 38,271 
 
 61,069 
 
 (22,798 
 ) 
 
 Corporate-level debt 
 
 30,099 
 
 27,240 
 
 2,859 
 
 $ 
 230,199 
 
 $ 
 276,627 
 
 (46,428 
 ) 
 
 Net decrease in interest expense $46.4 million is attributed to the following: 
 Digital— Amount represents interest expense on debt assumed from our DataBank subsidiary that was acquired in December 2019. 
 Healthcare— Interest expense was $30.1 million lower as a result of: (i) decrease in LIBOR on predominantly variable rate debt; (ii) interest expense recognized in the second quarter of 2019 from the write-off of debt discount in connection with a June 2019 refinancing; and (iii) debt repayment upon sale of non-core properties in 2019. These decreases were partially offset by interest expense recognized from amortization of deferred financing costs incurred in connection with the June 2019 refinancing. 
 Hospitality— Interest expense decreased $14.0 million , driven by a decline in LIBOR on predominantly variable rate debt on our hotel portfolio, partially offset by additional debt obtained in connection with debt refinancing in 2019 and higher deferred financing costs expensed as a result of the refinancing. 
 Other Equity and Debt— Interest expense decreased $22.8 million due to a decline in LIBOR and debt payoffs from sale of properties and resolution of loans receivable. 
 Corporate-level Debt— Interest expense increased $2.9 million as a result of writing off a portion of deferred financing costs on our corporate credit facility to reflect a reduction in the facility amount in June 2020, along with a higher average outstanding balance on the facility in 2020. This increase was partially offset by the effect of a decline in LIBOR on our junior subordinated debt and lower unused fees on our credit facility. 
 Investment and Servicing Expense 
 Investment and servicing costs were $14.9 million lower, attributed primarily to costs related to refinancing of our healthcare debt in 2019, higher unconsummated deal costs in 2019 and lower hotel asset management and incentive fees 
 
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 in 2020, which corresponds to the decline in hotel revenues, partially offset by higher investment expenses incurred by our European portfolio. 
 Transaction Costs 
 The higher transaction costs in 2019 of $2.8 million related to our acquisition of the Latin American investment management business of The Abraaj Group and acquisition of a hotel portfolio in France through a joint venture. 
 Depreciation and Amortization 
 Higher depreciation and amortization expense is attributed to real estate and intangible assets acquired from DataBank in December 2019 and DBH in July 2019, as well as capital improvements and fixed asset additions to our hotel properties that were completed throughout 2019 and beginning of 2020. These increases were partially offset by sales of non-core properties, lower real estate basis after impairment charges in 2019, termination of NRE management contract in September 2019 and write-down of NorthStar Healthcare management contract in December 2019. 
 Impairment Loss 
 
 Six Months Ended June 30, 
 
 (In thousands) 
 
 2020 
 
 2019 
 
 Change 
 
 Healthcare 
 
 $ 
 709,787 
 
 $ 
 51,324 
 
 $ 
 658,463 
 
 Hospitality 
 
 910,913 
 
 4,270 
 
 906,643 
 
 Other Equity and Debt 
 
 161,828 
 
 54,074 
 
 107,754 
 
 Other Investment Management 
 
 594,000 
 
 — 
 
 594,000 
 
 Unallocated 
 
 12,297 
 
 649 
 
 11,648 
 
 $ 
 2,388,825 
 
 $ 
 110,317 
 
 2,278,508 
 
 Impairment loss attributable to noncontrolling interests in investment entities 
 
 $ 
 319,974 
 
 $ 
 51,346 
 
 268,628 
 
 Impairment loss on real estate and goodwill are discussed further in Notes 4 and 7 , respectively, to the consolidated financial statements. 
 Healthcare and Hospitality— In 2020, we recognized impairment of $709.8 million on healthcare assets and $910.9 million on hotel assets, resulting from shortened holding period assumptions, 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 . This resulted in a shortfall in projected 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 , such that the carrying value of these assets would not be recoverable. 
 In 2019, impairment of (i) $51.3 million on healthcare assets was based upon a negotiated purchase option exercised by a tenant on three hospitals and preliminary offers received on certain net lease properties, all of which have since been sold; and (ii) $4.3 million on hotel assets was based upon revised expected sales prices or final net proceeds from sale. 
 Other Equity and Debt— Impairment was $107.8 million higher, attributed to write-downs in 2020 on the THL Hotel Portfolio and office properties in the U.S, partially offset by a net decrease in impairment on our European portfolio. The higher impairment in 2020 was driven by a shortened holding period assumption due to the Company's accelerated digital transformation or risk of default on non-recourse investment level debt; and/or the economic effects of COVID-19 on property operating cash flows and market values . 
 Other Investment Management— Goodwill in the other investment management segment was written down by $594 million , driven by acceleration of the Company's digital transformation and significant reduction in the value of its non-digital balance sheet assets . 
 Unallocated— Impairment was recorded on the corporate aircraft in 2020 to reflect recoverable value based upon a shortened holding period and on an office operating lease asset in 2019. 
 
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 Compensation Expense 
 The following table provides the components of compensation expense. 
 
 Six Months Ended June 30, 
 
 (In thousands) 
 
 2020 
 
 2019 
 
 Change 
 
 Cash compensation and benefits 
 
 $ 
 99,262 
 
 $ 
 54,086 
 
 $ 
 45,176 
 
 Equity-based compensation 
 
 18,671 
 
 13,491 
 
 5,180 
 
 Incentive and carried interest compensation 
 
 (10,343 
 ) 
 
 2,418 
 
 (12,761 
 ) 
 
 107,590 
 
 69,995 
 
 37,595 
 
 Compensation grossed up in income and expense 
 
 Equity-based compensation—CLNC and NRE (prior to September 2019) awards 
 
 (386 
 ) 
 
 6,370 
 
 (6,756 
 ) 
 
 Total compensation expense 
 
 $ 
 107,204 
 
 $ 
 76,365 
 
 30,839 
 
 Total compensation expense increased $30.8 million , attributed primarily to (i) additional compensation cost following the consolidation of DBH and DataBank, acquired in July and December 2019, respectively; and (ii) $6.6 million of severance related costs incurred in the second quarter of 2020 in connection with our new cost reduction initiative. These increases were partially offset by a decrease in compensation cost following the cost reduction initiative, sales of NRE in September 2019 and our industrial business in December 2019, and reversals of carried interest compensation and equity-based compensation on CLNC awards in 2020 (refer to discussion in Other Income ). 
 Administrative Expenses 
 Administrative expense was $10.3 million higher, largely attributable to higher professional service costs and additional expenses in connection with businesses acquired in 2019, partially offset by savings in business travel and office costs resulting from efforts to reduce the spread of COVID-19. 
 Settlement Loss 
 Amount represents fair value of the settlement arrangement with Blackwells at inception in March 2020, including reimbursement of legal costs. Refer to additional discussion in Note 12 to the consolidated financial statements. 
 Gain on Sale of Real Estate 
 There were higher gains in 2019 from sales of our European properties and U.S. multi-tenant office buildings. The pace of dispositions have slowed considerably in 2020 given the current global economic downturn resulting from efforts to contain COVID-19. 
 Gain on sale of $7.4 million and $34.7 million in the six months ended June 30, 2020 and 2019 , respectively, were attributable to noncontrolling interests in investment entities. 
 Equity Method Earnings (Losses) 
 
 Six Months Ended June 30, 
 
 (In thousands) 
 
 2020 
 
 2019 
 
 Change 
 
 Digital 
 
 $ 
 8,408 
 
 $ 
 6,423 
 
 $ 
 1,985 
 
 CLNC 
 
 (360,310 
 ) 
 
 (262,399 
 ) 
 
 (97,911 
 ) 
 
 Other Equity and Debt 
 
 (10,824 
 ) 
 
 50,206 
 
 (61,030 
 ) 
 
 Other Investment Management (including carried interest reversal $20,735 and income of $6,732, respectively) 
 
 85,158 
 
 (12,723 
 ) 
 
 97,881 
 
 $ 
 (277,568 
 ) 
 
 $ 
 (218,493 
 ) 
 
 (59,075 
 ) 
 
 Digital— Amounts represent net earnings from interests in (i) our sponsored DCP fund; (ii) through July 2019, Digital Colony Manager, the manager of DCP, prior to its consolidation upon acquisition of DBH; and beginning March 31, 2020, existing Colony investment vehicles that were repurposed to execute an investment strategy focused around the digital sector. 
 CLNC— We recorded other-than-temporary impairment on our investment in CLNC of $274.7 million in 2020 and $227.9 million in 2019. 
 Our interest in CLNC also generated net loss of $85.6 million in 2020 (inclusive of $27.9 million adjustment to reduce the basis difference allocated to non-strategic assets resolved during the six months ended June 30, 2020 ) and net loss of $34.5 million in 2019. CLNC's net losses were driven by allowance for loan losses, impairment or unrealized fair value 
 
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 losses on investments, and realized losses from sale of investments and unwinding of hedge positions, further affected by COVID-19 in 2020 . 
 Refer to Note 6 to the consolidated financial statements for further discussion of the CLNC impairment and basis adjustment. 
 Other Equity and Debt —Equity method losses in 2020 compared to earnings in 2019, resulting in a decrease of $61.0 million , arose from impairment of an investee based upon projected exit strategy, decrease in fair value of investments under the fair value option and our share of investee net losses, all of which reflect the economic effects of COVID-19. To a lesser extent, there was also a loss of earnings from investments that were resolved or sold in 2019, partially offset by income from additional acquisition, development and construction ("ADC") loan disbursements. 
 Other Investment Management— Equity method net income in 2020 was driven by a $106.1 million gain from sale of our equity investment in RXR Realty in February 2020, partially offset by a reversal of unrealized carried interest allocation. In comparison, equity method net loss was incurred in 2019, driven by impairment charge on an investee that has since been sold, partially offset by unrealized carried interest income. 
 Other Loss, Net 
 We recognized other net loss of $176.5 million in 2020 and $138.6 million in 2019, driven primarily by the following: 
 Six Months Ended June 30, 2020 
 
 • 
 $281.3 million ($227.6 million attributable to noncontrolling interests in investment entities) of net unrealized losses on loans receivable carried at fair value as recoverability is affected by increasing uncertainty and deterioration in the economic environment arising from the effects of COVID-19 (fair value option was elected on loans receivable beginning 2020); and 
 
 • 
 $22.2 million of unrealized credit losses on CRE debt securities; partially offset by 
 
 • 
 realized gain of $60.7 million and recognition of future profit allocation at fair value of $66.0 million ( $33.7 million attributable to noncontrolling interests in investment entities) from recapitalization of our co-investment venture which holds common equity in the Albertsons supermarket chain (refer to Note 6 to the consolidated financial statements). 
 
 Six Months Ended June 30, 2019 
 
 • 
 unrealized loss of $146.1 million on a non-designated interest rate swap assumed through the Merger that was intended to hedge future refinancing on certain healthcare mortgage debt. Such debt was refinanced in June 2019 and the swap was terminated at the end of 2019. 
 
 Income Tax Expense 
 Income tax expense was $12.3 million higher, attributed primarily to (i) valuation allowances established against deferred tax asset in the hospitality and healthcare segments as a result of uncertainties in future realization of net operating losses, taking into consideration the impairment of assets in these segments; (ii) tax liability on the gain from sale of our equity investment in RXR Realty in February 2020; partially offset by (iii) deferred tax benefit recognized in connection with our DataBank subsidiary acquired in December 2019 and taxable losses in the other investment management segment in the second quarter of 2020. 
 Income (Loss) from Discontinued Operations 
 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 . Refer to Note 16 to the consolidated financial statements. 
 
