Colony Capital, Inc.
Q3 2019 Earnings Call Transcript

Published: 8 Nov 2019

[Operator:]

Greetings, and welcome to Colony Capital, Inc. Third Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded.I would now like to turn the conference over to your host, Lasse Glassen, ADDO Investor Relations. Thank you. You may begin.

[Lasse Glassen:]

Good morning, everyone, and welcome to Colony Capital, Inc.’s third quarter 2019 earnings conference call. Speaking on the call today from the company is Tom Barrack, Chairman and CEO; and Mark Hedstrom, COO and CFO. The company’s President, Darren Tangen; and future CEO, Mark Ganzi, are also available for the question-and-answer session.Before I hand the call over to them, 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. All information discussed on this call is as of today, November 8, 2019, 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 in 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 of why the company believes such non-GAAP financial measures are useful to investors.In addition, the company has prepared a table that reconcile certain non-GAAP financial measures to the appropriate GAAP measure by reportable segment and this reconciliation is also available on the company’s website.And now, I’d like to turn the call over to Tom Barrack, Chairman and CEO of Colony Capital. Tom?

[Thomas Barrack:]

Good morning, and thank you, Lasse. This past quarter, we continue to successfully execute our strategic objectives of accelerating liquidity, surgically managing and stewarding legacy businesses in the best interest of our multitude of stakeholders, and pivoting to become the leading hard asset solutions provider of occupancy, infrastructure, connectivity, equity, and credit to the world’s leading mobile communications and technology logos and in doing so, to bridge the digital divide.These goals included

[Mark Hedstrom:]

