Q3 2019 Earnings Call

Greetings welcome to colony capital Inc.'s third quarter 2019 earnings conference call. At this time all participants are in listen only mode of question and answers that show follow the formal presentation. If any what's required operator, let's turn the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded I would now like turn there.

So what's your hosts lots of glass I don't Investor Relations. Thank you you maybe get.

Good morning, everyone and welcome to called the cap <unk> third quarter 2019 earnings Conference call.

Speaking on the call today from a company as Tom Barracks, Chairman, CEO , and Mark Abstral COO and CFO .

Companies, President Darrin tabs and future CEO Mark Gabby are also available for the question answer session.

Before I hand, the call about please note that on this call certain information presented contains forward looking statements. These statements are based on management's current expectations are subject to risks uncertainties assumptions.

Terrific certainly is a could cause the company's business and financial results to differ materially from these forward looking statements.

Our describing the company's periodic reports filed with the FCC sometimes.

All information discussed on this call is as of today November eight 2019, and calling capital.

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 segmented basis.

Today's earnings release, which was issued this morning and is available on the company's website presents reconciliations to interpret GAAP measure and an explanation of why the company believes such non-GAAP financial measures are useful to investors.

In addition, the company's apparently tables that reconcile certain non-GAAP financial measures to the appropriate GAAP measure by reportable segment and that's reconciliation is also available on the company's website.

And now I'd like to turn the call over to Tom Burke, Chairman and CEO of common capital.

Good morning, and thank you watch.

This past quarter, we continued to successfully execute our strategic objectives accelerating liquidity.

Surgically managing Stewarding legacy businesses.

That's interest of our multitude of stakeholders.

Shifting to become the leading hard assets solutions provider.

Occupancy.

Infrastructure.

Good activity.

What do you and credit.

To the world's leading mobile communications and technology logo.

And in doing so to bridge the digital divide.

These goals included.

What reduced Gionee and realigning.

Our athletes on the field.

True.

Simplify our business and align our capital structure with our business strategy.

Three.

Generate liquidity through the value maximization of legacy businesses.

Arbitraging, the mismatch between the public and private valuations of the company's assets.

Poor.

Transition the return profile colony capital balance sheet assets away from current yield at into total return.

The final digital real estate.

And lastly focus on new read eligible digital real estate balance sheet originated acquisition.

Vehicles and platforms and digital real estate investment management products.

In which we haven't edge.

No the scale.

Overall I'm pleased with the progress we made in delivering our objectives and sharpening our focus on digital infrastructure in digital real estate.

We believe will enable calling capital the capitalized.

Hi return opportunities.

Sector position for continued strong secular growth.

Now I'd like to provide you with a review of some of the key highlights from the court.

Digital bridge.

During the quarter, we completed the acquisition of digital bridge, a name art against the U.S. Kannan Capitals next CEO effective no sooner than the second half of 2020.

The transaction brings digital bridge is world class team of investment professionals and portfolio of high performing assets under the calling me franchise.

Mark is with us on the call today and will be available for Q and at the end of the call.

Connie industrial we also entered into definitive agreement to sell our light industrial platform to Blackstone for 5.7 billion.

The transaction allows colony do achieve compelling returns for investors and generate significant liquidity.

Which among other uses will help accelerate our ongoing transition into digital real estate and infrastructure.

Since our acquisition of cobalt at the end of 2014, we will generate a total profits to our shareholders of approximately $600 million.

Next and Ari.

In addition, we completed the sale NRT to access for $17 and a penny per share.

As we thought it the transaction, calling generated gross proceeds of 160 million from the sale of our 11% ownership position.

And the monetization of the management contract.

And most importantly shareholders and at our age should receive an approximate 16% realized I are from inception.

Other equity and debt.

We made continued progress and the accelerated modernization of our other equity in that segment, completing 272 million asset Monetizations just this quarter.

Cost of a this quarter's oh easy Monetizations total year to date, Oh, we de Monetizations about $651 million.

Credit investment management.

We held the first closing up our global real estate credit fund with total capital commitments of $420 million.

Next Gen a reduction.

During the quarter, we achieved approximately 80% of the expected total 50 to 55 million of the previously announced cost savings on a run rate basis and are on track to meet or exceed our target like early 2020 .

Seal and see.

Last night, CLM see reported third quarter earnings and announced new strategic plan to bifurcate its portfolio do a core segment.

And the balance into a legacy non strategic SEC.

