DigitalBridge Group, Inc. Q2 FY2020 Earnings Call

Greetings and welcome to the Colony Capital’s Second Quarter 2020 Earnings Conference Call. At this time all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Please note that the Company has posted a presentation to accompany today's remarks and is available on the Investor Relations section of the company website or via the webcast. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Severin White, Managing Director and Head of Public Investor Relations. Thank you. You may begin.

Good morning, everyone, and welcome to Colony Capital’s second quarter 2020 earnings Conference call. Speaking on the call today from the company is Marc Ganzi, our President and Chief Executive Officer and Jacky Wu, our Chief Financial Officer. Before I hand the call over to them, I’ll quickly cover the Safe Harbor. Some of the statements that we make today regarding our business operations and financial performance, including the effect of the COVID-19 pandemic on those areas may be considered forward-looking and such statements involve a number of risks and uncertainties that could cause actual results to differ materially. All information discussed on this call is as of today, August 7th, 2020 and Colony Capital does not intend and undertakes no duty to update for future events or circumstances. For more information, please refer to the risk factors discussed in our most recent form, 10-K filed with the SEC and in our Form 10-Q for the quarter ended June 30, 2020. During this call we will present both GAAP and non-GAAP financial measures. Reconciliation of non-GAAP to GAAP measures is included in today’s earnings press release, which is distributed and available to the public through the public shareholders section of our website located at clny.com. Thank you. And now, I’d like to turn the call over to Marc Ganzi, President and CEO of Colony Capital.