Thank you, Tom, and good morning, everyone. As a reminder, in addition to the release of our third quarter earnings, we filed a corporate overview and supplemental financial report this morning. Both of these documents are available within the Public Shareholders section of our website.On the call today, I will provide a review of the third quarter results, business segment performance, status of our cost reduction initiatives and several important transactions, which occurred during and after the end of the quarter.Turning to our financial results for the third quarter. GAAP net loss attributable to common stockholders in the third quarter was $555 million, or $1.16 per share, largely the result of certain charges and provisions for loan losses, totaling $540 million for the company’s share. Of this total, $387 million was attributable to the reduction of goodwill, primarily as a result of a charge for the pending fourth quarter sale of the industrial platform and real estate portfolio.In addition, there was impairment of goodwill related to the decrease in future management fees from CLNC, resulting from its portfolio bifurcation and reductions to portfolio carrying value, which I will discuss in more detail later, all of which are critical components of the company’s ongoing strategic repositioning.Reflecting very strong performance and execution in the quarter, core FFO was $102 million, or $0.19 per share. Excluding net losses of $4 million, primarily related to net investment losses in other equity and debt, offset by the management agreement termination fee received from NRE, core FFO would have been $106 million, or $0.20 per share.During the quarter, we have continued to make progress towards our strategic initiatives, which Tom just discussed, and we also had a strong operational quarter across most of our existing six reportable business segments, healthcare being the exception, as well as continued progress against our cost reduction objectives.Starting with the Healthcare Real Estate segment, same-store portfolio NOI decreased 7% compared to second quarter 2019. Third quarter 2019 same-store net operating income included a one-time write-off of certain tenant rent receivables in the Hospitals portfolio. Excluding one-time items from the same-store NOI, the healthcare, same-store portfolio sequential quarter-to-quarter comparable net operating income would have decreased only 4%.On the financing front, we refinanced $212 million British pound loan on a portfolio of UK senior housing assets, with a new $223 million British pound, fully extended five-year loan at a substantially reduced interest rate. This refinancing, along with previously completed refinancing transactions this year, addresses all of near-term healthcare real estate loan maturities.As part of the completion of the 2019 healthcare refinancing initiative, the company unwound a legacy $2 billion notional forward interest rate swap that was assumed in connection with the January 2017 Colony, NorthStar merger. The swap was originally entered into in June 2015 to hedge against potential increases in interest rates and the resulting potential for new equity financing required for certain healthcare mortgage debt maturing in December 2019.Subsequent to the June 2019 refinancing of the largest healthcare loan, the company unwound the entire swap in the aggregate amount of $365 million. For core FFO purposes, the company has excluded realized losses related to the swap, because the swap was an economic hedge against the refinancing risk of the maturing debt in the healthcare portfolio and core FFO does not reflect any realized gains or losses within our real estate verticals, or Investment Management businesses.Turning to the Industrial Real Estate segment, which performed slightly better operationally than planned for the quarter. The previously announced sale of substantially all industrial assets is still anticipated to close in the fourth quarter of 2019.Accordingly, for all current and prior periods presented, the related assets and liabilities of the Industrial segment are presented as assets and liabilities held for sale on the consolidated balance sheet and the related operating results are presented as income from discontinued operations on the consolidated statement of operations.As a result of the pending sale, GAAP net loss and core FFO for the quarter included $36 million of accrued carried interest income that we expect to earn from the industrial open-end fund based on the contractual sales price, with a corresponding charge for management’s 50% share. Additional amounts are expected at the closing of the transaction.Moving on to the Hospitality Real Estate segment. Compared to the same period last year, third quarter 2019 same-store portfolio NOI before FF&E Reserves, increased 2%, primarily due to a one-time reversal of property taxes that were accrued prior to 2018.Excluding the one-time reversal, third quarter 2019 NOI before FF&E Reserves was generally flat compared to the same period last year. Yesterday, CLNC announced a strategic plan to bifurcate its assets into a core portfolio, which will grow and a legacy non-strategic portfolio, which will be monetized with proceeds reinvested into the core portfolio.As part of its portfolio rationalization, CLNC meaningfully reduced the carrying value of certain of its legacy non-strategic portfolio to better represent its market value in anticipation of these sales.Further, CLNC reset the current dividend to levels, which can immediately be covered by in-place core earnings and amended its definition of core earnings to only reflect the results of its core portfolio. CLNC reported third quarter core earnings of $45 million, or $0.34 per share versus $41 million, or $0.31 per share in the prior quarter.Also in connection with CLNC’s portfolio rationalization, the company amended its management agreement with CLNC to make effective in the fourth quarter the alignment of the fee base with the newly reduced book value, which results in a decrease in the annual base management fees from $45 million to $33 million beginning in the fourth quarter.Next is our Other Equity and Debt, or OED segment, a $1.6 billion equity carrying value portfolio separated into strategic OED and non-strategic OED. Strategic OED includes our investments alongside third-party capital, where we earned Investment Management economics and which we plan to grow over time.During the third quarter, the undepreciated carrying value in strategic OED decreased by 16%, primarily due to the completion of the sale of NRE and the first closing of the company’s fifth Global Credit Fund, which returned capital previously advanced by the company to warehouse investments for the fund.We are also actively managing and liquidating non-strategic OED, which includes legacy investments, which are not core to the current Investment Management business. During the third quarter, undepreciated equity carrying value in non-strategic OED declined by $79 million, or 8% to $935 million.Our Investment Management business segment grew significantly during the quarter due to the July 2019 acquisition of Digital Bridge, which was only partially offset by the sale of NRE and certain other assets during the quarter.Colony ended the third quarter with third-party AUM of $39.3 billion, up 37% compared to $28.6 billion last quarter, and fee-earning equity under management increased to $22.4 billion, up $0.24, compared to $18 billion last quarter.Next, I’ll provide an update on the corporate restructuring and reorganization plan announced during the fourth quarter of 2018. During the year, since initiation of the plan, the company has achieved approximately 80% of the expected $50 million to $55 million in cost savings on the same-store run rate basis through various initiatives, including the reduction of more than 13% of the company’s workforce existing at the time the restructuring was announced.We expect to meet or exceed the original cost savings target over the next one or two quarters. You will increasingly see the impact of these G&A savings in our GAAP financial statements and core FFO, together with the impact of cost reductions following the completion of in-process sales transactions.However, period-to-period comparisons are difficult principally due to significant one-time employee transition costs related to the sale of NRE and the addition of Digital Bridge in July 2019. As an example, in the third quarter, employee separation costs totaling $39 million relating to the sale of NRE were included in compensation costs, while other income was grossed up by $26 million of that amount, representing amounts paid or reimbursed by NRE.Third quarter G&A costs reported on a core FFO basis, which adjusts for one-time and non-cash costs, including those I just mentioned, declined 14% on the same-store year-over-year comparison.In summary, we are very pleased with our strategic progress and operating results during the first nine months of 2019. And we look forward to finishing the year strongly and following up soon with the company’s detailed strategic plan.With that, I’d like to turn the call over to the operator to begin Q&A. Operator?

