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Colony Capital Inc (NYSE: CLNY)
Q1 2020 Earnings Call
May 9, 2020, 10:00 p.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Greetings, and welcome to the Colony Capital First Quarter 2020 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Severin White, Managing Director of Investor Relations.

Severin White -- Managing Director, Head of Investor Relations

Good morning, everyone, and welcome to Colony Capital's first quarter 2020 earnings conference call. Speaking on the call today from the company is Tom Barrack, our Chairman and CEO; Marc Ganzi, our CEO Elect and current CEO of Digital Colony; and Mark Hedstrom, our COO and CFO.

Before I turn the call over to them, I'll quickly cover the safe harbor. Some of the statements that we make today regarding our business, operations and financial performance, including the effect of the COVID-19 pandemic on those areas may be considered forward-looking, and such statements involve a number of risks and uncertainties that could cause actual results to differ materially. All information discussed on this call is as of today, May 8th, 2020, and Colony Capital does not intend and undertakes no duty to update for future events or circumstances.

For more information, please refer to the risk factors discussed in our most recent Form 10-K filed with the SEC and in our Form 10-Q for the quarter ended March 31st, 2020. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to GAAP measures is included in today's earnings press release, which is distributed and available to the public through the Public Shareholders section of our website located at clny.com.

Thanks, and now I'd 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

Thank you, Severin, and good morning, everyone. Before we begin, I want to hope that your families, your friends, your colleagues are all safe and will, and you're taking good care of yourself through these extraordinary times. I also want to express our sincere gratitude to the medical community and the first responders without whom we would be lost.

At Colony, we've taken all possible measures to safeguard the health, safety and well-being of our employees, tenants, customers, counterparties and the communities in which we operate on a global basis. We transitioned to a virtual workplace more than 45 days ago and support our teams and their families as they continue to work fervently and dedicatedly from home.

Crisis are not a new phenomenon, while we have the privilege to secure Colony through at least five global past tsunamis during my tenure at Colony, there are a few lessons learned that are constant and that I'd like to share with you. Number one, many investors, especially contrarian investors, seem to always hope for volatility to look forward to that unforeseen intervening event in order to have an edge or a widening investable horizon that comes from that contrarian investment philosophy. That is, of course, until that unforeseen intervening event occurs. And then the common theme becomes -- this is a crisis like no other crisis. What do we do? Where do we go? And then panic. What we've learned that the key element to avoid panic is patience and that the panacea is focused in continued dedication to the long-term goal, which in our case is a pivot.

Secondly, concentrate on those things that we can control, don't waste time on the things that we can't control. There's no point in spending untold resources of time and talent. I'm trying to analyze the long-term elements in a crisis that we cannot control, when will it end? How will we solve it? What's the medical solution? When do we go back to work? When do the kids go to school? Will we ever go to a sporting event? Will we ever sit in the middle seat of an airplane again? We need to, first and foremost, focus on those elements that we can control that mostly are right beneath our fingertips and wait for further information.

Next, and perhaps one of the most salient items, is liquidity. In volatile markets, businesses and markets will experience temporary cash flow deficits as revenues rapidly decline. There is a big difference between the liquidity crisis and a solvency crisis. And where we are in the middle today is certainly a liquidity crisis as a result of the cessation of most businesses and revenues. An assessment of the long-term profitability of the businesses that we operate quickly subordinates itself to near-term liquidity. Liquidity is the magic elixir to assure long-term optionality.

Next is optionality and adaptability. The world changes quickly and so do long-term business plans. When wandering through a jungle with no GPS, you must choose the roads that will give you the option to reroute in the event of future obstacles, and we know not from where they come. Adapt and keep all options open until the final point of decision and better information.

Next, fight. There is no other option than every day when we wake up to continue to strive to obtain the stress and to fight through the obstacles, which we find ourselves in every day. It reminds me of the parable that we use in our company quite often, which is every day in the jungle, an antelope awakens and knows he must do one thing, run faster than the fastest lion. And every day a lion awakes and knows he must do one thing, which is run faster than the slowest antelope. The bottom line, whether a lion or an antelope when you wake up, you better start running.

Next, communicate, communicate, communicate to all your constituencies, shareholders, lenders, borrowers, counterparties, customers, families, children, wives, associates, hope and a commitment to the long-term goals to the company is essential. In our instance, it's very simple. We committed to a pivot to digital and all roads eventually, regardless of what obstacles are in front of us, we'll turn to that committed pivot. Now, earlier this week, we finalized a series of strong proactive steps in consultation with our Board, designed to enhance the company's liquidity and financial flexibility as we adapt to the impacts of COVID-19 on our businesses. I want to talk about some of those, and I'll start with where we are today.

As of May 5th, we have $1 billion of cash on the balance sheet at the corporate level. While we're blessed to be in a strong position, we want to keep it that way, and we know the road ahead will continue to be rocky in the near-term. First, to conserve cash, the Board of Directors has determined to suspend the dividend on our common stock for the second quarter of 2020. This will preserve over $55 million in cash this quarter, and we believe this is the right decision until we have a better sense for what the new normal looks like and exactly what is in front of us. When it's time to revisit this dividend, we'll be taking more of a total return approach as we look to align with our digital peers over time, which is our goal.

Second, we drew down $600 million on our revolver to ensure funds are available to meet our commercial and debt service obligations. We don't need the capital today, but it's a precaution step we took when the spread of COVID was accelerating like many of our peers and many corporations on Wall Street.