Thank you, Severin. Good morning. I want to start by acknowledging and thanking our Board of Directors and our Chairman, Tom Barrack, for their trust in me as your CEO of Colony Capital. I appreciate the opportunity and am humbled by it, but most importantly, I'm excited to take you on this journey as we transform Colony into the first global diversified Digital REIT. We have a robust set of materials for you today, and I want to frame the agenda. I will first share my perspective on the digital infrastructure space, which is undergoing significant changes. I’ll provide some high-level insights on where we believe the market is heading. Then, I’ll turn it over to my partner Jacky Wu to discuss the company’s financial results. Finally, we’ll touch on our digital playbook and pose a question to our shareholders and potential investors: why own Colony Capital today? Let’s dive into the materials. If you can turn to page five, I'll begin with an overview of the current state of digital infrastructure. COVID has profoundly impacted us, and in my 26 years of investing in digital infrastructure, I have never experienced such a transformative time. Our lives have been shifting toward digital, and this shift has accelerated recently as demand increases across networks due to the online migration of various activities such as work, shopping, and telemedicine. There is unprecedented demand for enhanced connectivity, which is central to our strategy. Networks are experiencing stress like never before, and customers like AT&T and Vodafone are seeing huge surges in traffic. Moving to the next page, this demand increases the need for digital infrastructure as supply struggles to keep pace with current trends. Just looking at some of these verticals: Microsoft Teams reached a record of 5 billion meeting minutes in a single day during Q2. Amazon reported Q2 revenues of $89 billion, a 40% year-over-year increase. Netflix gained 15.8 million new subscribers in the first quarter, and app downloads for health and wellness surged by 65%. All of this correlates with new network investments and a shift towards 5G. Coupled with COVID, these trends accelerate the need for digital infrastructure. Moving on, I assert that network demand has become mission-critical. High-capacity workloads necessitate greater bandwidth, pushing our customers to seek more digital infrastructure for their applications and services. Unlike in the past, where we saw peak and off-peak periods, networks now need to operate continuously at high standards. Evolving demands call for new architecture, orchestration, and agility, which we will explore today as we discuss the movement of networks toward the edge. Colony enables our customers to deploy this digital infrastructure across four core verticals: data centers, towers, small cells, and fiber. Our customers will continue to expand and rely on our value-added services. Zoom's revenues grew 169% year-over-year, WhatsApp gained 50 million users during the pandemic, Microsoft Teams has 75 million active users, and Azure’s wide-area network added 110 terabytes of capacity. Cisco WebEx recorded 25 billion meeting minutes in April, tripling their average volume. We believe this will impact the entire digital ecosystem, from data centers to towers to small cells and fiber. What does this mean for us? Moving to page eight, it highlights a larger total addressable market for digital network spending. An estimated $241 billion will be invested in digital infrastructure this year across 39 million fiber route miles, 87,000 towers, 133,000 small cells, and 1400 megawatts in colocation absorption and hyperscale leasing. This includes $200 million dedicated to building and acquiring new fiber networks, $18.9 billion for towers, $3.2 billion for small cells, and $17.5 billion for data centers. At the core is mobile communications. We see a $1 trillion opportunity in global mobile capital expenditure (CapEx) driven by increasing data usage, which is projected to grow fourfold in five years. This trend is not limited to North America; it’s global. From 2020 to 2025, we anticipate $1.1 trillion will be spent on mobile CapEx, with 80% allocated to 5G investments. Historical shifts from 1G to 5G have typically taken seven years, but 5G represents a generational change and a transformative shift in network operations and capabilities. At Colony, we envision the networks of the future as converged networks. Our differentiation lies in providing next-generation mobile and internet connectivity solutions. Historically, the sector has operated in silos, like macro sites, data centers, small cells, and fiber optics. However, we believe networks are evolving beyond those boundaries, requiring significant CapEx across all verticals to enhance customer experience. We are focused on building our business around next-generation networks, leveraging our extensive experience in infrastructure and mobile connectivity. That concludes my overview of the digital landscape today. We will continue this dialogue in upcoming quarters as I share my insights on network topology, our customers, and the future of digital infrastructure. Now, I want to discuss Colony's current status and the tangible results from our business transformation. Execution and delivery are crucial for me. We are dedicated to serving our customers and shareholders. It’s been a busy quarter, and I'd like to highlight some accomplishments. First, when I joined the company in December, my top priority was to secure our liquidity, which we have achieved by amending our revolver and pricing a new convertible offering. Second, we have successfully deployed capital into high-quality digital infrastructure, closing seven transactions in the first half of the year amounting to $20 billion, and recently announced a strategic deal with Wafra. Third, we committed to cost cuts, achieving $35 million in the previous year and targeting $40 million this year while already realizing $38 million in cuts in the first half. We are also building a best-in-class management team and expanding in the growth segments of our businesses, especially in digital credit. Additionally, our digital line business is growing rapidly, already at a 22% annual growth rate, with expectations to exceed 30% by year-end. We’re seeing progress on the corporate front as well. On the hospitality side, occupancy rates for many of our hotels are rebounding, and in June, we saw positive NOI. While we still have challenges, the trends are stabilizing, and we believe there is value in the majority of our managed portfolios. Healthcare has performed well, maintaining high collections in a sector under operational pressure. In OE&D, we've achieved $380 million in monetization, and I foresee continued strong capital generation from this business in the latter half of the year. I also want to commend Mike Mazur for his leadership in stabilizing CLNC, which is on a positive trajectory and ready for growth. Overall, the first half of the year has been busy, and I'm proud of the progress we've made across all our business units at Colony Capital. Our capital stack has responded positively. While common shareholders may find it challenging to view this due to share price declines, we have made significant strides. Our liquidity stabilization measures have been recognized; the 2021 convertible notes have returned to par, our 2023 convertible notes have risen 23%, and Colony preferred stock has moved from around $8.5 to over $20. Ultimately, this progress is about creating a solid foundation for recovery in our common stock. In March, our stock hit a low of $1.41 per share, but we closed at about $2 per share recently, representing over a 36% increase. We see this as the starting point to build our foundation and move our business forward, believing our common stock will respond accordingly over time. Now, I’ll turn it over to my partner and CFO, Jacky Wu, to go over our financial results. Thank you, Jacky.