[Operator:]

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Jade Rahmani with KBW. Please proceed with your question.

[Jade Rahmani:]

Thanks very much. I guess, to start off with regarding the CLNC internalization proposal. I’d like to know if you’ve considered or would consider some kind of transaction with a third-party such as a Brookfield or a Blackstone, who can take over the company, acquired a management contract, and how that would compare with a related party transaction between the two entities?

[Thomas Barrack:]

Jade, it’s Tom. Thanks for the question. Obviously, it’s unbelievably complex, and we can’t deal with specific details. But generally, it’s simple. We are the largest shareholder and we will continue to do whatever the best execution is and the interest of all the shareholders, and since we’re the majority shareholder, that’s really yes.So because of the complexity of the entity and the other Colony credit vehicles that at times co-invest with that entity, and the external management contract, a complicated reach for a third-party. We have belief in our own man management team.We have belief in the assets what we did yesterday was a step forward for the creation of what we think will be best-in-class mortgage REIT. So we’ll obviously look at all available options. But when you get into the complexity of what’s here, we think this is really the best and probably only vehicle [indiscernible]. Any other comments?

[Mark Hedstrom:]

No, I would agree with that completely, Tom. And there’s work to do here in the coming months, as Tom said. But I think at the end of the day, we think that this is the best solution for all stakeholders involved.

[Jade Rahmani:]

Yes. I mean, I think it’s interesting to hear you say that, because I’ve now followed this company since 2009 and seen a multitude of these value-destroying transactions. And I think you might want to consider whether a third-party would also make sense and weigh the cost benefit of such interest if we were to materialize. I believe that there are numerous debt vehicles that are in a private format right now that would value highly permanent capital that a mortgage REIT offers, and I think that should also be evaluated?

[Thomas Barrack:]

Obviously, that’s the object of what we’re doing. So we hope you’re right. And we hope, there’s lots of participants who have lots of great ideas for all the shareholders and we’ll entertain them appropriately as they arise.

[Jade Rahmani:]

And what’s the technical reason that a shareholder vote would not be required, because I believe that Colony Capital owns 36% of Colony credit?

[Thomas Barrack:]

So, Jade, if what is being sold is the management contracts associated with Colony’s private credit businesses and an internalization of the contract. If the consideration involved is cash and not the issuance of stock by CLNC, then under that scenario and transaction structure, it’s not necessary that there would be a shareholder vote.

[Jade Rahmani:]

Okay. Is there any contemplation that some portion, if not the majority of Colony Capital’s OED assets would also be transferred or sold to CLNC?

[Thomas Barrack:]

It’s too early to make that determination, right? Along that road, there is some complexity, because there’s co-investing entities of CLNC with other private captured entities of CLNY. And we’ll let the process to determine what’s viable and what’s not. Of course, some of those silos are managed by the same management group, which was what I thought process was an internalization to align those interests. But we’ll let the process dictate what’s viable and what’s not, it’s too early for us to know.

