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Colony Capital Inc (NYSE:CLNY)
Q4 2019 Earnings Call
Feb 28, 2020, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings and welcome to Colony Capital's Fourth Quarter and Full Year 2019 Earnings Conference Call. [Operator Instructions]

It is now my pleasure to turn the conference over to your host, Lasse Glassen, with ADDO Investor Relations. Thank you. You may begin.

Lasse Glassen -- Managing Director

Good morning, everyone, and welcome to Colony Capital Inc.'s fourth quarter and full year 2019 earnings conference call.

Speaking on the call today from the Company is Tom Barrack, Chairman and CEO; Marc Ganzi, Incoming CEO and current CEO of Digital Bridge Holdings, LLC; and Mark Hedstrom, Colony's COO and CFO. The question-and-answer session will follow our prepared remarks.

Before I hand the call over to management, please note that on this call, certain information presented contains forward-looking statements. These statements are based on management's current expectations and are subject to risks, uncertainties and assumptions. Potential risks and uncertainties that could cause the Company's business and financial results to differ materially from these forward-looking statements are described in the Company's periodic reports filed with the SEC from time to time, including, but not limited to, the Company's Annual Report on Form 10-K for the year ended December 31, 2018, and quarterly report on Form 10-Q for the quarter ended June 30, 2019, as well as the exhibits to the current report on Form 8-K filed earlier today. All information discussed on this call is as of today, February 28, 2020, and Colony Capital does not intend and undertakes no duty to update for future events or circumstances.

In addition, certain of the financial information presented on this call represents non-GAAP financial measures, reported on both a consolidated and segmented basis. The Company's earnings release, which was issued this morning and is available on the Company's website, presents reconciliations to the appropriate GAAP measure and an explanation as to why the Company believes such non-GAAP financial measures are useful to investors. In addition, the Company has prepared a table that reconciles certain non-GAAP financial measures to the appropriate GAAP measure by reportable segment, and this reconciliation is also available on the Company's website.

With that, I'd now like to turn the call over to Tom Barrack, Chairman and CEO of Colony Capital. Tom?

Thomas J. Barrack -- Executive Chairman and Chief Executive Officer

Good morning. And thank you, Lasse.

A CEO's primary responsibility is to define the vision and persistently communicate that vision to all its constituencies. When embraced and executed by all the team members, that vision becomes a reality. In order to produce consistent extraordinary returns over the long term in a fast-moving world of accelerating disruption, friction and change, we must see things that others don't, adapting quickly and efficiently in order to define our relevance in this hypercompetitive an ever-changing environment.

A flood of liquidity in the global markets has caused an insatiable thirst for yield. As a result, pricing in most real estate food groups has become surgical and amazingly competitive at a time when many assets are quickly becoming physically, functionally and financially obsolescent. Capex today is the four-letter word in real estate, and the line between return of and return on capital is oftentimes opaque.

Consequently, we peered through the valuable bricks and mortar that we own across the globe to anticipate the needs and transformation of the users of our assets. Technological advancements in the Internet of Things, Big Data, biotech, communication networks, instantaneous and prolific information, e-commerce and last mile logistics, manufacturing, hospitality, healthcare and media and entertainment are increasing at warp speed to new destinations and require new highways upon which to travel.

The infrastructure necessary for that journey is new, different and in great demand. Consequently, we are availing ourselves of historic prices in many of our legacy assets and converting that modernization to, number one, fortify our balance sheet, and secondly, invest in the digital ecosystem where we have defined a competitive edge.

As we increasingly expand our digital program to invest ahead of and alongside of change, we also must change from the top. We've already accomplished this rotation, beginning with the acquisition of Digital Bridge and the designation of Marc Ganzi as my successor. We will continue with the reallocation of resources and talent sets to properly man and execute this initiative while at the same time fortifying the traditional strengths of Colony's global brand and investment management business.

The rotation necessitates change and realignment of teams and themes. Our vision is to become the most significant solutions provider of digital infrastructure across the digital ecosystem to the best and largest technology and telephony companies around the world. This vision is both very achievable and we are well under way, as you can see.

Many times, the adaptation and redefinition of the vision necessitates short-term pain for long-term gain. However, we are stewards of an end of life balance sheet and we are focused on the long game, as we continue to provide meaningful dividends from our legacy assets and extraordinary total return from our digital assets. We are moving down the field, as we have planned, and I'll now share with you the results on the past year.

What was accomplished in 2019 starts with simplification. Industrial. We completed the sale of our light industrial platform for $5.7 billion, delivering a 17% IRR to our shareholders, while utilizing modest leverage, resulting in a net cash gain and incentive fees of approximately $473 [Phonetic] million and net cash proceeds of approximately $1.25 billion for the Company's share.

Next, other equity and debt. We exceeded our 2019 target of $500 million of OED monetizations, with $717 million of OED asset monetizations in 2019. We achieved more than $2.1 billion in total OED monetizations since the beginning of 2018.

NRE. We completed the sale of NRE, delivering a 16% IRR to shareholders since inception and generating gross proceeds of $160 million to Colony Capital, 4% to 11% [Phonetic] share commissions in the management contract.

Next, credit. We closed a $1 billion CRE CLO at CLNC. Evaluating the strategic transaction regarding the CLNC management contract is an ongoing process, and we held the closing of our fifth global real estate credit fund with total capital commitments of $428 million.

G&A reduction. We achieved well over the expected $50 million to $55 million previously announced of cost savings on a run rate basis, and we will continue to exceed our target in 2020 as we continue to clip away.

Healthcare. We refinanced an aggregate $2.2 billion of debt, including $1.725 billion in a GAR [Phonetic] loan refinancing. That addressed all of our material near-term maturities and puts us in very good shape. In addition, we've sold three hospitals, generating $88 million of equity proceeds.

Hospitality. We refinanced three portfolios totaling $1.1 billion of debt on accretive terms that extend maturities out four to seven years.

