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Colony Capital aims to be 90% digital by 2021-end, CEO says

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Colony Capital aims to be 90% digital by 2021-end, CEO says

Colony Capital Inc. executives at a recent conference in New York City restated the company's plan to focus on digital real estate, saying the objective is to be "mostly all things digital" by the end of 2021.

"Within 24 months, the complexion of what Colony will be is completely new. It'll have balance sheet, it'll have [investment management], but it'll be 90% digital," Executive Chairman and CEO Tom Barrack Jr. said Sept. 11 at the Bank of America Merrill Lynch 2019 Global Real Estate Conference.

Barrack, who founded the diversified real estate investment trust in the early 1990s, said the company is looking to monetize its $20 billion real estate portfolio and to reinvest the proceeds into digital real estate assets.

The goal is to, "as quickly as we can, pivot out of those legacy assets that the private market is telling us are worth more than the public market values," the executive said.

Barrack called Colony's January 2017 merger with NorthStar Asset Management Group Inc. and NorthStar Realty Finance Corp. "a mistake."

"We missed it," Barrack said. "It's on me. I was the chairman at the time, in January 2017. It's my responsibility, and it shouldn't have happened. It's more complicated. We mispriced it. The physical and financial obsolescence of the silos that we acquired were much more dramatic than we'd thought."

Operating as a diversified REIT with an asset management component, as the company did after the NorthStar deal, "sounded like a great idea, and the market hated it," Barrack added. "It hated it from the beginning of January 2017, and it hated it also in January 2018."

Colony has historically invested in healthcare, lodging and industrial assets, but those are not growing as fast as digital real estate verticals such as data centers, towers and fiber, Marc Ganzi, co-founder and CEO of Colony unit Digital Bridge Holdings LLC, said at the conference.

By pruning the company's legacy holdings, there is "a very attractive opportunity to take those cash flows and put that equity to work in better assets, assets that you appreciate and that The Street appreciates," Ganzi said.

As part of the company's leadership succession plan, Barrack will step down as CEO and will be succeeded by Ganzi.