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 Assets Under Management ("AUM") and Fee Earning Equity Under Management ("FEEUM") 
 Below is a summary of our third party AUM and FEEUM for our digital and other investment management business. 
 
 AUM (1) (In billions) 
 
 FEEUM (2) (In billions) 
 
 Type 
 
 Products 
 
 Description 
 
 June 30, 2020 
 
 December 31, 2019 (3) 
 
 June 30, 2020 
 
 December 31, 2019 (3) 
 
 Digital segment 
 
 Other Investment Vehicles 
 
 Digital real estate and infrastructure 
 
 Earns base management fees and service fees; potential for carried interest from DCP 
 
 $ 
 21.0 
 
 $ 
 13.5 
 
 $ 
 7.8 
 
 $ 
 6.8 
 
 Other Investment Management segment 
 
 Institutional funds 
 
 Credit funds, opportunistic funds, value-add funds and other co-investment vehicles 
 
 Earns base and asset management fees from all managed funds; potential for carried interest on sponsored funds 
 
 8.5 
 
 8.5 
 
 5.6 
 
 5.6 
 
 Retail Companies 
 
 NorthStar Healthcare 
 
 Earns base management fees and potential for carried interest 
 
 3.4 
 
 3.4 
 
 1.2 
 
 1.2 
 
 Public Companies 
 
 Colony Credit Real Estate, Inc. (4) 
 
 NYSE-listed credit REIT 
 
 3.0 
 
 3.5 
 
 1.7 
 
 2.2 
 
 Earns base management fees and potential for incentive fees 
 
 Subtotal - Other Investment Management segment 
 
 14.9 
 
 15.4 
 
 8.5 
 
 9.0 
 
 Total Company 
 
 $ 
 35.9 
 
 $ 
 28.9 
 
 $ 
 16.3 
 
 $ 
 15.8 
 
 __________ 
 
 (1) 
 Assets for which the Company and its affiliates provide investment management services, including assets for which the Company may or may not charge management fees and/or performance allocations. AUM is based on the cost basis of managed investments as reported by each underlying vehicle as of the end of the reporting period and includes uncalled capital commitments. The Company's calculations of AUM may differ from other asset managers, and as a result, may not be comparable to similar measures presented by other asset managers. 
 
 (2) 
 Equity for which the Company and its affiliates provide investment management services and derive management fees and/or incentives. FEEUM generally represents the basis used to derive fees, which may be based upon invested equity, stockholders’ equity, or fair value pursuant to the terms of each underlying investment management agreement. The Company's calculation of FEEUM may differ from other asset managers, and as a result, may not be comparable to similar measures presented by other asset managers. 
 
 (3) 
 Effective June 30, 2020, we no longer include the Company's share of AUM and FEEUM managed by third party asset managers in which we have an equity interest. AUM and FEEUM for December 31, 2019 have been revised to conform to the current definition. 
 
 (4) 
 Represents third party ownership share of CLNC's pro rata share of total assets, excluding consolidated securitization trusts. 
 
 • 
 Total third party FEEUM increased $0.5 billion to $16.3 billion at June 30, 2020 . 
 
 • 
 There was a $1.0 billion increase in our digital FEEUM, of which $0.7 billion arose from DCP's acquisition in February 2020 of Zayo Group Holdings, Inc., a provider of bandwidth infrastructure services in the United States and Europe. Zayo, formerly a publicly-traded company, was taken private as part of the acquisition by DCP. 
 
 • 
 This increase was partially offset by a $0.4 billion decrease in FEEUM from CLNC as a result of a decrease in CLNC's asset values. 
 
 • 
 With the raising of third party capital alongside our balance sheet investment in Vantage's portfolio of stabilized hyperscale data centers in July 2020, our third party digital AUM and FEEUM have increased to $21.6 billion and $8.3 billion, respectively. 
 
 Segments 
 The following discussion summarizes key information on our reportable segments. 
 
 Digital Real Estate and Investment Management ("Digital") 
 Digital is a new segment for the Company effective the fourth quarter of 2019, and is where we expect substantial growth to take place, both in terms of the balance sheet and investment management through (a) further investment of capital into digital real estate and infrastructure assets and GP co-investments and (b) net inflows of third-party capital into digital-related investment strategies sponsored by the Company. 
 Our digital segment is composed of the following as of June 30, 2020 : 
 
 • 
 Digital real estate— A 20% controlling interest in DataBank, acquired in December 2019. DataBank is a leading provider of enterprise-class data centers, connectivity and managed services. 
 
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 DataBank owns eight data centers, having completed the construction of a new data center in the second quarter of 2020, and have leasehold interests in 12 data centers, operating in nine U.S. markets. This is our inaugural direct balance sheet investment in digital real estate and represents our first step in investing in the edge/colocation data center sector, which will support future growth opportunities through potential add-on acquisitions and greenfield edge data center developments. We earn rental and service income from providing use of space and/or capacity in our digital assets through long-term contracts and related service orders . 
 
 • 
 Digital investment management— DBH investment management business, acquired in July 2019, which currently manages DCP and six digital real estate portfolio companies, including DataBank. 
 
 At June 30, 2020 , our digital FEEUM totaled $7.8 billion . Investment management products may include investment vehicles for co - investment partnerships and other managed assets, and digital credit and liquid securities products in the future. 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. 
 
 • 
 Digital equity investments— DCP, our first sponsored digital real estate and infrastructure fund, which had its final closing in May 2019; and interests in existing Colony investment vehicles that were repurposed to execute an investment strategy focused around the digital sector. 
 
 DCP has total commitments of $4.06 billion, including our $250 million commitment, of which we have funded $115 million through June 30, 2020 . Refer to discussion of the Wafra transaction below in connection with our capital commitments to DCP. As of August 4, 2020 , DCP has called 77% of commitments, and is invested in ten geographically diversified portfolio companies across North America, South America, and Europe, composed of the digital infrastructure ecosystem of cell towers, data centers, small cells and fiber networks. 
 Acceleration of Our Digital Transformation 
 Strategic Partnership in Our Digital Investment Management Business 
 On July 17, 2020, we formed a strategic partnership with Wafra in which Wafra made a minority investment representing an approximate 31.5% interest in our Digital IM Business. Wafra paid a consideration of $254 million for its investment in the Digital IM Business and for warrants issued by the Company to Wafra (assuming the consideration excludes the warrants, this implies an approximately $805 million valuation of 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 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. Wafra's investment provides us with permanent capital to pursue strategic digital infrastructure investments and grow the Digital IM Business. Refer to Note 24 to the consolidated financial statements for further discussion of the Wafra transaction. 
 Investment in Hyperscale Data Centers 
 On July 22, 2020, alongside an approximate $1 billion of fee bearing third party capital that we raised, we invested $1.21 billion for an approximate 80% equity stake in Vantage's portfolio of 12 stabilized hyperscale data centers in North America. Our balance sheet investment is $185 million, which represents a 12.3% interest. Following the closing of this transaction, our digital FEEUM increased to $8.3 billion. This investment is our second significant balance sheet investment in a digital operating business and achieves our transformation goals on two fronts, that is the rotation of our balance sheet to digital assets and growing our digital investment management business. 
 
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 Balance Sheet Information 
 The following table presents key balance sheet data of our digital segment: 
 
 (In thousands) 
 
 June 30, 2020 
 
 December 31, 2019 
 
 Real estate held for investment 
 
 $ 
 845,146 
 
 $ 
 846,393 
 
 Deferred leasing costs and identifiable intangibles, net (excluding goodwill) 
 
 Lease intangibles, customer relationships and trade name 
 
 179,338 
 
 195,291 
 
 Investment management intangibles 
 
 149,753 
 
 162,878 
 
 Equity investments 
 
 241,535 
 
 47,891 
 
 Secured debt 
 
 515,007 
 
 539,155 
 
 The increase in equity investments reflect additional funding in DCP, and interests in existing Colony investment vehicles that were repurposed to execute an investment strategy focused on the digital sector effective March 31, 2020. 
 Operating Performance 
 Results of operations of our digital segment are as follows. 
 
 (In thousands) 
 
 Total Revenues (1) 
 
 Net Income (Loss) 
 
 Net Income (Loss) Attributable to Colony Capital, Inc. 
 
 Three Months Ended June 30, 
 
 2020 
 
 2019 
 
 2020 
 
 2019 
 
 2020 
 
 2019 
 
 Digital real estate 
 
 $ 
 42,021 
 
 $ 
 — 
 
 $ 
 (21,142 
 ) 
 
 $ 
 — 
 
 $ 
 (3,795 
 ) 
 
 $ 
 — 
 
 Digital investment management 
 
 20,729 
 
 — 
 
 2,304 
 
 1,833 
 
 1,346 
 
 1,723 
 
 Digital equity investments 
 
 663 
 
 — 
 
 12,292 
 
 124 
 
 10,968 
 
 116 
 
 Total 
 
 $ 
 63,413 
 
 $ 
 — 
 
 $ 
 (6,546 
 ) 
 
 $ 
 1,957 
 
 $ 
 8,519 
 
 $ 
 1,839 
 
 Six Months Ended June 30, 
 
 Digital real estate 
 
 $ 
 87,188 
 
 $ 
 — 
 
 $ 
 (39,437 
 ) 
 
 $ 
 — 
 
 $ 
 (7,587 
 ) 
 
 $ 
 — 
 
 Digital investment management 
 
 39,908 
 
 — 
 
 4,414 
 
 4,814 
 
 3,867 
 
 4,523 
 
 Digital equity investments 
 
 823 
 
 — 
 
 9,257 
 
 159 
 
 8,481 
 
 149 
 
 Total 
 
 $ 
 127,919 
 
 $ 
 — 
 
 $ 
 (25,766 
 ) 
 
 $ 
 4,973 
 
 $ 
 4,761 
 
 $ 
 4,672 
 
 _________ 
 
 (1) 
 Digital real estate revenues in the second quarter of 2020 included the effects of purchase price allocation adjustments to the amortization of above/below-market lease intangibles (see Note 3 to the consolidated financial statements) which reduced revenues by $3.2 million. 
 
 • 
 Prior to July 2019, our digital segment generated only equity method earnings from our 50% interest in Digital Colony Manager which manages DCP, and from our interest in DCP. Digital Colony Manager was consolidated upon acquisition of DBH. 
 
 • 
 Revenues from our digital segment in 2020 represent primarily property operating income from DataBank, acquired in December 2019, and fee income from DBH, acquired in July 2019. 
 
 • 
 Digital real estate— The net loss from our DataBank business in 2020 includes the effect of interest expense from debt financing, and depreciation and amortization expense. Operating results of DataBank excluding these effects are presented below as earnings before interest, tax and depreciation for real estate ("EBITDA re "). 
 
 • 
 Digital investment management— While fee income from our digital investment management business is trending positively in 2020, operating margins have a seen a decline as we ramp up resources to support future investment product offerings. 
 
 • 
 Digital equity investments— Net income from digital equity investments in 2020 includes the results of existing Colony investment vehicles that were repurposed to execute an investment strategy focused on the digital sector, and more notable contributions from DCP as the fund ramps up its investing activities, in particular contribution from DCP's Zayo co-investment that closed in February 2020. 
 