RXR. We just completed the sale of the company and our 27.2% ownership in RXR Realty, a non-wholly owned real estate investment management platform, for approximately $200 million resulting in realized pre-tax gain of $106 million.

Next, a thematic growth story. Today, we manage more than $20 billion of digital real estate AUM, an extraordinary increase from just zero dollars in digital real estate AUM only two years ago, a dramatic pivot. Let me review with you some of the results.

Digital Colony Partners, DCP, closed a historic $4.1 billion of commitments for Digital Colony Partners, the largest first-time fund for digital real estate in history and far surpassing our $3 billion target size, with 73% of the fund already invested or committed to be invested. Secondly, we acquired Digital Bridge Holdings, the investment manager of DCP, and its six digital portfolio companies and unified its world-class team of investment professionals with Colony's. Additionally, we have made a number of outstanding additions to the Digital Colony team.

Next, Zayo, a major transaction in the United States with an anticipated close of March 9. $14.3 billion transaction, to which DCP committed $800 million of capital and we raised an additional $2.2 billion of equity co-investment capital from some of the world's most sophisticated institutional investors.

Next, liability management. We completed the redemption of all of the outstanding 8.25% Series B and 8.75% Series E cumulative redeemable perpetual preferred stock for $408 million, which was settled in January of 2020, eliminating $34 million of annualized preferred dividends.

2019 and 2020 $0.44 dividend. We paid a $0.44 dividend in 2019, and we are committed to pay a $0.44 dividend in 2020. Over the past three years, we've returned over $2.6 billion to common and preferred shareholders through dividends, redemptions and repurchases.

DataBank. We acquired a 20.4% controlling interest in DataBank, a leading private owner and manager of edge data centers in the US for approximately $185 million, representing the Company's inaugural direct balance sheet investment in digital real estate.

Liquidity. As of February 25, we had significant liquidity of $1.3 billion, including $520 million of cash on hand and through availability under our revolving credit facilities.

CEO succession. We've designated Marc Ganzi as Colony Capital's next CEO to succeed me.

Board additions. We've added three new independent directors to the Board in 2019 for a total of 10 independent directors. We've now engaged an executive search firm to assist the Company's Board including in nominating a Corporate Governance Committee and its ongoing process to evaluate Board composition, governance and refreshment matters with a focus on identifying potential director candidates with appropriate digital experience to join the Company's Board as the Company continues to execute on its digital evolution.

Bridging the digital divide. What is our focus mission? Simple. To become the leading real estate asset solutions provider of occupancy, connectivity and capital to the world's leading mobile communications and technology logos. Together with our limited partners, we will invest in digital real estate assets in which we have a durable competitive advantage, in which we have control, in which we possess compelling growth characteristics.

What's our differentiated strategy? To thoughtfully utilize our well regarded Digital Colony brand, access to permanent capital, global reach, best-in-class tenant relationships and operating experience in digital to our limited partners' and our shareholders' benefit; continue to focus on culture, alignment and motivation of our employees and our partners.

Our balance sheet. Efficiently manage and steward legacy businesses in the best interests of our shareholders and other stakeholders as we opportunistically cull, curate and define value, maximizing futures for these legacy businesses.

Our commitment to best-in-class governance. With the full support of the Board of our nominations and governance committee, we're commencing a process to refresh the Board to best suit the tasks at hand, including efforts to identify independent members with extraordinary capabilities in tech driven sectors of the economy, consistent with our emphasis on digital real estate and digital infrastructure and the background characteristics of our new CEO.

The impact of the volatility that we're currently undergoing on businesses and commerce globally as it relates to the pandemic and the volatility in the equity and fixed income markets has been and will continue to be severe and with no clear set of guardrails to the bottom.

I'll turn it over to Marc to highlight the durability of digital infrastructure in times of volatility and why the significance of digital infrastructure operators has never been more mission-critical than it is at the moment. Marc?

Marc Ganzi -- Chief Executive Officer-elect, Chief Executive Officer-Digital Colony

Thank you, Tom.

We believe more than ever being invested in and exposed to digital infrastructure and digital real estate is seminal to defensible long-term investment plan. Digital infrastructure has long been a safe haven for investors in times of great volatility. We believe this cycle will be no different.

Colony's rotation to digital allows investors to participate in this global thematic with strong upside and downside protection. The 16 digital businesses we own and operate globally have long-term contracts varying from five to 25 years in duration with built-in annual escalators and high exposure to investment grade counterparties.

As the world deals with uncertainty, the digital economy continues to move as our customers continue to do business and enable the global economy to keep moving. Telecommuting via video conferencing on applications like Zoom, Microsoft Teams, Cisco and Slack are key examples of our customers helping the world's leading enterprises enable and conduct commerce.

Our fiber lines feed the servers and nodes and towers that enable these signals. Our data centers run high power density applications to ensure the ecosystem continues to deliver durable goods and services to consumers and enterprises alike. Never before has digital infrastructure been more mission-critical than it is today. As a diversified global REIT, Colony offers investors the opportunity to be exposed to the thematic and sector and a unique and highly converged platform without equal.

I'm looking forward to the journey ahead in 2020 and engaging with investors and our customers as we map the digital divide and convergence in and among various parts of our ecosystem and enabling our customers continue to build and deploy networks globally.

Thomas J. Barrack -- Executive Chairman and Chief Executive Officer

Thanks, Marc.

Before I turn it over to Mark Hedstrom, I wanted to thank Justin Metz who has been one of our most valued directors who has done an amazing job for us, who has recently resigned due to the demands of his own great business. We are unbelievably grateful, respectful and will always have Justin in our Colony family.

With that, I'll turn it over to Mark Hedstrom.

Mark M. Hedstrom -- Executive Vice President, Chief Financial Officer and Chief Operating Officer

Thank you, Tom, and good morning, everyone.

