Home    Colony’s value suffers from stock market turmoil

Colony Capital, the investment group founded by real estate investor Tom Barrack, has emerged as one of the private equity industry’s worst losers from a week of stock market turmoil, as investors grew concerned that the coronavirus pandemic could inflict severe losses on the company’s portfolio of hotels and nursing homes. 

Colony’s value has fallen by 41 per cent in the past week, roughly four times the declines registered by leading investment firms such as Apollo Global Management and Carlyle Group, and significantly worse than rival real estate investment trusts including Vornado and Simon Properties.

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

Mr Barrack will step down as chief executive in July, the company announced on Thursday. He had planned to stay on until next year before handing the top job to his longtime polo acquaintance Marc Ganzi, who joined as managing director last year.

Investors’ concerns have focused on a portfolio of 157 “hospitality properties” that account for a third of Colony’s real estate portfolio. Many are hotels operating under brands such as Marriott and Hilton, whose owners also took a battering this week, as the virus proliferated and global travel restrictions spread.

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

Mr Ganzi sold his Digital Bridge infrastructure group to Colony for $325m in July, and plans to transform Colony into an owner of mobile phone masts, datacentres and “digital infrastructure” assets.

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As part of that strategy, Colony last year sold a portfolio of warehouses to Blackstone, a rival investment group. But the group planned to take its time finding a buyer for the healthcare and hospitality portfolios. “We sold some hotels last year,” Mr Ganzi told an audience in January. “We sold three hospitals . . . So it’s not necessary that we completely divest off all those assets today.”

The strategic shifts at Colony have prompted scorn from some shareholders. Activist investor Blackwells Capital last week wrote an open letter to the board lambasting what it called Mr Barrack’s “random hunt for opportunistic transactions and ventures (many involving his friends) that are justified post hoc with a few edits to the company’s mission statement”.

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

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