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 Earnings Before Interest, Tax and Depreciation for Real Estate 
 EBITDA re generated by our digital real estate business, which currently consists of DataBank, is as follows. A reconciliation of the most directly comparable GAAP measure to EBITDA re is presented in " —Non-GAAP Supplemental Financial Measures. " 
 
 Digital Real Estate 
 
 (In thousands) 
 
 Three Months Ended June 30, 2020 
 
 Six Months Ended June 30, 2020 
 
 Total revenues 
 
 $ 
 42,021 
 
 $ 
 87,188 
 
 Property operating expenses 
 
 (18,055 
 ) 
 
 (34,961 
 ) 
 
 Transaction, investment and servicing costs 
 
 (576 
 ) 
 
 (773 
 ) 
 
 Compensation and administrative expense 
 
 (10,464 
 ) 
 
 (23,120 
 ) 
 
 EBITDA re —Digital real estate 
 
 $ 
 12,926 
 
 $ 
 28,334 
 
 Healthcare 
 Our healthcare segment is composed of a diverse portfolio of senior housing facilities, skilled nursing facilities, medical office buildings and hospitals. We earn rental income from our senior housing facilities, skilled nursing facilities and hospitals that are under net leases to single tenants/operators and from medical office buildings which are both single tenant and multi-tenant. In addition, we earn resident fee income from senior housing facilities that are managed by operators under a RIDEA structure, which effectively allows us to gain financial exposure to the underlying operations of the facility in a tax efficient manner versus receiving contractual rent under a net lease arrangement. 
 We own between 69.6% and 81.3% of the various portfolios within our healthcare segment. 
 Portfolio Overview 
 Our healthcare portfolio is located across 32 states domestically and in the United Kingdom (representing 17% of our portfolio based upon NOI for the second quarter of 2020). 
 The following table presents key balance sheet data of our healthcare segment: 
 
 (In thousands) 
 
 June 30, 2020 
 
 December 31, 2019 
 
 Real estate 
 
 Held for investment 
 
 $ 
 3,638,987 
 
 $ 
 4,433,825 
 
 Held for sale 
 
 46,259 
 
 57,664 
 
 Debt 
 
 2,884,765 
 
 2,910,032 
 
 The following table presents selected operating metrics of our healthcare segment: 
 
 Number of Properties 
 
 Capacity 
 
 Average Occupancy (1) 
 
 Average Remaining Lease Term (Years) 
 
 June 30, 2020 
 
 Senior housing — operating (2)(3) 
 
 89 
 
 6,898 units 
 
 79.3 
 % 
 
 N/A 
 
 Medical office buildings 
 
 106 
 
 3.8 million sq. ft. 
 
 83.4 
 % 
 
 4.5 
 
 Net lease—senior housing (2) 
 
 65 
 
 3,529 units 
 
 83.5 
 % 
 
 11.9 
 
 Net lease—skilled nursing facilities 
 
 88 
 
 10,458 beds 
 
 82.5 
 % 
 
 5.3 
 
 Net lease—hospitals 
 
 9 
 
 456 beds 
 
 66.9 
 % 
 
 9.9 
 
 Total 
 
 357 
 
 December 31, 2019 
 
 Senior housing — operating 
 
 83 
 
 6,388 units 
 
 86.5 
 % 
 
 N/A 
 
 Medical office buildings 
 
 106 
 
 3.8 million sq. ft. 
 
 82.2 
 % 
 
 4.8 
 
 Net lease—senior housing 
 
 71 
 
 4,039 units 
 
 80.7 
 % 
 
 11.5 
 
 Net lease—skilled nursing facilities 
 
 89 
 
 10,601 beds 
 
 82.7 
 % 
 
 5.8 
 
 Net lease—hospitals 
 
 9 
 
 456 beds 
 
 58.0 
 % 
 
 10.3 
 
 Total 
 
 358 
 
 __________ 
 
 (1) 
 Occupancy represents the property operator's patient occupancy for all types except medical office buildings. Average occupancy is based upon the number of units, beds or square footage by type of facility. Occupancy percentages are presented as follows: (i) as of the last day of the quarter for 
 
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 medical office buildings; (ii) average for the quarter for senior housing — operating; and (iii) average of the prior quarter for net lease properties as our operators report on a quarter lag. 
 
 (2) 
 Six senior housing properties were transitioned from net leases into operating properties in the second quarter of 2020. 
 
 (3) 
 In August 2020, 36 properties, along with the underlying debt, were indirectly conveyed to an affiliate of a lender, as discussed further below. 
 
 Held for Sale and Dispositions 
 We sold a portfolio of net lease skilled nursing facilities totaling 143 beds and a land parcel in the first quarter of 2020 in our effort to monetize non-core assets in our healthcare segment. We received gross proceeds of $7.5 million, from which we paid off $6.5 million of associated debt. 
 At June 30, 2020 , real estate properties with aggregate carrying value of $46.3 million were held for sale, comprising one portfolio of net lease skilled nursing facilities totaling 766 beds that was encumbered with $45.1 million of debt. 
 Financing 
 At June 30, 2020 , our healthcare portfolio was financed by $2.92 billion of outstanding debt principal, of which $0.4 billion was fixed rate debt and $2.52 billion was variable rate debt, bearing a combined weighted average interest rate of 3.88% per annum. 
 Of the total healthcare debt at June 30, 2020 , $203.0 million was in default. Subsequently, 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. As of the date of this filing, $45.1 million of healthcare debt remains in default. 
 Operating Performance 
 Results of operations of our healthcare segment are as follows: 
 
 Three Months Ended June 30, 
 
 Six Months Ended June 30, 
 
 (In thousands) 
 
 2020 
 
 2019 
 
 Change 
 
 2020 
 
 2019 
 
 Change 
 
 Total revenues 
 
 $ 
 142,680 
 
 $ 
 145,896 
 
 $ 
 (3,216 
 ) 
 
 $ 
 281,862 
 
 $ 
 291,670 
 
 $ 
 (9,808 
 ) 
 
 Net loss 
 
 (680,140 
 ) 
 
 (81,520 
 ) 
 
 (598,620 
 ) 
 
 (744,285 
 ) 
 
 (88,726 
 ) 
 
 (655,559 
 ) 
 
 Net loss attributable to Colony Capital, Inc. 
 
 (434,410 
 ) 
 
 (58,616 
 ) 
 
 (375,794 
 ) 
 
 (482,422 
 ) 
 
 (66,078 
 ) 
 
 (416,344 
 ) 
 
 Operating results at the property level are discussed under NOI below. Results summarized above include the effects of interest expense from mortgage financing, impairment charges and depreciation and amortization expense on our healthcare portfolio, which are discussed in " —Results of Operations. " 
 While there was a loss of earnings from sales of net leased properties in 2019 and operating profits declined in 2020, as discussed below, the net losses in all periods were driven by significant impairment charges, in particular $661.3 million and $709.8 million in the three and six months ended June 30, 2020 , respectively, due to a shortened holding period assumption. 
 Net Operating Income 
 NOI for our healthcare segment is derived as follows and reconciled to the most directly comparable GAAP measure in " —Non-GAAP Supplemental Financial Measures. " 
 
 Three Months Ended June 30, 
 
 Six Months Ended June 30, 
 
 (In thousands) 
 
 2020 
 
 2019 
 
 2020 
 
 2019 
 
 Total revenues 
 
 $ 
 142,680 
 
 $ 
 145,896 
 
 $ 
 281,862 
 
 $ 
 291,670 
 
 Straight-line rent and amortization of above- and below-market lease intangibles and ground lease asset 
 
 (8,071 
 ) 
 
 (4,817 
 ) 
 
 (12,037 
 ) 
 
 (10,044 
 ) 
 
 Interest income 
 
 (71 
 ) 
 
 — 
 
 (98 
 ) 
 
 — 
 
 Other income 
 
 — 
 
 (36 
 ) 
 
 — 
 
 (36 
 ) 
 
 Property operating expenses 
 
 (74,752 
 ) 
 
 (63,924 
 ) 
 
 (141,319 
 ) 
 
 (128,226 
 ) 
 
 NOI—Healthcare 
 
 $ 
 59,786 
 
 $ 
 77,119 
 
 $ 
 128,408 
 
 $ 
 153,364 
 
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 NOI by healthcare portfolio is as follows: 
 
 Three Months Ended June 30, 
 
 Change 
 
 Six Months Ended June 30, 
 
 Change 
 
 ($ in thousands) 
 
 2020 
 
 2019 
 
 $ 
 
 % 
 
 2020 
 
 2019 
 
 $ 
 
 % 
 
 Senior housing—operating 
 
 $ 
 8,987 
 
 $ 
 16,468 
 
 $ 
 (7,481 
 ) 
 
 (45.4 
 )% 
 
 $ 
 25,840 
 
 $ 
 33,803 
 
 $ 
 (7,963 
 ) 
 
 (23.6 
 )% 
 
 Medical office buildings 
 
 13,368 
 
 13,481 
 
 (113 
 ) 
 
 (0.8 
 )% 
 
 26,359 
 
 25,905 
 
 454 
 
 1.8 
 % 
 
 Net lease—senior housing 
 
 12,845 
 
 15,290 
 
 (2,445 
 ) 
 
 (16.0 
 )% 
 
 27,149 
 
 30,669 
 
 (3,520 
 ) 
 
 (11.5 
 )% 
 
 Net lease—skilled nursing facilities 
 
 22,572 
 
 26,895 
 
 (4,323 
 ) 
 
 (16.1 
 )% 
 
 45,095 
 
 52,639 
 
 (7,544 
 ) 
 
 (14.3 
 )% 
 
 Net lease—hospitals 
 
 2,014 
 
 4,985 
 
 (2,971 
 ) 
 
 (59.6 
 )% 
 
 3,965 
 
 10,348 
 
 (6,383 
 ) 
 
 (61.7 
 )% 
 
 NOI—Healthcare 
 
 $ 
 59,786 
 
 $ 
 77,119 
 
 (17,333 
 ) 
 
 (22.5 
 )% 
 
 $ 
 128,408 
 
 $ 
 153,364 
 
 (24,956 
 ) 
 
 (16.3 
 )% 
 
 NOI decreased $17.3 million and $25.0 million in the three and six months ended June 30, 2020 , respectively, of which $5.7 million and $11.5 million, respectively, are attributed to the sales of 25 net lease properties in 2019 and one in the first quarter of 2020 . 
 The remaining decrease in NOI resulted primarily from: 
 
 • 
 lower rental income from lease restructurings on certain net leased senior housing and skilled nursing facilities ; and 
 
 • 
 in our senior housing operating portfolio, resident fee income decreased as occupancy declined while operating costs increased, both as a result of COVID-19, as discussed further below. 
 
 Effects of COVID-19 on our Healthcare Segment 
 Our first priority has been, and continues to be, the health and safety of the residents and staff at our communities. We remain focused on supporting our operating partners during this challenging time. Concurrently, we are actively managing capital needs and liquidity to mitigate the financial impact of COVID-19 on our healthcare business. 
 At this time, we understand from our operators and managers that our communities as a whole continue to experience a moderate level of confirmed COVID-19 cases. The incidence of confirmed cases in our portfolio may continue and could accelerate depending on the duration, scope and depth of COVID-19 . 
 The effect of COVID-19 varies by asset class in the Company's healthcare portfolio. Specifically, efforts to address COVID-19 have in some cases forced temporary closures of medical offices, restricted the admission of new residents to senior housing facilities, especially in communities that have experienced infections, and caused incurrence of unanticipated costs and other business disruptions. The Company will be directly impacted by these factors in its RIDEA assets, and indirectly impacted in its net leased assets as these factors influence tenants’ ability to pay rent. 
 