As a reminder, in addition to the release of our fourth quarter earnings, we filed a corporate overview and supplemental financial report this morning, which is available within the public shareholders section of our website. On the call today, I will provide a review of our fourth quarter and full year 2019 financial results, business segment performance and other key financial and operational details.

Turning to our financial results. GAAP net loss attributable to common stockholders in the fourth quarter was $26 million or $0.06 per share, and the full year 2019 was a net loss of $1.15 billion or $2.41 per share. A significant and anticipated contributor to the 2019 loss was tied to Colony's ongoing strategic transition and long-term plan to focus on and create the leading platform for digital real estate and infrastructure. This transformation led the Company to reduce the carrying value of goodwill and other intangibles related to certain components of our legacy investment management business and to record a non-cash GAAP impairment charge of $411 million in the fourth quarter.

Core FFO was $48 million or $0.09 per share for the fourth quarter and $266 million or $0.50 per share for the full year. Excluding net losses of $21 million, primarily in the Other Equity and Debt segment, fourth quarter core FFO was $69 million or $0.13 per share. For the full year 2019, excluding net investment losses of $52 million, core FFO was $318 million or $0.60 per share, which exceeded our annual dividend of $0.44 per share.

In 2019, Colony executed on a number of initiatives to advance our stated strategic priorities, which included streamlining the business, further optimizing our capital structure and the generation of significant liquidity in order to transition to a digital real estate strategy. The Company ended the year well ahead of plan on a core FFO basis, while exceeding its 2019 asset monetization target with both contributing to a strong year-end liquidity position.

Turning to 2020. We expect to maintain a $0.44 per share regular common dividend for the full year 2020, a transitional year for the Company. The expectation is underpinned and well covered by the Company's full year 2020 outlook for core FFO of $0.35 to $0.40 per share in addition to significant anticipated net cash gains not part of core FFO, including the $106 million gain or $0.20 per share that was already generated through the early February sale of Colony's interest in RXR Realty.

Now I will provide a breakdown of Colony's operating results by segment. Starting with our investment management business. We ended the fourth quarter with third-party AUM of $36.3 billion, down 8% compared to last quarter, and fee earning equity under management of $19.4 billion, down 13% compared to last quarter. The decrease in third-party AUM and FEEUM were primarily attributable to the December sale of the light industrial platform and to a much lesser extent the sale of our interest in Hamburg Trust. We expect non-digital legacy AUM and FEEUM to continue to decrease in 2020 as we dispose of legacy OED and other assets, including the previously mentioned sale earlier this month of our interest in RXR Realty.

In contrast, Colony's digital AUM reached $13.8 billion in the fourth quarter, which represents approximately 29% of the Company's entire AUM. The Digital Colony Partners fund closed two new investments in the fourth quarter and committed to three additional investments so far in 2020 and is now 73% committed. The Company also made its first direct balance sheet investment in digital real estate in the fourth quarter through the acquisition of a 20% controlling interest is DataBank, a leading private owner and manager of edge data centers in the US, for approximately $185 million.

We expect to grow our digital real estate investment management platform by continuing to focus on our successful digital equity strategy as well as expanding into digital credit and digital liquidity strategies, with the expectation of substantial associated co-investment vehicles. We expect digital FEEUM, currently $6.8 billion, to grow at a rate of more than 15% in 2020 and even faster in 2021.

Next, I will provide an update on the corporate restructuring and reorganization plan announced during the fourth quarter of 2018. Since initiation of the plan, the Company has achieved more than 100% of the expected $50 million to $55 million cost savings on a same-store run rate basis through various initiatives, including the reduction of almost 30% of the Company's workforce existing at the time the restructuring was announced. In addition to savings from businesses expected to be sold during the year, we anticipate an additional $10 million to $15 million of annual run rate reduction in corporate G&A in 2020. The targeted G&A savings related to the legacy Colony businesses will partially be offset by additional investment into the digital real estate team to support the platforms' very profitable operations and growth.

Moving to the Healthcare Real Estate segment. The fourth quarter included a one-time recovery of rent receivables and termination fees, which resulted in an 11% same-store portfolio NOI increase from the third quarter. Excluding these one-time items, same-store NOI was flat. Same-store portfolio full year 2019 NOI was also flat compared to 2018. There were two significant transactions on the healthcare financing front. We refinanced the GBP212 million loan on a portfolio of UK senior housing assets with a new GBP223 million fully extended five year loan at a substantially reduced interest rate.

Additionally, we put in place a $48 million loan on a skilled nursing facility, lengthening the fully extended maturity date to 2024 at a similar interest rate. These refinancings, along with previously completed refinancing transactions in 2019, address all near-term healthcare real estate loan maturities which was a key 2019 objective.

Turning to the Hospitality Real Estate segment. Compared to the same period last year, fourth quarter 2019 same-store portfolio NOI before FF&E reserve decreased 10%, primarily due to incremental room demand generated from one-time events in the fourth quarter of 2018 and higher room revenue displacement from hotels under renovation and continued wage pressure in the fourth quarter of 2019. Excluding the one-time events and renovation displacement, fourth quarter 2019 NOI before FF&E reserve decreased 8% compared to the same period last year.

Same-store portfolio full year 2019 NOI before FF&E reserve decreased 2% compared to 2018. During the fourth quarter, we also refinanced an aggregate total of $982 million of secured debt on two hospitality portfolios, significantly extending the outside maturity dates to 2026 at slightly lower interest rates on average.

Last quarter, CLNC announced a strategic plan to bifurcate its assets into a core portfolio, which will grow, and a legacy nonstrategic portfolio, which will be monetized with proceeds reinvested into the core portfolio. Further, CLNC amended its definition of core Earnings to only reflect the results of its core portfolio. Yesterday, CLNC reported fourth quarter core earnings of $43 million or $0.33 per share versus $45 million or $0.34 per share in the prior quarter. More information can be found in the CLNC's earning release.