Fourth, hospitality. The reality is that most people are not going to hotels right now. And consequently, we are experiencing the same reduced occupancy levels as our peers, averaging mostly in the 20s. We don't expect this to change materially until the pandemic subsides and life goes back to normal, and we need probably a new definition of normal. To navigate this period of disruption, our investment and asset management teams are working closely and aggressively with our operating partners and lenders to create near and long-term solutions. In the short-term, our management operating partners moved quickly to reduce operating level expenses, effectively shrinking hotel footprints, reducing staffing levels, sharing staff across facilities and suspending non-essential investment among other actions. At the corporate level, we've recently engaged an external advisor to help us evaluate a variety of operational and strategic options as we work with our lenders, counterparties and brands.

Fifth, while we suspended guidance with respect to the magnitude of other equity and debt monetizations, we remain intent on harvesting liquidity from those assets. Just last week, we recapped a non-strategic investment in the grocery retail business, generating over $70 million of proceeds well ahead of our carrying costs and bringing our year-to-date monetizations to over $300 million.

Finally, credit. We brought in Mike Mazzei, formerly of Ladder Capital, at the end of March to run CLNC with a goal of getting that business stabilized and ultimately back to trading in line with its intrinsic value. Between the CLO created last year to finance $1 billion of our portfolio, the success we'd already had in liquidating CLNC's non-strategic portfolio, about $200 million of the $400 million had been monetized pre-COVID. We've done a very good job. CLNC had an earnings call yesterday, and I refer you for the further details to that transcript.

We believe these proactive initiatives are necessary, prudent and allow us to face the challenges ahead. We are working with lenders, our operating partners, the investment community and our teams all over the globe to make sure we remain stable, well capitalized in a good position to meet all of our obligations and that we stay on target to the commitment of our pivot. While the COVID-19 pandemic and related government-imposed stay-at-home restrictions have impacted our legacy assets, our digital business has remained resilient and vibrant. COVID-19 has only amplified the fundamental demand for digital infrastructure and the world's reliance on the digital ecosystem. And today's shareholder call is a prime example of how we are now communicating.

As Marc will discuss in great detail, our focus on shifting digital infrastructure is stronger than ever. Being mobile and remaining connected has never been so important. And as Marc formally assumes the role of CEO at Colony as of July 1st, the firm is strategically poised to become the leading digital real estate provider and funding source across the digital ecosystem.

In closing, Colony Capital is a resilient and adaptable company that knows how to manage itself through adversity and has done so time and time again. The COVID-19 crisis is not different. It is challenging, and we will all successfully navigate our way through this obstacle. While this situation is challenging for everyone, I have no doubt in our ability to preserve and excel through this crisis and emerge even stronger.

And with that, I'll pass this over to Marc to speak on the progress we're seeing on the digital pivot. Marc?

Marc Ganzi -- Chief Executive Officer Elect

Thank you, Tom. I'd like to echo Tom's praise of all of our employees for their dedication during this challenging time. As I think many of you have heard me say in the past, people create alpha, and their hard work is truly appreciated. We've never been better prepared to face adversity like we're seeing today. First, I'd like to thank Tom and the Colony team for making the CEO succession process so seamless. Jacky Wu, my new partner and our incoming CFO, and I are eager to get started and chart the next course of Colony's journey.

As Tom mentioned, our strategic pivot to digital is more relevant than ever. As the pandemic is unfolded, we're all seeing how vital a role mobility and reliable digital infrastructure plays in the world today. I would offer you to all of you without today's technology, social distancing would have meant isolation. Instead, we're seeing an explosion in usage and use cases from telecommuting to distance learning to virtual events, telemedicine, e-commerce, online fitness and entertainment. This unprecedented demand for remote connectivity, cloud access and mobility is also highlighting the mission-critical nature of digital infrastructure.

The unique combination of growth and resilience has made digital infrastructure both a safe haven and an exciting area for attractive returns, and we are well prepared to capitalize on the opportunities across the digital ecosystem. Not only are we built to serve the world's leading technology and telco companies as they deploy next-generation networks, most importantly, we've got the capital and liquidity to execute. Even as COVID-19 has delayed the recycling of our balance sheet capital into digital between our portfolio companies and the dry powder at Digital Colony Partners, we still have close to $3.5 billion ready to deploy into new opportunities in our existing companies. We've never been busier. I've even instituted a daily meeting with our investment team to keep track of all of our activity on a global basis.

Let me brief you on some of those activities that we prosecuted in the first quarter. We've recently closed four transactions this year that represent major milestones to our digital evolution. First and foremost, we successfully completed the acquisition of Zayo Group for over $14 billion, adding a global leader in fiber connectivity with over 13 million fiber miles and 40 data centers to the Digital Colony portfolio and in the process, adding over $700 million in fee earning AUM. It's a real testament to the team's ability to handle complexity and deliver on extremely tight milestones as we got it done in less than a year. Anecdotally, just in the past two months, Zayo has experienced record sales in lit and dark services across all of its fiber business units as companies look to light up fiber and meet increased demand. Furthermore, I'd be remiss if I didn't thank EQT, our great partners in that transaction.

Second, Vantage Data Centers. Digital Colony's hyperscale data center platform acquired Etix Everywhere, expanding our presence into Europe with data center campuses under construction or development in Frankfurt, Berlin, Warsaw, Milan and Zurich. The demand for data center capacity in Europe is even stronger than U.S. right now as the pandemic has pushed the transition to digital into high gear across Europe.

Third, we supported Vantage Europe in its acquisition of next-generation data, expanding Vantage's footprint into a sixth and strategic market in Europe with over 180 megawatts located in Cardiff, Wales. Cardiff is a really unique location. This is where most of the suboceanic cables come into Europe from the U.S. and other parts of the world. It's an incredibly strategic landing station and, most importantly, one of the most powerful and largest data centers in Europe.