New plan will generate significant liquidity for steel and see from the sale of these nonstrategic assets, which will be reinvested into new core investments.

This asset rotation out of the legacy nonstrategic sector.

Ended a core segment will drive core growth in core earnings and simplify the overall business.

As a result of this new strategy and reduced whole periods for nonstrategic assets.

Let's see did recognize meaningful impairments and third quarter.

Would you bring it undepreciated GAAP book value down to a level that we believe it's a good reflection of the companies and Navy based on the planned asset sales.

And I'm currently.

Dividend was reset to a level that is now covered by in place core earnings.

Combined with significantly improved disclosure regarding sealants sees assets.

We believe these actions taken together better position the company for long term growth and shareholder value creation.

Additionally, and as we disclosed last night.

Colony capital has initiated discussions with the independent directors colony real estate credit regarding a transaction to create pre eminent internally managed credit read what they clearly defined strategy and position for greater growth and profit maximization.

This potential transaction would involve a transfer calling capitals market, leading credit management business to colony real estate credit.

Representing yet another step calling capital strategic repositioning simplified boat business.

Oh line shareholder interest into definable and specific range for each.

And establish colony capital as a leading platform for digital real estate in infrastructure.

Yeah quality real estate credit as a leading internally managed mark.

Well colony capital looks forward to engage in closely with feeling see potential transaction there could be no assurance.

I'm an agreement.

That may be reached.

Or what form potential agreement may take.

We will update you in more detail on this potential transaction and the proposed internalization of management ATSI Olin Stephen King.

We've executed on what we stated we would do when I became CEO and we're pleased with our significant progress today.

Now looking ahead.

Fail and industrial is anticipated to generate roughly $1.2 billion net equity proceeds to colony capital and we expect this transaction to close by yearend.

As a result in the sale and other Monetizations referenced earlier, calling capital would be equipped with a substantial quantum of liquidity.

At what we think we'll be very appropriate time.

We are targeting sharing the details of colony, two point of digital strategic plan, which we outlined in broad strokes ever.

In the presentation posted on our website.

Sometime in mid December we look forward to speaking with you that.

In summary.

All in capital Board and management team are confident in the compelling growth prospects available to us.

And we believe we are taking to write steps to drive long term value for all stakeholders.

And now I'll turn it over to our CFO and COO markets.

Mark.

Thank you Tom and good morning, everyone.

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 in the public shareholders section our website.

On the call today I will provide a review of the third quarter results business segment performance.

Got it summer cost reduction initiatives, several important transactions, which occurred during and after the ended the quarter.

Turning to our financial results for the third quarter.

GAAP net loss attributable to common stockholders <unk> third quarter was $555 million or $1.16 cents for sure largely the result, certain charges and provisions for loan losses.

Totaling 540 million for the company share of this total 387 million was attributable to the reduction of goodwill primarily as result of a charge for the pending fourth quarter sale, the industrial platform and real estate portfolio.

In addition, there was impairment of goodwill related to the decrease in future management fees from C. On C., resulting from its portfolio bifurcation reductions 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 19 cents per share excluding net losses $4 million, primarily related to net investment losses, and other equity and debt offset by the management agreement termination fee received from Ann.

Sorry.

Core FFO would have been $106 million or 20 cents per share.

During the quarter, we've continued to make progress towards our strategic initiatives, which Tom just discussed we also had a strong operational quarter across most of our existing six reportable business segments health care beam 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 onetime write off certain kind of receivables hospitals portfolio.

Excluding onetime items from same store and Allied healthcare same store portfolio sequential quarter to quarter come.

Terrible 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, a new 223 million British pound fully extended five year loan at a substantially reduced interest rate this refinancing long previously.

We completed refinancing transactions this year.

Dresses, all near term healthcare real estate loan maturities.

Part of the completion of the 2019 health care refinancing initiative.

Company Unwound, a legacy 2 billion dollar notional forward interest rate swap that was assumed in connection with the January 2017 colony Northstar merger.

Swap was originally entered into in June 2015.

Hedge against potential increases in interest rates and the resulting potential for new equity financing required for certain health care mortgage debt maturing in December 2019.

Subsequent to the June 2019 refinancing of the largest health care alone 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 swap because the swap was an economic hedge against the refinancing risk.

The maturing debt outgrow 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.

Previously announced sale of substantially all industrial assets is still anticipated to close in the fourth quarter 2019, Accordingly for all current and prior periods presented.