Next is our Other Equity and Debt or OED segment, a $1.8 billion equity carrying value portfolio separated into strategic OED and non-strategic OED. Strategic OED has an equity carrying value of $870 million and includes our investments alongside third-party capital where we earn investment management economics. We are also actively managing and liquidating nonstrategic OED which has an equity carrying value of $941 million and includes legacy investments which are not core to the current investment management business and are not intended to be owned for the long term.

During the fourth quarter, we completed planned asset monetizations, returning $35 million of net equity proceeds with the OED segment, and for the full year 2019 we returned net equity proceeds of $566 million from asset monetizations. Looking ahead, the Company has a 2020 asset monetization target of $300 million to $500 million, with the goal to ultimately monetize the entire Legacy OED portfolio.

I will now touch on the industrial platform sale and related corporate capital allocation. In December, the Company completed the sale of its light industrial platform for an aggregate $5.7 billion which resulted in a net cash gain and incentive fees of approximately $475 million and net cash proceeds of approximately $1.25 billion for the Company's share. This successfully executed sale generated a high teens IRR and a 1.8 times equity multiple on the Company's investment while utilizing only modest leverage.

Those proceeds are being deployed in part to accelerate our ongoing transition into digital real estate, including our fourth quarter DataBank acquisition, and also to redeem $403 million of high cost preferred equity to improve the Company's leverage and capital structure and to eliminate $34 million of annual preferred dividends.

And finally, a word about the Company and its balance sheet and operations in light of these recently turbulent times and associated high volatility. First, as mentioned earlier, we believe that the digital real estate business model is extremely resilient and that there will be no slowdown to operation of an investment in digital infrastructure.

Second, while our risk assessment of the impact of the current environment on our legacy businesses is still ongoing, we have addressed all near-term secured debt maturities, allowing us time to operate and create additional value in the assets. Third, we have $5.5 billion of capped floating rate secured debt, and if interest rates decline in this environment beyond levels already anticipated, the interest savings may act to offset lower operating expectations in the legacy asset classes.

And lastly, we are well positioned, with significant levels of liquidity, which today stands at $1.3 billion, including $520 million cash on hand in addition to an undrawn revolving line of credit.

We are pleased with the progress we have made in realigning our business to reflect our digital transformation while fortifying our balance sheet, allowing us to experience a strong start to 2020.

With that, I will turn the call over to the operator to begin Q&A. Operator?

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from Jade Rahmani with KBW. Please proceed with your question.

Jade Rahmani -- KBW -- Analyst

Thank you very much. Starting with CLNC, I wanted to ask, what do you expect the likely outcome to be and over what timeframe you think is reasonable to anticipate a resolution?

Thomas J. Barrack -- Executive Chairman and Chief Executive Officer

Jade, good morning. It's Tom. We expect a series of strategies and proposals within the next week, from which we'll then start selecting and curating along with the CLNC board to figure out what the best strategy ultimately for the share value [Phonetic]. We own 36% of the stock of CLNC in addition to the external manager. And except for the 1,000 point decline in the stock market for the third time in Sweden [Phonetic], we anticipate a very robust review of the internalization and other strategic options of the external management agreement and what will be accretive and positive to the shares. The credit business and the balance sheet and platform is valuable, and as interest rates continue to decline, those businesses get better. So we're bullish on looking at what our strategic options are starting sorry in the next week, which will culminate sometime in the next quarter.

Jade Rahmani -- KBW -- Analyst

Okay. In terms of CLNC itself, and as the external manager of that company, have you considered or will you consider the prospect to bulk-sell assets from CLNC's core portfolio, take those proceeds, and even though it might be at a haircut to par value, you could use those proceeds to buy back stock at 60%, 70% of book value, you can announce a tender for the shares. Because I think one overhang that will likely remain so long as CLNY owns 36% of that company is what eventually happens to that block of stock. Is that something that you would consider having CLNC do?

Thomas J. Barrack -- Executive Chairman and Chief Executive Officer

Yeah, absolutely. It's a great question because you're exactly right. The management contract itself is pretty easy to value that the hangover of the 36% of our ownership is, it really always a question and we're trading way below book value and NAV. So, of course to that interest in executing a sale at the values that we are at today, but that race in getting share price back is in a parallel track with what the perception of our 36% is and how we distributed and ultimately where we want it go. So we've looked at it as distorted value.

So yes, we're looking at all of those options mostly as it relates to exactly what we're talking about, what's the ultimate road to getting that increase share value and it's all those components, right? In the legacy assets, what's really the marketable value to our written down value is and we're at pace. We're doing great job on those assets and we're actually liquidating them in a more rapid benefit than we thought. And the other is what's left in the core portfolio that is believable around [indecipherable] and we think we're pretty close to having a core portfolio stabilized, and that CLO helped a lot.

And the third part of course is over time, how do you start trading like the other externally managed mortgage REITs so that we can go back to a premium to book we're trading, as you know, at a deficit. So all those options are being brought to us at the moment. We'll evaluate them including the good one that you suggested and we will come up with the right conclusion. But it's a good solid business and we think we're right toward the bottom of both legacy assets, understanding what the core portfolio is, figuring out and execution of liquidity at what we can do the share value. And anybody who is going to want to do anything with us is going to want some shareholder agreement and direction on what we're doing with that 36%.

Jade Rahmani -- KBW -- Analyst

Okay. In the past, some of your language has included the term special dividend. And I wanted to find out, if you could provide some insight as to what you meant by that. Would you consider a special dividend in the CLNC shares to CLNY holders and they can decide what to do with them? Or did you mean perhaps special dividend getting some gains such as the industrials gain and the RXR gain. What does that refer to?

