NEW YORK and LOS ANGELES (August 28, 2017) – Colony NorthStar, Inc. and certain of its affiliates (collectively, “Colony NorthStar”) (NYSE: CLNS), NorthStar Real Estate Income Trust, Inc., a public, non-traded REIT (“NorthStar I”), and NorthStar Real Estate Income II, Inc., a public, non-traded REIT (“NorthStar II”), today announced that they have entered into a definitive tri-party agreement (the “Combination Agreement”) under which a select portfolio of Colony NorthStar assets and liabilities (the “CLNS Contributed Portfolio”) will combine with NorthStar I and NorthStar II in an all-stock combination transaction to create a leading commercial real estate credit REIT with approximately $5.5 billion in assets and $3.4 billion in equity value. The transaction has been approved by the board of directors of Colony NorthStar and unanimously approved by the special committees and boards of directors of NorthStar I and NorthStar II. The combined company will be named “Colony NorthStar Credit Real Estate, Inc.” (the “Company”).
At the closing, Colony NorthStar will be the largest single investor in the Company and will enter into a management agreement on market terms to serve as the Company’s external manager. It is expected that Kevin P. Traenkle, Colony NorthStar’s Executive Vice President and Chief Investment Officer, will be Chief Executive Officer of the Company, Sujan Patel, Colony NorthStar’s Managing Director and Co-Head of U.S. Investment Management, will be Chief Financial Officer of the Company and that the Company’s board of directors will be comprised of seven directors, including four independent directors.
Transaction Delivers a Number of Strategic and Financial Benefits
The transaction is expected to deliver a number of strategic and financial benefits to the stockholders of NorthStar I and NorthStar II and to Colony NorthStar:
- Creates a Leading Commercial Real Estate Credit REIT: The Company will have
approximately $5.5 billion in assets and $3.4 billion in equity value, which will position it
as the second largest (by equity value) publicly-listed commercial mortgage REIT.
- Attractive, Stabilized and Well-Diversified Income Oriented Portfolio: TheCompany’s portfolio will consist of well-diversified and stabilized investments with attractive in-place yield and potential for capital appreciation and net asset value growth (through equity participations and owned real estate).
- Sponsorship, Management and Significant Ownership by Colony NorthStar: The substantial ownership by Colony NorthStar, a global leader in real estate and investment management with $56 billion in assets under management and deep transaction and asset management experience across the capital stack through multiple real estate cycles, will align Colony NorthStar’s interests with those of the Company’s stockholders.
- Differentiated Strategy: The Company will have a diversified investment mandate across the capital structure that should serve to mitigate reinvestment risk and provide flexibility through economic cycles to achieve appropriate risk-adjusted returns.
- More Efficient Capital Structure: The Company expects to have access to multiple financing sources at an attractive cost of capital, including credit facilities, credit market securitizations, mortgage debt on real estate and term facilities.
Under the terms of the Combination Agreement, certain subsidiaries of Colony NorthStar will contribute the CLNS Contributed Portfolio, which represents substantially all of the U.S. investments within Colony NorthStar’s Other Equity and Debt segment that are transferable assets consistent with the Company’s strategy (the “CLNS Contributions”), and NorthStar I and NorthStar II will merge with and into the Company, with the Company surviving (the “NorthStar Mergers”). In connection with the CLNS Contributions, Colony NorthStar will receive both shares of Class A common stock of the Company and membership units in the Company’s operating company (which will be exchangeable for shares of Class A common stock of the Company or cash, in the Company’s sole discretion). The Class A common stock of the Company received by Colony NorthStar in the transaction or upon redemption of membership units in the Company’s operating company will be subject to a lock-up restriction prohibiting sales of such shares for 1 year from the date of closing of the transaction. NorthStar I stockholders and NorthStar II stockholders will receive shares of the Company’s Class B common stock. The shares of Class B common stock of the Company received by NorthStar I and NorthStar II stockholders will convert to shares of the Company’s Class A common stock as follows: 10% within 30 days, 45% at 180 days and 45% at 1 year, in each case, after closing of the transaction.
The CLNS Contributions are intended to be tax-free to Colony NorthStar and the NorthStar Mergers are intended to qualify as tax-free reorganizations.
Approvals and Anticipated Closing
The transaction is expected to close either in late 2017 or the first quarter of 2018, subject to customary closing conditions, including approval by the NorthStar I and NorthStar II stockholders. The closing of the transaction also is conditioned upon a successful listing of the Company’s common stock on a national securities exchange, which may be effected up to nine months following approval of the transaction by the NorthStar I and NorthStar II stockholders. Colony NorthStar, NorthStar I and NorthStar II also will cause the Company to file with the Securities and Exchange Commission (the “SEC”) a registration statement on Form S-4 that will include a joint proxy statement of NorthStar I and NorthStar II and that also will constitute a prospectus of the Company.
J.P. Morgan Securities LLC is acting as the lead financial advisor with Barclays acting as a financial advisor to Colony NorthStar, and Hogan Lovells US LLP is acting as legal counsel to Colony NorthStar.
Credit Suisse Securities (USA) LLC is acting as financial advisor to the NorthStar I special committee, and Alston & Bird LLP is acting as legal counsel to the NorthStar I special committee.
Moelis & Company LLC is acting as the financial advisor to the NorthStar II special committee, Venable LLP is acting as legal counsel to the NorthStar II special committee and Greenberg Traurig, LLP is acting as legal counsel to NorthStar II.
For more details on the transaction, please refer to the investor presentation, which is available on each of Colony NorthStar’s, NorthStar I’s and NorthStar II’s website.
About Colony NorthStar, Inc.
Colony NorthStar (NYSE:CLNS) is a leading global real estate and investment management firm. Colony NorthStar resulted from the January 2017 merger between Colony Capital, Inc., NorthStar Asset Management Group Inc. and NorthStar Realty Finance Corp. Colony NorthStar has significant property holdings in the healthcare, industrial and hospitality sectors, other equity and debt investments and an embedded institutional and retail investment management business. It currently has assets under management of $56 billion and manages capital on behalf of its stockholders, as well as institutional and retail investors in private funds, non-traded and traded real estate investment trusts and registered investment companies. In addition, Colony NorthStar owns NorthStar Securities, LLC, a captive broker-dealer platform which raises capital in the retail market. The firm maintains principal offices in Los Angeles and New York, with more than 500 employees in offices located across 18 cities in ten countries. Colony NorthStar will elect to be taxed as a REIT for U.S. federal income tax purposes. For additional information regarding Colony NorthStar and its management and business, please refer to www.clns.com.
About NorthStar Real Estate Income Trust, Inc.
NorthStar I is a public, non-traded REIT sponsored by Colony NorthStar. NorthStar I was formed to originate, acquire and asset manage a diversified portfolio of commercial real estate debt, select equity and securities investments predominantly in the United States.
About NorthStar Real Estate Income II, Inc.
NorthStar II is a public, non-traded REIT sponsored by Colony NorthStar. NorthStar II was formed to originate, acquire and asset manage a diversified portfolio of commercial real estate debt, select equity and securities investments predominantly in the United States.