 • 
 In our medical office portfolio, beginning in April 2020, a number of tenants failed to make rent payments or make timely payments, and some sought more flexible payment terms or rent concessions as a result of the COVID-19 crisis. 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. The Company has agreed to provide the affected tenants with a deferral of rent, generally for two to three months, with deferred rent to be repaid in monthly installments over periods of four to 18 months. This resulted in an increase in lease income receivable totaling $0.3 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 our senior housing operating portfolio, statutory or self-imposed restrictions began to limit admission of new residents into our communities starting in March 2020 in an effort to contain COVID-19. Also, we continue to face challenges from existing communities that have experienced infections, heightened risk of resident and staff illness and resident move-outs, particularly in those communities that have experienced infections. There is typically a period of time where restrictions on admissions continue to be imposed in communities that have experienced infections until such time that infections are no longer detected. As a result, we anticipate a decline in occupancy to continue as the rate of resident move-outs continue to outpace new resident admissions. 
 
 • 
 Operating costs in our senior housing operating portfolio have risen as our healthcare operators take action to protect their residents and staff, specifically higher labor costs, as well as higher usage and cost of personal protective equipment, and medical and sanitation supplies. We incurred $7.7 million of such incremental costs in 
 
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 the second quarter of 2020, of which $1.6 million was abated through government stimulus funding under the CARES Act Provider Relief Fund . 
 The challenges faced by our healthcare operators and our tenants as a result of COVID-19 will continue to put pressure on future revenues and operating margins in our healthcare segment. 
 As necessary, we will engage in discussions with our lenders on the deferral of payment obligations, and/or waiver of defaults for any potential failure in the future to satisfy certain financial or other covenants. 
 Given the ongoing nature of the pandemic, the extent of the financial effects and how prolonged the effects will be to our healthcare business is uncertain at this time, and largely dependent on the duration and severity of the COVID-19 crisis. 
 
 Hospitality 
 Our hotel portfolio consists primarily of extended stay hotels and premium branded select service hotels located in both major metropolitan markets and high-demand suburban markets throughout the U.S. The majority of our hotels are affiliated with top hotel brands such as Marriott and Hilton. 
 We own between 89.7% and 100% of the various portfolios within our hospitality segment. 
 We are currently engaged with a third party advisor to evaluate strategic and financial alternatives to maximize the value of our hospitality portfolio, including the THL Hotel Portfolio in the other equity and debt segment, while balancing the need to preserve liquidity and prioritize the growth of our digital business. We do not anticipate allocating material amounts of the Company's own capital to our hospitality portfolios, but may elect to contribute capital on a limited basis, including in the THL Hotel Portfolio, where we determine it would be meaningful to protect the value of these portfolios. 
 Portfolio Overview 
 Our hotel portfolio is located across 26 states in the U.S., with concentrations in Texas (13.9%), California (12.9%), and Florida (12.6%), based upon revenues in the three months ended June 30, 2020 . 
 The following table presents key balance sheet data of our hospitality segment: 
 
 (In thousands) 
 
 June 30, 2020 
 
 December 31, 2019 
 
 Real estate 
 
 Held for investment 
 
 $ 
 2,635,718 
 
 $ 
 3,544,264 
 
 Held for sale 
 
 — 
 
 16,155 
 
 Debt 
 
 2,635,393 
 
 2,623,306 
 
 A majority of our portfolio is affiliated with top hotel brands. Composition of our hotel portfolio by brand at June 30, 2020 , based upon the number of rooms, is as follows: 
 
 Brands 
 
 % by Rooms 
 
 Marriott 
 
 78 
 % 
 
 Hilton 
 
 16 
 % 
 
 Hyatt 
 
 4 
 % 
 
 Intercontinental 
 
 2 
 % 
 
 Total 
 
 100 
 % 
 
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 The following table presents selected operating metrics of our hotel portfolio: 
 
 June 30, 
 
 Three Months Ended June 30, 
 
 Six Months Ended June 30, 
 
 Type 
 
 Number of Hotel Properties 
 
 Number of Rooms 
 
 Average Occupancy 
 
 ADR (1) 
 
 RevPAR (2) 
 
 Average Occupancy 
 
 ADR (1) 
 
 RevPAR (2) 
 
 2020 
 
 Select service 
 
 87 
 
 11,737 
 
 21.7 
 % 
 
 $ 
 88 
 
 $ 
 19 
 
 38.2 
 % 
 
 $ 
 114 
 
 $ 
 44 
 
 Extended stay 
 
 66 
 
 7,936 
 
 44.7 
 % 
 
 97 
 
 43 
 
 54.8 
 % 
 
 113 
 
 62 
 
 Full service 
 
 4 
 
 966 
 
 13.3 
 % 
 
 167 
 
 22 
 
 34.5 
 % 
 
 173 
 
 60 
 
 Total 
 
 157 
 
 20,639 
 
 30.2 
 % 
 
 95 
 
 29 
 
 44.4 
 % 
 
 116 
 
 51 
 
 2019 
 
 Select service 
 
 94 
 
 12,762 
 
 76.0 
 % 
 
 $ 
 128 
 
 $ 
 98 
 
 71.5 
 % 
 
 $ 
 127 
 
 $ 
 91 
 
 Extended stay 
 
 66 
 
 7,936 
 
 83.0 
 % 
 
 135 
 
 112 
 
 78.6 
 % 
 
 132 
 
 104 
 
 Full service 
 
 4 
 
 966 
 
 78.2 
 % 
 
 168 
 
 132 
 
 74.1 
 % 
 
 170 
 
 126 
 
 Total 
 
 164 
 
 21,664 
 
 78.6 
 % 
 
 133 
 
 104 
 
 74.2 
 % 
 
 131 
 
 97 
 
 _________ 
 
 (1) 
 ADR is calculated by dividing room revenue by total rooms sold. 
 
 (2) 
 RevPAR is calculated by dividing room revenue by room nights available for the period. 
 
 Financing 
 At June 30, 2020 , our hotel portfolio was financed by $2.67 billion of predominantly variable rate debt, bearing a weighted average interest rate of 3.29% per annum. Refer to further discussion below on the effects of COVID-19. 
 Operating Performance 
 Results of operations of our hospitality segment are as follows: 
 
 Three Months Ended June 30, 
 
 Six Months Ended June 30, 
 
 (In thousands) 
 
 2020 
 
 2019 
 
 Change 
 
 2020 
 
 2019 
 
 Change 
 
 Total revenues 
 
 $ 
 57,143 
 
 $ 
 227,080 
 
 $ 
 (169,937 
 ) 
 
 $ 
 210,669 
 
 $ 
 423,695 
 
 $ 
 (213,026 
 ) 
 
 Net loss 
 
 (741,621 
 ) 
 
 (3,505 
 ) 
 
 (738,116 
 ) 
 
 (1,037,378 
 ) 
 
 (29,582 
 ) 
 
 (1,007,796 
 ) 
 
 Net loss attributable to Colony Capital, Inc. 
 
 (633,863 
 ) 
 
 (3,330 
 ) 
 
 (630,533 
 ) 
 
 (875,095 
 ) 
 
 (26,311 
 ) 
 
 (848,784 
 ) 
 
 Operating results at the property level are discussed under NOI before FF&E Reserve below. Results summarized above include the effects of interest expense from mortgage financing, impairment charges and depreciation and amortization expense on our hotel portfolio, which are discussed in " —Results of Operations. " 
 While there was a loss of earnings from sales of ten properties in 2019 and operating performance declined due to COVID-19, as discussed below, the significant net losses in 2020 resulted from impairment charges of $660.8 million and $910.9 million in the three and six months ended June 30, 2020 , respectively, driven by a shortened holding period assumption. 
 
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 Net Operating Income before Reserves for Furniture, Fixtures and Equipment ("NOI before FF&E Reserve") 
 NOI before FF&E Reserve for our hospitality segment is calculated as follows and reconciled to the most directly comparable GAAP figure in " —Non-GAAP Supplemental Financial Measures. " 
 
 Three Months Ended June 30, 
 
 Six Months Ended June 30, 
 
 (In thousands) 
 
 2020 
 
 2019 
 
 2020 
 
 2019 
 
 Total revenues 
 
 $ 
 57,143 
 
 $ 
 227,080 
 
 $ 
 210,669 
 
 $ 
 423,695 
 
 Straight-line rent and amortization of above- and below-market lease intangibles and ground lease asset 
 
 (16 
 ) 
 
 316 
 
 298 
 
 626 
 
 Interest income 
 
 — 
 
 (6 
 ) 
 
 — 
 
 (6 
 ) 
 
 Other income 
 
 — 
 
 (3 
 ) 
 
 — 
 
 (3 
 ) 
 
 Property operating expenses 
 
 (63,733 
 ) 
 
 (144,691 
 ) 
 
 (184,728 
 ) 
 
 (281,036 
 ) 
 
 NOI before FF&E Reserve—Hospitality 
 
 $ 
 (6,606 
 ) 
 
 $ 
 82,696 
 
 $ 
 26,239 
 
 $ 
 143,276 
 
 NOI before FF&E Reserve by hotel type is as follows: 
 
 Three Months Ended June 30, 
 
 Change 
 
 Six Months Ended June 30, 
 
 Change 
 
 ($ in thousands) 
 
 2020 
 
 2019 
 
 $ 
 
 % 
 
 2020 
 
 2019 
 
 $ 
 
 % 
 
 Select service 
 
 $ 
 (9,792 
 ) 
 
 $ 
 45,701 
 
 $ 
 (55,493 
 ) 
 
 (121.4 
 )% 
 
 $ 
 5,975 
 
 $ 
 79,882 
 
 $ 
 (73,907 
 ) 
 
 (92.5 
 )% 
 
 Extended stay 
 
 4,691 
 
 32,723 
 
 (28,032 
 ) 
 
 (85.7 
 )% 
 
 20,079 
 
 55,570 
 
 (35,491 
 ) 
 
 (63.9 
 )% 
 
 Full service 
 
 (1,505 
 ) 
 
 4,272 
 
 (5,777 
 ) 
 
 (135.2 
 )% 
 
 185 
 
 7,824 
 
 (7,639 
 ) 
 
 (97.6 
 )% 
 
 NOI before FF&E Reserve—Hospitality 
 
 $ 
 (6,606 
 ) 
 
 $ 
 82,696 
 
 $ 
 (89,302 
 ) 
 
 (108.0 
 )% 
 
 $ 
 26,239 
 
 $ 
 143,276 
 
 $ 
 (117,037 
 ) 
 
 (81.7 
 )% 
 
 NOI before FF&E Reserve decreased $89.3 million and $117.0 million in the three and six months ended June 30, 2020 , respectively, of which $3.2 million and $4.3 million, respectively, are attributed to the sales of ten select service properties in 2019. The decrease otherwise reflects the effects of COVID-19, with significant declines in room demand. For the three and six months ended June 30, 2020 , average occupancy fell 62% and 40% , respectively, compared to the same period last year, to 30.2% and 44.4% , respectively. This was further compounded by lower ADR, resulting in a decrease in RevPAR of 72% and 47% for the three and six months ended June 30, 2020 , respectively, compared to the same periods last year. 
 Notwithstanding the overall negative results for the second quarter of 2020, operations have recovered from the trough in April 2020, with NOI before FF&E Reserve turning a slight positive in June 2020, as illustrated below. Improvements in occupancy from 21.8% in April 2020 to 39.1% in June 2020 was driven by extended stay demand and also weekend leisure demand, while demand from corporate business travel remains muted. 
 