Thank you, Marc, and good morning everyone. As a reminder, in addition to the release of our second quarter earnings, we filed a supplemental financial report this morning, which is available within the public shareholder section of our website. Starting on page 16, the company has continued to make progress in its digital transformation as we have increased digital AUM to over 47% of total AUM at the end of the second quarter, and has now reached 49% following the Vantage stabilized data center transaction, which closed in mid-July. And as Marc has discussed, our digital platform continues to perform with strength in the current market environment. Colony's digital portfolio companies across investment management and operating businesses grew core organic revenues approximately 9% on average in the second quarter compared to the same period last year. Due to the significant challenges associated with the global COVID pandemic, our second quarter reported total revenues, however, was $372 million, which represents a 35% decrease from the same period last year, primarily as a result of our hospitality segments. Our one portfolio that has been most impacted by the global shelter-in-place initiatives. The hospitality segments experienced a sharp rebound from its trough occupancy of 22% during April to almost 40% during June, reflecting reopening efforts across the United States. Thus far in July and into August, the company has maintained this elevated level of occupancy rates. The company's healthcare segment, however, has thus far been relatively stable, generating revenues in the second quarter that decreased only 2% year-over-year while collecting 96% of contractual triple net and medical office rents during the quarter. With the second quarter GAAP net loss attributable to common stockholders was $2 billion, or $4.33 per share. The loss is primarily the result of a $2 billion non-cash GAAP impairment charge in the legacy non-digital businesses. The company determined this quarter that it would accelerate its shift to a digitally focused strategy, as the COVID crisis has negatively impacted legacy businesses and further emphasizes the importance of digital transformation in order to better position the company for growth. As a result, the company adjusted the fair market values of those legacy non-digital assets accordingly. Moving to page 17, digital core FFO contribution has been steadily increasing. Digital core FFO was $21 million in the second quarter, an $18 million increase from the same period last year. This was a combination of both increased recurring digital investment management fees, as well as increased equity-based earnings from outperformance at our digital portfolio companies. Despite our digital growth, however, company-wide core FFO was negative $19 million or $0.04 per share, excluding net gains and losses. The decline in total core FFO is driven almost entirely by the company's hotels, which experienced significant declines in occupancy, down 62% year-over-year during the second quarter. However, as I previously noted, the company has seen market improvements in occupancy at the end of the second quarter, as June hospitality segment NOI turned positive. Turning to page 18, we ended the second quarter with AUM of $46 billion. And just after the end of the quarter, the company closed the Vantage stabilized data centers transaction, which increased AUM on a pro forma basis to $47 billion. Total AUM has increased $11 billion or 32% since the second quarter of 2019, including a $21 billion increase in digital AUM partially offset by legacy asset monetization, and our previously mentioned legacy asset impairments of $2 billion. The company's fee earning equity under management reached over $17 billion in the second quarter, including our Vantage acquisition. This represents an over $8 billion year-over-year increase. We are extraordinarily proud of the progress we have made towards our digital transformation. Digital fee AUM as Marc mentioned, is up over 22% year to date, outpacing our previous guidance of 15% for the year. And we have plenty more to look forward to, as our M&A pipeline continues to be robust with tremendous opportunities in towers and data centers on the horizon. Moving to page 19, as Marc mentioned earlier, we executed a series of steps to solidify our liquidity position and strengthen our overall balance sheet, not just to continue to drive our digital growth, but to defend against the potential economic impact of a second wave of COVID and shelter-in-place closures. First, we successfully renegotiated our corporate revolver to enhance financial flexibility and to rebaseline financial covenants that more adequately reflect today's reality and our digital future. And as of today, the company is in full compliance with all covenants with this new facility. Second, we issued $300 million of new five-year exchangeable notes and simultaneously repurchased an equivalent amount of our 2021 convertible notes. This issuance eliminates our near-term debt maturities, and despite the adverse environment created by the COVID pandemic, these developments will enable us to accelerate our digital transformation, while positioning us to preserve and ultimately monetize the value of our legacy assets. It is again important to emphasize that our investment-level debt is not included on this page as they are non-recourse. And as you can see, the company continues to preserve liquidity and see minimal cash outflows toward these businesses despite their challenges in the COVID pandemic. Turning to the right side of page 19, the company maintained its liquidity of approximately $900 million throughout the quarter. In July, the company closed a significant strategic investment from Wafra to invest over $400 million in our Digital Colony platform, including over $250 million for a 31.5% ownership stake in the Digital Colony investment management business at an $805 million valuation, which represents over a two times return in just one year on our digital investment management business since we acquired Digital Bridge Holdings in July 2019. Wafra has also committed over $150 million to Digital Colony's current and future investment products. In addition, as Marc previously stated, the company closed on its second significant digital balance sheet investment by investing $190 million in Vantage stabilized data centers transaction. As of today, the company has approximately $875 million of liquidity for the remainder of the year. The company expects to monetize an additional $200 million to $300 million of legacy assets and deploy approximately $350 to $550 million of capital towards digital infrastructure, M&A, and other capital commitments, including the remaining $112 million of January 2021 convertible notes. This will lead the company with an ending liquidity balance of approximately $625 million to $725 million. With that, Mark, we'll walk you through the further details on our plans to continue to execute our digital playbook. Thank you.

