US firms join forces into $58bn global equity REIT

US-based property managers NorthStar Asset Management Group (NSAM), Colony Capital and NorthStar Realty Finance (NRF) have reached a definitive merger agreement that will lead to the creation of a global and diversified real estate and investment management platform.

The combined company will operate under the name of Colony NorthStar and will manage some $58bn (€51.1bn) in assets. The merger will bring diversification of the existing real estate portfolios.

The transaction will also allow significant cost savings with an estimated amount of $80m (€70.5m)  of cash savings and $35m (€30.9m) of stock based compensation savings, expected to be realised post-closing.

The deal has been approved by NSAM and NRF’s committees as well as by the board of directors of Colony.

In detail, NSAM shareholders will own approximately 32.85%, Colony shareholders around 33.25% and NRF shareholders around 33.90% of the combined company on a fully diluted basis.

Thomas Barrack Jr. will be executive chairman of the board of directors of Colony NorthStar while David Hamamoto and Richard Saltzman will respectively hold the positions of executive vice chairman and chief executive officer.

Colony NorthStar’s board will consist of 13 directors of which six will be named by NSAM and NRF and six by Colony. The additional board member is to be mutually agreed upon by the existing NSAM, Colony and NRF directors. The majority of the board will be comprised of independent directors.

Hamamoto, executive chairman of NSAM and chairman of NRF, said:  “We are incredibly excited to merge with Colony to create a global real estate leader well positioned for long-term growth.

“This strategic combination is the next logical step for NSAM and NRF, creating substantial value for shareholders and transforming the companies into a world-class, internally-managed equity REIT that includes a sizable, established institutional and retail asset management platform.

“We are confident that Colony NorthStar with its lower leverage, larger balance sheet and improved liquidity profile is poised for meaningful multiple expansion and substantially enhanced long-term returns for shareholders.”

Thomas Barrack Jr., executive chairman of Colony, stated, “This is an amazing combination of three highly compatible companies with complementary strategic priorities that we expect will deliver substantial value for all three sets of shareholders.

“The combined company will have both the capability and balance sheet capacity to deploy capital to establish and fortify foundational equity real estate positions through all points in the cycle, across geographies, asset types and capital structures.

“We also will realise substantial efficiencies and synergies by bringing our organizations together and offering a well curated menu of durable real estate business lines with broad-based capital access.”

Adrien Paredes-Vanheule
Adrien Paredes-Vanheule is French-Speaking Europe Correspondent for InvestmentEurope, covering France, Belgium, Geneva and Monaco. Prior to joining InvestmentEurope, he spent almost five years writing for various publications in Monaco, primarily as a criminal and financial court reporter. Before that, he worked for newspapers and radio stations in France, in particular in Lyon.

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