Thomas J. Barrack -- Executive Chairman and Chief Executive Officer

I mean, look, we've looked -- we've looked at everything and what we did is try and blended a myriad of all of that. So in our analysis and our advice for this year on our dividend, we decided that we would just establish from cash flow and from gains and set a dividend for 2020 that we can live with that's fully covered. The special dividend idea is always there, right, it's a store of value, that bank of value in CLNC depending on where you think you are in book value and distribution someplace win secured $800 billion can be used for a lot of things and we've always thought that it could be used for special dividend, depending on where we end up on the legacy businesses.

Legacy businesses are actually stabilized, they are doing actually better than we anticipated in a different voice. So one time we've got a special dividend, we've got hospitality and healthcare, we termed out debt, we stabilized the income stream, other than the last week and with ramifications of coronavirus and the volatility in this market are, we're comfortable keeping that cash flow going as we transition and depending on what happens with CLNC, we always have that as an added liquidity device for either special dividend to convert into cash to do the other things that we've always said that we will analyze. Buyback stock, trim the debt on the balance sheet, utilize for greater digital acquisitions, but we've got plenty of liquidity. We are at about $1.2 billion of liquidity, including what our anticipation is premiumization of the digital machine that market strike.

So yes, the special dividend is the -- in focus as the tool we could use at the point in time that we start understanding stabilization at 36% share.

Jade Rahmani -- KBW -- Analyst

Okay. I wanted to also ask on, do you plan additional redemptions of preferreds. And also, what is your thinking about the convert that matures next year.

Thomas J. Barrack -- Executive Chairman and Chief Executive Officer

Yeah, good question. And we're always -- even today like we're not only at analyzing redemption of preferred we're looking to buy back our own stock. And I think I hate to keep looking at promised through the -- I don't look at our own stock price every day, because it's attracts from running the business, but one of the things we're looking at, it is a group is buying back common, so every day in kind of our investment committees, we have a race between what we do and paying down debt, anchoring new GP products, digital balance sheet products, special dividends buyback of the preferred, buyback of our common and it's raised for the long-term right solution, right.

Today in an evolving environment and whatever you think our NAV is, you might be very tempted to say the best utilization to cash is to buy back common stock. So we're just evaluating on a daily basis. We resolve those markets, we try not to make those decisions quite honestly.

Jade Rahmani -- KBW -- Analyst

Okay. Lastly, I just wanted to ask about the digital investment landscape. Can you quantify what digital fee earning equity under management is currently? And how you're seeing what kinds of opportunities are most interesting and also if you could address the competitive landscape? There has been some very large infrastructure funds raised, not sure how you're seeing the steep amount of competition that's there.

Thomas J. Barrack -- Executive Chairman and Chief Executive Officer

With that, let me turn it over to our digital czar, Marc.

Marc Ganzi -- Chief Executive Officer-elect, Chief Executive Officer-Digital Colony

Good morning, Jade. How you are doing?

Jade Rahmani -- KBW -- Analyst

Great, thanks.

Marc Ganzi -- Chief Executive Officer-elect, Chief Executive Officer-Digital Colony

So Jade, three questions there. Let me try to take them in sequence. I'll answer your last question first around the digital FEEUM that we're generating today and what we anticipate generating over the course of this year. First and foremost, competitive environment on deals. I would say it's been as competitive as it's ever been, and you are right, we do face a lot of competition out there in auctions. What I would tell you is we don't play in a lot of auctions, it's just not a place where we find value today. If you look at the 11 investments we've made in Digital Colony one, key out of those 11 investments were proprietary where there was not an option or a competitive process, but rather we created the opportunity, we spent time with the management team and we've ultimately were able to convince them to allow us to partner with them and to get to the right place.

And so that for us has always been our calling card is having great relationships with management teams and we think that is what will endure and that's how you create value for your LPs and for your shareholders. As it relates to the total amount of revenues that we generate from the digital business, we generate roughly about a little over $75 million in reoccurring fees. What I would tell you, as we look toward 2020 Jade, couple of areas that we've guided you to. One is, we believe that will grow by at least 15%, and we think that guide is conservative.

Unpacking that for a second, Jade, there is two ways that we generate fees. One is through proprietary co-investment ideas and opportunities for our investors and the second is new fund products. As Mark Hedstrom said earlier in the call today, we are in the process of launching some new fund products. The details around those will become more apparent in Q2. But we're already in flight and raising new IM products. The second swim lane, you should think about is co-investment.

So just for example Zayo alone, we raised $2.7 billion of co-investment. We have four other projects in the co-investment category today. One of those projects was Project F1. I think you saw an announcement that we expanded Vantage into Europe and we raised $800 million of equity to support Vantage. $400 million was in a strategic co-invest and then $400 million was from Digital Colony Partners One, so there is a great example of where we use the fund Jade, $400 million. We then had co-investors, lined up for the other $400 million that generates fee and carry. And you're going to see more of that we've got besides Project F1, we've got three other projects that are in flight right now that we can't give you details on today, they are strategic.

But what I would tell you is those three projects will generate significant outsized co-investment opportunities for Colony in 2020. So the setup for 2020 is fantastic. We've got a bunch of new ways to generate FEEUM. I absolutely anticipate crushing that 15% metric that we've guided you to, and we will continue to look for deals where others don't. That's been sort of my 25-year track record in doing these deals is, we typically don't play particularly well in auction formats.

Jade Rahmani -- KBW -- Analyst

Okay, thanks so much for taking the questions.

Thomas J. Barrack -- Executive Chairman and Chief Executive Officer

No, thanks, Jade.

Operator

Our next question comes from Randy Binner with B. Riley. Please proceed with your question.

Randolph Binner -- Riley FBR, Inc. -- Analyst

Hey, good morning. I think I'll pick up right there on -- on just parsing out the share of the business that is expected to be digital and can we just go a step further out and talk about the guide you laid out last fall of AUM or fee earning AUM, however you want to define it of being 50% for the consolidated entity by year-end '20 and then 90% by '21. Is that -- that's pro forma Zayo and I think that number pro forma Zayo now is something in the high 30s. So, is that right that that number of pro forma Zayo is in the high 30s and then is it still realistic to say, this is going to be a 50% in the 90% digital asset base in '20 and '21 respectively?