Thank you, Jacky. Now, let’s look at page 21. We want to outline our digital strategy and our approach to transform Colony for the future. Our plan has been to adjust our balance sheet by selling off traditional Colony assets and reinvesting the capital into what we believe is the most promising investment sector today: digital infrastructure. In the past, Colony was a diversified real estate company managing various asset classes in traditional real estate sectors such as healthcare, industrial, credit, hospitality, and more. Today, we've shifted to a diversified global digital real estate investment trust. Our strategic approach aims to align investors with significant trends, particularly the digital transition. We aim to simplify Colony’s story so that you can easily understand our operations and how we generate core funds from operations. Our goal is to create stable digital earnings and deliver attractive returns on invested capital for our shareholders. Looking ahead, we are focused on enhancing mobile and internet connectivity through investments in towers, data centers, small cell infrastructure, and fiber networks, which are essential for our future direction. In the first half of 2020, our execution has shown strong results. We have been proactive in digital infrastructure investment, closing seven key transformative deals totaling nearly $20 billion. We also secured six financings amounting to approximately $12 billion in credit during these unusual times. Notably, we invested in Highline do Brasil, DataBank, Vantage data centers, and other significant transactions such as the $14.7 billion acquisition of Zayo and the Scala investment in Brazil. These dealings underpin our investment approach. Furthermore, executing these transactions has led us to achieve a vital metric for ongoing focus: growth in fee-earning assets under management (FEEUM). Earlier this year, I committed to a 15% growth in this area, and I’m pleased to report that we have delivered a 22% increase, significantly surpassing our target. This growth stems from leveraging our longstanding relationships and partnering with new capital sources seeking exposure to fast-growing digital infrastructure sectors. To illustrate our balance sheet strategy, I'll present two case studies. In July 2020, we combined our resources to invest in top-tier data centers and blue-chip digital infrastructure assets. The aim was to provide investors with predictable earnings from quality assets. We acquired an 80% stake in a digital center for $1.2 billion. This strategic approach has historically resulted in returns that exceed public market trading multiples for similar assets. Our second case study focuses on edge computing. DataBank is positioned well for the 5G migration and low latency applications. Our investment in DataBank reflects this strategic decision, with the company achieving a 9.5% organic growth rate through the second quarter of 2020. Moving on to ESG initiatives, we prioritize responsible resource management and strive to create a positive impact on the environment and communities. Our commitment to sustainability is reflected in our practices and partnerships with organizations that enhance our ESG efforts. In conclusion, I invite you to consider why you should invest in Colony today. We believe we are in the optimal sector with favorable growth trends, and we have a seasoned management team equipped to navigate the complexities of digital infrastructure. Our aim is to simplify operations and drive shareholder value. We are positioned to evolve into a pure-play digital REIT with significant growth projections in earnings and assets under management. I appreciate the time you've spent with us today and thank you for your trust in our company.

Thank you. Our first question comes from Randy Binner with B. Riley FBR. Please go ahead with your question.

Hey, good morning. Thank you. I wanted to first start with just a kind of question and clarification on liquidity, which was on slide number 19 in the deck. You lay out some monetization and then also investments in digital there. They're not quantified, that blue and green box respectively. If I size it, and if I think about where we have liquidity, I think each of those categories is 200 to 300 million. So wondering if you can kind of help us quantify that? And then also the 625 to 725 at the year end 2020 is before the remaining kind of hundred or so million on the convertible bond. I just wanted to clarify that?

Yes. Good morning, Randy. How are you? So, first and foremost, on monetization, we believe there's $200 million to $300 million of incremental monetizations in legacy. Those projects are currently in flight. When I say in flight, we have active dialogue and active processes to monetize a couple of legacy assets. And we have pretty strong conviction around our ability to execute like we had in the first half of this year around a couple of situations. So, I think if you're trying to put some brackets around that, I’d put $200 million to $300 million. On the expansion of the digital balance sheet, we are seeing some really tremendous opportunities. I'm sort of targeting $350 million to $550 million of incremental deployment between now and the end of the year. Like I said, we've always telegraphed to you when we think we've got something interesting for the balance sheet and we're in the midst of those discussions and diligence. And we feel reasonably strong about our ability to continue to deploy balance sheet capital to build long-term sustainable digital earnings.