The related assets and liabilities. The industrial segment are presented as assets and liabilities held for sale on the consolidated balance sheet and the related operating results presented as income from discontinued operations on a 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 industrial open end fund based on the contractual sales price with a corresponding charge for management to 50% share.

Additional amounts are expected to closing of the transaction.

Moving onto the hospitality real estate segment parent to the same period last year third quarter 2019 same store portfolio I know why.

Before F and the reserves increased 2%, primarily due to a onetime reversal.

30 taxes and were accrued prior to 2018.

Excluding the onetime reversal third quarter 2019, I know why for F any reserves.

It was generally flat compared to the same period last year.

[noise] yesterday, sealant see 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 sealants see meaningfully reduce the carrying value certain of its legacy non strategic portfolio to better represent its market value and just in anticipation of these sales.

Further sealants see 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.

Sealants see reported third quarter core earnings of $45 million score 34 cents per share versus $41 million or 31 cents per share in the current quarter.

Also in connection with Fiancees portfolio rationalization the company amended its management agreement with you on fee to make affected in the fourth quarter. The alignment of the fee base with the new the reduced book value, which results in a decrease in the annual base management fees from $45 million to 33.

The dollars beginning in the fourth quarter.

Next is our other equity and debt or are we de segment and 1.6 billion dollar equity carrying value portfolio separated into strategic OE D and strategic already.

Strategic already includes our investments alongside third party capital, where we earn investment management economics, and which we plan to grow overtime during the third quarter, the undepreciated carrying value in strategic or we de decreased by 16% primarily due to the completion of the sale of NRT and the first.

Closing of the company's global credit fund.

Which returned capital previously advanced by the company to warehouse investments for the thought.

We're also actively managing and liquidating non strategic already which includes legacy investments, which are not core to the current investment management business during the third quarter Undepreciated equity carrying value non strategic or we de declined by $79 million worth 8% to 935 million dollar.

Yes.

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 NRT and certain other assets during the quarter.

Colony ended the third quarter third party you EM.

$39.3 billion up 37% compared to 28.6 billion last quarter.

And fee, earning equity under management increased to $22.4 billion up 24 cents 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 a same store run rate basis through various initiatives, including the reduction of more than 13% the company's workforce existing at the time restructuring was it.

Last.

We expect to meet or exceed the original cost saving target over the next one or two quarters.

You will increasingly see the impact of these DNA savings in our GAAP financial statements and core FFO together with the impact of cost reductions following the completion of and process sales transactions.

However period to period comparisons are difficult principally due to significant one time employee transition costs related to the sale of that Ari and the addition of digital bridge in July 2019.

As an example, and the third quarter employee separation costs.

Totaling $39 million relating to the sale of and are we were included in compensation costs. While other income was grossed up by $26 million about him out representing amounts paid are reimbursed by industry.

Third quarter DNA cost reported on a core AFFO basis.

Which adjusts for one time non cash cost, including those I just mentioned declined 14% on a same store year over year comparison.

In summary, we're very pleased with our strategic progress and operating results. During the first nine months of 2019, and we look forward to finish 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 cumin aim operator.

Thank you at this time will be conducted a question and answer session. If you will like does question. Please press star one on your telephone keypad a confirmation. So indicate your line is in the question Q.

You mean fresh start to feel that some of your question from the Q.

For participants do you think speaker equipment any be necessary to pick up your handset before person Starkey.

Our first question comes on line of Jade Rahmani KBW, Please see with the question.

Oh, thanks, very much I guess the start off with.

Regarding the ceiling see internalization proposal.

I'd like to know if.

You considered or would consider.

Some kind of transaction with a third party that's at the Brookfield there at Blackstone.

Who can take over the company acquired the management contract.

And how that would compare with a related party transaction between the two entities.

Jay It's Tom.

Thanks for your question obviously.

Unbelievably complex.

We we can't deal with specific agents, but generally it's simple we are the largest shareholder and we will continue to do whatever the best execution is and the interest all the shareholders, that's where the majority shareholder.

That's really yes so.

Because of the complexity of the entity and the other colony credit vehicles at times Cohen asked would that entity.

And the external management contract.

It's a complicated reach for a third party, we athletes on our management team.

Bleach on the assets what we.

Good yesterday was step forward for [noise].

So what we think will be.

No asset class mortgage riet.

I will obviously look at all available options, but when you get into the complexity of whats here. We think this is really the best probably.

During this year, where it sits on that.

Any other comments no I would agree with that completely Tom and.

