Colony Capital Inc. (CLNY) has inked a deal with Fortress Investment Group LLC to sell the majority of its Other Equity & Debt (OED) portfolio of real estate assets for $535 million.
Shares of the leading global digital infrastructure REIT jumped 3.8% to close at $7.60 on June 7.
The deal is expected to create overhead cost savings of over $18 million, increase liquidity to more than $1.2 billion and reduce investment-level debt by $945 million.
Through the portfolio sale, the company will progress with its strategic goals and focus mainly on its digital platform. The sale proceeds will be utilized to make high-quality digital investments. (See CLNY stock analysis on TipRanks)
Upon completion, digital assets under management (AUM) will account for 80% of the company’s total AUM. The remaining 20% will comprise its Wellness Infrastructure segment and ownership stake in the publicly-listed shares of Colony Credit Real Estate, Inc. (CLNC) and some OED assets.
Notably, with the current sale, CLNY has generated total monetizations worth $790 million year-to-date. This surpasses the company’s annual target of $400 – $600 million in monetizations.
Colony Capital CEO Marc Ganzi commented, “This transaction is a watershed moment for us, a big step towards our Finish-The-Mission goal as we rotate to a fully-digital business. Not only are we freeing up over a half-billion dollars to redeploy into digital, we’re simplifying our business, making it easier to manage and to understand.”
The deal consideration is equivalent to the net equity carrying value of the underlying assets as of March 31, 2021.
The sale is expected to close during the fourth quarter of the year, subject to certain regulatory approvals.
On June 4, B.Riley Financial analyst Daniel Day resumed coverage on CLNY with a Buy rating and the price target of $11 (45.5% upside potential).
Day believes CLNY will outperform its peers as it undergoes a dramatic transition from a diversified commercial real estate asset manager to a pure-play digital infrastructure REIT.
Overall, the stock has a Moderate Buy consensus rating based on 2 Buys and 1 Hold. The CLNY average analyst price target of $8.67 implies 14.7% upside potential from current levels. Shares of CLNY have jumped 143.9% over the past year.
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