Understood. So that's why it lands a little bit lower at 625 to 725. I just wanted to confirm that that would be before the January paydown of whatever's remaining on the convert after the recent debt exchange?

Randy, this is Jacky. We've included that $112 million included in that 350 to 550. So that's the broad range.

Yes, that's part of that paydown, Randy.

I was uncertain about that. It seemed to be a timing issue. I understand now. That's reassuring. Regarding hospitality, it clearly detracts from our digital narrative, which you've mentioned frequently. I recognize you're addressing it. However, could you elaborate on what strategic actions you anticipate taking? Will it require additional capital investment? Are there significant or strategic steps you can take to lessen the focus on the hospitality aspect?

Yes. Look, at the end of the day as I think you and I've had this discussion for the last couple of quarters. We don't hold a tremendous amount of positive net value for the lodging portfolio. I think today we hold it a little over $50 million in positive net contribution. We've been very careful not to put good money into bad situations. I think, once again, we telegraphed that in Q1 and Q2. That being said, we've made as I said on the call today, we've made a ton of progress. All seven portfolios continue to be in play from an equity preservation perspective and certainly from a cash flow preservation perspective. Very encouraged by the June results. A little less encouraged by July results. But once again, we've seen a pickup again here in the early part of August. So we're just going to have to keep our eye on it. But what I would tell you is, we have a game plan for every portfolio, every one of the portfolios from my perspective, feels like a salvageable situation. And once those assets are salvaged, and we regain our footing as it relates to core FFO, there's a lot of value in these assets. We get calls every day from people wanting to buy our hotels. So what I can share with you is the following three headlines: one, first and foremost, we've seen recovery in NOI. Two, we have a game plan to work through every single one of the portfolios and that game plan has been in flight now for six months; we're coming out the back end of those discussions. And we believe most of those discussions will be fully resolved in Q3, if not in Q4. And then last but not least, I'll continue to say what I've always said, we think there's positive equity value in the portfolio. We have a lot of inquiries about the assets. There are a lot of distressed real estate funds out there trying to gather assets right now, as you know, Randy, the world is awash with liquidity, my friend. And there's a lot of opportunistic real estate funds that see the value in this portfolio. Limited service hotels are the easiest to bring back online. They represent the fastest way to get cash flow in the sector. And so this portfolio has value. And we will remain committed to recovering the value in the portfolio. Can't be more clear about that.

Okay, great. There is a number, I don't know if you can comment on this, but I've got a number of questions about this telecom situation in Brazil, Oi. Can you comment on that? Is there anything you can share with people about those reports?

Yes. Look, I can't actually. I apologize. We're under a nondisclosure agreement. What I would say is, we're an incredibly active owner of digital infrastructure in Brazil. We own the second largest data center operator in Scala in the country. We own one of the fastest-growing tower companies in Brazil called Highline. My lineage dates back to my days at Deutsche Bank working in Brazil for many years, successfully investing in Telecom and Digital Media. I like the country. I like the setup. And we're very committed to our investments in Brazil. And we're going to continue to invest in Brazil. So you can read the subtext to that as you wish. Now, when we do invest in Brazil, we're going to invest in good situations. What I mean by that is, we're not going to break our rules of our four corners of underwriting. We want to own infrastructure. We want to have long-term contracts. We want to have great locations, and we want to have assets that can grow with us organically. And down in that part of the world we think our assets today are growing at double-digit organic growth rates. So we see a lot of opportunity. We see dislocation in the currency. We see a dislocated economy. But we see a very, very strong digital economy that underpins that. Brazil is the perfect situation for us. We're very pleased with the assets we have today. And as I said, we have a lot of growth there. We're going to continue to keep investing in the country. And most importantly, we're going to continue to invest in our customers. We have very, very strong customer relationships down there at Highline and Scala. Oi is one of them. Telecom Italia is one, Claro is one, and Vivo is one. So we've got four really good customers down there on the mobile side. And we're going to continue to invest in all four customers.

I'll leave it there. Thank you very much.

Sure.

Thank you. Our next question comes from Jade Rahmani with KBW. Please proceed with your question.

Thank you very much. Marc, I wanted to ask you a question that I haven't had the chance to ask you, but we'd be curious as to how you'll respond. Have you given any thought to taking the company private and undertaking this immense transformation behind the scenes at this valuation that you cited instead of absorbing the costs and burdens of being public and all that involves? How do you think about that?