 Second Quarter 2020 
 
 ($ in thousands) 
 
 April 
 
 May 
 
 June 
 
 Total 
 
 Average occupancy 
 
 21.8 
 % 
 
 29.7 
 % 
 
 39.1 
 % 
 
 30.2 
 % 
 
 NOI before FF&E Reserve 
 
 $ 
 (6,331 
 ) 
 
 $ 
 (1,249 
 ) 
 
 $ 
 974 
 
 $ 
 (6,606 
 ) 
 
 Efforts to Mitigate Effects of COVID-19 on our Hospitality Segment and THL Hotel Portfolio in Other Equity and Debt Segment 
 Through the date of this filing, all of our hotels are operating, but at significantly reduced levels; however, we may decide or be required to temporarily suspend operations at some or all of our hotels in the future. 
 Operating Performance 
 The fallout from COVID-19 began to negatively affect room demand and occupancy in March 2020, with significant effects on our revenues and operating cash flows beginning April 2020, as discussed above. 
 Liquidity 
 In order to conserve capital and improve liquidity: 
 
 • 
 We have taken various steps to minimize non-essential operating expenses, including where applicable, reduction of services, closure of amenities and floor spaces, and keeping only essential resources on the ground, with our hotel operators having furloughed a substantial number of personnel. 
 
 • 
 We are deferring all non-essential capital expenditures in 2020 of approximately $85 million for our hospitality segment and $10 million for our THL Hotel Portfolio, which will provide notable cost savings in the near term. 
 
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 • 
 Following the onset of the COVID-19 crisis, we have not made certain debt service payments on our non-recourse debt. Through the date of this filing, we have successfully executed interest forbearance on some of our debt, after which a remaining combined total of $3.03 billion is in default in our hospitality segment and the THL Hotel Portfolio. The remaining $482.4 million of debt in our hospitality segment was not in default as of the date of this filing. We have received notices of acceleration with respect to defaulted debt of $780.0 million in our 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 select service and extended stay hotels, and receivers have been or are expected to be appointed for all of these assets. In connection with the remaining defaulted debt, we continue to engage in active negotiations with the respective lenders or servicers to seek various relief, including executing or extending interest forbearance, temporary use of FF&E and other capital expenditure reserves to fund interest payments and hotel operations (such reserves total $35.1 million in our hospitality segment as of June 30, 2020 ), and execution of debt modifications, including extension of upcoming maturities in 2020, or make other arrangements, as appropriate. There can be no assurance that we will be successful in any of the negotiations with our lenders or servicers. 
 
 Due to uncertainties as to the duration and severity of the economic fallout from COVID-19, at this time, we are unable to estimate with any meaningful precision the extent of the economic and financial impact of COVID-19 to our hospitality business and operations, and how prolonged the impact would be. We cannot predict when business will return to normal levels when the effects of COVID-19 subside. 
 
 Colony Credit Real Estate, Inc. 
 The following table summarizes our ownership interest (on a fully diluted basis) and carrying value in CLNC. 
 
 (In thousands, except %) 
 
 June 30, 2020 
 
 December 31, 2019 
 
 Ownership in CLNC 
 
 Number of shares of common stock and units in CLNC's operating subsidiary 
 
 47,936 
 
 $ 
 47,936 
 
 Interest % 
 
 36.4 
 % 
 
 36.4 
 % 
 
 Carrying value of CLNC investment 
 
 $ 
 336,513 
 
 $ 
 725,443 
 
 Our carrying value in CLNC reflects its market value as of June 30, 2020 . The $388.9 million decrease in carrying value in the first six months of 2020 resulted from an impairment charge recorded in the second quarter of 2020, our share of CLNC's net loss, and dividends received in the first quarter of 2020. 
 Our equity method loss from CLNC is as follows. 
 
 Three Months Ended June 30, 
 
 Six Months Ended June 30, 
 
 (In thousands) 
 
 2020 
 
 2019 
 
 2020 
 
 2019 
 
 Equity method loss 
 
 Share of CLNC's net loss 
 
 $ 
 (75,570 
 ) 
 
 $ 
 (40,008 
 ) 
 
 $ 
 (85,639 
 ) 
 
 $ 
 (34,495 
 ) 
 
 Other-than-temporary impairment 
 
 (274,671 
 ) 
 
 (227,904 
 ) 
 
 (274,671 
 ) 
 
 (227,904 
 ) 
 
 $ 
 (350,241 
 ) 
 
 $ 
 (267,912 
 ) 
 
 $ 
 (360,310 
 ) 
 
 $ 
 (262,399 
 ) 
 
 Our share of CLNC's net loss was net of $8.7 million and $27.9 million to reduce the basis difference allocated to non-strategic assets resolved during the three and six months ended June 30, 2020 , respectively (Note 6 to the consolidated financial statements). CLNC's net loss was driven by allowance for loan losses, impairment or unrealized fair value losses on investments, and realized losses from sale of investments and unwinding of hedge positions, further affected by COVID-19 in 2020 . 
 Other-Than-Temporary Impairment Assessment 
 In the second quarter of 2020, the Company determined that its investment in CLNC was other-than-temporarily impaired, and recorded an impairment charge of $274.7 million , 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 . Refer to further discussion of the impairment on our CLNC investment in Note 6 to the consolidated financial statements. 
 
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 CLNC Business Update 
 Michael J. Mazzei was appointed Chief Executive Officer and President of CLNC effective April 1, 2020. Mr. Mazzei brings 35 years of experience, knowledge of navigating through cycles, and strong executive leadership in the commercial real estate finance and mortgage REIT business. 
 Following the onset of the COVID-19 crisis, CLNC suspended its monthly stock dividend beginning April 2020 in an effort to conserve available liquidity, a move that is in line with many other mortgage REITs. In the second quarter of 2020, CLNC executed on a number of strategic initiatives that generated additional liquidity while reducing recourse financing to further fortify its balance sheet under the current challenging economic environment. 
 
 Other Equity and Debt 
 This segment is composed of a diversified group of non-digital real estate and real estate-related debt and equity investments, including investments for which the Company acts as a general partner and/or manager ("GP co-investments") and receives various forms of investment management economics on related third-party capital on such investments, other real estate equity and debt investments and other real estate related securities, among other holdings. 
 Over time, the Company expects to monetize the bulk of its existing portfolio as it completes its digital evolution. 
 Investments and financing in our other equity and debt portfolio are summarized below: 
 
 (In thousands) 
 
 June 30, 2020 
 
 December 31, 2019 
 
 Real estate 
 
 Held for investment 
 
 $ 
 1,868,051 
 
 $ 
 2,036,036 
 
 Held for sale 
 
 263,023 
 
 353,724 
 
 Equity and debt investments 
 
 Limited partnership interests in our sponsored and co-sponsored funds 
 
 54,978 
 
 63,102 
 
 Other equity investments (1) 
 
 1,131,100 
 
 1,276,059 
 
 CRE debt securities 
 
 33,949 
 
 57,591 
 
 Loans receivable (2) 
 
 1,349,103 
 
 1,518,058 
 
 Debt (3) 
 
 1,924,639 
 
 2,061,101 
 
 _________ 
 
 (1) 
 Significant investments include acquisition, development and construction loans ( $575.6 million ) and preferred equity investments ( $140.3 million ). 
 
 (2) 
 Carried at fair value upon adoption of fair value option on January 1, 2020. 
 
 (3) 
 Includes debt carrying value of $155.3 million related to real estate held for sale. 
 
 Our other equity and debt segment generated the following results of operations: 
 
 Three Months Ended June 30, 
 
 Six Months Ended June 30, 
 
 (In thousands) 
 
 2020 
 
 2019 
 
 Change 
 
 2020 
 
 2019 
 
 Change 
 
 Total revenues 
 
 $ 
 74,428 
 
 $ 
 152,066 
 
 $ 
 (77,638 
 ) 
 
 $ 
 195,547 
 
 $ 
 314,754 
 
 $ 
 (119,207 
 ) 
 
 Net income (loss) 
 
 (370,305 
 ) 
 
 (128 
 ) 
 
 (370,177 
 ) 
 
 (340,328 
 ) 
 
 59,400 
 
 (399,728 
 ) 
 
 Net income (loss) attributable to Colony Capital, Inc. 
 
 (141,671 
 ) 
 
 (5,957 
 ) 
 
 (135,714 
 ) 
 
 (143,123 
 ) 
 
 17,932 
 
 (161,055 
 ) 
 
 • 
 Net income from the other equity and debt segment has decreased over time as we monetized our other equity and debt portfolio throughout 2019, and also reflects the effects of COVID-19 on the operating results of the THL Hotel Portfolio in 2020. However, the large net loss in 2020 resulted primarily from (i) significant unrealized losses on loans receivable carried at fair value; and (ii) real estate impairment, in particular on the THL Hotel Portfolio and a U.S. net lease property. Refer to further discussion in " —Results of Operations. " 
 
 • 
 Generally, in 2020, we expect a slower pace of dispositions given the current global economic downturn resulting from efforts to contain COVID-19; nevertheless, we do intend to accelerate the sale of these non-core assets where reasonable values can be attained. Most recently, in April 2020, we recapitalized a co-investment venture which holds common equity in the Albertsons supermarket chain, generating $72.7 million of proceeds to us and realizing our share of gain of $29.7 million. 
 
 • 
 In connection with the THL Hotel Portfolio, operations have recovered from the trough in April 2020 when we recorded negative NOI before FF&E with average occupancy at 25%. Beginning in May, NOI before FF&E has turned positive with average occupancy recovering to 48% in June, and this positive trend has continued into July. 
 
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 A discussion of our efforts to mitigate the effects of COVID-19 on the THL Hotel Portfolio is included within the Hospitality segment above. 
 
 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 . 
 As part of the Company’s ongoing transition and rotation to an investment management and operating business focused on digital real estate and infrastructure, the Company continues to pivot away from its non-digital investment management business. 
 Balance Sheet Information 
 Equity investments on the balance sheet of our other investment management segment totaling $23.6 million at June 30, 2020 and $140.0 million at December 31, 2019 generally consist of our general partner and co-general partner interests in non-digital investment vehicles we sponsor or co-sponsor, and interests in other real estate asset managers. 
 Operating Performance 
 Results of operations of our other investment management segment are as follows. 
 
 Three Months Ended June 30, 
 
 Six Months Ended June 30, 
 
 (In thousands) 
 
 2020 
 
 2019 
 
 Change 
 
 2020 
 
 2019 
 
 Change 
 
 Total revenues (1) 
 
 $ 
 30,198 
 
 $ 
 43,802 
 
 $ 
 (13,604 
 ) 
 
 $ 
 54,497 
 
 $ 
 83,807 
 
 $ 
 (29,310 
 ) 
 
 Net income (loss) 
 
 (496,000 
 ) 
 
 2,176 
 
 (498,176 
 ) 
 
 (477,870 
 ) 
 
 21,972 
 
 (499,842 
 ) 
 
 Net income (loss) attributable to Colony Capital, Inc. 
 
 (446,743 
 ) 
 
 2,628 
 
 (449,371 
 ) 
 
 (430,384 
 ) 
 
 20,376 
 
 (450,760 
 ) 
 
 __________ 
 
 (1) 
 Includes cost reimbursement income from CLNC, NRE (prior to its sale in September 2019) and retail companies of $2.9 million and $3.4 million for the three months ended June 30, 2020 and 2019 , respectively, $6.4 million and $6.7 million for the six months ended June 30, 2020 and 2019 , which are recorded gross as income and expense in the results of operations. 
 
