Colony Capital Inc. (NYSE: CLNY), a publicly traded real estate investment trust, has agreed to sell six of its hospitality portfolios to Highgate, a real estate investment and hospitality management company with more than $10 billion of hospitality assets under management.
The transaction is valued at $2.8 billion, including $67.5 million of gross proceeds on a consolidated basis and the assumption of $2.7 billion in consolidated investment-level debt. The six portfolios consist of 22,676 rooms across 197 hotel properties.
In January 2017, Colony Capital Inc. merged with NorthStar Asset Management Group Inc., and NorthStar Realty Finance Corp. and changed its name to Colony NorthStar (NYSE: CLNS). Shortly thereafter, the company changed its name back to Colony Capital and began trading under its former ticker symbol. Colony currently sponsors NorthStar Healthcare Income Inc., a publicly registered non-traded REIT.
The hotel sale signals Colony’s stated intention of simplifying its business profile to focus exclusively on digital infrastructure assets. In addition to the benefits of exiting the hospitality business, Colony Capital said that it expects to generate segment and corporate-level general and administrative expense savings post-closing.
As part of the transaction with Highgate, Colony will transfer five of the six portfolios held in the hospitality segment and an approximately 55 percent interest in the THL Portfolio held in the other equity and debt segment. The sixth portfolio in the hospitality segment, the Inland portfolio, is under receivership and is excluded from the transaction. This transaction will reduce Colony’s consolidated debt outstanding by $2.7 billion, including its $2.3 billion pro-rata share.
“We are thrilled to be delivering on our commitment to dispose of non-core assets and harvest positive value for our hospitality business…,” said Marc Ganzi, chief executive officer of Colony Capital. “The sale of our legacy hospitality assets is a significant milestone in Colony’s digital transformation as we pivot to focus exclusively on our fast-growing digital businesses that generate superior returns for Colony shareholders.”
The transaction is expected to close in the first quarter of 2021.
Colony Capital manages a $46 billion portfolio of real assets on behalf of its shareholders and limited partners, including more than $20 billion in digital real estate investments through Digital Colony, its digital infrastructure platform.