Marc Ganzi -- Chief Executive Officer-elect, Chief Executive Officer-Digital Colony

Thanks, Randy. Appreciate the question and it's a good question. So let's just talk about exactly where we are today, before Zayo closes on March 9 as Tom Barrack told you earlier, we're very excited to announce formerly the closing date of Zayo and our partnership with EQT. Today, we have about $13.5 billion of digital assets across our $36 billion plus of AUM today. Once Zayo closes, obviously, that's another close to more than $7 billion of AUM that takes us up to about $21 billion of digital assets under management. And it takes the firm just a little bit somewhere in the zip code of about $43 billion of total assets under management pro forma for the Zayo close.

But I think as we think about where we've told folks, where we are capable of going this year. One sale closes and a couple of the other investments that Mark Hedstrom had told you about that we closed in the digital investment management platform. We are well north of 40% of digital assets under management. I feel very safe to say that somewhere between 50% to 60% of our AUM will be digital by the end of this year, at the end of 2020. And I still feel very good as is Tom and the rest of our management team with that 90% figure in 2021.

We have a very clear roadmap on how we get there and the way we get there is by continuing to invest our balance sheet wisely. We were able to weaponize that capital, we can bring our LP capital side by side with us in some of our best proprietary ideas. Secondarily as we launch new IM products specifically in liquid and in credit and further equity products, we see a path to increasing our total AUM on the private side in our digital IM business. And then as I mentioned earlier, Randy this notion of co-investment is so important to us. We've had a rich history at Digital Ridge, now Digital Colony and now Colony Consolidated by being able to bring our ideas to our investors, put our capital side by side with them, and create unique opportunities that candidly LPs are not seeing anywhere else in the world. I mentioned Vantage Europe as an example of that.

That's a proprietary opportunity that was afforded to our LPs, and it was afforded to Digital Colony One and we're backing what we believe is the best management team in the planet and hyperscale data centers. And that opportunity would not be possible without having the unique ecosystem of companies and CEOs that we have here at Colony Capital today. So I don't know if that gives you a little more clarity, but I feel very good about our 2021 promise to the Street. And I feel very good about our ability to generate an outperformer FEEUM numbers for 2020.

Thomas J. Barrack -- Executive Chairman and Chief Executive Officer

Hey, Randy, it's Tom. Let me add one other thing, which I think is really pivotal in understanding where we're going. When we bought Digital Bridge, if you remember, Digital Bridge in addition to having general partnership interests in the IM side of life moving forward also manage six distinct silos. And those assets under management in those silos in a private equity format rolling up to stabilization to at some point in time get into a public format. So you have radio cell towers, micro towers, edge computing, data centers, fiber, smart logistics and part of what the market is not thin is what we're doing is farming of those silos.

So when Marc says we don't compete at auctions, much of the opportunities are coming from those silos themselves. And as we match and marry balance sheet to IM, those opportunities, which are not in the marketplace are at the forefront of the things that we're doing. So if you look, there wasn't a related party issue here, actually the reason that we acquired Digital besides the talent base Marc had seen was the opportunity to harvest those silos transactions and they are going to come fast and furious and as Marc will tell you is the most defensive part of asset acquisitions, and all of these very confusing food groups in the marketplace right now. And Marc will expand on that as we talk.

Randolph Binner -- Riley FBR, Inc. -- Analyst

All right, that is very helpful. So the related question then is, and I guess I'm thinking of this in the context of the core FFO guide, but is there, it's pretty rapid transition. How much overlap is there in your professional workforce, in professionals who can switch to digital from legacy for lack of a better way of putting it? And how should we think about that, is there a next step for expense in head count. I understand that you hit your prior goal, but it is a lot of -- it's a lot of friction, I think to use your term, and so I'm just curious how that -- how much overlap is there? How much ability is there to pivot your existing workforce to, you know, I guess sourcing diligence in and ultimately investing in these new asset types? And how does that all fit into the core FFO guidance?

Thomas J. Barrack -- Executive Chairman and Chief Executive Officer

Yeah, that's a great question. So the base business, right. If you look at our constituencies. We have a number of constituencies but the biggest one, our shareholders and you, side by side with that our limited partners, right? Institutional investors and both don't exactly have the same goals quest, right. On the limited partner side, residual value over term, looking for the best economics on fee and carrying, on the shareholder side saying maximize the fees and then of the carry and give us more distributed income on a recurring basis, use your balance sheet when you need to originate and syndicate. So that base business is 28 years old and that's solid in that space.

So the machine to digest whatever it is, whatever animal is out there that goes through that digestion change is the same, whether it's digital, whether it's hospitality, whether it's industrial, whether it's credit, underlying basis, so that should get better and better and more efficient and more efficient. On top of that, it changes. So at a senior level, Marc's team, which is home warriors that have been doing this for a long time takes precedence on the acquisition origination, management process of those silos underneath. So you have six lanes, all with different cars on and going down the same highway. So at the top, some of that will change, and some of our senior people gets recycled and why do we get recycled because as we discontinued businesses, some of them are in the best-in-class in that particular business, and they will decide that they need to move on to another frontier to pursue that and will help them do that. And that's the natural evolution of things.

So I think part of the problem and it has pivoted, yes, it's going to change, yes, there is going to be teams and themes to change. There will be a lot of people that rise to the top in this process as we move harder and harder into digital and that's the natural evolution of things. It is emotionally difficult at times, but it's the nature of the being to adapt, to move, to realign, to give accountability and responsibility side by side. And we're all learning quite honestly as everybody in the marketplace, not just turning to digital, but if you look at what's happening now. The only stable thing is the iPhone in front of you.