 Significant net losses were incurred in 2020. While we recognized a $96.9 million gain, net of tax, from the sale of our equity investment in RXR Realty in February 2020, this was offset by significant goodwill impairment of $79.0 million and $515.0 million in the first and second quarters of 2020, respectively, a reversal of carried interest allocation and decrease in fee income. Refer to discussion of the various components in " —Results of Operations. " 
 
 Non-GAAP Supplemental Financial Measures 
 The Company reports funds from operations ("FFO") as an overall non-GAAP supplemental financial measure. The Company also reports EBITDA re for the digital real estate segment, NOI for the healthcare segment and NOI Before FF&E Reserve for the hospitality segment, which are supplemental non-GAAP financial measures widely used in the equity REIT industry. These non-GAAP measures should not be considered alternatives to GAAP net income as indications of operating performance, or to cash flows from operating activities as measures of liquidity, nor as indications of the availability of funds for our cash needs, including funds available to make distributions. Our calculation of FFO, EBITDA re and NOI may differ from methodologies utilized by other REITs for similar performance measurements, and, accordingly, may not be comparable to those of other REITs. 
 Funds from Operations 
 We calculate FFO in accordance with standards established by the National Association of Real Estate Investment Trusts ("NAREIT"), which defines FFO as net income or loss calculated in accordance with GAAP, excluding (i) extraordinary items, as defined by GAAP; (ii) gains and losses from sales of depreciable real estate; (iii) impairment write-downs associated with depreciable real estate; and (iv) gains and losses from a change in control in connection with interests in depreciable real estate or in-substance real estate; plus (v) real estate-related depreciation and amortization; and (vi) including similar adjustments for equity method investments. Included in FFO are gains and losses from sales of assets which are not depreciable real estate such as loans receivable, equity method investments, and equity and debt securities, as applicable. 
 
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 We believe that FFO is a meaningful supplemental measure of the operating performance of our business because historical cost accounting for real estate assets in accordance with GAAP assumes that the value of real estate assets diminishes predictably over time, as reflected through depreciation. Because real estate values fluctuate with market conditions, management considers FFO an appropriate supplemental performance measure by excluding historical cost depreciation, gains related to sales of previously depreciated real estate, and impairment of previously depreciated real estate which is an early recognition of loss on sale. 
 The following table presents a reconciliation of net income attributable to common stockholders to FFO attributable to common interests in Operating Company and common stockholders. Amounts in the table include our share of activity in unconsolidated ventures. 
 
 Three Months Ended June 30, 
 
 Six Months Ended June 30, 
 
 (In thousands) 
 
 2020 
 
 2019 
 
 2020 
 
 2019 
 
 Net loss attributable to common stockholders 
 
 $ 
 (2,042,790 
 ) 
 
 $ 
 (468,890 
 ) 
 
 $ 
 (2,404,423 
 ) 
 
 $ 
 (571,003 
 ) 
 
 Adjustments for FFO attributable to common interests in Operating Company and common stockholders: 
 
 Net loss attributable to noncontrolling common interests in Operating Company 
 
 (225,057 
 ) 
 
 (29,989 
 ) 
 
 (264,658 
 ) 
 
 (36,600 
 ) 
 
 Real estate depreciation and amortization 
 
 131,722 
 
 159,496 
 
 262,245 
 
 313,898 
 
 Impairment of real estate 
 
 1,474,262 
 
 87,600 
 
 1,782,530 
 
 113,222 
 
 Loss (gain) on sales of real estate 
 
 4,919 
 
 (7,088 
 ) 
 
 (3,014 
 ) 
 
 (62,322 
 ) 
 
 Less: Adjustments attributable to noncontrolling interests in investment entities (1) 
 
 (329,601 
 ) 
 
 (88,705 
 ) 
 
 (411,930 
 ) 
 
 (123,979 
 ) 
 
 FFO attributable to common interests in Operating Company and common stockholders 
 
 $ 
 (986,545 
 ) 
 
 $ 
 (347,576 
 ) 
 
 $ 
 (1,039,250 
 ) 
 
 $ 
 (366,784 
 ) 
 
 __________ 
 
 (1) 
 The components of adjustments attributable to noncontrolling interests in investment entities for FFO are as follows: 
 
 Three Months Ended June 30, 
 
 Six Months Ended June 30, 
 
 (In thousands) 
 
 2020 
 
 2019 
 
 2020 
 
 2019 
 
 FFO adjustments attributable to noncontrolling interests in investment entities: 
 
 Real estate depreciation and amortization 
 
 $ 
 46,499 
 
 $ 
 55,646 
 
 $ 
 94,214 
 
 $ 
 107,456 
 
 Impairment of real estate 
 
 279,840 
 
 37,195 
 
 319,974 
 
 51,346 
 
 Loss (gain) on sales of real estate 
 
 3,262 
 
 (4,136 
 ) 
 
 (2,258 
 ) 
 
 (34,823 
 ) 
 
 $ 
 329,601 
 
 $ 
 88,705 
 
 $ 
 411,930 
 
 $ 
 123,979 
 
 EBITDAre 
 We calculate EBITDA re for our digital real estate segment in accordance with standards established by NAREIT, which defines EBITDA re as net income or loss calculated in accordance with GAAP, excluding (i) interest expense; (ii) income tax benefit (expense); (iii) depreciation and amortization; (iv) gains on disposition of depreciated real estate, including gains or losses on change of control; (v) impairment write-downs of depreciated real estate and of investments in unconsolidated affiliates caused by a decrease in value of depreciated real estate in the affiliate; and (vi) including similar adjustments for equity method investments to reflect the Company's share of EBITDAre of unconsolidated affiliates 
 EBITDA re represents a widely known supplemental measure of performance, EBITDA, but for real estate entities, which we believe is particularly helpful for generalist investors in REITs. EBITDA re depicts the operating performance of a real estate business independent of its capital structure, leverage and noncash items, which allows for comparability across real estate entities with different capital structure, tax rates and depreciation or amortization policies. Additionally, exclusion of gains on disposition and impairment of depreciated real estate, similar to FFO, also provides a reflection of on-going operating performance and allows for period-over-period comparability. 
 As with other non-GAAP measures, the usefulness of EBITDA re may be limited. For example, EBITDA re focuses on profitability from operations, and does not take into account financing costs, and capital expenditures needed to maintain operating real estate. 
 
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 NOI 
 NOI for our healthcare and hospitality segments represent total property and related income less property operating expenses, adjusted primarily for the effects of (i) straight-line rental income adjustments; and (ii) amortization of acquired above- and below-market lease adjustments to rental income, where applicable. For our hospitality segment, NOI does not reflect the reserve contributions to fund certain capital expenditures, repair, replacement and refurbishment of furniture, fixtures, and equipment, based on a percentage of hotel revenues, typically 4% to 5%, that is required under certain debt agreements and/or franchise and brand-managed hotel agreements. 
 We believe that NOI is a useful measure of operating performance of our healthcare and hospitality portfolios as it is more closely linked to the direct results of operations at the property level. NOI also reflects actual rents received during the period after adjusting for the effects of straight-line rents and amortization of above- and below-market leases; therefore, a comparison of NOI across periods better reflects the trend in occupancy rates and rental rates at our properties. 
 NOI excludes historical cost depreciation and amortization, which are based upon different useful life estimates depending on the age of the properties, as well as adjust for the effects of real estate impairment and gains or losses on sales of depreciated properties, which eliminate differences arising from investment and disposition decisions. This allows for comparability of operating performance of our properties period over period and also against the results of other equity REITs in the same sectors. 
 Additionally, by excluding corporate level expenses or benefits such as interest expense, any gain or loss on early extinguishment of debt and income taxes, which are incurred by the parent entity and are not directly linked to the operating performance of our properties, NOI provides a measure of operating performance independent of our capital structure and indebtedness. 
 However, the exclusion of these items as well as others, such as capital expenditures, FF&E reserve and leasing costs, which are necessary to maintain the operating performance of our properties, and transaction costs and administrative costs, may limit the usefulness of NOI. 
 Reconciliation of Non-GAAP Financial Measures 
 The following tables present reconciliations of net loss of the digital real estate segment to EBITDA re , and net loss of the healthcare and hospitality segments to NOI. 
 
 Digital Real Estate 
 
 Healthcare 
 
 Hospitality (1) 
 
 Three Months Ended June 30, 2020 
 
 Three Months Ended June 30, 
 
 Three Months Ended June 30, 
 
 (In thousands) 
 
 2020 
 
 2019 
 
 2020 
 
 2019 
 
 Net loss 
 
 $ 
 (21,142 
 ) 
 
 $ 
 (680,140 
 ) 
 
 $ 
 (81,520 
 ) 
 
 $ 
 (741,621 
 ) 
 
 $ 
 (3,505 
 ) 
 
 Adjustments: 
 
 Straight-line rent and amortization of above- and below-market lease intangibles and ground lease asset 
 
 — 
 
 (8,071 
 ) 
 
 (4,817 
 ) 
 
 (16 
 ) 
 
 316 
 
 Interest income 
 
 — 
 
 (71 
 ) 
 
 — 
 
 — 
 
 (6 
 ) 
 
 Other income 
 
 — 
 
 — 
 
 (36 
 ) 
 
 — 
 
 (3 
 ) 
 
 Interest expense 
 
 8,170 
 
 34,699 
 
 57,135 
 
 29,889 
 
 41,591 
 
 Transaction, investment and servicing costs 
 
 — 
 
 907 
 
 9,097 
 
 799 
 
 2,712 
 
 Depreciation and amortization 
 
 28,571 
 
 36,980 
 
 40,778 
 
 35,462 
 
 37,008 
 
 Impairment loss 
 
 — 
 
 661,255 
 
 51,324 
 
 660,751 
 
 420 
 
 Compensation and administrative expense 
 
 — 
 
 1,749 
 
 2,301 
 
 1,793 
 
 2,183 
 
 Gain on sale of real estate 
 
 — 
 
 — 
 
 — 
 
 — 
 
 (140 
 ) 
 
 Other (gain) loss, net 
 
 — 
 
 342 
 
 2,261 
 
 (354 
 ) 
 
 114 
 
 Income tax (benefit) expense 
 
 (2,673 
 ) 
 
 12,136 
 
 596 
 
 6,691 
 
 2,006 
 
 EBITDA re / NOI / NOI before FF&E Reserve 
 
 $ 
 12,926 
 
 $ 
 59,786 
 
 $ 
 77,119 
 
 $ 
 (6,606 
 ) 
 
 $ 
 82,696 
 
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 Digital Real Estate 
 
 Healthcare 
 
 Hospitality (1) 
 
 Six Months Ended June 30, 2020 
 
 Six Months Ended June 30, 
 
 Six Months Ended June 30, 
 
 (In thousands) 
 
 2020 
 
 2019 
 
 2020 
 
 2019 
 
 Net loss 
 
 $ 
 (39,437 
 ) 
 
 $ 
 (744,285 
 ) 
 
 $ 
 (88,726 
 ) 
 
 $ 
 (1,037,378 
 ) 
 
 $ 
 (29,582 
 ) 
 
 Adjustments: 
 
 Straight-line rent and amortization of above- and below-market lease intangibles and ground lease asset 
 
 — 
 
 (12,037 
 ) 
 
 (10,044 
 ) 
 
 298 
 
 626 
 
 Interest income 
 
 — 
 
 (98 
 ) 
 
 — 
 
 — 
 
 (6 
 ) 
 
 Other income 
 
 — 
 
 — 
 
 (36 
 ) 
 
 — 
 
 (3 
 ) 
 
 Interest expense 
 
 17,572 
 
 74,565 
 
 104,662 
 
 69,678 
 
 83,656 
 
 Transaction, investment and servicing costs 
 
 — 
 
 3,805 
 
 12,205 
 
 2,220 
 
 4,296 
 
 Depreciation and amortization 
 
 58,602 
 
 74,440 
 
 80,909 
 
 71,906 
 
 73,256 
 
 Impairment loss 
 
 — 
 
 709,787 
 
 51,324 
 
 910,913 
 
 4,270 
 
 Compensation and administrative expense 
 
 — 
 
 4,232 
 
 3,954 
 
 4,300 
 
 4,087 
 
 Gain on sale of real estate 
 
 — 
 
 — 
 
 — 
 
 — 
 
 (279 
 ) 
 
 Other (gain) loss, net 
 
 — 
 
 5,993 
 
 394 
 
 (510 
 ) 
 
 113 
 
 Income tax (benefit) expense 
 
 (8,403 
 ) 
 
 12,006 
 
 (1,278 
 ) 
 
 4,812 
 
 2,842 
 
 EBITDAre / NOI / NOI before FF&E Reserve 
 
 $ 
 28,334 
 
 $ 
 128,408 
 
 $ 
 153,364 
 
 $ 
 26,239 
 
 $ 
 143,276 
 
 __________ 
 
 (1) 
 NOI for the hospitality segment excludes FF&E Reserve which is determined based on a percentage of hotel revenues. 
 