Thanks, Jade, and you've never asked me that question. So thank you. I appreciate it. In all seriousness, look, my job right now is I'm working for our common shareholders. And that's my highest priority. I assume the CEO chair on July 1. And what comes with that is a massive opportunity. And also, what comes with that is the burden of having to rectify some of the legacy issues that I was handed. I'm really happy with where we are. I think the work that's been done through the first half of this year has been tremendous. And we've made a lot of progress. If you had to sort of calibrate where we are in a sort of four-quarter football game and the transformation of Colony, I'd say we've come out of the locker room at halftime and we're just about playing the third quarter of the game. So I think we're definitely more than halfway to where we want to be. And so from that context, now that we are more than halfway done, whether we're private or whether we're public, the transformation continues. And so that's my methodology as a CEO. I'm a day-to-day guy. I come in. We do the work. We know it's hard work. And we just keep knocking things down Jade one by one. And whether our structure is public or whether the structure is private, it really doesn't matter. The work has to be done. And right now my work is for the common shareholders. Look, I can't stop people from making offers on our company. I really can't be concerned about that. What I'm most concerned about right now is just continuing to execute. And I think you saw that tone and tenor in the presentation today. This is an execution-focused management team. And we believe we're winning. So I'm going to keep my focus there for the time being, and we think that work will be rewarded long-term for our shareholders.

Thank you very much. Looking at the OED portfolio, and you've mentioned that there's a ton of liquidity on the sidelines. Do you envision an opportunity to bulk sell the entire OED portfolio along with legacy institutional funds through a third-party asset manager in the opportunistic capital for Colony's balance sheet that could be used to further bolster the liquidity, add additional firepower for deployment into digital and also allow you to accelerate simplification of the capital structure?

Yes. Look, it's a great question and you're on the right issue. Cards up, we get calls all the time for the entire portfolio. Now phone calls are different from fully binding offer letters that have equity commitment letters and a timeline for execution. I think interest is continuing to build in our assets and our OED business. And that's fine. And we'll continue to have those conversations with alternative asset managers that understand the embedded value of what we've done. And I think, look, we're always a good listener. And Jonathan Grunzweig to his strong credit has done an amazing job with his team of continuing to manage those assets and most importantly, extract what we believe is fair to maximum value for those assets. And we feel really good about the second half of the year. I'm always surprised Jade about how much private liquidity sits out there. And look, this is an amazing portfolio of assets. The CDCF three, four, and five series were great funds. And so whether it's organizations that buy GP stakes, like Dial or Landmark or Goldman or Blackstone, or whether it's individual asset managers, like Starwood or people like that that understand opportunistic real estate, we will continue to feel those calls and have those conversations. Look, $380 million has been monetized this year. So far, we've got a couple of great assets that are currently in flight for monetization. But at the end of the day, this is about liquidity. We've done a spectacular job enhancing our liquidity. As you've seen through the presentation, we've shored up our capital stack. So honestly, cash is great, we could always use more cash to continue our digital pivot. But now, like I said, being at the second half of this football game, with our liquidity in a good position, and our debt maturities now taken care of, we can be patient. And as I mentioned, our calendar is to get to the other side by the first quarter of 2022. So we've got 18 months to continue this methodical, orderly wind down of our existing positions. And that really is a great place to be, because we're no longer positioned as somebody who has to sell assets at potentially prices that may be perceived to be less than fair market value. We now have the capability to be incredibly patient and ultimately find the right home for these assets. And that's what we're doing. And you'll see that in the third and fourth quarter. That's a high priority for us as a management team in the second half of this year is to continue to monetize OE&D. It would be a lot easier and a lot more elegant if somebody came along and said, here's a big check for OE&D. We'd look at that and say, that's pretty attractive. It would certainly accelerate our digital pivot. But at the same time, we're happy to go first half of this year almost $400 million, and back half of this year, another $200 million to $400 million. We keep going at this pace. So OE&D will have an orderly finish here, within 18 to 24 months. So I'm pleased with where we are. And I now have the runway in the liquidity to be patient, which I like. It's a good place to be.

Okay, I appreciate that. And I also appreciate the additional disclosure where you go through the top assets and also the remaining. That's very helpful. Just a question on the earnings-driven model since you put it out there. Core FFO of $200 million to $275 million in 2023, 65% of which is the Digital Balance Sheet, the 35%, digital Investment Management. Any sense for what that might translate to on an AFFO basis, just factoring in CapEx? And also, do you plan in that scenario to keep the current capital structure in place, and also further optimize G&A?