So everything else is going volatile. But what's happening is the amount of data that's being communicated kind of entertainment, kind of information and the information that you need is more and more coming through these mobile devices and as coronavirus, for instance, takes place that's happening in space. So certainly, big parts of our team will have to be replanted, refreshed and replaced. We're talking about doing that from the top down, starting with me. So you take a dinosaur like me that's been in one aspect of the business. The best thing that I could have done to this company is go out and find a warrior who can take you through the next frontier, and we did that.

And at the Board level, the same thing. We have the best most focused existing board. We do need some help. We need a digital point of view of technological and telephony background that none of us have. So it's going to rotate and change, and that's the good thing, that's the nature of the animal. And we think we're going to be the only public company that has a diverse ecosystem of technology and telephony to those five large logos. And that is the pivot, and that's the frustrating thing for you, but we're clear. We see the roadmap. The short-term pain that we're taking in the middle of going there is not bothering but my job is to protect this balance sheet for the next five years, not for the next five days.

Randolph Binner -- Riley FBR, Inc. -- Analyst

Okay. That is helpful. And, but just to be clear, that is all in, I mean all that's contemplated within the FFO guide that the upfront cost to change that workforce over?

Thomas J. Barrack -- Executive Chairman and Chief Executive Officer

Yes. Yeah, 100%. And then Randy, just quickly, Randy. One thing for you to consider for example, when we went out, we raised that $4.1 billion fund last year. We used the entire Colony IR apparatus to go raise that fund. And so now under Kevin Smithen's leadership, who is our new Head of Capital Formation and Strategy. Kevin guides that team not only to go out and raise new equity products, Randy, but he's also out helping the liquid team, the credit team and reading our co-investment efforts, which are massive. So that's a great example where we took the existing infrastructure.

We did "digitize" it, so to speak, and it's one of the most effective fundraising teams in the world of digital infrastructure. And there's other -- there is other examples of that where we see folks that have worked at Colony for example in credit, or they worked in IR, or they worked in HR. We're putting that playbook together, we're integrating the companies. What we told you what we would do last year is that we would make significant G&A cuts, we delivered on that goal. We beat it by 10%. What we've told you for 2020 is we will reduce G&A by another $10 million to $15 million and depending on how accelerated as Tom said, as we find the right home for certain assets, logically certain G&A may go with those assets. We may end up having a little bit of a beat to that $10 million to $15 million of incremental G&A guidance that we've given you.

Randolph Binner -- Riley FBR, Inc. -- Analyst

All right, I'll leave it there since we are close to the top of the hour. I appreciate it.

Thomas J. Barrack -- Executive Chairman and Chief Executive Officer

Thanks, Randy.

Operator

Our next question comes from Jennifer Fritzsche with Wells Fargo. Please proceed with your question.

Jennifer Fritzsche -- Wells Fargo -- Analyst

Great, thank you for taking the question. Marc, I appreciate at the beginning of the call addressing the current environment, it clearly is a fluid situation, but as you look at your different silos of broadband infrastructure I guess what do you, what are you most excited about because clearly they are critical in the environment we're in, but if you look at like data centers, wireless infrastructure and certainly fiber. If you were to look to build out any more of that which area would it be in?

Marc Ganzi -- Chief Executive Officer-elect, Chief Executive Officer-Digital Colony

Jennifer, thank you. And first of all, thank you for participating. We're actually excited about a lot of things right now. And to pick one, perhaps it would be unfair. But as you've known me from time to time, I do sometimes rank via children and try to prioritize which one are performing better than others, but I will tell you the early guide we're getting from customers in 2020 is they need more dark fiber and they need it in more locations. So the densification of that fiber plant, Jennifer, and the demand on higher stream count is something that's pretty unusual. And I see an insatiable amount of demand for dark fiber. And what's interesting is where that dark fiber is going and so as we trace the roots of where our customers are asking us to go, obviously, data center connectivity is huge. But the biggest thematic, I think you have to keep you eye on, Jen at 2020, it's really where that fiber ends up at a CRAN hub, or a baseband hotel. We really see edge computing as being the main thematic, as we push into this next topology of network architecture.

And so, where that takes us to is an environment where you have more open RAN architecture, and you have smaller hubs where you've got an accumulation of radio, cable companies, IoT providers, content providers, converging in these CRAN hubs that have either dual path or multiple paths, dark fiber routes that are exceeding to other places. And those other places could be main data centers, they could be switch facilities, they could be small cell nodes, they could be macro sites.

We see a massive surge in demand for CRAN computing, which is really what we refer to today and you, the analyst community referred to today, edge computing. So everyone is constantly asking me, Jennifer, where's the edge, define the edge. Well, the edge is where the customer tells us their network is the weakest, and where there's a defined latency problem. So that edge can be different for Netflix; it can be different for Amazon; it can be different for Azure; it can be different for T-Mobile; it can be different for NVIDIA. And this is really the opportunity and the challenge for us, is that we have massive assets today that have the best defensible characteristics. Because as you think about where edge computing is happening, it's happening in a Colony CRAN hub, it's happening at a DataBank, edge data center. It's happening on an ExteNet network, it's happening on a Zayo long haul route.

And those long-term relationships with our customers are what is going to endure. And it's what's going to pay the road for growth as our customers continue to invest. So, I'm really excited, I think. So, the short answer is dark fiber CRAN hubs, but places where we see our customers growing and in places for our investors where they're going to find safety and comfort and the defensible characteristics of our assets.

Jennifer Fritzsche -- Wells Fargo -- Analyst

And if I could just add one more question kind of tailing off that, since your last call, you've had two pretty major developments; you've had the Sprint T-Mobile merger approval, which puts into place DISH and I think as we speak, we have the FCC talking about freeing up 280 megahertz of C band spectrum. I think is it fair to assume you see both those events being and outgrowing DISH there being significantly positive for kind of each of your silos, maybe data centers is kind of a separate one, but?

