Colony Capital stock suffers from market turmoil

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Updates from Tom Barrack

Colony Capital, the investment group founded by real estate investor Tom Barrack, has become one of the private equity industry’s worst losers after a week of market turmoil, as investors feared the coronavirus pandemic would inflicts heavy losses on the company’s portfolio. hotels and nursing homes.

Colony’s value has fallen 41% over the past week, about four times the declines seen by major investment firms such as Apollo Global Management and Carlyle Group, and far worse than rival real estate investment trusts such as Vornado and Simon Properties.

The group’s share price is now less than a sixth of its value on the day Donald Trump took office, after a campaign in which the President’s longtime friend, Mr Barrack , was a key support.

Mr Barrack will step down as chief executive in July, the company said Thursday. He had planned to stay until next year before handing the managerial post to his longtime polo acquaintance Marc Ganzi, who joined last year as general manager.

Investor concerns have focused on a portfolio of 157 “hotel properties” which represent one-third of Colony’s real estate portfolio. Many are hotels operating under brands such as Marriott and Hilton, whose owners were also beaten this week as the virus proliferated and global travel restrictions spread.

Almost as worrying, some analysts say, is Colony’s portfolio of 358 nursing homes, assisted living centers and other healthcare-related properties. The industry has fallen out of favor with investors since a similar facility in Seattle was identified as the center of that city’s coronavirus outbreak earlier this month.

Mr. Ganzi sold his Digital Bridge infrastructure group to Colony for $ 325 million in July and plans to turn Colony into the owner of mobile phone masts, data centers and “digital infrastructure” assets. .

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As part of this strategy, Colony last year sold a portfolio of warehouses to Blackstone, a rival investment group. But the group has planned to take its time to find a buyer for the health and hotel portfolios. “We sold hotels last year,” Ganzi told an audience in January. “We sold three hospitals. . . It is therefore not necessary to completely dispose of all these assets today.

The strategic changes at Colony have aroused the contempt of some shareholders. Activist investor Blackwells Capital wrote an open letter to the board last week lambasting what he called Mr. Barrack’s “random hunt for opportunistic deals and businesses (many involving his friends) which are justified post hoc with some modifications to the mission statement of the company “.

Colony called the intervention “yet another effort to hide [Blackwells’] lack of a coherent strategy behind personal attacks on Colony’s board and management team ”.


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