I just want to do here and the coming months as Tom said, but I think at the end of the day. We think this is the best solution for all stakeholders halt.

Yes, I mean, I think it's interesting to hear you say that because I've now follow this company 2009 and seen multitude of these value destroying transactions and I think you might want to consider whether a third party. What also makes sense and way the cost benefit of such.

Interest if if they were to materialize I believe that there are numerous that vehicles that are in a private format right now that would value highly.

Permanent capital that a mortgage riet offers and I think I should also be evaluated.

But obviously, that's the object of what we're doing.

So.

We hope you're right. It really helps theres lots parts, especially we have lots of great ideas for all shareholders will entertain them appropriately as they arise.

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.

So Jay that if what is being sold is the management.

Contracts associated with colonies private credit businesses and internalization of contract.

Yes, if the consideration involved is cash and not the issuance of stockpiles seal and see then.

Under that scenario in transaction structure, it's not necessary that there would be.

A shareholder vote.

Okay.

Is there any contemplation that some portion if not the majority of colony capital. So we de assets would also be transferred or sold to steal NZ.

Too early to make that a termination right a lot along that road. There has some complexity because there's co investing entities seal and see what other private captured entities seal and why.

Well, we'll let the process determine whats viable and what's not or some of those silos are.

Managed by the same management group, which was what I thought process was translation to align those interest.

Well, we'll let the process to a viable and it's not it's too early for us.

[noise] turning to industrial is is it.

Just to understand that the timing of the sale was delayed and can you provide any color on that when do you anticipate the sale clothing and can you explain.

Yes, the kinda sale, it's it's not delayed call. We've always said it's by yearend.

Continue to be by year end, we anticipate smell of December .

And.

All things are on target a portion of the.

Entire portfolio of all portion.

It is not going to be executed in the same context, and that's a tiny portion of the overall transaction.

Let's turn to preset too.

200 million.

[noise] everything is on target to close no issues.

Okay on the health care side, Ventas reported a somewhat disappointing results and curtailed their growth expectations for 2020 does that change any.

Areas that could play out with respect to the health care portfolio on how you're thinking about that.

[noise] I really I mean, that's been cost as best of class Debbie just an amazing job.

She is.

Dealing with headwinds in the industry as the industry transitions.

Experience, yes, as everybody does.

Uh huh.

Continue to view them as a valued stakeholder.

Our refinancing.

Yeah.

I actually got a fight her way out of this.

Victory and it doesn't affect.

Policy start going forward.

Okay.

Thank you and then just lastly in terms of the transition and transformation of the company toward cap colony capital to point, though digital focused company.

Would you give any consideration to a potential private Jason of the company or do you view.

You do highly valued the benefits of being public.

[noise] like we obviously value the benefits are being public when it works year affect every day as frustration when we're trying to explain in public market you have the assets that are.

Sometimes very evaluated in a private market.

And this investment management business, it's something that's not really well regarded in a public setting.

So as we've struggled through and this last year.

The other diversified great investment after toggle would realize it's mark by that.

What you wise a clear single swimmingly.

And then the public market in issuing new equity.

Offers an abundance.

Benefits.

The digital business, we think is best handle any public savvy.

Because your balance sheet and liquidity that we're generating can be used as a great tool.

And the investment management side of the business.

Yes.

As liquid and is [noise].

Hop your what.

As we've seen.

At the digital category is right across the markets here talk more about it.

As we relate to assets on the balance sheet to have high growth potential on what have we transition from legacy assets, which are Kenya.

As I've said before physically obsolescence and actually obsolescence actually obsolescence.

Balance sheet accretion on a total return basis is really interesting to us.

Owner.

And I'll be investment management side.

Leading with that kind of the balance sheet.

Creates more alignment for the limited partner unit.

Yeah, No Tom I think you've sent decides to correctly.

We really feel like Theres, an unprecedented opportunity to deploy capital across our very valuable platforms and new platforms.

We're seeing over $480 billion investment opportunity across the digital infrastructure ecosystem over the next five years, we deployed mission critical eye on T. networks Fiveg networks.

Our net 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 say that markets that opportunity. It's just a bigger bigger pool of opportunity for our tenants and our customers.

And just a follow up on that is the I Nx and deal something that you.

Considered or even at this stage would consider.

As a potential transaction.

Okay.

[noise] I'm sorry clarify the question are you talking about the privatization of the I am business.

The in Texas the on transaction.

Its digital Realty Trust is under agreement to acquire was wondering if that's something colony digital colony would have considered or could still at this stage consider.