So sort of three components to your question. First and foremost the ladder and the steps we get to our ultimate core FFO over the next three years. We're going to work with you and the rest of the analyst community over the next two quarters to give you those building blocks and show you how we get there. I think what we've done today is we've given you some very key examples on how we have strong assets, where we've married the balance sheet with third-party capital to build stabilized long-term earnings. We think that's a good architecture and we think that's a good playbook because look, Jade, at the end of the day, you get two for one, right? You get a great asset on the balance sheet that has long-term contracts with investment-grade tenants. And then you get an investment vehicle that's 10 to 15 to 20 years long-term capital, that's patient, that pays you fees along that journey that only enhances your core FFO and gives you carry on the back end, which only creates more FEEUM and creates more earnings at the end of the day for our shareholders. So we think this is a good playbook. We think it's a good architecture. And as I said, I can't give you specific details, but I will tell you that we have other deals in flight that we plan to reveal to you over the next two quarters, which I think you'll be very happy with. And that really demonstrate our ability to grow that digital core balance sheet FFO. Those are the earnings that you want. Those are the earnings that big investors want. Because it's the earnings candidly they're used to seeing, right? They're used to seeing those earnings at DLR, AMT, SBA, CCI, and Equinix. And we're replicating that, but doing it with a slightly differentiated approach, more global approach, the ability to cross across all four swim lanes and the ability to deliver that extra, which is the management piece on top where we marry the balance sheet capital with third-party capital. It's a great, great formula. And at the same time, as we simplify the business, G&A sort of writes itself Jade. So as we continue to monetize legacy assets, G&A go with those assets. So it makes it pretty easy, I think as Jacky, and I think about the future of the company, we think there's more opportunity for G&A cuts. We'll be more transparent with you. We're in the middle of budget season right now getting ready for the 2021 budget. And once that's done at the end of the third quarter, we'll start unveiling what our thoughts are around headcount at G&A and how we can continue to streamline the business. The great thing about investments like DataBank and Vantage is it requires no G&A, zero G&A in fact, to manage those assets. We already have a 77-person global team that manages our digital investments for us. So part of the synergy of doing balance sheet investments is you don't take on incremental G&A because you already have that investment framework and you have that investment management team. So we don't have to take on extra G&A as we grow our assets and grow the balance sheet, like a traditional digital REIT. If another digital REIT decides to go to Asia and go build 12 data centers, they got to G&A that thing up. We don't have to do that. We actually have the capability through our portfolio companies' investment management to build great assets, and then ultimately transition them to the balance sheet, if it makes sense. That's a real competitive advantage for us. And we'll spend more time with you in the third and fourth quarter unveiling that because once again, it'll be another area where we are different from our peer group. It's a different model than American Tower, Digital Realty, not to suggest that those aren't great companies. They're incredible companies. And they're my friends. But what we're doing is just a little bit differentiated. And today was the unveiling of that differentiation.

Thank you very much for taking the questions.

Thanks, Jay. Appreciate your support.

Thanks, Jade.

Thank you. We have reached the end of our question and answer session. So I'd like to pass the floor back over to management for any additional closing comments.

Well, listen, thank you. It's been an incredible first half of the year. Once again, I want to thank our Board. I want to thank our Chairman, Tom Barrack. I want to thank our team. This is an incredible team we have here at Colony Capital. I think we unveiled some of that to you today. But this doesn't happen without a great team focused on continuing to find the right home for our legacy assets, and continue to grow our business going forward. I think we've made the case today why this is a great moment in time to buy Colony. And I'd ask all of you who've been investing in the sector for two decades, who've watched my career to remember those seminal moments when American Tower, Crown, and SBA were all trading sort of sub $2. Those were really interesting points in time to buy digital infrastructure. Colony today trades slightly under $2. I'd encourage you guys to look at your history books, think about this management team, think about our business model, and think about where we're going. With that, look forward to continuing the dialogue with all of you. And we're looking forward to a very successful close to the backend of 2020. Thank you very much. Have a great weekend.

Thank you.

Ladies and gentlemen, this concludes today's teleconference. We thank you for your participation and you may disconnect your lines at this time.