 Liquidity and Capital Resources 
 Second Quarter 2020 Update 
 We have substantially addressed our near-term corporate maturity obligations and have enhanced our long-term capital structure and liquidity profile through (i) the June 2020 amendment of our corporate credit facility which right-sizes availability and provides enhanced financial flexibility; and (ii) issuance of $300 million of exchangeable notes by the OP and concurrent repurchase of $290 million of convertible notes due in January 2021 which allowed us to reduce our near term maturity obligations while also preserving $300 million of liquidity. 
 As of August 5, 2020, our liquidity position was approximately $0.9 billion, composed of cash on hand and the full $500 million available under our corporate credit facility. Cash on hand included $252 million of final net proceeds from Wafra's minority investment in our digital investment management business, which provides us with permanent capital for growing our digital business. 
 None of our investment level financing are recourse to the Company, and instead are secured by underlying commercial real estate or mortgage loans receivable. Generally, we do not apply corporate level cash to service investment level debt. 
 Additionally, we have begun executing a new cost reduction program that has to-date addressed annual run-rate cost savings of approximately $38 million, mostly from headcount and compensation related cost reductions. 
 While the Company is in compliance with its corporate debt covenants and currently has sufficient liquidity to meet its operational needs, general concerns over credit and liquidity continue to permeate the financial markets in an economic downturn environment. The Company continues to evaluate opportunities to maintain and strengthen its liquidity position through the current economic recession. 
 Liquidity Needs and Sources of Liquidity 
 Our current primary liquidity needs are to fund: 
 
 • 
 our general partner commitments to our future investment vehicles and co-investment commitments to other investment vehicles; 
 
 • 
 acquisitions of our target digital assets for our balance sheet and third party capital and related ongoing commitments; 
 
 • 
 principal and interest payments on our debt; 
 
 • 
 our operations, including compensation, administrative and overhead costs; 
 
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 • 
 capital expenditures for our non-digital and digital real estate investments; 
 
 • 
 distributions to our common and preferred stockholders (to the extent distributions have not been temporarily suspended); and 
 
 • 
 income tax liabilities of taxable REIT subsidiaries and of the Company subject to limitations as a REIT. 
 
 Our current primary sources of liquidity are: 
 
 • 
 cash on hand; 
 
 • 
 our corporate revolving credit facility; 
 
 • 
 cash flow generated from our investments, both from operations and return of capital; 
 
 • 
 fees received from our investment management business, including incentive or carried interest payments, if any; 
 
 • 
 proceeds from full or partial realization of investments and/or businesses, particularly from investments in the Other Equity and Debt segment; 
 
 • 
 investment-level financing; 
 
 • 
 proceeds from public or private equity and debt offerings; and 
 
 • 
 third party co-investors in our consolidated investments and/or businesses. 
 
 Distribution requirements imposed on us to qualify as a REIT generally require that we distribute to our stockholders 90% of our taxable income, which constrains our ability to accumulate operating cash flows. 
 Liquidity Needs 
 Investment Commitments 
 Our share of commitments in connection with our investment activities as of June 30, 2020 include the following: 
 
 • 
 $38 million of lending commitments to borrowers (subsequent to June 30, 2020 , we no longer have funding obligations on $6 million of previously outstanding lending commitments pursuant to an agreement with the borrower); 
 
 • 
 $50 million to joint venture investments, including ADC loan arrangements accounted for as equity method investments; and 
 
 • 
 $229 million of remaining capital commitments to Company sponsored and third party sponsored funds, of which $135 million is for DCP, our inaugural fund dedicated to a digital strategy. 
 
 Generally, we expect to fund our investment commitments through cash on hand and/or proceeds from future asset monetization. 
 As it relates to our commitment to DCP, our original commitment totals $250 million, of which we have funded $115 million through June 30, 2020 . In connection with our strategic partnership with Wafra, Wafra is expected to assume $80 million of our total commitment to DCP. The Wafra transaction is described in more detail in Note 24 to the consolidated financial statements. 
 Dividends 
 U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of its REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and that it pay tax at regular corporate rates to the extent that it annually distributes less than 100% of its net taxable income. We intend to pay regular quarterly dividends to our stockholders in an amount equal to our net taxable income, if and to the extent authorized by our board of directors. Before we pay any dividend, whether for U.S. federal income tax purposes or otherwise, we must first meet both our operating requirements and debt service, if any. If our cash available for distribution is less than our net taxable income, we may be required to sell assets or borrow funds to make cash distributions or we may make a portion of the required distribution in the form of a taxable stock distribution or distribution of debt securities. 
 Common Stock —Our board of directors declared a dividend of $0.11 per share of common stock for the first quarter of 2020. 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. 
 
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 Preferred Stock— We are required to make quarterly cash distributions on our outstanding preferred stock, with a weighted average dividend rate of 7.16% per annum, as follows. 
 
 Shares Outstanding
June 30, 2020
(In thousands) 
 
 Quarterly Cash Distributions 
 
 Description 
 
 Dividend Rate Per Annum 
 
 Total 
 (In thousands) 
 
 Per Share 
 
 Series G 
 
 7.5% 
 
 3,450 
 
 $ 
 1,617 
 
 $ 
 0.4687500 
 
 Series H 
 
 7.125% 
 
 11,500 
 
 5,121 
 
 0.4453125 
 
 Series I 
 
 7.15% 
 
 13,800 
 
 6,167 
 
 0.4468750 
 
 Series J 
 
 7.125% 
 
 12,600 
 
 5,611 
 
 0.4453125 
 
 41,350 
 
 $ 
 18,516 
 
 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. 
 Sources of Liquidity 
 Cash From Operations 
 Our investments generate cash, either from operations or as a return of our invested capital. We primarily generate revenue from net operating income of our real estate properties. We also generate interest income from commercial real estate related loans and securities as well as receive periodic distributions from our equity investments, including our GP co-investments. Such income is partially offset by interest expense associated with non-recourse borrowings on our investments. 
 Additionally, we generate fee revenue from our investment management business. Management fee income is generally a predictable and stable revenue stream, while carried interest and contractual incentive fees are by nature less predictable in amount and timing. Our ability to establish new investment vehicles and raise investor capital depends on general market conditions and availability of attractive investment opportunities as well as availability of debt capital. 
 Following the onset of COVID-19, our hotel properties in the hospitality segment incurred negative operating cash flows in April and May 2020, recovering to a slight positive operating cash flow in June 2020. As discussed in " —Segment Results—Hospitality", we have taken various steps to minimize operating expenses, as appropriate, in order to minimize operating cash needs. At this time, we do not anticipate allocating material amounts of the Company's own capital to our hospitality portfolios, but may elect to contribute capital on a limited basis, where we determine it would be meaningful to protect the value of these portfolios. 
 Asset Monetization 
 We periodically monetize our investments through asset sales that are opportunistic in nature or to recycle capital from non-core assets, in particular, assets in our other equity and debt segment. 
 Generally, in 2020, we expect a slower pace of dispositions given the current global economic downturn; nevertheless, we do intend to accelerate the sale of these non-core assets where reasonable values can be attained. 
 Non-Recourse Investment-Level Financing 
 We have various forms of investment-level financing across our digital real estate, healthcare, hospitality and other equity and debt segments, which are non-recourse to the Company, as described in more detail in Note 10 to the consolidated financial statements. 
 As discussed in " —Segment Results—Hospitality," in order to minimize cash needs, we did not make debt service payments on non-recourse debt financing our hotel properties, which resulted in the default of a combined $3.03 billion of debt in our hospitality segment and the THL Hotel Portfolio in the other equity and debt segment. We continue to engage in active negotiations with the respective lenders or servicers to seek various relief. We have not and do not intend to apply corporate level cash to service investment level debt. As noted, the defaulted debt is non-recourse to the Company. 
 Corporate Credit Facility 
 As described in Note 10 to the consolidated financial statements, the Credit Agreement was amended on June 29, 2020, which reduced aggregate revolving commitments from $750 million to $500 million and increased the interest rate on borrowings from LIBOR plus 2.25% to LIBOR plus 2.5% per annum. The amended terms provide for greater financial covenant flexibility and more borrowing base credit for digital investments. The credit facility is still scheduled to expire in 
 
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 January 2021, with two 6-month extension options. During the extension term(s), the interest rate would increase by 0.25%, and effective March 31, 2021, credit availability would be reduced to $400 million . 
 The maximum amount available at any time is limited by a borrowing base of certain investment assets. As of the date of this filing, the full $500 million is available to be drawn under the credit facility. 
 Additionally, through the date of this filing, we are in compliance with all financial covenants under the credit facility. 
 Convertible and Exchangeable Notes 
 In July 2020, the OP issued $300.0 million of exchangeable notes with maturity in July 2025 and bearing interest at 5.75% per annum. Net proceeds from this issuance of $291.0 million was applied to repurchase $289.7 million of the outstanding principal of the 3.875% convertible notes for total purchase price of $289.2 million , including accrued interest. This substantially addresses the January 2021 maturity of the 3.875% convertible notes, with $112.8 million principal outstanding as of the date of this filing, which we expect to address through cash on hand and/or proceeds from future asset monetizations. 
 As of the date of this filing, we have total outstanding principal of $626.4 million on our convertible and exchangeable senior notes, with a weighted average of 3.6 years remaining to maturity, and bearing weighted average interest of 5.16% per annum. 
 Junior Subordinated Debt 
 Our junior subordinated debt represents an obligation of a subsidiary of the OP that holds healthcare, hospitality and other non-core assets, as described in more detail in Note 10 to the consolidated financial statements. Colony Capital, Inc. and its operating company, Colony Capital Operating Company, LLC, are not guarantors on the junior subordinated debt. As of June 30, 2020 , we have total outstanding principal of $280 million on our junior subordinated debt, with a weighted average of 15.9 years remaining to maturity, and bearing weighted average interest rates of 3.17% . 
 Public Offerings 
 We may offer and sell various types of securities under our shelf registration statement. These securities may be issued from time to time at our discretion based on our needs and depending upon market conditions and available pricing. There are no planned public offerings of securities at this time. 
 Cash Flows 
 The following table summarizes our cash flow activity for the periods presented. 
 
 Six Months Ended June 30, 
 
 (In thousands) 
 
 2020 
 
 2019 
 
 Net cash provided by (used in): 
 
 Operating activities 
 
 $ 
 42,312 
 
 $ 
 139,151 
 
 Investing activities 
 
 114,565 
 
 (858,190 
 ) 
 
 Financing activities 
 
 (329,490 
 ) 
 
 579,735 
 
 Operating Activities 
 Cash inflows from operating activities are generated primarily through property operating income from our real estate investments, interest received from our loans and securities portfolio, distributions of earnings received from equity investments, and fee income from our investment management business. This is partially offset by payment of operating expenses supporting our various lines of business, including property management and operations, loan servicing and workout of loans in default, investment transaction costs, as well as compensation and general administrative costs. 
 Our operating activities generated net cash inflows of $42.3 million compared to $139.2 million in the six months ended June 30, 2020 and 2019 , respectively. 
 This can be attributed in part to operating cash flows in connection with our industrial business that was sold in December 2019. 
 