Finally, we launched Scala Data Centers, a hyperscale data center platform headquartered in Sao Paulo, Brazil through the acquisition of assets from UOL Diveo. At closing, Scala is already one of the largest data center platforms in Brazil and Latin America, and we see a multi-billion-dollar data center and digital infrastructure opportunity in the region. Marcos Peigo, formerly Vice President, IBM Latin America, will lead Scala and oversee our growth strategy in Latin America.

I also want to highlight something Tom touched on earlier around the importance of lender relationships through this volatile period. It's worth noting that the three deals that I described above and a fourth transaction we completed internally a few days ago involving pricing and placing of four credit facilities just in the last 60 days. We've got very strong relationships with our lenders who are supportive of our strategic pivot and we're getting deals done. I want to thank all of the participant banks that helped us complete these financings. These are relationships that I've had for multiple decades through the good times and the hard times our lender relationships have been there for us, and it's proven to be no different through the pandemic.

Another step in our digital transformation that I wanted to quickly highlight is that beginning this quarter, we've broken out a digital reporting segment designed to improve transparency and enhance the investment community's ability to evaluate and monitor our pivot to digital infrastructure. The segment is comprised of the digital investment management business, which currently manages the $4.1 billion Digital Colony Partners fund; six separately capitalized digital infrastructure portfolio companies, formerly known as the Digital Bridge Holdings portfolio; and balance sheet equity investments in digital assets, including the 20% controlling interest we have in DataBank and our $250 million GP co-investment commitment to Digital Colony Partners One. We look forward to your feedback on this first step on what will continue to be an iterative process.

Finally, let me leave you with two thoughts. One, first and foremost is simplification. When I started this dialogue with the investor community many quarters ago, when we think about transforming Colony -- when I think about the transformation of Colony and this undertaking, let me just be candid with all of you. It's not easy. One of the guiding principles for coming out of this is the desire to reduce complexity. We will increase transparency and simplify the business and the process of understanding it. It's important to our investors, it's important to us. The second thought I'd like to leave you with is appreciation. I want to thank the heroes of this pandemic, the healthcare workers, the first responders who are sitting on the front lines. I also want to thank all the essential workers, those who go out and work each day to keep our systems working, our communities clean and safe, and our economy moving.

With that, I'm going to turn it over to Mark Hedstrom for a review of our first quarter financial results and business segment performance. Over to you, Mark.

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

Thank you, Marc, and good morning, everyone. As a reminder, in addition to the release of our first quarter earnings, we filed a Corporate Overview and Supplemental Financial Report this morning, which is available in the Public Shareholders section of our website. On the call today, I will provide a review of our first quarter 2020 results, business segment performance and an update on liquidity and cost reductions.

Turning to our financial results. For the first quarter, GAAP net loss attributable to common stockholders was $362 million or $0.76 per share. The loss included $313 million of non-cash GAAP impairment charges, including $242 million of real estate impairments, primarily in the hospitality and healthcare segments as well as a $71 million reduction in the carrying value of goodwill related to certain components of our legacy investment management business.

Core FFO was negative $20 million or $0.04 per share. Excluding net losses of $22 million, primarily attributable to net investment losses and other equity and debt segment, core FFO was $2 million. Company's results in the first quarter of 2020 were primarily impacted by the economic effects of COVID-19 during the month of March, particularly within the non-digital businesses, including most significantly our hotel exposure through our hospitality and THL portfolio and certain other equity and debt investments. The company expects the effects of the economic impacts of COVID-19 pandemic to be more significant in future periods beginning with the second quarter of 2020.

As Tom mentioned, we have taken a number of proactive steps to enhance the company's liquidity and financial flexibility as we adapt to the impacts of COVID-19 on our businesses. First, to conserve cash, the Board of Directors has determined to suspend the common dividend for the second quarter of 2020. This will preserve approximately $60 million in cash for the second quarter. We will continue to assess the common dividend policy going forward, especially as we continue to make the pivot toward digital and as we receive more information around the impacts of COVID-19. In the interest of all stakeholders and given the current economic environment, the company's Board has decided to wait until no later than June 30th to make a decision as to the declaration of dividends payable to its preferred stockholders for the second quarter 2020.

Second, we drew down $600 million from our corporate revolving credit facility in March. Although we did not have an immediate need for this cash, we took this step as a precaution, given that the length and severity of the economic crisis remains uncertain. We are currently in compliance with all covenants under the facility. However, further deterioration in the markets and our operating performance may limit our ability to access the facility under its current terms. Including the revolver draw, the company currently has $1 billion of cash on hand.

Third, management recently identified and began executing on an immediate cost reduction program targeting over $40 million in annual run rate cost savings, mostly from headcount and compensation-related cost reductions, which are expected to be implemented during the course of 2020. These cuts represent a significant percentage of our current non-digital compensation and administrative costs. This follows the full achievement last quarter of the previously announced $55 million of cost savings on a same-store run rate basis, which included the reduction of almost 30% of the company's non-digital workforce existing at the time the restructuring was announced in the fourth quarter of 2018.

Now, I will provide a breakdown of Colony's operating results by segment. Starting with our new reporting segment, Digital Real Estate and Investment Management, we ended the first quarter with third-party digital AUM of $20.1 billion, up 49% from last quarter, and digital fee earnings equity under management or FEEUM, of $7.7 billion, up 13% from last quarter. The increase in digital AUM and fee-earning equity under management was primarily attributable to the acquisition of Zayo, a global leader in fiber connectivity with over 13 million fiber miles and over 40 data centers. With the consummation of Zayo and two other digital infrastructure investments, our flagship digital fund, Digital Colony Partners or DCP, has now invested or committed 73% and of its total capital commitments.