Sure. Thank you, we honestly don't don't comment on on market reverse related to transactions that.

And the press that our names being circulated so for the time being I'll I'll say no comment as related to a interaction.

Thanks for taking the questions.

Thank you thanks Jay.

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

Doug maybe though that Mackenzie I appreciate your comments here.

Stock price today about 50 cents on the dollar as to where Youre LP units best at what gives you confidence that.

This company can turn things around.

Sure. Thanks, Mitch, let's say.

As as Tom likes to say Mitch, we're playing offense, we're playing defense that you've had to side of the ball. We've made very clear what our objectives are and what we promised to commit to the market the sale within our either sell industrial.

Turning of our OE de portfolio those are essential components for us to clarify our story and allow us to be honest singular mission to do the things that we want to do.

Well 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 are best business is 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 higher implied yield third we want to be involved in businesses that have higher double digit organic growth, which are resident and some of the businesses that we already own and operate today I think most of you know colony today owns and or manage as 10 very.

Valuable digital assets, which will be happy to give you some of the highlight 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.

Our digital County partners, one which was the most successful first time ever FCC funds and to where we can use that balance sheet effectively to warehouse transactions like we did with NDN 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 and a superior facet as it relates to what we've done traditionally on either industrial health care or lodging and so there's three ways to use the balance sheet capital if were effective it using that balance sheet capital Mitch and.

Applying capital across those three different avenues that I just mentioned, we believe two things will happen.

What 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 I will make this abundantly clear.

Second when we think about how we can grow the business. It's no secret that digital assets trade 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 colony.

Oh, it 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 right, whether it's a digital read or whether it's an esoteric rate. The most important factor mentioned 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 owning businesses that haven't playard implied higher organic growth rates.

And as we've demonstrated over the last 25 years into businesses that we own and operate we've managed to do that and as this business plan and then strap plan becomes more apparent to you and the rest of world. We believe that people want to own this company and people want to own the shares as the first truly diversified digital rate and digits.

That's a manager.

That's where we're going to add.

Whilst we haven't been able to give you that specific color today I can assure you when we do unveil that that ought to be very transparent and it'll be something that we believe that others want to talk partake in enjoying that journey with us.

Thank you for that are there any considerations whether be debt covenants or.

Balance sheet or or other that prohibit you from.

Pursuing sales over the course, the next 12 to 18 months of health care and lodging.

No not.

Okay. What can you just.

Maybe socialize the aid the industrial sale process in terms of.

So how it.

Turned out with regards the demand bidding and then I guess, you're holding back now you have to previously announcing the sale it looks like you're holding back the the bulk industrial size of that can you just kind of elaborate what's going on there.

Yes is there an answer and around the process.

Yes, Hey, Manchester and so I mean, the product sale process itself was incredibly robust as you might imagine I mean, there was a tremendous amount of interest like we had over 10 submissions on five plus billion dollar portfolio in the first round. We brought several groups through the second as you now know blacks.

Prevail.

As it relates to the Theres, a 200 million dollar component of the 5.9 billion that was originally announced which is the ball portfolio component and as we announced back in September when the deal what's printed there with some third party consents that were associated with that because we were selling a 51% interest in it.

Our ownership so the expectation we are engaged in other sales discussions relating to that ball portfolio. It may be somewhat delayed from the ended 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 a 5.9 billion dollar trade. So it's somewhat immaterial in terms of size.

And.

As those third party consents our realized.

Is it a new sale process that.

That is launched or does it go to Blackstone.

I'm not Blackstone. So the original deal was that Blackstone was going to buy the 51% interest in the partnership so it.

It's going to end up being sold two at a different party, but it's not an entirely new sale process, that's being watched no. It it's involving some of the affiliated parties and the deal today. So it's something that we expect we can document and close quite quickly.

Got you last from me, maybe more catch him.

How should we think of a clean run rate you know you've got a whole bunch of NRG noise, you've got a whole bunch of noise and OE D. Some onetime varies in almost every single segment, what's what's core earnings absent one timers.

[noise] [noise] I think we're looking at [noise].

Yes.

Rates that are going to be slightly down from this quarter on a run rate basis.

With the sale of industry in the sale of in our re how quickly we deploy that capital.

And in other investments as well as gets the benefit.

[noise] the digital platform in the digital investments those investment management economics.

You know those are going to be accretive so.

I think we don't really.

Have a lot of guidance there for you right now we think this this quarter is a good quarter, we expect the fourth quarter to be.