[Jade Rahmani:]

Turning to industrial, is it – for us to understand that the timing of the sale was delayed, and can you provide any color on that? When do you anticipate the sale closing and can you explain?

[Thomas Barrack:]

Yes. The timing of the sale is not delayed at all. We’ve always said that it’s by year-end and will continue to be by year-end, we anticipate the middle of December. And all things are on target. A portion of the entire portfolio, the bulk portion is not going to be executed in the same context and it’s a tiny portion of the overall transaction less than 2%...

[Mark Hedstrom:]

$200 million.

[Thomas Barrack:]

…$200 million, but everything is on target to close. No issues.

[Jade Rahmani:]

Okay. On the healthcare side, Ventas reported somewhat disappointing results and curtailed their growth expectations for 2020. Does that change any scenarios that could play out with respect to the healthcare portfolio and how you’re thinking about that?

[Thomas Barrack:]

Not really. I mean, Ventas is best-of-class. Debby does an amazing job. She’s dealing with headwinds in the industry as the industry transitions and she’s looking for transparency as everybody does. We continue to view them as a valued stakeholder and our car refinancing be pivotal. And I think she’s going to fight her way out of this to victory and it doesn’t affect what our practices or policies are going forward.

[Jade Rahmani:]

Thank you. And then just lastly, in terms of the transition and transformation of the company toward Colony Capital 2.0 digital focused company, would you give any consideration to a potential privatization of the company, or do you view – you do highly value the benefits of being public?

[Thomas Barrack:]

Look, we obviously value the benefits of being public when it works to your effect. Every day is a frustration when we’re trying to explain in public market the value of the assets that are – sometimes that are evaluated in the private market. And this – the Investment Management business is something that’s not really well regarded in a public setting.So as we’ve struggled through in this last year, this idea of a diversified REIT investment manger talk about and [ph] we realize that the market doesn’t buy that. What you want is a clear single swimming lane. And then the public market and issuing new equity offers an abundance of benefits.The digital business we think is best handled in a public setting, because the balance sheet and the liquidity that we’re generating can be used as a great tool. And the investment management side of the business is liquid and is hence opulent, as we’ve seen it that the digital categories that went across in the markets here and can talk a little more about it.As we relate to assets on the balance sheet that have high-growth potential on one hand, and we transitioned from legacy assets, which in our opinion, as I said before, physically obsolescent and financially obsolescent or functionally obsolescent. At balance sheet accretion on a total return basis is really interesting to us as an owner. And on the investment management side, leading with that kind of the balance sheet creates more alignment for the limited partner universe. Marc, anything to add?

[Marc Ganzi:]

No, Tom, I think you synthesized it correctly. We really feel like there’s an unprecedented opportunity to deploy capital across our very valuable platforms and new platforms. We’re seeing over $408 billion in investment opportunity across the digital infrastructure ecosystem.Over the next five years as we deploy mission-critical IoT networks, 5G networks, the Internet of Everything, as we call it, and when we sort of look at that side by side against what we see in sort of traditional real estate and investing in traditional real estate, that market set opportunities just to figure a bigger pool of opportunity for our tenants and our customers.

[Jade Rahmani:]

And just to follow-up on that, is the INXN deal something that you considered or even at this stage would consider as a potential transaction?

[Thomas Barrack:]

I’m sorry, clarify the question. Are you talking about the privatization of the IM business?

[Jade Rahmani:]

The Interxion transaction, which Digital Realty Trust is under agreement to acquire. I was wondering if that’s something Colony – Digital Colony would have considered or could still at this stage consider?

[Thomas Barrack:]

Sure. Thank you. We honestly don’t comment on market rumors related to transactions that in the press that our name is being circulated. So for the time being, I’ll say no comment as related to an Interxion.

[Jade Rahmani:]

Thanks for taking the questions.

[Thomas Barrack:]

Thank you.

[Mark Hedstrom:]

Thanks, Jade.