During the first quarter of 2020, Digital Investment Management generated $19 million of revenues and digital fee-related earnings, or FRE, of approximately $10 million after deducting operating expenses. As Marc discussed, our digital platform has performed extremely well during the crisis, and we continue our commitment to digital as the growth driver of the business going forward.

Turning to our legacy Other Investment Management segment, which excludes the digital business. We ended the first quarter with $17.4 billion of non-digital third party AUM, while fee-earning equity under management was $10.8 billion, which compared to the same period last year, are each down over 30% as we continue to make our pivot to the digital business. The decrease in AUM and fee-earning equity under management over the last year was primarily attributable to sales of non-digital legacy investment management businesses, including the light industrial platform, Northstar Realty Europe, RXR Realty and Hamburg Trust, as well as the reduction of fee bases at CLNC and Northstar Healthcare income. We expect non-digital legacy AUM and FEEUM to continue to decrease in 2020 as we continue to monetize legacy investments.

Moving to the Healthcare Real Estate segment. First quarter same-store NOI decreased only 2% compared to the same period last year, primarily due to increased wages in the Senior Housing Operating portfolio and lower rent collections from certain tenants and the Triple-Net Lease Skilled Nursing Facilities and Hospitals portfolios.

For our Hospitality Real Estate segment, first quarter 2020 hospitality same-store portfolio revenue decreased 18% and NOI before FF&E reserve decreased 45% compared to the same period last year, primarily due to the economic impacts of COVID-19 across the entire hospitality portfolio during the month of March 2020. As noted in our earnings release, the company is in default on a significant portion of the hotel portfolio investment level non-recourse debt as a result of the COVID-19 crisis and its impacts on the hotel industry at large. The company is in dialogue with all of its lending -- with all of its lending counterparties and as well has begun discussions with advisors to evaluate strategic and financial alternatives to maximize the value of its hospitality assets.

Yesterday, CLNC reported first quarter core portfolio core earnings of $46 million or $0.35 per share, up from prior quarter amounts of $43 million or $0.33 per share. CLNC has taken a number of actions led by newly appointed CEO, Mike Mazzei, to maintain and preserve liquidity, including the finalization of an amendment to the corporate revolving line of credit and the suspension of the company's monthly common dividend. More information can be found in CLNC's earnings release.

Next is our Other Equity and Debt or OED segment, a $1.6 billion equity carrying value portfolio of non-digital real estate and real estate-related debt and equity investments, including GP co-investments. From the beginning of 2020 through today, the company has generated total net proceeds of $339 million from asset dispositions, including $120 million from the assets classified under our OED segment and $219 million from the sale of RXR Realty and Hamburg Trust, which are classified under our investment management reporting segment.

Looking ahead, the company continues to concentrate on its keenly focused efforts to monetize the entire legacy OED portfolio as an important source of liquidity and as it completes its digital evolution.

And finally, a word about the company's guidance policy. As we noted in our earnings release, until economic and financial conditions stabilize and become more predictable, we will refrain from providing guidance with respect to core FFO or other operating metrics.

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

Questions and Answers:


Thank you. [Operator Instructions] Our first question comes from Jade Rahmani with KBW. Please go ahead.

Jade Rahmani -- KBW -- Analyst

Thank you very much. Nice to hear from you, and hope you're all safe and doing well. To start off with, I wanted to ask, with the suspension of the common stock dividend, which I believe is the prudent decision and with the deferred decision on the preferred stock dividend, I think the most basic question I've been getting from investors relates to your confidence that the Colony common equity position can be preserved and will in fact survive. Can you please speak to that and address the exposure of recourse debt which is approximately, I believe, 20%?

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

Jade, it's Tom. I'll take a crack at the first part, and Mark Hedstrom can talk to you about the debt. Hope you are safe and well in surviving through this too. First of all, the survival of the common stock of Colony is a certainty. We wake up every morning with a 1,000 different edges of this Rubik's cube as do every one of our peers. And evaluate a long-term perspective on the basis of having enough liquidity to get through a scenario, which is the worst case, hoping that in front of us all on a health basis and an economic basis is a better case.

We have a variety of legacy assets that are under pressure, hospitality being the most significant, as we've talked about, and we have created a pivot up to almost 40% of AUM rolling into digital, which has unbelievable sustainability through any of these environments. So, this is a different kind of a crisis. We're not concerned about the solvency of our business. We're concerned about the liquidity of our business. And as we've said time and time again, this crisis is about liquidity. And all of the ramifications that we're dealing with are really focused on liquidity, optionality, adaptability, and we'll navigate through this.

Look, the prudent thing on the common dividend and on every decision you make every day is to retain optionality. And we don't know just like you don't know what is in front of us tomorrow. So we can talk about hospitality occupancies, we can talk about what's happening in wellness infrastructure, we can talk about what's happening in the credit businesses, and borrowers, counterparties, tenants, occupants are all under tremendous pressure. So we go day-to-day on the basis of saying, the key to long-term survivability and common stock profitability is day-to-day liquidity. And I think that's the only answer anybody can give at this point in time.

Mark, do you want to comment on the recourse aspects of debt?

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

Sure, Tom. And just briefly, I think we have substantial corporate debt, of course, at the investment level, all of our debt subject to customary carve-outs is non-recourse. And at the corporate level, we're in compliance with all of our debt covenants and conditions, and we expect to be able to meet obligations as they arise. So, we're -- there's really no leakage out of the investment level and corporate debt is well under control today.