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 • 
 Specifically, the six months ended June 30, 2019 had included $95.1 million of operating cash inflows from our industrial business. The digital real estate business that was acquired in December 2019 using proceeds from the industrial sale is a much smaller portfolio, thereby contributing less operating cash flows in comparison. 
 
 • 
 In contrast, the six months ended June 30, 2020 included the payment of $39.9 million of accrued carried interest compensation in connection with carried interest realized from the sale of our light industrial portfolio. 
 
 Additionally, operating cash flows were negatively affected by the fallout from COVID-19 in the second quarter of 2020, particularly in our hospitality and healthcare business, as discussed in " —Segment Results. " 
 Investing Activities 
 Investing activities include cash outlays for acquisition of real estate, disbursements on new and/or existing loans, and contributions to unconsolidated ventures, which are partially offset by repayments and sales of loans receivable, distributions of capital received from unconsolidated ventures, proceeds from sale of real estate and equity investments, as well as proceeds from maturity or sale of debt securities. 
 Our investing activities generated net cash inflows of $114.6 million compared to net cash outflows of $858.2 million in the six months ended June 30, 2020 and 2019 , respectively. 
 
 • 
 Real estate investments —The significant net cash outflows in the six months ended June 30, 2019 was driven by outflows of $1.1 billion for acquisition, net of sales, of real estate; in particular, acquisition of a combined $1.1 billion light and bulk industrial portfolio in February 2019. Our entire light industrial portfolio was sold in December 2019. In contrast, our real estate investment activities in the six months ended June 30, 2020 generated net cash inflows of $38.1 million from sales, net of acquisitions. 
 
 • 
 Equity investments —Another significant contributor of net cash inflows in the six months ended June 30, 2020 was $203.7 million from our equity investments, driven by $179.1 million net proceeds from sale of our investment in RXR Realty in February 2020 and $87.4 million from recapitalization of our joint venture investment in Albertsons in April 2020, representing amounts recognized as return of investment. In the six months ended June 30, 2019 , we had net cash inflows of $30.2 million from equity investments, primarily proceeds from sales. 
 
 • 
 Debt investments —Lastly, our loan and securities portfolio generated net cash outflows of $116.8 million in the six months ended June 30, 2020 compared to net cash inflows of $230.8 million in the six months ended June 30, 2019 when loan repayments outpaced loan disbursements. 
 
 Financing Activities 
 We finance our investing activities largely through investment-level secured debt along with capital from third party or affiliated co-investors. We also draw upon our corporate credit facility to finance our investing and operating activities, as well as have the ability to raise capital in the public markets through issuances of preferred stock, common stock and debt such as our convertible notes. Accordingly, we incur cash outlays for payments on our investment-level and corporate debt, dividends to our preferred and common stockholders, as well as distributions to our noncontrolling interests. 
 Financing activities generated net cash outflows of $329.5 million compared to net cash inflows of $579.7 million in the six months ended June 30, 2020 and 2019 , respectively. 
 
 • 
 The significant net cash inflows in the six months ended June 30, 2019 was driven by borrowings exceeding debt repayments by $660.3 million , specifically $735 million of borrowings to fund a large industrial portfolio acquisition in February 2019, a majority of which was sold in December 2019. 
 
 • 
 While borrowings exceeded debt repayments in the six months ended June 30, 2020 by $224.8 million , primarily due to a net draw of $400 million on our corporate credit facility, we also settled the December 2019 redemption of our Series B and E preferred stock for $402.9 million in January 2020 using proceeds from our industrial sale. 
 
 • 
 Cash outflows for common stock repurchases were also higher in the six months ended June 30, 2020 totaling $24.7 million compared to $10.7 million in the six months ended June 30, 2019 . 
 
 • 
 Additionally, net contributions from noncontrolling interests of $97.1 million contributed to overall net cash inflows in the six months ended June 30, 2019 , while net contributions from noncontrolling interests was much lower at $28.4 million in the six months ended June 30, 2020 . 
 
 Contractual Obligations, Commitments and Contingencies 
 There were no material changes outside the ordinary course of business to the information regarding specified contractual obligations contained in our Form 10-K for the year ended December 31, 2019 . 
 
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 Guarantees and Off-Balance Sheet Arrangements 
 In connection with financing arrangements for certain unconsolidated ventures, we provided customary non-recourse carve-out guarantees. In addition, we have entered into guarantee or contribution agreements with certain hotel franchisors or operating partners, pursuant to which we guaranteed or agreed to contribute to the franchisees’ obligations, including payments of franchise fees and marketing fees, for the term of the agreements. We believe that the likelihood of making any payments under the guarantees is remote. 
 We have off-balance sheet arrangements with respect to our retained interests in certain N-Star CDOs. In each case, our exposure to loss is limited to the carrying value of our investment. 
 
 Risk Management 
 Risk management is a significant component of our strategy to deliver consistent risk-adjusted returns to our stockholders. The risk committee of our board of directors, in consultation with our chief risk officer, internal auditor and management, periodically reviews our policies with respect to risk assessment and risk management, including key risks to which we are subject, including credit risk, liquidity risk, financing risk, foreign currency risk and market risk, and the steps that management has taken to monitor and control such risks. The audit committee of our board of directors maintains oversight of financial reporting risk matters. 
 Underwriting and Investment Process 
 In connection with executing any new investment in digital assets for our balance sheet or a managed investment vehicle, our underwriting team undertakes a comprehensive due diligence process to ensure that we understand all of the material risks involved with making such investment, in addition to related accounting, legal, financial and business issues. If the risks can be sufficiently mitigated in relation to the potential return, we will pursue the investment on behalf of our balance sheet and/or investment vehicles, subject to approval from the applicable investment committee, composed of senior executives of the Company. 
 Specifically, as part of our underwriting process, we evaluate and review the following data, including, but not limited to: financial data including historical and budgeted financial statements, tenant or customer quality, lease terms and structure, renewal probability, capital expenditure plans, sales pipeline , technical/energy requirements and supply, local and macroeconomic market conditions, ESG, leverage and comparable transactions, as applicable. For debt investments, we also analyze metrics such as loan-to-collateral value ratios, debt service coverage ratios, debt yields, sponsor credit ratings and performance history. 
 In addition to evaluating the merits of any particular proposed investment, we evaluate the diversification of our or a particular managed investment vehicle’s portfolio of assets, as the case may be. Prior to making a final investment decision, we determine whether a target asset will cause the portfolio of assets to be too heavily concentrated with, or cause too much risk exposure to, any one digital real estate sector, geographic region, source of cash flow such as tenants or borrowers, or other geopolitical issues. If we determine that a proposed investment presents excessive concentration risk, we may decide not to pursue an otherwise attractive investment. 
 Allocation Procedures 
 We currently manage, and may in the future manage, REITs and other entities that have investment and/or rate of return objectives similar to our own or to other investment vehicles that we manage. In order to address the risk of potential conflicts of interest among us and our managed investment vehicles, we have implemented an investment allocation policy consistent with our duty as a registered investment adviser to treat our managed investment vehicles fairly and equitably over time. Pursuant to this policy, investment allocation decisions are based on a suitability assessment involving a review of numerous factors, including the particular source of capital’s investment objectives, available cash, diversification/concentration, leverage policy, the size of the investment, tax, anticipated pipeline of suitable investments and fund life. 
 Portfolio Management 
 The comprehensive portfolio management process generally includes day-to-day oversight by the Company's portfolio management team, regular management meetings and quarterly asset review process. These processes are designed to enable management to evaluate and proactively identify investment-specific issues and trends on a portfolio-wide basis for both assets on our balance sheet and assets of the companies within our investment management business. Nevertheless, we cannot be certain that such review will identify all issues within our portfolio due to, among other things, adverse economic conditions or events adversely affecting specific assets; therefore, potential future losses may also stem from investments that are not identified during these reviews. 
 
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 We use many methods to actively manage our risk to preserve our income and capital, including, but not limited to, maintaining dialogue with tenants, operators, partners and/or borrowers and performing regular inspections of our collateral and owned properties. With respect to our healthcare properties, we consider the impact of regulatory changes on operator performance and property values. During a quarterly review, or more frequently as necessary, investments are monitored and identified for possible asset impairment or loan loss reserves, as applicable, based upon several factors, including missed or late contractual payments, significant declines in property operating performance and other data which may indicate a potential issue in our ability to recover our invested capital from an investment. In addition, we may utilize services of certain strategic partnerships and joint ventures with third parties with relevant expertise to assist our portfolio management. 
 In order to maintain our qualification as a REIT for U.S. federal income tax purposes and our exemption from registration under the 1940 Act, and maximize returns and manage portfolio risk, we may dispose of an asset earlier than anticipated or hold an asset longer than anticipated if we determine it to be appropriate depending upon prevailing market conditions or factors regarding a particular asset. We can provide no assurances, however, that we will be successful in identifying or managing all of the risks associated with acquiring, holding or disposing of a particular asset or that we will not realize losses on certain assets. 
 Interest Rate and Foreign Currency Hedging 
 Subject to maintaining our qualification as a REIT for U.S. federal income tax purposes and our exemption from registration under the 1940 Act, we may mitigate the risk of interest rate volatility through the use of hedging instruments, such as interest rate swap agreements and interest rate cap agreements. The goal of our interest rate management strategy is to minimize or eliminate the effects of interest rate changes on the value of our assets, to improve risk-adjusted returns and, where possible, to lock in, on a long-term basis, a favorable spread between the yield on our assets and the cost of financing such assets. In addition, because we are exposed to foreign currency exchange rate fluctuations, we employ foreign currency risk management strategies, including the use of, among others, currency hedges, and matched currency financing. We can provide no assurances, however, that our efforts to manage interest rate and foreign currency exchange rate volatility will successfully mitigate the risks of such volatility on our portfolio. 
 
 Critical Accounting Policies and Estimates 
 Our financial statements are prepared in accordance with GAAP, which requires the use of estimates and assumptions that involve the exercise of judgment and that affect the reported amounts of assets, liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. 
 Other than adoption of new accounting standards, in particular, Topic 326 Financial Instruments — Credit Losses , which are discussed in Note 2 to our consolidated financial statements in Item 1 of this Quarterly Report, there have been no changes to our critical accounting policies or those of our unconsolidated joint ventures since the filing of our Annual Report on Form 10-K for the year ended December 31, 2019 . 
 The application of critical accounting policies that required significant management judgment, estimates and assumptions are discussed further in the following notes to the consolidated financial statements. 
 
 • 
 Impairment of real estate—Note 4 
 
 • 
 Other-than-temporary impairment on equity method investments—Note 6 
 
 • 
 Fair value measurement of loans receivable under fair value option—Note 12 
 
 • 
 Credit loss on available for sale debt securities—Note 6 
 
 • 
 Impairment of goodwill and intangible assets—Note 7 
 
 We believe that all of the underlying decisions and assessments applied were reasonable at the time made, based upon information available to us at that time. Due to the inherently judgmental nature of the various projections and assumptions used, the unpredictability of economic and market conditions, and the uncertainties over the duration and severity of the resulting economic effects of COVID-19, actual results may differ from estimates, and changes in estimates and assumptions could have a material effect on our financial statements in the future. 
 Recent Accounting Updates 
 The impact of accounting standards adopted in 2020 and the potential impact of accounting standards to be adopted in the future are described in Note 2 to our consolidated financial statements in Item 1 of this Quarterly Report. 
 
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DigitalBridge Group, Inc. 10-Q

Item 2. Management’s Discussion and Analysis