Marc Ganzi -- Chief Executive Officer-elect, Chief Executive Officer-Digital Colony

Sure. Let me take the T-Mobile Sprint merger. First of all, we were very early in supporting the merger. And we believe that a stronger T-Mobile and a stronger Sprint makes for better outcome for consumers. We're very close to both those customers. As you know, T-Mobile being the dominant carrier in that merger had a massive program for investment in 2020 and 2021 and beyond. So, we have a fantastic relationship with them. And we're building a lot of infrastructure for them as we speak. And that's a unique logo for us, Jennifer, because it needs more fiber, it needs more CRAN hubs, it needs more small cells, and it needs more macro sites.

And our ability to deliver converged solution for T-Mobile is unlike any other digital REIT on the planet. So, when we sit with Neville Ray, and we sit with his team and Mike Simpson in engineering, we're not talking about how we deliver one tower. We're not talking about how we deliver 10 nodes. What we're talking about today at Colony is, how do we deliver a turfing solution for an entire market? Let us handle that for you.

We have the capital formation, we have the necessary skills, we have the ability to entitle things, but most importantly, we have the ability to execute, and execute across multiple verticals for our customers. And so, as we think about where T-Mobile is going, we see the future for that organization is very bright. I've had a multi-decade relationship with Neville and Braxton and the entire management team there. And we're looking forward to going incredibly deep with them.

At the same time, as you look through the assets that perhaps get left behind and the Sprint legacy assets. It's a huge opportunity for Charlie and Tom Cullen. We're very excited about what DISH is doing in 5G and IoT. We've been a long time provider of infrastructure to DISH. I think Charlie is one of the smartest guys in the industry. I'm really excited to work with him and his team in building their network. They've got massive initiatives out there right now for fiber and for towers and our portfolio of companies have gone to them and have responded to their needs. But once again, it's a unique invitation for us to sit with that customer and provide a holistic set of solutions in a converged network environment. And this is something that we can do that perhaps some of the other digital REITs can't provide that total end-to-end solution in a 5G converged environment.

So, that for us is very exciting. And we think the early designs on what DISH is doing is very, very exciting for customers. I think you had one other question, Jennifer. I don't know if I answered all your questions.

Jennifer Fritzsche -- Wells Fargo -- Analyst

Just the C Band spectrum. If this happens, the 280 megahertz of spectrum pushed into the market...

Marc Ganzi -- Chief Executive Officer-elect, Chief Executive Officer-Digital Colony

So super -- I think about yeah that CBRS. So, one of the things that we've been doing, Jennifer, is we've been trial testing CBRS with enterprise users, and we've been doing that at ExteNet. And so, we have NDAs in place with some major corporate manufacturers that have millions of square feet of manufacturing space and hundreds of thousands of employees. And ExteNet has the ability to deploy network, deploy that spectrum and create a unique wide area network on enterprise 5G that is unlike any other systems we've ever seen. And what's great about that is, we're bringing cost savings to enterprises.

We're helping them deploy their applications across their own wide area network. And at the same time across that main corporate user, because of the nature of that spectrum, we can also host spectrum for T-Mobile, for AT&T and for Verizon, and really bring down their total cost of infrastructure. And so, by having shared infrastructure, by sharing that spectrum and by having someone like ourselves or our very good portfolio company ExteNet out of Lisle, Illinois deploy those nodes, deploy that fiber, and then deploy that spectrum, it's a real game changer for enterprises.

So we've got actually three trials going on right now, all of which are generating revenue for ExteNet. So, this is a revenue opportunity, it's a new opportunity. And I'm really looking forward to talking about CBRS over the next couple of months in some of the conferences that we're going to. I see CBRS as being a major opportunity for us at Colony because we have so much real estate, we have so many buildings that we can penetrate, we have amazing large stadiums and venues and airports and tunnels and other places where we can really bring down the total cost of bandwidth for mobile operators as they proliferate their 5G networks. I'm really fired up about it, as you can tell.

Jennifer Fritzsche -- Wells Fargo -- Analyst

Okay, thank you.

Operator

We have reached the end of the question-and-answer session. At this time, I'd like to turn the call back over to management for closing comments.

Thomas J. Barrack -- Executive Chairman and Chief Executive Officer

Great. Well, thanks, everybody. And I know today everybody's minds are on a lot of things in the midst of all this volatility. And what comes to mind, I think for us is one of the benefits of hard assets, which sometimes seems like it's plain because it's so slow moving. It is slow moving. So, we hope that the coronavirus doesn't become a pandemic. We're evaluating all of the options and alternatives, and concluding by the way, what opportunities may come as a result of it, and how to be defensive across all of our businesses. And as Marc told you, the defense nature of digital is superb.

Hospitality and healthcare, we're constantly evaluating how to reposition, what we do defensively. What we also might do offensively. Those businesses are producing massive core FFO and cash flow. And in moment like this, there may be opportunities as we look to take those legacy assets in separate silos to do lots of things. So, we're looking at buying back stock, we're looking at preferred, we're looking at when we do the conversion as time comes down. But remember, the decreasing expectation of interest rates goes right to our bottom line.

So, the floating rate ability of most of our debt is a huge, huge asset. So, thanks for being there with us. Let's hope that these markets stabilize and that the coronavirus somehow comes up with a solution without too many more deaths or consequences. Thanks for being with us.

Operator

[Operator Closing Remarks]

Duration: 68 minutes

Call participants:

Lasse Glassen -- Managing Director

Thomas J. Barrack -- Executive Chairman and Chief Executive Officer

Marc Ganzi -- Chief Executive Officer-elect, Chief Executive Officer-Digital Colony

Mark M. Hedstrom -- Executive Vice President, Chief Financial Officer and Chief Operating Officer

Jade Rahmani -- KBW -- Analyst

Randolph Binner -- Riley FBR, Inc. -- Analyst

Jennifer Fritzsche -- Wells Fargo -- Analyst

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