[Operator:]

Our next question comes from the line of Mitch Germain with JMP Securities. Please proceed with your question.

[Mitch Germain:]

Maybe now that Marc Ganzi, I appreciate your comments here, stock price today about $0.50 on the $1 as to where your OP units vest at. What gives you confidence that this company can turn things around?

[Marc Ganzi:]

Sure. Thanks, Mitch. Listen, as Tom likes to say, Mitch, we’re playing offense, we’re playing defense. The defensive side of the ball, we’ve made very clear what our objectives are and what we promise to commit to the market, the sale of NRE, the sale of industrial, the pruning of our OED portfolio, those are essential components for us to clarify our story and allow us to be on a singular mission to do the things that we want to do.On the offensive side of the football, we’ve been very clear about what we want to do. We want to take balance sheet capital, put it to work behind our best logos, our best businesses, our best executives in places where we think we can deliver more total shareholder return.Now, let’s unpack the comment of total shareholder return. One, we want to buy assets effectively cheaper than where we’re selling assets. Second, we want to hire employee yield. Third, we want to be involved in businesses that have higher double-digit organic growth, which are resident in some of the businesses that we already own and operate today.As I think most of you know, Colony today owns and/or manages 10 very valuable digital assets, which will be happy to give you some of the highlights of what we did in the third quarter as it relates to those assets, which there were a lot of great things happening down in the digital domain within Colony.We believe also when you take that balance sheet, Mitch, and you weaponize the balance sheet, and you’re able to deploy capital into either GP commitments, all our digital economy partners, one, which was the most successful first-time ever SEC funds; and two, where we can use that balance sheet effectively to warehouse transactions like we did with Andean Tower Partners; and three, where we can step up and we can use the balance sheet to acquire portions or majority portions of businesses that perform in every metric in a superior facet, as it relates to what we’ve done traditionally in either industrial, healthcare or logic.And so there’s three ways to use the balance sheet capital. If we’re effective of using that balance sheet capital, Mitch, and deploying capital across those three different avenues that I just mentioned, we believe the two things will happen. One, we will be able to raise more third-party capital. And in doing so, we will grow our investment management platform. It is we have a very, very clear strategy that we’re going to unveil to you and the rest of the world in early December. That’ll make this abundantly clear.Second, when we think about how we can grow the business, it’s no secret that digital assets traded at a much higher premium to where we trade today. And if we think about why they trade at a premium, it’s because the businesses that we own and operate today at Colony, own and/or manage, have longer-term leases, higher concentration to investment-grade, lower churn, and most importantly, much stronger fundamental organic cash flow growth.At the end of the day, any REIT, whether it’s a digital REIT or whether it’s an [excellent tariff] [ph] REIT, the most important factor, Mitch, is your ability to lease vacant space, and to continue to grow free cash flow growth, the way we turn the ship, the way we get your confidence back, is by doing that, by owning assets and owning businesses that have implied higher organic growth rates.And as we’ve demonstrated over the last 25 years in the businesses that we own and operate, we’ve managed to do that. And as this business plan, and this draft plan becomes more apparent to you and the rest of the world, we believe that people will want to own this company.And people who want to own these shares is the first truly diversified digital REIT and a digital investment manager. That’s where we’re going. And whilst we haven’t been able to give you that specific color today, I can assure you when we do unveil that, that it will be very transparent. And it will be something that we believe that others who want to partake in and join that journey with us.

[Mitch Germain:]

Thank you for that. Are there any considerations, whether it be debt covenants or balance sheet or other that prohibit you from pursuing sales over the course of next 12 to 18 months of healthcare and lodging?

[Thomas Barrack:]

No, not.

[Mitch Germain:]

Okay. What – can you just maybe socialize the, A, the industrial sale process in terms of how it turned out with regards to the demand bidding? And then I guess, you’re holding back now, after previously announcing the sale, it looks like you’re holding back the bulk industrial size of that. Can you just kind of elaborate what’s going on there?