Jade Rahmani -- KBW -- Analyst

In terms of the liquidity, the press release notes say $1 billion of corporate cash on hand, which includes $600 million of revolving credit facility capacity. What are your expectations for cash utilization for 2020, what are your expectations for cash generation for 2020, and what are the covenants on the recourse debt?

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


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

We expect it to be able to fund the operations of the business from cash flow generated from our sales of assets and operations. The covenants of the non-recourse debt are -- remain at the investment level, again, subject to customary carve-outs, those bad debt is non-recourse. And we have that 80% of our debt stack is non-recourse. Only 20% of it is corporate level, as you I think pointed out, Jade, where we're in compliance. But right now, we expect to be able to access our revolving line of credit and stay in compliance with corporate debt, non-recourse debt at the investment level. Particularly in the hospitality portfolio, we're in discussions with lenders as we speak, have received a number of positive reactions and forbearances from those lending parties and expect to continue to make progress there.

Jade Rahmani -- KBW -- Analyst

And lastly, on the financial covenants and recourse debt primarily in the credit agreement or are there other instruments that have covenants, speaking to the recourse debt solely?

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

So, the only covenants that are related to operating performance are in our revolving line of credit. That's the only instrument that has covenants. And as of today, we're in compliance with all of those covenants under our revolver.

Jade Rahmani -- KBW -- Analyst

Thanks for taking the questions.

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

Thank you. Next question comes from Randy Binner with B. Riley. Please go ahead.

Randy Binner -- B. Riley FBR -- Analyst

Hi. Good morning. So, just on the -- just a quick one on the preferred, can you quantify how much cash that would potentially preserve on a quarterly basis? And I believe all of those are cumulative. So, I guess, how would the accounting for that work with that cash you save really be unencumbered, if you did choose to defer that payment?

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

Yeah. Randy, it's Tom. So it's $76 million a year, more or less on preferred. So, it's a meaningful number. On the accounting side, I defer to Mark Hedstrom. Mark, what's the accounting treatment?

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

We would still accrue that preferred dividend and on the balance sheet. It would still get carried and reflected in the financials. And there are covenants within the preferred that say that if we don't make that preferred dividend to bring it back to current within six quarters, then there's consequences related to that, that are within that instrument, but it remains on the balance sheet.

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

And Randy, I think [Speech Overlap].

Randy Binner -- B. Riley FBR -- Analyst

But the liquidity is unencumbered, I guess, is what I'm trying to figure out.

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

Correct. Correct.

Randy Binner -- B. Riley FBR -- Analyst


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

It doesn't affect -- it wouldn't encumber liquidity.

Randy Binner -- B. Riley FBR -- Analyst

I guess, just on healthcare, I know this you did disposed the skilled nursing facility. Can you -- I mean, hospitality, clearly, has got a lot of pressure. But can you talk a little bit to healthcare? Just and really with kind of an eye toward the ability to sell assets there, how -- what parts of your portfolio are transacting, which aren't? It'd be interesting to hear how the different pieces of your portfolio are perceived in the market from an asset disposition perspective?

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

Randy, it's Tom. So, if you take wellness infrastructure and divide it into medical office buildings, hospitals, skilled nursing in your housing, so many different components. But the amazing thing is the resiliency of what's happened in our wellness infrastructure categories on all fronts, right? We've collected a little over 90% of revenue streams in all of those categories, of course, hard to set medical office buildings when you think of doctors and what happens as a result of social distancing and where they're going. Hospitals, we know about skilled nursing is unbelievably difficult. And remembering that we are not operators ourselves, so we're a couple levels removed from the patient and the payment sequence. And without going into the parade of horribles as a result of the epidemic of trying to relieve hospitals from the non-COVID patients and adapting in every community and every regulatory environment we have to those requirements, which has been remarkable.

So, when we talk about asset sales, I think as you look across our peers to the bigger and better each of those categories that have specific focus on senior housing, which is hard hit, right, senior housing in our portfolio is doing well. The senior housing industry is not getting much subsidy from the governmental programs. It's an orphan, and it's very difficult. Because if you have senior housing, it's normally rotating at 5% or 10% vacancy levels and relying on new occupants and prospective seniors, it's not happening, right. You can't address a preview of these facilities with even non-COVID patients because of all of the parade of horribles that we know.

So, when we talk about moving the assets or sale of the assets, we are engaging in sale of some of the assets. Those assets are being sold in many instances to the operators of those assets or to the competitors who have some particular need, but of course the market is everyone right now. And our strategy in this has really been just to narrow costs and expenses concentrated on health and safety, which is our teams have done an amazing job, Rich Welch, who runs that silo. You can imagine what he and all of our peers in the wellness industry are dealing with on a daily basis.

So, we're not looking at near-term asset sales in healthcare as being a panacea. The lever that we have on liquidity, as Mark Hedstrom was talking about, we have plenty of flex and other equity and debt that we can monetize assets quicker if we need to do it, but healthcare is steady as it goes. And if you look at the effect on core FFO as to where it is and what the dissipation is performing much, much better than hospitality. Now, a lot of that is a result of governmental intervention on things like Medicaid advances and the operators getting some support. But I would say asset sales are the least important thing to us at the moment.

Randy Binner -- B. Riley FBR -- Analyst

Okay. Great. And then, my third question is on digital. It's very welcome to have the digital segment broken out from the financials. It looks like the AUM overall and then the FEEUM of $7 billion is pretty in line with what was covered at the December strategic outlook call. Maybe it's a little bit ahead of plan, but can you all just take a second to kind of let us know where you are in what was delivered here and where you're trending in the second quarter in digital relative to what you laid out in December, I'm kind of thinking of our blended fees overall around 100 basis points. I think we had talked about a margin maybe to be around 40% in 2020. Can you just give an overview of kind of where you are versus that expectation in December?

