Colony Capital Hires Moelis to Weigh Options for Hotel Holdings

(Bloomberg) -- Colony Capital Inc. has hired Moelis & Co. to explore options for its hotel holdings as it migrates its focus from traditional commercial real estate to digital properties such as data centers, according to people with knowledge of the matter.

Colony is weighing alternatives for its portfolio of select-service, extended stay and full-service hotels, said the people, who requested anonymity discussing a private matter.

Los Angles-based Colony disclosed information about its lodging holdings on Friday “to enhance visibility and transparency” as it evaluates strategic options. Earlier this month, the real estate investment trust said it was working with an external adviser to “evaluate strategic and financial alternatives to maximize the value of its hospitality assets.”

Representatives for Colony and Moelis declined to comment.

With travel mostly halted, hotels have been hit harder than other real estate sectors during the shelter-at-home orders imposed in response to the coronavirus pandemic. Approximately 35% of hospitality commercial mortgage backed securities were delinquent in May, according to the Commercial Real Estate Finance Council.

The company said its hotel properties are held in seven separate portfolios and that the associated debt has no recourse to Colony itself. One portfolio, for instance, includes some 6,400 rooms across 48 properties that operate under brands including Courtyard by Marriott and Hilton Garden Inn. Another has almost 8,600 rooms across 89 properties that are mostly flagged by Marriott and Hilton.

The REIT said it doesn’t “anticipate allocating material amounts of its own capital to these hospitality portfolios.” It added that the disclosure on Friday improves its ability to “explore potential transactions involving portions of its hospitality borrowings, including transacting in the borrowings either directly or through joint ventures or other collaborative efforts with third party capital sources.”

Colony also said it remains in “active negotiations” with lenders and servicers to seek forbearance and debt modifications to protect the value of its lodging holdings.

The REIT’s founder Tom Barrack plans to step down as chief executive officer later this summer. Colony’s stock has fallen more than 50% this year, worse than the roughly 18% decline for Bloomberg U.S. REIT index.

Separately, a $145 million loan owned by Colony Credit Real Estate Inc., in which Colony Capital is the largest shareholder, is on the block, according to people familiar with the matter and a marketing document seen by Bloomberg. The loan is on the Fairmont Grand Del Mar, a luxury resort near San Diego, the document shows.

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