The good quarter for us as well.

But I think run rate going forward, there's still a lot to do with the street strategic plan to develop how real from number for that.

Okay. So we don't know what the real numbers. Thank you.

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

Hi, good morning, So I wanted to just try and scope out of a better understanding of this December event.

Is it.

He said early December mid December .

You know 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 re segment or otherwise restate the financials.

Hi, My name is top the format is gonna be we're going to we're going to post on our website.

A definitive strategic plan doesn't have any degree with restating actuals.

As you would with setting forth sources and uses of capital, which is what you're going to be the most interested we created a tremendous amount of liquidity and everybody, saying that's terrific where does it go.

Yes, you have a number of options of course.

We've got liability management on my side.

You got the deployment of.

She capital for digital and new acquisitions, we have the deployment out much capital.

Three new digital.

I'm going to partner products that we're about to watch.

And we have all of the usual frameworks.

Discern between.

Stock buyback special dividend.

The timing of what we do with adapt liquidity.

What that means to the existing.

Silence going forward, what we're not abandoning legacy businesses.

So we've got shareholders, we implement partners like see business, we've got substantial cash flow from thanks, Mark it's like hospitality and healthcare.

And we're moving not all those France, and we're going to give you a birds eye view.

The optionality.

Where those legacy assets go and the growth of with digital is third party capital on balance sheet.

Acquisitions going forward.

Is that by the notes.

Okay, and then I can present there'll be a you know a call and other ways they interact with management around that yes.

Absolutely.

Where what once we do that we're going to habit series, where we're a digital company and we're going to digital age what we do it.

Thanks.

Youre going to start a new program.

So in addition, due to non deal road shows.

We're anticipating Webinars town halls, a series of communication fast.

That will also give all of you a better view of what is this digital great. Why is this digital highway.

Everybody knows what's happening in digital reached at our Oh.

Oh defined within their own range.

What's happening.

[noise], new kind of digital nation states that make them the best counterparty for somebody like us, which is hard asset investors qonq.

So in addition to our strategic plan of saying, here's the math, here's where we're going to your timeframe our getting there.

Existing client businesses handy to.

Acquired calling businesses.

It's really.

Teach and assets that were buying.

So.

We anticipate in the last.

Last part of this year in first quarter next year to rollout in communications format. It well.

[laughter] farming.

Yeah that transparency, we welcome and then I guess I'd take it from your comments if I'm hearing you correctly then it's.

And I know you can't commit to this but it feels like you're saying, it's 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.

[noise], yes, yes [noise].

Oh I would quit.

Quick specificity shred it initial parts of it or.

What are the gauging of Monetizations.

And what's the 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 break one foot on asset.

Yes.

[laughter] upstart are difficult for you to understand and we look at every day and so you know what it's not easy being owner, it's much easier to view investor.

It's all of you can vote your feet like it.

Or you don't like drought.

We're making decisions.

Across the board as an owner have three or four years five year consequences.

And.

Sometimes that that's that's difficult that's where we've got so we're not.

We're not envisioning gigantic.

[noise] distortion boost in the strategic plan, what you're going to see is.

Our view of it very carefully thought.

Dziedzic realignment, calling 2.0.

We do it the legacy assets the cash flow that we have quite honestly have on balance sheet deployment of that capital and logical way and what you've seen in CLL see it's our view as a shareholder of saying how do we streamline these confusing interest.

No way back in the short term cause some turbulence to our share price Jasmine faster, 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 Chuck because we love our management team and we love where we are in the space.

So we're going to give you.

Thank you arithmetic you want to go to the good question draw asking it's taken us.

Okay fair because as you know it's not shop.

I just had another question the on the the interest rate swap.

You know if I understand this correctly that you took a loss of 91 million.

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.

The Matt the matter is entirely dissolve the swap is is settled and close their small payment due.

The beginning of December that's reflected in accrued in our financials total cost of.

Getting out of that swap was 365 million.

Which I think about 240 million is reflected in.

The current year there were some of that that was taken for GAAP purposes in 2018.

It is it is completed its all reflected in financials.

Hi.

Closed out.

Except for this cash transfer it occurs.

Okay I understand that better now that's all I had thank you.

Thank you.

Okay. No further questions slip into Q I would like to turn the floor back over to management for any closing remarks.

Thanks, everybody for your participation and thanks for your patience and we will get back again in December but more flesh on a scale that enough.

Thanks, everybody have good.

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

[noise] [noise].