Marc Ganzi -- Chief Executive Officer Elect

Yeah. Good morning, Jade. It's Marc Ganzi. How are you?

Randy Binner -- B. Riley FBR -- Analyst

I'm good. Just Randy Binner from B. Riley.

Marc Ganzi -- Chief Executive Officer Elect

So, Randy, just the guidance that we gave you back in December and where we're trending right now is, let me sort of break it out into a couple of different subcategories for your ease of use. First and foremost, on the digital IM business, we had a very strong first quarter. Co-investments came in quite strong. We had the co-investment related to Zayo. We had co-investments related to Vantage Europe. And so, our total FEEUM and FEEUM bearing capital increased at a pretty good clip in the first quarter. And what we had told you back in December is, we wanted to grow FEEUM by 10% to 15% this year. And so far, we're off to a very good start on that goal and obviously raised a lot of third-party capital for both of those opportunities on a co-invest basis. We don't see that slowing down. We have a continued plan to deploy new digital IM products and to continue to deploy new digital co-investments. And so, that guidance that we gave you, that 10% to 15% FEEUM growth is something that we obviously intend to beat this year. And I would say, the fundraising environment right now for our digital IM business remains incredibly robust.

Investor demand for what we're doing and investor appetite for our IM products is quite strong. And our capital formation team right now is out in active dialogue with literally a couple of hundred investors across a bunch of new products and new co-investments. So, we're obviously very excited about that. I think, as it relates to the assets that are on the balance sheet, Digital Colony Partners One is over 73% deployed now with committed capital to those existing 10 investments -- the 10 portfolio companies in DCP One were at 80% of committed capital. And we have about 20% of the fund in reserve to do either maybe perhaps one more new platform, which we're evaluating about four or five opportunities right now in late-stage diligence or we can continue to commit that capital, Randy, to existing portfolio companies that are seeing tremendous opportunities inside of their own individual platforms.

So, in addition to that, we have another asset on the balance sheet, which is DataBank. DataBank, we just came out of the first quarter, had a very, very strong first quarter, strong net bookings, strong EBITDA growth. We continue to see DataBank accelerating throughout the year, like its peer group. Relevant peer group would be perhaps Equinix or Digital Realty Trust. DataBank, as you know, is a company that's focused on edge computing data centers. And we absolutely anticipate with the impact of COVID, bookings are accelerating through the course of the year. Churn has been much lower than we thought, and we expect DataBank to perform. Through the end of first quarter, they were plus 6% on EBITDA. So we feel really good about the fund. We feel really good about DataBank. We feel very good about digital IM products.

There is a fourth sleeve inside of the digital reporting silo, which is our liquid securities strategy. Colony has long had a real estate liquid security strategy fund led by Bill Hughes. We've recently began the process of adding digital real estate to that liquid security strategy and eventually converting that to a full digital liquid security strategy. So that silo now also reports into the digital business and the digital reporting segment. So, net-net, we're at about where we thought we would be. I would say, from my perspective, I think we feel really strong about the growth across all of the digital assets. And my expectation is to outperform where we thought we would be in 2020.

Randy Binner -- B. Riley FBR -- Analyst

All right. Well, thanks for that. Best of luck.


Next question comes from Jennifer Fritzsche with Wells Fargo. Please go ahead.

Jennifer Fritzsche -- Wells Fargo Securities -- Analyst

Thank you for taking the question. This question is for Marc Ganzi, if I may. Marc, there seems to be a lot of talk about the broadband infrastructure component possible for stimulus. I'm curious as to the collection of assets you have there. How do you see that playing out from what I understand 5G will be very much wrapped into this. So, how do you see Colony playing in that? Thank you.

Marc Ganzi -- Chief Executive Officer Elect

Sure. Thanks, Jennifer. Well, look, I think our companies that are based here in the U.S. will certainly benefit from that. Our largest investment, Jennifer, in Digital Colony Partners One is a business called Zayo. Zayo obviously is a broadband communications provider. It engages in business with the government and engages in businesses with other constituents inside the government like e-rate plans. We really think the stimulus bill that is being contemplated right now will really focus on rural broadband connectivity. In my purview of sitting on the broadband deployment action committee on behalf of Chairman Pai, I think that is a core focus of the FCC right now is bringing that connectivity to rural areas. And that will be something that perhaps Zayo will engage in. I mean, most of our networks are traditionally in the urban core, where we have dense urban metro fiber. And we have obviously really strong long haul capacity, long-haul capacity here in the U.S. and in Europe and the ocean that connects us.

So, I think, in thinking through the first stage of any stimulus, it will be focused on rural connectivity. And Zayo will probably have a little bit of a seat at that table. We're not expecting a significant seat. Really Zayo doesn't need a subsidy of any sorts because, to be candid, the knitting is quite strong in its core business today. So, I wouldn't anticipate a short-term stimulus bill would impact us. I think, looking around the corner of any other potential government stimulus around 5G, the most important thing right now, Jennifer, is we need to get the CBRS spectrum out there. I think that's a real important part. We've got to continue to have the FCC push spectrum auctions along. You've seen some of that activity in the first quarter.

And the best way to spur innovation is to put new spectrum out. So, my hope is that the government will continue to accelerate spectrum deployment so that we can continue to innovate and invest and work with our customers to deploy that technology. So, I really -- from our impact, obviously these stimuluses around broadband can certainly be helpful. But to be honest, and caucusing with our 15 CEOs last week, I didn't hear any of them say that they needed a stimulus package of any sort to enable their businesses.