[Thomas Barrack:]

Yes. Darren is here and Darren ran the process. Darren, do you want to comment on that?

[Darren Tangen:]

Yes. Hey, Mitch, it’s Darren. So I mean, the process – sale process itself was incredibly robust, as you might imagine. I mean, there was a tremendous amount of interest, I think, we had over 10 submissions on a $5-plus billion portfolio. In the first round, we brought several groups through to the second. And, as you now know, Blackstone prevail.As it relates to the – there’s a $200 million component of the $5.9 billion that was originally announced, which is the bulk portfolio component. And as we announced back in September, when the deal was printed, there is some third-party consents that were associated with that, because we were selling a 51% interest in a partnership.So the expectation we are engaged in other sale discussions related to that bulk portfolio, it may be somewhat delayed from the end of the year. It could be a January, February type closing, but something that we still expect to happen pretty quickly. But again, it’s $200 million of a $5.9 billion trade, so it’s somewhat immaterial in terms of size.

[Mitch Germain:]

And as those third-party consents are realized, is it a new sale process that that is launched, or does it go to Blackstone?

[Darren Tangen:]

I – not Blackstone, so the original deal was that Blackstone was going to buy the 51% interest in the partnership. So it’s going to end up being sold to a different party. But it’s not an entirely new sale process that’s being launched. No, it’s involving some of the affiliated parties in the deal today. So it’s something that we expect we can document and close quite quickly.

[Mitch Germain:]

Got you. Last for me, maybe Mark Hedstrom. How should I think of a clean run rate? You’ve got a whole bunch of NRE noise. You’ve got a whole bunch of noise in OED, so one timers in almost every single segment. What’s core earnings absent one timers?

[Mark Hedstrom:]

I think we’re looking at at rates that are going to be slightly down from this quarter on a run rate basis with the sale of industrial and the sale of NRE, how quickly we deploy that capital and in other investments, as well as get the benefit of the digital platform and the digital investments, those Investment Management economics. Those are going to be a creative.So I think we don’t really have a lot of guidance there for you right now. We think this quarter is a good quarter. We expect the fourth quarter to be a good quarter for us as well. But I think runway going forward, there’s still a lot to do with the Street strategic plan to develop a real firm number for that.

[Mitch Germain:]

Okay. So we don’t know what the real number is. Thank you.

[Operator:]

Our next question comes from the line of Randy Binner with B. Riley FBR. Please proceed with your question.

[Randy Binner:]

Hi, good morning. So I wanted to just try and scope out a better understanding of this December event. Is it- you said early December, mid-December, I think, planning for these things is helpful. So, is there a firmer timeframe you can give us, can you lay out what the format is going to be? Do you plan to resegment or otherwise restate the financials?

[Thomas Barrack:]

Yes, Randy, it’s Tom. The format is going to be we’re going to post on our website a definitive strategic plan. It doesn’t have anything to do with restating the financials. Has to do with setting for sources and uses of capital, which is what you’re going to be the most interested in and we created a tremendous amount of liquidity and everybody is saying that’s terrific, where does it go?We have a number of options, of course. We’ve got liability management on one side. We’ve got the deployment of balance sheet capital for digital and new acquisitions. We have the deployment of LNG capital on, at least, three new digital limited partner products that we’re about to launch. And we have all of the usual frameworks of discern between stock buyback, special dividend, the timing of what we do with that liquidity and what that means to the existing silos going forward. But we’re not abandoning legacy businesses.So we’ve got shareholders, we have limited partners in legacy business, we’ve got substantial cash flow from things that the market hates, like hospitality and healthcare, and we’re moving on all those fronts. And we’re going to give you a bird’s eye view of the optionality of where those legacy assets go. And the growth of with digital is third-party capital and balance sheet acquisitions going forward. And we’ll do that by the middle of December.

[Randy Binner:]

Okay. And then I can presume there’ll be a call and other ways to interact with management around that, yes?