Jennifer Fritzsche -- Wells Fargo Securities -- Analyst

One more, if I may. This obviously market has caused much dislocation in terms of assets, which we've talked about, do you -- as you look at your plans to continue to increase the digital portion of your portfolio, do you see some bargain basements out there or is there -- has there been some contraction of multiples for sellers who maybe were holding out?

Marc Ganzi -- Chief Executive Officer Elect

Yeah. I would say, listen, private market multiples really haven't moved that much yet, Jennifer. And I think that's probably going to persist through Q2. And I think we won't see significant movement in multiples probably until Q3 and Q4. It really comes back to a central thesis that Tom hit on earlier, it's just about liquidity, right? And so, when liquidity gets constrained and lenders stop lending, that's when we really find that there is a significant movement in private M&A pricing. And so, we've been patient. We picked our spots over the last 90 days. We've been able to get a few deals done that diligence was complete in Q4 or in January of this year, and our lenders showed up for us based on a long standing relationship.

So, if you can get deals financed and you can put adequate to conservative leverage on those deals, you can get deals done in this environment. I think, looking sort of around the corner and where we think M&A will ultimately be, that will be very much driven by the capital markets. And I think we'll continue to see opportunities. I mean, down at the portfolio company level for tuck-ins and for greenfield opportunities, those are quite robust at the moment. So, we're seeing a lot of opportunities down at our 15 portfolio companies where there is a bigger opportunity to get closer to our customers and to help them enable and deploy next-generation networks. So, I think, for us, it's going to be keeping a careful eye on M&A. It's going to be supporting our portfolio companies. And then I would say just a small nuance toward credit for a second.

The real dislocation right now is perhaps happening in companies that had older legacy assets. And as we think about turning the corner toward 5G and cloud computing and next-generation applications, AI and autonomous driving vehicles and all of the things that we've been talking about in this new digital economy, there are some legacy telco assets that are assets that were built in the '70s and '80s and early '90s, and some of those assets currently are going through some restructuring. So, I won't name names, but there are certain digital businesses that are facing a transformation in terms of their physical plant, and some of those cash flows are coming under stress. And so, I always tell folks, not all digital infrastructure assets are the same, Jennifer. You have to be a very careful buyer.

And so, when we do see certain assets coming under stress, one of the great things that Tom has built here at Colony is a great legacy in credit. We've assembled a fantastic digital credit team. We're looking at digital credit as a vertical and as an opportunity, and we are seeing tremendous opportunities in digital credit. So, small preview without going into too much detail, but we're obviously excited about the opportunity to play opportunistically across the capital stack either in secondary stakes or in primary stakes, first lien, second lien, convertible preferred, mezzanine debt, you name it. We think there is a lot of opportunity out there to help customers and help different companies be able to work through their capital structure issues as they pivot out of legacy assets and move toward more next-generation digital assets. I'm actually very excited about that opportunity.

Jennifer Fritzsche -- Wells Fargo Securities -- Analyst

Thank you.


Next question comes from Ric Prentiss with Raymond James. Please go ahead.

Ric Prentiss -- Raymond James -- Analyst

Yes. Good morning. I hope you, your family, your friends and employees stay well. Good to hear everything is going OK so far. A couple of questions on the digital infrastructure side. Marc, you mentioned the CBRS auction. I think that's been pushed back from June to July. But how do you see Colony Capital playing in that? Is it the spectrum side? Is it the -- in building side? Is it maybe with the cable guys at macro side? What do you see is the opportunity of spectrum, which is the lifeblood of wireless?

Marc Ganzi -- Chief Executive Officer Elect

Yeah. I'm very excited about CBRS. And good morning, Rick, good to hear your voice. Hope you're doing well and wish you and your family well. For me, CBRS is a huge catalyst, Ric, because it's the advent of what we call enterprise 5G. And so, we've been having CBRS trials down at ExteNet, one of Digital Colony's portfolio companies, and it's been really encouraging, and those tests, Ric, are really faced on the enterprise. So we're partnering up with a corporate logo or we're partnering with a government entity, where we own the infrastructure, we build the infrastructure for the entity, and we run it for them.

And so, in that environment, where it's a control environment, whether it's a corporate headquarters, it's a factory, or for example, it could be a port, could be a downtown CBD area. CBRS has so many applications right now, Ric. So, as we think about it, there are a bunch of different ways that you can play in it, and we are actually canvassing the spectrum, we're canvassing the management of the spectrum. We're looking at owning the infrastructure and deploying and working on behalf of enterprises where the enterprise engages us and we enter into long-term contract with them and building and managing that infrastructure.

And then, of course, obviously at Colony, we have a rich heritage in real estate. And so, having access to a lot of commercial real estate and a lot of the folks that we lend money to, some of the businesses like hospitals where we actually have hard infrastructure where we can partner with hospital groups to deploy that spectrum, and then just looking through other applications and outdoor applications where we have a rich heritage in partnering with governments and partnering with municipalities.

There are so many tentacles to CBRS, Ric. It's very exciting. So first, you got to prove the business model. And so, our trial testing in the few cases that we've already deployed this year have all gone incredibly successful. So that's good news. The proof of the technology was the first thing we had to get through. We did that last year in proving out the technology and testing radios and testing how the spectrum performs. And looking, most importantly, Ric, beyond just spectrum performance, looking at the applications and thinking about the applications and how you can enable an enterprise and help that company get through it.

So, we've been at CBRS now for about two years. And we've actually got three different business models that we're working on right now at Digital Colony. It will be a big part of our push later this year and into our future funds. And so, we're very excited about it. And now that we've proved out the technology, we've proved out the business models and the use cases, there's a bunch of different ways we can go about at Colony. And having that access to real estate and having those key relationships with landlords and hospital systems and other types of property owners that Tom has developed over the last 30 years, and that I've developed, as you know, at Apex and SpectraSite and GTP and Vertical Bridge, we have access to real estate.

So, marrying that knowledge of how to build it, how to manage it, how to deploy it, how to explain those applications to enterprises and explain the cost benefit to them, that's something we've already developed on a proprietary basis. So, don't want to go too far ahead, but I can tell you that we've been at it for a couple of years now. We're very excited about it, and it is a big part of Colony's future.

Ric Prentiss -- Raymond James -- Analyst

Great. Second question for me is on the fiber side. Like you said, not all digital assets are created equally. How is the fiber business at Zayo doing through this economic time. There's differences, obviously, between enterprise fiber, dark fiber, any issue with churn, bad debt, collectibles, and how do you see the whole fiber industry basically?

Marc Ganzi -- Chief Executive Officer Elect

Listen, I'll give you our experience at Beanfield and Zayo, which are two of our portfolio companies and Digital Colony One. Starting in the U.S. with Zayo, they had a tremendous first quarter. I would say, net bookings probably the strongest quarter that Zayo has had probably in three or four years, Ric. So really tremendous net bookings, largely aided by lit services was significantly up. Spot bookings were up in that ability to deploy incremental lit infrastructure for customers was delivered upon. So that was a great result.

On the dark side, same thing, focused on obviously data center connectivity, supporting our cloud customers, supporting mobility, all of those verticals, Ric, have been up and have been performing incredibly well. We have a data center business inside of it called zColo. It's had a couple of bumpy quarters, but in March, we turned that and reversed that trend, and that had a positive quarter. So, positive month and looks like it's continued to be positive in April. So, Zayo from a net bookings and net install base has had a very, very strong first quarter. So, we think that was about 11% up over last year's first quarter. So, really good first quarter.

On the Beanfield side in Toronto and in Montreal and Northeast Canada, tremendous, tremendous quarter for them. Their bookings were up over 100% over last quarter, that's not a typo. So they had a fantastic quarter. That was a combination, once again, of lit and dark, but most of that being lit metro and focused on enterprise users. So, really a tremendous moment for the fiber sector and owning good durable plant with high strand count and having that strand count open where you can activate for customers quickly is really the name of the game. And so, owning older legacy assets that are still exposed to copper or have no strand count or we have to overlash and overbuild, that's not where you want to be right now.

So, we've tried to be very selective at Colony about what good fiber we want to own and then fiber we don't want to own. There are some distressed opportunities in the marketplace right now. We've stayed on the sidelines very consciously, decided that those are situations we don't want to be in because the reality is we can continue to build dark fiber with high strand count at a better cost than buying even some of those distressed assets. So, we're going to continue to measure that. We are looking at select M&A opportunities both at Beanfield and at Zayo and also in Zayo Europe as well. So -- and also in Zayo Europe, Ric, very, very strong first quarter bookings as well.

So, net-net, fiber has been one of those really good pleasant surprises in Q1. Looking at the backlog and pushing into Q2, I don't see any of that demand sort of subsiding. I think we continue to see robust demand pushing into Q2 as well.

Ric Prentiss -- Raymond James -- Analyst

Great. Thanks. Best to you and your family and friends, everybody stay well.

Marc Ganzi -- Chief Executive Officer Elect

Thanks, Ric. Appreciate it.


Thank you. I would like to turn the floor over to Tom Barrack for closing comments.

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

Thanks, everybody, and we hope you have a great weekend. I wanted to end with just a notion, which is, we're all suffering through the unknown COVID and what it does to all the businesses that we steward and manage in all businesses in which you invest. But in actuality, for Colony, we started this adventure a long time ago. So, we formed a joint venture with Marc and his team in 2017, not ever foreseeing COVID, but starting this rotation from legacy assets, which at the time we felt were fully valued to digital, which we believe to be the railroad of the future. In 18 months from then, a historic $4 billion fund, which had never been achieved before. And in the last really 18 months, Digital Colony moving through acquisitions of companies like Zayo, a $14.3 billion transaction, of which DCP itself committed $800 million.

The addition to support Marc as my successor coming on in July, as we turn the corner to a new kind of company with four new highly qualified directors and Jeannie Diefenderfer, who just came on board adds that technological background also. And all that's been fueled on digital by a legacy team that supplied the capital to do that, over $12 billion of asset sales in order to get to this rotation to $20 billion of digital assets from zero started three years ago.

So, we're listening to the noise. COVID has complicated everything, but we had the right vision. We created the right structure. We've been divesting the assets that we thought had reached their optimum value. We have a temporary liquidity issue, which we're going to solve and we're going to pay attention to. We have a new CEO in direction. Marc is going to do a sensational job at manning the new digital frontier and safeguarding the old legacy assets. And sorry for the interruption along the investment field, and thanks for your patience. But this too will come to pass. Colony will prevail. Colony will become the foremost digital infrastructure provider, and we'll get through this crisis all together.

So godspeed, have a safe weekend, keep your family safe, and thanks so much for being with us this morning.


[Operator Closing Remarks]

Duration: 67 minutes

Call participants:

Severin White -- Managing Director, Head of Investor Relations

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

Marc Ganzi -- Chief Executive Officer Elect

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

Jade Rahmani -- KBW -- Analyst

Randy Binner -- B. Riley FBR -- Analyst

Jennifer Fritzsche -- Wells Fargo Securities -- Analyst

Ric Prentiss -- Raymond James -- Analyst

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