[Thomas Barrack:]

Well, absolutely. We’re – once we do that, we’re going to have a series of – we’re digital company and we’re going to the digital age and what we do is have phone calls and text, but you’re – we’re going to start a new program.So in addition to non-deal road shows, we’re anticipating webinars, town halls, a series of communication events that will also give all of you a better view of what is this Digital Bridge. What is this digital highway. Now everybody knows what’s happening in digital REITs that are all defined within their own lanes. And what’s happening of these new kind of digital nation states that make them the best counterparty for somebody like us, which is hard asset investor is complicated.So in addition to our strategic plan of saying, here’s the math and here’s where we’re going. Here’s the timeframe of how we’re getting there on the existing Colony businesses, adding two the acquired Colony businesses is really a key churn and the assets that we’re buying. So we anticipated the last part of this year and the first quarter of next year to roll out a new communications format and plan. We think it will be…

[Randy Binner:]

Yes, that transparency will be welcomed. And then I guess, I’d take it from your comments, if I’m hearing it correctly, then it’s and I know you can’t commit to this. But it feels like you’re saying it’s less likely to be kind of a core versus non-core separation and more likely to be what’s going on with the existing business and then the addition of the digital pivot. Is that fair?

[Mark Hedstrom:]

Yes.

[Thomas Barrack:]

Yes, but with specificity, right? The initial parts of it are what are the gauging of monetizations? And what’s the balance of dividend and total return? And that’s what you’re trying to gauge. And that’s what we’re always trying to gauge. So one foot on the brake and one foot on asset. These hiccups are difficult for you to understand. And we look at it every day and say, what, it’s not easy to be an owner, it’s much easier to be an investor. As all of you can vote with your feet like it, you buy more and you don’t like, you’re out.We’re making decisions across the Board as an owner and have three-year, four-year, five-year consequences. And sometimes that – that’s typical, that’s where we’ve been. So we’re not envisioning gigantic distortion moves and the strategic plan, which you’re going to see is our view of a very carefully thought strategic realignment, calling 2.0, what we do with the legacy assets, the cash flow that we have, the liabilities that we have on balance, the deployment of that capital in a logical way.And what you’ve seen in CLNC is our view of shareholder saying, how do we streamline these confusing interests in a way that can short-term cause some turbulence to our share price. Again, as an investor, that’s not desirable. But we know we’re going to get back to book value.As soon as we get back to book value, we have a different day on the chalk, because we love our management team and we love where we are in the space. So we’re going to give you, I think, the arithmetic that you want to go to the good questions you’re all asking. It’s taken us a while to get there, because, as you know, it’s not much simple.

[Randy Binner:]

I just had another question. The – on the interest rate swap, if I understand this correctly, that you took a loss of $91 million and that is a lot of money, but it was actually somewhat better than we expected. And so I just wanted to clarify if that matter is entirely resolved, or if there’s some ongoing exposure?

[Thomas Barrack:]

The matter is entirely dissolved. The swap is settled and closed. There’s a small payment due in the beginning of December, but that’s reflected and accrued in our financials. The total cost of getting out of that swap was $365 million, of which I think about $240 million is reflected in the current year. There was some of that that was taken for GAAP purposes in 2018. So it is completed. It’s all reflected in the financials and closed out, except for this cash transfer that occurs early December.

[Randy Binner:]

Okay. I understand that better now. That’s all I had. Thank you.

[Thomas Barrack:]

Thank you.

[Operator:]

If there are no further questions left in the queue, I would like to turn the floor back over to management for any closing remarks.

[Thomas Barrack:]

Thanks, everybody, for your participation and thanks for your patience. And we will be back to you in mid-December to put more flesh on the skeleton of what we talked about. Thanks, everybody. Have a good weekend.

[Operator:]

This concludes today’s teleconference. You may now disconnect your lines at this time. Thank you for your participation and have a wonderful day.